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Section 1: 497 (497)

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The information in this preliminary prospectus supplement is not complete and may be changed. A registration statement
relating to these securities has been filed with and declared effective by the Securities and Exchange Commission. This preliminary prospectus supplement and prospectus are not offers to sell these securities and are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION DATED MAY 15, 2018


PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated October 30, 2017)
$

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Prospect Capital Corporation
4.95% Convertible Notes due 2022
This is an offering by Prospect Capital Corporation of $ aggregate principal amount of its 4.95% Convertible Notes due 2022 (the “Notes”). The Notes offered hereby are a further issuance of the 4.95% Convertible Notes due 2022 that we issued on April 11, 2017 in the aggregate principal amount of $225,000,000 (the “existing 4.95% Convertible Notes”). The Notes offered hereby will be treated as a single series with the existing 4.95% Convertible Notes under the indenture and will have the same terms as the existing 4.95% Convertible Notes. The Notes offered hereby will have the same CUSIP number and will be fully fungible and rank equally in right of payment with the existing 4.95% Convertible Notes. Upon the issuance of the Notes offered hereby, the outstanding aggregate principal amount of our 4.95% Convertible Notes will be $ . Unless the context otherwise requires, references herein to the “Notes” include the Notes offered hereby and the existing 4.95% Convertible Notes. The Notes will be convertible, at your option, into shares of our common stock initially at a conversion rate of 100.2305 shares per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $9.98 per share), subject to adjustment as described in this prospectus supplement, at any time on or prior to the close of business on the business day immediately preceding the maturity date.
In the case of Notes that are converted in connection with certain types of fundamental changes, we will, in certain circumstances, increase the conversion rate by a number of additional shares.
We may not redeem the Notes prior to April 15, 2022. On or after April 15, 2022, we may redeem the Notes for cash, in whole or from time to time in part, at our option at a redemption price equal to the sum of (i) 100% of the principal amount of the Notes to be redeemed, (ii) accrued and unpaid interest thereon to, but excluding, the redemption date and (iii) the make‑whole premium, each as further discussed in “Description of the Notes-Redemption During Final Three Month Term of the Notes.” No sinking fund will be provided for the Notes.
The Notes bear interest at a rate of 4.95% per year, payable on January 15 and July 15 of each year, commencing on July 15, 2018. The Notes will mature on July 15, 2022, unless earlier converted, repurchased or redeemed.
You may require us to repurchase all or a portion of your Notes upon a fundamental change at a cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the repurchase date. See “Description of the Notes - Fundamental Change Put.”




The Notes will be among our senior unsecured obligations. As of May 14, 2018, we and our subsidiaries had approximately $2.3 billion of unsecured senior indebtedness outstanding and $105.0 million of secured indebtedness outstanding.
Our common stock is listed on The Nasdaq Global Select Market under the symbol “PSEC.” The last reported sale price of our common stock on May 14, 2018 was $6.64 per share. Our most recently estimated NAV per share is $9.22 on an as adjusted basis solely to give effect to our issuance of common stock since March 31, 2018 in connection with our dividend reinvestment plan, which is lower than the $9.23 determined by us as of March 31, 2018.
We do not intend to apply for listing of the Notes on any securities exchange or for inclusion of the Notes in any automated quotation system.
Investing in the Notes involves certain risks, including those described in the “Risk Factors” section beginning on page S-12 of this prospectus supplement and page 12 of the accompanying prospectus.
 
 
Per Note
 
Total(2)
 
Public offering price(1)
 
 
%
 
 
Underwriting discounts and commissions (sales load)
 
 
%
 
 
Proceeds to Prospect Capital Corporation (before expenses)(3)
 
 
%
 
 
 
 
 
 
 
 

(1)    Plus accrued interest from January 15, 2018 up to, but not including, the date of delivery.
(2)    Assumes no exercise of the underwriter’s option to purchase additional Notes as described below.
(3)    Expenses payable by us related to this offering are estimated to be $500,000.

The underwriter may also purchase up to an additional $ total aggregate principal amount of Notes solely to cover over-allotments, if any, within 30 days of the date of this prospectus supplement. If the underwriter exercises this option in full, the total public offering price will be $ , the total underwriting discounts and commissions (sales loads) paid by us will be $ and total proceeds before expenses will be $ .

This prospectus supplement and the accompanying prospectus contain important information you should know before investing in our securities. Please read it before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission, or the “SEC.” This information is available free of charge by contacting us at 10 East 40th Street, 42nd Floor, New York, NY 10016 or by telephone at (212) 448-0702. The SEC maintains a website at www.sec.gov where such information is available without charge upon written or oral request. Our internet website address is www.prospectstreet.com. Information contained on our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus and you should not consider information contained on our website to be part of this prospectus supplement or the accompanying prospectus.
Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.
Obligations of Prospect Capital Corporation and any subsidiary of Prospect Capital Corporation are not guaranteed by the full faith and credit of the United States of America. Neither Prospect Capital Corporation nor any subsidiary of Prospect Capital Corporation is a government-sponsored enterprise or an instrumentality of the United States of America.
Goldman Sachs & Co. LLC expects to deliver the Notes on or about May , 2018.

Goldman Sachs & Co. LLC
Prospectus Supplement dated May , 2018.



FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” which involve substantial risks and uncertainties. Forward-looking statements predict or describe our future operations, business plans, business and investment strategies and portfolio management and the performance of our investments and our investment management business. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs, and our assumptions. Words such as “intends,” “intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projected,” “projections,” “plans,” “seeks,” “anticipates,” “anticipated,” “should,” “could,” “may,” “will,” “designed to,” “foreseeable future,” “believe,” “believes” and “scheduled” and variations of these words and similar expressions are intended to identify forward-looking statements. Our actual results or outcomes may differ materially from those anticipated. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date the statement was made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
our future operating results,
our business prospects and the prospects of our portfolio companies,
the impact of investments that we expect to make,
our contractual arrangements and relationships with third parties,
the dependence of our future success on the general economy and its impact on the industries in which we invest,
the ability of our portfolio companies to achieve their objectives,
difficulty in obtaining financing or raising capital, especially in the current credit and equity environment,
the level and volatility of prevailing interest rates and credit spreads, magnified by the current turmoil in the credit markets,
adverse developments in the availability of desirable loan and investment opportunities whether they are due to competition, regulation or otherwise,
a compression of the yield on our investments and the cost of our liabilities, as well as the level of leverage available to us,
our regulatory structure and tax treatment, including our ability to operate as a business development company and a regulated investment company,
the adequacy of our cash resources and working capital,
the timing of cash flows, if any, from the operations of our portfolio companies,
the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments,
authoritative generally accepted accounting principles or policy changes from such standard-setting bodies as the Financial Accounting Standards Board, the SEC, Internal Revenue Service, the NASDAQ Global Select Market, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business, and
the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this prospectus supplement and the accompanying prospectus and in our filings with the SEC.
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, ability to obtain 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 prospectus supplement and the accompanying prospectus, respectively, should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Risk Factors” and elsewhere in this prospectus supplement and the accompanying prospectus, respectively. You should not place undue reliance on these forward-looking statements, which apply

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only as of the date of this prospectus supplement or the accompanying prospectus, as applicable. These forward-looking statements do not meet the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act of 1933, as amended, or the “Securities Act.”
You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. We have not, and the agent(s) or dealer(s) has not, authorized any other person to provide you with information that is different from that contained in this prospectus supplement or the accompanying prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the agents are not, making an offer of these securities in any jurisdiction where the offer is not permitted. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus is accurate only as of their respective dates and we assume no obligation to update any such information. Our business, financial condition and results of operations may have changed since those dates. Although we undertake no obligation to revise or update any forward-looking statements, 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 have filed with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
This prospectus supplement supersedes the accompanying prospectus to the extent it contains information that is different from or in addition to the information in that prospectus.



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TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT
PROSPECTUS

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PROSPECTUS SUMMARY
This section summarizes the legal and financial terms of the Notes that are described in more detail in “Description of the Notes” beginning on page S-20. It does not contain all the information that may be important to an investor. For a more complete understanding of this offering, we encourage you to read the more detailed information appearing elsewhere in this prospectus supplement and the accompanying prospectus.
The terms “we,” “us,” “our” and “Company” refer to Prospect Capital Corporation; “Prospect Capital Management,” “Investment Adviser” and “PCM” refer to Prospect Capital Management L.P.; and “Prospect Administration” and the “Administrator” refer to Prospect Administration LLC.
Our $200.0 million aggregate principal amount of 5.875% Senior Convertible Notes due 2019 are referred to as the “2019 Notes.” Our $392.0 million aggregate principal amount of 4.75% Senior Convertible Notes due 2020 are referred to as the “2020 Notes.” Our $225.0 million aggregate principal amount of 4.95% Convertible Notes due 2022 that we issued on April 11, 2017 are referred to as the “existing 4.95% Convertible Notes” and, collectively with the 2019 Notes and the 2020 Notes, the “Senior Convertible Notes.” Our $300.0 million aggregate principal amount of 5.00% Senior Notes due 2019 are referred to as the “5.00% 2019 Notes.” Our $250.0 million aggregate principal amount of 5.875% Senior Notes due 2023 are referred to as the “2023 Notes.” Our $199.3 million aggregate principal amount of 6.25% Notes due 2024 are referred to as the “2024 Notes” and, collectively with the 5.00% 2019 Notes and the 2023 Notes, the “Public Notes.” Any Prospect Capital InterNotes® issued pursuant to our medium term notes program are referred to as the “Prospect Capital InterNotes.” The Senior Convertible Notes, the Public Notes and the Prospect Capital InterNotes are referred to as the “Unsecured Notes.”
The Company
Prospect Capital Corporation is a financial services company that primarily lends to and invests in middle market privately-held companies. We are a closed-end investment company incorporated in Maryland. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). As a BDC, we have elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986 (the “Code”). We were organized on April 13, 2004 and were funded in an initial public offering completed on July 27, 2004. We are one of the largest BDCs with approximately $5.85 billion of total assets as of March 31, 2018.
We are externally managed by our investment adviser, Prospect Capital Management. Prospect Administration provides administrative services and facilities necessary for us to operate.
On May 15, 2007, we formed a wholly-owned subsidiary Prospect Capital Funding LLC (“PCF”), a Delaware limited liability company and a bankruptcy remote special purpose entity, which holds certain of our portfolio loan investments that are used as collateral for the revolving credit facility at PCF. Our wholly-owned subsidiary Prospect Small Business Lending, LLC (“PSBL”) was formed on January 27, 2014 and purchases small business whole loans on a recurring basis from online small business loan originators, including On Deck Capital, Inc. (“OnDeck”). On September 30, 2014, we formed a wholly-owned subsidiary Prospect Yield Corporation, LLC (“PYC”) and effective October 23, 2014, PYC holds our investments in collateralized loan obligations (“CLOs”). Each of these subsidiaries have been consolidated since operations commenced.
We currently have nine strategies that guide our origination of investment opportunities: (1) lending to companies controlled by private equity sponsors, (2) lending to companies not controlled by private equity sponsors, (3) purchasing controlling equity positions and lending to operating companies, (4) purchasing controlling equity positions and lending to financial services companies, (5) purchasing controlling equity positions and lending to real estate companies, (6) purchasing controlling equity positions and lending to aircraft leasing companies, (7) investing in structured credit, (8) investing in non-agented debt and (9) investing in online loans. We may also invest in other strategies and opportunities from time to time that we view as attractive. We continue to evaluate other origination strategies in the ordinary course of business with no specific top-down allocation to any single origination strategy.
Lending to Companies Controlled by Private Equity Sponsors - We make agented loans to companies which are controlled by private equity sponsors. This debt can take the form of first lien, second lien, unitranche or unsecured loans. These loans typically have equity subordinate to our loan position. Historically, this strategy has comprised approximately 40%-60% of our portfolio.

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Lending to Companies not Controlled by Private Equity Sponsors - We make loans to companies which are not controlled by private equity sponsors, such as companies that are controlled by the management team, the founder, a family or public shareholders. This origination strategy may have less competition to provide debt financing than the private-equity-sponsor origination strategy because such company financing needs are not easily addressed by banks and often require more diligence preparation. This origination strategy can result in investments with higher returns or lower leverage than the private-equity-sponsor origination strategy. Historically, this strategy has comprised up to approximately 15% of our portfolio.
Purchasing Controlling Equity Positions and Lending to Operating Companies - This strategy involves purchasing yield-producing debt and controlling equity positions in non-financial-services operating companies. We believe that we can provide enhanced certainty of closure and liquidity to sellers and we look for management to continue on in their current roles. This strategy has comprised approximately 5%-15% of our portfolio.

Purchasing Controlling Equity Positions and Lending to Financial Services Companies - This strategy involves purchasing yield-producing debt and controlling equity positions in financial services companies, including consumer direct lending, sub-prime auto lending and other strategies. These investments are often structured in tax-efficient partnerships, enhancing returns. This strategy has comprised approximately 5%-15% of our portfolio.
Purchasing Controlling Equity Positions and Lending to Real Estate Companies - We purchase debt and controlling equity positions in tax-efficient real estate investment trusts (“REIT” or “REITs”). National Property REIT Corp.’s (“NPRC”), an operating company and the surviving entity of the May 23, 2016 merger with American Property REIT Corp. (“APRC”) and United Property REIT Corp. (“UPRC”), real estate investments are in various classes of developed and occupied real estate properties that generate current yields, including multi-family properties, student housing, and self-storage. NPRC seeks to identify properties that have historically significant occupancy rates and recurring cash flow generation. NPRC generally co-invests with established and experienced property management teams that manage such properties after acquisition. Additionally, NPRC purchases loans originated by certain consumer loan facilitators. It purchases each loan in its entirety (i.e., a “whole loan”). The borrowers are consumers, and the loans are typically serviced by the facilitators of the loans. This investment strategy has comprised approximately 10%-20% of our business.
Purchasing Controlling Equity Positions and Lending to Aircraft Leasing Companies - We invest in debt as well as equity in companies with aircraft assets subject to commercial leases to airlines across the globe. We believe that these investments can present attractive return opportunities due to cash flow consistency from long-term leases coupled with hard asset residual value. We believe that these investment companies seek to deliver risk-adjusted returns with strong downside protection by analyzing relative value characteristics across a variety of aircraft types and vintages. This strategy historically has comprised less than 5% of our portfolio.
Investing in Structured Credit - We make investments in CLOs, often taking a significant position in the subordinated interests (equity) of the CLOs. The underlying portfolio of each CLO investment is diversified across approximately 100 to 200 broadly syndicated loans and does not have direct exposure to real estate, mortgages, or consumer-based credit assets. The CLOs in which we invest are managed by established collateral management teams with many years of experience in the industry. This strategy has comprised approximately 10%-20% of our portfolio.
Investing in Non-Agented Debt - On a primary or secondary basis, we purchase primarily senior and secured loans and high yield bonds that have been sold to a club or syndicate of buyers. These investments are often purchased with a long term, buy-and-hold outlook, and we often look to provide significant input to the transaction by providing anchoring orders. This strategy has comprised approximately 5%-10% of our portfolio.
Investing in Online Loans - We purchase loans originated by certain small-and-medium-sized business (“SME”) loan facilitators. We generally purchase each loan in its entirety (i.e., a “whole loan”). The borrowers are SMEs and the loans are typically serviced by the facilitators of the loans. This investment strategy has comprised up to approximately 1% of our portfolio.
Typically, we concentrate on making investments in companies with annual revenues of less than $750 million and enterprise values of less than $1 billion. Our typical investment involves a secured loan of less than $250 million. We also acquire controlling interests in companies in conjunction with making secured debt investments in such companies. In most cases, companies in which we invest are privately held at the time we invest in them. We refer to these companies as “target” or “middle market” companies and these investments as “middle market investments.”
We seek to maximize total returns to our investors, including both current yield and equity upside, by applying rigorous credit analysis and asset-based and cash-flow based lending techniques to make and monitor our investments. We are constantly pursuing multiple investment opportunities, including purchases of portfolios from private and public companies, as well as

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originations and secondary purchases of particular securities. We also regularly evaluate control investment opportunities in a range of industries, and some of these investments could be material to us. There can be no assurance that we will successfully consummate any investment opportunity we are currently pursuing. If any of these opportunities are consummated, there can be no assurance that investors will share our view of valuation or that any assets acquired will not be subject to future write downs, each of which could have an adverse effect on our stock price.
As of March 31, 2018, we had investments in 134 portfolio companies and CLOs. The aggregate fair value as of March 31, 2018 of investments in these portfolio companies held on that date is approximately $5.7 billion. Our portfolio across all our performing interest-bearing investments had an annualized current yield of 12.9% as of March 31, 2018. Our annualized current yield was 10.8% as of March 31, 2018 across all investments.
Recent Developments
Recent Investment Activity
On April 2, 2018, Ability Network Inc. repaid the $15.0 million second lien term loan receivable to us.

On April 3, 2018, we made a $28.0 million first lien senior secured investment in Mobile Posse Inc., which offers home screen content and messaging services to mobile phone carriers.

On April 4, 2018, Wheel Pros, LLC repaid the $20.8 million senior secured subordinated notes receivable to us.

On April 4, 2018, we filed an 8-K announcing that our Board of Directors appointed Kristin Van Dask as our Chief Financial Officer, Treasurer, Secretary, and Chief Compliance Officer, effective immediately, in place of Brian H. Oswald who previously served in such positions.

