• A 'REIT for private businesses'. (Like a Real Estate Investment Trust (REIT) invests in properties and pays high dividends, PSEC invests in loans and equity of private companies and distributes most of its income.)
• A publicly traded private credit and equity fund. (PSEC allows individual investors to access private company debt and equity investments, an asset class typically reserved for institutional funds managed by firms like Blackstone or Ares Management.)

• Senior and Secured Debt: Providing collateralized loans that have priority in repayment to middle-market companies.
• Unitranche Debt: Offering a single debt facility that combines both senior and subordinated debt tranches.
• Mezzanine Debt: Supplying unsecured and subordinated loans, often with equity components like warrants, to support growth or acquisitions.
• Equity Investments: Making direct equity investments in private companies, typically alongside debt financing, to acquire ownership stakes.

Prospect Capital (PSEC) is a Business Development Company (BDC) that provides financing to other companies. Therefore, its "customers" are primarily the companies to which it provides debt and equity capital.

Prospect Capital primarily sells to other companies. However, due to the nature of its business as a BDC, its customer base consists predominantly of privately held, U.S. middle-market companies seeking financing for growth, acquisitions, or recapitalizations. These companies typically do not have public stock symbols.

BDCs like Prospect Capital maintain a diversified portfolio of investments across various industries. As such, there are typically no individual "major customers" that represent a disproportionately large share of their business and would be named as such in the traditional sense. Instead, Prospect Capital's strategy is to invest in a broad range of private companies. Given the private nature of these companies and the diversification of its portfolio, specific names of "major customers" with public stock symbols cannot be provided.

Instead, Prospect Capital's customer base can be broadly characterized as privately-held, middle-market companies operating in various sectors, including but not limited to:

• Healthcare Services
• Business Services
• Manufacturing & Industrials
• Financial Services
• Consumer Goods & Services
• Information Technology

• KPMG LLP
• Computershare Limited (ASX: CPU)
• The Bank of New York Mellon Corporation (NYSE: BK)

John F. Barry III Chairman and Chief Executive Officer

Mr. Barry has served as Chairman and CEO of Prospect Capital Corporation since 2004. He has been the managing member of Prospect Management Group GP LLC (PMG) since 1998, after purchasing PMG, and an officer of PMG since 1990. Mr. Barry co-founded Prospect Capital Management, a private equity firm established in 1988. He has served as Chairman and CEO of Bondnet Trading Systems, Inc. and on the boards of over a dozen private and public portfolio companies. His prior experience includes managing the Corporate Finance Department of L.F. Rothschild & Company and working as an investment banker at Merrill Lynch & Co. He is also responsible for managing many of Prospect's relationships with private equity sponsors.

M. Grier Eliasek President and Chief Operating Officer

Mr. Eliasek is the President and COO of Prospect Capital Corporation and a Managing Director of Prospect Capital Management. He also serves on Prospect Capital Corporation's Board of Directors. He is responsible for leading the team in origination and assessment of investments. Before joining Prospect Capital, Mr. Eliasek was a Managing Director with Prospect Street Ventures, an investment management firm that invested in private equity and venture capital structures. He also served as a consultant with Bain & Company from 1995 to 1998. Mr. Eliasek is also the Chairman and CEO of Priority Income Fund, Inc.

Kristin L. Van Dask Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary

Ms. Van Dask has served as Prospect Capital's CFO, CCO, Treasurer, and Secretary for Prospect's funds under management. She has worked in investment management and accounting since 2001, with extensive experience in finance, accounting, and financial reporting across various structures, including business development companies, closed-end funds, securitizations, and private partnerships. Before Prospect, she was an Accounting Manager in the Structured Finance Division of GSC Group LLC, where she handled accounting and financial reporting for private equity and hedge funds. She also held various positions within the assurance practice of Ernst & Young LLP, working with private and public clients, private equity funds, and investment advisory partnerships.

