PSEC 10-Q Quarterly Report March 31, 2016 | Alphaminr
PROSPECT CAPITAL CORP
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PSEC 10-Q Quarter ended March 31, 2016

Balance Sheet
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10-Q 1 psec10-qq32016.htm 10-Q SEC Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 814-00659
PROSPECT CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
Maryland
43-2048643
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
10 East 40th Street, 42nd Floor
New York, New York
10016
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (212) 448-0702
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.
Class of Common Stock
Outstanding at May 10, 2016
$0.001 par value
356,437,837



Table of Contents
Page
PART I
FINANCIAL INFORMATION
PART II
OTHER INFORMATION


FORWARD-LOOKING STATEMENTS
This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,”
“intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future—including statements relating to volume growth, share of sales and earnings per share growth, and statements expressing general views about future operating results—are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended June 30, 2015, and those described from time to time in our future reports filed with the Securities and Exchange Commission.



1

PART I

Item 1. Financial Statements
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share and per share data)
March 31, 2016
June 30, 2015
(Unaudited)
(Audited)
Assets


Investments at fair value:


Control investments (amortized cost of $1,959,243 and $1,894,644, respectively)
$
1,998,023

$
1,974,202

Affiliate investments (amortized cost of $10,758 and $45,150, respectively)
12,088

45,945

Non-control/non-affiliate investments (amortized cost of $4,238,156 and $4,619,582, respectively)
3,994,994

4,589,411

Total investments at fair value (amortized cost of $6,208,157 and $6,559,376, respectively)
6,005,105

6,609,558

Cash and cash equivalents
169,212

110,026

Receivables for:
Interest, net
18,879

20,408

Other
927

2,885

Prepaid expenses
1,268

757

Deferred financing costs
50,937

54,420

Total Assets
6,246,328

6,798,054

Liabilities


Revolving Credit Facility (Notes 4 and 8)
—

368,700

Convertible Notes (Notes 5 and 8)
1,089,000

1,239,500

Public Notes (Notes 6 and 8)
708,242

548,094

Prospect Capital InterNotes ® (Notes 7 and 8)
898,535

827,442

Due to broker
—

26,778

Interest payable
33,724

39,659

Dividends payable
29,675

29,923

Due to Prospect Administration (Note 13)
1,899

4,238

Due to Prospect Capital Management (Note 13)
55,021

2,550

Accrued expenses
3,153

3,408

Other liabilities
4,663

4,713

Commitments and Contingencies (Note 3)
—

—

Total Liabilities
2,823,912

3,095,005

Net Assets
$
3,422,416

$
3,703,049

Components of Net Assets


Common stock, par value $0.001 per share (1,000,000,000 common shares authorized; 356,113,777 and 359,090,759 issued and outstanding, respectively) (Note 9)
$
356

$
359

Paid-in capital in excess of par (Note 9)
3,959,864

3,975,672

Accumulated overdistributed net investment income
(5,800
)
(21,077
)
Accumulated net realized loss on investments and extinguishment of debt
(328,952
)
(302,087
)
Net unrealized (depreciation) appreciation on investments
(203,052
)
50,182

Net Assets
$
3,422,416

$
3,703,049

Net Asset Value Per Share (Note 16)
$
9.61

$
10.31



See notes to consolidated financial statements.
2

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(Unaudited)

Three Months Ended March 31,
Nine Months Ended March 31,
2016
2015
2016
2015
Investment Income
Interest income:
Control investments
$
50,762

$
50,418

$
154,135

$
146,230

Affiliate investments
—

973

896

2,814

Non-control/non-affiliate investments
83,986

94,556

265,855

290,665

Structured credit securities
44,244

39,046

135,912

118,238

Total interest income
178,992

184,993

556,798

557,947

Dividend income:
Control investments
8,288

1,346

25,046

4,756

Affiliate investments
—

—

—

778

Non-control/non-affiliate investments
13

24

16

46

Money market funds
—

1

—

27

Total dividend income
8,301

1,371

25,062

5,607

Other income:
Control investments
1,758

1,620

7,436

10,352

Affiliate investments
—

—

—

226

Non-control/non-affiliate investments
442

3,366

9,639

18,122

Total other income (Note 10)
2,200

4,986

17,075

28,700

Total Investment Income
189,493

191,350

598,935

592,254

Operating Expenses
Investment advisory fees:
Base management fee (Note 13)
30,977

33,679

95,712

100,878

Income incentive fee (Note 13)
21,906

21,860

69,940

68,307

Total investment advisory fees
52,883

55,539

165,652

169,185

Interest and credit facility expenses
41,719

42,213

125,881

127,371

Legal fees
11

(4
)
2,163

1,554

Valuation services
365

401

1,228

1,310

Audit, compliance and tax related fees
1,596

648

4,665

2,239

Allocation of overhead from Prospect Administration (Note 13)
2,936

2,984

9,114

8,414

Insurance expense
214

121

653

373

Directors’ fees
94

94

282

282

Excise tax
400

(793
)
1,700

982

Other general and administrative expenses
1,649

2,706

7,836

7,315

Total Operating Expenses
101,867

103,909

319,174

319,025

Net Investment Income
87,626

87,441

279,761

273,229

Net realized (losses) gains on investments
(10,784
)
4,704

(18,237
)
(150,973
)
Net change in unrealized (depreciation) appreciation on investments
(1,311
)
(9,775
)
(253,233
)
130,528

Net realized and unrealized losses on investments
(12,095
)
(5,071
)
(271,470
)
(20,445
)
Net realized losses on extinguishment of debt
(23
)
(878
)
(86
)
(1,214
)
Net Increase in Net Assets Resulting from Operations
$
75,508

$
81,492

$
8,205

$
251,570

Net increase in net assets resulting from operations per share
$
0.21

$
0.23

$
0.02

$
0.71

Dividends declared per share
$
(0.25
)
$
(0.28
)
$
(0.75
)
$
(0.94
)

See notes to consolidated financial statements.
3

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except share data)
(Unaudited)

Nine Months Ended March 31,
2016
2015
Operations


Net investment income
$
279,761

$
273,229

Net realized losses on investments
(18,237
)
(150,973
)
Net change in unrealized (depreciation) appreciation on investments
(253,233
)
130,528

Net realized losses on extinguishment of debt
(86
)
(1,214
)
Net Increase in Net Assets Resulting from Operations
8,205

251,570

Distributions to Shareholders
Distribution from net investment income
(266,920
)
(331,863
)
Distribution of return of capital
—

—

Net Decrease in Net Assets Resulting from Distributions to Shareholders
(266,920
)
(331,863
)
Common Stock Transactions
Issuance of common stock, net of underwriting costs
—

146,085

Less: Offering costs from issuance of common stock
118

(585
)
Repurchase of common stock under stock repurchase program
(34,140
)
—

Value of shares issued through reinvestment of dividends
12,104

11,199

Net (Decrease) Increase in Net Assets Resulting from Common Stock Transactions
(21,918
)
156,699

Total (Decrease) Increase in Net Assets
(280,633
)
76,406

Net assets at beginning of period
3,703,049

3,618,182

Net Assets at End of Period
$
3,422,416

$
3,694,588

Common Stock Activity
Shares sold
—

14,845,556

Shares repurchased under stock repurchase program
(4,708,750
)
—

Shares issued through reinvestment of dividends
1,731,768

1,189,248

Net shares (repurchased) issued due to common stock activity
(2,976,982
)
16,034,804

Shares issued and outstanding at beginning of period
359,090,759

342,626,637

Shares Issued and Outstanding at End of Period
356,113,777

358,661,441



See notes to consolidated financial statements.
4

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data)
(Unaudited)


Nine Months Ended March 31,
2016
2015
Operating Activities
Net increase in net assets resulting from operations
$
8,205

$
251,570

Net realized losses on extinguishment of debt
86

1,214

Net realized losses on investments
18,237

150,973

Net change in unrealized depreciation (appreciation) on investments
253,233

(130,528
)
Amortization of discounts and premiums, net
62,631

64,200

Accretion of discount on Public Notes (Note 6)
148

164

Amortization of deferred financing costs
10,156

9,601

Payment-in-kind interest
(7,475
)
(16,485
)
Structuring fees
(6,932
)
(18,055
)
Change in operating assets and liabilities:
Payments for purchases of investments
(670,657
)
(1,421,531
)
Proceeds from sale of investments and collection of investment principal
955,415

1,022,394

Decrease (increase) in interest receivable, net
1,529

(2,372
)
Decrease in other receivables
1,958

983

(Increase) decrease in prepaid expenses
(511
)
968

Decrease in due to broker
(26,778
)
—

Decrease in interest payable
(5,935
)
(2,073
)
(Decrease) increase in due to Prospect Administration
(2,339
)
336

Increase in due to Prospect Capital Management
52,471

1,388

Decrease in accrued expenses
(255
)
(1,455
)
(Decrease) increase in other liabilities
(50
)
319

Net Cash Provided by (Used in) Operating Activities
643,137

(88,389
)
Financing Activities
Borrowings under Revolving Credit Facility (Note 4)
615,000

1,187,000

Principal payments under Revolving Credit Facility (Note 4)
(983,700
)
(961,300
)
Issuance of Public Notes (Note 6)
160,000

—

Redemption of Convertible Notes (Note 5)
(150,000
)
—

Repurchase of Convertible Notes, net (Note 5)
(500
)
(7,658
)
Issuances of Prospect Capital InterNotes® (Note 7)
74,862

74,967

Redemptions of Prospect Capital InterNotes®, net (Note 7)
(3,769
)
(83,475
)
Financing costs paid and deferred
(6,759
)
(8,626
)
Cost of shares repurchased under stock repurchase program
(34,140
)
—

Proceeds from issuance of common stock, net of underwriting costs
—

146,085

Offering costs from issuance of common stock
118

(585
)
Dividends paid
(255,063
)
(328,620
)
Net Cash (Used in) Provided by Financing Activities
(583,951
)
17,788

Net Increase (Decrease) in Cash and Cash Equivalents
59,186

(70,601
)
Cash and cash equivalents at beginning of period
110,026

134,225

Cash and Cash Equivalents at End of Period
$
169,212

$
63,624

Supplemental Disclosures
Cash paid for interest
$
121,512

$
119,679

Non-Cash Financing Activities
Value of shares issued through reinvestment of dividends
$
12,104

$
11,199


See notes to consolidated financial statements.
5

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS
(in thousands, except share data)


March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Control Investments (greater than 25.00% voting control)(47)
American Property REIT Corp.(8)
Various / Real Estate
Senior Secured Term Loan (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(4)(6)(30)
$
51,905

$
51,905

$
51,905

1.4%
Common Stock (318,249 shares)
—

24,382

43,170

1.3%
Net Operating Income Interest (5% of Net Operating Income)
—

—

12,418

0.4%
76,287

107,493

3.1%
Arctic Energy Services, LLC(9)
Wyoming / Oil & Gas Services
Class D Units (32,915 units)
—

31,639

33,116

1.0%
Class E Units (21,080 units)
—

20,230

4,500

0.1%
Class A Units (700 units)
—

9,006

—

—%
Class C Units (10 units)
—

—

—

—%
60,875

37,616

1.1%
CCPI Inc.(10)
Ohio / Manufacturing
Senior Secured Term Loan A (10.00%, due 12/31/2017)(3)
12,425

12,425

12,425

0.4%
Senior Secured Term Loan B (12.00% plus 7.00% PIK, due 12/31/2017)(6)
9,320

9,320

9,320

0.3%
Common Stock (14,957 shares)
—

6,636

19,108

0.5%
28,381

40,853

1.2%
CP Energy Services Inc.(11)
Oklahoma / Oil & Gas Services
Series B Convertible Preferred Stock (1,043 shares)
—

98,272

75,423

2.2%
Common Stock (2,924 shares)
—

15,227

—

—%
113,499

75,423

2.2%
Credit Central Loan Company, LLC(12)
South Carolina / Consumer Finance
Subordinated Term Loan (10.00% plus 10.00% PIK, due 6/26/2019)(6)(32)
36,333

36,333

36,333

1.0%
Class A Shares (7,500,000 shares)(32)
—

11,633

12,426

0.4%
Net Revenues Interest (25% of Net Revenues)(32)
—

—

3,627

0.1%
47,966

52,386

1.5%
Echelon Aviation LLC
New York / Aerospace & Defense
Senior Secured Term Loan (11.75% (LIBOR + 9.75% with 2.00% LIBOR floor) plus 2.25% PIK, due 3/31/2022)(4)(6)(30)
37,855

37,855

37,855

1.1%
Membership Interest (99%)
—

19,907

19,109

0.6%
57,762

56,964

1.7%
Edmentum Ultimate Holdings, LLC(13)
Minnesota / Consumer Services
Second Lien Revolving Credit Facility to Edmentum, Inc. – $7,834 Commitment (5.00%, due 6/9/2020)(33)
—

2,742

2,742

0.1%
Unsecured Senior PIK Note (8.50% PIK, due 6/9/2020)(6)
6,209

6,209

6,209

0.2%
Unsecured Junior PIK Note (10.00% PIK, due 6/9/2020)(6)
28,131

21,632

25,092

0.7%
Class A Common Units (370,964.14 units)
—

6,577

6,245

0.2%
37,160

40,288

1.2%
First Tower Finance Company LLC(14)
Mississippi / Consumer Finance
Subordinated Term Loan to First Tower, LLC (10.00% plus 12.00% PIK, due 6/24/2019)(6)(32)
255,249

255,249

255,249

7.5%
Class A Shares (86,711,625 shares)(32)
—

70,476

102,881

3.0%
325,725

358,130

10.5%
Freedom Marine Solutions, LLC(15)
Louisiana / Oil & Gas Services
Membership Interest (100%)
—

40,211

26,619

0.8%
40,211

26,619

0.8%

See notes to consolidated financial statements.
6

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Control Investments (greater than 25.00% voting control)(47)
Gulf Coast Machine & Supply Company
Texas / Manufacturing
Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), in non-accrual status effective 1/1/2015, due 10/12/2017)(4)(30)
$
37,379

$
33,925

$
9,946

0.3%
Series A Convertible Preferred Stock (99,900 shares)
—

25,950

—

—%
59,875

9,946

0.3%
Harbortouch Payments, LLC(16)
Pennsylvania / Business Services
Senior Secured Term Loan A (9.00% (LIBOR + 7.00% with 2.00% LIBOR floor), due 9/30/2017)(3)(4)(30)
128,225

128,225

128,225

3.7%
Senior Secured Term Loan B (5.50% (LIBOR + 4.00% with 1.50% LIBOR floor) plus 5.50% PIK, due 3/31/2018)(4)(6)(30)
144,878

144,878

144,878

4.2%
Senior Secured Term Loan C (13.00% (LIBOR + 9.00% with 4.00% LIBOR floor), due 9/29/2018)(4)(30)
19,639

19,639

19,639

0.6%
Class C Shares (535 shares)
—

8,689

42,938

1.3%
301,431

335,680

9.8%
MITY, Inc.(17)
Utah / Durable Consumer Products
Senior Secured Note A (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor), due 3/19/2019)(3)(4)(30)
18,250

18,250

18,250

0.5%
Senior Secured Note B (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor) plus 10.00% PIK, due 3/19/2019)(3)(4)(6)(30)
16,442

16,442

16,442

0.5%
Subordinated Unsecured Note to Broda Enterprises ULC (10.00%, due on demand)(32)
7,200

7,200

5,555

0.2%
Common Stock (42,053 shares)
—

6,849

17,376

0.5%
48,741

57,623

1.7%
National Property REIT Corp.(18)
Various / Real Estate
Senior Secured Term Loan A (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(4)(6)(30)
140,061

140,061

140,061

4.1%
Senior Secured Term Loan E (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 5.00% PIK, due 4/1/2019)(4)(6)(30)
158,079

158,079

158,079

4.6%
Senior Secured Term Loan C to ACL Loan Holdings, Inc. (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 5.00% PIK, due 4/1/2019)(4)(6)(30)(32)
113,131

113,131

113,131

3.3%
Common Stock (1,000,451 shares)
—

114,794

130,439

3.8%
Net Operating Income Interest (5% of Net Operating Income)
—

—

36,833

1.1%
526,065

578,543

16.9%
Nationwide Loan Company LLC(19)
Illinois / Consumer Finance
Senior Subordinated Term Loan to Nationwide Acceptance LLC (10.00% plus 10.00% PIK, due 6/18/2019)(6)(32)
16,696

16,696

16,696

0.5%
Class A Shares (30,192,535 shares)(32)
—

16,201

17,502

0.5%
32,897

34,198

1.0%
NMMB, Inc.(20)
New York / Media
Senior Secured Note (14.00%, due 5/6/2021)
3,714

3,714

3,714

0.1%
Senior Secured Note to Armed Forces Communications, Inc. (14.00%, due 5/6/2021)
7,000

7,000

7,000

0.2%
Series A Preferred Stock (7,200 shares)
—

7,200

2,556

0.1%
Series B Preferred Stock (5,669 shares)
—

5,669

—

—%
23,583

13,270

0.4%
R-V Industries, Inc.
Pennsylvania / Manufacturing
Senior Subordinated Note (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 6/12/2018)(3)(4)(30)
28,622

28,622

28,622

0.8%
Common Stock (545,107 shares)
—

5,087

4,891

0.1%
Warrant (to purchase 200,000 shares of Common Stock, expires 6/30/2017)
—

1,682

1,794

0.1%
35,391

35,307

1.0%

7
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Control Investments (greater than 25.00% voting control)(47)
United Property REIT Corp.(21)
Various / Real Estate
Senior Term Loan (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(4)(6)(30)
$
67,252

$
67,252

$
67,252

2.0%
Common Stock (83,470 shares)
—

15,907

20,734

0.6%
Net Operating Income Interest (5% of Net Operating Income)
—

—

17,646

0.5%
83,159

105,632

3.1%
Valley Electric Company, Inc.(22)
Washington / Construction & Engineering
Senior Secured Note to Valley Electric Co. of Mt. Vernon, Inc. (8.00% (LIBOR + 5.00% with 3.00% LIBOR floor) plus 2.50% PIK, due 12/31/2017)(3)(4)(6)(30)
10,430

10,430

10,430

0.3%
Senior Secured Note (10.00% plus 8.50% PIK, due 12/31/2018)(6)
23,601

23,601

20,929

0.6%
Common Stock (50,000 shares)
—

26,204

—

—%
60,235

31,359

0.9%
Wolf Energy, LLC
Kansas / Oil & Gas Production
Senior Secured Promissory Note secured by assets formerly owned by H&M (18.00%, in non-accrual status effective 4/15/2013, due 4/15/2018)
35,050

—

674

—%
Membership Interest (100%)
—

—

—

—%
Net Profits Interest (8% of Equity Distributions)(7)
—

—

19

—%
—

693

—%
Total Control Investments
$
1,959,243

$
1,998,023

58.9%
Affiliate Investments (5.00% to 24.99% voting control)(48)
BNN Holdings Corp.
Michigan / Healthcare
Series A Preferred Stock (9,925.455 shares)(26)
$
—

$
2,228

$
2,904

0.1%
Series B Preferred Stock (1,753.636 shares)(26)
—

—

623

—%
2,228

3,527

0.1%
Targus International, LLC(46)
California / Durable Consumer Products
Senior Secured Term Loan A (15.00% PIK, in non-accrual status effective 10/1/15, due 12/31/2019)(27)
1,270

1,263

1,270

—%
Senior Secured Term Loan B (15.00% PIK, in non-accrual status effective 10/1/15, due 12/31/2019)(27)
3,812

3,788

3,812

0.1%
Common (1,262,737 shares)
—

3,479

3,479

0.1%
8,530

8,561

0.2%
Total Affiliate Investments
$
10,758

$
12,088

0.3%

8
PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
AFI Shareholder, LLC
(f/k/a Aircraft Fasteners International, LLC)
California / Machinery
Class A Units (32,500 units)
$
—

$
349

$
482

—%
349

482

—%
Airmall Inc.
Pennsylvania / Property Management
Escrow Receivable
—

4,160

3,061

0.1%
4,160

3,061

0.1%
Ajax Rolled Ring & Machine, LLC(42)
South Carolina / Manufacturing
Escrow Receivable(42)
—

1,264

2,312

0.1%
1,264

2,312

0.1%
ALG USA Holdings, LLC
Pennsylvania / Hotels, Restaurants & Leisure
Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 2/28/2020)(4)(27)(30)
11,771

11,620

11,771

0.3%
11,620

11,771

0.3%
American Gilsonite Company
Utah / Metal Services & Minerals
Membership Interest (1.93%)(36)
—

—

—

—%
—

—

—%
Apidos CLO IX
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 17.56%)(24)(32)
23,525

20,097

19,490

0.6%
20,097

19,490

0.6%
Apidos CLO XI
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 12.94%)(24)(32)
38,340

30,111

25,358

0.7%
30,111

25,358

0.7%
Apidos CLO XII
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 14.55%)(24)(32)
44,063

35,179

29,742

0.9%
35,179

29,742

0.9%
Apidos CLO XV
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 12.42%)(24)(32)
36,515

31,908

24,179

0.7%
31,908

24,179

0.7%
Apidos CLO XXII
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 16.61%)(24)(25)(32)
31,350

27,868

24,461

0.7%
27,868

24,461

0.7%
Arctic Glacier U.S.A., Inc.
Minnesota / Food Products
Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 11/10/2019)(3)(4)(30)
150,000

150,000

145,015

4.2%
150,000

145,015

4.2%
Ark-La-Tex Wireline Services, LLC
Louisiana / Oil & Gas Services
Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 4/8/2019)(4)(31)
21,322

21,322

14,781

0.4%
Senior Secured Term Loan B (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 4/8/2019)(4)(31)
23,239

23,239

—

—%
44,561

14,781

0.4%
Armor Holding II LLC
New York / Diversified Financial Services
Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 12/26/2020)(4)(27)(30)
7,000

6,901

6,913

0.2%
6,901

6,913

0.2%

See notes to consolidated financial statements.
9

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Atlantis Health Care Group (Puerto Rico), Inc.
Puerto Rico / Healthcare
Revolving Line of Credit – $7,000 Commitment (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 8/21/2017)(4)(30)(33)
$
2,350

$
2,350

$
2,350

0.1%
Senior Term Loan (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 2/21/2018)(3)(4)(30)
38,265

38,265

38,008

1.1%
40,615

40,358

1.2%
Babson CLO Ltd. 2014-III
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 13.71%)(24)(25)(32)
52,250

44,678

38,113

1.1%
44,678

38,113

1.1%
Broder Bros., Co.
Pennsylvania / Textiles, Apparel & Luxury Goods
Senior Secured Term Loan A (7.00% (LIBOR + 5.75% with 1.25% LIBOR floor), due 6/03/2021)(3)(4)(31)
121,475

121,475

121,475

3.5%
Senior Secured Term Loan B (13.50% (LIBOR + 12.25% with 1.25% LIBOR floor), due 6/03/2021)(4)(31)
121,966

121,966

121,966

3.6%
243,441

243,441

7.1%
Brookside Mill CLO Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.23%)(24)(32)
26,000

20,131

18,490

0.5%
20,131

18,490

0.5%
Capstone Logistics Acquisition, Inc.
Georgia / Business Services
Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 10/7/2022)(3)(4)(27)(31)
102,500

101,948

98,169

2.9%
101,948

98,169

2.9%
Cent CLO 17 Limited
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 9.54%)(24)(32)
24,870

19,206

16,208

0.5%
19,206

16,208

0.5%
Cent CLO 20 Limited
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 7.58%)(24)(32)
40,275

33,574

25,023

0.7%
33,574

25,023

0.7%
Cent CLO 21 Limited
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 7.70%)(24)(25)(32)
48,528

39,614

29,616

0.9%
39,614

29,616

0.9%
CIFC Funding 2013-III, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 16.80%)(24)(32)
44,100

32,902

29,752

0.9%
32,902

29,752

0.9%
CIFC Funding 2013-IV, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 17.45%)(24)(32)
45,500

34,078

33,278

1.0%
34,078

33,278

1.0%
CIFC Funding 2014-IV Investor, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 15.41%)(24)(25)(32)
41,500

32,303

29,486

0.9%
32,303

29,486

0.9%
Cinedigm DC Holdings, LLC
New York / Software & Computer Services
Senior Secured Term Loan (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/31/2021)(4)(6)(30)
66,543

66,493

66,543

1.9%
66,493

66,543

1.9%

See notes to consolidated financial statements.
10

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Coverall North America, Inc.
Florida / Commercial Services
Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 11/02/2020)(3)(4)(30)
$
24,500

$
24,500

$
24,500

0.7%
Senior Secured Term Loan B(12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 11/02/2020)(3)(4)(30)
25,000

25,000

25,000

0.7%
49,500

49,500

1.4%
Crosman Corporation
New York / Manufacturing
Senior Secured Term Loan A (9.13% (LIBOR + 8.70% with 0.3% LIBOR floor) plus 4.00% PIK, due 8/5/2020)(3)(4)(6)(31)
53,707

53,707

51,660

1.5%
Senior Secured Term Loan B (16.13% (LIBOR + 15.70% with 0.3% LIBOR floor) plus 4.00% PIK, due 8/5/2020)(4)(6)(31)
40,920

40,920

38,396

1.1%
94,627

90,056

2.6%
Easy Gardener Products, Inc.
Texas / Durable Consumer Products
Senior Secured Term Loan (10.63% (LIBOR + 10.00% with 0.25% LIBOR floor), due 09/30/2020)(3)(4)(30)
17,413

17,413

17,413

0.5%
17,413

17,413

0.5%
Empire Today, LLC
Illinois / Durable Consumer Products
Senior Secured Note (11.375%, due 2/1/2017)(27)
15,700

15,602

15,700

0.5%
15,602

15,700

0.5%
Fleetwash, Inc.
New Jersey / Business Services
Senior Secured Term Loan B (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 4/30/2019)(3)(4)(30)
24,446

24,446

24,117

0.7%
Delayed Draw Term Loan – $15,000 Commitment (expires 4/30/2019)(4)(33)
—

—

(202
)
—%
24,446

23,915

0.7%
Focus Brands, Inc.
Georgia / Consumer Services
Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 8/21/2018)(4)(27)(31)
18,000

17,862

18,000

0.5%
17,862

18,000

0.5%
Galaxy XV CLO, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 18.15%)(24)(32)
39,275

29,195

29,001

0.8%
29,195

29,001

0.8%
Galaxy XVI CLO, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.96%)(24)(32)
24,575

19,420

18,092

0.5%
19,420

18,092

0.5%
Galaxy XVII CLO, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.67%)(24)(25)(32)
39,905

31,376

29,034

0.8%
31,376

29,034

0.8%
Global Employment Solutions, Inc.
Colorado / Business Services
Senior Secured Term Loan (10.25% (LIBOR + 9.25% with 1.00% LIBOR floor), due 6/26/2020)(3)(4)(31)
49,379

49,379

48,893

1.4%
49,379

48,893

1.4%
Halcyon Loan Advisors Funding 2012-1 Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 21.06%)(24)(32)
23,188

18,672

18,969

0.6%
18,672

18,969

0.6%
Halcyon Loan Advisors Funding 2013-1 Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 23.80%)(24)(32)
40,400

32,563

33,415

1.0%
32,563

33,415

1.0%

See notes to consolidated financial statements.
11

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Halcyon Loan Advisors Funding 2014-1 Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 17.25%)(24)(32)
$
24,500

$
18,853

$
17,435

0.5%
18,853

17,435

0.5%
Halcyon Loan Advisors Funding 2014-2 Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 20.67%)(24)(25)(32)
41,164

31,691

31,344

0.9%
31,691

31,344

0.9%
Halcyon Loan Advisors Funding 2015-3 Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 19.00%)(24)(25)(32)
39,598

40,552

38,102

1.1%
40,552

38,102

1.1%
HarbourView CLO VII, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 16.12%)(24)(25)(32)
19,025

14,516

12,179

0.4%
14,516

12,179

0.4%
Harley Marine Services, Inc.
Washington / Transportation
Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 12/20/2019)(3)(4)(27)(30)
9,000

8,878

8,878

0.3%
8,878

8,878

0.3%
Hollander Sleep Products, LLC
Florida / Durable Consumer Products
Senior Secured Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 10/21/2020)(3)(4)(30)
22,275

22,275

21,396

0.6%
22,275

21,396

0.6%
ICV-CAS Holdings, LLC
New York / Transportation
Escrow Receivable
—

—

58

—%
—

—

58

—%
Instant Web, LLC
Minnesota / Media
Senior Secured Term Loan A (5.50% (LIBOR + 4.50% with 1.00% LIBOR floor), due 3/28/2019)(4)(30)
115,442

115,442

115,442

3.4%
Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 3/28/2019)(3)(4)(30)
150,100

150,100

150,100

4.3%
Senior Secured Term Loan C (12.75% (LIBOR + 11.75% with 1.00% LIBOR floor), due 3/28/2019)(4)(30)
27,000

27,000

27,000

0.8%
Delayed Draw Term Loan – $16,000 Commitment (expires 5/29/2016)(33)
—

—

—

—%
292,542

292,542

8.5%
InterDent, Inc.
California / Healthcare
Senior Secured Term Loan A (6.25% (LIBOR + 5.50% with 0.75% LIBOR floor), due 8/3/2017)(4)(31)
79,759

79,759

79,759

2.3%
Senior Secured Term Loan B (11.25% (LIBOR + 10.50% with 0.75% LIBOR floor), due 8/3/2017)(3)(4)(31)
131,125

131,125

129,979

3.8%
210,884

209,738

6.1%
JAC Holding Corporation
Michigan / Transportation
Senior Secured Note (11.50%, due 10/1/2019)(27)
2,868

2,868

2,777

0.1%
2,868

2,777

0.1%
Jefferson Mill CLO Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 10.40%)(24)(25)(32)
19,500

16,925

12,241

0.4%
16,925

12,241

0.4%
JHH Holdings, Inc.
Texas / Healthcare
Second Lien Term Loan (11.25% (LIBOR + 10.00% with 1.25% LIBOR floor) plus 0.50% PIK, due 3/30/2019)(3)(4)(6)(30)
35,432

35,432

35,432

1.0%
35,432

35,432

1.0%

See notes to consolidated financial statements.
12

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
LaserShip, Inc.
Virginia / Transportation
Senior Secured Term Loan A (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor) plus 2.00% PIK, due 3/18/2019)(4)(6)(31)
$
34,629

$
34,629

$
29,495

0.9%
Senior Secured Term Loan B (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor) plus 2.00% PIK, due 3/18/2019)(3)(4)(6)(31)
21,245

21,245

18,095

0.5%
55,874

47,590

1.4%
LCM XIV Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 17.71%)(24)(32)
30,500

23,256

22,225

0.6%
23,256

22,225

0.6%
Madison Park Funding IX, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 20.38%)(24)(32)
31,110

22,617

23,670

0.7%
22,617

23,670

0.7%
Matrixx Initiatives, Inc.
New Jersey / Pharmaceuticals
Senior Secured Term Loan A (7.50% (LIBOR + 6.00% with 1.50% LIBOR floor), due 8/9/2018)(3)(4)(30)
32,327

32,327

32,260

0.9%
Senior Secured Term Loan B (12.50% (LIBOR + 11.00% with 1.50% LIBOR floor), due 8/9/2018)(3)(4)(30)
40,562

40,562

40,562

1.2%
72,889

72,822

2.1%
Maverick Healthcare Equity, LLC
Arizona / Healthcare
Preferred Units (1,250,000 units)
—

1,252

2,037

0.1%
Class A Common Units (1,250,000 units)
—

—

895

—%
1,252

2,932

0.1%
Mineral Fusions Natural Brands
Colorado / Personal & Nondurable Consumer Products
Membership Interest (1.43%)(40)
—

—

266

—%
—

266

—%
Mountain View CLO 2013-I Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 16.24%)(24)(32)
43,650

34,466

31,761

0.9%
34,466

31,761

0.9%
Mountain View CLO IX Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 16.81%)(24)(25)(32)
47,830

43,830

39,129

1.1%
43,830

39,129

1.1%
Nathan's Famous, Inc.
New York / Food Products
Senior Secured Notes (10.00%, due 3/15/2020)(27)
3,000

3,000

3,000

0.1%
3,000

3,000

0.1%
NCP Finance Limited Partnership(37)
Ohio / Consumer Finance
Subordinated Secured Term Loan (11.00% (LIBOR + 9.75% with 1.25% LIBOR floor), due 9/30/2018)(3)(4)(27)(31)(32)
16,169

15,977

16,125

0.5%
15,977

16,125

0.5%
Nixon, Inc.
California / Durable Consumer Products
Senior Secured Term Loan (9.50% plus 3.00% PIK, due 4/16/2018)(3)(6)(27)
14,192

14,061

13,133

0.4%
14,061

13,133

0.4%
Octagon Investment Partners XV, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 17.20%)(24)(32)
32,921

26,520

23,862

0.7%
26,520

23,862

0.7%
Octagon Investment Partners XVIII, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 20.20%)(24)(25)(32)
28,200

20,456

19,547

0.6%
20,456

19,547

0.6%

See notes to consolidated financial statements.
13

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Onyx Payments(43)
Texas / Diversified Financial Services
Revolving Line of Credit – $5,000 Commitment (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 9/10/2016)(4)(30)(33)
$
1,000

$
1,000

$
1,000

—%
Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 9/10/2019)(3)(4)(30)
49,884

49,884

49,884

1.5%
Senior Secured Term Loan B (13.50% (LIBOR + 12.50% with 1.00% LIBOR floor), due 9/10/2019)(3)(4)(30)
59,389

59,389

59,337

1.7%
110,273

110,221

3.2%
Pacific World Corporation
California / Personal & Nondurable Consumer Products
Revolving Line of Credit – $15,000 Commitment (8.00% (LIBOR + 7.00% with 1.00% LIBOR floor), due 9/26/2020)(4)(31)(33)
2,500

2,500

2,500

0.1%
Senior Secured Term Loan A (6.00% (LIBOR + 5.00% with 1.00% LIBOR floor), due 9/26/2020)(4)(31)
98,250

98,250

90,349

2.6%
Senior Secured Term Loan B (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 9/26/2020)(3)(4)(31)
98,250

98,250

72,714

2.1%
199,000

165,563

4.8%
Pelican Products, Inc.
California / Durable Consumer Products
Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 4/9/2021)(4)(27)(30)
17,500

17,486

16,319

0.5%
17,486

16,319

0.5%
PeopleConnect Intermediate, LLC (f/k/a Intelius, Inc.)
Washington / Software & Computer Services
Revolving Line of Credit – $1,500 Commitment (9.50% (LIBOR + 8.50% with 1.00% LIBOR floor), due 7/1/2016)(4)(30)(33)
—

—

—

—%
Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 7/1/2020)(3)(4)(30)
21,142

21,142

20,848

0.6%
Senior Secured Term Loan B (12.50% (LIBOR + 11.50% with 1.00% LIBOR floor), due 7/1/2020)(3)(4)(30)
21,321

21,321

20,872

0.6%
42,463

41,720

1.2%
PGX Holdings, Inc.(39)
Utah / Consumer Services
Second Lien Term Loan (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 9/29/2021)(3)(4)(31)(28)
135,000

135,000

135,000

3.9%
135,000

135,000

3.9%
Photonis Technologies SAS
France / Aerospace & Defense
First Lien Term Loan (8.50% (LIBOR + 7.50% with 1.00% LIBOR floor), due 9/18/2019)(4)(27)(30)(32)
10,255

10,072

9,388

0.3%
10,072

9,388

0.3%
Pinnacle (US) Acquisition Co. Limited
Texas / Software & Computer Services
Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 8/3/2020)(4)(27)(30)
7,037

6,910

5,406

0.2%
6,910

5,406

0.2%
PlayPower, Inc.
North Carolina / Durable Consumer Products
Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 6/23/2022)(3)(4)(27)(30)
11,000

10,850

10,824

0.3%
10,850

10,824

0.3%
Prime Security Services Borrower, LLC
Illinois / Consumer Services
Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 7/1/2022)(4)(27)(30)
10,000

9,864

9,864

0.3%
9,864

9,864

0.3%
PrimeSport, Inc.
Georgia / Hotels, Restaurants & Leisure
Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 2/11/2021)(3)(4)(30)
53,837

53,837

53,466

1.6%
Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 2/11/2021)(3)(4)(30)
74,500

74,500

74,500

2.1%
128,337

127,966

3.7%

See notes to consolidated financial statements.
14

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Prince Mineral Holding Corp.
New York / Metal Services & Minerals
Senior Secured Term Loan (11.50%, due 12/15/2019)(27)
$
10,000

$
9,929

$
8,204

0.2%
9,929

8,204

0.2%
Rocket Software, Inc.
Massachusetts / Software & Computer Services
Second Lien Term Loan (10.25% (LIBOR + 8.75% with 1.50% LIBOR floor), due 2/8/2019)(3)(4)(27)(30)
20,000

19,840

20,000

0.6%
19,840

20,000

0.6%
Royal Holdings, Inc.
Indiana / Chemicals
Second Lien Term Loan (8.50% (LIBOR + 7.50% with 1.00% LIBOR floor), due 6/19/2023)(4)(27)(30)
5,000

4,966

4,707

0.1%
4,966

4,707

0.1%
SCS Merger Sub, Inc. (Sirius)
Texas / Software & Computer Services
Second Lien Term Loan (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 10/30/2023)(3)(4)(27)(31)
20,000

19,438

19,438

0.6%
19,438

19,438

0.6%
Security Alarm Financing Enterprises, L.P.(44)
California / Consumer Services
Subordinated Unsecured Notes (11.50% (LIBOR + 9.50% with 2.00% LIBOR floor), due 12/19/2020)(4)(31)
25,000

25,000

22,717

0.7%
25,000

22,717

0.7%
SESAC Holdco II LLC
Tennessee / Media
Second Lien Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 4/22/2021)(3)(4)(27)(30)
10,000

9,872

9,871

0.3%
9,872

9,871

0.3%
SITEL Worldwide Corporation
Tennessee / Business Services
Second Lien Term Loan (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 9/18/2022)(4)(27)(30)
16,000

15,703

15,220

0.4%
15,703

15,220

0.4%
Small Business Whole Loan Portfolio
Various / Online Lending
908 small business loans purchased from On Deck Capital, Inc.(38)
20,015

20,015

20,383

0.6%
Subordinated Notes (Residual Interest, current yield -4.01%) in MarketPlace Loan Trust, Series 2015-OD2(32)
—

719

391

—%
20,734

20,774

0.6%
Spartan Energy Services, Inc.
Louisiana / Oil & Gas Services
Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 12/28/2017)(4)(31)
13,156

13,156

10,257

0.3%
Senior Secured Term Loan B (11.00% (LIBOR + 10.00% with 1.00% LIBOR floor), due 12/28/2017)(4)(31)
13,669

13,669

—

—%
26,825

10,257

0.3%
Speedy Group Holdings Corp.
Canada / Consumer Finance
Senior Unsecured Notes (12.00%, due 11/15/2017)(27)(29)(32)
15,000

15,000

10,244

0.3%
15,000

10,244

0.3%
Stryker Energy, LLC
Ohio / Oil & Gas Production
Overriding Royalty Interests(18)
—

—

—

—%
—

—

—%
Sudbury Mill CLO Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 11.21%)(24)(32)
28,200

21,090

17,155

0.5%
21,090

17,155

0.5%
Symphony CLO IX Ltd.
Cayman Islands / Structured Finance
Preference Shares (Residual Interest, current yield 14.27%)(24)(32)
45,500

33,187

30,045

0.9%
33,187

30,045

0.9%

See notes to consolidated financial statements.
15

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Symphony CLO XIV Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 11.41%)(24)(25)(32)
$
49,250

$
40,217

$
34,520

1.0%
40,217

34,520

1.0%
Symphony CLO XV, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 13.40%)(24)(32)
50,250

44,797

38,389

1.1%
44,797

38,389

1.1%
System One Holdings, LLC
Pennsylvania / Business Services
Senior Secured Term Loan (11.25% (LIBOR + 10.50% with 0.75% LIBOR floor), due 11/17/2020)(3)(4)(31)
104,553

104,553

104,553

3.1%
104,553

104,553

3.1%
TouchTunes Interactive Networks, Inc.
New York / Media
Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 5/29/2022)(4)(27)(30)
5,000

4,933

4,906

0.1%
4,933

4,906

0.1%
Traeger Pellet Grills LLC
Oregon / Durable Consumer Products
Senior Secured Term Loan A (6.50% (LIBOR + 4.50% with 2.00% LIBOR floor), due 6/18/2018)(3)(4)(30)
34,800

34,800

34,103

1.0%
Senior Secured Term Loan B (11.50% (LIBOR + 9.50% with 2.00% LIBOR floor), due 6/18/2018)(3)(4)(30)
36,600

36,600

35,933

1.0%
71,400

70,036

2.0%
Transaction Network Services, Inc.
Virginia / Telecommunication Services
Second Lien Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 8/14/2020)(4)(27)(30)
4,410

4,391

4,296

0.1%
4,391

4,296

0.1%
Trinity Services Group, Inc.(35)
Florida / Food Products
Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 8/13/2019)(4)(35)
9,676

9,676

9,676

0.3%
Senior Secured Term Loan B (11.50% (LIBOR + 10.50% with 1.00% LIBOR floor), due 8/13/2019)(3)(4)(35)
100,000

100,000

100,000

2.9%
109,676

109,676

3.2%
United Sporting Companies, Inc.(5)
South Carolina / Durable Consumer Products
Second Lien Term Loan (12.75% (LIBOR + 11.00% with 1.75% LIBOR floor), due 5/16/2018)(3)(4)(5)(31)
140,847

140,847

137,751

4.0%
140,847

137,751

4.0%
United States Environmental Services, LLC
Texas / Commercial Services
Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 3/31/2019)(3)(4)(30)
22,950

22,950

20,752

0.6%
Senior Secured Term Loan B (13.50% (LIBOR + 12.50% with 1.00% LIBOR floor), due 3/31/2019)(3)(4)(30)
36,000

36,000

31,619

0.9%
58,950

52,371

1.5%
Universal Fiber Systems, LLC(5)
Virginia / Textiles, Apparel & Luxury Goods
Second Lien Term Loan (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 10/02/2022)(3)(4)(27)(31)
37,000

36,314

36,314

1.1%
36,314

36,314

1.1%
USG Intermediate, LLC
Texas / Durable Consumer Products
Revolving Line of Credit – $2,500 Commitment (10.75% (LIBOR + 9.75% with 1.00% LIBOR floor), due 4/15/2016)(4)(31)(33)
1,000

1,000

1,000

—%
Senior Secured Term Loan A (8.25% (LIBOR + 7.25% with 1.00% LIBOR floor), due 4/15/2020)(3)(4)(31)
17,359

17,359

17,178

0.5%
Senior Secured Term Loan B (13.25% (LIBOR + 12.25% with 1.00% LIBOR floor), due 4/15/2020)(3)(4)(31)
20,140

20,140

19,154

0.6%
Equity
—

1

—

—%
38,500

37,332

1.1%

See notes to consolidated financial statements.
16

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

March 31, 2016 (Unaudited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Venio LLC
Pennsylvania / Business Services
Second Lien Term Loan (12.00% (LIBOR + 9.50% with 2.50% LIBOR floor) plus 2.00% default interest, in non-accrual status effective 12/31/15, due 2/19/2020)(4)(30)
$
17,000

$
17,000

$
12,911

0.4%
17,000

12,911

0.4%
Voya CLO 2012-2, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 18.83%)(24)(32)
38,070

28,421

28,165

0.8%
28,421

28,165

0.8%
Voya CLO 2012-3, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 18.55%)(24)(32)
46,632

34,930

33,437

1.0%
34,930

33,437

1.0%
Voya CLO 2012-4, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 18.72%)(24)(32)
40,613

30,957

30,768

0.9%
30,957

30,768

0.9%
Voya CLO 2014-1, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 18.90%)(24)(25)(32)
32,383

26,505

25,561

0.7%
26,505

25,561

0.7%
Washington Mill CLO Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 9.56%)(24)(25)(32)
22,600

18,718

14,687

0.4%
18,718

14,687

0.4%
Water Pik, Inc.
Colorado / Personal & Nondurable Consumer Products
Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 1/8/2021)(4)(27)(30)
15,439

15,078

14,746

0.4%
15,078

14,746

0.4%
Wheel Pros, LLC
Colorado / Business Services
Senior Subordinated Secured Note (11.00% (LIBOR + 7.00% with 4.00% LIBOR floor), due 6/29/2020)(3)(4)(30)
12,000

12,000

11,998

0.3%
Subordinated Secured (11.00% (LIBOR + 7.00% with 4.00% LIBOR floor), due 6/29/2020)(3)(4)(30)
5,460

5,460

5,460

0.2%
17,460

17,458

0.5%
Total Non-Control/Non-Affiliate Investments (Level 3)
$
4,238,156

$
3,994,994

116.2%
Total Portfolio Investments
$
6,208,157

$
6,005,105

175.5%


See notes to consolidated financial statements.
17

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Control Investments (greater than 25.00% voting control)(49)
American Property REIT Corp.(8)
Various / Real Estate
Senior Secured Term Loan (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(4)(6)(30)
$
78,077

$
78,077

$
78,077

2.1%
Common Stock (301,845 shares)
—

22,115

32,098

0.9%
Net Operating Income Interest (5% of Net Operating Income)
—

—

8,081

0.2%
100,192

118,256

3.2%
Arctic Energy Services, LLC(9)
Wyoming / Oil & Gas Services
Senior Secured Term Loan (12.00% (LIBOR + 9.00% with 3.00% LIBOR floor), due 5/5/2019)(3)(4)
31,640

31,640

31,640

0.9%
Senior Subordinated Term Loan (14.00% (LIBOR + 11.00% with 3.00% LIBOR floor), due 5/5/2019)(3)(4)
20,230

20,230

20,230

0.5%
Class A Units (700 units)
—

8,879

8,374

0.2%
Class C Units (10 units)
—

127

120

—%
60,876

60,364

1.6%
CCPI Inc.(10)
Ohio / Manufacturing
Senior Secured Term Loan A (10.00%, due 12/31/2017)(3)
16,763

16,763

16,763

0.5%
Senior Secured Term Loan B (12.00% plus 7.00% PIK, due 12/31/2017)(6)
8,844

8,844

8,844

0.2%
Common Stock (14,857 shares)
—

8,553

15,745

0.4%
34,160

41,352

1.1%
CP Energy Services Inc.(11)
Oklahoma / Oil & Gas Services
Senior Secured Term Loan A to CP Well Testing, LLC (7.00% (LIBOR + 5.00% with 2.00% LIBOR floor), due 4/1/2019)(4)(30)
11,035

11,035

11,035

0.3%
Senior Secured Term Loan B to CP Well Testing, LLC (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor) plus 7.50% PIK, due 4/1/2019)(3)(4)(6)(30)
74,493

74,493

74,493

2.0%
Second Lien Term Loan to CP Well Testing, LLC (9.00% (LIBOR + 7.00% with 2.00% LIBOR floor) plus 9.00% PIK, due 4/1/2019)(4)(6)(30)
15,563

15,563

5,481

0.2%
Common Stock (2,924 shares)
—

15,227

—

—%
116,318

91,009

2.5%
Credit Central Loan Company, LLC(12)
South Carolina / Consumer Finance
Subordinated Term Loan (10.00% plus 10.00% PIK, due 6/26/2019)(6)(32)
36,333

36,333

36,333

1.0%
Class A Shares (7,500,000 shares)(32)
—

11,633

14,529

0.4%
Net Revenues Interest (25% of Net Revenues)(32)
—

—

4,310

0.1%
47,966

55,172

1.5%
Echelon Aviation LLC
New York / Aerospace & Defense
Senior Secured Term Loan (11.75% (LIBOR + 9.75% with 2.00% LIBOR floor) plus 2.25% PIK, due 3/31/2022)(4)(6)(30)
40,808

40,808

40,808

1.1%
Membership Interest (99%)
—

19,907

28,133

0.8%
60,715

68,941

1.9%
Edmentum Ultimate Holdings, LLC(13)
Minnesota / Consumer Services
Second Lien Revolving Credit Facility to Edmentum, Inc. – $7,834 Commitment (5.00%, due 6/9/2020)(33)(29)
4,896

4,896

4,896

0.1%
Unsecured Senior PIK Note (8.50% PIK, due 6/9/2020)(6)
5,875

5,875

5,875

0.2%
Unsecured Junior PIK Note (10.00% PIK, due 6/9/2020)(6)
19,868

19,868

19,868

0.5%
Class A Common Units (370,964.14 units)
—

6,577

6,577

0.2%
37,216

37,216

1.0%

See notes to consolidated financial statements.
18

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Control Investments (greater than 25.00% voting control)(49)
First Tower Finance Company LLC(14)
Mississippi / Consumer Finance
Subordinated Term Loan to First Tower, LLC (10.00% plus 12.00% PIK, due 6/24/2019)(6)(32)
$
251,578

$
251,578

$
251,578

6.8%
Class A Shares (83,729,323 shares)(32)
—

66,473

114,372

3.1%
318,051

365,950

9.9%
Freedom Marine Solutions, LLC(15)
Louisiana / Oil & Gas Services
Senior Secured Note to Vessel Company, LLC (18.00%, due 12/12/2016)
3,500

3,500

3,500

0.1%
Senior Secured Note to Vessel Company II, LLC (13.00%, due 11/25/2018)
13,000

12,504

8,680

0.2%
Senior Secured Note to Vessel Company III, LLC (13.00%, due 12/3/2018)
16,000

16,000

13,790

0.4%
Membership Interest (100%)
—

7,808

1,120

—%
39,812

27,090

0.7%
Gulf Coast Machine & Supply Company
Texas / Manufacturing
Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), in non-accrual status effective 1/1/2015, due 10/12/2017)(4)(30)
26,844

26,000

6,918

0.2%
Series A Convertible Preferred Stock (99,900 shares)
—

25,950

—

—%
51,950

6,918

0.2%
Harbortouch Payments, LLC(16)
Pennsylvania / Business Services
Senior Secured Term Loan A (9.00% (LIBOR + 7.00% with 2.00% LIBOR floor), due 9/30/2017)(3)(4)(30)
128,980

128,980

128,980

3.5%
Senior Secured Term Loan B (5.50% (LIBOR + 4.00% with 1.50% LIBOR floor) plus 5.50% PIK, due 3/31/2018)(4)(6)(30)
144,878

144,878

144,878

3.9%
Senior Secured Term Loan C (13.00% (LIBOR + 9.00% with 4.00% LIBOR floor), due 9/29/2018)(4)(30)
22,876

22,876

22,876

0.6%
Class C Shares (535 shares)
—

8,725

80,202

2.2%
305,459

376,936

10.2%
MITY, Inc.(17)
Utah / Durable Consumer Products
Senior Secured Note A (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor), due 3/19/2019)(3)(4)(30)
18,250

18,250

18,250

0.5%
Senior Secured Note B (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor) plus 10.00% PIK, due 3/19/2019)(4)(6)(30)
16,301

16,301

16,301

0.4%
Subordinated Unsecured Note to Broda Enterprises ULC (10.00%, due on demand)(32)
7,200

7,200

5,827

0.2%
Common Stock (42,053 shares)
—

6,849

10,417

0.3%
48,600

50,795

1.4%
National Property REIT Corp.(18)
Various / Real Estate
Senior Secured Term Loan A (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(4)(6)(30)
202,629

202,629

202,629

5.5%
Senior Secured Term Loan C (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 7.50% PIK, due 4/1/2019)(4)(6)(30)
44,147

44,147

44,147

1.2%
Senior Secured Term Loan D (14.00% (LIBOR + 12.00% with 2.00% LIBOR floor) plus 4.50% PIK, due 4/1/2019)(4)(6)(30)
67,443

67,443

67,443

1.8%
Senior Secured Term Loan A to ACL Loan Holdings, Inc. (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 7.50% PIK, due 4/1/2019)(4)(6)(30)
20,413

20,413

20,413

0.6%
Senior Secured Term Loan B to ACL Loan Holdings, Inc. (14.00% (LIBOR + 12.00% with 2.00% LIBOR floor) plus 4.50% PIK, due 4/1/2019)(4)(6)(30)
30,582

30,582

30,582

0.8%
Common Stock (643,175 shares)
—

84,446

87,002

2.3%
Net Operating Income Interest (5% of Net Operating Income)
—

—

19,673

0.5%
449,660

471,889

12.7%

See notes to consolidated financial statements.
19

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Control Investments (greater than 25.00% voting control)(49)
Nationwide Loan Company LLC(19)
Illinois / Consumer Finance
Senior Subordinated Term Loan to Nationwide Acceptance LLC (10.00% plus 10.00% PIK, due 6/18/2019)(6)(32)
$
14,820

$
14,820

$
14,820

0.4%
Class A Shares (26,974,454.27 shares)(32)
—

14,795

19,730

0.5%
29,615

34,550

0.9%
NMMB, Inc.(20)
New York / Media
Senior Secured Note (14.00%, due 5/6/2016)
3,714

3,714

3,714

0.1%
Senior Secured Note to Armed Forces Communications, Inc. (14.00%, due 5/6/2016)
7,000

7,000

7,000

0.2%
Series A Preferred Stock (7,200 shares)
—

7,200

1,338

—%
Series B Preferred Stock (5,669 shares)
—

5,669

—

—%
23,583

12,052

0.3%
R-V Industries, Inc.
Pennsylvania / Manufacturing
Senior Subordinated Note (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 6/12/2018)(3)(4)(30)
29,237

29,237

29,237

0.8%
Common Stock (545,107 shares)
—

5,087

8,246

0.2%
Warrant (to purchase 200,000 shares of Common Stock, expires 6/30/2017)
—

1,682

3,025

0.1%
36,006

40,508

1.1%
United Property REIT Corp.(21)
Various / Real Estate
Senior Term Loan (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(4)(6)(30)
62,768

62,768

62,768

1.7%
Common Stock (74,449 shares)
—

12,860

11,216

0.3%
Net Operating Income Interest (5% of Net Operating Income)
—

—

10,701

0.3%
75,628

84,685

2.3%
Valley Electric Company, Inc.(22)
Washington / Construction & Engineering
Senior Secured Note to Valley Electric Co. of Mt. Vernon, Inc. (8.00% (LIBOR + 5.00% with 3.00% LIBOR floor) plus 2.50% PIK, due 12/31/2017)(3)(4)(6)(30)
10,340

10,340

10,340

0.3%
Senior Secured Note (10.00% plus 8.50% PIK, due 12/31/2018)(6)
22,293

22,293

20,157

0.5%
Common Stock (50,000 shares)
—

26,204

—

—%
58,837

30,497

0.8%
Wolf Energy, LLC
Kansas / Oil & Gas Production
Senior Secured Promissory Note secured by assets formerly owned by H&M (18.00%, in non-accrual status effective 4/15/2013, due 4/15/2018)
32,112

—

—

—%
Membership Interest (100%)
—

—

—

—%
Net Profits Interest (8% of Equity Distributions)(7)
—

—

22

—%
—

22

—%
Total Control Investments
$
1,894,644

$
1,974,202

53.3%

Affiliate Investments (5.00% to 24.99% voting control)(49)
BNN Holdings Corp.
Michigan / Healthcare
Senior Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 8/29/2019)(3)(4)(29)
$
21,182

$
21,182

$
21,182

0.6%
Senior Term Loan B (11.50% (LIBOR + 10.50% with 1.00% LIBOR floor), due 8/29/2019)(3)(4)(29)
21,740

21,740

21,740

0.6%
Series A Preferred Stock (9,925.455 shares)(26)
1,780

2,569

—%
Series B Preferred Stock (1,753.636 shares)(26)
448

454

—%
45,150

45,945

1.2%
Total Affiliate Investments
$
45,150

$
45,945

1.2%

See notes to consolidated financial statements.
20

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Aderant North America, Inc.
Georgia / Software & Computer Services
Second Lien Term Loan (10.00% (LIBOR + 8.75% with 1.25% LIBOR floor), due 6/20/2019)(4)(27)(31)
$
7,000

$
6,928

$
7,000

0.2%
6,928

7,000

0.2%
AFI Shareholder, LLC
(f/k/a Aircraft Fasteners International, LLC)
California / Machinery
Class A Units (32,500 units)
—

376

563

—%
376

563

—%
Airmall Inc.
Pennsylvania / Property Management
Escrow Receivable
—

5,880

3,814

0.1%
5,880

3,814

0.1%
Ajax Rolled Ring & Machine, LLC(42)
South Carolina / Manufacturing
Escrow Receivable
—

1,264

2,170

0.1%
1,264

2,170

0.1%
ALG USA Holdings, LLC
Pennsylvania / Hotels, Restaurants & Leisure
Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 2/28/2020)(4)(27)(31)
11,771

11,593

11,771

0.3%
11,593

11,771

0.3%
American Gilsonite Company
Utah / Metal Services & Minerals
Second Lien Term Loan (11.50%, due 9/1/2017)(27)
15,755

15,755

14,287

0.4%
Membership Interest (99.9999%)(36)
—

—

—

—%
15,755

14,287

0.4%
Apidos CLO IX
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 22.56%)(24)(32)
23,525

20,644

22,325

0.6%
20,644

22,325

0.6%
Apidos CLO XI
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.64%)(24)(32)
38,340

31,485

32,108

0.9%
31,485

32,108

0.9%
Apidos CLO XII
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 17.68%)(24)(32)
44,063

37,751

38,817

1.0%
37,751

38,817

1.0%
Apidos CLO XV
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.07%)(24)(32)
36,515

33,958

30,911

0.8%
33,958

30,911

0.8%
Arctic Glacier U.S.A., Inc.
Minnesota / Food Products
Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 11/10/2019)(3)(4)(30)
150,000

150,000

149,180

4.0%
150,000

149,180

4.0%
Ark-La-Tex Wireline Services, LLC
Louisiana / Oil & Gas Services
Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 4/8/2019)(4)(31)
21,743

21,743

20,042

0.5%
Senior Secured Term Loan B (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 4/8/2019)(4)(31)
23,697

23,697

21,675

0.6%
45,440

41,717

1.1%
Armor Holding II LLC
New York / Diversified Financial Services
Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 12/26/2020)(3)(4)(27)(30)
7,000

