FLOATING RATE CAPITAL OF PENNANTPARK LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-K)

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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 outlook and the outlook for our prospective portfolio

businesses, including due to the current pandemic caused by COVID-19;




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




   •  our ability to continue to effectively manage our business due to the
      significant disruptions caused by the current COVID-19 pandemic;




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



• the impact of a prolonged decline in the liquidity of the credit markets on our

      business;




  • the impact of investments that we expect to make;



• the impact of fluctuations in interest rates and 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, in particular 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 schedule of cash flows, if any, from the operations of our

      portfolio companies;




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



• the ability of our investment advisor to find 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; and



• the impact of Brexit and other global economic and political issues.


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

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

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

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

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes 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" or "high yield" securities or "junk
bonds" and are often higher risk compared to debt instruments that are rated
above investment grade and have speculative characteristics. 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.

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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 Compliance Officer, Chief Financial Officer 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.



COVID-19 developments

COVID-19 was first detected in December 2019 and has since been identified as a
global pandemic by the World Health Organization. The effect of the ongoing
COVID-19 pandemic or any worsening thereof, uncertainty relating to more
contagious strains of the virus, the length of recovery of certain economic
sectors in the U.S. and globally and the speed and efficiency of the vaccination
process, including the extent to which the available vaccines are ineffective
against any new COVID_19 variants, may create stress on the market and may
affect some of our portfolio companies. We cannot predict the full impact of the
COVID-19 pandemic, including any worsening thereof or its duration in the United
States and globally and any impact to our business operations or the business
operations of our portfolio companies.

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



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



  • U.S. and global economic recovery;


  • changes in interest rates, including LIBOR;


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


  • disruptions to supply-chains and price volatility;

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

       regulations; and


  • uncertainty regarding future governmental and regulatory policies.




The business disruption and financial harm resulting from the COVID-19 pandemic
experienced by some of our portfolio companies may reduce, over time, the amount
of interest and dividend income that we receive from such investments and may
require us to provide an increase of capital to such companies in the form of
follow on investments. In connection with the adverse effects of the COVID-19
pandemic, we may also need to restructure the capitalization of some of our
portfolio companies, which could result in reduced interest payments, an
increase in the amount of PIK interest we receive or a permanent reduction in
the value of our investments. If our net investment income decreases, the
percentage of our cash flows dedicated to debt servicing and distribution
payments to stockholders would subsequently increase. If such cash flows cannot
be sustained, we may be required to reduce the amount of our future
distributions to stockholders. As of September 30, 2021, we had two portfolio
companies on non-accrual status, and the continuing impact of the COVID-19
pandemic, or any worsening thereof, may result in additional portfolio
investments being placed on non-accrual status in the future.



Additionally, as of September 30, 2021 and 2020, our asset coverage ratio, as
computed in accordance with the 1940 Act, was 175% and 168%, respectively. Our
Credit Facility includes standard covenants and events of default provisions. If
we fail to make the required payments or breach the covenants therein, it could
result in a default under the Credit Facility. Failure to cure such default or
obtain a waiver from the appropriate party would result in an event of default,
and the lenders may accelerate the repayment of our indebtedness under the
Credit Facility, such that all amounts owed are due immediately at the time of
default. Such an action would negatively affect our liquidity, business,
financial condition, results of operations, cash flows and ability to pay
distributions to our stockholders.



We are also subject to financial risks, including changes in market interest
rates. As of September 30, 2021, our debt portfolio consisted of 99%
variable-rate investments. The variable-rate loans are usually based on a
floating interest rate index such as LIBOR and typically have durations of three
months after which they reset to current market interest rates. Variable-rate
investments subject to a floor generally reset by reference to the current
market index after one to nine months only if the index exceeds the floor. In
addition, the Credit Facility currently bears interest at LIBOR (or an
alternative risk-free floating interest rate index) plus 225 basis points and,
after the revolving period ends in August 2024, the rate will reset to Base Rate
(or an alternative risk-free floating interest rate index) plus 250 basis
points. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and
other central banks have reduced interest rates, which has caused LIBOR to
decrease. Due to such rates, our gross investment income has decreased, which
could result in a decrease in our net investment income if such decreases in
LIBOR are not offset by, among other things, a corresponding increase in the
spread over LIBOR that we earn on such loans or a decrease in the interest rate
of our floating interest rate liabilities tied to LIBOR. See "Item 7A.
Quantitative and Qualitative Disclosures About Market Risk" below.

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



At-the-Market Offering



On August 20, 2021, the Company entered into equity distribution agreements
(together, the "Equity Distribution Agreements") with each of JMP Securities LLC
and Raymond James & Associates, Inc., as the sales agents (each, a "Sales
Agent," and together, the "Sales Agents"), in connection with the sale of shares
of the Company's common stock, par value $0.001 per share (the "Common Stock"),
with an aggregate offering price of up to $75 million. The Equity Distribution
Agreements provide that the Company may offer and sell shares of the Common
Stock from time to time through a Sales Agent in amounts and at times to be
determined by the Company. Actual sales will depend on a variety of factors to
be determined by the Company from time to time, including, market conditions and
the trading price of the Common Stock.

Income

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 are non-recurring in nature. Such fees include loan
prepayment penalties, structuring fees and amendment fees, and are recorded as
other investment income when earned. 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

assessment services;

• the cost of realizing the sales and repurchases of shares of our ordinary shares

and other titles;

• costs payable to third parties relating to, or associated with, the realization

       investments, including fees and expenses associated with performing due
       diligence and reviews of prospective investments or complementary
       businesses;

• the expenses incurred by the Investment Adviser within the framework of the due diligence and

       reviews of 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;

• loyalty bond, directors ‘and officers’ liability, errors and omissions

insurance premiums and other insurance premiums;

• direct costs such as printing, mailing, long distance calls and personnel;

• fees and expenses associated with independent audits and external legal costs;

• the costs associated with our reporting and compliance obligations under the

the 1940 Act and applicable federal and state securities laws; and

• all other expenses incurred by the Administrator or by us in connection with

with the administration of our business, including payments under our

Administration agreement which will be based on our attributable share of

overheads and other expenses incurred by the Administrator to carry out

its obligations under our administration agreement, including rent and our

attributable share of compensation costs and related expenses of our

Chief Compliance Officer, Chief Financial Officer and their

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.

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PORTFOLIO AND INVESTMENT ACTIVITY

As of September 30, 2021, our portfolio totaled $1,081.6 million and consisted
of $934.4 million of first lien secured debt (including $140.9 million in PSSL),
$8.9 million of second lien secured debt and $138.3 million of preferred and
common equity (including $44.9 million in PSSL). Our debt portfolio consisted of
99% variable-rate investments. As of September 30, 2021, we had two portfolio
companies on non-accrual, representing 2.7% and 2.6% of our overall portfolio on
a cost and fair value basis, respectively. Overall, the portfolio had net
unrealized appreciation of $11.0 million. Our overall portfolio consisted of 110
companies with an average investment size of $9.8 million, had a weighted
average yield on debt investments of 7.4%, and was invested 86% in first lien
secured debt (including 13% in PSSL), 1% in second lien secured debt and 13% in
preferred and common equity (including 4% in PSSL). As of September 30, 2021,
99% of the investments held by PSSL were first lien secured debt.

