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10-Q

Pennantpark Investment Corp (PNNT)

10-Q 2022-05-05 For: 2022-03-31
View Original
Added on April 12, 2026

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 814-00736

PENNANTPARK INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)

MARYLAND 20-8250744
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1691 Michigan Avenue,<br><br>Miami Beach, Florida 33319
(Address of principal executive offices) (Zip Code)

(212) 905-1000

(Registrant’s Telephone Number, Including Area Code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share PNNT The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of May 4, 2022 was 66,131,651.

PENNANTPARK INVESTMENT CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022

TABLE OF CONTENTS

PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Assets and Liabilities as of March 31, 2022 (unaudited) and September 30, 2021 4
Consolidated Statements of Operations for the three and six months ended March 31, 2022 and 2021 (unaudited) 5
Consolidated Statements of Changes in Net Assets for the three and six months ended March 31, 2022 and 2021 (unaudited) 6
Consolidated Statements of Cash Flows for the six months ended March 31, 2022 and 2021 (unaudited) 7
Consolidated Schedules of Investments as of March 31, 2022 (unaudited) and September 30, 2021 8
Notes to Consolidated Financial Statements (unaudited) 18
Report of Independent Registered Public Accounting Firm 34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35
Item 3. Quantitative and Qualitative Disclosures About Market Risk 48
Item 4. Controls and Procedures 49
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 50
Item 1A. Risk Factors 50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 51
Item 3. Defaults Upon Senior Securities 51
Item 4. Mine Safety Disclosures 51
Item 5. Other Information 51
Item 6. Exhibits 52
SIGNATURES 53

We are filing this Quarterly Report on Form 10-Q, or the Report, in compliance with Rule 13a-13 as promulgated by the Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In this Report, except where context suggest otherwise, the terms “Company,” “we,” “our” or “us” refers to PennantPark Investment Corporation and its consolidated subsidiaries; “PennantPark Investment” refers to only PennantPark Investment Corporation; “our SBIC Fund” refers collectively to our consolidated subsidiaries, PennantPark SBIC II LP, or SBIC II, and its general partner, PennantPark SBIC GP II, LLC; “Funding I” refers to PennantPark Investment Funding I, LLC, a wholly-owned subsidiary prior to deconsolidation on July 31, 2020; “Taxable Subsidiary” refers to PNNT Investment Holdings, LLC; “PSLF” refers to PennantPark Senior Loan Fund, LLC, an unconsolidated joint venture; “PTSF II” refers to PennantPark-TSO Senior Loan Fund II, LP, an unconsolidated limited partnership; “PennantPark Investment Advisers” or “Investment Adviser” refers to PennantPark Investment Advisers, LLC; “PennantPark Investment Administration” or “Administrator” refers to PennantPark Investment Administration, LLC; “SBA” refers to the Small Business Administration; “SBIC” refers to a small business investment company under the Small Business Investment Act of 1958, as amended, or the “1958 Act”; “BNP Credit Facility” refers to our revolving credit facility with BNP Paribas prior to deconsolidation of Funding I; “Truist Credit Facility” refers to our multi-currency, senior secured revolving credit facility with Truist Bank (formerly SunTrust Bank), as amended and restated; “Credit Facilities” refers to the BNP Credit Facility and the Truist Credit Facility collectively; “2024 Notes” refers to our 5.50% Notes due 2024; “2026 Notes” refers to our 4.50% Notes due May 2026; “2026 Notes-2” refers to our 4.00% Notes due November 2026; “BDC” refers to a business development company under the Investment Company Act of 1940, as amended, or the “1940 Act”; “SBCAA” refers to the Small Business Credit Availability Act; “Code” refers to the Internal Revenue Code of 1986, as amended; and “RIC” refers to a regulated investment company under the Code. References to our portfolio, our investments and our business include investments we make through SBIC II and other consolidated subsidiaries.

Item 1. Consolidated Financial Statements

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(In thousands, except share data)

September 30, 2021
Assets
Investments at fair value
Non-controlled, non-affiliated investments (cost—875,230 and 729,811, respectively) 901,587 $ 820,500
Non-controlled, affiliated investments (cost—47,450 and 78,723, respectively) 36,730 50,161
Controlled, affiliated investments (cost—361,809 and 412,587, respectively) 275,640 384,628
Total investments (cost—1,284,490 and 1,221,121, respectively) 1,213,957 1,255,290
Cash and cash equivalents (cost—26,259 and 20,383, respectively) 26,251 20,357
Interest receivable 3,394 4,958
Receivable for investments sold — 12,793
Distribution receivable 2,420 1,694
Total assets 1,246,022 1,295,092
Liabilities
Distributions payable 9,386 8,045
Payable for investments purchased 9,620 8,407
Truist Credit Facility payable, at fair value (cost—217,920 and 316,545, respectively) (See Notes 5 and 10) 215,899 314,813
2024 Notes payable, net (par— zero and 86,250, respectively) (See Notes 5 and 10) — 84,503
2026 Notes payable, net (par— 150,000) (See Notes 5 and 10) 146,316 145,865
2026 Notes-2 payable, net (par— 165,000 and zero, respectively) (See Notes 5 and 10) 160,946 —
SBA debentures payable, net (par—27,500 and 63,500, respectively) (See Notes 5 and 10) 27,026 62,159
Base-management fee payable, net (See Note 3) 4,981 4,580
Performance based-incentive fee payable (See Note 3) — 575
Interest payable on debt 6,686 4,943
Accrued other expenses 837 1,058
Total liabilities 581,697 634,948
Commitments and contingencies (See Note 11)
Net assets
Common stock, 66,131,651 and 67,045,105, respectively, shares issued and outstanding   Par value 0.001 per share and 100,000,000 shares authorized 66 67
Paid-in capital in excess of par value 779,938 786,993
Accumulated deficit (115,679 ) (126,916 )
Total net assets 664,325 $ 660,144
Total liabilities and net assets 1,246,022 $ 1,295,092
Net asset value per share 10.05 $ 9.85

All values are in US Dollars.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except share and per share data)

Three Months Ended March 31, Six Months Ended March 31,
2022 2021 2022 2021
Investment income:
From non-controlled, non-affiliated investments:
Interest $ 14,543 $ 11,669 $ 30,083 $ 23,101
Payment-in-kind 996 2,012 3,406 3,471
Other income 2,612 24 6,803 505
From non-controlled, affiliated investments:
Payment-in-kind — 380 — 457
From controlled, affiliated investments:
Interest 2,343 2,177 4,609 4,454
Payment-in-kind 1,425 1,519 3,551 3,004
Dividend income 2,420 1,452 4,235 2,973
Total investment income 24,339 19,233 52,687 37,966
Expenses:
Base management fee (See Note 3) 4,981 4,282 10,090 8,397
Performance-based incentive fee (See Note 3) — — 2,657 —
Interest and expenses on debt (See Note 10) 6,498 4,890 13,385 9,894
Administrative services expenses (See Note 3) 250 505 500 1,010
Other general and administrative expenses 723 643 1,446 1,287
Expenses before provision for taxes 12,452 10,320 28,078 20,588
Provision for taxes on net investment income 200 150 400 300
Net expenses 12,652 10,470 28,478 20,888
Net investment income 11,687 8,763 24,209 17,078
Realized and unrealized gain (loss) on investments and debt:
Net realized gain (loss) on investments and debt:
Non-controlled, non-affiliated investments 1,889 319 7,090 2,450
Non-controlled and controlled, affiliated investments 140,898 — 109,624 (19,708 )
Debt extinguishment (1,132 ) — (2,801 ) —
Provision for taxes on realized gain on investments (5,060 ) (5,060 )
Net realized gain (loss) on investments and debt 136,595 319 108,853 (17,258 )
Net change in unrealized appreciation (depreciation) on:
Non-controlled, non-affiliated investments (158,062 ) 11,207 (207,665 ) 87,612
Non-controlled and controlled, affiliated investments 6,610 21,969 102,982 39,069
Provision for taxes on unrealized appreciation on investments 5,045 — — —
Debt (appreciation) depreciation (See Notes 5 and 10) 1,285 (3,763 ) 289 (16,873 )
Net change in unrealized appreciation (depreciation) on investments and debt (145,122 ) 29,413 (104,394 ) 109,809
Net realized and unrealized gain (loss) from investments and debt (8,528 ) 29,732 4,459 92,551
Net increase (decrease) in net assets resulting from operations 3,160 38,495 $ 28,668 109,629
Net increase (decrease) in net assets resulting from operations per common share (See Note 7) $ 0.05 $ 0.57 $ 0.43 $ 1.64
Net investment income per common share $ 0.18 $ 0.13 $ 0.36 $ 0.25

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)

(In thousands, except share and per share data)

Three Months Ended March 31, Six Months Ended March 31,
2022 2021 2022 2021
Net increase (decrease) in net assets resulting from operations:
Net investment income $ 11,687 $ 8,763 $ 24,209 $ 17,078
Net realized gain (loss) on investments and debt 141,655 319 113,913 (17,258 )
Net change in unrealized (depreciation) appreciation on investments (151,452 ) 33,176 (104,683 ) 126,681
Net change in provision for taxes on net realized gain (loss) on investments (5,060 ) — (5,060 ) —
Net change in provision for taxes on unrealized appreciation on investments 5,045 — — —
Net change in unrealized appreciation depreciation on debt 1,285 (3,763 ) 289 (16,873 )
Net increase (decrease) in net assets resulting from operations 3,160 38,495 28,668 109,629
Distributions to stockholders: (9,386 ) (8,045 ) (17,432 ) (16,091 )
Capital Transactions:
Repurchase of common stock (See Note 13) (7,055 ) — (7,055 ) —
Net increase in net assets (13,281 ) 30,450 4,181 93,538
Net assets:
Beginning of period 677,609 588,797 660,144 525,709
End of period $ 664,327 $ 619,246 $ 664,324 $ 619,246
Capital share activity:
Shares of common stock repurchased 913,454 — 913,454 —

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands, except share and per share data)

Six months ended March 31,
2022 2021
Cash flows from operating activities:
Net increase in net assets resulting from operations $ 28,669 $ 109,629
Adjustments to reconcile net increase (decrease) in net assets resulting from <br>   operations to net cash (used in) provided by operating activities:
Net change in net unrealized (appreciation) depreciation on investments 104,683 (126,681 )
Net change in unrealized appreciation (depreciation) on debt (289 ) 16,873
Net realized (gain) loss on investments (116,714 ) 17,258
Debt extinguishment realized loss 2,801 —
Net accretion of discount and amortization of premium (3,515 ) (1,643 )
Purchases of investments (473,128 ) (143,008 )
Payment-in-kind income (7,688 ) (7,058 )
Proceeds from dispositions of investments 537,695 167,585
Amortization of deferred financing costs 1,049 689
Decrease in interest receivable 1,565 90
Decrease in receivables from investments sold 12,793 —
Increase in distribution receivable (726 ) (58 )
Increase in prepaid expenses and other assets — (1 )
Increase in payable for investments purchased 1,213 13,120
Increase (decrease) in interest payable on debt 1,742 (15 )
Increase (decrease) in base management fee payable, net 401 (88 )
Decrease in performance-based incentive fee payable, net (575 ) —
(Decrease) increase in accrued other expenses (223 ) 75
Net cash (used in) provided by operating activities 89,753 46,767
Cash flows from financing activities:
Repurchase of common stock (7,055 ) —
Distributions paid to stockholders (16,091 ) (16,091 )
Net repayments of the 2024 Notes issuance (86,250 ) —
Proceeds from 2026 Notes-2 issuance 160,519 —
Repayments under SBA debentures (36,358 ) (10,000 )
Borrowings under Truist Credit Facility 496,841 91,564
Repayments under Truist Credit Facility (595,466 ) (104,271 )
Net cash provided by (used in) financing activities (83,859 ) (38,798 )
Net increase (decrease) in cash equivalents 5,894 7,969
Effect of exchange rate changes on cash - 81
Cash and cash equivalents, beginning of period 20,357 25,806
Cash and cash equivalents, end of period $ 26,251 $ 33,855
Supplemental disclosure of cash flow information:
Interest paid $ 10,594 $ 9,220
Taxes paid $ 5,055 $ 656
Non-cash exchanges and conversions $ (31,274 ) $ 16,516

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited)

MARCH 31, 2022

(In thousands, except share data)

Issuer Name Maturity / Expiration Industry Current<br> Coupon Basis Point<br> Spread Above<br> Index (4) Par /<br> Shares Cost Fair Value (3)
Investments in Non-Controlled, Non-Affiliated Portfolio Companies—135.7% (1), (2)
First Lien Secured Debt—92.9%
Ad.net Acquisition, LLC (Revolver) (7) 05/06/2026 Media — — 444 $ — $ —
Altamira Technologies, LLC (Revolver) 07/24/2025 Aerospace and Defense 9.00 % 3M L+800 50 50 48
Altamira Technologies, LLC (Revolver) (7) 07/24/2025 Aerospace and Defense — — 138 — (6 )
American Insulated Glass, LLC 12/21/2023 Building Materials 6.50 % 3M L+550 10,815 10,730 10,815
Any Hour Services 07/21/2027 Personal, Food and Miscellaneous Services 6.75 % 3M L+575 3,510 3,477 3,510
Any Hour Services Term Loan (7) 07/21/2027 Personal, Food and Miscellaneous Services — — 314 — 3
Any Hour Services Term Loan II(7) 01/14/2024 Personal, Food and Miscellaneous Services — — 3,824 — 38
Any Hour Services (Revolver) (7) 07/21/2027 Personal, Food and Miscellaneous Services — — 1,147 — —
Apex Service Partners, LLC 07/31/2025 Personal, Food and Miscellaneous Services 6.50 % 1M L+550 3,936 3,936 3,936
Apex Service Partners, LLC Term Loan C 07/31/2025 Personal, Food and Miscellaneous Services 6.50 % 1M L+550 6,895 6,837 6,895
Apex Service Partners, LLC (Revolver) 07/29/2024 Personal, Food and Miscellaneous Services 6.36 % 3M L+525 249 249 249
Apex Service Partners, LLC (Revolver) (7) 07/29/2024 Personal, Food and Miscellaneous Services — — 684 — —
Applied Technical Services, LLC 12/29/2026 Environmental Services 6.76 % 3M L+575 1,306 1,292 1,290
Applied Technical Services, LLC (7) 06/29/2022 Environmental Services — — 3,175 — (4 )
Applied Technical Services, LLC (Revolver) 12/29/2026 Environmental Services 8.25 % 3M P +475 150 150 148
Applied Technical Services, LLC (Revolver) (7) 12/29/2026 Environmental Services — — 850 — (11 )
Arcfield Acquisition Corp. 03/07/2028 Aerospace and Defense 6.50 % 3M L+575 12,000 11,762 11,760
Arcfield Acquisition Corp. (7) 03/07/2028 Aerospace and Defense — — 2,263 — —
Blackhawk Industrial Distribution, Inc. 09/17/2024 Distribution 6.00 % 3M L+500 16,433 16,192 16,186
Blackhawk Industrial Distribution, Inc.(7) 09/17/2024 Distribution — — 2,288 — (17 )
Blackhawk Industrial Distribution, Inc. (Revolver) 09/17/2024 Distribution 6.00 % 3M L+500 229 229 225
Blackhawk Industrial Distribution, Inc. (Revolver) (7) 09/17/2024 Distribution — — 2,059 — (31 )
Bottom Line Systems, LLC 02/13/2023 Healthcare, Education and Childcare 6.25 % 1M L+550 6,153 6,137 6,153
Broder Bros., Co. 12/02/2022 Consumer Products 8.00 % 3M L+700 21,375 21,375 21,375
CF512, Inc. 08/20/2026 Media 7.00 % 3M L+600 6,754 6,654 6,686
CF512, Inc.(Revolver) (7) 08/20/2026 Media — — 909 — (9 )
Compex Legal Services, Inc. 02/09/2026 Business Services 6.75 % 3M L+575 809 797 809
Compex Legal Services, Inc. (Revolver) 02/07/2025 Business Services 6.26 % 3M L+525 393 393 393
Compex Legal Services, Inc. (Revolver) (7) 02/07/2025 Business Services — — 262 — —
Connatix Buyer, Inc. 07/13/2027 Media 6.25 % 3M L+550 9,190 9,025 9,236
Connatix Buyer, Inc. (7) 01/13/2023 Media — — 3,158 — 47
Connatix Buyer, Inc. (Revolver) (7) 07/13/2027 Media — — 1,859 — —
Crane 1 Services, Inc. 08/16/2027 Personal, Food and Miscellaneous Services 6.75 % 3M L+575 2,368 2,338 2,344
Crane 1 Services, Inc. (7) 08/16/2023 Personal, Food and Miscellaneous Services — — 253 — (1 )
Crane 1 Services, Inc. (Revolver) (7) 08/16/2027 Personal, Food and Miscellaneous Services — — 292 — (3 )
Crash Champions, LLC 08/05/2025 Auto Sector 6.00 % 3M L+500 25,007 24,577 24,382
Crash Champions, LLC (7) 08/05/2025 Auto Sector — — 111 — (2 )
DermaRite Industries LLC 06/30/2023 Manufacturing / Basic Industries 8.00 % 1M L+700 8,383 8,336 6,941
Dr. Squatch, LLC 08/31/2026 Personal and Non-Durable Consumer Products 7.00 % 3M L+600 8,475 8,314 8,475
Dr. Squatch, LLC (7) 08/27/2026 Personal and Non-Durable Consumer Products — — 6,500 — 65
Dr. Squatch, LLC (Revolver) (7) 08/31/2026 Personal and Non-Durable Consumer Products — — 2,326 — —
DRS Holdings III, Inc. 11/03/2025 Consumer Products 6.75 % 3M L+575 2,200 2,182 2,189
DRS Holdings III, Inc. (Revolver) (7) 11/03/2025 Consumer Products — — 1,783 — (9 )
Duraco Specialty Tapes LLC 06/30/2024 Manufacturing / Basic Industries 6.50 % 3M L+550 4,200 4,135 4,129
ECL Entertainment, LLC 03/31/2028 Hotels, Motels, Inns and Gaming 8.25 % 1M L+750 8,703 8,626 8,740
ECM Industries, LLC (Revolver) 12/23/2025 Electronics 5.75 % 3M L+475 291 291 285
ECM Industries, LLC (Revolver) (7) 12/23/2025 Electronics — — 226 — (5 )
Exigo Intermediate II, LLC 03/15/2027 Business Services 6.75 % 3M L+575 35,000 34,478 34,475
Exigo Intermediate II, LLC (7) 03/15/2024 Business Services — — 7,424 — —
Exigo Intermediate II, LLC (Revolver) 03/15/2027 Business Services 6.75 % 3M L+575 371 371 371
Exigo Intermediate II, LLC (Revolver) (7) 03/15/2027 Business Services — — 1,485 — —
Fairbanks Morse Defense 06/17/2028 Aerospace and Defense 5.50 % 3M L+475 750 748 739
Gantech Acquisition Corp. 05/14/2026 Business Services 7.25 % 1M L+625 16,981 16,689 16,812
Gantech Acquisition Corp. (Revolver) 05/14/2026 Business Services 7.25 % 1M L+625 332 332 329
Gantech Acquisition Corp. (Revolver) (7) 05/14/2026 Business Services — — 1,659 — (17 )
Graffiti Buyer, Inc. (7) 08/10/2023 Distribution — — 893 — (7 )
Graffiti Buyer, Inc. (Revolver) 08/10/2027 Distribution 6.75 % 3M L+575 243 243 237
Graffiti Buyer, Inc. (Revolver) (7) 08/10/2027 Distribution — — 525 — (14 )
Hancock Roofing and Construction L.L.C. 12/31/2026 Insurance 6.25 % 3M L+525 1,097 1,097 1,097
Hancock Roofing and Construction L.L.C. (7) 12/31/2022 Insurance — — 400 — —
Hancock Roofing and Construction L.L.C. (Revolver) (7) 12/31/2026 Insurance — — 750 — —
Holdco Sands Intermediate, LLC 11/23/2028 Aerospace and Defense 7.01 % 1M L+600 17,955 17,608 17,596
Holdco Sands Intermediate, LLC (Revolver) (7) 11/23/2027 Aerospace and Defense — — 3,941 — (79 )
HW Holdco, LLC 12/10/2024 Media 6.16 % 3M L+500 10,246 10,111 10,041
HW Holdco, LLC (7) 12/10/2024 Media — — 3,049 — (30 )
HW Holdco, LLC (Revolver) (7) 12/10/2024 Media — — 3,387 — (68 )
IDC Infusion Services, Inc. 12/30/2026 Healthcare, Education and Childcare 7.00 % 3M L+600 17,488 17,271 17,138
IDC Infusion Services, Inc. (Revolver) (7) 12/30/2026 Healthcare, Education and Childcare — — 4,167 — (83 )
IG Investments Holdings, LLC (Revolver) 09/22/2027 Business Services 8.50 % 3M L+500 95 95 94
IG Investments Holdings, LLC (Revolver) (7) 09/22/2027 Business Services — — 382 — (6 )
Imagine Acquisitionco, LLC 11/15/2027 Business Services 6.50 % 3M L+550 1,982 1,944 1,942
Imagine Acquisitionco, LLC (7) 11/15/2027 Business Services — — 2,341 — (23 )
Imagine Acquisitionco, LLC (Revolver) (7) 11/15/2027 Business Services — — 1,685 — (34 )
Inception Fertility Ventures, LLC 12/07/2023 Healthcare, Education and Childcare 6.50 % 3M L+550 4,909 4,807 4,786
Inception Fertility Ventures, LLC (7) 12/07/2023 Healthcare, Education and Childcare — — 12,980 — (162 )
Infolinks Media Buyco, LLC 11/01/2026 Media 7.01 % 1M L+600 6,461 6,341 6,461
Infolinks Media Buyco, LLC (7) 11/01/2023 Media — — 2,372 — 24
Integrity Marketing Acquisition, LLC 08/27/2025 Insurance 6.76 % 3M L+550 21,270 21,144 21,066
Integrity Marketing Acquisition, LLC (7) 07/09/2023 Insurance — — 873 — (2 )
ITI Holdings, Inc. 03/03/2028 Business Services 6.25 % 3M L+550 8,972 8,817 8,815
ITI Holdings, Inc. (Revolver) (7) 03/03/2028 Business Services — — 1,490 — —
K2 Pure Solutions NoCal, L.P. 12/20/2023 Chemicals, Plastics and Rubber 9.00 % 1M L+800 11,739 11,670 11,622
K2 Pure Solutions NoCal, L.P. (Revolver) 12/20/2023 Chemicals, Plastics and Rubber 9.00 % 1M L+800 872 872 863
K2 Pure Solutions NoCal, L.P. (Revolver) (7) 12/20/2023 Chemicals, Plastics and Rubber — — 1,066 — (11 )

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) —(Continued)

MARCH 31, 2022

(In thousands, except share data)

Issuer Name Maturity / Expiration Industry Current<br> Coupon Basis Point<br> Spread Above<br> Index (4) Par /<br> Shares Cost Fair Value (3)
Kinetic Purchaser, LLC 11/10/2027 Consumer Products 7.00 % 3M L+600 19,451 19,082 19,257
Kinetic Purchaser, LLC (Revolver) (7) 11/10/2026 Consumer Products — — 4,854 — (49 )
Lash OpCo, LLC 02/18/2027 Consumer Products 8.01 % 1M L+700 12,893 12,625 12,893
Lash OpCo, LLC (Revolver) (7) 08/16/2026 Consumer Products — — 1,820 — —
LAV Gear Holdings, Inc. 10/31/2024 Leisure, Amusement, Motion Pictures, Entertainment 8.51 % 1M L+750 795 790 776
(PIK 5.00%)
Ledge Lounger, Inc. 11/09/2026 Consumer Products 7.25 % 3M L+625 9,224 $ 9,051 $ 9,131
Ledge Lounger, Inc. (Revolver) 11/09/2026 Consumer Products 7.25 % 3M L+625 1,288 1,288 1,276
Ledge Lounger, Inc. (Revolver) (7) 11/09/2026 Consumer Products — — 644 — (6 )
Lightspeed Buyer Inc. 02/03/2026 Healthcare, Education and Childcare 6.50 % 1M L+550 2,232 2,214 2,209
Lightspeed Buyer Inc. (Revolver) 02/03/2026 Healthcare, Education and Childcare 6.50 % 1M L+550 311 311 308
Lightspeed Buyer Inc. (Revolver) (7) 02/03/2026 Healthcare, Education and Childcare — — 855 — (9 )
Lombart Brothers, Inc. 04/13/2023 Healthcare, Education and Childcare 7.25 % 1M L+625 2,046 2,035 2,046
Lombart Brothers, Inc. (Revolver) 04/13/2023 Healthcare, Education and Childcare 7.25 % 1M L+625 737 737 737
LSF9 Atlantis Holdings, LLC 03/31/2029 Retail 8.00 % 3M L+725 6,000 5,760 5,880
Mars Acquisition Holdings Corp. (Revolver)(7) 5/14/2026 Media — — 806 — (6 )
MBS Holdings, Inc. (Revolver) (7) 04/16/2027 Telecommunications — — 694 — (7 )
Meadowlark Acquirer, LLC 12/10/2027 Business Services 6.51 % 3M L+550 3,080 3,043 3,019
Meadowlark Acquirer, LLC Term Loan I (7) 12/10/2027 Business Services — — 2,920 — (29 )
Meadowlark Acquirer, LLC Term Loan II (7) 12/10/2027 Business Services — — 8,922 — (89 )
Meadowlark Acquirer, LLC (Revolver) (7) 12/10/2027 Business Services — — 1,685 — (34 )
MeritDirect, LLC 05/23/2024 Media 6.50 % 3M L+550 2,444 2,427 2,444
MeritDirect, LLC (Revolver) (7) 05/23/2024 Media — — 1,612 — —
Municipal Emergency Services, Inc. 09/28/2027 Distribution 6.00 % 3M L+500 547 542 529
Municipal Emergency Services, Inc. (7) 09/28/2027 Distribution — — 1,333 — (31 )
Municipal Emergency Services, Inc. (Revolver) 09/28/2027 Distribution 6.00 % 3M L+500 282 282 273
Municipal Emergency Services, Inc. (Revolver) (7) 09/28/2027 Distribution — — 1,598 — (53 )
NBH Group LLC (Revolver) (7) 08/19/2026 Healthcare, Education and Childcare — — 1,163 — (6 )
Neptune Flood Incorporated 10/14/2026 Financial Services 7.00 % 3M L+600 4,821 4,787 4,821
OIS Management Services, LLC 07/09/2026 Healthcare, Education and Childcare 5.56 % 3M L+475 1,433 1,423 1,419
OIS Management Services, LLC (Revolver) 07/09/2026 Healthcare, Education and Childcare 5.75 % 3M L+475 333 333 330
One Stop Mailing, LLC 05/07/2027 Cargo Transport 7.25 % 3M L+625 7,127 6,997 7,055
ORL Acquisition, Inc. 09/03/2027 Business Services 6.26 % 3M L+525 4,476 4,394 4,476
ORL Acquisition, Inc. (Revolver) (7) 09/03/2027 Business Services — — 597 — —
Owl Acquisition, LLC 2/4/2028 Education 6.75 % 3M L+575 4,000 3,922 3,900
Ox Two, LLC 05/18/2026 Building Materials 8.00 % 1M L+700 12,849 12,676 12,592
Ox Two, LLC (Revolver) 05/18/2026 Building Materials 8.00 % 1M L+700 2,097 2,097 2,055
Ox Two, LLC (Revolver) (7) 05/18/2026 Building Materials — — 323 — (6 )
PL Acquisitionco, LLC 11/09/2027 Retail 7.50 % 3M L+650 8,678 8,535 8,526
PL Acquisitionco, LLC - (Revolver) 11/09/2027 Retail 7.50 % 3M L+650 1,294 1,294 1,272
PL Acquisitionco, LLC (Revolver) (7) 11/09/2027 Retail — 1,941 — (34 )
PRA Events, Inc. 08/07/2025 Business Services 11.50 % 3M L+1,050 24,868 21,623 24,868
(PIK 11.50%)
PRA Events, Inc. (Revolver) 08/07/2025 Business Services 11.50 % 3M L+1,050 2,606 2,268 2,606
(PIK 11.50%)
Quantic Electronics, LLC (7) 11/19/2026 Aerospace and Defense — — 2,094 — (21 )
Quantic Electronics, LLC (Revolver) (7) 11/19/2026 Aerospace and Defense — — 528 — (11 )
Questex, LLC 09/09/2024 Media 6.00 % 3M L+500 21,713 21,509 20,627
Questex, LLC (Revolver) 09/09/2024 Media 6.00 % 3M L+500 1,436 1,436 1,364
Questex, LLC (Revolver) (7) 09/09/2024 Media — — 2,154 — (108 )
Radius Aerospace, Inc. (Revolver) (7) 03/31/2025 Aerospace and Defense — — 2,227 — (22 )
Rancho Health MSO, Inc. (7) 12/18/2025 Healthcare, Education and Childcare — — 1,050 — —
Rancho Health MSO, Inc. (Revolver) (7) 12/18/2025 Healthcare, Education and Childcare — — 525 — —
Recteq, LLC (Revolver) (7) 01/29/2026 Consumer Products — — 1,127 — (17 )
Research Now Group, Inc. and Dynata, LLC 12/20/2024 Business Services 6.50 % 3M L+550 126 126 124
Riverpoint Medical, LLC (Revolver) (7) 06/20/2025 Healthcare, Education and Childcare — — 364 — (1 )
Riverside Assessments, LLC 03/10/2025 Education 6.50 % 3M L+550 12,692 12,542 12,692
Sales Benchmark Index LLC (Revolver) (7) 01/03/2025 Business Services — — 732 — —
Sargent & Greenleaf Inc. (Revolver) 12/20/2024 Electronics 7.00 % 3M L+550 598 598 598
Schlesinger Global, Inc. 07/14/2025 Business Services 8.00 % 3M L+700 4,513 4,455 4,468
(PIK 1.00%)
Schlesinger Global, Inc. (Revolver) 07/14/2025 Business Services 7.00 % 3M L+600 30 30 30
(PIK 1.00%)
Schlesinger Global, Inc. (Revolver)(7) 07/14/2025 Business Services — — 8 — (0 )
Sigma Defense Systems, LLC 12/18/2025 Telecommunications 9.50 % 3M L+850 20,665 20,189 20,355
Sigma Defense Systems, LLC (Revolver) (7) 12/18/2025 Telecommunications — — 2,976 — (45 )
Signature Systems Holding Company (Revolver) 05/03/2024 Chemicals, Plastics and Rubber 7.50 % 3M L+650 484 484 484
Signature Systems Holding Company (Revolver) (7) 05/03/2024 Chemicals, Plastics and Rubber — — 1,532 — —
Solutionreach, Inc. (Revolver) (7) 01/17/2024 Communications — — 1,665 — (73 )
Spear Education, LLC 02/26/2025 Education 6.26 % 3M L+525 12,110 12,026 12,110
Spendmend Holdings LLC 03/01/2028 Business Services 6.75 % 3M L+575 7,861 7,744 7,735
Spendmend Holdings LLC - Unfunded Term Loan 03/01/2023 Business Services 4,671 — (40 )
Spendmend Holdings LLC - Funded Revolver 03/01/2028 Business Services 6.75 % 3M L+575 187 187 184
Spendmend Holdings LLC - Unfunded Revolver 03/01/2028 Business Services 1,215 — (19 )
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) 08/16/2027 Aerospace and Defense 7.00 % 3M L+600 11,250 11,038 10,879
System Planning and Analysis, Inc. - (Revolver) (7) (f/k/a Management Consulting & Research, LLC) 08/16/2027 Aerospace and Defense — — 2,925 — (97 )
TAC LifePort Purchaser, LLC (Revolver) (7) 03/01/2026 Aerospace and Defense — — 620 — —
The Aegis Technologies Group, LLC 10/31/2025 Aerospace and Defense 7.01 % 3M L+600 11,265 11,163 11,152