6,888

6,480

0.2%
6,888

6,480

0.2%
Atlantis Health Care Group (Puerto Rico), Inc.
Puerto Rico / Healthcare
Revolving Line of Credit – $4,000 Commitment (13.00% (LIBOR + 11.00% with 2.00% LIBOR floor), due 8/21/2016)(4)(30)(33)
2,350

2,350

2,350

0.1%
Senior Term Loan (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 2/21/2018)(3)(4)(30)
38,561

38,561

35,189

0.9%
40,911

37,539

1.0%

See notes to consolidated financial statements.
21

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
BAART Programs, Inc.
California / Healthcare
Revolving Line of Credit – $5,000 Commitment (8.75% (LIBOR + 8.25% with 0.50% LIBOR floor), due 6/30/2018)(4)(30)(33)
$
1,000

$
1,000

$
1,000

—%
Senior Secured Term Loan A (6.25% (LIBOR + 5.75% with 0.50% LIBOR floor), due 6/30/2020)(4)(30)
21,500

21,500

21,500

0.6%
Senior Secured Term Loan B (11.25% (LIBOR + 10.75% with 0.50% LIBOR floor), due 6/30/2020)(4)(30)
21,500

21,500

21,500

0.6%
Delayed Draw Term Loan – $10,500 Commitment (expires 12/31/2015)(33)
—

—

—

—%
44,000

44,000

1.2%
Babson CLO Ltd. 2014-III
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 14.25%)(24)(25)(32)
52,250

47,799

47,148

1.3%
47,799

47,148

1.3%
Broder Bros., Co.
Pennsylvania / Textiles, Apparel & Luxury Goods
Senior Secured Notes (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 4/8/2019)(3)(4)(31)(45)
252,200

252,200

252,200

6.8%
252,200

252,200

6.8%
Brookside Mill CLO Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 19.25%)(24)(32)
26,000

21,432

24,566

0.7%
21,432

24,566

0.7%
Caleel + Hayden, LLC
Colorado / Personal & Nondurable Consumer Products
Membership Interest(40)
—

—

227

—%
—

227

—%
Capstone Logistics Acquisition, Inc.
Georgia / Business Services
Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 10/7/2022)(3)(4)(31)
102,500

101,891

101,891

2.8%
101,891

101,891

2.8%
Cent CLO 17 Limited
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 14.90%)(24)(32)
24,870

20,309

20,922

0.6%
20,309

20,922

0.6%
Cent CLO 20 Limited
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 12.49%)(24)(32)
40,275

35,724

33,505

0.9%
35,724

33,505

0.9%
Cent CLO 21 Limited
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 13.42%)(24)(25)(32)
48,528

43,038

41,910

1.1%
43,038

41,910

1.1%
CIFC Funding 2011-I, Ltd.
Cayman Islands / Structured Finance
Class D Senior Secured Notes (5.28% (LIBOR + 5.00%, due 1/19/2023)(4)(23)(30)(32)
19,000

15,604

18,175

0.5%
Class E Subordinated Notes (7.28% (LIBOR + 7.00%, due 1/19/2023)(4)(23)(30)(32)
15,400

13,009

14,223

0.4%
28,613

32,398

0.9%
CIFC Funding 2013-III, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 14.56%)(24)(32)
44,100

35,412

35,599

1.0%
35,412

35,599

1.0%
CIFC Funding 2013-IV, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 14.87%)(24)(32)
45,500

36,124

38,265

1.0%
36,124

38,265

1.0%
CIFC Funding 2014-IV Investor, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 13.83%)(24)(25)(32)
41,500

34,921

36,195

1.0%
34,921

36,195

1.0%

See notes to consolidated financial statements.
22

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Cinedigm DC Holdings, LLC
New York / Software & Computer Services
Senior Secured Term Loan (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/31/2021)(4)(6)(30)
$
67,449

$
67,399

$
67,449

1.8%
67,399

67,449

1.8%
Coverall North America, Inc.
Florida / Commercial Services
Senior Secured Term Loan (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor), due 12/17/2017)(3)(4)(31)
49,922

49,922

49,922

1.3%
49,922

49,922

1.3%
Crosman Corporation
New York / Manufacturing
Second Lien Term Loan (12.00% (LIBOR + 10.50% with 1.50% LIBOR floor), due 12/30/2019)(3)(4)(31)
40,000

40,000

35,973

1.0%
40,000

35,973

1.0%
Diamondback Operating, LP
Oklahoma / Oil & Gas Production
Net Profits Interest (15% of Equity Distributions)(7)
—

—

—

—%
—

—

—%
Empire Today, LLC
Illinois / Durable Consumer Products
Senior Secured Note (11.375%, due 2/1/2017)(27)
15,700

15,518

13,070

0.4%
15,518

13,070

0.4%
Fleetwash, Inc.
New Jersey / Business Services
Senior Secured Term Loan B (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 4/30/2019)(3)(4)(30)
24,446

24,446

24,446

0.7%
Delayed Draw Term Loan – $15,000 Commitment (expires 4/30/2019)(33)
—

—

—

—%
24,446

24,446

0.7%
Focus Brands, Inc.
Georgia / Consumer Services
Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 8/21/2018)(4)(27)(31)
18,000

17,821

18,000

0.5%
17,821

18,000

0.5%
Galaxy XV CLO, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.65%)(24)(32)
35,025

27,762

29,739

0.8%
27,762

29,739

0.8%
Galaxy XVI CLO, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 13.97%)(24)(32)
24,575

20,434

20,849

0.6%
20,434

20,849

0.6%
Galaxy XVII CLO, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 13.43%)(24)(25)(32)
39,905

33,493

33,742

0.9%
33,493

33,742

0.9%
Global Employment Solutions, Inc.
Colorado / Business Services
Senior Secured Term Loan (10.25% (LIBOR + 9.25% with 1.00% LIBOR floor), due 6/26/2020)(3)(4)(31)
49,567

49,567

49,567

1.3%
49,567

49,567

1.3%
GTP Operations, LLC(34)
Texas / Software & Computer Services
Senior Secured Term Loan (10.00% (LIBOR + 5.00% with 5.00% LIBOR floor), due 12/11/2018)(3)(4)(30)
116,411

116,411

116,411

3.1%
116,411

116,411

3.1%
Halcyon Loan Advisors Funding 2012-1 Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 30.89%)(24)(32)
23,188

19,941

23,172

0.6%
19,941

23,172

0.6%
Halcyon Loan Advisors Funding 2013-1 Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 21.41%)(24)(32)
40,400

34,936

39,208

1.1%
34,936

39,208

1.1%
Halcyon Loan Advisors Funding 2014-1 Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 17.17%)(24)(32)
24,500

21,020

22,096

0.6%
21,020

22,096

0.6%

See notes to consolidated financial statements.
23

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Halcyon Loan Advisors Funding 2014-2 Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 18.73%)(24)(25)(32)
$
41,164

$
34,723

$
37,555

1.0%
34,723

37,555

1.0%
HarbourView CLO VII, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 17.84%)(24)(25)(32)
19,025

15,252

15,197

0.4%
15,252

15,197

0.4%
Harley Marine Services, Inc.
Washington / Transportation
Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 12/20/2019)(3)(4)(27)(30)
9,000

8,855

8,748

0.2%
8,855

8,748

0.2%
Hollander Sleep Products, LLC
Florida / Durable Consumer Products
Senior Secured Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 10/21/2020)(3)(4)(31)
22,444

22,444

22,444

0.6%
22,444

22,444

0.6%
ICON Health & Fitness, Inc.
Utah / Durable Consumer Products
Senior Secured Note (11.875%, due 10/15/2016)(27)
16,100

16,103

16,100

0.4%
16,103

16,100

0.4%
ICV-CSI Holdings, LLC
New York / Transportation
Membership Units (1.6 units)
—

1,639

2,400

0.1%
1,639

2,400

0.1%
Instant Web, LLC
Minnesota / Media
Senior Secured Term Loan A (5.50% (LIBOR + 4.50% with 1.00% LIBOR floor), due 3/28/2019)(4)(30)
146,363

146,363

146,363

4.0%
Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 3/28/2019)(3)(4)(30)
150,100

150,100

150,100

4.0%
Senior Secured Term Loan C (12.75% (LIBOR + 11.75% with 1.00% LIBOR floor), due 3/28/2019)(4)(30)
27,000

27,000

27,000

0.7%
Delayed Draw Term Loan – $16,000 Commitment (expires 5/29/2016)(33)
—

—

—

—%
323,463

323,463

8.7%
InterDent, Inc.
California / Healthcare
Senior Secured Term Loan A (6.25% (LIBOR + 5.25% with 1.00% LIBOR floor), due 8/3/2017)(4)(31)
125,350

125,350

125,350

3.4%
Senior Secured Term Loan B (11.25% (LIBOR + 10.25% with 1.00% LIBOR floor), due 8/3/2017)(3)(4)(31)
131,125

131,125

131,125

3.5%
256,475

256,475

6.9%
JAC Holding Corporation
Michigan / Transportation
Senior Secured Note (11.50%, due 10/1/2019)(27)
3,000

3,000

3,000

0.1%
3,000

3,000

0.1%
Jefferson Mill CLO Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.65%)(24)(25)(32)
19,500

16,928

16,928

0.5%
16,928

16,928

0.5%
JHH Holdings, Inc.
Texas / Healthcare
Second Lien Term Loan (11.25% (LIBOR + 10.00% with 1.25% LIBOR floor) plus 0.50% PIK, due 3/30/2019)(3)(4)(6)(30)
35,297

35,297

35,297

1.0%
35,297

35,297

1.0%

See notes to consolidated financial statements.
24

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
LaserShip, Inc.
Virginia / Transportation
Senior Secured Term Loan A (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor) plus 2.00% default interest, due 3/18/2019)(3)(4)(31)
$
35,156

$
35,156

$
30,778

0.8%
Senior Secured Term Loan B (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor) plus 2.00% default interest, due 3/18/2019)(3)(4)(31)
21,555

21,555

18,866

0.5%
Delayed Draw Term Loan – $6,000 Commitment (expires 12/31/2016)(33)
—

—

—

—%
56,711

49,644

1.3%
LCM XIV Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 16.70%)(24)(32)
26,500

22,636

23,163

0.6%
22,636

23,163

0.6%
Madison Park Funding IX, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 21.64%)(24)(32)
31,110

23,663

25,804

0.7%
23,663

25,804

0.7%
Matrixx Initiatives, Inc.
New Jersey / Pharmaceuticals
Senior Secured Term Loan A (7.50% (LIBOR + 6.00% with 1.50% LIBOR floor), due 8/9/2018)(3)(4)(30)
34,389

34,389

34,026

0.9%
Senior Secured Term Loan B (12.50% (LIBOR + 11.00% with 1.50% LIBOR floor), due 8/9/2018)(3)(4)(30)
40,562

40,562

40,562

1.1%
74,951

74,588

2.0%
Maverick Healthcare Equity, LLC
Arizona / Healthcare
Preferred Units (1,250,000 units)
—

1,252

2,190

0.1%
Class A Common Units (1,250,000 units)
—

—

—

—%
1,252

2,190

0.1%
Mountain View CLO 2013-I Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 18.47%)(24)(32)
43,650

37,168

40,480

1.1%
37,168

40,480

1.1%
Mountain View CLO IX Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.43%)(24)(25)(32)
47,830

44,739

44,666

1.2%
44,739

44,666

1.2%
Nathan's Famous, Inc.
New York / Food Products
Senior Secured Notes (10.00%, due 3/15/2020)(27)
3,000

3,000

3,000

0.1%
3,000

3,000

0.1%
NCP Finance Limited Partnership(37)
Ohio / Consumer Finance
Subordinated Secured Term Loan (11.00% (LIBOR + 9.75% with 1.25% LIBOR floor), due 9/30/2018)(3)(4)(27)(31)(32)
16,305

16,065

16,305

0.4%
16,065

16,305

0.4%
New Century Transportation, Inc.
New Jersey / Transportation
Senior Subordinated Term Loan (12.00% (LIBOR + 10.00% with 2.00% LIBOR floor) plus 4.00% PIK, in non-accrual status effective 4/1/2014, due 2/3/2018)(4)(6)(31)
187

187

—

—%
187

—

—%
Nixon, Inc.
California / Durable Consumer Products
Senior Secured Term Loan (8.75% plus 2.75% PIK, due 4/16/2018)(3)(6)(27)
13,925

13,749

13,616

0.4%
13,749

13,616

0.4%
Octagon Investment Partners XV, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 20.72%)(24)(32)
28,571

24,515

26,461

0.7%
24,515

26,461

0.7%

See notes to consolidated financial statements.
25

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Onyx Payments(43)
Texas / Diversified Financial Services
Revolving Line of Credit – $5,000 Commitment (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 9/10/2015)(4)(30)(33)
$
2,000

$
2,000

$
2,000

0.1%
Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 9/10/2019)(3)(4)(30)
52,050

52,050

52,050

1.4%
Senior Secured Term Loan B (13.50% (LIBOR + 12.50% with 1.00% LIBOR floor), due 9/10/2019)(4)(30)
59,389

59,389

59,389

1.6%
113,439

113,439

3.1%
Pacific World Corporation
California / Personal & Nondurable Consumer Products
Revolving Line of Credit – $15,000 Commitment (8.00% (LIBOR + 7.00% with 1.00% LIBOR floor), due 9/26/2020)(4)(31)(33)
6,500

6,500

6,500

0.2%
Senior Secured Term Loan A (6.00% (LIBOR + 5.00% with 1.00% LIBOR floor), due 9/26/2020)(4)(31)
99,250

99,250

95,400

2.6%
Senior Secured Term Loan B (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 9/26/2020)(3)(4)(31)
99,250

99,250

81,772

2.2%
205,000

183,672

5.0%
Pelican Products, Inc.
California / Durable Consumer Products
Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 4/9/2021)(4)(27)(31)
17,500

17,484

17,500

0.5%
17,484

17,500

0.5%
PGX Holdings, Inc.(39)
Utah / Consumer Services
Second Lien Term Loan (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 9/29/2021)(3)(4)(31)
135,000

135,000

135,000

3.6%
135,000

135,000

3.6%
Photonis Technologies SAS
France / Aerospace & Defense
First Lien Term Loan (8.50% (LIBOR + 7.50% with 1.00% LIBOR floor), due 9/18/2019)(4)(27)(31)(32)
10,369

10,145

9,734

0.3%
10,145

9,734

0.3%
Pinnacle (US) Acquisition Co. Limited
Texas / Software & Computer Services
Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 8/3/2020)(4)(27)(30)
7,037

6,890

6,612

0.2%
6,890

6,612

0.2%
PlayPower, Inc.
North Carolina / Durable Consumer Products
Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 6/23/2022)(4)(27)(30)
10,000

9,850

9,850

0.3%
9,850

9,850

0.3%
Prime Security Services Borrower, LLC
Illinois / Consumer Services
Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 7/1/2022)(4)(27)(31)
10,000

9,850

9,850

0.3%
9,850

9,850

0.3%
PrimeSport, Inc.
Georgia / Hotels, Restaurants & Leisure
Revolving Line of Credit – $15,000 Commitment (9.50% (LIBOR + 8.50% with 1.00% LIBOR floor), due 7/31/2015)(4)(30)(33)
13,800

13,800

13,800

0.4%
Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 2/11/2021)(3)(4)(30)
54,227

54,227

54,227

1.4%
Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 2/11/2021)(3)(4)
74,500

74,500

74,500

2.0%
142,527

142,527

3.8%
Prince Mineral Holding Corp.
New York / Metal Services & Minerals
Senior Secured Term Loan (11.50%, due 12/15/2019)(27)
10,000

9,915

9,458

0.3%
9,915

9,458

0.3%

See notes to consolidated financial statements.
26

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Rocket Software, Inc.
Massachusetts / Software & Computer Services
Second Lien Term Loan (10.25% (LIBOR + 8.75% with 1.50% LIBOR floor), due 2/8/2019)(3)(4)(27)(30)
$
20,000

$
19,801

$
20,000

0.5%
19,801

20,000

0.5%
Royal Holdings, Inc.
Indiana / Chemicals
Second Lien Term Loan (8.50% (LIBOR + 7.50% with 1.00% LIBOR floor), due 6/19/2023)(4)(27)(31)
5,000

4,963

5,000

0.1%
4,963

5,000

0.1%
Ryan, LLC
Texas / Business Services
Subordinated Unsecured Notes (12.00% (LIBOR + 9.00% with 3.00% LIBOR floor) plus 3.00% PIK, due 6/30/2018)(4)(6)(30)
72,701

72,701

72,701

2.0%
72,701

72,701

2.0%
Security Alarm Financing Enterprises, L.P.(45)
California / Consumer Services
Subordinated Unsecured Notes (11.50% (LIBOR + 9.50% with 2.00% LIBOR floor), due 12/19/2020)(4)(31)
25,000

25,000

25,000

0.7%
25,000

25,000

0.7%
SESAC Holdco II LLC
Tennessee / Media
Second Lien Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 4/22/2021)(3)(4)(27)(30)
10,000

9,854

9,925

0.3%
9,854

9,925

0.3%
Small Business Whole Loan Portfolio
New York / Online Lending
40 small business loans purchased from Direct Capital Corporation(38)
492

492

362

—%
2,306 small business loans purchased from On Deck Capital, Inc.(38)
50,066

50,066

50,530

1.4%
50,558

50,892

1.4%
Spartan Energy Services, Inc.
Louisiana / Oil & Gas Services
Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 12/28/2017)(3)(4)(31)
13,422

13,422

12,973

0.3%
Senior Secured Term Loan B (11.00% (LIBOR + 10.00% with 1.00% LIBOR floor), due 12/28/2017)(3)(4)(31)
13,935

13,935

13,664

0.4%
27,357

26,637

0.7%
Speedy Group Holdings Corp.
Canada / Consumer Finance
Senior Unsecured Notes (12.00%, due 11/15/2017)(27)(32)
15,000

15,000

15,000

0.4%
15,000

15,000

0.4%
Stauber Performance Ingredients, Inc.
California / Food Products
Senior Secured Term Loan A (7.50% (LIBOR + 6.50% with 1.00% LIBOR floor), due 11/25/2019)(3)(4)(30)
9,561

9,561

9,561

0.2%
Senior Secured Term Loan B (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 11/25/2019)(3)(4)(30)
9,799

9,799

9,799

0.3%
19,360

19,360

0.5%
Stryker Energy, LLC
Ohio / Oil & Gas Production
Overriding Royalty Interests(28)
—

—

—

—%
—

—

—%
Sudbury Mill CLO Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.92%)(24)(32)
28,200

22,562

24,425

0.7%
22,562

24,425

0.7%
Symphony CLO IX Ltd.
Cayman Islands / Structured Finance
Preference Shares (Residual Interest, current yield 20.76%)(24)(32)
45,500

34,797

40,034

1.1%
34,797

40,034

1.1%
Symphony CLO XIV Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 12.24%)(24)(25)(32)
49,250

44,018

45,641

1.2%
44,018

45,641

1.2%
Symphony CLO XV, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 11.72%)(24)(32)
50,250

46,994

46,452

1.3%
46,994

46,452

1.3%

See notes to consolidated financial statements.
27

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
System One Holdings, LLC
Pennsylvania / Business Services
Senior Secured Term Loan (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 11/17/2020)(3)(4)(31)
$
68,146

$
68,146

$
68,146

1.8%
Delayed Draw Term Loan – $11,500 Commitment (expires 12/31/2015)(33)
—

—

—

—%
68,146

68,146

1.8%
Targus Group International, Inc.
California / Durable Consumer Products
First Lien Term Loan (11.75% (PRIME + 8.50%) plus 1.00% PIK and 2.00% default interest, due 5/24/2016)(4)(6)(27)
21,487

21,378

17,233

0.5%
21,378

17,233

0.5%
TB Corp.
Texas / Hotels, Restaurants & Leisure
Senior Subordinated Note (12.00% plus 1.50% PIK, due 12/19/2018)(3)(6)
23,628

23,628

23,628

0.6%
23,628

23,628

0.6%
Therakos, Inc.
New Jersey / Healthcare
Second Lien Term Loan (10.75% (LIBOR + 9.50% with 1.25% LIBOR floor), due 6/27/2018)(4)(27)(30)
13,000

12,808

13,000

0.4%
12,808

13,000

0.4%
Tolt Solutions, Inc.
South Carolina / Business Services
Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 3/7/2019)(3)(4)(30)
47,802

47,802

45,548

1.2%
Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 3/7/2019)(3)(4)(30)
48,900

48,900

46,155

1.2%
96,702

91,703

2.4%
TouchTunes Interactive Networks, Inc.
New York / Media
Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 5/29/2022)(4)(27)(31)
5,000

4,925

4,925

0.1%
4,925

4,925

0.1%
Traeger Pellet Grills LLC
Oregon / Durable Consumer Products
Senior Secured Term Loan A (6.50% (LIBOR + 4.50% with 2.00% LIBOR floor), due 6/18/2018)(3)(4)(30)
35,644

35,644

35,644

1.0%
Senior Secured Term Loan B (11.50% (LIBOR + 9.50% with 2.00% LIBOR floor), due 6/18/2018)(3)(4)(30)
36,881

36,881

36,881

1.0%
72,525

72,525

2.0%
Transaction Network Services, Inc.
Virginia / Telecommunication Services
Second Lien Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 8/14/2020)(4)(27)(31)
4,595

4,573

4,595

0.1%
4,573

4,595

0.1%
Trinity Services Group, Inc.(14)
Florida / Food Products
Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 8/13/2019)(4)(30)
9,825

9,825

9,825

0.3%
Senior Secured Term Loan B (11.50% (LIBOR + 10.50% with 1.00% LIBOR floor), due 8/13/2019)(3)(4)(30)
100,000

100,000

100,000

2.7%
109,825

109,825

3.0%
United Sporting Companies, Inc.(5)
South Carolina / Durable Consumer Products
Second Lien Term Loan (12.75% (LIBOR + 11.00% with 1.75% LIBOR floor), due 5/16/2018)(3)(4)(31)
158,238

158,238

145,618

3.9%
158,238

145,618

3.9%
United States Environmental Services, LLC
Texas / Commercial Services
Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor) plus 2.00% default interest, due 3/31/2019)(3)(4)(30)
23,250

23,250

21,551

0.6%
Senior Secured Term Loan B (11.50% (LIBOR + 10.50% with 1.00% LIBOR floor) plus 2.00% default interest, due 3/31/2019)(3)(4)(30)
36,000

36,000

33,406

0.9%
59,250

54,957

1.5%

See notes to consolidated financial statements.
28

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
USG Intermediate, LLC
Texas / Durable Consumer Products
Revolving Line of Credit – $5,000 Commitment (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 4/15/2016)(4)(31)(33)
$
—

$
—

$
—

—%
Senior Secured Term Loan A (7.50% (LIBOR + 6.50% with 1.00% LIBOR floor), due 4/15/2020)(3)(4)(31)
21,587

21,587

21,587

0.6%
Senior Secured Term Loan B (12.50% (LIBOR + 11.50% with 1.00% LIBOR floor), due 4/15/2020)(3)(4)(31)
21,695

21,695

21,695

0.6%
Equity
—

1

—

—%
43,283

43,282

1.2%
Venio LLC
Pennsylvania / Business Services
Second Lien Term Loan (12.00% (LIBOR + 9.50% with 2.50% LIBOR floor), due 2/19/2020)(3)(4)(30)
17,000

17,000

16,042

0.4%
17,000

16,042

0.4%
Voya CLO 2012-2, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 19.32%)(24)(32)
38,070

30,002

32,391

0.9%
30,002

32,391

0.9%
Voya CLO 2012-3, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 16.87%)(24)(32)
46,632

37,208

38,465

1.0%
37,208

38,465

1.0%
Voya CLO 2012-4, Ltd.
Cayman Islands / Structured Finance
Income Notes (Residual Interest, current yield 19.40%)(24)(32)
40,613

32,918

34,977

0.9%
32,918

34,977

0.9%
Voya CLO 2014-1, Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 15.25%)(24)(25)(32)
32,383

28,886

29,170

0.8%
28,886

29,170

0.8%
Washington Mill CLO Ltd.
Cayman Islands / Structured Finance
Subordinated Notes (Residual Interest, current yield 14.28%)(24)(25)(32)
22,600

19,542

20,137

0.5%
19,542

20,137

0.5%
Water Pik, Inc.
Colorado / Personal & Nondurable Consumer Products
Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 1/8/2021)(4)(27)(30)
9,147

8,796

9,147

0.2%
8,796

9,147

0.2%
Wheel Pros, LLC
Colorado / Business Services
Senior Subordinated Secured Note (11.00% (LIBOR + 7.00% with 4.00% LIBOR floor), due 6/29/2020)(3)(4)(30)
12,000

12,000

12,000

0.3%
Delayed Draw Term Loan – $3,000 Commitment (expires 12/30/2015)(33)
—

—

—

—%
12,000

12,000

0.3%
Wind River Resources Corporation(41)
Utah / Oil & Gas Production
Senior Secured Note (13.00% (LIBOR + 7.50% with 5.50% LIBOR floor) plus 3.00% default interest on principal and 16.00% default interest on past due interest, in non-accrual status effective 12/1/2008, past due)(4)(41)
3,000

3,000

—

—%
Net Profits Interest (5% of Equity Distributions)(7)
—

—

—%
3,000

—

—%
Total Non-Control/Non-Affiliate Investments (Level 3)
$
4,619,519

$
4,589,151

124.0%
Total Level 3 Portfolio Investments
$
6,559,313

$
6,609,298

178.5%



See notes to consolidated financial statements.
29

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

June 30, 2015 (Audited)
Portfolio Company
Locale / Industry
Investments(1)
Principal Value
Cost
Fair
Value(2)
% of Net Assets
LEVEL 1 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Dover Saddlery, Inc.
Massachusetts / Retail
Common Stock (30,974 shares)
$
63

$
260

—%
63

260

—%
Total Non-Control/Non-Affiliate Investments (Level 1)
$
63

$
260

—%
Total Non-Control/Non-Affiliate Investments
$
4,619,582

$
4,589,411

124.0%
Total Portfolio Investments
$
6,559,376

$
6,609,558

178.5%


See notes to consolidated financial statements.
30

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

Endnote Explanations as of March 31, 2016 (Unaudited) and June 30, 2015 (Continued)


(1)
The terms “Prospect,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise. The securities in which Prospect has invested were acquired in transactions that were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These securities may be resold only in transactions that are exempt from registration under the Securities Act.
(2)
Fair value is determined by or under the direction of our Board of Directors. As of June 30, 2015 , one of our portfolio investments, Dover Saddlery, Inc. (“Dover”), was publicly traded and classified as Level 1 within the valuation hierarchy established by ASC 820, Fair Value Measurement (“ASC 820”). On July 1, 2015 we redeemed our investment in Dover and realized a gain of $200. As of June 30, 2015 , the fair value of our remaining portfolio investments was determined using significant unobservable inputs. As of March 31, 2016 , all of our investments were classified as Level 3. ASC 820 classifies such unobservable inputs used to measure fair value as Level 3 within the valuation hierarchy. See Notes 2 and 3 within the accompanying notes to consolidated financial statements for further discussion.
(3)
Security, or a portion thereof, is held by Prospect Capital Funding LLC (“PCF”), our wholly-owned subsidiary and a bankruptcy remote special purpose entity, and is pledged as collateral for the Revolving Credit Facility and such security is not available as collateral to our general creditors (see Note 4). The fair values of the investments held by PCF at March 31, 2016 and June 30, 2015 were $1,432,939 and $1,511,585 , respectively, representing 23.9% and 22.9% of our total investments, respectively.
(4)
Security, or a portion thereof, has a floating interest rate which may be subject to a LIBOR or PRIME floor. The interest rate was in effect at March 31, 2016 and June 30, 2015 .
(5)
Ellett Brothers, LLC, Evans Sports, Inc., Jerry’s Sports, Inc., Simmons Gun Specialties, Inc., Bonitz Brothers, Inc., and Outdoor Sports Headquarters, Inc. are joint borrowers on the second lien term loan. United Sporting Companies, Inc. is a parent guarantor of this debt investment.
(6)
The interest rate on these investments contains a paid in kind (“PIK”) provision, whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities. The interest rate in the schedule represents the current interest rate in effect for these investments.

















See notes to consolidated financial statements.
31

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

Endnote Explanations as of March 31, 2016 (Unaudited) and June 30, 2015 (Continued)


The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed under the existing credit agreements, as of and for the three months ended March 31, 2016:
Security Name
PIK Rate -
Capitalized
PIK Rate -
Paid as cash
Maximum
Current PIK Rate
American Property REIT Corp.
—%
5.50%
5.50%
CCPI Inc.
7.00%
—%
7.00%
Cinedigm DC Holdings, LLC
—%
2.50%
2.50%
Credit Central Loan Company
0.35%
9.65%
10.00%
Crosman Corporation - Senior Secured Term Loan A
4.00%
—%
4.00%
Crosman Corporation - Senior Secured Term Loan B
4.00%
—%
4.00%
Echelon Aviation LLC
—%
2.25%
2.25%
Edmentum Ultimate Holdings, LLC - Senior PIK Note
8.50%
—%
8.50%
Edmentum Ultimate Holdings, LLC - Junior PIK Note
10.00%
—%
10.00%
First Tower Finance Company LLC
—%
12.00%
12.00%
Harbortouch Payments, LLC
N/A
N/A
5.50%
(A)
JHH Holdings, Inc.
0.50%
—%
0.50%
LaserShip , Inc. - Term Loan A
2.00%
—%
2.00%

LaserShip , Inc. - Term Loan B
2.00%
—%
2.00%
Mity, Inc.
—%
10.00%
10.00%
National Property REIT Corp. - Senior Secured Term Loan A
—%
5.50%
5.50%
National Property REIT Corp. - Senior Secured Term Loan C
—%
5.00%
5.00%
National Property REIT Corp. - Senior Secured Term Loan E
—%
5.00%
5.00%
Nationwide Loan Company LLC
0.52%
9.48%
10.00%
Nixon, Inc.
3.00%
—%
3.00%
United Property REIT Corp.
—%
5.50%
5.50%
Valley Electric Co. of Mt. Vernon, Inc.
—%
2.50%
2.50%
Valley Electric Company, Inc.
0.71%
7.79%
8.50%




See notes to consolidated financial statements.
32

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

Endnote Explanations as of March 31, 2016 (Unaudited) and June 30, 2015 (Continued)


The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed under the existing credit agreements, as of and for the three months ended June 30, 2015:
Security Name
PIK Rate -
Capitalized
PIK Rate -
Paid as cash
Maximum Current PIK Rate
American Property REIT Corp.
—%
5.50%
5.50%

CCPI Inc.
7.00%
—%
7.00%

Cinedigm DC Holdings, LLC
2.50%
—%
2.50%

CP Energy Services Inc. - Second Lien Term Loan
9.00%
—%
9.00%

CP Energy Services Inc. - Senior Secured Term Loan B
7.50%
—%
7.50%

Credit Central Loan Company, LLC
—%
10.00%
10.00%

Echelon Aviation LLC
N/A
N/A
2.25%
(B)
Edmentum Ultimate Holdings, LLC - Unsecured Junior PIK Note
N/A
N/A
10.00%
(B)
Edmentum Ultimate Holdings, LLC - Unsecured Senior PIK Note
N/A
N/A
8.50%
(B)
First Tower Finance Company LLC
1.64%
10.36%
12.00%

Harbortouch Payments, LLC
5.50%
—%
5.50%
(A)
JHH Holdings, Inc.
0.50%
—%
0.50%

Mity, Inc.
10.00%
—%
10.00%

National Property REIT Corp. - Senior Secured Term Loan A
—%
5.50%
5.50%

National Property REIT Corp. - Senior Secured Term Loan A to ACL Loan Holdings, Inc.
—%
7.50%
7.50%

National Property REIT Corp. - Senior Secured Term Loan B to ACL Loan Holdings, Inc.
—%
4.50%
4.50%

National Property REIT Corp. - Senior Secured Term Loan C
—%
7.50%
7.50%

National Property REIT Corp. - Senior Secured Term Loan D
—%
4.50%
4.50%

Nationwide Loan Company LLC
—%
10.00%
10.00%

Nixon, Inc.
2.75%
—%
2.75%

Ryan, LLC
3.00%
—%
3.00%

Targus Group International, Inc.
1.00%
—%
1.00%

United Property REIT Corp.
—%
5.50%
5.50%

Valley Electric Co. of Mt. Vernon, Inc.
2.50%
—%
2.50%

Valley Electric Company, Inc.
8.50%
—%
8.50%

(A) PIK is capitalized annually; next PIK payment/capitalization date at March 31, 2016 and June 30, 2015 is April 1, 2016.
(B) PIK is capitalized quarterly; next PIK payment date at June 30, 2015 was July 31, 2015.
(7)
In addition to the stated returns, the net profits interest held will be realized upon sale of the borrower or a sale of the interests.
(8)
APH Property Holdings, LLC, a consolidated entity in which we own 100% of the membership interests, owns 100% of the common equity of American Property REIT Corp. (f/k/a American Property Holdings Corp. (“APRC”)), a qualified Real Estate Investment Trust ( “REIT”) which holds investments in several real estate properties. We report APRC as a separate controlled company. See Note 3 for further discussion of the properties held by APRC.
(9)
Arctic Oilfield Equipment USA, Inc. (“Arctic Oilfield”), a consolidated entity in which we own 100% of the common equity, owns 70% of the equity Units of Arctic Energy Services, LLC (“Arctic Energy”), the operating company. We report Arctic Energy as a separate contro lled company. On September 30, 2015, we restructured our investment in Arctic Energy. Concurrent with the restructuring, we exchanged our $31,640 senior secured loan and our $20,230 subordinated loan for Class D and Class E Units in Arctic Energy. Our ownership of Arctic Oilfield includes a preferred interest in their holdings of all the Class D, Class E, Class C, and Class A Units (in order of priority returns). These unit classes are senior to management’s interests in the F and B Units.
(10)
CCPI Holdings Inc., a consolidated entity in which we own 100% of the common stock, owns 94.63% and 94.95% of CCPI Inc. (“CCPI”), the operating company, as of March 31, 2016 and June 30, 2015 , respectively. We report CCPI as a separate controlled company.

See notes to consolidated financial statements.
33

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

Endnote Explanations as of March 31, 2016 (Unaudited) and June 30, 2015 (Continued)


(11)
CP Holdings of Delaware LLC, a consolidated entity in which we own 100% of the membership interests, owns 82.3% of CP Energy Services Inc. (“CP Energy”) as of March 31, 2016 and June 30, 2015 , respectively. As of June 30, 2015 , CP Energy owned directly or indirectly 100% of each of CP Well Testing, LLC (“CP Well”); Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; and Wright Trucking, Inc. We report CP Energy as a separate controlled company. Effective December 31, 2014, CP Energy underwent a corporate reorganization in order to consolidate certain of its wholly-owned subsidiaries. On October 30, 2015, we restructured our investment in CP Energy. Concurrent with the restructuring, we exchanged our $86,965 senior secured loan and $15,924 subordinated loan for Series B Redeemable Preferred Stock in CP Energy.
(12)
Credit Central Holdings of Delaware, LLC, a consolidated entity in which we own 100% of the membership interests, owns 74.93% of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC (“Credit Central”)) as of March 31, 2016 and June 30, 2015 , Credit Central owns 100% of each of Credit Central, LLC; Credit Central South, LLC; Credit Central of Texas, LLC; and Credit Central of Tennessee, LLC, the operating companies. We report Credit Central as a separate controlled company.
(13)
On June 9, 2015, we provided additional debt and equity financing to support the recapitalization of Edmentum, Inc. (“Edmentum”). As part of the recapitalization, we exchanged 100% of the $50,000 second lien term loan previously outstanding for $26,365 of junior PIK notes and 370,964.14 Class A common units representing 37.1% equity ownership in Edmentum Ultimate Holdings, LLC. In addition, we invested $5,875 in senior PIK notes and committed $7,834 as part of a second lien revolving credit facility, of which $4,896 was funded at closing. On June 9, 2015, we determined that Edmentum was impaired and recorded a realized loss of $22,116 for the amount that the amortized cost exceeded the fair value, reducing the amortized cost to $37,216.
(14)
First Tower Holdings of Delaware LLC, a consolidated entity in which we own 100% of the membership interests, owns 80.1% of First Tower Finance Company LLC (“First Tower Finance”), which owns 100% of First Tower, LLC, the operating company as of March 31, 2016 and June 30, 2015 , respectively. We report First Tower Finance as a separate controlled company.
(15)
Energy Solutions Holdings Inc., a consolidated entity in which we own 100% of equity, owns 100% of Freedom Marine Solutions, LLC (“Freedom Marine”), which owns Vessel Company, LLC, Vessel Company II, LLC and Vessel Company III, LLC. We report Freedom Marine as a separate controlled company. On October 30, 2015, we restructured our investment in Freedom Marine. Concurrent with the restructuring, we exchanged our $32,500 senior secured loans for additional membership interest in Freedom Marine.
(16)
Harbortouch Holdings of Delaware Inc., a consolidated entity in which we own 100% of the common stock, owns 100% of the Class C voting units of Harbortouch Payments, LLC (“Harbortouch”), which provide for a 53.5% residual profits allocation. Harbortouch management owns 100% of the Class B and Class D voting units of Harbortouch, which provide for a 46.5% residual profits allocation. Harbortouch owns 100% of Credit Card Processing USA, LLC. We report Harbortouch as a separate controlled company.
(17)
MITY Holdings of Delaware Inc. (“MITY Delaware”), a consolidated entity in which we own 100% of the common stock, owns 95.83% and 94.99% of the equity of MITY, Inc. (f/k/a MITY Enterprises, Inc.) (“MITY”), as of March 31, 2016 and June 30, 2015 , respectively. MITY owns 100% of each of MITY-Lite, Inc.; Broda Enterprises USA, Inc.; and Broda Enterprises ULC (“Broda Canada”). We report MITY as a separate controlled company. MITY Delaware has a subordinated unsecured note issued and outstanding to Broda Canada that is denominated in Canadian Dollars (CAD). As of March 31, 2016 and June 30, 2015 , the principal balance of this note was CAD 7,371. In accordance with ASC 830, Foreign Currency Matters (“ASC 830”), this note was remeasured into our functional currency, US Dollars (USD), and is presented on our Consolidated Schedule of Investments in USD.
(18)
NPH Property Holdings, LLC, a consolidated entity in which we own 100% of the membership interests, owns 100% of the common equity of National Property REIT Corp. (f/k/a National Property Holdings Corp. (“NPRC”)), a property REIT which holds investments in several real estate properties. Additionally, through its wholly-owned subsidiaries, NPRC invests in online consumer loans. We report NPRC as a separate controlled company. See Note 3 for further discussion of the properties held by NPRC. On March 17, 2015, we entered into a new credit agreement with ACL Loan Holdings, Inc. (“ACLLH”), a wholly-owned subsidiary of NPRC, to form two new tranches of senior secured term loans, Term Loan A and Term Loan B, with the same terms as the then existing NPRC Term Loan A and Term Loan B due to us. That agreement was effective as of June 30, 2014. On June 30, 2014, ACLLH made a non-cash return of capital distribution of $22,390 to NPRC and NPRC transferred and assigned to ACLLH a senior secured Term Loan A due to us. On June 2, 2015, we amended the credit agreement with NPRC to form two new tranches of senior secured term loans, Term Loan C and Term Loan D, with the same terms as the then existing ACLLH Term Loan A and Term Loan B due to us. That amendment was effective as of April 1, 2015. On August 18, 2015, we amended the credit agreement with NPRC to form a new tranche of senior secured term loans, Term Loan E. The amendment was effective as of July 1, 2015, and the outstanding Term Loan C and Term Loan D balances were converted to Term Loan E. On August 12, 2015, we also amended the credit agreement with ACLLH to form a new tranche of senior secured term loans, Term Loan C. The

See notes to consolidated financial statements.
34

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

Endnote Explanations as of March 31, 2016 (Unaudited) and June 30, 2015 (Continued)


amendment was effective as of July 1, 2015, and the outstanding Term Loan A and Term Loan B balances were converted to Term Loan C.
(19)
Nationwide Acceptance Holdings LLC, a consolidated entity in which we own 100% of the membership interests, owns 93.79% of Nationwide Loan Company LLC (f/k/a Nationwide Acceptance LLC (“Nationwide”)), the operating company, as of March 31, 2016 and June 30, 2015 . We report Nationwide as a separate controlled company. On June 1, 2015, Nationwide completed a corporate reorganization. As part of a reorganization, Nationwide Acceptance LLC was renamed Nationwide Loan Company LLC (continues as “Nationwide”) and formed two new wholly-owned subsidiaries: Pelican Loan Company LLC (“Pelican”) and Nationwide Consumer Loans LLC. Nationwide assigned 100% of the equity interests in its other subsidiaries to Pelican which, in turn, assigned these interests to Nationwide Acceptance LLC (“New Nationwide”), the new operating company wholly-owned by Pelican. New Nationwide also assumed the existing senior subordinated term loan due to Prospect.
(20)
NMMB Holdings, a consolidated entity in which we own 100% of the equity, owns 96.33% of the fully diluted equity of NMMB, Inc. (“NMMB”) as of March 31, 2016 and June 30, 2015 . NMMB owns 100% of Refuel Agency, Inc., which owns 100% of Armed Forces Communications, Inc. We report NMMB as a separate controlled company.
(21)
UPH Property Holdings, LLC, a consolidated entity in which we own 100% of the membership interests, owns 100% of the common equity of United Property REIT Corp. (f/k/a United Property Holdings Corp. (“UPRC”)), a property REIT which holds investments in several real estate properties. We report UPRC as a separate controlled company. See Note 3 for further discussion of the properties held by UPRC.
(22)
Valley Electric Holdings I, Inc., a consolidated entity in which we own 100% of the common stock, owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”), another consolidated entity. Valley Holdings II owns 94.99% of Valley Electric Company, Inc. (“Valley Electric”). Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc. (“Valley”). We report Valley Electric as a separate controlled company.
(23)
This investment is in the debt class of a CLO security.
(24)
This investment is in the equity class of a CLO security. The CLO equity investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The current estimated yield is based on the current projections of this excess cash flow taking into account assumptions which have been made regarding expected prepayments, losses and future reinvestment rates. These assumptions are periodically reviewed and adjusted. Ultimately, the actual yield may be higher or lower than the estimated yield if actual results differ from those used for the assumptions.
(25)
Co-investment with another fund managed by an affiliate of our investment adviser, Prospect Capital Management L.P. See Note 13 for further discussion.
(26)
On a fully diluted basis represents 10.00% of voting common shares.
(27)
Syndicated investment which was originated by a financial institution and broadly distributed.
(28)
The overriding royalty interests held receive payments at the stated rates based upon operations of the borrower.
(29)
The interest rate on these investments is subject to the base rate of 6-Month LIBOR, which was 0.90% and 0.44% at March 31, 2016 and June 30, 2015 , respectively. The current base rate for each investment may be different from the reference rate on June 30, 2015.
(30)
The interest rate on these investments is subject to the base rate of 3-Month LIBOR, which was 0.63% and 0.28% at March 31, 2016 and June 30, 2015 , respectively. The current base rate for each investment may be different from the reference rate on March 31, 2016 and June 30, 2015 .
(31)
The interest rate on these investments is subject to the base rate of 1-Month LIBOR, which was 0.44% and 0.19% at March 31, 2016 and June 30, 2015 , respectively. The current base rate for each investment may be different from the reference rate on March 31, 2016 and June 30, 2015 .
(32)
Investment has been designated as an investment not “qualifying” under Section 55(a) of the Investment Company Act of 1940 (the “1940 Act”). Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of March 31, 2016 and June 30, 2015 , our qualifying assets as a percentage of total assets, stood at 74.46% and 75.1%, respectively. We monitor the status of these assets on an ongoing basis.

See notes to consolidated financial statements.
35

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

Endnote Explanations as of March 31, 2016 (Unaudited) and June 30, 2015 (Continued)


(33)
Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 6.00% . As of March 31, 2016 and June 30, 2015 , we had $60,242 and $88,288 , respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies.
(34)
GTP Operations, LLC, Transplace, LLC, CI (Transplace) International, LLC, Transplace Freight Services, LLC, Transplace Texas, LP, Transplace Stuttgart, LP, Transplace International, Inc., Celtic International, LLC, and Treetop Merger Sub, LLC are joint borrowers on the senior secured term loan.
(35)
Trinity Services Group, Inc. and Trinity Services I, LLC are joint borrowers on the senior secured loan facility.
(36)
We own 99.9999% of AGC/PEP, LLC. AGC/PEP, LLC owns 2,038 out of a total of 93,485 shares (including 7,456 vested and unvested management options) of American Gilsonite Holding Company which owns 100% of American Gilsonite Company.
(37)
NCP Finance Limited Partnership, NCP Finance Ohio, LLC, and certain affiliates thereof are joint borrowers on the subordinated secured term loan
(38)
Our wholly-owned subsidiary Prospect Small Business Lending, LLC purchases small business whole loans from small business loan originators, including On Deck Capital, Inc., and Direct Capital Corporation.
(39)
As of June 30, 2015 , Progrexion Marketing, Inc., Progrexion Teleservices, Inc., Progrexion ASG, Inc., Progrexion IP, Inc., Creditrepair.com, Inc., and eFolks, LLC were joint borrowers on the senior secured term loan. PGX Holdings, Inc. (“PGX”) was the parent guarantor of this debt investment. As of March 31, 2016 , PGX is the sole borrower on the second lien term loan.
(40)
As of March 31, 2016 and June 30, 2015 , we own 1.43% (13,220 shares) of Mineral Fusion Natural, LLC, a subsidiary of Caleel + Hayden, LLC, common and preferred interest.
(41)
Wind River Resources Corporation and Wind River II Corporation are joint borrowers on the senior secured note. The interest rate for this investment is subject to the base rate of 12-Month LIBOR, which was 0.77% at June 30, 2015 .
(42)
SB Forging Company, Inc. (“SB Forging”), a consolidated entity in which we own 100% of the equity, owned 100% of Ajax Rolled Ring & Machine, LLC, the operating company, which was sold on October 10, 2014. As part of the sale there is $3,000 being held in escrow of which $802 was received on May 6, 2015 for which we realized a gain of the same amount.
(43)
Pegasus Business Intelligence, LP, Paycom Acquisition, LLC, and Paycom Acquisition Corp. are joint borrowers on the senior secured loan facilities. Paycom Intermediate Holdings, Inc. is the parent guarantor of this debt investment. These entities transact business internationally under the trade name Onyx Payments.
(44)
Security Alarm Financing Enterprises, L.P. and California Security Alarms, Inc. are joint borrowers on the senior subordinated note.
(45)
A portion of the senior secured note is denominated in Canadian Dollars (CAD). As of June 30, 2015, the principal balance of this note was CAD 36,666. In accordance with ASC 830, this note was remeasured into our functional currency, US Dollars (USD), and is presented on our Consolidated Schedules of Investments in USD.
(46)
On February 3, 2016, lenders foreclosed on Targus Group International, Inc., and our $21,613 first lien term loan was extinguished and exchanged for 1,262,737 common units representing 12.63% equity ownership in Targus Cayman HoldCo Limited, the parent company of Targus.  On February 17, 2016, we provided additional debt financing to support the recapitalization of Targus. As part of the recapitalization, we invested an additional $1,263 in a new senior secured Term Loan A notes and were allocated $3,788 in new senior secured Term Loan B notes. During the same period, Targus was written-down for tax purposes and a realized loss of $14,194 therefore was realized for the amount that the amortized cost exceeded the fair value.
(47)
As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the nine months ended March 31, 2016 with these controlled investments were as follows:

See notes to consolidated financial statements.
36

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

Endnote Explanations as of March 31, 2016 (Unaudited) and June 30, 2015 (Continued)


Portfolio Company
Fair Value at
June 30, 2015
Gross Additions (Cost)*
Gross Reductions (Cost)**
Net unrealized
gains (losses)
Fair Value at
March 31, 2016
Interest
income
Dividend
income
Other
income
Net realized
gains (losses)
American Property REIT Corp.
$
118,256

$
2,826

$
(26,730
)
$
13,141

$
107,493

$
6,488

$
11,016

$
702

$
—

Arctic Energy Services, LLC
60,364

—

—

(22,748
)
37,616

1,123

—

—

—

CCPI Inc.
41,352

475

(6,255
)
5,281

40,853

2,370

3,195

—

—

CP Energy Services Inc.
91,009

(2,820
)
—

(12,766
)
75,423

(390
)
—

—

—

Credit Central Loan Company, LLC
55,172

323

(323
)
(2,786
)
52,386

5,556

—

1,852

—

Echelon Aviation LLC
68,941

—

(2,954
)
(9,023
)
56,964

4,360

7,250

—

—

Edmentum Ultimate Holdings, LLC
37,216

4,841

(4,896
)
3,127

40,288

2,728

—

—

—

First Tower Finance Company LLC
365,950

8,353

(679
)
(15,494
)
358,130

42,499

—

—

—

Freedom Marine Solutions, LLC
27,090

400

—

(871
)
26,619

1,112

—

—

—

Gulf Coast Machine & Supply Company
6,918

8,000

(75
)
(4,897
)
9,946

—

—

—

—

Harbortouch Payments, LLC
376,936

—

(4,028
)
(37,228
)
335,680

23,129

—

—

—

MITY, Inc.
50,795

140

—

6,688

57,623

4,325

710

—

7

National Property REIT Corp.
471,889

192,533

(116,128
)
30,249

578,543

45,360

—

3,894

—

Nationwide Loan Company LLC
34,550

3,583

(300
)
(3,635
)
34,198

2,368

2,651

—

—

NMMB, Inc.
12,052

—

—

1,218

13,270

1,146

—

—

—

R-V Industries, Inc.
40,508

—

(614
)
(4,587
)
35,307

2,192

224

—

—

SB Forging Company, Inc.
—

—

—

—

—

—

—

—

—

United Property REIT Corp.
84,685

7,531

—

13,416

105,632

5,774

—

988

—

Valley Electric Company, Inc.
30,497

1,397

—

(535
)
31,359

3,995

—

—

—

Wolf Energy, LLC
22

—

—

671

693

—

—

—

—

Total
$
1,974,202

$
227,582

$
(162,982
)
$
(40,779
)
$
1,998,023

$
154,135

$
25,046

$
7,436

$
7


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

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

(48)
As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities. Transactions during the nine months ended March 31, 2016 with these affiliated investments were as follows:
Portfolio Company
Fair Value at
June 30, 2015
Gross Additions (Cost)*
Gross Reductions (Cost)*
Net unrealized
gains (losses)
Fair Value at
March 31, 2016
Interest
income
Dividend
income
Other
income
Net realized
gains (losses)
BNN Holdings Corp.
$
45,945

$
—

$
(42,922
)
$
504

$
3,527

$
896

$
—

$
—

$
—

Targus International LLC
—

22,724

(14,194
)
31

8,561

—

—

—

(14,194
)
Total
$
45,945

$
22,724

$
(57,116
)
$
535

$
12,088

$
896

$
—

$
—

$
(14,194
)

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

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

See notes to consolidated financial statements.
37

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

Endnote Explanations as of March 31, 2016 (Unaudited) and June 30, 2015 (Continued)


(49)
As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the year ended June 30, 2015 with these controlled investments were as follows:
Portfolio Company
Fair Value at
June 30, 2014
Gross Additions (Cost)*
Gross Reductions (Cost)**
Net unrealized
gains (losses)
Fair Value at
June 30, 2015
Interest
income
Dividend
income
Other
income
Net realized
gains (losses)
Airmall Inc.
$
45,284

$
—

$
(57,500
)
$
12,216

$
—

$
576

$
—

$
3,000

$
(2,808
)
American Property REIT Corp.
206,159

(102,543
)
***
(32
)
14,672

118,256

14,747

—

1,342

—

Appalachian Energy LLC
—

—

(2,050
)
2,050

—

—

—

—

(2,050
)
Arctic Energy Services, LLC
61,114

—

—

(750
)
60,364

6,721

—

—

—

Borga, Inc.
436

—

(3,177
)
2,741

—

—

—

—

(2,589
)
BXC Company, Inc.
2,115

250

(17,698
)
15,333

—

—

—

5

(16,949
)
CCPI Inc.
32,594

599

(476
)
8,635

41,352

3,332

—

525

—

Change Clean Energy Company, LLC
—

—

—

—

—

—

—

—

—

Coalbed, LLC
—

—

—

—

—

—

—

—

—

CP Energy Services Inc.
130,119

2,818

—

(41,927
)
91,010

16,420

—

—

—

Credit Central Loan Company, LLC
50,432

300

(2,337
)
6,777

55,172

7,375

159

1,220

—

Echelon Aviation LLC
92,628

5,800

(37,713
)
8,226

68,941

6,895

—

—

—

Edmentum Ultimate Holdings, LLC
—

60,772

(23,556
)
—

37,216

—

—

—

(22,116
)
First Tower Finance Company LLC
326,785

332

(1,932
)
40,765

365,950

52,900

1,929

—

—

Freedom Marine Solutions, LLC
32,004

—

(485
)
(4,429
)
27,090

4,461

—

—

—

Gulf Coast Machine & Supply Company
14,459

8,500

—

(16,041
)
6,918

1,370

—

—

—

Harbortouch Payments, LLC
291,314

35,374

(8,609
)
58,857

376,936

29,834

—

579

—

Manx Energy, Inc.
—

—

(50
)
50

—

—

—

—

(50
)
MITY, Inc.
49,289

3,032

(2,594
)
1,068

50,795

5,783

—

—

(5
)
National Property REIT Corp.
124,511

361,481

***
(38,420
)
24,317

471,889

30,611

—

1,959

—

Nationwide Loan Company LLC
(f/k/a Nationwide Acceptance LLC)
29,923

2,814

(2,350
)
4,163

34,550

3,005

4,425

—

—

NMMB, Inc.
6,297

383

—

5,372

12,052

1,521

—

—

—

R-V Industries, Inc.
57,734

—

(1,175
)
(16,052
)
40,507

3,018

298

—

—

SB Forging Company, Inc. *****
25,536

—

(46,550
)
21,014

—

956

—

2,000

(21,001
)
United Property REIT Corp.
24,566

51,936

***
(448
)
8,631

84,685

5,893

—

2,345

—

Valley Electric Company, Inc.
33,556

2,053

(76
)
(5,036
)
30,497

4,991

—

—

—

Vets Securing America, Inc.****
—

100

(3,931
)
3,831

—

—

—

—

(3,246
)
Wolf Energy, LLC
3,599

—

(5,991
)
2,414

22

—

—

—

(5,818
)
Yatesville Coal Company, LLC
—

—

—

(1,449
)
1,449

—

—

—

—

(1,449
)
Total
$
1,640,454

$
434,001

$
(258,599
)
$
158,346

$
1,974,202

$
200,409

$
6,811

$
12,975

$
(78,081
)







See notes to consolidated financial statements.
38

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)
(in thousands, except share data)

Endnote Explanations as of March 31, 2016 (Unaudited) and June 30, 2015 (Continued)


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

** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales, and impairments. Redemption amounts included within gross reductions include the cost basis adjustments resulting from consolidation on July 1, 2014.
*** These amounts include the cost basis of investments transferred from APRC and UPRC to NPRC. (See Note 3 for details.)
**** During the year ended June 30, 2015, The Healing Staff, Inc. (“THS”) ceased operations and Vets Securing America, Inc. (“VSA”) management team supervised both the continued operations of VSA and the wind-down of activities at THS.
***** Realized loss reflects an adjustment from three months ended March 31, 2016, pertaining to prior period.

(50)
As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities. Transactions during the year ended June 30, 2015 with these affiliated investments were as follows:
Portfolio Company
Fair Value at
June 30, 2014
Gross Additions (Cost)*
Gross Reductions (Cost)**
Net unrealized
gains (losses)
Fair Value at
June 30, 2015
Interest
income
Dividend
income
Other
income
Net realized
gains (losses)
BNN Holdings Corp.
$
32,121

$
44,000

$
(30,679
)
$
503

$
45,945

$
3,799

$
778

$
226

$
—

Total
$
32,121

$
44,000

$
(30,679
)
$
503

$
45,945

$
3,799

$
778

$
226

$
—


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

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


See notes to consolidated financial statements.
39

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(Unaudited)


Note 1. Organization
In this report, the terms “Prospect,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise.

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

On May 15, 2007, we formed a wholly-owned subsidiary Prospect Capital Funding LLC (“PCF”), a Delaware limited liability company and a bankruptcy remote special purpose entity, which holds certain of our portfolio loan investments that are used as collateral for the revolving credit facility at PCF. Our wholly-owned subsidiary Prospect Small Business Lending, LLC (“PSBL”) was formed on January 27, 2014 and purchases small business whole loans on a recurring basis from online small business loan originators, including On Deck Capital, Inc. (“OnDeck”). On September 30, 2014, we formed a wholly-owned subsidiary Prospect Yield Corporation, LLC (“PYC”) and effective October 23, 2014, PYC holds our investments in collateralized loan obligations (“CLOs”). Each of these subsidiaries have been consolidated since operations commenced.
Effective July 1, 2014, we began consolidating certain of our wholly-owned and substantially wholly-owned holding companies formed by us in order to facilitate our investment strategy. The following companies have been included in our consolidated financial statements since July 1, 2014: AMU Holdings Inc.; APH Property Holdings, LLC; Arctic Oilfield Equipment USA, Inc.; CCPI Holdings Inc.; CP Holdings of Delaware LLC; Credit Central Holdings of Delaware, LLC; Energy Solutions Holdings Inc.; First Tower Holdings of Delaware LLC; Harbortouch Holdings of Delaware Inc.; MITY Holdings of Delaware Inc.; Nationwide Acceptance Holdings LLC; NMMB Holdings, Inc.; NPH Property Holdings, LLC (“NPH”); STI Holding, Inc.; UPH Property Holdings, LLC; Valley Electric Holdings I, Inc.; Valley Electric Holdings II, Inc.; and Wolf Energy Holdings Inc. On October 10, 2014, concurrent with the sale of the operating company, our ownership increased to 100% of the outstanding equity of ARRM Services, Inc. (“ARRM”) which was renamed SB Forging Company, Inc. (“SB Forging”). As such, we began consolidating SB Forging on October 11, 2014. We collectively refer to these entities as the “Consolidated Holding Companies.”
We are externally managed by our investment adviser, Prospect Capital Management L.P. (“Prospect Capital Management” or the “Investment Adviser”). Prospect Administration LLC (“Prospect Administration” or the “Administrator”), a wholly-owned subsidiary of the Investment Adviser, provides administrative services and facilities necessary for us to operate.
Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. We invest primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. We work with the management teams or financial sponsors to identify investments with historical cash flows, asset collateral or contracted pro-forma cash flows for investment.
Note 2. Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) pursuant to the requirements for reporting on Form 10-Q, ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6, 10 and 12 of Regulation S-X. Under the 1940 Act, ASC 946, and the regulations pursuant to Article 6 of Regulation S-X, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit us. Our consolidated financial statements include the accounts of Prospect, PCF, PSBL, PYC, and the Consolidated Holding Companies. All intercompany balances and transactions have been eliminated in consolidation. The financial results of our non-substantially wholly-owned holding companies and operating portfolio company investments are not consolidated in the financial statements. Any operating companies owned by the Consolidated Holding Companies are not consolidated.

