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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 DECEMBER 31, 2016

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: 814-00891





PENNANTPARK FLOATING RATE CAPITAL LTD.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|MARYLAND                                                       |  | 27-3794690                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|590 Madison Avenue, 15th Floor
New York, N.Y.                  |  | 10022                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(212) 905-1000

(Registrants Telephone Number, Including Area Code)





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 and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 and post such files).    Yes  ☐    No  ☐

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer,
accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  | ☐                                                |  | Accelerated filer         |  | ☒
|                        |  |                                                  | 
|Non-accelerated filer   |  | ☐  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | ☐

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 February 9, 2017 was 26,730,074.







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PENNANTPARK FLOATING RATE CAPITAL LTD.

FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2016

TABLE OF CONTENTS



|                                                                                                                    |  |  |    | 
|------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
|PART I. CONSOLIDATED FINANCIAL INFORMATION                                                                          |  |  |   
|                                                                                                                    | 
|Item 1. Consolidated Financial Statements                                                                           |  |  |    | 
|                                                                                                                    | 
|Consolidated Statements of Assets and Liabilities as of December 
31, 2016 (unaudited) and September 30, 2016       |  |  | 4  | 
|                                                                                                                    | 
|Consolidated Statements of Operations for the three months ended December 31,
 2016 and 2015 (unaudited)            |  |  | 5  | 
|                                                                                                                    | 
|Consolidated Statements of Changes in Net Assets for the three months ended December 31,
 2016 and 2015 (unaudited) |  |  | 6  | 
|                                                                                                                    | 
|Consolidated Statements of Cash Flows for the three months ended December 31,
 2016 and 2015 (unaudited)            |  |  | 7  | 
|                                                                                                                    | 
|Consolidated Schedules of Investments as of December 
31, 2016 (unaudited) and September 30, 2016                   |  |  | 8  | 
|                                                                                                                    | 
|Notes to Consolidated Financial Statements (unaudited)                                                              |  |  | 14 | 
|                                                                                                                    | 
|Report of Independent Registered Public Accounting Firm                                                             |  |  | 24 | 
|                                                                                                                    | 
|Item 
2. Managements Discussion and Analysis of Financial Condition and Results of Operations                      |  |  | 25 | 
|                                                                                                                    | 
|Item 3. Quantitative And Qualitative Disclosures About Market
Risk                                                  |  |  | 32 | 
|                                                                                                                    | 
|Item 4. Controls and Procedures                                                                                     |  |  | 32 | 
|                                                                                                                    | 
|PART II. OTHER INFORMATION                                                                                          |  |  |    | 
|                                                                                                                    | 
|Item 1. Legal Proceedings                                                                                           |  |  | 33 | 
|                                                                                                                    | 
|Item 1A. Risk Factors                                                                                               |  |  | 33 | 
|                                                                                                                    | 
|Item 2. 
Unregistered Sales of Equity Securities and Use of Proceeds                                                |  |  | 33 | 
|                                                                                                                    | 
|Item 3. Defaults Upon Senior Securities                                                                             |  |  | 33 | 
|                                                                                                                    | 
|Item 4. Mine Safety Disclosures                                                                                     |  |  | 33 | 
|                                                                                                                    | 
|Item 5. Other Information                                                                                           |  |  | 33 | 
|                                                                                                                    | 
|Item 6. Exhibits                                                                                                    |  |  | 34 | 
|                                                                                                                    | 
|SIGNATURES                                                                                                          |  |  | 35 | 



2



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PART ICONSOLIDATED FINANCIAL INFORMATION

We are filing this Quarterly Report on Form 10-Q, or the Report, in compliance with Rule
13a-13 promulgated by the Securities and Exchange Commission, or the SEC. In this Report, except where the context suggests otherwise, the terms Company, we, our or
us refer to PennantPark Floating Rate Capital Ltd. and its wholly-owned consolidated subsidiaries; Funding I refers to PennantPark Floating Rate Funding I, LLC; Taxable Subsidiary refers to PFLT Investment
Holdings, LLC; PennantPark Investment Advisers or Investment Adviser refers to PennantPark Investment Advisers, LLC; PennantPark Investment Administration or Administrator refers to PennantPark
Investment Administration, LLC; 1940 Act refers to the Investment Company Act of 1940, as amended; Code refers to the Internal Revenue Code of 1986, as amended; RIC refers to a regulated investment company under
the Code; BDC refers to a business development company under the 1940 Act. References to our portfolio, our investments, our multi-currency, senior secured revolving credit facility, as amended and restated, or the Credit Facility, and
our business include investments we make through our subsidiaries.



3



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##### Table of Contents

|Item 1. | Consolidated Financial Statements
|------- | ---------------------------------

PENNANTPARK FLOATING RATE
CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES



|                                                                                                                   |  |                              |             |   |                    |   |             |  
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ----------- | - | ------------------ | - | ----------- | -
|                                                                                                                   |  | December 31, 2016(unaudited) |             |   | September 30, 2016 |  
|Assets                                                                                                             |  |                              |             |   |                    |   |             |  
|Investments at fair value                                                                                          |  |                              |             |   |                    |   |             |  
|Non-controlled,
non-affiliated investments (cost$653,340,297 and $597,910,267, respectively)                      |  | $                            | 656,868,887 |   |                    | $ | 598,887,525 |  
|Cash and cash equivalents (cost$24,201,258 and $28,903,359, respectively)                                         |  |                              | 24,203,565  |   |                    |   | 28,910,973  |  
|Interest receivable                                                                                                |  |                              | 3,088,719   |   |                    |   | 2,480,406   |  
|Receivable for investments sold                                                                                    |  |                              | 11,357,601  |   |                    |   |            |  
|Prepaid expenses and other assets                                                                                  |  |                              | 1,088,475   |   |                    |   | 1,141,191   |  
|                                                                                                                   |  |                              |             |   |                    |   |             |  
|Total assets                                                                                                       |  |                              | 696,607,247 |   |                    |   | 631,420,095 |  
|                                                                                                                   |  |                              |             |   |                    |   |             |  
|Liabilities                                                                                                        |  |                              |             |   |                    |   |             |  
|Distributions payable                                                                                              |  |                              | 2,539,357   |   |                    |   | 2,539,357   |  
|Payable for investments purchased                                                                                  |  |                              | 11,827,362  |   |                    |   | 14,935,970  |  
|Credit Facility payable (cost$299,309,500 and $232,907,500, respectively) (See Notes 5 and
9)                     |  |                              | 299,859,712 |   |                    |   | 232,389,498 |  
|Interest payable on Credit Facility                                                                                |  |                              | 672,625     |   |                    |   | 531,926     |  
|Management fee payable (See Note 3)                                                                                |  |                              | 1,595,726   |   |                    |   | 1,458,625   |  
|Performance-based incentive fee payable (See Note 3)                                                               |  |                              | 2,602,140   |   |                    |   | 3,454,914   |  
|Accrued other expenses                                                                                             |  |                              | 372,659     |   |                    |   | 202,977     |  
|                                                                                                                   |  |                              |             |   |                    |   |             |  
|Total liabilities                                                                                                  |  |                              | 319,469,581 |   |                    |   | 255,513,267 |  
|                                                                                                                   |  |                              |             |   |                    |   |             |  
|Commitments and contingencies (See Note 10)                                                                        |  |                              |             |   |                    |   |             |  
|Net assets                                                                                                         |  |                              |             |   |                    |   |             |  
|Common stock, 26,730,074 shares issued and outstandingPar value $0.001 per share and
100,000,000 shares authorized |  |                              | 26,730      |   |                    |   | 26,730      |  
|Paid-in capital in excess of par value                                                                             |  |                              | 371,194,366 |   |                    |   | 371,194,366 |  
|Undistributed net investment income                                                                                |  |                              | 3,763,272   |   |                    |   | 4,559,646   |  
|Accumulated net realized loss on investments                                                                       |  |                              | (827,387    | ) |                    |   | (1,376,788  | )
|Net unrealized appreciation on investments                                                                         |  |                              | 3,530,897   |   |                    |   | 984,872     |  
|Net unrealized (appreciation) depreciation on Credit Facility                                                      |  |                              | (550,212    | ) |                    |   | 518,002     |  
|                                                                                                                   |  |                              |             |   |                    |   |             |  
|Total net assets                                                                                                   |  | $                            | 377,137,666 |   |                    | $ | 375,906,828 |  
|                                                                                                                   |  |                              |             |   |                    |   |             |  
|Total liabilities and net assets                                                                                   |  | $                            | 696,607,247 |   |                    | $ | 631,420,095 |  
|                                                                                                                   |  |                              |             |   |                    |   |             |  
|Net asset value per share                                                                                          |  | $                            | 14.11       |   |                    | $ | 14.06       |  
|                                                                                                                   |  |                              |             |   |                    |   |             |  

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



4



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                        |  |                                 |            |   |      |   |            |  
|--------------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                        |  | Three Months Ended December 31, |           
|                                                                                        |  | 2016                            |            |   | 2015 |  
|Investment income:                                                                      |  |                                 |            |   |      |   |            |  
|From non-controlled,
non-affiliated investments:                                        |  |                                 |            |   |      |   |            |  
|Interest                                                                                |  | $                               | 11,951,835 |   |      | $ | 8,612,862  |  
|Other income                                                                            |  |                                 | 679,433    |   |      |   | 102,685    |  
|From controlled, affiliated investments:                                                |  |                                 |            |   |      |   |            |  
|Interest                                                                                |  |                                 |           |   |      |   | 40,933     |  
|                                                                                        |  |                                 |            |   |      |   |            |  
|Total investment income                                                                 |  |                                 | 12,631,268 |   |      |   | 8,756,480  |  
|                                                                                        |  |                                 |            |   |      |   |            |  
|Expenses:                                                                               |  |                                 |            |   |      |   |            |  
|Base management fee (See Note 3)                                                        |  |                                 | 1,595,727  |   |      |   | 1,077,741  |  
|Performance-based incentive fee (See Note 3)                                            |  |                                 | 1,469,369  |   |      |   | (2,936     | )
|Interest and expenses on Credit Facility (See Note 9)                                   |  |                                 | 1,800,725  |   |      |   | 939,682    |  
|Administrative services expenses (See Note 3)                                           |  |                                 | 561,250    |   |      |   | 200,000    |  
|Other general and administrative expenses                                               |  |                                 | 357,500    |   |      |   | 548,313    |  
|                                                                                        |  |                                 |            |   |      |   |            |  
|Expenses before provision for taxes and amendment costs                                 |  |                                 | 5,784,571  |   |      |   | 2,762,800  |  
|Provision for taxes                                                                     |  |                                 | 25,000     |   |      |   |           |  
|Credit Facility amendment costs (See Notes 5 and 9)                                     |  |                                 |           |   |      |   | 907,722    |  
|                                                                                        |  |                                 |            |   |      |   |            |  
|Total expenses                                                                          |  |                                 | 5,809,571  |   |      |   | 3,670,522  |  
|                                                                                        |  |                                 |            |   |      |   |            |  
|Net investment income                                                                   |  |                                 | 6,821,697  |   |      |   | 5,085,958  |  
|                                                                                        |  |                                 |            |   |      |   |            |  
|Realized and unrealized gain (loss) on investments and Credit Facility:                 |  |                                 |            |   |      |   |            |  
|Net realized gain (loss) on investments                                                 |  |                                 | 549,401    |   |      |   | (3,232,008 | )
|Net change in unrealized appreciation (depreciation) on:                                |  |                                 |            |   |      |   |            |  
|Non-controlled,
non-affiliated investments                                              |  |                                 | 2,546,025  |   |      |   | (708,946   | )
|Credit Facility (appreciation) depreciation (See Notes 5 and 9)                         |  |                                 | (1,068,214 | ) |      |   | 601,875    |  
|                                                                                        |  |                                 |            |   |      |   |            |  
|Net change in unrealized appreciation (depreciation) on investments and Credit
Facility |  |                                 | 1,477,811  |   |      |   | (107,071   | )
|                                                                                        |  |                                 |            |   |      |   |            |  
|Net realized and unrealized gain (loss) from investments and Credit Facility            |  |                                 | 2,027,212  |   |      |   | (3,339,079 | )
|                                                                                        |  |                                 |            |   |      |   |            |  
|Net increase in net assets resulting from operations                                    |  | $                               | 8,848,909  |   |      | $ | 1,746,879  |  
|                                                                                        |  |                                 |            |   |      |   |            |  
|Net increase in net assets resulting from operations per common share (See Note 6)      |  | $                               | 0.33       |   |      | $ | 0.07       |  
|                                                                                        |  |                                 |            |   |      |   |            |  
|Net investment income per common share                                                  |  | $                               | 0.26       |   |      | $ | 0.19       |  
|                                                                                        |  |                                 |            |   |      |   |            |  

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                                        |  |                                 |             |   |      |   |             |  
|----------------------------------------------------------------------- |  | ------------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                        |  | Three Months Ended December 31, |            
|                                                                        |  | 2016                            |             |   | 2015 |  
|Net increase in net assets from operations:                             |  |                                 |             |   |      |   |             |  
|Net investment income                                                   |  | $                               | 6,821,697   |   |      | $ | 5,085,958   |  
|Net realized gain (loss) on investments                                 |  |                                 | 549,401     |   |      |   | (3,232,008  | )
|Net change in unrealized appreciation (depreciation) on investments     |  |                                 | 2,546,025   |   |      |   | (708,946    | )
|Net change in unrealized (appreciation) depreciation on Credit Facility |  |                                 | (1,068,214  | ) |      |   | 601,875     |  
|                                                                        |  |                                 |             |   |      |   |             |  
|Net increase in net assets resulting from operations                    |  |                                 | 8,848,909   |   |      |   | 1,746,879   |  
|                                                                        |  |                                 |             |   |      |   |             |  
|Distributions to stockholders                                           |  |                                 | (7,618,071  | ) |      |   | (7,618,071  | )
|                                                                        |  |                                 |             |   |      |   |             |  
|Net increase (decrease) in net assets                                   |  |                                 | 1,230,838   |   |      |   | (5,871,192  | )
|                                                                        |  |                                 |             |   |      |   |             |  
|Net assets:                                                             |  |                                 |             |   |      |   |             |  
|Beginning of period                                                     |  |                                 | 375,906,828 |   |      |   | 372,890,449 |  
|                                                                        |  |                                 |             |   |      |   |             |  
|End of period                                                           |  | $                               | 377,137,666 |   |      | $ | 367,019,257 |  
|                                                                        |  |                                 |             |   |      |   |             |  
|Undistributed net investment income, end of period                      |  | $                               | 3,763,272   |   |      | $ | 4,459,360   |  
|                                                                        |  |                                 |             |   |      |   |             |  

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                                        |  |                                 |              |   |      |   |             |  
|----------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------------ | - | ---- | - | ----------- | -
|                                                                                                                        |  | Three Months Ended December 31, |             
|                                                                                                                        |  | 2016                            |              |   | 2015 |  
|Cash flows from operating activities:                                                                                   |  |                                 |              |   |      |   |             |  
|Net increase in net assets resulting from operations                                                                    |  | $                               | 8,848,909    |   |      | $ | 1,746,879   |  
|Adjustments to reconcile net increase in net assets resulting from operations to net cash used in
operating activities: |  |                                 |              |   |      |   |             |  
|Net change in unrealized (appreciation) depreciation on investments                                                     |  |                                 | (2,546,025   | ) |      |   | 708,946     |  
|Net change in unrealized appreciation (depreciation) on Credit Facility                                                 |  |                                 | 1,068,214    |   |      |   | (601,875    | )
|Net realized (gain) loss on investments                                                                                 |  |                                 | (549,401     | ) |      |   | 3,232,008   |  
|Net accretion of discount and amortization of premium                                                                   |  |                                 | (425,722     | ) |      |   | (337,666    | )
|Purchases of investments                                                                                                |  |                                 | (124,826,238 | ) |      |   | (99,199,653 | )
|Payment-in-kind
interest                                                                                                |  |                                 | (39,085      | ) |      |   | (18,135     | )
|Proceeds from dispositions of investments                                                                               |  |                                 | 70,405,217   |   |      |   | 26,860,815  |  
|Increase in interest receivable                                                                                         |  |                                 | (608,313     | ) |      |   | (314,572    | )
|Increase in receivable for investments sold                                                                             |  |                                 | (11,357,601  | ) |      |   |            |  
|Decrease (increase) in prepaid expenses and other assets                                                                |  |                                 | 52,716       |   |      |   | (59,486     | )
|(Decrease) increase in payable for investments purchased                                                                |  |                                 | (3,108,608   | ) |      |   | 1,435,162   |  
|Increase in interest payable on Credit Facility                                                                         |  |                                 | 140,699      |   |      |   | 115,221     |  
|Increase in management fee payable                                                                                      |  |                                 | 137,101      |   |      |   | 121,626     |  
|Decrease in performance-based incentive fee payable                                                                     |  |                                 | (852,774     | ) |      |   | (2,936      | )
|Increase (decrease) in accrued other expenses                                                                           |  |                                 | 169,682      |   |      |   | (160,831    | )
|                                                                                                                        |  |                                 |              |   |      |   |             |  
|Net cash used in operating activities                                                                                   |  |                                 | (63,491,229  | ) |      |   | (66,474,497 | )
|                                                                                                                        |  |                                 |              |   |      |   |             |  
|Cash flows from financing activities:                                                                                   |  |                                 |              |   |      |   |             |  
|Distributions paid to stockholders                                                                                      |  |                                 | (7,618,071   | ) |      |   | (7,618,071  | )
|Borrowings under Credit Facility (See Notes 5 and 9)                                                                    |  |                                 | 91,902,000   |   |      |   | 69,300,000  |  
|Repayments under Credit Facility (See Notes 5 and 9)                                                                    |  |                                 | (25,500,000  | ) |      |   | (2,600,000  | )
|                                                                                                                        |  |                                 |              |   |      |   |             |  
|Net cash provided by financing activities                                                                               |  |                                 | 58,783,929   |   |      |   | 59,081,929  |  
|                                                                                                                        |  |                                 |              |   |      |   |             |  
|Net decrease in cash equivalents                                                                                        |  |                                 | (4,707,300   | ) |      |   | (7,392,568  | )
|Effect of exchange rate changes on cash                                                                                 |  |                                 | (108         | ) |      |   |            |  
|Cash and cash equivalents, beginning of period                                                                          |  |                                 | 28,910,973   |   |      |   | 21,428,514  |  
|                                                                                                                        |  |                                 |              |   |      |   |             |  
|Cash and cash equivalents, end of period                                                                                |  | $                               | 24,203,565   |   |      | $ | 14,035,946  |  
|                                                                                                                        |  |                                 |              |   |      |   |             |  
|Supplemental disclosure of cash flow information:                                                                       |  |                                 |              |   |      |   |             |  
|Interest paid                                                                                                           |  | $                               | 1,660,026    |   |      | $ | 824,461     |  
|                                                                                                                        |  |                                 |              |   |      |   |             |  
|Taxes paid                                                                                                              |  | $                               |             |   |      | $ | 1,190       |  
|                                                                                                                        |  |                                 |              |   |      |   |             |  
|Non-cash exchanges and conversions                                                                                      |  | $                               | 709,685      |   |      | $ | 4,547,934   |  
|                                                                                                                        |  |                                 |              |   |      |   |             |  

