# PennantPark Floating Rate Capital Ltd.: Form 10-Q for the period ended Dec 31, 2023

- Company: [PennantPark Floating Rate Capital Ltd.](/companies/pflt.md) (CIK 1504619)
- Form: 10-Q
- Filed: 2024-02-07
- Accepted by EDGAR: Feb 7, 2024, 16:07 ET
- Period: 2023-12-31
- Accession: 0000950170-24-012187
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1504619/000095017024012187/pflt-20231231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1504619/000095017024012187/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Net income | 3 months, 2023-10-01 to 2023-12-31 | $22.5m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2023-10-01 to 2023-12-31 | 58,734,702 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-10-01 to 2023-12-31 | −$181.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 3 months, 2023-10-01 to 2023-12-31 | $18.1m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2023-12-31 | $75.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-12-31 | $1.36bn | us-gaap:Assets |
| Total liabilities | at 2023-12-31 | $701.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-12-31 | $658.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 104,926 characters.

### FORWARD-LOOKING STATEMENTS

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

- our future operating results;
- our business prospects and the prospects of our prospective portfolio companies;
- changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets that could result in changes to the value of our assets;
- the dependence of our future success on the general economy and its impact on the industries in which we invest;
- the impact of a protracted decline in the liquidity of credit markets on our business;
- the impact of investments that we expect to make;
- the impact of fluctuations in interest rates and foreign exchange rates on our business and our portfolio companies;
- our contractual arrangements and relationships with third parties;
- the valuation of our investments in portfolio companies, particularly those having no liquid trading market;
- the ability of our prospective portfolio companies to achieve their objectives;
- our expected financings and investments and ability to fund capital commitments to PSSL;
- the adequacy of our cash resources and working capital;
- the timing of cash flows, if any, from the operations of our prospective portfolio companies;
- the impact of price and volume fluctuations in the stock market;
- increasing levels of inflation, and its impact on us and our portfolio companies;
- the ability of our Investment Adviser to locate suitable investments for us and to monitor and administer our investments;
- the impact of future legislation and regulation on our business and our portfolio companies;
- the impact of the ongoing invasion of Ukraine by Russia other world economic and political issues; and
- the inability to develop and maintain effective internal control over financial reporting.

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

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

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

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

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

### Overview

PennantPark Floating Rate Capital Ltd. is a BDC whose objectives are to generate both current income and capital appreciation while seeking to preserve capital by investing primarily in floating rate loans and other investments made to U.S. middle-market companies.

We believe that floating rate loans to U.S. middle-market companies offer attractive risk-reward to investors due to a limited amount of capital available for such companies. We use the term “middle-market” to refer to companies with annual revenues between $50 million and $1 billion. Our investments are typically rated below investment grade. Securities rated below investment grade are often referred to as “leveraged loans,” “high yield” securities or “junk bonds” and are often higher risk compared to debt instruments that are rated above investment grade and have speculative characteristics. However, when compared to junk bonds and other non-investment grade debt, senior secured floating rate loans typically have more robust capital-preserving qualities, such as historically lower default rates than junk bonds, represent the senior source of capital in a borrower’s capital structure and often have certain of the borrower’s assets pledged as collateral. Our debt investments may generally range in maturity from three to ten years and are made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and geographical regions.

Under normal market conditions, we generally expect that at least 80% of the value of our managed assets will be invested in floating rate loans and other investments bearing a variable-rate of interest. We generally expect that first lien secured debt will represent at least 65% of our overall portfolio. We also generally expect to invest up to 35% of our overall portfolio opportunistically in other types of investments, including second lien secured debt and subordinated debt and, to a lesser extent, equity investments. We seek to create a diversified portfolio by generally targeting an investment size between $5 million and $30 million, on average, although we expect that this investment size will vary proportionately with the size of our capital base.

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

### Organization and Structure of PennantPark Floating Rate Capital Ltd.

PennantPark Floating Rate Capital Ltd., a Maryland corporation organized in October 2010, is a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for federal income tax purposes we elected to be treated, and intend to qualify annually, as a RIC under the Code.

Our investment activities are managed by the Investment Adviser. Under our Investment Management Agreement, we have agreed to pay our Investment Adviser an annual base management fee based on our average adjusted gross assets as well as an incentive fee based on our investment performance. We have also entered into an Administration Agreement with the Administrator. Under our Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer, Chief Compliance Officer, Corporate Counsel and their respective staffs. Our board of directors, a majority of whom are independent of us, provides overall supervision of our activities, and the Investment Adviser supervises our day-to-day activities.

### Revenues

We generate revenue in the form of interest income on the debt securities we hold and capital gains and dividends, if any, on investment securities that we may acquire in portfolio companies. Our debt investments, whether in the form of first lien secured debt, second lien secured debt or subordinated debt, typically have a term of three to ten years and bear interest at a floating or fixed rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, our investments provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally becomes due at the maturity date. In addition, we may generate revenue in the form of amendment, commitment, origination, structuring or diligence fees, fees for providing significant managerial assistance and possibly consulting fees. Loan origination fees, OID and market discount or premium are capitalized and accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which may or may not be non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees and agency fees, and are recorded as other investment income when earned. Litigation settlements are accounted for in accordance with the gain contingency provisions of ASC Subtopic 450-30, Gain Contingencies, or ASC 450-30.

### Expenses

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

- the cost of calculating our NAV, including the cost of any third-party valuation services;
- the cost of effecting sales and repurchases of shares of our common stock and other securities;
- fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence and reviews of prospective investments or complementary businesses;
- expenses incurred by the Investment Adviser in performing due diligence and reviews of investments, including expenses incurred by the Investment Adviser payable to third parties (including agents and consultants) in monitoring our financial and legal affairs for and in monitoring our investments;
- transfer agent and custodial fees;
- fees and expenses associated with marketing efforts;
- federal and state registration fees and any exchange listing fees;
- federal, state, local and foreign taxes;
- independent directors’ fees and expenses;
- brokerage commissions;
- fidelity bond, directors and officers, errors and omissions liability insurance and other insurance premiums;
- direct costs such as printing, mailing, long distance telephone and staff;
- fees and expenses associated with independent audits and outside legal costs;
- costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and
- all other expenses incurred by either the Administrator or us in connection with administering our business, including payments under our Administration Agreement that will be based upon our allocable portion of overhead, and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer, Corporate Counsel and their respective staffs.

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

### Restatement of Previously Issued Financial Statements

As noted in the Annual Report on Form 10-K for the year ended September 30, 2023, during the preparation of the financial statements as of and for the year ended September 30, 2023, Management identified an error in the classification and presentation of cash pertaining to the Company’s affiliates – PSSL and PTSF in the September 30, 2022 financial statements. The Company recorded cash activity and due to affiliates pertaining to their investments as a reduction of the cash account instead of presenting the related cash and cash equivalents as an asset and a due to affiliates as a liability. This misclassification also existed at December 31, 2022, and the impact of the error correction is reflected on the consolidated statement of cash flows for the three months ended December 31, 2022 as an increase to cash and cash equivalents, beginning of period totaling $3.6 million, an increase to cash and cash equivalents, end of period totaling $2.1 million, and decrease in due to affiliates of $1.5 million.

There was no impact from the error correction on net investment income or net increase (decrease) in net assets resulting from operations in total or on a per common share basis as reported on the consolidated statements of operations for the three months ended December 31, 2022. The corrections related to the prior year comparative cash flow statement amounts were reported in the quarter ended December 31, 2023.

As a result of the error in the classification and presentation of cash described above, we conducted an analysis to determine whether incentive-based compensation was erroneously awarded, thereby necessitating recovery under the Clawback Policy we adopted effective December 1, 2023. Because we do not pay or otherwise award incentive-based compensation to the Company’s executives, we concluded that the error did not result in erroneously-awarded incentive-based compensation, and therefore no compensation recovery is required.

### PORTFOLIO AND INVESTMENT ACTIVITY

### PennantPark Floating Rate Capital Ltd.

As of December 31, 2023, our portfolio totaled $1,270.9 million, and consisted of $1,090.5 million of first lien secured debt (including $210.1 million in PSSL), $0.2 million of second lien secured debt and $180.3 million of preferred and common equity (including $52.1 million in PSSL). Our debt portfolio consisted of approximately 100% variable-rate investments. As of December 31, 2023, we had one portfolio company on non-accrual, representing 0.1% and zero percent of our overall portfolio on a cost and fair value basis, respectively. As of December 31, 2023, the portfolio had net unrealized depreciation of $19.6 million. Our overall portfolio consisted of 141 companies with an average investment size of $9.0 million and had a weighted average yield on debt investments of 12.5%, and was invested 86% in first lien secured debt (including 17% in PSSL), less than 1% in second lien secured debt and 14% in preferred and common equity (including 4% in PSSL). As of December 31, 2023, approximately 100% of the investments held by PSSL were first lien secured debt.

As of September 30, 2023, our portfolio totaled $1,067.2 million and consisted of $r906.2 million of first lien secured debt (including $210.1 million in PSSL), $0.1 million of second lien secured debt and $160.9 million of preferred and common equity (including $50.9 million in PSSL). Our debt portfolio consisted of approximately 100% variable-rate investments. As of September 30, 2023, we had three portfolio companies on non-accrual, representing 0.9% and 0.2% of our overall portfolio on a cost and fair value basis, respectively. As of September 30, 2023, the portfolio had net unrealized depreciation of $25.7 million. Our overall portfolio consisted of 131 companies with an average investment size of $8.1 million, had a weighted average yield on debt investments of 12.6%, and was invested 85% in first lien secured debt (including 20% in PSSL), less than 1% in second lien secured debt and 15% in preferred and common equity (including 5% in PSSL). As of September 30, 2023, 99% of the investments held by PSSL were first lien secured debt.

For the three months ended December 31, 2023, we invested $302.6 million in 13 new and 34 existing portfolio companies at a weighted average yield on debt investments of 11.9%. For the three months ended December 31, 2023, sales and repayments of investments totaled $103.8 million, including $62.7 million of sales to PSSL.