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited)—(Continued)

MARCH 31, 2022

(In thousands, except share data)

Issuer Name Maturity / Expiration Industry Current<br> Coupon Basis Point<br> Spread Above<br> Index (4) Par /<br> Shares Cost Fair Value (3)
The Bluebird Group LLC 07/27/2026 Business Services 7.50 % 3M L+650 7,511 $ 7,367 $ 7,661
The Bluebird Group LLC (Revolver) (7) 07/27/2026 Business Services — — 734 — 15
The Vertex Companies, LLC (7) 08/30/2027 Business Services — — 2,221 — (7 )
The Vertex Companies, LLC (Revolver) (7) 08/30/2027 Business Services — — 740 — (10 )
TVC Enterprises, LLC 03/26/2026 Transportation 7.00 % 1M L+600 17,688 17,485 17,335
TVC Enterprises, LLC (Revolver) (7) 03/26/2026 Transportation — — 1,370 — (27 )
TWS Acquisition Corporation 06/16/2025 Education 7.25 % 1M L+625 1,314 1,314 1,314
TWS Acquisition Corporation (Revolver) (7) 06/16/2025 Education — — 1,644 — —
Tyto Athene, LLC 04/01/2028 Aerospace and Defense 6.25 % 3M L+550 2,232 2,211 2,176
Tyto Athene, LLC (Revolver) (7) 04/01/2026 Aerospace and Defense — — 364 — (9 )
Walker Edison Furniture Company LLC 03/31/2027 Home and Office Furnishings 9.76 % 3M L+875 25,110 24,574 24,733
Wildcat Buyerco, Inc. 02/27/2026 Electronics 6.76 % 3M L+575 1,885 1,867 1,885
Wildcat Buyerco, Inc. Term Loan C (7) 05/11/2023 Electronics — — 1,578 — 18
Wildcat Buyerco, Inc. (Revolver) (7) 02/27/2026 Electronics — — 551 — —
Zips Car Wash, LLC 03/01/2024 Auto Sector 8.18 % 3M L+700 14,002 13,868 13,862
Zips Car Wash, LLC (Revolver) (7) 03/01/2024 Auto Sector — — 1,140 — —
Total First Lien Secured Debt 615,472 616,862
Second Lien Secured Debt—19.6%
Atlas Purchaser, Inc 05/07/2029 Telecommunications 9.75 % 3M L+900 17,000 16,527 16,725
Best Practice Associates LLC 06/29/2027 Aerospace and Defense 10.00 % 3M L+900 17,176 16,845 16,833
Data Axle, Inc. 04/03/2024 Other Media 10.25 % 3M L+925 20,400 20,253 20,400
ENC Parent Corporation 08/19/2029 Business Services 8.51 % 3M L+750 7,500 7,428 7,350
Halo Buyer, Inc. 07/06/2026 Consumer Products 9.25 % 1M L+825 32,500 32,134 31,119
Inventus Power, Inc. 09/29/2024 Electronics 9.50 % 3M L+850 16,593 16,340 16,178
QuantiTech LLC 02/04/2027 Aerospace and Defense 11.00 % 3M L+1,000 150 147 150
VT Topco, Inc. 08/17/2026 Business Services 7.76 % 3M L+675 15,000 14,926 14,700
Total Second Lien Secured Debt 124,602 123,455
Subordinated Debt/Corporate Notes—5.1%
Cascade Environmental LLC (6) 12/30/2023 Environmental Services — — 45,265 43,561 33,782
(PIK 13.00%)
Total Subordinated Debt/Corporate Notes 43,561 33,782
Preferred Equity/Partnership Interests—1.0% (6)
Ad.net Holdings, Inc. (9) — Media — — 2,400 240 240
AH Newco Equityholdings, LLC — Healthcare, Education and Childcare 6.00 % — 211 500 1,109
Cascade Environmental LLC (9) — Environmental Services 16.00 % — 178,304 17,607 —
Imagine Topco, LP — Business Services 8.00 % — 743,826 744 744
Mars Intermediate Holdings II, Inc (9) — Media — — 414 414 457
MeritDirect Holdings, LP (9) — Media — — 1,135 1,135 1,359
NXOF Holdings, Inc. (Tyto Athene, LLC) — Aerospace and Defense — — 160 160 214
ORL Holdco, Inc. — Business Services — — 575 57 60
Signature CR Intermediate Holdco, Inc. — Chemicals, Plastics and Rubber 12.00 % — 1,527 1,527 1,932
TPC Holding Company, LP (8),(11) — Food — — 219 219 223
TWD Parent Holdings, LLC — Business Services — — 30 30 33
(The Vertex Companies, LLC)
Total Preferred Equity/Partnership Interests 22,634 6,372
Common Equity/Partnership Interests/Warrants—18.2% (6)
Ad.net Holdings, Inc. (9) — Media — — 2,667 27 78
Affinion Group Holdings, Inc. (Warrants) 04/10/2024 Consumer Products — — 77,190 2,126 —
AG Investco LP (9) — Business Services — — 805,164 805 1,203
AG Investco LP (7), (9) — Business Services — — 194,836 — —
Altamira Intermediate Company II, Inc. — Aerospace and Defense — — 125,000 125 50
Athletico Holdings, LLC — Healthcare, Education and Childcare — — 9,357 10,000 10,023
Atlas Investment Aggregator, LLC (9) — Telecomunications — — 1,700,000 1,700 1,632
Cascade Environmental Holdings, LLC (9) — Environmental Services — — 33,901 2,852 —
CI (Allied) Investment Holdings, LLC — Business Services — — 120,962 1,243 863
(PRA Events, Inc.) (9)
Connatix Parent, LLC — Media — — 57,416 632 837
Cowboy Parent LLC — Distribution — — 26,360 2,782 3,632
(Blackhawk Industrial Distribution, Inc.)
Crane 1 Acquisition Parent Holdings, L.P. — Personal, Food and Miscellaneous Services — — 113 104 118
Crash Champion Holdings, LLC (9) — Auto Sector — — 36 328 740
Delta InvestCo LP — Telecommunications — — 698,889 699 1,250
(Sigma Defense Systems, LLC) (9) — —
Delta InvestCo LP — Telecommunications — — 442,155 — —
(Sigma Defense Systems, LLC) (7), (9)
ECM Investors, LLC (9) — Electronics — — 167,537 41 434
eCommission Holding Corporation (11) — Financial Services — — 80 1,005 1,269
Exigo, LLC (9) — Business Services 1,458,333 1,458 1,458
FedHC InvestCo LP (9) — Aerospace and Defense — — 14,186 511 1,149
FedHC InvestCo LP (7),(9) — Aerospace and Defense — — 6,384 — —
FedHC InvestCo II LP (9) — Aerospace and Defense 20,357 2,290 3,338
Gauge Lash Coinvest LLC — Consumer Products — — 889,376 136 4,515
Gauge Schlesinger Coinvest, LLC — Business Services — — 9 9 14
Gauge TVC Coinvest, LLC — Transportation — — 810,645 — 2,710
(TVC Enterprises, LLC)
GCOM InvestCo LP (9) — Business Services — — 2,434 1,003 588
Go Dawgs Capital III, LP — Building Materials — — 675,325 675 783
(American Insulated Glass, LLC) (9)
Green Veracity Holdings, LP - Class A — Business Services — — 15,000 1,500 5,078
(VT Topco, Inc.)
Hancock Claims Consultants Investors, LLC (9) — Insurance — — 450,000 450 608

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) —(Continued)

MARCH 31, 2022

(In thousands, except share data)

Issuer Name Maturity / Expiration Industry Current<br> Coupon Basis Point<br> Spread Above<br> Index (4) Par /<br> Shares Cost Fair Value (3)
Icon Partners V C, L.P. — Business Services — — 1,111,111 $ 1,111 $ 1,111
Icon Partners V C, L.P. (7),(9) — Business Services — — 388,889 — —
Imagine Topco, LP — Business Services — — 743,826 — —
Infogroup Parent Holdings, Inc. — Other Media — — 181,495 2,040 4,510
(Data Axle, Inc.)
Ironclad Holdco, LLC — Environmental Services — — 4,566 450 590
(Applied Technical Services, LLC) (9)
ITC Infusion Co-invest, LP — Healthcare, Education and Childcare — — 82,895 829 829
ITC Rumba, LLC — Healthcare, Education and Childcare — — 375,675 8 30,965
(Cano Health, LLC) (9)
JWC-WE Holdings, L.P. — Home and Office Furnishings — — 2,688 783 2,688
(Walker Edison Furniture Company LLC) (9)
Kentucky Racing Holdco, LLC (Warrants) — Hotels, Motels, Inns and Gaming — — 161,252 — 1,315
Kinetic Purchaser, LLC — Consumer Products — — 1,308,814 1,309 1,660
KL Stockton Co-Invest LP — Personal, Food and Miscellaneous Services — — 382,353 382 485
(Any Hour Services) (9)
Lariat ecoserv Co-Invest Holdings, LLC (9) — Environmental Services — — 363,656 364 1,262
Lightspeed Investment Holdco LLC — Healthcare, Education and Childcare — — 273,143 273 468
Mars Intermidiate Holdings II, Inc. (9) — Media — — 414 — 123
Meadowlark Title, LLC (9) — Business Services — — 815,385 815 815
MeritDirect Holdings, LP (9) — Media — — 1,135 — 178
Municipal Emergency Services, Inc. — Distribution — — 3,920,145 3,984 3,763
NEPRT Parent Holdings, LLC — Consumer Products — — 1,299 1,261 1,112
(Recteq, LLC) (9)
North Haven Saints Equity Holdings, LP — Business Services — — 351,553 352 362
NXOF Holdings, Inc. — Aerospace and Defense — — 3,261 3 276
(Tyto Athene, LLC)
OceanSound Discovery Equity, LP — Aerospace and Defense — — 98,286 979 1,708
(Holdco Sands Intermediate, LLC) (9)
OHCP V BC COI, L.P. — Distribution — — 446,250 446 446
OHCP V BC COI, L.P. (7),(9) — Distribution — — 303,750 — —
Oral Surgery (ITC) Holdings, LLC (9) — Healthcare, Education and Childcare — — 2,904 63 72
ORL Holdco, Inc. — Business Services — — 638 6 92
PennantPark-TSO Senior Loan Fund II, LP — Financial Services — — 11,418,675 11,419 11,678
Pink Lily Holdco, LLC (9) — Retail — — 1,044 1,044 857
QuantiTech InvestCo LP (9) — Aerospace and Defense — — 700 66 340
QuantiTech InvestCo LP (7),(9) — Aerospace and Defense — — 967 — —
QuantiTech InvestCo II LP (9) — Aerospace and Defense — — 40 24 41
RFMG Parent, LP — Healthcare, Education and Childcare — — 1,050,000 1,050 1,173
(Rancho Health MSO, Inc.)
SBI Holdings Investments LLC — Business Services — — 36,585 366 383
(Sales Benchmark Index LLC) — —
Signature CR Intermediate Holdco, Inc. — Chemicals, Plastics and Rubber — — 80 80 —
SP L2 Holdings, LLC — Consumer Products — — 881,966 882 883
SSC Dominion Holdings, LLC — Electronics — — 1,500 1,500 1,890
Class A (US Dominion, Inc.)
SSC Dominion Holdings, LLC — Electronics — — 1,500 — 4,120
Class B (US Dominion, Inc.) — —
StellPen Holdings, LLC — Media — — 153,846 154 178
(CF512, Inc.)
TAC LifePort Holdings, LLC (9) — Aerospace and Defense — — 232,558 233 274
Tower Arch Infolinks Media, LP (9) — Media — — 528,683 529 650
Tower Arch Infolinks Media, LP (7), (9) — Media — — 366,761 — —
TPC Holding Company, LP (8). (11) — Food — — 11,527 12 —
TWD Parent Holdings, LLC — Business Services — — 608 1 1
(The Vertex Companies, LLC)
U.S. Well Services, Inc. - Class A (5), (11) — Oil and Gas — — 360,343 3,022 396
UniVista Insurance (9) — Business Services — — 400 393 484
Wildcat Parent, LP — Electronics — — 2,314 231 563
(Wildcat Buyerco, Inc.)
Total Common Equity/Partnership Interests/Warrants 68,962 121,115
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies 875,230 901,587
Investments in Non-Controlled, Affiliated Portfolio Companies—5.5% (1), (2)
Preferred Equity/Partnership Interests—4.8% (6)
ETX Energy, LLC (9) — Oil and Gas — — 61,732 6,173 —
ETX Energy, LLC - Series X (9) — Oil and Gas — — 10,944 1,094 —
MidOcean JF Holdings Corp. — Distribution — — 153,922 15,392 31,619
Total Preferred Equity/Partnership Interests 22,660 31,619
Common Equity/Partnership Interests/Warrants—0.8% (6)
MidOcean JF Holdings Corp. — Distribution — — 65,933 24,790 5,111
Total Common Equity/Partnership Interests/Warrants 24,790 5,111
Total Investments in Non-Controlled, Affiliated Portfolio Companies 47,450 36,730
Investments in Controlled, Affiliated Portfolio Companies—41.5% (1), (2)
First Lien Secured Debt—7.6%
AKW Holdings Limited (8), (10), (11) 03/13/2024 Healthcare, Education and Childcare 7.56 % 3M L+700 £ 38,250 52,792 50,362
Total First Lien Secured Debt 52,792 50,362

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) —(Continued)

MARCH 31, 2022

(In thousands, except share data)

Issuer Name Maturity / Expiration Industry Current<br> Coupon Basis Point<br> Spread Above<br> Index (4) Par /<br> Shares Cost Fair Value (3)
Second Lien Secured Debt—1.7%
Mailsouth Inc. 04/23/2025 Printing and Publishing 15.00 % — 11,950,604 $ 11,951 $ 11,353
(PIK 15.00%)
Total Second Lien Secured Debt 11,951 11,353
Subordinated Debt—11.5%
PennantPark Senior Loan Fund, LLC (11) 07/31/2027 Financial Services 9.00 % 3M L+800 76,082,678 76,083 76,083
Total Subordinated Debt 76,083 76,083
Common Equity—20.7% (6)
AKW Holdings Limited (8), (10), (11) — Healthcare, Education and Childcare — — £ 950 132 851
MSpark, LLC — Printing and Publishing — — 51,151 16,516 —
PennantPark Senior Loan Fund, LLC (11) — Financial Services — — 41,564,397 41,627 48,129
RAM Energy Holdings LLC (9) — Energy and Utilities — — 180,805 162,708 88,862
Total Common Equity 220,984 137,842
Total Investments in Controlled, Affiliated Portfolio Companies 361,809 275,640
Total Investments—182.7% 1,284,489 1,213,957
Cash and Cash Equivalents—4.0%
BlackRock Federal FD Institutional 30 13,663 13,663
BNY Mellon Cash Reserve and Cash 12,596 12,587
Total Cash and Cash Equivalents 26,259 26,251
Total Investments and Cash Equivalents—186.7% $ 1,310,748 $ 1,240,208
Liabilities in Excess of Other Assets—(86.7%) (575,882 )
Net Assets—100.0% $ 664,325
(1) The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities (See Note 6).
--- ---
(2) The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities (See Note 6).
(3) Valued based on our accounting policy (See Note 2).
(4) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable London Interbank Offered Rate, or LIBOR or “L,” the Euro Interbank Offered Rate, or EURIBOR or “E,” or Prime rate, or “P.” The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 90-day or 180-day LIBOR rate (1M L, 3M L, or 6M L, respectively), and EURIBOR loans are typically indexed to a 90-day EURIBOR rate (3M E), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes payment-in-kind, or PIK, interest and other fee rates, if any.
(5) The security was not valued using significant unobservable inputs. The value of all other securities was determined using significant unobservable inputs (See Note 5).
(6) Non-income producing securities.
(7) Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.
(8) Non-U.S. company or principal place of business outside the United States.
(9) Investment is held through our Taxable Subsidiary (See Note 1).
(10) Par / Shares amount is denominated in British Pounds (£) as denoted.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2021

(In thousands, except share data)

Issuer Name Maturity / Expiration Industry Current<br> Coupon Basis Point<br> Spread Above<br> Index (4) Par /<br> Shares Cost Fair Value (3)
Investments in Non-Controlled, Non-Affiliated Portfolio Companies—124.3% (1), (2)
First Lien Secured Debt—77.5%
18 Freemont Street Acquisition, LLC 08/11/2025 Hotels, Motels, Inns and Gaming 9.50 % 1M L+800 7,433 $ 6,815 $ 7,563
Ad.net Acquisition, LLC (Revolver) 05/06/2026 Media 7.00 % 3M L+600 76 76 74
Ad.net Acquisition, LLC (Revolver) (7) 05/06/2026 Media — — 369 — (6 )
Altamira Technologies, LLC (Revolver) 07/24/2025 Aerospace and Defense 8.00 % 3M L+700 50 50 47
Altamira Technologies, LLC (Revolver) (7) 07/24/2025 Aerospace and Defense — — 138 — (9 )
American Insulated Glass, LLC 12/21/2023 Building Materials 6.50 % 3M L+550 15,795 15,639 15,637
Any Hour Services (7) 07/21/2027 Personal, Food and Miscellaneous Services — — 3,824 — (38 )
Any Hour Services (Revolver) (7) 07/21/2027 Personal, Food and Miscellaneous Services — — 1,147 — (23 )
Apex Service Partners, LLC 07/31/2025 Personal, Food and Miscellaneous Services 6.25 % 1M L+525 1,331 1,331 1,317
Apex Service Partners, LLC Term Loan C 07/31/2025 Personal, Food and Miscellaneous Services 6.25 % 1M L+525 5,592 5,509 5,536
Apex Service Partners, LLC Term Loan C (7) 01/31/2022 Personal, Food and Miscellaneous Services — — 6,658 — (8 )
Apex Service Partners, LLC (Revolver) 07/29/2024 Personal, Food and Miscellaneous Services 6.25 % 3M L+525 239 239 235
Apex Service Partners, LLC (Revolver) (7) 07/29/2024 Personal, Food and Miscellaneous Services — — 693 — (12 )
Applied Technical Services, LLC (7) 06/29/2022 Environmental Services — — 6,235 — (55 )
Applied Technical Services, LLC (Revolver) (7) 12/29/2026 Environmental Services — — 1,000 — (20 )
Bottom Line Systems, LLC 02/13/2023 Healthcare, Education and Childcare 6.25 % 1M L+550 6,153 6,128 6,153
Broder Bros., Co. 12/02/2022 Consumer Products 9.75 % 3M L+850 25,333 25,333 25,333
CF512, Inc. 08/20/2026 Media 7.00 % 3M L+600 10,000 9,802 9,800
CF512, Inc. (7) 08/20/2026 Media — — 2,727 — (27 )
CF512, Inc.(Revolver) (7) 08/20/2026 Media — — 909 — (18 )
Compex Legal Services, Inc. 02/09/2026 Business Services 6.75 % 3M L+575 3,570 3,514 3,529
Compex Legal Services, Inc. (Revolver) 02/07/2025 Business Services 6.75 % 3M L+575 459 459 454
Compex Legal Services, Inc. (Revolver) (7) 02/07/2025 Business Services — — 197 — (2 )
Connatix Buyer, Inc. 07/13/2027 Media 6.25 % 3M L+550 12,000 11,766 11,760
Connatix Buyer, Inc. (7) 01/13/2023 Media — — 3,158 — (32 )
Connatix Buyer, Inc. (Revolver) 07/13/2027 Media 6.25 % 3M L+550 186 186 182
Connatix Buyer, Inc. (Revolver) (7) 07/13/2027 Media — — 1,673 — (33 )
Crane 1 Services, Inc. 08/16/2027 Personal, Food and Miscellaneous Services 6.75 % 3M L+575 1,847 1,820 1,829
Crane 1 Services, Inc. (7) 08/16/2023 Personal, Food and Miscellaneous Services — — 778 — (2 )
Crane 1 Services, Inc. (Revolver) (7) 08/16/2027 Personal, Food and Miscellaneous Services — — 292 — (3 )
Crash Champions, LLC 08/05/2025 Auto Sector 6.00 % 3M L+500 4,751 4,704 4,656
Crash Champions, LLC (7) 05/14/2022 Auto Sector — — 6,749 — (67 )
DermaRite Industries LLC 03/03/2022 Manufacturing / Basic Industries 8.00 % 1M L+700 8,055 8,041 7,720
Dr. Squatch, LLC 08/27/2026 Personal and Non-Durable Consumer Products 7.00 % 3M L+600 13,515 13,247 13,244
Dr. Squatch, LLC (Revolver) 08/27/2026 Personal and Non-Durable Consumer Products 7.00 % 3M L+600 1,706 1,706 1,671
Dr. Squatch, LLC (Revolver) (7) 08/27/2026 Personal and Non-Durable Consumer Products — — 620 — (12 )
DRS Holdings III, Inc. 11/03/2025 Consumer Products 7.25 % 3M L+625 9,975 9,882 9,905
DRS Holdings III, Inc. (Revolver) (7) 11/03/2025 Consumer Products — — 1,783 — (12 )
ECL Entertainment, LLC 03/31/2028 Hotels, Motels, Inns and Gaming 8.25 % 1M L+750 8,747 8,664 8,944
ECM Industries, LLC (Revolver) (7) 12/23/2025 Electronics — — 518 — (3 )
Fairbanks Morse Defense 06/17/2028 Aerospace and Defense 5.50 % 3M L+475 3,500 3,487 3,500
Gantech Acquisition Corp. 05/14/2026 Business Services 7.25 % 1M L+625 19,900 19,522 19,502
Gantech Acquisition Corp. (Revolver) 05/14/2026 Business Services 7.25 % 1M L+625 498 498 488
Gantech Acquisition Corp. (Revolver) (7) 05/14/2026 Business Services — — 1,493 — (30 )
Graffiti Buyer, Inc. 08/10/2027 Distribution 6.75 % 3M L+575 1,994 1,955 1,964
Graffiti Buyer, Inc. (7) 08/10/2023 Distribution — — 893 — (4 )
Graffiti Buyer, Inc. (Revolver) (7) 08/10/2027 Distribution — — 769 — (18 )
Hancock Roofing and Construction L.L.C. (7) 12/31/2022 Insurance — — 1,500 — (15 )
Hancock Roofing and Construction L.L.C. (Revolver) (7) 12/31/2026 Insurance — — 750 — (8 )
HW Holdco, LLC 12/10/2024 Media 5.50 % 3M L+450 2,541 2,526 2,516
HW Holdco, LLC (Revolver) 12/10/2024 Media 5.50 % 3M L+450 1,219 1,219 1,207
HW Holdco, LLC (Revolver) (7) 12/10/2024 Media — — 2,168 — (22 )
IG Investments Holdings, LLC 09/22/2028 Business Services 6.75 % 3M L+600 4,518 4,428 4,428
IG Investments Holdings, LLC (Revolver) (7) 09/22/2027 Business Services — — 477 — —
IMIA Holdings, Inc. 04/09/2027 Aerospace and Defense 6.75 % 3M L+575 13,589 13,341 13,317
IMIA Holdings, Inc. (Revolver) (7) 04/09/2027 Aerospace and Defense — — 1,674 — (33 )
Integrity Marketing Acquisition, LLC 08/27/2025 Insurance 6.49 % 3M L+550 17,220 17,116 17,134
Integrity Marketing Acquisition, LLC (7) 07/09/2023 Insurance — — 4,278 — 11
Juniper Landscaping of Florida, LLC 12/22/2021 Personal, Food and Miscellaneous Services 6.50 % 1M L+550 2,615 2,611 2,615
K2 Pure Solutions NoCal, L.P. 12/20/2023 Chemicals, Plastics and Rubber 8.00 % 1M L+700 11,800 11,712 11,486
K2 Pure Solutions NoCal, L.P. (Revolver) 12/20/2023 Chemicals, Plastics and Rubber 8.00 % 1M L+700 872 872 849
K2 Pure Solutions NoCal, L.P. (Revolver) (7) 12/20/2023 Chemicals, Plastics and Rubber — — 1,066 — (28 )
Lash OpCo, LLC 02/18/2027 Consumer Products 8.00 % 1M L+700 30,000 29,335 29,400
Lash OpCo, LLC (Revolver) 08/16/2026 Consumer Products 8.00 % 1M L+700 291 291 285
Lash OpCo, LLC (Revolver) (7) 08/19/2026 Consumer Products — — 1,528 — (31 )
LAV Gear Holdings, Inc. 10/31/2024 Leisure, Amusement, Motion Pictures, Entertainment 8.50 % 1M L+750 790 785 741
(PIK 5.00%)
Lightspeed Buyer Inc. 02/03/2026 Healthcare, Education and Childcare 6.75 % 1M L+575 4,994 4,922 4,994
Lightspeed Buyer Inc. (Revolver) (7) 02/03/2026 Healthcare, Education and Childcare — — 1,166 — —
Lombart Brothers, Inc. 04/13/2023 Healthcare, Education and Childcare 7.25 % 1M L+625 1,036 1,036 1,036
Lombart Brothers, Inc. (Revolver) 04/13/2023 Healthcare, Education and Childcare 7.25 % 1M L+625 737 737 737

