One-stop and Targeted Financing Solutions to Middle Market Companies

Summary:

• Business Development Company focused on secured lending and private equity
• Managed by Prospect Capital Management (20-year history)
• 5th year as public company (IPO July 2004)
• 18 consecutive quarterly dividend increases
• 12% year-over-year increase in NII per share for the fiscal quarter ended December 31, 2008
• Particular expertise in asset-rich sectors
• Diversified portfolio, 31 companies (~15% yield across debt and equity investments)
• Conservative balance sheet; Leverage limited to 1:1 (liabilities to equity currently <0.35x)
• Credit facility obtained, invested, upsized three times ($428M book equity and $200M credit facility with AAA-rated bank)
• Significant current investment pipeline (~2,000 opportunities per annum)
• Headquartered in New York with reach across North America

• Only BDC that does buyouts as well as financings for <$50M EBITDA companies; counterparties value our flexible, one-stop solutions
• Long-term, flexible perspective as permanent capital
• Origination, due diligence, and management team networks
• Team drive and responsiveness
• Ability to add particular value in asset-rich sectors
• Transparent counterparty vs. hedge funds
• Total focus by management team; management has invested ~$20M in equity of company
• Senior secured debt is a majority of the portfolio; all deals have secured liens with significant collateral coverage and tight covenant packages
• Currently seeing some of the best opportunities in years as massive de-leveraging occurs across banks and hedge funds
• Third party firms for quarterly independent valuations, quarterly reporting/audits, custody, and Sarbanes-Oxley 404 compliance

• Inefficient Markets
  • Middle-market private companies (typically $5-50M EBITDA)
  • Expertise in underserved asset-rich sectors (such as energy/industrials)
  • Wide origination outreach built on ideas/relationships

• Solid Businesses
  • Defensible recurring revenue streams
  • Persistent, visible profitability
  • Experienced management

• Value-Oriented Discipline
  • Lending downside protection, with equity upside in selected cases
  • Focus on income-enhancing structures
  • Conservative multiples/ratios
  • Buy and hold (not trading) approach

• Capital Usage Types
  • We invest primarily in senior and subordinated debt and equity of companies in need of capital for acquisitions, divestitures, growth, development, project financing and recapitalization
  • Work with management teams and/or financial sponsors to seek investments with historical cash flows, asset coverage and/or contracted pro forma cash flows

• Control Types
  • Private equity control ("Sponsor"): target 13-18% IRRs
  • Company control ("Sponsorless"): target 16-25% IRRs
  • Prospect control ("Buyout"): target 20-30% IRRs

• Institutional Co-investors
  • We have relationships with many of the leading commercial lenders and investment firms