For the three months ended December 31, 2022, we invested $65.6 million in four new and 29 existing portfolio companies at a weighted average yield on debt investments of 11.2%. For the three months ended December 31, 2022 sales and repayments of investments totaled $63.0 million, including $18.8 million of sales to PSSL.

### PennantPark Senior Secured Loan Fund I LLC

As of December 31, 2023, PSSL’s portfolio totaled $836.9 million and consisted of 106 companies with an average investment size of $7.9 million and at a weighted average yield on debt investments of 12.1%. As of September 30, 2023, PSSL’s portfolio totaled $785.9 million, consisted of 105 companies with an average investment size of $7.5 million and at a weighted average yield on debt investments of 12.1%.

For the three months ended December 31, 2023, PSSL invested $75.7 million (including $62.7 million purchased from the Company) in four new and nine existing portfolio companies at a weighted average yield on debt investments of 12.3%. Sales and repayments of investments for the three months ended December 31, 2023 totaled $27.7 million.

For the three months ended December 31, 2022, PSSL invested $29.5 million (including $18.8 million purchased from the Company) in seven new and eight existing portfolio companies at a weighted average yield on debt investments of 11.1%. For the three months ended December 31, 2022 sales and repayments of investments totaled $28.8 million.

### At-the-Market Offering

On March 27, 2023 we entered into equity distribution agreements with JMP Securities LLC, Raymond James & Associates, Inc. and Truist Securities, Inc. (together, the "Equity Distribution Agreements"), as sales agents (each a "Sales Agent" and together, the "Sales Agents") in connection with the sale of shares of our common stock, which we amended on August 11, 2023 with an aggregate offering of up to $250 million under an at-the-market offering ("ATM Program"). On August 11, 2023, we amended and restated the Equity Distribution Agreements with each of the Sales Agents (together the "Amended and Restated Equity Distribution Agreements") to increase the aggregate offering price to up to $250 million. The Amended and Restated Equity Distribution Agreements provide that we may offer and sell shares of our common stock from time to time through a sales agent in amounts and at times to be determined by us. Actual sales will depend on a variety of factors to be determined by us from time to time, including, market conditions and the trading price of our common stock. The Investment Adviser may, from time to time, in its sole discretion, pay some or all of the commissions payable under the equity distribution agreements or make additional supplemental payments to ensure that the sales price per share of our common stock in connection with all of the offerings made hereunder will not be less than our current NAV per share. Any such payments made by the Investment Adviser will not be subject to reimbursement by us.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to ASC serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued. In addition to the discussion below, we describe our critical accounting policies in the notes to our Consolidated Financial Statements. We discuss our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K. There have been no significant changes in our critical accounting estimates during the three months from those disclosed in our 2023 Annual Report on Form 10-K.

### Investment Valuations

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

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

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

(2) Preliminary valuation conclusions are then documented and discussed with the management of our Investment Adviser;

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

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

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

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

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

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

Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.

Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.

Level 3: Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our 2031 Asset-Backed Debt, 2023 Notes and our Credit Facility are classified as Level 3. Our 2026 Notes are classified as Level 2 as they are financial instruments with readily observable market inputs. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.

On December 3, 2020, the SEC adopted Rule 2a-5 under the 1940 Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The new rule clarifies how fund boards of directors can satisfy their valuation obligations and requires, among other things, the boards of directors to periodically assess material valuation risks and take steps to manage those risks. The rule also permits boards of directors, subject to board oversight and certain other conditions, to designate the fund’s investment adviser to perform fair value determinations. The new rule went into effect on March 8, 2021 and had a compliance date of September 8, 2022. We came into compliance with Rule 2a-5 under the 1940 Act before the compliance date. While our board of directors has not elected to designate the Investment Adviser as the valuation designee at this time, we have adopted certain revisions to our valuation policies and procedures in order comply with the applicable requirements of Rule 2a-5 under the 1940 Act.

In addition to using the above inputs to value cash equivalents, investments, our 2023 Notes, our 2026 Notes, our 2031 Asset-Backed Debt and our Credit Facility, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.

Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to the Credit Facility and the 2023 Notes. We elected to use the fair value option for the Credit Facility and the 2023 Notes to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we did not incur any expenses relating to amendment costs on the Credit Facility and debt issuance costs on the 2023 Notes during the three months ended December 31, 2023 and 2022, respectively. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facility and the 2023 Notes are reported in our Consolidated Statements of Operations. We elected not to apply ASC 825-10 to any other financial assets or liabilities, including the 2026 Notes and the 2031 Asset-Backed Debt.

For the three months ended December 31, 2023 and 2022, the Credit Facility and the 2023 Notes had a net change in unrealized appreciation (depreciation) of less than $0.1 million and $(2.1) million, respectively. As of December 31, 2023 and September 30, 2023, the net unrealized appreciation (depreciation) on the Credit Facility as applicable, and the 2023 Notes totaled $0.1 million and zero, respectively. We use a nationally recognized independent valuation service to measure the fair value of the Credit Facility in a manner consistent with the valuation process that our board of directors uses to value our investments. Our 2023 Notes traded on the TASE and were fully paid off during the quarter.

### Revenue Recognition

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

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

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in the fair values of our portfolio investments, our Credit Facility, the 2023 Notes during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

### Foreign Currency Translation

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

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

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

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

### Payment -in-kind, or PIK Interest

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

### Federal Income Taxes

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

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

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

For the three months ended December 31, 2023 and 2022, we recorded a provision for taxes on net investment income of $0.2 million and $0.5 million, respectively, pertaining to federal excise tax.

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

For the three months ended December 31, 2023, the Company recognized a provision for taxes of zero on unrealized appreciation (depreciation) on investments by the Taxable Subsidiary. For the three months ended December 31, 2022 the Company recognized a provision for taxes of $0.7 million on unrealized appreciation (depreciation) on investments by the Taxable Subsidiary. The provision for taxes on unrealized appreciation (depreciation) on investments is the result of netting (i) the expected tax liability on gains from sales of investments and (ii) the expected tax benefit from the use of losses in the current year. As of December 31, 2023 and September 30, 2023, $1.8 and $1.8 million, respectively, was accrued as a deferred tax liability on the Consolidated Statements of Assets and Liabilities relating to unrealized gain on investments held by the Taxable Subsidiary. As of December 31, 2023 and September 30, 2023, zero and $0.3 million, respectively, was accrued as a provision for taxes on the Consolidated Statements of Operations relating to realized gain on investments held by the Taxable Subsidiary. During the three months ended December 31, 2023 and 2022, the Company paid zero and zero, respectively, in taxes on realized gains on the sale of investments held by the Taxable Subsidiary.

We operate in a manner to maintain our election to be subject to tax as a RIC and to eliminate corporate-level U.S. federal income tax (other than the 4% excise tax) by distributing sufficient investment company taxable income and capital gain net income (if any). As a result, we will have an effective tax rate equal to 0% before the excise tax and income taxes incurred by the Taxable Subsidiary. As such, a reconciliation of the differences between our reported income tax expense and its tax expense at the federal statutory rate of 21% is not meaningful.

We have formed and expect to continue to form certain taxable subsidiaries, including the Taxable Subsidiary, which are taxed as corporations. These taxable subsidiaries allow us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.

### RESULTS OF OPERATIONS

Set forth below are the results of operations for the three months ended December 31, 2023 and 2022.

### Investment Income

For the three months ended December 31, 2023, investment income was $38.0 million, which was attributable to $33.2 million from first lien secured debt and $4.8 million from other investments. For the three months ended December 31, 2022, investment income was $31.3 million, which was attributable to $27.6 million from first lien secured debt and $3.7 million from other investments. The increase in investment income compared to the same period in the prior year was primarily due to the increase in the cost yield of our debt portfolio.

### Expenses

For the three months ended December 31, 2023, expenses totaled $18.5 million and were comprised of: $8.9 million of debt related interest and expenses, $3.0 million of base management fees, $4.9 million of performance-based incentive fees, $1.6 million of general and administrative expenses and $0.2 million of taxes. For the three months ended December 31, 2022, expenses totaled $17.6 million and were comprised of: $9.9 million of debt related interest and expenses, $2.9 million of base management fees, $3.4 million of performance-based incentive fees, $0.8 million of general and administrative expenses and $0.5 million of taxes. The increase in expenses compared to the same period in the prior year was primarily due to the increase in performance-based incentive fees as a result of higher pre-incentive fee net investment income.

### Net Investment Income

For the three months ended December 31, 2023 and 2022, net investment income totaled $19.4 million or $0.33 per share, and $13.7 million or $0.30 per share, respectively. The increase in net investment income was primarily due to an increase in investment income partially offset by an increase in expenses compared to the same period in the prior year.

### Net Realized Gains or Losses

For the three months ended December 31, 2023 and 2022, net realized gains (losses) totaled $(3.1) million and less than $0.1 million, respectively. The change in net realized gains (losses) compared to the same period in the prior year was primarily due to changes in the market conditions of our investments and the values at which they were realized.

### Unrealized Appreciation or Depreciation on Investments, the Credit Facility and the 2023 Notes

For the three months ended December 31, 2023 and 2022, we reported net change in unrealized appreciation (depreciation) on investments of $6.2 million and $(16.8) million, respectively. As of December 31, 2023 and September 30, 2023, our net unrealized appreciation (depreciation) on investments totaled $(19.6) million and $(25.7) million, respectively. The net change in unrealized appreciation (depreciation) on our investments compared to the same period in the prior year was primarily due to the operating performance of the portfolio companies within our portfolio and changes in the capital market conditions of our investments.

For the three months ended December 31, 2023 and 2022, our Credit Facility and the 2023 Notes had a net change in unrealized appreciation (depreciation) of less than $0.1 million and $(2.1) million, respectively. As of December 31, 2023 and September 30, 2023, the net unrealized appreciation (depreciation) on the Credit Facility and the 2023 Notes totaled less than $0.1 million and zero, respectively. The net change in net unrealized appreciation or (depreciation) compared to the same period in the prior year was primarily due to changes in the capital markets.

### Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended December 31, 2023 and 2022, net increase (decrease) in net assets resulting from operations totaled $22.5 million or $0.38 per share and $(1.6) million, or $(0.04) per share, respectively. The net increase or (decrease) from operations compared to the same period in the prior year was primarily due to operating performance of our portfolio and changes in capital market conditions of our investments along with change in cost yield of our debt portfolio and costs of financing.

### LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are derived primarily from cash flows from operations, including income earned, proceeds from investment sales and repayments, and proceeds of securities offerings and debt financings. Our primary use of funds from operations includes investments in portfolio companies and payments of fees and other operating expenses we incur. We have used, and expect to continue to use, our debt capital, proceeds from our portfolio and proceeds from public and private offerings of securities to finance our investment objectives and operations. As of December 31, 2023, in accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing.

On April 5, 2018, our board of directors approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the SBCAA). As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), effective as of April 5, 2019, subject to compliance with certain disclosure requirements. As of December 31, 2023 and September 30, 2023, our asset coverage ratio, as computed in accordance with the 1940 Act, was 197% and 230%, respectively.

For the three months ended December 31, 2023 and 2022, the annualized weighted average cost of debt, inclusive of the fee on the undrawn commitment on the Credit Facility, amendment costs and debt issuance costs, was 6.8% and 5.7%, respectively. As of December 31, 2023 and September 30, 2023, we had $125.1 million and $376.6 million of unused borrowing capacity under the Credit Facility, as applicable, respectively, subject to leverage and borrowing base restrictions.

Funding I’s multi-currency Credit Facility with the Lenders was $386.0 million as of December 31, 2023 subject to satisfaction of certain conditions and regulatory restrictions that the 1940 Act imposes on us as a BDC, has an interest rate spread above SOFR (or an alternative risk-free floating interest rate index) of 236 basis points, a maturity date of August 2026 and a revolving period that ends in August 2024. As of December 31, 2023 and September 30, 2023, PennantPark Floating Rate Funding I, LLC, our wholly-owned subsidiary, borrowed $260.9 million and $9.4 million under the Credit Facility, respectively, and the weighted average interest rate, exclusive of the fee on undrawn commitments, was of 7.7% and 7.7%, respectively, exclusive of the fee on undrawn commitments.

During the revolving period, the Credit Facility bears interest at SOFR (or an alternative risk-free floating interest rate index) plus 236 basis points and, after the revolving period, the rate will reset to Base Rate (or an alternative risk-free floating interest rate index) plus 250 basis points for the remaining two years, maturing in August 2026. The Credit Facility is secured by all of the assets of Funding I. Both PennantPark Floating Rate Capital Ltd. and Funding I have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.

The Credit Facility contains covenants, including but not limited to, restrictions of loan size, currency types and amounts, industry requirements, average life of loans, geographic and individual portfolio concentrations, minimum portfolio yield and loan payment frequency. Additionally, the Credit Facility requires the maintenance of a minimum equity investment in Funding I and income ratio as well as restrictions on certain payments and issuance of debt. The Credit Facility compliance reporting is prepared on a basis of accounting other than GAAP. As of December 31, 2023, we were in compliance with the covenants relating to our Credit Facility.

We own 100% of the equity interest in Funding I and treat the indebtedness of Funding I as our leverage. Our Investment Adviser serves as collateral manager to Funding I under the Credit Facility.

Our interest in Funding I (other than the management fee) is subordinate in priority of payment to every other obligation of Funding I and is subject to certain payment restrictions set forth in the Credit Facility. We may receive cash distributions on our equity interests in Funding I only after it has made (1) all required cash interest and, if applicable, principal payments to the Lenders, (2) required administrative expenses and (3) claims of other unsecured creditors of Funding I. We cannot assure you that there will be sufficient funds available to make any distributions to us or that such distributions will meet our expectations from Funding I. The Investment Adviser has irrevocably directed that the management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager.

In November 2017, we issued $138.6 million of our 2023 Notes. The 2023 Notes were issued pursuant to a deed of trust between the Company and Mishmeret Trust Company, Ltd., as trustee, of which zero and $76.2 million was outstanding as of December 31, 2023 and September 30, 2023, respectively.

The 2023 Notes paid interest at a rate of 4.3% per year. Interest on the 2023 Notes was payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2018. The principal on the 2023 Notes was payable in four annual installments as follows: 15% of the original principal amount on December 15, 2020, 15% of the original principal amount on December 15, 2021, 15% of the original principal amount on December 15, 2022 and 55% of the original principal amount on December 15, 2023. On December 15, 2023, the remaining outstanding 2023 Notes were repaid in full.

In March 2021 and in October 2021, we issued $100.0 million and $85.0 million, respectively, in aggregate principal amount of our 2026 Notes at a public offering price per note of 99.4% and 101.5%, respectively. Interest on the 2026 Notes is paid semi-annually on April 1 and October 1 of each year, at a rate of 4.25% per year, commencing October 1, 2021. The 2026 Notes mature on April 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are our general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes on any securities exchange or automated dealer quotation system.

In September 2019, the Securitization Issuers completed the Debt Securitization. The 2031 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $78.5 million Class A-1 Senior Secured Floating Rate Notes maturing 2031, which bear interest at the three-month SOFR plus 1.8%, (ii) $15.0 million Class A-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 3.7%, (iii) $14.0 million Class B-1 Senior Secured Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 2.9%, (iv) $16.0 million Class B-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 4.3%, (v) $19.0 million Class C‑1 Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 4.0%, (vi) $8.0 million Class C-2 Secured Deferrable Fixed Rate Notes due 2031, which bear interest at 5.4%, and (vii) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 4.8% and (B) the borrowing of $77.5 million Class A‑1 Senior Secured Floating Rate Loans due 2031, which bear interest at the three-month SOFR plus 1.8%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and U.S. Bank National Association, as collateral agent and as loan agent. The 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031. As of both December 31, 2023 and September 30, 2023, the Company had $228.0 million of 2031 Asset-Backed Debt outstanding with a weighted average interest rate of 7.2% and 7.1%, respectively.

On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by our wholly-owned subsidiary, the Securitization Issuer transferred to us 100% of the Preferred Shares of the Securitization Issuer, 100% of the Class D Secured Deferrable Floating Rate Notes issued by the Securitization Issuer, and a portion of the net cash proceeds received from the sale of the 2031 Asset-Backed Debt. The Preferred Shares of the Securitization Issuer do not bear interest and had a stated value of $55.4 million at the closing of the Debt Securitization.

The 2031 Asset-Backed Debt constitutes secured obligations of the Securitization Issuers, and the indenture governing the 2031 Asset-Backed Debt includes customary covenants and events of default. The 2031 Asset-Backed Debt has not been, and will not be, registered under the Securities Act or any state securities or “blue sky” laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from registration.

Our Investment Adviser serves as collateral manager to the Securitization Issuer pursuant to a collateral management agreement between our Investment Adviser and the Securitization Issuer, or the Collateral Management Agreement. For so long as our Investment Adviser serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreement.

On March 27, 2023 we entered into equity distribution agreements with JMP Securities LLC, Raymond James & Associates, Inc. and Truist Securities, Inc. (together, the "Equity Distribution Agreements"), as sales agents (each a “Sales Agent” and together, the “Sales Agents”) in connection with the sale of shares of our common stock, with an aggregate offering price of up to $100 million under an at-the-market offering (“ATM Program”). On August 11, 2023, we amended the Equity Distribution Agreements with each of the Sales Agents (together, the "Amended and Restated Equity Distribution Agreements") to increase the aggregate offering price to up to $250 million. The Amended and Restated Equity Distribution Agreements provide that we may offer and sell shares of our common stock from time to time through a sales agent in amounts and at times to be determined by us. Actual sales will depend on a variety of factors to be determined by us from time to time, including, market conditions and the trading price of our common stock. The Investment Adviser may, from time to time, in its sole discretion, pay some or all of the commissions payable under the equity distribution agreements or make additional supplemental payments to ensure that the sales price per share of our common stock in connection with all of the offerings made hereunder will not be less than our current NAV per share. Any such payments made by the Investment Adviser will not be subject to reimbursement by us.

During the three months ended December 31, 2023, we did not issue any shares of common stock through the ATM Program.

We may raise equity or debt capital through both registered offerings off our shelf registration statement and private offerings of securities, securitizing a portion of our investments among other considerations or mergers and acquisitions. Furthermore, the Credit Facility availability depends on various covenants and restrictions as discussed in the preceding paragraphs. The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate purposes.

We have entered into certain contracts under which we have material future commitments. Under our Investment Management Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in February 2024, PennantPark Investment Advisers serves as our investment adviser. Payments under our Investment Management Agreement in each reporting period are equal to (1) a management fee equal to a percentage of the value of our average adjusted gross assets and (2) an incentive fee based on our performance.

Under our Administration Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in February 2024, the Administrator furnishes us with office facilities and administrative services necessary to conduct our day-to-day operations. The Administration Agreement was amended on July 1, 2022. If requested to provide significant managerial assistance to our portfolio companies, we or the Administrator will be paid an additional amount based on the services provided. Payment under our Administration Agreement is based upon our allocable portion of the Administrator’s overhead in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of our Chief Financial Officer, Chief Compliance Officer, Corporate Counsel and their respective staffs.

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

As of December 31, 2023 and September 30, 2023, we had cash and cash equivalents of $75.8 million and $100.6 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to take advantage of market opportunities.

For the three months ended December 31, 2023, our operating activities used cash of $181.9 million and our financing activities provided cash of $157.2 million. Our operating activities used cash primarily due to our investment activities and our financing activities provided cash primarily due to borrowings under our Credit Facility partially offset by the repayment of the 2023 Notes.

For the three months ended December 31, 2022, our operating activities provided cash of $6.3 million and our financing activities used cash of $2.7 million. Our operating activities provided cash primarily realized from our investment activities and our financing activities used cash primarily due to borrowings under our Credit Facility and principal repayment of our 2023 Notes.