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS – (Continued)

September 30, 2021

(In thousands, except share data)

Issuer Name Maturity / Expiration Industry Current<br> Coupon Basis Point<br> Spread Above<br> Index (4) Par /<br> Shares Cost Fair Value (3)
Mars Acquisition Holdings Corp. (Revolver)(7) 5/14/2026 Media — — 806 $ - $ (8 )
MBS Holdings, Inc. (Revolver) (7) 04/16/2027 Telecommunications — — 694 — (14 )
MeritDirect, LLC 05/23/2024 Media 6.50 % 3M L+550 2,759 2,736 2,732
MeritDirect, LLC (Revolver) (7) 05/23/2024 Media — — 2,518 — (25 )
Municipal Emergency Services, Inc. 09/28/2027 Distribution 6.00 % 3M L+500 6,953 6,814 6,814
Municipal Emergency Services, Inc. (7) 09/28/2027 Distribution — — 1,880 — —
Municipal Emergency Services, Inc. (Revolver) (7) 09/28/2027 Distribution — — 1,880 — —
NBH Group LLC 08/19/2026 Healthcare, Education and Childcare 6.50 % 1M L+550 7,561 7,413 7,410
NBH Group LLC (Revolver) (7) 08/19/2026 Healthcare, Education and Childcare — — 1,163 — (23 )
OIS Management Services, LLC 07/09/2026 Healthcare, Education and Childcare 5.75 % 3M L+475 3,893 3,843 3,834
OIS Management Services, LLC (7) 07/09/2023 Healthcare, Education and Childcare — — 1,433 — (11 )
OIS Management Services, LLC (Revolver) (7) 07/09/2026 Healthcare, Education and Childcare — — 333 — (5 )
One Stop Mailing, LLC 05/07/2027 Cargo Transport 7.25 % 3M L+625 14,920 14,631 14,659
ORL Acquisition, Inc. 09/03/2027 Business Services 6.25 % 3M L+525 5,041 4,941 4,940
ORL Acquisition, Inc. (Revolver) (7) 09/03/2027 Business Services — — 597 — —
Ox Two, LLC 05/18/2026 Building Materials 7.00 % 1M L+600 15,671 15,435 15,358
Ox Two, LLC (Revolver) 05/18/2026 Building Materials 7.00 % 1M L+600 645 645 632
Ox Two, LLC (Revolver) (7) 05/18/2026 Building Materials — — 1,774 — (35 )
PRA Events, Inc. 08/07/2025 Business Services 11.50 % 3M L+1,050 23,675 20,421 22,373
(PIK 11.50%)
PRA Events, Inc. (Revolver) 08/07/2025 Business Services 11.50 % 3M L+1,050 2,461 2,123 2,326
(PIK 11.50%)
Quantic Electronics, LLC 11/19/2026 Aerospace and Defense 7.25 % 1M L+625 6,188 6,095 6,064
Quantic Electronics, LLC (7) 11/19/2026 Aerospace and Defense — — 2,094 — (21 )
Quantic Electronics, LLC (Revolver) (7) 11/19/2026 Aerospace and Defense — — 528 — (11 )
Questex, LLC 09/09/2024 Media 6.00 % 3M L+500 21,825 21,584 20,516
Questex, LLC (Revolver) 09/09/2024 Media 6.00 % 3M L+500 2,154 2,154 2,025
Questex, LLC (Revolver) (7) 09/09/2024 Media — — 1,436 — (86 )
Radius Aerospace, Inc. (Revolver) (7) 03/31/2025 Aerospace and Defense — — 2,227 — (63 )
Rancho Health MSO, Inc. (7) 12/18/2025 Healthcare, Education and Childcare — — 1,050 — —
Rancho Health MSO, Inc. (Revolver) (7) 12/18/2025 Healthcare, Education and Childcare — — 525 — —
Recteq, LLC (Revolver) (7) 01/29/2026 Consumer Products — — 1,127 — (11 )
Research Horizons, LLC 06/28/2022 Media 7.25 % 1M L+625 28,796 28,682 28,508
Research Now Group, Inc. and Dynata, LLC 12/20/2024 Business Services 6.50 % 3M L+550 2,884 2,884 2,847
Riverpoint Medical, LLC (Revolver) (7) 06/20/2025 Healthcare, Education and Childcare — — 364 — (4 )
Riverside Assessments, LLC 03/10/2025 Education 6.75 % 3M L+575 16,174 15,952 15,769
Sales Benchmark Index LLC (Revolver) (7) 01/03/2025 Business Services — — 732 — (18 )
Sargent & Greenleaf Inc. (Revolver) 12/20/2024 Electronics 7.00 % 3M L+550 299 299 299
Sargent & Greenleaf Inc. (Revolver) (7) 12/20/2024 Electronics — — 299 — —
Schlesinger Global, Inc. 07/14/2025 Business Services 8.00 % 3M L+700 512 507 489
(PIK 1.00%)
Schlesinger Global, Inc. (Revolver) 07/14/2025 Business Services 8.00 % 3M L+700 24 24 23
(PIK 1.00%)
Schlesinger Global, Inc. (Revolver)(7) 07/14/2025 Business Services — — 14 — (1 )
Sigma Defense Systems, LLC 12/18/2025 Telecommunications 9.75 % 3M L+875 6,520 6,378 6,406
Sigma Defense Systems, LLC (Revolver) (7) 12/18/2025 Telecommunications — — 951 — (17 )
Signature Systems Holding Company - Term Loan II 12/31/2021 Chemicals, Plastics and Rubber 8.50 % 3M L+750 806 802 798
Signature Systems Holding Company (Revolver) 05/03/2024 Chemicals, Plastics and Rubber 8.50 % 3M L+750 484 484 479
Signature Systems Holding Company (Revolver) (7) 05/03/2024 Chemicals, Plastics and Rubber — — 1,532 — (15 )
Solutionreach, Inc. (Revolver) (7) 01/17/2024 Communications — — 1,665 — —
Spear Education, LLC 02/26/2025 Education 6.00 % 3M L+500 14,898 14,781 14,898
Spear Education, LLC (7) 02/26/2022 Education — — 6,875 — —
Spectacle Gary Holdings, LLC 12/23/2025 Hotels, Motels, Inns and Gaming 11.00 % 1M L+900 21,546 20,972 23,391
TAC LifePort Purchaser, LLC (Revolver) (7) 03/01/2026 Aerospace and Defense — — 620 — (0 )
The Bluebird Group LLC 07/27/2026 Business Services 8.00 % 3M L+700 5,606 5,496 5,570
The Bluebird Group LLC (Revolver) (7) 07/27/2026 Business Services — — 734 — (5 )
The Vertex Companies, LLC 08/30/2027 Business Services 6.50 % 1M L+550 4,577 4,486 4,491
The Vertex Companies, LLC (7) 08/30/2027 Business Services — — 2,221 — (19 )
The Vertex Companies, LLC (Revolver) (7) 08/30/2027 Business Services — — 740 — (14 )
TPC Canada Parent, Inc. and TPC US Parent, LLC (8),(11) 11/24/2025 Food 6.25 % 3M L+525 1,771 1,771 1,718
TVC Enterprises, LLC 03/26/2026 Transportation 6.75 % 1M L+575 15,506 15,347 15,506
TVC Enterprises, LLC (Revolver) (7) 03/26/2026 Transportation — — 2,702 — —
TWS Acquisition Corporation 06/16/2025 Education 7.25 % 1M L+625 4,137 4,137 4,137
TWS Acquisition Corporation (Revolver) (7) 06/16/2025 Education — — 1,644 — —
Tyto Athene, LLC (Revolver) (7) 04/01/2026 Aerospace and Defense — — 364 — —
Walker Edison Furniture Company LLC 03/31/2027 Home and Office Furnishings 6.75 % 3M L+575 24,875 24,293 23,942
Wildcat Buyerco, Inc. 02/27/2026 Electronics 6.00 % 3M L+500 1,629 1,612 1,621
Wildcat Buyerco, Inc. (7) 02/27/2022 Electronics — — 2,574 — 16
Wildcat Buyerco, Inc. (Revolver) (7) 02/27/2026 Electronics — — 551 — (7 )
Total First Lien Secured Debt 509,046 511,405
Second Lien Secured Debt—16.2%
Atlas Purchaser, Inc 05/07/2029 Telecommunications 9.75 % 3M L+900 17,000 16,506 16,873
Data Axle, Inc. 04/03/2024 Other Media 10.25 % 3M L+925 20,400 20,220 20,400
ENC Parent Corporation 08/19/2029 Business Services 8.25 % 3M L+750 7,500 7,426 7,425
Halo Buyer, Inc. 07/06/2026 Consumer Products 9.25 % 1M L+825 32,500 32,106 31,119
Inventus Power, Inc. 09/29/2024 Electronics 9.50 % 3M L+850 16,593 16,292 16,261
QuantiTech LLC 02/04/2027 Aerospace and Defense 11.00 % 3M L+1,000 150 147 147
VT Topco, Inc. 08/17/2026 Business Services 7.06 % 3M L+675 15,000 14,922 15,000
Total Second Lien Secured Debt $ 107,620 $ 107,225

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS – (Continued)

September 30, 2021

(In thousands, except share data)

Issuer Name Maturity / Expiration Industry Current<br> Coupon Basis Point<br> Spread Above<br> Index (4) Par /<br> Shares Cost Fair Value (3)
Subordinated Debt/Corporate Notes—8.6%
Blackhawk Industrial Distribution, Inc. 03/17/2025 Distribution 12.00 % — 14,335 $ 14,165 $ 14,335
(PIK 2.00%)
Cascade Environmental LLC 12/30/2023 Environmental Services 13.00 % — 42,468 42,150 42,680
(PIK 13.00%)
Total Subordinated Debt/Corporate Notes 56,315 57,015
Preferred Equity/Partnership Interests—3.9% (6)
Ad.net Holdings, Inc. (9) — Media — — 2,400 240 240
AH Newco Equityholdings, LLC — Healthcare, Education and Childcare 6.00 % — 211 500 944
Cascade Environmental LLC — Environmental Services 16.00 % — 178,304 17,607 21,133
Mars Intermediate Holdings II, Inc Media — — 414 414 432
MeritDirect Holdings, LP (9) — Media — — 540 540 693
NXOF Holdings, Inc. (Tyto Athene, LLC) — Aerospace and Defense — — 160 160 202
ORL Holdco, Inc. — Business Services — — 575 57 57
Signature CR Intermediate Holdco, Inc. — Chemicals, Plastics and Rubber 12.00 % — 1,527 1,527 1,879
TPC Holding Company, LP (8),(11) — Food — — 219 219 262
TWD Parent Holdings, LLC (The Vertex Companies, LLC) — Business Services — — 30 30 30
Total Preferred Equity/Partnership Interests 21,295 25,873
Common Equity/Partnership Interests/Warrants—18.0% (6)
Ad.net Holdings, Inc. (9) — Media — — 2,667 27 49
Affinion Group Holdings, Inc. (Warrants) 04/10/2024 Consumer Products — — 77,190 2,126 —
AG Investco LP (9) — Business Services — — 805,164 805 1,192
AG Investco LP (7), (9) — Business Services — — 194,836 — —
Altamira Intermediate Company II, Inc. — Aerospace and Defense — — 125,000 125 33
Atlas Investment Aggregator, LLC (9) — Telecomunications — — 1,700,000 1,700 1,710
Cascade Environmental Holdings, LLC (9) — Environmental Services — — 33,901 2,852 478
CI (Allied) Investment Holdings, LLC — Business Services — — 120,962 1,243 475
(PRA Events, Inc.) (9)
Connatix Parent, LLC — Media — — 57,416 632 635
Cowboy Parent LLC — Distribution — — 22,500 2,250 1,902
(Blackhawk Industrial Distribution, Inc.)
Crane 1 Acquisition Parent Holdings, L.P. — Personal, Food and Miscellaneous Services — — 113 104 104
Crash Champion Holdings, LLC (9) — Auto Sector — — 36 328 369
Delta InvestCo LP (Sigma Defense Systems, LLC) (9) — Telecommunications — — 570,522 571 488
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (9) — Telecommunications — — 570,522 — (82 )
ECM Investors, LLC (9) — Electronics — — 167,537 41 565
eCommission Holding Corporation (11) — Financial Services — — 80 1,005 1,153
FedHC InvestCo LP (9) — Aerospace and Defense — — 3,331 333 339
FedHC InvestCo LP (7),(9) — Aerospace and Defense — — 4,072 — —
Gauge Lash Coinvest LLC — Consumer Products — — 889,376 136 3,558
Gauge Schlesinger Coinvest, LLC — Business Services — — 9 9 9
Gauge TVC Coinvest, LLC — Transportation — — 810,645 — 2,663
(TVC Enterprises, LLC) — —
GCOM InvestCo LP (9) — Business Services — — 1,855 809 352
GCOM InvestCo LP (7),(9) — Business Services — — 965 — —
Go Dawgs Capital III, LP — Building Materials — — 675,325 675 844
(American Insulated Glass, LLC) (9)
Green Veracity Holdings, LP - Class A — Business Services — — 15,000 1,500 5,320
(VT Topco, Inc.)
Hancock Claims Consultants Investors, LLC (9) — Insurance — — 450,000 450 613
Infogroup Parent Holdings, Inc. (Data Axle, Inc.) — Other Media — — 181,495 2,040 3,221
Ironclad Holdco, LLC (Applied Technical Services, LLC) (9) — Environmental Services — — 3,960 390 434
ITC Rumba, LLC (Cano Health, LLC) (9) — Healthcare, Education and Childcare — — 375,675 — 60,808
JWC-WE Holdings, L.P. — Home and Office Furnishings — — 1,906,433 — 6,616
(Walker Edison Furniture Company LLC) (9)
Kadmon Holdings, Inc. (5) — Healthcare, Education and Childcare — — 252,014 2,266 2,195
Kentucky Racing Holdco, LLC (Warrants) (9) — Hotels, Motels, Inns and Gaming — — 161,252 — 1,147
KL Stockton Co-Invest LP (Any Hour Services) (9) — Personal, Food and Miscellaneous Services — — 382,353 382 382
Lariat ecoserv Co-Invest Holdings, LLC (9) — Environmental Services — — 363,656 364 1,044
Lightspeed Investment Holdco LLC — Healthcare, Education and Childcare — — 273,143 273 315
Mars Intermidiate Holdings II, Inc. — Media — — 414 — 169
MeritDirect Holdings, LP (9) — Media — — 540 — 126
Municipal Emergency Services, Inc. — Distribution — — 1,593,514 1,594 1,594
NEPRT Parent Holdings, LLC (Recteq, LLC) (9) — Consumer Products — — 1,299 1,262 1,537
NXOF Holdings, Inc. — Aerospace and Defense — — 3,261 3 186
(Tyto Athene, LLC)
OceanSound Discovery Equity, LP — Aerospace and Defense — — 98,286 979 1,625
(Holdco Sands Intermediate, LLC) (9)
Oral Surgery (ITC) Holdings, LLC (9) — Healthcare, Education and Childcare — — 2,904 63 63
ORL Holdco, Inc. — Business Services — — 638 6 6
QuantiTech InvestCo LP (9) — Aerospace and Defense — — 700 66 365
QuantiTech InvestCo LP (7),(9) — Aerospace and Defense — — 967 — —
QuantiTech InvestCo II LP (9) — Aerospace and Defense — — 40 24 21

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS – (Continued)

September 30, 2021

(In thousands, except share data)

Issuer Name Maturity / Expiration Industry Current<br> Coupon Basis Point<br> Spread Above<br> Index (4) Par /<br> Shares Cost Fair Value (3)
RFMG Parent, LP (Rancho Health MSO, Inc.) — Healthcare, Education and Childcare — — 1,050,000 $ 1,050 $ 1,253
SBI Holdings Investments LLC — Business Services — — 36,585 366 278
(Sales Benchmark Index LLC) — —
Signature CR Intermediate Holdco, Inc. — Chemicals, Plastics and Rubber — — 80 80 —
SSC Dominion Holdings, LLC — Electronics — — 1,500 1,500 1,890
Class A (US Dominion, Inc.) — —
SSC Dominion Holdings, LLC — Electronics — — 1,500 — 3,534
Class B (US Dominion, Inc.) — —
StellPen Holdings, LLC (CF512, Inc.) — Media — — 153,846 154 154
TAC LifePort Holdings, LLC (9) — Aerospace and Defense — — 232,558 233 260
TPC Holding Company, LP (8). (11) — Food — — 11,527 12 33
TWD Parent Holdings, LLC (The Vertex Companies, LLC) — Business Services — — 608 1 1
U.S. Well Services, Inc. - Class A (5), (11) — Oil and Gas — — 1,261,201 3,022 914
UniVista Insurance — Business Services — — 400 400 405
Wildcat Parent, LP (Wildcat Buyerco, Inc.) — Electronics — — 2,314 231 411
ZS Juniper L.P. — Personal, Food and Miscellaneous Services — — 1,056 1,056 5,227
(Juniper Landscaping of Florida, LLC) (9)
Total Common Equity/Partnership Interests/Warrants 35,536 118,982
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies 729,811 820,500
Investments in Non-Controlled, Affiliated Portfolio Companies—7.6% (1), (2)
Preferred Equity/Partnership Interests—6.2% (6)
ETX Energy, LLC (9) — Oil and Gas — — 61,732 6,173 —
ETX Energy, LLC - Series X (9) — Oil and Gas — — 10,944 1,094 —
MidOcean JF Holdings Corp. — Distribution — — 153,922 15,392 41,023
Total Preferred Equity/Partnership Interests 22,660 41,023
Common Equity/Partnership Interests/Warrants—1.4% (6)
ETX Energy, LLC (9) — Oil and Gas — — 1,658,389 29,712 —
ETX Energy Management Company, LLC — Oil and Gas — — 1,754,104 1,562 —
MidOcean JF Holdings Corp. — Distribution — — 65,933 24,790 9,139
Total Common Equity/Partnership Interests/Warrants 56,064 9,139
Total Investments in Non-Controlled, Affiliated Portfolio Companies 78,723 50,161
Investments in Controlled, Affiliated Portfolio Companies—58.3% (1), (2)
First Lien Secured Debt—6.2%
AKW Holdings Limited (8), (10), (11) 03/13/2024 Healthcare, Education and Childcare 7.50 % 3M L+700 £ 30,500 42,389 41,125
Total First Lien Secured Debt 42,389 41,125
Second Lien Secured Debt—10.6%
Mailsouth Inc. 04/23/2025 Printing and Publishing 15.00 % — 11,087 11,087 11,087
(PIK 15.00%)
PT Network Intermediate Holdings, LLC 11/30/2024 Healthcare, Education and Childcare 11.00 % 3M L+1,000 58,582 58,276 58,582
(PIK 11.00%)
Total Second Lien Secured Debt 69,363 69,668
Subordinated Debt—9.7%
PennantPark Senior Loan Fund, LLC (11) 07/31/2027 Financial Services 9.00 % 3M L+800 64,155 64,155 64,155
Total Subordinated Debt 64,155 64,155
Preferred Equity—2.0% (6)
CI (PTN) Investment Holdings II, LLC — Healthcare, Education and Childcare — — 36,450 547 —
(PT Network, LLC) (9)
PT Network Intermediate Holdings, LLC (9) Healthcare, Education and Childcare 11.00 % 3M L+1,000 833 10,725 13,412
Total Preferred Equity 11,272 13,412
Common Equity—29.7% (6)
AKW Holdings Limited (8), (10), (11) — Healthcare, Education and Childcare — — £ 950 132 254
CI (PTN) Investment Holdings II, LLC — Healthcare, Education and Childcare — — 333,333 5,000 —
(PT Network, LLC) (9)
MSpark, LLC — Printing and Publishing — — 51,151 16,516 11,013
PennantPark Senior Loan Fund, LLC (11) — Financial Services — — 33,830,005 33,893 41,160
PT Network Intermediate Holdings, LLC (9) Healthcare, Education and Childcare — — 621 7,159 62,131
RAM Energy Holdings LLC — Energy and Utilities — — 180,805 162,708 81,710
Total Common Equity 225,408 196,269
Total Investments in Controlled, Affiliated Portfolio Companies 412,587 384,628
Total Investments—190.2% 1,221,121 1,255,289
Cash and Cash Equivalents—3.1%
BlackRock Federal FD Institutional 30 18,220 18,220
BNY Mellon Cash Reserve and Cash 2,163 2,137
Total Cash and Cash Equivalents 20,383 20,357
Total Investments and Cash Equivalents—193.2% $ 1,241,504 $ 1,275,646
Liabilities in Excess of Other Assets—(93.2%) (615,502 )
Net Assets—100.0% $ 660,144

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities.
(2) The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities (See Note 6).
(3) Valued based on our accounting policy (See Note 2).
(4) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable London Interbank Offered Rate, or LIBOR or “L,” the Euro Interbank Offered Rate, or EURIBOR or “E,” or Prime rate, or “P.” The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 90-day or 180-day LIBOR rate (1M L, 3M L, or 6M L, respectively), and EURIBOR loans are typically indexed to a 90-day EURIBOR rate (3M E), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.
(5) The security was not valued using significant unobservable inputs. The value of all other securities was determined using significant unobservable inputs (See Note 5).
(6) Non-income producing securities.
(7) Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.
(8) Non-U.S. company or principal place of business outside the United States.
(9) Investment is held through our Taxable Subsidiary (See Note 1).
(10) Par / Shares amount is denominated in British Pounds (£) as denoted.
(11) The investment is treated as a non-qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2021, qualifying assets represent 88% of the Company’s total assets and non-qualifying assets represent 12% of the Company’s total assets.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2022

  1. ORGANIZATION

PennantPark Investment Corporation was organized as a Maryland corporation in January 2007. We are a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. Our investment objective is to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments. We invest primarily in U.S. middle-market companies in the form of first lien secured debt, second lien secured debt, subordinated debt and, to a lesser extent, equity investments. On April 24, 2007, we closed our initial public offering. Our common stock trades on the New York Stock Exchange under the symbol “PNNT.”

We have entered into an investment management agreement, or the Investment Management Agreement, with the Investment Adviser, an external adviser that manages our day-to-day operations. PennantPark Investment, through the Investment Adviser, manages the day-to-day operations of, and provides investment advisory services to, SBIC II under a separate investment management agreement. We have also entered into an administration agreement, or the Administration Agreement, with the Administrator, which provides the administrative services necessary for us to operate. PennantPark Investment, through the Administrator, also provides similar services to SBIC II under a separate administration agreement. See Note 3.

SBIC II, our wholly-owned subsidiary, was organized as a Delaware limited partnership in 2012. SBIC II received a license from the SBA to operate as a SBIC under Section 301(c) of the 1958 Act. SBIC II’s objectives are to generate both current income and capital appreciation through debt and equity investments generally by investing with us in SBA-eligible businesses that meet the investment selection criteria used by PennantPark Investment.

On July 31, 2020, we and certain entities and managed accounts of the private credit investment manager of Pantheon Ventures (UK) LLP, or Pantheon, entered into a limited liability company agreement to co-manage PSLF, a newly-formed unconsolidated joint venture. In connection with this transaction, we contributed in-kind our formerly wholly-owned subsidiary, Funding I. As a result of this transaction, Funding I became a wholly-owned subsidiary of PSLF and has been deconsolidated from our financial statements. PSLF invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSLF was formed as a Delaware limited liability company. See Note 4.

In April 2021, we issued $150.0 million in aggregate principal amount of our 2026 Notes at a public offering price per note of 99.4%. Interest on the 2026 Notes is paid semi-annually on May 1 and November 1 of each year, at a rate of 4.50% per year, commencing November 1, 2021. The 2026 Notes mature on May 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes on any securities exchange or automated dealer quotation system.

In October 2021, we issued $165.0 million in aggregate principal amount of our 2026 Notes-2 at a public offering price per note of 99.436%. Interest on the 2026 Notes is paid semi-annually on May 1 and November 1 of each year, at a rate of 4.00% per year, commencing May 1, 2022. The 2026 Notes-2 mature on November 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes-2 are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes-2 are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes-2 on any securities exchange or automated dealer quotation system.

We have formed the Taxable Subsidiary, which is subject to tax as a corporation. The Taxable Subsidiary allows us to hold equity securities of certain portfolio companies treated as pass-through entities for federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.

In January 2022, we formed PennantPark-TSO Senior Loan Fund II LP, ("PTSF II"), an unconsolidated limited partnership, organized as a Delaware limited liability partnership. We sold $82.3 million in investments to a wholly-owned subsidiary of PTSF II in exchange for cash in the amount of $75.7 million and an $6.6 million equity interest in PTSF II representing 23.1% of the total outstanding Class A Units of PTSF II. We recognized $0.2 million of realized gain upon the formation of PTSF II. As of March 31, 2022, our capital commitment of $15.0 million is 93.1% funded and we hold 23.1% of the total outstanding Class A Units of PTSF II and a 4.99% voting interest in the general partner which manages PTSF II.

We are operated by a person who has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and the Investment Adviser intends to continue to affirm the exclusion on an annual basis, and therefore, is not subject to registration or regulation as a commodity pool operator under the Commodity Exchange Act.

  1. SIGNIFICANT ACCOUNTING POLICIES

The preparation of our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, or GAAP requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Changes in the economic and regulatory environment, financial markets, the credit worthiness of our portfolio companies, the global outbreak of the novel coronavirus (“COVID-19”) and any other parameters used in determining these estimates and assumptions could cause actual results to differ from such estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions in consolidation. References to the Financial Accounting Standards Board’s, or FASB’s, Accounting Standards Codification, as amended, or ASC, serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued.

Our Consolidated Financial Statements are prepared in accordance with GAAP, consistent with ASC Topic 946, Financial Services – Investment Companies, and pursuant to the requirements for reporting on Form 10-K/Q and Articles 6, 10 and 12 of Regulation S-X, as appropriate. In accordance with Article 6-09 of Regulation S-X, we have provided a Consolidated Statement of Changes in Net Assets in lieu of a Consolidated Statement of Changes in Stockholders’ Equity.

Our significant accounting policies consistently applied are as follows:

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

(a) Investment Valuations

We expect that there may not be readily available market values for many of the investments which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy and a consistently applied valuation process, as described in this Report. With respect to investments for which there is no readily available market value, the factors that our board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material. See Note 5.

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

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

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

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

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

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

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

(b) Security Transactions, Revenue Recognition, and Realized/Unrealized Gains or Losses

Security transactions are recorded on a trade-date basis. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering prepayment penalties. Net change in unrealized appreciation or depreciation reflects, as applicable, the change in the fair values of our portfolio investments and the Credit Facilities during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

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

Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or if there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. As of March 31, 2022, we had one portfolio company on non-accrual, representing 3.5% and 2.8% of our overall portfolio on a cost and fair value basis, respectively. As of September 30, 2021, we had no portfolio companies on non-accrual.

(c) Income Taxes

We have complied with the requirements of Subchapter M of the Code and have qualified to be treated as a RIC for federal income tax purposes. In this regard, we account for income taxes using the asset and liability method prescribed by ASC Topic 740, Income Taxes, or ASC 740. Under this method, income taxes are provided for amounts currently payable and for amounts deferred as tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Based upon our qualification and election to be treated as a RIC for U.S. federal income tax purposes, we typically do not incur material federal income taxes. However, we may choose to retain a portion of our calendar year income, which may result in the imposition of an excise tax. Additionally, certain of the Company’s consolidated subsidiaries are subject to federal, state and local income taxes. For the three and six months ended March 31, 2022, we recorded a provision for taxes on net investment income of $0.2 million and $0.4 million respectively, all of which pertains to U.S. federal excise tax. For the three and six months ended March 31, 2021, we recorded a provision for taxes on net investment income of $0.2 million and $0.3 million respectively, all of which pertains to U.S. federal excise tax.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

We recognize the effect of a tax position in our Consolidated Financial Statements in accordance with ASC 740 when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by the applicable tax authority. Tax positions not considered to satisfy the “more-likely-than-not” threshold would be recorded as a tax expense or benefit. Penalties or interest, if applicable, that may be assessed relating to income taxes would be classified as other operating expenses in the financial statements. There were no tax accruals relating to uncertain tax positions and no amounts accrued for any related interest or penalties with respect to the periods presented herein. The Company’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Although the Company files both federal and state income tax returns, the Company’s major tax jurisdiction is federal.