As of September 30, 2020, our portfolio totaled $1,086.9 million and consisted
of $968.6 million of first lien secured debt (including $125.4 million in PSSL),
$29.9 million of second lien secured debt and $88.4 million of preferred and
common equity (including $39.9 million in PSSL). Our debt portfolio consisted of
99% variable-rate investments. As of September 30, 2020, we had three portfolio
companies on non-accrual, representing 2.1% and 1.8% of our overall portfolio on
a cost and fair value basis, respectively. Overall, the portfolio had net
unrealized depreciation of $29.9 million. Our overall portfolio consisted of 102
companies with an average investment size of $10.7 million, had a weighted
average yield on debt investments of 7.3%, and was invested 89% in first lien
secured debt (including 12% in PSSL), 3% in second lien secured debt and 8% in
preferred and common equity (including 4% in PSSL). As of September 30, 2020,
97% of the investments held by PSSL were first lien secured debt.

For the year ended September 30, 2021, we invested $661.1 million in 35 new and
68 existing portfolio companies with a weighted average yield on debt
investments of 7.4%. Sales and repayments of investments for the same period
totaled $702.1 million.

For the year ended September 30, 2020, we invested $436.7 million in 19 new and
95 existing portfolio companies with a weighted average yield on debt
investments of 8.0%. Sales and repayments of investments for the same period
totaled $396.9 million.


PennantPark Senior Secured Loan Fund I LLC



As of September 30, 2021, PSSL's portfolio totaled $564.8 million, consisted of
74 companies with an average investment size of $7.6 million and had a weighted
average yield on debt investments of 7.1%. As of September 30, 2020, PSSL's
portfolio totaled $393.0 million, consisted of 45 companies with an average
investment size of $7.6 million and had a weighted average yield on debt
investments of 6.8%.



For the year ended September 30, 2021, PSSL invested $354.4 million (of which
$285.7 million was purchased from the Company) in 42 new and 29 existing
portfolio companies with a weighted average yield on debt investments of 7.2%.
PSSL's sales and repayments of investments for the same period totaled $185.7
million.



For the year ended September 30, 2020, PSSL invested $87.1 million (of which
$86.7 million was purchased from the Company) in 11 new and two existing
portfolio companies with a weighted average yield on debt investments of 7.4%.
PSSL's sales and repayments of investments for the same period totaled $172.6
million.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Investment assessments

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 advisor responsible for the portfolio investment;

(2) The preliminary conclusions of the assessment are then documented and discussed with

the management of our investment advisor;

(3) Our board of directors also engages independent valuation companies to

independent valuations of our investments for which market quotes are

not readily available or are readily available but considered non-reflective

the fair value of the investment. Independent expertise firms

review management’s preliminary assessments in light of their own

independent valuation and also in the light of market quotations obtained

an independent pricing service, broker, reseller or market maker;

(4) The audit committee of our board of directors reviews the

valuations of our Investment Advisor and those of the independent

assessment companies on a quarterly basis, periodically assesses the assessment

methodologies of independent valuation firms, and responds to and

complements the evaluation recommendations of the independent evaluation

companies to take into account 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

contribution of our investment advisor, the respective independent valuation

        firms and the audit committee.


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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 

the measure

             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 

entries which

             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 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.
Our 2023 Notes are classified as Level 1, as they were valued using the closing
price from the primary exchange. Due to the inherent uncertainty of determining
the fair value of investments that do not have a readily available market value,
the price used in an actual transaction may be different than our valuation and
those differences may be material.



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



In addition to using the above inputs to value cash equivalents, investments,
our 2023 Notes 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 under ASC 825-10, which
provides companies with an option to report selected financial assets and
liabilities at fair value, and made an irrevocable election to apply ASC 825-10
to our Credit Facility and the 2023 Notes. We elected to use the fair value
option for our 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 incurred expenses of $2.9 million and zero relating
to amendment costs on the Credit Facility and debt issuance costs on the 2023
Notes during the years ended September 30, 2021 and 2020, 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 years September 30, 2021 and 2020, our Credit Facility or our Prior
Credit Facility, as applicable, the 2023 Notes had a net change in unrealized
(appreciation) depreciation of $(11.6) million and $14.2 million, respectively.
As of September 30, 2021 and 2020, the net unrealized depreciation on our Credit
Facility or Prior Credit Facility, as applicable, the 2023 Notes totaled $7.2
million and $18.8 million, respectively. We use a nationally recognized
independent valuation service to measure the fair value of our Credit Facility
in a manner consistent with the valuation process that the board of directors
uses to value our investments. Our 2023 Notes trade on the TASE and we use the
closing price on the exchange to determine the fair value.

Revenue recognition

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

Net realized gains or losses and net change in unrealized capital gains 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 value of our portfolio investments, our Credit
Facility, the 2023 during the reporting period, including any reversal of
previously recorded unrealized appreciation or depreciation, when gains or
losses are realized.

Foreign currency conversion

Our books and records are kept in we dollars. All amounts in foreign currencies are converted into we dollars on the following basis:

1. Fair value of marketable securities, other assets and liabilities – at

exchange rate in effect at the end of the applicable period; and

2. Purchases and sales of marketable securities, income and expenses – as of

exchange rate in effect on the respective dates of these transactions.


                                       45

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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 U.S. federal income tax purposes, even though we may not have
collected any cash with respect to interest on PIK securities.

Federal income taxes

We have elected to be treated, and intend to qualify annually to maintain our
election to be treated, as a RIC under Subchapter M of the Code. To maintain our
RIC tax election, we must, among other requirements, meet certain annual
source-of-income and quarterly asset diversification requirements. We also must
annually distribute dividends for 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 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 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.

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.

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 years ended September 30,
2021 and 2020. For information regarding results of operations for the year
ended September 30, 2019, see the Company's Form 10-K for the fiscal year ended
September 30, 2020, as filed with the SEC on November 18, 2020.

Investment income

Investment income for the year ended September 30, 2021 was $82.7 million and
was attributable to $72.1 million from first lien secured debt and $10.6 million
from other investments. The decrease in investment income compared to the same
periods in the prior year was primarily due to a decrease in the size of our
portfolio and in LIBOR.

Investment income for the year ended September 30, 2020 was $95.5 million and
was attributable to $86.8 million from first lien secured debt and $8.7 million
from other investments.

Expenses

Expenses for the year ended September 30, 2021 totaled $43.1 million. Base
management fee for the same period totaled $10.7 million, incentive fee totaled
$5.3 million, debt related interest and expenses totaled $24.5 million
(including $2.9 million attributable to fees associated with entering into the
New Credit Facility amendment fees), general and administrative expenses totaled
$2.1 million and provision for taxes totaled $0.4 million. The decrease in
expenses compared to the prior year was primarily due to a decrease in
management fees under our Investment Management Agreement with the Investment
Advisor and debt related interest and expenses.

Expenses for the year ended September 30, 2020 totaled $52.1 million. Base
management fee for the same period totaled $11.4 million, incentive fee totaled
$9.3 million, debt related interest and expenses totaled $27.1 million, general
and administrative expenses totaled $3.9 million and provision for taxes totaled
$0.4 million.

Net Investment Income



Net investment income totaled $39.6 million, or $1.02 per share, and $43.4
million, or $1.12 per share, for the years ended September 30, 2021 and 2020,
respectively. The decrease in net investment income compared to the prior year
was primarily due to a decrease in the size of our portfolio and in LIBOR.