### PennantPark Senior Secured Loan Fund I LLC

In May 2017, we and Kemper formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. As of December 31, 2023 and September 30, 2023, PSSL had total assets of $879.4 million and $869.4 million, respectively, and its investment portfolio consisted of investments in 106 and 105 portfolio companies, respectively. As of December 31, 2023, at fair value, the largest investment in a single portfolio company in PSSL was $21.1 million and the five largest investments totaled $91.7 million. As of September 30, 2023, at fair value, the largest investment in a single portfolio company in PSSL was $18.5 million and the five largest investments totaled $83.4 million. PSSL invests in portfolio companies in the same industries in which we may directly invest.

We and Kemper provide capital to PSSL in the form of first lien secured debt and equity interests. As of December 31, 2023, and September 30, 2023, we and Kemper owned 87.5% and 12.5%, respectively, of each of the outstanding first lien secured debt and equity interests. As of the same dates, our investment in PSSL consisted of first lien secured debt of $210.1 million (additional $27.6 million unfunded) and $210.1 million (additional $27.6 million unfunded), respectively, and equity interests of $90.0 million (additional $11.8 million unfunded) and $90.0 million (additional $11.8 million unfunded), respectively.

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

In August 2023 PSSL entered into a $260.0 million (decreased from $325.0 million) senior secured revolving credit facility which bears interest at SOFR plus 260 basis points (including a spread adjustment) with Ally Bank through its wholly-owned subsidiary, PennantPark Senior Secured Loan Facility LLC II, or PSSL Subsidiary II, subject to leverage and borrowing base restrictions.

In January 2021, PSSL completed a $300.7 million debt securitization in the form of a collateralized loan obligation, or the “2032 Asset-Backed Debt”. The 2032 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO II, Ltd., a wholly-owned and consolidated subsidiary of PSSL, consisting primarily of middle market loans and participation interests in middle market loans. The 2032 Asset-Backed Debt is scheduled to mature in January 2032. On the closing date of the transaction, in consideration of PSSL’s transfer to PennantPark CLO II, Ltd. of the initial closing date loan portfolio, which included loans distributed to PSSL by certain of its wholly owned subsidiaries and us, PennantPark CLO II, Ltd. transferred to PSSL 100% of the Preferred Shares of PennantPark CLO II, Ltd. and 100% of the Class E Notes issued by PennantPark CLO II, Ltd.

In April 2023, PSSL completed a $297.8 million debt securitization in the form of a collateralized loan obligation, or the “2035 Asset-Backed Debt”. The 2035 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO VI, LLC, a wholly-owned and consolidated subsidiary of PSSL, consisting primarily of middle market loans and participation interests in middle market loans. The 2035 Asset-Backed Debt is scheduled to mature in April 2035. On the closing date of the transaction, in consideration of PSSL’s transfer to PennantPark CLO VI, LLC of the initial closing date loan portfolio, which included loans distributed to PSSL by certain of its wholly owned subsidiaries and us, PennantPark CLO VI, LLC transferred to PSSL 100% of the Preferred Shares of CLO VI, LLC

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

*($ in thousands)*

|  | December 31, 2023 | September 30, 2023 |
| --- | ---: | ---: |
| Total investments | $836,857 | $785,859 |
| Weighted average cost yield on income producing investments | 12.1% | 12.1% |
| Number of portfolio companies in PSSL | 106 | 105 |
| Largest portfolio company investment | $21,114 | $18,463 |
| Total of five largest portfolio company investments | $91,715 | $83,365 |

49

Below is a listing of PSSL’s individual investments as of December 31, 2023 (Par and $ in thousands):

| Issuer Name First Lien Secured Debt - 1,398.7% | Maturity | Industry | Current Coupon | Basis Point Spread Above Index (1) | Par | Cost | Fair Value (2) |
| --- | --- | --- | ---: | --- | ---: | ---: | ---: |
| A1 Garage Merger Sub, LLC | 12/22/2028 | Commercial Services & Supplies | 11.96% | SOFR+660 | 2,932 | $2,881 | $2,918 |
| ACP Avenu Buyer, LLC | 10/1/2029 | Business Services | 11.75% | SOFR+626 | 10,000 | 9,827 | 9,750 |
| ACP Falcon Buyer, Inc. | 8/1/2029 | Business Services | 11.85% | SOFR+650 | 18,904 | 18,539 | 18,696 |
| Ad.net Acquisition, LLC | 5/7/2026 | Media | 11.61% | SOFR+626 | 8,775 | 8,708 | 8,731 |
| Alpine Acquisition Corp II | 11/30/2026 | Containers and Packaging | 11.44% | SOFR+600 | 12,820 | 12,519 | 12,307 |
| Anteriad, LLC (f/k/a MeritDirect, LLC) | 5/23/2024 | Media: Advertising, Printing & Publishing | 11.00% | SOFR+565 | 4,930 | 4,912 | 4,881 |
| Anteriad, LLC (f/k/a MeritDirect, LLC) - Incremental Term Loan | 5/23/2024 | Media: Advertising, Printing & Publishing | 12.00% | SOFR+665 | 4,813 | 4,778 | 4,788 |
| Any Hour Services | 7/21/2027 | Professional Services | 11.23% | SOFR+585 | 7,491 | 7,338 | 7,416 |
| Applied Technical Services, LLC | 12/29/2026 | Commercial Services & Supplies | 11.25% | SOFR+615 | 9,748 | 9,652 | 9,553 |
| Arcfield Acquisition Corp. | 8/3/2029 | Aerospace and Defense | 11.64% | SOFR+625 | 11,200 | 11,048 | 11,088 |
| Beta Plus Technologies, Inc. | 7/1/2029 | Business Services | 11.10% | SOFR+575 | 4,938 | 4,854 | 4,740 |
| BioDerm, Inc. | 1/31/2028 | Healthcare and Pharmaceuticals | 11.84% | SOFR+650 | 8,955 | 8,854 | 8,865 |
| Blackhawk Industrial Distribution, Inc. | 9/17/2026 | Distributors | 11.75% | SOFR+625 | 15,092 | 14,892 | 14,904 |
| BlueHalo Financing Holdings, LLC | 10/31/2025 | Aerospace and Defense | 12.01% | SOFR+665 | 5,588 | 5,552 | 5,476 |
| Broder Bros., Co. | 12/4/2025 | Consumer Products | 11.65% | SOFR+626 | 2,334 | 2,334 | 2,334 |
| Burgess Point Purchaser Corporation | 9/26/2029 | Automotive | 10.71% | SOFR+525 | 446 | 418 | 419 |
| By Light Professional IT Services, LLC | 5/16/2025 | High Tech Industries | 12.40% | SOFR+688 | 13,538 | 13,500 | 13,267 |
| Cartessa Aesthetics, LLC | 6/14/2028 | Distributors | 11.10% | SOFR+575 | 9,612 | 9,490 | 9,612 |
| CF512, Inc. | 8/20/2026 | Media | 11.57% | SOFR+619 | 6,803 | 6,713 | 6,667 |
| CHA Holdings, Inc. | 4/10/2025 | Construction and Engineering | 9.97% | SOFR+461 | 5,484 | 5,448 | 5,484 |
| Challenger Performance Optimization, Inc. | 8/31/2024 | Business Services | 12.18% | SOFR+775 | 9,232 | 9,208 | 8,909 |
|  |  |  | (PIK 1.00%) |  |  |  |  |
| Confluent Health, LLC | 10/28/2028 | Healthcare and Pharmaceuticals | 9.47% | SOFR+400 | 6,761 | 6,529 | 6,626 |
| Connatix Buyer, Inc. | 7/13/2027 | Media | 11.14% | SOFR+576 | 3,805 | 3,756 | 3,634 |
| Crane 1 Services, Inc. | 8/16/2027 | Commercial Services & Supplies | 10.36% | SOFR+501 | 2,084 | 2,063 | 2,073 |
| Dr. Squatch, LLC | 8/31/2027 | Personal Products | 11.20% | SOFR+585 | 14,675 | 14,484 | 14,675 |
| DRI Holding Inc. | 12/21/2028 | Media | 10.71% | SOFR+525 | 2,620 | 2,419 | 2,385 |
| DRS Holdings III, Inc. | 11/3/2025 | Consumer Goods: Durable | 11.75% | SOFR+640 | 14,189 | 14,144 | 14,033 |
| Duraco Specialty Tapes LLC | 6/30/2024 | Containers and Packaging | 11.96% | SOFR+650 | 10,876 | 10,833 | 10,702 |
| ECL Entertainment, LLC | 8/31/2030 | Hotel, Gaming and Leisure | 10.14% | SOFR+475 | 5,000 | 4,913 | 5,004 |
| EDS Buyer, LLC | 1/10/2029 | Electronic Equipment, Instruments, and Components | 11.60% | SOFR+625 | 8,933 | 8,817 | 8,843 |
| Exigo Intermediate II, LLC | 3/15/2027 | Software | 11.46% | SOFR+610 | 12,643 | 12,484 | 12,453 |
| ETE Intermediate II, LLC | 5/29/2029 | Diversified Consumer Services | 11.89% | SOFR+650 | 12,373 | 12,132 | 12,373 |
| Fairbanks Morse Defense | 6/17/2028 | Aerospace and Defense | 10.36% | SOFR+475 | 10,169 | 10,119 | 10,150 |
| Global Holdings InterCo LLC | 3/16/2026 | Diversified Financial Services | 11.46% | SOFR+610 | 3,726 | 3,715 | 3,540 |
| Graffiti Buyer, Inc. | 8/10/2027 | Trading Companies & Distributors | 10.95% | SOFR+560 | 2,339 | 2,314 | 2,316 |
| Hancock Roofing and Construction L.L.C. | 12/31/2026 | Insurance | 10.95% | SOFR+560 | 2,250 | 2,219 | 2,160 |
| Holdco Sands Intermediate, LLC | 11/23/2028 | Aerospace and Defense | 11.57% | SOFR+635 | 4,900 | 4,830 | 4,851 |
| HW Holdco, LLC | 12/10/2024 | Media | 11.80% | SOFR+640 | 3,014 | 2,993 | 2,968 |
| Imagine Acquisitionco, LLC | 11/15/2027 | Software | 10.74% | SOFR+550 | 9,225 | 9,064 | 9,086 |
| Inception Fertility Ventures, LLC | 12/31/2024 | Healthcare Providers and Services | 12.64% | SOFR+725 | 16,411 | 16,254 | 16,411 |
| Infinity Home Services Holdco, Inc. | 12/28/2028 | Commercial Services & Supplies | 12.20% | SOFR+685 | 6,075 | 5,967 | 6,075 |
| Integrative Nutrition, LLC | 1/31/2025 | Diversified Consumer Services | 12.50% | SOFR+715 | 11,130 | 11,113 | 10,351 |
|  |  |  | (PIK 2.25%) |  |  |  |  |
| Integrity Marketing Acquisition, LLC | 8/27/2026 | Insurance | 11.54% | SOFR+615 | 5,895 | 5,847 | 5,836 |
| Inventus Power, Inc. | 6/30/2025 | Consumer Goods: Durable | 12.97% | SOFR+761 | 8,226 | 8,094 | 8,061 |
| ITI Holdings, Inc. | 3/3/2028 | IT Services | 10.96% | SOFR+560 | 3,940 | 3,888 | 3,822 |
| K2 Pure Solutions NoCal, L.P. | 1/31/2024 | Chemicals, Plastics and Rubber | 15.46% | SOFR+1000 | 14,602 | 14,599 | 14,602 |
| Kinetic Purchaser, LLC | 11/10/2027 | Personal Products | 11.50% | SOFR+615 | 16,620 | 16,324 | 16,537 |
| Lash OpCo, LLC | 2/18/2027 | Personal Products | 12.48% | SOFR+700 | 14,174 | 13,968 | 14,103 |
| LAV Gear Holdings, Inc. | 10/31/2025 | Capital Equipment | 11.82% | SOFR+640 | 15,006 | 14,973 | 14,676 |
| Lightspeed Buyer Inc. | 2/3/2026 | Healthcare Providers and Services | 10.71% | SOFR+535 | 12,024 | 11,896 | 11,964 |
| LJ Avalon Holdings, LLC | 1/31/2030 | Environmental Industries | 11.86% | SOFR+640 | 2,579 | 2,533 | 2,527 |
| Loving Tan Intermediate II, Inc. | 5/31/2028 | Consumer Products | 12.35% | SOFR+700 | 7,463 | 7,326 | 7,388 |
| Lucky Bucks, LLC - First-Out Term Loan | 10/2/2028 | Hotel, Gaming and Leisure | 13.03% | SOFR+765 | 261 | 261 | 261 |
| Lucky Bucks, LLC - Last-Out Term Loan | 10/2/2029 | Hotel, Gaming and Leisure | 13.03% | SOFR+765 | 522 | 522 | 522 |
| MAG DS Corp | 4/1/2027 | Aerospace and Defense | 10.95% | SOFR+550 | 2,091 | 2,007 | 1,997 |
| Magenta Buyer, LLC | 7/31/2028 | Software | 10.64% | SOFR+500 | 2,998 | 2,844 | 2,106 |
| Marketplace Events, LLC - Super Priority First Lien Term Loan | 9/30/2025 | Media: Diversified and Production | 10.94% | SOFR+525 | 647 | 647 | 647 |
| Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3) | 9/30/2025 | Media: Diversified and Production |  |  | 589 | - | - |
| Marketplace Events, LLC | 9/30/2026 | Media: Diversified and Production | 10.94% | SOFR+525 | 4,837 | 3,852 | 4,837 |
| Mars Acquisition Holdings Corp. | 5/14/2026 | Media | 11.01% | SOFR+565 | 11,558 | 11,460 | 11,558 |
| MBS Holdings, Inc. | 4/16/2027 | Internet Software and Services | 11.21% | SOFR+585 | 8,395 | 8,290 | 8,282 |
| MDI Buyer, Inc. | 7/25/2028 | Chemicals, Plastics and Rubber | 11.63% | SOFR+625 | 6,364 | 6,260 | 6,212 |
| Meadowlark Acquirer, LLC | 12/10/2027 | Professional Services | 11.00% | SOFR+565 | 2,366 | 2,332 | 2,295 |