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

For the three and six months ended March 31, 2022, the Company recognized a provision for taxes of $5.1 million and $5.1 million, respectively, on net realized gain on investments by the Taxable Subsidiary. The provision for taxes on net realized gain on investments is the result of netting (i) the expected tax liability on the gains from the sales of investments which were realized during fiscal year ending September 30, 2022 and (ii) the expected tax benefit resulting from the use of loss carryforwards to offset such gains. For the three and six months ended March 31, 2021, the Company recognized a provision for taxes of zero on net realized gain on investments by the Taxable Subsidiary.

For the three and six months ended March 31, 2022, the Company recognized a provision for taxes of $(5.1) million and zero, respectively, on unrealized appreciation on investments by the Taxable Subsidiary. For the three and six months ended March 31, 2021, the Company recognized a provision for taxes of zero on unrealized appreciation on investments by the Taxable Subsidiary. During the three and six months ended March 31, 2022, the Company paid $4.0 million in taxes on realized gains on the sale of investments held by the Taxable Subsidiary, resulting in remaining tax liability of $1.1 million as of March 31, 2022 included under accrued other expenses in the consolidated statement of assets and liabilities.

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

(d) Distributions and Capital Transactions

Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid, if any, as a distribution is determined by our board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually. The tax attributes for distributions will generally include ordinary income and capital gains, but may also include certain tax-qualified dividends and/or a return of capital.

Capital transactions, in connection with our dividend reinvestment plan or through offerings of our common stock, are recorded when issued and offering costs are charged as a reduction of capital upon issuance of our common stock.

(e) Foreign Currency Translation

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

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

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

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

Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices to be more volatile than those of comparable U.S. companies or U.S. government securities.

(f) Consolidation

As permitted under Regulation S-X and as explained by ASC paragraph 946-810-45-3, PennantPark Investment will generally not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we have consolidated the results of our SBIC Funds and our Taxable Subsidiary in our Consolidated Financial Statements. We do not consolidate our non-controlling interest in PSLF or PTSF II. See further description of our investment in PSLF in Note 4.

(g) Asset Transfers and Servicing

Asset transfers that do not meet ASC Topic 860, Transfers and Servicing, requirements for sale accounting treatment are reflected in the Consolidated Statements of Assets and Liabilities and the Consolidated Schedules of Investments as investments.

(h) Recent Accounting Pronouncements

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

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

  1. AGREEMENTS AND RELATED PARTY TRANSACTIONS

(a) Investment Management Agreement

Base Management Fee

The Investment Management Agreement with the Investment Adviser was reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in February 2022 Under the Investment Management Agreement, the Investment Adviser, subject to the overall supervision of our board of directors, manages the day-to-day operations of and provides investment advisory services to, us. The Investment Adviser serves as the servicer to Funding I and has irrevocably directed that the management fee owed to it with respect to such services be paid to the Company so long as the Investment Adviser remains the servicer. SBIC II’s investment management agreement does not affect the management or incentive fees that we pay to the Investment Adviser on a consolidated basis. For providing these services, the Investment Adviser receives a fee from us, consisting of two components— a base management fee and an incentive fee or, collectively, Management Fees.

The base management fee is calculated at an annual rate of 1.50% of our “average adjusted gross assets,” which equals our gross assets (exclusive of U.S. Treasury Bills, temporary draws under any credit facility, cash and cash equivalents, repurchase agreements or other balance sheet transactions undertaken at the end of a fiscal quarter for purposes of preserving investment flexibility for the next quarter and unfunded commitments, if any) and is payable quarterly in arrears. In addition, on November 13, 2018, in connection with our board of directors’ approval of the application of the modified asset coverage requirements under the 1940 Act to the Company, our board of directors also approved an amendment to the Investment Management Agreement reducing the Investment Adviser’s annual base management fee from 1.50% to 1.00% on gross assets that exceed 200% of the Company’s total net assets as of the immediately preceding quarter-end. This amendment became effective on February 5, 2019 with the amendment and restatement of the Investment Management Agreement on April 12, 2019. The base management fee is calculated based on the average adjusted gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. For example, if we sold shares on the 45th day of a quarter and did not use the proceeds from the sale to repay outstanding indebtedness, our gross assets for such quarter would give effect to the net proceeds of the issuance for only 45 days of the quarter during which the additional shares were outstanding. For the three and six months ended March 31, 2022, the Investment Adviser earned a base management fee of $5.0 million and $10.1 million, respectively, from us. For the three and six months ended March 31, 2021, the Investment Adviser earned a base management fee of $4.3 million and $8.4 million, respectively, from us.

Incentive Fee

The incentive fee has two parts, as follows:

One part is calculated and payable quarterly in arrears based on our Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter. For this purpose, Pre-Incentive Fee Net Investment Income means interest income, dividend income and any other income, including any other fees (other than fees for providing managerial assistance), such as amendment, commitment, origination, prepayment penalties, structuring, diligence and consulting fees or other fees received from portfolio companies, accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement and any interest expense or amendment fees under any credit facility and distribution paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income, expressed as a percentage of the value of our net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7.00% annualized). We pay the Investment Adviser an incentive fee with respect to our Pre- Incentive Fee Net Investment Income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.75%, (2) 100% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than 2.1212% in any calendar quarter (8.4848% annualized), and (3) 17.5% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.1212% in any calendar quarter. These calculations are pro-rated for any share issuances or repurchases during the relevant quarter, if applicable.

Beginning April 1, 2020 and through June 30, 2021, the Investment Adviser has voluntarily agreed, in consultation with our board of directors, to irrevocably waive the performance-based incentive fees. For the three and six months ended March 31, 2022, the Investment Adviser earned an incentive fee of zero and $2.7 million, respectively, on net investment income from us. For the three and six months ended March 31, 2021, the Investment Adviser did not earn an incentive fee on net investment income from us.

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date) and, effective January 1, 2018, equals 17.5% of our realized capital gains, (20.0% for periods prior to January 1, 2018), if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. For each of three and six months ended March 31, 2022 and 2021, the Investment Adviser did not accrue an incentive fee on capital gains as calculated under the Investment Management Agreement (as described above).

Under GAAP, we are required to accrue a capital gains incentive fee based upon net realized capital gains and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the capital gains incentive fee accrual, we considered the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Management Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then we record a capital gains incentive fee equal to 17.5% of such amount, less the aggregate amount of actual capital gains related to incentive fees paid in all prior years. If such amount is negative, then there is no accrual for such year. There can be no assurance that such unrealized capital appreciation will be realized in the future. For each of the three and six months ended March 31, 2022 and 2021, the Investment Adviser did not accrue an incentive fee on capital gains as calculated under GAAP.

(b) Administration Agreement

The Administration Agreement with the Administrator was reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in February 2022. Under the Administration Agreement, the Administrator provides administrative services and office facilities to us. The Administrator provides similar services to SBIC II under its administration agreement with PennantPark Investment. For providing these services, facilities and personnel, we have agreed to

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

reimburse the Administrator for its allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their respective staffs. The Administrator also offers, on our behalf, significant managerial assistance to portfolio companies to which we are required to offer such assistance. Reimbursement for certain of these costs is included in administrative services expenses in the Consolidated Statements of Operations. For the three and six months ended March 31, 2022,we reimbursed the Investment Adviser approximately $0.6 million and $0.9 million, respectively, including expenses the Investment Adviser incurred on behalf of the Administrator, for the services described above. For the three and six months ended March 31, 2021, we reimbursed the Investment Adviser approximately $0.5 million and $0.7 million, respectively, including expenses the Investment Adviser incurred on behalf of the Administrator, for the services described above.

(c) Other Related Party Transactions

There were no transactions subject to Rule 17a-7 under the 1940 Act during each of the three and six months ended March 31, 2022 and 2021.

For the three and six months ended March 31, 2022 we sold $11.5 million and $59.6 million in investments to PSLF at fair value, respectively, and recognized zero and $0.1 million of net realized gains, respectively. For the three and six months ended March 31, 2021, we sold $15.5 million $37.8 million in investments to PSLF at fair value, respectively, and recognized $0.1 million and $0.5 million of net realized gains, respectively.

For the three months ended March 31, 2022, we sold $82.3 million in investments to PTSF II at fair value and recognized $0.2 million of net realized gains.

  1. INVESTMENTS

Purchases of investments, including PIK interest, for the three and six months ended March 31, 2022 totaled $185.7 million and $480.8 million, respectively. For the same periods in the prior year, purchases of investments, including PIK interest, totaled $78.4 million and $150.1 million, respectively. Sales and repayments of investments for the three and six months ended March 31, 2022 totaled $405.5 million and $537.7 million, respectively. For the same periods in the prior year, sales and repayments of investments totaled $65.0 million and $167.6 million, respectively.

Investments and cash and cash equivalents consisted of the following:

March 31, 2022 September 30, 2021
Investment Classification ($ in thousands) Cost Fair Value Cost Fair Value
First lien $ 668,265 $ 667,224 $ 551,435 $ 552,530
Second lien 136,552 134,808 176,983 176,894
Subordinated debt / corporate notes 43,561 33,782 56,315 57,015
Subordinated notes in PSLF 76,083 76,083 64,155 64,155
Equity 318,402 253,931 338,341 363,537
Equity in PSLF 41,627 48,129 33,893 41,160
Total investments 1,284,490 1,213,957 1,221,121 1,255,290
Cash and cash equivalents 26,259 26,251 20,383 20,357
Total investments and cash and cash equivalents $ 1,310,749 $ 1,240,207 $ 1,241,504 $ 1,275,647

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets (excluding cash and cash equivalents) in such industries as of:

Industry Classification March 31, 2022(1) September 30, 2021 (1)
Business Services 14 % 9 %
Healthcare, Education and Childcare 12 23
Consumer Products 10 9
Energy and Utilities 8 7
Aerospace and Defense 7 2
Distribution 6 7
Media 6 7
Auto Sector 4 —
Telecommunications 4 2
Education 3 3
Environmental Services 3 6
Home and Office Furnishings 3 3
Building Materials 2 3
Electronics 2 2
Financial Services 2 —
Insurance 2 2
Other Media 2 2
Personal, Food and Miscellaneous Services 2 1
Retail 2 —
Transportation 2 2
Chemicals, Plastics and Rubber 1 1
Manufacturing / Basic Industries 1 1
Printing and Publishing 1 2
Cargo Transport — 1
Hotels, Motels, Inns and Gaming — 4
Personal and Non-Durable Consumer Products — 1
Other 1 —
Total 100 % 100 %

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

(1) Excludes investments in PSLF.

PennantPark Senior Loan Fund, LLC

In July 2020, we and Pantheon formed PSLF, an unconsolidated joint venture. PSLF invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSLF was formed as a Delaware limited liability company. As of March 31, 2022 and September 30, 2021, PSLF had total assets of $468.6 million and $417.4 million, respectively. PSLF’s portfolio consisted of debt investments in 60 and 47 portfolio companies as of March 31, 2022 and September 30, 2021, respectively. As of the same dates, we and Pantheon had remaining commitments to fund first lien secured debt and equity interests in PSLF in an aggregate amount of $19.7 and $12.8 million, respectively. As of March 31, 2022, at fair value, the largest investment in a single portfolio company in PSLF was $16.7 million and the five largest investments totaled $73.9 million. As of September 30, 2021, at fair value, the largest investment in a single portfolio company in PSLF was $16.8 million and the five largest investments totaled $74.4 million. PSLF invests in portfolio companies in the same industries in which we may directly invest.

We provide capital to PSLF in the form of subordinated notes and equity interests. As of March 31, 2022 and September 30, 2021, we and Pantheon owned 60.5% and 39.5%, respectively, of each of the outstanding subordinated notes and equity interests of PSLF. As of March 31, 2022 and September 30, 2021 our investment in PSLF consisted of subordinated notes of $76.1 million (additional $11.9 million unfunded) and $64.2 million, respectively, and equity interests of $48.1 million (additional $7.7 million unfunded) and $41.2 million, respectively.

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

Additionally, PSLF, through its wholly-owned subsidiary, or PSLF Subsidiary, has entered into a $225.0 million (reduced from $275.0 million on March 2, 2022) senior secured revolving credit facility which bears interest at SOFR (or an alternative risk-free interest rate index) plus 255 basis points during the investment period, or the PSLF Credit Facility, with BNP Paribas, subject to leverage and borrowing base restrictions.

In March 2022, PSLF completed a $304.0 million debt securitization in the form of a collateralized loan obligation, or the “2034 Asset-Backed Debt”. The 2034 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO IV, Ltd., a wholly-owned and consolidated subsidiary of PSLF, consisting primarily of middle market loans and participation interests in middle market loans. The 2034 Asset-Backed Debt is scheduled to mature in April 2034. On the closing date of the transaction, in consideration of PSLF’s transfer to PennantPark CLO IV, Ltd. of the initial closing date loan portfolio, which included loans distributed to PSLF by certain of its wholly owned subsidiaries and us, PennantPark CLO IV, Ltd. transferred to PSLF 100% of the Preferred Shares of PennantPark CLO IV, Ltd. and 100% of the Subordinated Notes issued by PennantPark CLO IV, Ltd.

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

($ in thousands) March 31, 2022 September 30, 2021
Total investments $ 446,088 $ 405,232
Weighted average cost yield on income producing investments 7.2 % 7.1 %
Number of portfolio companies in PSLF 60 47
Largest portfolio company investment $ 16,727 $ 16,817
Total of five largest portfolio company investments $ 73,858 $ 74,445

Below is a listing of PSLF’s individual investments as of March 31, 2022:

Issuer Name Maturity Industry Current<br> Coupon Basis Point<br>Spread Above<br>Index (1) Par Cost Fair Value (2)
First Lien Secured Debt - 560.7%
Ad.net Acquisition, LLC 5/6/2026 Media 7.00 % 3M L+600 4,963 $ 4,963 $ 4,963
Altamira Technologies, LLC 7/24/2025 Aerospace and Defense 9.00 % 3M L+800 896 888 860
American Insulated Glass, LLC 12/21/2023 Building Materials 6.50 % 3M L+550 12,560 12,508 12,560
Any Hour Services 7/21/2027 Personal, Food and Miscellaneous Services 6.75 % 3M L+575 6,484 6,475 6,484
Apex Service Partners, LLC 7/31/2025 Personal, Food and Miscellaneous Services 6.27 % 1M L+550 6,569 6,492 6,569
Apex Service Partners, LLC Term Loan B 7/31/2025 Personal, Food and Miscellaneous Services 6.55 % — 3,323 3,294 3,323
Applied Technical Services, LLC 12/29/2026 Environmental Services 6.75 % 3M L+575 7,406 7,313 7,314
Bottom Line Systems, LLC 2/13/2023 Healthcare, Education and Childcare 6.25 % 3M L+550 13,729 13,710 13,729
CF512, Inc. 8/20/2026 Media 7.00 % 3M L+600 2,992 2,963 2,963
Crash Champions, LLC 8/5/2025 Auto Sector 6.00 % 3M L+500 5,955 5,839 5,806
Dr. Squatch, LLC 8/27/2026 Personal and Non-Durable Consumer Products 7.00 % 3M L+600 6,484 6,357 6,484
DRS Holdings III, Inc. 11/3/2025 Consumer Products 6.75 % 3M L+575 13,360 13,280 13,293
Duraco Specialty Tapes, LLC 6/30/2024 Containers and Packaging 6.50 % 1M L+550 4,000 3,938 3,932
ECL Entertainment, LLC 3/31/2028 Hotels, Motels, Inns and Gaming 8.25 % 3M L+750 4,581 4,581 4,600
ECM Industries, LLC 12/23/2025 Electronics 5.75 % 3M L+475 2,827 2,758 2,770
Global Holdings InterCo LLC 3/16/2026 Banking, Finance, Insurance & Real Estate 7.00 % 3M L+600 7,425 7,392 7,351
Graffiti Buyer, Inc. 8/10/2027 Distribution 6.75 % 3M L+575 1,984 1,946 1,930
Hancock Roofing and Construction L.L.C. 12/31/2026 Insurance 6.26 % 3M L+500 5,925 5,925 5,925
Holdco Sands Intermediate, LLC 11/23/2028 Aerospace and Defense 7.00 % 3M L+600 4,000 3,926 3,920
HW Holdco, LLC 12/10/2024 Media 6.44 % 1M L+575 14,513 14,350 14,222
IG Investments Holdings, LLC 9/22/2028 Business Services 7.01 % 3M L+600 4,496 4,406 4,428
Imagine Acquisitionco, Inc. 11/15/2027 Software 6.50 % 3M L+550 3,678 3,610 3,605
Integrity Marketing Acquisition, LLC 8/27/2025 Insurance 6.75 % 1M L+575 7,828 7,785 7,753
K2 Pure Solutions NoCal, L.P. 12/20/2023 Chemicals, Plastics and Rubber 9.00 % 1M L+800 14,513 14,347 14,367
Lash OpCo, LLC 2/18/2027 Consumer Products 8.01 % 3M L+700 9,975 9,840 9,975
LAV Gear Holdings, Inc. 10/31/2024 Leisure, Amusement, Motion Pictures, Entertainment 8.50 % 3M L+750 2,131 2,120 2,082
Lightspeed Buyer Inc. 2/3/2026 Healthcare, Education and Childcare 6.50 % 1M L+575 12,408 12,153 12,284
Lombart Brothers, Inc. 4/13/2023 Healthcare, Education and Childcare 7.25 % 3M L+625 16,727 16,689 16,727
MAG DS Corp. 4/1/2027 Aerospace and Defense 6.50 % 3M L+550 5,600 5,117 5,040
Mars Acquisition Holdings Corp. 5/14/2026 Media 6.50 % 1M L+550 7,960 7,897 7,900
MBS Holdings, Inc. 4/16/2027 Telecommunications 6.75 % 3M L+575 7,444 7,359 7,369
MeritDirect, LLC 5/23/2024 Media 6.50 % 3M L+550 13,130 13,022 13,130

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

Municipal Emergency Services, Inc. 9/28/2027 Distribution 6.00 % 3M L+500 4,175 4,108 4,037
NBH Group LLC 8/19/2026 Healthcare, Education and Childcare 6.50 % 1M L+650 7,542 7,456 7,505
OIS Management Services, LLC 7/9/2026 Healthcare, Education and Childcare 5.75 % 3M L+475 3,883 3,845 3,844
PlayPower, Inc. 5/8/2026 Consumer Products 6.50 % 3M L+550 2,594 2,491 2,447
Quantic Electronics, LLC 11/19/2026 Aerospace and Defense 7.25 % 1M L+625 3,429 3,362 3,361
Radius Aerospace, Inc. 3/31/2025 Aerospace and Defense 6.75 % 3M L+575 12,784 12,665 12,656
Rancho Health MSO, Inc. 12/18/2025 Healthcare, Education and Childcare 6.75 % 3M L+575 5,207 5,207 5,207
Recteq, LLC 1/29/2026 Consumer Products 7.00 % 3M L+600 9,900 9,750 9,752
Research Now Group, LLC and Dynata, LLC 12/20/2024 Business Services 6.50 % 3M L+550 14,618 14,495 14,329
Riverpoint Medical, LLC 6/20/2025 Healthcare, Education and Childcare 6.75 % 3M L+575 3,229 3,207 3,220
Sales Benchmark Index LLC 1/3/2025 Business Services 7.75 % 3M L+600 7,267 7,164 7,267
Sargent & Greenleaf Inc. 12/20/2024 Electronics 7.00 % 3M L+550 5,137 5,137 5,137
Signature Systems Holding Company 5/3/2024 Chemicals, Plastics and Rubber 7.50 % 1M L+650 13,125 13,024 13,125
Solutionreach, Inc. 1/17/2024 Communications 6.75 % 1M L+575 11,815 11,767 11,295
STV Group Incorporated 12/11/2026 Transportation 5.71 % 1M L+525 12,099 12,024 11,736
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) 8/16/2027 Aerospace and Defense 7.01 % 1M L+600 4,988 4,889 4,823
TAC LifePort Purchaser, LLC 3/1/2026 Aerospace and Defense 7.00 % 3M L+600 4,646 4,646 4,646
TeleGuam Holdings, LLC 11/20/2025 Telecommunications 5.50 % 1M L+450 4,566 4,544 4,521
Teneo Holdings LLC 7/18/2025 Financial Services 6.25 % 1M L+525 2,981 2,967 2,946
The Bluebird Group LLC 7/27/2026 Business Services 8.00 % 3M L+700 3,000 3,000 3,060
The Vertex Companies, LLC 8/30/2027 Business Services 6.50 % 1M L+550 4,554 4,505 4,495
TPC Canada Parent, Inc. and TPC US Parent, LLC 11/24/2025 Food 6.25 % 3M L+525 5,565 5,401 5,398
TVC Enterprises, LLC 3/26/2026 Transportation 7.00 % 1M L+575 12,709 12,654 12,455
TWS Acquisition Corporation 6/16/2025 Education 7.25 % 3M L+625 9,145 9,101 9,145
Tyto Athene, LLC 4/3/2028 Aerospace and Defense 6.25 % 3M L+550 9,925 9,846 9,677
UBEO, LLC 4/3/2024 Printing and Publishing 5.51 % 1M L+450 4,686 4,664 4,592
Vision Purchaser Corporation 6/10/2025 Media 7.75 % 6M L+675 14,212 14,054 14,212
Wildcat Buyerco, Inc. 2/27/2026 Electronics 6.76 % 3M L+575 10,120 10,023 10,120
Zips Car Wash, LLC 3/1/2024 Business Services 7.75 % 3M L+675 7,498 7,356 7,423
Total First Lien Secured Debt 446,592 446,088
Total Investments - 560.7%
Cash and Cash Equivalents - 22.5%
BlackRock Federal FD Institutional 30 17,862 17,862
Total Cash and Cash Equivalents 17,862 17,862
Total Investments and Cash Equivalents - 583.2% $ 464,454 $ 463,950
Liabilities in Excess of Other Assets — (483.2)% (384,398 )
Members' Equity—100.0% $ 79,552

(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

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

Below is a listing of PSLF’s individual investments as of September 30, 2021:

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

Issuer Name Maturity Industry Current<br> Coupon Basis Point<br>Spread Above<br>Index (1) Par Cost Fair Value (2)
First Lien Secured Debt - 570.7%
Ad.net Acquisition, LLC 05/06/26 Media 7.00% 3M L + 600 $ 4,988 $ 4,920 $ 4,913
Altamira Technologies, LLC 07/24/25 Aerospace and Defense 8.00% 3M L+700 921 912 864
American Insulated Glass, LLC 12/21/23 Building Materials 6.50% 3M L+550 14,625 14,481 14,479
Any Hour Services 07/21/27 Personal, Food and Miscellaneous Services 6.75% 1M L+525 6,500 6,378 6,370
Apex Service Partners, LLC 07/31/25 Personal, Food and Miscellaneous Services 6.25% 1M L+550 6,569 6,518 6,504
Apex Service Partners, LLC Term Loan B 07/31/25 Personal, Food and Miscellaneous Services 6.55% — 3,347 3,313 3,313
Applied Technical Services, LLC 12/29/26 Environmental Services 6.75% 3M L+575 7,444 7,336 7,295
Bottom Line Systems, LLC 02/13/23 Healthcare, Education and Childcare 6.25% 1M L+550 13,729 13,674 13,729
Crash Champions, LLC 08/05/25 Auto Sector 6.00% 1M L+525 5,985 5,873 5,865
DRS Holdings III, Inc. 11/03/25 Consumer Products 7.25% 1M L+625 13,428 13,335 13,334
ECL Entertainment, LLC 03/31/28 Hotels, Motels, Inns and Gaming 8.25% 3M L+750 4,604 4,560 4,707
ECM Industries, LLC 12/23/25 Electronics 5.50% 3M L+450 2,827 2,805 2,770
Global Holdings InterCo LLC 03/16/26 Banking, Finance, Insurance & Real Estate 7.00% 3M L+600 7,463 7,360 7,425
Hancock Roofing and Construction L.L.C. 12/31/26 Insurance 6.00% 3M L+500 5,955 5,819 5,895
Holdco Sands Intermediate, LLC 12/19/25 Aerospace and Defense 7.50% 3M L+600 12,071 11,934 12,010
HW Holdco, LLC 12/10/24 Media 5.50% 3M L+450 14,588 14,499 14,442
IMIA Holdings, Inc. 04/09/27 Aerospace and Defense 6.75% 3M L+600 9,059 8,890 8,878
Integrity Marketing Acquisition, LLC 08/27/25 Insurance 6.50% 3M L+550 7,868 7,803 7,829
Juniper Landscaping of Florida, LLC 12/22/21 Personal, Food and Miscellaneous Services 6.50% 3M L+550 9,420 9,420 9,420
K2 Pure Solutions NoCal, L.P. 12/20/23 Chemicals, Plastics and Rubber 8.00% 1M L+700 14,588 14,479 14,199
LAV Gear Holdings, Inc. 10/31/24 Leisure, Amusement, Motion Pictures, Entertainment 8.50% 3M L+750 2,120 2,107 1,987
Lightspeed Buyer Inc. 02/03/26 Healthcare, Education and Childcare 6.75% 1M L+550 12,472 12,273 12,472
Lombart Brothers, Inc. 04/13/23 Healthcare, Education and Childcare 7.25% 1M L+825 16,817 16,729 16,817
MAG DS Corp. 04/01/27 Aerospace and Defense 6.50% 1M L+550 5,837 5,581 5,253
Mars Acquisition Holdings Corp. 05/14/26 Media 6.50% 1M L+575 8,000 7,852 7,920
MBS Holdings, Inc. 04/16/27 Telecommunications 6.75% 3M L+550 7,481 7,338 7,332
MeritDirect, LLC 05/23/24 Media 6.50% 3M L+550 13,386 13,272 13,252
PlayPower, Inc. 05/08/26 Consumer Products 5.65% 3M L+575 3,805 3,778 3,736
Radius Aerospace, Inc. 03/31/25 Aerospace and Defense 6.75% 3M L+600 13,335 13,202 13,068
Rancho Health MSO, Inc. 12/18/25 Healthcare, Education and Childcare 6.75% 3M L+550 5,232 5,140 5,232
Recteq, LLC 01/29/26 Consumer Products 7.00% 3M L+450 9,950 9,775 9,851
Research Now Group, LLC and Dynata, LLC 12/20/24 Business Services 6.50% 3M L+600 14,695 14,602 14,508
Riverpoint Medical, LLC 06/20/25 Healthcare, Education and Childcare 5.50% 1M L+550 3,246 3,217 3,206
Sales Benchmark Index LLC 01/03/25 Business Services 7.75% 3M L+750 7,632 7,526 7,442
Sargent & Greenleaf Inc. 12/20/24 Electronics 7.00% 3M L+575 5,232 5,181 5,232
Signature Systems Holding Company 05/03/24 Chemicals, Plastics and Rubber 8.50% 1M L+525 13,500 13,397 13,365
Solutionreach, Inc. 01/17/24 Communications 6.75% 1M L+600 11,882 11,758 11,882
STV Group Incorporated 12/11/26 Transportation 5.33% 1M L+450 12,099 12,003 12,038
TAC LifePort Purchaser, LLC 03/01/26 Aerospace and Defense 7.00% 1M L+525 4,967 4,891 4,966
TeleGuam Holdings, LLC 11/20/25 Telecommunications 5.50% 3M L+525 4,593 4,558 4,547
Teneo Holdings LLC 07/18/25 Financial Services 6.25% 1M L+575 2,997 2,884 2,981
TPC Canada Parent, Inc. and TPC US Parent, LLC 11/24/25 Food 6.25% 1M L+625 5,593 5,537 5,425
TVC Enterprises, LLC 03/26/26 Transportation 6.75% 3M L+550 12,773 12,643 12,773
TWS Acquisition Corporation 06/16/25 Education 7.25% 3M L+450 9,648 9,515 9,648
Tyto Athene, LLC 04/03/28 Aerospace and Defense 6.25% 1M L+675 9,950 9,853 9,950
UBEO, LLC 04/03/24 Printing and Publishing 5.50% 1M L+500 4,710 4,676 4,687
Vision Purchaser Corporation 06/10/25 Media 7.75% 14,249 14,056 14,035
Wildcat Buyerco, Inc. 02/27/26 Electronics 6.00% 7,425 7,360 7,388
— —
Total First Lien Secured Debt 409,602 405,009 405,232
Cash and Cash Equivalents—18.9% - -
BlackRock Federal FD Institutional 30 11,013 11,013
US Bank Cash — —
Total Cash and Cash Equivalents 11,013 11,013
Total Investments and Cash Equivalents—592.7% $ 416,023 $ 416,246
Liabilities in Excess of Other Assets—(492.7)% (348,213 )
Members' Equity—100.0% $ 68,032

(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

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

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

Below is the financial information for PSLF:

Consolidated Statements of Assets and Liabilities
( In thousands)
September 30, 2021
Assets
Investments at fair value (cost—446,592 and 405,009, respectively) 446,088 $ 405,232
Cash and cash equivalents (cost—17,862 and 11,013, respectively) 17,862 11,013
Interest receivable 1,415 1,175
Prepaid expenses and other assets 921 —
Total assets 466,286 417,421
Liabilities
Distribution payable to Members 4,000 2,800
Payable for investments purchased — 12,793
Credit facility payable 9,000 224,000
2034 Asset-backed debt, net (par—246,000) 243,702 —
Notes payable to members 125,756 106,041
Interest payable on credit facility 1,995 1,499
Interest payable on notes to members 1,635 1,644
Accrued other expenses 645 612
Total liabilities 386,733 349,389
Members' equity 79,552 68,032
Total liabilities and members' equity 466,286 $ 417,421

All values are in US Dollars.