40

Reclassifications

Certain reclassifications have been made in the presentation of prior consolidated financial statements and accompanying notes to conform to the presentation as of and for the three and nine months ended March 31, 2016.


Use of Estimates
The preparation of the consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income, expenses, and gains and losses during the reported period. Changes in the economic environment, financial markets, creditworthiness of our portfolio companies and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.
Cash and Cash Equivalents
Cash and cash equivalents include funds deposited with financial institutions and short-term, highly-liquid overnight investments in money market funds. Cash and cash equivalents are carried at cost which approximates fair value.
Investment Classification
We are a non-diversified company within the meaning of the 1940 Act. As required by the 1940 Act, we classify our investments by level of control. As defined in the 1940 Act, “Control Investments” are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less, a beneficial ownership of more than 25% of the voting securities of an investee company. Under the 1940 Act, “Affiliate Investments” are defined by a lesser degree of influence and are deemed to exist through the possession outright or via the right to acquire within 60 days or less, beneficial ownership of 5% or more of the outstanding voting securities of another person. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.
Investment Transactions
Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. Amounts for investments recognized or derecognized but not yet settled are reported in due to broker or as a receivable for investments sold, respectively, in the consolidated statements of assets and liabilities.
Investment Risks
Our investments are subject to a variety of risks. Those risks include the following:
Market Risk
Market risk represents the potential loss that can be caused by a change in the fair value of the financial instrument.
Credit Risk
Credit risk represents the risk that we would incur if the counterparties failed to perform pursuant to the terms of their agreements with us.
Liquidity Risk
Liquidity risk represents the possibility that we may not be able to rapidly adjust the size of our investment positions in times of high volatility and financial stress at a reasonable price.
Interest Rate Risk
Interest rate risk represents a change in interest rates, which could result in an adverse change in the fair value of an interest-bearing financial instrument.

41

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

CLO investments may be riskier and less transparent to us than direct investments in underlying companies. CLOs typically will have no significant assets other than their underlying senior secured loans. Therefore, payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans.
Investment Valuation
To value our investments, we follow the guidance of ASC 820, Fair Value Measurement (“ASC 820”), that defines fair value, establishes a framework for measuring fair value in conformity with GAAP, and requires disclosures about fair value measurements. In accordance with ASC 820, the fair value of our investments is defined as the price that we would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market in which that investment is transacted.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level 1 : Quoted prices in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2 : Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3 : Unobservable inputs for the asset or liability.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment.
Our Board of Directors has established procedures for the valuation of our investment portfolio. These procedures are detailed below.
Investments for which market quotations are readily available are valued at such market quotations.
For most of our investments, market quotations are not available. With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our Board of Directors has approved a multi-step valuation process each quarter, as described below.
1.
Each portfolio company or investment is reviewed by our investment professionals with independent valuation firms engaged by our Board of Directors.
2.
The independent valuation firms prepare independent valuations for each investment based on their own independent assessments and issue their report.
3.
The Audit Committee of our Board of Directors reviews and discusses with the independent valuation firms the valuation reports, and then makes a recommendation to the Board of Directors of the value for each investment.
4.
The Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser, the respective independent valuation firm and the Audit Committee.
Our non-CLO investments are valued utilizing a yield analysis, enterprise value (“EV”) analysis, net asset value analysis, liquidation analysis, discounted cash flow analysis, or a combination of methods, as appropriate. The yield analysis uses loan spreads for loans, dividend yields for certain investments and other relevant information implied by market data involving identical or comparable assets or liabilities. Under the EV analysis, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e., “waterfall” allocation). To determine the EV, we typically use a market multiples approach that considers relevant and applicable market trading data of guideline public companies, transaction metrics from precedent merger and acquisitions transactions and/or a discounted cash flow analysis. The

42

net asset value analysis is used to derive a value of an underlying investment (such as real estate property) by dividing a relevant earnings stream by an appropriate capitalization rate. For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions. The liquidation analysis is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets. The discounted cash flow analysis uses valuation techniques to convert future cash flows or earnings to a range of fair values from which a single estimate may be derived utilizing an appropriate discount rate. The measurement is based on the net present value indicated by current market expectations about those future amounts.
In applying these methodologies, additional factors that we consider in valuing our investments may include, as we deem relevant: security covenants, call protection provisions, and information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the principal markets in which the portfolio company does business; publicly available financial ratios of peer companies; the principal market; and enterprise values, among other factors.
Our investments in CLOs are classified as ASC 820 Level 3 securities and are valued using a discounted cash flow model. The valuations have been accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date (i.e., expected maturity). For each CLO security, the most appropriate valuation approach has been chosen from alternative approaches to ensure the most accurate valuation for such security. To value a CLO, both the assets and the liabilities of the CLO capital structure are modeled. Our valuation agent utilizes other methods to validate the results from the discounted cash flow method. We use a waterfall engine to store the collateral data, generate collateral cash flows from the assets based on various assumptions for the risk factors, distribute the cash flows to the liability structure based on the payment priorities, and discount them back using current market discount rates. We are not responsible for and have no influence over the asset management of the portfolios underlying the CLO investments we hold as those portfolios are managed by non-affiliated third party CLO collateral managers. The main risk factors are: default risk, interest rate risk, downgrade risk, and credit spread risk.
Valuation of Other Financial Assets and Financial Liabilities
ASC 825, Financial Instruments , specifically ASC 825-10-25, permits an entity to choose, at specified election dates, to measure eligible items at fair value (the “Fair Value Option”). We have not elected the Fair Value Option to report selected financial assets and financial liabilities. See Note 8 for further discussion of our financial liabilities that are measured using another measurement attribute.
Convertible Notes
We have recorded the Convertible Notes at their contractual amounts. The Convertible Notes were analyzed for any features that would require bifurcation and such features were determined to be immaterial. See Note 5 for further discussion.
Revenue Recognition
Realized gains or losses on the sale of investments are calculated using the specific identification method.
Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Accretion of such purchase discounts or amortization of premiums is calculated using the effective interest method as of the purchase date and adjusted only for material amendments or prepayments. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as interest income.
Loans are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Unpaid accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and in management’s judgment, is likely to remain current. As of March 31, 2016 , approximately 0.5% of our total assets are in non-accrual status.
Interest income from investments in the “equity” class of security of CLO funds (typically preferred shares, income notes or subordinated notes) and “equity” class of security of securitized trust is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40, Beneficial Interests in Securitized Financial Assets . We monitor the expected cash inflows from our CLO and securitized trust equity investments, including the expected residual payments, and the effective yield is determined and updated periodically.
Dividend income is recorded on the ex-dividend date.

43

Structuring fees and similar fees are recognized as income is earned, usually when paid. Structuring fees, excess deal deposits, net profits interests and overriding royalty interests are included in other income. See Note 10 for further discussion.
Federal and State Income Taxes
We have elected to be treated as a regulated investment company and intend to continue to comply with the requirements of the Code applicable to regulated investment companies. We are required to distribute at least 90% of our investment company taxable income and intend to distribute (or retain through a deemed distribution) all of our investment company taxable income and net capital gain to stockholders; therefore, we have made no provision for income taxes. The character of income and gains that we will distribute is determined in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified to paid-in capital.
If we do not distribute (or are not deemed to have distributed) at least 98% of our annual ordinary income and 98.2% of our capital gains in the calendar year earned, we will generally be required to pay an excise tax equal to 4% of the amount by which 98% of our annual ordinary income and 98.2% of our capital gains exceed the distributions from such taxable income for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income. As of March 31, 2016 and June 30, 2015, we accrued $400 and $305, respectively, for any unpaid potential excise tax liability and have included these amounts within other liabilities on the accompanying Consolidated Statements of Assets and Liabilities .
If we fail to satisfy the annual distribution requirement or otherwise fail to qualify as a RIC in any taxable year, we would be subject to tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would we be required to make distributions. Distributions would generally be taxable to our individual and other non-corporate taxable stockholders as ordinary dividend income eligible for the reduced maximum rate applicable to qualified dividend income to the extent of our current and accumulated earnings and profits, provided certain holding period and other requirements are met. Subject to certain limitations under the Code, corporate distributions would be eligible for the dividends-received deduction. To qualify again to be taxed as a RIC in a subsequent year, we would be required to distribute to our shareholders our accumulated earnings and profits attributable to non-RIC years reduced by an interest charge of 50% of such earnings and profits payable by us as an additional tax. In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of ten years.
We follow ASC 740, Income Taxes (“ASC 740”). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. As of March 31, 2016 and for the three and nine months then ended, we did not record any unrecognized tax benefits or liabilities. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Although we file both federal and state income tax returns, our major tax jurisdiction is federal. Our tax returns for our federal tax years ended August 31, 2012 and thereafter remain subject to examination by the Internal Revenue Service.
Dividends and Distributions
Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount, if any, to be paid as a monthly dividend or distribution is approved by our Board of Directors quarterly and is generally based upon our management’s estimate of our future earnings. Net realized capital gains, if any, are distributed at least annually.
Financing Costs
We record origination expenses related to our Revolving Credit Facility and Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Unsecured Notes”) as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method for our Revolving Credit Facility and the effective interest method for our Unsecured Notes over the respective expected life or maturity. In the event that we modify or extinguish our debt before maturity, we follow the guidance in ASC 470-50, Modification and Extinguishments (“ASC 470-50”). For modifications to or exchanges of our Revolving Credit Facility, any unamortized deferred costs relating to lenders who are not part of the new lending group are expensed. For extinguishments of our Unsecured Notes, any unamortized deferred costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment. Effective July 1, 2016, these costs will be reclassified to the

44

balance sheet as a deduction from the debt liability rather than an asset, in accordance with Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”).
We may record registration expenses related to shelf filings as prepaid assets. These expenses consist principally of SEC registration fees, legal fees and accounting fees incurred. These prepaid assets are charged to capital upon the receipt of proceeds from an equity offering or charged to expense if no offering is completed. As of March 31, 2016 and June 30, 2015, there are no prepaid assets related to registration expenses and all amounts incurred have been expensed.
Guarantees and Indemnification Agreements
We follow ASC 460, Guarantees (“ASC 460”). ASC 460 elaborates on the disclosure requirements of a guarantor in its interim and annual consolidated financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, for those guarantees that are covered by ASC 460, the fair value of the obligation undertaken in issuing certain guarantees.
Per Share Information
Net increase or decrease in net assets resulting from operations per share is calculated using the weighted average number of common shares outstanding for the period presented. In accordance with ASC 946, convertible securities are not considered in the calculation of net asset value per share.
Recent Accounting Pronouncements
In April 2015, the FASB issued ASU 2015-03 which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. The new guidance will make the presentation of debt issuance costs consistent with the presentation of debt discounts or premiums. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The new guidance must be applied on a retrospective basis to all prior periods presented in the financial statements. The adoption of the amended guidance in ASU 2015-03 is expected to decrease total liabilities by decreasing the carrying value of our debt, and is expected to decrease total assets by decreasing deferred financing costs of our debt, but is not expected to have any other significant effect on our consolidated financial statements and disclosures.
In January 2016, the FASB issued Accounting Standards Update 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. One such amendment requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option. That presentation addresses financial statement users’ feedback that presenting the total change in fair value of a liability in net income reduced the decision usefulness of an entity’s net income when it had a deterioration in its credit worthiness. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The new guidance must be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of ASU 2016-01. The adoption of the amended guidance in ASU 2016-01 is not expected to have a significant effect on our consolidated financial statements and disclosures.
Note 3. Portfolio Investments
At March 31, 2016 , we had investments in 125 long-term portfolio investments, which had an amortized cost of $6,208,157 and a fair value of $6,005,105 . At June 30, 2015 , we had investments in 131 long-term portfolio investments, which had an amortized cost of $6,559,376 and a fair value of $6,609,558 .
The original cost basis of debt placement and equity securities acquired, including follow-on investments for existing portfolio companies, payment-in-kind interest, and structuring fees, totaled $685,064 and $1,456,071 during the nine months ended March 31, 2016 and March 31, 2015 , respectively. Debt repayments and proceeds from sales of equity securities of approximately $955,415 and $1,022,394 were received during the nine months ended March 31, 2016 and March 31, 2015 , respectively.
The following table shows the composition of our investment portfolio as of March 31, 2016 and June 30, 2015 .

45

March 31, 2016
June 30, 2015
Cost
Fair Value
Cost
Fair Value
Revolving Line of Credit
$
9,592

$
9,390

$
30,546

$
30,546

Senior Secured Debt
3,224,780

3,089,474

3,617,111

3,533,447

Subordinated Secured Debt
1,171,470

1,152,234

1,234,701

1,205,303

Subordinated Unsecured Debt
75,041

69,817

145,644

144,271

Small Business Loans
20,734

20,774

50,558

50,892

CLO Debt
—

—

28,613

32,398

CLO Residual Interest
1,105,379

995,929

1,072,734

1,113,023

Equity
601,161

667,487

379,469

499,678

Total Investments
$
6,208,157

$
6,005,105

$
6,559,376

$
6,609,558

In the previous table and throughout the remainder of this footnote, we aggregate our portfolio investments by type of investment, which may differ slightly from the nomenclature used by the constituent instruments defining the rights of holders of the investment, as disclosed on our Consolidated Schedules of Investments (“SOI”). The following investments are included in each category:
•
Senior Secured Debt includes investments listed on the SOI such as senior secured term loans, senior term loans, secured promissory notes, senior demand notes, and first lien term loans.
•
Subordinated Secured Debt includes investments listed on the SOI such as subordinated secured term loans, subordinated term loans, senior subordinated notes, and second lien term loans.
•
Subordinated Unsecured Debt includes investments listed on the SOI such as subordinated unsecured notes and senior unsecured notes.
•
Small Business Loans includes our investments in small business whole loans purchased from OnDeck and Direct Capital Corporation (“Direct Capital”).
•
CLO Debt includes our investments in the “debt” class of security of CLO funds.
•
CLO Residual Interest includes our investments in the “equity” class of security of CLO funds such as income notes, preference shares, and subordinated notes.
•
Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.

46

The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of March 31, 2016 .
Level 1
Level 2
Level 3
Total
Revolving Line of Credit
$
—

$
—

$
9,390

$
9,390

Senior Secured Debt
—

—

3,089,474

3,089,474

Subordinated Secured Debt
—

—

1,152,234

1,152,234

Subordinated Unsecured Debt
—

—

69,817

69,817

Small Business Loans
—

—

20,774

20,774

CLO Residual Interest
—

—

995,929

995,929

Equity
—

—

667,487

667,487

Total Investments
$
—

$
—

$
6,005,105

$
6,005,105

The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of June 30, 2015 .
Level 1
Level 2
Level 3
Total
Revolving Line of Credit
$
—

$
—

$
30,546

$
30,546

Senior Secured Debt
—

—

3,533,447

3,533,447

Subordinated Secured Debt
—

—

1,205,303

1,205,303

Subordinated Unsecured Debt
—

—

144,271

144,271

Small Business Loans
—

—

50,892

50,892

CLO Debt
—

—

32,398

32,398

CLO Residual Interest
—

—

1,113,023

1,113,023

Equity
260

—

499,418

499,678

Total Investments
$
260

$
—

$
6,609,298

$
6,609,558

The following tables show the aggregate changes in the fair value of our Level 3 investments during the nine months ended March 31, 2016 .
Fair Value Measurements Using Unobservable Inputs (Level 3)
Control
Investments
Affiliate
Investments
Non-Control/
Non-Affiliate
Investments
Total
Fair value as of June 30, 2015
$
1,974,202

$
45,945

$
4,589,151

$
6,609,298

Net realized gains (losses) on investments
7

(14,194
)
(6,872
)
(21,059
)
Net change in unrealized (depreciation) appreciation
(40,779
)
535

(212,792
)
(253,036
)
Net realized and unrealized losses
(40,772
)
(13,659
)
(219,664
)
(274,095
)
Purchases of portfolio investments
224,058

1,263

452,268

677,589

Payment-in-kind interest
3,524

—

3,951

7,475

Amortization of discounts and premiums
—

—

(62,631
)
(62,631
)
Repayments and sales of portfolio investments
(162,989
)
(42,922
)
(746,620
)
(952,531
)
Transfers within Level 3(1)
—

21,461

(21,461
)
—

Transfers in (out) of Level 3(1)
—

—

—

—

Fair value as of March 31, 2016
$
1,998,023

$
12,088

$
3,994,994

$
6,005,105


47

Revolving Line of Credit
Senior Secured
Debt
Subordinated Secured Debt
Subordinated Unsecured Debt
Small Business Loans
CLO
Debt
CLO
Residual Interest
Equity
Total
Fair value as of June 30, 2015
$
30,546

$
3,533,447

$
1,205,303

$
144,271

$
50,892

$
32,398

$
1,113,023

$
499,418

$
6,609,298

Net realized (losses) gains on investments
—

(1,245
)
(7,457
)
8

(4,875
)
3,911

—

(11,401
)
(21,059
)
Net change in unrealized (depreciation) appreciation
(202
)
(51,642
)
10,160

(3,853
)
(294
)
(3,784
)
(149,736
)
(53,685
)
(253,036
)
Net realized and unrealized (losses)
(202
)
(52,887
)
2,703

(3,845
)
(5,169
)
127

(149,736
)
(65,086
)
(274,095
)
Purchases of portfolio investments
6,142

367,732

90,604

—

62,621

—

96,620

53,870

677,589

Payment-in-kind interest
—

4,838

540

2,097

—

—

—

—

7,475

Accretion (amortization) of discounts and premiums
—

194

763

—

—

390

(63,978
)
—

(62,631
)
Repayments and sales of portfolio investments
(27,096
)
(639,265
)
(72,447
)
(72,706
)
(87,570
)
(32,915
)
—

(20,532
)
(952,531
)
Transfers within Level 3(1)
—

(124,585
)
(75,232
)
—

—

—

—

199,817

—

Transfers in (out) of Level 3(1)
—

—

—

—

—

—

—

—

—

Fair value as of March 31, 2016
$
9,390

$
3,089,474

$
1,152,234

$
69,817

$
20,774

$
—

$
995,929

$
667,487

$
6,005,105

(1)
Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred.
The following tables show the aggregate changes in the fair value of our Level 3 investments during the nine months ended March 31, 2015 .
Fair Value Measurements Using Unobservable Inputs (Level 3)
Control
Investments
Affiliate
Investments
Non-Control/
Non-Affiliate
Investments
Total
Fair value as of June 30, 2014
$
1,640,454

$
32,121

$
4,580,996

$
6,253,571

Net realized loss on investments
(54,588
)
—

(96,385
)
(150,973
)
Net change in unrealized appreciation
114,495

611

15,440

130,546

Net realized and unrealized gain (loss)
59,907

611

(80,945
)
(20,427
)
Purchases of portfolio investments
288,514

15,050

1,136,022

1,439,586

Payment-in-kind interest
11,224

—

5,261

16,485

Amortization of discounts and premiums
—

—

(64,200
)
(64,200
)
Repayments and sales of portfolio investments
(171,888
)
(1,509
)
(848,997
)
(1,022,394
)
Transfers within Level 3(1)
—

—

—

—

Transfers in (out) of Level 3(1)
—

—

—

—

Fair value as of March 31, 2015
$
1,828,211

$
46,273

$
4,728,137

$
6,602,621

Revolving Line of Credit
Senior Secured
Debt
Subordinated Secured Debt
Subordinated Unsecured Debt
Small Business Loans
CLO
Debt
CLO
Residual Interest
Equity
Total
Fair value as of June 30, 2014
$
2,786

$
3,514,198

$
1,200,221

$
85,531

$
4,252

$
33,199

$
1,093,985

$
319,399

$
6,253,571

Net realized loss on investments
(1,094
)
(33,873
)
(75,164
)
(4
)
(708
)
—

(15,561
)
(24,569
)
(150,973
)
Net change in unrealized appreciation (depreciation)
659

3,934

35,223

—

(1,644
)
(608
)
(6,667
)
99,649

130,546

Net realized and unrealized (loss) gain
(435
)
(29,939
)
(39,941
)
(4
)
(2,352
)
(608
)
(22,228
)
75,080

(20,427
)
Purchases of portfolio investments
39,500

1,036,849

93,830

6,593

63,887

—

141,166

57,761

1,439,586

Payment-in-kind interest
—

14,176

686

1,623

—

—

—

—

16,485

Accretion (amortization) of discounts and premiums
—

206

1,084

—

—

367

(65,857
)
—

(64,200
)
Repayments and sales of portfolio investments
(30,001
)
(733,547
)
(116,198
)
610

(27,497
)
—

(85,074
)
(30,687
)
(1,022,394
)
Transfers within Level 3(1)
—

(144,000
)
144,000

—

—

—

—

—

—

Transfers in (out) of Level 3(1)
—

—

—

—

—

—

—

—

—

Fair value as of March 31, 2015
$
11,850

$
3,657,943

$
1,283,682

$
94,353

$
38,290

$
32,958

$
1,061,992

$
421,553

$
6,602,621

(1)
Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred.
For the nine months ended March 31, 2016 and March 31, 2015 , the net change in unrealized (depreciation) appreciation on the investments that use Level 3 inputs was $(266,054) and $42,583 for investments still held as of March 31, 2016 and March 31, 2015 , respectively.

48

The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of March 31, 2016 were as follows:
Unobservable Input
Asset Category
Fair Value
Primary Valuation Technique
Input
Range
Weighted
Average
Senior Secured Debt
$
2,099,254

Discounted Cash Flow
(Yield analysis)
Market Yield
6.0%-27.7%
12.4%
Senior Secured Debt
405,926

Enterprise Value Waterfall (Market approach)
EBITDA Multiple
4.0x-10.0x
8.5x
Senior Secured Debt
14,781

Enterprise Value Waterfall (Market approach)
Book Value Multiple
0.8x-1.0x
0.9x
Senior Secured Debt
37,855

Enterprise Value Waterfall (Discounted cash flow)
Discount Rate
7.0%-9.0%
8.0%
Senior Secured Debt
10,620

Liquidation Analysis
N/A
N/A
N/A
Senior Secured Debt (1)
113,131

Enterprise Value Waterfall
Loss-Adjusted Discount Rate
0.9%-15.06%
11.18%
Senior Secured Debt (2)
417,297

Enterprise Value Waterfall (NAV Analysis)
Capitalization Rate
5.2%-7.2%
5.8%
Enterprise Value Waterfall (Income approach)
Discount Rate
6.5%-7.5%
7.0%
Subordinated Secured Debt
815,334

Discounted Cash Flow
(Yield Analysis)
Market Yield
7.3%-25.9%
12.9%
Subordinated Secured Debt
28,622

Enterprise Value Waterfall (Market approach)
EBITDA Multiple
7.0x-8.0x
7.5x
Subordinated Secured Debt (3)
308,278

Enterprise Value Waterfall (Market approach)
Book Value Multiple
1.2x-3.7x
2.5x
Enterprise Value Waterfall (Market approach)
Earnings Multiple
7.0x-10.8x
10.0x
Subordinated Unsecured Debt
32,961

Discounted Cash Flow
(Yield Analysis)
Market Yield
14.4%-50.1%
25.2%
Subordinated Unsecured Debt
36,856

Enterprise Value Waterfall (Market approach)
EBITDA Multiple
5.8x-8.0x
7.3x
Small Business Loans (4)
20,774

Discounted Cash Flow
Loss-Adjusted Discount Rate
19.2%-31.8%
22.7%
CLO Residual Interest
995,929

Discounted Cash Flow
Discount Rate
17.6% - 22.4%
19.6%
Preferred Equity
77,979

Enterprise Value Waterfall (Market approach)
EBITDA Multiple
4.8x-8.5x
8.1x
Preferred Equity
3,527

Discounted Cash Flow
(Yield analysis)
Market Yield
19.6-24.5%
22.1%
Common Equity/Interests/Warrants
137,127

Enterprise Value Waterfall (Market approach)
EBITDA Multiple
3.5x-10.0x
6.9x
Common Equity/Interests/Warrants (2)
194,343

Enterprise Value Waterfall (NAV analysis)
Capitalization Rate
5.2%-7.2%
5.8%
Enterprise Value Waterfall (Income approach)
Discount Rate
6.5%-7.5%
7.0%
Common Equity/Interests/Warrants (3)
132,809

Enterprise Value Waterfall (Market approach)
Book Value Multiple
1.2x-3.7x
2.4x
Enterprise Value Waterfall (Market approach)
Earnings Multiple
7.0x-10.8x
10.0x
Common Equity/Interests/Warrants (5)
66,897

Discounted Cash Flow
Discount Rate
6.5%-7.5%
7.0%
Common Equity/Interests/Warrants
19,109

Discounted Cash Flow
Discount Rate
7.0%-9.0%
8.0%
Common Equity/Interests/Warrants
3,627

Discounted Cash Flow
(Yield analysis)
Market Yield
16.0%-18.0%
17.0%
Common Equity/Interests/Warrants
26,638

Liquidation Analysis
N/A
N/A
N/A
Escrow Receivable
5,431

Discounted Cash Flow
Discount Rate
6.4%-7.5%
6.9%
Total Level 3 Investments
$
6,005,105

(1)
Represents an investment in a Real Estate Investment Trust ( “REITs”) subsidiary. The EV analysis includes the fair value of our investments in such indirect subsidiary’s consumer loans purchased from online consumer lending platforms, which are valued using a discounted cash flow valuation technique. The key unobservable input to the discounted cash flow analysis is noted above. In addition, the valuation also used projected loss rates as an unobservable input ranging from 0.94%-22.45%, with a weighted average of 10.25%

49

(2)
Represents our REIT investments. EV waterfall methodology uses both the net asset value analysis and discounted cash flow analysis, which are weighted equally (50%).
(3)
Represents investments in consumer finance controlled subsidiaries. The EV waterfall methodology utilizes book value and earnings multiples, as noted above. In addition, the valuation of certain consumer finance companies utilizes the discounted cash flow technique whereby the significant unobservable input is the discount rate. For these companies each observable input (book value multiple, earnings multiple and discount rate) is weighted equally. For these companies the discount rate ranged from 14.5%-17.0% with a weighted average of 15.6%.
(4)
Includes our investments in small business whole loans purchased from OnDeck and our residual interest in MarketPlace Loan Trust, Series 2015-OD2. Valuation also used projected loss rates as an unobservable input ranging from 3.77%-9.63%, with a weighted average of 5.09%.
(5)
Represents net operating income interests in our REIT investments.











































50

The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of June 30, 2015 were as follows:
Unobservable Input
Asset Category
Fair Value
Primary Valuation Technique
Input
Range
Weighted
Average
Senior Secured Debt
$
2,421,188

Discounted cash flow
(Yield analysis)
Market Yield
6.1%-21.4%
11.3%
Senior Secured Debt
563,050

Enterprise value waterfall (Market approach)
EBITDA Multiple
3.5x-11.0x
8.1x
Senior Secured Debt
40,808

Enterprise value waterfall (Discounted cash flow)
Discount Rate
7.0%-9.0%
8.0%
Senior Secured Debt
6,918

Liquidation Analysis
N/A
N/A
N/A
Senior Secured Debt (1)
98,025

Enterprise value waterfall
Loss-Adjusted Discount Rate
3.8%-10.7%
6.9%
Senior Secured Debt (2)
64,560

Enterprise value waterfall
Loss-Adjusted Discount Rate
5.4%-16.3%
10.0%
Senior Secured Debt
25,970

Enterprise value waterfall
Appraisal
N/A
N/A
Senior Secured Debt (3)
343,474

Enterprise value waterfall (NAV analysis)
Capitalization Rate
5.6%-7.0%
6.0%
Enterprise value waterfall (Market approach)
Dividend Yield
8.8%-11.7%
9.7%
Subordinated Secured Debt
847,624

Discounted cash flow
(Yield analysis)
Market Yield
8.1%-18.3%
12.5%
Subordinated Secured Debt
54,948

Enterprise value waterfall (Market approach)
EBITDA Multiple
3.5x-6.0x
4.7x
Subordinated Secured Debt (4)
302,731

Enterprise value waterfall (Market approach)
Book Value Multiple
1.2x-3.8x
2.7x
Enterprise value waterfall (Market approach)
Earnings multiple
6.8x-11.0x
10.3x
Subordinated Unsecured Debt
112,701

Discounted cash flow
(Yield analysis)
Market Yield
9.1%-15.3%
11.8%
Subordinated Unsecured Debt
31,570

Enterprise value waterfall (Market approach)
EBITDA Multiple
5.8x-8.0x
7.2x
Small Business Loans (5)
362

Discounted Cash Flow
Loss-Adjusted Discount Rate
11.7%-27.3%
23.5%
Small Business Loans (6)
50,530

Discounted Cash Flow
Loss-Adjusted Discount Rate
20.4%-33.2%
24.9%
CLO Debt
32,398

Discounted Cash Flow
Discount Rate
6.1%-6.9%
6.5%
CLO Residual Interest
1,113,023

Discounted Cash Flow
Discount Rate
11.2%-18.0%
14.0%
Preferred Equity
4,091

Enterprise value waterfall (Market approach)
EBITDA multiple
4.5x - 8.5x
6.7x
Preferred Equity
3,023

Discounted cash flow
(Yield analysis)
Market yield
19.8% - 24.7%
22.2%
Common Equity/Interests/Warrants
135,333

Enterprise value waterfall (Market approach)
EBITDA multiple
3.5x-11.0x
8.6x
Common Equity/Interests/Warrants (3)
130,316

Enterprise value waterfall (NAV analysis)
Capitalization Rate
5.6%-7.0%
5.9%
Enterprise value waterfall (Market approach)
Dividend Yield
8.8% - 11.7%
9.5%
Common Equity/Interests/Warrants (4)
148,631

Enterprise value waterfall (Market approach)
Book value multiple
1.2x-3.8x
2.5x
Enterprise value waterfall (Market approach)
Earnings multiple
6.8x-11.0x
10.1x
Common Equity/Interests/Warrants (7)
38,455

Discounted cash flow
Discount rate
11.5% - 12.5%
12.0%
Common Equity/Interests/Warrants
28,133

Enterprise value waterfall (Discounted cash flow)
Discount rate
7.0%-9.0%
8.0%
Common Equity/Interests/Warrants
4,310

Discounted cash flow (Yield analysis)
Market yield
16.0% - 18.0%
17.0%
Common Equity/Interests/Warrants
1,120

Enterprise value waterfall
Appraisal
n/a
n/a
Common Equity/Interests/Warrants
22

Liquidation analysis
n/a
n/a
n/a
Escrow Receivable
5,984

Discounted cash flow
Discount rate
7.0%-8.2%
7.6%
Total Level 3 Investments
$
6,609,298


51

(1)
Represents an investment in a REIT subsidiary. The EV analysis includes the fair value of our investments in such indirect subsidiary’s consumer loans purchased from online consumer lending platforms, which are valued using a discounted cash flow valuation technique. The key unobservable input to the discounted cash flow analysis is noted above. In addition, the valuation also used projected loss rates as an unobservable input ranging from 0.6%-26.5%, with a weighted average of 8.4%.
(2)
EV analysis is based on the fair value of our investments in consumer loans purchased from Lending Club, which are valued using a discounted cash flow valuation technique. The key unobservable input to the discounted cash flow analysis is noted above. In addition, the valuation also used projected loss rates as an unobservable input ranging from 2.3%-23.8%, with a weighted average of 16.9%.
(3)
Represents our REIT investments. EV waterfall methodology uses both the net asset value analysis and dividend yield analysis, which are weighted equally (50%).
(4)
Represents investments in consumer finance controlled subsidiaries. The enterprise value waterfall methodology utilizes book value and earnings multiples, as noted above. In addition, the valuation of certain consumer finance companies utilizes the discounted cash flow technique whereby the significant unobservable input is the discount rate. For these companies each observable input (book value multiple, earnings multiple and discount rate) is weighted equally. For these companies the discount rate ranged from 14.5% - 18.0% with a weighted average of 15.7%.
(5)
Includes our investments in small business whole loans purchased from Direct Capital Corporation and OnDeck and our residual interest in MarketPlace Loan Trust. Valuation also used projected loss rates as an unobservable input ranging from 4.2%-11.7%, with a weighted average of 9.71%.
(6)
Includes our investments in small business whole loans purchased from OnDeck. Valuation also used projected loss rates as an unobservable input ranging from 4.2%-11.7%, with a weighted average of 9.7%.
(7)
Represents net operating income interests in our REIT investments.
In determining the range of values for debt instruments, except CLOs and debt investments in controlling portfolio companies, management and the independent valuation firm estimated corporate and security credit ratings and identified corresponding yields to maturity for each loan from relevant market data. A discounted cash flow analysis was then prepared using the appropriate yield to maturity as the discount rate, to determine a range of values. In determining the range of values for debt investments of controlled companies and equity investments, the enterprise value was determined by applying earnings before income tax, depreciation and amortization (“EBITDA”) multiples, the discounted cash flow technique, net income and/or book value multiples for similar guideline public companies and/or similar recent investment transactions. For stressed equity investments, a liquidation analysis was prepared. For the private REIT investments, enterprise values were determined based on an average of results from a net asset value analysis of the underlying property investments and a discounted cash flow method utilizing capitalization rates for similar guideline companies and/or similar recent investment transactions.
In determining the range of value for our investments in CLOs, management and the independent valuation firm used a discounted cash flow model. The valuations were accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date. For each CLO security, the most appropriate valuation approach was chosen from alternative approaches to ensure the most accurate valuation for such security. A waterfall engine was used to store the collateral data, generate collateral cash flows from the assets based on various assumptions for the risk factors, distribute the cash flows to the liability structure based on the payment priorities, and discount them back using proper discount rates to expected maturity or call date.
Our portfolio consists of residual interests in CLOs, which involve a number of significant risks. CLOs are typically very highly levered (10 - 14 times), and therefore the junior debt and residual interest tranches that we invest in are subject to a higher degree of risk of total loss. In particular, investors in CLO residual interests indirectly bear risks of the underlying loan investments held by such CLOs. We generally have the right to receive payments only from the CLOs, and generally do not have direct rights against the underlying borrowers or the entity that sponsored the CLO. While the CLOs we target generally enable the investor to acquire interests in a pool of senior loans without the expenses associated with directly holding the same investments, our prices of indices and securities underlying CLOs will rise or fall. These prices (and, therefore, the prices of the CLOs) will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally. The failure by a CLO investment in which we invest to satisfy financial covenants, including with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us. In the event that a CLO fails certain tests, holders of debt senior to us being entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting CLO or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.


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The interests we have acquired in CLOs are generally thinly traded or have only a limited trading market. CLOs are typically privately offered and sold, even in the secondary market. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLO residual interests carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the investments in CLO tranches will likely be subordinate to other senior classes of note tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO investment or unexpected investment results. Our net asset value may also decline over time if our principal recovery with respect to CLO residual interests is less than the cost of those investments. Our CLO investments and/or the underlying senior secured loans may prepay more quickly than expected, which could have an adverse impact on our value.

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

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

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

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

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

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

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The significant unobservable inputs used to value our investments based on the EV analysis may include market multiples of specified financial measures such as EBITDA, net income, or book value of identified guideline public companies, implied valuation multiples from precedent M&A transactions, and/or discount rates applied in a discounted cash flow analysis. The independent valuation firm identifies a population of publicly traded companies with similar operations and key attributes to that of the portfolio company. Using valuation and operating metrics of these guideline public companies and/or as implied by relevant precedent transactions, a range of multiples of the latest twelve months EBITDA, or other measure such as net income or book value, is typically calculated. The independent valuation firm utilizes the determined multiples to estimate the portfolio company’s EV generally based on the latest twelve months EBITDA of the portfolio company (or other meaningful measure). Increases or decreases in the multiple may result in an increase or decrease, respectively, in EV which may increase or decrease the fair value measurement of the debt of controlled companies and/or equity investment, as applicable. In certain instances, a discounted cash flow analysis may be considered in estimating EV, in which case, discount rates based on a weighted average cost of capital and application of the capital asset pricing model may be utilized.
The significant unobservable input used to value our private REIT investments based on the net asset value analysis is the capitalization rate applied to the earnings measure of the underlying property. Increases or decreases in the capitalization rate would result in a decrease or increase, respectively, in the fair value measurement.
Changes in market yields, discount rates, capitalization rates or EBITDA multiples, each in isolation, may change the fair value measurement of certain of our investments. Generally, an increase in market yields, discount rates or capitalization rates, or a decrease in EBITDA (or other) multiples may result in a decrease in the fair value measurement of certain of our investments.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the currently assigned valuations.
During the nine months ended March 31, 2016 , the valuation methodology for Empire Today, LLC (“Empire”) changed to remove the waterfall analysis used in previous periods due to positive trends in financial performance and deleveraging. As a result of this change and current market conditions, the fair value of our investment in Empire increased to $15,700 as of March 31, 2016 , a premium of $98 from its amortized cost, compared to the $2,448 unrealized depreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , the valuation methodology for Lasership, Inc. (“Lasership”) changed to incorporate a waterfall analysis. As a result of this change, and in recognition of recent company performance and current market conditions, we decreased the fair value of our investment in Lasership to $47,590 as of March 31, 2016 , a discount of $8,284 to its amortized cost, compared to the $7,067 unrealized depreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , the valuation methodology for Targus Group International, Inc. (“Targus”) changed to remove the weighting of secondary quotes as a component of the fair value conclusion, as the liquidity for this security decreased. As a result of this change, and in recognition of recent company performance and current market conditions, we decreased the fair value of our investment in Targus to $10,280 as of December 31, 2015, a discount of $11,180 from its amortized cost, compared to the $4,145 unrealized depreciation recorded at June 30, 2015 . During the three months ended March 31, 2016 , as a result of a public foreclosure, Targus first lien term loan was extinguished and exchanged for equity on a pro-rata basis. In addition, we invested in new senior secured notes and we continue to value our current investment in Targus using the enterprise waterfall methodology, consistent with prior quarter. Targus was written-off for tax purposes and a loss of $14,194 therefore was realized for the amount that the amortized cost exceeded the fair value.
During the nine months ended March 31, 2016 , the valuation methodology for American Gilsonite Company (“AGC”) changed to incorporate a waterfall analysis. Management adopted the waterfall analysis due to a deterioration in operating results and resulting credit impairment. As a result of this change, and in recognition of recent company performance and current market conditions, we decreased the fair value of our investment in AGC to $13,084 as of September 30, 2015, a discount of $1,671 from its amortized cost, compared to the $1,468 unrealized depreciation recorded at June 30, 2015 . During the three months ended December 31, 2015 we sold all of our $14,755 debt investment in AGC.

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During the nine months ended March 31, 2016 , the valuation methodology for Ark-La-Tex Wireline Services, LLC (“Ark-La-Tex”) changed to add the waterfall analysis due to impairment of Term Loan A and Term Loan B. As a result of this change, and in recognition of recent company performance and current market conditions, the fair value of our investment in Ark-La-Tex decreased to $14,781 as of March 31, 2016 , a discount of $29,780 from its amortized cost, compared to the $3,723 unrealized depreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , the valuation methodology for Nixon, Inc. (“Nixon”) changed to incorporate a waterfall analysis. As a result of the company’s performance and current market conditions, the fair value of our investment in Nixon decreased to $13,133 as of March 31, 2016 , a discount of $928 from its amortized cost, compared to the $133 unrealized depreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , the valuation methodology for Royal Holdings, Inc. (“Royal”) changed to remove the relative value method based on low liquidity of first lien term loan. As a result of this change the fair value of our investment in Royal decreased to $4,707 as of March 31, 2016 , a discount of $259 from its amortized cost, compared to the $37 unrealized appreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , the valuation methodology for Speedy Group Holdings Corp. (“Speedy”) changed to remove the shadow method and incorporate relative value method. As a result of this change and decreased market prices, the fair value of our investment in Speedy decreased to $10,244 as of March 31, 2016 , a discount of $4,756 from its amortized cost. No unrealized depreciation/appreciation was recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , the valuation methodology for Pacific World Corporation (“Pacific World”) changed to incorporate a waterfall analysis for the three months ended September 30, 2015. During the three months ended December 31, 2015, the waterfall analysis was removed due to an increase in enterprise value. During the three months ended March 31, 2016, the waterfall analysis was added back due to impairment of Term Loan B. As a result of this change, the fair value of our investment in Pacific World decreased to $165,563 as of March 31, 2016 , a discount of $33,437 from its amortized cost, compared to the $21,328 unrealized depreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , the valuation methodology for United States Environmental Services, LLC (“USES”) changed to incorporate a waterfall analysis for the three months ended September 30, 2015. During the three months ended December 31, 2015, the waterfall analysis was removed due to an increase in enterprise value. As a result of this change, the fair value of our investment in USES decreased to $52,371 as of March 31, 2016 , a discount of $6,579 from its amortized cost, compared to the $4,293 unrealized depreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , the valuation methodology for Spartan Energy Services, Inc. (“Spartan”) changed to add the waterfall analysis due to impairment of Term Loan B. As a result of this change and current market conditions, the fair value of our investment in Spartan decreased to $10,257 as of March 31, 2016 , a discount of $16,568 from its amortized cost, compared to the $720 unrealized depreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , we changed the valuation methodology for our REITs portfolio (American Property REIT Corp. (“APRC”), National Property REIT Corp. (“NPRC”), and United Property REIT Corp. (“UPRC”)) from averaging the net asset value and dividend yield method to averaging the net asset value and discounted cash flow method. The use of the discounted cash flow method more closely reflects the valuation techniques used by the broader multifamily real estate industry.
During the nine months ended March 31, 2016 , we removed the dividend yield method and used the discounted cash flow method for APRC. The discounted cash flow method is averaged with the net asset value method. The fair value of our investment in APRC increased primarily as a result of improved operating performance at the property level and market conditions. Total fair value of our investment in APRC increased to $107,493 as of March 31, 2016 , a premium of $31,206 from its amortized cost, compared to the $18,064 unrealized appreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , we removed the dividend yield method and used the discounted cash flow method for NPRC. The discounted cash flow method is averaged with the net asset value method. The fair value of our investment in NPRC increased primarily as a result of improved operating performance at the property level and market conditions. Total fair value of our investment in NPRC increased to $578,543 as of March 31, 2016 , a premium of $52,478 from its amortized cost, compared to the $22,229 unrealized appreciation recorded at June 30, 2015 .

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During the nine months ended March 31, 2016 , we removed the dividend yield method and used the discounted cash flow method for UPRC. The discounted cash flow method is averaged with the net asset value method. The fair value of our investment in UPRC increased primarily as a result of improved operating performance at the property level and market conditions. Total fair value of our investment in UPRC increased to $105,632 as of March 31, 2016 , a premium of $22,473 from its amortized cost, compared to the $9,057 unrealized appreciation recorded at June 30, 2015 .
During the nine months ended March 31, 2016 , we provided $2,268 of equity financing to APRC to fund capital expenditures for existing properties. In addition, during the nine months ended March 31, 2016 , we received a partial repayment of $26,730 of our loan previously outstanding and recorded $11,016 of dividend income in connection with the sale of Vista Palma Sola property. As of March 31, 2016 , our investment in APRC had an amortized cost of $76,287 and a fair value of $107,493 .

As of March 31, 2016 , APRC’s real estate portfolio was comprised of eleven multi-family properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by APRC as of March 31, 2016 .
No.
Property Name
City
Acquisition Date
Purchase Price
Mortgage Outstanding
1
1557 Terrell Mill Road, LLC
Marietta, GA
12/28/2012
$
23,500

$
14,964

2
Lofton Place, LLC
Tampa, FL
4/30/2013
26,000

20,410

3
Arlington Park Marietta, LLC
Marietta, GA
5/8/2013
14,850

9,650

4
Cordova Regency, LLC
Pensacola, FL
11/15/2013
13,750

11,375

5
Crestview at Oakleigh, LLC
Pensacola, FL
11/15/2013
17,500

13,845

6
Inverness Lakes, LLC
Mobile, AL
11/15/2013
29,600

24,700

7
Kings Mill Pensacola, LLC
Pensacola, FL
11/15/2013
20,750

17,550

8
Plantations at Pine Lake, LLC
Tallahassee, FL
11/15/2013
18,000

14,092

9
Verandas at Rocky Ridge, LLC
Birmingham, AL
11/15/2013
15,600

10,205

10
Plantations at Hillcrest, LLC
Mobile, AL
1/17/2014
6,930

4,904

11
Crestview at Cordova, LLC
Pensacola, FL
1/17/2014
8,500

8,160

12
Taco Bell, OK
Yukon, OK
6/4/2014
1,719

—

$
196,699

$
149,855

During the nine months ended March 31, 2016 , we provided $149,086 and $31,697 of debt and equity financing, respectively, to NPRC to enable certain of its wholly-owned subsidiaries to invest in online consumer loans. In addition, during the nine months ended March 31, 2016 , we received partial repayments of $40,460 of our loans previously outstanding and $12,396 as a return of capital on our equity investment in NPRC.
The online consumer loan investments held by certain of NPRC’s wholly-owned subsidiaries are unsecured obligations of individual borrowers that are issued in amounts ranging from $1 to $50, with fixed terms ranging from 18 to 85 months. As of March 31, 2016 , the investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 80,941 individual loans and had an aggregate fair value of $642,450. The average outstanding individual loan balance is approximately $8 and the loans mature on dates ranging from October 31, 2016 to April 2, 2023 with an average outstanding term of 35 months as of March 31, 2016 . Fixed interest rates range from 4.0% to 36.0% with a weighted-average current interest rate of 21.0%.
During the nine months ended March 31, 2016 , we provided $9,017 of equity financing to NPRC for the acquisition of real estate properties and $2,030 of equity financing to NPRC to fund capital expenditures for existing properties. In addition, during the nine months ended March 31, 2016 , we received partial repayments of $63,271 of our loans previously outstanding. As of March 31, 2016 , our investment in NPRC had an amortized cost of $526,065 and a fair value of $578,543 .
As of March 31, 2016 , NPRC’s real estate portfolio was comprised of twelve multi-family properties, twelve self-storage properties, and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by NPRC as of March 31, 2016 .

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No.
Property Name
City
Acquisition
Date
Purchase
Price
Mortgage
Outstanding
1
146 Forest Parkway, LLC
Forest Park, GA
10/24/2012
$
7,400

$
—

2
5100 Live Oaks Blvd, LLC
Tampa, FL
1/17/2013
63,400

46,700

3
NPRC Carroll Resort, LLC
Pembroke Pines, FL
6/24/2013
225,000

181,793

4
APH Carroll 41, LLC
Marietta, GA
11/1/2013
30,600

32,831

5
Matthews Reserve II, LLC
Matthews, NC
11/19/2013
22,063

19,971

6
City West Apartments II, LLC
Orlando, FL
11/19/2013
23,562

23,368

7
Vinings Corner II, LLC
Smyrna, GA
11/19/2013
35,691

33,045

8
Uptown Park Apartments II, LLC
Altamonte Springs, FL
11/19/2013
36,590

29,846

9
Mission Gate II, LLC
Plano, TX
11/19/2013
47,621

41,728

10
St. Marin Apartments II, LLC
Coppell, TX
11/19/2013
73,078

62,578

11
APH Carroll Bartram Park, LLC
Jacksonville, FL
12/31/2013
38,000

28,210

12
APH Carroll Atlantic Beach, LLC
Atlantic Beach, FL
1/31/2014
13,025

8,803

13
23 Mile Road Self Storage, LLC
Chesterfield, MI
8/19/2014
5,804

4,350

14
36th Street Self Storage, LLC
Wyoming, MI
8/19/2014
4,800

3,600

15
Ball Avenue Self Storage, LLC
Grand Rapids, MI
8/19/2014
7,281

5,460

16
Ford Road Self Storage, LLC
Westland, MI
8/29/2014
4,642

3,480

17
Ann Arbor Kalamazoo Self Storage, LLC
Ann Arbor, MI
8/29/2014
4,458

3,345

18
Ann Arbor Kalamazoo Self Storage, LLC
Scio, MI
8/29/2014
8,927

6,695

19
Ann Arbor Kalamazoo Self Storage, LLC
Kalamazoo, MI
8/29/2014
2,363

1,775

20
Jolly Road Self Storage, LLC
Okemos, MI
1/16/2015
7,492

5,620

21
Eaton Rapids Road Self Storage, LLC
Lansing West, MI
1/16/2015
1,741

1,305

22
Haggerty Road Self Storage, LLC
Novi, MI
1/16/2015
6,700

5,025

23
Waldon Road Self Storage, LLC
Lake Orion, MI
1/16/2015
6,965

5,225

24
Tyler Road Self Storage, LLC
Ypsilanti, MI
1/16/2015
3,507

2,630

25
SSIL I, LLC
Aurora, IL
11/5/2015
34,500

26,450

$
715,210

$
583,833

During the nine months ended March 31, 2016 , we provided $4,484 and $3,047 of debt and equity financing, respectively, to UPRC to fund capital expenditures for existing properties. As of March 31, 2016 , our investment in UPRC had an amortized cost of $83,159 and a fair value of $105,632 .
As of March 31, 2016 , UPRC’s real estate portfolio was comprised of fifteen multi-families properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by UPRC as of March 31, 2016 .

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No.
Property Name
City
Acquisition
Date
Purchase
Price
Mortgage
Outstanding
1
Atlanta Eastwood Village LLC
Stockbridge, GA
12/12/2013
$
25,957

$
19,785

2
Atlanta Monterey Village LLC
Jonesboro, GA
12/12/2013
11,501

9,193

3
Atlanta Hidden Creek LLC
Morrow, GA
12/12/2013
5,098

3,619

4
Atlanta Meadow Springs LLC
College Park, GA
12/12/2013
13,116

10,180

5
Atlanta Meadow View LLC
College Park, GA
12/12/2013
14,354

11,141

6
Atlanta Peachtree Landing LLC
Fairburn, GA
12/12/2013
17,224

13,575

7
Taco Bell, MO
Marshall, MO
6/4/2014
1,405

—

8
Canterbury Green Apartments Holdings LLC
Fort Wayne, IN
9/29/2014
85,500

74,305

9
Abbie Lakes OH Partners, LLC
Canal Winchester, OH
9/30/2014
12,600

10,440

10
Kengary Way OH Partners, LLC
Reynoldsburg, OH
9/30/2014
11,500

11,000

11
Lakeview Trail OH Partners, LLC
Canal Winchester, OH
9/30/2014
26,500

20,142

12
Lakepoint OH Partners, LLC
Pickerington, OH
9/30/2014
11,000

10,080

13
Sunbury OH Partners, LLC
Columbus, OH
9/30/2014
13,000

10,480

14
Heatherbridge OH Partners, LLC
Blacklick, OH
9/30/2014
18,416

15,480

15
Jefferson Chase OH Partners, LLC
Blacklick, OH
9/30/2014
13,551

12,240

16
Goldenstrand OH Partners, LLC
Hilliard, OH
10/29/2014
7,810

8,040

$
288,532

$
239,700

On August 1, 2014, we sold our investments in Airmall Inc. (“Airmall”) for net proceeds of $51,379 and realized a loss of $3,473 on the sale. In addition, there is $6,000 being held in escrow, of which 98% is due to Prospect, which will be recognized as an additional realized loss if it is not received. Included in the net proceeds were $3,000 of structuring fees from Airmall related to the sale of the operating company which was recognized as other income during the three months ended September 30, 2014. On October 22, 2014, we received a tax refund of $665 related to our investment in Airmall for which we realized a gain of the same amount.
On August 20, 2014, we sold the assets of Borga, Inc. (“Borga”), a wholly-owned subsidiary of STI Holding, Inc., for net proceeds of $382 and realized a loss of $2,589 on the sale. On December 29, 2014, Borga was dissolved.
On August 25, 2014, we sold Boxercraft Incorporated, a wholly-owned subsidiary of BXC Company, Inc., for net proceeds of $750 and realized a net loss of $16,949 on the sale.
On September 15, 2014, Echelon Aviation LLC repaid $37,313 of the $78,121 loan receivable to us.
On September 30, 2014, we made a $26,431 follow-on investment in Harbortouch Payments, LLC (“Harbortouch”) to support an acquisition. As part of the transaction, we received $529 of structuring fee income and $50 of amendment fee income from Harbortouch which was recognized as other income.
During the three months ended September 30, 2014, we impaired our investment in Appalachian Energy LLC and realized a loss of $2,050, reducing the amortized cost to zero.
On October 3, 2014, we sold our $35,000 investment in Babson CLO Ltd. 2011-I and realized a loss of $6,410 on the sale.

On October 10, 2014, ARRM sold Ajax Rolled Ring & Machine, LLC ("Ajax") to a third party and repaid the $19,337 loan receivable to us. We recorded a realized loss of $21,001 related to the sale. Concurrent with the sale, our ownership increased to 100% of the outstanding equity of SB Forging. As such, we began consolidating SB Forging on October 11, 2014. In addition, there is $3,000 being held in escrow of which $802 was received on May 6, 2015 for which Prospect realized a gain of the same amount.

On October 20, 2014, we sold our $22,000 investment in Galaxy XII CLO, Ltd. and realized a loss of $2,435 on the sale.
On November 21, 2014, Coalbed, LLC (“Coalbed”) merged with and into Wolf Energy, LLC (“Wolf Energy”), with Wolf Energy as the surviving entity. During the three months ended December 31, 2014, we impaired our investment in the Coalbed debt assumed by Wolf Energy and realized a loss of $5,991, reducing the amortized cost to zero.

58

On December 4, 2014, we sold our $29,075 investment in Babson CLO Ltd. 2012-I and realized a loss of $3,833 on the sale. On January 15, 2015, we received additional proceeds of $66 for which Prospect realized a gain of the same amount.
On December 4, 2014, we sold our $27,850 investment in Babson CLO Ltd. 2012-II and realized a loss of $2,961 on the sale. On February 18, 2015, we received additional proceeds of $12 for which Prospect realized a gain of the same amount.
During the three months ended December 31, 2014, Manx Energy, Inc. was dissolved and we recorded a realized loss of $50, reducing the amortized cost to zero.
During the three months ended December 31, 2014, we impaired our investments in Change Clean Energy Company, LLC and Yatesville Coal Company, LLC and recorded a realized loss of $1,449, reducing the amortized cost to zero.
During the three months ended December 31, 2014, we impaired our investment in New Century Transportation, Inc. (“NCT”) a realized a loss of $42,064, reducing the amortized cost to $980.
During the three months ended December 31, 2014, we impaired our investment in Stryker Energy, LLC and realized a loss of $32,711, reducing the amortized cost to zero.
During the three months ended December 31, 2014, we impaired our investment in Wind River Resources Corporation (“Wind River”) and recorded a realized loss of $11,650, reducing the amortized cost to $3,000. During the three months ended March 31, 2016, our remaining investment in Wind River was written-off for tax purposes and a loss of $3,000 was therefore realized.
On August 12, 2015, we sold 780 of our small business whole loans (with a cost of $30,968) purchased from OnDeck to Jefferies Asset Funding LLC for proceeds of $26,619, net of related transaction expenses, and a trust certificate representing a 41.54% interest in the MarketPlace Loan Trust, Series 2015-OD2. We realized a loss of $775 on the sale.

On September 30, 2015, we restructured our investment in Arctic Energy Services, LLC (“Arctic Energy”). Concurrent with the restructuring, we exchanged $31,640 senior secured loan and $20,230 subordinated loan for Class D and Class E equity in Arctic Energy.
On October 30, 2015, we restructured our investment in CP Energy Services Inc. (“CP Energy”). Concurrent with the restructuring, we exchanged our $86,965 senior secured loan and $15,924 subordinated loan for Series B Redeemable Preferred Stock in CP Energy.

On October 30, 2015, we restructured our investment in Freedom Marine Solutions, LLC (“Freedom Marine”). Concurrent with the restructuring, we exchanged our $32,500 senior secured loans for additional membership interest in Freedom Marine.
On November 16, 2015 and November 25, 2015, we sold our $14,755 debt investment in AGC. We realized a loss of $4,127 on the sale.
On January 21, 2016, we sold 100% of our CIFC Funding 2011-I, Ltd. Class E and Class D notes with a cost basis of $29,004.
We realized a gain of $3,911 on the sale.

On February 3, 2016, lenders foreclosed on Targus Group International, Inc., and our $21,613 first lien term loan was extinguished and exchanged for 1,262,737 common units representing 12.63% equity ownership in Targus Cayman HoldCo Limited, the parent company of Targus.  On February 17, 2016, we provided additional debt financing to support the recapitalization of Targus. As part of the recapitalization, we invested an additional $1,263 in a new senior secured Term Loan A notes and were allocated $3,788 in new senior secured Term Loan B notes. During the same period, Targus was written-down for tax purposes and a realized loss of $14,194 therefore was realized for the amount that the amortized cost exceeded the fair value.
During the three months ended March 31, 2016, we sold our $10,100 debt investment in ICON Health and Fitness, Inc. We realized a loss of $1,053 on the sale.
On March 22, 2016 and March 24, 2016, United Sporting Company, Inc. partially repaid the $17,391 loan receivable to us.
During the three months ended March 31, 2016, NCT was written-off for tax purposes and a loss of $187 was realized.
As of March 31, 2016 , $3,860,837 of our loans, at fair value, bear interest at floating rates and have LIBOR floors ranging from 0.3% to 4.0%. As of June 30, 2015 , $4,413,161 of our loans, at fair value, bore interest at floating rates and $4,380,763 of those loans had LIBOR floors ranging from 0.5% to 5.5%.