On April 6, 2018, Arctic Oilfield Equipment USA, Inc. merged with and into CP Energy Services, Inc. (“CP Energy”), with CP Energy as the surviving entity.

On April 10, 2018, we made a $25.5 million Senior Secured Term Loan A and $17.0 million Senior Secured Term Loan B investment in SEO TownCenter, Inc., a provider of search engine optimization services.

During the period from April 16, 2018 to May 14, 2018, we sold 13.18% of the outstanding principal balance of the senior secured note investment in Broder Bros., Co. for a total of $60.0 million at 100% of par. There was no gain or loss realized on the sale.

On April 17, 2018, we made a $43.0 million Senior Secured Term Loan A and $43.0 million Senior Secured Term Loan B investment in Motion Recruitment Partners LLC, a provider of IT-focused contractor and permanent staffing recruitment solutions.

On April 17, 2018, we made a $10.0 million Second Lien Term Loan investment in HelpSystems Holdings, a provider of software products.

On April 17 and April 18, 2018, we sold 49.71% of the outstanding principal balance of the senior secured term loan investment in RGIS Services, LLC, for a total of $15.0 million at 93.5% of par. We realized a $0.3 million loss on the sale.

On May 1, 2018, Pelican Products, Inc. repaid the $17.5 million second lien term loan receivable to us.

Debt and Equity

During the period from April 1, 2018 through May 10, 2018 we issued $3.6 million aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $3.5 million.
Dividends
On May 9, 2018, we announced the declaration of monthly dividends in the following amounts and with the following dates:
    
• $0.06 per share for May 2018 to holders of record on May 31, 2018 with a payment date of June 21, 2018.    
• $0.06 per share for June 2018 to holders of record on June 29, 2018 with a payment date of July 19, 2018.    
• $0.06 per share for July 2018 to holders of record on July 31, 2018 with a payment date of August 23, 2018.    

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• $0.06 per share for August 2018 to holders of record on August 31, 2018 with a payment date of September 20, 2018.

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The Offering
Issuer
Prospect Capital Corporation
Securities Offered
$  million aggregate principal amount of 4.95% Convertible Notes due 2022. The Notes offered hereby are a further issuance of the existing 4.95% Convertible Notes, will be treated as a single series with the existing 4.95% Convertible Notes under the indenture and will have the same terms as the existing 4.95% Convertible Notes. The Notes offered hereby will have the same CUSIP number and will be fully fungible and rank equally in right of payment with the existing 4.95% Convertible Notes. Unless the context otherwise requires, references herein to the “Notes” include the Notes offered hereby and the existing 4.95% Convertible Notes.
Option to purchase additional Notes
The underwriter may also purchase from us up to an additional $ aggregate principal amount of Notes solely to cover over-allotments, if any, within 30 days of the date of this prospectus supplement.
Price at Issuance
     %, plus accrued and unpaid interest from January 15, 2018 up to, but not including, the date of delivery.
Maturity
July 15, 2022, unless earlier converted, repurchased or redeemed.
Interest Rate
4.95% per year. Interest will accrue from January 15, 2018 and be payable in cash on January 15, and July 15 of each year, commencing on July 15, 2018.
Ranking
The Notes are our general, unsecured obligations and rank equal in right of payment with all of our existing and future senior, unsecured indebtedness (including the Unsecured Notes) and senior in right of payment to any of our subordinated indebtedness. As a result, the Notes are effectively subordinated to our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of our consolidated subsidiary.

As of May 14, 2018 we and our subsidiaries had approximately $2.3 billion of unsecured senior indebtedness outstanding and $105.0 million of secured indebtedness outstanding.
Redemption During Final Three Month Term of the Notes
We may not redeem the Notes prior to April 15, 2022. On or after April 15, 2022, we may redeem the Notes for cash, in whole or from time to time in part, at our option at a redemption price equal to the sum of (i) 100% of the principal amount of the Notes to be redeemed, (ii) accrued and unpaid interest (including additional interest, if any) to, but excluding, the redemption date and (iii) the make‑whole premium. We will give notice of any redemption not less than 10 nor more than 30 calendar days before the redemption date by mail or electronic delivery to the trustee, the paying agent and each holder of Notes. See “Description of the Notes-Redemption During Final Three Month Term of the Notes.” No sinking fund will be provided for the Notes, which means that we are not required to redeem or retire the Notes periodically.
Conversion Rights
You may convert your Notes into shares of our common stock at any time on or prior to the close of business on the business day immediately preceding the maturity date.

The Notes will be convertible at an initial conversion rate of 100.2305 shares of common stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $9.98 per share). The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described under “Description of the Notes - Conversion Rights - Conversion Rate Adjustments.”

Upon any conversion, unless you convert after a record date for an interest payment but prior to the corresponding interest payment date, you will receive a cash payment representing accrued and unpaid interest to, but not including, the conversion date. See “Description of the Notes - Conversion Rights.”

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Limitation on Beneficial Ownership
Notwithstanding the foregoing, no holder of Notes will be entitled to receive shares of our common stock upon conversion to the extent (but only to the extent) that such receipt would cause such converting holder to become, directly or indirectly, a “beneficial owner” (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of more than 5.0% of the shares of our common stock outstanding at such time (the “Limitation”). Any purported delivery of shares of our common stock upon conversion of Notes shall be void and have no effect to the extent (but only to the extent) that such delivery would result in the converting holder becoming the beneficial owner of more than 5.0% of the shares of common stock outstanding at such time. If any delivery of shares of our common stock owed to a holder upon conversion of Notes is not made, in whole or in part, as a result of the Limitation, our obligation to make such delivery shall not be extinguished and we shall deliver such shares as promptly as practicable after any such converting holder gives notice to us that such delivery would not result in it being the beneficial owner of more than 5.0% of the shares of common stock outstanding at such time. The Limitation shall no longer apply following the effective date of any Fundamental Change, as defined in “Description of the Notes - Fundamental Change Put.”
Adjustment to Conversion Rate Upon a Non‑Stock Change of Control
If and only to the extent holders elect to convert the Notes in connection with a transaction described under clause (1), (3) (without reference to the third bullet thereunder) or (4) of the definition of fundamental change as described in “Description of the Notes - Fundamental Change Put” pursuant to which 10% or more of the consideration for our common stock (other than cash payments for fractional shares and cash payments made in respect of dissenters’ appraisal rights) consists of cash or securities (or other property) that are not shares of common stock traded or scheduled to be traded immediately following such transaction on the New York Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market (or their respective successors), which we refer to as a “non‑stock change of control,” we will increase the conversion rate by a number of additional shares determined by reference to the table in “Description of the Notes - Conversion Rights - Adjustment to Conversion Rate Upon a Non‑Stock Change of Control,” based on the effective date and the price paid per share of our common stock in such non‑stock change of control. If the price paid per share of our common stock in a non‑stock change of control is less than $9.07 or more than $11.50 (subject to adjustment), there will be no such adjustment. If holders of our common stock receive only cash in the type of transaction described above, the price paid per share will be the cash amount paid per share. Otherwise, the stock price shall be the average of the last reported sale prices of our common stock over the five trading‑day period ending on, and including, the trading day immediately preceding the effective date of the non‑stock change of control.
Fundamental Change Repurchase Right of Holders
If we undergo a fundamental change (as defined in this prospectus supplement) prior to maturity, you will have the right, at your option, to require us to repurchase for cash some or all of your Notes at a repurchase price equal to 100% of the principal amount of the Notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date. See “Description of the Notes - Fundamental Change Put.”
Events of Default
If an event of default on the Notes occurs, the principal amount of the Notes, plus accrued and unpaid interest (including additional interest, if any) may be declared immediately due and payable, subject to certain conditions set forth in the indenture (as defined in this prospectus supplement). These amounts automatically become due and payable in the case of certain types of bankruptcy or insolvency events of default involving the Company.
Public Market for the Notes
While a limited trading market developed after issuing the existing 4.95% Convertible Notes, we cannot assure you that an active trading market for the Notes will be maintained or will exist at all. We do not intend to apply for listing of the Notes on any securities exchange or for inclusion of the Notes an any automated quotation system. Although the underwriter has informed us that they intend to continue to make a market in the Notes, as permitted by applicable laws and regulations, they are not obligated to do so and may discontinue market making activities at any time without notice. See “Underwriting.” The Notes are not listed on any securities exchange or quoted on any automated dealer quotation system, and we do not intend to apply for a listing of the Notes on any securities exchange or any automated dealer quotation system. Accordingly, we cannot assure you that a liquid market for the Notes will be maintained. If an active public trading market for the Notes is not maintained, the market price and liquidity of the Notes may be adversely affected.
The NASDAQ Global Select Market Symbol for Our Common Stock
Our common stock is traded on the NASDAQ Global Select Market under the symbol “PSEC.”
Trustee, Paying Agent and Conversion Agent
U.S. Bank National Association

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Use of Proceeds
We estimate that the net proceeds from this offering will be approximately $ million after deducting fees and estimated offering expenses of approximately $500,000 payable by us.

We expect to use a portion of the net proceeds from the sale of the Notes offered hereby to repay debt under our credit facility. We intend to use the remainder of the net proceeds of the offering to invest in high quality short term debt investments, and/or to make long term investments in accordance with our investment objective. See “Use of Proceeds.”
U.S. Federal Income Tax Considerations
You should consult your tax advisor with respect to the U.S. federal income tax consequences of the holding, disposition or conversion of the Notes and with respect to any tax consequences arising under the laws of any state, local, foreign or other taxing jurisdiction. See “Supplement to Material U.S. Federal Income Tax Considerations” and “Material U.S. Federal Income Tax Considerations” in this prospectus supplement and the accompanying prospectus.


S-7


FEES AND EXPENSES
The following tables are intended to assist you in understanding the costs and expenses that an investor in this offering will bear directly or indirectly on an as converted basis. We caution you that some of the percentages indicated in the table below are estimates and may vary. In these tables, we assume that we have borrowed $3.2 billion. Except where the context suggests otherwise, whenever this prospectus supplement or the accompanying prospectus contains a reference to fees or expenses paid by “you” or “us” or that “we” will pay fees or expenses, the Company will pay such fees and expenses out of our net assets and, consequently, you will indirectly bear such fees or expenses as an investor in the Company. However, you will not be required to deliver any money or otherwise bear personal liability or responsibility for such fees or expenses.
Stockholder transaction expenses:
 
Sales load (as a percentage of offering price)(1)
%

Offering expenses borne by us (as a percentage of offering price)(2)
%

Dividend reinvestment plan expenses(3)
None

Total stockholder transaction expenses (as a percentage of offering price)
%

Annual expenses (as a percentage of net assets attributable to common stock)(4):
 
Management Fees(5)
3.97
%
Incentive fees payable under Investment Advisory Agreement (20% of realized capital gains and 20% of pre‑incentive fee net investment income)(6)
2.07%

Total advisory fees
6.04
%
Total interest expense (other than the Notes offered hereby)(7)
5.16%

Interest payments on the Notes offered hereby
%

Acquired Fund Fees and Expenses(8)
0.01%

Other expenses(9)
0.69%

Total annual expenses(6)(9)
%


(1) 
Represents the commission with respect to our Notes being sold in this offering, which we will pay to the underwriter in connection with sales of Notes effected by the underwriter in this offering.
(2) 
The expenses of this offering are estimated to be approximately $500,000.
(3) 
The expenses of the dividend reinvestment plan are included in “other expenses.”
(4) 
Net assets attributable to our common stock equal net assets (i.e., total assets less liabilities other than liabilities for money borrowed for investment purposes) at March 31, 2018. See “Capitalization” in this prospectus supplement.
(5) 
Our base management fee is 2% of our gross assets (which include any amount borrowed, i.e., total assets without deduction for any liabilities, including any borrowed amounts for non‑investment purposes, for which purpose we have not borrowed and have no intention of borrowing). Although we have no intent to borrow the entire amount available under our line of credit, assuming that we borrowed $3.2 billion, the 2% management fee of gross assets equals approximately 3.97% of net assets. Based on our borrowings as of May 14, 2018 of $2.4 billion, the 2% management fee of gross assets equals approximately 3.55% of net assets. See “Business - Management Services - Investment Advisory Agreement” in the accompanying prospectus and footnote 6 below.
(6) 
Based on an annualized incentive fee paid during our nine months ended March 31, 2018, all of which consisted of an income incentive fee. The capital gain incentive fee is paid without regard to pre‑incentive fee income. For a more detailed discussion of the calculation of the two‑part incentive fee, see “Business - Management Services - Investment Advisory Agreement” in the accompanying prospectus.
(7) 
As of May 14, 2018, we have $2.3 billion outstanding of our Unsecured Notes in various maturities, ranging from July 15, 2018 to October 15, 2043, and interest rates, ranging from 4.0% to 7.0%, some of which are convertible into shares of our common stock at various conversion rates. See “Business - Convertible Notes, Business - Public Notes,” “Business - Prospect Capital InterNotes®,” and “Risk Factors - Risks Related to Our Business” in the accompanying prospectus for more details on the Unsecured Notes.

S-8


(8) 
Our stockholders indirectly bear the expenses of underlying investment companies in which we invest. This amount includes the fees and expenses of investment companies in which we are invested in as of March 31, 2018. When applicable, fees and expenses are based on historic fees and expenses for the investment companies and for those investment companies with little or no operating history, fees and expenses are based on expected fees and expenses stated in the investment companies’ prospectus or other similar communication without giving effect to any performance. Future fees and expenses for certain investment companies may be substantially higher or lower because certain fees and expenses are based on the performance of the investment companies, which may fluctuate over time. The amount of our average net assets used in calculating this percentage was based on net assets of approximately $3.3 billion as of March 31, 2018.
(9) 
“Other expenses” are based on estimated amounts for the current fiscal year. The amount shown above represents annualized expenses during our nine months ended March 31, 2018 representing all of our estimated recurring operating expenses (except fees and expenses reported in other items of this table) that are deducted from our operating income and reflected as expenses in our Statement of Operations. The estimate of our overhead expenses, including payments under an administration agreement with Prospect Administration, or the “Administration Agreement,” is based on our projected allocable portion of overhead and other expenses incurred by Prospect Administration in performing its obligations under the Administration Agreement. “Other expenses” does not include non‑recurring expenses. See “Business - Management Services - Administration Agreement” in the accompanying prospectus.
Example
The following table demonstrates the projected dollar amount of cumulative expenses we would pay out of net assets and that you would indirectly bear over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed we would have borrowed $3.2 billion, that its annual operating expenses would remain at the levels set forth in the table above and that we would pay the costs shown in the table above. You would pay the following expenses on a $1,000 investment, assuming a 5% annual return:
 
1 Years
3 Years
5 Years
10 Years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return(1)
$
98.34

$
281.00

$
446.42

$
794.87

You would pay the following expenses on a $1,000 investment, assuming a 5% annual return(2)
$
108.34

$
309.27

$
490.82

$
871.25

 
 
 
 
 

(1) 
Assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation
(2) 
Assumes no unrealized capital depreciation and 5% annual return resulting entirely from net realized capital gains (and therefore subject to the capital gains incentive fee).
The foregoing table is to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses, and returns to our investors, would be higher. In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, if our board of directors authorizes and we declare a cash dividend, participants in our dividend reinvestment plan who have not otherwise elected to receive cash will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the dividend. See “Dividend Reinvestment and Direct Stock Purchase Plan” in the accompanying prospectus for additional information regarding our dividend reinvestment plan.
This example and the expenses in the table above should not be considered a representation of our future expenses. Actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.

S-9


SELECTED CONDENSED FINANCIAL DATA
You should read the condensed consolidated financial information below with the Consolidated Financial Statements and notes thereto included in this prospectus supplement and the accompanying prospectus. Financial information below for the years ended June 30, 2017, 2016, 2015, 2014, and 2013 has been derived from the financial statements that were audited by our independent registered public accounting firm. The selected consolidated financial data at and for the three and nine months ended March 31, 2018 and 2017 has been derived from unaudited financial data. Interim results for the three and nine months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending June 30, 2018. Certain reclassifications have been made to the prior period financial information to conform to the current period presentation. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” starting on page S-39 for more information.
 