Daria Becker Head of Administration

Ms. Becker has worked in investment management and finance since 1978. She oversees Prospect's operations, human resources, and finances. Her prior experience includes managing a family office that specialized in hedge fund and alternative investments, and managing a real estate partnership. From 1978 to 1984, she was an officer at Citibank North America, focusing on lending, new business development, and marketing.

Bart J. deBie Managing Director

Mr. deBie has been with Prospect since 2004 and in the finance industry since 1997. He is responsible for overseeing Prospect's combined control equity and debt financing business. Mr. deBie serves as a director on the Boards of several Prospect-controlled companies, including Pacific World, Mity Inc., R-V Industries, and Valley Electric. He was previously on the Boards of other Prospect-controlled entities such as Airmall and Ajax Rolled Ring.

Key Risks to Prospect Capital (PSEC)

Prospect Capital (PSEC) faces several significant risks that have impacted its business and investor confidence. The most prominent risks revolve around its corporate governance, consistent decline in asset value, and challenges in sustaining its dividend payouts.

1. Dysfunctional Corporate Culture and Eroding Reputation: Reports indicate a dysfunctional corporate culture, particularly centered around CEO John Barry III, which has allegedly led to erratic business decisions, damaged Prospect Capital's reputation, and isolated the firm within the private credit industry. This internal dysfunction has reportedly hindered the company's ability to secure desirable loan deals, compelling it towards riskier investments with struggling borrowers. This leadership problem is seen as a root cause undermining the firm's standing and contributing to its external business decline.
2. Consistent Decline in Net Asset Value (NAV) and Shareholder Value Erosion: Prospect Capital has experienced a persistent decline in its Net Asset Value (NAV) per share over the past decade, resulting in substantial erosion of shareholder value. The company's stock price has significantly dropped, with a reported 65% decline over the last decade, and it trades at a considerable discount to its NAV. This trend points to challenges in capital allocation and a disappointing long-term performance in enhancing shareholder value.
3. Challenges in Dividend Sustainability and Reliance on Non-Cash Income: Prospect Capital has a history of dividend cuts and has consistently faced difficulties in generating sufficient cash flow from its net investment income to fully cover its dividend distributions. The company has notably relied on "pay-in-kind" (PIK) interest, where interest is added to the loan principal rather than paid in cash, to supplement its income. While there are efforts to shift towards lower-risk assets, this reliance on non-cash income and past dividend reductions raise significant concerns about the long-term sustainability and predictability of PSEC's dividend yield.

The accelerated growth and institutionalization of the broader private credit market, particularly direct lending funds managed by large institutional asset managers and private equity firms, poses a clear emerging threat. These highly capitalized, often less-regulated private funds are increasingly competing for the same middle-market lending opportunities that Prospect Capital and other Business Development Companies (BDCs) target. This intensification of competition can lead to yield compression on loans, potentially erode underwriting standards across the market as capital chases deals, and make it more challenging for PSEC to source attractive, high-quality investment opportunities, thereby pressuring its profitability and dividend sustainability.

Prospect Capital (PSEC) operates in several addressable markets within the United States, primarily focusing on middle-market lending, real estate investments, and structured credit.

Middle-Market Lending

Prospect Capital specializes in providing private debt and equity capital to U.S. middle-market companies. The U.S. middle market, defined as businesses with revenues generally between $10 million and $1 billion, comprises approximately 200,000 businesses, generates $13 trillion in annual revenue, and employs over 40 million people. Within this segment, the broader private credit market in the U.S. accounts for approximately $1.1 trillion of the estimated $1.6 trillion global private credit market. Direct lending, which is a core strategy for Prospect Capital, represents over half of this U.S. private credit market. In 2025, US-based direct lending funds deployed roughly $500 billion in new loans. As of the end of 2023, direct lending was the largest private debt strategy with $241 billion in assets under management.

Real Estate Investments

Prospect Capital invests in real estate, particularly multi-family residential properties in the U.S. The U.S. multifamily market was valued at $265 billion in 2022 and is projected to reach $466 billion by 2030, growing at a compound annual growth rate of 7.31% from 2023 to 2030. Multifamily sales volume in the U.S. totaled $157.7 billion over the 12 months leading up to May 2025. Fannie Mae estimates annual multifamily originations in the U.S. to be approximately $350 billion in 2025.