59

At March 31, 2016 , four loan investments were on non-accrual status: Gulf Coast Machine & Supply Company (“Gulf Coast”), Targus, Venio LLC and Wolf Energy. At June 30, 2015 , four loan investments were on non-accrual status: Gulf Coast, NCT, Wind River and Wolf Energy. Principal balances of these loans amounted to $94,511 and $62,143 as of March 31, 2016 and June 30, 2015 , respectively. The fair value of these loans amounted to $28,613 and $6,918 as of March 31, 2016 and June 30, 2015 , respectively. The fair values of these investments represent approximately 0.5% and 0.1% of our total assets as of March 31, 2016 and June 30, 2015 , respectively. For the nine months ended March 31, 2016 and March 31, 2015 , the income foregone as a result of not accruing interest on non-accrual debt investments amounted to $14,297 and $18,450, respectively.
Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 6.00%. As of March 31, 2016 and June 30, 2015 , we had $60,242 and $88,288 , respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies. The fair value of our undrawn committed revolvers and delayed draw term loans was $(202) as of March 31, 2016 and zero as of June 30, 2015 .
During the nine months ended March 31, 2016 , we sold $74,377 of the outstanding principal balance of the senior secured Term Loan A investments in certain portfolio companies. There was no gain or loss realized on the sale. We serve as an agent for these loans and collect a servicing fee from the counterparties on behalf of the Investment Adviser. We receive a credit for these payments as a reduction of base management fee payable by us to the Investment Adviser. See Note 13 for further discussion.
Unconsolidated Significant Subsidiaries
Our investments are generally in small and mid-sized companies in a variety of industries. In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, we must determine which of our unconsolidated controlled portfolio companies are considered “significant subsidiaries”, if any. In evaluating these investments, there are three tests utilized to determine if any of our controlled investments are considered significant subsidiaries: the investment test, the asset test and the income test. Rule 3-09 of Regulation S-X requires separate audited financial statements of an unconsolidated subsidiary in an annual report if any of the three tests exceed 20%. Rule 4-08(g) of Regulation S-X requires summarized financial information in an annual report if any of the three tests exceeds 10%, and summarized financial information in a quarterly report if any of the three tests exceeds 20% pursuant to Rule 10-01(b) of Regulation S-X.
As of March 31, 2016 and June 30, 2015, we did not have a single investment that represented greater than 20% of our total investment portfolio at fair value or 20% of our total assets. Income, consisting of interest, dividends, fees, other investment income and gains or losses, which can fluctuate upon repayment or sale of an investment or the marking to fair value an investment in any given period can be highly concentrated among several investments. After performing the income analysis for the nine months ended March 31, 2016 , as currently promulgated by the SEC, we determined that two of our controlled investments individually generated more than 20% of our income for the nine months ended March 31, 2016 . We do not believe that the calculation promulgated by the SEC correctly identifies significant subsidiaries but have included First Tower Finance Company LLC (“First Tower Finance”), Harbortouch and NPRC as significant subsidiaries.
The following tables show summarized financial information for First Tower Finance:
March 31, 2016
June 30, 2015
Balance Sheet Data
Cash and cash equivalents
$
72,606

$
65,614

Receivables
428,756

400,451

Intangibles, including goodwill
110,078

121,822

Other assets
19,428

17,373

Notes payable
359,653

334,637

Notes payable, due to Prospect or Affiliate
255,249

251,578

Other liabilities
49,906

47,493

Total equity
(33,940
)
(28,448
)

60

Three Months Ended March 31,
Nine Months Ended March 31,
2016
2015
2016
2015
Summary of Operations
Total revenue
$
52,842

$
50,180

$
162,375

$
157,703

Total expenses
59,719

55,215

173,369

164,207

Net loss
(6,877
)
(5,035
)
(10,994
)
(6,504
)
The following tables show summarized financial information for Harbortouch:
March 31, 2016
June 30, 2015
Balance Sheet Data
Cash and cash equivalents
$
4,006

$
168

Receivables
26,203

28,721

Intangibles, including goodwill
357,014

351,396

Other assets
29,859

28,686

Notes payable
28,494

25,132

Notes payable, due to Prospect or Affiliate
292,742

296,734

Other liabilities
40,196

37,235

Total equity
55,650

49,870


Three Months Ended March 31,
Nine Months Ended March 31,

2016
2015
2016
2015
Summary of Operations






Total revenue
$
78,334

$
67,908

$
231,548

$
204,566

Total expenses
85,174

80,994

239,957

241,668

Net loss
(6,840
)
(13,086
)
(8,409
)
(37,102
)
The following tables show summarized financial information for NPRC:
March 31, 2016
June 30, 2015
Balance Sheet Data
Cash and cash equivalents
$
51,169

$
43,722

Real estate, net
651,117

639,012

Unsecured Consumer Loans, net
642,450

366,014

Other assets
35,891

51,383

Mortgage Payable
583,048

484,771

Revolving credit facilities
356,437

208,296

Notes payable, due to Prospect or Affiliate
411,271

365,205

Other liabilities
25,073

21,745

Total equity
4,798

20,114


61

Three Months Ended March 31,
Nine Months Ended March 31,
2016
2015
2016
2015
Summary of Operations
Total revenue
$
155,833

$
28,307

$
245,368

$
82,585

Total expenses
147,618

29,881

229,999

80,428

Operating Income
8,215

(1,574
)
15,369

2,157

Depreciation and Amortization
$
24,661

$
4,747

$
38,481

$
17,866

Fair Value Adjustment
$
24,051

$
2,195

$
41,786

$
2,883

Net Loss
(40,497
)
(8,516
)
(64,898
)
(18,592
)
The SEC has requested comments on the proper mechanics of how the calculations related to Rules 3-09 and 4-08(g) of Regulation S-X should be completed. There is currently diversity in practice for the calculations. We expect that the SEC will clarify the calculation methods in the future.
Note 4. Revolving Credit Facility
On March 27, 2012, we closed on an extended and expanded credit facility with a syndicate of lenders through PCF (the “2012 Facility”). The lenders had extended commitments of $857,500 under the 2012 Facility as of June 30, 2014, which was increased to $877,500 in July 2014. The 2012 Facility included an accordion feature which allowed commitments to be increased up to $1,000,000 in the aggregate. Interest on borrowings under the 2012 Facility was one-month LIBOR plus 275 basis points with no minimum LIBOR floor. Additionally, the lenders charged a fee on the unused portion of the 2012 Facility equal to either 50 basis points if at least half of the credit facility is drawn or 100 basis points otherwise.
On August 29, 2014, we renegotiated the 2012 Facility and closed an expanded five and a half year revolving credit facility (the “2014 Facility” and collectively with the 2012 Facility, the “Revolving Credit Facility”). The lenders have extended commitments of $885,000 under the 2014 Facility as of March 31, 2016 . The 2014 Facility includes an accordion feature which allows commitments to be increased up to $1,500,000 in the aggregate. The revolving period of the 2014 Facility extends through March 2019, with an additional one year amortization period (with distributions allowed) after the completion of the revolving period. During such one year amortization period, all principal payments on the pledged assets will be applied to reduce the balance. At the end of the one year amortization period, the remaining balance will become due, if required by the lenders.
The 2014 Facility contains restrictions pertaining to the geographic and industry concentrations of funded loans, maximum size of funded loans, interest rate payment frequency of funded loans, maturity dates of funded loans and minimum equity requirements. The 2014 Facility also contains certain requirements relating to portfolio performance, including required minimum portfolio yield and limitations on delinquencies and charge-offs, violation of which could result in the early termination of the 2014 Facility. The 2014 Facility also requires the maintenance of a minimum liquidity requirement. As of March 31, 2016 , we were in compliance with the applicable covenants.
Interest on borrowings under the 2014 Facility is one-month LIBOR plus 225 basis points with no minimum LIBOR floor. Additionally, the lenders charge a fee on the unused portion of the 2014 Facility equal to either 50 basis points if at least 35% of the credit facility is drawn or 100 basis points otherwise. The 2014 Facility requires us to pledge assets as collateral in order to borrow under the credit facility.
As of March 31, 2016 and June 30, 2015 , we had $645,696 and $721,800 , respectively, available to us for borrowing under the Revolving Credit Facility, of which the amount outstanding was $0 and $368,700 , respectively. As additional eligible investments are transferred to PCF and pledged under the Revolving Credit Facility, PCF will generate additional availability up to the current commitment amount of $885,000 . As of March 31, 2016 , the investments, including cash and money market funds, used as collateral for the Revolving Credit Facility had an aggregate fair value of $1,470,217 , which represents 23.8% of our total investments, including cash and money market funds. These assets are held and owned by PCF, a bankruptcy remote special purpose entity, and as such, these investments are not available to our general creditors. The release of any assets from PCF requires the approval of the facility agent.
In connection with the origination and amendments of the Revolving Credit Facility, we incurred $12,405 of new fees and $3,539 of fees carried over for continuing participants from the previous facility, which are being amortized over the term of the facility in accordance with ASC 470-50, of which $8,210 remains to be amortized and is included within deferred financing costs on the Consolidated Statement of Assets and Liabilities as of March 31, 2016 . During the six months ended December 31, 2014, in

62

accordance with ASC 470-50, we expensed $332 of fees relating to credit providers in the 2012 Facility who did not commit to the 2014 Facility.

During the three months ended March 31, 2016 and March 31, 2015 , we recorded $3,046 and $3,545 , respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense. During the nine months ended March 31, 2016 and March 31, 2015 , we recorded $10,291 and $10,803 , respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.
Note 5. Convertible Notes
On December 21, 2010, we issued $150,000 aggregate principal amount of convertible notes that matured on December 15, 2015 (the “2015 Notes”). The 2015 Notes bore interest at a rate of 6.25% per year, payable semi-annually on June 15 and December 15 of each year, beginning June 15, 2011. Total proceeds from the issuance of the 2015 Notes, net of underwriting discounts and offering costs, were $145,200. On December 15, 2015, we repaid the outstanding principal amount of the 2015 Notes, plus interest. No gain or loss was realized on the transaction.
On February 18, 2011, we issued $172,500 aggregate principal amount of convertible notes that mature on August 15, 2016 (the “2016 Notes”), unless previously converted or repurchased in accordance with their terms. The 2016 Notes bear interest at a rate of 5.50% per year, payable semi-annually on February 15 and August 15 of each year, beginning August 15, 2011. Total proceeds from the issuance of the 2016 Notes, net of underwriting discounts and offering costs, were $167,325. Between January 30, 2012 and February 2, 2012, we repurchased $5,000 aggregate principal amount of the 2016 Notes at a price of 97.5, including commissions. The transactions resulted in our recognizing $10 of loss in the year ended June 30, 2012.
On April 16, 2012, we issued $130,000 aggregate principal amount of convertible notes that mature on October 15, 2017 (the “2017 Notes”), unless previously converted or repurchased in accordance with their terms. The 2017 Notes bear interest at a rate of 5.375% per year, payable semi-annually on April 15 and October 15 of each year, beginning October 15, 2012. Total proceeds from the issuance of the 2017 Notes, net of underwriting discounts and offering costs, were $126,035. On March 28, 2016, we repurchased $500 aggregate principal amount of the 2017 Notes at a price of 98.25, including commissions. The transaction resulted in our recognizing a $9 gain for the period ended March 31, 2016.
On August 14, 2012, we issued $200,000 aggregate principal amount of convertible notes that mature on March 15, 2018 (the “2018 Notes”), unless previously converted or repurchased in accordance with their terms. The 2018 Notes bear interest at a rate of 5.75% per year, payable semi-annually on March 15 and September 15 of each year, beginning March 15, 2013. Total proceeds from the issuance of the 2018 Notes, net of underwriting discounts and offering costs, were $193,600.
On December 21, 2012, we issued $200,000 aggregate principal amount of convertible notes that mature on January 15, 2019 (the “2019 Notes”), unless previously converted or repurchased in accordance with their terms. The 2019 Notes bear interest at a rate of 5.875% per year, payable semi-annually on January 15 and July 15 of each year, beginning July 15, 2013. Total proceeds from the issuance of the 2019 Notes, net of underwriting discounts and offering costs, were $193,600.
On April 11, 2014, we issued $400,000 aggregate principal amount of convertible notes that mature on April 15, 2020 (the “2020 Notes”), unless previously converted or repurchased in accordance with their terms. The 2020 Notes bear interest at a rate of 4.75% per year, payable semi-annually on April 15 and October 15 each year, beginning October 15, 2014. Total proceeds from the issuance of the 2020 Notes, net of underwriting discounts and offering costs, were $387,500. On January 30, 2015, we repurchased $8,000 aggregate principal amount of the 2020 Notes at a price of 93.0, including commissions. As a result of this transaction, we recorded a gain of $332, in the amount of the difference between the reacquisition price and the net carrying amount of the notes, net of the proportionate amount of unamortized debt issuance costs.
Certain key terms related to the convertible features for the 2016 Notes, the 2017 Notes, the 2018 Notes, the 2019 Notes and the 2020 Notes (collectively, the “Convertible Notes”) are listed below.
2016 Notes

2017 Notes

2018 Notes

2019 Notes

2020 Notes

Initial conversion rate(1)
78.3699

85.8442

82.3451

79.7766

80.6647

Initial conversion price
$
12.76

$
11.65

$
12.14

$
12.54

$
12.40

Conversion rate at March 31, 2016(1)(2)
80.2196

87.7516

84.1497

79.8360

80.6670

Conversion price at March 31, 2016(2)(3)
$
12.47

$
11.40

$
11.88

$
12.53

$
12.40

Last conversion price calculation date
2/18/2016

4/16/2015

8/14/2015

12/21/2015

4/11/2015

Dividend threshold amount (per share)(4)
$
0.101150

$
0.101500

$
0.101600

$
0.110025

$
0.110525


63

(1)
Conversion rates denominated in shares of common stock per $1 principal amount of the Convertible Notes converted.
(2)
Represents conversion rate and conversion price, as applicable, taking into account certain de minimis adjustments that will be made on the conversion date.
(3)
The conversion price in effect at March 31, 2016 was calculated on the last anniversary of the issuance and will be adjusted again on the next anniversary, unless the exercise price shall have changed by more than 1% before the anniversary.
(4)
The conversion rate is increased if monthly cash dividends paid to common shares exceed the monthly dividend threshold amount, subject to adjustment.
Upon conversion, unless a holder converts after a record date for an interest payment but prior to the corresponding interest payment date, the holder will receive a separate cash payment with respect to the notes surrendered for conversion representing accrued and unpaid interest to, but not including, the conversion date. Any such payment will be made on the settlement date applicable to the relevant conversion on the Convertible Notes.
No holder of Convertible Notes will be entitled to receive shares of our common stock upon conversion to the extent (but only to the extent) that such receipt would cause such converting holder to become, directly or indirectly, a beneficial owner (within the meaning of Section 13(d) of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of more than 5.0% of the shares of our common stock outstanding at such time. The 5.0% limitation shall no longer apply following the effective date of any fundamental change. We will not issue any shares in connection with the conversion or redemption of the Convertible Notes which would equal or exceed 20% of the shares outstanding at the time of the transaction in accordance with NASDAQ rules.
Subject to certain exceptions, holders may require us to repurchase, for cash, all or part of their Convertible Notes upon a fundamental change at a price equal to 100% of the principal amount of the Convertible Notes being repurchased plus any accrued and unpaid interest up to, but excluding, the fundamental change repurchase date. In addition, upon a fundamental change that constitutes a non-stock change of control we will also pay holders an amount in cash equal to the present value of all remaining interest payments (without duplication of the foregoing amounts) on such Convertible Notes through and including the maturity date.
In connection with the issuance of the Convertible Notes, we incurred $34,629 of fees which are being amortized over the terms of the notes, of which $16,137 remains to be amortized and is included within deferred financing costs on the Consolidated Statement of Assets and Liabilities as of March 31, 2016 . This amount included a $4 write-off of deferred financing costs associated with the repurchase of the 2017 Notes.
During the three months ended March 31, 2016 and March 31, 2015 , we recorded $16,038 and $18,572 , respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense. During the nine months ended March 31, 2016 and March 31, 2015 , we recorded $52,957 and $55,776 , respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense.
Note 6. Public Notes
On May 1, 2012, we issued $100,000 aggregate principal amount of unsecured notes that were scheduled to mature on November 15, 2022 (the “2022 Notes”). The 2022 Notes bore interest at a rate of 6.95% per year, payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning August 15, 2012. Total proceeds from the issuance of the 2022 Notes, net of underwriting discounts and offering costs, were $97,000. On May 15, 2015, we redeemed $100,000 aggregate principal amount of the 2022 Notes at par. In connection with this transaction, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on the extinguishment of the 2022 Notes in the year ended June 30, 2015 was $2,600.

On March 15, 2013, we issued $250,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “2023 Notes”). The 2023 Notes bear interest at a rate of 5.875% per year, payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2013. Total proceeds from the issuance of the 2023 Notes, net of underwriting discounts and offering costs, were $245,966.


64

On April 7, 2014, we issued $300,000 aggregate principal amount of unsecured notes that mature on July 15, 2019 (the “5.00% 2019 Notes”). Included in the issuance is $45,000 of Prospect Capital InterNotes® that were exchanged for the 5.00% 2019 Notes. The 5.00% 2019 Notes bear interest at a rate of 5.00% per year, payable semi-annually on January 15 and July 15 of each year, beginning July 15, 2014. Total proceeds from the issuance of the 5.00% 2019 Notes, net of underwriting discounts and offering costs, were $295,998.
On December 10, 2015, we issued $160,000 aggregate principal amount of unsecured notes that mature on June 15, 2024 (the “2024 Notes”). The 2024 Notes bear interest at a rate of 6.25% per year, payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2016. Total proceeds from the issuance of the 2024 Notes, net of underwriting discounts and offering costs, were $154,880.
The 2022 Notes, the 2023 Notes, the 5.00% 2019 Notes, and the 2024 Notes (collectively, the “Public Notes”) are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding.
In connection with the issuance of the 2023 Notes, the 5.00% 2019 Notes, and the 2024 Notes, we incurred $13,156 of fees which are being amortized over the term of the notes, of which $10,708 remains to be amortized and is included within deferred financing costs on the Consolidated Statement of Assets and Liabilities as of March 31, 2016 .
During the three months ended March 31, 2016 and March 31, 2015 , we recorded $10,352 and $9,493 , respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense. During the nine months ended March 31, 2016 and March 31, 2015 , we recorded $26,513 and $28,440 , respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense .
Note 7. Prospect Capital InterNotes®
On February 16, 2012, we entered into a selling agent agreement (the “Selling Agent Agreement”) with Incapital LLC, as purchasing agent for our issuance and sale from time to time of up to $500,000 of Prospect Capital InterNotes® (the “InterNotes® Offering”), which was increased to $1,500,000 in May 2014. Additional agents may be appointed by us from time to time in connection with the InterNotes® Offering and become parties to the Selling Agent Agreement.
These notes are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding. Each series of notes will be issued by a separate trust. These notes bear interest at fixed interest rates and offer a variety of maturities no less than twelve months from the original date of issuance.
During the nine months ended March 31, 2016 , we issued $74,862 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $73,738 . These notes were issued with stated interest rates ranging from 4.625% to 6.00% with a weighted average interest rate of 5.10% . These notes mature between July 15, 2020 and December 15, 2025 .

The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 2016 .
Tenor at
Origination
(in years)
Principal
Amount
Interest Rate
Range
Weighted
Average
Interest Rate
Maturity Date Range
5
$
37,930

4.625%–5.500%
4.93
%
July 15, 2020 – March 15, 2021
6.5
35,155

5.10%–5.25%
5.25
%
January 15, 2022 – May 15, 2022
7
990

5.625%–5.75%
5.65
%
November 15, 2022 – December 15, 2022
10
787

5.875%–6.00%
5.89
%
November 15, 2025 – December 15, 2025
$
74,862

During the nine months ended March 31, 2015 , we issued $74,967 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $73,730 . These notes were issued with a stated interest rates ranging from 4.25% to 4.75% with a weighted average interest rate of 4.58% . These notes mature between May 15, 2020 and September 15, 2020 . All notes issued during the nine months ended March 31, 2015 mature 5.5 years from the original date of issuance.


65

During the nine months ended March 31, 2016 , we repaid $ 3,769 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the nine months ended March 31, 2016 was $(95). The following table summarizes the Prospect Capital InterNotes® outstanding as of March 31, 2016 .
Tenor at
Origination
(in years)
Principal
Amount
Interest Rate
Range
Weighted
Average
Interest Rate
Maturity Date Range
3
$
5,710

4.00%
4.00
%
October 15, 2016
3.5
3,109

4.00%
4.00
%
April 15, 2017
4
45,690

3.75%–4.00%
3.92
%
November 15, 2017 – May 15, 2018
5
245,618

4.25%–5.500%
4.92
%
July 15, 2018 – March 15, 2021
5.2
4,440

4.625%
4.625
%
August 15, 2020 – September 15, 2020
5.3
2,686

4.625%
4.625
%
September 15, 2020
5.4
5,000

4.75%
4.75
%
August 15, 2019
5.5
109,981

4.25%–5.00%
4.65
%
February 15, 2019 – November 15, 2020
6
2,197

3.375%
3.375
%
April 15, 2021 – May 15, 2021
6.5
40,867

5.10%–5.50%
5.24
%
February 15, 2020 – May 15, 2022
7
192,389

4.00%–6.55%
5.13
%
June 15, 2019 – December 15, 2022
7.5
1,996

5.75%
5.75
%
February 15, 2021
10
37,558

3.622%–7.00%
6.12
%
March 15, 2022 – December 15, 2025
12
2,978

6.00%
6.00
%
November 15, 2025 – December 15, 2025
15
17,325

5.00%–6.00%
5.14
%
May 15, 2028 – November 15, 2028
18
22,453

4.125%–6.25%
5.53
%
December 15, 2030 – August 15, 2031
20
4,490

5.63%–6.00%
5.89
%
November 15, 2032 – October 15, 2033
25
35,488

6.25%–6.50%
6.39
%
August 15, 2038 – May 15, 2039
30
118,560

5.50%–6.75%
6.23
%
November 15, 2042 – October 15, 2043
$
898,535


During the nine months ended March 31, 2015 , we redeemed $76,931 aggregate principal amount of our Prospect Capital InterNotes® at par with a weighted average interest rate of 6.06% in order to replace debt with higher interest rates with debt with lower rates. As a result of these transactions, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the Prospect Capital InterNotes®, net of the proportionate amount of unamortized debt issuance costs. The net loss on extinguishment of debt we recorded in the three and nine months ended March 31, 2015 was $1,220 and $1,556, respectively. During the nine months ended March 31, 2015, we repaid $4,988 aggregate principal amount of our Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus.

The following table summarizes the Prospect Capital InterNotes® outstanding as of June 30, 2015 .

66

Tenor at
Origination
(in years)
Principal
Amount
Interest Rate
Range
Weighted
Average
Interest Rate
Maturity Date Range
3
$
5,710

4.00%
4.00
%
October 15, 2016
3.5
3,109

4.00%
4.00
%
April 15, 2017
4
45,690

3.75%–4.00%
3.92
%
November 15, 2017 – May 15, 2018
5
207,719

4.25%–5.00%
4.92
%
July 15, 2018 – May 15, 2019
5.25
7,126

4.625%
4.63
%
August 15, 2020 – September 15, 2020
5.5
115,184

4.25%–5.00%
4.65
%
February 15, 2019 – November 15, 2020
6
2,197

3.375%
3.38
%
April 15, 2021 – May 15, 2021
6.5
5,712

5.10%–5.50%
5.23
%
February 15, 2020 – December 15, 2021
7
191,549

4.00%–5.85%
5.13
%
September 15, 2019 – June 15, 2022
7.5
1,996

5.75%
5.75
%
February 15, 2021
10
36,925

3.29%–7.00%
6.11
%
March 15, 2022 – May 15, 2024
12
2,978

6.00%
6.00
%
November 15, 2025 – December 15, 2025
15
17,385

5.00%–6.00%
5.14
%
May 15, 2028 – November 15, 2028
18
22,729

4.125%–6.25%
5.52
%
December 15, 2030 – August 15, 2031
20
4,530

5.75%–6.00%
5.89
%
November 15, 2032 – October 15, 2033
25
36,320

6.25%–6.50%
6.39
%
August 15, 2038 – May 15, 2039
30
120,583

5.50%–6.75%
6.23
%
November 15, 2042 – October 15, 2043
$
827,442


In connection with the issuance of Prospect Capital InterNotes ® , we incurred $21,730 of fees which are being amortized over the term of the notes, of which $15,882 remains to be amortized and is included within deferred financing costs on the Consolidated Statement of Assets and Liabilities as of March 31, 2016 .
During the three months ended March 31, 2016 and March 31, 2015 , we recorded $12,283 and $10,603 , respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes ® as interest expense. During the nine months ended March 31, 2016 and March 31, 2015 , we recorded $36,120 and $32,352 , respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes ® as interest expense.
Note 8. Fair Value and Maturity of Debt Outstanding
The following table shows the maximum draw amounts and outstanding borrowings of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of March 31, 2016 and June 30, 2015 .
March 31, 2016
June 30, 2015
Maximum Draw Amount
Amount Outstanding
Maximum Draw Amount
Amount Outstanding
Revolving Credit Facility
$
885,000

$
—

$
885,000

$
368,700

Convertible Notes
1,089,000

1,089,000

1,239,500

1,239,500

Public Notes
708,242

708,242

548,094

548,094

Prospect Capital InterNotes ®
898,535

898,535

827,442

827,442

Total
$
3,580,777

$
2,695,777

$
3,500,036

$
2,983,736


67

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of March 31, 2016 .
Payments Due by Period
Total
Less than 1 Year
1 – 3 Years
3 – 5 Years
After 5 Years
Revolving Credit Facility
$
—

—

$
—

$
—

$
—

Convertible Notes
1,089,000

167,500

529,500

392,000

—

Public Notes
708,242

—

—

300,000

408,242

Prospect Capital InterNotes®
898,535

5,710

238,357

352,128

302,340

Total Contractual Obligations
$
2,695,777

$
173,210

$
767,857

$
1,044,128

$
710,582

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of June 30, 2015 .
Payments Due by Period
Total
Less than 1 Year
1 – 3 Years
3 – 5 Years
After 5 Years
Revolving Credit Facility
$
368,700

$
—

$
—

$
368,700

$
—

Convertible Notes
1,239,500

150,000

497,500

592,000

—

Public Notes
548,094

—

—

300,000

248,094

Prospect Capital InterNotes ®
827,442

—

54,509

369,938

402,995

Total Contractual Obligations
$
2,983,736

$
150,000

$
552,009

$
1,630,638

$
651,089

As permitted by ASC 825-10-25, we have not elected to value our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® at fair value. The following table shows the fair value of these financial liabilities disaggregated into the three levels of the ASC 820 valuation hierarchy as of March 31, 2016 .
Fair Value Hierarchy
Level 1
Level 2
Level 3
Total
Revolving Credit Facility(1)
$
—

$
—

$
—

$
—

Convertible Notes(2)
—

1,031,939

—

1,031,939

Public Notes(2)
—

648,887

—

648,887

Prospect Capital InterNotes®(3)
—

876,622

—

876,622

Total
$
—

$
2,557,448

$
—

$
2,557,448

(1)
The carrying value of our Revolving Credit Facility approximates the fair value.
(2)
We use available market quotes to estimate the fair value of the Convertible Notes and Public Notes.
(3)
The fair value of Prospect Capital InterNotes® is estimated by discounting remaining payments using current Treasury rates.
The following table shows the fair value of these financial liabilities disaggregated into the three levels of the ASC 820 valuation hierarchy as of June 30, 2015 .
Fair Value Hierarchy
Level 1
Level 2
Level 3
Total
Revolving Credit Facility(1)
$
—

$
368,700

$
—

$
368,700

Convertible Notes(2)
—

1,244,402

—

1,244,402

Public Notes(2)
—

564,052

—

564,052

Prospect Capital InterNotes®(3)
—

848,387

—

848,387

Total
$
—

$
3,025,541

$
—

$
3,025,541

(1)
The carrying value of our Revolving Credit Facility approximates the fair value.
(2)
We use available market quotes to estimate the fair value of the Convertible Notes and Public Notes.
(3)
The fair value of Prospect Capital InterNotes® is estimated by discounting remaining payments using current Treasury rates.

68

Note 9. Stock Repurchase Program, Equity Offerings, Offering Expenses, and Distributions
On August 24, 2011, our Board of Directors approved a share repurchase plan (the “Repurchase Program”) under which we may repurchase up to $100,000 of our common stock at prices below our net asset value per share. Prior to any repurchase, we are required to notify shareholders of our intention to purchase our common stock. We delivered a notice with our annual proxy mailing on September 23, 2015 and our most recent notice was delivered with a shareholder letter mailing on February 2, 2016. This notice extends for six months after the date that notice is delivered.
During the nine months ended March 31, 2016 , we repurchased 4,708,750 shares of our common stock pursuant to our Repurchase Program for $34,140 , or approximately $7.25 weighted average price per share at approximately a 30% discount to net asset value as of June 30, 2015. Our NAV per share was increased by approximately $0.02 for the nine months ended March 31, 2016 as a result of the share repurchases.
There were no repurchases made for the three months ended March 31, 2016 under our Repurchase Program.
Repurchases of Common Stock
Nine Months Ended March 31, 2016
Dollar amount repurchased
$
34,140

Shares Repurchased
4,708,750

Weighted average price per share
7.25
Weighted average discount to June 30, 2015 net asset value
30
%
Excluding dividend reinvestments, during the nine months ended March 31, 2016 we did not issue any shares of our common stock. Excluding dividend reinvestments, we issued 14,845,556 shares of our common stock during the nine months ended March 31, 2015 . The following table summarizes our issuances of common stock during the nine months ended March 31, 2015 .
Issuances of Common Stock
Number of
Shares Issued
Gross
Proceeds
Underwriting
Fees
Offering
Expenses
Average
Offering Price
During the nine months ended March 31, 2015:




September 11, 2014 – November 3, 2014(1)
9,490,975

$
95,149

$
474

$
175

$
10.03

November 17, 2014 – December 3, 2014(1)
5,354,581

$
51,678

$
268

$
410

$
9.65

(1)
Shares were issued in connection with our at-the-market offering program which we enter into from time to time with various counterparties.
Our shareholders’ equity accounts as of March 31, 2016 and June 30, 2015 reflect cumulative shares issued as of those respective dates. Our common stock has been issued through public offerings, a registered direct offering, the exercise of over-allotment options on the part of the underwriters, our dividend reinvestment plan and in connection with the acquisition of certain controlled portfolio companies. When our common stock is issued, the related offering expenses have been charged against paid-in capital in excess of par. All underwriting fees and offering expenses were borne by us.
On November 3, 2015, our Registration Statement on Form N-2 was declared effective by the SEC. Under this Shelf Registration Statement, we can issue up to $4,822,456 of additional debt and equity securities in the public market as of March 31, 2016 .



69

During the nine months ended March 31, 2016 and March 31, 2015 , we distributed approximately $266,920 and $331,863 , respectively, to our stockholders. The following table summarizes our distributions declared and payable for the nine months ended March 31, 2015 and March 31, 2016 .
Declaration Date
Record Date
Payment Date
Amount Per Share
Amount Distributed (in thousands)
2/3/2014
7/31/2014
8/21/2014
$
0.110475

$
37,863

2/3/2014
8/29/2014
9/18/2014
0.110500

37,885

2/3/2014
9/30/2014
10/22/2014
0.110525

38,519

5/6/2014
10/31/2014
11/20/2014
0.110550

38,977

5/6/2014
11/28/2014
12/18/2014
0.110575

39,583

5/6/2014
12/31/2014
1/22/2015
0.110600

39,623

9/24/2014
1/30/2015
2/19/2015
0.110625

39,648

12/8/2014
2/27/2015
3/19/2015
0.083330

29,878

12/8/2014
3/31/2015
4/23/2015
0.083330

29,887

Total declared and payable for the nine months ended March 31, 2015
$
331,863

5/6/2015
7/31/2015
8/20/2015
$
0.083330

$
29,909

5/6/2015
8/31/2015
9/17/2015
0.083330

29,605

8/24/2015
9/30/2015
10/22/2015
0.083330

29,601

8/24/2015
10/30/2015
11/19/2015
0.083330

29,600

11/4/2015
11/30/2015
12/24/2015
0.083330

29,611

11/4/2015
12/31/2015
1/21/2016
0.083330

29,616

11/4/2015
1/29/2016
2/18/2016
0.083330

29,641

2/9/2016
2/29/2016
3/24/2016
0.083330

29,662

2/9/2016
3/31/2016
4/21/2016
0.083330

29,675

Total declared and payable for the nine months ended March 31, 2016
$
266,920

Dividends and distributions to common stockholders are recorded on the ex-dividend date. As such, the table above includes distributions with record dates during the nine months ended March 31, 2016 and March 31, 2015 . It does not include distributions previously declared to stockholders of record on any future dates, as those amounts are not yet determinable. The following dividends were previously declared and will be payable subsequent to March 31, 2016 :
•
$0.08333 per share for March 2016 to holders of record on March 31, 2016 with a payment date of April 21, 2016.
•
$0.08333 per share for April 2016 to holders of record on April 29, 2016 with a payment date of May 19, 2016.
During the nine months ended March 31, 2016 and March 31, 2015 , we issued 1,731,768 and 1,189,248 shares of our common stock, respectively, in connection with the dividend reinvestment plan.
On February 9, 2016, we amended our dividend reinvestment plan that already provides for reinvestment of our dividends or distributions on behalf of our stockholders, unless a stockholder elects to receive cash, to add the ability of stockholders to purchase additional shares by making optional cash investments.  Under the revised dividend reinvestment and direct stock repurchase plan, stockholders may elect to purchase additional shares through our transfer agent in the open market or in negotiated transactions.

During nine months ended March 31, 2016 , Prospect Capital officers purchased 16,198,071 shares of our stock, or 4.6% of total outstanding shares as of March 31, 2016 , both through the open market transactions and shares issued in connection with our dividend reinvestment plan.
As of March 31, 2016 , we have reserved 89,219,237 shares of our common stock for issuance upon conversion of the Convertible Notes (see Note 5).

70

Note 10. Other Income
Other income consists of structuring fees, overriding royalty interests, revenue receipts related to net profit interests, deal deposits, administrative agent fees, and other miscellaneous and sundry cash receipts. The following table shows income from such sources during the three and nine months ended March 31, 2016 and March 31, 2015 .
Three Months Ended
March 31,
Nine Months Ended March 31,
2016
2015
2016
2015
Structuring and amendment fees (refer to Note 3)
$
213

$
3,380

$
10,967

$
24,988

Royalty and Net Revenue interests
1,732

1,390

5,471

3,218

Administrative agent fees
255

216

637

494

Total Other Income
$
2,200

$
4,986

$
17,075

$
28,700

Note 11. Net Increase in Net Assets per Share
The following information sets forth the computation of net increase in net assets resulting from operations per share during the three and nine months ended March 31, 2016 and March 31, 2015 .
Three Months Ended
March 31,
Nine Months Ended March 31,
2016
2015
2016
2015
Net increase in net assets resulting from operations
$
75,508

$
81,492

$
8,205

$
251,570

Weighted average common shares outstanding
355,779,088

358,449,304

355,994,927

351,922,217

Net increase in net assets resulting from operations per share
$
0.21

$
0.23

$
0.02

$
0.71

Note 12. Income Taxes
While our fiscal year end for financial reporting purposes is June 30 of each year, our tax year end is August 31 of each year. The information presented in this footnote is based on our tax year end for each period presented, unless otherwise specified. The tax return for the tax year ended August 31, 2015 has not been filed. Taxable income and all amounts related to taxable income for the tax year ended August 31, 2015 are estimates and will not be fully determined until the Company’s tax return is filed.
For income tax purposes, dividends paid and distributions made to shareholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of dividends paid to shareholders during the tax years ended August 31, 2015, 2014 and 2013 were as follows:
Tax Year Ended August 31,
2015
2014
2013
Ordinary income
$
413,640

$
413,051

$
282,621

Capital gain
—

—

—

Return of capital
—

—

—

Total dividends paid to shareholders
$
413,640

$
413,051

$
282,621

For the tax year ending August 31, 2016, the tax character of dividends paid to shareholders through March 31, 2016 is expected to be ordinary income. Because of the difference between our fiscal and tax year ends, the final determination of the tax character of dividends will not be made until we file our tax return for the tax year ending August 31, 2016.
Taxable income generally differs from net increase in net assets resulting from operations for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized gains or losses, as unrealized gains or losses are generally not included in taxable income until they are realized. The following reconciles the net increase in net assets resulting from operations to taxable income for the tax years ended August 31, 2015, 2014 and 2013:

71

Tax Year Ended August 31,
2015
2014
2013
Net increase in net assets resulting from operations
$
360,572

$
317,671

$
238,721

Net realized loss on investments
164,230

28,244

24,632

Net unrealized (appreciation) depreciation on investments
(157,745
)
24,638

77,835

Other temporary book-to-tax differences
98,289

(9,122
)
(6,994
)
Permanent differences
2,436

(4,317
)
5,939

Taxable income before deductions for distributions
$
467,782

$
357,114

$
340,133

Capital losses in excess of capital gains earned in a tax year may generally be carried forward and used to offset capital gains, subject to certain limitations. The Regulated Investment Company Modernization Act (the “RIC Modernization Act”) was enacted on December 22, 2010. Under the RIC Modernization Act, capital losses incurred by taxpayers in taxable years beginning after the date of enactment will be allowed to be carried forward indefinitely and are allowed to retain their character as either short-term or long-term losses. As such, the capital loss carryforwards generated by us after the August 31, 2011 tax year will not be subject to expiration. Any losses incurred in post-enactment tax years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As of August 31, 2015, we had capital loss carryforwards of approximately $295,106 available for use in later tax years. Of the amount available as of August 31, 2015, $32,612 and $46,156 will expire on August 31, 2017 and 2018, respectively, and $216,338 is not subject to expiration. The unused balance each year will be carried forward and utilized as gains are realized, subject to limitations. While our ability to utilize losses in the future depends upon a variety of factors that cannot be known in advance, substantially all of the Company's capital loss carryforwards may become permanently unavailable due to limitations by the Code.
For the tax year ended August 31, 2015, we estimated taxable income in excess of the distributions made and we will elect to carry forward the excess for distribution to shareholders in the tax year ending August 31, 2016. The cumulative amount carried forward to 2016 is expected to be approximately $103,613. For the tax year ended August 31, 2014, we had distributions in excess of taxable income. After the excess distributions, we still had cumulative taxable income in excess of cumulative distributions, and therefore, we elected to carry forward the excess for distribution to shareholders in the tax year ended August 31, 2015. The amount carried forward to 2015 was approximately $49,471. For the tax year ended August 31, 2013, we had taxable income in excess of the distributions made from such taxable income during the year, and therefore, we elected to carry forward the excess for distribution to shareholders in the tax year ended August 31, 2014. The amount carried forward to 2014 was approximately $105,408.
As of March 31, 2016 , the cost basis of investments for tax purposes was $6,292,766 resulting in estimated gross unrealized appreciation and depreciation of $215,114 and $502,775, respectively. As of June 30, 2015, the cost basis of investments for tax purposes was $6,599,876 resulting in estimated gross unrealized appreciation and depreciation of $263,892 and $254,210, respectively. Due to the difference between our fiscal year end and tax year end, the cost basis of our investments for tax purposes as of March 31, 2016 and June 30, 2015 was calculated based on the book cost of investments as of March 31, 2016 and June 30, 2015, respectively, with cumulative book-to-tax adjustments for investments through August 31, 2015 and 2014, respectively.
In general, we may make certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which may include merger-related items, differences in the book and tax basis of certain assets and liabilities, and nondeductible federal excise taxes, among other items. During the tax year ended August 31, 2015, we decreased overdistributed net investment income by $2,435, increased accumulated net realized loss on investments by $8,542 and increased capital in excess of par value by $6,107. During the tax year ended August 31, 2014, we increased accumulated overdistributed net investment income by $4,316, decreased accumulated net realized loss on investments by $3,384 and decreased capital in excess of par value by $932. Due to the difference between our fiscal and tax year end, the reclassifications for the taxable year ended August 31, 2015 is being recorded in the fiscal year ending June 30, 2016 and the reclassifications for the taxable year ended August 31, 2014 were recorded in the fiscal year ended June 30, 2015.

72

Note 13. Related Party Agreements and Transactions
Investment Advisory Agreement
On December 23, 2014, the Investment Adviser, Prospect Capital Management LLC, converted into a Delaware limited partnership and is now known as Prospect Capital Management L.P. (continues as the Investment Adviser). We have entered into an investment advisory and management agreement with the Investment Adviser (the “Investment Advisory Agreement”) under which the Investment Adviser, subject to the overall supervision of our Board of Directors, manages the day-to-day operations of, and provides investment advisory services to, us. Under the terms of the Investment Advisory Agreement, the Investment Adviser: (i) determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes, (ii) identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and (iii) closes and monitors investments we make.
The Investment Adviser’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired. For providing these services the Investment Adviser receives a fee from us, consisting of two components: a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 2.00% on our gross assets (including amounts borrowed). For services currently rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters and appropriately adjusted for any share issuances or repurchases during the current calendar quarter.
The total gross base management fee incurred to the favor of the Investment Adviser was $31,442 and $33,679 during the three months ended March 31, 2016 and March 31, 2015 , respectively. The total gross base management fee incurred to the favor of the Investment Adviser was $97,109 and $100,878 during the nine months ended March 31, 2016 and March 31, 2015 , respectively.
The Investment Adviser has entered into a servicing agreement with certain institutions who purchased loans with us, where we serve as the agent and collect a servicing fee on behalf of the Investment Adviser. During the three and nine months ended March 31, 2016 , we received payments of $465 and $1,397 , respectively, from these institutions, on behalf of the Investment Adviser, for providing such services under the servicing agreement. We were given a credit for these payments, which reduced the base management fee payable to $30,977 and $95,712 for the three and nine months ended March 31, 2016 , respectively. No such payments were received during the three and nine months ended March 31, 2015 .
The incentive fee has two parts. The first part, the income incentive fee, is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees and other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement described below, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a “hurdle rate” of 1.75% per quarter (7.00% annualized).
The net investment income used to calculate this part of the incentive fee is also included in the amount of the gross assets used to calculate the 2.00% base management fee. We pay the Investment Adviser an income incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:
•
No incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle rate;
•
100.00% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 125.00% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming a 7.00% annualized hurdle rate); and
•
20.00% of the amount of our pre-incentive fee net investment income, if any, that exceeds 125.00% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming a 7.00% annualized hurdle rate).

73

These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.
The second part of the incentive fee, the capital gains incentive fee, is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.00% of our realized capital gains for the calendar year, if any, computed net of all realized capital losses and unrealized capital depreciation at the end of such year. In determining the capital gains incentive fee payable to the Investment Adviser, we calculate the aggregate realized capital gains, aggregate realized capital losses and aggregate unrealized capital depreciation, as applicable, with respect to each investment that has been in its portfolio. For the purpose of this calculation, an “investment” is defined as the total of all rights and claims which may be asserted against a portfolio company arising from our participation in the debt, equity, and other financial instruments issued by that company. Aggregate realized capital gains, if any, equal the sum of the differences between the aggregate net sales price of each investment and the aggregate cost basis of such investment when sold or otherwise disposed. Aggregate realized capital losses equal the sum of the amounts by which the aggregate net sales price of each investment is less than the aggregate cost basis of such investment when sold or otherwise disposed. Aggregate unrealized capital depreciation equals the sum of the differences, if negative, between the aggregate valuation of each investment and the aggregate cost basis of such investment as of the applicable calendar year-end. At the end of the applicable calendar year, the amount of capital gains that serves as the basis for our calculation of the capital gains incentive fee involves netting aggregate realized capital gains against aggregate realized capital losses on a since-inception basis and then reducing this amount by the aggregate unrealized capital depreciation. If this number is positive, then the capital gains incentive fee payable is equal to 20.00% of such amount, less the aggregate amount of any capital gains incentive fees paid since inception.
The total income incentive fee incurred was $21,906 , and $21,860 during the three months ended March 31, 2016 and March 31, 2015 , respectively. The fees incurred for the nine months ended March 31, 2016 and March 31, 2015 were $69,940 and $68,307 , respectively. No capital gains incentive fee was incurred during the three or nine months ended March 31, 2016 and March 31, 2015 .
Administration Agreement
We have also entered into an administration agreement (the “Administration Agreement”) with Prospect Administration under which Prospect Administration, among other things, provides (or arranges for the provision of) administrative services and facilities for us. For providing these services, we reimburse Prospect Administration for our allocable portion of overhead incurred by Prospect Administration in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of our Chief Financial Officer and Chief Compliance Officer and his staff. Under this agreement, Prospect Administration furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Prospect Administration also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, Prospect Administration assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Under the Administration Agreement, Prospect Administration also provides on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance (see Managerial Assistance section below). The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party. Prospect Administration is a subsidiary of the Investment Adviser.
The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Prospect Administration and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Prospect Administration’s services under the Administration Agreement or otherwise as administrator for us. Our payments to Prospect Administration are periodically reviewed by our Board of Directors.
The allocation of gross overhead expense from Prospect Administration was $5,698 and $6,021 for the three months ended March 31, 2016 and March 31, 2015 , respectively. Prospect Administration received estimated payments of $2,762 and $3,037 directly from our portfolio companies and certain funds managed by the Investment Adviser for legal, tax and portfolio level accounting services during the three months ended March 31, 2016 and March 31, 2015 , respectively. We were given a credit for these payments as a reduction of the administrative services cost payable by us to Prospect Administration, resulting in net overhead expense of $2,936 and $2,984 during the three months ended March 31, 2016 and March 31, 2015 , respectively. Had Prospect Administration not received these payments, Prospect Administration’s charges for its administrative services would have increased by these amounts. (See Managerial Assistance below and Note 14 for further discussion.)

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The allocation of gross overhead expense from Prospect Administration was $14,725 and $13,998 for the nine months ended March 31, 2016 and March 31, 2015 , respectively. During the nine months ended March 31, 2016 , we renegotiated the managerial assistance agreement with First Tower LLC and reversed $1,200 of previously accrued managerial assistance at First Tower Delaware as the fee was paid by First Tower LLC, which decreased our overhead allocation. We also incurred $379 of overhead expense related to our consolidated entity SB Forging. Prospect Administration received estimated payments of 5,611 and $5,584 directly from our portfolio companies and certain funds managed by the Investment Adviser for legal, tax and portfolio level accounting services during the nine months ended March 31, 2016 and March 31, 2015 , respectively. We were given a credit for these payments as a reduction of the administrative services cost payable by us to Prospect Administration, resulting in net overhead expense of $9,114 and $8,414 during the nine months ended March 31, 2016 and March 31, 2015 , respectively. Had Prospect Administration not received these payments, Prospect Administration’s charges for its administrative services would have increased by these amounts. (See Managerial Assistance section below and Note 14 for further discussion.)
Managerial Assistance
As a BDC, we are obligated under the 1940 Act to make available to certain of our portfolio companies significant managerial assistance. “Making available significant managerial assistance” refers to any arrangement whereby we provide significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company. We are also deemed to be providing managerial assistance to all portfolio companies that we control, either by ourselves or in conjunction with others. The nature and extent of significant managerial assistance provided by us to controlled and non-controlled portfolio companies will vary according to the particular needs of each portfolio company. Examples of such activities include (i) advice on recruiting, hiring, management and termination of employees, officers and directors, succession planning and other human resource matters; (ii) advice on capital raising, capital budgeting, and capital expenditures; (iii) advice on advertising, marketing, and sales; (iv) advice on fulfillment, operations, and execution; (v) advice on managing relationships with unions and other personnel organizations, financing sources, vendors, customers, lessors, lessees, lawyers, accountants, regulators and other important counterparties; (vi) evaluating acquisition and divestiture opportunities, plant expansions and closings, and market expansions; (vii) participating in audit committee, nominating committee, board and management meetings; (viii) consulting with and advising board members and officers of portfolio companies (on overall strategy and other matters); and (ix) providing other organizational, operational, managerial and financial guidance.
Prospect Administration, when performing a managerial assistance agreement executed with each portfolio company to which we provide managerial assistance, arranges for the provision of such managerial assistance on our behalf. When doing so, Prospect Administration utilizes personnel of our Investment Adviser. We, on behalf of Prospect Administration, invoice portfolio companies receiving and paying for managerial assistance, and we remit to Prospect Administration its cost of providing such services, including the charges deemed appropriate by our Investment Adviser for providing such managerial assistance. No income is recognized by Prospect.
During the three months ended March 31, 2016 and March 31, 2015 , we received payments of $1,193 and $1,230, respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration. During the nine months ended March 31, 2016 and March 31, 2015 , we received payments of $3,813 and $3,795 respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration. During the nine months ended March 31, 2016 , we reversed $1,200 of managerial assistance expense related to our consolidated entity First Tower Delaware which was included within allocation from Prospect Administration on our Consolidated Statement of Operations for the nine months ended March 31, 2016 . The $1,200 was subsequently paid to Prospect Administration by First Tower LLC, the operating company. See Note 14 for further discussion.
Co-Investments
On February 10, 2014, we received an exemptive order from the SEC (the “Order”) that gave us the ability to negotiate terms other than price and quantity of co-investment transactions with other funds managed by the Investment Adviser or certain affiliates, including Priority Income Fund, Inc. and Pathway Energy Infrastructure Fund, Inc., subject to the conditions included therein. Under the terms of the relief permitting us to co-invest with other funds managed by our Investment Adviser or its affiliates, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies. In certain situations where co-investment with one or more funds managed by the Investment Adviser or its affiliates is not covered by the Order, such as when there is an opportunity to invest in different securities of the same issuer, the personnel of the Investment Adviser or its affiliates will need to decide which fund will proceed with the investment. Such personnel will make these determinations based on policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable

75

laws, rules and regulations. Moreover, except in certain circumstances, when relying on the Order, we will be unable to invest in any issuer in which one or more funds managed by the Investment Adviser or its affiliates has previously invested.
As of March 31, 2016 , we had co-investments with Priority Income Fund, Inc. in the following CLO funds: Apidos CLO XXII, Babson CLO Ltd. 2014-III; Cent CLO 21 Limited, CIFC Funding 2014-IV Investor, Ltd., Galaxy XVII CLO, Ltd., Halcyon Loan Advisors Funding 2014-2 Ltd., Halcyon Loan Advisors Funding 2015-3 Ltd., HarbourView CLO VII, Ltd., Jefferson Mill CLO Ltd., Mountain View CLO IX Ltd., Octagon Investment Partners XVIII, Ltd., Symphony CLO XIV Ltd., Voya IM CLO 2014-1 Ltd. and Washington Mill CLO Ltd.
Note 14. Transactions with Controlled Companies
The descriptions below detail the transactions which Prospect Capital Corporation (“Prospect”) has entered into with each of our controlled companies. Certain of the controlled entities discussed below were consolidated effective July 1, 2014 (see Note 1). As such, transactions with these Consolidated Holding Companies for the three and nine months ended March 31, 2016 are presented on a consolidated basis.
Airmall Inc.
As of June 30, 2014, Prospect owned 100% of the equity of AMU Holdings Inc. (“AMU”), a Consolidated Holding Company. AMU owned 98% of Airmall Inc. (f/k/a Airmall USA Holdings, Inc.) (“Airmall”). Airmall is a developer and manager of airport retail operations.
On July 30, 2010, Prospect made a $22,420 investment in AMU, of which $12,500 was a senior subordinated note and $9,920 was used to purchase 100% of the preferred and common equity of AMU. AMU used its combined debt and equity proceeds of $22,420 to purchase 100% of Airmall’s common stock for $18,000, to pay $1,573 of structuring fees from AMU to Prospect (which was recognized by Prospect as structuring fee income), $836 of third party expenses, $11 of legal services provided by attorneys at Prospect Administration, and $2,000 of withholding tax. Prospect then purchased for $30,000 two loans of Airmall payable to unrealized third parties, one for $10,000 and the other $20,000. Prospect and Airmall subsequently refinanced the two loans into a single $30,000 loan from Airmall to Prospect.
On October 1, 2013, Prospect made an additional $2,600 investment in the senior subordinated note, of which $575 was utilized by AMU to pay interest due to Prospect and $2,025 was retained by AMU for working capital. On November 25, 2013, Prospect funded an additional $5,000 to the senior subordinated note, which was utilized by AMU to pay a $5,000 dividend to Prospect. On December 4, 2013, Prospect sold 2% of the outstanding principal balance of the senior secured term loan to Airmall and 2% of the outstanding principal balance of the senior subordinated note to AMU for $972.
On June 13, 2014, Prospect made a new $19,993 investment as a senior secured loan to Airmall. Airmall then distributed this amount to AMU as a return of capital, which AMU used to pay down the senior subordinated loan in the same amount. The minority interest held by a third party in AMU was exchanged for common stock of Airmall.
On July 1, 2014, Prospect began consolidating AMU. As a result, any transactions between AMU and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
On August 1, 2014, Prospect sold its investments in Airmall for net proceeds of $51,379 and realized a loss of $3,473 on the sale. In addition, there is $6,000 being held in escrow, of which 98% is due to Prospect, which will be recognized as an additional realized loss if it is not received. Included in the net proceeds were $3,000 of structuring fees from Airmall related to the sale of the operating company which was recognized as other income during the year ended June 30, 2015. On October 22, 2014, Prospect received a tax refund of $665 related to its investment in Airmall and realized a gain of the same amount. On March 21, 2016, Prospect received $1,720 of the escrow proceeds which reduced the cost basis of the escrow receivable held on the balance sheet.
In addition to the repayments noted above, the following amounts were paid from Airmall to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
47,580

Nine Months Ended March 31, 2016
—


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The following interest payments were accrued and paid from Airmall to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
576

Nine Months Ended March 31, 2016
—

The following managerial assistance payments were paid from Airmall to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
75

Nine Months Ended March 31, 2016
—

The following payments were paid from Airmall to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Airmall (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
730

Nine Months Ended March 31, 2016
—

American Property REIT Corp.
Prospect owns 100% of the equity of APH Property Holdings, LLC (“APH”), a Consolidated Holding Company. APH owns 100% of the common equity of American Property REIT Corp. (f/k/a American Property Holdings Corp.) (“APRC”). APRC is a Maryland corporation and a qualified REIT for federal income tax purposes. In order to qualify as a REIT, APRC issued 125 shares of Series A Cumulative Non-Voting Preferred Stock to 125 accredited investors. The preferred stockholders are entitled to receive cumulative dividends semi-annually at an annual rate of 12.5% and do not have the ability to participate in the management or operation of APRC.
APRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. APRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. APRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (the “JV”).
On October 24, 2012, Prospect initially made a $7,808 investment in APH, of which $6,000 was a Senior Term Loan and $1,808 was used to purchase the membership interests of APH. The proceeds were utilized by APH to purchase APRC common equity for $7,806, with $2 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 100% ownership interest in 146 Forest Parkway, LLC for $7,326, pay a $250 non-refundable deposit and $222 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $8 retained by APRC for working capital. 146 Forest Parkway, LLC was purchased for $7,400. The remaining proceeds were used to pay $168 of third party expenses and $5 of legal services provided by attorneys at Prospect Administration, with $3 retained by the JV for working capital. The investment was subsequently contributed to NPRC.
On December 28, 2012, Prospect made a $9,594 investment in APH, of which $6,400 was a Senior Term Loan and $3,194 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $9,594. The proceeds were utilized by APRC to purchase a 92.7% ownership interest in 1557 Terrell Mill Road, LLC for $9,548, with $46 retained by APRC for other expenses. The JV was purchased for $23,500 which included debt financing and minority interest of $15,275 and $757, respectively. The remaining proceeds were used to pay $286 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income) and $1,652 of third party expenses, with $142 retained by the JV for working capital.