50

| Issuer Name Maturity Industry | Current Coupon | Basis Point Spread Above Index (1) | Par / Shares | Cost | Fair Value (2) |
| --- | ---: | --- | ---: | ---: | ---: |
| Medina Health, LLC 10/20/2028 Healthcare and Pharmaceuticals | 11.60% | SOFR+625 | 19,344 | $19,018 | $18,957 |
| Mission Critical Electronics, Inc. 3/28/2024 Capital Equipment | 11.29% | SOFR+590 | 5,769 | 5,764 | 5,769 |
| Municipal Emergency Services, Inc. 9/28/2027 Distributors | 10.50% | SOFR+515 | 3,421 | 3,374 | 3,418 |
| NBH Group LLC 8/19/2026 Healthcare, Education & Childcare | 11.19% | SOFR+525 | 10,684 | 10,553 | 10,043 |
| Neptune Flood Incorporated 5/9/2029 Insurance | 11.72% | SOFR+650 | 4,932 | 4,865 | 4,932 |
| New Milani Group LLC 6/6/2024 Consumer Goods: Non-Durable | 10.96% | SOFR+550 | 14,175 | 14,161 | 14,175 |
| NORA Acquisition, LLC 8/31/2029 Healthcare Providers and Services | 11.70% | SOFR+635 | 21,435 | 21,043 | 21,114 |
| One Stop Mailing, LLC 5/7/2027 Air Freight and Logistics | 11.72% | SOFR+636 | 15,807 | 15,559 | 15,807 |
| ORL Acquisitions, Inc. 9/3/2027 Consumer Finance | 12.75% | SOFR+740 | 2,217 | 2,198 | 1,884 |
| Output Services Group, Inc - First-Out Term Loan 11/30/2028 Business Services | 13.82% | SOFR+843 | 821 | 821 | 821 |
| Output Services Group, Inc - Last-Out Term Loan 5/30/2028 Business Services | 12.07% | SOFR+668 | 1,667 | 1,667 | 1,667 |
| Owl Acquisition, LLC 2/4/2028 Professional Services | 10.70% | SOFR+550 | 3,893 | 3,835 | 3,834 |
| Ox Two, LLC 5/18/2026 Construction and Building | 12.86% | SOFR+751 | 4,345 | 4,310 | 4,291 |
| Pacific Purchaser, LLC 9/30/2028 Business Services | 11.43% | SOFR+625 | 12,028 | 11,808 | 11,848 |
| Pequod Merger Sub, Inc. - Term Loan (f/k/a Simplicity Group) 12/2/2026 Diversified Financial Services | 11.75% | SOFR+640 | 11,474 | 11,281 | 11,244 |
| PH Beauty Holdings III, Inc. 9/29/2025 Wholesale | 10.65% | SOFR+500 | 9,468 | 9,292 | 8,884 |
| PL Acquisitionco, LLC 11/9/2027 Textiles, Apparel and Luxury Goods | 12.46% | SOFR+710 | 7,633 | 7,539 | 6,755 |
|  | (PIK 4.00%) |  |  |  |  |
| PlayPower, Inc. 5/8/2026 Consumer Goods: Durable | 11.06% | SOFR+565 | 2,551 | 2,497 | 2,474 |
| Pragmatic Institute, LLC 7/6/2028 Education | 11.14% | SOFR+575 | 11,109 | 10,977 | 10,387 |
| Quantic Electronics, LLC 11/19/2026 Aerospace and Defense | 11.70% | SOFR+635 | 2,796 | 2,774 | 2,740 |
| Rancho Health MSO, Inc. 12/18/2025 Healthcare Providers and Services | 11.24% | SOFR+585 | 1,026 | 1,026 | 1,026 |
| Reception Purchaser, LLC 2/28/2028 Air Freight and Logistics | 11.50% | SOFR+615 | 4,925 | 4,868 | 4,777 |
| Recteq, LLC 1/29/2026 Leisure Products | 12.50% | SOFR+715 | 4,863 | 4,819 | 4,692 |
| Research Now Group, LLC and Dynata, LLC 12/20/2024 Diversified Consumer Services | 11.14% | SOFR+576 | 12,399 | 12,314 | 10,973 |
| Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) 6/15/2029 High Tech Industries | 11.43% | SOFR+625 | 3,739 | 3,669 | 3,683 |
| Sales Benchmark Index LLC 1/3/2025 Professional Services | 11.55% | SOFR+620 | 9,268 | 9,233 | 9,222 |
| Sargent & Greenleaf Inc. 12/20/2024 Wholesale | 12.96% | SOFR+760 | 5,181 | 5,165 | 5,155 |
|  | (PIK 1.00%) |  |  |  |  |
| Schlesinger Global, Inc. 7/14/2025 Business Services | 12.53% | SOFR+715 | 11,791 | 11,780 | 11,407 |
|  | (PIK 0.50%) |  |  |  |  |
| Seaway Buyer, LLC 6/13/2029 Chemicals, Plastics and Rubber | 11.50% | SOFR+615 | 4,938 | 4,874 | 4,765 |
| Sigma Defense Systems, LLC 12/18/2027 Aerospace and Defense | 12.50% | SOFR+715 | 12,141 | 11,973 | 12,020 |
| Skopima Consilio Parent, LLC 5/17/2028 Business Services | 9.97% | SOFR+450 | 1,300 | 1,275 | 1,290 |
| Smile Brands Inc. 10/14/2025 Healthcare and Pharmaceuticals | 9.98% | SOFR+450 | 11,766 | 11,733 | 10,299 |
| Solutionreach, Inc. 7/17/2025 Healthcare and Pharmaceuticals | 12.53% | SOFR+700 | 4,582 | 4,554 | 4,568 |
| Spendmend Holdings LLC 3/1/2028 Healthcare Technology | 11.00% | SOFR+565 | 4,102 | 4,040 | 4,057 |
| STV Group Incorporated 12/11/2026 Construction and Building | 10.71% | SOFR+535 | 9,075 | 9,028 | 8,985 |
| Summit Behavioral Healthcare, LLC 11/24/2028 Healthcare and Pharmaceuticals | 10.40% | SOFR+501 | 1,782 | 1,695 | 1,777 |
| System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) 8/16/2027 Aerospace and Defense | 11.33% | SOFR+615 | 14,700 | 14,518 | 14,612 |
| Team Services Group, LLC 11/24/2028 Healthcare and Pharmaceuticals | 10.75% | SOFR+500 | 346 | 333 | 342 |
| Teneo Holdings LLC 7/18/2025 Business Services | 10.71% | SOFR+535 | 2,256 | 2,255 | 2,251 |
| The Bluebird Group LLC 7/27/2026 Professional Services | 12.00% | SOFR+665 | 8,569 | 8,455 | 8,475 |
| The Vertex Companies, LLC 8/31/2027 Construction and Engineering | 11.46% | SOFR+610 | 7,696 | 7,577 | 7,684 |
| TPC Canada Parent, Inc. and TPC US Parent, LLC 11/24/2025 Consumer Goods: Non-Durable | 11.04% | SOFR+565 | 8,640 | 8,553 | 8,554 |
| TWS Acquisition Corporation 6/16/2025 Diversified Consumer Services | 11.78% | SOFR+640 | 3,740 | 3,738 | 3,740 |
| Tyto Athene, LLC 4/1/2028 IT Services | 11.04% | SOFR+565 | 14,670 | 14,569 | 13,555 |
| Urology Management Holdings, Inc. 6/15/2026 Healthcare and Pharmaceuticals | 11.93% | SOFR+665 | 6,875 | 6,766 | 6,732 |
| Walker Edison Furniture Company LLC 3/1/2029 Wholesale | 12.21% | SOFR+685 | 4,028 | 4,028 | 3,947 |
| Walker Edison Furniture Company LLC - Junior Revolving Credit Facility 3/1/2029 Wholesale | 11.71% | SOFR+635 | 1,667 | 1,667 | 1,667 |
| Walker Edison Furniture Company LLC - DDTL - Unfunded (3) 3/1/2029 Wholesale |  |  | 1,042 | - | (21) |
| Wildcat Buyerco, Inc. 2/27/2027 Electronic Equipment, Instruments, and Components | 11.11% | SOFR+575 | 16,138 | 15,993 | 15,896 |
| Zips Car Wash, LLC 3/1/2024 Automobiles | 12.70% | SOFR+735 | 16,732 | 16,698 | 16,355 |
| **Total First Lien Secured Debt** |  |  |  | 841,081 | 833,276 |
| **Equity Securities - 3.9%** |  |  |  |  |  |
| Lucky Bucks, LLC — Hotel, Gaming and Leisure | — | — | 74 | 2,062 | 2,062 |
| New MPE Holdings, LLC — Media: Diversified and Production | — | — | - | - | 507 |
| Output Services Group, Inc — Business Services | — | — | 126 | 1,012 | 1,012 |
| Walker Edison Furniture - Common Equity — Wholesale | — | — | 36 | 3,393 | - |
| **Total Equity Securities** |  |  |  | 6,467 | 3,581 |
| **Total Investments - 1,404.7%** |  |  |  | 847,548 | 836,857 |
| **Cash and Cash Equivalents - 61.0%** |  |  |  |  |  |
| BlackRock Federal FD Institutional 30 |  |  |  | 36,339 | 36,339 |
| **Total Cash and Cash Equivalents** |  |  |  | 36,339 | 36,339 |
| **Total Investments and Cash Equivalents —1,465.7%** |  |  |  | $883,887 | $873,196 |
| **Liabilities in Excess of Other Assets — (1,365.7)%** |  |  |  |  | (813,620) |
| **Members' Equity—100.0%** |  |  |  |  | $59,576 |