 
For the Three
Months Ended
March 31,
 
For the Nine
Months Ended
March 31,
 
For the Year Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
(in thousands except data relating to shares, per share and number of portfolio companies)
Performance Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest income
 
$
145,862

 
$
161,711

 
$
447,329

 
$
508,152

 
$
668,717

 
$
731,618

 
$
748,974

 
$
613,741

 
$
435,455

Total dividend income
 
6,287

 
817

 
7,157

 
4,580

 
5,679

 
26,501

 
7,663

 
26,837

 
82,705

Total other income
 
10,686

 
8,504

 
29,328

 
21,612

 
26,650

 
33,854

 
34,447

 
71,713

 
58,176

Total Investment Income
 
162,835

 
171,032

 
483,814

 
534,344

 
701,046

 
791,973

 
791,084

 
712,291

 
576,336

Interest and credit facility expenses
 
(37,479
)
 
(41,464
)
 
(117,861
)
 
(123,981
)
 
(164,848
)
 
(167,719
)
 
(170,660
)
 
(130,103
)
 
(76,341
)
Investment advisory expense
 
(46,880
)
 
(48,819
)
 
(140,833
)
 
(151,328
)
 
(199,394
)
 
(219,305
)
 
(225,277
)
 
(198,296
)
 
(151,031
)
Other expenses
 
(8,030
)
 
(7,669
)
 
(17,750
)
 
(22,631
)
 
(30,722
)
 
(33,821
)
 
(32,400
)
 
(26,669
)
 
(24,040
)
Total Operating Expenses
 
(92,389
)
 
(97,952
)
 
(276,444
)
 
(297,940
)
 
(394,964
)
 
(420,845
)
 
(428,337
)
 
(355,068
)
 
(251,412
)
Net Investment Income
 
70,446

 
73,080

 
207,370

 
236,404

 
306,082

 
371,128

 
362,747

 
357,223

 
324,924

Net realized and change in unrealized gains (losses)
 
(18,587
)
 
(53,588
)
 
(21,811
)
 
(34,666
)
 
(53,176
)
 
(267,766
)
 
(16,408
)
 
(38,203
)
 
(104,068
)
Net increase in Net Assets from Operations
 
$
51,859

 
$
19,492

 
$
185,559

 
$
201,738

 
$
252,906

 
$
103,362

 
$
346,339

 
$
319,020

 
$
220,856

Per Share Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Increase in Net Assets from
Operations(1)
 
$
0.14

 
$
0.05

 
$
0.51

 
$
0.56

 
$
0.70

 
$
0.29

 
$
0.98

 
$
1.06

 
$
1.07

Dividends declared per share
 
$
(0.18
)
 
$
(0.25
)
 
$
(0.59
)
 
$
(0.75
)
 
$
(1.00
)
 
$
(1.00
)
 
$
(1.19
)
 
$
(1.32
)
 
$
(1.28
)
Weighted average shares of common stock outstanding
 
361,759,954

 
359,402,527

 
360,794,837

 
358,468,092

 
358,841,714

 
356,134,297

 
353,648,522

 
300,283,941

 
207,069,971

Assets and Liabilities Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments at Fair Value
 
$
5,719,804

 
$
6,024,766

 
$
5,719,804

 
$
6,024,766

 
$
5,838,305

 
$
5,897,708

 
$
6,609,558

 
$
6,253,739

 
$
4,172,852

Other Assets(4)
 
131,341

 
128,338

 
131,341

 
128,338

 
334,484

 
338,473

 
144,356

 
166,520

 
237,758

Total Assets(4)
 
5,851,145

 
6,153,104

 
5,851,145

 
6,153,104

 
6,172,789

 
6,236,181

 
6,753,914

 
6,420,259

 
4,410,610

Revolving Credit Facility
 
86,000

 

 
86,000

 

 

 

 
368,700

 
92,000

 
124,000

Convertible notes(4)
 
805,092

 
910,782

 
805,092

 
910,782

 
937,641

 
1,074,361

 
1,218,226

 
1,219,676

 
827,246

Public notes (4)
 
739,836

 
737,802

 
739,836

 
737,802

 
738,300

 
699,368

 
541,490

 
637,584

 
340,611

Prospect Capital InterNotes®(4)
 
743,729

 
991,345

 
743,729

 
991,345

 
966,254

 
893,210

 
811,180

 
766,781

 
353,538

Due to Prospect Administration and Prospect Capital Management
 
49,157

 
50,945

 
49,157

 
50,945

 
50,159

 
55,914

 
6,788

 
2,211

 
6,690

Other liabilities
 
80,935

 
70,062

 
80,935

 
70,062

 
125,483

 
77,411

 
104,481

 
83,825

 
102,031

Total Liabilities(4)
 
2,504,749

 
2,760,936

 
2,504,749

 
2,760,936

 
2,817,837

 
2,800,264

 
3,050,865

 
2,802,077

 
1,754,116

Net Assets
 
$
3,346,396

 
$
3,392,168

 
$
3,346,396

 
$
3,392,168

 
$
3,354,952

 
$
3,435,917

 
$
3,703,049

 
$
3,618,182

 
$
2,656,494

Investment Activity Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
No. of portfolio companies at period end
 
134

 
125

 
134

 
125

 
121

 
125

 
131

 
142

 
124

Acquisitions
 
$
429,928

 
$
449,607

 
$
1,390,816

 
$
1,266,294

 
$
1,489,470

 
$
979,102

 
$
1,867,477

 
$
2,933,365

 
$
3,103,217

Sales, repayments, and other disposals
 
$
118,083

 
$
302,335

 
$
1,471,246

 
$
1,061,661

 
$
1,413,882

 
$
1,338,875

 
$
1,411,562

 
$
767,978

 
$
931,534

Total return based on market value(2)
 
(0.20
)%
 
11.30
%
 
(12.00
)%
 
26.27
%
 
16.80
%
 
21.84
%
 
(20.84
)%
 
10.88
%
 
6.24
%
Total return based on net asset value(2)
 
2.14
 %
 
0.77
%
 
8.04
 %
 
7.07
%
 
8.98
%
 
7.15
%
 
11.47
 %
 
10.97
%
 
10.91
%
Weighted average yield on debt portfolio at period end(3)
 
12.9
 %
 
12.3
%
 
12.9
 %
 
12.3
%
 
12.2
%
 
13.2
%
 
12.7
 %
 
12.1
%
 
13.6
%
Weighted average yield on total portfolio at period end
 
10.8
 %
 
10.7
%
 
10.8
 %
 
10.7
%
 
10.4
%
 
12.0
%
 
11.9
 %
 
11.9
%
 
15.1
%
_______________________________________________________________________________

S-10


(1)
Per share data is based on the weighted average number of common shares outstanding for the year/period presented (except for dividends to shareholders which is based on actual rate per share).
(2)
Total return based on market value is based on the change in market price per share between the opening and ending market prices per share in each year/period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in each year/period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. For a period less than a year, the return is not annualized.
(3)
Excludes equity investments and non-performing loans.
(4)
We have changed our method of presentation relating to debt issuance costs in accordance with ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30). Unamortized deferred financing costs of $40,526, $44,140, $57,010, and $37,607 previously reported as an asset on the Consolidated Statements of Assets and Liabilities as of June 30, 2016, 2015, 2014, and 2013, respectively, have been reclassified as a direct deduction to the respective Unsecured Notes. See Critical Accounting Policies and Estimates for further discussion.


S-11


RISK FACTORS
Investing in our Notes involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this prospectus supplement and the accompanying prospectus , before you decide whether to make an investment in the Notes. If any of the adverse events or conditions described below or in the accompanying prospectus occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value, or NAV, and the value of the Notes and the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Relating to the Notes
Our amount of debt outstanding will increase as a result of this offering. Our current indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under the Notes and our other debt.
As of May 14, 2018, we and our subsidiaries had approximately $2.3 billion of unsecured senior indebtedness outstanding and $105.0 million of secured indebtedness outstanding.
The use of debt could have significant consequences on our future operations, including:
making it more difficult for us to meet our payment and other obligations under the Notes and our other outstanding debt;
resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which event of default could result in substantially all of our debt becoming immediately due and payable;
reducing the availability of our cash flow to fund investments, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;
subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates, including borrowings under our credit facility; and
limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy.
Any of the above‑listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the Notes and our other debt.
Our ability to meet our payment and other obligations under our debt instruments depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that future borrowings will be available to us under our credit facility or otherwise, in an amount sufficient to enable us to meet our payment obligations under the Notes and our other debt and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, including the Notes, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the Notes and our other debt.
An increase in market interest rates could result in a decrease in the market value of the Notes.
The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the Notes. In general, as market interest rates rise, debt securities bearing interest at fixed rates of interest decline in value. Consequently, if you purchase notes bearing interest at fixed rates of interest and market interest rates increase, the market values of those notes may decline. We cannot predict the future level of market interest rates.

S-12


The Notes are effectively subordinated to any existing and future secured indebtedness and structurally subordinated to existing and future liabilities and other indebtedness of our subsidiary, and are due after our other outstanding notes.
The Notes are our general, unsecured obligations and rank equally in right of payment with all of our existing and future unsubordinated, unsecured senior indebtedness, including without limitation, the Unsecured Notes. As a result, the Notes are effectively subordinated to our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of our subsidiaries. Effective subordination means that in any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors. Structural subordination means that creditors of a parent entity are subordinate to creditors of a subsidiary entity with respect to the subsidiary’s assets. These liabilities may include indebtedness, trade payables, guarantees, lease obligations and letter of credit obligations. The Notes do not restrict us or our subsidiaries from incurring indebtedness, including senior secured indebtedness in the future, nor do they limit the amount of indebtedness we can issue that is equal in right of payment to the Notes. As of May 14, 2018, we had $105.0 million in outstanding borrowings under our credit facility. Our credit facility is secured by certain of our assets and the indebtedness thereunder is therefore effectively senior to the Notes to the extent of the value of such assets.
Each of the 2019 Notes, the 5.00% 2019 Notes and the 2020 Notes will be due prior to the maturity of the Notes. We do not currently know whether we will be able to replace any of the 2019 Notes, the 5.00% 2019 Notes and the 2020 Notes upon their respective maturities, or if we do, whether we will be able to do so on terms that are as favorable as such notes. In the event that we are not able to replace the 2019 Notes, the 5.00% 2019 Notes and the 2020 Notes at the time of their respective maturities, this could have a material adverse effect on our liquidity and ability to fund new investments, our ability to make distributions to our stockholders, our ability to repay the Notes and our ability to qualify as a regulated investment company, or “RIC.”
The indenture governing the Notes contains no restrictive covenants and provides only limited protection, in the event of a change of control.
The indenture governing the Notes contains no financial or operating covenants or any other restrictive covenants that would limit our ability to engage in certain transactions that may adversely affect you. In particular, the indenture contains no covenants that limit our ability to pay dividends or make distributions on or redeem our capital stock or that limit our ability to incur additional indebtedness, including in a highly leveraged transaction or other similar transaction. We are only required to offer to repurchase the Notes upon a change of control in the case of the transactions specified in the definition of a “fundamental change” under “Description of the Notes - Fundamental Change Put.” Similarly, we are only required to adjust the conversion rate upon the occurrence of a “non‑stock change of control” in circumstances where a Note is converted in connection with such a transaction as set forth under “Description of the Notes - Conversion Rights - Adjustment to Conversion Rate Upon a Non‑Stock Change of Control.”
Accordingly, subject to restrictions contained in our other debt agreements, we are permitted to engage in certain transactions, such as acquisitions, refinancings or recapitalizations, that could affect our capital structure and the value of the Notes and our common stock but would not constitute a fundamental change or a non‑stock change of control under the Notes.
The conversion rate of the Notes may not be adjusted for all dilutive events that may adversely affect the trading price of the Notes or the common stock issuable upon conversion of the Notes.
The conversion rate of the Notes is subject to adjustment upon certain events, including the issuance of certain stock dividends on our common stock, certain issuance of rights or warrants, subdivisions, combinations, certain distributions of capital stock, indebtedness or assets, certain cash dividends and certain issuer tender or exchange offers as described under “Description of the Notes - Conversion Rights - Conversion Rate Adjustments.” The conversion rate will not be adjusted for certain other events, including cash dividends below the dividend threshold amount (as defined clause (4) of “Description of the Notes - Conversion Rights - Conversion Rate Adjustments”), that may adversely affect the trading price of the Notes or the common stock issuable upon conversion of the Notes.

S-13


We may be unable to repurchase the Notes following a fundamental change.
Holders of the Notes have the right to require us to repurchase their Notes prior to their maturity upon the occurrence of a fundamental change as described under “Description of the Notes - Fundamental Change Put.” Any of our future debt agreements may contain similar provisions. We may not have sufficient funds or the ability to arrange necessary financing on acceptable terms at the time we are required to make repurchases of tendered Notes. In addition, our ability to repurchase the Notes may be limited by law or the terms of other agreements relating to our debt outstanding at the time, including our credit facility. If we fail to repurchase the Notes as required by the indenture, it would constitute an event of default under the indenture governing the Notes, which, in turn, would constitute an event of default under our credit facility.
Some significant restructuring transactions may not constitute a fundamental change, in which case we would not be obligated to offer to repurchase the Notes.
Upon the occurrence of a fundamental change, you have the right to require us to offer to repurchase the Notes. However, the fundamental change provisions will not afford protection to holders of the Notes in the event of certain transactions. For example, transactions such as leveraged recapitalizations, refinancings, restructurings or acquisitions initiated by us would not constitute a fundamental change event which may require us to repurchase the Notes. In the event of any such transaction, the holders would not have the right to require us to repurchase the Notes, even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of the Notes.
Provisions of the Notes could discourage an acquisition of us by a third party.
Certain provisions of the Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of the Notes will have the right, at their option, to require us to repurchase all of their Notes or any portion of the principal amount of such Notes in integral multiples of $1,000. We may also be required to increase the conversion rate or provide for conversion into the acquirer’s capital stock in the event of certain fundamental changes constituting a non‑stock change of control. These provisions could discourage an acquisition of us by a third party.
The adjustment to the conversion rate upon the occurrence of certain types of fundamental changes may not adequately compensate you for the lost option time value of your Notes as a result of such fundamental change.
If certain types of fundamental changes constituting a non‑stock change of control occur on or prior to the maturity date of the Notes, we may increase the conversion rate by an additional number of shares for holders that elect to convert their Notes in connection with the non‑stock change of control. The number of additional shares to be added to the conversion rate will be determined based on the date on which a non‑stock change of control becomes effective and the price paid per share of our common stock in the non‑stock change of control as described under “Description of the Notes - Conversion Rights - Adjustment to Conversion Rate Upon a Non‑Stock Change of Control.” Although this adjustment is designed to compensate you for the lost option value of your Notes as a result of a non‑stock change of control, the adjustment is only an approximation of such lost value based upon assumptions made on the date of this prospectus supplement and may not adequately compensate you for such loss. In addition, if the price paid per share of our common stock in the non‑stock change of control is less than $9.07 or more than $11.50 (subject to adjustment), there will be no such adjustment.
While a limited trading market developed after issuing the existing 4.95% Convertible Notes, we cannot assure you that an active trading market for the Notes will be maintained or will exist at all.

While a limited trading market developed after issuing the existing 4.95% Convertible Notes, we cannot assure you that an active trading market for the Notes will be maintained or will exist at all. Although the underwriter has informed us that they intend to continue to make a market in the Notes, as permitted by applicable laws and regulations, they are not obligated to do so and may discontinue market making activities at their sole discretion at any time without notice. In addition, any market-making activity will be subject to limits imposed by law. The liquidity of the trading market in the Notes, and the market price quoted for the Notes, may be adversely affected by changes in the overall market for this type of security and by changes in our financial performance or prospects or in the prospects for companies in our industry generally or other factors. Accordingly, we cannot assure you that an active trading market for the Notes will be maintained, that you will be able to sell your Notes at a particular time or that the price you receive when you sell will be favorable. If an active trading market is not maintained, the market price and liquidity of the Notes may be adversely affected. The Notes are not listed on any securities exchange or quoted

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on any automated dealer quotation system, and we do not intend to apply for a listing of the Notes on any securities exchange or any automated dealer quotation system.