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

DECEMBER 31, 2016

(Unaudited)



|                                                                                  |  |            |  |                                            |  |               |                |      |                                  |  |         |             |  |   |            |  |  |                |            |  |  |   |            |  
|--------------------------------------------------------------------------------- |  | ---------- |  | ------------------------------------------ |  | ------------- | -------------- | ---- | -------------------------------- |  | ------- | ----------- |  | - | ---------- |  |  | -------------- | ---------- |  |  | - | ---------- | -
|Issuer Name                                                                       |  | Maturity   |  | Industry                                   |  | CurrentCoupon |                |      | Basis PointSpread AboveIndex (1) |  |         | Par /Shares |  |   | Cost       |  |  | Fair Value (2) |           
|Investments in Non-Controlled, Non-Affiliated Portfolio Companies174.2% (3), (4) | 
|First Lien Secured Debt159.1%                                                    | 
|Advanced Cable Communications, LLC                                                |  | 08/09/2021 |  | Telecommunications                         |  |               | 6.75           | %    |                                  |  | L+575   |             |  |   | 12,468,750 |  |  | $              | 12,236,628 |  |  | $ | 12,344,063 |  
|Advanced Cable Communications, LLC (8),
(10)                                      |  | 08/09/2021 |  | Telecommunications                         |  |               |               |      |                                  |  |        |             |  |   | 4,000,000  |  |  |                |           |  |  |   | (40,000    | )
|Alera Group Holdings, Inc.                                                        |  | 12/30/2022 |  | Banking, Finance, Insurance and RealEstate |  |               | 8.25           | %    |                                  |  | P+450   |             |  |   | 8,696,374  |  |  |                | 8,609,642  |  |  |   | 8,609,410  |  
|Alera Group Holdings, Inc. (Revolver)
(10)                                        |  | 12/30/2021 |  | Banking, Finance, Insurance and RealEstate |  |               |               |      |                                  |  |        |             |  |   | 1,771,962  |  |  |                |           |  |  |   |           |  
|Alera Group Holdings, Inc. (10)                                                   |  | 12/30/2022 |  | Banking, Finance, Insurance and RealEstate |  |               |               |      |                                  |  |        |             |  |   | 3,510,000  |  |  |                |           |  |  |   |           |  
|ALG USA Holdings, LLC                                                             |  | 02/28/2019 |  | Hotel, Gaming and Leisure                  |  |               | 7.00           | %    |                                  |  | L+575   |             |  |   | 12,064,454 |  |  |                | 12,041,216 |  |  |   | 12,064,454 |  
|Alvogen Pharma US, Inc. (6),(11)                                                  |  | 04/04/2022 |  | Healthcare and Pharmaceuticals             |  |               | 6.00           | %    |                                  |  | L+500   |             |  |   | 3,890,867  |  |  |                | 3,873,800  |  |  |   | 3,754,686  |  
|American Auto Auction Group, LLC                                                  |  | 11/30/2021 |  | Transportation: Consumer                   |  |               | 6.25           | %    |                                  |  | L+525   |             |  |   | 11,000,000 |  |  |                | 10,838,502 |  |  |   | 10,835,000 |  
|American Bath Group, LLC                                                          |  | 10/02/2023 |  | Consumer Goods: Durable                    |  |               | 6.75           | %    |                                  |  | L+575   |             |  |   | 2,992,500  |  |  |                | 2,963,304  |  |  |   | 2,988,759  |  
|American Gilsonite Company (8)                                                    |  | 12/31/2021 |  | Metals and Mining                          |  |               | 15.00(PIK 5.00 | % %) |                                  |  |        |             |  |   | 128,248    |  |  |                | 124,139    |  |  |   | 128,248    |  
|American Scaffold                                                                 |  | 03/31/2022 |  | Aerospace and Defense                      |  |               | 7.50           | %    |                                  |  | L+650   |             |  |   | 4,906,250  |  |  |                | 4,838,361  |  |  |   | 4,857,188  |  
|American Teleconferencing Services, Ltd.                                          |  | 12/08/2021 |  | Telecommunications                         |  |               | 7.50           | %    |                                  |  | L+650   |             |  |   | 6,997,280  |  |  |                | 6,787,362  |  |  |   | 6,809,263  |  
|AMF Bowling Centers, Inc.                                                         |  | 09/19/2023 |  | Retail                                     |  |               | 6.00           | %    |                                  |  | L+500   |             |  |   | 14,962,500 |  |  |                | 14,818,503 |  |  |   | 14,915,817 |  
|Anesthesia Consulting & Management, LP                                            |  | 10/31/2022 |  | Healthcare and Pharmaceuticals             |  |               | 6.00           | %    |                                  |  | L+500   |             |  |   | 4,000,000  |  |  |                | 3,960,604  |  |  |   | 3,970,000  |  
|Anesthesia Consulting & Management, LP (8),
(10)                                  |  | 10/31/2022 |  | Healthcare and Pharmaceuticals             |  |               |               |      |                                  |  |        |             |  |   | 1,000,000  |  |  |                |           |  |  |   | (7,500     | )
|AP Gaming I, LLC                                                                  |  | 12/21/2020 |  | Hotel, Gaming and Leisure                  |  |               | 9.25           | %    |                                  |  | L+825   |             |  |   | 6,518,078  |  |  |                | 6,444,893  |  |  |   | 6,474,603  |  
|API Technologies Corp.                                                            |  | 04/22/2022 |  | Aerospace and Defense                      |  |               | 7.50           | %    |                                  |  | L+650   |             |  |   | 9,950,000  |  |  |                | 9,770,591  |  |  |   | 9,800,750  |  
|Broder Bros., Co., Tranche A                                                      |  | 06/03/2021 |  | Consumer Goods: Non-Durable                |  |               | 7.00           | %    |                                  |  | L+575   |             |  |   | 2,425,000  |  |  |                | 2,384,579  |  |  |   | 2,425,000  |  
|Broder Bros., Co., Tranche B                                                      |  | 06/03/2021 |  | Consumer Goods: Non-Durable                |  |               | 13.50          | %    |                                  |  | L+1,225 |             |  |   | 2,450,000  |  |  |                | 2,407,862  |  |  |   | 2,450,000  |  
|Camin Cargo Control, Inc.                                                         |  | 06/30/2021 |  | Transportation: Cargo                      |  |               | 5.75           | %    |                                  |  | L+475   |             |  |   | 2,462,500  |  |  |                | 2,442,994  |  |  |   | 2,364,000  |  
|Cardenas Markets LLC                                                              |  | 11/29/2023 |  | Beverage, Food and Tobacco                 |  |               | 6.75           | %    |                                  |  | L+575   |             |  |   | 7,500,000  |  |  |                | 7,425,830  |  |  |   | 7,500,000  |  
|CBAC Borrower, LLC (8)                                                            |  | 07/02/2020 |  | Hotel, Gaming and Leisure                  |  |               | 8.25           | %    |                                  |  | L+700   |             |  |   | 4,950,000  |  |  |                | 4,921,411  |  |  |   | 4,950,000  |  
|CD&R TZ Purchaser, Inc.                                                           |  | 07/21/2023 |  | Consumer Goods: Durable                    |  |               | 7.00           | %    |                                  |  | L+600   |             |  |   | 12,468,750 |  |  |                | 12,158,895 |  |  |   | 12,531,094 |  
|Charming Charlie LLC                                                              |  | 12/24/2019 |  | Retail                                     |  |               | 9.00           | %    |                                  |  | L+800   |             |  |   | 3,948,750  |  |  |                | 3,916,040  |  |  |   | 3,474,900  |  
|Chicken Soup for the Soul Publishing, LLC                                         |  | 01/08/2019 |  | Media: Advertising, Printing andPublishing |  |               | 7.50           | %    |                                  |  | L+625   |             |  |   | 4,757,143  |  |  |                | 4,732,576  |  |  |   | 4,566,857  |  
|Corfin Industries
LLC                                                             |  | 11/25/2020 |  | Aerospace and Defense                      |  |               | 10.75          | %    |                                  |  | L+975   |             |  |   | 6,256,800  |  |  |                | 6,153,773  |  |  |   | 6,256,800  |  
|Corfin Industries LLC (Revolver) (8),
(10)                                        |  | 11/25/2020 |  | Aerospace and Defense                      |  |               |               |      |                                  |  |        |             |  |   | 518,033    |  |  |                |           |  |  |   |           |  
|CRGT Inc.                                                                         |  | 12/21/2020 |  | High Tech Industries                       |  |               | 7.50           | %    |                                  |  | L+650   |             |  |   | 9,712,731  |  |  |                | 9,642,729  |  |  |   | 9,688,450  |  
|Curo Health Services Holdings, Inc.                                               |  | 02/07/2022 |  | Healthcare and Pharmaceuticals             |  |               | 6.50           | %    |                                  |  | L+550   |             |  |   | 1,965,000  |  |  |                | 1,949,694  |  |  |   | 1,974,825  |  
|DBI Holding LLC                                                                   |  | 08/02/2021 |  | Business Services                          |  |               | 6.25           | %    |                                  |  | L+525   |             |  |   | 9,975,000  |  |  |                | 9,879,526  |  |  |   | 9,975,000  |  
|DCS Business Services, Inc.                                                       |  | 03/19/2018 |  | Business Services                          |  |               | 8.75           | %    |                                  |  | L+725   |             |  |   | 1,971,104  |  |  |                | 1,962,737  |  |  |   | 1,971,104  |  
|DISA Global Solutions, Inc.                                                       |  | 12/09/2020 |  | Business Services                          |  |               | 5.50           | %    |                                  |  | L+450   |             |  |   | 4,912,500  |  |  |                | 4,878,704  |  |  |   | 4,863,375  |  
|Digital Room LLC                                                                  |  | 11/21/2022 |  | Media: Advertising, Printing andPublishing |  |               | 7.00           | %    |                                  |  | L+600   |             |  |   | 7,000,000  |  |  |                | 6,861,733  |  |  |   | 6,860,000  |  
|Douglas Products and Packaging Company LLC                                        |  | 06/30/2020 |  | Chemicals, Plastics and Rubber             |  |               | 5.75           | %    |                                  |  | L+475   |             |  |   | 4,625,000  |  |  |                | 4,598,277  |  |  |   | 4,625,000  |  
|Driven Performance Brands, Inc. (8)                                               |  | 09/10/2020 |  | Consumer Goods: Durable                    |  |               | 5.75           | %    |                                  |  | L+475   |             |  |   | 8,437,500  |  |  |                | 8,403,778  |  |  |   | 8,437,500  |  
|Driven Performance Brands, Inc. (Revolver) (8),
(10)                              |  | 09/10/2020 |  | Consumer Goods: Durable                    |  |               |               |      |                                  |  |        |             |  |   | 1,000,000  |  |  |                |           |  |  |   |           |  
|Education Networks of America, Inc.                                               |  | 05/06/2021 |  | Telecommunications                         |  |               | 8.00           | %    |                                  |  | L+700   |             |  |   | 8,586,957  |  |  |                | 8,546,784  |  |  |   | 8,544,021  |  
|Education Networks of America, Inc. (Revolver) (8),
(10)                          |  | 05/06/2021 |  | Telecommunications                         |  |               |               |      |                                  |  |        |             |  |   | 1,304,348  |  |  |                |           |  |  |   |           |  
|Efficient Collaborative Retail Marketing Company, LLC                             |  | 06/15/2022 |  | Media: Diversified and Production          |  |               | 7.75           | %    |                                  |  | L+675   |             |  |   | 10,548,335 |  |  |                | 10,449,705 |  |  |   | 10,548,336 |  
|Emerging Markets Communications, LLC                                              |  | 07/01/2021 |  | Telecommunications                         |  |               | 6.75           | %    |                                  |  | L+575   |             |  |   | 4,925,000  |  |  |                | 4,866,496  |  |  |   | 4,801,875  |  
|FHC Health Systems, Inc.                                                          |  | 12/23/2021 |  | Healthcare and Pharmaceuticals             |  |               | 5.00           | %    |                                  |  | L+400   |             |  |   | 2,917,576  |  |  |                | 2,894,365  |  |  |   | 2,830,049  |  
|Greenway Health, LLC                                                              |  | 11/04/2020 |  | High Tech Industries                       |  |               | 6.00           | %    |                                  |  | L+500   |             |  |   | 6,618,092  |  |  |                | 6,577,992  |  |  |   | 6,551,911  |  
|GTCR Valor Companies, Inc.                                                        |  | 06/16/2023 |  | Media: Broadcasting and Subscription       |  |               | 7.00           | %    |                                  |  | L+600   |             |  |   | 7,462,500  |  |  |                | 7,182,715  |  |  |   | 7,376,234  |  
|Highline Aftermarket Acquisition, LLC                                             |  | 04/01/2022 |  | Wholesale                                  |  |               | 5.75           | %    |                                  |  | L+475   |             |  |   | 7,218,750  |  |  |                | 7,154,171  |  |  |   | 7,236,797  |  
|Hollander Sleep Products, LLC                                                     |  | 10/21/2020 |  | Consumer Goods: Non-Durable                |  |               | 9.00           | %    |                                  |  | L+800   |             |  |   | 1,165,886  |  |  |                | 1,153,558  |  |  |   | 1,142,569  |  
|Hostway Corporation                                                               |  | 12/13/2019 |  | High Tech Industries                       |  |               | 8.00           | %    |                                  |  | L+675   |             |  |   | 2,587,871  |  |  |                | 2,573,570  |  |  |   | 2,208,572  |  
|Hunter Defense Technologies, Inc. (8)                                             |  | 08/05/2019 |  | Aerospace and Defense                      |  |               | 7.00           | %    |                                  |  | L+600   |             |  |   | 6,125,000  |  |  |                | 6,093,462  |  |  |   | 5,512,500  |  
|Icynene U.S. Acquisition Corp. (6),
(11)                                          |  | 11/04/2020 |  | Construction and Building                  |  |               | 7.25           | %    |                                  |  | L+625   |             |  |   | 6,208,320  |  |  |                | 6,121,045  |  |  |   | 6,208,320  |  
|Idera, Inc.                                                                       |  | 04/09/2021 |  | High Tech Industries                       |  |               | 6.50           | %    |                                  |  | L+550   |             |  |   | 7,922,492  |  |  |                | 7,305,337  |  |  |   | 7,902,685  |  
|iEnergizer Limited and Aptara, Inc.(6),
(11)                                      |  | 05/01/2019 |  | Business Services                          |  |               | 7.25           | %    |                                  |  | L+600   |             |  |   | 8,321,542  |  |  |                | 8,268,965  |  |  |   | 7,988,680  |  
|IGM RFE1 B.V. (6), (11), (12)                                                     |  | 10/12/2021 |  | Chemicals, Plastics and Rubber             |  |               | 8.00           | %    |                                  |  | E+000   |             |  |  | 17,390,625 |  |  |                | 18,075,816 |  |  |   | 18,342,797 |  
|Imagine! Print Solutions, LLC                                                     |  | 03/30/2022 |  | Media: Advertising, Printing andPublishing |  |               | 7.00           | %    |                                  |  | L+600   |             |  |   | 5,959,975  |  |  |                | 5,902,236  |  |  |   | 6,049,375  |  
|Impact Sales, LLC                                                                 |  | 12/30/2021 |  | Wholesale                                  |  |               | 8.00           | %    |                                  |  | L+700   |             |  |   | 11,250,000 |  |  |                | 11,250,000 |  |  |   | 11,250,000 |  
|Impact Sales, LLC(10)                                                             |  | 12/31/2018 |  | Wholesale                                  |  |               |               |      |                                  |  |        |             |  |   | 3,750,000  |  |  |                |           |  |  |   |           |  
|Instant Web, LLC, Term Loan A                                                     |  | 03/28/2019 |  | Media: Advertising, Printing andPublishing |  |               | 5.50           | %    |                                  |  | L+450   |             |  |   | 5,256,439  |  |  |                | 5,218,146  |  |  |   | 5,256,439  |  
|Instant Web, LLC, Term Loan B                                                     |  | 03/28/2019 |  | Media: Advertising, Printing andPublishing |  |               | 12.00          | %    |                                  |  | L+1,100 |             |  |   | 4,500,000  |  |  |                | 4,464,349  |  |  |   | 4,500,000  |  
|Interior Specialists, Inc.                                                        |  | 06/30/2020 |  | Construction and Building                  |  |               | 9.00           | %    |                                  |  | L+800   |             |  |   | 6,628,398  |  |  |                | 6,579,255  |  |  |   | 6,628,398  |  
|Inventus Power, Inc.                                                              |  | 04/30/2020 |  | Consumer Goods: Durable                    |  |               | 6.50           | %    |                                  |  | L+550   |             |  |   | 4,882,266  |  |  |                | 4,849,446  |  |  |   | 4,638,153  |  
|Jackson Hewitt Inc.                                                               |  | 07/30/2020 |  | Consumer Services                          |  |               | 8.00           | %    |                                  |  | L+700   |             |  |   | 4,900,000  |  |  |                | 4,825,770  |  |  |   | 4,697,875  |  
|K2 Pure Solutions NoCal, L.P. (8)                                                 |  | 02/19/2021 |  | Chemicals, Plastics and Rubber             |  |               | 10.00          | %    |                                  |  | L+900   |             |  |   | 4,002,471  |  |  |                | 3,934,894  |  |  |   | 3,927,550  |  
|Kendra Scott, LLC                                                                 |  | 07/17/2020 |  | Retail                                     |  |               | 7.00           | %    |                                  |  | L+600   |             |  |   | 2,812,500  |  |  |                | 2,791,567  |  |  |   | 2,784,375  |  
|KHC Holdings, Inc.                                                                |  | 10/31/2022 |  | Wholesale                                  |  |               | 7.00           | %    |                                  |  | L+600   |             |  |   | 12,375,000 |  |  |                | 12,186,813 |  |  |   | 12,375,000 |  