Net realized gains or losses

Sales and repayments of investments for the years ended September 30, 2021 and
2020 totaled $702.1 million and $396.9 million, respectively. Net realized
losses totaled $12.8 million and $12.7 million for the same periods,
respectively. The change in realized losses was primarily due to changes in the
market conditions of our investments and the values at which they were realized,
caused by the fluctuations in the market and in the economy, as discussed above
under "COVID-19 Developments".

Unrealized Gains or Impairments on Investments, Credit Facility and 2023 Notes

For the years ended September 30, 2021 and 2020, we reported net change in
unrealized appreciation (depreciation) on investments of $41.3 million and
$(26.5) million, respectively. As of September 30, 2021 and 2020, our net
unrealized appreciation (depreciation) on investments totaled $11.0 million and
$(29.9) million, respectively. The net change in unrealized
appreciation/depreciation on our investments for the year ended September 30,
2021 compared to the prior year was primarily due to changes in the capital
market conditions as well as the financial performance of certain portfolio
companies primarily driven by the market disruption caused by the COVID-19
pandemic and the uncertainty surrounding its continued adverse economic impact,
as discussed above under "COVID-19 Developments."

For the year ended September 30, 2021 and 2020, our Credit Facility or Prior
Credit Facility, as applicable, and the 2023 Notes had a net change in
unrealized (appreciation) depreciation of $(11.6) million and $14.2 million and,
respectively. As of September 30, 2021 and 2020, our net unrealized depreciation
on our Credit Facility or our Prior Credit Facility, as applicable, and the 2023
Notes totaled $7.2 million and $18.8 million, respectively. The net change in
unrealized depreciation for the year ended September 30, 2021 compared to the
prior year was primarily due to changes in the capital markets, with the
economic instability negatively affecting the value, as further discussed above
under "COVID-19 Developments."

                                       46

————————————————– ——————————

Net change in net assets resulting from operations

Net change in net assets resulting from operations totaled $56.5 million, or
$1.46 per share, and $18.4 million, or $0.47 per share, for the years ended
September 30, 2021 and 2020, respectively. The increase in net assets from
operations for the year ended September 30, 2021 compared to the prior year was
primarily due to appreciation of the portfolio primarily driven by the recovery
from the market disruption caused by the COVID-19 pandemic and the uncertainty
surrounding its continued adverse economic impact, as discussed above under
"COVID-19 Developments".

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are derived primarily from proceeds of
securities offerings, debt capital and cash flows from operations, including
investment sales and repayments, and income earned. Our primary use of funds
from operations includes investments in portfolio companies and payments of fees
and other operating expenses we incur. We have used, and expect to continue to
use, our debt capital, proceeds from the rotation of our portfolio and proceeds
from public and private offerings of securities to finance our investment
objectives. As of September 30, 2021, 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. For information regarding liquidity and capital resources for the
year ended September 30, 2019, see the Company's Form 10-K for the fiscal year
ended September 30, 2020, as filed with the SEC on November 18, 2020.



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 requirements 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 September 30, 2021 and 2020, our asset coverage ratio, as
computed in accordance with the 1940 Act, was 175% and 168%, respectively.



The annualized weighted average cost of debt for the years ended September 30,
2021 and 2020, inclusive of the fee on the undrawn commitment on the Credit
Facility or Prior Credit Facility, as applicable, amendment costs and debt
issuance costs, was 3.9% and 3.7%, respectively (excluding amendment and debt
issuance costs, such amounts are 3.5% and 3.7%, respectively). As of
September 30, 2021 and 2020, we had $80.6 million and $211.4 million of unused
borrowing capacity under our Credit Facility or our Prior Credit Facility, as
applicable, respectively, subject to leverage and borrowing base restrictions.



Funding I's multi-currency Credit Facility with the Lenders was $300.0 million
as of September 30, 2021, 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 LIBOR (or an alternative risk-free floating interest
rate index) of 225 basis points, a maturity date of August 2026 and a revolving
period that ends in August 2024. As of September 30, 2021 and 2020, Funding I
had $219.4 million and $308.6 million of outstanding borrowings under the Credit
Facility or the Prior Credit Facility, as applicable, respectively. The Credit
Facility or the Prior Credit Facility, as applicable, had a weighted average
interest rate of 2.3% and 2.2%, exclusive of the fee on undrawn commitments, as
of September 30, 2021 and 2020, respectively.

During the revolving period, the Credit Facility bears interest at LIBOR (or an
alternative risk-free floating interest rate index) plus 225 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 September 30, 2021, 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.



The 2023 Notes pay interest at a rate of 4.3% per year. As a result of the
downgrade of the 2023 Notes from "ilA+" to "ilA-" in March 2020, the interest
rate of the 2023 Notes was increased to 4.3% from 3.8%. Interest on the 2023
Notes is payable semi-annually in arrears on June 15 and December 15 of each
year, commencing June 15, 2018. The principal on the 2023 Notes will be 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.



The 2023 Notes are general, unsecured obligations, rank equal in right of
payment with all of our existing and future senior unsecured indebtedness and
are generally redeemable at our option. The deed of trust governing the 2023
Notes includes certain customary covenants, including minimum equity
requirements, and events of default. Please refer to the deed of trust filed as
Exhibit (d)(8) to our post-effective amendment filed on December 13, 2017 for
more information. The 2023 Notes are rated ilA- by S&P Global Ratings Maalot
Ltd. and are listed on the TASE. In connection with this offering, we have dual
listed our common stock on the TASE.



The 2023 Notes have not been and will not be registered under the Securities Act
and may not be offered or sold in the United States absent registration under
the Securities Act or in transactions exempt from, or not subject to, such
registration requirements.



In March 2021, we issued $100.0 million in aggregate principal amount of 2026
Notes at a public offering price per note of 99.4%. 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
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 LIBOR 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 LIBOR

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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 C­1 Secured
Deferrable Floating Rate Notes due 2031, which bear interest at the three-month
LIBOR 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
LIBOR plus 4.8% and (B) the borrowing of $77.5 million Class A­1 Senior Secured
Floating Rate Loans due 2031, which bear interest at the three-month LIBOR 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 September 30, 2021 and
2020, the Company had $228.0 million of 2031 Asset-Backed Debt outstanding with
a weighted average interest rate of 2.6% and 2.7%, 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 August 20, 2021, we entered into equity distribution agreements (together,
the "Equity Distribution Agreements") with each of JMP Securities LLC and
Raymond James & Associates, Inc., as the sales agents (each, a "Sales Agent,"
and together, the "Sales Agents"), in connection with the sale of shares of our
common stock, par value $0.001 per share (the "Common Stock"), with an aggregate
offering price of up to $75 million under an at-the-market offering (the "ATM
Program"). The 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.



During the three months ended September 30, 2021, we issued 108,654 shares of
our Common Stock under the ATM Program at a weighted-average price of $12.91 per
share, raising $1.4 million of gross proceeds. Net proceeds were $1.4 million
after commissions to the Sales Agents on shares sold. We incurred $0.4 million
of legal and other offering costs associated with establishing the ATM Program.
As of September 30, 2021, we had $73.6 million available under the ATM Program.