Regulatory actions and the inability of investors in the Notes to borrow our common stock may adversely affect the trading price and liquidity of the Notes.
We expect that many investors in, and potential purchasers of, the Notes will employ, or seek to employ, a convertible arbitrage strategy with respect to the Notes. Investors would typically implement this strategy by selling short the common stock underlying the Notes and dynamically adjusting their short position while they hold the Notes. Investors may also implement this strategy by entering into swaps on our common stock in lieu of or in addition to short selling the common stock.
The SEC and other regulatory and self‑regulatory authorities have implemented various rules and may adopt additional rules in the future that may impact those engaging in short selling activity involving equity securities (including our common stock), including Rule 201 of SEC regulation SHO, the Financial Industry Regulatory Authority, Inc.’s “Limit Up‑Limit Down” program, market‑wide circuit breaker systems that halt trading of securities for certain periods following specific market declines, and rules stemming from the implementation of the Dodd‑Frank Wall Street Reform and Consumer Protection Act. Past regulatory actions, including emergency actions or regulations have had a significant impact on the trading prices and liquidity of equity‑linked instruments. Any governmental action that similarly restricts the ability of investors in, or potential purchasers of, the Notes to effect short sales of our common stock or enter into swaps on our common stock could similarly adversely affect the trading price and the liquidity of the Notes.
In addition, if investors and potential purchasers seeking to employ a convertible arbitrage strategy are unable to borrow or enter into swaps on our common stock, in each case on commercially reasonable terms, the trading price and liquidity of the Notes may be adversely effected.
The accounting for convertible debt securities is subject to uncertainty.
The accounting for convertible debt securities is subject to frequent scrutiny by the accounting regulatory bodies and is subject to change. We cannot predict if or when any such change could be made and any such change could have an adverse impact on our reported or future financial results. Any such impacts could adversely affect the market price of our common stock and in turn negatively impact the trading price of the Notes.
The price of our common stock and of the Notes may fluctuate significantly, and this may make it difficult for you to resell the Notes or common stock issuable upon conversion of the Notes when you want or at prices you find attractive.
The price of our common stock on The NASDAQ Global Select Market constantly changes. We expect that the market price of our common stock will continue to fluctuate. In addition, because the Notes are convertible into our common stock, volatility or depressed prices for our common stock could have a similar effect on the trading price of the Notes.
Our stock price may fluctuate as a result of a variety of factors, many of which are beyond our control. These factors include:
quarterly variations in our investment results;
operating results that vary from the expectations of management, securities analysts and investors;
changes in expectations as to our future financial performance;
the operating and securities price performance of other companies that investors believe are comparable to us;
future sales of our equity or equity‑related securities;
changes in general conditions in our industry and in the economy and the financial markets; and
departures of key personnel.
In addition, in recent years, the stock market in general has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons often unrelated to

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their operating performance. These broad market fluctuations may adversely affect our stock price, regardless of our operating results.
Future sales of our common stock in the public market or the issuance of securities senior to our common stock could adversely affect the trading price of our common stock and the value of the Notes and our ability to raise funds in new stock offerings.
Future sales of substantial amounts of our common stock or equity‑related securities in the public market, or the perception that such sales could occur, could adversely affect prevailing trading prices of our common stock and the value of the Notes and could impair our ability to raise capital through future offerings of equity or equity‑related securities. Upon completion of this offering, we may not, unless otherwise agreed to by the underwriter, commence any sales of shares of our common stock until 30 days following the date of this prospectus supplement. No prediction can be made as to the effect, if any, that future sales of shares of common stock or the availability of shares of common stock for future sale, will have on the trading price of our common stock or the value of the Notes.
Holders of the Notes will not be entitled to any rights with respect to our common stock, but will be subject to all changes made with respect to our common stock.
Holders of the Notes will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights or rights to receive any dividends or other distributions on our common stock), but will be subject to all changes affecting our common stock. Holders will only be entitled to rights in respect of our common stock if and when we deliver shares of our common stock upon conversion for their Notes and, to a limited extent, under the conversion rate adjustments applicable to the Notes. For example, in the event that an amendment is proposed to our certificate of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to a holder’s conversion of Notes, the holder will not be entitled to vote on the amendment, although the holder will nevertheless be subject to any changes in the powers, preferences or rights of our common stock that result from such amendment.
The Notes offered hereby are being issued with original issue discount for U.S. federal income tax purposes.
The Notes offered hereby are being issued with original issue discount (“OID”) for U.S. federal income tax purposes. Accordingly, a U.S. Holder (as defined in “Supplement to Material U.S. Federal Income Tax Considerations”), as well as a Non‑U.S. Holder (as defined in “Supplement to Material U.S. Federal Income Tax Considerations”) that is subject to U.S. federal income taxation on a net basis, generally will be required to include the OID in gross income as ordinary interest income in advance of the receipt of cash attributable to that income and regardless of such holder’s regular method of tax accounting. See “Supplement to Material U.S. Federal Income Tax Considerations.”
You may be deemed to receive a taxable distribution without the receipt of any cash or property.
The conversion rate of the Notes will be adjusted in certain circumstances. See the discussion under the headings “Description of the Notes - Conversion Rights - Conversion Rate Adjustments” and “- Adjustment to Conversion Rate Upon a Non‑Stock Change of Control.” Adjustments to the conversion rate of the Notes that have the effect of increasing your proportionate interest in our assets or earnings may in some circumstances result in a taxable constructive distribution to you for U.S. federal income tax purposes, notwithstanding the fact that you do not receive an actual distribution of cash or property. In addition, if you are a Non‑U.S. Holder, you may be subject to U.S. federal withholding taxes in connection with such a constructive distribution. If we pay withholding taxes on your behalf as a result of an adjustment to the conversion rate of the Notes, we may, at our option, set off such payments against payments of cash and common stock on the Notes. You are urged to consult your tax advisors with respect to the U.S. federal income tax consequences resulting from an adjustment to the conversion rate of the Notes. See the discussions under the headings “Supplement to Material U.S. Federal Income Tax Considerations - The Notes - Consequences to U.S. Holders - Constructive distributions” and “- Consequences to Non‑U.S. Holders - Constructive distributions.”
A downgrade, suspension or withdrawal of the rating assigned by a rating agency to us or the Notes, if any, could cause the liquidity or market value of the Notes to decline significantly.
Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Notes. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the Notes. Credit ratings are not a recommendation to buy,

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sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. We do not undertake any obligation to maintain our rating, if any, or to advise holders of Notes of any changes in ratings.
The Notes are rated by Standard & Poor’s Ratings Services, or “S&P”, and Kroll Bond Rating Agency, Inc., or “Kroll.” There can be no assurance that their rating will remain for any given period of time or that such rating will not be lowered or withdrawn entirely by S&P or Kroll if in their respective judgment future circumstances relating to the basis of the rating, such as adverse changes in our company, so warrant.
We may be subject to certain corporate‑level taxes, which could adversely affect our cash flow and consequently adversely affect our ability to make payments on the Notes.
We may be subject to certain corporate‑level taxes regardless of whether we continue to qualify as a regulated investment company, or RIC. Additionally, should we fail to qualify as a RIC, we would be subject to corporate‑level taxes on all of our taxable income. The imposition of corporate‑level taxes could adversely affect our cash flow and consequently adversely affect our ability to make payments on the Notes.
The indenture governing the Notes contains limited protection for holders of the Notes.
The indenture governing the Notes contains limited protection to holders of the Notes. The terms of the indenture and the Notes do not restrict our or our consolidated subsidiary’s ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on your investment in the Notes. In particular, the terms of the indenture and the Notes will not place any restrictions on our or our consolidated subsidiary’s ability to:
issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiary and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiary that would be senior to our equity interests in our subsidiary and therefore rank structurally senior to the Notes with respect to the assets of our subsidiary, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions;
pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes;
sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);
enter into transactions with affiliates;
create liens (including liens on the shares of our subsidiary) or enter into sale and leaseback transactions;
make investments; or
create restrictions on the payment of dividends or other amounts to us from our consolidated subsidiary.
Furthermore, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiary adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity other than certain limited restrictions on dividends and certain board structures or default provisions mandated by the 1940 Act.
Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.

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Certain of our current debt instruments include more protections for their holders than the indenture and the Notes. In addition, other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes.
Changes relating to the LIBOR calculation process may adversely affect the value of the LIBOR-indexed, floating-rate debt securities in our portfolio.
In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate. As such, the potential effect on any such event on our cost of capital and net investment income cannot yet be determined.
Actions by the British Bankers’ Association (“BBA”), regulators or law enforcement agencies as a result of these or future events, may result in changes to the manner in which LIBOR is determined. Potential changes, or uncertainty related to such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed, floating-rate debt securities.
Regulations governing our operation as a business development company affect our ability to raise, and the way in which we raise, additional capital.
We have incurred indebtedness under our revolving credit facility and through the issuance of the Unsecured Notes and, in the future, may issue preferred stock or debt securities and/or borrow additional money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we are permitted, as a BDC, to incur indebtedness or issue senior securities only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test, which would prohibit us from paying dividends in cash or other property and could prohibit us from qualifying as a RIC. If we cannot satisfy this test, we may be required to sell a portion of our investments or sell additional shares of common stock at a time when such sales may be disadvantageous in order to repay a portion of our indebtedness or otherwise increase our net assets. In addition, issuance of additional common stock could dilute the percentage ownership of our current stockholders in us. On March 23, 2018, President Trump signed into law the Small Business Credit Availability Act (the “SBCAA”), which included various changes to regulations under the federal securities laws that impact BDCs, including changes to the 1940 Act to allow BDCs to decrease their asset coverage requirement to 150% from 200% under certain circumstances. We currently have not determined whether to take advantage of the additional leverage. If we choose to take advantage of such additional leverage, it will mean that for every $100 of net assets, we may raise $200 from senior securities, such as borrowings or issuing secured stock. If this ratio declines below 150%, we may not be able to incur additional debt and may need to sell a portion of our investments to repay some debt when it is disadvantageous to do so, and we may not be able to make distributions.
As a BDC regulated under provisions of the 1940 Act, we are not generally able to issue and sell our common stock at a price below the current net asset value per share without stockholder approval. If our common stock trades at a discount to net asset value, this restriction could adversely affect our ability to raise capital. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the current net asset value of our common stock in certain circumstances, including if (i)(1) the holders of a majority of our shares (or, if less, at least 67% of a quorum consisting of a majority of our shares) and a similar majority of the holders of our shares who are not affiliated persons of us approve the sale of our common stock at a price that is less than the current net asset value, and (2) a majority of our Directors who have no financial interest in the transaction and a majority of our independent Directors (a) determine that such sale is in our and our stockholders’ best interests and (b) in consultation with any underwriter or underwriters of the offering, make a good faith determination as of a time either immediately prior to the first solicitation by us or on our behalf of firm commitments to purchase such shares, or immediately prior to the issuance of such shares, that the price at which such shares are to be sold is not less than a price which closely approximates the market value of such shares, less any distributing commission or discount or if (ii) a majority of the number of the beneficial holders of our common stock entitled to vote at our annual meeting, without regard to whether a majority of such shares are voted in favor of the proposal, approve the sale of our common stock at a price that is less than the current net asset value per share.

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To generate cash for funding new investments, we pledged a substantial portion of our portfolio investments under our revolving credit facility. These assets are not available to secure other sources of funding or for securitization. Our ability to obtain additional secured or unsecured financing on attractive terms in the future is uncertain.
Alternatively, we may securitize our future loans to generate cash for funding new investments. See “Securitization of our assets subjects us to various risks” in the accompanying prospectus.



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DESCRIPTION OF THE NOTES
On April 11, 2017, we issued $225 million in aggregate principal amount of our 4.95% Convertible Notes due 2022 (the “existing 4.95% Convertible Notes”) under an indenture, dated as of February 16, 2012, between the Company and U.S. Bank National Association, as trustee (the “trustee”), as amended by that certain Agreement of Resignation, Appointment and Acceptance, dated March 12, 2012, by and among the Company, the trustee, and American Stock Transfer & Trust Company, LLC (so amended, the “base indenture”), as supplemented by a supplemental indenture establishing the terms of the existing 4.95% Convertible Notes, dated April 11, 2017 (the “supplemental indenture” and, together with the base indenture, the “indenture”). We may issue additional Notes (“additional Notes”) from time to time under the indenture, subject to the terms and conditions of the indenture, and the Notes offered hereby will constitute additional Notes for purposes of the indenture. The $ million aggregate principal amount of additional Notes offered hereby will be treated as a single series with the existing 4.95% Convertible Notes under the indenture and will have the same terms as the existing 4.95% Convertible Notes. The Notes offered hereby will have the same CUSIP number and will be fully fungible and rank equally in right of payment with the existing 4.95% Convertible Notes. Unless the context otherwise requires, for all purposes of this “Description of the Notes,” references to the “Notes” include the Notes offered hereby, the existing 4.95% Convertible Notes and any further additional Notes that may be issued from time to time under the indenture. The terms of the Notes include those expressly set forth in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).
The following description is only a summary of the material provisions of the Notes and the indenture. We urge you to read the indenture in its entirety because it, and not this description, defines your rights as a holder of the Notes. You may request copies of these documents as set forth under the caption “Available Information”. Our other senior unsecured indebtedness are described under the headings “Business - Convertible Notes, Business - Public Notes and Business - Prospect Capital InterNotes®.”
When we refer to “Prospect Capital Corporation,” the “Company,” “we,” “our” or “us” in this section, we refer only to Prospect Capital Corporation and not its consolidated subsidiary. In addition, all references to interest in this prospectus supplement include additional interest, if any, payable as the sole remedy relating to the failure to comply with our reporting obligations pursuant to the provisions set forth below under the heading “- Events of Default; Notice and Waiver.”
Brief Description of the Notes
The Notes offered hereby will:
bear interest at a rate of 4.95% per year, payable semi‑annually in arrears, on January 15 and July 15 of each year, commencing on July 15, 2018;
be our general unsecured obligations, ranking equally with all of our other unsecured senior indebtedness (including the Unsecured Notes) and senior in right of payment to any of our subordinated indebtedness, effectively subordinated in right of payment to our existing and future secured indebtedness and structurally subordinated to all existing and future debt of our subsidiaries;
be convertible by you at any time on or prior to 5:00 p.m., New York City time, on the business day immediately preceding the maturity date, into shares of our common stock (together with cash in lieu of fractional shares) initially at a conversion rate of 100.2305 shares of our common stock per $1,000 principal amount of Notes (subject to adjustment as set forth in this prospectus supplement), which represents an initial conversion price of approximately $9.98 per share. In the event of a non‑stock change of control, we will, in certain circumstances, increase the conversion rate as described herein;
be subject to redemption at our option, in whole or from time to time in part, on or after April 15, 2022 at a redemption price equal to the sum of (i) 100% of the principal amount of the Notes to be redeemed, (ii) accrued and unpaid interest (including additional interest, if any) to, but not including, the redemption date and (iii) the make‑whole premium;
be subject to repurchase by us at your option if a fundamental change occurs, at a cash repurchase price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest (including additional interest, if any) to, but not including, the repurchase date; and
be due on July 15, 2022, unless earlier converted, repurchased or redeemed.

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Neither we nor any of our subsidiaries are subject to any financial covenants under the indenture. In addition, neither we nor our consolidated subsidiary are restricted under the indenture from paying dividends, incurring debt or issuing or repurchasing our securities. You are not afforded protection under the indenture in the event of a highly leveraged transaction or a change in control of us, except to the extent described below under “- Adjustment to Conversion Rate Upon a Non‑Stock Change of Control” and “- Fundamental Change Put.”
No sinking fund is provided for the Notes, and the Notes will not be subject to defeasance.
The Notes initially will be issued in book‑entry form only in denominations of $1,000 principal amount and integral multiples thereof. Beneficial interests in the Notes will be shown on, and transfers of beneficial interests in the Notes will be effected only through, records maintained by The Depository Trust Company, or DTC, or its nominee, and any such interests may not be exchanged for certificated Notes except in limited circumstances. For information regarding conversion, registration of transfer and exchange of global Notes held in DTC, see “- Form, Denomination and Registration - Global Notes Book‑Entry Form.”
If certificated Notes are issued, you may present them for conversion, registration of transfer and exchange, without service charge, at our office or agency in New York City, which will initially be the office or agency of the trustee in New York City.
Additional Notes
We may, without the consent of the holders of the Notes, increase the principal amount of the Notes by issuing additional Notes in the future on the same terms and conditions as the existing 4.95% Convertible Notes and the Notes offered hereby, except for any differences in the issue price and interest accrued prior to the issue date of the additional Notes; provided that such differences do not cause the additional Notes to constitute a different class of securities than the existing 4.95% Convertible Notes or the Notes offered hereby for U.S. federal income tax purposes. The Notes offered hereby, the existing 4.95% Convertible Notes and any further additional Notes would rank equally and ratably and would be treated as a single class for all purposes under the indenture. No additional Notes may be issued if any event of default has occurred with respect to the Notes. The $ million aggregate principal amount of Notes offered hereby will be issued as additional Notes under the indenture.

Payment at Maturity
On the maturity date, each holder will be entitled to receive on such date $1,000 in cash for each $1,000 in principal amount of Notes, together with accrued and unpaid interest (including additional interest, if any) to, but not including, the maturity date. With respect to global Notes, principal and interest (including additional interest, if any) will be paid to DTC in immediately available funds. With respect to any certificated Notes, principal and interest (including additional interest, if any) will be payable at our office or agency in New York City, which initially will be the office or agency of the trustee in New York City.
Interest
The Notes offered hereby bear interest at a rate of 4.95% per year. Interest on the Notes offered hereby will accrue from January 15, 2018 or from the most recent date to which interest has been paid or duly provided for. We will pay interest (including additional interest, if any) semi‑annually, in arrears on January 15 and July 15 of each year, commencing on January 15, 2018, to holders of record at 5:00 p.m., New York City time, on the preceding January 1 and July 1, respectively. However, there are two exceptions to the preceding sentence:
holders will be entitled to a cash payment representing accrued and unpaid interest to, but not including, the conversion date on any Notes unless the Notes are converted after a record date for an interest payment but prior to the corresponding interest payment date, as described under “- Conversion Rights;” and
on the maturity date, we will pay accrued and unpaid interest to the person to whom we pay the principal amount.
We will pay interest on:
global Notes to DTC in immediately available funds;

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any certificated Notes having a principal amount of less than $2,000,000, by check mailed to the holders of those Notes; provided, however, at maturity, interest will be payable as described under “- Payment at Maturity;” and
any certificated Notes having a principal amount of $2,000,000 or more, by wire transfer in immediately available funds at the election of the holders of these Notes duly delivered to the trustee at least five business days prior to the relevant interest payment date; provided, however, at maturity, interest will be payable as described under “- Payment at Maturity.”
Interest will be calculated on the basis of a 360‑day year consisting of twelve 30‑day months. If a payment date is not a business day, payment will be made on the next succeeding business day, and no additional interest will accrue thereon. The term “business day” means any day other than a Saturday, a Sunday or a day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.
To the extent lawful, payments of principal or interest (including additional interest, if any) on the Notes that are not made when due will accrue interest at the annual rate of 1% above the then applicable interest rate from the required payment date.
Redemption During Final Three Month Term of the Notes
We may not redeem the Notes prior to April 15, 2022. On or after April 15, 2022, we may redeem the Notes for cash, in whole or from time to time in part, at our option at a redemption price equal to the sum of (i) 100% of the principal amount of the Notes to be redeemed, (ii) accrued and unpaid interest thereon to, but excluding, the redemption date and (iii) an amount equal to the present value of the interest that would accrue on such Notes from, and including, the redemption date until the maturity date, with such present value computed using a discount rate equal to the yield to maturity of United States Treasury securities with three months of remaining maturity (as determined in a commercially reasonable manner by us prior to providing the applicable notice of redemption) plus 50 basis points (such present value, the “make‑whole premium”); provided, however, that if the redemption date falls after a record date and on or prior to the interest payment date to which such record date relates, we will instead pay the full amount of accrued and unpaid interest to the holder of record on such record date and the redemption price will be equal to 100% of the principal amount of the Notes to be redeemed. In the case of any such redemption, we will provide not less than 10 nor more than 30 calendar days’ notice before the redemption date to each holder of the Notes. The redemption date must be a business day. If we call the Notes for redemption, a holder of the Notes may convert all or any portion of its Notes called for redemption only until 5:00 p.m., New York City time, on the business day immediately preceding the redemption date and, if the conversion date falls after April 15, 2022 and prior to the next record date, such holder shall receive, in addition to any accrued and unpaid interest to, but excluding the conversion date, the make‑whole premium.
If we decide to redeem fewer than all of the outstanding Notes, the Notes shall be selected to be redeemed (in principal amounts of $1,000 or multiples thereof) in accordance with the applicable procedures of DTC, in the case of global Notes, and by lot, in the case of certificated Notes.
If a portion of your Note is selected for partial redemption and you convert a portion of the same Note, the converted portion will be deemed to be from the portion selected for redemption.
In the event of any redemption in part, we will not be required to register the transfer of or exchange of any Notes so selected for redemption, in whole or in part, except the unredeemed portion of any Note being redeemed in part.
No Notes may be redeemed if the principal amount of the Notes has been accelerated, and such acceleration has not been rescinded, on or prior to the redemption date (except in the case of an acceleration resulting from a default by us in the payment of the redemption price with respect to such Notes).
Conversion Rights
Holders may convert their Notes prior to 5:00 p.m., New York City time, on the business day preceding the maturity date at an initial conversion rate of 100.2305 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $9.98 per share). The conversion rate will be subject to adjustment as described below. You will have the right to convert any portion of the principal amount of any Notes that is an integral multiple of $1,000 at any time on or prior to the close of business on the business day immediately preceding the maturity date.