Structured Credit

The company also invests in structured credit, specifically collateralized loan obligations (CLOs). The U.S. CLO market has grown to over $1 trillion as of February 2024 and is the largest buyer of leveraged loans. The global collateralized loan obligation market size was $1.41 trillion in 2024 and is expected to reach $1.6 trillion in 2025, with North America being the largest regional market. Gross issuance in the U.S. broadly syndicated loan (BSL) CLO market reached $220 billion in the first half of 2025, while the middle market (MM) segment saw $44 billion in total gross issuance during the same period. U.S. CLO sales reached approximately $184.7 billion in 2024, setting an annual issuance record, with forecasts for 2025 ranging up to $215 billion.

Expected Drivers of Future Revenue Growth for Prospect Capital (PSEC)

Over the next 2-3 years, Prospect Capital (PSEC) is expected to drive future revenue growth through several strategic initiatives:

1. Increased Focus on First-Lien Senior Secured Middle Market Loans: Prospect Capital is actively repositioning its investment portfolio to emphasize first-lien senior secured middle-market loans. This strategic shift is aimed at enhancing the quality and security of its investments, and the company has seen its first-lien investment share increase to 70.1%, a 3.2 percentage point increase year-over-year. This focus is expected to generate attractive risk-adjusted yields and a high-quality recurring revenue profile.
2. Targeting Smaller Companies with Reduced Competition: The company is concentrating new investment originations on businesses with less than $50 million in EBITDA. This strategy targets the lower middle market, including companies with smaller funded private equity sponsors, independent sponsors, and no third-party financial sponsors, where Prospect Capital anticipates less competition and the potential for better returns.
3. Redeployment of Capital from Real Estate Exits: Prospect Capital is actively exiting its real estate property portfolio. Since June 2025, the company has successfully exited three property investments, yielding approximately $59 million in net proceeds. These proceeds, along with future asset sale proceeds from the remaining properties, are expected to be redeployed primarily into higher-yielding first-lien senior secured loans, optimizing the overall portfolio's income generation.
4. Optimizing Funding Strategy and Effective Debt Management: Prospect Capital's effective debt management, including the successful institutional issuance of approximately $168 million in senior unsecured 5.5% Notes due 2030, strengthens its financial positioning. This optimization of its funding strategy and robust liquidity, with $1.5 billion in cash and undrawn revolving credit facility commitments, allows for efficient capital deployment, which can contribute to higher net investment income.

Share Repurchases

• Prospect Capital has a share repurchase program in place, which allows for the repurchase of common shares at prices below net asset value.
• Specific dollar amounts of common stock repurchases over the last 3-5 years are not explicitly detailed in the provided information.

Share Issuance

• As of December 31, 2024, Prospect Capital has raised significant capital through its existing $2.25 billion perpetual preferred stock offering programs.
• As of December 31, 2023, the company had issued approximately $1.6 billion of its 6.50%, 5.50%, and Floating Rate perpetual preferred stock, with total preferred stock exceeding $1.7 billion including a $150 million listed 5.35% perpetual preferred stock offering.
• Common stock transactions have included issuances through public offerings, a common stock dividend reinvestment plan, and shares issued to acquire investments.

Outbound Investments

• During the fiscal year ended June 30, 2024, Prospect Capital closed $764 million of new investments, primarily (91%) consisting of first lien, senior secured loans, across 38 new and existing portfolio companies.
• The company's investment strategy focuses on providing flexible private debt and equity capital to U.S. middle-market businesses across various industries, including real estate, with 85% of investment assets in first lien or other senior secured debt.
• As of October 14, 2024, Prospect Capital maintained an investment pipeline of over $350 million, with transactions under due diligence and analysis.

Capital Expenditures

• No significant capital expenditures for Prospect Capital itself were explicitly reported in the provided financial information for the last 3-5 years, which is typical for a business development company.