SEE NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS



8



---

##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



|                                                                    |  |            |  |                                            |  |               |               |     |                                  |  |         |             |  |    |            |  |  |                |             |  |  |   |             |  
|------------------------------------------------------------------- |  | ---------- |  | ------------------------------------------ |  | ------------- | ------------- | --- | -------------------------------- |  | ------- | ----------- |  | -- | ---------- |  |  | -------------- | ----------- |  |  | - | ----------- | -
|Issuer Name                                                         |  | Maturity   |  | Industry                                   |  | CurrentCoupon |               |     | Basis PointSpread AboveIndex (1) |  |         | Par /Shares |  |    | Cost       |  |  | Fair Value (2) |            
|KHC Holdings, Inc. (Revolver) (8),
(10)                             |  | 10/30/2020 |  | Wholesale                                  |  |               |              |     |                                  |  |        |             |  |    | 1,209,677  |  |  | $              |            |  |  | $ |            |  
|Lago Resort & Casino, LLC                                           |  | 03/07/2022 |  | Hotel, Gaming and Leisure                  |  |               | 10.50         | %   |                                  |  | L+950   |             |  |    | 10,200,000 |  |  |                | 10,017,217  |  |  |   | 10,200,000  |  
|LifeCare Holdings LLC (8)                                           |  | 11/30/2018 |  | Healthcare and Pharmaceuticals             |  |               | 6.50          | %   |                                  |  | L+525   |             |  |    | 5,392,148  |  |  |                | 5,356,439   |  |  |   | 5,203,422   |  
|Lombart Brothers, Inc.                                              |  | 04/13/2022 |  | Capital Equipment                          |  |               | 7.50          | %   |                                  |  | L+650   |             |  |    | 5,970,000  |  |  |                | 5,889,619   |  |  |   | 5,970,000   |  
|Lombart Brothers, Inc. (Revolver) (8),
(10)                         |  | 04/13/2022 |  | Capital Equipment                          |  |               |              |     |                                  |  |        |             |  |    | 1,238,938  |  |  |                |            |  |  |   |            |  
|Longs Drugs Incorporated                                           |  | 08/19/2021 |  | Healthcare and Pharmaceuticals             |  |               | 6.25          | %   |                                  |  | L+525   |             |  |    | 4,987,500  |  |  |                | 4,941,570   |  |  |   | 4,937,625   |  
|LSF9 Atlantis Holdings, LLC                                         |  | 01/15/2021 |  | Retail                                     |  |               | 10.00         | %   |                                  |  | L+900   |             |  |    | 9,420,054  |  |  |                | 9,301,704   |  |  |   | 9,420,054   |  
|Marketplace Events LLC                                              |  | 01/27/2021 |  | Media: Diversified and Production          |  |               | 6.25          | %   |                                  |  | L+525   |             |  |    | 3,402,920  |  |  |                | 3,353,135   |  |  |   | 3,385,905   |  
|Marketplace Events LLC (12)                                         |  | 01/27/2021 |  | Media: Diversified and Production          |  |               | 6.25          | %   |                                  |  | P+275   |             |  | C$ | 17,200,829 |  |  |                | 12,043,641  |  |  |   | 12,762,251  |  
|Marketplace Events LLC (Revolver) (8),
(10)                         |  | 01/27/2021 |  | Media: Diversified and Production          |  |               |              |     |                                  |  |        |             |  |    | 1,703,163  |  |  |                |            |  |  |   |            |  
|Mission Critical Electronics, Inc.
(8)                              |  | 09/28/2022 |  | Capital Equipment                          |  |               | 6.00          | %   |                                  |  | L+500   |             |  |    | 4,106,316  |  |  |                | 4,067,156   |  |  |   | 4,072,029   |  
|Mission Critical Electronics, Inc. (Revolver)
(8), (10)             |  | 09/28/2021 |  | Capital Equipment                          |  |               |              |     |                                  |  |        |             |  |    | 883,392    |  |  |                |            |  |  |   | (11,793     | )
|New Trident HoldCorp, Inc.                                          |  | 07/31/2019 |  | Healthcare and Pharmaceuticals             |  |               | 7.00          | %   |                                  |  | L+575   |             |  |    | 8,792,647  |  |  |                | 8,748,099   |  |  |   | 7,895,797   |  
|Pathway Partners Vet Management Company LLC
(8)                     |  | 08/19/2022 |  | Healthcare and Pharmaceuticals             |  |               | 6.00          | %   |                                  |  | L+500   |             |  |    | 6,463,433  |  |  |                | 6,402,888   |  |  |   | 6,463,433   |  
|Pathway Partners Vet Management Company
LLC (8), (10)               |  | 08/19/2022 |  | Healthcare and Pharmaceuticals             |  |               |              |     |                                  |  |        |             |  |    | 3,520,896  |  |  |                |            |  |  |   |            |  
|Polycom, Inc.                                                       |  | 09/27/2023 |  | Telecommunications                         |  |               | 7.50          | %   |                                  |  | L+650   |             |  |    | 5,802,500  |  |  |                | 5,575,908   |  |  |   | 5,824,259   |  
|Precyse Acquisition Corp.                                           |  | 10/20/2022 |  | Healthcare and Pharmaceuticals             |  |               | 6.50          | %   |                                  |  | L+550   |             |  |    | 4,977,494  |  |  |                | 4,910,610   |  |  |   | 5,033,491   |  
|Premier Dental Services, Inc.                                       |  | 11/01/2018 |  | Consumer Services                          |  |               | 7.50          | %   |                                  |  | L+650   |             |  |    | 7,528,230  |  |  |                | 7,474,965   |  |  |   | 7,471,768   |  
|Profile Products LLC                                                |  | 05/20/2021 |  | Environmental Industries                   |  |               | 5.75          | %   |                                  |  | L+475   |             |  |    | 7,234,631  |  |  |                | 7,178,888   |  |  |   | 7,234,631   |  
|Profile Products LLC (Revolver) (8),
(10)                           |  | 05/20/2020 |  | Environmental Industries                   |  |               |              |     |                                  |  |        |             |  |    | 2,459,016  |  |  |                |            |  |  |   |            |  
|PT Network, LLC                                                     |  | 11/30/2021 |  | Healthcare and Pharmaceuticals             |  |               | 7.50          | %   |                                  |  | L+650   |             |  |    | 7,800,000  |  |  |                | 7,723,967   |  |  |   | 7,722,000   |  
|PT Network, LLC (8), (10)                                           |  | 11/30/2021 |  | Healthcare and Pharmaceuticals             |  |               |              |     |                                  |  |        |             |  |    | 3,000,000  |  |  |                |            |  |  |   | (30,000     | )
|Quick Weight Loss Centers, LLC                                      |  | 08/23/2021 |  | Beverage, Food and Tobacco                 |  |               | 5.75          | %   |                                  |  | L+475   |             |  |    | 10,000,000 |  |  |                | 9,858,256   |  |  |   | 9,950,000   |  
|Research Now Group, Inc.                                            |  | 03/18/2021 |  | High Tech Industries                       |  |               | 5.50          | %   |                                  |  | L+450   |             |  |    | 6,877,500  |  |  |                | 6,851,967   |  |  |   | 6,774,338   |  
|Robertshaw US Holding Corp.                                         |  | 06/18/2019 |  | Consumer Goods: Durable                    |  |               | 8.50          | %   |                                  |  | L+700   |             |  |    | 4,245,684  |  |  |                | 4,228,328   |  |  |   | 4,189,615   |  
|Ryan, LLC                                                           |  | 08/07/2020 |  | Business Services                          |  |               | 6.75          | %   |                                  |  | L+575   |             |  |    | 4,162,500  |  |  |                | 4,114,022   |  |  |   | 4,123,497   |  
|Snak Club, LLC                                                      |  | 07/19/2021 |  | Beverage, Food and Tobacco                 |  |               | 6.00          | %   |                                  |  | L+500   |             |  |    | 4,937,495  |  |  |                | 4,868,948   |  |  |   | 4,912,808   |  
|Snak Club, LLC (Revolver) (8)                                       |  | 07/19/2021 |  | Beverage, Food and Tobacco                 |  |               | 6.00          | %   |                                  |  | L+500   |             |  |    | 350,000    |  |  |                | 350,000     |  |  |   | 350,000     |  
|Snak Club, LLC (Revolver) (8), (10)                                 |  | 07/19/2021 |  | Beverage, Food and Tobacco                 |  |               |              |     |                                  |  |        |             |  |    | 150,000    |  |  |                |            |  |  |   |            |  
|Softvision, LLC (f/k/a Software Paradigms International Group, LLC) |  | 05/21/2021 |  | High Tech Industries                       |  |               | 6.50          | %   |                                  |  | L+550   |             |  |    | 9,750,000  |  |  |                | 9,661,870   |  |  |   | 9,701,250   |  
|Sotera Defense Solutions, Inc.                                      |  | 04/21/2017 |  | Aerospace and Defense                      |  |               | 9.00          | %   |                                  |  | L+750   |             |  |    | 5,668,843  |  |  |                | 5,639,737   |  |  |   | 5,527,122   |  
|Sundial Group Holdings LLC                                          |  | 10/19/2021 |  | Consumer Goods: Non-Durable                |  |               | 7.25          | %   |                                  |  | L+625   |             |  |    | 7,218,750  |  |  |                | 7,112,700   |  |  |   | 7,290,938   |  
|Survey Sampling International, LLC                                  |  | 12/16/2020 |  | Business Services                          |  |               | 6.00          | %   |                                  |  | L+500   |             |  |    | 7,427,655  |  |  |                | 7,379,369   |  |  |   | 7,390,517   |  
|Tensar Corporation                                                  |  | 07/09/2021 |  | Construction and Building                  |  |               | 5.75          | %   |                                  |  | L+475   |             |  |    | 4,822,723  |  |  |                | 4,788,808   |  |  |   | 4,340,451   |  
|The Infosoft Group, LLC                                             |  | 12/02/2021 |  | Media: Broadcasting and Subscription       |  |               | 6.25          | %   |                                  |  | L+525   |             |  |    | 15,000,000 |  |  |                | 14,853,374  |  |  |   | 14,850,000  |  
|The Original Cakerie, Co. (6), (11)                                 |  | 07/20/2021 |  | Consumer Goods: Non-Durable                |  |               | 6.50          | %   |                                  |  | L+550   |             |  |    | 3,084,564  |  |  |                | 3,056,154   |  |  |   | 3,084,564   |  
|The Original Cakerie Ltd. (6), (11)                                 |  | 07/20/2021 |  | Consumer Goods: Non-Durable                |  |               | 6.00          | %   |                                  |  | L+500   |             |  |    | 5,971,037  |  |  |                | 5,916,117   |  |  |   | 5,971,037   |  
|The Original Cakerie Ltd. (Revolver) (6), (8), (10),
(11)           |  | 07/20/2021 |  | Consumer Goods: Non-Durable                |  |               |              |     |                                  |  |        |             |  |    | 1,418,484  |  |  |                |            |  |  |   |            |  
|TOMS Shoes, LLC                                                     |  | 11/02/2020 |  | Consumer Goods: Non-Durable                |  |               | 6.50          | %   |                                  |  | L+550   |             |  |    | 1,965,000  |  |  |                | 1,828,667   |  |  |   | 1,434,450   |  
|Triad Manufacturing, Inc.                                           |  | 12/28/2020 |  | Capital Equipment                          |  |               | 12.02         | %   |                                  |  | L+1,125 | (9)         |  |    | 9,655,810  |  |  |                | 9,493,124   |  |  |   | 9,655,810   |  
|UniTek Global Services, Inc. (8)                                    |  | 01/14/2019 |  | Telecommunications                         |  |               | 9.50(PIK 1.00 | %%) |                                  |  | L+850   |             |  |    | 257,621    |  |  |                | 257,621     |  |  |   | 257,621     |  
|UniTek Global Services, Inc. (8)                                    |  | 01/14/2019 |  | Telecommunications                         |  |               | 8.50          | %   |                                  |  | L+750   |             |  |    | 599,702    |  |  |                | 566,344     |  |  |   | 599,702     |  
|UniTek Global Services, Inc. (8),(10)                               |  | 01/14/2019 |  | Telecommunications                         |  |               |              |     |                                  |  |        |             |  |    | 151,090    |  |  |                |            |  |  |   |            |  
|Universal Fiber Systems, LLC                                        |  | 10/04/2021 |  | Chemicals, Plastics and Rubber             |  |               | 6.50          | %   |                                  |  | L+550   |             |  |    | 8,939,921  |  |  |                | 8,889,413   |  |  |   | 8,939,921   |  
|U.S. Anesthesia Partners, Inc.                                      |  | 12/31/2019 |  | Healthcare and Pharmaceuticals             |  |               | 6.00          | %   |                                  |  | L+500   |             |  |    | 12,368,750 |  |  |                | 12,268,500  |  |  |   | 12,306,906  |  
|US Med Acquisition, Inc. (8)                                        |  | 08/13/2021 |  | Healthcare and Pharmaceuticals             |  |               | 10.00         | %   |                                  |  | L+900   |             |  |    | 3,082,031  |  |  |                | 3,082,031   |  |  |   | 3,082,031   |  
|Vistage Worldwide, Inc.                                             |  | 08/19/2021 |  | Media: Broadcasting and Subscription       |  |               | 6.50          | %   |                                  |  | L+550   |             |  |    | 5,092,831  |  |  |                | 5,051,051   |  |  |   | 5,105,563   |  
|Winchester Electronics Corporation                                  |  | 06/30/2022 |  | Capital Equipment                          |  |               | 7.50          | %   |                                  |  | L+650   |             |  |    | 7,754,100  |  |  |                | 7,686,604   |  |  |   | 7,817,225   |  
|Winchester Electronics Corporation (8),
(10)                        |  | 06/30/2022 |  | Capital Equipment                          |  |               |              |     |                                  |  |        |             |  |    | 708,333    |  |  |                |            |  |  |   | 5,767       |  
|Worley Claims Services, LLC                                         |  | 10/30/2020 |  | Banking, Finance, Insurance andReal Estate |  |               | 9.00          | %   |                                  |  | L+800   |             |  |    | 7,297,877  |  |  |                | 7,243,917   |  |  |   | 7,115,431   |  
|                                                                    |  |            |  |                                            |  |               |               |     |                                  |  |         |             |  |    |            |  |  |                |             |  |  |   |             |  
|Total First Lien Secured Debt                                       |  |            |  |                                            |  |               |               |     |                                  |  |         |             |  |    |            |  |  |                | 599,327,868 |  |  |   | 600,052,593 |  
|                                                                    |  |            |  |                                            |  |               |               |     |                                  |  |         |             |  |    |            |  |  |                |             |  |  |   |             |  
|Second Lien Secured Debt9.8%                                       |  |            |  |                                            |  |               |               |     |                                  |  |         |             |  |    |            |  |  |                |             |  |  |   |             |  
|Affinion Group, Inc. (8)                                            |  | 10/31/2018 |  | Consumer Goods: Durable                    |  |               | 8.50          | %   |                                  |  | L+700   |             |  |    | 1,000,000  |  |  |                | 948,800     |  |  |   | 969,000     |  
|Douglas Products and Packaging Company LLC                          |  | 12/31/2020 |  | Chemicals, Plastics and Rubber             |  |               | 11.34         | %   |                                  |  | L+1,050 | (9)         |  |    | 2,000,000  |  |  |                | 1,972,437   |  |  |   | 2,020,000   |  
|Howard Berger Co. LLC                                               |  | 09/30/2020 |  | Wholesale                                  |  |               | 11.00         | %   |                                  |  | L+1,000 |             |  |    | 11,000,000 |  |  |                | 10,537,088  |  |  |   | 9,790,000   |  
|MailSouth, Inc.                                                     |  | 10/22/2021 |  | Media: Advertising, Printing andPublishing |  |               | 11.50         | %   |                                  |  | L+1,050 |             |  |    | 3,775,000  |  |  |                | 3,706,653   |  |  |   | 3,775,000   |  
|Novitex Acquisition, LLC                                            |  | 07/07/2021 |  | Business Services                          |  |               | 12.25         | %   |                                  |  | L+1,100 |             |  |    | 11,900,000 |  |  |                | 11,763,956  |  |  |   | 11,900,000  |  
|Sunshine Oilsands Ltd. (5), (6), (8),
(11)                          |  | 08/01/2017 |  | Energy: Oil and Gas                        |  |               | 12.50         | %   |                                  |  |        |             |  |    | 2,812,500  |  |  |                | 2,772,451   |  |  |   | 1,575,000   |  
|VT Buyer Acquisition Corp.                                          |  | 01/30/2023 |  | Business Services                          |  |               | 10.75         | %   |                                  |  | L+975   |             |  |    | 1,837,500  |  |  |                | 1,778,941   |  |  |   | 1,837,500   |  
|WD Wolverine Holdings, LLC (8)                                      |  | 10/17/2024 |  | Healthcare and Pharmaceuticals             |  |               | 10.50         | %   |                                  |  | L+950   |             |  |    | 5,250,000  |  |  |                | 5,040,000   |  |  |   | 5,046,563   |  
|                                                                    |  |            |  |                                            |  |               |               |     |                                  |  |         |             |  |    |            |  |  |                |             |  |  |   |             |  
|Total Second Lien Secured Debt                                      |  |            |  |                                            |  |               |               |     |                                  |  |         |             |  |    |            |  |  |                | 38,520,326  |  |  |   | 36,913,063  |  
|                                                                    |  |            |  |                                            |  |               |               |     |                                  |  |         |             |  |    |            |  |  |                |             |  |  |   |             |  



SEE NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS



9



---

##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|------------------------------------------------------------------------- |  | -------- | ---------- |  | -------- |  | ------------------------------------------ | ------------- |  |  | -------------------------------- | ---- |  | ----------- | - | ----------- | ---- |  | --------- | -------------- |  | - | ---------- |  |  | - | ------------ | -
|Issuer Name                                                               |  | Maturity |            |  | Industry |  |                                            | CurrentCoupon |  |  | Basis PointSpread AboveIndex (1) |      |  | Par /Shares |   |             | Cost |  |           | Fair Value (2) | 
|Subordinated Debt/Corporate Notes2.2% (8)                                |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                | 
|Affinion International Holdings Limited (5), (6),
(11)                    |  |          | 07/30/2018 |  |          |  | Consumer Goods: Durable                    |               |  |  | 7.50(PIK 4.00                    | % %) |  |             |  |             |      |  | 1,157,978 |                |  | $ | 1,067,044  |  |  | $ | 1,111,659    |  
|American Gilsonite Company (5)                                            |  |          | 12/31/2021 |  |          |  | Metals and Mining                          |               |  |  | 17.00(PIK 17.00                  | % %) |  |             |  |             |      |  | 370,370   |                |  |   | 370,370    |  |  |   | 370,370      |  
|Credit Infonet, Inc.                                                      |  |          | 10/26/2018 |  |          |  | High Tech Industries                       |               |  |  | 13.25(PIK 2.00                   | % %) |  |             |  |             |      |  | 2,079,296 |                |  |   | 2,039,546  |  |  |   | 2,023,013    |  
|Sonnys Enterprises, LLC                                                  |  |          | 06/01/2023 |  |          |  | Capital Equipment                          |               |  |  | 11.00                            | %    |  |             |  |             |      |  | 4,750,000 |                |  |   | 4,656,141  |  |  |   | 4,655,000    |  
|UniTek Global Services, Inc.                                              |  |          | 07/15/2019 |  |          |  | Telecommunications                         |               |  |  | 15.00(PIK 15.00                  | % %) |  |             |  |             |      |  | 152,509   |                |  |   | 152,509    |  |  |   | 154,797      |  
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Total Subordinated Debt/Corporate Notes                                   |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   | 8,285,610   |      |  |           | 8,314,839      | 
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Preferred Equity0.4%(7),
(8)                                             |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|UniTek Global Services, Inc.                                              |  |          |           |  |          |  | Telecommunications                         |               |  |  | 13.50                            | %    |  |             |  |             |      |  | 1,047,317 |                |  |   | 670,283    |  |  |   | 1,364,841    |  
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Common Equity/Warrants2.7% (7),
(8)                                      |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Affinion Group Holdings, Inc.                                             |  |          |           |  |          |  | Consumer Goods: Durable                    |               |  |  |                                 |      |  |             |  |             |      |  | 99,029    |                |  |   | 3,514,572  |  |  |   | 3,889,552    |  
|Affinion Group Holdings, Inc., Series C and Series D                      |  |          |           |  |          |  | Consumer Goods: Durable                    |               |  |  |                                 |      |  |             |  |             |      |  | 4,298     |                |  |   | 1,186,649  |  |  |   | 28,641       |  
|American Gilsonite Company                                                |  |          |           |  |          |  | Metals and Mining                          |               |  |  |                                 |      |  |             |  |             |      |  | 1,000     |                |  |   | 215,182    |  |  |   | 215,182      |  
|Corfin InvestCo, L.P.                                                     |  |          |           |  |          |  | Aerospace and Defense                      |               |  |  |                                 |      |  |             |  |             |      |  | 3,000     |                |  |   | 300,000    |  |  |   | 694,987      |  
|Corfin InvestCo, L.P. (10)                                                |  |          |           |  |          |  | Aerospace and Defense                      |               |  |  |                                 |      |  |             |  |             |      |  | 3,000     |                |  |   |           |  |  |   |             |  
|e.l.f. Beauty, Inc.                                                       |  |          |           |  |          |  | Consumer Goods: Durable                    |               |  |  |                                 |      |  |             |  |             |      |  | 110,399   |                |  |   | 295,670    |  |  |   | 3,102,473    |  
|Faraday Holdings, LLC(Interior Specialists, Inc.)                         |  |          |           |  |          |  | Construction and Building                  |               |  |  |                                 |      |  |             |  |             |      |  | 1,141     |                |  |   | 58,044     |  |  |   | 110,766      |  
|Gauge InfosoftCoInvest, LLC(The Infosoft Group, LLC)                      |  |          |           |  |          |  | Media: Broadcasting and Subscription       |               |  |  |                                 |      |  |             |  |             |      |  | 500       |                |  |   | 500,000    |  |  |   | 500,000      |  
|Patriot National, Inc.                                                    |  |          |           |  |          |  | Banking, Finance,Insurance and Real Estate |               |  |  |                                 |      |  |             |  |             |      |  | 11,867    |                |  |   | 27,995     |  |  |   | 55,182       |  
|TPC Broadband Investors, LP(Advanced Cable Communications, LLC) (13)      |  |          |           |  |          |  | Telecommunications                         |               |  |  |                                 |      |  |             |  |             |      |  | 438,098   |                |  |   | 438,098    |  |  |   | 438,098      |  
|TPC Broadband Investors, LP(Advanced Cable Communications, LLC)(10), (13) |  |          |           |  |          |  | Telecommunications                         |               |  |  |                                 |      |  |             |  |             |      |  | 561,902   |                |  |   |           |  |  |   |             |  
|UniTek Global Services, Inc.                                              |  |          |           |  |          |  | Telecommunications                         |               |  |  |                                 |      |  |             |  |             |      |  | 149,617   |                |  |   |           |  |  |   | 1,188,670    |  
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Total Common Equity/Warrants                                              |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   | 6,536,210  |  |  |   | 10,223,551   |  
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies   |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   | 653,340,297 |      |  |           | 656,868,887    | 
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Cash and Cash Equivalents6.4%                                            |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|BlackRock Federal FD Instl 30                                             |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   | 22,526,563 |  |  |   | 22,526,563   |  
|BNY Mellon Cash                                                           |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   | 1,674,695  |  |  |   | 1,677,002    |  
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Total Cash and Cash Equivalents                                           |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   | 24,201,258 |  |  |   | 24,203,565   |  
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Total Investments and Cash Equivalents180.6%                             |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             | $ | 677,541,555 |      |  | $         | 681,072,452    | 
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  
|Liabilities in Excess of Other Assets(80.6)%                             |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   | (303,934,786 | )
|Net Assets100.0%                                                         |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  | $ | 377,137,666  |  
|                                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |   |             |      |  |           |                |  |   |            |  |  |   |              |  



|(1) | 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. 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Valued based on our accounting policy (see Note 2).
|--- | ---------------------------------------------------

|(3) | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Security is exempt from registration under Rule 144A promulgated under the Securities Act of 1933, as amended, or the Securities Act. The security may be resold in transactions that are exempt from registration,
normally to qualified institutional buyers.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Non-U.S. company or principal place of business outside the United States.
|--- | --------------------------------------------------------------------------

|(7) | Non-income producing securities.
|--- | --------------------------------

|(8) | The securities, or a portion thereof, are not pledged as collateral under the Credit Facility. All other securities are pledged as collateral under the Credit Facility and held through Funding I.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Coupon is not subject to a LIBOR or Prime rate floor.
|--- | -----------------------------------------------------

|(10) | 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.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Par amount is denominated in Canadian Dollars (C$) or in Euros () as denoted.
|---- | ------------------------------------------------------------------------------

|(13) | Investment is held through our Taxable Subsidiary (See Note 1).
|---- | ---------------------------------------------------------------