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Upon conversion, unless you convert after a record date for an interest payment but prior to the corresponding interest payment date, you will receive a separate cash payment representing accrued and unpaid interest to, but not including the conversion date. Any such payment will be made on the settlement date applicable to the relevant conversion on the Notes.
If we call the Notes for redemption, a holder of the Notes may convert all or any portion of its Notes called for redemption only until 5:00 p.m., New York City time, on the business day immediately preceding the redemption date and, if the conversion date falls after April 15, 2022, and prior to the next record date, such holder shall receive, in addition to any accrued and unpaid interest to, but excluding the conversion date, the make‑whole premium.
Except as described under “- Conversion Rate Adjustments,” we will not make any payment or other adjustment for dividends on any common stock issued upon conversion of the Notes.
Conversion Procedures
Procedures to be Followed by a Holder
If you hold a beneficial interest in a global Note, to convert you must deliver to DTC the appropriate instruction form for conversion pursuant to DTC’s conversion program and, if required, pay all taxes or duties, if any.
If you hold a certificated Note, to convert you must:
complete and manually sign the conversion notice on the back of the Notes or a facsimile of the conversion notice;
deliver the completed conversion notice and the Notes to be converted to the conversion agent;
if required, furnish appropriate endorsements and transfer documents; and
if required, pay all transfer or similar taxes, if any.
The conversion date will be the date on which you have satisfied all of the foregoing requirements. The Notes will be deemed to have been converted immediately prior to 5:00 p.m., New York City time, on the conversion date.
You will not be required to pay any taxes or duties relating to the issuance or delivery of our common stock if you exercise your conversion rights, but you will be required to pay any tax or duty that may be payable relating to any transfer involved in the issuance or delivery of the common stock in a name other than your own. Certificates representing common stock will be issued and delivered only after all applicable taxes and duties, if any, payable by you have been paid in full.
We will not issue fractional shares of our common stock upon conversion of the Notes. Instead, we will pay cash in lieu of fractional shares based on the closing sale price of our common stock on the conversion date.
Limitation on Beneficial Ownership
Notwithstanding the foregoing, no holder of Notes will be entitled to receive shares of our common stock upon conversion to the extent (but only to the extent) that such receipt would cause such converting holder to become, directly or indirectly, a “beneficial owner” (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of more than 5.0% of the shares of our common stock outstanding at such time (the “Limitation”). Any purported delivery of shares of our common stock upon conversion of Notes shall be void and have no effect to the extent (but only to the extent) that such delivery would result in the converting holder becoming the beneficial owner of more than the Limitation. If any delivery of shares of our common stock owed to a holder upon conversion of Notes is not made, in whole or in part, as a result of the Limitation, our obligation to make such delivery shall not be extinguished and we shall deliver such shares as promptly as practicable after any such converting holder gives notice to us that such delivery would not result in it being the beneficial owner of more than 5.0% of the shares of common stock outstanding at such time. The Limitation shall no longer apply following the effective date of any Fundamental Change, as defined in “- Fundamental Change Put.”
Conversion Rate Adjustments
We will adjust the conversion rate for the following events:

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(1)    If we issue shares of our common stock as a dividend or distribution on shares of our common stock, or if we effect a share split or share combination of our common stock, the conversion rate will be adjusted based on the following formula:
393506792_a1a02.jpg
where,
CR1
=
the conversion rate in effect immediately prior to the open of business on the record date for such dividend or distribution or the effective date of such share split or combination, as the case may be;
CR0
=
the conversion rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the record date for such dividend or distribution or the effective date of such share split or combination, as the case may be;
OS0
=
the number of shares of our common stock outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the record date for such dividend or distribution or the effective date of such share split or combination; and
OS1
=
the number of shares of our common stock that would be outstanding immediately after, and solely as a result of, such dividend, distribution, share split or combination, as the case may be.
(2)If we distribute to all or substantially all holders of our common stock any rights or warrants (other than rights issued pursuant to a stockholders’ right plan) entitling them for a period of not more than 60 days from the issuance date for such distribution to subscribe for or purchase shares of our common stock, at a price per share less than the last reported sale price of our common stock on the trading day immediately preceding the declaration date of such distribution, the conversion rate will be increased based on the following formula; provided that the conversion rate will be readjusted to the extent that such rights or warrants are not exercised prior to their expiration:
393506792_a2a02.jpg
where,
CR1
=
the conversion rate in effect immediately prior to the open of business on the record date for such distribution;
CR0
=
the conversion rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the record date for such distribution;
OS0
=
the number of shares of our common stock outstanding at 5:00 p.m. New York City time, on the trading day immediately preceding the record date for such distribution;
X
=
the total number of shares of our common stock issuable pursuant to such rights or warrants; and
Y
=
the number of shares of our common stock equal to the aggregate price payable to exercise such rights or warrants, divided by the average of the last reported sale prices of our common stock over the 10 consecutive trading day period ending on the trading day immediately preceding the record date for such distribution.
(3)(a) If we distribute shares of our capital stock, evidences of our indebtedness or other of our assets or property to all or substantially all holders of our common stock, excluding:
dividends or distributions as to which adjustment is required to be effected in clause (1) or (2) above;
dividends or distributions paid exclusively in cash; and
spin‑offs described below in clause (3)(b),
then the conversion rate will be increased based on the following formula:

S-24


393506792_a3a04.jpg
where,
CR1
=
the conversion rate in effect immediately prior to the open of business on the record date for such distribution;
CR0
=
the conversion rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the record date for such distribution;
SP0
=
the average of the last reported sale prices of our common stock over the 10 consecutive trading day period ending on the trading day immediately preceding the record date for such distribution; and
FMV
=
the fair market value (as determined by our board of directors or a committee thereof) of the shares of capital stock, evidences of indebtedness, assets or property distributed, with respect to each outstanding share of our common stock as of the open of business on the record date for such distribution.
(b)With respect to an adjustment pursuant to this clause (3) where there has been a payment of a dividend or other distribution on our common stock in shares of capital stock of any class or series, or similar equity interest, of or relating to a subsidiary or other business unit of ours that are listed on a national or regional securities exchange, which is referred to in this prospectus supplement as a “spin‑off,” the conversion rate will be increased based on the following formula:
393506792_a4.jpg
where,
CR1
=
the conversion rate in effect immediately prior to the open of business on the record date for the spin‑off;
CR0
=
the conversion rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the record date for the spin‑off;
FMV
=
the average of the last reported sale prices of the capital stock or similar equity interest distributed to holders of our common stock applicable to one share of our common stock over the first 10 consecutive trading day period immediately following, and including, the third trading day after the record date for such spin‑off (such period, the “valuation period”); and
MP0
=
the average of the last reported sale prices of our common stock over the valuation period.
Any adjustment to the conversion rate under this clause (3)(b) will be made immediately after the open of business on the day after the last day of the valuation period, but will be given effect as of the open of business on the record date for the spin‑off. Because we will make the adjustment to the conversion rate at the end of the valuation period with retroactive effect, we will delay the settlement of any Notes where the conversion date occurs during the valuation period. In such event, we will deliver shares of our common stock, if any, and any cash in lieu thereof (based on the adjusted conversion rate as described above) on the third business day immediately following the last day of the valuation period.
(4)    If we pay any cash dividends or make distributions paid exclusively in cash to all or substantially all holders of our common stock (other than dividends or distributions made in connection with our liquidation, dissolution or winding‑up or upon a merger, consolidation or sale, lease, transfer, conveyance or other disposition resulting in a change in the conversion consideration as described under “- Change in the Conversion Rights upon Certain Reclassification, Business Combinations, Asset Sales and Corporate Events”), the conversion rate will be increased based on the following formula:
393506792_a5.jpg
where,

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CR1
=
the conversion rate in effect immediately prior to the open of business on the record date for such dividend or distribution;
CR0
=
the conversion rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the record date for such distribution;
SP0
=
the average of the last reported sale prices of our common stock over the 10 consecutive trading day period ending on the trading day immediately preceding the record date for such distribution;
DTA
=
the dividend threshold amount, which will initially equal $0.08333 per share in any month; provided that if there is not a record date for a dividend in any month, the DTA may be carried forward by us to the next subsequent month and to the extent the aggregate amount of any dividends with record dates in such subsequent month is less than $0.08333 such difference may be carried forward to the second subsequent month, subject to a maximum DTA at any time of $0.25; and
C
=
the amount in cash per share we distribute to holders of our common stock in any dividend
The dividend threshold amount is subject to adjustment on an inversely proportional basis whenever the conversion rate is adjusted other than adjustments made pursuant to this clause (4). If an adjustment is required to be made as set forth in this clause (4) as a result of a distribution that is not a regular monthly or quarterly dividend, the dividend threshold amount will be deemed to be zero. For the avoidance of doubt, a distribution that relates to a prior monthly or quarterly period during which the record date for a regular distribution did not occur (such distribution, a “delayed distribution”) shall constitute a regular monthly or quarterly dividend (whether paid separately or together with the regular monthly or quarterly distribution with respect to the period in which such delayed distribution occurs), notwithstanding the fact that the record date for such delayed distribution occurs after the monthly or quarterly period to which the delayed distribution relates.
If “C” (as defined above) is equal to or greater than “SP0” (as defined above), or if the difference between “SP0” and “C” is less than $0.01, in lieu of the foregoing increase, each holder of a Note shall receive, in respect of each $1,000 principal amount thereof, at the same time and upon the same terms as holders of shares of our common stock, the amount of cash that such holder would have received as if such holder owned a number of shares of our common stock equal to the conversion rate on the record date for such cash dividend or distribution.
(5)    If we or any of our subsidiaries makes a payment in respect of a tender offer or exchange offer for our common stock, to the extent that the cash and value of any other consideration included in the payment per share of our common stock exceeds the last reported sale price of our common stock on the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer, the conversion rate will be increased based on the following formula:
393506792_a6.jpg
where,
CR1
=
the conversion rate in effect at 5:00 p.m. on the day such tender offer or exchange offer expires;
CR0
=
the conversion rate in effect immediately prior to the open of business on the trading day next succeeding the date such tender offer or exchange offer expires;
AC
=
the aggregate value of all cash and any other consideration (as determined by our board of directors or a committee thereof) paid or payable for shares purchased in such tender or exchange offer;
SP1
=
the average of the last reported sale prices of our common stock over the 10 consecutive trading day period commencing on, and including, the trading day next succeeding the date such tender or exchange offer expires (the “averaging period”);
OS1
=
the number of shares of our common stock outstanding immediately after the close of business on the date such tender or exchange offer expires (after giving effect to such tender offer or exchange offer); and
OS0
=
the number of shares of our common stock outstanding immediately prior to the date such tender or exchange offer expires (prior to giving effect to such tender offer or exchange offer).
Any adjustment to the conversion rate under this clause (5) will be made immediately prior to the open of business on the day following the last day of the averaging period, but will be given effect as of the open of business on the trading day next succeeding the date such tender offer or exchange offer expires. Because we will make the adjustment to the conversion rate at

S-26


the end of the averaging period with retroactive effect, we will delay the settlement of any Notes where the conversion date occurs during the averaging period. In such event, we will deliver shares of our common stock, if any, and any cash in lieu thereof (based on the adjusted conversion rate as described above) on the third business day immediately following the last day of the averaging period.
To the extent that any future stockholders’ rights plan adopted by us is in effect upon conversion of the Notes into common stock, you will receive, in addition to the common stock, the rights under the applicable rights agreement unless the rights have separated from our common stock at the time of conversion of the Notes, in which case, the conversion rate will be adjusted as if we distributed to all holders of our common stock shares of our capital stock, evidences of indebtedness or assets as described above in clause (3), subject to readjustment in the event of the expiration, termination or redemption of such rights.
We will not make any adjustment if holders may participate in the transaction or in certain other cases. Except with respect to a spin‑off, in cases where the fair market value of assets, debt securities or certain rights, warrants or options to purchase our securities, applicable to one share of common stock, distributed to stockholders:
equals or exceeds the average closing price of the common stock over the 10 consecutive trading day period ending on the record date for such distribution, or
such average closing price exceeds the fair market value of such assets, debt securities or rights, warrants or options so distributed by less than $0.01,
rather than being entitled to an adjustment in the conversion price, the holder of Notes will be entitled to receive upon conversion, in addition to the shares of common stock, the kind and amount of assets, debt securities or rights, warrants or options comprising the distribution that such holder would have received if such holder had converted such Notes immediately prior to the record date for determining the stockholders entitled to receive the distribution.
To the extent that we are required to make an adjustment pursuant to a distribution that qualifies under two or more of the clauses above, we will adjust the conversion rate pursuant to clause (3)(a) above.
Except as stated above, we will not adjust the conversion rate for the issuance of our common stock or any securities convertible into or exchangeable for our common stock or carrying the right to purchase any of the foregoing.
If a taxable distribution to holders of our common stock or other transaction occurs that results in any adjustment of the conversion rate (including an adjustment at our option), you may, in certain circumstances, be deemed to have received a distribution subject to U.S. federal income tax as a dividend. In certain other circumstances, the absence of an adjustment may result in a taxable dividend to the holders of our common stock. See “Supplement to Material U.S. Federal Income Tax Considerations.”
We will not be required to make an adjustment in the conversion rate unless the adjustment would require a change of at least 1% in the conversion rate. However, we will carry forward any adjustment that is less than 1% of the conversion rate, take such carried‑forward adjustments into account in any subsequent adjustment, and make such carried forward adjustments, regardless of whether the aggregate adjustment is less than 1%, (a) annually on the anniversary of the first date of issue of the Notes and otherwise (b)(1) 10 business days prior to the maturity date of the Notes or (2) 10 business days prior to any repurchase date or redemption date, unless such adjustment has already been made.
Without limiting the foregoing, no adjustment to the conversion rate need be made:
(i)    upon the issuance of any shares of common stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on our securities and the investment of additional optional amounts in shares of common stock under any plan;
(ii)    upon the issuance of any shares of common stock or options or rights to purchase shares of common stock pursuant to any present or future employee, director or consultant benefit plan or program or employee stock purchase plan of, or assumed by, us or any of our subsidiaries;
(iii)    upon the issuance of any shares of common stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security not described in clause (ii) above and outstanding as of the issue date;

S-27


(iv)    for a change in the par value of the common stock; or
(v)    for accrued and unpaid interest (including any additional interest, if applicable).
Change in the Conversion Rights upon Certain Reclassifications, Business Combinations, Asset Sales and Corporate Events
If we:
reclassify or change our common stock (other than changes resulting from a subdivision or combination), or
consolidate or merge with or into any person or sell, lease, transfer, convey or otherwise dispose of all or substantially all of our assets and those of our subsidiaries taken as a whole to another person,
and in either case holders of our common stock receive stock, other securities or other property or assets (including cash or any combination thereof) with respect to or in exchange for their common stock, then from and after the effective date of such transaction, each outstanding Note will, without the consent of any holders of the Notes, upon the occurrence of such transaction, become convertible in accordance with the procedures described in “- Conversion Procedures,” into the consideration the holders of our common stock received in such reclassification, change, consolidation, merger, sale, lease, transfer, conveyance or other disposition (such consideration, the “reference property”). If the transaction causes our common stock to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), the reference property into which the Notes will become convertible will be deemed to be the kind and amount of consideration elected to be received by a majority of our common stock voted for such an election (if electing between two types of consideration) or a plurality of our common stock voted for such an election (if electing between more than two types of consideration), as the case may be. We may not become a party to any such transaction unless its terms are consistent with the foregoing in all material respects.
Adjustment to Conversion Rate Upon a Non‑Stock Change of Control
If and only to the extent you elect to convert your Notes in connection with a transaction described under clause (1), (3) (without reference to the third bullet thereunder) or (4) under the definition of a fundamental change described below under “- Fundamental Change Put” pursuant to which 10% or more of the consideration for our common stock (other than cash payments for fractional shares and cash payments made in respect of dissenters’ appraisal rights) in such fundamental change transaction consists of cash or securities (or other property) that are not shares of common stock traded or scheduled to be traded immediately following such transaction on the New York Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market (or any of their respective successors), which we refer to as a “non‑stock change of control” we will increase the conversion rate as described below (subject to the limitations described below). The number of additional shares by which the conversion is increased (the “additional shares”) will be determined by reference to the table below, based on the date on which the non‑stock change of control becomes effective (the “effective date”) and the price (the “stock price”) paid per share for our common stock in such non‑stock change of control. If holders of our common stock receive only cash in such transaction, the price paid per share will be the cash amount paid per share. Otherwise, the stock price shall be the average of the last reported sale prices of our common stock over the five trading‑day period ending on, and including, the trading day immediately preceding the effective date of the non‑stock change of control. We will notify you of the effective date of any fundamental change no later than such time that the fundamental change occurs.
A conversion of the Notes by a holder will be deemed for these purposes to be “in connection with” a non‑stock change of control if the conversion notice is received by the conversion agent following the effective date of the non‑stock change of control but before the close of business on the business day immediately preceding the related repurchase date (as specified in the repurchase notice described under “- Fundamental Change Put”).
The number of additional shares will be adjusted in the same manner as and as of any date on which the conversion rate of the Notes is adjusted as described above under “- Conversion Rate Adjustments.” The stock prices set forth in the first row of the table below (i.e., the column headers) will be simultaneously adjusted to equal the stock prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the conversion rate immediately prior to the adjustment and the denominator of which is the conversion rate as so adjusted.