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On January 17, 2013, Prospect made a $30,348 investment in APH, of which $27,600 was a Senior Term Loan and $2,748 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $29,348, with $1,000 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 97.7% ownership interest in 5100 Live Oaks Blvd, LLC for $29,348. The JV was purchased for $63,400 which included debt financing and minority interest of $39,600 and $686, respectively. The remaining proceeds were used to pay $880 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $4,265 of third party expenses, $14 of legal services provided by attorneys at Prospect Administration, and $1,030 of prepaid assets, with $45 retained by the JV for working capital. The investment was subsequently contributed to NPRC.
On April 30, 2013, Prospect made a $10,383 investment in APH, of which $9,000 was a Senior Term Loan and $1,383 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $10,233, with $150 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 93.2% ownership interest in Lofton Place, LLC for $10,233. The JV was purchased for $26,000 which included debt financing and minority interest of $16,965 and $745, respectively. The remaining proceeds were used to pay $306 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,223 of third party expenses, $5 of legal services provided by attorneys at Prospect Administration, and $364 of prepaid assets, with $45 retained by the JV for working capital.
On April 30, 2013, Prospect made a $10,863 investment in APH, of which $9,000 was a Senior Term Loan and $1,863 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $10,708, with $155 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 93.2% ownership interest in Vista Palma Sola, LLC for $10,708. The JV was purchased for $27,000 which included debt financing and minority interest of $17,550 and $785, respectively. The remaining proceeds were used to pay $321 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,272 of third party expenses, $4 of legal services provided by attorneys at Prospect Administration, and $401 of prepaid assets, with $45 retained by the JV for working capital.
On May 8, 2013, Prospect made a $6,118 investment in APH, of which $4,000 was a Senior Term Loan and $2,118 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $6,028, with $90 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 93.3% ownership interest in Arlington Park Marietta, LLC for $6,028. Arlington Park Marietta, LLC was purchased for $14,850 which included debt financing and minority interest of $9,650 and $437, respectively. The remaining proceeds were used to pay $181 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $911 of third party expenses, and $128 of prepaid assets, with $45 retained by the JV for working capital.
On June 24, 2013, Prospect made a $76,533 investment in APH, of which $63,000 was a Senior Term Loan and $13,533 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $75,233, with $1,300 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 95.0% ownership interest in APH Carroll Resort, LLC for $74,398 and to pay $835 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income). The JV was purchased for $225,000 which included debt financing and minority interest of $157,500 and $3,916, respectively. The remaining proceeds were used to pay $1,436 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $7,687 of third party expenses, $8 of legal services provided by attorneys at Prospect Administration, and $1,683 of prepaid assets. The investment was subsequently contributed to NPRC and renamed NPRC Carroll Resort, LLC.
Between October 29, 2013 and December 4, 2013, Prospect made an $11,000 investment in APH, of which $9,350 was a Senior Term Loan and $1,650 was used to purchase additional membership interests of APH. The proceeds were utilized by certain of APH’s wholly-owned subsidiaries to purchase online consumer loans from a third party. The investment was subsequently contributed to NPRC.
On November 1, 2013, Prospect made a $9,869 investment in APH, of which $8,200 was a Senior Term Loan and $1,669 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $9,869. The proceeds were utilized by APRC to purchase a 94.0% ownership interest in APH Carroll 41, LLC for $9,548 and to pay $102 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $219 retained by APRC for working capital. The JV was purchased for $30,600 which included debt financing and minority interest of $22,497 and $609, respectively. The remaining proceeds were used to pay $190 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,589 of third party expenses, $5 of legal services provided by attorneys at Prospect Administration, and $270 of prepaid assets. The investment was subsequently contributed to NPRC.

78

On November 15, 2013, Prospect made a $45,900 investment in APH, of which $38,500 was a Senior Term Loan and $7,400 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $45,900. The proceeds were utilized by APRC to purchase a 99.3% ownership interest in APH Gulf Coast Holdings, LLC for $45,024 and to pay $364 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $512 retained by APRC for working capital. The JV was purchased for $115,200 which included debt financing and minority interest of $75,558 and $337, respectively. The remaining proceeds were used to pay $1,013 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $2,590 of third party expenses, $23 of legal services provided by attorneys at Prospect Administration, and $2,023 of prepaid assets, with $70 retained by the JV for working capital.
On November 19, 2013, Prospect made a $66,188 investment in APH, of which $55,000 was a Senior Term Loan and $11,188 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $66,188. The proceeds were utilized by APRC to purchase a 90.0% ownership interest in APH McDowell, LLC for $64,392 and to pay $695 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $1,101 retained by APRC for working capital. The JV was purchased for $238,605 which included debt financing and minority interest of $180,226 and $7,155, respectively. The remaining proceeds were used to pay $1,290 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $9,205 of third party expenses, $23 of legal services provided by attorneys at Prospect Administration, and $1,160 of prepaid assets, with $1,490 retained by the JV for working capital. The investment was subsequently contributed to NPRC and renamed NPH McDowell, LLC.
On December 12, 2013, Prospect made a $22,507 investment in APH, of which $18,800 was a Senior Term Loan and $3,707 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $22,507. The proceeds were utilized by APRC to purchase a 92.6% ownership interest in South Atlanta Portfolio Holding Company, LLC for $21,874 and to pay $238 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $395 retained by APRC for working capital. The JV was purchased for $87,250 which included debt financing and minority interest of $67,493 and $1,756, respectively. The remaining proceeds were used to pay $437 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $2,920 of third party expenses, and $116 of prepaid assets, with $400 retained by the JV for working capital. The investment was subsequently contributed to UPRC.
On December 31, 2013, APRC distributed its majority interests in five JVs holding real estate assets to APH. APH then distributed these JV interests to Prospect in a transaction characterized as a return of capital. Prospect, on the same day, contributed certain of these JV interests to NPH Property Holdings, LLC and the remainder to UPH Property Holdings, LLC (each wholly-owned subsidiaries of Prospect). Each of NPH and UPH immediately thereafter contributed these JV interests to NPRC and UPRC, respectively. The total investments in the JVs transferred consisted of $98,164 and $20,022 of debt and equity financing, respectively. There was no material gain or loss realized on these transactions.
On January 17, 2014, Prospect made a $6,565 investment in APH, of which $5,500 was a Senior Term Loan and $1,065 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $6,565. The proceeds were utilized by APRC to purchase a 99.3% ownership interest in APH Gulf Coast Holdings, LLC for $6,336 and to pay $54 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $175 retained by APRC for other expenses. The JV was purchased for $15,430 which included debt financing and minority interest of $10,167 and $48, respectively. The remaining proceeds were used to pay $143 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $627 of third party expenses, $4 of legal services provided by attorneys at Prospect Administration, and $312 of prepaid assets, with $35 retained by the JV for working capital.
Effective April 1, 2014, Prospect made a new $167,162 senior term loan to APRC. APRC then distributed this amount to APH as a return of capital which was used to pay down the Senior Term Loan from APH by the same amount.
On June 4, 2014, Prospect made a $1,719 investment in APH to purchase additional membership interests of APH, which was revised to $1,732 on July 1, 2014. The proceeds were utilized by APH to purchase additional APRC common equity for $1,732. The proceeds were utilized by APRC to acquire the real property located at 975 South Cornwell, Yukon, OK (“Taco Bell, OK”) for $1,719 and pay $13 of third party expenses.
On July 1, 2014, Prospect began consolidating APH. As a result, any transactions between APH and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
On November 26, 2014, APRC transferred its investment in APH Carroll Resort, LLC to NPRC and the investment was renamed NPRC Carroll Resort, LLC. As a result, Prospect’s investments in APRC related to this property also transferred to NPRC. The investments transferred consisted of $10,237 of equity and $65,586 of debt. There was no gain or loss realized on the transaction.

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On May 1, 2015, APRC transferred its investment in 5100 Live Oaks Blvd, LLC to NPRC. As a result, Prospect’s investments in APRC related to this property also transferred to NPRC. The investments transferred consisted of $2,748 of equity and $29,990 of debt. There was no gain or loss realized on the transaction.
On May 6, 2015, Prospect made a $1,475 investment in APRC, of which $1,381 was a Senior Term Loan and $94 was used to purchase additional common equity of APRC through APH. The proceeds were utilized by APRC to purchase additional ownership interest in its twelve multi-family properties for $1,473 and pay $2 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $17 in the JVs. The proceeds were used by the JVs to fund $1,490 of capital expenditures.
During the year ended June 30, 2015 Prospect received $8 as a return of capital on the equity investment in APRC.
On September 9, 2015, Prospect made a $799 investment in APRC used to purchase additional common equity of APRC through APH. The proceeds were utilized by APRC to purchase additional ownership interest in its twelve multi-family properties for $799. The minority interest holder also invested an additional $12 in the JVs. The proceeds were used by the JVs to fund $811 of capital expenditures.
On December 23, 2015, Prospect made a $1,469 investment in APRC used to purchase additional common equity of APRC through APH. The proceeds were utilized by APRC to purchase additional ownership interest in its eleven multi-family properties for $1,468 and pay $1 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $20 in the JVs. The proceeds were used by the JVs to fund $1,488 of capital expenditures.
On December 31, 2015, APRC made a partial repayment on the Senior Term Loan of $9,000 and Prospect recorded $11,016 of dividend income in connection with the sale of the Vista Palma Sola property.
On March 3, 2016, APRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of $14,621.
On March 28, 2016, APRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of $3,109.
The following interest payments were accrued and paid from APRC to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
3,047

Three Months Ended March 31, 2016
1,885

Nine Months Ended March 31, 2015
12,205

Nine Months Ended March 31, 2016
6,488

Included above, the following payment-in-kind interest from APRC was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
728

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
4,529

Nine Months Ended March 31, 2016
558

The following interest income recognized had not yet been paid by APRC to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
25

March 31, 2016
17

The following net revenue interest payments were paid from APRC to Prospect and recognized by Prospect as other income:
Three Months Ended March 31, 2015
$
265

Three Months Ended March 31, 2016
228

Nine Months Ended March 31, 2015
1,078

Nine Months Ended March 31, 2016
702


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The following managerial assistance payments were paid from APRC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
148

Three Months Ended March 31, 2016
148

Nine Months Ended March 31, 2015
443

Nine Months Ended March 31, 2016
443

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
148

March 31, 2016
148

The following payments were paid from APRC to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to APRC (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
83

Three Months Ended March 31, 2016
390

Nine Months Ended March 31, 2015
189

Nine Months Ended March 31, 2016
612

The following amounts were due from APRC to Prospect for reimbursement of expenses paid by Prospect on behalf of APRC and were included by Prospect within other receivables:
June 30, 2015
$
124

March 31, 2016
2

Arctic Energy Services, LLC
Prospect owns 100% of the equity of Arctic Oilfield Equipment USA, Inc. (“Arctic Equipment”), a Consolidated Holding Company. Arctic Equipment owns 70% of the equity of Arctic Energy Services, LLC (“Arctic Energy”), with Ailport Holdings, LLC (“Ailport”) (100% owned and controlled by Arctic Energy management) owning the remaining 30% of the equity of Arctic Energy. Arctic Energy provides oilfield service personnel, well testing flowback equipment, frac support systems and other services to exploration and development companies in the Rocky Mountains.
On May 5, 2014, Prospect initially purchased 100% of the common shares of Arctic Equipment for $9,006. Proceeds were utilized by Arctic Equipment to purchase 70% of Arctic Energy as described in the following paragraph.
On May 5, 2014, Prospect made an additional $51,870 investment (including in exchange for 1,102,313 common shares of Prospect at fair value of $11,916) in Arctic Energy in exchange for a $31,640 senior secured loan and a $20,230 subordinated loan. Total proceeds received by Arctic Energy of $60,876 were used to purchase 70% of the equity interests in Arctic Energy from Ailport for $47,516, pay $875 of third-party expenses, $1,713 of structuring fees to Prospect (which was recognized as structuring fee income), $445 of legal services provided by attorneys at Prospect Administration and $10,327 was retained as working capital.
On July 1, 2014, Prospect began consolidating Arctic Equipment. As a result, any transactions between Arctic Equipment and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
On September 30, 2015, we restructured our investment in Arctic Energy. Concurrent with the restructuring, we exchanged our $31,640 senior secured loan and $20,230 subordinated loan for Class D and Class E equity in Arctic Energy.

81

The following interest payments were accrued and paid from Arctic Energy to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
1,657

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
5,045

Nine Months Ended March 31, 2016
1,123

The following interest income recognized had not yet been paid by Arctic Energy to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
18

March 31, 2016
—

The following managerial assistance payments were paid from Arctic Energy to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
25

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
75

Nine Months Ended March 31, 2016
50

The following managerial assistance recognized had not yet been paid by Arctic Energy to Prospect and was included by Prospect within other receivables and due to Prospect Administration:
June 30, 2015
$
25

March 31, 2016
25

The following amounts were due to Arctic Energy from Prospect for reimbursement of expenses paid by Arctic Energy on behalf of Prospect and were included by Prospect within other liabilities:
June 30, 2015
$
1

March 31, 2016
—

Borga, Inc.
As of June 30, 2014, Prospect owned 100% of the equity of STI Holding, Inc. (“STI”), a Consolidated Holding Company. STI owned 100% of the equity of Borga, Inc. (“Borga”). Borga manufactures pre-engineered metal buildings and components for the agricultural and light industrial markets.
On May 6, 2005, Patriot Capital Funding, Inc. (“Patriot”) (previously acquired by Prospect) provided $14,000 in senior secured debt to Borga. The debt was comprised of $1,000 Senior Secured Revolver, $3,500 Senior Secured Term Loan A, $2,500 Senior Secured Term Loan B and $7,000 Senior Secured Term Loan C. On March 31, 2009, Borga made its final amortization payment on the Senior Secured Term Loan A. The other loans remained outstanding. Prospect owned warrants to purchase 33,750 shares of common stock in Metal Buildings Holding Corporation (“Metal Buildings”), the former holding company of Borga. Metal Buildings owned 100% of Borga.
On March 8, 2010, Prospect acquired the remaining common stock of Borga.
On January 24, 2014, Prospect contributed its holdings in Borga to STI. STI also held $3,371 of proceeds from the sale of a minority equity interest in Smart Tuition Holdings, LLC (“SMART”). Prospect initially acquired membership interests in SMART indirectly as part of the Patriot acquisition on December 2, 2009 recording a zero cost basis for the equity investment. The $3,371 was distributed to Prospect on May 29, 2014, of which $3,246 was paid from earnings and profits of STI and was recognized as dividend income by Prospect. The remaining $125 was recognized as return of capital by Prospect.
On July 1, 2014, Prospect began consolidating STI. As a result, any transactions between STI and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.

82

On August 20, 2014, Prospect sold the assets of Borga, a wholly-owned subsidiary of STI, for net proceeds of $382 and realized a loss of $2,589 on the sale. On December 29, 2014, Borga was dissolved.
BXC Company, Inc.
As of June 30, 2014, Prospect owned 86.7% of Series A Preferred Stock, 96.8% of Series B Preferred Stock, and 83.1% of fully diluted common stock of BXC Company, Inc. (f/k/a BXC Holding Company) (“BXC”). BXC owned 100% of the common stock of Boxercraft Incorporated (“Boxercraft”).
As of July 1, 2012, the cost basis of Prospect’s total debt and equity investment in Boxercraft was $15,123, including capitalized payment-in-kind interest of $1,466. On December 31, 2013, Boxercraft repaid $100 of the senior secured term loan. On April 18, 2014, Prospect made a new $300 senior secured term loan to Boxercraft. During the period from July 1, 2012 through June 30, 2014, Prospect capitalized a total of $804 of paid-in-kind interest and accreted a total of $1,321 of the original purchase discount, increasing the total debt investment to $17,448 as of June 30, 2014.
Effective March 28, 2014, Prospect acquired voting control of BXC pursuant to a voting agreement and irrevocable proxy. Effective May 8, 2014, Prospect acquired control of BXC by transferring shares held by the other equity holders of BXC to Prospect pursuant to an assignment agreement entered into with such other equity holders.
On July 2, 2014, Prospect made a new $250 senior secured term loan to provide liquidity to Boxercraft.
On July 17, 2014, Prospect restructured the investments in BXC and Boxercraft. The existing Senior Secured Term Loan A and a portion of the existing Senior Secured Term Loan B were replaced with a new Senior Secured Term Loan A to Boxercraft. The remainder of the existing Senior Secured Term Loan B and the existing Senior Secured Term Loan C, Senior Secured Term Loan D, and Senior Secured Term Loan E were replaced with a new Senior Secured Term Loan B to Boxercraft. The existing Senior Secured Term Loan to Boxercraft was converted into Series D Preferred Stock in BXC.
During the year ended June 30, 2015, Prospect accrued $5 of administrative agent fees from Boxercraft (which were recognized by Prospect as other income). On August 25, 2014, Prospect sold Boxercraft, a wholly-owned subsidiary of BXC, for net proceeds of $750 and realized a net loss of $16,949 on the sale.
CCPI Inc.
Prospect owns 100% of the equity of CCPI Holdings Inc. (“CCPI Holdings”), a Consolidated Holding Company. CCPI Holdings owns 94.95% of the equity of CCPI Inc. (“CCPI”), with CCPI management owning the remaining 5.05% of the equity. CCPI owns 100% of each of CCPI Europe Ltd. and MEFEC B.V., and 45% of Gulf Temperature Sensors W.L.L.
On December 13, 2012, Prospect initially made a $15,921 investment (including 467,928 common shares of Prospect at fair value of $5,021) in CCPI Holdings, $7,500 senior secured note and $8,443 equity interest. The proceeds received by CCPI Holdings were partially utilized to purchase 95.13% of CCPI common stock for $14,878. The remaining proceeds were used to pay $395 of structuring fees from CCPI Holdings to Prospect (which were recognized by Prospect as structuring fee income), $215 for legal services provided by attorneys at Prospect Administration, $137 for third party expenses and $318 was retained by CCPI Holdings for working capital.
On December 13, 2012, Prospect made an additional investment of $18,000 in CCPI senior secured debt. The proceeds of the Prospect loan along with $14,878 of equity financing from CCPI Holdings (mentioned above) were used to purchase 95.13% of CCPI equity from the sellers for $31,829, provide $120 of debt financing to CCPI management (to partially fund a purchase by management of CCPI stock), fund $180 of structuring fees from CCPI to Prospect (which were recognized by Prospect as structuring fee income), pay $548 of third-party expenses, reimburse $12 for reimbursement of expenses paid by Prospect on behalf of CCPI (no income was recognized by Prospect) and $189 was retained by CCPI as working capital.
During the year ended June 30, 2014, certain members of CCPI management exercised options to purchase common stock, decreasing our ownership to 94.77%. On June 13, 2014, Prospect made a new $8,218 senior secured note to CCPI. CCPI then distributed this amount to CCPI Holdings as a return of capital which was used to pay down the $8,216 senior secured note from CCPI Holdings to Prospect. The remaining $2 was distributed to Prospect as a return of capital of Prospect’s equity investment in CCPI Holdings.
On July 1, 2014, Prospect began consolidating CCPI Holdings. As a result, any transactions between CCPI Holdings and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.

83

During the year ended June 30, 2015, CCPI repurchased 30 shares of its common stock from a former CCPI executive, decreasing the number of shares outstanding and increasing Prospect’s ownership to 94.95%.
In June 2015, CCPI engaged Prospect to provide certain investment banking and financial advisory services in connection with a possible transaction. As compensation for the services provided, Prospect received $525 of advisory fees from CCPI which was recognized as other income during the year ended June 30, 2015.
During the three months ended September 30, 2015, CCPI repurchased 86 shares of its common stock from former CCPI executives. Additionally, certain CCPI executives exercised their option rights, purchasing 246 shares of CCPI common stock. These transactions increased the number of common shares outstanding by 160 shares and thus decreased Prospect’s ownership to 93.99%.

In addition to the repayments noted above, the following amounts were paid from CCPI to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
113

Three Months Ended March 31, 2016
113

Nine Months Ended March 31, 2015
338

Nine Months Ended March 31, 2016
4,337

The following cash distributions were declared and paid from CCPI to CCPI Holdings and recognized as a return of capital by CCPI Holdings:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
1,918

The following dividends were declared and paid from CCPI to CCPI Holdings and recognized as dividend income by CCPI Holdings:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
3,195

All dividends were paid from earnings and profits of CCPI.
The following interest payments were accrued and paid from CCPI to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
841

Three Months Ended March 31, 2016
751

Nine Months Ended March 31, 2015
2,495

Nine Months Ended March 31, 2016
2,329

Included above, the following payment-in-kind interest from CCPI was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
152

Three Months Ended March 31, 2016
161

Nine Months Ended March 31, 2015
446

Nine Months Ended March 31, 2016
475

The following interest income recognized had not yet been paid by CCPI to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
—

March 31, 2016
—


84

The following managerial assistance payments were paid from CCPI to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
60

Three Months Ended March 31, 2016
60

Nine Months Ended March 31, 2015
180

Nine Months Ended March 31, 2016
180

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
60

March 31, 2016
60

The following payments were paid from CCPI to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to CCPI (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
96

The following amounts were due from CCPI to Prospect for reimbursement of expenses paid by Prospect on behalf of CCPI and were included by Prospect within other receivables:
June 30, 2015
$
—

March 31, 2016
13

CP Energy Services Inc.
Prospect owns 100% of the equity of CP Holdings of Delaware LLC (“CP Holdings”), a Consolidated Holding Company. CP Holdings owns 82.3% of the equity of CP Energy Services Inc. (“CP Energy”), and the remaining 17.7% of the equity is owned by CP Energy management. As of June 30, 2014, CP Energy owned directly or indirectly 100% of each of CP Well Testing Services, LLC (f/k/a CP Well Testing Holding Company LLC) (“CP Well Testing”); CP Well Testing, LLC (“CP Well”); Fluid Management Services, Inc. (f/k/a Fluid Management Holdings, Inc.) (“Fluid Management”); Fluid Management Services LLC (f/k/a Fluid Management Holdings LLC); Wright Transport, Inc. (f/k/a Wright Holdings, Inc.); Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; Artexoma Logistics, LLC; and Wright Trucking, Inc. Effective December 31, 2014, CP Energy underwent a corporate reorganization in order to consolidate certain of its wholly-owned subsidiaries. As of June 30, 2015, CP Energy owned directly or indirectly 100% of each of CP Well; Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; and Wright Trucking, Inc. CP Energy provides oilfield flowback services and fluid hauling and disposal services through its subsidiaries.
On October 3, 2012, Prospect initially made a $21,500 senior secured debt investment in CP Well. As part of the transaction, Prospect received $430 of structuring fees from CP Well (which was recognized by Prospect as structuring fee income) and $7 was paid by CP Well to Prospect Administration for legal services provided by attorneys at Prospect Administration.
On August 2, 2013, Prospect invested $94,014 (including 1,918,342 unregistered shares of Prospect common stock at a fair value of $21,006) to support the recapitalization of CP Energy where Prospect acquired a controlling interest in CP Energy.
On August 2, 2013, Prospect invested $12,741 into CP Holdings to purchase 100% of the common stock in CP Holdings. The proceeds were used by CP Holdings to purchase 82.9% of the common stock in CP Energy for $12,135 and pay $606 of legal services provided by attorneys at Prospect Administration.
On August 2, 2013, Prospect made a senior secured debt investment of $58,773 in CP Energy. CP Energy also received $2,505 management co-investment in exchange for 17.1% of CP Energy common stock. Total proceeds received by CP Energy of $73,413 (including the $12,135 of equity financing from CP Holdings mentioned above) were used to purchase 100% of the equity interests in CP Well Testing and Fluid Management for $33,600 and $34,576, respectively. The remaining proceeds were used by CP Energy

85

to pay $1,414 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income) and pay $823 of third-party expenses, with $3,000 retained by CP Energy for working capital.
On August 2, 2013, Prospect made an additional senior secured debt investment of $22,500 in CP Well Testing. Total proceeds received by CP Well Testing of $56,100 (including the $33,600 of equity financing from CP Energy mentioned above) were used to purchase 100% of the equity interests in CP Well for $55,650 and pay $450 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income). After the financing, Prospect received repayment of the $18,991 loan previously outstanding from CP Well.
On October 11, 2013, Prospect made a $746 follow-on investment in CP Holdings to fund equity into CP Energy and made an additional senior secured loan to CP Energy of $5,100. Management invested an additional $154 of equity in CP Energy, and the percentage ownership of CP Energy did not change. Total proceeds of $6,000 were used to purchase flowback equipment and expand the CP Well operations in West Texas.
On December 26, 2013, Prospect made an additional $1,741 follow-on investment in CP Holdings to fund equity into CP Energy and made an additional senior secured loan to CP Energy of $11,900. Management invested an additional $359 of equity in CP Energy, and the percentage ownership of CP Energy did not change. Total proceeds of $14,000 were used to purchase additional equipment.
On April 1, 2014, Prospect made new loans to CP Well (with Foster Testing Co., Inc.; ProHaul Transports, LLC; and Wright Trucking, Inc. as co-borrowers), two first lien loans in the amount of $11,035 and $72,238, and a second lien loan in the amount of $15,000. The proceeds of these loans were used to repay CP Energy’s senior secured term loan and CP Well Testing’s senior secured term loan previously outstanding from Prospect.
On July 1, 2014, Prospect began consolidating CP Holdings. As a result, any transactions between CP Holdings and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
During the year ended June 30, 2015, certain members of CP Energy management exercised options to purchase common stock, decreasing our ownership to 82.3%.
On October 30, 2015, we restructured our investment in CP Energy. Concurrent with the restructuring, we exchanged our $86,965 senior secured loan and $15,924 subordinated loan for Series B Redeemable Preferred Stock in CP Energy.

The following interest payments were accrued and paid from CP Well to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
4,037

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
12,273

Nine Months Ended March 31, 2016
(390
)
Included above, the following payment-in-kind interest from CP Well was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
1,075

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
1,075

Nine Months Ended March 31, 2016
(2,819
)
The following interest income recognized had not yet been paid by CP Well to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
46

March 31, 2016
—


86

The following managerial assistance payments were paid from CP Energy to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
75

Three Months Ended March 31, 2016
75

Nine Months Ended March 31, 2015
225

Nine Months Ended March 31, 2016
225

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
75

March 31, 2016
75

The following payments were paid from CP Energy to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to CP Energy (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
60

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
60

Nine Months Ended March 31, 2016
—

The following amounts were due from CP Energy to Prospect for reimbursement of expenses paid by Prospect on behalf of CP Energy and were included by Prospect within other receivables:
June 30, 2015
$
1

March 31, 2016
—

Credit Central Loan Company, LLC
Prospect owns 100% of the equity of Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”), a Consolidated Holding Company. Credit Central Delaware owns 74.93% of the equity of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC) (“Credit Central”), with entities owned by Credit Central management owning the remaining 25.07% of the equity. Credit Central owns 100% of each of Credit Central, LLC; Credit Central South, LLC; Credit Central of Texas, LLC; and Credit Central of Tennessee, LLC. Credit Central is a branch-based provider of installment loans.
On December 28, 2012, Prospect initially made a $47,663 investment (including the fair value of 897,906 common shares of Prospect for $9,581 on that date, which were included in the purchase cost paid to acquire Credit Central) in Credit Central Delaware, of which $38,082 was a Senior Secured Revolving Credit Facility and $9,581 to purchase the membership interests of Credit Central Delaware. The proceeds were partially utilized to purchase 74.75% of Credit Central’s membership interests for $43,293. The remaining proceeds were used to pay $1,440 of structuring fees from Credit Central Delaware to Prospect (which was recognized by Prospect as structuring fee income), $638 for third party expenses, $292 for legal services provided by attorneys at Prospect Administration and $2,000 was retained by Credit Central Delaware for working capital. On March 28, 2014, Prospect funded an additional $2,500 ($2,125 to the Senior Secured Revolving Credit Facility and $375 to purchase additional membership interests of Credit Central Delaware) which was utilized by Credit Central Delaware to pay a $2,000 dividend to Prospect and $500 was retained by Credit Central Delaware for working capital.
On June 26, 2014, Prospect made a new $36,333 second lien term loan to Credit Central. Credit Central then distributed this amount to Credit Central Delaware as a return of capital which was used to pay down the Senior Secured Revolving Credit Facility from Credit Central Delaware by the same amount. The remaining amount of the Senior Secured Revolving Credit Facility, $3,874, was then converted to additional membership interests in Credit Central Delaware.
On July 1, 2014, Prospect began consolidating Credit Central Delaware. As a result, any transactions between Credit Central Delaware and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
During the year ended June 30, 2015, Credit Central redeemed 24,629 shares of its membership interest from former Credit Central employees, decreasing the number of shares outstanding and increasing Prospect’s ownership to 74.93%.

87

In addition to the repayments noted above, the following amounts were paid from Credit Central to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
300

Three Months Ended March 31, 2016
323

Nine Months Ended March 31, 2015
300

Nine Months Ended March 31, 2016
323

During the three months ended March 31, 2015, Prospect reclassified $159 of return of capital received from Credit Central
Delaware in prior periods as dividend income.

The following interest payments were accrued and paid from Credit Central to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
1,824

Three Months Ended March 31, 2016
1,842

Nine Months Ended March 31, 2015
5,538

Nine Months Ended March 31, 2016
5,556

Included above, the following payment-in-kind interest from Credit Central was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
300

Three Months Ended March 31, 2016
323

Nine Months Ended March 31, 2015
300

Nine Months Ended March 31, 2016
323

The following interest income recognized had not yet been paid by Credit Central to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
20

March 31, 2016
20

The following net revenue interest payments were paid from Credit Central to Prospect and recognized by Prospect as other income:
Three Months Ended March 31, 2015
$
608

Three Months Ended March 31, 2016
614

Nine Months Ended March 31, 2015
608

Nine Months Ended March 31, 2016
1,852

The following managerial assistance payments were paid from Credit Central to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
175

Three Months Ended March 31, 2016
175

Nine Months Ended March 31, 2015
525

Nine Months Ended March 31, 2016
525

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
175

March 31, 2016
175


88

The following amounts were due to Credit Central from Prospect for reimbursement of expenses paid by Credit Central on behalf of Prospect and were included by Prospect within other liabilities:
June 30, 2015
$
27

March 31, 2016
16

Echelon Aviation LLC
Prospect owns 99.02% of the membership interests of Echelon Aviation LLC (“Echelon”). Echelon owns 60.7% of the equity of AerLift Leasing Limited (“AerLift”).
On March 31, 2014, Prospect initially made a $92,628 investment in Echelon, of which $78,521 was a Senior Secured Revolving Credit Facility and $14,107 to purchase 100% of the membership interests of Echelon. The proceeds were partially utilized to purchase 60.7% of AerLift’s membership interests for $83,657. The remaining proceeds were used to pay $2,771 of structuring fees from Echelon to Prospect (which was recognized by Prospect as structuring fee income), $540 for third party expenses, $664 for legal and tax services provided by Prospect Administration and $4,996 was retained by Echelon for working capital.
During the year ended June 30, 2014, Echelon issued 57,779.44 Class B shares to the company’s President, decreasing Prospect’s ownership to 99.49%.
On July 1, 2014, Prospect sold a $400 participation in the Senior Secured Revolving Credit Facility, equal to 0.51% of the outstanding principal amount on that date.
On September 15, 2014, Echelon made an optional partial prepayment of $37,313 of the Senior Secured Revolving Credit Facility outstanding.
On September 30, 2014, Prospect made an additional $5,800 investment in the membership interests of Echelon.
During the year ended June 30, 2015, Echelon issued 54,482.06 Class B shares to the company’s President, decreasing Prospect’s ownership to 99.02%.
On March 28, 2016, Echelon made an optional partial prepayment of $2,954 of the Senior Secured Revolving Credit Facility outstanding.
During the quarter ended March 31, 2016, Echelon issued 36,059 Class B shares to the company’s President, decreasing Prospect’s ownership to 98.97%.
The following dividends were declared and paid from Echelon to Prospect and recognized as dividend income by Prospect:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
7,250

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
7,250

All dividends were paid from earnings and profits of Echelon.
The following interest payments were accrued and paid from Echelon to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
1,428

Three Months Ended March 31, 2016
1,440

Nine Months Ended March 31, 2015
5,451

Nine Months Ended March 31, 2016
4,360

The following interest income recognized had not yet been paid by Echelon to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
2,412

March 31, 2016
995


89

The following managerial assistance payments were paid from Echelon to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
125

Three Months Ended March 31, 2016
63

Nine Months Ended March 31, 2015
250

Nine Months Ended March 31, 2016
188

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
63

March 31, 2016
63

The following payments were paid from Echelon to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Echelon (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
206

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
211

Nine Months Ended March 31, 2016
120

The following amounts were due from Echelon to Prospect for reimbursement of expenses paid by Prospect on behalf of Echelon and were included by Prospect within other receivables:
June 30, 2015
$
30

March 31, 2016
2

Edmentum Ultimate Holdings, LLC
Prospect owns 37.1% of the equity of Edmentum Ultimate Holdings, LLC (“Edmentum Holdings”). Edmentum Holdings owns 100% of the equity of Edmentum, Inc. (“Edmentum”). Edmentum is the largest all subscription based, software as a service provider of online curriculum and assessments to the U.S. education market. Edmentum provides high-value, comprehensive online solutions that support educators to successfully transition learners from one stage to the next.
On May 17, 2012, Prospect initially made a $50,000 second lien term loan to Edmentum.
On June 9, 2015, Prospect provided additional debt and equity financing to support the recapitalization of Edmentum. As part of the recapitalization, Prospect exchanged 100% of the $50,000 second lien term loan previously outstanding for $26,365 of junior paid in kind (“PIK”) notes and 370,964.14 Class A common units representing 37.1% equity ownership in Edmentum Holdings. In addition, Prospect invested $5,875 in senior PIK notes and committed $7,834 as part of a second lien revolving credit facility, of which $4,896 was funded at closing. On June 9, 2015, our investment in Edmentum was written-down for tax purposes and a loss of $22,116 was therefore realized for the amount that the amortized cost exceeded the fair value, reducing the amortized cost to $37,216.
During the three months ended March 31, 2016, Prospect funded an additional $2,742 in the second lien revolving credit facility.
The following amounts were paid from Edmentum to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
4,896


90

The following interest payments were accrued and paid from Edmentum to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
843

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
2,728

Included above, the following payment-in-kind interest from Edmentum was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
833

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
2,099

The following interest income recognized had not yet been paid by Edmentum to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
—

March 31, 2016
578

Energy Solutions Holdings Inc.
Prospect owns 100% of the equity of Energy Solutions Holdings Inc. (f/k/a Gas Solutions Holdings Inc.) (“Energy Solutions”), a Consolidated Holding Company. Energy Solutions owns 100% of each of Change Clean Energy Company, LLC (f/k/a Change Clean Energy Holdings, LLC) (“Change Clean”); Freedom Marine Solutions, LLC (f/k/a Freedom Marine Services Holdings, LLC) (“Freedom Marine”); and Yatesville Coal Company, LLC (f/k/a Yatesville Coal Holdings, LLC) (“Yatesville”). Change Clean owns 100% of each of Change Clean Energy, LLC and Down East Power Company, LLC, and 50.1% of BioChips LLC. Freedom Marine owns 100% of each of Vessel Company, LLC (f/k/a Vessel Holdings, LLC) (“Vessel”); Vessel Company II, LLC (f/k/a Vessel Holdings II, LLC) (“Vessel II”); and Vessel Company III, LLC (f/k/a Vessel Holdings III, LLC) (“Vessel III”). Yatesville owns 100% of North Fork Collieries, LLC.
Energy Solutions owns interests in companies operating in the energy sector. These include companies operating offshore supply vessels, ownership of a non-operating biomass electrical generation plant and several coal mines. Energy Solutions subsidiaries formerly owned interests in gathering and processing business in east Texas. As of July 1, 2011, the cost basis of Prospect’s investment in Energy Solutions, including debt and equity, was $42,003.
In December 2011, Prospect completed a reorganization of Gas Solutions Holdings Inc. renaming the company Energy Solutions and transferring ownership of other operating companies owned by Prospect and operating within the energy industry. As part of the reorganization, Prospect transferred its debt and equity interests with cost basis of $2,540 in Change Clean Energy Holdings, Inc. and Change Clean Energy, Inc. to Change Clean; $12,504 in Freedom Marine Holdings, Inc. to Freedom Marine; and $1,449 of Yatesville Coal Holdings, Inc. to Yatesville. Each of these entities is wholly owned (directly or indirectly) by Energy Solutions. On December 28, 2011, Prospect made a follow-on $1,250 equity investment in Energy Solutions and a $3,500 debt investment in Vessel.
On January 4, 2012, Energy Solutions sold its gas gathering and processing assets held in Gas Solutions II Ltd. (“Gas Solutions”) for a potential sale price of $199,805, adjusted for the final working capital settlement, including a potential earn-out of $28,000 that may be paid based on the future performance of Gas Solutions. After expenses, including structuring fees of $9,966 paid to Prospect, and $3,152 of third-party expenses, Gas Solutions LP LLC and Gas Solutions GP LLC, subsidiaries of Gas Solutions, received $157,100 and $1,587 in cash, respectively, and subsequently distributed these amounts, $158,687 in total, to Energy Solutions. The sale of Gas Solutions by Energy Solutions resulted in significant earnings and profits, as defined by the Code, at Energy Solutions for calendar year 2012. In accordance with ASC 946, the distributions Prospect received from Energy Solutions during calendar year 2012 were required to be recognized as dividend income, as there were current year earnings and profits sufficient to support such recognition. As a result, we recognized dividends of $53,820 from Energy Solutions during the year ended June 30, 2013. No such dividends were received from Energy Solutions during the year ended June 30, 2014.

91

During the year ended June 30, 2013, Energy Solutions repaid $28,500 of senior and subordinated secured debt due to Prospect. In addition to the repayment of principal, Prospect received $19,543 of make-whole fees for early repayment of the outstanding loan receivables, which was recorded as additional interest income during the year ended June 30, 2013.
On November 25, 2013, Prospect restructured its investment in Freedom Marine. The $12,504 subordinated secured loan to Jettco Marine Services, LLC, a subsidiary of Freedom Marine, was replaced with a senior secured note to Vessel II. On December 3, 2013, Prospect made a $16,000 senior secured investment in Vessel III. Overall, the restructuring of Prospect’s investment in Freedom Marine provided approximately $16,000 net new senior secured debt financing to support the acquisition of two new vessels. Prospect received $2,480 of structuring fees from Energy Solutions related to the Freedom Marine restructuring which was recognized as other income.
During the year ended June 30, 2014, Energy Solutions repaid the remaining $8,500 of the subordinated secured debt due to Prospect. In addition to the repayment of principal, Prospect received $4,812 of make-whole fees for early repayment of the outstanding loan receivables, which was recorded as additional interest income during the year ended June 30, 2014.
On November 28, 2012 and January 1, 2014, Prospect received $475 and $25 of litigation settlement proceeds related to Change Clean and recorded a reduction in its equity investment cost basis for Energy Solutions, respectively.
On June 4, 2014, Gas Solutions GP LLC and Gas Solutions LP LLC merged with and into Freedom Marine, with Freedom Marine as the surviving entity.
On July 1, 2014, Prospect began consolidating Energy Solutions. As a result, any transactions between Energy Solutions and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below. Transactions between Prospect and Freedom Marine are separately discussed below under “Freedom Marine Solutions, LLC.”
During the three months ended December 31, 2014, Prospect determined that our remaining investments in Change Clean and Yatesville were impaired and recorded a realized loss of $1,449, reducing the amortized cost to zero.
During the six months ended December 31, 2015, Prospect dissolved the following entities: Change Clean Energy Company, LLC, Change Clean Energy, LLC, Down East Power Company, LLC and BioChips LLC.
The following payments were paid from Energy Solutions to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Energy Solutions (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
65

First Tower Finance Company LLC
Prospect owns 100% of the equity of First Tower Holdings of Delaware LLC (“First Tower Delaware”), a Consolidated Holding Company. First Tower Delaware owns 80.1% of First Tower Finance Company LLC (f/k/a First Tower Holdings LLC) (“First Tower Finance”). First Tower Finance owns 100% of First Tower, LLC (“First Tower”), a multiline specialty finance company.
On June 15, 2012, Prospect made a $287,953 investment (including 14,518,207 common shares of Prospect at a fair value of $160,571) in First Tower Delaware, of which $244,760 was a Senior Secured Revolving Credit Facility and $43,193 of membership interest in First Tower Delaware. The proceeds were utilized by First Tower Delaware to purchase 80.1% of the membership interests in First Tower Finance for $282,968. The remaining proceeds at First Tower Delaware were used to pay $4,038 of structuring fees from First Tower Delaware to Prospect (which was recognized by Prospect as structuring fee income), $940 of legal services provided by attorneys at Prospect Administration, and $7 of third party expenses. Prospect received an additional $4,038 of structuring fees from First Tower (which was recognized by Prospect as structuring fee income). Management purchased the additional 19.9% of First Tower Finance common stock for $70,300. The combined proceeds received by First Tower Finance of $353,268 ($282,968 equity financing from First Tower Delaware mentioned above and $70,300 equity financing from management) were used to purchase 100% of the common stock of First Tower for $338,042, pay $11,188 of third-party expenses and $4,038 of structuring fees from First Tower mentioned above (which was recognized by Prospect as structuring fee income).

92

On October 18, 2012, Prospect made an additional $20,000 investment through the Senior Secured Revolving Credit Facility, $12,008 of which was invested by First Tower Delaware in First Tower Finance as equity and $7,992 of which was retained by First Tower Delaware as working capital. On December 30, 2013, Prospect funded an additional $10,000 into First Tower Delaware, $8,500 through the Senior Secured Revolving Credit Facility and $1,500 through the purchase of additional membership interests in First Tower Delaware. $8,000 of the proceeds were utilized by First Tower Delaware to pay structuring fees to Prospect for the renegotiation and expansion of First Tower’s third-party revolver, and $2,000 of the proceeds were retained by First Tower Delaware for working capital.
On June 24, 2014, Prospect made a new $251,246 second lien term loan to First Tower. First Tower distributed this amount to First Tower Finance, which distributed this amount to First Tower Delaware as a return of capital. First Tower Delaware used the distribution to partially pay down the Senior Secured Revolving Credit Facility. The remaining $23,712 of the Senior Secured Revolving Credit Facility was then converted to additional membership interests held by Prospect in First Tower Delaware.
On July 1, 2014, Prospect began consolidating First Tower Delaware. As a result, any transactions between First Tower Delaware and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
During the quarter ended December 31, 2015, Prospect made an additional $8,005 investment split evenly between equity and the second lien term loan to First Tower.
The following dividends were declared and paid from First Tower to First Tower Delaware and recognized as dividend income by First Tower Delaware:
Three Months Ended March 31, 2015
$
1,929

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
1,929

Nine Months Ended March 31, 2016
—

All dividends were paid from earnings and profits of First Tower.
The following amounts were paid from First Tower to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
679

The following interest payments were accrued and paid from First Tower to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
14,334

Three Months Ended March 31, 2016
14,195

Nine Months Ended March 31, 2015
38,921

Nine Months Ended March 31, 2016
42,499

Included above, the following payment-in-kind interest from First Tower was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
348


93


The following interest income recognized had not yet been paid by First Tower to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
4,612

March 31, 2016
156

During the three months ended December 31, 2015, the managerial assistance agreement between First Tower Delaware and Prospect Administration was amended and $1,200 of managerial assistance expense was reversed at First Tower Delaware. First Tower replaced First Tower Delaware in the managerial assistance agreement with Prospect Administration as of December 14, 2015.

The following managerial assistance payments were accrued and paid from First Tower Delaware to Prospect Administration and recognized by Prospect as an expense:
Three Months Ended March 31, 2015
$
600

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
1,800

Nine Months Ended March 31, 2016
(1,200
)
The following managerial assistance recognized has not yet been paid by First Tower Delaware to Prospect Administration and was included by Prospect within due to Prospect Administration.
June 30, 2015
$
600

March 31, 2016
—

The following managerial assistance recognized had not yet been paid by First Tower to Prospect and was included by Prospect
within other receivables and due to Prospect Administration:
June 30, 2015
$
—

March 31, 2016
600

The following amounts were due from First Tower to Prospect for reimbursement of expenses paid by Prospect on behalf of First Tower and were included by Prospect within other receivables:
June 30, 2015
$
20

March 31, 2016
9

Freedom Marine Solutions, LLC
As discussed above, Prospect owns 100% of the equity of Energy Solutions, a Consolidated Holding Company. Energy Solutions owns 100% of Freedom Marine. Freedom Marine owns 100% of each of Vessel, Vessel II, and Vessel III.
As of July 1, 2014, the cost basis of Prospect’s total debt and equity investment in Freedom Marine was $39,811, which consisted of the following: $3,500 senior secured note to Vessel; $12,504 senior secured note to Vessel II; $16,000 senior secured note to Vessel III; and $7,807 of equity.
On December 29, 2014, Freedom Marine reached a settlement for and received $5,174, net of third party obligations, related to the contingent earn-out from the sale of Gas Solutions in January 2012 which was retained by Freedom Marine. This is a final settlement and no further payments are expected from the sale. (See “Energy Solutions Holdings Inc.” above for more information related to the sale of Gas Solutions.)
On October 30, 2015, we restructured our investment in Freedom Marine Solutions, LLC (“Freedom Marine”). Concurrent with the restructuring, we exchanged our $32,500 senior secured loans for additional membership interest in Freedom Marine.
On January 7, 2016, Prospect purchased an additional $400 in membership interests in Freedom Marine to support its ongoing operations and liquidity needs.

94


The following interest payments were accrued and paid from Vessel to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
157

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
480

Nine Months Ended March 31, 2016
159

The following interest income recognized had not yet been paid by Vessel to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
2

March 31, 2016
—

The following interest payments were accrued and paid from Vessel II to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
422

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
1,286

Nine Months Ended March 31, 2016
427

The following interest income recognized had not yet been paid by Vessel II to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
5

March 31, 2016
—

The following interest payments were accrued and paid from Vessel III to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
520

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
1,583

Nine Months Ended March 31, 2016
526

The following interest income recognized had not yet been paid by Vessel III to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
6

March 31, 2016
—

The following managerial assistance recognized had not yet been paid by Freedom Marine to Prospect and was included by Prospect within other receivables and due to Prospect Administration:
June 30, 2015
$
—

March 31, 2016
150

The following payments were paid from Freedom Marine to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Freedom Marine (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
1

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
1

Nine Months Ended March 31, 2016
—



95

The following amounts were due from Freedom Marine to Prospect for reimbursement of expenses paid by Prospect on behalf of Freedom Marine and were included by Prospect within other receivables:
June 30, 2015
$
3

March 31, 2016
—

Gulf Coast Machine & Supply Company
Prospect owns 100% of the preferred equity of Gulf Coast Machine & Supply Company (“Gulf Coast”). Gulf Coast is a provider of value-added forging solutions to energy and industrial end markets.
On October 12, 2012, Prospect initially made a $42,000 first lien term loan to Gulf Coast, of which $840 was used to pay structuring fees from Gulf Coast to Prospect (which was recognized by Prospect as structuring fee income). During the year ended June 30, 2013, Gulf Coast repaid $787 of the first lien term loan.
Between July 1, 2013 and November 8, 2013, Gulf Coast repaid $263 of the first lien term loan, leaving a balance of $40,950. On November 8, 2013, Gulf Coast issued $25,950 of convertible preferred stock to Prospect (representing 99.9% of the voting securities of Gulf Coast) in exchange for crediting the same amount to the first lien term loan previously outstanding, leaving a first lien loan balance of $15,000. Prior to this conversion, Prospect was just a lender to Gulf Coast and the investment was not a controlled investment. On November 29, 2013 and December 16, 2013, Prospect provided an additional $1,000 and $1,500, respectively, to fund working capital needs, increasing the first lien loan balance to $17,500.
During the year ended June 30, 2015, Prospect made an additional $8,500 investment in the first lien term loan to Gulf Coast to fund capital improvements to key forging equipment and other liquidity needs.
During the nine months ended March 31, 2016, Prospect made an additional $8,000 investment in the first lien term loan to Gulf Coast to fund capital improvements to key forging equipment and other liquidity needs.
The following amounts were paid from Gulf Coast to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
75

The following interest payments were accrued and paid from Gulf Coast to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
324

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
1,370

Nine Months Ended March 31, 2016
—

The following amounts were due from Gulf Coast to Prospect for reimbursement of expenses paid by Prospect on behalf of Gulf Coast and were included by Prospect within other receivables:
June 30, 2015
$
1

March 31, 2016
—

Harbortouch Payments, LLC
Prospect owns 100% of the equity of Harbortouch Holdings of Delaware Inc. (“Harbortouch Delaware”), a Consolidated Holding Company. Harbortouch Delaware owns 100% of the Class C voting units of Harbortouch Payments, LLC (“Harbortouch”), which provide for a 53.5% residual profits allocation. Harbortouch management owns 100% of the Class B and D voting units of Harbortouch, which provide for a 46.5% residual profits allocation. Harbortouch owns 100% of Credit Card Processing USA, LLC. Harbortouch is a provider of transaction processing services and point-of sale equipment used by merchants across the United States.
On March 31, 2014, Prospect made a $147,898 investment (including 2,306,294 common shares of Prospect at a fair value of $24,908) in Harbortouch Delaware. Of this amount, $123,000 was loaned in exchanged for a subordinated note and $24,898 was

96

an equity contribution. Harbortouch Delaware utilized $137,972 to purchase 100% of the Harbortouch Class A voting preferred units which provided an 11% preferred return and a 53.5% interest in the residual profits. Harbortouch Delaware used the remaining proceeds to pay $4,920 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,761 for legal services provided by attorneys at Prospect Administration and $3,245 was retained by Harbortouch Delaware for working capital. Additionally, on March 31, 2014, Prospect provided Harbortouch a senior secured loan of $130,796. Prospect received a structuring fee of $2,616 from Harbortouch (which was recognized by Prospect as structuring fee income).
On April 1, 2014, Prospect made a new $137,226 senior secured term loan to Harbortouch. Harbortouch then distributed this amount to Harbortouch Delaware as a return of capital which was used to pay down the $123,000 senior secured note from Harbortouch Delaware to Prospect. The remaining $14,226 was distributed to Prospect as a return of capital of Prospect’s equity investment in Harbortouch Delaware.
On July 1, 2014, Prospect began consolidating Harbortouch Delaware. As a result, any transactions between Harbortouch Delaware and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
On September 30, 2014, Prospect made a new $26,431 senior secured term loan to Harbortouch to support an acquisition. As part of the transaction, Prospect received $529 of structuring fees (which was recognized by Prospect as structuring fee income) and $50 of amendment fees (which was recognized by Prospect as amendment fee income).
On December 19, 2014, Prospect made an additional $1,291 equity investment in Harbortouch Class C voting units. This amount was deferred consideration stipulated in the original agreement.
In addition to the repayments noted above, the following amounts were paid from Harbortouch to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
1,914

Three Months Ended March 31, 2016
1,410

Nine Months Ended March 31, 2015
3,554

Nine Months Ended March 31, 2016
3,991

The following cash distributions were declared and paid from Harbortouch to Harbortouch Holdings and recognized as a return of capital by Harbortouch Holdings:
Three Months Ended March 31, 2015
$
41

Three Months Ended March 31, 2016
14

Nine Months Ended March 31, 2015
41

Nine Months Ended March 31, 2016
37

The following interest payments were accrued and paid from Harbortouch to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
7,502

Three Months Ended March 31, 2016
7,612

Nine Months Ended March 31, 2015
22,092

Nine Months Ended March 31, 2016
23,129

The following interest income recognized had not yet been paid by Harbortouch to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
2,077

March 31, 2016
8,162

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

97

Three Months Ended March 31, 2015
$
125

Three Months Ended March 31, 2016
125

Nine Months Ended March 31, 2015
375

Nine Months Ended March 31, 2016
375

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
125

March 31, 2016
125

The following payments were paid from Harbortouch to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Harbortouch (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
31

Nine Months Ended March 31, 2016
—

The following amounts were due from Harbortouch to Prospect for reimbursement of expenses paid by Prospect on behalf of Harbortouch and were included within other receivables:
June 30, 2015
$
—

March 31, 2016
42

Manx Energy, Inc.
As of June 30, 2014, Prospect owned 41% of the equity of Manx Energy, Inc. (“Manx”). Manx was formed on January 19, 2010 for the purpose of rolling up the assets of existing Prospect portfolio companies, Coalbed, LLC (“Coalbed”), Appalachian Energy LLC (f/k/a Appalachian Energy Holdings, LLC) (“AEH”) and Kinley Exploration LLC. The three companies were combined under new common management.
On January 19, 2010, Prospect made a $2,800 investment at closing to Manx to provide for working capital. On the same date, Prospect exchanged $2,100 and $4,500 of the loans to AEH and Coalbed, respectively, for Manx preferred equity, and Prospect’s AEH equity interest was converted into Manx common stock. There was no change to fair value at the time of restructuring, and Prospect continued to fully reserve any income accrued for Manx. On October 15, 2010 and May 26, 2011, Prospect increased its loan to Manx in the amount of $500 and $250, respectively, to provide additional working capital. As of June 30, 2011, the cost basis of Prospect’s investment in Manx, including debt and equity, was $19,019.
On June 30, 2012, AEH and Coalbed loans held by Manx with a cost basis of $7,991 were removed from Manx and contributed by Prospect to Wolf Energy Holdings Inc., a separate holding company wholly owned by Prospect. During the three months ended June 30, 2013, Prospect determined that our investment in Manx was impaired and recorded a realized loss of $9,397 for the amount that the amortized cost exceeded the fair value, reducing the amortized cost to $500. During the year ended June 30, 2014, Manx repaid $450 of the senior secured note. During the three months ended December 31, 2014, Manx was dissolved and Prospect recorded a realized loss of $50, reducing the amortized cost to zero.
MITY, Inc.
Prospect owns 100% of the equity of MITY Holdings of Delaware Inc. (“MITY Delaware”), a Consolidated Holding Company. MITY Delaware holds 94.99% of the equity of MITY, Inc. (f/k/a MITY Enterprises, Inc.) (“MITY”), with management of MITY owning the remaining 5.01% of the equity of MITY. MITY owns 100% of each of MITY-Lite, Inc. (“MITY-Lite”); Broda USA, Inc. (f/k/a Broda Enterprises USA, Inc.) (“Broda USA”); and Broda Enterprises ULC (“Broda Canada”). MITY is a designer, manufacturer and seller of multipurpose room furniture and specialty healthcare seating products.
On September 19, 2013, Prospect made a $29,735 investment in MITY Delaware, of which $22,792 was a senior secured debt to MITY Delaware and $6,943 was a capital contribution to the equity of MITY Delaware. The proceeds were partially utilized to purchase 97.7% of MITY common stock for $21,027. The remaining proceeds were used to issue a $7,200 note from Broda Canada

98

to MITY Delaware, pay $684 of structuring fees from MITY Delaware to Prospect (which was recognized by Prospect as structuring fee income), $311 for legal services provided by attorneys employed by Prospect Administration and $513 was retained by MITY Delaware for working capital.
On September 19, 2013, Prospect made an additional $18,250 senior secured debt investment in MITY. The proceeds were used to repay existing third-party indebtedness, pay $365 of structuring fees from MITY to Prospect (which was recognized by Prospect as structuring fee income), pay $1,143 of third party expenses and $2,580 was retained by MITY for working capital. Members of management of MITY purchased additional shares of common stock of MITY, reducing MITY Delaware’s ownership to 94.99%. MITY, MITY-Lite and Broda USA are joint borrowers on the senior secured debt of MITY.
On June 23, 2014, Prospect made a new $15,769 debt investment in MITY and MITY distributed proceeds to MITY Delaware as a return of capital. MITY Delaware used this distribution to pay down the senior secured debt of MITY Delaware to Prospect by the same amount. The remaining amount of the senior secured debt due from MITY Delaware to Prospect, $7,200, was then contributed to the capital of MITY Delaware. On June 23, 2014, Prospect also extended a new $7,500 senior secured revolving facility to MITY, which was unfunded at closing.
On July 1, 2014, Prospect began consolidating MITY Delaware. As a result, any transactions between MITY Delaware and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
During the year ended June 30, 2015, Prospect funded $2,500 of MITY’s senior secured revolving facility, which MITY fully repaid during that time.
During the quarter ended March 31, 2016, Prospect’s ownership in MITY increased to 95.83% resulting from a stock repurchase of a key executive’s shares.
The following dividends were declared and paid from MITY to MITY Delaware and recognized as dividend income by MITY Delaware:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
710

All dividends were paid from earnings and profits of MITY.
The following interest payments were accrued and paid from MITY to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
1,259

Three Months Ended March 31, 2016
1,293

Nine Months Ended March 31, 2015
3,874

Nine Months Ended March 31, 2016
3,904

Included above, the following payment-in-kind interest from MITY was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
127

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
127

Nine Months Ended March 31, 2016
140

The following interest income recognized had not yet been paid by MITY to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
14

March 31, 2016
14


99

The following interest payments were accrued and paid from Broda Canada to MITY Delaware and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
149

Three Months Ended March 31, 2016
136

Nine Months Ended March 31, 2015
486

Nine Months Ended March 31, 2016
421

During the three and nine months ended March 31, 2016, there was a favorable fluctuation in the foreign currency exchange rate and MITY Delaware recognized $6 and $7, respectively of realized gain related to its investment in Broda Canada.
The following managerial assistance payments were paid from MITY to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
75

Three Months Ended March 31, 2016
75

Nine Months Ended March 31, 2015
235

Nine Months Ended March 31, 2016
225

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
75

March 31, 2016
75

The following payments were paid from MITY to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to MITY (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
121

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
121

Nine Months Ended March 31, 2016
59

The following amounts were due from MITY to Prospect for reimbursement of expenses paid by Prospect on behalf of MITY and were included within other receivables:
June 30, 2015
$
—

March 31, 2016
1

The following amounts were due to MITY from Prospect for reimbursement of expenses paid by MITY on behalf of Prospect and were included within other liabilities:
June 30, 2015
$
1

March 31, 2016
—

National Property REIT Corp.
Prospect owns 100% of the equity of NPH Property Holdings, LLC (“NPH”), a Consolidated Holding Company. NPH owns 100% of the common equity of National Property REIT Corp. (f/k/a National Property Holdings Corp.) (“NPRC”). NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. In order to qualify as a REIT, NPRC issued 125 shares of Series A Cumulative Non-Voting Preferred Stock to 125 accredited investors. The preferred stockholders are entitled to receive cumulative dividends semi-annually at an annual rate of 12.5% and do not have the ability to participate in the management or operation of NPRC.
NPRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. NPRC acquires real estate

100

assets, including, but not limited to, industrial, commercial, and multi-family properties. NPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (the “JV”). Additionally, through its wholly-owned subsidiaries, NPRC invests in online consumer loans.
On December 31, 2013, APRC distributed its majority interests in five JVs holding real estate assets to APH. APH then distributed these JV interests to Prospect in a transaction characterized as a return of capital. Prospect, on the same day, contributed certain of these JV interests to NPH and the remainder to UPH (each wholly-owned subsidiaries of Prospect). Each of NPH and UPH immediately thereafter contributed these JV interests to NPRC and UPRC, respectively. The total investments in the JVs transferred to NPH and from NPH to NPRC consisted of $79,309 and $16,315 of debt and equity financing, respectively. There was no material gain or loss realized on these transactions.
On December 31, 2013, Prospect made a $10,620 investment in NPH, of which $8,800 was a Senior Term Loan and $1,820 was used to purchase additional membership interests of NPH. The proceeds were utilized by NPH to purchase additional NPRC common equity for $10,620. The proceeds were utilized by NPRC to purchase a 93.0% ownership interest in APH Carroll Bartram Park, LLC for $10,288 and to pay $113 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $219 retained by NPRC for working capital. The JV was purchased for $38,000 which included debt financing and minority interest of $28,500 and $774, respectively. The remaining proceeds were used to pay $206 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,038 of third party expenses, $5 of legal services provided by attorneys at Prospect Administration, and $304 of prepaid assets, with $9 retained by the JV for working capital.
Between January 7, 2014 and March 13, 2014, Prospect made a $14,000 investment in NPH, of which $11,900 was a Senior Term Loan and $2,100 was used to purchase additional membership interests of NPH. The proceeds were utilized by certain of NPRC’s wholly-owned subsidiaries to purchase online consumer loans from a third party.
On January 31, 2014, Prospect made a $4,805 investment in NPH, of which $4,000 was a Senior Term Loan and $805 used to purchase additional membership interests of NPH. The proceeds were utilized by NPH to purchase additional NPRC common equity for $4,805. The proceeds were utilized by NPRC to purchase a 93.0% ownership interest in APH Carroll Atlantic Beach, LLC for $4,603 and to pay $52 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $150 retained by NPRC for working capital. The JV was purchased for $13,025 which included debt financing and minority interest of $9,118 and $346, respectively. The remaining proceeds were used to pay $92 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $681 of third party expenses, $7 of legal services provided by attorneys at Prospect Administration, and $182 of prepaid assets, with $80 retained by the JV for working capital.
Effective April 1, 2014, Prospect made a new $104,460 senior term loan to NPRC. NPRC then distributed this amount to NPH as a return of capital which was used to pay down the Senior Term Loan from NPH by the same amount.
Between April 3, 2014 and May 21, 2014, Prospect made an $11,000 investment in NPH and NPRC, of which $9,350 was a Senior Term Loan to NPRC and $1,650 was used to purchase additional membership interests of NPH. The proceeds were utilized by NPH to purchase additional NPRC common equity for $1,650. The proceeds were utilized by certain of NPRC’s wholly-owned subsidiaries to purchase online consumer loans from a third party.
On July 1, 2014, Prospect began consolidating NPH. As a result, any transactions between NPH and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
On October 23, 2014, UPRC transferred its investment in Michigan Storage, LLC to NPRC. As a result, Prospect’s investments in UPRC related to these properties also transferred to NPRC. The investments transferred consisted of $1,281 of equity and $9,444 of debt. There was no gain or loss realized on the transaction.
On November 26, 2014, APRC transferred its investment in APH Carroll Resort, LLC to NPRC and the investment was renamed NPRC Carroll Resort, LLC. As a result, Prospect’s investments in APRC related to this property also transferred to NPRC. The investments transferred consisted of $10,237 of equity and $65,586 of debt. There was no gain or loss realized on the transaction.
On January 16, 2015, Prospect made a $13,871 investment in NPRC, of which $11,810 was a Senior Term Loan directly to NPRC and $2,061 was used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in Michigan Storage, LLC (which was originally purchased by UPRC and transferred to NPRC, as discussed below) for $13,854, with $17 retained by NPRC for working capital. The minority interest holder also invested an additional $2,445 in the JV. With additional debt financing of $12,602, the total proceeds were used by the JV to purchase five additional properties for $26,405. The remaining proceeds were used to pay $276 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,762 of third party expenses, $65 in pre-funded capital expenditures, and $393 of prepaid assets.