Through September 30, 2021, we issued 108,654 shares of our Common Stock under
the ATM Program at a weighted-average price of $12.91, raising $1.4 million of
gross proceeds. Net proceeds were $1.4 million after commissions to the Sales
Agents on shares sold. We incurred $0.4 million of legal and other offering
costs associated with establishing 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, our 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. For
the year ended September 30, 2020 we did not issue any shares.

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 2021,
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 2021, the Administrator furnishes us with office
facilities and administrative services necessary to conduct our day-to-day
operations. If requested to provide significant managerial assistance to our
portfolio companies, we or the Administrator will be paid an additional amount
based on the services provided. Payment under our Administration Agreement is
based upon our allocable portion of the Administrator's overhead in performing
its obligations under our Administration Agreement, including rent and our
allocable portion of the costs of our Chief Compliance Officer, Chief Financial
Officer and their respective staffs.

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

As of September 30, 2021 and 2020, we had cash equivalents of $49.8 million and
$57.5 million, respectively, available for investing and general corporate
purposes. We believe our liquidity and capital resources are sufficient to take
advantage of market opportunities.

Our operating activities provided cash of $49.6 million for the year ended
September 30, 2021, and our financing activities used cash of $56.3 million for
the same period. Our operating activities used cash primarily for our investment
activities and our financing activities used cash primarily for paying down our
Credit Facility and paying distributions to stockholders.



Our operating activities used cash of $4.9 million for the year ended
September 30, 2020, and our financing activities used cash of $0.9 million for
the same period. Our operating activities used cash primarily for our investment
activities and our financing activities used cash primarily for paying down our
Credit Facility and paying distributions to stockholders.





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Senior Securities



Information about our senior securities is shown in the following table as of
September 30, 2021, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013 and 2012. The
report of RSM US LLP, an independent registered public accounting firm, on the
Senior Securities table as of September 30, 2021, is attached as an exhibit to
this Report.



                                                                          Average
                                Total Amount        Asset Coverage      Market Value
     Class and Year            Outstanding (1)       Per Unit (2)       Per Unit (3)
     Credit Facility
     Fiscal 2021              $         219,400     $         1,746              N/A
     Fiscal 2020                        308,599               1,677              N/A
     Fiscal 2019                        265,308               1,786              N/A
     Fiscal 2018                        333,728               2,122              N/A
     Fiscal 2017                        253,783               2,780              N/A
     Fiscal 2016                        232,908               2,601              N/A
     Fiscal 2015                         29,600              13,598              N/A
     Fiscal 2014                        146,400               2,469              N/A
     Fiscal 2013                         99,600               3,109              N/A
     Fiscal 2012                         75,500               2,263              N/A
     2023 Notes
     Fiscal 2021                        117,793               1,746              N/A
     Fiscal 2020                        138,580               1,677              N/A
     Fiscal 2019                        138,580               1,786              N/A
     Fiscal 2018                        138,580               2,122              N/A
     2026 Notes
     Fiscal 2021                        100,000               1,746              N/A
     2031 Asset-Backed Debt
     Fiscal 2021                        228,000               1,746              N/A
     Fiscal 2020                        228,000               1,677              N/A
     Fiscal 2019              $         228,000     $         1,786              N/A



(1) Total cost of each category of senior securities outstanding at the end of

    period presented in thousands (000s).



(2) The asset coverage ratio of a class of senior securities representing

debt is calculated as our total consolidated assets, less all

liabilities and debt not represented by senior securities, divided by

senior securities representing debt at par. This asset coverage ratio

    is multiplied by $1,000 to determine the Asset Coverage Per Unit.



(3) Not applicable, as senior securities are not listed for trading

    the United States of America.



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 September 30, 2021 and 2020, PSSL had total assets of $603.6
million and $406.4 million, respectively. As of the same dates, we and Kemper
had remaining commitments to fund first lien secured debt and equity interests
in PSSL in an aggregate amount of $48.0 million and $25.3 million, respectively.
PSSL invests in portfolio companies in the same industries in which we may
directly invest.



We provide capital to PSSL in the form of first lien secured debt and equity
interests. As of September 30, 2021 and 2020, 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 made in PSSL consisted of
first lien secured debt of $140.9 million (additional $29.4 million unfunded)
and $125.4 million (additional $15.5 million unfunded), respectively, and equity
interests of $60.4 million (additional $12.6 million unfunded) and $53.7 million
(additional $6.6 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.



Additionally, PSSL entered into a $155.0 million senior secured revolving credit
facility which bears interest at LIBOR (or an alternative risk-free floating
interest rate index) plus 260 basis points, or the PSSL Credit Facility, with
Ally Bank. through its wholly-owned subsidiary, PennantPark Senior Secured Loan
Facility LLC, or PSSL Subsidiary, 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.


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


                                                        September 30,      September 30,
                                                             2021               2020
Total investments                                       $  564,783,128     $  392,986,090
Weighted average cost yield on income producing
investments                                                        7.1 %              6.8 %
Number of portfolio companies in PSSL                               74                 45
Largest portfolio company investment                    $   18,932,630     

$ 20,614,860
Total of the top five investments in portfolio companies $ 84,287,460 $ 93,320,993







                                       49
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Below is a listing of PSSL's individual investments as of September 30, 2021:



                                                                                           Basis Point
                                                                          Current          Spread Above
Issuer Name                      Maturity            Industry             Coupon            Index (1)         Par              Cost          Fair Value (2)
First Lien Secured Debt -
1,088.%
Ad.net Acquisition, LLC         05/06/2026            Media                    7.00 %          3M L+600      8,977,500     $  8,851,554     $      8,842,838
Altamira Technologies, LLC      07/24/2025      Business Services              8.00 %          3M L+700      5,525,093        5,375,682            5,179,775
American Insulated Glass, LLC   12/21/2023      Building Products              6.50 %          3M L+550      5,720,691        5,653,291            5,663,484
                                               Diversified Consumer
Apex Service Partners, LLC      07/31/2025           Services                  6.25 %          3M L+525      1,020,636        1,020,636            1,010,430
Apex Service Partners, LLC                     Diversified Consumer
Term Loan B                     07/31/2025           Services                  6.50 %          1M L+550      2,222,284        2,222,284            2,200,061
Apex Service Partners, LLC                     Diversified Consumer
Term Loan C                     07/31/2025           Services                  6.25 %          3M L+525      4,173,913        4,103,292            4,132,174
Applied Technical Services,                   Commercial Services &
LLC                             12/29/2026           Supplies                  6.75 %          3M L+575      4,511,364        4,419,019            4,421,136
By Light Professional IT
Services, LLC                   05/16/2022     High Tech Industries            7.25 %          1M L+625     12,879,690       12,868,714           12,879,690
Cadence Aerospace, LLC          11/14/2023    Aerospace and Defense            9.50 %          3M L+850     12,281,867       12,231,080           11,980,961
                                                                          (PIK 9.50 %)
                                             Healthcare, Education &
Cano Health                     11/23/2027          Childcare                  5.25 %          3M L+450      2,653,333        2,646,700            2,654,448
                                                 Construction and
CHA Holdings, Inc.              04/10/2025         Engineering                 5.50 %          3M L+450      5,614,627        5,518,856            5,530,408
Challenger Performance
Optimization, Inc.              08/31/2023      Business Services              8.00 %          1M L+675      9,500,705        9,453,659            9,215,683
                                                                          (PIK 1.00 %)
Connatix Buyer, Inc             07/13/2027            Media                    6.25 %          1M L+550      4,000,000        3,921,757            3,920,000
CoolSys, Inc                    08/04/2028      Business Services              5.50 %          1M L+475      1,909,091        1,890,159            1,913,864
                                              Commercial Services &
Crane 1 Services Inc            08/16/2027           Supplies                  6.75 %          1M L+575      2,131,579        2,100,271            2,110,264
Crash Champions, LLC            08/05/2025         Automobiles                 6.00 %          3M L+500      8,977,500        8,801,543            8,797,950
Digital Room Holdings, Inc.                   Commercial Services &                            1M L+500
                                05/22/2026           Supplies                  5.08 %                        3,228,001        3,111,026            3,186,037
Douglas Products and                         Chemicals, Plastics and
Packaging Company LLC           10/19/2022            Rubber                   6.75 %          3M L+575      8,746,050        8,694,764            8,746,050
Douglas Sewer Intermediate,                  Chemicals, Plastics and
LLC                             10/19/2022            Rubber                   6.75 %          3M L+575      7,323,008        7,278,084            7,323,008
Dr. Squatch, LLC                8/27/2026       Personal Products              7.00 %          3M L+600     10,000,000        9,803,125            9,800,000
DRS Holdings III, Inc.          11/03/2025   Consumer Goods: Durable           7.25 %          1M L+625     15,675,682       15,584,366           15,565,952
East Valley Tourist                          Hotels, Restaurants and
Development Authority           03/07/2022           Leisure                   9.00 %          3M L+800      5,719,009        5,624,041            5,633,224
                                                                          (PIK 3.50 %)
                                             Hotels, Restaurants and
ECL Entertainment, LLC          03/312028            Leisure                   8.25 %          1M L+750      2,647,212        2,621,341            2,706,774
                                              Electronic Equipment,
                                                 Instruments, and
ECM Industries, LLC             12/23/2025          Components                 5.50 %          1M L+450      4,994,355        4,994,355            4,894,468
Fairbanks More Defense          06/17/2028    Aerospace and Defense            5.50 %          3M L+475     10,000,000        9,954,660           10,000,000
                                              Commercial Services &
FlexPrint, LLC                  01/02/2024           Supplies                  6.02 %          1M L+590      4,769,595        4,732,000            4,745,747
Gantech Acquisition Corp.       05/14/2026         IT Services                 7.25 %          3M L+625     14,925,000       14,648,015           14,626,500
                                              Diversified Financial
Global Holdings InterCo LLC     03/16/2026           Services                  7.00 %          3M L+600      3,967,531        3,947,994            3,947,694
                                                Trding Companies &
Graffiti Buyer, Inc             08/10/2027         Distributors                6.75 %          3M L+575      2,392,857        2,345,748            2,356,964
Hancock Roofing and
Construction L.L.C.             12/31/2026          Insurance                  6.00 %          3M L+500      2,481,250        2,424,925            2,456,438
Holdco Sands Intermediate,
LLC                             12/19/2025    Aerospace and Defense            7.50 %          3M L+600      6,473,725        6,407,142            6,441,356
IMIA Holdings, Inc.             04/09/2027    Aerospace and Defense            6.75 %          3M L+575     13,589,144       13,338,397           13,317,361
                                               Diversified Consumer
Integrative Nutrition, LLC      09/29/2023           Services                  5.50 %          3M L+450     11,566,905       11,527,975           11,566,905
                                             Chemicals, Plastics and
K2 Pure Solutions NoCal, L.P.   12/20/2023            Rubber                   8.00 %          1M L+700     19,450,000       19,192,725           18,932,630
LAV Gear Holdings, Inc.         10/31/2024      Capital Equipment              8.50 %          3M L+750     10,491,277       10,435,348            9,833,474
                                                                          (PIK 1.00 %)
                                             Healthcare Providers and
Lightspeed Buyer Inc.           02/3/2026            Services                  6.75 %          1M L+575      5,706,549        5,605,574            5,706,549
                                                Hotel, Gaming and
Lucky Bucks, LLC                07/20/2027           Leisure                   6.25 %          1M L+550      4,500,000        4,411,012            4,424,085
                                              Media: Diversified and
Marketplace Events, LLC         09/30/2025          Production                 6.25 %          3M L+525        617,487          617,487              617,487
  Super Priority First Lien                                               (PIK 6.25 %)
Term Loan
Marketplace Events, LLC -
Super Priority First Lien                     Media: Diversified and
Unfunded Term Loan              09/30/2025          Production                    -                   -        589,122                -                    -
                                              Media: Diversified and                   (3)            -
Marketplace Events LLC          09/30/2026          Production                 0.00 %                        4,614,973        3,441,474            4,614,973
Mars Acquisition Holdings
Corp.                           05/14/2026            Media                    6.50 %          1M L+550     10,000,000        9,812,779            9,900,000
                                              Internet Software and
MBS Holdings, Inc.              04/16/2027           Services                  6.75 %          3M L+575      7,481,250        7,337,843            7,331,625
                                               Media: Advertising,
MeritDirect, LLC                05/23/2024    Printing & Publishing            6.50 %          3M L+550      5,531,856        5,411,520            5,476,537
Mission Critical Electronics,
Inc.                            09/28/2022      Capital Equipment              6.00 %          3M L+500      5,889,949        5,877,013            5,889,949
                                             Healthcare, Education &
NBH Group LLC                   08/19/2026           Culture                   6.50 %          3M L+550     10,901,830       10,687,200           10,683,794
                                                 Consumer Goods:
New Milani Group LLC            06/06/2024         Non-Durable                 6.50 %          1M L+550     14,550,000       14,481,129           13,895,250
                                             Healthcare Equipment and
OIS Management Services LLC     07/09/2026           Supplies                  5.75 %          1M L+475      1,995,000        1,965,911            1,965,075
                                                 Air Freight and
One Stop Mailing, LLC           05/07/2027          Logistics                  7.25 %          1M L+625     14,919,643       14,631,178           14,658,549
Output Services Group, Inc.     03/27/2024      Business Services              5.50 %          1M L+450      7,743,419        7,732,934            7,046,511
                                                 Construction and
Ox Two, LLC                     05/18/2026           Building                  7.00 %          3M L+600      4,975,000        4,901,154            4,875,500
PH Beauty Holdings III, Inc.    09/29/2025          Wholesale                  5.12 %          1M L+500      9,692,670        9,514,071            9,466,540
Plant Health Intermediate,                   Chemicals, Plastics and
Inc.                            10/19/2022            Rubber                   6.75 %          3M L+575      1,577,806        1,568,099            1,577,806
PlayPower, Inc.                 05/8/2026    Consumer Goods: Durable           5.63 %          3M L+550      3,805,440        3,719,648            3,735,687
Recteq, LLC                     01/29/2026       Leisure Products              7.00 %          3M L+600      4,975,000        4,887,511            4,925,250
Research Now Group, Inc. and
Survey Sampling International                  Diversified Consumer
LLC                             12/20/2024           Services                  6.50 %          3M L+550     10,679,701       10,591,506           10,543,962
Sales Benchmark Index LLC       01/03/2025    Professional Services            7.75 %          3M L+600      5,578,331        5,495,801            5,438,872
Sargent & Greenleaf Inc.        12/20/2024          Wholesale                  7.00 %          1M L+550      5,549,876        5,492,898            5,549,876
Schlesinger Global, Inc.        07/14/2025      Business Services              8.00 %          3M L+700     11,784,634       11,760,259           11,254,326
                                                  Healthcare and
Smile Brands Inc.               10/14/2024       Pharmaceuticals               5.32 %          3M L+450     12,576,323       12,458,672           12,450,560
                                                Beverage, Food and
Snak Club, LLC                  07/19/2022           Tobacco                   7.00 %          1M L+600      4,388,056        4,361,678            4,388,056
                                                  Healthcare and
Solutionreach, Inc.             01/17/2024       Pharmaceuticals               6.75 %          1M L+575      5,892,286        5,854,034            5,892,286