SEE NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS



10



---

##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2016



|                                                                                  |  |          |            |  |          |                                            |               |  |       |                                  |  |  |             |  |  |      |            |  |                |   |            |  |  |   |            |  
|--------------------------------------------------------------------------------- |  | -------- | ---------- |  | -------- | ------------------------------------------ | ------------- |  | ----- | -------------------------------- |  |  | ----------- |  |  | ---- | ---------- |  | -------------- | - | ---------- |  |  | - | ---------- | -
|Issuer Name                                                                       |  | Maturity |            |  | Industry |                                            | CurrentCoupon |  |       | Basis PointSpread AboveIndex (1) |  |  | Par /Shares |  |  | Cost |            |  | Fair Value (2) |  
|Investments in Non-Controlled, Non-Affiliated Portfolio Companies159.3% (3), (4) | 
|First Lien Secured Debt145.9%                                                    | 
|Advanced Cable Communications, LLC                                                |  |          | 08/09/2021 |  |          | Telecommunications                         |               |  | 6.75  | %                                |  |  | L+575       |  |  |      | 12,500,000 |  |                | $ | 12,255,990 |  |  | $ | 12,250,000 |  
|Advanced Cable Communications, LLC
(10)                                           |  |          | 08/09/2021 |  |          | Telecommunications                         |               |  |      |                                  |  |  |            |  |  |      | 4,000,000  |  |                |   |           |  |  |   | (80,000    | )
|ALG USA Holdings, LLC                                                             |  |          | 02/28/2019 |  |          | Hotel, Gaming and Leisure                  |               |  | 7.00  | %                                |  |  | L+575       |  |  |      | 12,064,454 |  |                |   | 12,037,105 |  |  |   | 12,064,454 |  
|Alvogen Pharma US, Inc. (6),(11)                                                  |  |          | 04/04/2022 |  |          | Healthcare and Pharmaceuticals             |               |  | 6.00  | %                                |  |  | L+500       |  |  |      | 3,943,925  |  |                |   | 3,925,777  |  |  |   | 3,946,410  |  
|American Bath Group, LLC                                                          |  |          | 10/02/2023 |  |          | Consumer Goods: Durable                    |               |  | 6.75  | %                                |  |  | L+575       |  |  |      | 3,000,000  |  |                |   | 2,970,000  |  |  |   | 2,992,500  |  
|American Scaffold                                                                 |  |          | 03/31/2022 |  |          | Aerospace and Defense                      |               |  | 7.50  | %                                |  |  | L+650       |  |  |      | 4,937,500  |  |                |   | 4,866,801  |  |  |   | 4,888,125  |  
|AMF Bowling Centers, Inc.                                                         |  |          | 09/19/2023 |  |          | Retail                                     |               |  | 6.00  | %                                |  |  | L+500       |  |  |      | 15,000,000 |  |                |   | 14,850,608 |  |  |   | 14,931,300 |  
|AP Gaming I, LLC                                                                  |  |          | 12/21/2020 |  |          | Hotel, Gaming and Leisure                  |               |  | 9.25  | %                                |  |  | L+825       |  |  |      | 6,534,878  |  |                |   | 6,462,308  |  |  |   | 6,220,419  |  
|API Technologies Corp.                                                            |  |          | 04/22/2022 |  |          | Aerospace and Defense                      |               |  | 7.50  | %                                |  |  | L+650       |  |  |      | 9,975,000  |  |                |   | 9,787,810  |  |  |   | 9,825,375  |  
|Azure Midstream Energy LLC                                                        |  |          | 11/15/2018 |  |          | Energy: Oil and Gas                        |               |  | 7.50  | %                                |  |  | L+650       |  |  |      | 5,125,684  |  |                |   | 5,042,414  |  |  |   | 4,228,689  |  
|Blue Bird Body Company                                                            |  |          | 06/29/2020 |  |          | Automotive                                 |               |  | 6.50  | %                                |  |  | L+550       |  |  |      | 3,498,670  |  |                |   | 3,462,806  |  |  |   | 3,498,670  |  
|Broder Bros., Co., Tranche A                                                      |  |          | 06/03/2021 |  |          | Consumer Goods: Non-Durable                |               |  | 7.00  | %                                |  |  | L+575       |  |  |      | 2,440,000  |  |                |   | 2,397,229  |  |  |   | 2,422,820  |  
|Broder Bros., Co., Tranche B                                                      |  |          | 06/03/2021 |  |          | Consumer Goods: Non-Durable                |               |  | 13.50 | %                                |  |  | L+1,225     |  |  |      | 2,460,000  |  |                |   | 2,415,653  |  |  |   | 2,442,679  |  
|Camin Cargo Control, Inc.                                                         |  |          | 06/30/2021 |  |          | Transportation: Cargo                      |               |  | 5.75  | %                                |  |  | L+475       |  |  |      | 2,468,750  |  |                |   | 2,448,157  |  |  |   | 2,370,000  |  
|CareCentrix, Inc.                                                                 |  |          | 07/08/2021 |  |          | Healthcare and Pharmaceuticals             |               |  | 6.00  | %                                |  |  | L+500       |  |  |      | 4,950,000  |  |                |   | 4,847,215  |  |  |   | 4,863,375  |  
|CBAC Borrower, LLC (8)                                                            |  |          | 07/02/2020 |  |          | Hotel, Gaming and Leisure                  |               |  | 8.25  | %                                |  |  | L+700       |  |  |      | 4,962,500  |  |                |   | 4,930,912  |  |  |   | 4,850,844  |  
|CD&R TZ Purchaser, Inc.                                                           |  |          | 07/21/2023 |  |          | Consumer Goods: Durable                    |               |  | 7.00  | %                                |  |  | L+600       |  |  |      | 12,500,000 |  |                |   | 12,179,928 |  |  |   | 12,343,750 |  
|Charming Charlie LLC                                                              |  |          | 12/24/2019 |  |          | Retail                                     |               |  | 9.00  | %                                |  |  | L+800       |  |  |      | 4,098,750  |  |                |   | 4,061,551  |  |  |   | 3,750,357  |  
|Chicken Soup for the Soul Publishing, LLC                                         |  |          | 01/08/2019 |  |          | Media: Advertising, Printing andPublishing |               |  | 7.50  | %                                |  |  | L+625       |  |  |      | 4,828,571  |  |                |   | 4,801,254  |  |  |   | 4,732,000  |  
|Corfin Industries
LLC                                                             |  |          | 11/25/2020 |  |          | Aerospace and Defense                      |               |  | 10.75 | %                                |  |  | L+975       |  |  |      | 6,272,600  |  |                |   | 6,163,749  |  |  |   | 6,272,600  |  
|Corfin Industries LLC (Revolver) (10)                                             |  |          | 11/25/2020 |  |          | Aerospace and Defense                      |               |  |      |                                  |  |  |            |  |  |      | 518,033    |  |                |   |           |  |  |   |           |  
|CRGT Inc.                                                                         |  |          | 12/21/2020 |  |          | High Tech Industries                       |               |  | 7.50  | %                                |  |  | L+650       |  |  |      | 10,531,671 |  |                |   | 10,451,145 |  |  |   | 10,505,342 |  
|Curo Health Services Holdings, Inc.                                               |  |          | 02/07/2022 |  |          | Healthcare and Pharmaceuticals             |               |  | 6.50  | %                                |  |  | L+550       |  |  |      | 1,970,000  |  |                |   | 1,953,997  |  |  |   | 1,970,000  |  
|DBI Holding LLC                                                                   |  |          | 08/02/2021 |  |          | Business Services                          |               |  | 6.25  | %                                |  |  | L+525       |  |  |      | 10,000,000 |  |                |   | 9,900,163  |  |  |   | 9,900,000  |  
|DCS Business Services, Inc.                                                       |  |          | 03/19/2018 |  |          | Business Services                          |               |  | 8.75  | %                                |  |  | L+725       |  |  |      | 2,237,139  |  |                |   | 2,225,615  |  |  |   | 2,237,139  |  
|DISA Global Solutions, Inc.                                                       |  |          | 12/09/2020 |  |          | Business Services                          |               |  | 5.50  | %                                |  |  | L+450       |  |  |      | 4,925,000  |  |                |   | 4,889,096  |  |  |   | 4,875,750  |  
|Douglas Products and Packaging Company LLC                                        |  |          | 06/30/2020 |  |          | Chemicals, Plastics and Rubber             |               |  | 5.75  | %                                |  |  | L+475       |  |  |      | 4,687,500  |  |                |   | 4,659,016  |  |  |   | 4,687,500  |  
|Driven Performance Brands, Inc. (8)                                               |  |          | 09/10/2020 |  |          | Consumer Goods: Durable                    |               |  | 5.75  | %                                |  |  | L+475       |  |  |      | 8,550,000  |  |                |   | 8,513,835  |  |  |   | 8,507,250  |  
|Driven Performance Brands, Inc. (Revolver) (8),
(10)                              |  |          | 09/10/2020 |  |          | Consumer Goods: Durable                    |               |  |      |                                  |  |  |            |  |  |      | 1,000,000  |  |                |   |           |  |  |   |           |  
|Education Networks of America, Inc.                                               |  |          | 05/06/2021 |  |          | Telecommunications                         |               |  | 8.00  | %                                |  |  | L+700       |  |  |      | 8,641,304  |  |                |   | 8,599,431  |  |  |   | 8,598,098  |  
|Education Networks of America, Inc. (Revolver)                                    |  |          | 05/06/2021 |  |          | Telecommunications                         |               |  | 8.00  | %                                |  |  | L+700       |  |  |      | 434,783    |  |                |   | 434,783    |  |  |   | 434,783    |  
|Education Networks of America, Inc. (Revolver)
(10)                               |  |          | 05/06/2021 |  |          | Telecommunications                         |               |  |      |                                  |  |  |            |  |  |      | 869,565    |  |                |   |           |  |  |   |           |  
|Efficient Collaborative Retail Marketing Company, LLC                             |  |          | 06/15/2022 |  |          | Media: Diversified and Production          |               |  | 7.75  | %                                |  |  | L+675       |  |  |      | 10,972,500 |  |                |   | 10,864,398 |  |  |   | 10,972,500 |  
|Emerging Markets Communications, LLC                                              |  |          | 07/01/2021 |  |          | Telecommunications                         |               |  | 6.75  | %                                |  |  | L+575       |  |  |      | 4,937,500  |  |                |   | 4,875,844  |  |  |   | 4,702,969  |  
|FHC Health Systems, Inc.                                                          |  |          | 12/23/2021 |  |          | Healthcare and Pharmaceuticals             |               |  | 5.00  | %                                |  |  | L+400       |  |  |      | 4,925,000  |  |                |   | 4,884,041  |  |  |   | 4,798,821  |  
|GlobalLogic Holdings, Inc.                                                        |  |          | 05/31/2019 |  |          | High Tech Industries                       |               |  | 6.25  | %                                |  |  | L+525       |  |  |      | 3,890,000  |  |                |   | 3,867,640  |  |  |   | 3,880,275  |  
|Greenway Health, LLC                                                              |  |          | 11/04/2020 |  |          | High Tech Industries                       |               |  | 6.00  | %                                |  |  | L+500       |  |  |      | 6,807,500  |  |                |   | 6,765,938  |  |  |   | 6,620,294  |  
|GTCR Valor Companies, Inc.                                                        |  |          | 06/16/2023 |  |          | Media: Broadcasting and Subscription       |               |  | 7.00  | %                                |  |  | L+600       |  |  |      | 7,481,250  |  |                |   | 7,191,975  |  |  |   | 7,116,539  |  
|Harbortouch Payments, LLC                                                         |  |          | 05/31/2022 |  |          | Banking, Finance, Insurance andReal Estate |               |  | 7.00  | %                                |  |  | L+600       |  |  |      | 6,956,250  |  |                |   | 6,889,369  |  |  |   | 7,025,812  |  
|Highline Aftermarket Acquisition, LLC (f/k/a DYKPrime Acquisition, LLC)           |  |          | 04/01/2022 |  |          | Wholesale                                  |               |  | 5.75  | %                                |  |  | L+475       |  |  |      | 7,312,500  |  |                |   | 7,244,146  |  |  |   | 7,275,937  |  
|Hollander Sleep Products, LLC                                                     |  |          | 10/21/2020 |  |          | Consumer Goods: Non-Durable                |               |  | 9.00  | %                                |  |  | L+800       |  |  |      | 1,165,886  |  |                |   | 1,153,016  |  |  |   | 1,142,569  |  
|Hostway Corporation                                                               |  |          | 12/13/2019 |  |          | High Tech Industries                       |               |  | 6.00  | %                                |  |  | L+475       |  |  |      | 2,624,730  |  |                |   | 2,610,592  |  |  |   | 2,183,890  |  
|Hunter Defense Technologies, Inc. (8)                                             |  |          | 08/05/2019 |  |          | Aerospace and Defense                      |               |  | 7.00  | %                                |  |  | L+600       |  |  |      | 6,256,250  |  |                |   | 6,218,559  |  |  |   | 5,505,500  |  
|Icynene U.S. Acquisition Corp. (6),
(11)                                          |  |          | 11/04/2020 |  |          | Construction and Building                  |               |  | 7.25  | %                                |  |  | L+625       |  |  |      | 6,225,820  |  |                |   | 6,133,990  |  |  |   | 6,225,820  |  
|Idera, Inc.                                                                       |  |          | 04/09/2021 |  |          | High Tech Industries                       |               |  | 6.50  | %                                |  |  | L+550       |  |  |      | 7,942,494  |  |                |   | 7,293,179  |  |  |   | 7,684,363  |  
|iEnergizer Limited and Aptara, Inc.(6),
(11)                                      |  |          | 05/01/2019 |  |          | Business Services                          |               |  | 7.25  | %                                |  |  | L+600       |  |  |      | 8,676,097  |  |                |   | 8,614,521  |  |  |   | 8,242,292  |  
|Imagine! Print Solutions, LLC                                                     |  |          | 03/30/2022 |  |          | Media: Advertising, Printing andPublishing |               |  | 7.00  | %                                |  |  | L+600       |  |  |      | 5,974,987  |  |                |   | 5,914,562  |  |  |   | 6,027,269  |  
|Instant Web, LLC, Term Loan A                                                     |  |          | 03/28/2019 |  |          | Media: Advertising, Printing andPublishing |               |  | 5.50  | %                                |  |  | L+450       |  |  |      | 5,277,938  |  |                |   | 5,235,239  |  |  |   | 5,277,938  |  
|Instant Web, LLC, Term Loan B                                                     |  |          | 03/28/2019 |  |          | Media: Advertising, Printing andPublishing |               |  | 12.00 | %                                |  |  | L+1,100     |  |  |      | 4,500,000  |  |                |   | 4,460,571  |  |  |   | 4,500,000  |  
|Interior Specialists, Inc.                                                        |  |          | 06/30/2020 |  |          | Construction and Building                  |               |  | 9.00  | %                                |  |  | L+800       |  |  |      | 6,662,719  |  |                |   | 6,609,864  |  |  |   | 6,662,719  |  
|Inventus Power, Inc. (f/k/a ICC-Nexergy, Inc.)                                    |  |          | 04/30/2020 |  |          | Consumer Goods: Durable                    |               |  | 6.50  | %                                |  |  | L+550       |  |  |      | 4,882,266  |  |                |   | 4,846,935  |  |  |   | 4,686,976  |  
|Jackson Hewitt Inc.                                                               |  |          | 07/30/2020 |  |          | Consumer Services                          |               |  | 8.00  | %                                |  |  | L+700       |  |  |      | 4,900,000  |  |                |   | 4,820,995  |  |  |   | 4,753,000  |  
|K2 Pure Solutions NoCal, L.P. (8)                                                 |  |          | 02/19/2021 |  |          | Chemicals, Plastics and Rubber             |               |  | 10.00 | %                                |  |  | L+900       |  |  |      | 4,002,471  |  |                |   | 3,932,760  |  |  |   | 3,925,841  |  
|Kendra Scott, LLC                                                                 |  |          | 07/17/2020 |  |          | Retail                                     |               |  | 7.00  | %                                |  |  | L+600       |  |  |      | 2,850,000  |  |                |   | 2,827,307  |  |  |   | 2,821,500  |  
|KHC Holdings, Inc.                                                                |  |          | 10/31/2022 |  |          | Wholesale                                  |               |  | 7.00  | %                                |  |  | L+600       |  |  |      | 12,406,250 |  |                |   | 12,210,683 |  |  |   | 12,344,219 |  
|KHC Holdings, Inc. (Revolver) (8),
(10)                                           |  |          | 10/30/2020 |  |          | Wholesale                                  |               |  |      |                                  |  |  |            |  |  |      | 1,209,677  |  |                |   |           |  |  |   |           |  
|Lago Resort & Casino, LLC                                                         |  |          | 03/07/2022 |  |          | Hotel, Gaming and Leisure                  |               |  | 10.50 | %                                |  |  | L+950       |  |  |      | 10,174,500 |  |                |   | 9,984,965  |  |  |   | 9,971,010  |  
|Lanyon Solutions, Inc.                                                            |  |          | 11/13/2020 |  |          | High Tech Industries                       |               |  | 5.50  | %                                |  |  | L+450       |  |  |      | 1,945,020  |  |                |   | 1,940,066  |  |  |   | 1,930,432  |  
|LifeCare Holdings LLC (8)                                                         |  |          | 11/30/2018 |  |          | Healthcare and Pharmaceuticals             |               |  | 6.50  | %                                |  |  | L+525       |  |  |      | 5,407,864  |  |                |   | 5,371,524  |  |  |   | 5,272,668  |  
|Lindblad Expeditions, Inc. (6), (11)                                              |  |          | 05/10/2021 |  |          | Hotel, Gaming and Leisure                  |               |  | 5.50  | %                                |  |  | L+450       |  |  |      | 2,186,607  |  |                |   | 2,177,539  |  |  |   | 2,186,607  |  
|Lindblad Maritime Enterprises, Ltd. (6),
(11)                                     |  |          | 05/10/2021 |  |          | Hotel, Gaming and Leisure                  |               |  | 5.50  | %                                |  |  | L+450       |  |  |      | 282,143    |  |                |   | 280,973    |  |  |   | 282,143    |  
|Lombart Brothers, Inc.                                                            |  |          | 04/13/2022 |  |          | Capital Equipment                          |               |  | 7.75  | %                                |  |  | L+675       |  |  |      | 5,985,000  |  |                |   | 5,901,046  |  |  |   | 6,014,925  |  
|Lombart Brothers, Inc. (Revolver) (8)                                             |  |          | 04/13/2022 |  |          | Capital Equipment                          |               |  | 7.75  | %                                |  |  | L+675       |  |  |      | 176,991    |  |                |   | 176,991    |  |  |   | 176,991    |  





SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

SEPTEMBER 30, 2016



|                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |         |     |      |    |            |                |  |   |             |  |  |   |             |  
|--------------------------------------------------------- |  | -------- | ---------- |  | -------- |  | ------------------------------------------ | ------------- |  |  | -------------------------------- | ---- |  | ----------- | ------- | --- | ---- | -- | ---------- | -------------- |  | - | ----------- |  |  | - | ----------- | -
|Issuer Name                                               |  | Maturity |            |  | Industry |  |                                            | CurrentCoupon |  |  | Basis PointSpread AboveIndex (1) |      |  | Par /Shares |         |     | Cost |    |            | Fair Value (2) | 
|Lombart Brothers, Inc. (Revolver) (8),
(10)               |  |          | 04/13/2022 |  |          |  | Capital Equipment                          |               |  |  |                                 |      |  |             |        |     |      |    | 1,061,947  |                |  | $ |            |  |  | $ |            |  
|Longs Drugs Incorporated                                 |  |          | 08/19/2021 |  |          |  | Healthcare and Pharmaceuticals             |               |  |  | 6.25                             | %    |  |             | L+525   |     |      |    | 5,000,000  |                |  |   | 4,951,874   |  |  |   | 4,950,000   |  
|LSF9 Atlantis Holdings, LLC                               |  |          | 01/15/2021 |  |          |  | Retail                                     |               |  |  | 10.00                            | %    |  |             | L+900   |     |      |    | 9,542,392  |                |  |   | 9,417,467   |  |  |   | 9,542,392   |  
|LTI Holdings, Inc.                                        |  |          | 04/18/2022 |  |          |  | Chemicals, Plastics and Rubber             |               |  |  | 5.25                             | %    |  |             | L+425   |     |      |    | 5,431,250  |                |  |   | 4,973,326   |  |  |   | 5,254,734   |  
|Marketplace Events LLC                                    |  |          | 01/27/2021 |  |          |  | Media: Diversified and Production          |               |  |  | 6.25                             | %    |  |             | L+525   |     |      |    | 1,362,530  |                |  |   | 1,342,162   |  |  |   | 1,342,092   |  
|Marketplace Events LLC (12)                               |  |          | 01/27/2021 |  |          |  | Media: Diversified and Production          |               |  |  | 6.25                             | %    |  |             | P+275   |     |      | C$ | 17,244,188 |                |  |   | 12,065,652  |  |  |   | 13,078,215  |  
|Marketplace Events LLC (Revolver) (8)                     |  |          | 01/27/2021 |  |          |  | Media: Diversified and Production          |               |  |  | 6.25                             | %    |  |             | P+275   |     |      |    | 1,090,024  |                |  |   | 1,090,024   |  |  |   | 1,090,024   |  
|Marketplace Events LLC (Revolver) (8),
(10)               |  |          | 01/27/2021 |  |          |  | Media: Diversified and Production          |               |  |  |                                 |      |  |             |        |     |      |    | 613,139    |                |  |   |            |  |  |   |            |  
|Mission Critical Electronics, Inc.
(8)                    |  |          | 09/28/2022 |  |          |  | Capital Equipment                          |               |  |  | 6.00                             | %    |  |             | L+500   |     |      |    | 4,116,608  |                |  |   | 4,075,499   |  |  |   | 4,075,442   |  
|Mission Critical Electronics, Inc. (Revolver) (8),
(10)   |  |          | 09/28/2021 |  |          |  | Capital Equipment                          |               |  |  |                                 |      |  |             |        |     |      |    | 883,392    |                |  |   |            |  |  |   |            |  
|New Trident HoldCorp, Inc.                                |  |          | 07/31/2019 |  |          |  | Healthcare and Pharmaceuticals             |               |  |  | 6.50                             | %    |  |             | L+525   |     |      |    | 8,817,647  |                |  |   | 8,767,669   |  |  |   | 8,288,588   |  
|Pathway Partners Vet Management Company LLC
(8)           |  |          | 08/19/2022 |  |          |  | Healthcare and Pharmaceuticals             |               |  |  | 6.00                             | %    |  |             | L+500   |     |      |    | 6,268,657  |                |  |   | 6,205,970   |  |  |   | 6,205,970   |  
|Pathway Partners Vet Management Company LLC
(8), (10)     |  |          | 08/19/2022 |  |          |  | Healthcare and Pharmaceuticals             |               |  |  |                                 |      |  |             |        |     |      |    | 3,731,343  |                |  |   |            |  |  |   |            |  
|Polycom, Inc.                                             |  |          | 09/27/2023 |  |          |  | Telecommunications                         |               |  |  | 7.50                             | %    |  |             | L+650   |     |      |    | 6,000,000  |                |  |   | 5,760,000   |  |  |   | 5,775,000   |  
|Precyse Acquisition Corp.                                 |  |          | 10/20/2022 |  |          |  | Healthcare and Pharmaceuticals             |               |  |  | 6.50                             | %    |  |             | L+550   |     |      |    | 3,990,000  |                |  |   | 3,932,956   |  |  |   | 4,014,938   |  
|Premier Dental Services, Inc.                             |  |          | 11/01/2018 |  |          |  | Consumer Services                          |               |  |  | 7.50                             | %    |  |             | L+650   |     |      |    | 7,528,230  |                |  |   | 7,473,587   |  |  |   | 7,490,588   |  
|Profile Products LLC                                      |  |          | 05/20/2021 |  |          |  | Environmental Industries                   |               |  |  | 5.75                             | %    |  |             | L+475   |     |      |    | 7,281,762  |                |  |   | 7,222,561   |  |  |   | 7,281,762   |  
|Profile Products LLC (Revolver) (8),
(10)                 |  |          | 05/20/2020 |  |          |  | Environmental Industries                   |               |  |  |                                 |      |  |             |        |     |      |    | 2,459,016  |                |  |   |            |  |  |   |            |  
|Quick Weight Loss Centers, LLC                            |  |          | 08/23/2021 |  |          |  | Beverage, Food and Tobacco                 |               |  |  | 5.75                             | %    |  |             | L+475   |     |      |    | 10,000,000 |                |  |   | 9,852,456   |  |  |   | 9,900,000   |  
|Research Now Group, Inc.                                  |  |          | 03/18/2021 |  |          |  | High Tech Industries                       |               |  |  | 5.50                             | %    |  |             | L+450   |     |      |    | 6,895,000  |                |  |   | 6,867,800   |  |  |   | 6,688,150   |  
|Robertshaw US Holding Corp.                               |  |          | 06/18/2019 |  |          |  | Consumer Goods: Durable                    |               |  |  | 8.50                             | %    |  |             | L+700   |     |      |    | 4,252,830  |                |  |   | 4,233,671   |  |  |   | 4,258,699   |  
|Ryan, LLC                                                 |  |          | 08/07/2020 |  |          |  | Business Services                          |               |  |  | 6.75                             | %    |  |             | L+575   |     |      |    | 4,218,750  |                |  |   | 4,166,413   |  |  |   | 4,163,400   |  
|Sensus USA, Inc.                                          |  |          | 04/05/2023 |  |          |  | Utilities: Water                           |               |  |  | 6.50                             | %    |  |             | L+550   |     |      |    | 9,975,000  |                |  |   | 9,692,511   |  |  |   | 9,999,938   |  
|Snak Club, LLC                                            |  |          | 07/19/2021 |  |          |  | Beverage, Food and Tobacco                 |               |  |  | 6.00                             | %    |  |             | L+500   |     |      |    | 4,968,748  |                |  |   | 4,896,623   |  |  |   | 4,919,060   |  
|Snak Club, LLC (Revolver) (10)                            |  |          | 07/19/2021 |  |          |  | Beverage, Food and Tobacco                 |               |  |  |                                 |      |  |             |        |     |      |    | 500,000    |                |  |   |            |  |  |   |            |  
|Software Paradigms International Group, LLC               |  |          | 05/21/2021 |  |          |  | High Tech Industries                       |               |  |  | 6.50                             | %    |  |             | L+550   |     |      |    | 9,875,000  |                |  |   | 9,781,596   |  |  |   | 9,825,625   |  
|Sotera Defense Solutions, Inc.                            |  |          | 04/21/2017 |  |          |  | Aerospace and Defense                      |               |  |  | 9.00                             | %    |  |             | L+750   |     |      |    | 5,668,843  |                |  |   | 5,614,696   |  |  |   | 5,640,499   |  
|Sundial Group Holdings LLC                                |  |          | 10/19/2021 |  |          |  | Consumer Goods: Non-Durable                |               |  |  | 7.25                             | %    |  |             | L+625   |     |      |    | 7,312,500  |                |  |   | 7,200,786   |  |  |   | 7,312,500   |  
|Survey Sampling International, LLC                        |  |          | 12/16/2020 |  |          |  | Business Services                          |               |  |  | 6.00                             | %    |  |             | L+500   |     |      |    | 7,446,562  |                |  |   | 7,395,200   |  |  |   | 7,409,329   |  
|Systems Maintenance Services Holding, Inc.                |  |          | 10/18/2019 |  |          |  | High Tech Industries                       |               |  |  | 5.00                             | %    |  |             | L+400   |     |      |    | 5,850,000  |                |  |   | 5,834,217   |  |  |   | 5,733,000   |  
|Tensar Corporation                                        |  |          | 07/09/2021 |  |          |  | Construction and Building                  |               |  |  | 5.75                             | %    |  |             | L+475   |     |      |    | 4,822,723  |                |  |   | 4,786,985   |  |  |   | 4,071,198   |  
|The Original Cakerie, Co. (6), (11)                       |  |          | 07/20/2021 |  |          |  | Consumer Goods: Non-Durable                |               |  |  | 6.50                             | %    |  |             | L+550   |     |      |    | 3,092,295  |                |  |   | 3,062,366   |  |  |   | 3,061,372   |  
|The Original Cakerie Ltd. (6), (11)                       |  |          | 07/20/2021 |  |          |  | Consumer Goods: Non-Durable                |               |  |  | 6.00                             | %    |  |             | L+500   |     |      |    | 5,986,002  |                |  |   | 5,928,120   |  |  |   | 5,926,142   |  
|The Original Cakerie Ltd. (Revolver) (6), (8), (10),
(11) |  |          | 07/20/2021 |  |          |  | Consumer Goods: Non-Durable                |               |  |  |                                 |      |  |             |        |     |      |    | 1,418,484  |                |  |   |            |  |  |   | (7,092      | )
|TOMS Shoes, LLC                                           |  |          | 11/02/2020 |  |          |  | Consumer Goods: Non-Durable                |               |  |  | 6.50                             | %    |  |             | L+550   |     |      |    | 1,970,000  |                |  |   | 1,825,559   |  |  |   | 1,576,000   |  
|Triad Manufacturing, Inc.                                 |  |          | 12/28/2020 |  |          |  | Capital Equipment                          |               |  |  | 11.27                            | %    |  |             | L+1,075 | (9) |      |    | 10,306,936 |                |  |   | 10,124,477  |  |  |   | 10,306,936  |  
|UniTek Global Services, Inc. (8)                          |  |          | 01/14/2019 |  |          |  | Telecommunications                         |               |  |  | 9.50(PIK 1.00                    | % %) |  |             | L+850   |     |      |    | 256,971    |                |  |   | 256,971     |  |  |   | 256,971     |  
|UniTek Global Services, Inc. (8)                          |  |          | 01/14/2019 |  |          |  | Telecommunications                         |               |  |  | 8.50                             | %    |  |             | L+750   |     |      |    | 599,702    |                |  |   | 562,432     |  |  |   | 590,706     |  
|UniTek Global Services, Inc. (8),(10)                     |  |          | 01/14/2019 |  |          |  | Telecommunications                         |               |  |  |                                 |      |  |             |        |     |      |    | 151,090    |                |  |   |            |  |  |   |            |  
|Universal Fiber Systems, LLC                              |  |          | 10/04/2021 |  |          |  | Chemicals, Plastics and Rubber             |               |  |  | 6.50                             | %    |  |             | L+550   |     |      |    | 4,962,500  |                |  |   | 4,919,423   |  |  |   | 4,937,688   |  
|U.S. Anesthesia Partners, Inc.                            |  |          | 12/31/2019 |  |          |  | Healthcare and Pharmaceuticals             |               |  |  | 6.00                             | %    |  |             | L+500   |     |      |    | 9,900,000  |                |  |   | 9,818,407   |  |  |   | 9,850,500   |  
|US Med Acquisition, Inc. (8)                              |  |          | 08/13/2021 |  |          |  | Healthcare and Pharmaceuticals             |               |  |  | 10.00                            | %    |  |             | L+900   |     |      |    | 3,089,844  |                |  |   | 3,089,844   |  |  |   | 3,089,844   |  
|Vistage Worldwide, Inc.                                   |  |          | 08/19/2021 |  |          |  | Media: Broadcasting and Subscription       |               |  |  | 6.50                             | %    |  |             | L+550   |     |      |    | 4,792,831  |                |  |   | 4,752,002   |  |  |   | 4,792,831   |  
|Winchester Electronics Corporation                        |  |          | 06/30/2022 |  |          |  | Capital Equipment                          |               |  |  | 7.50                             | %    |  |             | L+650   |     |      |    | 7,773,579  |                |  |   | 7,703,094   |  |  |   | 7,668,171   |  
|Winchester Electronics Corporation
(10)                   |  |          | 06/30/2022 |  |          |  | Capital Equipment                          |               |  |  |                                 |      |  |             |        |     |      |    | 708,333    |                |  |   |            |  |  |   | (9,605      | )
|Worley Claims Services, LLC                               |  |          | 10/30/2020 |  |          |  | Banking, Finance, Insurance and RealEstate |               |  |  | 9.00                             | %    |  |             | L+800   |     |      |    | 7,316,440  |                |  |   | 7,259,010   |  |  |   | 7,316,440   |  
|                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |         |     |      |    |            |                |  |   |             |  |  |   |             |  
|Total First Lien Secured Debt                             |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |         |     |      |    |            |                |  |   | 549,736,982 |  |  |   | 548,410,095 |  
|                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |         |     |      |    |            |                |  |   |             |  |  |   |             |  
|Second Lien Secured Debt9.7%                             |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |         |     |      |    |            |                |  |   |             |  |  |   |             |  
|Affinion Group, Inc. (8)                                  |  |          | 10/31/2018 |  |          |  | Consumer Goods: Durable                    |               |  |  | 8.50                             | %    |  |             | L+700   |     |      |    | 1,000,000  |                |  |   | 942,276     |  |  |   | 879,170     |  
|American Gilsonite Company(5), (8)                        |  |          | 09/01/2017 |  |          |  | Metals and Mining                          |               |  |  |                                 | (7)  |  |             |        |     |      |    | 1,000,000  |                |  |   | 1,000,000   |  |  |   | 700,000     |  
|Douglas Products and Packaging Company LLC                |  |          | 12/31/2020 |  |          |  | Chemicals, Plastics and Rubber             |               |  |  | 11.34                            | %    |  |             | L+1,050 | (9) |      |    | 2,000,000  |                |  |   | 1,971,030   |  |  |   | 2,020,000   |  
|Howard Berger Co. LLC                                     |  |          | 09/30/2020 |  |          |  | Wholesale                                  |               |  |  | 11.00                            | %    |  |             | L+1,000 |     |      |    | 11,000,000 |                |  |   | 10,511,818  |  |  |   | 9,900,000   |  
|MailSouth, Inc.                                           |  |          | 10/22/2021 |  |          |  | Media: Advertising, Printing andPublishing |               |  |  | 11.50                            | %    |  |             | L+1,050 |     |      |    | 3,775,000  |                |  |   | 3,703,724   |  |  |   | 3,775,000   |  
|Novitex Acquisition, LLC                                  |  |          | 07/07/2021 |  |          |  | Business Services                          |               |  |  | 12.25                            | %    |  |             | L+1,100 |     |      |    | 11,000,000 |                |  |   | 10,914,618  |  |  |   | 11,000,000  |  
|Penton Media, Inc. (8)                                    |  |          | 10/02/2020 |  |          |  | Media: Diversified and Production          |               |  |  | 9.00                             | %    |  |             | L+775   |     |      |    | 4,872,042  |                |  |   | 4,826,926   |  |  |   | 4,853,772   |  
|Sunshine Oilsands Ltd. (5), (6), (8),
(11)                |  |          | 08/01/2017 |  |          |  | Energy: Oil and Gas                        |               |  |  | 12.50                            | %    |  |             |        |     |      |    | 2,812,500  |                |  |   | 2,756,732   |  |  |   | 1,631,250   |  
|VT Buyer Acquisition Corp.                                |  |          | 01/30/2023 |  |          |  | Business Services                          |               |  |  | 10.75                            | %    |  |             | L+975   |     |      |    | 1,837,500  |                |  |   | 1,777,304   |  |  |   | 1,837,500   |  
|                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |         |     |      |    |            |                |  |   |             |  |  |   |             |  
|Total Second Lien Secured Debt                            |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |         |     |      |    |            |                |  |   | 38,404,428  |  |  |   | 36,596,692  |  
|                                                          |  |          |            |  |          |  |                                            |               |  |  |                                  |      |  |             |         |     |      |    |            |                |  |   |             |  |  |   |             |  





SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



12



---

##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

SEPTEMBER 30, 2016



|                                                                         |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   |              |  
|------------------------------------------------------------------------ |  | -------- | ---------- | ----------- | -------- |  | ------------------------------------------ | ------------- |  |  | -------------------------------- | ---- |  | ----------- | - |  | ---- |  | --------- | -------------- |  | - | ----------- |  |  | - | ------------ | -
|Issuer Name                                                              |  | Maturity |            |             | Industry |  |                                            | CurrentCoupon |  |  | Basis PointSpread AboveIndex (1) |      |  | Par /Shares |   |  | Cost |  |           | Fair Value (2) | 
|Subordinated Debt/Corporate Notes0.8%
(8)                               |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   |              |  
|Affinion International Holdings Limited (5), (6),
(11)                   |  |          | 07/30/2018 |             |          |  | Consumer Goods: Durable                    |               |  |  | 7.50(PIK 4.00                    | % %) |  |             |  |  |      |  | 1,135,273 |                |  | $ | 1,030,320   |  |  | $ | 1,035,937    |  
|Credit Infonet, Inc.                                                     |  |          | 10/26/2018 |             |          |  | High Tech Industries                       |               |  |  | 13.00(PIK 1.75                   | % %) |  |             |  |  |      |  | 2,069,078 |                |  |   | 2,050,767   |  |  |   | 1,975,969    |  
|UniTek Global Services, Inc.                                             |  |          | 07/15/2019 |             |          |  | Telecommunications                         |               |  |  | 15.00(PIK 15.00                  | % %) |  |             |  |  |      |  | 146,996   |                |  |   | 146,996     |  |  |   | 148,466      |  
|                                                                         |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   |              |  
|Total Subordinated Debt/Corporate Notes                                  |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   | 3,228,083   |  |  |   | 3,160,372    |  
|                                                                         |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   |              |  
|Preferred Equity0.4%(7),
(8)                                            |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   |              |  
|UniTek Global Services, Inc.                                             |  |          |           |             |          |  | Telecommunications                         |               |  |  | 13.50                            | %    |  |             |  |  |      |  | 1,047,317 |                |  |   | 670,283     |  |  |   | 1,319,308    |  
|                                                                         |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   |              |  
|Common Equity/Warrants2.5% (7),
(8)                                     |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   |              |  
|Affinion Group Holdings, Inc.                                            |  |          |           |             |          |  | Consumer Goods: Durable                    |               |  |  |                                 |      |  |             |  |  |      |  | 99,029    |                |  |   | 3,514,572   |  |  |   | 3,700,216    |  
|Affinion Group Holdings, Inc., Series C and Series D                     |  |          |           |             |          |  | Consumer Goods: Durable                    |               |  |  |                                 |      |  |             |  |  |      |  | 4,298     |                |  |   | 1,186,649   |  |  |   | 20,096       |  
|Corfin InvestCo, L.P.                                                    |  |          |           |             |          |  | Aerospace and Defense                      |               |  |  |                                 |      |  |             |  |  |      |  | 3,000     |                |  |   | 300,000     |  |  |   | 621,550      |  
|Corfin InvestCo, L.P. (10)                                               |  |          |           |             |          |  | Aerospace and Defense                      |               |  |  |                                 |      |  |             |  |  |      |  | 3,000     |                |  |   |            |  |  |   |             |  
|e.l.f. Beauty, Inc. (f/k/a J.A. Cosmetics US, Inc.)                      |  |          |           |             |          |  | Consumer Goods: Durable                    |               |  |  |                                 |      |  |             |  |  |      |  | 110,399   |                |  |   | 295,670     |  |  |   | 2,957,767    |  
|Faraday Holdings, LLC(Interior Specialists, Inc.)                        |  |          |           |             |          |  | Construction and Building                  |               |  |  |                                 |      |  |             |  |  |      |  | 1,141     |                |  |   | 58,044      |  |  |   | 94,560       |  
|Patriot National, Inc.                                                   |  |          |           |             |          |  | Banking, Finance,Insurance and Real Estate |               |  |  |                                 |      |  |             |  |  |      |  | 11,867    |                |  |   | 27,995      |  |  |   | 106,922      |  
|TPC Broadband Investors, LP(Advanced Cable Communications, LLC)          |  |          |           |             |          |  | Telecommunications                         |               |  |  |                                 |      |  |             |  |  |      |  | 430,666   |                |  |   | 430,666     |  |  |   | 430,666      |  
|TPC Broadband Investors, LP(Advanced Cable Communications, LLC)(10)      |  |          |           |             |          |  | Telecommunications                         |               |  |  |                                 |      |  |             |  |  |      |  | 569,334   |                |  |   |            |  |  |   |             |  
|UniTek Global Services, Inc.                                             |  |          |           |             |          |  | Telecommunications                         |               |  |  |                                 |      |  |             |  |  |      |  | 149,617   |                |  |   |            |  |  |   | 892,276      |  
|Vestcom Parent Holdings, Inc.                                            |  |          |           |             |          |  | Media: Advertising,Printing and Publishing |               |  |  |                                 |      |  |             |  |  |      |  | 15,179    |                |  |   | 56,895      |  |  |   | 577,005      |  
|                                                                         |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   |              |  
|Total Common Equity/Warrants                                             |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   | 5,870,491   |  |  |   | 9,401,058    |  
|                                                                         |  |          |            |             |          |  |                                            |               | 
|Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies  |  |          |            | 597,910,267 |          |  |                                            | 598,887,525   | 
|                                                                         |  |          |            |             |          |  |                                            |               | 
|Cash and Cash Equivalents7.7%                                           |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   |              |  
|BlackRock Liquidity Funds, Temp Cash and Temp Fund, Institutional Shares |  |          |            | 28,212,041  |          |  |                                            | 28,212,041    | 
|BNY Mellon Cash Reserve and Cash                                         |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   | 691,318     |  |  |   | 698,932      |  
|                                                                         |  |          |            |             |          |  |                                            |               | 
|Total Cash and Cash Equivalents                                          |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   | 28,903,359  |  |  |   | 28,910,973   |  
|                                                                         |  |          |            |             |          |  |                                            |               | 
|Total Investments and Cash Equivalents167.0%                            |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  | $ | 626,813,626 |  |  | $ | 627,798,498  |  
|                                                                         |  |          |            |             |          |  |                                            |               | 
|Liabilities in Excess of Other Assets(67.0)%                            |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  |   | (251,891,670 | )
|Net Assets100.0%                                                        |  |          |            |             |          |  |                                            |               |  |  |                                  |      |  |             |   |  |      |  |           |                |  |   |             |  |  | $ | 375,906,828  |  
|                                                                         |  |          |            |             |         



|(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. 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 our accounting policy (see Note 2).
|--- | ---------------------------------------------------

|(3) | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Security is exempt from registration under Rule 144A promulgated under the Securities Act. The security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Non-U.S. company or principal place of business outside the United States.
|--- | --------------------------------------------------------------------------

|(7) | Non-income producing securities.
|--- | --------------------------------

|(8) | The securities, or a portion thereof, are not pledged as collateral under the Credit Facility. All other securities are pledged as collateral under the Credit Facility and held through Funding I.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Coupon is not subject to a LIBOR or Prime rate floor.
|--- | -----------------------------------------------------

|(10) | 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.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Par amount is denominated in Canadian Dollars.
|---- | ----------------------------------------------

SEE NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016

(Unaudited)

1. ORGANIZATION

PennantPark Floating Rate Capital Ltd. was organized as a Maryland corporation in October 2010. 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 objectives are to generate current income and capital appreciation while seeking to preserve capital. We seek to achieve our
investment objective by investing primarily in loans bearing a variable-rate of interest, or Floating Rate Loans, and other investments made to U.S. middle-market companies whose debt is rated below investment grade. Floating Rate Loans pay interest
at variable rates, which are determined periodically, on the basis of a floating base lending rate such as LIBOR, with or without a floor, plus a fixed spread. Under normal market conditions, we generally expect that at least 80% of the value of our
Managed Assets, which means our net assets plus any borrowings for investment purposes, will be invested in Floating Rate Loans and other investments bearing a variable rate of interest, which may include, from time to time, variable rate derivative
instruments. We generally expect that senior secured debt, or first lien loans, will represent at least 65% of our overall portfolio. We generally expect to invest up to 35% of our overall portfolio opportunistically in other types of investments,
including mezzanine debt, which we define as second lien secured and subordinated debt, and, to a lesser extent, equity investments.

We
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. We also entered into an administration agreement, or the Administration Agreement, with the Administrator, which provides the administrative services necessary for us to operate.

Funding I, our wholly owned subsidiary and a special purpose entity, was organized in Delaware as a limited liability company in May 2011. We
formed Funding I in order to establish our Credit Facility. The Investment Adviser serves as the collateral manager to Funding I and has irrevocably directed that the management fee owed with respect to such services is to be paid to us so long as
the Investment Adviser remains the collateral manager. This arrangement does not increase our consolidated management fee. The Credit Facility allows Funding I to borrow up to $350 million at LIBOR plus 200 basis points during the revolving
period. The Credit Facility is secured by all of the assets held by Funding I. See Note 9.

We have formed and expect to continue to form
certain taxable subsidiaries, including the Taxable Subsidiary, which are subject to tax as corporations. 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 allowing us to maintain our ability to qualify as a RIC under the Code.

2. 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. Actual results could differ from these estimates due to changes in the
economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all
intercompany balances and transactions. References to the Financial Accounting Standards Board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 946, Financial Services  Investment Companies, and pursuant to the requirements for reporting on Form 10-K/Q and Article 6 or 10 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:

(a)   Investment Valuations

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



| | (2) | Preliminary valuation conclusions are then documented and discussed with the management of our 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;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)





| | (4) | The audit committee of our board of directors reviews the preliminary valuations of our 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 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 the change in the fair values of our portfolio investments and Credit Facility during the reporting period, including any 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 collectible. 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 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.

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.

(c) Income Taxes

We have complied with the requirements of Subchapter M of the Code and expect to be treated as a RIC for federal income tax purposes. As a
result, we account for income taxes using the asset and liability method prescribed by ASC 740, Income Taxes. 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 federal income tax purposes, we typically do not incur any
material level of federal income taxes. Although we generally do not incur federal income taxes as a RIC, we may elect to retain a portion of our calendar year income, which may result in an excise tax or we may incur taxes through our taxable
subsidiaries. For the three months ended December 31, 2016 and 2015, we recorded a provision for taxes of less than $0.1 million and zero, respectively.

We recognize the effect of a tax position in our Consolidated Financial Statements 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. We did not have any material uncertain tax positions or any unrecognized tax benefits that met the recognition or measurement criteria of ASC
740-10-25 as of the periods presented herein.

Because
federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and net realized gain recognized for financial reporting purposes. Differences between tax regulations and GAAP
may be permanent or temporary. Permanent differences are reclassified among capital accounts in the Consolidated Financial Statements to reflect their 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 ratified by the 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 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.



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



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 946-810-45, PennantPark Floating Rate Capital Ltd. 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 taxable subsidiaries in our Consolidated Financial Statements.

(g)   Asset Transfers and Servicing

Asset transfers that do not meet ASC 860, Transfers and Servicing, requirements for sale accounting treatment are reflected in the Consolidated
Statement of Assets and Liabilities as investments. The creditors of Funding I have received a security interest in all of its assets and such assets are not intended to be available to the creditors of PennantPark Floating Rate Capital Ltd. or any
of its affiliates.

3. AGREEMENTS

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 2017. 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 collateral manager to Funding I and has irrevocably directed that the management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser
remains the collateral manager. This arrangement does not increase our consolidated management fee. For providing these services, the Investment Adviser receives a fee from us consisting of two componentsa base management fee and an incentive
fee.

The base management fee is calculated at an annual rate of 1.00% of our average adjusted gross assets, which equals our
gross assets (net 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 adjusted to exclude cash, cash equivalents and unfunded commitments, if any) and is payable quarterly in arrears. 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 months ended
December 31, 2016 and 2015, the Investment Adviser earned a base management fee of $1.6 million and $1.1 million, respectively, from us.

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) 50% 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
2.9167% in any calendar quarter (11.67% annualized) (we refer to this portion of our Pre-Incentive Fee Net Investment Income (which exceeds the hurdle but is less than 2.9167%) as the catch-up, which is meant to provide our Investment Adviser with 20% of our Pre-Incentive Fee Net Investment Income, as if a hurdle did not apply, if this net
investment income exceeds 2.9167% in any calendar quarter), and (3) 20% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.9167% in any calendar quarter. These
calculations are pro-rated for any share issuances or repurchases during the relevant quarter, if applicable. For the three months ended December 31, 2016 and 2015, the Investment Adviser earned
$0.9 million and zero, respectively, in incentive fees 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 equals 20% of our realized capital gains, 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 the three months ended
December 31, 2016 and 2015, the Investment Adviser did not earn 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 20% of such amount, less the aggregate amount of actual capital gains related 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, if any, will be realized in the future. The incentive fee accrued for under GAAP on our unrealized and realized capital gains for the three months ended December 31, 2016 and 2015 was $0.6 million and zero,
respectively.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



The Administration Agreement with the Administrator was reapproved by our board of directors,
including a majority of the directors who are not interested persons of us, in February 2017. Under the Administration Agreement, the Administrator provides administration services and office facilities to us. For providing these services,
facilities and personnel, 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 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, 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 months ended December 31, 2016 and 2015, the
Investment Adviser was reimbursed approximately $0.3 million and $0.1 million, respectively, from us, including expenses the Investment Adviser incurred on behalf of the Administrator, for services described above.

4. INVESTMENTS

Purchases of investments,
including PIK interest, for the three months ended December 31, 2016 and 2015 totaled $124.9 million and $99.2 million, respectively. Sales and repayments of investments for the same periods totaled $70.4 million and
$26.9 million, respectively. For the three months ended December 31, 2016, the Company sold $5.0 million in total investments to an affiliated fund managed by our Investment Adviser in accordance with, and pursuant to procedures
adopted under, Rule 17a-7 of the 1940 Act. Realized gain on that transaction amounted to less than $0.1 million.

Investments, cash and cash equivalents consisted of the following:



|                                             |  |                   |             |  |                    |   |             |      |  |   |             |  |  |   |             | 
|-------------------------------------------- |  | ----------------- | ----------- |  | ------------------ | - | ----------- | ---- |  | - | ----------- |  |  | - | ----------- | 
|                                             |  | December 31, 2016 |             |  | September 30, 2016 |  
|Investment Classification                    |  | Cost              |             |  | Fair Value         |   |             | Cost |  |   | Fair Value  | 
|First lien                                   |  | $                 | 599,327,868 |  |                    | $ | 600,052,593 |      |  | $ | 549,736,982 |  |  | $ | 548,410,095 | 
|Second lien                                  |  |                   | 38,520,326  |  |                    |   | 36,913,063  |      |  |   | 38,404,428  |  |  |   | 36,596,692  | 
|Subordinated debt / corporate notes          |  |                   | 8,285,610   |  |                    |   | 8,314,839   |      |  |   | 3,228,083   |  |  |   | 3,160,372   | 
|Equity                                       |  |                   | 7,206,493   |  |                    |   | 11,588,392  |      |  |   | 6,540,774   |  |  |   | 10,720,366  | 
|                                             |  |                   |             |  |                    |   |             |      |  |   |             |  |  |   |             | 
|Total investments                            |  |                   | 653,340,297 |  |                    |   | 656,868,887 |      |  |   | 597,910,267 |  |  |   | 598,887,525 | 
|                                             |  |                   |             |  |                    |   |             |      |  |   |             |  |  |   |             | 
|Cash and cash equivalents                    |  |                   | 24,201,258  |  |                    |   | 24,203,565  |      |  |   | 28,903,359  |  |  |   | 28,910,973  | 
|                                             |  |                   |             |  |                    |   |             |      |  |   |             |  |  |   |             | 
|Total investments, cash and cash equivalents |  | $                 | 677,541,555 |  |                    | $ | 681,072,452 |      |  | $ | 626,813,626 |  |  | $ | 627,798,498 | 
|                                             |  |                   |             |  |                    |   |             |      |  |   |             |  |  |   |             | 

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:



|                                            |  |                   |     |   |                    |  |     |  
|------------------------------------------- |  | ----------------- | --- | - | ------------------ |  | --- | -
|Industry Classification                     |  | December 31, 2016 |     |   | September 30, 2016 | 
|Healthcare and Pharmaceuticals              |  |                   | 11  | % |                    |  | 10  | %
|Business Services                           |  |                   | 8   |   |                    |  | 8   |  
|High Tech Industries                        |  |                   | 7   |   |                    |  | 10  |  
|Chemicals, Plastics and Rubber              |  |                   | 6   |   |                    |  | 3   |  
|Consumer Goods: Durable                     |  |                   | 6   |   |                    |  | 7   |  
|Telecommunications                          |  |                   | 6   |   |                    |  | 6   |  
|Wholesale                                   |  |                   | 6   |   |                    |  | 5   |  
|Aerospace and Defense                       |  |                   | 5   |   |                    |  | 5   |  
|Capital Equipment                           |  |                   | 5   |   |                    |  | 5   |  
|Hotel, Gaming and Leisure                   |  |                   | 5   |   |                    |  | 6   |  
|Media: Advertising, Printing and Publishing |  |                   | 5   |   |                    |  | 4   |  
|Retail                                      |  |                   | 5   |   |                    |  | 5   |  
|Consumer Goods: Non-Durable                 |  |                   | 4   |   |                    |  | 4   |  
|Media: Broadcasting and Subscription        |  |                   | 4   |   |                    |  | 2   |  
|Media: Diversified and Production           |  |                   | 4   |   |                    |  | 5   |  
|Beverage, Food and Tobacco                  |  |                   | 3   |   |                    |  | 2   |  
|Construction and Building                   |  |                   | 3   |   |                    |  | 3   |  
|Banking, Finance, Insurance and Real Estate |  |                   | 2   |   |                    |  | 2   |  
|Consumer Services                           |  |                   | 2   |   |                    |  | 2   |  
|Utilities: Water                            |  |                   |    |   |                    |  | 2   |  
|All Other                                   |  |                   | 3   |   |                    |  | 4   |  
|                                            |  |                   |     |   |                    |  |     |  
|Total                                       |  |                   | 100 | % |                    |  | 100 | %
|                                            |  |                   |     |   |                    |  |     |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



5. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value, as defined under ASC 820, Fair Value Measurement, or 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 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 and our Credit Facility are classified as Level 3. 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 was 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 Floating Rate Loans,
mainly senior secured debt, but also may include second lien, high yield, mezzanine and distressed debt securities 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. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of the Level 3
category as of the end of the quarter in which the reclassifications occur. During the three months ended December 31, 2016 and 2015, our ability to observe valuation inputs resulted in no reclassifications and one reclassification of an asset
from Level 2 to 1, respectively.

In addition to using the above inputs in cash equivalents, investments and our Credit Facility
valuations, 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 typically 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 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.

The remainder of our portfolio and our long-term Credit Facility 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 the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any
collateral, the portfolio companys ability to make payments, 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 EBITDA multiple will result in an increase in the valuation of an investment, while a
decrease in an EBITDA will have the opposite effect.



18



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



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



|                                    |  |                                 |             |  |                     |  |                         |                    |  |  |                                  |  |  |  |                       | 
|----------------------------------- |  | ------------------------------- | ----------- |  | ------------------- |  | ----------------------- | ------------------ |  |  | -------------------------------- |  |  |  | --------------------- | 
|Asset Category                      |  | Fair Value atDecember 31, 2016  |             |  | Valuation Technique |  |                         | Unobservable Input |  |  | Range of Input(Weighted Average) | 
|First lien                          |  | $                               | 284,513,256 |  |                     |  | Market Comparable       |                    |  |  | Broker/Dealer bids or quotes     |  |  |  | N/A                   | 
|Second lien                         |  |                                 | 7,590,563   |  |                     |  | Market Comparable       |                    |  |  | Broker/Dealer bids or quotes     |  |  |  | N/A                   | 
|Subordinated debt / corporate notes |  |                                 | 1,111,659   |  |                     |  | Market Comparable       |                    |  |  | Broker/Dealer bids or quotes     |  |  |  | N/A                   | 
|First lien                          |  |                                 | 315,539,337 |  |                     |  | Market Comparable       |                    |  |  | Market Yield                     |  |  |  | 5.3%  16.4% (8.5%)   | 
|Second lien                         |  |                                 | 29,322,500  |  |                     |  | Market Comparable       |                    |  |  | Market Yield                     |  |  |  | 12.2%  17.0% (14.5%) | 
|Subordinated debt / corporate notes |  |                                 | 7,203,180   |  |                     |  | Market Comparable       |                    |  |  | Market Yield                     |  |  |  | 12.1%  18.6% (13.4%) | 
|Equity                              |  |                                 | 8,430,737   |  |                     |  | Enterprise Market Value |                    |  |  | EBITDA multiple                  |  |  |  | 4.5x  11.5x (7.5x)   | 
|                                    |  |                                 |             |  |                     |  |                         |                    |  |  |                                  |  |  |  |                       | 
|Total Level 3 investments           |  | $                               | 653,711,232 |  |                     |  |                         |                    |  |  |                                  |  |  |  |                       | 
|                                    |  |                                 |             |  |                     |  |                         |                    |  |  |                                  |  |  |  |                       | 
|Long-Term Credit Facility           |  | $                               | 299,859,712 |  |                     |  | Market Comparable       |                    |  |  | Market Yield                     |  |  |  | 3.2%                  | 
|                                    |  |                                 |             |  |                     |  |                         |                    |  |  |                                  |  |  |  |                       | 
|                                    |  |                                 |             | 
|Asset Category                      |  | Fair Value atSeptember 30, 2016 |             |  | Valuation Technique |  |                         | Unobservable Input |  |  | Range of Input(Weighted Average) | 
|First lien                          |  | $                               | 264,299,729 |  |                     |  | Market Comparable       |                    |  |  | Broker/Dealer bids or quotes     |  |  |  | N/A                   | 
|Second lien                         |  |                                 | 8,064,192   |  |                     |  | Market Comparable       |                    |  |  | Broker/Dealer bids or quotes     |  |  |  | N/A                   | 
|Subordinated debt / corporate notes |  |                                 | 1,035,937   |  |                     |  | Market Comparable       |                    |  |  | Broker/Dealer bids or quotes     |  |  |  | N/A                   | 
|First lien                          |  |                                 | 284,110,366 |  |                     |  | Market Comparable       |                    |  |  | Market Yield                     |  |  |  | 5.3%  13.9% (8.3%)   | 
|Second lien                         |  |                                 | 28,532,500  |  |                     |  | Market Comparable       |                    |  |  | Market Yield                     |  |  |  | 10.2%  15.9% (13.7%) | 
|Subordinated debt / corporate notes |  |                                 | 2,124,435   |  |                     |  | Market Comparable       |                    |  |  | Market Yield                     |  |  |  | 15.7%  16.5% (15.8%) | 
|Equity                              |  |                                 | 7,655,677   |  |                     |  | Enterprise Market Value |                    |  |  | EBITDA multiple                  |  |  |  | 4.3x  9.0x (7.2x)    | 
|                                    |  |                                 |             |  |                     |  |                         |                    |  |  |                                  |  |  |  |                       | 
|Total Level 3 investments           |  | $                               | 595,822,836 |  |                     |  |                         |                    |  |  |                                  |  |  |  |                       | 
|                                    |  |                                 |             |  |                     |  |                         |                    |  |  |                                  |  |  |  |                       | 
|Long-Term Credit Facility           |  | $                               | 232,389,498 |  |                     |  | Market Comparable       |                    |  |  | Market Yield                     |  |  |  | 3.4%                  | 
|                                    |  |                                 |             |  |                     |  |                         |                    |  |  |                                  |  |  |  |                       | 