(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable Secured Overnight Financing Rate or "SOFR", or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Consolidated Schedule of Investments disclose the actual interest rate in effect as of the reporting period. All securities are subject to a SOFR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

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

Below is a listing of PSSL’s individual investments as of September 30, 2023 ($ in thousands):

| Issuer Name First Lien Secured Debt - 1,347.5% | Maturity | Industry | Current Coupon | Basis Point Spread Above Index (1) | Par | Cost | Fair Value (2) |
| --- | --- | --- | ---: | --- | ---: | ---: | ---: |
| A1 Garage Merger Sub, LLC | 12/22/2028 | Commercial Services & Supplies | 11.84% | SOFR+660 | 2,940 | $2,886 | $2,925 |
| Ad.net Acquisition, LLC | 5/7/2026 | Media | 11.65% | SOFR+626 | 8,798 | 8,723 | 8,754 |
| Alpine Acquisition Corp II | 11/30/2026 | Containers and Packaging | 11.24% | SOFR+600 | 12,852 | 12,535 | 12,338 |
| Anteriad, LLC (f/k/a MeritDirect, LLC) | 5/23/2024 | Media: Advertising, Printing & Publishing | 11.04% | SOFR+550 | 5,001 | 4,971 | 4,913 |
| Anteriad Holdings Inc (fka MeritDirect) March 2023 | 5/23/2024 | Media: Advertising, Printing & Publishing | 12.04% | SOFR+650 | 4,875 | 4,817 | 4,814 |
| Any Hour Services | 7/21/2027 | Professional Services | 11.59% | SOFR+585 | 7,510 | 7,348 | 7,360 |
| Apex Service Partners, LLC | 7/31/2025 | Diversified Consumer Services | 10.52% | SOFR+525 | 1,002 | 1,002 | 1,000 |
| Apex Service Partners, LLC Term Loan B | 7/31/2025 | Diversified Consumer Services | 11.04% | SOFR+550 | 2,187 | 2,187 | 2,181 |
| Apex Service Partners, LLC Term Loan C | 7/31/2025 | Diversified Consumer Services | 10.69% | SOFR+525 | 11,013 | 10,972 | 10,985 |
| Applied Technical Services, LLC | 12/29/2026 | Commercial Services & Supplies | 11.54% | SOFR+615 | 9,579 | 9,475 | 9,387 |
| Applied Technical Services, LLC - DDTL Unfunded (3) | 12/29/2026 | Commercial Services & Supplies |  |  | 194 | - | (2) |
| Arcfield Acquisition Corp. | 8/3/2029 | Aerospace and Defense | 11.62% | SOFR+625 | 9,218 | 9,093 | 9,126 |
| Beta Plus Technologies, Inc. | 7/1/2029 | Business Services | 11.14% | SOFR+575 | 4,950 | 4,863 | 4,604 |
| BioDerm, Inc. | 1/31/2028 | Healthcare and Pharmaceuticals | 11.83% | SOFR+650 | 8,978 | 8,874 | 8,933 |
| Blackhawk Industrial Distribution, Inc. | 9/17/2026 | Distributors | 11.79% | SOFR+640 | 15,132 | 14,928 | 14,905 |
| Broder Bros., Co. | 12/4/2025 | Consumer Products | 11.50% | SOFR+626 | 2,349 | 2,349 | 2,349 |
| By Light Professional IT Services, LLC | 5/16/2025 | High Tech Industries | 12.43% | SOFR+688 | 13,821 | 13,778 | 13,579 |
| Cadence Aerospace, LLC | 11/14/2023 | Aerospace and Defense | 12.07% | SOFR+665 | 4,011 | 4,010 | 4,011 |
|  |  |  | (PIK 2.00%) |  |  |  |  |
| Cartessa Aesthetics, LLC | 6/14/2028 | Distributors | 11.39% | SOFR+600 | 9,636 | 9,509 | 9,636 |
| CHA Holdings, Inc. | 4/10/2025 | Construction and Engineering | 10.15% | SOFR+476 | 5,499 | 5,455 | 5,499 |
| Challenger Performance Optimization, Inc. | 8/31/2024 | Business Services | 12.18% | SOFR+675 | 9,232 | 9,201 | 8,955 |
|  |  |  | (PIK 1.00%) |  |  |  |  |
| Confluent Health, LLC | 10/28/2028 | Healthcare and Pharmaceuticals | 9.32% | SOFR+400 | 6,797 | 6,559 | 6,445 |
| Connatix Buyer, Inc. | 7/13/2027 | Media | 11.16% | SOFR+576 | 3,815 | 3,762 | 3,681 |
| Crane 1 Services, Inc. | 8/16/2027 | Commercial Services & Supplies | 10.90% | SOFR+551 | 2,089 | 2,067 | 2,079 |
| Dr. Squatch, LLC | 8/31/2027 | Personal Products | 11.24% | SOFR+585 | 14,712 | 14,511 | 14,712 |
| DRI Holding Inc. | 12/21/2028 | Media | 10.67% | SOFR+525 | 2,627 | 2,418 | 2,394 |
| DRS Holdings III, Inc. | 11/3/2025 | Consumer Goods: Durable | 11.79% | SOFR+640 | 14,429 | 14,376 | 14,256 |
| Duraco Specialty Tapes LLC | 6/30/2024 | Containers and Packaging | 11.89% | SOFR+650 | 10,904 | 10,838 | 10,740 |
| ECL Entertainment, LLC | 8/31/2030 | Hotel, Gaming and Leisure | 10.07% | SOFR+475 | 5,000 | 4,900 | 4,985 |
| EDS Buyer, LLC | 1/10/2029 | Electronic Equipment, Instruments, and Components | 11.64% | SOFR+625 | 8,955 | 8,833 | 8,821 |
| Electro Rent Corporation | 1/17/2024 | Electronic Equipment, Instruments, and Components | 11.00% | SOFR+550 | 2,219 | 2,200 | 2,171 |
| Exigo Intermediate II, LLC | 3/15/2027 | Software | 11.17% | SOFR+585 | 12,675 | 12,505 | 12,422 |
| ETE Intermediate II, LLC | 5/29/2029 | Diversified Consumer Services | 11.89% | SOFR+650 | 12,404 | 12,154 | 12,193 |
| Fairbanks Morse Defense | 6/17/2028 | Aerospace and Defense | 10.40% | SOFR+475 | 10,195 | 10,143 | 10,114 |
| Global Holdings InterCo LLC | 3/16/2026 | Diversified Financial Services | 11.96% | SOFR+660 | 3,736 | 3,724 | 3,549 |
| Graffiti Buyer, Inc. | 8/10/2027 | Trading Companies & Distributors | 10.99% | SOFR+575 | 2,345 | 2,316 | 2,322 |
| Hancock Roofing and Construction L.L.C. | 12/31/2026 | Insurance | 10.92% | SOFR+560 | 2,250 | 2,217 | 2,194 |
| Holdco Sands Intermediate, LLC | 11/23/2028 | Aerospace and Defense | 11.32% | SOFR+585 | 4,913 | 4,838 | 4,913 |
| HW Holdco, LLC | 12/10/2024 | Media | 11.75% | SOFR+640 | 3,014 | 2,988 | 2,968 |
| Imagine Acquisitionco, LLC | 11/15/2027 | Software | 10.72% | SOFR+535 | 9,248 | 9,075 | 9,110 |
| Inception Fertility Ventures, LLC | 12/31/2024 | Healthcare Providers and Services | 12.51% | SOFR+715 | 16,453 | 16,257 | 16,453 |
| Infinity Home Services Holdco, Inc. | 12/28/2028 | Commercial Services & Supplies | 12.24% | SOFR+685 | 6,090 | 5,979 | 6,090 |
| Integrated Data Services | 8/1/2029 | Business Services | 11.87% | SOFR+650 | 18,904 | 18,532 | 18,463 |
| Integrative Nutrition, LLC | 1/31/2025 | Diversified Consumer Services | 12.54% | SOFR+700 | 11,105 | 11,083 | 10,439 |
|  |  |  | (PIK 2.25%) |  |  |  |  |
| Integrity Marketing Acquisition, LLC | 8/27/2026 | Insurance | 11.57% | SOFR+575 | 5,906 | 5,851 | 5,847 |
| ITI Holdings, Inc. | 3/3/2028 | IT Services | 11.06% | SOFR+560 | 3,940 | 3,886 | 3,861 |
| K2 Pure Solutions NoCal, L.P. | 12/20/2023 | Chemicals, Plastics and Rubber | 13.42% | SOFR+810 | 15,509 | 15,487 | 15,509 |
| Kinetic Purchaser, LLC | 11/10/2027 | Personal Products | 11.54% | SOFR+615 | 16,662 | 16,346 | 16,412 |
| Lash OpCo, LLC | 2/18/2027 | Personal Products | 12.13% | SOFR+675 | 14,210 | 13,989 | 14,068 |
| LAV Gear Holdings, Inc. | 10/31/2024 | Capital Equipment | 11.74% | SOFR+643 | 15,042 | 14,997 | 14,862 |
| Lightspeed Buyer Inc. | 2/3/2026 | Healthcare Providers and Services | 10.70% | SOFR+535 | 12,056 | 11,911 | 11,935 |
| LJ Avalon Holdings, LLC | 1/31/2030 | Environmental Industries | 11.77% | SOFR+640 | 2,585 | 2,537 | 2,534 |
| Loving Tan Intermediate II, Inc. | 5/26/2028 | Consumer Products | 12.39% | SOFR+700 | 7,481 | 7,337 | 7,369 |
| Lucky Bucks, LLC (4) | 7/20/2027 | Hotel, Gaming and Leisure | 0.00% |  | 4,489 | 4,207 | 1,182 |
| Lucky Bucks. LLC - OpCo DIP Loans | 9/30/2025 | Hotel, Gaming and Leisure | 15.33% | SOFR+1000 | 160 | 158 | 160 |
| MAG DS Corp | 4/1/2027 | Aerospace and Defense | 10.99% | SOFR+550 | 2,097 | 2,007 | 1,986 |
| Magenta Buyer, LLC | 7/31/2028 | Software | 10.63% | SOFR+500 | 3,006 | 2,845 | 2,228 |
| Marketplace Events, LLC - Super Priority First Lien Term Loan | 9/30/2025 | Media: Diversified and Production | 10.94% | SOFR+525 | 647 | 647 | 647 |
| Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3) | 9/30/2025 | Media: Diversified and Production |  |  | 589 | - | - |
| Marketplace Events, LLC | 9/30/2026 | Media: Diversified and Production | 10.94% | SOFR+525 | 4,837 | 3,782 | 4,837 |
| Mars Acquisition Holdings Corp. | 5/14/2026 | Media | 11.04% | SOFR+565 | 11,588 | 11,476 | 11,472 |
| MBS Holdings, Inc. | 4/16/2027 | Internet Software and Services | 11.17% | SOFR+585 | 7,859 | 7,758 | 7,749 |
| MDI Buyer, Inc. | 7/25/2028 | Chemicals, Plastics and Rubber | 11.32% | SOFR+600 | 6,380 | 6,271 | 6,244 |
| Meadowlark Acquirer, LLC | 12/10/2027 | Professional Services | 11.04% | SOFR+565 | 2,372 | 2,336 | 2,312 |