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On March 17, 2015, Prospect entered into a new credit agreement with ACL Loan Holdings, Inc. (“ACLLH”), a wholly-owned subsidiary of NPRC, to form two new tranches of senior secured term loans, Term Loan A and Term Loan B, with the same terms as the existing NPRC Term Loan A and Term Loan B due to Prospect. The agreement was effective as of June 30, 2014. On June 30, 2014, ACLLH made a non-cash return of capital distribution of $22,390 to NPRC and NPRC transferred and assigned to ACLLH a senior secured Term Loan A due to Prospect.
On May 1, 2015, APRC transferred its investment in 5100 Live Oaks Blvd, LLC to NPRC. As a result, Prospect’s investments in APRC related to this property also transferred to NPRC. The investments transferred consisted of $2,748 of equity and $29,990 of debt. There was no gain or loss realized on the transaction.
On May 6, 2015, Prospect made a $252 investment in NPRC, of which $236 was a Senior Term Loan and $16 was used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in 5100 Live Oaks Blvd, LLC for $252. The minority interest holder also invested an additional $6 in the JV. The proceeds were used by the JV to fund $258 of capital expenditures.
On June 2, 2015, Prospect amended the credit agreement with NPRC to form two new tranches of senior secured term loans, Term Loan C and Term Loan D, with the same terms as the existing ACLLH Term Loan A and Term Loan B due to Prospect. The amendment was effective as of April 1, 2015.
During the year ended June 30, 2015, Prospect made thirty-six follow-on investments in NPRC totaling $224,200 to support the online consumer lending initiative. Prospect invested $52,350 of equity through NPH and $171,850 of debt directly to NPRC and its wholly-owned subsidiaries. In addition, during the year ended June 30, 2015, Prospect received partial repayments of $32,883 of the loans previously outstanding and $5,577 as a return of capital on the equity investment in NPRC.
On September 9, 2015, Prospect made a $159 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in its multi-family property for $159. The minority interest holder also invested an additional $4 in the JVs. The proceeds were used by the JVs to fund $163 of capital expenditures.
On November 5, 2015 Prospect made a $9,017 investment in NPRC used to purchase additional common equity in NPRC through NPH. The proceeds were utilized by NPRC to purchase an 80.0% ownership interest in SSIL I, LLC for $9,017. The JV was purchased for $34,500 which included debt financing and minority interest of $26,450 and $2,254, respectively. The remaining proceeds were used to pay $180 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,243 of escrows and reserves, $1,243 of third party expenses, $42 of legal services provided by attorneys at Prospect Administration, and $513 of capital expenditures.
On November 12, 2015, NPRC used supplemental debt proceeds obtained by their JVs to make a partial repayment on the Senior Term Loan of 22,098.
On November 19, 2015, Prospect made a $695 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in its multi-family properties for $690 and pay $5 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $76 in the JVs. The proceeds were used by the JVs to fund $766 of capital expenditures.
On November 25, 2015, Prospect made a $323 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in its multi-family properties for $321 and pay $2 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $19 in the JVs. The proceeds were used by the JVs to fund $340 of capital expenditures.
On December 23, 2015, Prospect made a $499 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in its multi-family property for $499. The minority interest holder also invested an additional $12 in the JVs. The proceeds were used by the JVs to fund $511 of capital expenditures.
On December 30, 2015, NPRC used supplemental debt proceeds obtained by its’ JVs to make a partial repayment on the Senior Term Loan of 9,821.
On January 20, 2016, NPRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of 6,774.
On February 10, 2016, Prospect made a $354 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest Carroll Management Group, LLC

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for $352. The minority interest holder also invested an additional $22 in the JVs. The proceeds were used by the JVs to fund $376 of capital expenditures.
On February 24, 2016, NPRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of 24,579.
During the nine months ended March 31, 2015, we provided $149,086 and $31,697 of debt and equity financing, respectively, to NPRC to enable certain of its wholly-owned subsidiaries to invest in online consumer loans. In addition, during the nine months ended March 31, 2016 , we received partial repayments of $40,460 of our loans previously outstanding and $12,396 as a return of capital on our equity investment in NPRC.

The following interest payments were accrued and paid by NPRC to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
4,832

Three Months Ended March 31, 2016
14,177

Nine Months Ended March 31, 2015
14,775

Nine Months Ended March 31, 2016
27,586

Included above, the following payment-in-kind interest from NPRC was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
1,738

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
3,056

Nine Months Ended March 31, 2016
703

The following interest income recognized had not yet been paid by NPRC to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
116

March 31, 2016
114

The following interest payments were accrued and paid by ACLLH to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
3,293

Three Months Ended March 31, 2016
1,320

Nine Months Ended March 31, 2015
3,293

Nine Months Ended March 31, 2016
17,774

The following interest income recognized had not yet been paid by ACLLH to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
23

March 31, 2016
52

The following net revenue interest payments were paid from NPRC to Prospect and recognized by Prospect as other income:
Three Months Ended March 31, 2015
$
506

Three Months Ended March 31, 2016
601

Nine Months Ended March 31, 2015
1,150

Nine Months Ended March 31, 2016
2,031

The following structuring fees were paid from NPRC to Prospect and recognized by Prospect as other income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
180


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The following structuring fees were paid from ACLLH to Prospect and recognized by Prospect as other income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
26

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
1,683

The following managerial assistance payments were paid from NPRC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
128

Three Months Ended March 31, 2016
128

Nine Months Ended March 31, 2015
383

Nine Months Ended March 31, 2016
383

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
128

March 31, 2016
128

The following payments were paid from NPRC to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to NPRC (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
649

Three Months Ended March 31, 2016
780

Nine Months Ended March 31, 2015
709

Nine Months Ended March 31, 2016
1,808

The following amounts were due from NPRC to Prospect for reimbursement of expenses paid by Prospect on behalf of NPRC and included by Prospect within other receivables:
June 30, 2015
$
108

March 31, 2016
—

The following amounts were due to NPRC from Prospect for reimbursement of expenses paid by NPRC on behalf of Prospect and included by Prospect within other liabilities:
June 30, 2015
$
—

March 31, 2016
37

The following amounts were due from ACLLH to Prospect for reimbursement of expenses paid by Prospect on behalf of NPRC and included by Prospect within other receivables:
June 30, 2015
$
—

March 31, 2016
2


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Nationwide Acceptance LLC
Prospect owns 100% of the membership interests of Nationwide Acceptance Holdings LLC (“Nationwide Holdings”), a Consolidated Holding Company. Nationwide Holdings owns 93.79% of the equity of Nationwide Loan Company LLC (f/k/a Nationwide Acceptance LLC) (“Nationwide”), with members of Nationwide management owning the remaining 6.21% of the equity.
On January 31, 2013, Prospect initially made a $25,151 investment in Nationwide Holdings, of which $21,308 was a Senior Secured Revolving Credit Facility and $3,843 was in the form of membership interests in Nationwide Holdings. $21,885 of the proceeds were utilized to purchase 93.79% of the membership interests in Nationwide. Proceeds were also used to pay $753 of structuring fees from Nationwide Holdings to Prospect (which was recognized by Prospect as structuring fee income), $350 of third party expenses and $163 of legal services provided by attorneys at Prospect Administration. The remaining $2,000 was retained by Nationwide Holdings as working capital.
In December 2013, Prospect received $1,500 of structuring fees from Nationwide Holdings related to the amendment of the loan agreement. On March 28, 2014, Prospect funded an additional $4,000 to Nationwide Holdings ($3,400 through the Senior Secured Revolving Credit Facility and $600 to purchase additional membership interests in Nationwide Holdings). The additional funding along with cash on hand was utilized by Nationwide Holdings to fund a $5,000 dividend to Prospect.
On June 18, 2014, Prospect made a new $14,820 second lien term loan to Nationwide. Nationwide distributed this amount to Nationwide Holdings as a return of capital. Nationwide Holdings used the distribution to pay down the Senior Secured Revolving Credit Facility. The remaining $9,888 of the Senior Secured Revolving Credit Facility was then converted to additional membership interests in Nationwide Holdings.
On July 1, 2014, Prospect began consolidating Nationwide Holdings. As a result, any transactions between Nationwide Holdings and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
On June 1, 2015, Nationwide completed a corporate reorganization. As part of the reorganization, Nationwide Acceptance LLC was renamed Nationwide Loan Company LLC (continues as “Nationwide”) and formed two new wholly-owned subsidiaries: Pelican Loan Company LLC (“Pelican”) and Nationwide Consumer Loans LLC. Nationwide assigned 100% of the equity interests in its other subsidiaries to Pelican which, in turn, assigned these interests to Nationwide Acceptance LLC (“New Nationwide”), the new operating company wholly-owned by Pelican. New Nationwide also assumed the existing senior subordinated term loan due to Prospect.
During the year ended June 30, 2015, Prospect made additional equity investments totaling $2,814 in Nationwide. Nationwide management invested an additional $186 of equity in Nationwide, and Prospect’s ownership in Nationwide did not change.
During the quarter ended December 31, 2015, Prospect made additional investments totaling $1,876 in the senior subordinated term loan to Nationwide.
On March 31, 2016, Prospect made an additional equity investment totaling $1,407, and Prospect’s ownership in Nationwide did not change.
The following dividends were declared and paid from Nationwide to Nationwide Holdings and recognized as dividend income by Nationwide Holdings:
Three Months Ended March 31, 2015
$
1,139

Three Months Ended March 31, 2016
963

Nine Months Ended March 31, 2015
2,444

Nine Months Ended March 31, 2016
2,651

All dividends were paid from earnings and profits of Nationwide.
The following amounts were paid from Nationwide to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
300

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
300


105

The following interest payments were accrued and paid from Nationwide to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
741

Three Months Ended March 31, 2016
852

Nine Months Ended March 31, 2015
2,256

Nine Months Ended March 31, 2016
2,368

Included above, the following payment-in-kind interest from Nationwide was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
300

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
300

The following interest income recognized had not yet been paid by Nationwide to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
8

March 31, 2016
9

The following managerial assistance payments were paid from Nationwide to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
100

Three Months Ended March 31, 2016
100

Nine Months Ended March 31, 2015
300

Nine Months Ended March 31, 2016
300

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
100

March 31, 2016
100

The following payments were paid from Nationwide to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Nationwide (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative service costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
4

Nine Months Ended March 31, 2016
—

The following amounts were due to Nationwide from Prospect for reimbursement of expenses paid by Nationwide on behalf of Prospect and were included by Prospect within other liabilities:
June 30, 2015
$
12

March 31, 2016
6


106

NMMB, Inc.
Prospect owns 100% of the equity of NMMB Holdings, Inc. (“NMMB Holdings”), a Consolidated Holding Company. NMMB Holdings owns 96.33% of the fully-diluted equity of NMMB, Inc. (f/k/a NMMB Acquisition, Inc.) (“NMMB”), with NMMB management owning the remaining 3.67% of the equity. NMMB owns 100% of Refuel Agency, Inc. (“Refuel Agency”). Refuel Agency owns 100% of Armed Forces Communications, Inc. (“Armed Forces”). NMMB is an advertising media buying business.
On May 6, 2011, Prospect initially made a $34,450 investment (of which $31,750 was funded at closing) in NMMB Holdings and NMMB, of which $24,250 was a senior secured term loan to NMMB, $3,000 was a senior secured revolver to NMMB (of which $300 was funded at closing), $2,800 was a senior subordinated term loan to NMMB Holdings and $4,400 to purchase 100% of the Series A Preferred Stock of NMMB Holdings. The proceeds received by NMMB were used to purchase 100% of the equity of Refuel Agency and assets related to the business for $30,069, pay $1,035 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), pay $396 for third party expenses and $250 was retained by NMMB for working capital. On May 31, 2011, NMMB repaid the $300 senior secured revolver.
During the year ended June 30, 2012, NMMB repaid $2,550 of the senior secured term loan. During the year ended June 30, 2013, NMMB repaid $5,700 of the senior secured term loan due.
On December 13, 2013, Prospect invested $8,086 for preferred equity to recapitalize NMMB Holdings. The proceeds were used by NMMB Holdings to repay in full the $2,800 outstanding under the subordinated term loan and the remaining $5,286 of proceeds from Prospect were used by NMMB Holdings to purchase preferred equity in NMMB. NMMB used the proceeds from the preferred equity issuance to pay down the senior term loan.
On June 12, 2014, Prospect made a new $7,000 senior secured term loan to Armed Forces. Armed Forces distributed this amount to Refuel Agency as a return of capital. Refuel Agency distributed this amount to NMMB as a return of capital, which was used to pay down $7,000 of NMMB’s $10,714 senior secured term loan to Prospect.
On July 1, 2014, Prospect began consolidating NMMB Holdings. As a result, any transactions between NMMB Holdings and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
On October 1, 2014, Prospect made an additional $383 equity investment in NMMB Series B Preferred Stock, increasing Prospect’s ownership to 93.13%. During the year ended June 30, 2015, NMMB repurchased 460 shares of its common stock from a former NMMB executive, decreasing the number of shares outstanding and increasing Prospect’s ownership to 96.33%.
The following interest payments were accrued and paid from NMMB to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
130

Three Months Ended March 31, 2016
131

Nine Months Ended March 31, 2015
393

Nine Months Ended March 31, 2016
397

The following interest income recognized had not yet been paid by NMMB to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
133

March 31, 2016
1

The following interest payments were accrued and paid from Armed Forces to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
245

Three Months Ended March 31, 2016
248

Nine Months Ended March 31, 2015
749

Nine Months Ended March 31, 2016
749


107

The following interest income recognized had not yet been paid by Armed Forces to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
250

March 31, 2016
3

The following managerial assistance recognized had not yet been paid by NMMB to Prospect and was included by Prospect within other receivables and due to Prospect Administration:
June 30, 2015
$
700

March 31, 2016
1,000

The following amounts were due from NMMB to Prospect for reimbursement of expenses paid by Prospect on behalf of NMMB and were included by Prospect within other receivables:
June 30, 2015
$
2

March 31, 2016
1

R-V Industries, Inc.
As of July 1, 2011 and continuing through March 31, 2016 , Prospect owns 88.27% of the fully-diluted equity of R-V Industries, Inc. (“R-V”), with R-V management owning the remaining 11.73% of the equity. As of June 30, 2011, Prospect’s equity investment cost basis was $1,682 and $5,087 for warrants and common stock, respectively.
On November 30, 2012, Prospect made a $9,500 second lien term loan to R-V and R-V received an additional $4,000 of senior secured financing from a third-party lender. The combined $13,500 of proceeds was partially utilized by R-V to pay a dividend to its common stockholders in an aggregate amount equal to $13,288 (including $11,073 to Prospect recognized by Prospect as a dividend). The remaining proceeds were used by R-V to pay $142 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $47 for third party expenses and $23 for legal services provided by attorneys at Prospect Administration.
On June 12, 2013, Prospect provided an additional $23,250 to the second lien term loan to R-V. The proceeds were partially utilized by R-V to pay a dividend to the common stockholders in an aggregate amount equal to $15,000 (including $13,240 dividend to Prospect). The remaining proceeds were used to pay off $7,835 of outstanding debt due from R-V to a third-party, $11 for legal services provided by attorneys at Prospect Administration and $404 was retained by R-V for working capital.
In addition to the repayments noted above, the following amounts were paid from R-V to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
614

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
614

The following dividends were declared and paid from R-V to Prospect and recognized as dividend income by Prospect:
Three Months Ended March 31, 2015
$
75

Three Months Ended March 31, 2016
75

Nine Months Ended March 31, 2015
224

Nine Months Ended March 31, 2016
224

All dividends were paid from earnings and profits of R-V.
The following interest payments were accrued and paid from R-V to Prospect and recognized by Prospect as interest income:

108

Three Months Ended March 31, 2015
$
761

Three Months Ended March 31, 2016
730

Nine Months Ended March 31, 2015
2,281

Nine Months Ended March 31, 2016
2,192

The following managerial assistance payments were paid from R-V to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
45

Three Months Ended March 31, 2016
45

Nine Months Ended March 31, 2015
135

Nine Months Ended March 31, 2016
135

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
45

March 31, 2016
45

The following payments were paid from R-V to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to R-V (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative service costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
—

Nine Months Ended March 31, 2016
1

The following amounts were due to R-V from Prospect for reimbursement of expenses paid by R-V on behalf of Prospect and were included by Prospect within other liabilities:
June 30, 2015
$
2

March 31, 2016
2

SB Forging Company, Inc.
As of June 30, 2014, Prospect owned 79.53% of the fully-diluted common, 85.76% of the Series A Preferred and 100% of the Series B Preferred equity of ARRM Services, Inc. (f/k/a ARRM Holdings, Inc.) (“ARRM”). ARRM owned 100% of the equity of Ajax Rolled Ring & Machine, LLC (f/k/a Ajax Rolled Ring & Machine, Inc.) (“Ajax”). Ajax forges large seamless steel rings on two forging mills in the company’s York, South Carolina facility. The rings are used in a range of industrial applications, including in construction equipment and power turbines. Ajax also provides machining and other ancillary services.
As of July 1, 2011, the cost basis of Prospect’s total debt and equity investment in Ajax was $41,699, including capitalized payment-in-kind interest of $3,535. Prospect’s investment in Ajax consisted of the following: $20,607 of senior secured term debt (“Tranche A Term Loan”); $15,035 of subordinated secured term debt (“Tranche B Term Loan”); and $6,057 of common equity. In October 2011, ARRM assumed Ajax’s Tranche B Term Loan and the equity of Ajax was exchanged for equity in ARRM. Ajax was converted into a limited liability company shortly thereafter. On December 28, 2012, Prospect provided an additional $3,600 of unsecured debt to ARRM (“Promissory Demand Note”).
On April 1, 2013, Prospect refinanced its investment in Ajax and ARRM, increasing the total size of the debt investment to $38,537. The $19,837 Tranche A Term Loan was replaced with a new senior secured term loan to Ajax in the same amount. The $15,035 Tranche B Term Loan and $3,600 Promissory Demand Note were replaced with a new subordinated unsecured term loan to ARRM in the amount of $18,700. Prospect received $50 and $46 of structuring fees from Ajax and ARRM, respectively, which were recognized as other income.
On June 28, 2013, Prospect provided an additional $1,000 in the ARRM subordinated unsecured term loan to fund equity into Ajax. The proceeds were used by Ajax to repay senior debt to a third party. On October 11, 2013, Prospect provided $25,000 in

109

preferred equity for the recapitalization of ARRM. After the financing, Prospect received repayment of the $20,008 subordinated unsecured term loan previously outstanding from ARRM. In March 2014, Prospect received $98 of structuring fees from Ajax related to the amendment of the loan agreement in September 2013.
On October 10, 2014, ARRM sold Ajax to a third party and repaid the $19,337 loan receivable to Prospect. Prospect recorded a realized loss of $21,001 related to the sale. Concurrent with the sale, Prospect’s ownership increased to 100% of the outstanding equity of ARRM Services, Inc. which was renamed SB Forging Company, Inc. (“SB Forging”). As such, Prospect began consolidating SB Forging on October 11, 2014. In addition, there is $3,000 being held in escrow of which $802 was received on May 6, 2015 for which Prospect realized a gain of the same amount. Prospect received $2,000 of structuring fees from Ajax related to the sale of the operating company which was recognized as other income during the year ended June 30, 2015.
SB Forging has incurred $2,560 of overhead expense, which is included within due to Prospect Administration at December 31, 2015.
The following amounts were paid from Ajax to Prospect and recorded by Prospect as repayment of loan receivable:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
19,337

Nine Months Ended March 31, 2016
—


The following interest payments, including prepayment penalty fees, were accrued and paid from Ajax to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
956

Nine Months Ended March 31, 2016
—

The following managerial assistance payments were paid from Ajax to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
45

Nine Months Ended March 31, 2016
—

The following payments were paid from SB Forging to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to SB Forging (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
1,391

Nine Months Ended March 31, 2016
—

United Property REIT Corp.
Prospect owns 100% of the equity of UPH Property Holdings, LLC (“UPH”), a Consolidated Holding Company. UPH owns 100% of the common equity of United Property REIT Corp. (f/k/a United Property Holdings Corp.) (“UPRC”). UPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. In order to qualify as a REIT, UPRC issued 125 shares of Series A Cumulative Non-Voting Preferred Stock to 125 accredited investors. The preferred stockholders are entitled to receive cumulative dividends semi-annually at an annual rate of 12.5% and do not have the ability to participate in the management or operation of UPRC.
UPRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. UPRC acquires real estate

110

assets, including, but not limited to, industrial, commercial, and multi-family properties. UPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (the “JV”).
On December 31, 2013, APRC distributed its majority interests in five JVs holding real estate assets to APH. APH then distributed these JV interests to Prospect in a transaction characterized as a return of capital. Prospect, on the same day, contributed certain of these JV interests to NPH and the remainder to UPH (each wholly-owned subsidiaries of Prospect). Each of NPH and UPH immediately thereafter contributed these JV interests to NPRC and UPRC, respectively. The total investments in the JVs transferred to UPH and from UPH to UPRC consisted of $18,855 and $3,707 of debt and equity financing, respectively. There was no material gain or loss realized on these transactions.
Effective April 1, 2014, Prospect made a new $19,027 senior term loan to UPRC. UPRC then distributed this amount to UPH as a return of capital which was used to pay down the Senior Term Loan from UPH by the same amount.
On June 4, 2014, Prospect made a $1,405 investment in UPH to purchase additional membership interests of UPH, which was revised to $1,420 on July 1, 2014. The proceeds were utilized by UPH to purchase additional UPRC common equity for $1,420. The proceeds were utilized by UPRC to acquire the real property located at 1201 West College, Marshall, MO (“Taco Bell, MO”) for $1,405 and pay $15 of third party expenses.
On July 1, 2014, Prospect began consolidating UPH. As a result, any transactions between UPH and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
On August 19,  2014 and August 27, 2014, Prospect made a combined $11,046 investment in UPRC, of which $9,389 was a Senior Term Loan directly to UPRC and $1,657 was used to purchase additional common equity of UPRC through UPH. On October 1, 2015, UPRC distributed $376 to Prospect as a return of capital. The net proceeds were utilized by UPRC to purchase an 85.0% ownership interest in Michigan Storage, LLC for $10,579, with $42 retained by UPRC for working capital and $49 restricted for future property acquisitions. The JV was purchased for $38,275 which included debt financing and minority interest of $28,705 and $1,867, respectively. The remaining proceeds were used to pay $210 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $2,589 of third party expenses, and $77 for legal services provided by attorneys at Prospect Administration. The investment was subsequently contributed to NPRC.
On September 29, 2014, Prospect made a $22,618 investment in UPRC, of which $19,225 was a Senior Term Loan and $3,393 was used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase a 92.5% ownership interest in Canterbury Green Apartments Holdings, LLC for $22,036, with $582 retained by UPRC for working capital. The JV was purchased for $85,500 which included debt financing and minority interest of $65,825 and $1,787, respectively. The remaining proceeds were used to pay $432 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $2,135 of third party expenses, $82 for legal services provided by attorneys at Prospect Administration, and $1,249 of prepaid assets, with $250 retained by the JV for working capital.
On September 30, 2014 and October 29, 2014, Prospect made a combined $22,688 investment in UPRC, of which $19,290 was a Senior Term Loan and $3,398 was used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase a 66.2% ownership interest in Columbus OH Apartment Holdco, LLC for $21,992 and to pay $241 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $455 retained by UPRC for working capital. The JV was purchased for $114,377 which included debt financing and minority interest of $97,902 and $11,250, respectively. The remaining proceeds were used to pay $440 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $7,711 of third party expenses, $180 for legal services provided by attorneys at Prospect Administration, $6,778 in pre-funded capital expenditures, and $1,658 of prepaid assets.
On October 23, 2014, UPRC transferred its investment in Michigan Storage, LLC to NPRC. As a result, Prospect’s investments in UPRC related to these properties also transferred to NPRC. The investments transferred consisted of $1,281 of equity and $9,444 of debt. There was no gain or loss realized on the transaction.
On November 12, 2014, Prospect made a $669 investment in UPRC, of which $569 was a Senior Term Loan and $100 was used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in South Atlanta Portfolio Holding Company, LLC for $667, with $2 retained by UPRC for working capital. The minority interest holder also invested an additional $53 in the JV. The proceeds were used by the JV to fund $707 of capital expenditures and pay $13 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income).

111

On April 27, 2015, Prospect made a $733 investment in UPRC, of which $623 was a Senior Term Loan and $110 was used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in South Atlanta Portfolio Holding Company, LLC for $731 and pay $2 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $59 in the JV. The proceeds were used by the JV to fund $775 of capital expenditures and pay $15 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income).
On May 19, 2015, Prospect made a $4,730 investment in UPRC, of which $3,926 was a Senior Term Loan and $804 was used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in Columbus OH Apartment Holdco, LLC for $4,658, with $72 retained by UPRC for working capital. The proceeds were used by the JV to fund $4,565 of capital expenditures and pay $93 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income).
On July 9, 2015, Prospect made a $2,044 investment in UPRC, of which $1,738 was a Senior Term Loan and $306 was used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in Canterbury Green Apartment Holdings, LLC for $2042, and pay $2 of legal services provided by attorneys at Prospect Administration. The proceeds were used by the JV to fund $2,167 of capital expenditures and pay $40 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income).
On November 25, 2015, Prospect made a $3,433 investment in UPRC, of which $2,746 was a Senior Term Loan and $687 was used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in Columbus OH Apartment Holdco, LLC for $3,274, and pay $2 of legal services provided by attorneys at Prospect Administration with $158 retained by UPRC for working capital. The proceeds were used by the JV to fund $3,209 of capital expenditures and pay $65 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income).
On March 9, 2016, Prospect made a $777 investment in UPRC used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in South Atlanta Portfolio Holding Company, LLC for $775, and pay $2 of legal services provided by attorneys at Prospect. The minority interest holder also invested an additional $62 in the JVs. The proceeds were used by the JV to fund $836 of capital expenditures.
On March 9, 2016, Prospect made a $1,277 investment in UPRC used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in Canterbury Green Apartments Holdings, LLC for $1,277. The minority interest holder also invested an additional $104 in the JVs. The proceeds were used by the JV to fund $1,381 of capital expenditures.
The following interest payments were accrued and paid by UPRC to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
1,674

Three Months Ended March 31, 2016
1,954

Nine Months Ended March 31, 2015
4,134

Nine Months Ended March 31, 2016
5,774

Included above, the following payment-in-kind interest from UPRC was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
162

Nine Months Ended March 31, 2016
—

The following interest income recognized had not yet been paid by UPRC to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
20

March 31, 2016
21


112

The following net revenue interest payments were paid from UPRC to Prospect and recognized by Prospect as other income:
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
289

Nine Months Ended March 31, 2015
320

Nine Months Ended March 31, 2016
883

The following managerial assistance payments were paid from UPRC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
50

Nine Months Ended March 31, 2015
100

Nine Months Ended March 31, 2016
150

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
50

March 31, 2016
50

The following payments were paid from UPRC to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to UPRC (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
104

Three Months Ended March 31, 2016
300

Nine Months Ended March 31, 2015
177

Nine Months Ended March 31, 2016
518

The following amounts were due from UPRC to Prospect for reimbursement of expenses paid by Prospect on behalf of UPRC and were included by Prospect within other receivables:
June 30, 2015
$
15

March 31, 2016
1

Valley Electric Company, Inc.
Prospect owns 100% of the common stock of Valley Electric Holdings I, Inc. (“Valley Holdings I”), a Consolidated Holding Company. Valley Holdings I owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”), a Consolidated Holding Company. Valley Holdings II owns 94.99% of Valley Electric Company, Inc. (“Valley Electric”), with Valley Electric management owning the remaining 5.01% of the equity. Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc. (“Valley”), a leading provider of specialty electrical services in the state of Washington and among the top 50 electrical contractors in the United States.
On December 31, 2012, Prospect initially invested $52,098 (including 4,141,547 common shares of Prospect at a fair value of $44,650) in exchange for $32,572 was in the form of a senior secured note to Valley Holdings I, a $10,000 senior secured note to Valley (discussed below) and $9,526 to purchase the common stock of Valley Holdings I. The proceeds were partially utilized by Valley Holdings I to purchase 100% of Valley Holdings II common stock for $40,528. The remaining proceeds at Valley Holdings I were used to pay $977 of structuring fees from Valley Holdings I to Prospect (which were recognized by Prospect as structuring fee income), $345 for legal services provided by attorneys at Prospect Administration and $248 was retained by Valley Holdings I for working capital. The $40,528 of proceeds received by Valley Holdings II were subsequently used to purchase 96.3% of Valley’s common stock. Valley management provided a $1,500 co-investment in Valley.

113

On December 31, 2012, Prospect invested $10,000 (as mentioned above) into Valley in the form of senior secured debt. Total proceeds of $52,028 received by Valley (including $42,028 equity investment mentioned above) were used to purchase the equity of Valley from third-party sellers for $45,650, pay $4,628 of third-party transaction expenses (including bonuses to Valley’s management of $2,320), pay $250 from Valley to Prospect (which were recognized by Prospect as structuring fee income) and $1,500 was retained by Valley for working capital.
On June 24, 2014, Valley Holdings II and management of Valley formed Valley Electric and contributed their shares of Valley stock to Valley Electric. Valley management made an additional equity investment in Valley Electric, reducing our ownership to 94.99%. Prospect made a new $20,471 senior secured loan to Valley Electric. Valley Electric then distributed this amount to Valley Holdings I, via Valley Holdings II, as a return of capital which was used to pay down the senior secured note of Valley Holdings I by the same amount. The remaining principal amount of the senior secured note, $16,754, was then contributed to the capital of Valley Holdings I.
On July 1, 2014, Prospect began consolidating Valley Holdings I and Valley Holdings II. As a result, any transactions between Valley Holdings I, Valley Holdings II and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
The following interest payments were accrued and paid from Valley Electric to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
972

Three Months Ended March 31, 2016
1,076

Nine Months Ended March 31, 2015
2,906

Nine Months Ended March 31, 2016
3,160

Included above, the following payment-in-kind interest from Valley Electric was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
454

Three Months Ended March 31, 2016
350

Nine Months Ended March 31, 2015
1,335

Nine Months Ended March 31, 2016
1,307

The following interest income recognized had not yet been paid by Valley Electric to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
11

March 31, 2016
12

The following interest payments were accrued and paid from Valley to Prospect and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
268

Three Months Ended March 31, 2016
277

Nine Months Ended March 31, 2015
812

Nine Months Ended March 31, 2016
835

Included above, the following payment-in-kind interest from Valley was capitalized and recognized by Prospect as interest income:
Three Months Ended March 31, 2015
$
64

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
194

Nine Months Ended March 31, 2016
90


114

The following interest income recognized had not yet been paid by Valley to Prospect and was included by Prospect within interest receivable:
June 30, 2015
$
3

March 31, 2016
3

The following managerial assistance payments were paid from Valley to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):
Three Months Ended March 31, 2015
$
75

Three Months Ended March 31, 2016
75

Nine Months Ended March 31, 2015
225

Nine Months Ended March 31, 2016
225

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:
June 30, 2015
$
75

March 31, 2016
75

The following payments were paid from Valley Electric to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Valley Electric (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):
Three Months Ended March 31, 2015
$
—

Three Months Ended March 31, 2016
—

Nine Months Ended March 31, 2015
18

Nine Months Ended March 31, 2016
9

The following amounts were due from Valley Electric to Prospect for reimbursement of expenses paid by Prospect on behalf of Valley Electric and were included by Prospect within other receivables:
June 30, 2015
$
—

March 31, 2016
3

Vets Securing America, Inc.
As of June 30, 2014, Prospect owned 100% of the equity of Vets Securing America, Inc. (“VSA”) and 100% of the equity of The Healing Staff, Inc. (“THS”), a former wholly-owned subsidiary of ESA Environmental Specialists, Inc. (“ESA”). During the year ended June 30, 2015, THS ceased operations and the VSA management team supervised both the continued operations of VSA and the wind-down of activities at THS. VSA provides out-sourced security guards staffing.
As of July 1, 2011, the cost basis of Prospect’s investment in THS and VSA, including debt and equity, was $18,219. During the year ended June 30, 2012, Prospect made follow-on secured debt investments of $1,033 to support the ongoing operations of THS and VSA. In October 2011, Prospect sold a building previously acquired from ESA for $894. In January 2012, Prospect received $2,250 of litigation settlement proceeds related to ESA. The proceeds from both of these transactions were used to reduce the outstanding loan balances due from THS and VSA by $3,144. In June 2012, THS and VSA repaid $118 and $42, respectively, of loans previously outstanding.
In May 2012, in connection with the implementation of accounts receivable based funding programs for THS and VSA with a third party provider, Prospect agreed to subordinate its first priority security interest in all of the accounts receivable and other assets of THS and VSA to the third party provider of that accounts receivable based funding.
During the year ended June 30, 2013, Prospect determined that our investment in THS and VSA was impaired and recorded a realized loss of $12,117, reducing the amortized cost to $3,831. During the year ended June 30, 2014, Prospect received $5,825 of legal cost reimbursement related to the ESA litigation settlement which had been expensed in prior years. The proceeds were recognized by Prospect as other income during the year ended June 30, 2014. During the year ended June 30, 2015, Prospect received $685 related to the ESA litigation settlement which was recognized as realized gain.

115

On May 20, 2015, Prospect made a new $100 secured promissory note to provide liquidity to VSA.
As of June 30, 2014, THS and VSA were joint borrowers on the secured promissory notes. On June 5, 2015, Prospect sold its equity investment in VSA and realized a net loss of $975 on the sale. In connection with the sale, VSA was released as a borrower on the secured promissory notes, leaving THS as the sole borrower. During the year ended June 30, 2015, THS ceased operations and Prospect recorded a realized loss of $2,956, reducing the amortized cost to zero.
Wolf Energy, LLC
Prospect owns 100% of the equity of Wolf Energy Holdings Inc. (“Wolf Energy Holdings”), a Consolidated Holding Company. Wolf Energy Holdings owns 100% of each of Appalachian Energy LLC (f/k/a Appalachian Energy Holdings, LLC) (“AEH”); Coalbed, LLC (“Coalbed”); and Wolf Energy, LLC (“Wolf Energy”). AEH owns 100% of C&S Operating, LLC.
Wolf Energy Holdings is a holding company formed to hold 100% of the outstanding membership interests of each of AEH and Coalbed. The membership interests and associated operating company debt of AEH and Coalbed, which were previously owned by Manx Energy, Inc. (“Manx”), were assigned to Wolf Energy Holdings effective June 30, 2012. The purpose of assignment was to remove those activities from Manx deemed non-core by the Manx convertible debt investors who were not interested in funding those operations. On June 30, 2012, AEH and Coalbed loans with a cost basis of $7,991 were assigned by Prospect to Wolf Energy Holdings from Manx.
In addition, effective June 29, 2012, C&J Cladding Holding Company, Inc. (“C&J Holdings”) merged with and into Wolf Energy Holdings, with Wolf Energy Holdings as the surviving entity. At the time of the merger, C&J Holdings held the remaining undistributed proceeds in cash from the sale of its membership interests in C&J Cladding, LLC (“C&J”) (discussed below). The merger was effectuated in connection with the broader simplification of Prospect’s energy investment holdings.
On June 1, 2012, Prospect sold the membership interests in C&J for $5,500. Proceeds from the sale were used to pay a $3,000 distribution to Prospect ($580 reduction in cost basis and $2,420 realized gain recognized by Prospect), an advisory fee of $1,500 from C&J to Prospect (which was recognized by Prospect as other income) and $978 was retained by C&J as working capital to pay $22 of legal services provided by attorneys at Prospect Administration and third-party expenses.
On February 27, 2013, Prospect made a $50 senior secured debt investment senior secured to East Cumberland, L.L.C., a former wholly-owned subsidiary of AEH with AEH as guarantor. Proceeds were used to pay off vendors.
On April 15, 2013, Prospect foreclosed on the assets of H&M Oil & Gas, LLC (“H&M”). At the time of foreclosure, H&M was in default on loans receivables due to Prospect with a cost basis of $64,449. The assets previously held by H&M were assigned by Prospect to Wolf Energy in exchange for a $66,000 term loan secured by the assets. The cost basis in this loan of $44,632 was determined in accordance with ASC 310-40, Troubled Debt Restructurings by Creditors , and was equal to the fair value of assets at the time of transfer resulting in a capital loss of $19,647 in connection with the foreclosure on the assets. On May 17, 2013, Wolf Energy sold the assets located in Martin County, which were previously held by H&M, for $66,000. Proceeds from the sale were primarily used to repay the loan, accrued interest and net profits interest receivable due to us resulting in a realized capital gain of $11,826 offsetting the previously recognized loss. Prospect received $3,960 of structuring and advisory fees from Wolf Energy during the year ended June 30, 2013 related to the sale and $991 under the net profits interest agreement which was recognized as other income during the fiscal year ended June 30, 2013.
On July 1, 2014, Prospect began consolidating Wolf Energy Holdings. As a result, any transactions between Wolf Energy Holdings and Prospect are eliminated in consolidation and as such, transactions after July 1, 2014 are not presented below.
During the three months ended September 30, 2014, Prospect determined that our investment in AEH was impaired and recorded a realized loss of $2,050, reducing the amortized cost to zero. On November 21, 2014, Coalbed merged with and into Wolf Energy, with Wolf Energy as the surviving entity. During the three months ended December 31, 2014, Prospect determined that our investment in the Coalbed debt assumed by Wolf Energy was impaired and recorded a realized loss of $5,991, reducing the amortized cost to zero.
During the year ended June 30, 2015, Wolf Energy Holdings received a tax refund of $173 related to its investment in C&J and Prospect realized a gain of the same amount.
The following managerial assistance recognized had not yet been paid by Wolf Energy to Prospect and was included by Prospect within other receivables and due to Prospect Administration:
June 30, 2015
$
—

March 31, 2016
14


116

Note 15. Litigation
From time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to intellectual property, employment, tax, regulation, contract or other matters. The resolution of such matters as may arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any material legal proceedings as of March 31, 2016 . Our Investment Adviser and Administrator have been named as defendants in a lawsuit filed on April 21, 2016 by a purported shareholder of Prospect in the United States District Court for the Southern District of New York under the caption Paskowitz v. Prospect Capital Management and Prospect Administration. The complaint alleges that the defendants received purportedly excessive management and administrative services fees from us in violation of Section 36(b) of the 1940 Act. The plaintiff seeks to recover on behalf of us damages in an amount not specified in the complaint. The defendants have informed us that they believe the complaint is without merit and intend to defend themselves vigorously against the plaintiff’s claims. We believe that the lawsuit is not likely to have a material adverse effect on Prospect.
Note 16. Financial Highlights
The following is a schedule of financial highlights for the three and nine months ended March 31, 2016 and March 31, 2015 :
Three Months Ended
March 31,
Nine Months Ended
March 31,
2016
2015
2016
2015
Per Share Data
Net asset value at beginning of period
$
9.65

$
10.35

$
10.31

$
10.56

Net investment income(1)
0.25

0.24

0.79

0.78

Net realized (loss) gain(1)
(0.03
)
0.01

(0.05
)
(0.44
)
Net change in unrealized (depreciation) appreciation on investments(1)
—

(0.02
)
(0.71
)
0.37

Dividends to shareholders
(0.25
)
(0.28
)
(0.75
)
(0.94
)
Common stock transactions(2)
(0.01
)
—

0.02

(0.03
)
Net asset value at end of period
$
9.61

$
10.30

$
9.61

$
10.30

Per share market value at end of period
$
7.27

$
8.45

$
7.27

$
8.45

Total return based on market value(3)
8.25
%
5.97
%
9.62
%
(11.98
%)
Total return based on net asset value(3)
3.50
%
3.09
%
3.58
%
8.00
%
Shares of common stock outstanding at end of period
356,113,777

358,661,441

356,113,777

358,661,441

Weighted average shares of common stock outstanding
355,779,088

358,449,304

355,994,927

351,922,217

Ratios/Supplemental Data




Net assets at end of period
$
3,422,416

$
3,694,588

$
3,422,416

$
3,694,588

Portfolio turnover rate
0.38
%
1.65
%
10.86
%
15.95
%
Annualized ratio of operating expenses to average net assets
11.89
%
11.23
%
12.01
%
11.60
%
Annualized ratio of net investment income to average net assets
10.23
%
9.45
%
10.53
%
9.93
%


117

The following is a schedule of financial highlights for each of the five years ended in the period ended June 30, 2015:
Year Ended June 30,
2015
2014
2013
2012
2011
Per Share Data
Net asset value at beginning of year
$
10.56

$
10.72

$
10.83

$
10.36

$
10.30

Net investment income(1)
1.03

1.19

1.57

1.63

1.10

Net realized losses (gains) on investments(1)
(0.51
)
(0.01
)
(0.13
)
0.32

0.19

Net change in unrealized appreciation (depreciation) on investments(1)
0.47

(0.12
)
(0.37
)
(0.28
)
0.09

Net realized losses on extinguishment of debt(1)
(0.01
)
—

—

—

—

Dividends to shareholders
(1.19
)
(1.32
)
(1.28
)
(1.22
)
(1.21
)
Common stock transactions(2)
(0.04
)
0.10

0.10

0.02

(0.11
)
Net asset value at end of year
$
10.31

$
10.56

$
10.72

$
10.83

$
10.36

Per share market value at end of year
$
7.37

$
10.63

$
10.80

$
11.39

$
10.11

Total return based on market value(3)
(20.84
%)
10.88
%
6.24
%
27.21
%
17.22
%
Total return based on net asset value(3)
11.47
%
10.97
%
10.91
%
18.03
%
12.54
%
Shares of common stock outstanding at end of year
359,090,759

342,626,637

247,836,965

139,633,870

107,606,690

Weighted average shares of common stock outstanding
353,648,522

300,283,941

207,069,971

114,394,554

85,978,757

Ratios/Supplemental Data




Net assets at end of year
$
3,703,049

$
3,618,182

$
2,656,494

$
1,511,974

$
1,114,357

Portfolio turnover rate
25.32
%
15.21
%
29.24
%
29.06
%
27.63
%
Annualized ratio of operating expenses to average net assets
11.70
%
11.11
%
11.50
%
10.73
%
8.47
%
Annualized ratio of net investment income to average net assets
9.91
%
11.18
%
14.86
%
14.92
%
10.60
%
(1)
Per share data amount is based on the weighted average number of common shares outstanding for the period presented (except for dividends to shareholders which is based on actual rate per share).
(2)
Common stock transactions include the effect of our issuance of common stock in public offerings (net of underwriting and offering costs), shares issued in connection with our dividend reinvestment plan, shares issued to acquire investments and repurchases of common stock below net asset value pursuant to our Repurchase Program.
(3)
Total return based on market value is based on the change in market price per share between the opening and ending market prices per share in each period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in each period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. For periods less than a year, the return is not annualized.

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Note 17. Selected Quarterly Financial Data (Unaudited)
The following table sets forth selected financial data for each quarter within the three years ending June 30, 2016 .
Investment Income
Net Investment Income
Net Realized and Unrealized Gains (Losses)
Net Increase (Decrease) in
Net Assets from Operations
Quarter Ended
Total
Per Share(1)
Total
Per Share(1)
Total
Per Share(1)
Total
Per Share(1)
September 30, 2013
161,034

0.62

82,337

0.32

(2,437
)
(0.01
)
79,900

0.31

December 31, 2013
178,090

0.62

92,215

0.32

(6,853
)
(0.02
)
85,362

0.30

March 31, 2014
190,327

0.60

98,523

0.31

(16,422
)
(0.05
)
82,101

0.26

June 30, 2014
182,840

0.54

84,148

0.25

(12,491
)
(0.04
)
71,657

0.21

September 30, 2014
202,021

0.59

94,463

0.28

(10,355
)
(0.04
)
84,108

0.24

December 31, 2014
198,883

0.56

91,325

0.26

(5,355
)
(0.02
)
85,970

0.24

March 31, 2015
191,350

0.53

87,441

0.24

(5,949
)
(0.01
)
81,492

0.23

June 30, 2015
198,830

0.55

89,518

0.25

5,251

0.01

94,769

0.26

September 30, 2015
200,251

0.56

91,242

0.26

(63,425
)
(0.18
)
27,817

0.08

December 31, 2015
209,191

0.59

100,893

0.28

(196,013
)
(0.55
)
(95,120
)
(0.27
)
March 31, 2016
189,493

0.53

87,626

0.25

(12,118
)
(0.03
)
75,508

0.21

(1)
Per share amounts are calculated using the weighted average number of common shares outstanding for the period presented. As such, the sum of the quarterly per share amounts above will not necessarily equal the per share amounts for the fiscal year.
Note 18. Subsequent Events
During the period from April 1, 2016 through May 10, 2016 , we made four follow-on investments in NPRC totaling $39,504 to support our online consumer lending initiative. We invested $5,926 of equity through NPH and $33,578 of debt directly to ACL Loan Holdings, Inc. (“ACL”), a wholly-owned subsidiary of NPRC. In addition, during this period, we received a partial repayment of $11,800 ACL loan previously outstanding.

On April 6, 2016, we received partial repayments from APRC of $2,973 for our loans previously outstanding.

On April 6, 2016, we received partial repayments from UPRC of $7,567 for our loans previously outstanding.

On April 11, 2016, we announced the then current conversion rate on the 2020 Notes as 80.6670 shares of common stock per
$1 principal amount of the 2020 Notes converted, which is equivalent to a conversion price of approximately $12.40.

On April 16, 2016, we announced the then current conversion rate on the 2017 Notes as 87.7516 shares of common stock per
$1 principal amount of the 2017 Notes converted, which is equivalent to a conversion price of approximately $11.40.

On April 29, 2016, we invested an additional $25,000 of Senior Secured Term Loan A and an additional $25,000 of Senior Secured Term Loan B debt investments in Trinity Services Group, Inc. (“Trinity”).

On April 29, 2016, through our delayed draw term loan commitment with Instant Web, LLC, we funded $8,000 of Senior Secured Term Loan A and $8,000 of Senior Secured Term Loan B.

During the period from May 3, 2016 through May 10, 2016, we collectively sold 72.10% of the outstanding principal balance of the Senior Secured Term Loan A investment in Trinity for $25,000. There was no gain or loss realized on the sale.

During the period from April 1, 2016 through May 10, 2016 , our wholly-owned subsidiary PSBL purchased $5,555 of small business whole loans from OnDeck.

During the period from April 1, 2016 through May 10, 2016 we issued $4,451 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $4,395. In addition, we sold $953 in aggregate principal amount of our Prospect Capital
InterNotes® for net proceeds of $941 with expected closing on May 12, 2016.

On May 9, 2016, we announced the declaration of monthly dividends in the following amounts and with the following dates:
•
$0.08333 per share for May 2016 to holders of record on May 31, 2016 with a payment date of June 23, 2016;

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•
$0.08333 per share for June 2016 to holders of record on June 30, 2016 with a payment date of July 21, 2016;
•
$0.08333 per share for July 2016 to holders of record on July 29, 2016 with a payment date of August 18, 2016; and
•
$0.08333 per share for August 2016 to holders of record on August 31, 2016 with a payment date of September 22, 2016.

120

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(All figures in this item are in thousands except share, per share and other data.)
The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report. In addition to historical information, the following discussion and other parts of this Annual Report contain forward-looking information that involves risks and uncertainties. Our actual results may differ significantly from any results expressed or implied by these forward-looking statements due to the factors discussed in Part II, “Item 1A. Risk Factors” and “Forward-Looking Statements” appearing elsewhere herein.
Overview
The terms “Prospect,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise.

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

On May 15, 2007, we formed a wholly-owned subsidiary Prospect Capital Funding LLC (“PCF”), a Delaware limited liability company and a bankruptcy remote special purpose entity, which holds certain of our portfolio loan investments that are used as collateral for the revolving credit facility at PCF. Our wholly-owned subsidiary Prospect Small Business Lending, LLC (“PSBL”) was formed on January 27, 2014 and purchases small business whole loans on a recurring basis from online small business loan originators, including On Deck Capital, Inc. (“OnDeck”). On September 30, 2014, we formed a wholly-owned subsidiary Prospect Yield Corporation, LLC (“PYC”) and effective October 23, 2014, PYC holds our investments in collateralized loan obligations (“CLOs”). Each of these subsidiaries have been consolidated since operations commenced.
Effective July 1, 2014, we began consolidating certain of our wholly-owned and substantially wholly-owned holding companies formed by us in order to facilitate our investment strategy. The following companies have been included in our consolidated financial statements since July 1, 2014: AMU Holdings Inc.; APH Property Holdings, LLC; Arctic Oilfield Equipment USA, Inc.; CCPI Holdings Inc.; CP Holdings of Delaware LLC; Credit Central Holdings of Delaware, LLC; Energy Solutions Holdings Inc.; First Tower Holdings of Delaware LLC; Harbortouch Holdings of Delaware Inc.; MITY Holdings of Delaware Inc.; Nationwide Acceptance Holdings LLC; NMMB Holdings, Inc.; NPH Property Holdings, LLC (“NPH”); STI Holding, Inc.; UPH Property Holdings, LLC; Valley Electric Holdings I, Inc.; Valley Electric Holdings II, Inc.; and Wolf Energy Holdings Inc. On October 10, 2014, concurrent with the sale of the operating company, our ownership increased to 100% of the outstanding equity of ARRM Services, Inc. (“ARRM”) which was renamed SB Forging Company, Inc. (“SB Forging”). As such, we began consolidating SB Forging on October 11, 2014. We collectively refer to these entities as the “Consolidated Holding Companies.”
We are externally managed by our investment adviser, Prospect Capital Management L.P. (“Prospect Capital Management” or the “Investment Adviser”). Prospect Administration LLC (“Prospect Administration” or the “Administrator”), a wholly-owned subsidiary of the Investment Adviser, provides administrative services and facilities necessary for us to operate.
Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. We invest primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. We work with the management teams or financial sponsors to seek investments with historical cash flows, asset collateral or contracted pro-forma cash flows.
We currently have nine origination strategies in which we make investments: (1) lending in private equity sponsored transactions, (2) lending directly to companies not owned by private equity firms, (3) control investments in corporate operating companies, (4) control investments in financial companies, (5) investments in structured credit, (6) real estate investments, (7) investments in syndicated debt, (8) aircraft leasing and (9) online lending. We continue to evaluate other origination strategies in the ordinary course of business with no specific tops-down allocation to any single origination strategy.
Lending in Private Equity Sponsored Transactions – We make loans to companies which are controlled by leading private equity firms. This debt can take the form of first lien, second lien, unitranche or unsecured loans. In making these investments, we look for a diversified customer base, recurring demand for the product or service, barriers to entry, strong historical cash flow and experienced management teams. These loans typically have significant equity subordinate to our loan position. Historically, this strategy has comprised approximately 50%-60% of our business, but more recently it is less than 50% of our business.

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Lending Directly to Companies – We provide debt financing to companies owned by non-private equity firms, the company founder, a management team or a family. Here, in addition to the strengths we look for in a sponsored transaction, we also look for the alignment with the management team with significant invested capital. This strategy often has less competition than the private equity sponsor strategy because such company financing needs are not easily addressed by banks and often require more diligence preparation. Direct lending can result in higher returns and lower leverage than sponsor transactions and may include warrants or equity to us. Historically, this strategy has comprised approximately 5%-15% of our business, but more recently it is less than 5% of our business.
Control Investments in Corporate Operating Companies – This strategy involves acquiring controlling stakes in non-financial operating companies. Our investments in these companies are generally structured as a combination of yield-producing debt and equity.  We provide enhanced certainty of closure to our counterparties, give the seller personal liquidity and generally look for management to continue on in their current roles. This strategy has comprised approximately 10%-15% of our business.
Control Investments in Financial Companies – This strategy involves acquiring controlling stakes in financial companies, including consumer direct lending, sub-prime auto lending and other strategies. Our investments in these companies are generally structured as a combination of yield-producing debt and equity. These investments are often structured in a tax-efficient RIC-compliant partnership, enhancing returns. This strategy has comprised approximately 5%-15% of our business.
Investments in Structured Credit – We make investments in CLOs, generally taking a significant position in the subordinated interests (equity) of the CLOs. The CLOs include a diversified portfolio of broadly syndicated loans and do not have direct exposure to real estate, mortgages, debt or consumer based debt. The CLOs in which we invest are managed by top-tier collateral managers that have been thoroughly diligenced prior to investment. This strategy has comprised approximately 10%-20% of our business.
Real Estate Investments – We make investments in real estate through our three wholly-owned tax-efficient real estate investment trusts (“REITs”), American Property REIT Corp. (“APRC”), National Property REIT Corp. (“NPRC”) and United Property REIT Corp. (“UPRC” and collectively with APRC and NPRC, “our REITs”). Our real estate investments are in various classes of fully developed and occupied real estate properties that generate current yields. We seek to identify properties that have historically high occupancy and steady cash flow generation. Our REITs co-invest with established and experienced property managers that manage such properties after acquisition. This investment strategy has comprised approximately 5%-10% of our business.
Investments in Syndicated Debt – On an opportunistic basis, we make investments in loans and high yield bonds that have been sold to a syndicate of buyers. Here we look for investments with attractive risk-adjusted returns after we have completed a fundamental credit analysis. These investments are purchased with a long term, buy-and-hold outlook and we look to provide significant structuring input by providing anchoring orders. This strategy has comprised approximately 5%-10% of our business.
Aircraft Leasing – We invest debt as well as equity in aircraft assets subject to commercial leases to credit-worthy airlines across the globe. These investments present attractive return opportunities due to cash flow consistency from long-lived assets coupled with hard asset collateral. We seek to deliver risk-adjusted returns with strong downside protection by analyzing relative value characteristics across the spectrum of aircraft types of all vintages. Our target portfolio includes both in-production and out-of-production jet and turboprop aircraft and engines, operated by airlines across the globe. This strategy comprised approximately 1% of our business in the fiscal year ended June 30, 2015 and approximately 1% as of March 31, 2016 .
Online Lending – We make investments in loans originated by certain consumer loan and small and medium sized business (“SME”) aggregators. We purchase each loan in its entirety (i.e., a “whole loan”). The borrowers are consumers and SMEs. The loans are typically serviced by the aggregators of the loans. This strategy comprised approximately 5% of our business in the fiscal year ended June 30, 2015 and approximately 5% as of March 31, 2016 .
We invest primarily in first and second lien secured loans and unsecured debt, which in some cases includes an equity component. First and second lien secured loans generally are senior debt instruments that rank ahead of unsecured debt of a given portfolio company. These loans also have the benefit of security interests on the assets of the portfolio company, which may rank ahead of or be junior to other security interests. Our investments in CLOs are subordinated to senior loans and are generally unsecured. We invest in debt and equity positions of CLOs which are a form of securitization in which the cash flows of a portfolio of loans are pooled and passed on to different classes of owners in various tranches. Our CLO investments are derived from portfolios of corporate debt securities which are generally risk rated from BB to B.