Our investments, cash and cash equivalents and Credit Facility were categorized as follows in the fair value
hierarchy for ASC 820 purposes:



|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|-------------------------------------------- |  | --------------------------------------------- | ----------- |  | ------- | - | ---------- | ------- |  | - | --------- |  |  | - | ----------- | 
|                                             |  | Fair Value Measurements at December 31, 2016  |            
|Description                                  |  | Fair Value                                    |             |  | Level 1 |   |            | Level 2 |  |   | Level 3   | 
|First lien                                   |  | $                                             | 600,052,593 |  |         | $ |           |         |  | $ |          |  |  | $ | 600,052,593 | 
|Second lien                                  |  |                                               | 36,913,063  |  |         |   |           |         |  |   |          |  |  |   | 36,913,063  | 
|Subordinated debt / corporate notes          |  |                                               | 8,314,839   |  |         |   |           |         |  |   |          |  |  |   | 8,314,839   | 
|Equity                                       |  |                                               | 11,588,392  |  |         |   | 55,182     |         |  |   | 3,102,473 |  |  |   | 8,430,737   | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|Total investments                            |  |                                               | 656,868,887 |  |         |   | 55,182     |         |  |   | 3,102,473 |  |  |   | 653,711,232 | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|Cash and cash equivalents                    |  |                                               | 24,203,565  |  |         |   | 24,203,565 |         |  |   |          |  |  |   |            | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|Total investments, cash and cash equivalents |  | $                                             | 681,072,452 |  |         | $ | 24,258,747 |         |  | $ | 3,102,473 |  |  | $ | 653,711,232 | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|Long-Term Credit Facility                    |  | $                                             | 299,859,712 |  |         | $ |           |         |  | $ |          |  |  | $ | 299,859,712 | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|                                             | 
|                                             |  | Fair Value Measurements at September 30, 2016 |            
|Description                                  |  | Fair Value                                    |             |  | Level 1 |   |            | Level 2 |  |   | Level 3   | 
|First lien                                   |  | $                                             | 548,410,095 |  |         | $ |           |         |  | $ |          |  |  | $ | 548,410,095 | 
|Second lien                                  |  |                                               | 36,596,692  |  |         |   |           |         |  |   |          |  |  |   | 36,596,692  | 
|Subordinated debt / corporate notes          |  |                                               | 3,160,372   |  |         |   |           |         |  |   |          |  |  |   | 3,160,372   | 
|Equity                                       |  |                                               | 10,720,366  |  |         |   | 106,922    |         |  |   | 2,957,767 |  |  |   | 7,655,677   | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|Total investments                            |  |                                               | 598,887,525 |  |         |   | 106,922    |         |  |   | 2,957,767 |  |  |   | 595,822,836 | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|Cash and cash equivalents                    |  |                                               | 28,910,973  |  |         |   | 28,910,973 |         |  |   |          |  |  |   |            | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|Total investments, cash and cash equivalents |  | $                                             | 627,798,498 |  |         | $ | 29,017,895 |         |  | $ | 2,957,757 |  |  | $ | 595,822,836 | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 
|Long-Term Credit Facility                    |  | $                                             | 232,389,498 |  |         | $ |           |         |  | $ |          |  |  | $ | 232,389,498 | 
|                                             |  |                                               |             |  |         |   |            |         |  |   |           |  |  |   |             | 



19



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



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



|                                                                                                                                                                                                                                 |  |                                      |             |   |                                                     |   |             |        |  |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ----------- | - | --------------------------------------------------- | - | ----------- | ------ |  | - | ----------- | -
|                                                                                                                                                                                                                                 |  | Three Months Ended December 31, 2016 |            
|Description                                                                                                                                                                                                                      |  | First Lien                           |             |   | Second lien,subordinated debtand equity investments |   |             | Totals | 
|Beginning Balance                                                                                                                                                                                                                |  | $                                    | 548,410,095 |   |                                                     | $ | 47,412,741  |        |  | $ | 595,822,836 |  
|Net realized gains                                                                                                                                                                                                               |  |                                      | 280,208     |   |                                                     |   | 263,993     |        |  |   | 544,201     |  
|Net unrealized appreciation                                                                                                                                                                                                      |  |                                      | 2,051,612   |   |                                                     |   | 406,754     |        |  |   | 2,458,366   |  
|Purchases, PIK interest, net discount accretion and
non-cash exchanges                                                                                                                                                           |  |                                      | 109,256,025 |   |                                                     |   | 16,035,021  |        |  |   | 125,291,046 |  
|Sales, repayments and non-cash exchanges                                                                                                                                                                                         |  |                                      | (59,945,347 | ) |                                                     |   | (10,459,870 | )      |  |   | (70,405,217 | )
|Transfers in and/or out ofLevel 3                                                                                                                                                                                                |  |                                      |            |   |                                                     |   |            |        |  |   |            |  
|                                                                                                                                                                                                                                 |  |                                      |             |   |                                                     |   |             |        |  |   |             |  
|Ending Balance                                                                                                                                                                                                                   |  | $                                    | 600,052,593 |   |                                                     | $ | 53,658,639  |        |  | $ | 653,711,232 |  
|                                                                                                                                                                                                                                 |  |                                      |             |   |                                                     |   |             |        |  |   |             |  
|Net change in unrealized appreciation reported within the net change in unrealized appreciation on
investments in our Consolidated Statements of Operations attributable to our Level 3 assets still held at the reporting date. |  | $                                    | 1,927,211   |   |                                                     | $ | 653,710     |        |  | $ | 2,580,921   |  
|                                                                                                                                                                                                                                 |  |                                      |             |   |                                                     |   |             |        |  |   |             |  
|                                                                                                                                                                                                                                 | 
|                                                                                                                                                                                                                                 |  | Three Months Ended December 31, 2015 |            
|Description                                                                                                                                                                                                                      |  | First Lien                           |             |   | Second lien,subordinated debtand equity investments |   |             | Totals | 
|Beginning Balance                                                                                                                                                                                                                |  | $                                    | 334,957,341 |   |                                                     | $ | 56,163,940  |        |  | $ | 391,121,281 |  
|Net realized gains (losses)                                                                                                                                                                                                      |  |                                      | 53,300      |   |                                                     |   | (3,285,308  | )      |  |   | (3,232,008  | )
|Net unrealized (depreciation) appreciation                                                                                                                                                                                       |  |                                      | (2,864,750  | ) |                                                     |   | 2,266,779   |        |  |   | (597,971    | )
|Purchases, PIK interest, net discount accretion and
non-cash exchanges                                                                                                                                                           |  |                                      | 97,970,469  |   |                                                     |   | 1,584,985   |        |  |   | 99,555,454  |  
|Sales, repayments and non-cash exchanges                                                                                                                                                                                         |  |                                      | (26,887,251 | ) |                                                     |   | 26,442      |        |  |   | (26,860,809 | )
|Transfers in and/or out ofLevel 3                                                                                                                                                                                                |  |                                      |            |   |                                                     |   |            |        |  |   |            |  
|                                                                                                                                                                                                                                 |  |                                      |             |   |                                                     |   |             |        |  |   |             |  
|Ending Balance                                                                                                                                                                                                                   |  | $                                    | 403,229,109 |   |                                                     | $ | 56,756,838  |        |  | $ | 459,985,947 |  
|                                                                                                                                                                                                                                 |  |                                      |             |   |                                                     |   |             |        |  |   |             |  
|Net change in unrealized depreciation reported within the net change in unrealized depreciation on
investments in our Consolidated Statements of Operations attributable to our Level 3 assets still held at the reporting date. |  | $                                    | (2,963,079  | ) |                                                     | $ | (758,129    | )      |  | $ | (3,721,208  | )
|                                                                                                                                                                                                                                 |  |                                      |             |   |                                                     |   |             |        |  |   |             |  



20



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



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



|                                                                          |  |                                 |             |   |      |   |            |  
|------------------------------------------------------------------------- |  | ------------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                          |  | Three Months Ended December 31, |            
|Long-Term Credit Facility
(1)                                             |  | 2016                            |             |   | 2015 |  
|Beginning Balance (cost  $232,907,500 and $29,600,000, respectively)     |  | $                               | 232,389,498 |   |      | $ | 29,600,000 |  
|Net change in unrealized appreciation (depreciation) included in earnings |  |                                 | 1,068,214   |   |      |   | (601,875   | )
|Borrowings                                                                |  |                                 | 91,902,000  |   |      |   | 69,300,000 |  
|Repayments                                                                |  |                                 | (25,500,000 | ) |      |   | (2,600,000 | )
|Transfers in and/or out ofLevel 3                                         |  |                                 |            |   |      |   |           |  
|                                                                          |  |                                 |             |   |      |   |            |  
|Ending Balance (cost  $299,309,500 and $96,300,000, respectively)        |  | $                               | 299,859,712 |   |      | $ | 95,698,125 |  
|                                                                          |  |                                 |             |   |      |   |            |  





|(1) | The carrying value of our consolidated financial liabilities approximates fair value.
|--- | -------------------------------------------------------------------------------------

As of
December 31, 2016, we had outstanding non-U.S. dollar borrowings on our Credit Facility. Net change in fair value from foreign currency translation on outstanding borrowings is listed below:



|                 |  |                 |            |  |                |   |            |               |  |   |            |  |  |                     |                 |  |  |   |         | 
|---------------- |  | --------------- | ---------- |  | -------------- | - | ---------- | ------------- |  | - | ---------- |  |  | ------------------- | --------------- |  |  | - | ------- | 
|Foreign Currency |  | Amount Borrowed |            |  | Borrowing Cost |   |            | Current Value |  |   | Reset Date |  |  | Change in FairValue |                
|Canadian Dollar  |  | C$              | 17,500,000 |  |                | $ | 12,407,501 |               |  | $ | 13,049,470 |  |  |                     | January 3, 2017 |  |  | $ | 641,969 | 
|Euro             |  |                | 18,000,000 |  |                |   | 18,702,000 |               |  |   | 18,985,536 |  |  |                     | January 3, 2017 |  |  |   | 283,536 | 
|                 |  |                 |            |  |                |   |            |               |  |   |            |  |  |                     |                 |  |  |   |         | 
|                 |  |                 |            |  |                | $ | 31,109,501 |               |  | $ | 32,035,006 |  |  |                     |                 |  |  | $ | 925,505 | 
|                 |  |                 |            |  |                |   |            |               |  |   |            |  |  |                     |                 |  |  |   |         | 

As of September 30, 2016, we had outstanding non-U.S. dollar
borrowings on our Credit Facility. Net change in fair value from foreign currency translation on outstanding borrowings is listed below:



|                 |  |                 |            |  |                |   |            |               |  |   |            |  |                     |                 |  |   |         | 
|---------------- |  | --------------- | ---------- |  | -------------- | - | ---------- | ------------- |  | - | ---------- |  | ------------------- | --------------- |  | - | ------- | 
|Foreign Currency |  | Amount Borrowed |            |  | Borrowing Cost |   |            | Current Value |  |   | Reset Date |  | Change in FairValue |                
|Canadian Dollar  |  | C$              | 17,500,000 |  |                | $ | 12,407,501 |               |  | $ | 13,338,920 |  |                     | October 3, 2016 |  | $ | 931,419 | 

The carrying value of our consolidated financial liabilities approximates fair value. We adopted ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our
Credit Facility. We elected to use the fair value option for our Credit Facility 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 had expenses of zero and $0.9 million, respectively, relating to amendment fees on the Credit Facility during the three months ended December 31, 2016 and 2015. ASC
825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to
more easily understand the effect on earnings of a companys choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the
Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facility are reported in our Consolidated Statements of Operations. We elected not to apply ASC 825-10 to any other
financial assets or liabilities. For the three months ended December 31, 2016 and 2015, our Credit Facility had a net change in unrealized (appreciation) depreciation of $(1.1) million and $0.6 million, respectively. As of
December 31, 2016 and September 30, 2016, the net unrealized (appreciation) depreciation on our Credit Facility totaled $(0.6) million and $0.5 million, respectively. We use a nationally recognized independent valuation service to
measure the fair value of our Credit Facility in a manner consistent with the valuation process that the board of directors uses to value our investments.

6. 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 December 31, |           
|                                                                                 |  | 2016                            |            |  | 2015 |  
|Numerator for net increase in net assets resulting from operations               |  | $                               | 8,848,909  |  |      | $ | 1,746,879  | 
|Denominator for basic and diluted weighted average shares                        |  |                                 | 26,730,074 |  |      |   | 26,730,074 | 
|Basic and diluted net increase in net assets per share resulting from operations |  | $                               | 0.33       |  |      | $ | 0.07       | 

7. 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 Facility, or utilizing repurchase agreements or other balance sheet transactions as are deemed appropriate for this purpose. These amounts are excluded from
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 December 31,
2016 and September 30, 2016, cash and cash equivalents consisted of money market funds in the amounts of $24.2 million and $28.9 million, respectively, at fair value.



21



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



8. FINANCIAL HIGHLIGHTS

Below are the financial highlights:



|                                                                    |  |                                 |             |   |      |   |             |   
|------------------------------------------------------------------- |  | ------------------------------- | ----------- | - | ---- | - | ----------- | --
|                                                                    |  | Three Months Ended December 31, |            
|                                                                    |  | 2016                            |             |   | 2015 |  
|Per Share Data:                                                     |  |                                 |             |   |      |   |             |   
|Net asset value, beginning of period                                |  | $                               | 14.06       |   |      | $ | 13.95       |   
|Net investment income (1)                                           |  |                                 | 0.26        |   |      |   | 0.19        |   
|Net change in realized and unrealized gain (loss)
(1)               |  |                                 | 0.07        |   |      |   | (0.12       | ) 
|                                                                    |  |                                 |             |   |      |   |             |   
|Net increase in net assets resulting from operations
(1)            |  |                                 | 0.33        |   |      |   | 0.07        |   
|Distributions to stockholders (1),
(2)                              |  |                                 | (0.28       | ) |      |   | (0.29       | ) 
|                                                                    |  |                                 |             |   |      |   |             |   
|Net asset value, end of period                                      |  | $                               | 14.11       |   |      | $ | 13.73       |   
|                                                                    |  |                                 |             |   |      |   |             |   
|Per share market value, end of period                               |  | $                               | 14.11       |   |      | $ | 11.25       |   
|                                                                    |  |                                 |             |   |      |   |             |   
|Total return* (3)                                                   |  |                                 | 8.90        | % |      |   | (3.48       | )%
|Shares outstanding at end of period                                 |  |                                 | 26,730,074  |   |      |   | 26,730,074  |   
|                                                                    |  |                                 |             |   |      |   |             |   
|Ratios** / Supplemental Data:                                       |  |                                 |             |   |      |   |             |   
|Ratio of operating expenses to average net assets
(4)               |  |                                 | 4.25        | % |      |   | 1.98        | % 
|Ratio of Credit Facility related expenses to average net assets (5) |  |                                 | 1.91        | % |      |   | 1.26        | % 
|                                                                    |  |                                 |             |   |      |   |             |   
|Ratio of total expenses to average net assets
(5)                   |  |                                 | 6.16        | % |      |   | 3.24        | % 
|Ratio of net investment income to average net assets
(5)            |  |                                 | 7.24        | % |      |   | 6.25        | % 
|Net assets at end of period                                         |  | $                               | 377,137,666 |   |      | $ | 367,019,257 |   
|                                                                    |  |                                 |             |   |      |   |             |   
|Weighted average debt outstanding                                   |  | $                               | 247,183,783 |   |      | $ | 63,132,609  |   
|                                                                    |  |                                 |             |   |      |   |             |   
|Weighted average debt per share (1)                                 |  | $                               | 9.25        |   |      | $ | 2.36        |   
|Asset coverage per unit (6)                                         |  | $                               | 2,258       |   |      | $ | 4,835       |   
|Portfolio turnover ratio                                            |  |                                 | 44.82       | % |      |   | 25.35       | % 



|* | 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 period and takes into account distributions, if any, reinvested in accordance with our dividend reinvestment plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Excludes Credit Facility related costs.
|--- | ---------------------------------------

|(5) | Credit Facility amendment costs, if any, are not annualized.
|--- | ------------------------------------------------------------

|(6) | The asset coverage ratio for a class of senior securities representing indebtedness is calculated on our consolidated total assets, less all liabilities and
indebtedness not represented by senior securities, divided by the senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the asset coverage per unit.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9. CREDIT FACILITY

Funding Is
multi-currency Credit Facility with affiliates of SunTrust Bank, or the Lenders, was $350.0 million as of December 31, 2016, subject to satisfaction of certain conditions and the regulatory restrictions that the 1940 Act imposes on us as a
BDC, has an interest rate spread above LIBOR of 200 basis points, a maturity date of August 2020 and a revolving period that ends in August 2018. As of December 31, 2016 and September 30, 2016, Funding I had $299.3 million and
$232.9 million of outstanding borrowings under the Credit Facility, respectively. The Credit Facility had an interest rate of 2.74% and 2.57%, as of December 31, 2016 and September 30, 2016, respectively, excluding the undrawn
commitment fees of 0.375%. The annualized weighted average cost of debt for the three months ended December 31, 2016 and 2015, inclusive of the fee on the undrawn commitment on the Credit Facility but excluding amendment costs, was 2.91% and
5.95%, respectively.

During the revolving period, the Credit Facility bears interest at LIBOR plus 200 basis points and, after the
revolving period, the rate sets to LIBOR plus 425 basis points for the remaining two years, maturing in August 2020. The Credit Facility is secured by all of the assets of Funding I. Both PennantPark Floating Rate Capital Ltd. and Funding I have
made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.

The Credit Facility contains covenants, including, but not limited to, restrictions of loan size, industry requirements, average life of loans,
geographic and individual portfolio concentrations, minimum portfolio yield and loan payment frequency. Additionally, the Credit Facility requires the maintenance of a minimum equity investment in Funding I and income ratio as well as restrictions
on certain payments and issuance of debt. For instance, we must maintain at least $25 million in equity and must maintain an interest coverage ratio of at least 125%. The Credit Facility compliance reporting is prepared on a basis of accounting
other than GAAP. As of December 31, 2016, we were in compliance with the covenants relating to our Credit Facility.

We own 100% of the
equity interest in Funding I and treat the indebtedness of Funding I as our leverage. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that we are in compliance with our asset coverage
ratio after such borrowing. Our Investment Adviser serves as collateral manager to Funding I under the Credit Facility.

Our interest in
Funding I (other than the management fee) is subordinate in priority of payment to every other obligation of Funding I and is subject to certain payment restrictions set forth in the Credit Facility. We may receive cash distributions on our equity
interests in Funding I only after it has made all required payments of (1) cash interest and, if applicable, principal to the Lenders, (2) administrative expenses and (3) claims of other unsecured creditors of Funding I. The
Investment Adviser has irrevocably directed that any management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager.



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

DECEMBER 31, 2016

(Unaudited)



10. 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 investments, if any, are disclosed in the Consolidated Schedules of Investments. As of December 31, 2016 and September 30, 2016, we had $34.2 million and $20.0 million, respectively, in
commitments to fund investments.



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

PennantPark Floating Rate
Capital Ltd. and its Subsidiaries:

We have reviewed the accompanying consolidated statements of assets and liabilities of PennantPark
Floating Rate Capital Ltd. and its Subsidiaries (collectively referred to as the Company), including the consolidated schedule of investments, as of December 31, 2016, and the consolidated statements of operations, changes in net
assets and cash flows for the three months ended December 31, 2016 and 2015. These consolidated financial statements are the responsibility of the Companys management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures to financial data 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 Public Company Accounting Oversight Board, 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.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements
referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in
accordance with the standards of the Public Company Accounting Oversight Board, the consolidated statement of assets and liabilities of the Company, including the consolidated schedule of investments, as of September 30, 2016, 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 22, 2016, we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying consolidated statements of assets and liabilities as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated statements of assets and liabilities.