———————————

(1) As of March 31, 2022 and September 30, 2021, PSLF did not have any unfunded commitments to fund investments.

Consolidated Statements of Operations
(Unaudited)
( In thousands)
Six Months Ended March 31,
2021 2022 2021
Investment income:
Interest 7,698 $ 6,696 $ 15,269 $ 13,258
Other income 39 290 142 727
Total investment income 7,737 6,986 15,410 13,985
Expenses:
Interest expense on credit facility and asset-backed debt 2,046 1,498 3,654 3,250
Interest expense on notes to members 2,430 2,381 4,869 4,683
Administrative services expenses 293 293 586 586
Other general and administrative expenses 112 112 223 223
Total expenses 4,881 4,283 9,333 8,742
Net investment income 2,856 2,702 6,077 5,242
Realized and unrealized (loss) gain on investments and credit facility foreign   currency translations:
Net realized (loss) gain on investments 387 — 386 464
Net change in unrealized (depreciation) appreciation on:
Investments (1,233 ) 1,744 (727 ) 4,454
Net change in unrealized (depreciation) appreciation on investments (1,233 ) 1,744 (727 ) 4,454
Net realized and unrealized (loss) gain from investments (846 ) 1,744 (341 ) 4,919
Net increase in members' equity resulting from operations 2,010 $ 4,446 $ 5,736 $ 10,161

All values are in US Dollars.

———————————

(1) No management or incentive fees are payable by PSLF.

  1. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
Level 3: Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our Credit Facilities and our SBA debentures are classified as Level 3. Our 2024 Notes are classified as Level 1 and our 2026 Notes and 2026 Notes-2 are classified as Level 2, as they are financial instruments with readily observable market inputs. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.

The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information, disorderly transactions or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence were available. Corroborating evidence that would result in classifying these non-binding broker/dealer bids as a Level 2 asset includes observable orderly market-based transactions for the same or similar assets or other relevant observable market-based inputs that may be used in pricing an asset.

Our investments are generally structured as debt and equity investments in the form of first lien secured debt, second lien secured debt, subordinated debt and equity investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Ongoing reviews by our Investment Adviser and independent valuation firms are based on an assessment of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information including comparable transactions, performance multiples and yields, among other factors. These non-public investments valued using unobservable inputs are included in Level 3 of the fair value hierarchy.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities.

In addition to using the above inputs to value cash equivalents, investments, our SBA debentures, our 2024 Notes, our 2026 Notes, our 2026 Notes -2 and our Credit Facilities, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.

As outlined in the table below, some of our Level 3 investments using a market approach valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, may not have corroborating evidence, may be the result of a disorderly transaction and may be the result of consensus pricing. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such bids do not reflect the fair value of an investment, it may independently value such investment by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available. In accordance with ASC 820, we do not categorize any investments for which fair value is measured using the net asset value per share within the fair value hierarchy.

The remainder of our investment portfolio and our long-term Credit Facilities are valued using a market comparable or an enterprise market value technique. With respect to investments for which there is no readily available market value, the factors that our board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the pricing indicated by the external event, excluding transaction costs, is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment. Generally, an increase in a market yield will result in a decrease in the valuation of a debt investment, while a decrease in a market yield will have the opposite effect. Generally, an increase in an earnings before interest, taxes, depreciation and amortization, or EBITDA, multiple will result in an increase in the valuation of an investment, while a decrease in an EBITDA multiple will have the opposite effect.

Our Level 3 valuation techniques, unobservable inputs and ranges were categorized as follows for ASC 820 purposes:

Asset Category ( in thousands) Valuation Technique Unobservable Input Range of Input<br>(Weighted Average) (1)
First lien 45,522 Market Comparable Broker/Dealer bids or quotes N/A
First lien 621,702 Market Comparable Market yield 7.0% - 18.1% (9.1%)
Second lien 22,050 Market Comparable Broker/Dealer bids or quotes N/A
Second lien 101,405 Market Comparable Market yield 11.4% - 12.5% (12.0%)
Second lien 11,353 Enterprise Market Value EBITDA multiple 5.8x
Subordinated debt / corporate notes 109,865 Market Comparable Market yield 9.0% - 34.7% (16.9%)
Equity 210,890 Enterprise Market Value EBITDA multiple 2.8x - 23.3x (7.2x)
Equity 30,965 Enterprise Market Value DLOM(2) 16.6%
Total Level 3 investments 1,153,753
Debt Category ( in thousands)
Truist Credit Facility 215,899 Market Comparable Market yield 2.3%

All values are in US Dollars.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

(1) The weighted averages disclosed in the table above were weighted by their relative fair value.

(2) DLOM is defined as discount for lack of marketability.

Asset Category ( in thousands) Valuation Technique Unobservable Input Range of Input<br>(Weighted Average) (1)
First lien 90,266 Market Comparable Broker/Dealer bids or quotes N/A
First lien 462,264 Market Comparable Market yield 6.1% – 13.1% (8.1%)
Second lien 39,298 Market Comparable Broker/Dealer bids or quotes N/A
Second lien 126,509 Market Comparable Market yield 10.3% – 11.5% (10.7%)
Second lien 11,087 Enterprise Market Value EBITDA multiple 5.4x
Subordinated debt / corporate notes 121,170 Market Comparable Market yield 9.6% – 17.1% (12.5%)
Equity 278,486 Enterprise Market Value EBITDA multiple 2.6x – 18.5x (8.5x)
Equity 60,808 Enterprise Market Value DLOM(2) 9.3%
Equity 21,133 Market Comparable Market yield 20.4%
Total Level 3 investments 1,211,021
Debt Category ( in thousands)
Truist Credit Facility 314,813 Market Comparable Market yield 2.4%

All values are in US Dollars.

1. The weighted averages disclosed in the table above were weighted by their relative fair value.

2. DLOM is defined as discount for lack of marketability.

Our investments, cash and cash equivalents, Truist Credit Facility, SBA debentures, 2024 Notes, 2026 Notes and 2026 Notes-2 were categorized as follows in the fair value hierarchy:

Fair Value at March 31, 2022
Description ($ in thousands) Fair Value Level 1 Level 2 Level 3 Measured at Net Asset Value (1)
Debt investments $ 911,897 $ — $ — $ 911,897 $ —
Equity investments 302,060 396 — 241,856 59,808
Total investments 1,213,957 396 — 1,153,753 59,808
Cash and cash equivalents 26,251 26,251 — — —
Total investments and cash and cash equivalents $ 1,240,208 $ 26,647 $ — $ 1,153,753 $ 59,808
Truist Credit Facility $ 215,899 $ — $ — $ 215,899 $ —
SBA Debentures(2) 27,026 — — 27,026 —
2026 Notes(2) 146,316 — 146,316 — —
2026 Notes-2(2) 160,946 — 160,946 — —
Total debt $ 550,187 $ — $ 307,262 $ 242,925 $ —
(1) In accordance with ASC Subtopic 820-10, Fair Value Measurements and Disclosures, or ASC 820-10, our equity investment in PSLF is measured using the net asset value per share (or its equivalent) as a practical expedient for fair value, and thus has not been classified in the fair value hierarchy.
--- ---
(2) We elected not to apply ASC 825-10 to the SBA debentures, the 2026 Notes and the 2026 Notes-2, and thus the balance reported in the Consolidated Statement of Assets and Liabilities represents the carrying value. As of March 31, 2022, the carrying value of the SBA debentures approximates the fair value.
Fair Value at September 30, 2021
--- --- --- --- --- --- --- --- --- --- ---
Description ($ in thousands) Fair Value Level 1 Level 2 Level 3 Measured at Net Asset Value (1)
Debt investments $ 850,593 $ — $ — $ 850,593 $ —
Equity investments 404,697 3,110 — 360,428 41,160
Total investments 1,255,290 3,110 — 1,211,021 41,160
Cash and cash equivalents 20,357 20,357 — — —
Total investments and cash and cash equivalents $ 1,275,647 $ 23,467 $ — $ 1,211,021 $ 41,160
Truist Credit Facility $ 314,813 $ — $ — $ 314,813 —
SBA Debentures (2) 62,159 — — 62,159 —
2024 Notes (2) 84,503 84,503 — — —
2026 Notes (2) 145,865 — 145,865 — —
Total debt $ 607,340 $ 84,503 $ 145,865 $ 376,972 $ —
(1) In accordance with ASC Subtopic 820-10, Fair Value Measurements and Disclosures, or ASC 820-10, our equity investment in PSLF is measured using the net asset value per share (or its equivalent) as a practical expedient for fair value, and thus has not been classified in the fair value hierarchy.
--- ---
(2) We elected not to apply ASC 825-10 to the SBA debentures or the 2024 Notes and the 2026 Notes and thus the balance reported in the Consolidated Statement of Assets and Liabilities represents the carrying value. As of September 30, 2021, the carrying value of the SBA debentures approximates the fair value.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

The tables below show a reconciliation of the beginning and ending balances for investments measured at fair value using significant unobservable inputs (Level 3):

Six Months Ended March 31, 2022
Description ($ in thousands) Debt<br> investments Equity<br> investments Totals
Beginning Balance $ 850,593 $ 360,428 $ 1,211,021
Net realized (loss) gain 421 116,163 116,584
Net change in unrealized appreciation (14,269 ) (89,480 ) (103,749 )
Purchases, PIK interest, net discount accretion and non-cash exchanges 441,570 29,813 471,382
Sales, repayments and non-cash exchanges (366,418 ) (175,067 ) (541,485 )
Transfers in/out of Level 3 — — —
Ending Balance $ 911,897 $ 241,856 $ 1,153,753
Net change in unrealized appreciation reported within the net change in<br>   unrealized appreciation on investments in our Consolidated Statements of Operations<br>   attributable to our Level 3 assets still held at the reporting date $ (12,650 ) $ (90,848 ) $ (103,498 )
Six Months Ended March 31, 2021
--- --- --- --- --- --- --- --- --- ---
Description ($ in thousands) Debt<br> investments Equity<br> investments Totals
Beginning Balance $ 773,426 $ 270,754 $ 1,044,180
Net realized gain (loss) (19,629 ) 2,306 (17,323 )
Net change in unrealized depreciation 30,412 91,986 122,398
Purchases, PIK interest, net discount accretion and non-cash exchanges 129,950 21,087 151,037
Sales, repayments and non-cash exchanges (157,984 ) (9,602 ) (167,585 )
Transfers in/out of Level 3 — — —
Ending Balance $ 756,175 $ 376,531 $ 1,132,706
Net change in unrealized depreciation reported within the net change in<br>   unrealized depreciation on investments in our Consolidated Statements of Operations<br>   attributable to our Level 3 assets still held at the reporting date $ 30,710 $ 92,810 $ 123,520

The table below shows a reconciliation of the beginning and ending balances for liabilities measured at fair value using significant unobservable inputs (Level 3):

Six months ended March 31,
Long-Term Credit Facility 2022 2021
Beginning Balance (cost – $316,545 and $380,252, respectively) $ 314,813 $ 360,702
Net change in unrealized (depreciation) appreciation included in earnings (289 ) 16,873
Borrowings (1) 496,841 49,564
Repayments (1) (595,466 ) (77,271 )
Transfers in and/or out of Level 3 — —
Ending Balance (cost – $217,920 and $352,545, respectively) $ 215,899 $ 349,867
Temporary draws outstanding, at cost — 23,000
Ending Balance (cost – $217,920 and $375,545, respectively) $ 215,899 $ 372,867

(1) Excludes temporary draws.

As of March 31, 2022, we had outstanding non-U.S. dollar borrowings on our Credit Facility. Net change in fair value on foreign currency translation on outstanding borrowings is listed below ($ in thousands):

Foreign Currency Amount Borrowed Borrowing Cost Current Value Reset Date Change in Fair Value
British Pound £ 5,000 $ 6,696 $ 6,738 April 29, 2022 $ 42
British Pound £ 31,000 $ 42,724 $ 40,393 June 18, 2022 $ (2,331 )

As of September 30, 2021, we had outstanding non-U.S. dollar borrowings on our Truist Credit Facility. Net change in fair value on foreign currency translation on outstanding borrowings is listed below ($ in thousands):

Foreign Currency Amount Borrowed Borrowing Cost Current Value Reset Date Change in Fair Value
British Pound £ 29,000 $ 40,045 $ 39,102 December 17, 2021 $ (943 )

Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our Credit Facilities. We elected to use the fair value option for the Credit Facilities to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we did not incur any expenses relating to amendment costs on the Credit Facilities during the three and six months ended March 31, 2022 and 2021. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires us to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facilities are reported in our Consolidated Statements of Operations. We did not elect to apply ASC 825-10 to any other financial assets or liabilities, including the 2024 Notes, the 2026 Notes, 2026 Notes-2, and the SBA debentures.

For the three and six months ended March 31, 2022, the Credit Facility had a net change in unrealized depreciation of $1.3 million and $0.3 million, respectively. For the three and six months ended March 31, 2021, the Credit Facility and the 2023 Notes had a net change in unrealized appreciation of $3.8 million and $16.9 million,

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

respectively. As of March 31, 2022 and September 30, 2021, the net unrealized depreciation on the Credit Facility totaled $2.0 million and $2.7 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of our Credit Facilities in a manner consistent with the valuation process that our board of directors uses to value our investments.

  1. TRANSACTIONS WITH AFFILIATED COMPANIES

An affiliated portfolio company is a company in which we have ownership of 5% or more of its voting securities. A portfolio company is generally presumed to be a non-controlled affiliate when we own at least 5% but 25% or less of its voting securities and a controlled affiliate when we own more than 25% of its voting securities. Transactions related to our funded investments with both controlled and non-controlled affiliates for the six months ended March 31, 2022 were as follows:

Name of Investment Fair Value at<br>September 30, 2021 Gross<br>Additions(1) Gross<br>Reductions Net Change in<br>Appreciation /<br>(Depreciation) Fair Value at<br>March 31, 2022 Interest<br>Income PIK<br>Income Dividend Income Net Realized<br>Gains<br>(Losses)
Controlled Affiliates
AKW Holdings Limited $ 41,379 $ 10,403 $ — $ (570 ) $ 51,212 $ 1,664 $ — $ — $ —
Mailsouth Inc. 22,100 864 — (11,611 ) 11,353 — 877 — —
PennantPark Senior Loan Fund, LLC * 105,314 19,662 — (765 ) 124,212 2,946 — 4,235 —
PT Networks, LLC 134,125 9,917 (234,974 ) 90,933 0 — 2,674 — 140,898
RAM Energy LLC 81,710 — — 7,152 88,862 — — — —
Total Controlled Affiliates $ 384,628 $ 40,846 $ (234,974 ) $ 85,139 $ 275,640 $ 4,609 $ 3,551 $ 4,235 $ 140,898
Non-Controlled Affiliates
ETX Energy, LLC $ — $ — $ (31,274 ) $ 31,274 $ — $ — $ — $ — $ (31,274 )
MidOcean JF Holdings<br>   Corp. 50,161 — — (13,431 ) 36,730 — — — —
Total Non-Controlled<br>   Affiliates $ 50,161 $ — $ (31,274 ) $ 17,842 $ 36,730 $ — $ — $ — $ (31,274 )
Total Controlled and<br>   Non-Controlled Affiliates $ 434,790 $ 40,846 $ (266,248 ) $ 102,982 $ 312,370 $ 4,609 $ 3,551 $ 4,235 $ 109,624

(1) Includes PIK.

• We and Pantheon are the members of PSLF, a joint venture formed as a Delaware limited liability company that is not consolidated by us for financial reporting purposes. The members of PSLF make investments in the PSLF in the form of subordinated debt and equity interests, and all portfolio and other material decisions regarding PSLF must be submitted to PSLF’s four-person Member Designees’ Committee, which is comprised of two members appointed by each of us and Pantheon. Because management of PSLF is shared equally between us and Pantheon, we do not believe we control PSLF for purposes of the 1940 Act or otherwise.

  1. CHANGE IN NET ASSETS FROM OPERATIONS PER COMMON SHARE

The following information sets forth the computation of basic and diluted per share net increase in net assets resulting from operations:

Three Months Ended March 31, Six Months Ended March 31,
2022 2021 2022 2021
Numerator for net increase (decrease) in net assets resulting from operations $ 3,160 $ 38,495 $ 28,668 $ 109,629
Denominator for basic and diluted weighted average shares 66,747,256 67,045,105 66,897,817 67,045,105
Basic and diluted net increase (decrease) in net assets per share resulting from operations $ 0.05 $ 0.57 $ 0.43 $ 1.64
  1. CASH AND CASH EQUIVALENTS

Cash equivalents represent cash in money market funds pending investment in longer-term portfolio holdings. Our portfolio may consist of temporary investments in U.S. Treasury Bills (of varying maturities), repurchase agreements, money market funds or repurchase agreement-like treasury securities. These temporary investments with original maturities of 90 days or less are deemed cash equivalents and are included in the Consolidated Schedule of Investments. At the end of each fiscal quarter, we may take proactive steps to preserve investment flexibility for the next quarter by investing in cash equivalents, which is dependent upon the composition of our total assets at quarter-end. We may accomplish this in several ways, including purchasing U.S. Treasury Bills and closing out positions on a net cash basis after quarter-end, temporarily drawing down on the Credit Facilities, or utilizing repurchase agreements or other balance sheet transactions as are deemed appropriate for this purpose. These amounts are excluded from average adjusted gross assets for purposes of computing the Investment Adviser’s management fee. U.S. Treasury Bills with maturities greater than 60 days from the time of purchase are valued consistent with our valuation policy. As of March 31, 2022 and September 30, 2021, cash and cash equivalents consisted of money market funds in the amounts of $26.3 million and $20.4 million at fair value, respectively.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

  1. FINANCIAL HIGHLIGHTS

Below are the financial highlights ($ in thousands, except share and per share data):

Six Months Ended March 31,
2022 2021
Per Share Data:
Net asset value, beginning of period $ 9.85 $ 7.84
Net investment income (1) 0.36 0.25
Net change in realized and unrealized (loss) gain (1) 0.07 1.39
Net increase in net assets resulting from operations (1) 0.43 1.64
Distributions to stockholders (1), (2) (0.26 ) (0.24 )
Repurchase of common stock (1) 0.03 —
Net asset value, end of period $ 10.05 $ 9.24
Per share market value, end of period $ 7.78 $ 5.65
Total return* (3) 24.09 % 85.65 %
Shares outstanding at end of period 66,131,651 67,045,105
Ratios** / Supplemental Data:
Ratio of operating expenses to average net assets (4) 4.55 % 3.86 %
Ratio of debt related expenses to average net assets (5) 4.03 % 3.47 %
Ratio of total expenses to average net assets (5) 8.58 % 7.33 %
Ratio of net investment income to average net assets (5) 7.30 % 5.99 %
Net assets at end of period $ 664,325 $ 619,247
Weighted average debt outstanding $ 558,399 $ 569,210
Weighted average debt per share (1) $ 8.37 $ 0.01
Asset coverage per unit (6) $ 2,271 $ 2,335
Portfolio turnover ratio 35.66 % 25.88 %

* Not annualized for periods less than one year.

** Annualized for periods less than one year.

(1) Based on the weighted average shares outstanding for the respective periods.

(2) The tax status of distributions is calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP, and reported on Form 1099-DIV each calendar year.

(3) Based on the change in market price per share during the periods and assumes distributions, if any, are reinvested.

(4) Excludes debt-related costs.

(5) Includes interest and expenses on debt (annualized) as well as Credit Facility amendment, debt issuance costs and excludes debt extinguishment cost, if any, (not annualized).

(6) Includes SBA debentures outstanding.

(7) The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by the senior securities representing indebtedness at par (changed from fair value). This asset coverage ratio is multiplied by $1,000 to determine the asset coverage per unit. These amounts exclude SBA debentures from our asset coverage per unit computation pursuant to exemptive relief received from the SEC in June 2011.

  1. DEBT

The annualized weighted average cost of debt for the six months ended March 31, 2022 and 2021, inclusive of the fee on the undrawn commitment under the Truist Credit Facility and amortized upfront fees on SBA debentures, 2024 Notes, 2026 Notes and 2026 Notes-2, was 4.8% and 3.5%, respectively. As of March 31, 2022, in accordance with the 1940 Act, with certain limited exceptions, we were only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing, excluding SBA debentures, pursuant to exemptive relief from the SEC received in June 2011.

On February 5, 2019, our stockholders approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the Small Business Credit Availability Act, or SBCAA) as approved by our board of directors on November 13, 2018. As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), subject to compliance with certain disclosure requirements. As of March 31, 2022 and September 30, 2021, our asset coverage ratio, as computed in accordance with the 1940 Act, was 227% and 221%, respectively.

Truist Credit Facility

As of March 31, 2022, we had the multi-currency Truist Credit Facility for up to $465.0 million (increased from $435.0 million in December 2021) in borrowings with certain lenders and Truist Bank (formerly SunTrust Bank), acting as administrative agent, and JPMorgan Chase Bank, N.A., acting as syndication agent for the lenders. As of March 31, 2022 and September 30, 2021, we had $217.9 million and $316.5 million, respectively, in outstanding borrowings under the Truist Credit Facility. The Truist Credit Facility had a weighted average interest rate of 2.8% and 2.4%, respectively, exclusive of the fee on undrawn commitment, as of March 31, 2022 and September 30, 2021. The Truist Credit Facility is a revolving facility with a stated maturity date of September 4, 2024, a one-year term-out period on September 4, 2023 and pricing set at 225 basis points over LIBOR (or an alternative risk-free floating interest rate index). As of March 31, 2022 and September 30, 2021, we had $247.1 million and $118.5 million of unused borrowing capacity under the Truist Credit Facility, respectively, subject to leverage and borrowing base restrictions. The Truist Credit Facility is secured by substantially all of our assets, excluding assets held by SBIC II. As of March 31, 2022, we were in compliance with the terms of the Truist Credit Facility.

SBA Debentures

SBIC II is able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid-in and is subject to customary regulatory requirements including an examination by the SBA. We have funded SBIC II with $75.0 million of equity capital and it had SBA debentures outstanding of $27.5 million as of March 31, 2022 and September 30, 2021, respectively. SBA debentures are non-recourse to us and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. Under current SBA regulations, a SBIC may individually borrow to a maximum of $175.0 million, which is up to twice its potential regulatory capital, and as part of a group of SBICs under common control may borrow a maximum of $350 million in the aggregate.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

As of both March 31, 2022 and September 30, 2021, SBIC II had an initial $150.0 million in debt commitments, all of which were drawn. During the three and six months ended March 31, 2022, $36.0 million in SBA debentures were repaid, respectively. During both the three and six months ended March 31, 2021, there was $20.0 million in SBA debentures were repaid, respectively. As of both March 31, 2022 and September 30, 2021, the unamortized fees on the SBA debentures was $1.3 million, respectively. The SBA debentures’ upfront fees of 3.4% consist of a commitment fee of 1.0% and an issuance discount of 2.4%, which are being amortized.

Our fixed-rate SBA debentures were as follows ($ in thousands):

Issuance Dates Maturity Fixed All-in Coupon Rate (1) As of March 31, 2022<br>Principal Balance
September 20, 2017 September 1, 2027 2.9 % 27,500
Issuance Dates Maturity Fixed All-in Coupon Rate (1) As of September 30, 2021<br>Principal Balance
September 20, 2017 September 1, 2027 2.9 % $ 27,500
March 21, 2018 March 1, 2028 3.5 36,000
Weighted Average Rate / Total 3.2 % $ 63,500

(1) Excluding 3.4% of upfront fees.

The SBIC program is designed to stimulate the flow of capital into eligible businesses. Under SBA regulations, SBIC II is subject to regulatory requirements, including making investments in SBA eligible businesses, investing at least 25% of regulatory capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, prohibiting investment in certain industries and requiring capitalization thresholds that limit distributions to us, and is subject to periodic audits and examinations of its financial statements that are prepared on a basis of accounting other than GAAP (for example, fair value, as defined under ASC 820, is not required to be used for assets or liabilities for such compliance reporting). As of March 31, 2022, SBIC II was in compliance with its regulatory requirements.

2024 Notes

As of March 31, 2022 and September 30, 2021, we had zero and $86.3 million in aggregate principal amount of 2024 Notes outstanding, respectively. The 2024 Notes were redeemed on November 13, 2021 at a redemption price of $25.00 per 2024 Note, plus accrued and unpaid interest to November 13, 2021, pursuant to the indenture governing the 2024 Notes. Interest on the 2024 Notes was paid quarterly on January 15, April 15, July 15 and October 15, at a rate of 5.5% per year.

2026 Notes

In April 2021, we issued $150.0 million in aggregate principal amount of our 2026 Notes at a public offering price per note of 99.4%. Interest on the 2026 Notes is paid semi-annually on May 1 and November 1 of each year, at a rate of 4.50% per year, commencing November 1, 2021. The 2026 Notes mature on May 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes on any securities exchange or automated dealer quotation system.

2026 Notes-2

In October 2021, we issued $165.0 million in aggregate principal amount of our 2026 Notes-2 at a public offering price per note of 99.4%. Interest on the 2026 Notes-2 is paid semi-annually on May 1 and November 1 of each year, at a rate of 4.00% per year, commencing May 1, 2022. The 2026 Notes-2 mature on November 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes-2 are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes-2 are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes-2 on any securities exchange or automated dealer quotation system.

  1. COMMITMENTS AND CONTINGENCIES

From time to time, we, the Investment Adviser or the Administrator may be a party to legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Unfunded debt and equity investments, if any, are disclosed in the Consolidated Schedules of Investments. Under these arrangements, we may be required to supply a letter of credit to a third party if the portfolio company were to request a letter of credit. As of March 31, 2022 and September 30, 2021, we had $155.9 million and $104.8 million, respectively, in commitments to fund investments. For the same periods, there were no letters of credit issued.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

  1. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES

We must determine which, if any, of our unconsolidated controlled portfolio companies is a "significant subsidiary" within the meaning of Regulation S-X. We have determined that, as of September 30, 2021, PennantPark Senior Loan Fund, LLC, PT Networks, LLC and RAM Energy Holdings LLC triggered at least one of the significance tests. As a result and in accordance with Rule 3-09 of Regulation S-X, presented below is summarized unaudited financial information for RAM Energy Holdings LLC for the three and six months ended March 31, 2022 and 2021. Similarly, in accordance with Rule 4-08(g) of Regulation S-X, which requires summarized financial information to be included in the notes to the Company’s financial statements, please refer to Note 4 to review the Statement of Assets and Liabilities as well as the Statement of Operations for PennantPark Senior Loan Fund, LLC. PennantPark Senior Loan Fund, LLC did not meet the significance threshold under Rule 3-09 which requires separate audited financial statements. Our investment in PT Networks, LLC was realized on February 14, 2022.

a) RAM Energy Holdings LLC:

Three Months Ended March 31, Six Months Ended March 31,
Income Statement 2022 2021 2022 2021
Total revenue $ 5,062 $ 21,121 $ 17,796 $ 27,090
Total expenses (7,523 ) (10,357 ) (16,838 ) (17,697 )
Net income (loss) $ (2,460 ) $ 10,764 $ 958 $ 9,393

.

  1. STOCK REPURCHASE PROGRAM

On February 9, 2022, we announced a share repurchase program which allows us to repurchase up to $25 million of our outstanding common stock in the open market at prices below our net asset value as reported in our then most recently published consolidated financial statements. The shares may be purchased from time to time at prevailing market prices, through open market transactions, including block transactions. Unless extended by our board of directors, the program, which may be implemented at the discretion of management, will expire on the earlier of March 31, 2023 and the repurchase of $25 million of common stock. During the three months ended March 31, 2022, we repurchased 913,454 shares of common stock in open market transactions for an aggregate cost (including transaction costs) of $7.1 million. During the three months ended March 31, 2021, we did not make any repurchases of shares of our common stock.

