PSEC

Business Context and Reporting Period

Company: Prospect Capital Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: April 17, 2020
Subject: Material Modification to Rights of Security Holders regarding the Dividend Reinvestment and Direct Stock Purchase Plan.

Key Financial Metrics

This filing does not contain financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity metrics. The document focuses exclusively on corporate governance and shareholder plan amendments.

Material Changes

The Board of Directors approved amendments to the Dividend Reinvestment and Direct Stock Purchase Plan effective May 21, 2020. Key changes include:

• Discount Mechanism: Newly-issued shares for dividend reinvestment will be issued at a 5% discount from the market value of the Common Stock on the valuation date.
• Automatic Reinvestment: Shareholders who do not opt out will have cash distributions automatically reinvested in additional shares of Common Stock.
• Share Source: The Company will primarily use newly-issued shares for reinvestment, regardless of whether shares trade at a premium or discount to net asset value, though it reserves the right to purchase shares in the open market.
• Direct Purchase: Non-stockholders may enroll with an initial investment of $250. Shares acquired via the direct purchase option will be bought on the open market at current market prices, not via newly-issued shares.

Outlook, Risks, and Contingencies

Impact on Net Asset Value (NAV): Shareholders opting out of the Plan may experience accretion to NAV if the reinvestment price is a premium to NAV, or dilution if the reinvestment price is a discount to NAV. The magnitude depends on participation levels and the premium/discount spread.
Deadlines:

• To terminate participation and retain the account for the May Distribution: Notice required by April 30, 2020.
• To terminate participation and liquidate the account for the May Distribution: Notice required by May 18, 2020.

Applicability: Amendments apply to the dividend declared on February 10, 2020 (May Distribution) and all subsequent dividends.

Investor Verification Checklist

• Confirm current participation status in the Dividend Reinvestment Plan to determine if the 5% discount applies to upcoming distributions.
• Verify the record date (April 30, 2020) and payment date (May 21, 2020) for the May Distribution to ensure timely opt-out notices if desired.
• Review the full text of the Plan (Exhibit 99.1) for detailed terms regarding share issuance and open market purchases.
• Assess the potential dilution or accretion impact on NAV based on the Company's current trading price relative to its net asset value.