122

We hold many of our control investments in a two-tier structure consisting of a holding company and one or more related operating companies for tax purposes. These holding companies serve various business purposes including concentration of management teams, optimization of third party borrowing costs, improvement of supplier, customer, and insurance terms, and enhancement of co-investments by the management teams. In these cases, our investment in the holding company, generally as equity, its equity investment in the operating company and along with any debt from us directly to the operating company structure represents our total exposure for the investment. As of March 31, 2016 , as shown in our Consolidated Schedule of Investments, the cost basis and fair value of our investments in controlled companies was $1,959,243 and $1,998,023 , respectively. This structure gives rise to several of the risks described in our public documents and highlighted elsewhere in this Quarterly Report. On July 1, 2014, we began consolidating all wholly-owned and substantially wholly-owned holding companies formed by us for the purpose of holding our controlled investments in operating companies. There were no significant effects of consolidating these holding companies as they hold minimal assets other than their investments in the controlled operating companies. Investment company accounting prohibits the consolidation of any operating companies.
Third Quarter Highlights
Investment Transactions
We seek to be a long-term investor with our portfolio companies. During the three months ended March 31, 2016 , we completed follow-on investments in existing portfolio companies totaling approximately $17,099 , funded $2,742 of revolver advances, and recorded paid in kind (“PIK”) interest of $3,335 , resulting in gross investment originations of $23,176 . During the three months ended March 31, 2016 , we received full repayments on one investment and received several partial prepayments and amortization payments totaling $163,641 , including realized losses totaling $ 10,784 . The more significant of these transactions are discussed in “Portfolio Investment Activity.”
Debt Issuances and Redemptions
During the three months ended March 31, 2016 , we issued $ 5,573 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $ 5,503 . These notes were issued with stated interest rates ranging from 5.38% to 5.50% with a weighted average interest rate of 5.41% . These notes mature between January 15, 2021 and March 15, 2021 . The following table summarizes the Prospect Capital InterNotes® issued during the three months ended March 31, 2016 .
Tenor at
Origination
(in years)
Principal
Amount
Interest Rate
Range
Weighted
Average
Interest Rate
Maturity Date Range
5
$
5,573

5.375%–5.500%
5.41
%
January 15, 2021 – March 15, 2021
$
5,573

During the three months ended March 31, 2016 , we repaid $ 1,163 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended March 31, 2016 was $ 32 .
On March 28, 2016, we repurchased $500 aggregate principal amount of the 2017 Notes at a price of 98.25, including commissions. The transaction resulted in our recognizing a $9 gain, excluding the $4 write-off of deferred financing costs associated with the repurchase, for the three months ended March 31, 2016.
Equity Issuances
On January 21, 2016 , February 18, 2016 and March 24, 2016 , we issued 299,423 , 255,743 and 146,899 shares of our common stock in connection with the dividend reinvestment plan, respectively.
On February 9, 2016, we amended our dividend reinvestment plan that already provides for reinvestment of our dividends or distributions on behalf of our stockholders, unless a stockholder elects to receive cash, to add the ability of stockholders to purchase additional shares by making optional cash investments.  Under the revised dividend reinvestment and direct stock repurchase plan, stockholders may elect to purchase additional shares through our transfer agent in the open market or in negotiated transactions.

123

Affiliate Share Purchases
During three months ended March 31, 2016 , Prospect Capital officers purchased 8,454,796 shares of our stock, or 2.4% of total outstanding shares as of March 31, 2016 , both through the open market transactions and shares issued in connection with our dividend reinvestment plan.
“Spin-Offs” of Certain Business Strategies
We previously announced that we intend to unlock value by “spinning off” certain “pure play” business strategies to our shareholders. We desire through these transactions to (i) transform some of the business strategies we have successfully grown and developed inside Prospect into pure play public companies with the potential for increased earnings multiples, (ii) allow for continued revenue and earnings growth through more flexible non-BDC formats (which are expected to benefit from not having one or more of the (a) 30% basket, (b) leverage, and (c) control basket constraining BDCs, and (iii) free up our 30% basket and leverage capacity for new originations at Prospect. The business strategies we intend to enable our shareholders to participate in on a “pure play” basis have grown faster than our overall growth rate in the past few years, with outlets in less constricting structures required to continue this strong growth. We anticipate these non-BDC companies will have tax efficient structures.
We initially intend to focus our “spin-off” efforts on the launch of up to three separate companies owning portions of our (i) consumer online lending business, (ii) real estate business and (iii) structured credit business. We are seeking to divest these businesses in conjunction with rights offering capital raises in which existing Prospect shareholders could elect to participate in each offering or sell their rights. The goals of these “spin-offs” include leverage and earnings neutrality for Prospect. Our primary objective is to maximize the valuation of each offering (declining to proceed with any offering if we find any valuation not to be attractive).
The sizes and likelihood of these dispositions, some of which are expected to be partial rather than complete spin-offs, remain to be determined, but we currently expect the collective size of these three dispositions to be 10% or less of our asset base. We seek to complete these “spin-offs” in calendar year 2016 or 2017 in a sequential fashion. The consummation of any of the spin-offs depends upon, among other things: market conditions, regulatory and exchange listing approval, and sufficient investor demand, and there can be no guarantee that we will consummate any of these spin-offs.
On March 11, 2015, PYC filed a registration statement with the SEC in connection with our rights offering disposition of a portion of our structured credit business, and PYC filed an amendment on April 17, 2015. We are a selling stockholder under the registration statement. If favorable market conditions exist, we will seek but cannot guarantee consummation of this disposition, which is subject to regulatory review.
On May 6, 2015, Prospect Finance Company, LLC (“Prospect Finance”), our indirect wholly-owned subsidiary, filed a confidential registration statement with the SEC in connection with our rights offering disposition of our online consumer lending business, and Prospect Finance filed confidential amendments on June 16, July 20 and August 12, 2015. We are a selling stockholder under the registration statement. If favorable market conditions exist, we will seek but cannot guarantee consummation of this disposition, which is subject to regulatory review.
On May 6, 2015, Prospect Realty Income Trust Corp. (“Prospect Realty”), our wholly-owned subsidiary, filed a confidential registration statement with the SEC in connection with our rights offering disposition of a portion of our real estate business, and Prospect Realty filed confidential amendments on June 30, July 27 and August 12, 2015. We are a selling stockholder under the registration statement. If favorable market conditions exist, we will seek but cannot guarantee consummation of this disposition, which is subject to regulatory review.
On May 19, 2015, Prospect, Prospect Capital Management, PYC, Prospect Finance and Prospect Realty filed an application for an exemptive order authorizing a joint transaction that may otherwise be prohibited by Section 57(a)(4) of the 1940 Act in order to complete each of the rights offerings described above and, on October 2, 2015, an amended and restated application for the exemptive order was filed in response to comments from the SEC. There is no guarantee that the SEC will grant the relief requested in the exemptive order application.

We expect to continue as a BDC in the future to pursue our multi-line origination strategy (including continuing to invest in the businesses discussed above) as a value-added differentiating factor compared with other BDCs.
Investment Holdings
As of March 31, 2016 , we continue to pursue our investment strategy. At March 31, 2016 , approximately $6,005,105 , or 175.5% , of our net assets are invested in 125 long-term portfolio investments and CLOs.

124

During the nine months ended March 31, 2016 , we originated $685,064 of new investments, primarily composed of $360,863 of debt and equity financing to non-controlled portfolio investments, $227,581 of debt and equity financing to controlled investments, and $96,620 of subordinated notes in CLOs. Our origination efforts are focused primarily on secured lending to non-control investments to reduce the risk in the portfolio by investing primarily in first lien loans, though we also continue to close select junior debt and equity investments. Our annualized current yield was 12.7% and 13.4% as of June 30, 2015 and March 31, 2016 , respectively, across all performing interest bearing investments. The increase in our current yield is primarily due to market fluctuations and the resulting decline in our portfolio value. Monetization of equity positions that we hold and loans on non-accrual status are not included in this yield calculation. In many of our portfolio companies we hold equity positions, ranging from minority interests to majority stakes, which we expect over time to contribute to our investment returns. Some of these equity positions include features such as contractual minimum internal rates of returns, preferred distributions, flip structures and other features expected to generate additional investment returns, as well as contractual protections and preferences over junior equity, in addition to the yield and security offered by our cash flow and collateral debt protections.
We are a non-diversified company within the meaning of the 1940 Act. As required by the 1940 Act, we classify our investments by level of control. As defined in the 1940 Act, “Control Investments” are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less, a beneficial ownership of 25% or more of the voting securities of an investee company. Under the 1940 Act, “Affiliate Investments” are defined by a lesser degree of influence and are deemed to exist through the possession outright or via the right to acquire within 60 days or less, beneficial ownership of 5% or more of the outstanding voting securities of another person. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.
As of March 31, 2016 , we own controlling interests in the following portfolio companies: APRC; Arctic Energy Services, LLC (“Arctic Energy”); CCPI Inc. (“CCPI”); CP Energy Services Inc. (“CP Energy”); Credit Central Loan Company, LLC; Echelon Aviation LLC (“Echelon”); Edmentum Ultimate Holdings, LLC (“Edmentum”); First Tower Finance Company LLC (“First Tower Finance”); Freedom Marine Solutions, LLC (“Freedom Marine”); Gulf Coast Machine & Supply Company (“Gulf Coast”); Harbortouch Payments, LLC (“Harbortouch”); MITY, Inc. (“MITY”); NPRC; Nationwide Loan Company LLC (f/k/a Nationwide Acceptance LLC) (“Nationwide”); NMMB, Inc.; R-V Industries, Inc. (“R-V”); UPRC; Valley Electric Company, Inc. (“Valley Electric”); and Wolf Energy, LLC. We also own an affiliated interest in BNN Holdings Corp and Targus International, LLC (“Targus”).
The following shows the composition of our investment portfolio by level of control as of March 31, 2016 and June 30, 2015 :
March 31, 2016
June 30, 2015
Level of Control
Cost
% of Portfolio
Fair Value
% of Portfolio
Cost
% of Portfolio
Fair Value
% of Portfolio
Control Investments
$
1,959,243

31.6
%
$
1,998,023

33.3
%
$
1,894,644

28.9
%
$
1,974,202

29.9
%
Affiliate Investments
10,758

0.2
%
12,088

0.2
%
45,150

0.7
%
45,945

0.7
%
Non-Control/Non-Affiliate Investments
4,238,156

68.2
%
3,994,994

66.5
%
4,619,582

70.4
%
4,589,411

69.4
%
Total Investments
$
6,208,157

100.0
%
$
6,005,105

100.0
%
$
6,559,376

100.0
%
$
6,609,558

100.0
%

125

The following shows the composition of our investment portfolio by type of investment as of March 31, 2016 and June 30, 2015 :
March 31, 2016
June 30, 2015
Type of Investment
Cost
% of Portfolio
Fair Value
% of Portfolio
Cost
% of Portfolio
Fair Value
% of Portfolio
Revolving Line of Credit
$
9,592

0.2
%
$
9,390

0.2
%
$
30,546

0.5
%
$
30,546

0.5
%
Senior Secured Debt
3,224,780

51.9
%
3,089,474

51.4
%
3,617,111

55.1
%
3,533,447

53.5
%
Subordinated Secured Debt
1,171,470

18.9
%
1,152,234

19.2
%
1,234,701

18.8
%
1,205,303

18.2
%
Subordinated Unsecured Debt
75,041

1.2
%
69,817

1.2
%
145,644

2.2
%
144,271

2.2
%
Small Business Loans
20,734

0.3
%
20,774

0.3
%
50,558

0.8
%
50,892

0.8
%
CLO Debt
—

—
%
—

—
%
28,613

0.4
%
32,398

0.5
%
CLO Residual Interest
1,105,379

17.8
%
995,929

16.6
%
1,072,734

16.4
%
1,113,023

16.8
%
Preferred Stock
139,319

2.2
%
81,506

1.4
%
41,047

0.6
%
4,361

0.1
%
Common Stock
295,300

4.8
%
338,682

5.6
%
181,404

2.8
%
164,984

2.5
%
Membership Interest
159,436

2.6
%
169,531

2.8
%
148,192

2.3
%
278,537

4.2
%
Participating Interest(1)
—

—
%
70,543

1.2
%
—

—
%
42,787

0.6
%
Escrow Receivable
5,424

0.1
%
5,431

0.1
%
7,144

0.1
%
5,984

0.1
%
Warrants
1,682

0.0
%
1,794

0.0
%
1,682

0.0
%
3,025

0.0
%
Total Investments
$
6,208,157

100.0
%
$
6,005,105

100.0
%
$
6,559,376

100.0
%
$
6,609,558

100.0
%
(1)
Participating Interest includes our participating equity investments, such as net profits interests, net operating income interests, net revenue interests, and overriding royalty interests.
The following shows our investments in interest bearing securities by type of investment as of March 31, 2016 and June 30, 2015 :
March 31, 2016
June 30, 2015
Type of Investment
Cost
% of Portfolio
Fair Value
% of Portfolio
Cost
% of Portfolio
Fair Value
% of Portfolio
First Lien
$
3,231,630

57.6
%
$
3,096,122

58.0
%
$
3,642,761

58.9
%
$
3,559,097

58.3
%
Second Lien
1,174,212

21.0
%
1,154,976

21.6
%
1,239,597

20.0
%
1,210,199

19.8
%
Unsecured
75,041

1.3
%
69,817

1.3
%
145,644

2.4
%
144,271

2.4
%
Small Business Loans
20,734

0.4
%
20,774

0.4
%
50,558

0.8
%
50,892

0.8
%
CLO Debt
—

—
%
—

—
%
28,613

0.5
%
32,398

0.5
%
CLO Residual Interest
1,105,379

19.7
%
995,929

18.7
%
1,072,734

17.4
%
1,113,023

18.2
%
Total Debt Investments
$
5,606,996

100.0
%
$
5,337,618

100.0
%
$
6,179,907

100.0
%
$
6,109,880

100.0
%

126

The following shows the composition of our investment portfolio by geographic location as of March 31, 2016 and June 30, 2015 :
March 31, 2016
June 30, 2015
Geographic Location
Cost
% of Portfolio
Fair Value
% of Portfolio
Cost
% of Portfolio
Fair Value
% of Portfolio
Canada
$
15,000

0.2
%
$
10,244

0.2
%
$
15,000

0.2
%
$
15,000

0.2
%
Cayman Islands
1,105,379

17.8
%
995,929

16.6
%
1,101,347

16.8
%
1,145,421

17.3
%
France
10,072

0.2
%
9,388

0.2
%
10,145

0.2
%
9,734

0.2
%
MidWest US
685,838

11.0
%
722,597

12.0
%
749,036

11.4
%
767,419

11.6
%
NorthEast US
1,122,733

18.1
%
1,134,149

18.9
%
1,085,569

16.6
%
1,151,510

17.4
%
NorthWest US
42,463

0.7
%
41,720

0.7
%
—

—
%
—

—
%
Puerto Rico
40,615

0.7
%
40,358

0.7
%
40,911

0.6
%
37,539

0.6
%
SouthEast US
1,467,273

23.6
%
1,502,404

25.0
%
1,609,956

24.5
%
1,661,477

25.1
%
SouthWest US
587,135

9.5
%
500,081

8.3
%
762,454

11.6
%
693,138

10.5
%
Western US
1,131,649

18.2
%
1,048,235

17.5
%
1,184,958

18.1
%
1,128,320

17.1
%
Total Investments
$
6,208,157

100.0
%
$
6,005,105

100.1
%
$
6,559,376

100.0
%
$
6,609,558

100.0
%

127

The following shows the composition of our investment portfolio by industry as of March 31, 2016 and June 30, 2015 :
March 31, 2016
June 30, 2015
Industry
Cost
% of Portfolio
Fair Value
% of Portfolio
Cost
% of Portfolio
Fair Value
% of Portfolio
Aerospace & Defense
$
67,834

1.1
%
$
66,352

1.1
%
$
70,860

1.1
%
$
78,675

1.2
%
Business Services
524,512

8.4
%
553,170

9.2
%
646,021

9.8
%
711,541

10.8
%
Chemicals
4,966

0.1
%
4,707

0.1
%
4,963

0.1
%
5,000

0.1
%
Commercial Services
245,262

4.1
%
232,621

3.9
%
245,913

3.8
%
241,620

3.6
%
Construction & Engineering
60,235

1.0
%
31,359

0.5
%
58,837

0.9
%
30,497

0.4
%
Consumer Finance
437,565

7.0
%
471,083

7.8
%
426,697

6.5
%
486,977

7.4
%
Consumer Services
190,022

3.1
%
193,288

3.2
%
190,037

2.9
%
190,216

2.9
%
Diversified Financial Services
117,174

2.0
%
117,134

2.0
%
120,327

1.8
%
119,919

1.8
%
Durable Consumer Products
405,705

6.5
%
406,088

6.8
%
439,172

6.7
%
422,033

6.4
%
Food Products
262,676

4.2
%
257,691

4.3
%
282,185

4.3
%
281,365

4.3
%
Healthcare
290,411

4.7
%
291,987

4.9
%
435,893

6.6
%
434,446

6.6
%
Hotels, Restaurants & Leisure
139,957

2.3
%
139,737

2.3
%
177,748

2.7
%
177,926

2.7
%
Machinery
349

0.0
%
482

0.0
%
376

0.0
%
563

0.0
%
Manufacturing
219,538

3.5
%
178,474

3.0
%
163,380

2.5
%
126,921

1.9
%
Media
330,930

5.3
%
320,589

5.3
%
361,825

5.5
%
350,365

5.3
%
Metal Services & Minerals
9,929

0.2
%
8,204

0.1
%
25,670

0.4
%
23,745

0.4
%
Oil and Gas Production
5,460

0.1
%
6,153

0.1
%
3,000

0.0
%
22

0.0
%
Oil and Gas Services
285,971

4.5
%
164,696

2.7
%
289,803

4.4
%
246,817

3.7
%
Online Lending
362,061

5.5
%
343,576

5.7
%
263,958

4.0
%
260,526

3.9
%
Personal & Nondurable Consumer Products
214,078

3.4
%
180,575

3.0
%
213,796

3.4
%
193,046

2.8
%
Pharmaceuticals
72,889

1.2
%
72,822

1.2
%
74,951

1.1
%
74,588

1.1
%
Property Management
4,160

0.1
%
3,061

0.1
%
5,880

0.1
%
3,814

0.1
%
Real Estate
344,184

5.5
%
468,866

7.8
%
412,080

6.3
%
465,196

7.0
%
Retail
—

—
%
—

—
%
63

0.0
%
260

0.0
%
Software & Computer Services
155,144

2.5
%
153,107

2.5
%
217,429

3.3
%
217,472

3.3
%
Telecommunication Services
4,391

0.1
%
4,296

0.1
%
4,573

0.1
%
4,595

0.1
%
Textiles, Apparel & Luxury Goods
279,755

4.5
%
279,755

4.7
%
252,200

3.8
%
252,200

3.8
%
Transportation
67,620

1.1
%
59,303

1.0
%
70,392

1.1
%
63,792

1.0
%
Subtotal
$
5,102,778

82.0
%
$
5,009,176

83.4
%
$
5,458,029

83.2
%
$
5,464,137

82.6
%
Structured Finance(1)
1,105,379

17.8
%
995,929

16.6
%
1,101,347

16.8
%
1,145,421

17.3
%
Total Investments
$
6,208,157

99.8
%
$
6,005,105

100.0
%
$
6,559,376

100.0
%
$
6,609,558

99.9
%
(1)
Our CLO investments do not have industry concentrations and as such have been separated in the table above.

128

Portfolio Investment Activity
During the nine months ended March 31, 2016 , we acquired $312,479 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $358,968 , funded $6,142 of revolver advances, and recorded PIK interest of $7,475 , resulting in gross investment originations of $685,064 . The more significant of these transactions are briefly described below.
On July 1, 2015, we provided $31,000 of first lien senior secured financing to Intelius, Inc. (“Intelius”), an online information commerce company, of which $30,200 was funded at closing. On August 11, 2015, we made a $13,500 follow-on first lien senior secured debt investment in Intelius, of which $13,000 was funded at closing, to support an acquisition. The $21,500 Term Loan A note bears interest at the greater of 6.5% or Libor plus 5.5% and has a final maturity of July 1, 2020. The $21,500 Term Loan B note bears interest at the greater of 12.5% or Libor plus 11.5% and has a final maturity of July 1, 2020. The $1,500 senior secured revolver, which was not funded at closing, bears interest at 9.5% or Libor plus 8.5% and has a final maturity of July 1, 2016.
On July 23, 2015, we made an investment of $37,969 to purchase 80.73% of the subordinated notes issued by Halcyon Loan Advisors Funding 2015-3 Ltd. in a co-investment transaction with Priority Income Fund, Inc., a closed-end fund managed by an affiliate of Prospect Capital Management.
On August 6, 2015, we provided $92,500 of first lien senior secured debt to support the refinancing of Crosman Corporation (“Crosman”). Concurrent with the refinancing, we received repayment of the $40,000 second lien term loan previously outstanding. The $52,500 Term Loan A note bears interest at the greater of 9.0% or Libor plus 8.7% and interest payment in kind of 4.0%, and has a final maturity of August 5, 2020. The $40,000 Term Loan B note bears interest at the greater of 16.0% or Libor plus 15.7% and interest payment in kind of 4.0%, and has a final maturity of August 5, 2020.
On August 12, 2015, we made an investment of $22,898 to purchase 50.04% of the subordinated notes issued by Octagon Investment Partners XVIII, Ltd.
On August 12, 2015, we sold 780 of our small business whole loans (with a cost of $30,968) purchased from OnDeck to Jefferies Asset Funding LLC for proceeds of $26,619, net of related transaction expenses, and a trust certificate representing a 41.54% interest in the MarketPlace Loan Trust, Series 2015-OD2. We realized a loss of $775 on the sale.
On August 21, 2015, we committed to funding a $16,000 second lien secured investment in Sitel Worldwide Corporation, a provider of customer care outsourcing services. The second lien term loan bears interest at the greater of 10.5% or Libor plus 9.5% and has a final maturity of September 18, 2022.
On September 16, 2015, we made an investment of $26,773 to purchase 75.09% of the subordinated notes issued by Apidos CLO XXII in a co-investment transaction with Priority Income Fund, Inc., a closed-end fund managed by an affiliate of Prospect Capital Management.
On October 2, 2015, we provided $17,500 of first lien senior secured debt to Easy Gardener Products, Inc., a designer, marketer, and manufacturer of branded lawn and garden products. The first lien term loan bears interest at the greater of 10.25% or Libor plus 10.0% and has a final maturity of September 30, 2020.
On October 16, 2015, we made a $37,000 second lien secured debt investment in Universal Fiber Systems, LLC, a manufacturer of custom and specialty fiber products used in high performance applications. The second lien term loan bears interest at the greater of 10.5% or Libor plus 9.5% and has a final maturity of October 2, 2022.
On November 2, 2015, we provided $50,000 of first lien senior secured debt to Coverall North America, Inc. (“Coverall”), a leading franchiser of commercial cleaning businesses. We invested $25,000 in Term Loan A and $25,000 in Term Loan B Notes. Term Loan A bears interest at the greater of 7.0% or Libor plus 6.0% and has a final maturity of November 2, 2020. Term Loan B bears interest at the greater of 12.0% or Libor plus 11.0% and has a final maturity of November 2, 2020. As part of the recapitalization, we received repayment of the $49,600 loan outstanding.
On November 6, 2015, we made a $20,000 second lien secured debt investment in SCS Merger Sub, Inc., a value-added reseller of data center-focused hardware, software and related services. The second lien term loan bears interest at the greater of 10.5% or Libor plus 9.5% and has a final maturity of October 30, 2023.
On November 9, 2015 and December 28, 2015, we made a combined $30,100 million follow-on first lien senior secured debt investment in System One Holdings, LLC (“System One”), to support an acquisition. The first lien term loan bears interest at the greater of 11.25% or Libor plus 10.5% and has a final maturity of November 17, 2020.

129

On December 3, 2015, we provided $245,900 of first lien senior secured debt to Broder Bros., Co (“Broder”)., a leading distributor of imprintable sportswear and accessories in the United States. We invested $122,950 in Term Loan A and $122,950 in Term Loan B Notes. Term Loan A bears interest at the greater of 7.0% or Libor plus 5.75% and has a final maturity of June 3, 2021. Term Loan B bears interest at the greater of 13.50% or Libor plus 12.25% and has a final maturity of June 3, 2021. As part of the recapitalization, we sold $5,000 and received a repayment of $245,900 of the previous loan outstanding. We realized no gain or loss on the sale.
On February 3, 2016, lenders foreclosed on Targus Group International, Inc., and our $21,613 first lien term loan was extinguished and exchanged for 1,262,737 common units representing 12.63% equity ownership in Targus Cayman HoldCo Limited, the parent company of Targus. On February 17, 2016, we provided additional debt financing to support the recapitalization of Targus. As part of the recapitalization, we invested an additional $1,263 in a new senior secured Term Loan A notes and were allocated $3,788 in new senior secured Term Loan B notes. Term Loan A and Term Loan B bear interest payment in kind of 15.0%, and have a final maturity date of December 31, 2019. During the same period, Targus was written-down for tax purposes and a loss of $14,194 was therefore realized for the amount that the amortized cost exceeded the fair value, reducing the amortized cost to $3,479.
During the nine months ended March 31, 2016 , we made 23 follow-on investments in NPRC totaling $180,783 to support the online consumer lending initiative. We invested $31,697 of equity through NPH and $149,086 of debt directly to NPRC and its wholly-owned subsidiaries. We also provided $11,047 of equity financing to NPRC, $9,017 of which was for the acquisition of Orchard Village Apartments, a multi-family property located in Aurora, Illinois, and $2,030 to fund capital expenditures for existing properties.
During the nine months ended March 31, 2016 , we provided $2,268 of equity financing to APRC, and $4,484 debt and and $3,047 of equity financing to UPRC to fund capital expenditures for existing properties.
During the nine months ended March 31, 2016 , our wholly-owned subsidiary PSBL purchased $59,021 of small business whole loans from OnDeck.
During the nine months ended March 31, 2016 , we received full repayments on eleven investments, sold four investments, and received several partial prepayments and amortization payments totaling $955,415 , net of realized losses totaling $18,237 . The more significant of these transactions are briefly described below.
On July 8, 2015, we sold 27.45% of the outstanding principal balance of the senior secured Term Loan A investment in InterDent, Inc. (“Interdent”) for $34,415. We realized no gain or loss on the sale.
On July 24, 2015, TB Corp. repaid the $23,628 loan receivable to us.
On August 7, 2015, Ryan, LLC repaid the $72,701 loan receivable to us.
On September 1, 2015, BNN Holdings Corp. repaid the $42,922 loans receivable to us.
On September 16, 2015, GTP Operations, LLC repaid the $116,411 loan receivable to us.
On September 22, 2015, we sold 19.4% of the outstanding principal balance of the senior secured Term Loan A investment in Instant Web, LLC for $29,447. We realized no gain or loss on the sale.
On September 25, 2015, we sold an additional 8.39% of the total outstanding principal balance of the senior secured Term Loan A investment in InterDent, Inc. for $10,516. We realized no gain or loss on the sale.
On September 25, 2015, Therakos, Inc. repaid the $13,000 loan receivable to us.
On September 30, 2015, we restructured our investment in Arctic Energy. Concurrent with the restructuring, we exchanged our $31,640 senior secured loan and our $20,230 subordinated loan for Class D and Class E equity in Arctic Energy.
On October 9, 2015, BAART Programs, Inc. repaid the $42,866 loans receivable to us.
On October 21, 2015, Aderant North American, Inc. repaid the $7,000 loan receivable to us.
On October 30, 2015, we restructured our investment in CP Energy. Concurrent with the restructuring, we exchanged our $86,965 senior secured loan and $15,924 subordinated loan for Series B Redeemable Preferred Stock in CP Energy.

130

On October 30, 2015, we restructured our investment in Freedom Marine. Concurrent with the restructuring, we exchanged our $32,500 senior secured loans for additional membership interest in Freedom Marine.
On November 16, 2015 and November 25, 2015, we sold our $14,755 debt investment in American Gilsonite Company (“American Gilsonite”). We realized a loss of $4,127 on the sale.
On November 30, 2015, Tolt Solutions, Inc. repaid the $96,382 loan receivable to us.
On December 23, 2015, Stauber Performance Ingredients, Inc. repaid the $16,811 loan receivable to us.
On January 21, 2016, we sold 100% of our CIFC Funding 2011-I, Ltd. Class E and Class D notes (collectively “CIFC”) with a cost basis of $29,004. We realized a gain of $3,911 on the sale.
On March 22, 2016 and March 24, 2016, United Sporting Company, Inc. partially repaid the $17,391 loan receivable to us.
During the three months ended March 31, 2016, we sold our $10,100 debt investment in ICON Health and Fitness, Inc (“ICON”). We realized a loss of $1,053 on the sale.
During the three months ended March 31, 2016, our remaining investment in New Century Transportation, Inc. (“NCT”) was written-off for tax purposes and a loss of $187 was therefore realized.
During the three months ended March 31, 2016, our remaining investment in Wind River Resources Corporation (“Wind River”) was written-off for tax purposes and a loss of $3,000 was therefore realized.
During the nine months ended March 31, 2016 , we received partial repayments of $103,732 of our loans previously outstanding and $12,396 as a return of capital on our equity investment in NPRC.
During the nine months ended March 31, 2016 , we received a partial repayment of $26,730 of our loan previously outstanding with APRC and recorded $11,016 of dividend income from APRC in connection with the sale of its Vista Palma Sola (“Vista”) property.
The following table provides a summary of our investment activity for each quarter within the two years ending June 30, 2016 :
Quarter Ended
Acquisitions(1)
Dispositions(2)
September 30, 2014
714,255

690,194

December 31, 2014
522,705

224,076

March 31, 2015
219,111

108,124

June 30, 2015
411,406

389,168

September 30, 2015
345,743

436,919

December 31, 2015
316,145

354,855

March 31, 2016
23,176

163,641

(1)
Includes investments in new portfolio companies, follow-on investments in existing portfolio companies, refinancings and PIK interest.
(2)
Includes sales, scheduled principal payments, prepayments and refinancings.

131

Investment Valuation
In determining the range of values for debt instruments, except CLOs and debt investments in controlling portfolio companies, management and the independent valuation firm estimated corporate and security credit ratings and identified corresponding yields to maturity for each loan from relevant market data. A discounted cash flow analysis was then prepared using the appropriate yield to maturity as the discount rate, to determine a range of values. In determining the range of values for debt investments of controlled companies and equity investments, the enterprise value was determined by applying earnings before income tax, depreciation and amortization (“EBITDA”) multiples, the discounted cash flow technique, net income and/or book value multiples for similar guideline public companies and/or similar recent investment transactions. For stressed equity investments, a liquidation analysis was prepared. For the private REIT investments, enterprise values were determined based on an average of results from a net asset value analysis of the underlying property investments and a discounted cash flow method utilizing capitalization rates for similar guideline companies and/or similar recent investment transactions.
In determining the range of value for our investments in CLOs, management and the independent valuation firm used a discounted cash flow model. The valuations were accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date. For each CLO security, the most appropriate valuation approach was chosen from alternative approaches to ensure the most accurate valuation for such security. A waterfall engine was used to store the collateral data, generate collateral cash flows from the assets based on various assumptions for the risk factors, distribute the cash flows to the liability structure based on the payment priorities, and discount them back using proper discount rates to expected maturity or call date.
The Board of Directors looked at several factors in determining where within the range to value the asset including: recent operating and financial trends for the asset, independent ratings obtained from third parties, comparable multiples for recent sales of companies within the industry and discounted cash flow models for our investments in CLOs. The composite of all these analyses, applied to each investment, was a total valuation of $6,005,105 .
Our portfolio companies are generally lower middle market companies, outside of the financial sector, with less than $150,000 of annual EBITDA. We believe our market has experienced less volatility than others because we believe there are more buy and hold investors who own these less liquid investments.
Control investments offer increased risk and reward over straight debt investments. Operating results and changes in market multiples can result in dramatic changes in values from quarter to quarter. Significant downturns in operations can further result in our looking to recoveries on sales of assets rather than the enterprise value of the investment. Transactions between our controlled investments and us have been detailed in Note 14 to the accompanying consolidated financial statements. Several control investments in our portfolio are under enhanced scrutiny by our senior management and our Board of Directors and are discussed below.
American Property REIT Corp.
APRC is a Maryland corporation and a qualified REIT for federal income tax purposes. APRC is held for purposes of investing, operating, financing, leasing, managing and selling a portfolio of real estate assets and engages in any and all other activities that may be necessary, incidental, or convenient to perform the foregoing. APRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. APRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity. As of March 31, 2016 , we own 100% of the fully-diluted common equity of APRC.
During the nine months ended March 31, 2016 , we provided $2,268 of equity financing to APRC to fund capital expenditures for existing properties.
As of March 31, 2016 , APRC’s real estate portfolio was comprised of eleven multi-family properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by APRC as of March 31, 2016 . In addition, during the nine months ended March 31, 2016 , we received a partial repayment of $26,730 of our loan previously outstanding and recorded $11,016 of dividend income in connection with the sale of Vista Palma Sola property.

132

No.
Property Name
City
Acquisition Date
Purchase Price
Mortgage Outstanding
1
1557 Terrell Mill Road, LLC
Marietta, GA
12/28/2012
$
23,500

$
14,964

2
Lofton Place, LLC
Tampa, FL
4/30/2013
26,000

20,410

3
Arlington Park Marietta, LLC
Marietta, GA
5/8/2013
14,850

9,650

4
Cordova Regency, LLC
Pensacola, FL
11/15/2013
13,750

11,375

5
Crestview at Oakleigh, LLC
Pensacola, FL
11/15/2013
17,500

13,845

6
Inverness Lakes, LLC
Mobile, AL
11/15/2013
29,600

24,700

7
Kings Mill Pensacola, LLC
Pensacola, FL
11/15/2013
20,750

17,550

8
Plantations at Pine Lake, LLC
Tallahassee, FL
11/15/2013
18,000

14,092

9
Verandas at Rocky Ridge, LLC
Birmingham, AL
11/15/2013
15,600

10,205

10
Plantations at Hillcrest, LLC
Mobile, AL
1/17/2014
6,930

4,904

11
Crestview at Cordova, LLC
Pensacola, FL
1/17/2014
8,500

8,160

12
Taco Bell, OK
Yukon, OK
6/4/2014
1,719

—

$
196,699

$
149,855

Due to improved operating performance at the property level, the Board of Directors increased the fair value of our investment in APRC to $107,493 as of March 31, 2016 , a premium of $31,206 from its amortized cost, compared to the $18,064 unrealized appreciation recorded at June 30, 2015 .
First Tower Finance Company LLC
We own 80.1% of First Tower Finance, which owns 100% of First Tower, LLC (“First Tower”), the operating company. First Tower is a multiline specialty finance company based in Flowood, Mississippi with over 170 branch offices.
On June 15, 2012, we acquired 80.1% of First Tower businesses for $110,200 in cash and 14,518,207 unregistered shares of our common stock. Based on our share price of $11.06 at the time of issuance, we acquired our 80.1% interest in First Tower for approximately $270,771. The assets of First Tower acquired include, among other things, the subsidiaries owned by First Tower, which hold finance receivables, leaseholds, and tangible property associated with First Tower’s businesses. As part of the transaction, we received $4,038 in structuring fee income from First Tower. On October 18, 2012, we funded an additional $20,000 of senior secured debt to support seasonally high demand during the holiday season. On December 30, 2013, we funded an additional $10,000 to again support seasonal demand and received $8,000 of structuring fees related to the renegotiation and expansion of First Tower’s revolver with a third party which was recognized as other income. As of March 31, 2016 , First Tower had $428,756 of finance receivables net of unearned charges. As of March 31, 2016 , First Tower’s total debt outstanding to parties senior to us was $49,906 .
The Board of Directors slightly decreased the fair value of our investment in First Tower Finance to $358,130 as of March 31, 2016 , a premium of $32,405 to its amortized cost, compared to the $47,899 unrealized appreciation recorded at June 30, 2015 .
Harbortouch Payments, LLC
Harbortouch is a merchant processor headquartered in Allentown, Pennsylvania. The company offers a range of payment processing equipment and services that facilitate the exchange of goods and services provided by small to medium-sized merchants located in the United States for payments made by credit, debit, prepaid, electronic gift, and loyalty cards. Harbortouch provides point-of-sale equipment free of cost to merchants and then manages the process whereby transaction information is sent to a consumer’s bank from the point-of-sale (front-end processing), and then funds are transferred from the consumer’s account to the merchant’s account (back-end processing).
On March 31, 2014, we acquired a controlling interest in Harbortouch for $147,898 in cash and 2,306,294 unregistered shares of our common stock. We recorded $130,796 of senior secured term debt, $123,000 of subordinated term debt and $24,898 of equity at closing. As part of the transaction, we received $7,536 of structuring fee income from Harbortouch. On April 1, 2014, we restructured our investment in Harbortouch and $14,226 of equity was converted into additional debt investment. On September 30, 2014, we made a $26,431 follow-on investment in Harbortouch to support an acquisition. As part of the transaction, we received $529 of structuring fee income and $50 of amendment fee income from Harbortouch which was recorded as other income. On December 19, 2014, we made an additional $1,292 equity investment in Harbortouch Class C voting units. As of March 31, 2016 , we own 100% of the Class C voting units of Harbortouch, which provide for a 53.5% residual profits allocation.

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Due to market developments, the Board of Directors decreased the fair value of our investment in Harbortouch to $335,680 as of March 31, 2016 , a premium of $34,249 to its amortized cost, compared to the $71,477 unrealized appreciation recorded at June 30, 2015 .
National Property REIT Corp.
NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. NPRC is held for purposes of investing, operating, financing, leasing, managing and selling a portfolio of real estate assets and engages in any and all other activities that may be necessary, incidental, or convenient to perform the foregoing. NPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. NPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity. Additionally, through its wholly-owned subsidiaries, NPRC invests in online consumer loans. As of March 31, 2016 , we own 100% of the fully-diluted common equity of NPRC.
During the nine months ended March 31, 2016 we made 23 follow-on investments in NPRC totaling $180,783 to support the online consumer lending initiative. We invested $31,697 of equity through NPH and $134,449 of debt to ACL Loan Holdings, Inc. (“ACL”), a wholly-owned subsidiary of NPRC, with the remaining $14,637 of debt directly to NPRC and its wholly-owned subsidiaries. In addition, during the nine months ended March 31, 2016 , we received partial repayments of $40,460 of our loans previously outstanding and $12,396 as a return of capital on our equity investment in NPRC.
The online consumer loan investments held by certain of NPRC’s wholly-owned subsidiaries are unsecured obligations of individual borrowers that are issued in amounts ranging from $1 to $50, with fixed terms ranging from 18 to 85 months. As of March 31, 2016 , the investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 80,941 individual loans and had an aggregate fair value of $642,450. The average outstanding individual loan balance is approximately $8 and the loans mature on dates ranging from October 31, 2016 to April 2, 2023 with an average outstanding term of 35 months as of March 31, 2016 . Fixed interest rates range from 4.0% to 36.0% with a weighted-average current interest rate of 21.0%.
During the nine months ended March 31, 2016 , we provided $11,046 of equity financing to NPRC to fund capital expenditures for existing properties, and received partial repayments of $63,271 of our loans previously outstanding.
As of March 31, 2016 , NPRC’s real estate portfolio was comprised of twelve multi-family properties, twelve self-storage properties, and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by NPRC as of March 31, 2016 .

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No.
Property Name
City
Acquisition
Date
Purchase
Price
Mortgage
Outstanding
1
146 Forest Parkway, LLC
Forest Park, GA
10/24/2012
$
7,400

$
—

2
5100 Live Oaks Blvd, LLC
Tampa, FL
1/17/2013
63,400

46,700

3
NPRC Carroll Resort, LLC
Pembroke Pines, FL
6/24/2013
225,000

181,793

4
APH Carroll 41, LLC
Marietta, GA
11/1/2013
30,600

32,831

5
Matthews Reserve II, LLC
Matthews, NC
11/19/2013
22,063

19,971

6
City West Apartments II, LLC
Orlando, FL
11/19/2013
23,562

23,368

7
Vinings Corner II, LLC
Smyrna, GA
11/19/2013
35,691

33,045

8
Uptown Park Apartments II, LLC
Altamonte Springs, FL
11/19/2013
36,590

29,846

9
Mission Gate II, LLC
Plano, TX
11/19/2013
47,621

41,728

10
St. Marin Apartments II, LLC
Coppell, TX
11/19/2013
73,078

62,578

11
APH Carroll Bartram Park, LLC
Jacksonville, FL
12/31/2013
38,000

28,210

12
APH Carroll Atlantic Beach, LLC
Atlantic Beach, FL
1/31/2014
13,025

8,803

13
23 Mile Road Self Storage, LLC
Chesterfield, MI
8/19/2014
5,804

4,350

14
36th Street Self Storage, LLC
Wyoming, MI
8/19/2014
4,800

3,600

15
Ball Avenue Self Storage, LLC
Grand Rapids, MI
8/19/2014
7,281

5,460

16
Ford Road Self Storage, LLC
Westland, MI
8/29/2014
4,642

3,480

17
Ann Arbor Kalamazoo Self Storage, LLC
Ann Arbor, MI
8/29/2014
4,458

3,345

18
Ann Arbor Kalamazoo Self Storage, LLC
Scio, MI
8/29/2014
8,927

6,695

19
Ann Arbor Kalamazoo Self Storage, LLC
Kalamazoo, MI
8/29/2014
2,363

1,775

20
Jolly Road Self Storage, LLC
Okemos, MI
1/16/2015
7,492

5,620

21
Eaton Rapids Road Self Storage, LLC
Lansing West, MI
1/16/2015
1,741

1,305

22
Haggerty Road Self Storage, LLC
Novi, MI
1/16/2015
6,700

5,025

23
Waldon Road Self Storage, LLC
Lake Orion, MI
1/16/2015
6,965

5,225

24
Tyler Road Self Storage, LLC
Ypsilanti, MI
1/16/2015
3,507

2,630

25
SSIL I, LLC
Aurora, IL
11/5/2015
34,500

26,450

$
715,210

$
583,833

Due to improved operating performance at the property level, the Board of Directors increased the fair value of our investment in NPRC to $578,543 as of March 31, 2016 , a premium of $52,478 from its amortized cost, compared to the $22,229 unrealized appreciation recorded at June 30, 2015 .
United Property REIT Corp.
UPRC is a Delaware limited liability company and a qualified REIT for federal income tax purposes. UPRC is held for purposes of investing, operating, financing, leasing, managing and selling a portfolio of real estate assets and engages in any and all other activities that may be necessary, incidental, or convenient to perform the foregoing. UPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. UPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity. As of March 31, 2016 , we own 100% of the fully-diluted common equity of UPRC.
During the nine months ended March 31, 2016 , we provided $4,484 and $3,047 of debt and equity financing, respectively, to UPRC to fund capital expenditures for existing properties.
As of March 31, 2016 , UPRC’s real estate portfolio was comprised of fifteen multi-families properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by UPRC as of March 31, 2016 .

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No.
Property Name
City
Acquisition
Date
Purchase
Price
Mortgage
Outstanding
1
Atlanta Eastwood Village LLC
Stockbridge, GA
12/12/2013
$
25,957

$
19,785

2
Atlanta Monterey Village LLC
Jonesboro, GA
12/12/2013
11,501

9,193

3
Atlanta Hidden Creek LLC
Morrow, GA
12/12/2013
5,098

3,619

4
Atlanta Meadow Springs LLC
College Park, GA
12/12/2013
13,116

10,180

5
Atlanta Meadow View LLC
College Park, GA
12/12/2013
14,354

11,141

6
Atlanta Peachtree Landing LLC
Fairburn, GA
12/12/2013
17,224

13,575

7
Taco Bell, MO
Marshall, MO
6/4/2014
1,405

—

8
Canterbury Green Apartments Holdings LLC
Fort Wayne, IN
9/29/2014
85,500

74,305

9
Abbie Lakes OH Partners, LLC
Canal Winchester, OH
9/30/2014
12,600

10,440

10
Kengary Way OH Partners, LLC
Reynoldsburg, OH
9/30/2014
11,500

11,000

11
Lakeview Trail OH Partners, LLC
Canal Winchester, OH
9/30/2014
26,500

20,142

12
Lakepoint OH Partners, LLC
Pickerington, OH
9/30/2014
11,000

10,080

13
Sunbury OH Partners, LLC
Columbus, OH
9/30/2014
13,000

10,480

14
Heatherbridge OH Partners, LLC
Blacklick, OH
9/30/2014
18,416

15,480

15
Jefferson Chase OH Partners, LLC
Blacklick, OH
9/30/2014
13,551

12,240

16
Goldenstrand OH Partners, LLC
Hilliard, OH
10/29/2014
7,810

8,040

$
288,532

$
239,700

Due to improved operating performance at the property level, the Board of Directors increased the fair value of our investment in UPRC to $105,632 as of March 31, 2016 , a premium of $22,473 from its amortized cost, compared to the $9,057 unrealized appreciation recorded at June 30, 2015 .
Valley Electric Company, Inc.
We own 94.99% of Valley Electric as of March 31, 2016 . Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc. (“Valley”). Valley is a leading provider of specialty electrical services in the state of Washington and is among the top 50 electrical contractors in the U.S. The company, with its headquarters in Everett, Washington, offers a comprehensive array of contracting services, primarily for commercial, industrial, and transportation infrastructure applications, including new installation, engineering and design, design-build, traffic lighting and signalization, low to medium voltage power distribution, construction management, energy management and control systems, 24-hour electrical maintenance and testing, as well as special projects and tenant improvement services. Valley was founded in 1982 by the Ward family, who held the company until the end of 2012.
On December 31, 2012, we acquired 96.3% of the outstanding shares of Valley. We funded the recapitalization of Valley with $42,572 of debt and $9,526 of equity financing. Through the recapitalization, we acquired a controlling interest in Valley for $7,449 in cash and 4,141,547 unregistered shares of our common stock. On June 24, 2014, Prospect and management of Valley formed Valley Electric and contributed their shares of Valley stock to Valley Electric. Valley management made an additional equity investment in Valley Electric, reducing our ownership to 94.99%.
Due to a decrease in operational performance, the Board of Directors slightly decreased the fair value of our investment in Valley Electric to $31,359 as of March 31, 2016 , a discount of $28,876 from its amortized cost, compared to the $28,340 unrealized depreciation recorded at June 30, 2015 .
Equity positions in our portfolio are susceptible to potentially significant changes in value, both increases as well as decreases, due to changes in operating results and market multiples. Several of our controlled companies experienced such volatility and we recorded corresponding fluctuations in valuations during the nine months ended March 31, 2016 . See above for discussions regarding the fluctuations in APRC, First Tower Finance, Harbortouch, NPRC, UPRC and Valley Electric. During the nine months ended March 31, 2016 , the value of our investment in Arctic Energy decreased by $22,747 as a result of declining operations. During the nine months ended March 31, 2016 , the value of our investment in CP Energy decreased by $12,766 as a result of depressed earnings resulting from softness of the energy markets; Echelon decreased by $9,023 due to aircraft sale proceeds and resulting dividend distribution; and R-V decreased by $4,587 due to lower sales profitability. In total, eleven of the controlled investments are valued at the original investment amounts or higher, and eight of the controlled investments have been valued at discounts to the original investment. Overall, at March 31, 2016 , control investments are valued at $38,780 above their amortized cost.

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We hold two affiliate investment at March 31, 2016 . Our affiliate portfolio companies did not experience a significant change in valuation during the nine months ended March 31, 2016 .
With the non-control/non-affiliate investments, generally, there is less volatility related to our total investments because our equity positions tend to be smaller than with our control/affiliate investments, and debt investments are generally not as susceptible to large swings in value as equity investments. For debt investments, the fair value is generally limited on the high side to each loan’s par value, plus any prepayment premium that could be imposed. Many of the debt investments in this category have not experienced a significant change in value, as they were previously valued at or near par value. Non-control/non-affiliate investments did not experience significant changes and are generally performing as expected or better. During the nine months ended March 31, 2016 , the value of our CLO residual interest investments decreased by $ 149,739 primarily due to non-credit related changes in the capital markets impacting the underlying collateral and increasing our discount rate by 305 bps. Overall, at March 31, 2016 , non-control/non-affiliate investments are valued $ 243,162 below their amortized cost.
Capitalization
Our investment activities are capital intensive and the availability and cost of capital is a critical component of our business. We capitalize our business with a combination of debt and equity. Our debt as of March 31, 2016 consists of: a Revolving Credit Facility availing us of the ability to borrow debt subject to borrowing base determinations; Convertible Notes which we issued in February 2011, April 2012, August 2012, December 2012 and April 2014; Public Notes which we issued in March 2013, April 2014 and December 2015; and Prospect Capital InterNotes® which we issue from time to time. Our equity capital is comprised entirely of common equity.
The following table shows the maximum draw amounts and outstanding borrowings of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes ® as of March 31, 2016 and June 30, 2015 .
March 31, 2016
June 30, 2015
Maximum Draw Amount
Amount Outstanding
Maximum Draw Amount
Amount Outstanding
Revolving Credit Facility
$
885,000

$
—

$
885,000

$
368,700

Convertible Notes
1,089,000

1,089,000

1,239,500

1,239,500

Public Notes
708,242

708,242

548,094

548,094

Prospect Capital InterNotes®
898,535

898,535

827,442

827,442

Total
$
3,580,777

$
2,695,777

$
3,500,036

$
2,983,736

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes ® as of March 31, 2016 .
Payments Due by Period
Total
Less than 1 Year
1 – 3 Years
3 – 5 Years
After 5 Years
Revolving Credit Facility
$
—

$
—

$
—

$
—

$
—

Convertible Notes
1,089,000

167,500

529,500

392,000

—

Public Notes
708,242

—

—

300,000

408,242

Prospect Capital InterNotes®
898,535

5,710

238,357

352,128

302,340

Total Contractual Obligations
$
2,695,777

$
173,210

$
767,857

$
1,044,128

$
710,582

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes ® as of June 30, 2015 .
Payments Due by Period
Total
Less than 1 Year
1 – 3 Years
3 – 5 Years
After 5 Years
Revolving Credit Facility
$
368,700

$
—

$
—

$
368,700

$
—

Convertible Notes
1,239,500

150,000

497,500

592,000

—

Public Notes
548,094

—

—

300,000

248,094

Prospect Capital InterNotes®
827,442

—

54,509

369,938

402,995

Total Contractual Obligations
$
2,983,736

$
150,000

$
552,009

$
1,630,638

$
651,089


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Historically, we have funded a portion of our cash needs through borrowings from banks, issuances of senior securities, including secured, unsecured and convertible debt securities, or issuances of common equity. For flexibility, we maintain a universal shelf registration statement that allows for the public offering and sale of our debt securities, common stock, preferred stock, subscription rights, and warrants and units to purchase such securities in an amount up to $5,000,000 less issuances to date. As of March 31, 2016 , we can issue up to $4,822,456 of additional debt and equity securities in the public market under this shelf registration. We may from time to time issue securities pursuant to the shelf registration statement or otherwise pursuant to private offerings. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors and there can be no assurance that any such issuance will occur or be successful.
Each of our Unsecured Notes (as defined below) are our general, unsecured obligations and rank equal in right of payment with all of our existing and future unsecured indebtedness and will be senior in right of payment to any of our subordinated indebtedness that may be issued in the future. The Unsecured Notes are effectively subordinated to our existing secured indebtedness, such as our credit facility, and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of any of our subsidiaries.
Revolving Credit Facility
On March 27, 2012, we closed on an extended and expanded credit facility with a syndicate of lenders through PCF (the “2012 Facility”). The lenders had extended commitments of $857,500 under the 2012 Facility as of June 30, 2014, which was increased to $877,500 in July 2014. The 2012 Facility included an accordion feature which allowed commitments to be increased up to $1,000,000 in the aggregate. Interest on borrowings under the 2012 Facility was one-month LIBOR plus 275 basis points with no minimum LIBOR floor. Additionally, the lenders charged a fee on the unused portion of the 2012 Facility equal to either 50 basis points if at least half of the credit facility is drawn or 100 basis points otherwise.
On August 29, 2014, we renegotiated the 2012 Facility and closed an expanded five and a half year revolving credit facility (the “2014 Facility” and collectively with the 2012 Facility, the “Revolving Credit Facility”). The lenders have extended commitments of $885,000 under the 2014 Facility as of March 31, 2016 . The 2014 Facility includes an accordion feature which allows commitments to be increased up to $1,500,000 in the aggregate. The revolving period of the 2014 Facility extends through March 2019, with an additional one year amortization period (with distributions allowed) after the completion of the revolving period. During such one year amortization period, all principal payments on the pledged assets will be applied to reduce the balance. At the end of the one year amortization period, the remaining balance will become due, if required by the lenders.
The 2014 Facility contains restrictions pertaining to the geographic and industry concentrations of funded loans, maximum size of funded loans, interest rate payment frequency of funded loans, maturity dates of funded loans and minimum equity requirements. The 2014 Facility also contains certain requirements relating to portfolio performance, including required minimum portfolio yield and limitations on delinquencies and charge-offs, violation of which could result in the early termination of the 2014 Facility. The 2014 Facility also requires the maintenance of a minimum liquidity requirement. As of March 31, 2016 , we were in compliance with the applicable covenants.
Interest on borrowings under the 2014 Facility is one-month LIBOR plus 225 basis points with no minimum LIBOR floor. Additionally, the lenders charge a fee on the unused portion of the 2014 Facility equal to either 50 basis points if at least 35% of the credit facility is drawn or 100 basis points otherwise. The 2014 Facility requires us to pledge assets as collateral in order to borrow under the credit facility.
As of March 31, 2016 and June 30, 2015 , we had $645,696 and $721,800 , respectively, available to us for borrowing under the Revolving Credit Facility, of which the amount outstanding was $0 and $368,700 , respectively. As additional eligible investments are transferred to PCF and pledged under the Revolving Credit Facility, PCF will generate additional availability up to the current commitment amount of $885,000 . As of March 31, 2016 , the investments, including cash and money market funds, used as collateral for the Revolving Credit Facility had an aggregate fair value of $1,470,217 , which represents 23.8% of our total investments, including cash and money market funds. These assets are held and owned by PCF, a bankruptcy remote special purpose entity, and as such, these investments are not available to our general creditors. The release of any assets from PCF requires the approval of the facility agent.
In connection with the origination and amendments of the Revolving Credit Facility, we incurred $12,405 of new fees and $3,539 of fees carried over for continuing participants from the previous facility, which are being amortized over the term of the facility in accordance with ASC 470-50, of which $8,210 remains to be amortized and is included within deferred financing costs on the Consolidated Statement of Assets and Liabilities as of March 31, 2016 . During the six months ended December 31, 2014, in accordance with ASC 470-50, we expensed $332 of fees relating to credit providers in the 2012 Facility who did not commit to the 2014 Facility.