  1. SUBSEQUENT EVENTS

On April 14, 2022, listing and trading of the Company's common stock commenced on the New York Stock Exchange after the Company voluntarily withdrew the principal listing of its common stock from The Nasdaq Stock Market LLC ("Nasdaq") effective at market close on April 13, 2022.

[•]

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of PennantPark Investment Corporation and its Subsidiaries

Results of Review of Interim Financial Statements

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated statement of assets and liabilities of PennantPark Investment Corporation and its Subsidiaries (collectively referred to as the Company), including the consolidated schedule of investments, as of March 31, 2022, and the related consolidated statements of operations and changes in net assets for the three-month and six-month periods ended March 31, 2022 and 2021, and cash flows for the six-month periods ended March 31, 2022 and 2021, and the related notes to the consolidated financial statements (collectively, the interim financial information or financial statements). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of assets and liabilities of the Company, including the consolidated schedule of investments, as of September 30, 2021, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended (not presented herein), and in our report dated November 17, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of assets and liabilities as of September 30, 2021, is fairly stated, in all material respects, in relation to the consolidated statement of assets and liabilities from which it has been derived.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

/s/ RSM US LLP

New York, New York

May 4, 2022

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

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

• our future operating results;

• our business prospects and the prospects of our prospective portfolio companies, including as a result of the current pandemic caused by COVID-19 or any worsening there of;

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

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

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

• the impact of a protracted decline in the liquidity of credit markets on our business;

• the impact of investments that we expect to make;

• the impact of fluctuations in interest rates and foreign exchange rates on our business and our portfolio companies;

• our contractual arrangements and relationships with third parties;

• the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

• the ability of our prospective portfolio companies to achieve their objectives;

• our expected financings and investments;

• the adequacy of our cash resources and working capital;

• the timing of cash flows, if any, from the operations of our prospective portfolio companies;

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

• the ability of our Investment Adviser to locate suitable investments for us and to monitor and administer our investments;

• the impact of future legislation and regulation on our business and our portfolio companies; and

• the impact of the United Kingdom’s withdrawal from the European Union and other world economic and political issues.

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

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

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

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

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

Overview

PennantPark Investment Corporation is a BDC whose objectives are to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments primarily made to U.S. middle-market companies in the form of first lien secured debt, second lien secured debt, subordinated debt and equity investments.

We believe middle-market companies offer attractive risk-reward to investors due to a limited amount of capital available for such companies. We seek to create a diversified portfolio that includes first lien secured debt, second lien secured debt, subordinated debt and equity investments by investing approximately $10 million to $50 million of capital, on average, in the securities of middle-market companies. We expect this investment size to vary proportionately with the size of our capital base. We use the term “middle-market” to refer to companies with annual revenues between $50 million and $1 billion. The companies in which we invest are typically highly leveraged, and, in most cases, are not rated by national rating agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poor’s system) from the national rating agencies. Securities rated below investment grade are often referred to as “leveraged loans” or “high yield” securities or “junk bonds” and are often higher risk compared to debt instruments that are rated above investment grade and have speculative characteristics. Our debt investments may generally range in maturity from three to ten years and are made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and geographical regions.

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

Organization and Structure of PennantPark Investment Corporation

PennantPark Investment Corporation, a Maryland corporation organized in January 2007, is a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for federal income tax purposes we have elected to be treated, and intend to qualify annually, as a RIC under the Code.

SBIC II, our wholly-owned subsidiary, was organized as a Delaware limited partnership in 2012. SBIC II received a license from the SBA to operate as a SBIC under Section 301(c) of the 1958 Act. SBIC II’s objectives are to generate both current income and capital appreciation through debt and equity investments generally by investing with us in SBA eligible businesses that meet the investment selection criteria used by PennantPark Investment.

Our investment activities are managed by the Investment Adviser. Under our Investment Management Agreement, we have agreed to pay our Investment Adviser an annual base management fee based on our average adjusted gross assets as well as an incentive fee based on our investment performance. PennantPark Investment, through the Investment Adviser, provides similar services to SBIC II under its investment management agreement. SBIC II’s investment management agreement does not affect the management and incentive fees on a consolidated basis. We have also entered into an Administration Agreement with the Administrator. Under our Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their respective staffs. PennantPark Investment, through the Administrator, provides similar services to SBIC II under its administration agreement with us. Our board of directors, a majority of whom are independent of us, provides overall supervision of our activities, and the Investment Adviser supervises our day-to-day activities.

COVID-19 Developments

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

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

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

• U.S. and global economic recovery;

• changes in interest rates, including LIBOR;

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

• disruptions to supply-chains and price volatility;

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

• uncertainty regarding future governmental and regulatory policies.

The business disruption and financial harm resulting from the COVID-19 pandemic experienced by some of our portfolio companies may reduce, over time, the amount of interest and dividend income that we receive from such investments and may require us to provide an increase of capital to such companies in the form of follow on investments. In connection with the adverse effects of the COVID-19 pandemic, we may also need to restructure the capitalization of some of our portfolio companies, which could result in reduced interest payments, an increase in the amount of PIK interest we receive or a permanent reduction in the value of our investments. If our net investment income decreases, the percentage of our cash flows dedicated to debt servicing and distribution payments to stockholders would subsequently increase. This has required us to reduce the amount of our distributions to stockholders as compared to distributions in previous years. As of March 31, 2022, we had one portfolio company on non-accrual status, and the continuing impact of the COVID-19 pandemic, or any worsening thereof, may result in portfolio investments being placed on non-accrual status in the future.

Additionally, as of March 31, 2022 and September 30, 2021, our asset coverage ratio, as computed in accordance with the 1940 Act, was 227% and 221%, respectively. The Truist Credit Facility includes standard covenants and events of default provisions. If we fail to make the required payments or breach the covenants therein, it could result in a default under the Truist Credit Facility. Failure to cure such default or obtain a waiver from the appropriate party would result in an event of default, and the lenders may accelerate the repayment of our indebtedness under the Truist Credit Facility, such that all amounts owed are due immediately at the time of default. Such an action would negatively affect our liquidity, business, financial condition, results of operations, cash flows and ability to pay distributions to our stockholders.

We are also subject to financial risks, including changes in market interest rates. As of March 31, 2022, our interest bearing debt portfolio consisted of 99% variable-rate investments. The variable-rate loans are usually based on a floating interest rate index such as LIBOR and typically have durations of three months after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In addition, the Truist Credit Facility also has floating rate interest provisions, with pricing set at 225 basis points over LIBOR (or an alternative risk-free floating interest rate index). In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced interest rates, which has caused LIBOR to decrease. Due to such rates, our gross investment income may decrease, which could result in a decrease in our net investment income if such decreases in LIBOR are not offset by, among other things, a corresponding increase in the spread over LIBOR that we earn on such loans or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” below.

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

LIBOR Developments

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. As of December 31, 2021, all non-U.S. dollar LIBOR publications have been phased out. The phase out of a majority of the U.S. dollar publications is currently delayed until June 30, 2023. The Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by the U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, it is not possible at this time to predict the effect of any such changes, any establishment of alternative reference rates, whether the COVID-19 pandemic will have further effect on LIBOR transition timelines, or other reforms to LIBOR that may be enacted.

The effect of the establishment of alternative reference rates or other reforms to LIBOR or other reference rates is complex and could have a material adverse effect on our business, financial condition and results of operations. Given the inherent differences between LIBOR and SOFR, or any other alternative benchmark rate that may be established, there are continuing uncertainties regarding the transition from LIBOR, including, but not limited to, the need to amend all contracts with LIBOR as the referenced rate and how this will impact the cost of variable rate debt and certain derivative financial instruments. In addition, SOFR or other replacement rates may fail to gain market acceptance. Any failure of SOFR or alternative reference rates to gain market acceptance could adversely affect the return on, value of and market for securities linked to such rates.

Factors such as the pace of the transition to replacement or reformed rates, the specific terms and parameters for and market acceptance of any alternative reference rate, prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to transition and develop appropriate systems and analytics for one or more alternative reference rates could also have a material adverse effect on our business, financial condition and results of operations.

Revenues

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

Expenses

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

• the cost of calculating our net asset value, including the cost of any third-party valuation services;

• the cost of effecting sales and repurchases of shares of our common stock and other securities;

• fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence and reviews of prospective investments or complementary businesses;

• expenses incurred by the Investment Adviser in performing due diligence and reviews of investments;

• transfer agent and custodial fees;

• fees and expenses associated with marketing efforts;

• federal and state registration fees and any exchange listing fees;

• federal, state, local and foreign taxes;

• independent directors’ fees and expenses;

• brokerage commissions;

• fidelity bond, directors and officers, errors and omissions liability insurance and other insurance premiums;

• direct costs such as printing, mailing, long distance telephone and staff;

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

• costs associated with our reporting and compliance obligations under the 1940 Act, the 1958 Act and applicable federal and state securities laws; and

• all other expenses incurred by either the Administrator or us in connection with administering our business, including payments under our Administration Agreement that will be based upon our allocable portion of overhead, and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their respective staffs.

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

PORTFOLIO AND INVESTMENT ACTIVITY

As of March 31, 2022, our portfolio totaled $1,214.0 million, which consisted of $667.2 million of first lien secured debt, $134.8 million of second lien secured debt, $109.9 million of subordinated debt (including $76.1 million in PSLF) and $302.1 million of preferred and common equity (including $48.1 million in PSLF). Our debt portfolio consisted of 99% variable-rate investments and 1% fixed-rate investments. As of March 31, 2022, we had one portfolio company on non-accrual, representing 3.5% and 2.8% of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $70.5 million as of March 31, 2022. Our overall portfolio consisted of 113 companies with an average investment size of $10.7 million, had a weighted average yield on interest bearing debt investments of 8.4% and was invested 55% in first lien secured debt, 11% in second lien secured debt, 9% in subordinated debt (including 6% in PSLF) and 25% in preferred and common equity (including 4% in PSLF). As of March 31, 2022, all of the investments held by PSLF were first lien secured debt.

As of September 30, 2021, our portfolio totaled $1,255.3 million and consisted of $552.5 million of first lien secured debt, $176.9 million of second lien secured debt, $121.2 million of subordinated debt (including $64.2 million in PSLF) and $404.7 million of preferred and common equity (including $41.2 million in PSLF). Our interest bearing debt portfolio consisted of 92% variable-rate investments and 8% fixed-rate investments. As of September 30, 2021, we had no portfolio companies on non-accrual. Overall, the portfolio had net unrealized appreciation of $34.2 million as of September 30, 2021. Our overall portfolio consisted of 97 companies with an average investment size of $12.9 million, had a weighted average yield on interest bearing debt investments of 9.0% and was invested 44% in first lien secured debt, 14% in second lien secured debt, 10% in subordinated debt (including 5% in PSLF) and 32% in preferred and common equity (including 3% in PSLF). As of September 30, 2021, all of the investments held by PSLF were first lien secured debt.

For the three months ended March 31, 2022, we invested $178.0 million in eight new and 29 existing portfolio companies with a weighted average yield on debt investments of 7.2%. Sales and repayments of investments for the three months ended March 31, 2022 totaled $405.5 million. For the six months ended March 31, 2022, we invested $473.1 million in 24 new and 59 existing portfolio companies with a weighted average yield on debt investments of 7.8%. Sales and repayments of investments for the six months ended March 31, 2022 totaled $537.7 million.

For the three months ended March 31, 2021, we invested $74.8 million in three new and eight existing portfolio companies with a weighted average yield on debt investments of 7.9%. Sales and repayments of investments for the three months ended March 31, 2021 totaled $65.0 million. For the six months ended March 31, 2021, we invested $143.0 million in seven new and 23 existing portfolio companies with a weighted average yield on debt investments of 8.8%. Sales and repayments of investments for the six months ended March 31, 2021 totaled $167.6 million.

PennantPark Senior Loan Fund, LLC

As of March 31, 2022, PSLF’s portfolio totaled $446.1 million, consisted of 60 companies with an average investment size of $7.4 million and had a weighted average yield on debt investments of 7.2%.

As of September 30, 2021, PSLF’s portfolio totaled $405.2 million, consisted of 47 companies with an average investment size of $8.6 million and had a weighted average yield on debt investments of 7.2%.

For the three months ended March 31, 2022, PSLF invested $27.4 million (of which $11.5 million was purchased from the Company) in six new portfolio companies with a weighted average yield on debt investments of 7.5%. PSLF’s sales and repayments of investments for the same period totaled $2.3 million. For the six months ended March 31, 2022, PSLF invested $78.1 million (of which $59.6 million was purchased from the Company) in 15 new and two existing portfolio companies with a weighted average yield on debt investments of 7.5%. PSLF’s sales and repayments of investments for the same period totaled $37.9 million.

For the three months ended March 31, 2021, PSLF invested $32.5 million (of which $15.5 million was purchased from the Company) in four new and two existing portfolio companies with a weighted average yield on debt investments of 8.0%. PSLF’s sales and repayments of investments for the same period totaled $4.9 million. For the six months ended March 31, 2021, PSLF invested $63.3 million (of which $37.8 million was purchased from the Company) in six new and six existing portfolio companies with a weighted average yield on debt investments of 7.5%. PSLF’s sales and repayments of investments for the same period totaled $40.7 million.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions, including the credit worthiness of our portfolio companies and the global outbreak of COVID-19. We may reclassify certain prior period

amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to ASC serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued. In addition to the discussion below, we describe our critical accounting policies in the notes to our Consolidated Financial Statements. We discuss our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report on Form 10-K. There have been no significant changes in our critical accounting estimates during the six months from those disclosed in our 2021 Annual Report on Form 10-K.

Investment Valuations

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

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

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

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

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

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

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

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

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

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

Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
Level 3: Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our Credit Facilities, 2026 Notes, 2026-2 Notes and our SBA debentures are classified as Level 3. Our 2024 Notes are classified as Level 1, as they were valued using the closing price from the primary exchange. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.

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

In addition to using the above inputs to value cash equivalents, investments, our SBA debentures, our 2024 Notes, our 2026 Notes, 2026 Notes-2 and our Credit Facilities, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.

Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our Credit Facilities. We elected to use the fair value option for the Credit Facilities to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we did not incur any expenses relating to amendment costs on the Credit Facilities for both the three months ended March 31, 2022 and 2021. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facilities are reported in our Consolidated Statements of Operations. We elect not to apply ASC 825-10 to any other financial assets or liabilities, including the 2024 Notes, 2026 Notes, 2026 Notes-2 and SBA debentures.

For the three and six months ended March 31, 2022, the Truist Credit Facility had a net change in unrealized depreciation of $1.3 million and $0.3 million, respectively. For the three and six months ended March 31, 2021, our Credit Facilities had a net change in unrealized appreciation of $3.8 million and $16.9 million, respectively. As of March 31, 2022 and September 30, 2021, the net unrealized depreciation on the Truist Credit Facility totaled $2.0 million and $1.7 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of our Credit Facilities in a manner consistent with the valuation process that the board of directors uses to value our investments.

Revenue Recognition

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

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

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

Foreign Currency Translation

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

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

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

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

Payment-in-Kind, or PIK Interest

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

Federal Income Taxes

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

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

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

For the three and six months ended March 31, 2022, we recorded a provision for taxes on net investment income of $0.2 million and $0.4 million respectively, all of which pertains to U.S. federal excise tax. For the three and six months ended March 31, 2021, we recorded a provision for taxes on net investment income of $0.2 million and $0.3 million respectively, all of which pertains to U.S. federal excise tax.

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

For the three and six months ended March 31, 2022, the Company recognized a provision for taxes of $5.1 million and $5.1 million, respectively, on net realized gain on investments by the Taxable Subsidiary. The provision for taxes on net realized gain on investments is the result of netting (i) the expected tax liability on the gains from the sales of investments which were realized during fiscal year ending September 30, 2022 and (ii) the expected tax benefit resulting from the use of loss carryforwards to offset such gains. For the three and six months ended March 31, 2021, the Company recognized a provision for taxes of zero on net realized gain on investments by the Taxable Subsidiary.

For the three and six months ended March 31, 2022, the Company recognized a provision for taxes of $(5.1) million and zero, respectively, on unrealized appreciation on investments by the Taxable Subsidiary. For the three and six months ended March 31, 2021, the Company recognized a provision for taxes of zero on unrealized appreciation on investments by the Taxable Subsidiary. During the three and six months ended March 31, 2022, the Company paid $4.0 million in taxes on realized gains on the sale of investments held by the Taxable Subsidiary, resulting in remaining tax liability of $1.1 million as of March 31, 2022 included under accrued other expenses in the consolidated statement of assets and liabilities.

We have formed the Taxable Subsidiary, which is subject to tax as a corporation. The Taxable Subsidiary allows us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.

RESULTS OF OPERATIONS

Set forth below are the results of operations for the three and six months ended March 31, 2022 and 2021.

Investment Income

Investment income for the three and six months ended March 31, 2022 was $24.3 million and $52.7 million, respectively, which was attributable to $14.5 million and $34.6 million from first lien secured debt, $6.3 million and $10.8 million from second lien secured debt, $0.4 million and $2.3 million from subordinated debt and $3.1 million and $4.9 million from preferred and common equity, respectively. This compares to Investment income for the three and six months ended March 31, 2021 was $19.2 million and $38.0 million, respectively, which was attributable to $10.9 million and $22.1 million from first lien secured debt, $5.8 million and $10.6 million from second lien secured debt, $1.7 million and $3.4 million from subordinated debt and $0.9 million and $1.9 million from preferred and common equity, respectively. The increase in investment income compared to the same periods in the prior year was primarily due to the increase in the size of our debt portfolio.

Expenses

Expenses for the three and six months ended March 31, 2022 totaled $12.7 million and $28.5 million, respectively. Base management fee for the same periods totaled $5.0 million and $10.1 million, performance base incentive fee for the same periods totaled zero and $2.7 million, debt related interest and expenses totaled $6.5 million and $13.4 million, general and administrative expenses totaled $1.0 million and $1.9 million and provision for taxes totaled $0.2 million and $0.4 million, respectively. This compares to net expenses for the three and six months ended March 31, 2021 totaled $10.5 million and $20.9 million, respectively. Base management fee for the same periods totaled $4.3 million and $8.4 million, debt related interest and expenses totaled $4.9 million and $9.9 million, general and administrative expenses totaled $1.1 million and $2.3 million and provision for taxes totaled $0.2 million and $0.3 million, respectively. The increase in expenses for the three months ended March 31, 2022 compared to the same period in the prior year was primarily due to increased financing costs .

Net Investment Income

Net investment income totaled $11.7 million and $24.2 million, or $0.18 and $0.36 per share, for the three and six months ended March 31, 2022, respectively. Net investment income totaled $8.8 million and $17.1 million, or $0.13 and $0.25 per share, for the three and six months ended March 31, 2021, respectively. The increase in net investment income compared to the same period in the prior year was primarily due to increased investment income.

Net Realized Gains or Losses

Sales and repayments of investments for the three and six months ended March 31, 2022 totaled $405.5 million and $537.7 million, respectively, and net realized gains totaled $142.8 million and $116.7 million, respectively. Sales and repayments of investments for the three and six months ended March 31, 2021 totaled $65.0 million and $167.6 million, respectively, and net realized gains (losses) totaled $0.3 million and ($17.3) million, respectively. The change in realized gains was primarily due to changes in the market conditions of our investments and the values at which they were realized.

Unrealized Appreciation or Depreciation on Investments and the Credit Facilities

For the three and six months ended March 31, 2022, we reported net change in unrealized depreciation on investments of $151.5 million and $104.7 million, respectively. For the three and six months ended March 31, 2021, we reported net change in unrealized appreciation on investments of $33.2 million and $126.7 million, respectively. As of March 31, 2022 and September 30, 2021, our net unrealized (depreciation) appreciation on investments totaled $(70.5) million and $34.2 million, respectively. The net change in unrealized depreciation on our investments compared to the same period in the prior year was primarily due to the reversal of the unrealized appreciation of PT Network Intermediate Holdings, LLC after realizing the investment.

For the three and six months ended March 31, 2022, the Truist Credit Facility had a net change in unrealized depreciation of $1.3 million and $0.3 million, respectively. For the three and six months ended March 31, 2021, the Truist Credit Facility had a net change in unrealized appreciation of $3.8 million and $16.9 million, respectively, respectively. As of March 31, 2022 and September 30, 2021, the net unrealized depreciation on the Credit Facilities totaled $2.0 million and $1.7 million, respectively. The net change in unrealized depreciation compared to the same periods in the prior year was primarily due to changes in the capital markets.

Net Change in Net Assets Resulting from Operations

Net change in net assets resulting from operations totaled $3.2 million and $28.7 million, or $0.05 and $0.43 per share, for the three and six months ended March 31, 2022, respectively. Net change in net assets resulting from operations totaled $38.5 million and $109.6 million, or $0.57 and $1.64 per share, for the three and six months ended March 31, 2021, respectively. The decrease in the net change in net assets from operations for the three and six months ended March 31, 2022 compared to the same periods in the prior year was primarily due to a decrease in unrealized appreciation.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are derived primarily from proceeds of securities offerings, debt capital and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and payments of fees and other operating expenses we incur. We have used, and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives. As of March 31, 2022, in accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing, excluding SBA debentures pursuant to exemptive relief from the SEC received in June 2011. This “Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Developments” section above.

On February 5, 2019, our stockholders approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the SBCAA) as approved by our board of directors on November 13, 2018. As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), subject to compliance with certain disclosure requirements.

As of March 31, 2022 and September 30, 2021, our asset coverage ratio, computed in accordance with the 1940 Act was 227% and 221%, respectively.

The annualized weighted average cost of debt for the six months ended March 31, 2022 and 2021, inclusive of the fee on the undrawn commitment and amendment costs on the Credit Facilities, amortized upfront fees on SBA debentures, was 4.8% and 3.5%, respectively.

As of March 31, 2022, we had the multi-currency Truist Credit Facility for up to $465.0 million (increased from $435.0 million in December 2021) in borrowings with certain lenders and Truist Bank, acting as administrative agent, and JPMorgan Chase Bank, N.A., acting as syndication agent for the lenders. As of March 31, 2022 and September 30, 2021, we had $217.9 million and $316.5 million, respectively, in outstanding borrowings under the Truist Credit Facility. The Truist Credit Facility had a weighted average interest rate of 2.8% and 2.4%, respectively, exclusive of the fee on undrawn commitments, as of March 31, 2022 and September 30, 2021. The Truist Credit Facility is a revolving facility with a stated maturity date of September 4, 2024, a one-year term-out period on September 4, 2023 and pricing set at 225 basis points over LIBOR (or an alternative risk-free floating interest rate index). As of March 31, 2022 and September 30, 2021, we had $247.1 million and $118.5 million of unused borrowing capacity under the Truist Credit Facility, respectively, subject to leverage and borrowing base restrictions. The Truist Credit Facility is secured by substantially all of our assets excluding assets held by SBIC II. As of March 31, 2022, we were in compliance with the terms of the Truist Credit Facility.

As of March 31, 2022 and September 30, 2021, we had zero and $86.3 million in aggregate principal amount of 2024 Notes outstanding, respectively. The 2024 Notes were redeemed on November 13, 2021 at a redemption price of $25.00 per 2024 Note, plus accrued and unpaid interest to November 13, 2021, pursuant to the indenture governing the 2024 Notes. Interest on the 2024 Notes was paid quarterly on January 15, April 15, July 15 and October 15, at a rate of 5.5% per year.

As of March 31, 2022, we had $150.0 million in aggregate principal amount of 2026 Notes outstanding. Interest on the 2026 Notes is paid semi-annually on May 1 and November 1, at a rate of 4.50% per year, commencing November 1, 2021. The 2026 Notes mature on May 1, 2026, and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are direct unsecured obligations and rank pari passu in right of payment with future unsecured unsubordinated indebtedness. The 2026 Notes are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities.

As of March 31, 2022, we had $165.0 million in aggregate principal amount of 2026 Notes-2 outstanding. Interest on the 2026 Notes is paid semi-annually on May 1 and November 1, at a rate of 4.0% per year, commencing May 1, 2022. The 2026 Notes-2 mature on November 1, 2026, and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes-2 are direct unsecured obligations and rank pari passu in right of payment with future unsecured unsubordinated indebtedness. The 2026 Notes-2 are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities.

We may raise additional equity or debt capital through both registered offerings off our shelf registration statement and private offerings of securities, by securitizing a portion of our investments or borrowing from the SBA, among other sources. Any future additional debt capital we incur, to the extent it is available, may be issued at a higher cost and on less favorable terms and conditions than the Truist Credit Facility and SBA debentures. Furthermore, the Truist Credit Facility availability depends on various covenants and restrictions. The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate or strategic purposes such as our stock repurchase program.

We have entered into certain contracts under which we have material future commitments. Under our Investment Management Agreement, which was reapproved by our board of directors (including a majority of our directors who are not interested persons of us or the Investment Adviser) in February 2022 PennantPark Investment Advisers serves as our investment adviser. PennantPark Investment, through the Investment Adviser, provides similar services to SBIC II under its investment management agreement with us. SBIC II’s investment management agreement does not affect the management or incentive fees that we pay to the Investment Adviser on a consolidated basis. Payments under our Investment Management Agreement in each reporting period are equal to (1) a management fee equal to a percentage of the value of our average adjusted gross assets and (2) an incentive fee based on our performance.

Under our Administration Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in February 2022 the Administrator furnishes us with office facilities and administrative services necessary to conduct our day-to-day operations. PennantPark Investment, through the Administrator, provides similar services to SBIC II under its administration agreements, which are intended to have no effect on the consolidated administration fee. If requested to provide significant managerial assistance to our portfolio companies, we or the Administrator will be paid an additional amount based on the services provided. Payment under our Administration Agreement is based upon our allocable portion of the Administrator’s overhead in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of our Chief Compliance Officer, Chief Financial Officer and their respective staffs.

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

SBIC II is able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid-in and is subject to customary regulatory requirements including an examination by the SBA. We have funded SBIC II with $75.0 million of equity capital and it had SBA debentures outstanding of $27.5 million and $63.5 million as of March 31, 2022 and September 30, 2021, respectively. SBA debentures are non-recourse to us and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. Under current SBA regulations, a SBIC may individually borrow up to a maximum of $175.0 million, which is up to twice its potential regulatory capital, and as part of a group of SBICs under common control may borrow a maximum of $350 million in the aggregate.

As of both March 31, 2022 and September 30, 2021, SBIC II had an initial $150.0 million in debt commitments, all of which were drawn. During the three and six months ended March 31, 2022, $36.0 million in SBA debentures were repaid, respectively. During both the three and six months ended March 31, 2021, there was $20.0 million in SBA debentures were repaid, respectively. As of both March 31, 2022 and September 30, 2021, the unamortized fees on the SBA debentures was $1.3 million, respectively. The SBA debentures’ upfront fees of 3.4% consist of a commitment fee of 1.0% and an issuance discount of 2.4%, which are being amortized.

Our fixed-rate SBA debentures as of March 31, 2022 and September 30, 2021 were as follows:

Issuance Dates Maturity Fixed All-in Coupon Rate (1) As of March 31, 2022<br>Principal Balance
September 20, 2017 September 1, 2027 2.9 % 27,500
Issuance Dates Maturity Fixed All-in Coupon Rate (1) As of September 30, 2021<br>Principal Balance
September 20, 2017 September 1, 2027 2.9 % $ 27,500
March 21, 2018 March 1, 2028 3.5 36,000
Weighted Average Rate / Total 3.2 % $ 63,500

(1) Excluding 3.4% of upfront fees.

The SBIC program is designed to stimulate the flow of capital into eligible businesses. Under SBA regulations, SBIC II is subject to regulatory requirements, including making investments in SBA eligible businesses, investing at least 25% of regulatory capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, prohibiting investment in certain industries and requiring capitalization thresholds that limit distributions to us, and is subject to periodic audits and examinations of their financial statements that are prepared on a basis of accounting other than GAAP (for example, fair value, as defined under ASC 820, is not required to be used for assets or liabilities for such compliance reporting). As of March 31, 2022, SBIC II was in compliance with their regulatory requirements.