                                       50
--------------------------------------------------------------------------------


Below is a listing of PSSL's individual investments as of September 30,
2021(continued):





                                                                                                Basis Point
                                                                                                  Spread
                                                                                Current            Above            Par /
Issuer Name                        Maturity               Industry              Coupon           Index (1)          Shares            Cost          Fair Value (2)
                                                   Hotels, Restaurants and
Spectacle Gary Holdings, LLC      12/23/2025               Leisure          

11.00% 1M L + 900 4 389 000 4 505 648

4 764 830

STV Group Incorporated            12/11/2026      Construction and Building 

5.33% 1M L + 525 9 075 412 9 003 666

9,030,035

LifePort Buyer TAC, LLC 03/01/2026 Aeronautics and Defense

7.00% 3M L + 600 4,950,000 4,860,463

4,948,403

TeleGuam Holdings, LLC            11/20/2025         Telecommunications              5.50 %         1M L+450       10,337,380        10,312,931          10,234,006
Teneo Holdings LLC                07/18/2025          Business Services              6.25 %         1M L+525        2,309,486         2,306,149           2,296,969
The Aegis Technologies Group,
LLC                               10/31/2025        Aerospace and Defense   

6.77% 3M L + 550 5 713 461 5 633 702

5 656 327

The Bluebird Group LLC            07/27/2026        Professional Services   

8.00% 3M L + 700 1 743 846 1 709 872

1,732,860

                                                   Media: Broadcasting and
The Infosoft Group, LLC           09/16/2024            Subscription        

6.75% 6M L + 575 13 383 253 13 375 955

13 383 253

                                                      Construction and
The Vertex Companies, LLC         08/30/2027             Engineering        

6.50% 6M L + 550 5 634 134 5 523 212

5,528,647

TPC Canada Parent, Inc. and TPC                        Consumer Goods:
US Parent, LLC                    11/24/2025             Non-Durable                 6.25 %         3M L+525        8,834,066         8,654,973           8,569,044
                                                    Diversified Consumer
TVC Enterprises, LLC              03/26/2026              Services                   6.75 %         1M L+575        8,558,226         8,593,467           8,558,226
                                                    Diversified Consumer
TWS Acquisition Corporation       06/16/2025              Services                   7.25 %         1M L+625        6,636,062         6,598,947           6,636,062
Tyto Athene, LLC                  08/27/2024             IT Services                 6.25 %         1M L+550       11,442,500        11,334,186          11,442,500
UBEO, LLC                         04/03/2024          Capital Equipment              5.50 %         1M L+450       17,571,320        17,457,179          17,483,464
Urology Management Associates,                         Healthcare and
LLC                               08/30/2024           Pharmaceuticals      

5.50% 1M L + 450 11 030 410 10 848 799

10 975 256

Walker Edison Furniture Company
LLC                               03/31/2027              Wholesale                  6.75 %         1M L+575       12,437,500        12,141,939          11,971,094
                                                    Electronic Equipment,
                                                      Instruments, and
Wildcat Buyerco, Inc.             02/27/2026             Components                  6.00 %         3M L+500        5,705,549         5,655,884           5,678,016
Total First Lien Secured Debt                                                                                                       558,879,885         557,731,845
Second Lien Secured Debt -
10.5%
DBI Intermediate Holdco, LLC,
Term Loan B                       02/02/2026          Business Services             11.00 %                -        2,434,333         2,434,333           2,434,333
                                                                                (PIK 9.00 %)
Inventus Power, Inc.              09/29/2024       Consumer Goods: Durable           9.50 %         3M L+850        3,000,000         2,946,584         

2,940,000

Total Second Lien Secured Debt                                                                                                        5,380,917         

5 374 333

Equity Securities - 3.3%
DBI Intermediate Holdco, LLC,             -
Series A-1                                            Business Services             13.00 %                -            6,784         5,034,310         

DBI Intermediate Holdco, LLC,             -                                                                             7,007
Series AA                                             Business Services                 -                  -                          6,731,347         

1,314,706.0

DBI Intermediate Holdco, LLC,             -                                                                         1,065,021
Series B                                              Business Services                 -                  -                            236,521                   -
                                          -        Media: Diversified and                                                  47
New MPE Holdings, LLC                                    Production                     -                  -                                  -           362,244.0
Total Equity Securities                                                                                                              12,002,178           1,676,950
Total Investments - 1101.7%                                                                                                         576,262,980         

564 783 128

Cash and Cash Equivalents - 55.3%
BlackRock Federal FD
Institutional 30                                                                                                                     28,190,894          28,190,894
US Bank Cash                                                                                                                            195,787             182,647
Total Cash and Cash Equivalents                                                                                                      28,386,681          28,373,541
Total Investments and Cash
Equivalents -1,157.1%                                                                                                             $ 604,649,661     $   593,156,669
Liabilities in Excess of Other
Assets - (1057.1)%                                                                                                                                     (541,892,538 )
Members' Equity-100.0%                                                                                                                              $    51,264,131







(1) Represents variable rate instruments that bear interest at a

spread against an index, usually the LIBOR or “L” or the applicable Prime

rate or “P”. The spread can change depending on the type of rate used. Terms

in the Table of investments disclose the real interest rate in force as

    of the reporting period. LIBOR loans are typically indexed to a 30-day,
    60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L,
    respectively), at the borrower's option. All securities are subject to a
    LIBOR or Prime rate floor where a spread is provided, unless noted. The
    spread provided includes PIK interest and other fee rates, if any.

(2) Evaluated in accordance with PSSL’s accounting policy.

(3) Security not producing income.