52

| Issuer Name Maturity Industry | Current Coupon | Basis Point Spread Above Index (1) | Par / Shares | Cost | Fair Value (2) |
| --- | ---: | --- | ---: | ---: | ---: |
| Mission Critical Electronics, Inc. 3/28/2024 Capital Equipment | 11.29% | SOFR+515 | 5,769 | $5,763 | $5,740 |
| Municipal Emergency Services, Inc. 9/28/2027 Distributors | 11.04% | SOFR+565 | 3,430 | 3,380 | 3,355 |
| NBH Group LLC 8/19/2026 Healthcare, Education & Childcare | 10.93% | SOFR+525 | 10,711 | 10,572 | 10,497 |
| New Milani Group LLC 6/6/2024 Consumer Goods: Non-Durable | 10.92% | SOFR+550 | 14,213 | 14,194 | 14,213 |
| One Stop Mailing, LLC 5/7/2027 Air Freight and Logistics | 11.68% | SOFR+636 | 15,849 | 15,588 | 15,849 |
| ORL Acquisitions, Inc. 9/3/2027 Consumer Finance | 12.84% | SOFR+725 | 2,223 | 2,202 | 2,023 |
| Output Services Group, Inc. (4) 6/27/2026 Business Services | 0.00% | — | 7,759 | 7,689 | 1,513 |
| Owl Acquisition, LLC 2/4/2028 Professional Services | 10.80% | SOFR+575 | 3,893 | 3,832 | 3,834 |
| Ox Two, LLC 5/18/2026 Construction and Building | 12.90% | SOFR+751 | 4,345 | 4,306 | 4,269 |
| Peaquod Merger Sub, Inc. 12/2/2026 Diversified Financial Services | 11.79% | SOFR+640 | 11,474 | 11,267 | 11,244 |
| PH Beauty Holdings III, Inc. 9/29/2025 Wholesale | 10.68% | SOFR+500 | 9,493 | 9,282 | 7,974 |
| PL Acquisitionco, LLC 11/9/2027 Textiles, Apparel and Luxury Goods | 12.42% | SOFR+710 | 7,565 | 7,467 | 6,809 |
|  | (PIK 4.00%) |  |  |  |  |
| PlayPower, Inc. 5/8/2026 Consumer Goods: Durable | 10.57% | SOFR+565 | 2,551 | 2,491 | 2,436 |
| Pragmatic Institute, LLC 7/6/2028 Education | 11.17% | SOFR+575 | 11,138 | 10,999 | 10,636 |
| Quantic Electronics, LLC 11/19/2026 Aerospace and Defense | 11.74% | SOFR+635 | 2,803 | 2,776 | 2,761 |
| Rancho Health MSO, Inc. 12/18/2025 Healthcare Providers and Services | 11.22% | SOFR+585 | 1,029 | 1,029 | 1,029 |
| Reception Purchaser, LLC 2/28/2028 Air Freight and Logistics | 11.54% | SOFR+600 | 4,938 | 4,876 | 4,740 |
| Recteq, LLC 1/29/2026 Leisure Products | 12.54% | SOFR+700 | 4,875 | 4,825 | 4,729 |
| Research Now Group, LLC and Dynata, LLC 12/20/2024 Diversified Consumer Services | 11.13% | SOFR+576 | 12,432 | 12,322 | 10,878 |
| Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) 6/15/2029 High Tech Industries | 11.52% | SOFR+625 | 3,749 | 3,676 | 3,692 |
| Sales Benchmark Index LLC 1/3/2025 Professional Services | 11.59% | SOFR+620 | 9,522 | 9,474 | 9,475 |
| Sargent & Greenleaf Inc. 12/20/2024 Wholesale | 12.92% | SOFR+760 | 5,167 | 5,148 | 5,116 |
|  | (PIK 1.00%) |  |  |  |  |
| Schlesinger Global, Inc. 7/14/2025 Business Services | 12.52% | SOFR+715 | 11,791 | 11,777 | 11,407 |
|  | (PIK 0.50%) |  |  |  |  |
| Seaway Buyer, LLC 6/13/2029 Chemicals, Plastics and Rubber | 11.54% | SOFR+615 | 4,950 | 4,884 | 4,802 |
| Sigma Defense Systems, LLC 12/18/2025 Aerospace and Defense | 14.04% | SOFR+865 | 13,787 | 13,579 | 13,580 |
| Skopima Consilio Parent, LLC 5/17/2028 Business Services | 9.93% | SOFR+450 | 1,300 | 1,274 | 1,272 |
| Smile Brands Inc. 10/14/2025 Healthcare and Pharmaceuticals | 9.70% | SOFR+450 | 11,796 | 11,739 | 10,598 |
| Solutionreach, Inc. 7/17/2025 Healthcare and Pharmaceuticals | 12.37% | SOFR+700 | 4,582 | 4,577 | 4,563 |
| Spendmend Holdings LLC 3/1/2028 Healthcare Technology | 11.04% | SOFR+565 | 4,112 | 4,047 | 4,022 |
| STV Group Incorporated 12/11/2026 Construction and Building | 10.67% | SOFR+535 | 9,075 | 9,025 | 8,894 |
| Summit Behavioral Healthcare, LLC 11/24/2028 Healthcare and Pharmaceuticals | 10.43% | SOFR+475 | 1,786 | 1,696 | 1,779 |
| System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) 8/16/2027 Aerospace and Defense | 11.49% | SOFR+600 | 14,738 | 14,540 | 14,575 |
| Team Services Group, LLC 11/24/2028 Healthcare and Pharmaceuticals | 10.75% | SOFR+500 | 346 | 333 | 339 |
| Teneo Holdings LLC 7/18/2025 Business Services | 10.67% | SOFR+535 | 2,262 | 2,261 | 2,259 |
| The Aegis Technologies Group, LLC 10/31/2025 Aerospace and Defense | 12.04% | SOFR+665 | 5,602 | 5,560 | 5,518 |
| The Bluebird Group LLC 7/27/2026 Professional Services | 12.79% | SOFR+700 | 5,403 | 5,336 | 5,382 |
| The Vertex Companies, LLC 8/31/2027 Construction and Engineering | 11.72% | SOFR+635 | 7,716 | 7,591 | 7,656 |
| TPC Canada Parent, Inc. and TPC US Parent, LLC 11/24/2025 Consumer Goods: Non-Durable | 10.95% | SOFR+565 | 8,654 | 8,556 | 8,654 |
| TWS Acquisition Corporation 6/16/2025 Diversified Consumer Services | 11.80% | SOFR+625 | 4,316 | 4,310 | 4,316 |
| Tyto Athene, LLC 4/1/2028 IT Services | 10.90% | SOFR+550 | 14,670 | 14,565 | 13,379 |
| Urology Management Holdings, Inc. 6/15/2026 Healthcare and Pharmaceuticals | 11.79% | SOFR+665 | 6,892 | 6,775 | 6,749 |
| Walker Edison Furniture Company LLC 3/31/2027 Wholesale | 12.18% | SOFR+685 | 3,521 | 3,521 | 3,521 |
| Walker Edison Furniture Company LLC - Junior Revolving Credit Facility 3/31/2027 Wholesale | 11.68% | SOFR+635 | 1,667 | 1,667 | 1,667 |
| Walker Edison Furniture Company LLC - DDTL - Unfunded (3) 3/31/2027 Wholesale |  |  | 333 | - | - |
| Wildcat Buyerco, Inc. 2/27/2026 Electronic Equipment, Instruments, and Components | 10.54% | SOFR+515 | 10,565 | 10,491 | 10,460 |
| Zips Car Wash, LLC 3/1/2024 Automobiles | 12.67% | SOFR+735 | 16,732 | 16,660 | 16,188 |
| **Total First Lien Secured Debt** |  |  |  | 801,215 | 783,598 |
| **Equity Securities - 3.9%** |  |  |  |  |  |
| New MPE Holdings, LLC — Media: Diversified and Production | — | — | - | - | 495 |
| Walker Edison Furniture - Common Equity — Wholesale |  |  | 36 | 3,393 | 1,766 |
| **Total Equity Securities** |  |  |  | 3,393 | 2,261 |
| **Total Investments - 1,351.4%** |  |  |  | 804,608 | 785,859 |
| **Cash and Cash Equivalents - 133.2%** |  |  |  |  |  |
| BlackRock Federal FD Institutional 30 |  |  |  | 77,446 | 77,446 |
| **Total Cash and Cash Equivalents** |  |  |  | 77,446 | 77,446 |
| **Total Investments and Cash Equivalents —1,484.6%** |  |  |  | $882,054 | $863,305 |
| **Liabilities in Excess of Other Assets — (1,384.6)%** |  |  |  |  | (805,155) |
| **Members' Equity—100.0%** |  |  |  |  | $58,150 |