In accordance with the 1940 Act, with certain limited exceptions, PennantPark Investment is only allowed to borrow amounts such that our required 150% asset coverage ratio is met after such borrowing. As of March 31, 2022 and September 30, 2021, we excluded the principal amounts of our SBA debentures from our asset coverage ratio pursuant to SEC exemptive relief. In 2011, we received exemptive relief from the SEC allowing us to modify the asset coverage ratio requirement to exclude the SBA debentures from the calculation. Accordingly, our ratio of total assets on a consolidated basis to outstanding indebtedness may be less than 150% which, while providing increased investment flexibility, also increases our exposure to risks associated with leverage.

As of March 31, 2022 and September 30, 2021, we had cash and cash equivalents of $26.3 million and $20.4 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to take advantage of market opportunities.

Our operating activities provided cash of $89.8 million for the six months ended March 31, 2022, and our financing activities used cash of $83.9 million for the same period. Our operating activities provided cash primarily due to our investment activities and our financing activities used cash primarily due to the repayments under the Truist Credit Facility.

Our operating activities provided cash of $46.8 million for the six months ended March 31, 2021 and our financing activities used cash of $38.8 million for the same period. Our operating activities provided cash primarily from our investment activities and our financing activities used cash primarily to pay down the Truist Credit Facility and our SBA Debentures.

PennantPark Senior Loan Fund, LLC

In July 2020, we and Pantheon formed PSLF, an unconsolidated joint venture. PSLF invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSLF was formed as a Delaware limited liability company. As of March 31, 2022 and September 30, 2021, PSLF had total assets of $468.6 million and $417.4 million, respectively. PSLF’s portfolio consisted of debt investments in 60 and 47 portfolio companies as of March 31, 2022 and September 30, 2021, respectively. As of the same dates, we and Pantheon had remaining commitments to fund first lien secured debt and equity interests in PSLF in an aggregate amount of $19.7 and $12.8 million, respectively. As of March 31, 2022, at fair value, the largest investment in a single portfolio company in PSLF was $16.7 million and the five largest investments totaled $73.9 million. As of September 30, 2021, at fair value, the largest investment in a single portfolio company in PSLF was $16.8 million and the five largest investments totaled $74.4 million. PSLF invests in portfolio companies in the same industries in which we may directly invest.

We provide capital to PSLF in the form of subordinated notes and equity interests. As of March 31, 2022 and September 30, 2021, we and Pantheon owned 60.5% and 39.5%, respectively, of each of the outstanding subordinated notes and equity interests of PSLF. As of March 31, 2022 and September 30, 2021 our investment in PSLF consisted of subordinated notes of $76.1 million (additional $11.9 million unfunded) and $64.2 million, respectively, and equity interests of $48.1 million (additional $7.7 million unfunded) and $41.2 million, respectively.

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

Additionally, PSLF, through its wholly-owned subsidiary, or PSLF Subsidiary, has entered into a $225.0 million (reduced from $275.0 million on March 2, 2022) senior secured revolving credit facility which bears interest at SOFR (or an alternative risk-free interest rate index) plus 255 basis points during the investment period, or the PSLF Credit Facility, with BNP Paribas, subject to leverage and borrowing base restrictions.

In March 2022, PSLF completed a $304.0 million debt securitization in the form of a collateralized loan obligation, or the “2034 Asset-Backed Debt”. The 2034 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO IV, Ltd., a wholly-owned and consolidated subsidiary of PSLF, consisting primarily of middle market loans and participation interests in middle market loans. The 2034 Asset-Backed Debt is scheduled to mature in April 2034. On the closing date of the transaction, in consideration of PSLF’s transfer to PennantPark CLO IV, Ltd. of the initial closing date loan portfolio, which included loans distributed to PSLF by certain of its wholly owned subsidiaries and us, PennantPark CLO IV, Ltd. transferred to PSLF 100% of the Preferred Shares of PennantPark CLO IV, Ltd. and 100% of the Subordinated Notes issued by PennantPark CLO IV, Ltd.

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

($ in thousands) March 31, 2022 September 30, 2021
Total investments $ 446,088 $ 405,232
Weighted average cost yield on income producing investments 7.2 % 7.1 %
Number of portfolio companies in PSLF 60 47
Largest portfolio company investment $ 16,727 $ 16,817
Total of five largest portfolio company investments $ 73,858 $ 74,445

Below is a listing of PSLF’s individual investments as of March 31, 2022:

Issuer Name Maturity Industry Current<br> Coupon Basis Point<br>Spread Above<br>Index (1) Par Cost Fair Value (2)
First Lien Secured Debt - 560.7%
Ad.net Acquisition, LLC 5/6/2026 Media 7.00 % 3M L+600 4,963 $ 4,963 $ 4,963
Altamira Technologies, LLC 7/24/2025 Aerospace and Defense 9.00 % 3M L+800 896 888 860
American Insulated Glass, LLC 12/21/2023 Building Materials 6.50 % 3M L+550 12,560 12,508 12,560
Any Hour Services 7/21/2027 Personal, Food and Miscellaneous Services 6.75 % 3M L+575 6,484 6,475 6,484
Apex Service Partners, LLC 7/31/2025 Personal, Food and Miscellaneous Services 6.27 % 1M L+550 6,569 6,492 6,569
Apex Service Partners, LLC Term Loan B 7/31/2025 Personal, Food and Miscellaneous Services 6.55 % — 3,323 3,294 3,323
Applied Technical Services, LLC 12/29/2026 Environmental Services 6.75 % 3M L+575 7,406 7,313 7,314
Bottom Line Systems, LLC 2/13/2023 Healthcare, Education and Childcare 6.25 % 3M L+550 13,729 13,710 13,729
CF512, Inc. 8/20/2026 Media 7.00 % 3M L+600 2,992 2,963 2,963
Crash Champions, LLC 8/5/2025 Auto Sector 6.00 % 3M L+500 5,955 5,839 5,806
Dr. Squatch, LLC 8/27/2026 Personal and Non-Durable Consumer Products 7.00 % 3M L+600 6,484 6,357 6,484
DRS Holdings III, Inc. 11/3/2025 Consumer Products 6.75 % 3M L+575 13,360 13,280 13,293
Duraco Specialty Tapes, LLC 6/30/2024 Containers and Packaging 6.50 % 1M L+550 4,000 3,938 3,932
ECL Entertainment, LLC 3/31/2028 Hotels, Motels, Inns and Gaming 8.25 % 3M L+750 4,581 4,581 4,600
ECM Industries, LLC 12/23/2025 Electronics 5.75 % 3M L+475 2,827 2,758 2,770
Global Holdings InterCo LLC 3/16/2026 Banking, Finance, Insurance & Real Estate 7.00 % 3M L+600 7,425 7,392 7,351
Graffiti Buyer, Inc. 8/10/2027 Distribution 6.75 % 3M L+575 1,984 1,946 1,930
Hancock Roofing and Construction L.L.C. 12/31/2026 Insurance 6.26 % 3M L+500 5,925 5,925 5,925
Holdco Sands Intermediate, LLC 11/23/2028 Aerospace and Defense 7.00 % 3M L+600 4,000 3,926 3,920
HW Holdco, LLC 12/10/2024 Media 6.44 % 1M L+575 14,513 14,350 14,222
IG Investments Holdings, LLC 9/22/2028 Business Services 7.01 % 3M L+600 4,496 4,406 4,428
Imagine Acquisitionco, Inc. 11/15/2027 Software 6.50 % 3M L+550 3,678 3,610 3,605
Integrity Marketing Acquisition, LLC 8/27/2025 Insurance 6.75 % 1M L+575 7,828 7,785 7,753
K2 Pure Solutions NoCal, L.P. 12/20/2023 Chemicals, Plastics and Rubber 9.00 % 1M L+800 14,513 14,347 14,367
Lash OpCo, LLC 2/18/2027 Consumer Products 8.01 % 3M L+700 9,975 9,840 9,975
LAV Gear Holdings, Inc. 10/31/2024 Leisure, Amusement, Motion Pictures, Entertainment 8.50 % 3M L+750 2,131 2,120 2,082
Lightspeed Buyer Inc. 2/3/2026 Healthcare, Education and Childcare 6.50 % 1M L+575 12,408 12,153 12,284
Lombart Brothers, Inc. 4/13/2023 Healthcare, Education and Childcare 7.25 % 3M L+625 16,727 16,689 16,727
MAG DS Corp. 4/1/2027 Aerospace and Defense 6.50 % 3M L+550 5,600 5,117 5,040
Mars Acquisition Holdings Corp. 5/14/2026 Media 6.50 % 1M L+550 7,960 7,897 7,900
MBS Holdings, Inc. 4/16/2027 Telecommunications 6.75 % 3M L+575 7,444 7,359 7,369
MeritDirect, LLC 5/23/2024 Media 6.50 % 3M L+550 13,130 13,022 13,130
Municipal Emergency Services, Inc. 9/28/2027 Distribution 6.00 % 3M L+500 4,175 4,108 4,037
NBH Group LLC 8/19/2026 Healthcare, Education and Childcare 6.50 % 1M L+650 7,542 7,456 7,505
OIS Management Services, LLC 7/9/2026 Healthcare, Education and Childcare 5.75 % 3M L+475 3,883 3,845 3,844
PlayPower, Inc. 5/8/2026 Consumer Products 6.50 % 3M L+550 2,594 2,491 2,447
Quantic Electronics, LLC 11/19/2026 Aerospace and Defense 7.25 % 1M L+625 3,429 3,362 3,361
Radius Aerospace, Inc. 3/31/2025 Aerospace and Defense 6.75 % 3M L+575 12,784 12,665 12,656
Rancho Health MSO, Inc. 12/18/2025 Healthcare, Education and Childcare 6.75 % 3M L+575 5,207 5,207 5,207
Recteq, LLC 1/29/2026 Consumer Products 7.00 % 3M L+600 9,900 9,750 9,752
Research Now Group, LLC and Dynata, LLC 12/20/2024 Business Services 6.50 % 3M L+550 14,618 14,495 14,329
Riverpoint Medical, LLC 6/20/2025 Healthcare, Education and Childcare 6.75 % 3M L+575 3,229 3,207 3,220
Sales Benchmark Index LLC 1/3/2025 Business Services 7.75 % 3M L+600 7,267 7,164 7,267
Sargent & Greenleaf Inc. 12/20/2024 Electronics 7.00 % 3M L+550 5,137 5,137 5,137
Signature Systems Holding Company 5/3/2024 Chemicals, Plastics and Rubber 7.50 % 1M L+650 13,125 13,024 13,125
Solutionreach, Inc. 1/17/2024 Communications 6.75 % 1M L+575 11,815 11,767 11,295
STV Group Incorporated 12/11/2026 Transportation 5.71 % 1M L+525 12,099 12,024 11,736
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) 8/16/2027 Aerospace and Defense 7.01 % 1M L+600 4,988 4,889 4,823
TAC LifePort Purchaser, LLC 3/1/2026 Aerospace and Defense 7.00 % 3M L+600 4,646 4,646 4,646
TeleGuam Holdings, LLC 11/20/2025 Telecommunications 5.50 % 1M L+450 4,566 4,544 4,521
Teneo Holdings LLC 7/18/2025 Financial Services 6.25 % 1M L+525 2,981 2,967 2,946
The Bluebird Group LLC 7/27/2026 Business Services 8.00 % 3M L+700 3,000 3,000 3,060
The Vertex Companies, LLC 8/30/2027 Business Services 6.50 % 1M L+550 4,554 4,505 4,495
TPC Canada Parent, Inc. and TPC US Parent, LLC 11/24/2025 Food 6.25 % 3M L+525 5,565 5,401 5,398
TVC Enterprises, LLC 3/26/2026 Transportation 7.00 % 1M L+575 12,709 12,654 12,455
TWS Acquisition Corporation 6/16/2025 Education 7.25 % 3M L+625 9,145 9,101 9,145
Tyto Athene, LLC 4/3/2028 Aerospace and Defense 6.25 % 3M L+550 9,925 9,846 9,677
UBEO, LLC 4/3/2024 Printing and Publishing 5.51 % 1M L+450 4,686 4,664 4,592
Vision Purchaser Corporation 6/10/2025 Media 7.75 % 6M L+675 14,212 14,054 14,212
Wildcat Buyerco, Inc. 2/27/2026 Electronics 6.76 % 3M L+575 10,120 10,023 10,120
Zips Car Wash, LLC 3/1/2024 Business Services 7.75 % 3M L+675 7,498 7,356 7,423
Total First Lien Secured Debt 446,592 446,088
Total Investments - 560.7%
Cash and Cash Equivalents - 22.5%
--- --- --- --- --- ---
BlackRock Federal FD Institutional 30 17,862 17,862
Total Cash and Cash Equivalents 17,862 17,862
Total Investments and Cash Equivalents - 583.2% $ 464,454 $ 463,950
Liabilities in Excess of Other Assets — (483.2)% (384,398 )
Members' Equity—100.0% $ 79,552

(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR, or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

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

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

Below is a listing of PSLF’s individual investments as of September 30, 2021:

Issuer Name Maturity Industry Current<br> Coupon Basis Point<br>Spread Above<br>Index (1) Par Cost Fair Value (2)
First Lien Secured Debt - 570.7%
Ad.net Acquisition, LLC 05/06/26 Media 7.00% 3M L + 600 $ 4,988 $ 4,920 $ 4,913
Altamira Technologies, LLC 07/24/25 Aerospace and Defense 8.00% 3M L+700 921 912 864
American Insulated Glass, LLC 12/21/23 Building Materials 6.50% 3M L+550 14,625 14,481 14,479
Any Hour Services 07/21/27 Personal, Food and Miscellaneous Services 6.75% 1M L+525 6,500 6,378 6,370
Apex Service Partners, LLC 07/31/25 Personal, Food and Miscellaneous Services 6.25% 1M L+550 6,569 6,518 6,504
Apex Service Partners, LLC Term Loan B 07/31/25 Personal, Food and Miscellaneous Services 6.55% — 3,347 3,313 3,313
Applied Technical Services, LLC 12/29/26 Environmental Services 6.75% 3M L+575 7,444 7,336 7,295
Bottom Line Systems, LLC 02/13/23 Healthcare, Education and Childcare 6.25% 1M L+550 13,729 13,674 13,729
Crash Champions, LLC 08/05/25 Auto Sector 6.00% 1M L+525 5,985 5,873 5,865
DRS Holdings III, Inc. 11/03/25 Consumer Products 7.25% 1M L+625 13,428 13,335 13,334
ECL Entertainment, LLC 03/31/28 Hotels, Motels, Inns and Gaming 8.25% 3M L+750 4,604 4,560 4,707
ECM Industries, LLC 12/23/25 Electronics 5.50% 3M L+450 2,827 2,805 2,770
Global Holdings InterCo LLC 03/16/26 Banking, Finance, Insurance & Real Estate 7.00% 3M L+600 7,463 7,360 7,425
Hancock Roofing and Construction L.L.C. 12/31/26 Insurance 6.00% 3M L+500 5,955 5,819 5,895
Holdco Sands Intermediate, LLC 12/19/25 Aerospace and Defense 7.50% 3M L+600 12,071 11,934 12,010
HW Holdco, LLC 12/10/24 Media 5.50% 3M L+450 14,588 14,499 14,442
IMIA Holdings, Inc. 04/09/27 Aerospace and Defense 6.75% 3M L+600 9,059 8,890 8,878
Integrity Marketing Acquisition, LLC 08/27/25 Insurance 6.50% 3M L+550 7,868 7,803 7,829
Juniper Landscaping of Florida, LLC 12/22/21 Personal, Food and Miscellaneous Services 6.50% 3M L+550 9,420 9,420 9,420
K2 Pure Solutions NoCal, L.P. 12/20/23 Chemicals, Plastics and Rubber 8.00% 1M L+700 14,588 14,479 14,199
LAV Gear Holdings, Inc. 10/31/24 Leisure, Amusement, Motion Pictures, Entertainment 8.50% 3M L+750 2,120 2,107 1,987
Lightspeed Buyer Inc. 02/03/26 Healthcare, Education and Childcare 6.75% 1M L+550 12,472 12,273 12,472
Lombart Brothers, Inc. 04/13/23 Healthcare, Education and Childcare 7.25% 1M L+825 16,817 16,729 16,817
MAG DS Corp. 04/01/27 Aerospace and Defense 6.50% 1M L+550 5,837 5,581 5,253
Mars Acquisition Holdings Corp. 05/14/26 Media 6.50% 1M L+575 8,000 7,852 7,920
MBS Holdings, Inc. 04/16/27 Telecommunications 6.75% 3M L+550 7,481 7,338 7,332
MeritDirect, LLC 05/23/24 Media 6.50% 3M L+550 13,386 13,272 13,252
PlayPower, Inc. 05/08/26 Consumer Products 5.65% 3M L+575 3,805 3,778 3,736
Radius Aerospace, Inc. 03/31/25 Aerospace and Defense 6.75% 3M L+600 13,335 13,202 13,068
Rancho Health MSO, Inc. 12/18/25 Healthcare, Education and Childcare 6.75% 3M L+550 5,232 5,140 5,232
Recteq, LLC 01/29/26 Consumer Products 7.00% 3M L+450 9,950 9,775 9,851
Research Now Group, LLC and Dynata, LLC 12/20/24 Business Services 6.50% 3M L+600 14,695 14,602 14,508
Riverpoint Medical, LLC 06/20/25 Healthcare, Education and Childcare 5.50% 1M L+550 3,246 3,217 3,206
Sales Benchmark Index LLC 01/03/25 Business Services 7.75% 3M L+750 7,632 7,526 7,442
Sargent & Greenleaf Inc. 12/20/24 Electronics 7.00% 3M L+575 5,232 5,181 5,232
Signature Systems Holding Company 05/03/24 Chemicals, Plastics and Rubber 8.50% 1M L+525 13,500 13,397 13,365
Solutionreach, Inc. 01/17/24 Communications 6.75% 1M L+600 11,882 11,758 11,882
STV Group Incorporated 12/11/26 Transportation 5.33% 1M L+450 12,099 12,003 12,038
TAC LifePort Purchaser, LLC 03/01/26 Aerospace and Defense 7.00% 1M L+525 4,967 4,891 4,966
TeleGuam Holdings, LLC 11/20/25 Telecommunications 5.50% 3M L+525 4,593 4,558 4,547
Teneo Holdings LLC 07/18/25 Financial Services 6.25% 1M L+575 2,997 2,884 2,981
TPC Canada Parent, Inc. and TPC US Parent, LLC 11/24/25 Food 6.25% 1M L+625 5,593 5,537 5,425
TVC Enterprises, LLC 03/26/26 Transportation 6.75% 3M L+550 12,773 12,643 12,773
TWS Acquisition Corporation 06/16/25 Education 7.25% 3M L+450 9,648 9,515 9,648
Tyto Athene, LLC 04/03/28 Aerospace and Defense 6.25% 1M L+675 9,950 9,853 9,950
UBEO, LLC 04/03/24 Printing and Publishing 5.50% 1M L+500 4,710 4,676 4,687
Vision Purchaser Corporation 06/10/25 Media 7.75% 14,249 14,056 14,035
Wildcat Buyerco, Inc. 02/27/26 Electronics 6.00% 7,425 7,360 7,388
— —
Total First Lien Secured Debt 409,602 405,009 405,232
Cash and Cash Equivalents—18.9% - -
BlackRock Federal FD Institutional 30 11,013 11,013
US Bank Cash — —
Total Cash and Cash Equivalents 11,013 11,013
Total Investments and Cash Equivalents—592.7% $ 416,023 $ 416,246
Liabilities in Excess of Other Assets—(492.7)% (348,213 )
Members' Equity—100.0% $ 68,032

(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR, or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

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

Below is the financial information for PSLF:

Consolidated Statements of Assets and Liabilities
( In thousands)
September 30, 2021
Assets
Investments at fair value (cost—446,592 and 405,009, respectively) 446,088 $ 405,232
Cash and cash equivalents (cost—17,862 and 11,013, respectively) 17,862 11,013
Interest receivable 1,415 1,175
Prepaid expenses and other assets 921 —
Total assets 466,286 417,421
Liabilities
Distribution payable to Members 4,000 2,800
Payable for investments purchased — 12,793
Credit facility payable 9,000 224,000
2034 Asset-backed debt, net (par—246,000) 243,702 —
Notes payable to members 125,756 106,041
Interest payable on credit facility 1,995 1,499
Interest payable on notes to members 1,635 1,644
Accrued other expenses 645 612
Total liabilities 386,733 349,389
Members' equity 79,552 68,032
Total liabilities and members' equity 466,286 $ 417,421

All values are in US Dollars.

(1) As of March 31, 2022 and September 30, 2021, PSLF did not have any unfunded commitments to fund investments.

Consolidated Statements of Operations
(Unaudited)
( In thousands)
Six Months Ended March 31,
2021 2022 2021
Investment income:
Interest 7,698 $ 6,696 $ 15,269 $ 13,258
Other income 39 290 142 727
Total investment income 7,737 6,986 15,410 13,985
Expenses:
Interest expense on credit facility and asset-backed debt 2,046 1,498 3,654 3,250
Interest expense on notes to members 2,430 2,381 4,869 4,683
Administrative services expenses 293 293 586 586
Other general and administrative expenses 112 112 223 223
Total expenses 4,881 4,283 9,333 8,742
Net investment income 2,856 2,702 6,077 5,242
Realized and unrealized (loss) gain on investments and credit facility foreign   currency translations:
Net realized (loss) gain on investments 387 — 386 464
Net change in unrealized (depreciation) appreciation on:
Investments (1,233 ) 1,744 (727 ) 4,454
Net change in unrealized (depreciation) appreciation on investments (1,233 ) 1,744 (727 ) 4,454
Net realized and unrealized (loss) gain from investments (846 ) 1,744 (341 ) 4,919
Net increase in members' equity resulting from operations 2,010 $ 4,446 $ 5,736 $ 10,161

All values are in US Dollars.

(1) No management or incentive fees are payable by PSLF.

Recent Developments

On April 14, 2022, listing and trading of the Company's common stock commenced on the New York Stock Exchange after the Company voluntarily withdrew the principal listing of its common stock from The Nasdaq Stock Market LLC ("Nasdaq") effective at market close on April 13, 2022.

Distributions

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

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

During the three and six months ended March 31, 2022, we declared distributions of $0.14 and $0.26 per share, for total distributions of $9.4 million and $17.4 million, respectively. For the same periods in the prior year, we declared distributions of $0.12 and $0.24 per share, for total distributions of $8.0 million and $16.1 million, respectively. We monitor available net investment income to determine if a return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the SEC.

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

We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions.

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

Recent Accounting Pronouncements

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

Stock Repurchase Program

On February 9, 2022, we announced a share repurchase program which allows us to repurchase up to $25 million of our outstanding common stock in the open market at prices below our net asset value as reported in our then most recently published consolidated financial statements. The shares may be purchased from time to time at prevailing market prices, through open market transactions, including block transactions. Unless extended by our board of directors, the program, which may be implemented at the discretion of management, will expire on the earlier of March 31, 2023 and the repurchase of $25 million of common stock. During the three months ended March 31, 2022, we repurchased 913,454 shares of common stock in open market transactions for an aggregate cost (including transaction costs) of $7.1 million. During the three months ended March 31, 2021, we did not make any repurchases of shares of our common stock.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. As of March 31, 2022, our debt portfolio consisted of 99% variable-rate investments and 5% fixed rate investments. The variable-rate loans are usually based on a LIBOR (or an alternative risk-free floating interest rate index) rate and typically have durations of three months after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In regards to variable-rate instruments with a floor, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor. In contrast, our cost of funds, to the extent it is not fixed, will fluctuate with changes in interest rates since it has no floor.

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

Change in Interest Rates Change in Interest Income, <br>Net of Interest Expense<br> (in thousands) Change in Interest Income, <br>Net of Interest <br>Expense Per Share
Down 1% $ 835 $ 0.01
Up 1% 2,808 0.04
Up 2% 9,328 0.14
Up 3% 15,848 0.24
Up 4% $ 22,368 $ 0.34

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

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

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

Item 4. Controls and Procedures

As of the period covered by this Report, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic filings with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 1. Legal Proceedings

None of us, our Investment Adviser or our Administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our Investment Adviser or Administrator. From time to time, we, our Investment Adviser or Administrator may be a party to certain legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this Report, you should consider carefully the factors discussed below, as well as in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 filed on November 17, 2021 which could materially affect our business, financial condition and/or operating results. The risks described below, as well as in our Annual Report on Form 10-K, are not the only risks facing PennantPark Investment. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

The ongoing invasion of Ukraine by Russia and related sanctions have increased global political and economic uncertainty, which may have a material impact on the Company's portfolio and the value of your investment in the Company.

The ongoing invasion of Ukraine by Russia and related sanctions have increased global political and economic uncertainty. In February 2022, Russia invaded Ukraine and, in response, the United States and many other countries placed economic sanctions on certain Russian entities and individuals. Because Russia is a major exporter of oil and natural gas, the invasion and related sanctions have reduced the supply, and increased the price, of energy, which is accelerating inflation and may exacerbate ongoing supply chain issues. There is also the risk of retaliatory actions by Russia against countries which have enacted sanctions, including cyberattacks against financial and governmental institutions, which could result in business disruptions and further economic turbulence. Although the Company has no direct exposure to Russia or Ukraine, the broader consequences of the invasion may have a material adverse impact on the Company's portfolio and the value of your investment in the Company. Because this is an uncertain and evolving situation, its full impact is unknown at this time.

Legislation enacted in 2018 allows us to incur additional leverage.

A BDC has historically been able to issue “senior securities,” including borrowing money from banks or other financial institutions, only in amounts such that its asset coverage, as defined in Section 61(a)(2) of the 1940 Act, equals at least 200% after such incurrence or issuance. In March 2018, the Consolidated Appropriations Act of 2018 (which includes the SBCAA) was enacted which amended the 1940 Act to decrease this percentage from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity) for a BDC that has received either stockholder approval or approval of a “required majority” (as defined in Section 57(o) of the 1940 Act) of its board of directors of the application of such lower asset coverage ratio to the BDC. On February 5, 2019, our stockholders approved such reduction, as approved by our board of directors on November 13, 2018. As of February 5, 2019, we are able to incur additional indebtedness so long as we comply with the applicable disclosure requirements, which may increase the risk of investing in us. Under the 200% minimum asset coverage ratio, we were permitted to borrow up to one dollar for investment purposes for every one dollar of investor equity and, under the 150% minimum asset coverage ratio, we are permitted to borrow up to two dollars for investment purposes for every one dollar of investor equity. In other words, Section 61(a)(2) of the 1940 Act permits BDCs to potentially increase their debt-to-equity ratio from a maximum of 1-to-1 to a maximum of 2-to-1. In addition, since our base management fee is determined and payable based upon our average adjusted gross assets, which includes any borrowings for investment purposes, our base management fee expense may increase if we incur additional leverage. Effective February 5, 2019, base management fees were reduced from 1.50% to 1.00% on gross assets that exceed 200% of the Company’s total net assets as of the immediately preceding quarter-end.

Because we intend to distribute substantially all of our income to our stockholders to maintain our ability to be subject to tax as a RIC, we may need to raise additional capital to finance our growth. If funds are not available to us, we may need to curtail new investments, and our common stock value could decline.

In connection with satisfying the requirements to be subject to tax as a RIC for federal income tax purposes, we intend to distribute to our stockholders substantially all of our investment company taxable income and net capital gains each taxable year. However, we may retain all or a portion of our net capital gains and incur applicable income taxes with respect thereto and elect to treat such retained net capital gains as deemed dividend distributions to our stockholders.

As noted above, on November 13, 2018 and February 5, 2019, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act), and our stockholders, respectively, approved a reduction of our asset coverage ratio from 200% to 150%. As a result, as of February 6, 2019, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). If we incur additional indebtedness under this provision, the risk of investing in us will increase. If the value of our assets declines, we may be unable to satisfy this asset coverage test. If that happens, we may be required to sell a portion of our investments or sell additional common stock and, depending on the nature of our leverage, to repay a portion of our indebtedness at a time when such sales and repayments may be disadvantageous. In addition, the issuance of additional securities could dilute the percentage ownership of our current stockholders in us.

We are partially dependent on our SBIC Fund for cash distributions to enable us to meet the distribution requirements in order to permit us to be subject to tax as a RIC. In this regard, our SBIC Fund is limited by the SBA regulations governing SBICs from making certain distributions to us that may be necessary to satisfy the requirements to be subject to tax as a RIC. In such a case, we would need to request a waiver of the SBA’s restrictions for our SBIC Fund to make certain distributions to enable us to be subject to tax as a RIC. We cannot assure you that the SBA will grant such waiver, and if our SBIC Fund is unable to obtain a waiver, compliance with the SBA regulations may cause us to incur a corporate-level income tax.