                                       51
--------------------------------------------------------------------------------




Below is a listing of PSSL's individual investments as of September 30, 2020:



                                                                                                   Basis Point
                                                                                  Current          Spread Above
Issuer Name                        Maturity                Industry               Coupon            Index (1)         Par              Cost          Fair Value (2)
First Lien Secured Debt-838.2%
Altamira Technologies, LLC        07/24/2025         High Tech Industries              7.00 %          3M L+600      4,856,155     $   4,795,251     $  

4,686,189

American Auto Auction Group,
LLC                               01/02/2024       Transportation: Consumer            6.00 %          3M L+500      7,670,399         7,596,860           7,440,287
By Light Professional IT
Services, LLC                     05/16/2022         High Tech Industries              7.25 %          1M L+625     10,901,843        10,774,172          10,792,825
Cadence Aerospace, LLC            11/14/2023         Aerospace and Defense             9.50 %          3M L+850     11,802,082        11,730,187          11,322,915
Cardenas Markets LLC              11/29/2023      Beverage, Food and Tobacco           6.75 %          1M L+575      4,779,776         4,759,527           4,779,776

Centauri Group Holdings, LLC 12/02/2024 Aeronautics and Defense

            6.25 %          1M L+525      5,330,847         5,330,847           5,304,193
Challenger Performance
Optimization, Inc.                08/31/2023           Business Services               7.00 %          1M L+575      9,663,392         9,595,826           8,986,954
Country Fresh Holdings, LLC       05/01/2023      Beverage, Food and Tobacco           6.00 %          1M L+500        182,403           179,976             182,403
Country Fresh Holdings, LLC
(Revolver)                        05/01/2023      Beverage, Food and Tobacco           6.00 %          1M L+500        450,110           450,111             450,110
Douglas Products and Packaging                      Chemicals, Plastics and
Company LLC                       10/19/2022                Rubber                     6.75 %          3M L+575      8,836,683         8,756,358        

8,704,133

                                                    Chemicals, Plastics and
Douglas Sewer Intermediate, LLC   10/19/2022                Rubber                     6.75 %          3M L+575      7,403,183         7,370,405           7,292,135
DRS Holdings III, Inc.            11/03/2025        Consumer Goods: Durable            6.75 %          1M L+575      8,022,149         7,950,609           7,875,344
                                                  Banking, Finance, Insurance
Findex Group Limited (3), (4)     05/31/2024            and Real Estate                5.46 %          3M L+525 A $ 10,000,000         7,411,600           6,809,125
GCOM Software LLC                 11/14/2022         High Tech Industries              7.75 %          1M L+625     16,646,228        16,562,972          16,646,228
Good2Grow LLC                     11/18/2024               Beverages                   5.25 %          3M L+425      9,499,183         9,429,133           9,427,938
GSM Holdings, Inc.                06/03/2024        Consumer Goods: Durable            5.50 %          3M L+450     19,470,523        19,354,235          19,275,817
IMIA Holdings, Inc.               10/26/2025         Aerospace and Defense             5.50 %          3M L+450     12,143,568        12,097,717          12,022,132
Impact Group, LLC                 06/27/2023               Wholesale                   8.37 %          1M L+737      9,290,185         9,216,206           9,336,636
                                                     Diversified Consumer
Integrative Nutrition, LLC        09/29/2023               Services                    5.75 %          1M L+475      8,587,606         8,587,606        

8 458 792

                                                    Chemicals, Plastics and
K2 Pure Solutions NoCal, L.P.     12/20/2023                Rubber                     8.00 %          1M L+700     19,650,000        19,436,214          19,217,700
LAV Gear Holdings, Inc.           10/31/2024           Capital Equipment               8.50 %          3M L+750      9,975,861         9,902,990           9,188,766
LSF9 Atlantis Holdings, LLC       05/01/2023                Retail                     7.00 %          1M L+600      6,843,750         6,872,048        

6 631 320

Manna Pro Products, LLC           12/08/2023      Consumer Goods: 

Non Durable 7.00% 1M L + 600 4 313 910 4 273 019

           4,197,866
                                                    Media: Diversified and                     (5)            -
Marketplace Events LLC (4)        01/27/2023              Production                   0.00 %                   C $  5,730,254         4,449,786           3,623,691
                                                      Media: Advertising,
MeritDirect, LLC                  05/23/2024         Printing & Publishing             6.50 %          3M L+550      4,812,500         4,771,073        

4,583,906

Mission Critical Electronics,
Inc.                              09/28/2022           Capital Equipment               6.00 %          3M L+500      5,949,731         5,927,114        

5 877 737

New Milani Group LLC              06/06/2024      Consumer Goods: 

Non Durable 6.50% 1M L + 550 14 662 500 14 568 019 13 379 531
Exit Services Group, Inc. 03/27/2024

           Business Services               5.50 %          1M L+450      7,803,419         7,825,029        

7 101 111

PH Beauty Holdings III, Inc.      09/29/2025               Wholesale                   5.19 %          1M L+500      9,792,594         9,717,936        

9,156,076

                                                    Chemicals, Plastics and
Plant Health Intermediate, Inc.   10/19/2022                Rubber                     6.75 %          3M L+575      1,594,030         1,579,915           1,570,120
PlayPower, Inc.                    05/8/2026           Leisure Products                5.72 %          3M L+550      4,025,520         3,990,707           3,824,244
Sargent & Greenleaf Inc.          12/20/2024               Wholesale                   7.00 %          1M L+550      4,925,000         4,860,858        

4 836 350

Schlesinger Global, Inc.          07/14/2025           Business Services               7.00 %          1M L+600     11,904,617        11,904,617          11,041,532
                                                        Healthcare and
Smile Brands Inc.                 10/14/2024            Pharmaceuticals                4.93 %          3M L+450     11,175,938        11,090,654          10,840,659
Snak Club, LLC                    07/19/2021      Beverage, Food and Tobacco           6.50 %          1M L+550      4,561,971         4,561,971           4,493,542
                                                        Healthcare and
Solutionreach, Inc.               01/17/2024            Pharmaceuticals                6.75 %          3M L+575      6,214,305         6,149,172           6,145,948
STV Group Incorporated            12/11/2026       Construction and Building           5.40 %          1M L+525      7,762,222         7,692,023           7,684,600
TeleGuam Holdings, LLC            11/20/2025          Telecommunications               5.50 %          1M L+450      8,309,797         8,272,104           8,060,503
Teneo Holdings LLC                07/18/2025           Business Services               6.25 %          1M L+525      4,950,000         4,783,595           4,764,375
                                                    Media: Broadcasting and
The Infosoft Group, LLC           09/16/2024             Subscription                  6.75 %          6M L+575      8,602,807         8,584,634           8,602,807
TPC Canada Parent, Inc. and TPC
US Parent, LLC                    11/24/2025      Consumer Goods: 

Non Durable 6.25% 3M L + 525 8 924 066 8 837 614

           8,656,344
                                                     Diversified Consumer
TVC Enterprises, LLC              01/18/2024               Services                    6.50 %          1M L+550      9,747,335         9,747,335           9,674,230
                                                     Diversified Consumer
TWS Acquisition Corporation       06/16/2025               Services                    7.25 %          1M L+625      6,910,465         6,797,117           6,772,256
UBEO, LLC                         04/03/2024           Capital Equipment               5.50 %          3M L+450     21,930,702        21,762,065          20,614,860
Urology Management Associates,                          Healthcare and
LLC                               08/30/2024            Pharmaceuticals                6.00 %          3M L+500     11,463,443        11,311,325        

11,119,540

Walker Edison Furniture Company
LLC                               09/26/2024               Wholesale                   7.25 %          3M L+625     10,594,047        10,440,520        

10,594,047

Whitney, Bradley & Brown, Inc. 10/18/2022 Aeronautics and Defense

            8.50 %          1M L+750        254,095           250,910        

251,557

Total First Lien Secured Debt                                                                                                        392,309,962        

382 299 150

Secured Debt-19.5%
Country Fresh Holdings, LLC 04/29/2024 Drinks, food and tobacco

           9.50 %          1M L+850        964,045           964,045             889,813
                                                                                  (PIK 9.50 %)
DBI Holding, LLC, Term Loan B     03/26/2021           Business Services               9.00 %                 -         15,946            15,946        