(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable Secured Overnight Financing Rate or "SOFR", or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Consolidated Schedule of Investments disclose the actual interest rate in effect as of the reporting period. All securities are subject to a SOFR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

(2) Valued based on PSSL’s accounting policy.

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

Below are the consolidated statements of assets and liabilities for PSSL ($ in thousands):

*(Unaudited)*

| Assets | December 31, 2023 | September 30, 2023 |
| --- | ---: | ---: |
| Investments at fair value (amortized cost—$847,548 and $804,608, respectively) | $836,857 | $785,859 |
| Cash and cash equivalents (cost—$36,339 and $77,446, respectively) | 36,339 | 77,446 |
| Interest receivable | 5,652 | 5,179 |
| Due from affiliate | 394 | 436 |
| Prepaid expenses and other assets | 151 | 490 |
| **Total assets** | 879,393 | 869,410 |
| **Liabilities** |  |  |
| Credit facility payable | 75,600 | 48,600 |
| 2032 Asset-backed debt, net (par—$246,000) | 244,125 | 243,973 |
| 2035 Asset-backed debt, net (par—$246,000) | 243,596 | 243,483 |
| Notes payable to members | 240,100 | 240,100 |
| Interest payable on Credit facility and asset backed debt | 9,105 | 14,291 |
| Payable for investments purchased | — | 13,466 |
| Interest payable on notes to members | 6,532 | 6,488 |
| Accrued expenses | 759 | 859 |
| **Total liabilities** | 819,817 | 811,260 |
| Commitments and contingencies(1) |  |  |
| **Members' equity** | 59,576 | 58,150 |
| **Total liabilities and members' equity** | $879,393 | $869,410 |

**(1)** As of December 31, 2023 and September 30, 2023, PSSL had unfunded commitments to fund investments of $1.6 million and $1.1 million, respectively.

Below are the consolidated statements of operations for PSSL ($ in thousands):

| Investment income: | Three months ended December 31, 2023 | 2022 |
| --- | ---: | ---: |
| Interest | $26,048 | $19,617 |
| Other income | 177 | 110 |
| **Total investment income** | 26,225 | 19,727 |
| **Expenses(1):** |  |  |
| Interest and expense on credit facility and asset-backed debt | 13,398 | 8,641 |
| Interest expense on notes to members | 8,220 | 6,810 |
| Administration fees | 558 | 508 |
| General and administrative expenses | 262 | 300 |
| **Total expenses** | 22,438 | 16,259 |
| **Net investment income** | 3,787 | 3,468 |
| **Realized and unrealized gain (loss) on investments:** |  |  |
| Net realized gain (loss) on investments | (6,420) | (70) |
| Net change in unrealized appreciation (depreciation) on investments | 8,059 | (5,800) |
| **Net realized and unrealized gain (loss) on investments** | 1,639 | (5,870) |
| **Net increase (decrease) in members' equity resulting from operations** | $5,426 | $(2,402) |

(1) Currently, no management or incentive fees are payable by PSSL. If any fees were to be charged, they would be separately disclosed in the Statements of Operations.

### Off-Balance Sheet Arrangements

We currently engage in no off-balance sheet arrangements other than our funding requirements for the unfunded investments described above.

### Distributions

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

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

During the three months ended December 31, 2023 and 2022, we declared distributions of $0.3075 and $0.285 per share for total distributions of $18.1 million and $12.9 million, respectively. We monitor available net investment income to determine if a return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the SEC.

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

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

### Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update, or ASU, No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The FASB approved an (optional) two year extension to December 31, 2024, for transitioning away from LIBOR. The Company utilized the optional expedients and exceptions provided by ASU 2020-04 during the three months ended December 31, 2023, the effect of which was not material to the consolidated financial statements and the notes thereto.

In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments - Credit Losses (Topic 326)”, which is intended to address issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning after December 15, 2022. The Company has adopted the new accounting standard implementing appropriate controls and procedures, the effect of which was not material to the consolidated financial statements and the notes thereto.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, or ASU 2022-03, which changed the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein. Early application is permitted. The Company is currently evaluating the impact the adoption of this new accounting standard will have on its consolidated financial statements, but the impact of the adoption is not expected to be material.

## Market risk

As filed, 3,159 characters.

We are subject to financial market risks, including changes in interest rates. As of December 31, 2023, our debt portfolio consisted of approximately 100.0% variable-rate investments. The variable-rate loans are usually based on a SOFR (or an alternative risk-free floating interest rate index) rate and typically have durations of three months, after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In regards to variable-rate instruments with a floor, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor. In contrast, our cost of funds, to the extent it is not fixed, will fluctuate with changes in interest rates since it has no floor.

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

| Change in Interest Rates | Change in Interest Income, Net of Interest Expense (in thousands) | Change in Interest Income, Net of Interest Expense Per Share |
| --- | ---: | ---: |
| Down 1% | $(6,603) | $(0.11) |
| Up 1% | 6,603 | 0.11 |
| Up 2% | 13,206 | 0.22 |
| Up 3% | 19,809 | 0.34 |
| Up 4% | 26,425 | 0.45 |

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

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

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

## Controls and procedures

As filed, 2,785 characters.

As of the quarter ended December 31, 2023, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). As disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, a material weakness was previously identified in connection with our internal control over financial reporting relating to the review of quarterly cash and investment reconciliations. Additionally, a material weakness was identified in the operation of our internal controls over financial reporting relating to our review of interest income and non-accrual classification of investments. We have taken steps to remediate these material weaknesses, which steps have included (i) enhancing existing controls to ensure the appropriate review of the quarterly cash and investment reconciliation and that it is adequately documented so as to provide evidence that the controls are operating effectively, (ii) enhancing existing controls to ensure that our internal controls over financial reporting relating to our analysis of interest income and assessment of investments for classification as non-accrual investments are operating effectively and (iii) enhancing policies and procedures to demonstrate a commitment to improving our overall control environment.

Taking the above efforts into consideration, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures for the quarter ended December 31, 2023 were effective and provided reasonable assurance that information required to be disclosed in our periodic filings with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

Other than disclosed in this Item 4, there have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 708 characters.

In addition to the other information set forth in this Report, you should consider carefully the factors discussed below, as well as in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 filed on December 8, 2023, which could materially affect our business, financial condition and/or operating results. The risks described below, as well as in our Annual Report on Form 10-K are not the only risks facing PennantPark Floating Rate Capital Ltd. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

Filed Feb 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-012187. Last ingested by Listed: Nov 3, 2026, 18:58 ET. No prices; not investment advice.