138

During the three months ended March 31, 2016 and March 31, 2015 , we recorded $3,046 and $3,545 , respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense. During the nine months ended March 31, 2016 and March 31, 2015 , we recorded $10,291 and $10,803 , respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.
Convertible Notes
On December 21, 2010, we issued $150,000 aggregate principal amount of convertible notes that matured on December 15, 2015 (the “2015 Notes”). The 2015 Notes bore interest at a rate of 6.25% per year, payable semi-annually on June 15 and December 15 of each year, beginning June 15, 2011. Total proceeds from the issuance of the 2015 Notes, net of underwriting discounts and offering costs, were $145,200. On December 15, 2015, we repaid the outstanding principal amount of the 2015 Notes, plus interest. No gain or loss was realized on the transaction.
On February 18, 2011, we issued $172,500 aggregate principal amount of convertible notes that mature on August 15, 2016 (the “2016 Notes”), unless previously converted or repurchased in accordance with their terms. The 2016 Notes bear interest at a rate of 5.50% per year, payable semi-annually on February 15 and August 15 of each year, beginning August 15, 2011. Total proceeds from the issuance of the 2016 Notes, net of underwriting discounts and offering costs, were $167,325. Between January 30, 2012 and February 2, 2012, we repurchased $5,000 aggregate principal amount of the 2016 Notes at a price of 97.5, including commissions. The transactions resulted in our recognizing $10 of loss in the year ended June 30, 2012.
On April 16, 2012, we issued $130,000 aggregate principal amount of convertible notes that mature on October 15, 2017 (the “2017 Notes”), unless previously converted or repurchased in accordance with their terms. The 2017 Notes bear interest at a rate of 5.375% per year, payable semi-annually on April 15 and October 15 of each year, beginning October 15, 2012. Total proceeds from the issuance of the 2017 Notes, net of underwriting discounts and offering costs, were $126,035. On March 28, 2016, we repurchased $500 aggregate principal amount of the 2017 Notes at a price of 98.25, including commissions. The transaction resulted in our recognizing a $9 gain for the period ended March 31, 2016.
On August 14, 2012, we issued $200,000 aggregate principal amount of convertible notes that mature on March 15, 2018 (the “2018 Notes”), unless previously converted or repurchased in accordance with their terms. The 2018 Notes bear interest at a rate of 5.75% per year, payable semi-annually on March 15 and September 15 of each year, beginning March 15, 2013. Total proceeds from the issuance of the 2018 Notes, net of underwriting discounts and offering costs, were $193,600.
On December 21, 2012, we issued $200,000 aggregate principal amount of convertible notes that mature on January 15, 2019 (the “2019 Notes”), unless previously converted or repurchased in accordance with their terms. The 2019 Notes bear interest at a rate of 5.875% per year, payable semi-annually on January 15 and July 15 of each year, beginning July 15, 2013. Total proceeds from the issuance of the 2019 Notes, net of underwriting discounts and offering costs, were $193,600.
On April 11, 2014, we issued $400,000 aggregate principal amount of convertible notes that mature on April 15, 2020 (the “2020 Notes”), unless previously converted or repurchased in accordance with their terms. The 2020 Notes bear interest at a rate of 4.75% per year, payable semi-annually on April 15 and October 15 each year, beginning October 15, 2014. Total proceeds from the issuance of the 2020 Notes, net of underwriting discounts and offering costs, were $387,500. On January 30, 2015, we repurchased $8,000 aggregate principal amount of the 2020 Notes at a price of 93.0, including commissions. As a result of this transaction, we recorded a gain of $332, in the amount of the difference between the reacquisition price and the net carrying amount of the notes, net of the proportionate amount of unamortized debt issuance costs.
Certain key terms related to the convertible features for the 2016 Notes, the 2017 Notes, the 2018 Notes, the 2019 Notes and the 2020 Notes (collectively, the “Convertible Notes”) are listed below.
2016 Notes

2017 Notes

2018 Notes

2019 Notes

2020 Notes

Initial conversion rate(1)
78.3699

85.8442

82.3451

79.7766

80.6647

Initial conversion price
$
12.76

$
11.65

$
12.14

$
12.54

$
12.40

Conversion rate at March 31, 2016(1)(2)
80.2196

87.7516

84.1497

79.8360

80.6670

Conversion price at March 31, 2016(2)(3)
$
12.47

$
11.40

$
11.88

$
12.53

$
12.40

Last conversion price calculation date
2/18/2016

4/16/2015

8/14/2015

12/21/2015

4/11/2015

Dividend threshold amount (per share)(4)
$
0.101150

$
0.101500

$
0.101600

$
0.110025

$
0.110525

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

139

(2)
Represents conversion rate and conversion price, as applicable, taking into account certain de minimis adjustments that will be made on the conversion date.
(3)
The conversion price in effect at March 31, 2016 was calculated on the last anniversary of the issuance and will be adjusted again on the next anniversary, unless the exercise price shall have changed by more than 1% before the anniversary.
(4)
The conversion rate is increased if monthly cash dividends paid to common shares exceed the monthly dividend threshold amount, subject to adjustment.
Upon conversion, unless a holder converts after a record date for an interest payment but prior to the corresponding interest payment date, the holder will receive a separate cash payment with respect to the notes surrendered for conversion representing accrued and unpaid interest to, but not including, the conversion date. Any such payment will be made on the settlement date applicable to the relevant conversion on the Convertible Notes.
No holder of Convertible Notes will be entitled to receive shares of our common stock upon conversion to the extent (but only to the extent) that such receipt would cause such converting holder to become, directly or indirectly, a beneficial owner (within the meaning of Section 13(d) of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of more than 5.0% of the shares of our common stock outstanding at such time. The 5.0% limitation shall no longer apply following the effective date of any fundamental change. We will not issue any shares in connection with the conversion or redemption of the Convertible Notes which would equal or exceed 20% of the shares outstanding at the time of the transaction in accordance with NASDAQ rules.
Subject to certain exceptions, holders may require us to repurchase, for cash, all or part of their Convertible Notes upon a fundamental change at a price equal to 100% of the principal amount of the Convertible Notes being repurchased plus any accrued and unpaid interest up to, but excluding, the fundamental change repurchase date. In addition, upon a fundamental change that constitutes a non-stock change of control we will also pay holders an amount in cash equal to the present value of all remaining interest payments (without duplication of the foregoing amounts) on such Convertible Notes through and including the maturity date.
In connection with the issuance of the Convertible Notes, we incurred $34,629 of fees which are being amortized over the terms of the notes, of which $16,137 remains to be amortized and is included within deferred financing costs on the Consolidated Statement of Assets and Liabilities as of March 31, 2016 . This amount included a $4 write-off of deferred financing costs associated with the repurchase of the 2017 Notes.
During the three months ended March 31, 2016 and March 31, 2015 , we recorded $16,038 and $18,572 , respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense. During the nine months ended March 31, 2016 and March 31, 2015 , we recorded $52,957 and $55,776 , respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense.
Public Notes
On May 1, 2012, we issued $100,000 aggregate principal amount of unsecured notes that were scheduled to mature on November 15, 2022 (the “2022 Notes”). The 2022 Notes bore interest at a rate of 6.95% per year, payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning August 15, 2012. Total proceeds from the issuance of the 2022 Notes, net of underwriting discounts and offering costs, were $97,000. On May 15, 2015, we redeemed $100,000 aggregate principal amount of the 2022 Notes at par. In connection with this transaction, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on the extinguishment of the 2022 Notes in the year ended June 30, 2015 was $2,600.

On March 15, 2013, we issued $250,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “2023 Notes”). The 2023 Notes bear interest at a rate of 5.875% per year, payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2013. Total proceeds from the issuance of the 2023 Notes, net of underwriting discounts and offering costs, were $245,966.


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On April 7, 2014, we issued $300,000 aggregate principal amount of unsecured notes that mature on July 15, 2019 (the “5.00% 2019 Notes”). Included in the issuance is $45,000 of Prospect Capital InterNotes® that were exchanged for the 5.00% 2019 Notes. The 5.00% 2019 Notes bear interest at a rate of 5.00% per year, payable semi-annually on January 15 and July 15 of each year, beginning July 15, 2014. Total proceeds from the issuance of the 5.00% 2019 Notes, net of underwriting discounts and offering costs, were $295,998.
On December 10, 2015, we issued $160,000 aggregate principal amount of unsecured notes that mature on June 15, 2024 (the “2024 Notes”). The 2024 Notes bear interest at a rate of 6.25% per year, payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2016. Total proceeds from the issuance of the 2024 Notes, net of underwriting discounts and offering costs, were $154,880.
The 2022 Notes, the 2023 Notes, the 5.00% 2019 Notes, and the 2024 Notes (collectively, the “Public Notes”) are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding.
In connection with the issuance of the 2023 Notes, the 5.00% 2019 Notes, and the 2024 Notes, we incurred $13,156 of fees which are being amortized over the term of the notes, of which $10,708 remains to be amortized and is included within deferred financing costs on the Consolidated Statement of Assets and Liabilities as of March 31, 2016 .
During the three months ended March 31, 2016 and March 31, 2015 , we recorded $10,352 and $9,493 , respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense. During the nine months ended March 31, 2016 and March 31, 2015 , we recorded $26,513 and $28,440 , respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense .
Prospect Capital InterNotes ®
On February 16, 2012, we entered into a selling agent agreement (the “Selling Agent Agreement”) with Incapital LLC, as purchasing agent for our issuance and sale from time to time of up to $500,000 of Prospect Capital InterNotes® (the “InterNotes® Offering”), which was increased to $1,500,000 in May 2014. Additional agents may be appointed by us from time to time in connection with the InterNotes® Offering and become parties to the Selling Agent Agreement.
These notes are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding. Each series of notes will be issued by a separate trust. These notes bear interest at fixed interest rates and offer a variety of maturities no less than twelve months from the original date of issuance.
During the three months ended March 31, 2016 , we issued $5,573 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $5,503 . These notes were issued with stated interest rates ranging from 5.375% to 5.50% with a weighted average interest rate of 5.41% . These notes mature between January 15, 2021 and March 15, 2021 .

During the nine months ended March 31, 2016 , we issued $74,862 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $73,738 . These notes were issued with stated interest rates ranging from 4.625% to 6.00% with a weighted average interest rate of 5.10% . These notes mature between July 15, 2020 and December 15, 2025 .

The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 2016 .
Tenor at
Origination
(in years)
Principal
Amount
Interest Rate
Range
Weighted
Average
Interest Rate
Maturity Date Range
5
$
37,930

4.625%–5.500%
4.93
%
July 15, 2020 – March 15, 2021
6.5
35,155

5.10%–5.25%
5.25
%
January 15, 2022 – May 15, 2022
7
990

5.625%–5.75%
5.65
%
November 15, 2022 – December 15, 2022
10
787

5.875%–6.00%
5.89
%
November 15, 2025 – December 15, 2025
$
74,862



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During the nine months ended March 31, 2015 , we issued $74,967 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $73,730 . These notes were issued with a stated interest rates ranging from 4.25% to 4.75% with a weighted average interest rate of 4.58% . These notes mature between May 15, 2020 and September 15, 2020 . All notes issued during the nine months ended March 31, 2015 mature 5.5 years from the original date of issuance.

During the three months ended March 31, 2016 , we repaid $ 1,163 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended March 31, 2016 was $28.
The following table summarizes the Prospect Capital InterNotes® outstanding as of March 31, 2016 .
Tenor at
Origination
(in years)
Principal
Amount
Interest Rate
Range
Weighted
Average
Interest Rate
Maturity Date Range
3
$
5,710

4.00%
4.00
%
October 15, 2016
3.5
3,109

4.00%
4.00
%
April 15, 2017
4
45,690

3.75%–4.00%
3.92
%
November 15, 2017 – May 15, 2018
5
245,618

4.25%–5.500%
4.92
%
July 15, 2018 – March 15, 2021
5.2
4,440

4.625%
4.625
%
August 15, 2020 – September 15, 2020
5.3
2,686

4.625%
4.625
%
September 15, 2020
5.4
5,000

4.75%
4.75
%
August 15, 2019
5.5
109,981

4.25%–5.00%
4.65
%
February 15, 2019 – November 15, 2020
6
2,197

3.375%
3.375
%
April 15, 2021 – May 15, 2021
6.5
40,867

5.10%–5.50%
5.24
%
February 15, 2020 – May 15, 2022
7
192,389

4.00%–6.55%
5.13
%
June 15, 2019 – December 15, 2022
7.5
1,996

5.75%
5.75
%
February 15, 2021
10
37,558

3.622%–7.00%
6.12
%
March 15, 2022 – December 15, 2025
12
2,978

6.00%
6.00
%
November 15, 2025 – December 15, 2025
15
17,325

5.00%–6.00%
5.14
%
May 15, 2028 – November 15, 2028
18
22,453

4.125%–6.25%
5.53
%
December 15, 2030 – August 15, 2031
20
4,490

5.63%–6.00%
5.89
%
November 15, 2032 – October 15, 2033
25
35,488

6.25%–6.50%
6.39
%
August 15, 2038 – May 15, 2039
30
118,560

5.50%–6.75%
6.23
%
November 15, 2042 – October 15, 2043
$
898,535


During the nine months ended March 31, 2015 , we redeemed $76,931 aggregate principal amount of our Prospect Capital InterNotes® at par with a weighted average interest rate of 6.06% in order to replace debt with higher interest rates with debt with lower rates. As a result of these transactions, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the Prospect Capital InterNotes®, net of the proportionate amount of unamortized debt issuance costs. The net loss on extinguishment of debt we recorded in the three and nine months ended March 31, 2015 was $1,220 and $1,556, respectively. During the nine months ended March 31, 2015, we repaid $4,988 aggregate principal amount of our Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus.


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The following table summarizes the Prospect Capital InterNotes® outstanding as of June 30, 2015 .
Tenor at
Origination
(in years)
Principal
Amount
Interest Rate
Range
Weighted
Average
Interest Rate
Maturity Date Range
3
$
5,710

4.00%
4.00
%
October 15, 2016
3.5
3,109

4.00%
4.00
%
April 15, 2017
4
45,690

3.75%–4.00%
3.92
%
November 15, 2017 – May 15, 2018
5
207,719

4.25%–5.00%
4.92
%
July 15, 2018 – May 15, 2019
5.25
7,126

4.625%
4.63
%
August 15, 2020 – September 15, 2020
5.5
115,184

4.25%–5.00%
4.65
%
February 15, 2019 – November 15, 2020
6.0
2,197

3.375%
3.38
%
April 15, 2021 – May 15, 2021
6.5
5,712

5.10%–5.50%
5.23
%
February 15, 2020 – December 15, 2021
7.0
191,549

4.00%–5.85%
5.13
%
September 15, 2019 – June 15, 2022
7.5
1,996

5.75%
5.75
%
February 15, 2021
10
36,925

3.29%–7.00%
6.11
%
March 15, 2022 – May 15, 2024
12.0
2,978

6.00%
6.00
%
November 15, 2025 – December 15, 2025
15
17,385

5.00%–6.00%
5.14
%
May 15, 2028 – November 15, 2028
18
22,729

4.125%–6.25%
5.52
%
December 15, 2030 – August 15, 2031
20
4,530

5.75%–6.00%
5.89
%
November 15, 2032 – October 15, 2033
25
36,320

6.25%–6.50%
6.39
%
August 15, 2038 – May 15, 2039
30
120,583

5.50%–6.75%
6.23
%
November 15, 2042 – October 15, 2043
$
827,442


In connection with the issuance of Prospect Capital InterNotes ® , we incurred $21,730 of fees which are being amortized over the term of the notes, of which $15,882 remains to be amortized and is included within deferred financing costs on the Consolidated Statement of Assets and Liabilities as of March 31, 2016 .
During the three months ended March 31, 2016 and March 31, 2015 , we recorded $12,283 and $10,603 , respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes ® as interest expense. During the nine months ended March 31, 2016 and March 31, 2015 , we recorded $36,120 and $32,352 , respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes ® as interest expense.
Net Asset Value
During the nine months ended March 31, 2016 , our net asset value decreased by $280,633 , or $0.70 per share, resulting from a $271,470 , or $ 0.76 per weighted average share, decrease in net realized and unrealized gains and losses on investments (see “Results of Operations” for further discussion). This decrease in our net asset value was partially offset by net investment income of $279,761 , or $0.79 per weighted average share and a $ 0.02 per share increase attributable to share repurchases, earned in excess of dividends to shareholders of $266,920 or $ 0.75 per share.

During the nine months ended March 31, 2016 , we repurchased 4,708,750 shares of our common stock pursuant to our Repurchase Program for $34,140 , or approximately $7.25 weighted average price per share at approximately a 30% discount to net asset value as of June 30, 2015. Our NAV per share was increased by approximately $0.02 for the nine months ended March 31, 2016 as a result of the share repurchases. During the nine months ended March 31, 2016 , we issued 1,731,768 shares of our common stock in connection with the dividend reinvestment plan. The following table shows the calculation of net asset value per share as of March 31, 2016 and June 30, 2015 .
March 31, 2016
June 30, 2015
Net assets
$
3,422,416

$
3,703,049

Shares of common stock issued and outstanding
356,113,777

359,090,759

Net asset value per share
$
9.61

$
10.31

Results of Operations
Net change in net assets resulting from operations for the three months ended March 31, 2016 and March 31, 2015 was $75,508 and $81,492 . During the three months ended March 31, 2016 the $5,984 decrease is primarily due to a $7,024 increase in net

143

realized and unrealized losses on investments when comparing results for the quarters ended March 31, 2016 and March 31, 2015 . This $7,024 increase is comprised of net realized and unrealized losses of $26,202 and $2,290 on our CLO residual interests and equity investments, respectively, and net realized and unrealized gains of $21,468 on our debt investments. This increase in net realized and unrealized losses are primarily due to non-credit related macro changes in the capital markets impacting our valuations in late calendar year 2015. (See Investment Income, Net Realized Losses , and Net Change in Unrealized Appreciation (Depreciation) sections below for further discussion.)
Net change in net assets resulting from operations for the nine months ended March 31, 2016 and March 31, 2015 was $8,205 and $251,570 . During the nine months ended March 31, 2016 , the $243,365 decrease is primarily due to a $251,025 increase in net realized and unrealized losses on investments, partially offset by net investment income, when comparing results for the nine months ended March 31, 2016 and March 31, 2015 . This $251,025 increase is primarily comprised of net realized and unrealized losses of $126,772 and $137,514 on our CLO residual interests and equity investments, respectively, and net realized and unrealized gains of $13,261 on our debt investments. This increase in net realized and unrealized losses is primarily due to non-credit related macro changes in the capital markets impacting our valuations in late calendar year 2015. (See Investment Income, Net Realized Losses , and Net Change in Unrealized Appreciation (Depreciation) sections below for further discussion.)
While we seek to maximize gains and minimize losses, our investments in portfolio companies can expose our capital to risks greater than those we may anticipate. These companies typically do not issue securities rated investment grade, and have limited resources, limited operating history, and concentrated product lines or customers. These are generally private companies with limited operating information available and are likely to depend on a small core of management talents. Changes in any of these factors can have a significant impact on the value of the portfolio company.

Investment Income
We generate revenue in the form of interest income on the debt securities that we own, dividend income on any common or preferred stock that we own, and fees generated from the structuring of new deals. Our investments, if in the form of debt securities, will typically have a term of one to ten years and bear interest at a fixed or floating rate. To the extent achievable, we will seek to collateralize our investments by obtaining security interests in our portfolio companies’ assets. We also may acquire minority or majority equity interests in our portfolio companies, which may pay cash or in-kind dividends on a recurring or otherwise negotiated basis. In addition, we may generate revenue in other forms including prepayment penalties and possibly consulting fees. Any such fees generated in connection with our investments are recognized as earned.
Investment income, which consists of interest income, including accretion of loan origination fees and prepayment penalty fees, dividend income and other income, including settlement of net profits interests, overriding royalty interests and structuring fees, was $189,493 and $191,350 for the three months ended March 31, 2016 and March 31, 2015 , respectively. Investment income was $598,935 and $592,254 for the nine months ended March 31, 2016 and March 31, 2015 , respectively. The $6,681 increase is primarily the result of a $19,455 increase in dividend income primarily from our investments in APRC and Echelon. This increase was partially offset by a $11,625 decrease in other income primarily from a reduction in structuring fees due to lower levels of originations.

The following table describes the various components of investment income and the related levels of debt investments:
Three Months Ended March 31,
Nine Months Ended March 31,
2016
2015
2016
2015
Interest income
$
178,992

$
184,993

$
556,798

$
557,947

Dividend income
8,301

1,371

25,062

5,607

Other income
2,200

4,986

17,075

28,700

Total investment income
$
189,493

$
191,350

$
598,935

$
592,254

Average debt principal of performing investments
$
5,913,900

$
6,248,211

$
6,122,039

$
6,161,906

Weighted average interest rate earned on performing debt and equity investments
12.11
%
11.84
%
11.95
%
11.90
%

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Average interest income producing assets decreased from $6,248,211 for the three months ended March 31, 2015 to $5,913,900 for the three months ended March 31, 2016 . The average interest earned on interest bearing performing assets increased from 11.84% for the three months ended March 31, 2015 to 12.11% for the three months ended March 31, 2016 . The increase in returns is primarily due to an increase in interest income from our CLO investments. Average interest income producing assets increased from $6,161,906 for the nine months ended March 31, 2015 to $6,122,039 for the nine months ended March 31, 2016 . The average interest earned on interest bearing performing assets increased from 11.90% for the nine months ended March 31, 2015 to 11.95% for the nine months ended March 31, 2016 . The increase in returns is primarily due to an increase in interest income from our CLO investments.
Investment income is also generated from dividends and other income which is less predictable than interest income. Dividend income increased from $1,371 for the three months ended March 31, 2015 to $8,301 for the three months ended March 31, 2016 . The increase in dividend income is primarily attributable to a $7,250 dividend received from our investment in Echelon. No such dividends were received from Echelon during the three months ended March 31, 2015 . We received dividends of $961 and $1,139 related to our investment in Nationwide during the three months ended March 31, 2016 and March 31, 2105, respectively. We also received dividends of $75 related to our investment in R-V for both the three months ended March 31, 2016 and March 31, 2015.
Dividend income increased from $5,607 for the nine months ended March 31, 2015 to $25,062 for the nine months ended March 31, 2016 . The $19,455 increase in dividend income is primarily attributable to a $11,016 dividend received from our investment in APRC and $7,250 dividend received from our investment in Echelon. No such dividends were received from either APRC or Echelon during the nine months ended March 31, 2015 . Additionally,we received dividends of $3,195, $2,649 and $710 related to our investments in CCPI, Nationwide and MITY, respectively, during the nine months ended March 31, 2016 . No such dividends were received from CCPI or MITY during the nine months ended March 31, 2015 . The increase in dividend income was partially offset by dividends of $2,444 and $1,929 received from our investments in Nationwide and First Tower, respectively, during the nine months ended March 31, 2015. No such dividends were received from First Tower during the nine months ended March 31, 2016
Other income has come primarily from structuring fees, royalty interests, and settlement of net profits interests. Income from other sources decreased from $4,986 for the three months ended March 31, 2015 to $2,200 for the three months ended March 31, 2016 . The decrease is primarily due to a $3,167 decrease in structuring fees, which are generated from originations and will fluctuate as levels and types of loan originations fluctuate. In November 2014, we elected to suspend our equity raising activities, which has since reduced our origination activity. Total originations decreased from $219,111 in the three months ended March 31, 2015 to $23,176 in the three months ended March 31, 2016 . As a result, structuring fees fell from $3,367 in the three months ended March 31, 2015 to $182 in the three months ended March 31, 2016. The structuring fees recognized during the three months ended March 31, 2015 resulted from follow-on investments in existing portfolio companies, primarily from our investments in NPRC, Atlantis Health Care Group (Puerto Rico), Inc., and USG Intermediate, LLC.
Income from other sources decreased from $28,700 for the nine months ended March 31, 2015 to $17,075 for the nine months ended March 31, 2016 . The decrease is primarily due to a $14,021 decrease in structuring fees, which are generated from originations and will fluctuate as levels of originations and types of originations fluctuate. In November 2014, we elected to suspend our equity raising activities, which has since reduced our origination activity. Total originations decreased from $1,456,071 in the nine months ended March 31, 2015 to $685,064 in the nine months ended March 31, 2016 . As a result, structuring fees fell from $24,162 in the nine months ended March 31, 2015 to $10,623 in the nine months ended March 31, 2016 . Included within the $24,162 of structuring fees recognized during the nine months ended March 31, 2015 is a $3,000 fee from Airmall Inc. (“Airmall”) related to the sale of the operating company for which a fee was received in August 2014 and a $2,000 fee from Ajax Rolled Ring & Machine, LLC (“Ajax”) related to the sale of the operating company for which a fee was received in October 2014. The remaining $19,162 of structuring fees recognized during the nine months ended March 31, 2015 resulted from follow-on investments in existing portfolio companies and new originations, primarily from our investments in InterDent, Instant Web, LLC (“IWCO”), Pacific World Corporation, PrimeSport, Inc., Trinity Services Group, Inc., and UPRC, as discussed above. The structuring fees recognized during the nine months ended March 31, 2016 resulted from follow-on investments in existing portfolio companies, primarily from our investments in Crosman, Intelius, Broder, Coverall, NPRC and System One.

145

Operating Expenses
Our primary operating expenses consist of investment advisory fees (base management and income incentive fees), borrowing costs, legal and professional fees and other operating and overhead-related expenses. These expenses include our allocable portion of overhead under the Administration Agreement with Prospect Administration under which Prospect Administration provides administrative services and facilities for us. Our investment advisory fees compensate the Investment Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other costs and expenses of our operations and transactions. Operating expenses were $101,867 and $103,909 for the three months ended March 31, 2016 and March 31, 2015 . Operating expenses were $319,174 and $319,025 for the nine months ended March 31, 2016 and March 31, 2015 , respectively.
The net base management fee was $30,977 and $33,679 for the three months ended March 31, 2016 and March 31, 2015 , respectively, holding constant at $0.09 per weighted average share. The total gross base management fee incurred to the favor of the Investment Adviser was $31,442 and $33,679 during the three months ended March 31, 2016 and March 31, 2015 , respectively. The $2,237 decrease in total gross base management fee is directly related to a decrease in average total assets. The Investment Adviser has entered into a servicing agreement with certain institutions, where we serve as the agent and collect a servicing fee on behalf of the Investment Adviser. During the three months ended March 31, 2016 , we received payments of $465 from these institutions, on behalf of the Investment Adviser, for providing such services under the servicing agreement for the three months ended March 31, 2016 . We were given a credit for these payments as a reduction of base management fee payable by us to the Investment Adviser during the three months ended March 31, 2016 resulting in net total base management fees of $30,977 . No such credits were received during the three months ended March 31, 2015 .
The net base management fee was $95,712 and $100,878 for the nine months ended March 31, 2016 and March 31, 2015 , respectively ( $0.27 and $0.29 per weighted average share, respectively). The total gross base management fee incurred to the favor of the Investment Adviser was $97,109 and $100,878 during the nine months ended March 31, 2016 and March 31, 2015 , respectively. The $3,769 decrease in total gross base management fee is directly related to a decrease in average total assets. The Investment Adviser has entered into a servicing agreement with certain institutions, where we serve as the agent and collect a servicing fee on behalf of the Investment Adviser. During the nine months ended March 31, 2016 , we received payments of $1,397 from these institutions, on behalf of the Investment Adviser, for providing such services under the servicing agreement for the nine months ended March 31, 2016 . We were given a credit for these payments as a reduction of base management fee payable by us to the Investment Adviser during the nine months ended March 31, 2016 resulting in net total base management fee of $95,712 . No such credits were received during the nine months ended March 31, 2015 .
For the three months ended March 31, 2016 and March 31, 2015 , we incurred $21,906 and $21,860 of income incentive fees, respectively, holding constant at $0.06 per weighted average share. This slight increase was driven by a corresponding increase in pre-incentive fee net investment income from $109,301 for the three months ended March 31, 2015 to $109,532 for the three months ended March 31, 2016 , primarily due to an increase in dividend income. No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement.
For the nine months ended March 31, 2016 and March 31, 2015 , we incurred $69,940 and $68,307 of income incentive fees, respectively ( $0.20 and $0.19 per weighted average share, respectively). This increase was driven by a corresponding increase in pre-incentive fee net investment income from $341,536 for the nine months ended March 31, 2015 to $349,701 for the nine months ended March 31, 2016 , primarily due to an increase in dividend income. No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement.
During the three months ended March 31, 2016 and March 31, 2015 , we incurred $41,719 and $42,213 , respectively, of interest expenses related to our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Notes”). During the nine months ended March 31, 2016 and March 31, 2015 , we incurred $125,881 and $127,371 , respectively, of expenses related to our Notes. These expenses are related directly to the leveraging capacity put into place for each of those periods and the levels of indebtedness actually undertaken in those periods.
The table below describes the various expenses of our Notes and the related indicators of leveraging capacity and indebtedness during these periods.

146

Three Months Ended March 31,
Nine Months Ended March 31,
2016
2015
2016
2015
Interest on borrowings
$
36,268

$
37,605

$
110,515

$
112,319

Amortization of deferred financing costs
3,240

2,913

10,156

9,601

Accretion of discount on Public Notes
50

47

148

164

Facility commitment fees
2,161

1,648

5,062

5,287

Total interest and credit facility expenses
$
41,719

$
42,213

$
125,881

$
127,371

Average principal debt outstanding
$
2,725,717

$
2,879,132

$
2,842,070

$
2,819,457

Weighted average stated interest rate on borrowings(1)
5.32
%
5.22
%
5.18
%
5.31
%
Weighted average interest rate on borrowings(2)
6.12
%
5.86
%
5.91
%
6.02
%
Revolving Credit Facility amount at beginning of period
$
885,000

$
810,000

$
885,000

$
857,500

(1)
Includes only the stated interest expense.
(2)
Includes the stated interest expense, amortization of deferred financing costs, accretion of discount on Public Notes and commitment fees on the undrawn portion of our Revolving Credit Facility.
Interest expense during the nine months ended March 31, 2016 and March 31, 2015 is relatively stable as a result of increased issuances through our InterNotes programs and increased utilization of our Revolving Credit Facility, offset by both Public and Convertible Note maturities. The weighted average stated interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) decreased from 5.31% for the nine months ended March 31, 2015 to 5.18% for the nine months ended March 31, 2016 . This decrease is primarily due to issuances of shorter term debt at lower rates.
The allocation of gross overhead expense from Prospect Administration was $5,698 and $6,021 for the three months ended March 31, 2016 and March 31, 2015, respectively. Prospect Administration received estimated payments of $2,762 and $3,037 directly from our portfolio companies and certain funds managed by the Investment Adviser for legal, tax and portfolio level accounting services during the three months ended March 31, 2016 and March 31, 2015, respectively. We were given a credit for these payments as a reduction of the administrative services cost payable by us to Prospect Administration, resulting in net overhead expense of $2,936 and $2,984 during the three months ended March 31, 2016 and March 31, 2015, respectively. Had Prospect Administration not received these payments, Prospect Administration’s charges for its administrative services would have increased by these amounts. As our portfolio continues to grow, we expect Prospect Administration to continue to increase the size of its administrative and financial staff.

The allocation of gross overhead expense from Prospect Administration was $14,725 and $13,998 for the nine months ended March 31, 2016 and March 31, 2015, respectively. During the nine months ended March 31, 2016, we renegotiated the managerial assistance agreement with First Tower LLC and reversed $1,200 of previously accrued managerial assistance at First Tower Delaware as the fee was paid by First Tower LLC, which decreased our overhead allocation. We also incurred $379 of overhead expense related to our consolidated entity SB Forging. Prospect Administration received estimated payments of 5,611 and $5,584 directly from our portfolio companies and certain funds managed by the Investment Adviser for legal, tax and portfolio level accounting services during the nine months ended March 31, 2016 and March 31, 2015, respectively. We were given a credit for these payments as a reduction of the administrative services cost payable by us to Prospect Administration, resulting in net overhead expense of $9,114 and $8,414 during the nine months ended March 31, 2016 and March 31, 2015, respectively. Had Prospect Administration not received these payments, Prospect Administration’s charges for its administrative services would have increased by these amounts. As our portfolio continues to grow, we expect Prospect Administration to continue to increase the size of its administrative and financial staff.

Total operating expenses, net of investment advisory fees, interest and credit facility expenses, allocation of overhead from Prospect Administration (“Other Operating Expenses”) were $4,329 and $3,173 for the three months ended March 31, 2016 and March 31, 2015 , respectively. The increase of $1,156 during the three months ended March 31, 2016 is primarily due to an overall increase in audit, compliance and tax related fees due to the growing size and complexity of our business. Other Operating Expenses were $18,527 and $14,055 for the nine months ended March 31, 2016 and March 31, 2015 , respectively. The increase of $4,472 during the nine months ended March 31, 2016 is primarily due to an increase in audit, compliance and tax related fees due to the growing size and complexity of our business.

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Net Investment Income
Net investment income represents the difference between investment income and operating expenses. Net investment income was $87,626 and $87,441 for the three months ended March 31, 2016 and March 31, 2015 , respectively. Net investment income remained constant as increases in dividends and CLO interest income was offset by a decrease in other income as a result of lower levels of originations and structuring fees.
Net investment income was $279,761 and $273,229 for the nine months ended March 31, 2016 and March 31, 2015 , respectively. The $6,532 increase during the nine months ended March 31, 2016 is primarily the result of a $19,455 increase in dividend income related to APRC’s sale of the Vista property and a $3,533 decrease in advisory fees. These positive results were offset by a $1,149 decrease in interest income, primarily due to an increase in foregone interest on non-accrual loans, and a $11,625 decrease in other income, primarily due to a decrease in structuring fees from originations.
Net Realized Gains/Losses
During the three months ended March 31, 2016 we recognized net realized loss on investments of $10,784 and a net realized gain of $4,704 for the three months ended March 31, 2015 . The net realized loss during the three months ended March 31, 2016 was primarily due to the $17,194 write-down of our investment in Targus and write-off of our remaining investment in Wind River. The net realized gain during the three months ended March 31, 2015 was primarily due to an escrow release related to our investment in NRG Manufacturing, Inc. for which we realized a gain $4,647. This gain was supplemented by other realized gains totaling $357, primarily from partial sales and the release of escrowed amounts due to us from other portfolio companies. These gains were partially offset by realized losses resulting from the write-downs of certain investments for which we recognized total realized losses of $300.
During the nine months ended March 31, 2016 and March 31, 2015 , we recognized net realized losses on investments of $18,237 and $150,973 , respectively. The net realized loss during the nine months ended March 31, 2016 was primarily due to the write-down of our investment in Targus and write-off of our remaining investment in Wind River discussed above, along with $5,062 of write-offs of our small business whole loan portfolio. The net realized loss during the nine months ended March 31, 2015 was primarily due to the sale of our investments in Airmall, Ajax, Borga, Inc. (“Borga”) and BXC Company, Inc. (“BXC”) for which we recognized total realized losses of $46,571, and the sale of four of our CLO investments for which we realized total losses of $15,561. During the nine months ended March 31, 2015, we decreased our cost basis in several of our investments (e.g., Appalachian Energy LLC, Change Clean Energy Company, Coalbed, LLC, Manx Energy, Inc., NCT, Stryker Energy, LLC, Wind River, and Yatesville Coal Company, LLC) were written-off and recorded total realized losses of $96,700 (which were previously recognized as unrealized losses) for the amount that the amortized cost exceeded the fair value. These losses were partially offset by net realized gains from the proceeds collected on warrants redeemed from Snacks Parent Corporation, litigation settlements, partial sales, and the release of escrowed amounts due to us from several portfolio companies, for which we recognized total realized gains of $7,859.
Net Change in Unrealized (Depreciation) Appreciation
Net change in unrealized depreciation was $1,311 and $9,775 for the three months ended March 31, 2016 and March 31, 2015 , respectively. For the three months ended March 31, 2016 , the $1,311 net decrease in unrealized depreciation was driven primarily by increases in market yields and the competitive environment faced by our energy-related companies. Unrealized losses on our CLO debt and equity investments comprised $33,556 of total net change in unrealized depreciation, and unrealized losses on our energy-related investments comprised $40,022 of total net change in unrealized deprecation for the three months ended March 31, 2016 . These unrealized losses were offset by $69,985 unrealized appreciation in our REITs portfolio due to improved operating performance at the property-level. The remaining $2,282 net decrease in unrealized depreciation is primarily the result of current market conditions and the results of operations of individual portfolio companies across various industries. For the three months ended March 31, 2015 , the $9,775 net change in unrealized depreciation was primarily the result of significant write-downs in our investments in CP Energy, Edmentum, Gulf Coast, and R-V. These instances of unrealized depreciation were partially offset by unrealized appreciation related to APRC, Echelon, First Tower, and UPRC.

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Net change in unrealized (depreciation) appreciation was $(253,233) and $130,528 for the nine months ended March 31, 2016 and March 31, 2015 , respectively. For the nine months ended March 31, 2016 , the $253,233 net decrease in unrealized depreciation was driven primarily by increases in market yields and the competitive environment faced by our energy-related companies. Unrealized losses on our CLO debt and equity investments comprised $153,524 of total net change in unrealized depreciation and unrealized losses on our energy-related investments comprised $77,618 of total net change in unrealized depreciation for the nine months ended March 31, 2016 . During the nine months ended March 31, 2016 , the valuation of our portfolio was also negatively impacted by increased regulatory scrutiny within the consumer finance industry and we recognized $26,762 in unrealized losses, primarily related to our investment in First Tower. Additionally, during the nine months ended March 31, 2016 , we reduced the value of our investment in Harbortouch by $37,228 due to current market developments and our investment in Pacific World by $12,109 due to declining operating results. These unrealized losses were offset by $56,807 unrealized appreciation in our REITs portfolio due to improved operating performance at the property-level. The remaining unrealized depreciation was partially offset by unrealized appreciation due to operating improvements across multiple investments and industries.
For the nine months ended March 31, 2015 , the $130,528 increase in net change in unrealized (depreciation) appreciation was primarily the result of realizing losses that were previously unrealized related to the sale of our investments in Airmall, Ajax, Borga and BXC, and the write-off of certain investments for which we eliminated the unrealized depreciation balances related to these investments. We also experienced significant write-ups in our investments in First Tower, Harbortouch, and NPRC. These instances of unrealized appreciation were partially offset by unrealized depreciation related to CP Energy, Edmentum, Gulf Coast, R-V, and United States Environmental Services, LLC.
Financial Condition, Liquidity and Capital Resources
For the nine months ended March 31, 2016 and March 31, 2015 , our operating activities provided $643,137 and used $88,389 of cash, respectively. There were no investing activities for the nine months ended March 31, 2016 and March 31, 2015 . Financing activities used $583,951 and provided $17,788 of cash during the nine months ended March 31, 2016 and March 31, 2015 , respectively, which included dividend payments of $255,063 and $328,620 , respectively.
Our primary uses of funds have been to continue to invest in portfolio companies, through both debt and equity investments, repay outstanding borrowings and to make cash distributions to holders of our common stock.
Our primary sources of funds have historically been issuances of debt and equity. More recently, we have and may continue to fund a portion of our cash needs through repayments and opportunistic sales of our existing investment portfolio. We may also securitize a portion of our investments in unsecured or senior secured loans or other assets. Our objective is to put in place such borrowings in order to enable us to expand our portfolio. During the nine months ended March 31, 2016 , we borrowed $615,000 and made repayments totaling $983,700 under our Revolving Credit Facility. As of March 31, 2016 , we had no outstanding balance on our Revolving Credit Facility, $1,089,000 outstanding on the Convertible Notes, Public Notes with a carrying value of $708,242 and $898,535 outstanding on the Prospect Capital InterNotes®. (See “Capitalization” above.)
Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 6.00%. As of March 31, 2016 and June 30, 2015 , we had $60,242 and $88,288 , respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies. The fair value of our undrawn committed revolvers and delayed draw term loans was $(202) as of March 31, 2016 and zero as of June 30, 2015 .
Our shareholders’ equity accounts as of March 31, 2016 and June 30, 2015 reflect cumulative shares issued as of those respective dates. Our common stock has been issued through public offerings, a registered direct offering, the exercise of over-allotment options on the part of the underwriters, our dividend reinvestment plan and in connection with the acquisition of certain controlled portfolio companies. When our common stock is issued, the related offering expenses have been charged against paid-in capital in excess of par. All underwriting fees and offering expenses were borne by us.
As part of our Repurchase Program, we delivered a notice with our annual proxy mailing on September 23, 2015 and our most recent notice was delivered with a shareholder letter mailing on February 2, 2016. This notice extends for six months after the date that notice is delivered. During the nine months ended March 31, 2016 , we repurchased 4,708,750 shares of our common stock pursuant to our Repurchase Program for $34,140 , or approximately $7.25 weighted average price per share at approximately a 30% discount to net asset value as of June 30, 2015. Our NAV per share was increased by approximately $0.02 for the nine months ended March 31, 2016 as a result of the share repurchases.
On November 3, 2015, our Registration Statement on Form N-2 was declared effective by the SEC. Under this Shelf Registration Statement, we can issue up to $4,822,456 of additional debt and equity securities in the public market as of March 31, 2016 .

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Off-Balance Sheet Arrangements
As of March 31, 2016 , we did not have any off-balance sheet liabilities or other contractual obligations that are reasonably likely to have a current or future material effect on our financial condition, other than those which originate from 1) the investment advisory and management agreement and the administration agreement and 2) the portfolio companies.
Recent Developments
During the period from April 1, 2016 through May 10, 2016 , we made four follow-on investments in NPRC totaling $39,504 to support our online consumer lending initiative. We invested $5,926 of equity through NPH and $33,578 of debt directly to ACL Loan Holdings, Inc. (“ACL”), a wholly-owned subsidiary of NPRC. In addition, during this period, we received a partial repayment of $11,800 ACL loan previously outstanding.

On April 6, 2016, we received partial repayments from APRC of $2,973 for our loans previously outstanding.

On April 6, 2016, we received partial repayments from UPRC of $7,567 for our loans previously outstanding.

On April 11, 2016, we announced the then current conversion rate on the 2020 Notes as 80.6670 shares of common stock per
$1 principal amount of the 2020 Notes converted, which is equivalent to a conversion price of approximately $12.40.

On April 16, 2016, we announced the then current conversion rate on the 2017 Notes as 87.7516 shares of common stock per
$1 principal amount of the 2017 Notes converted, which is equivalent to a conversion price of approximately $11.40.

On April 29, 2016, we invested an additional $25,000 of Senior Secured Term Loan A and an additional $25,000 of Senior Secured Term Loan B debt investment in Trinity Services Group, Inc. (“Trinity”).

On April 29, 2016, through our delayed draw term loan commitment with Instant Web, LLC, we funded $8,000 of Senior Secured Term Loan A and $8,000 of Senior Secured Term Loan B.

During the period from May 3, 2016 through May 10, 2016, we collectively sold 72.10% of the outstanding principal balance of the Senior Secured Term Loan A investment in Trinity for $25,000. There was no gain or loss realized on the sale.

During the period from April 1, 2016 through May 10, 2016 , our wholly-owned subsidiary PSBL purchased $5,555 of small business whole loans from OnDeck.

During the period from April 1, 2016 through May 10, 2016 we issued $4,451 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $4,395. In addition, we sold $953 in aggregate principal amount of our Prospect Capital
InterNotes® for net proceeds of $941 with expected closing on May 12, 2016.

On May 9, 2016, we announced the declaration of monthly dividends in the following amounts and with the following dates:
•
$0.08333 per share for May 2016 to holders of record on May 31, 2016 with a payment date of June 23, 2016;
•
$0.08333 per share for June 2016 to holders of record on June 30, 2016 with a payment date of July 21, 2016;
•
$0.08333 per share for July 2016 to holders of record on July 29, 2016 with a payment date of August 18, 2016; and
•
$0.08333 per share for August 2016 to holders of record on August 31, 2016 with a payment date of September 22, 2016.
Critical Accounting Policies and Estimates
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) pursuant to the requirements for reporting on Form 10-Q, ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6, 10 and 12 of Regulation S-X. Under the 1940 Act, ASC 946, and the regulations pursuant to Article 6 of Regulation S-X, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit us. Our consolidated financial statements include the accounts of Prospect, PCF, PSBL, PYC, and the Consolidated Holding Companies. All intercompany balances and transactions have been eliminated in consolidation. The financial results of our non-substantially wholly-owned holding companies and operating portfolio company investments are not consolidated in the financial statements. Any operating companies owned by the Consolidated Holding Companies are not consolidated.

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Reclassifications

Certain reclassifications have been made in the presentation of prior consolidated financial statements and accompanying notes to conform to the presentation as of and for the three and nine months ended March 31, 2016.

Use of Estimates
The preparation of the consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income, expenses, and gains and losses during the reported period. Changes in the economic environment, financial markets, creditworthiness of our portfolio companies and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.
Cash and Cash Equivalents
Cash and cash equivalents include funds deposited with financial institutions and short-term, highly-liquid overnight investments in money market funds. Cash and cash equivalents are carried at cost which approximates fair value.
Investment Classification
We are a non-diversified company within the meaning of the 1940 Act. As required by the 1940 Act, we classify our investments by level of control. As defined in the 1940 Act, “Control Investments” are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less, a beneficial ownership of more than 25% of the voting securities of an investee company. Under the 1940 Act, “Affiliate Investments” are defined by a lesser degree of influence and are deemed to exist through the possession outright or via the right to acquire within 60 days or less, beneficial ownership of 5% or more of the outstanding voting securities of another person. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.
Investment Transactions
Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. Amounts for investments recognized or derecognized but not yet settled are reported in due to broker or as a receivable for investments sold, respectively, in the consolidated statements of assets and liabilities.
Investment Risks
Our investments are subject to a variety of risks. Those risks include the following:
Market Risk
Market risk represents the potential loss that can be caused by a change in the fair value of the financial instrument.
Credit Risk
Credit risk represents the risk that we would incur if the counterparties failed to perform pursuant to the terms of their agreements with us.
Liquidity Risk
Liquidity risk represents the possibility that we may not be able to rapidly adjust the size of our investment positions in times of high volatility and financial stress at a reasonable price.
Interest Rate Risk
Interest rate risk represents a change in interest rates, which could result in an adverse change in the fair value of an interest-bearing financial instrument.

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

CLO investments may be riskier and less transparent to us than direct investments in underlying companies. CLOs typically will have no significant assets other than their underlying senior secured loans. Therefore, payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans.
Investment Valuation
To value our investments, we follow the guidance of ASC 820, Fair Value Measurement (“ASC 820”), that defines fair value, establishes a framework for measuring fair value in conformity with GAAP, and requires disclosures about fair value measurements. In accordance with ASC 820, the fair value of our investments is defined as the price that we would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market in which that investment is transacted.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchy:
Level 1 : Quoted prices in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2 : Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3 : Unobservable inputs for the asset or liability.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment.
Our Board of Directors has established procedures for the valuation of our investment portfolio. These procedures are detailed below.
Investments for which market quotations are readily available are valued at such market quotations.
For most of our investments, market quotations are not available. With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our Board of Directors has approved a multi-step valuation process each quarter, as described below.
1.
Each portfolio company or investment is reviewed by our investment professionals with independent valuation firms engaged by our Board of Directors.
2.
The independent valuation firms prepare independent valuations for each investment based on their own independent assessments and issue their report.
3.
The Audit Committee of our Board of Directors reviews and discusses with the independent valuation firms the valuation reports, and then makes a recommendation to the Board of Directors of the value for each investment.
4.
The Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser, the respective independent valuation firm and the Audit Committee.
Our non-CLO investments are valued utilizing a yield analysis, enterprise value (“EV”) analysis, net asset value analysis, liquidation analysis, discounted cash flow analysis, or a combination of methods, as appropriate. The yield analysis uses loan spreads for loans, dividend yields for certain investments and other relevant information implied by market data involving identical or comparable assets or liabilities. Under the EV analysis, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e., “waterfall” allocation). To determine the EV, we typically use a market multiples approach that considers relevant and applicable market trading data of guideline public companies, transaction metrics from precedent merger and acquisitions transactions and/or a discounted cash flow analysis. The

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net asset value analysis is used to derive a value of an underlying investment (such as real estate property) by dividing a relevant earnings stream by an appropriate capitalization rate. For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions. The liquidation analysis is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets. The discounted cash flow analysis uses valuation techniques to convert future cash flows or earnings to a range of fair values from which a single estimate may be derived utilizing an appropriate discount rate. The measurement is based on the net present value indicated by current market expectations about those future amounts.
In applying these methodologies, additional factors that we consider in valuing our investments may include, as we deem relevant: security covenants, call protection provisions, and information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the principal markets in which the portfolio company does business; publicly available financial ratios of peer companies; the principal market; and enterprise values, among other factors.
Our investments in CLOs are classified as ASC 820 Level 3 securities and are valued using a discounted cash flow model. The valuations have been accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date (i.e., expected maturity). For each CLO security, the most appropriate valuation approach has been chosen from alternative approaches to ensure the most accurate valuation for such security. To value a CLO, both the assets and the liabilities of the CLO capital structure are modeled. Our valuation agent utilizes other methods to validate the results from the discounted cash flow method. We use a waterfall engine to store the collateral data, generate collateral cash flows from the assets based on various assumptions for the risk factors, distribute the cash flows to the liability structure based on the payment priorities, and discount them back using current market discount rates. We are not responsible for and have no influence over the asset management of the portfolios underlying the CLO investments we hold as those portfolios are managed by non-affiliated third party CLO collateral managers. The main risk factors are: default risk, interest rate risk, downgrade risk, and credit spread risk.
Valuation of Other Financial Assets and Financial Liabilities
ASC 825, Financial Instruments , specifically ASC 825-10-25, permits an entity to choose, at specified election dates, to measure eligible items at fair value (the “Fair Value Option”). We have not elected the Fair Value Option to report selected financial assets and financial liabilities. See Note 8 for further discussion of our financial liabilities that are measured using another measurement attribute.
Convertible Notes
We have recorded the Convertible Notes at their contractual amounts. The Convertible Notes were analyzed for any features that would require bifurcation and such features were determined to be immaterial. See Note 5 for further discussion.
Revenue Recognition
Realized gains or losses on the sale of investments are calculated using the specific identification method.
Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Accretion of such purchase discounts or amortization of premiums is calculated using the effective interest method as of the purchase date and adjusted only for material amendments or prepayments. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as interest income.
Loans are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Unpaid accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and in management’s judgment, is likely to remain current. As of March 31, 2016 , approximately 0.5% of our total assets are in non-accrual status.
Interest income from investments in the “equity” class of security of CLO funds (typically preferred shares, income notes or subordinated notes) and “equity” class of security of securitized trust is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40, Beneficial Interests in Securitized Financial Assets . We monitor the expected cash inflows from our CLO and securitized trust equity investments, including the expected residual payments, and the effective yield is determined and updated periodically.
Dividend income is recorded on the ex-dividend date.

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Structuring fees and similar fees are recognized as income is earned, usually when paid. Structuring fees, excess deal deposits, net profits interests and overriding royalty interests are included in other income.
Federal and State Income Taxes
We have elected to be treated as a regulated investment company and intend to continue to comply with the requirements of the Code applicable to regulated investment companies. We are required to distribute at least 90% of our investment company taxable income and intend to distribute (or retain through a deemed distribution) all of our investment company taxable income and net capital gain to stockholders; therefore, we have made no provision for income taxes. The character of income and gains that we will distribute is determined in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified to paid-in capital.
If we do not distribute (or are not deemed to have distributed) at least 98% of our annual ordinary income and 98.2% of our capital gains in the calendar year earned, we will generally be required to pay an excise tax equal to 4% of the amount by which 98% of our annual ordinary income and 98.2% of our capital gains exceed the distributions from such taxable income for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income. As of March 31, 2016 and June 30, 2015, we accrued $400 and $305, respectively, for any unpaid potential excise tax liability and have included these amounts within other liabilities on the accompanying Consolidated Statements of Assets and Liabilities .
If we fail to satisfy the annual distribution requirement or otherwise fail to qualify as a RIC in any taxable year, we would be subject to tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would we be required to make distributions. Distributions would generally be taxable to our individual and other non-corporate taxable stockholders as ordinary dividend income eligible for the reduced maximum rate applicable to qualified dividend income to the extent of our current and accumulated earnings and profits, provided certain holding period and other requirements are met. Subject to certain limitations under the Code, corporate distributions would be eligible for the dividends-received deduction. To qualify again to be taxed as a RIC in a subsequent year, we would be required to distribute to our shareholders our accumulated earnings and profits attributable to non-RIC years reduced by an interest charge of 50% of such earnings and profits payable by us as an additional tax. In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of ten years.
We follow ASC 740, Income Taxes (“ASC 740”). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. As of March 31, 2016 and for the three and nine months then ended, we did not record any unrecognized tax benefits or liabilities. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Although we file both federal and state income tax returns, our major tax jurisdiction is federal. Our tax returns for our federal tax years ended August 31, 2012 and thereafter remain subject to examination by the Internal Revenue Service.
Dividends and Distributions
Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount, if any, to be paid as a monthly dividend or distribution is approved by our Board of Directors quarterly and is generally based upon our management’s estimate of our future earnings. Net realized capital gains, if any, are distributed at least annually.
Financing Costs
We record origination expenses related to our Revolving Credit Facility and Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Unsecured Notes”) as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method for our Revolving Credit Facility and the effective interest method for our Unsecured Notes over the respective expected life or maturity. In the event that we modify or extinguish our debt before maturity, we follow the guidance in ASC 470-50, Modification and Extinguishments (“ASC 470-50”). For modifications to or exchanges of our Revolving Credit Facility, any unamortized deferred costs relating to lenders who are not part of the new lending group are expensed. For extinguishments of our Unsecured Notes, any unamortized deferred costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment. Effective July 1, 2016, these costs will be reclassified to the

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balance sheet as a deduction from the debt liability rather than an asset, in accordance with Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”).
We may record registration expenses related to shelf filings as prepaid assets. These expenses consist principally of SEC registration fees, legal fees and accounting fees incurred. These prepaid assets are charged to capital upon the receipt of proceeds from an equity offering or charged to expense if no offering is completed. As of March 31, 2016 and June 30, 2015, there are no prepaid assets related to registration expenses and all amounts incurred have been expensed.
Guarantees and Indemnification Agreements
We follow ASC 460, Guarantees (“ASC 460”). ASC 460 elaborates on the disclosure requirements of a guarantor in its interim and annual consolidated financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, for those guarantees that are covered by ASC 460, the fair value of the obligation undertaken in issuing certain guarantees.
Per Share Information
Net increase or decrease in net assets resulting from operations per share is calculated using the weighted average number of common shares outstanding for the period presented. In accordance with ASC 946, convertible securities are not considered in the calculation of net asset value per share.
Recent Accounting Pronouncements
In April 2015, the FASB issued ASU 2015-03 which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. The new guidance will make the presentation of debt issuance costs consistent with the presentation of debt discounts or premiums. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The new guidance must be applied on a retrospective basis to all prior periods presented in the financial statements. The adoption of the amended guidance in ASU 2015-03 is expected to decrease total liabilities by decreasing the carrying value of our debt, and is expected to decrease total assets by decreasing deferred financing costs of our debt, but is not expected to have any other significant effect on our consolidated financial statements and disclosures.
In January 2016, the FASB issued Accounting Standards Update 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. One such amendment requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option. That presentation addresses financial statement users’ feedback that presenting the total change in fair value of a liability in net income reduced the decision usefulness of an entity’s net income when it had a deterioration in its credit worthiness. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The new guidance must be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of ASU 2016-01. The adoption of the amended guidance in ASU 2016-01 is not expected to have a significant effect on our consolidated financial statements and disclosures.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, including changes in interest rates and equity price risk. Some of the loans in our portfolio have floating interest rates.
We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of higher interest rates with respect to our portfolio of investments. During the quarter ended March 31, 2016 , we did not engage in hedging activities.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures

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As of March 31, 2016 , we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II
Item 1. Legal Proceedings
From time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to intellectual property, employment, tax, regulation, contract or other matters. The resolution of such matters as may arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any material legal proceedings as of March 31, 2016 . Our Investment Adviser and Administrator have been named as defendants in a lawsuit filed on April 21, 2016 by a purported shareholder of Prospect in the United States District Court for the Southern District of New York under the caption Paskowitz v. Prospect Capital Management and Prospect Administration. The complaint alleges that the defendants received purportedly excessive management and administrative services fees from us in violation of Section 36(b) of the 1940 Act. The plaintiff seeks to recover on behalf of us damages in an amount not specified in the complaint. The defendants have informed us that they believe the complaint is without merit and intend to defend themselves vigorously against the plaintiff’s claims. We believe that the lawsuit is not likely to have a material adverse effect on Prospect.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, 2015 , which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits, Financial Statement Schedules
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC (according to the number assigned to them in Item 601 of Regulation S-K):

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Exhibit No.
3.1
Articles of Amendment and Restatement(1)
3.2
Amended and Restated Bylaws(2)
4.1
Four Hundred Eleventh Supplemental Indenture dated as of January 7, 2016, to the U.S. Bank Indenture and Form of 5.375% Prospect Capital InterNote® due 2021(3)
4.2
Four Hundred Twelfth Supplemental Indenture dated as of January 14, 2016, to the U.S. Bank Indenture and Form of 5.375% Prospect Capital InterNote® due 2021(4)
4.3
Four Hundred Thirteenth Supplemental Indenture dated as of January 22, 2016, to the U.S. Bank Indenture and Form of 5.375% Prospect Capital InterNote® due 2021(5)
4.4
Four Hundred Fourteenth Supplemental Indenture dated as of March 3, 2016, to the U.S. Bank Indenture and Form of 5.375% Prospect Capital InterNote® due 2021(7)
4.5
Four Hundred Fifteenth Supplemental Indenture dated as of March 10, 2016, to the U.S. Bank Indenture and Form of 5.375% Prospect Capital InterNote® due 2021(8)
4.6
Four Hundred Sixteenth Supplemental Indenture dated as of March 17, 2016, to the U.S. Bank Indenture and Form of 5.375% Prospect Capital InterNote® due 2021(9)
4.7
Four Hundred Seventeenth Supplemental Indenture dated as of March 24, 2016, to the U.S. Bank Indenture and Form of 5.500% Prospect Capital InterNote® due 2021(10)
4.8
Four Hundred Eighteenth Supplemental Indenture dated as of March 31, 2016, to the U.S. Bank Indenture and Form of 5.500% Prospect Capital InterNote® due 2021(11)
10.3
Dividend Reinvestment and Direct Stock Purchase Plan(6)
11
Computation of Per Share Earnings (included in the notes to the financial statements contained in this report)
12
Computation of Ratios (included in the notes to the financial statements contained in this report)
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended*
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended*
32.1
Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)*
32.2
Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)*
________________________
*
Filed herewith.
(1)
Incorporated by reference to Exhibit 3.1 of the Registrant’s form 8-K, filed on May 9, 2014.
(2)
Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K, filed on December 11, 2015.
(3)
Incorporated by reference from the Registrant's Post-Effective Amendment No. 8 to the Registration Statement on Form N-2, filed on January 7, 2016.
(4)
Incorporated by reference from the Registrant's Post-Effective Amendment No. 9 to the Registration Statement on Form N-2, filed on January 14, 2016.
(5)
Incorporated by reference from the Registrant's Post-Effective Amendment No. 10 to the Registration Statement on Form N-2, filed on January 22, 2016.
(6)
Incorporated by reference from the Registrant's Post-Effective Amendment No. 11 to the Registration Statement on Form N-2, filed on February 12, 2016.
(7)
Incorporated by reference from the Registrant's Post-Effective Amendment No. 12 to the Registration Statement on Form N-2, filed on March 3, 2016.
(8)
Incorporated by reference from the Registrant's Post-Effective Amendment No. 13 to the Registration Statement on Form N-2, filed on March 10, 2016.
(9)
Incorporated by reference from the Registrant's Post-Effective Amendment No. 14 to the Registration Statement on Form N-2, filed on March 17, 2016.
(10)
Incorporated by reference from the Registrant's Post-Effective Amendment No. 15 to the Registration Statement on Form N-2, filed on March 24, 2016.
(11)
Incorporated by reference from the Registrant's Post-Effective Amendment No. 16 to the Registration Statement on Form N-2, filed on March 31, 2016.

158

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 10, 2016 .
PROSPECT CAPITAL CORPORATION
By:
/s/ JOHN F. BARRY III
John F. Barry III
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ JOHN F. BARRY III
/s/ ANDREW C. COOPER
John F. Barry III
Andrew C. Cooper
Chairman of the Board, Chief Executive Officer and Director
Director
May 10, 2016
May 10, 2016
/s/ BRIAN H. OSWALD
/s/ WILLIAM J. GREMP
Brian H. Oswald
William J. Gremp
Chief Financial Officer
Director
May 10, 2016
May 10, 2016
/s/ M. GRIER ELIASEK
/s/ EUGENE S. STARK
M. Grier Eliasek
Eugene S. Stark
President, Chief Operating Officer and Director
Director
May 10, 2016
May 10, 2016

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