15 946

                                                                                  (PIK 9.00 %)
DBI Holding, LLC, Term Loan C     02/02/2026           Business Services               9.00 %                 -      7,977,513         7,977,513        

7 977 513

                                                                                  (PIK 9.00 %)
Total Second Lien Secured Debt                                                                                                         8,957,504        

8 883 272

Equity Securities-4.0%
Country Fresh Holding Company             -
Inc.                                              Beverage, Food and Tobacco                                             1,317         1,713,105                   -
DBI Holding, LLC, Series A-1              -            Business Services                  -                   -          5,034         5,034,310           1,803,668
DBI Holding, LLC, Series B                -            Business Services                  -                   -      1,065,021           236,521                   -
Total Equity Securities                                                                                                                6,983,936           1,803,668
Total Investments-861.6%                                                                                                             408,251,402         392,986,090
Cash and Cash Equivalents-24.4%
BlackRock Federal FD
Institutional 30                                                                                                                       6,005,963           6,005,963
US Bank Cash                                                                                                                           5,109,410           5,115,516
Total Cash and Cash Equivalents                                                                                                       11,115,373          11,121,479
Total Investments and Cash
Equivalents-886.0%                                                                                                                 $ 419,366,775     $   404,107,569
Liabilities in Excess of Other
Assets-(786.0)%                                                                                                                                         (358,495,484 )
Members' Equity-100.0%                                                                                                                               $    45,612,085



(1) Represents variable rate instruments that bear interest at a

spread against an index, usually the applicable LIBOR or “L” or EURIBOR

or “E”. All securities are subject to a floor LIBOR or preferential rate when

propagation is provided, unless otherwise noted. Spread provided includes PIK interest

and other fee rates, if applicable.

(2) Evaluated according to PSSL’s accounting policy.

(3) No-we company or main establishment outside United States.

(4) The nominal amount is denominated in Australian dollars (A $) or Canadian dollars (C $)

as indicated.

(5) Represents the purchase of a deferred settlement security or

line of credit that is currently an unfunded investment. This security makes

    not earn a basis point spread above an index while it is unfunded.




                                       52
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You will find below the financial information of PSSL:


                          Statements of Assets and Liabilities

                                                        September 30,      September 30,
                                                             2021               2020
Assets
Investments at fair value (cost-$576,262,980 and
$408,251,402, respectively)                             $  564,783,128     $  392,986,090
Cash and cash equivalents (cost-$28,386,681 and
$11,115,373 , respectively)                                 28,373,541      

11,121,479

Interest receivable                                          1,413,529      

2,235,595

Receivable for investment sold                               7,323,360                  -
Prepaid expenses and other assets                            1,665,633      

62 812

Total assets                                               603,559,191      

406 405 976

Liabilities

Payable for investments purchased                           31,963,307                  -
PSSL Credit facility payable                               112,000,000                  -
Capital One, NA credit facility payable                              -      

216,969,469

2032 Asset-backed debt, net (par-$246,000,000)             242,756,901                  -
Notes payable to members                                   161,000,000      

143,290,000

Interest payable on PSSL Credit Facility                     1,740,807      

490,858

Interest payable on notes to members                         2,655,607             32,719
Accrued other expenses                                         178,438             10,845
Total liabilities                                          552,295,060        360,793,891
Commitments and contingencies (1)                                    -                  -
Members' equity                                             51,264,131      

45 612 085

Total liabilities and members' equity                   $  603,559,191     $  406,405,976



(1) From the two September 30, 2021 and 2020, PSSL had $ 0.6 million and zero

    unfunded commitments to fund investments, respectively.






                                       Statements of Operations
                                                   Year Ended          Year Ended         Year Ended
                                                  September 30,     

September 30, September 30,

                                                      2021                2020               2019
Investment income:
Interest                                         $    33,364,275     $   33,260,154     $    39,288,981
Other income                                             982,118            138,795             785,111
Total investment income                               34,346,393         33,398,949          40,074,092
Expenses:
Interest and expenses on PSSL Credit Facility
and 2032 Asset-Backed Debt                             9,648,602         11,865,971          16,487,783
Interest expense on notes to members                  12,635,490         13,531,037          14,247,817
Administrative services expenses                       1,200,000          1,200,000           1,150,000
Other general and administrative expenses (1)            906,134            485,660             454,600
Total expenses                                        24,390,226         27,082,668          32,340,200
Net investment income                                  9,956,167          6,316,281           7,733,892
Realized and unrealized (loss) gain on
investments and credit facility foreign
  currency translations:
Net realized (loss) gain on investments               (4,732,408 )         (992,974 )          (885,069 )
Net change in unrealized (depreciation)
appreciation on:
Investments                                            3,377,322         (9,368,121 )        (5,976,299 )
Credit facility foreign currency translation            (489,034 )       (2,210,907 )         1,887,878
Net change in unrealized (depreciation)
appreciation on investments and credit
  facility foreign currency translations               2,888,288        (11,579,028 )        (4,088,421 )
Net realized and unrealized (loss) gain from
investments and credit facility foreign
  currency translations                               (1,844,120 )      (12,572,002 )        (4,973,490 )
Net increase (decrease) in members' equity
resulting from operations                        $     8,112,047     $   (6,255,721 )   $     2,760,402



(1) No management or incentive fees are payable by PSSL. If fees were to be

invoiced, they would be disclosed separately in the income statements.



                                       53
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Recent developments

On October 6, 2021, we issued an additional $85 million aggregate principal
amount of our 4.25% Notes due 2026 (the "Add-On Notes") in an add-on offering
(the "Add-On Offering") pursuant to the Base Indenture, dated March 23, 2021
(the "Base Indenture"), between the Company and American Stock Transfer & Trust
Company, LLC (the "Trustee"), as supplemented by the First Supplemental
Indenture, dated March 23, 2021, between the Company and the Trustee (together
with the Base Indenture, the "Indenture"). In connection with the Add-On
Offering, the Company entered into an underwriting agreement (the "Underwriting
Agreement"), by and among the Company, PennantPark Investment Advisers, LLC (the
"Investment Adviser") and Goldman Sachs & Co. LLC, Keefe, Bruyette & Woods, Inc.
and Truist Securities, Inc., as representatives of the several underwriters
named on Schedule A to the Underwriting Agreement.



The Add-On Notes constitute a further issuance of the $100 million aggregate
principal amount of the 2026 Notes issued by the Company on March 23, 2021 (the
"Existing Notes") under the Indenture.



The Add-On Notes are treated as a single series with the Existing Notes and have
the same terms as the Existing Notes, other than the issue date and the offering
price. The Add-On Notes have the same CUSIP number and are fungible and rank
equally with the Existing Notes. Upon issuance of the Add-On Notes, the
outstanding aggregate principal amount of the Company's 4.25% notes due 2026 is
$185 million.



Subsequent to quarter end, PFLT had new funded investments of $82.3 million, net
of sales and repayments. PSSL had new funded investments of $23.3 million, net
of sales and repayments.

Division

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
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 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 both years ended September 30, 2021 and 2020, we declared distributions
of $1.14 per share for total distributions of $44.2 million. 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 making monthly distributions to our shareholders. Our monthly distributions, if any, are determined quarterly by our board of directors.

At November 22, 2017, we ended our dividend reinvestment plan. Termination of the plan applies to the reinvestment of cash distributions paid on or after December 22, 2017.

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 positions



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





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