S-28


The following table sets forth the number of additional shares by which the conversion rate shall be increased:
 
Stock Price
Effective Date
$ 9.07
$ 9.25
$ 9.75
$ 9.98
$ 10.25
$ 10.50
$ 10.75
$ 11.00
$ 11.25
$ 11.50
April 11, 2017
10.0230
9.8822
6.1823
4.7809
3.3659
2.2723
1.3865
0.7134
0.2491
0.0000
July 15, 2017
10.0230
9.5527
5.8239
4.4097
2.9788
1.8684
0.9541
0.2279
0.0000
0.0000
July 15, 2018
10.0230
9.3826
5.6876
4.2896
2.8786
1.7842
0.8858
0.1737
0.0000
0.0000
July 15, 2019
10.0230
9.4543
5.7392
4.3344
2.9173
1.8189
0.9155
0.1985
0.0000
0.0000
July 15, 2020
10.0230
9.5866
5.8026
4.3771
2.9430
1.8343
0.9247
0.2033
0.0000
0.0000
July 15, 2021
10.0230
9.3671
5.4659
4.0246
2.6007
1.5248
0.6642
0.0000
0.0000
0.0000
July 15, 2022
10.0230
7.8776
2.3336
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
The exact stock price and effective dates may not be set forth on the table, in which case, if the stock price is:
between two stock price amounts on the table or the effective date is between two dates on the table, the number of additional shares will be determined by straight‑line interpolation between the number of additional shares set forth for the higher and lower stock price amounts and the two dates, as applicable, based on a 360‑day year;
in excess of $11.50 per share (subject to adjustment), no additional shares will be issued upon conversion; and
less than $9.07 per share (subject to adjustment), no additional shares will be issued upon conversion.
Notwithstanding the foregoing, in no event will the total number of shares of common stock issuable upon conversion exceed 110.2535 per $1,000 principal amount of the Notes, subject to the same adjustments as the conversion rate as set forth above under “- Conversion Rate Adjustments.”
Additional shares deliverable as described in this section “- Adjustment to Conversion Rate Upon a Non‑Stock Change of Control,” will be delivered on the settlement date applicable to the relevant conversion.
Fundamental Change Put
If a fundamental change (as defined below) occurs at any time prior to the maturity of the Notes, you will have the right to require us to repurchase, at the repurchase price described below, all or part of your Notes for which you have properly delivered and not withdrawn a written repurchase notice. The Notes submitted for repurchase must be $1,000 in principal amount or integral multiples thereof.
The repurchase price will be payable in cash and will equal 100% of the principal amount of the Notes being repurchased, plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the repurchase date. However, if the repurchase date is after a record date and on or prior to the corresponding interest payment date, the interest (including additional interest, if any) will be paid on the repurchase date to the holder of record on the record date.
We may be unable to repurchase your Notes in cash upon a fundamental change. Our ability to repurchase the Notes in cash in the future may be limited by the terms of our then‑existing borrowing agreements. In addition, the occurrence of a fundamental change could cause an event of default under the terms of our then‑existing borrowing agreements. We cannot assure you that we would have the financial resources, or would be able to arrange financing, to pay the repurchase price in cash.
A “fundamental change” will be deemed to have occurred when any of the following has occurred:
1.    the consummation of any transaction (including, without limitation, any merger or consolidation other than those excluded under clause (3) below) the result of which is that any “person” becomes the “beneficial owner” (as these terms are defined in Rule 13d‑3 and Rule 13d‑5 under the Exchange Act), directly or indirectly, of more than 50% of our capital stock that is at the time entitled to vote by the holder thereof in the election of our board of directors (or comparable body); or
2.    the adoption of a plan relating to our liquidation or dissolution; or

S-29


3.    the consolidation or merger of us with or into any other person, or the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of our assets and those of our subsidiaries taken as a whole to any “person” (as this term is used in Section 13(d)(3) of the Exchange Act), other than:
any transaction that does not result in any reclassification, conversion, exchange or cancellation of all or substantially all of the outstanding shares of our capital stock;
any changes resulting from a subdivision or combination or a change solely in par value;
any transaction pursuant to which the holders of 50% or more of the total voting power of all shares of our capital stock entitled to vote generally in elections of directors immediately prior to such transaction have the right to exercise, directly or indirectly, 50% or more of the total voting power of all shares of capital stock of the continuing or surviving person immediately after giving effect to such transaction entitled to vote generally in elections of directors; or
any merger primarily for the purpose of changing our jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of common stock solely into shares of common stock of the surviving entity; or
4.    the termination of trading of our common stock, which will be deemed to have occurred if our common stock or other common stock into which the Notes are convertible is neither listed for trading on the New York Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market (or any of their respective successors).
Notwithstanding the foregoing, any transaction or event described above also will not constitute a fundamental change if, in connection with such transaction or event, or as a result therefrom, a transaction described in clauses (1) or (3) above occurs (without regard to any exclusion to such clause described in the bullets thereunder) and at least 90% of the consideration paid for our common stock (excluding cash payments for fractional shares, cash payments made pursuant to dissenters’ appraisal rights and cash dividends) consists of shares of common stock (or depositary receipts in respect thereof) traded on the New York Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market (or any of their respective successors) (or will be so traded or quoted immediately following the completion of the merger or consolidation or such other transaction) and, as a result of such transaction, the Notes become convertible into the reference property as described under “- Conversion Rate Adjustments - Change in the Conversion Rights upon Certain Reclassifications, Business Combinations, Asset Sales and Corporate Events” above.
The definition of “fundamental change” includes a phrase relating to the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of our assets and those of our subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of Notes to require us to repurchase the Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of our assets and those of our subsidiaries taken as a whole to another person or group may be uncertain.
On or before the fifth calendar day after the occurrence of a fundamental change, we will provide to all record holders of the Notes on the date of the fundamental change at their addresses shown in the register of the registrar and to beneficial owners to the extent required by applicable law, the trustee and the paying agent, a written notice of the occurrence of the fundamental change and the resulting repurchase right. Such notice shall state, among other things, the event causing the fundamental change and the procedures you must follow to require us to repurchase your Notes.
The repurchase date will be a date specified by us in the notice of a fundamental change that is not less than 20 nor more than 35 calendar days after the date of the notice of a fundamental change.
To exercise your repurchase right, you must deliver, prior to 5:00 p.m., New York City time, on the repurchase date, a written notice to the paying agent of your exercise of your repurchase right (together with the Notes to be repurchased, if certificated Notes have been issued). The repurchase notice must state:
if you hold a beneficial interest in a global Note, your repurchase notice must comply with appropriate DTC procedures; if you hold certificated Notes, the Notes certificate numbers;

S-30


the portion of the principal amount of the Notes to be repurchased, which must be $1,000 or integral multiples thereof; and
that the Notes are to be repurchased by us pursuant to the applicable provisions of the Notes and the indenture.
You may withdraw your repurchase notice at any time prior to 5:00 p.m., New York City time, on the repurchase date by delivering a written notice of withdrawal to the paying agent. If a repurchase notice is given and withdrawn during that period, we will not be obligated to repurchase the Notes listed in the repurchase notice. The withdrawal notice must state:
if you hold a beneficial interest in a global Note, your withdrawal notice must comply with appropriate DTC procedures; if you hold certificated Notes, the certificate numbers of the withdrawn Notes;
the principal amount of the withdrawn Notes; and
the principal amount, if any, which remains subject to the repurchase notice.
Payment of the repurchase price for Notes for which a repurchase notice has been delivered and not withdrawn is conditioned upon book‑entry transfer or delivery of the Notes, together with necessary endorsements, to the paying agent, as the case may be. Payment of the repurchase price for the Notes will be made promptly following the later of the repurchase date and the time of book‑entry transfer or delivery of the Notes, as the case may be.
If the paying agent holds on the business day immediately following the repurchase date cash sufficient to pay the repurchase price of the Notes that holders have elected to require us to repurchase, then, as of the repurchase date:
the Notes will cease to be outstanding and interest (including additional interest, if any) will cease to accrue, whether or not book‑entry transfer of the Notes has been made or the Notes have been delivered to the paying agent, as the case may be; and
all other rights of the holders of Notes will terminate, other than the right to receive the repurchase price upon delivery or transfer of the Notes.
In connection with any repurchase, we will, to the extent applicable:
comply with the provisions of Rule 13e‑4 and any other tender offer rules under the Exchange Act that may be applicable at the time of the offer to repurchase the Notes;
file a Schedule TO or any other schedule required in connection with any offer by us to repurchase the Notes; and
comply with all other federal and state securities laws in connection with any offer by us to repurchase the Notes.
This fundamental change repurchase right could discourage a potential acquirer of the Company. However, this fundamental change repurchase feature is not the result of management’s knowledge of any specific effort to obtain control of us by means of a merger, tender offer, solicitation or otherwise, or part of a plan by management to adopt a series of anti‑takeover provisions.
Our obligation to repurchase the Notes upon a fundamental change would not necessarily afford you protection in the event of a highly leveraged or other transaction involving us that may adversely affect holders. We also could, in the future, enter into certain transactions, including certain recapitalizations, that would not constitute a fundamental change but would increase the amount of our (or our subsidiaries’) outstanding debt. The incurrence of significant amounts of additional debt could adversely affect our ability to service our then existing debt, including the Notes.
Consolidation, Merger and Sale of Assets by the Company
The indenture provides that we may not, in a single transaction or a series of related transactions, consolidate with or merge with or into any other person or sell, convey, transfer or lease our property and assets substantially as an entirety to another person, unless:

S-31


either (a) we are the continuing corporation or (b) the resulting, surviving or transferee person (if other than us) is a corporation or limited liability company organized and existing under the laws of the United States, any state thereof or the District of Columbia and such person assumes, by a supplemental indenture in a form reasonably satisfactory to the trustee, all of our obligations under the Notes and the indenture;
immediately after giving effect to such transaction, no default or event of default has occurred and is continuing; and
we have delivered to the trustee certain certificates and opinions of counsel if so requested by the trustee.
In the event of any transaction described in and complying with the conditions listed in the immediately preceding paragraph in which the Company is not the continuing corporation, the successor person formed or remaining shall succeed, and be substituted for, and may exercise every right and power of, the Company, and the Company shall be discharged from its obligations, under the Notes and the indenture.
This covenant includes a phrase relating to the sale, conveyance, transfer and lease of the property and assets of the Company “substantially as an entirety”. There is no precise, established definition of the phrase “substantially as an entirety” under New York law, which governs the indenture and the Notes, or under the laws of Maryland, the Company’s state of incorporation. Accordingly, the ability of a holder of the Notes to require us to repurchase the Notes as a result of a sale, conveyance, transfer or lease of less than all of the property and assets of the Company may be uncertain.
An assumption by any person of the Company’s obligations under the Notes and the indenture might be deemed for U.S. federal income tax purposes to be an exchange of the Notes for new Notes by the holders thereof, resulting in recognition of gain or loss for such purposes and possibly other adverse tax consequences to the holders. Holders should consult their own tax advisors regarding the tax consequences of such an assumption.
Events of Default; Notice and Waiver
The following are events of default under the indenture:
we fail to pay any interest (including additional interest, if any) on the Notes when due and such failure continues for a period of 30 calendar days;
we fail to pay principal of the Notes when due at maturity, or we fail to pay the repurchase price or redemption price payable, in respect of any Notes when due;
we fail to deliver shares of common stock upon the conversion of any Notes and such failure continues for five business days following the scheduled settlement date for such conversion;
we fail to provide notice of the effective date or actual effective date of a fundamental change on a timely basis as required in the indenture;
we fail to perform or observe any other term, covenant or agreement in the Notes or the indenture for a period of 60 calendar days after written notice of such failure is given to us by the trustee or to us and the trustee by the holders of at least 25% in aggregate principal amount of the Notes then outstanding;
a failure to pay principal when due (whether at stated maturity or otherwise) or an uncured default that results in the acceleration of maturity, of any indebtedness for borrowed money of the Company or any of our “significant subsidiaries”, which term shall have the meaning specified in Rule 1‑02(w) of Regulation S‑X), other than subsidiaries that are non‑recourse or limited recourse subsidiaries, bankruptcy remote special purpose vehicles and any subsidiaries that are not consolidated with us for GAAP purposes, in an aggregate amount in excess of $50,000,000 (or its foreign currency equivalent), unless such indebtedness is discharged, or such acceleration is rescinded, stayed or annulled, within a period of 30 calendar days after written notice of such failure is given to us by the trustee or to us and the trustee by the holders of at least 25% in aggregate principal amount of the Notes then outstanding; or
certain events involving our bankruptcy, insolvency or reorganization of the Company or any of our “significant subsidiaries”, which term shall have the meaning specified in Rule 1‑02(w) of Regulation S‑X), other than

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subsidiaries that are non‑recourse or limited recourse subsidiaries, bankruptcy remote special purpose vehicles and any subsidiaries that are not consolidated with us for GAAP purposes.
We are required to notify the trustee promptly upon becoming aware of the occurrence of any default under the indenture known to us. The trustee is then required within 90 calendar days of being notified by us of the occurrence of any default to give to the registered holders of the Notes notice of all uncured defaults known to it. However, the trustee may withhold notice to the holders of the Notes of any default, except defaults in payment of principal or interest (including additional interest, if any) on the Notes, if the trustee, in good faith, determines that the withholding of such notice is in the interests of the holders. We are also required to deliver to the trustee, on or before a date not more than 120 calendar days after the end of each fiscal year, a written statement as to compliance with the indenture, including whether or not any default has occurred.
If an event of default specified in the last bullet point listed above occurs and continues, the principal amount of the Notes and accrued and unpaid interest (including additional interest, if any) on the outstanding Notes will automatically become due and payable. If any other event of default occurs and is continuing, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Notes may declare the principal amount of the Notes and accrued and unpaid interest (including additional interest, if any) on the outstanding Notes to be due and payable. Thereupon, the trustee may, in its discretion, proceed to protect and enforce the rights of the holders of the Notes by appropriate judicial proceedings.
After a declaration of acceleration, but before a judgment or decree for payment of the money due has been obtained by the trustee, the holders of a majority in aggregate principal amount of the Notes outstanding, by written notice to us and the trustee, may rescind and annul such declaration if:
we have paid (or deposited with the trustee a sum sufficient to pay) (1) all overdue interest (including additional interest, if any) on all Notes; (2) the principal amount of any Notes that have become due otherwise than by such declaration of acceleration; (3) to the extent that payment of such interest is lawful, interest upon overdue interest (including additional interest, if any); and (4) all sums paid or advanced by the trustee under the indenture and the reasonable compensation, expenses, disbursements and advances of the trustee, its agents and counsel; and
all events of default, other than the non‑payment of the principal amount and any accrued and unpaid interest (including additional interest, if any) that have become due solely by such declaration of acceleration, have been cured or waived.
The holders of a majority in aggregate principal amount of the outstanding Notes will have the right to direct the time, method and place of any proceedings for any remedy available to the trustee, subject to limitations specified in the indenture.
No holder of the Notes may pursue any remedy under the indenture, except in the case of a default in the payment of principal or interest (including additional interest, if any) on the Notes, unless:
the holder has given the trustee written notice of an event of default;
the holders of at least 25% in aggregate principal amount of the outstanding Notes make a written request to the trustee to pursue the remedy, and offer reasonable security or indemnity against any costs, liability or expense of the trustee;
the trustee fails to comply with the request within 60 calendar days after receipt of the request and offer of indemnity; and
the trustee does not receive an inconsistent direction from the holders of a majority in aggregate principal amount of the outstanding Notes.
Notwithstanding the foregoing, the indenture provides that the sole remedy for an event of default relating to the failure to comply with the reporting obligations in the indenture, which are described below under the caption “- Reports,” and for any failure to comply with the requirements of Section 314(a)(1) of the Trust Indenture Act (which also relate to the provision of reports), will, at our option, for the 365 days after the occurrence of such an event of default consist exclusively of the right to receive additional interest on the Notes at an annual rate equal to 0.50% of the principal amount of the Notes. In the event we do not elect to pay the additional interest upon an event of default in accordance with this paragraph, the Notes will be subject to acceleration as provided above. This additional interest will be payable in arrears on each interest payment date in the