If we incur additional debt, it could increase the risk of investing in our shares.

We have indebtedness outstanding pursuant to the Truist Credit Facility, 2024 Notes, 2026 Notes, 2026 Notes-2 and SBA debentures and expect in the future to borrow additional amounts under the Truist Credit Facility or other debt securities, subject to market availability, and, may increase the size of the Truist Credit Facility. We cannot assure you that our leverage will remain at current levels. The amount of leverage that we employ will depend upon our assessment of the market and other factors at the time of any proposed borrowing. Lenders have fixed dollar claims on our assets that are superior to the claims of our common stockholders or preferred stockholders, if any, and we have granted a security interest in our assets, excluding those of SBIC II, in connection with borrowings under the Truist Credit Facility. In the case of a liquidation event, those lenders would receive proceeds before our stockholders. Additionally, the SBA, as a lender and an administrative agent, has a superior claim over the assets of SBIC II in relation to our other creditors. Any future debt issuance will increase our leverage and may be subordinate to the Truist Credit Facility and SBA debentures. In addition, borrowings or debt issuances and SBA debentures, also known as leverage, magnify the potential for loss or gain on amounts invested and,

therefore, increase the risks associated with investing in our securities. Leverage is generally considered a speculative investment technique. If the value of our assets decreases, then leveraging would cause the net asset value attributable to our common stock to decline more than it otherwise would have had we not utilized leverage. Similarly, any decrease in our revenue would cause our net income to decline more than it would have had we not borrowed funds and could negatively affect our ability to make distributions on our common or preferred stock. Our ability to service any debt that we incur depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures.

As noted above, on November 13, 2018 and February 5, 2019, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act), and our stockholders, respectively, approved a reduction of our asset coverage ratio. As a result, as of February 6, 2019, the asset coverage requirement applicable to us for senior securities was reduced from 200% to 150%. As of such date, we are able to incur additional indebtedness so long as we comply with the applicable disclosure requirements, which may increase the risk of investing in us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Repurchases of our common stock under our share repurchase program are as follows:

Period Total Number of Shares Purchased Average Price per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands)
January 1, 2022 through March 31, 2022 913,454 $ 7.72 913,454 $ 17,944
Total investments 913,454 $ 7.72 913,454 $ 17,944

—————————

(1) On February 9, 2022, we announced a share repurchase program which allows us to repurchase up to $25.0 million of our outstanding commons stock. Unless extended by our board of directors, the program will expire on the earlier of March 31, 2021 and the repurchase of $25.0 million of common stock.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Unless specifically indicated otherwise, the following exhibits are incorporated by reference to exhibits previously filed with the SEC:

3.1 Articles of Incorporation (Incorporated by reference to Exhibit 99(a) to the Registrant’s Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2/A (File No. 333-140092), filed on April 5, 2007).
3.2 Second Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 814-00736), filed on May 11, 2020).
4.1 Form of Share Certificate (Incorporated by reference to Exhibit 99(d)(1) to the Registrant’s Registration Statement on Form N-2 (File No. 333-150033), filed on April 2, 2008).
14.1* Joint Code of Ethics of the Registrant
31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
32.1* Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1 Privacy Policy of the Registrant (Incorporated by reference to Exhibit 99.1 to the Registrant’s Annual Report on Form 10-K (File No. 814-00736), filed on November 16, 2011).

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

PENNANTPARK INVESTMENT CORPORATION
Date: May 4, 2022 By: /s/ Arthur H. Penn
Arthur H. Penn
Chief Executive Officer and Chairman of the Board of Directors<br><br>(Principal Executive Officer)
Date: May 4, 2022 By: /s/ Richard Cheung
Richard Cheung
Chief Financial Officer and Treasurer<br><br>(Principal Financial and Accounting Officer)

EX-14.1

Exhibit 14.1

JOINT CODE OF ETHICS FOR PENNANTPARK INVESTMENT CORPORATION PENNANTPARK FLOATING RATE CAPITAL LTD. PENNANTPARK INVESTMENT ADVISERS, LLC

Section I Statement of General Fiduciary Principles

This Joint Code of Ethics (the “Code”) has been adopted by each of PennantPark Investment Corporation, PennantPark Floating Rate Capital, Ltd. (each individually, the “Corporation”), and PennantPark Investment Advisers, LLC, the Corporations’ investment adviser (the “Adviser”), in compliance with Rule 17j-1 under the Investment Company Act of 1940 (the “Act”) and Section 204A of the Investment Advisers Act of 1940 (the “Advisers Act”). The purpose of the Code is to establish standards and procedures for the detection and prevention of activities by which persons having knowledge of the investments and investment intentions of the Corporations may abuse their fiduciary duty to the Corporations, and otherwise to deal with the types of conflict of interest situations to which Rule 17j-1 under the Act (“Rule 17j-1”) is addressed. As it relates to Section 204A of the Advisers Act, the purpose of this Code is to establish procedures that, taking into consideration the nature of the Adviser’s business, are reasonably designed to prevent misuse of material non-public information in violation of the federal securities laws by persons associated with the Adviser.

The Code is based on the principle that the directors and officers of the Corporations, and the managers, partners, officers and employees of the Adviser, who provide services to the Corporations, owe a fiduciary duty to the Corporations to conduct their personal securities transactions in a manner that does not interfere with the Corporations’ transactions or otherwise take unfair advantage of their relationship with the Corporations. All directors, managers, partners, officers and employees of the Corporations, and the Adviser (“Covered Personnel”) are expected to adhere to this general principle as well as to comply with all of the specific provisions of this Code that are applicable to them. Any Covered Personnel who is affiliated with another entity that is a registered investment adviser is, in addition, expected to comply with the provisions of the code of ethics that has been adopted by such other investment adviser.

Technical compliance with the Code will not automatically insulate any Covered Personnel from scrutiny of transactions that show a pattern of compromise or abuse of the individual’s fiduciary duty to the Corporation. Accordingly, all Covered Personnel must seek to avoid any actual or potential conflicts between their personal interests and the interests of the Corporation and its shareholders. In sum, all Covered Personnel shall place the interests of the Corporation before their own personal interests.

All Covered Personnel must read and retain this Code.

Section II Definitions

(A) “Access Person” means any director, officer, general partner or Advisory Person (as defined below) of the Corporations or the Adviser.

(B) An “Advisory Person” of the Corporation or the Adviser means: (i) any employee of the Corporation or the Adviser, or any company in a Control (as defined below) relationship to the Corporation or the Adviser, who in connection with his or her regular functions or duties makes, participates in, or obtains information regarding the purchase or sale of any Covered Security (as defined below) by the Corporation, or whose functions relate to the making of any recommendation with respect to such purchases or sales; and (ii) any natural person in a Control relationship to the Corporation or the Adviser, who obtains information concerning recommendations made to the Corporation with regard to the purchase or sale of any Covered Security by the Corporation.

(C) “Beneficial Ownership” is interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 (the “1934 Act”) in determining whether a person is a beneficial owner of a security for purposes of Section 16 of the 1934 Act and the rules and regulations thereunder.

(D) “Chief Compliance Officer” means the Chief Compliance Officer of the Corporation (who also may serve as the compliance officer of the Adviser and/or one or more affiliates of the Adviser).

(E) “Control” shall have the same meaning as that set forth in Section 2(a)(9) of the Act.

(F) “Covered Security” means a security as defined in Section 2(a)(36) of the Act, which includes: any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. However, a “Covered Security” does not include: (i) direct obligations of the Government of the United States; (ii) bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and (iii) shares issued by open-end investment companies registered under the Act. References to a Covered Security in this Code (e.g., a prohibition or requirement applicable to the purchase or sale of a Covered Security) shall be deemed to refer to and to include any warrant for, option in, or security immediately convertible into that Covered Security, and shall also include any instrument that has an investment return or value that is based, in whole or in part, on that Covered Security (collectively, “Derivatives”). Therefore, except as otherwise specifically provided by this Code: (i) any prohibition or requirement of this Code applicable to the purchase or sale of a Covered Security shall

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also be applicable to the purchase or sale of a Derivative relating to that Covered Security; and (ii) any prohibition or requirement of this Code applicable to the purchase or sale of a Derivative shall also be applicable to the purchase or sale of a Covered Security relating to that Derivative.

(G) “Independent Director” means a director of the Corporation who is not an “interested person” of the Corporation within the meaning of Section 2(a)(19) of the Act.

(H) “Initial Public Offering” means an offering of securities registered under the Securities Act of 1933, as amended (the “1933 Act”), the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the 1934 Act.

(I) “Limited Offering” means an offering that is exempt from registration under the 1933 Act pursuant to Section 4(2) or Section 4(6) thereof or pursuant to Rule 504, Rule 505, or Rule 506 thereunder.

(J) “Restricted List” means the “Pipeline” report of potential investments combined with the current holdings of the clients. PennantPark Access Persons are restricted from trading any security on the Restricted List.

(K) “Security Held or to be Acquired” by the Corporation means: (i) any Covered Security which, within the most recent 15 days: (A) is or has been held by the Corporation; or (B) is being or has been considered by the Corporation or the Adviser for purchase by the Corporation; and (ii) any option to purchase or sell, and any security convertible into or exchangeable for, a Covered Security described in Section II (K)(i) of this Code.

(L) “17j-1 Organization” means the Corporation or the Adviser, as the context requires.

Section III Objective and General Prohibitions

Covered Personnel may not engage in any investment transaction under circumstances in which the Covered Personnel benefits from or interferes with the purchase or sale of investments by the Corporation. In addition, Covered Personnel may not use information concerning the investments or investment intentions of the Corporation, or their ability to influence such investment intentions, for personal gain or in a manner detrimental to the interests of the Corporation.

Covered Personnel may not engage in conduct that is deceitful, fraudulent or manipulative, or that involves false or misleading statements, in connection with the purchase or sale of investments by the Corporation. In this regard, Covered Personnel should recognize that Rule 17j-1 makes it unlawful for any affiliated person of the Corporation, or any affiliated person of an investment adviser for the Corporation, in connection with the purchase or sale, directly or indirectly, by the person of a Security Held or to be Acquired by the Corporation to:

(i) employ any device, scheme or artifice to defraud the Corporation;

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(ii) make any untrue statement of a material fact to the Corporation or omit to state to the Corporation a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;

(iii) engage in any act, practice or course of business that operates or would operate as a fraud or deceit upon the Corporation; or

(iv) engage in any manipulative practice with respect to the Corporation.

Covered Personnel should also recognize that a violation of this Code or of Rule 17j-1 may result in the imposition of: (1) sanctions as provided by Section VIII of this Code; or (2) administrative, civil and, in certain cases, criminal fines, sanctions or penalties.

Section IV Pre-Clearance of Personal Account Transactions; Window Period to Trade PennantPark shares

Except as noted below, all Access Persons must obtain the prior written approval of the Managing Member (or such person as the Managing Member may designate) (“Approving Officer”) before engaging in any transaction in his or her Personal Account. The Approving Officer may approve the transaction if he concludes that the transaction would comply with the provisions of this Code and is not likely to have any adverse economic impact on clients. A request for preclearance must be made by email, with a copy to the Compliance Officer, in advance of the contemplated transaction. No particular form is required, but the email must include sufficient detail for the Approving Officer to decide if a trade is permissible and a statement that the Access Person has reviewed the Pipeline Report for any conflicts.

Any approval given under this paragraph will be provided by email and will remain in effect for 72 hours.

Exceptions to the Pre-Clearance Requirement Policy,

Access Persons will be allowed to trade securities of the Corporations during a “window period” that may be announced following the release of Corporations’ earnings release. If the window is opened for trading, it will begin no earlier than the second business day after a Corporation publicly releases quarterly or annual financial results and extends no later than (i) 30 calendar days after the release of results (29 calendar days in all) or (ii) in the case of either Corporation’s and the Adviser’s decision to buy or sell the applicable Corporation’s equity securities, the end of the quarterly period during which such financial results of such Corporation have been publicly released. Note that the ability of an officer, director or other Access Person to engage in transactions in the securities of a Corporation during a window period is not automatic or absolute because no trades may be made even during a window period by an individual who possesses material, nonpublic information about the Corporation, including any decision by the Corporation to buy or sell its own shares. Further, the window period may not open in a particular quarter, and it may be closed, as the case may be, prior to the expiration of 30 days or the applicable quarter end, in each case as events require.

Additionally, Independent Directors are not required to seek preapproval for any transactions other than those which would trigger reporting requirements as set forth in Section VI (C) of this Code.

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Section V Prohibited Transactions

(A) An Access Person may not purchase or otherwise acquire direct or indirect Beneficial Ownership of any Covered Security on the Restricted List, and may not sell or otherwise dispose of any Covered Security on the Restricted List in which he or she has direct or indirect Beneficial Ownership, if he or she knows or should know at the time of entering into the transaction that: (1) the Corporation has purchased or sold the Covered Security within the last 15 calendar days, or is purchasing or selling or intends to purchase or sell the Covered Security in the next 15 calendar days; or (2) the Adviser has within the last 15 calendar days considered purchasing or selling the Covered Security for the Corporation or within the next 15 calendar days intend to consider purchasing or selling the Covered Security for the Corporation.

(B) Every Advisory Person of the Corporation or the Adviser must obtain approval from the Corporation or the Adviser, as the case may be, before directly or indirectly acquiring Beneficial Ownership in any securities in an Initial Public Offering or in a Limited Offering. Such approval must be obtained from the Chief Compliance Officer, unless he is the person seeking such approval, in which case it must be obtained from the President of the 17j-1 Organization.

(C) No Access Person shall recommend any transaction in any Covered Securities by the Corporation without having disclosed to the Chief Compliance Officer his or her interest, if any, in such Covered Securities or the issuer thereof, including: the Access Person’s Beneficial Ownership of any Covered Securities of such issuer; any contemplated transaction by the Access Person in such Covered Securities; any position the Access Person has with such issuer; and any present or proposed business relationship between such issuer and the Access Person (or a party which the Access Person has a significant interest).

Section VI Reports by Access Persons

(A) Personal Securities Holdings Reports.

All Access Persons shall within 10 days of the date on which they become Access Persons, and thereafter, within 30 days after the end of each calendar year, disclose the title, number of shares and principal amount of all Covered Securities in which they have a Beneficial Ownership as of the date the person became an Access Person, in the case of such person’s initial report, and as of the last day of the year, as to annual reports. A form of such report, which is hereinafter called a “Personal Securities Holdings Report,” is attached hereto as Schedule A. Each Personal Securities Holdings Report must also disclose the name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person as of the date the person became an Access Person or as of the last day of the year, as the case may be. Each Personal Securities Holdings Report shall state the date it is being submitted.

(B) Quarterly Transaction Reports.

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Within 30 days after the end of each calendar quarter, each Access Person shall make a written report to the Chief Compliance Officer of all transactions occurring in the quarter in a Covered Security in which he or she had any Beneficial Ownership. A form of such report, which is hereinafter called a “Quarterly Securities Transaction Report,” is attached hereto as Schedule B.

A Quarterly Securities Transaction Report shall be in the form of Schedule B or such other form approved by the Chief Compliance Officer and must contain the following information with respect to each reportable transaction:

(1) Date and nature of the transaction (purchase, sale or any other type of acquisition or disposition);

(2) Title, interest rate and maturity date (if applicable), number of shares and principal amount of each Covered Security involved and the price of the Covered Security at which the transaction was effected;

(3) Name of the broker, dealer or bank with or through whom the transaction was effected; and

(4) The date the report is submitted by the Access Person.

(C) Independent Directors.

Notwithstanding the reporting requirements set forth in this Section V, an Independent Director who would be required to make a report under this Section V solely by reason of being a director of the Corporation is not required to file a Personal Securities Holding Report upon becoming a director of the Corporation or an annual Personal Securities Holding Report. Such an Independent Director also need not file a Quarterly Securities Transaction Report unless such director knew or, in the ordinary course of fulfilling his or her official duties as a director of the Corporation, should have known that during the 15-day period immediately preceding or after the date of the transaction in a Covered Security by the director such Covered Security is or was purchased or sold by the Corporation or the Corporation or the Adviser considered purchasing or selling such Covered Security.

(D) Access Persons of the Adviser.

An Access Person of the Adviser need not make a Quarterly Transaction Report if all of the information in the report would duplicate information required to be recorded pursuant to Rules 204-2(a)(12) or (13) under the Advisers Act.

(E) Brokerage Accounts and Statements.

Access Persons, except Independent Directors, shall:

(1) within 10 days after the end of each calendar quarter, identify the name of the broker, dealer or bank with whom the Access Person established an account in which any securities were held during the quarter for the direct or indirect benefit of the Access Person and identify any new account(s) and the date the account(s) were established. This information shall be included on the appropriate Quarterly Securities Transaction Report.

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(2) instruct the brokers, dealers or banks with whom they maintain such an account to provide duplicate account statements to the Chief Compliance Officer.

(3) on an annual basis, certify that they have complied with the requirements of (1) and (2) above.

(F) Form of Reports.

A Quarterly Securities Transaction Report may consist of broker statements or other statements that provide a list of all personal Covered Securities holdings and transactions in the time period covered by the report and contain the information required in a Quarterly Securities Transaction Report.

(G) Responsibility to Report.

It is the responsibility of each Access Person to take the initiative to comply with the requirements of this Section VI. Any effort by the Corporation, or by the Adviser and its affiliates, to facilitate the reporting process does not change or alter that responsibility. A person need not make a report hereunder with respect to transactions effected for, and Covered Securities held in, any account over which the person has no direct or indirect influence or control.

(H) Where to File Reports.

All Quarterly Securities Transaction Reports and Personal Securities Holdings Reports must be filed with the Chief Compliance Officer.

(I) Disclaimers.

Any report required by this Section VI may contain a statement that the report will not be construed as an admission that the person making the report has any direct or indirect Beneficial Ownership in the Covered, Security to which the report relates.

Section VII Additional Prohibitions

(A) Confidentiality of the Corporation’s Transactions.

Until disclosed in a public report to shareholders or to the Securities and Exchange Commission (the “SEC”) in the normal course, all information concerning the securities “being considered for purchase or sale” by the Corporation shall be kept confidential by all Covered Personnel and disclosed by them only on a “need to know” basis. It shall be the responsibility of the Chief Compliance Officer to report any inadequacy found in this regard to the directors of the Corporation.

(B) Outside Business Activities and Directorships.

Access Persons may not engage in any outside business activities that may give rise to conflicts of interest or jeopardize the integrity or reputation of the Corporation. Similarly, no such outside business activities may be inconsistent with the interests of the Corporation. All directorships of public or private companies held by Access Persons shall be reported to the Chief Compliance Officer.

(C) Gratuities.

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Covered Personnel shall not, directly or indirectly, take, accept or receive gifts or other consideration in merchandise, services or otherwise of more than nominal value from any person, firm, corporation, association or other entity other than such person’s employer that does business, or proposes to do business, with the Corporation.

Section VIII Prohibition Against Insider Trading

This Section is intended to satisfy the requirements of Section 204A of the Advisers Act, which is applicable to the Adviser and requires that the Adviser establish and enforce procedures designed to prevent the misuse of material, non-public information by its associated persons. It applies to all Advisory Persons. Trading securities while in possession of material, non-public information, or improperly communicating that information to others, may expose an Advisory Person to severe penalties. Criminal sanctions may include a fine of up to $1,000,000 and/or ten years imprisonment. The SEC can recover the profits gained or losses avoided through the violative trading, a penalty of up to three times the illicit windfall, and an order permanently barring an Advisory Person from the securities industry. Finally, an Advisory Person may be sued by investors seeking to recover damages for insider trading violations.

(A) No Advisory Person may trade a security, either personally or on behalf of any other person or account (including any fund), while in possession of material, non-public information concerning that security or the issuer thereof, nor may any Advisory Person communicate material, non-public information to others in violation of the law.

(B) Information is “material” where there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions. Generally, this includes any information the disclosure of which will have a substantial effect on the price of a security. No simple test exists to determine when information is material; assessments of materiality involve a highly fact specific inquiry. For this reason, an Advisory Person should direct any questions about whether information is material to the Chief Compliance Officer. Material information often relates to a company’s results and operations, including, for example, dividend changes, earnings results, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments. Material information may also relate to the market for a company’s securities. Information about a significant order to purchase or sell Securities may, in some contexts, be material. Pre-publication information regarding reports in the financial press may also be material.

(C) Information is “public” when it has been disseminated broadly to investors in the marketplace. For example, information is public after it has become available to the general public through a public filing with the SEC or some other government agency, the Dow Jones “tape” or The Wall Street Journal or some other publication of general circulation, and after sufficient time has passed so that the information has been disseminated widely.

(D) An Advisory Person, before executing any trade for himself or herself, or others, including the Corporation or other accounts managed by the Adviser or by a stockholder of the Adviser, or any affiliate of the stockholder (collectively, “Client Accounts”), must

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determine whether he or she has material, non-public information. Any Advisory Person who believes he or she is in possession of material, non-public information must take the following steps:

(1) Report the information and proposed trade immediately to the Chief Compliance Officer.

(2) Do not purchase or sell the securities on behalf of anyone, including Client Accounts.

(3) Do not communicate the information to any person, other than to the Chief Compliance Officer.

After the Chief Compliance Officer has reviewed the issue, the Chief Compliance Officer will determine whether the information is material and non-public and, if so, what action the Advisory Person should take. An Advisory Person must consult with the Chief Compliance Officer before taking any further action. This degree of caution will protect the Advisory Person and the Adviser.

(E) To prevent and detect insider trading from occurring, the Chief Compliance Officer shall prepare and maintain a “Restricted List” in order to monitor and prevent the occurrence of insider trading in certain securities that Access Persons are prohibited or restricted from trading. The Chief Compliance Officer manages, maintains and updates the Restricted List to actually restrict trading (no buying, no selling, no shorting, no trading, etc.) in the securities of specific issuers for personal accounts and on behalf Adviser’s clients. Before executing any trade for himself or herself, Advisory Persons are required to determine whether the transaction involves a security on the Restricted List. Advisory Persons are prohibited from trading any security which appears on the Restricted List, except that, with prior approval, an Advisory Person may sell securities which were not on the Restricted List when acquired (or which were acquired at a time when the Advisory Person was not subject to such restrictions). The Restricted List must be maintained strictly confidential and not disclosed to anyone outside of the Adviser and the Corporation.

(F) Contacts with public companies will sometimes be a part of an Adviser’s research efforts. Persons providing investment advisory services to the Corporation may make investment decisions on the basis of conclusions formed through such contacts and analysis of publicly available information. Difficult legal issues arise, however, when, in the course of these contacts, an Advisory Person becomes aware of material, non-public information. This could happen, for example, if a company’s chief financial officer prematurely discloses quarterly results to an analyst, or an investor relations representative makes selective disclosure of adverse news to a handful of investors. In such situations, the Adviser must make a judgment as to its further conduct. To protect yourself, clients and the Adviser, you should contact the Chief Compliance Officer immediately if you believe that you may have received material, non-public information.

Section IX Annual Certification

(A) Access Persons.

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Access Persons who are directors, managers, officers or employees of the Corporation or the Adviser shall be required to certify annually that they have read this Code and that they understand it and recognize that they are subject to it. Further, such Access Persons shall be required to certify annually that they have complied with the requirements of this Code.

(B) Board Review.

No less frequently than annually, the Corporation and the Adviser must furnish to the Corporation’s board of directors, and the board must consider, a written report that: (1) describes any issues arising under this Code or procedures since the last report to the board, including, but not limited to, information about material violations of this Code or procedures and sanctions imposed in response to material violations; and (2) certifies that the Corporation or the Adviser, as applicable, has adopted procedures reasonably necessary to prevent Access Persons from violating this Code.

Section X Sanctions

Any violation of this Code shall be subject to the imposition of such sanctions by the 17j-1 Organization as may be deemed appropriate under the circumstances to achieve the purposes of Rule 17j-1 and this Code. The sanctions to be imposed shall be determined by the board of directors, including a majority of the Independent Directors, provided, however, that with respect to violations by persons who are directors, managers, officers or employees of the Adviser (or of a company that controls the Adviser), the sanctions to be imposed shall be determined by the Adviser (or the controlling person thereof). Sanctions may include, but are not limited to, suspension or termination of employment, a letter of censure and/or restitution of an amount equal to the difference between the price paid or received by the Corporation and the more advantageous price paid or received by the offending person.

Section XI Administration and Construction

(A) The administration of this Code shall be the responsibility of the Chief Compliance Officer.

(B) The duties of the Chief Compliance Officer are as follows:

(1) Continuous maintenance of a current list of the names of all Access Persons with an appropriate description of their title or employment, including a notation of any directorships held by Access Persons who are officers or employees of the Adviser or of any company that controls the Adviser, and informing all Access Persons of their reporting obligations hereunder;

(2) On an annual basis, providing all Covered Personnel a copy of this Code and informing such persons of their duties and obligations hereunder including any supplemental training that may be required from time to time;

(3) Maintaining or supervising the maintenance of all records and reports required by this Code;

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(4) Preparing listings of all transactions effected by Access Persons who are subject to the requirement to file Quarterly Securities Transaction Reports and reviewing such transactions against a listing of all transactions effected by the Corporation;

(5) Issuance either personally or with the assistance of counsel as may be appropriate, of any interpretation of this Code that may appear consistent with the objectives of Rule 17j-1 and this Code;

(6) Conduct such inspections or investigations as shall reasonably be required to detect and report, with recommendations, any apparent violations of this Code to the board of directors of the Corporation;

(7) Submission of a report to the board of directors of the Corporation, no less frequently than annually, a written report that describes any issues arising under the Code since the last such report, including but not limited to the information described in Section VI (B); and

(C) The Chief Financial Officer shall maintain and cause to be maintained in an easily accessible place at the principal place of business of the 17j-1 Organization, the following records:

(1) A copy of all codes of ethics adopted by the Corporation or the Adviser and its affiliates, as the case may be, pursuant to Rule 17j-1 that have been in effect at any time during the past five (5) years;

(2) A record of each violation of such codes of ethics and of any action taken as a result of such violation for at least five (5) years after the end of the fiscal year in which the violation occurs;

(3) A copy of each report made by an Access Person for at least two (2) years after the end of the fiscal year in which the report is made, and for an additional three (3) years in a place that need not be easily accessible;

(4) A copy of each report made by the Chief Compliance Officer to the board of directors for two (2) years from the end of the fiscal year of the Corporation in which such report is made or issued and for an additional three (3) years in a place that need not be easily accessible;

(5) A list of all persons who are, or within the past five (5) years have been, required to make reports pursuant to Rule 17j-1 and this Code, or who are or were responsible for reviewing such reports;

(6) A copy of each report required by Section VII (B) of this Code for at least two (2) years after the end of the fiscal year in which it is made, and for an additional three (3) years in a place that need not be easily accessible; and

(7) A record of any decision, and the reasons supporting the decision, to approve the acquisition by an Advisory Person of securities in an Initial Public Offering or Limited Offering for at least five (5) years after the end of the fiscal year in which the approval is granted.

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(D) This Code may not be amended or modified except in a written form that is specifically approved by majority vote of the Independent Directors.

This Joint Code of Ethics, originally adopted December 12, 2007 and amended as of May 3, 2022, is annually reviewed and approved by the Board of Directors of the Corporation, including a majority of the Independent Directors.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Arthur H. Penn, Chief Executive Officer of PennantPark Investment Corporation, certify that:

  1. I have reviewed this Report on Form 10-Q of PennantPark Investment Corporation;

  2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

  3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

  1. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 4, 2022

/s/ Arthur H. Penn
Name: Arthur H. Penn
Title: Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Richard Cheung, Chief Financial Officer of PennantPark Investment Corporation, certify that:

  1. I have reviewed this Report on Form 10-Q of PennantPark Investment Corporation;

  2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

  3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

  1. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 4, 2022

/s/ Richard Cheung
Name: Richard Cheung
Title: Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

In connection with this Report on Form 10-Q for the three and six months ended March 31, 2022 (the “Report”) of PennantPark Investment Corporation (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Arthur H. Penn, Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Arthur H. Penn
Name: Arthur H. Penn
Title: Chief Executive Officer
Date: May 4, 2022

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

In connection with this Report on Form 10-Q for the three and six months ended March 31, 2022 (the “Report”) of PennantPark Investment Corporation (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Richard Cheung, Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Richard Cheung
Name: Richard Cheung
Title: Chief Financial Officer
Date: May 4, 2022

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