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same manner as regular interest on the Notes. The additional interest will accrue on all outstanding Notes from and including the date on which an event of default relating to a failure to comply with the reporting obligations in the indenture first occurs to but not including the 365th day thereafter (or such earlier date on which the event of default relating to the reporting obligations shall have been cured or waived). On such 365th day (or earlier, if the event of default relating to the reporting obligations is cured or waived prior to such 365th day), such additional interest will cease to accrue and the Notes will be subject to acceleration as provided above if the event of default is continuing. The provisions of the indenture described in this paragraph will not affect the rights of holders of Notes in the event of the occurrence of any other event of default.
Waiver
The holders of a majority in aggregate principal amount of the Notes outstanding may, on behalf of the holders of all the Notes, waive any past default or event of default under the indenture and its consequences, except:
our failure to pay principal of or interest (including additional interest, if any) on any Notes when due;
our failure to convert any Notes into common stock as required by the indenture;
our failure to pay the repurchase price on the repurchase date in connection with a holder exercising its repurchase rights; or
our failure to comply with any of the provisions of the indenture that would require the consent of the holder of each outstanding Notes affected.
Modification
Changes Requiring Approval of Each Affected Holder
The indenture (including the terms and conditions of the Notes) may not be modified or amended without the written consent or the affirmative vote of the holder of each Note affected by such change to:
change the maturity of any Notes;
reduce the rate or extend the time for payment of interest (including additional interest, if any) on any Notes;
reduce the principal amount of any Notes;
reduce any amount payable upon repurchase or redemption of any Notes;
impair the right of a holder to receive payment with respect to any Notes or to institute suit for payment of any Notes;
change the currency in which any Notes is payable;
change our obligation to repurchase any Notes upon a fundamental change in a manner adverse to the rights of the holders;
affect the right of a holder to convert any Notes into shares of our common stock or reduce the number of shares of our common stock or any other property, receivable upon conversion pursuant to the terms of the indenture;
change our obligation to maintain an office or agency in New York City;
subject to specified exceptions, modify certain provisions of the indenture relating to modification of the indenture or waiver under the indenture; or
reduce the percentage of the Notes required for consent to any modification of the indenture that does not require the consent of each affected holder.

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Changes Requiring Majority Approval
The indenture (including the terms and conditions of the Notes) may be modified or amended, except as described above, with the written consent or affirmative vote of the holders of a majority in aggregate principal amount of the Notes then outstanding.
Changes Requiring No Approval
The indenture (including the terms and conditions of the Notes) may be modified or amended by us and the trustee, without the consent of the holder of any Notes, to, among other things:
provide for conversion rights of holders of the Notes and our repurchase obligations in connection with a fundamental change in the event of any reclassification of our common stock, merger or consolidation, or sale, conveyance, transfer or lease of our property and assets substantially as an entity;
secure the Notes;
provide for the assumption of our obligations to the holders of the Notes in the event of a merger or consolidation, or sale, conveyance, transfer or lease of our property and assets substantially as an entirety;
surrender any right or power conferred upon us;
add to our covenants for the benefit of the holders of the Notes;
cure any ambiguity or correct or supplement any inconsistent or otherwise defective provision contained in the indenture;
conform the provisions of the indenture to the description of the Notes contained in the preliminary prospectus supplement dated April 6, 2017, as supplemented by the relating pricing term sheet for the existing 4.95% Convertible Notes dated April 6, 2017;
make any provision with respect to matters or questions arising under the indenture that we may deem necessary or desirable and that shall not be inconsistent with provisions of the indenture; provided that such change or modification does not, in the good faith opinion of our board of directors, adversely affect the interests of the holders of the Notes in any material respect;
increase the conversion rate; provided, that the increase will not adversely affect the interests of the holders of the Notes;
adding guarantees of obligations under the Notes;
comply with any requirement of the SEC in connection with the qualification of the indenture under the Trust Indenture Act;
make such changes as may be necessary or desirable to allow us to issue additional Notes as described under “- Additional Notes” provided, that any such change will not materially adversely affect the interests of the holders of the Notes; and
provide for a successor trustee.
Other
The consent of the holders of Notes is not necessary under the indenture to approve the particular form of any proposed modification or amendment. It is sufficient if such consent approves the substance of the proposed modification or amendment. After a modification or amendment under the indenture becomes effective, we are required to mail to the holders a notice briefly describing such modification or amendment. However, the failure to give such notice to all the holders, or any defect in the notice, will not impair or affect the validity of the modification or amendment.

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Notes Not Entitled to Consent
Any Notes held by us or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with us shall be disregarded (from both the numerator and the denominator) for purposes of determining whether the holders of the requisite aggregate principal amount of the outstanding Notes have consented to a modification, amendment or waiver of the terms of the indenture.
Repurchase and Cancellation
We may, to the extent permitted by law, repurchase any Notes in the open market or by tender offer at any price or by private agreement. Any Notes repurchased by us may, at our option, be surrendered to the trustee for cancellation, but may not be reissued or resold by us. Any Notes surrendered for cancellation may not be reissued or resold and will be promptly cancelled.
Reports
We shall deliver to the trustee, within 15 days after filing with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that we are required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
Information Concerning the Trustee and Common Stock Transfer Agent and Registrar
We have appointed U.S. Bank National Association, the trustee under the indenture, as paying agent, conversion agent, Notes registrar and custodian for the Notes. The trustee or its affiliates may also provide other services to us in the ordinary course of their business. The indenture contains certain limitations on the rights of the trustee, if it or any of its affiliates is then our creditor, to obtain payment of claims in certain cases or to realize on certain property received on any claim as security or otherwise. The trustee and its affiliates will be permitted to engage in other transactions with us. However, if the trustee or any affiliate continues to have any conflicting interest and a default occurs with respect to the Notes, the trustee must eliminate such conflict or resign.
American Stock Transfer & Trust Company, LLC is the transfer agent and registrar for our common stock.
Governing Law
The indenture provides that it and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.
Calculations in Respect of the Notes
Except as otherwise provided herein, we will be responsible for making all calculations called for under the Notes. These calculations include, but are not limited to, determinations of the sale price of our common stock, accrued interest payable on the Notes and the conversion rate and conversion price. We or our agents will make all these calculations in good faith and, absent manifest error, such calculations will be final and binding on holders of the Notes. We will provide a schedule of these calculations to each of the trustee and the conversion agent, and each of the trustee and conversion agent is entitled to rely upon the accuracy of our calculations without independent verification. The trustee will forward these calculations to any holder of the Notes upon the request of that holder.
Form, Denomination and Registration
The Notes will be issued:
in fully registered form;
without interest coupons; and
in denominations of $1,000 principal amount and integral multiples of $1,000.

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Global Notes, Book‑Entry Form
The Notes will be evidenced by one or more global Notes. We will deposit the global Notes with DTC and register the global Notes in the name of Cede & Co. as DTC’s nominee. Except as set forth below, a global Note may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee.
Beneficial interests in a global Note may be held through organizations that are participants in DTC (called “participants”). Transfers between participants will be effected in the ordinary way in accordance with DTC rules and will be settled in clearing house funds. The laws of some states require that certain persons take physical delivery of securities in definitive form. As a result, the ability to transfer beneficial interests in the global Notes to such persons may be limited.
Beneficial interests in a global Note held by DTC may be held only through participants, or certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a participant, either directly or indirectly (called “indirect participants”). So long as Cede & Co., as the nominee of DTC, is the registered owner of a global Notes, Cede & Co. for all purposes will be considered the sole holder of such global Notes. Except as provided below, owners of beneficial interests in a global Note will:
not be entitled to have certificates registered in their names;
not receive physical delivery of certificates in definitive registered form; and
not be considered holders of the global Notes.
We will pay principal of and interest (including additional interest, if any) on, and the repurchase price or redemption price of, a global Note to Cede & Co., as the registered owner of the global Notes, by wire transfer of immediately available funds on the maturity date, each interest payment date, redemption date or repurchase date, as the case may be. Neither we, the trustee nor any paying agent will be responsible or liable:
for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in a global Note; or
for maintaining, supervising or reviewing any records relating to the beneficial ownership interests.
DTC has advised us that it will take any action permitted to be taken by a holder of the Notes, including the presentation of the Notes for conversion, only at the direction of one or more participants to whose account with DTC interests in the global Notes are credited, and only in respect of the principal amount of the Notes represented by the global Notes as to which the participant or participants has or have given such direction.
DTC has advised us that it is:
a limited purpose trust company organized under the laws of the State of New York, and a member of the Federal Reserve System;
a “clearing corporation” within the meaning of the Uniform Commercial Code; and
a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act.
DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book‑entry changes to the accounts of its participants. Participants include securities brokers, dealers, banks, trust companies and clearing corporations and other organizations. Some of the participants or their representatives, together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly.
DTC has agreed to the foregoing procedures to facilitate transfers of interests in a global Note among participants. However, DTC is under no obligation to perform or continue to perform these procedures, and may discontinue these procedures at any time. We will issue the Notes in definitive certificated form if DTC notifies us that it is unwilling or unable to continue as depositary or DTC ceases to be a clearing agency registered under the Exchange Act and a successor depositary is

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not appointed by us within 90 days. In addition, beneficial interests in a global Note may be exchanged for definitive certificated notes upon request by or on behalf of DTC in accordance with customary procedures following the request of a beneficial owner seeking to enforce its rights under such Notes or the indenture. The indenture permits us to determine at any time and in our sole discretion that Notes shall no longer be represented by global Notes. DTC has advised us that, under its current practices, it would notify its participants of our request, but will only withdraw beneficial interests from the global note at the request of each DTC participant. We would issue definitive certificates in exchange for any such beneficial interests withdrawn.
Neither we, the trustee, registrar, paying agent nor conversion agent will have any responsibility or liability for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(All figures in this item are in thousands except share, per share and other data.)
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this prospectus supplement and accompanying prospectus. Historical results set forth are not necessarily indicative of our future financial position and results of operations.
Overview
The terms “Prospect,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise.

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

On May 15, 2007, we formed a wholly-owned subsidiary Prospect Capital Funding LLC (“PCF”), a Delaware limited liability company and a bankruptcy remote special purpose entity, which holds certain of our portfolio loan investments that are used as collateral for the revolving credit facility at PCF. Our wholly-owned subsidiary Prospect Small Business Lending, LLC (“PSBL”) was formed on January 27, 2014 and purchases small business whole loans on a recurring basis from online small business loan originators, including On Deck Capital, Inc. (“OnDeck”). On September 30, 2014, we formed a wholly-owned subsidiary Prospect Yield Corporation, LLC (“PYC”) and effective October 23, 2014, PYC holds our investments in collateralized loan obligations (“CLOs”). Each of these subsidiaries have been consolidated since operations commenced.
We consolidate certain of our wholly-owned and substantially wholly-owned holding companies formed by us in order to facilitate our investment strategy. The following companies are included in our consolidated financial statements: APH Property Holdings, LLC (“APH”); Arctic Oilfield Equipment USA, Inc.; CCPI Holdings Inc.; CP Holdings of Delaware LLC (“CP Holdings”); Credit Central Holdings of Delaware, LLC; Energy Solutions Holdings Inc.; First Tower Holdings of Delaware LLC (“First Tower Delaware”); Harbortouch Holdings of Delaware Inc.; MITY Holdings of Delaware Inc.; Nationwide Acceptance Holdings LLC; NMMB Holdings, Inc. (“NMMB Holdings”); NPH Property Holdings, LLC (“NPH”); STI Holding, Inc.; UPH Property Holdings, LLC (“UPH”); Valley Electric Holdings I, Inc.; Valley Electric Holdings II, Inc.; and Wolf Energy Holdings Inc. (“Wolf Energy Holdings”). On October 10, 2014, concurrent with the sale of the operating company, our ownership increased to 100% of the outstanding equity of ARRM Services, Inc., which was renamed SB Forging Company, Inc. (“SB Forging”). As such, we began consolidating SB Forging on October 11, 2014. Effective May 23, 2016, in connection with the merger of American Property REIT Corp. (“APRC”) and United Property REIT Corp. (“UPRC”) with and into National Property REIT Corp. (“NPRC”), APH and UPH merged with and into NPH, and were dissolved. We collectively refer to these entities as the “Consolidated Holding Companies.”
We are externally managed by our investment adviser, Prospect Capital Management L.P. (“Prospect Capital Management” or the “Investment Adviser”). Prospect Administration LLC (“Prospect Administration”), a wholly-owned subsidiary of the Investment Adviser, provides administrative services and facilities necessary for us to operate.
Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. We invest primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. We work with the management teams or financial sponsors to seek investments with historical cash flows, asset collateral or contracted pro-forma cash flows.
We currently have nine strategies that guide our origination of investment opportunities: (1) lending to companies controlled by private equity sponsors, (2) lending to companies not controlled by private equity sponsors, (3) purchasing controlling equity positions and lending to operating companies, (4) purchasing controlling equity positions and lending to financial services companies, (5) purchasing controlling equity positions and lending to real estate companies, (6) purchasing controlling equity positions and lending to aircraft leasing companies (7) investing in structured credit (8) investing in non-agented debt and (9) investing in online loans. We may also invest in other strategies and opportunities from time to time that we view as attractive. We continue to evaluate other origination strategies in the ordinary course of business with no specific top-down allocation to any single origination strategy.

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Lending to Companies Controlled by Private Equity Sponsors - We make agented loans to companies which are controlled by private equity sponsors. This debt can take the form of first lien, second lien, unitranche or unsecured loans. These loans typically have equity subordinate to our loan position. Historically, this strategy has comprised approximately 40%-60% of our portfolio.
Lending to Companies not Controlled by Private Equity Sponsors - We make loans to companies which are not controlled by private equity sponsors, such as companies that are controlled by the management team, the founder, a family or public shareholders. This origination strategy may have less competition to provide debt financing than the private-equity-sponsor origination strategy because such company financing needs are not easily addressed by banks and often require more diligence preparation. This origination strategy can result in investments with higher returns or lower leverage than the private-equity-sponsor origination strategy. Historically, this strategy has comprised up to approximately 15% of our portfolio.
Purchasing Controlling Equity Positions and Lending to Operating Companies - This strategy involves purchasing yield-producing debt and controlling equity positions in non-financial-services operating companies. We believe that we can provide enhanced certainty of closure and liquidity to sellers and we look for management to continue on in their current roles. This strategy has comprised approximately 5%-15% of our portfolio.
Purchasing Controlling Equity Positions and Lending to Financial Services Companies - This strategy involves purchasing yield-producing debt and control equity investments in financial services companies, including consumer direct lending, sub-prime auto lending and other strategies. These investments are often structured in tax-efficient partnerships, enhancing returns. This strategy has comprised approximately 5%-15% of our portfolio.
Purchasing Controlling Equity Positions and Lending to Real Estate Companies - We purchase debt and controlling equity positions in tax-efficient real estate investment trusts (“REIT” or “REITs”). NPRC’s, an operating company and the surviving entity of the May 23, 2016 merger with APRC and UPRC, real estate investments are in various classes of developed and occupied real estate properties that generate current yields, including multi-family properties, student housing, and self-storage. NPRC seeks to identify properties that have historically significant occupancy rates and recurring cash flow generation. NPRC generally co-invests with established and experienced property management teams that manage such properties after acquisition. Additionally, NPRC purchases loans originated by certain consumer loan facilitators. It purchases each loan in its entirety (i.e., a “whole loan”). The borrowers are consumers, and the loans are typically serviced by the facilitators of the loans. This investment strategy has comprised approximately 10%-20% of our business.
Purchasing Controlling Equity Positions and Lending to Aircraft Leasing Companies - We invest in debt as well as equity in companies with aircraft assets subject to commercial leases to airlines across the globe. We believe that these investments can present attractive return opportunities due to cash flow consistency from long-term leases coupled with hard asset residual value. We believe that these investment companies seek to deliver risk-adjusted returns with strong downside protection by analyzing relative value characteristics across a variety of aircraft types and vintages. This strategy historically has comprised less than 5% of our portfolio.
Investing in Structured Credit - We make investments in CLOs, often taking a significant position in the subordinated interests (equity) of the CLOs. The underlying portfolio of each CLO investment is diversified across approximately 100 to 200 broadly syndicated loans and does not have direct exposure to real estate, mortgages, or consumer-based credit assets. The CLOs in which we invest are managed by established collateral management teams with many years of experience in the industry. This strategy has comprised approximately 10%-20% of our portfolio.
Investing in Non-Agented Debt - On a primary or secondary basis, we purchase primarily senior and secured loans and high yield bonds that have been sold to a club or syndicate of buyers. These investments are often purchased with a long term, buy-and-hold outlook, and we often look to provide significant input to the transaction by providing anchoring orders. This strategy has comprised approximately 5%-10% of our portfolio.
Investing in Online Business Loans - We purchase loans originated by certain small-and-medium-sized business (“SME”) loan facilitators. We generally purchase each loan in its entirety (i.e., a “whole loan”). The borrowers are SMEs and the loans are typically serviced by the facilitators of the loans. This investment strategy has comprised up to approximately 1% of our portfolio.

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We invest primarily in first and second lien secured loans and unsecured debt, which in some cases includes an equity component. First and second lien secured loans generally are senior debt instruments that rank ahead of unsecured debt of a given portfolio company. These loans also have the benefit of security interests on the assets of the portfolio company, which may rank ahead of or be junior to other security interests. Our investments in CLOs are subordinated to senior loans and are generally unsecured. We invest in debt and equity positions of CLOs which are a form of securitization in which the cash flows of a portfolio of loans are pooled and passed on to different classes of owners in various tranches. Our CLO investments are derived from portfolios of corporate debt securities which are generally risk rated from BB to B.
We hold many of our control investments in a two-tier structure consisting of a holding company and one or more related operating companies for tax purposes. These holding companies serve various business purposes including concentration of management teams, optimization of third party borrowing costs, improvement of supplier, customer, and insurance terms, and enhancement of co-investments by the management teams. In these cases, our investment, which is generally equity in the holding company, the holding company’s equity investment in the operating company and any debt from us directly to the operating company structure represents our total exposure for the investment. As of March 31, 2018, as shown in our Consolidated Schedule of Investments, the cost basis and fair value of our investments in controlled companies was $1,857,698 and $1,986,984, respectively. This structure gives rise to several of the risks described in our public documents and highlighted elsewhere in this prospectus supplement and the accompanying prospectus. We consolidate all wholly-owned and substantially wholly-owned holding companies formed by us for the purpose of holding our controlled investments in operating companies. There is no significant effect of consolidating these holding companies as they hold minimal assets other than their investments in the controlled operating companies. Investment company accounting prohibits the consolidation of any operating companies.
Third Quarter Highlights
Investment Transactions
We seek to be a long-term investor with our portfolio companies. During the three months ended March 31, 2018, we acquired $342,732 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $80,706, funded $4,342 of revolver advances, and recorded paid in kind (“PIK”) interest of $2,148, resulting in gross investment originations of $429,928. During the three months ended March 31, 2018, we received full repayments on 2 investments and received several partial prepayments and amortization payments totaling $118,083.

Debt Issuances and Redemptions
During the three months ended March 31, 2018, we redeemed $87,837 aggregate principal amount of our Prospect Capital InterNotes® at par with a weighted average interest rate of 4.97%, and repaid $1,090 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended March 31, 2018 was $513.
During the three months ended March 31, 2018 we issued $17,251 aggregate principal amount of Prospect Capital InterNotes® with a stated and weighted average interest rate of 4.29%, to extend our borrowing base. The newly issued notes mature between January 15, 2023 and March 15, 2026 and generated net proceeds of $16,999.
Equity Issuances
On January 18, 2018, February 15, 2018, and March 22, 2018, we issued 546,596, 540,758, and 589,256 shares of our common stock in connection with the dividend reinvestment plan, respectively.
Investment Holdings
As of March 31, 2018, we continue to pursue our investment strategy. At March 31, 2018, approximately $5,719,804, or 170.9%, of our net assets are invested in 134 long-term portfolio investments and CLOs.
During the nine months ended March 31, 2018, we originated $1,390,816 of new investments, primarily composed of $1,240,983 of debt and equity financing to non-controlled portfolio investments and $149,833 of debt and equity financing to controlled investments. Our origination efforts are focused primarily on secured lending to non-control investments to reduce the risk in the portfolio by investing primarily in first lien loans, though we also continue to close select junior debt and equity investments. Our annualized current yield was 12.9% and 12.2% as of March 31, 2018 and June 30, 2017, respectively, across all performing interest bearing investments, excluding equity investments and non-accrual loans. Our annualized current yield was 10.8% and 10.4% as of March 31, 2018 and June 30, 2017, respectively, across all investments. Monetization of equity positions that we hold and loans

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on non-accrual status are not included in this yield calculation. In many of our portfolio companies we hold equity positions, ranging from minority interests to majority stakes, which we expect over time to contribute to our investment returns. Some of these equity positions include features such as contractual minimum internal rates of returns, preferred distributions, flip structures and other features expected to generate additional investment returns, as well as contractual protections and preferences over junior equity, in addition to the yield and security offered by our cash flow and collateral debt protections.
We are a non-diversified company within the meaning of the 1940 Act. As required by the 1940 Act, we classify our investments by level of control. As defined in the 1940 Act, “Control Investments” are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less, a beneficial ownership of 25% or more of the voting securities of an investee company. Under the 1940 Act, “Affiliate Investments” are defined by a lesser degree of influence and are deemed to exist through the possession outright or via the right to acquire within 60 days or less, beneficial ownership of 5% or more of the outstanding voting securities of another person. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. As of March 31, 2018, we own controlling interests in the following portfolio companies: Arctic Energy Services, LLC (“Arctic Energy”); CCPI Inc. (“CCPI”); CP Energy Services Inc. (“CP Energy”); Credit Central Loan Company, LLC (“Credit Central”); Echelon Transportation, LLC (“Echelon”); First Tower Finance Company LLC (“First Tower Finance”); Freedom Marine Solutions, LLC (“Freedom Marine”); MITY, Inc. (“MITY”); NPRC; Nationwide Loan Company LLC (f/k/a Nationwide Acceptance LLC) (“Nationwide”); NMMB, Inc. (“NMMB”); R-V Industries, Inc.; SB Forging Company II, Inc. (f/k/a Gulf Coast Machine & Supply Company) (“Gulfco”); USES Corp. (“USES”); Valley Electric Company, Inc. (“Valley Electric”); and Wolf Energy, LLC (“Wolf Energy”). As of March 31, 2018, we also own affiliated interests in Nixon, Inc. (“Nixon”), Targus Cayman HoldCo Limited (“Targus”) and Edmentum Ultimate Holdings, LLC (“Edmentum”).
The following shows the composition of our investment portfolio by level of control as of March 31, 2018 and June 30, 2017:
 
March 31, 2018
 
June 30, 2017
Level of Control
Cost
% of Portfolio
Fair Value
% of Portfolio
 
Cost
% of Portfolio
Fair Value
% of Portfolio
Control Investments
$
1,857,698

31.7
%
$
1,986,984

34.7
%
 
$
1,840,731

30.8
%
$
1,911,775

32.7
%
Affiliate Investments
55,482

0.9
%
52,288

0.9
%
 
22,957

0.4
%
11,429

0.2
%
Non-Control/Non-Affiliate Investments
3,951,787

67.4
%
3,680,532

64.4
%
 
4,117,868

68.8
%
3,915,101

67.1
%
Total Investments
$
5,864,967

100.0
%
$
5,719,804

100.0
%
 
$
5,981,556

100.0
%
$
5,838,305

100.0
%
The following shows the composition of our investment portfolio by type of investment as of March 31, 2018 and June 30, 2017:
 
March 31, 2018
 
June 30, 2017
Type of Investment
Cost
% of Portfolio
Fair Value
% of Portfolio
 
Cost
% of Portfolio
Fair Value
% of Portfolio
Revolving Line of Credit
$
38,659

0.7
%
$
38,593

0.7
%
 
$
27,409

0.5
%
$
27,409

0.5
%
Senior Secured Debt
2,634,484

44.9
%
2,537,625

44.4
%
 
2,940,163

49.2
%
2,798,796

47.9
%
Subordinated Secured Debt
1,391,914

23.7
%
1,317,084

23.0
%
 
1,160,019

19.4
%
1,107,040

19.0
%
Subordinated Unsecured Debt
38,393

0.7
%
30,809

0.5
%
 
37,934

0.6
%
44,434

0.8
%
Small Business Loans
288

%
199

%
 
8,434

0.1
%
7,964

0.1
%
CLO Residual Interest
1,096,809

18.7
%
944,815

16.5
%
 
1,150,006

19.2
%
1,079,712

18.5
%
Preferred Stock
77,346

1.3
%
65,477

1.1
%
 
112,394

1.9
%
83,209

1.4
%
Common Stock
329,311

5.6
%
417,910

7.3
%
 
295,200

4.9
%
391,374

6.7
%
Membership Interest
257,763

4.4
%
271,857

4.8
%
 
249,997

4.2
%
206,012

3.5
%
Participating Interest(1)

%
94,535

1.7
%
 

%
91,491

1.6
%
Escrow Receivable

%
900

%
 

%
864

%
Total Investments
$
5,864,967

100.0
%
$
5,719,804

100.0
%
 
$
5,981,556

100.0
%
$
5,838,305

100.0
%
(1)
Participating Interest includes our participating equity investments, such as net profits interests, net operating income interests, net revenue interests, and overriding royalty interests.

S-42


The following shows our investments in interest bearing securities by type of investment as of March 31, 2018 and June 30, 2017:
 
March 31, 2018
 
June 30, 2017
Type of Investment
Cost
% of Portfolio
Fair Value
% of Portfolio
 
Cost
% of Portfolio
Fair Value
% of Portfolio
First Lien
$
2,665,309

51.3
%
$
2,568,384

52.8
%
 
$
2,959,738

55.6
%
$
2,818,371

55.6
%
Second Lien
1,399,748

26.9
%
1,324,918

27.2
%
 
1,167,853

21.9
%
1,114,874

22.0
%
Unsecured
38,393

0.7
%
30,809

0.6
%
 
37,934

0.7
%
44,434

0.9
%
Small Business Loans
288

%
199

%
 
8,434

0.2
%
7,964

0.2
%
CLO Residual Interest
1,096,809

21.1
%
944,815

19.4
%
 
1,150,006

21.6
%
1,079,712

21.3
%
Total Debt Investments
$
5,200,547

100.0
%
$
4,869,125

100.0
%
 
$
5,323,965

100.0
%
$
5,065,355

100.0
%
The following shows the composition of our investment portfolio by geographic location as of March 31, 2018 and June 30, 2017:
 
March 31, 2018
 
June 30, 2017
Geographic Location
Cost
% of Portfolio
Fair Value
% of Portfolio
 
Cost
% of Portfolio
Fair Value
% of Portfolio
Canada
$
16,804

0.3
%
$
16,867

0.3
%
 
$
9,831

0.2
%
$
10,000

0.2
%
Cayman Islands
1,096,809

18.7
%
944,815

16.5
%
 
1,150,006

19.2
%
1,079,712

18.5
%
France
12,407

0.2
%
11,518

0.2
%
 
9,755

0.2
%
8,794

0.2
%
MidAtlantic US
564,872

9.6
%
564,872

9.9
%
 
 
%
 
%
Midwest US
399,595

6.8
%
411,640

7.2
%
 
605,417

10.1
%
678,766

11.6
%
Northeast US
520,161

8.9
%
536,626

9.4
%
 
786,552

13.1
%
823,616

14.0
%
Northwest US
177,168

3.0
%
118,211

2.1
%
 
281,336

4.7
%
207,962

3.6
%
Puerto Rico
85,949

1.5
%
85,134

1.5
%
 
83,410

1.4
%
83,410

1.4
%
Southeast US
1,234,905

21.1
%
1,468,917

25.7
%
 
1,367,606

22.9
%
1,412,351

24.2
%
Southwest US
642,239

11.0
%
551,514

9.6
%
 
616,008

10.3
%
558,368

9.6
%
Western US
1,114,058

18.9
%
1,009,690

17.6
%
 
1,071,635

17.9
%
975,326

16.7
%
Total Investments
$
5,864,967

100.0
%
$
5,719,804

100.0
%
 
$
5,981,556

100.0
%
$
5,838,305

100.0
%

S-43


The following shows the composition of our investment portfolio by industry as of March 31, 2018 and June 30, 2017:
 
March 31, 2018
 
June 30, 2017
Industry
Cost
% of Portfolio
Fair Value
% of Portfolio
 
Cost
% of Portfolio
Fair Value
% of Portfolio
Aerospace & Defense
$
69,837

1.2
%
$
79,301

1.4
%
 
$
69,837

1.2
%
$
71,318

1.2
%
Air Freight & Logistics

%

%
 
51,952

0.9
%
51,952

0.9
%
Auto Components
33,546

0.6
%
33,708

0.6
%
 
30,222

0.5
%
30,460

0.5
%
Building Products
9,902

0.2
%
10,000

0.2
%
 

%

%
Capital Markets
19,792

0.3
%
20,000

0.3
%
 
14,796

0.2
%
15,000

0.3
%
Chemicals
17,491

0.3
%
17,500

0.3
%
 
17,489

0.3
%
16,699

0.3
%
Commercial Services & Supplies
403,829

6.9
%
341,803

6.0
%
 
354,185

5.9
%
312,634

5.3
%
Communications Equipment
39,855

0.7
%
40,000

0.7
%
 

%

%
Construction & Engineering
63,926

1.1
%
42,462

0.7
%
 
62,258

1.0
%
32,509

0.6
%
Consumer Finance
483,756

8.2
%
575,894

10.1
%
 
469,869

7.9
%
502,941

8.6
%
Distributors
657,099

11.2
%
573,180

10.0
%
 
140,847

2.4
%
83,225

1.4
%
Diversified Consumer Services
173,893

3.0
%
161,216

2.8
%
 
188,912

3.2
%
190,662

3.3
%
Diversified Telecommunication Services

%

%
 
4,395

0.1
%
4,410

0.1
%
Electronic Equipment, Instruments & Components
54,717

0.9
%
62,641

1.1
%
 
37,696

0.6
%
51,846

0.9
%
Energy Equipment & Services
254,101

4.3
%
162,972

2.8
%
 
251,019

4.2
%
131,660

2.3
%
Equity Real Estate Investment Trusts (REITs)
449,781

7.7
%
733,626

12.8
%
 
374,380

6.3
%
624,337

10.7
%
Food Products
9,880

0.2
%
9,880

0.2
%
 

%

%
Health Care Equipment & Supplies
38,713

0.7
%
38,750

0.7
%
 

%

%
Health Care Providers & Services
438,363

7.5
%
433,445

7.6
%
 
422,919

7.1
%
421,389

7.1
%
Health Care Technology
14,928

0.3
%
15,300

0.3
%
 

%

%
Hotels, Restaurants & Leisure
37,482

0.6
%
37,482

0.7
%
 
127,638

2.1
%
103,897

1.8
%
Household & Personal Products
25,000

0.4
%
25,000

0.4
%
 
 
 
 
 
Household Durables
45,404

0.8
%
44,755

0.8
%
 
146,031

2.4
%
146,183

2.5
%
Insurance
2,986

0.1
%
2,986

0.1
%
 

%

%
Internet & Direct Marketing Retail
39,875

0.7
%
39,875

0.7
%
 

%

%
Internet Software & Services
188,414

3.2
%
188,493

3.3
%
 
219,348

3.7
%
219,348

3.8
%
IT Services
21,576

0.4
%
21,990

0.4
%
 
19,531

0.3
%
20,000

0.3
%
Leisure Products
49,006

0.8
%
49,107

0.9
%
 
44,085

0.7
%
44,204

0.8
%
Machinery
35,488

0.6
%
31,025

0.5
%
 
35,488

0.6
%
32,678

0.6
%
Marine(1)
8,943

0.2
%
8,879

0.2
%
 
8,919

0.1
%
8,800

0.2
%
Media
127,868

2.2
%
124,884

2.2
%
 
469,108

7.8
%
466,500

8.0
%
Metals & Mining

%

%
 
9,953

0.2
%
10,000

0.2
%
Online Lending
377,786

6.4
%
297,723

5.2
%
 
424,350

7.1
%
370,931

6.3
%
Paper & Forest Products
11,320

0.2
%
11,500

0.2
%
 
11,295

0.2
%
11,500

0.2
%
Personal Products
213,825

3.6
%
183,151

3.2
%
 
222,698

3.7
%
192,748

3.3
%
Pharmaceuticals
11,881

0.2
%
12,000

0.2
%
 
117,989

2.0
%
117,989

2.0
%
Professional Services
73,249

1.2
%
75,163

1.3
%
 
64,242

1.1
%
64,473

1.1
%
Real Estate Management & Development
42,000

0.7
%
42,000

0.7
%
 

%

%
Software
55,160

0.9
%
55,971

1.0
%
 
56,041

0.9
%
55,150

0.9
%
Technology Hardware, Storage & Peripherals
12,380

0.2
%
12,500

0.2
%
 

%

%
Textiles, Apparel & Luxury Goods
46,403

0.8
%
56,361

1.0
%
 
285,180

4.8
%
274,206

4.7
%
Tobacco
14,387

0.2
%
13,933

0.2
%
 
14,365

0.2
%
14,431

0.2
%

S-44


Trading Companies & Distributors
64,025

1.1
%
57,610

1.0
%
 
64,513

1.1
%
64,513

1.1
%
Transportation Infrastructure
30,291

0.5
%
30,923

0.5
%
 
$

%
$

%
Subtotal
$
4,768,158

81.3
%
$
4,774,989

83.5
%
 
$
4,831,550

80.8
%
$
4,758,593

81.5
%
Structured Finance(2)
$
1,096,809

18.7
%
$
944,815

16.5
%