/s/ RSM US LLP

New York, New York

February 9, 2017



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##### Table of Contents

|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;
| | - |  | --------------------------------------------------------------------------------



| |  |  | 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 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 markets;
| | - |  | -----------------------------------------------------------------



| |  |  | the ability of the 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 European sovereign debt, Brexit 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.

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 Securities Exchange Act of 1934, as amended, or 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 Floating Rate
Capital Ltd. is a BDC whose objectives are to generate current income and capital appreciation while seeking to preserve capital by investing primarily in Floating Rate Loans and other investments made to U.S. middle-market companies.

We believe that Floating Rate Loans to U.S. middle-market companies offer attractive risk-reward to investors due to a limited amount of capital
available for such companies and the potential for rising interest rates. We use the term middle-market to refer to companies with annual revenues between $50 million and $1 billion. Our investments are typically rated below
investment grade. Securities rated below investment grade are often referred to as leveraged loans or high yield securities or junk bonds and are often higher risk compared to debt instruments that are rated above
investment grade and have speculative characteristics. However, when compared to junk bonds and other non-investment grade debt, senior secured Floating Rate Loans typically have more robust capital-preserving
qualities, such as historically lower default rates than junk bonds, represent the senior source of capital in a borrowers capital structure and often have certain of the borrowers assets pledged as collateral. Our debt investments may
generally range in maturity from three to ten years and are made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and
geographical regions.



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##### Table of Contents

Under normal market conditions, we generally expect that at least 80% of the value of our Managed
Assets will be invested in Floating Rate Loans and other investments bearing a variable-rate of interest. We generally expect that senior secured debt, or first lien loans, will represent at least 65% of our overall portfolio. We also generally
expect to invest up to 35% of our overall portfolio opportunistically in other types of investments, including mezzanine debt and, to a lesser extent, equity investments. We seek to create a diversified portfolio by generally targeting an investment
size between $3 million and $15 million, on average, although we expect that this investment size will vary proportionately with the size of our capital base.

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

Organization and
Structure of PennantPark Floating Rate Capital Ltd.

PennantPark Floating Rate Capital Ltd., a Maryland corporation organized in
October 2010, is a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for
federal income tax purposes we elected to be treated, and intend to qualify annually, as a RIC under the Code.

Our investment activities
are managed by the Investment Adviser. Under our Investment Management Agreement, we have agreed to pay our Investment Adviser an annual base management fee based on our average adjusted gross total assets as well as an incentive fee based on our
investment performance. We have also entered into an Administration Agreement with the Administrator. Under our Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion of overhead and other expenses incurred
by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their
respective staffs. Our board of directors, a majority of whom are independent of us, provides overall supervision of our activities, and the Investment Adviser supervises our
day-to-day activities.

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 senior secured debt or mezzanine debt, typically have a term of three to ten years and bear interest at a fixed or floating rate. Interest on debt
securities is generally payable quarterly or semiannually. In some cases, our investments provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally becomes due
at the maturity date. In addition, we may generate revenue in the form of amendment, commitment, origination, structuring or diligence fees, fees for providing managerial assistance and possibly consulting fees. Loan origination fees, OID, market
discount or premium are capitalized and accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. We record prepayment penalties on loans and debt securities 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.

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 Credit Facility. 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 stock exchange listing fees;
| | - |  | ------------------------------------------------------------------------



| |  |  | fees and expenses associated with independent audits and outside legal costs;
| | - |  | -----------------------------------------------------------------------------



| |  |  | federal, state, local taxes 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;
| | - |  | --------------------------------------------------------------------------



| |  |  | costs associated with our reporting and compliance obligations under the 1940 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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 December 31, 2016, our portfolio totaled $656.9 million and consisted of $600.1 million of senior secured debt, $36.9 million of second lien secured debt and $19.9 million of subordinated debt, preferred and common
equity. Our debt portfolio consisted of 98% variable-rate investments (including 95% with a floor) and 2% fixed-rate investments. As of December 31, 2016, we had no companies on non-accrual. Overall, the
portfolio had net unrealized appreciation of $3.5 million. Our overall portfolio consisted of 98 companies with an average investment size of $6.7 million, had a weighted average yield on debt investments of 7.9%, and was invested 91% in
senior secured debt, 6% in second lien secured debt and 3% in subordinated debt, preferred and common equity.

As of September 30,
2016, our portfolio totaled $598.9 million and consisted of $548.4 million of senior secured debt, $36.6 million of second lien secured debt and $13.9 million of subordinated debt, preferred and common equity. Our debt portfolio
consisted of 99% variable-rate investments (including 94% with a floor) and 1% fixed-rate investments. As of September 30, 2016, we had one company on non-accrual, representing 0.2% and 0.1% of our
overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized appreciation of $1.0 million. Our overall portfolio consisted of 98 companies with an average investment size of $6.1 million, had a
weighted average yield on debt investments of 7.8%, and was invested 92% in senior secured debt, 6% in second lien secured debt and 2% in subordinated debt, preferred and common equity.

For the three months ended December 31, 2016, we invested $124.8 million in 12 new and 13 existing portfolio companies with a weighted
average yield on debt investments of 7.6%. Sales and repayments of investments for the three months ended December 31, 2016 totaled $70.4 million.

For the three months ended December 31, 2015, we invested $99.2 million in ten new and five existing portfolio companies with a
weighted average yield on debt investments of 8.4%. Sales and repayments of investments for the three months ended December 31, 2015 totaled $26.9 million.

CRITICAL ACCOUNTING POLICIES

The
preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and
the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been
included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions. We may reclassify certain prior
period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to the ASC serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as
appropriate for events occurring through the date the Consolidated Financial Statements are issued. In addition to the discussion below, we describe our critical accounting policies in the notes to our Consolidated Financial Statements.

Investment 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 the board of directors may take into account in
pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio companys ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio
company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external
event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation
and the difference may be material.

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



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



| | (2) | Preliminary valuation conclusions are then documented and discussed with the management of our 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 an investment. The independent valuation firms review managements preliminary valuations in light of its 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 our 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 date.



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##### Table of Contents

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 and our Credit Facility are classified as Level 3. 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.

In addition to using the above inputs in cash equivalents, investments and our Credit Facility valuations, 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.

The carrying value of our consolidated financial liabilities approximates fair value. We adopted ASC
825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10
to our Credit Facility. We elected to use the fair value option for our Credit Facility 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 had expenses of zero and $0.9 million, respectively, relating to amendment fees on the Credit Facility during the three months ended December 31, 2016 and 2015. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more
easily understand the effect on earnings of a companys choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the
Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facility are reported in our Consolidated Statements of Operations. We elected not to apply ASC 825-10 to any other
financial assets or liabilities. For the three months ended December 31, 2016 and 2015, our Credit Facility had a net change in unrealized (appreciation) depreciation of $(1.1) million and $0.6 million, respectively. As of
December 31, 2016 and September 30, 2016, the net unrealized (appreciation) depreciation on our Credit Facility totaled $(0.6) million and $0.5 million, respectively. We use a nationally recognized independent valuation service to
measure the fair value of our Credit Facility in a manner consistent with the valuation process that the board of directors uses to value our investments.

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 collectible. 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.

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 the fair values of our portfolio investments and Credit Facility during the reporting period, 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 Interest or PIK

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 treated as a RIC for federal income tax purposes, 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 have not collected any cash with respect to interest on PIK securities.

Federal Income Taxes

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



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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 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 net gain 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 not distributed during such years and on
which we did not incur any federal income tax. 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 in accordance with tax
regulations may differ from net investment income and net realized gain recognized for financial reporting purposes. Differences between tax regulations and GAAP may be permanent or temporary. Permanent differences are reclassified among capital
accounts in the Consolidated Financial Statements to reflect their appropriate tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

We have formed and expect to continue to form certain taxable subsidiaries, including the Taxable Subsidiary, which are subject to tax as
corporations. 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 allowing us to maintain our ability to qualify as a RIC under the
Code.

RESULTS OF OPERATIONS

Set forth
below are the results of operations for the three months ended December 31, 2016 and 2015.

Investment Income

Investment income for the three months ended December 31, 2016 was $12.6 million and was attributable to $11.2 million from
senior secured debt and $1.4 million from second lien secured debt and subordinated debt, respectively. Investment income for the three months ended December 31, 2015 was $8.8 million and was attributable to $7.3 million from
senior secured debt and $1.5 million from second lien secured debt and subordinated debt, respectively. The increase in investment income compared to the same period in the prior year was primarily due to the growth of our portfolio.

Expenses

Expenses for the three
months ended December 31, 2016 totaled $5.8 million. Base management fee for the same period totaled $1.6 million, incentive fee totaled $1.5 million (including $0.6 million on unrealized gains accrued but not payable),
Credit Facility expenses totaled $1.8 million and general and administrative expenses totaled $0.9 million. Expenses for the three months ended December 31, 2015 totaled $3.7 million. Base management fee for the same period
totaled $1.1 million, incentive fee totaled zero, Credit Facility expenses totaled $1.8 million (including $0.9 million of Credit Facility amendment expenses) and general and administrative expenses totaled $0.8 million. The
increase in expenses compared with the same period in the prior year was primarily due to increases in base management and incentive fees as a result of the growth of our portfolio.

Net Investment Income

Net investment
income totaled $6.8 million, or $0.26 per share, for the three months ended December 31, 2016, and $5.1 million, or $0.19 per share, for the three months ended December 31, 2015. The increase in net investment income compared to
the same period in the prior year was primarily due to the growth of our portfolio.

Net Realized Gains or Losses

Sales and repayments of investments for the three months ended December 31, 2016 totaled $70.4 million and realized gains totaled
$0.5 million. Sales and repayments of investments totaled $26.9 million and realized losses totaled $3.2 million for the three months ended December 31, 2015. The change in realized gains/losses 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
Credit Facility

For the three months ended December 31, 2016 and 2015, we reported net unrealized appreciation (depreciation)
on investments of $2.5 million and $(0.7) million, respectively. As of December 31, 2016 and September 30, 2016, our net unrealized appreciation on investments totaled $3.5 million and $1.0 million, respectively. The net
change in unrealized appreciation on our investments was driven primarily by changes in capital market conditions, the financial performance of certain portfolio companies and the reversal of unrealized depreciation (appreciation) on investments
that were sold.

For the three months ended December 31, 2016 and 2015, we reported net unrealized (appreciation) depreciation on our
Credit Facility of $(1.1) million and $0.6 million, respectively. The change compared to the same period 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 $8.8 million, or $0.33 per share, for the three months ended December 31,
2016. This compares to a net change in net assets resulting from operations of $1.7 million, or $0.07 per share, for the three months ended December 31, 2015. The increase in the net change in net assets from operations compared to the
same period in the prior year reflects the change in portfolio investment valuation during the reporting period and the change in net realized losses during the current period.



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LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are derived from public offerings, our Credit Facility, 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 Credit
Facility, the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.

Funding Is multi-currency Credit Facility with the Lenders was $350.0 million as of December 31, 2016, subject to satisfaction
of certain conditions and the regulatory restrictions that the 1940 Act imposes on us as a BDC, has an interest rate spread above LIBOR of 200 basis points, a maturity date of August 2020 and a revolving period that ends in August 2018. As of
December 31, 2016 and September 30, 2016, Funding I had $299.3 million and $232.9 million of outstanding borrowings under the Credit Facility, respectively. The Credit Facility had an interest rate of 2.74% and 2.57%, as of
December 31, 2016 and September 30, 2016, respectively, excluding the undrawn commitment fees of 0.375%. The annualized weighted average cost of debt for the three months ended December 31, 2016 and 2015, inclusive of the fee on the
undrawn commitment on the Credit Facility but excluding amendment costs, was 2.91% and 5.95%, respectively. As of December 31, 2016 and September 30, 2016, we had $50.7 million and $117.1 million of unused borrowing capacity
under our Credit Facility, respectively, subject to the regulatory restrictions.

During the revolving period, the Credit Facility bears
interest at LIBOR plus 200 basis points and, after the revolving period, the rate sets to LIBOR plus 425 basis points for the remaining two years, maturing in August 2020. The Credit Facility is secured by all of the assets of Funding I. Both
PennantPark Floating Rate Capital Ltd. and Funding I have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.

The Credit Facility contains covenants, including but not limited to, restrictions of loan size, currency types and amounts, industry
requirements, average life of loans, geographic and individual portfolio concentrations, minimum portfolio yield and loan payment frequency. Additionally, the Credit Facility requires the maintenance of a minimum equity investment in Funding I and
income ratio as well as restrictions on certain payments and issuance of debt. For instance, we must maintain at least $25 million in equity and must maintain an interest coverage ratio of at least 125%. The Credit Facility compliance reporting
is prepared on a basis of accounting other than GAAP. As of December 31, 2016, we were in compliance with the covenants relating to our Credit Facility.

We own 100% of the equity interest in Funding I and treat the indebtedness of Funding I as our leverage. In accordance with the 1940 Act, with
certain limited exceptions, we are only allowed to borrow amounts such that we are in compliance with our asset coverage ratio after such borrowing. Our Investment Adviser serves as collateral manager to Funding I under the Credit Facility.

Our interest in Funding I (other than the management fee) is subordinate in priority of payment to every other obligation of Funding I and is
subject to certain payment restrictions set forth in the Credit Facility. We may receive cash distributions on our equity interests in Funding I only after it has made (1) all required cash interest and, if applicable, principal payments to the
Lenders, (2) required administrative expenses and (3) claims of other unsecured creditors of Funding I. We cannot assure you that there will be sufficient funds available to make any distributions to us or that such distributions will meet
our expectations from Funding I. The Investment Adviser has irrevocably directed that the management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager.

We may raise equity or debt capital through both registered offerings and private offerings of securities, securitizing a portion of our
investments among other considerations or mergers and acquisitions. Furthermore, our Credit Facility availability depends on various covenants and restrictions as discussed in the preceding paragraphs. The primary use of existing funds and any funds
raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate purposes.

At December 31, 2016 and September 30, 2016, we had cash equivalents of $24.2 million and $28.9 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 used cash of $63.5 million for the three months ended December 31, 2016, and our financing activities
provided cash of $58.8 million for the same period. Our operating activities used cash primarily for our investment activities and our financing activities provided cash primarily from net borrowings under the Credit Facility.

Our operating activities used cash of $66.5 million for the three months ended December 31, 2015, and our financing activities
provided cash of $59.1 million for the same period. Our operating activities used cash primarily for our investment activities and our financing activities provided cash primarily from net borrowings under the Credit Facility.

Contractual Obligations

A summary of
our significant contractual payment obligations at cost as of December 31, 2016, including borrowings under our Credit Facility and other contractual obligations, is as follows:



|                              |  |                                   |       |  |                  |   |   |           |  |   |           |  |  |                   |       |  |  |   |      | 
|----------------------------- |  | --------------------------------- | ----- |  | ---------------- | - | - | --------- |  | - | --------- |  |  | ----------------- | ----- |  |  | - | ---- | 
|                              |  | Payments due by period (millions) |      
|                              |  | Total                             |       |  | Less than 1 year |   |   | 1-3 years |  |   | 3-5 years |  |  | More than 5 years |      
|Credit Facility               |  | $                                 | 299.3 |  |                  | $ |  |           |  | $ |          |  |  | $                 | 299.3 |  |  | $ |     | 
|Unfunded investments (1)      |  |                                   | 34.2  |  |                  |   |  |           |  |   | 3.9       |  |  |                   | 17.7  |  |  |   | 12.6 | 
|                              |  |                                   |       |  |                  |   |   |           |  |   |           |  |  |                   |       |  |  |   |      | 
|Total contractual obligations |  | $                                 | 333.5 |  |                  | $ |  |           |  | $ | 3.9       |  |  | $                 | 317.0 |  |  | $ | 12.6 | 
|                              |  |                                   |       |  |                  |   |   |           |  |   |           |  |  |                   |       |  |  |   |      | 



|(1) | Unfunded investments are disclosed in the Consolidated Schedule of Investments and Note 10 of our Consolidated Financial Statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

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 2017, PennantPark Investment Advisers serves as our Investment Adviser. Payments under our
Investment Management Agreement in each reporting period are equal to (1) a management fee equal to a percentage of the value of our gross assets and (2) an incentive fee based on our performance.

Under our Administration Agreement, which was reapproved by our board of directors, including a majority of our directors who are not interested
persons of us, in February 2017, the Administrator furnishes us with office facilities and administrative services necessary to conduct our day-to-day operations. If
requested to provide 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.



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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.

Off-Balance Sheet Arrangements

We currently engage in no off-balance sheet arrangements other than our funding requirements for the
unfunded investments described above.

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 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 not
distributed during such years and on which we did not incur any federal income tax. 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.

During the three months ended December 31, 2016 and 2015,
we declared distributions of $0.285 and $0.285 per share, respectively, for total distributions of $7.6 million and $7.6 million, respectively. We monitor available net investment income to determine if a tax return of capital 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, common 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 the calendar year and in our periodic reports filed with the SEC.

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

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 a certain percentage of our income annually, we will 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.



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|Item 3. | Quantitative And Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We
are subject to financial market risks, including changes in interest rates. As of December 31, 2016, our debt portfolio consisted of 98% variable-rate investments (including 95% with a floor) and 2% fixed-rate investments. The variable-rate
loans are usually based on a LIBOR 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
existing 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, NetOf Interest
Expense (In Thousands)



Change In Interest Income, NetOf Interest Expense
Per ShareUp 1%



$             
  1,435



$                          0.05Up 2%



$             
  4,916



$                          0.18Up 3%



$             
  8,397



$                          0.31Up 4%



$             
11,878



$                          0.44


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 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. During the periods covered by this Report, we did not engage in interest rate
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) of
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 December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II  OTHER INFORMATION



|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. MCG Capital Corporation, or MCG, was a party to certain legal proceedings, including the enforcement of
its rights under contracts with its portfolio companies. We inherited this litigation upon the closing of our acquisition of MCG. While the outcome of these and any future 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, although we cannot assure you that amounts received in settlement may not be requested to be returned or that we may not be found liable in any such
litigation.



|Item 1A. | Risk Factors
|-------- | ------------

In addition to the other information set forth in this Report, you should
consider carefully the factors discussed in Part I Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016, which could materially affect
our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks facing PennantPark Floating Rate Capital Ltd. 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.



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

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Mine Safety Disclosures
|------- | -----------------------

Not Applicable.



|Item 5. | Other Information
|------- | -----------------

None.



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##### Table of Contents

|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 Amendment and Restatement of the Registrant (Incorporated by reference to the Registrants Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-170243), filed on March 29, 2011).                                                                                                   
|      | 
|3.2   |  | Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K (File
No. 814-00891), filed on December 2, 2015).                                                                                                                                          
|      | 
|4.1   |  | Form of Share Certificate (Incorporated by reference to the Registrants Pre-Effective
Amendment No. 5 to the Registration Statement on Form N-2 (File
No. 333-170243), filed on April 5, 2011).                                                                                                                                  
|      | 
|10.1  |  | Indemnification Agreement, dated as of November 15, 2016, between PennantPark Floating Rate Capital Ltd. and each of the directors and officers listed on Schedule A attached thereto (Incorporated by reference to Exhibit 10.6 to
the Registrants Annual Report on Form 10-K (File No. 814-00891), filed on November 22, 2016).
|      | 
|11    |  | Computation of Per Share Earnings (included in the notes to the Consolidated Financial Statements contained in this Report).                                                                                                                                                                                                      
|      | 
|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 the Registrants Annual Report on Form
10-K (File No. 814-00891), filed on November 17,
2011).                                                                                                                                                                     



| | 
| | 

|* | Filed herewith.
|- | ---------------



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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 FLOATING RATE CAPITAL LTD.
|                       |  |                                       
|Date: February 9, 2017 |  | By:                                    |  | /s/ Arthur H. Penn                                                                          
|                       |  |                                        |  | Arthur H. Penn                                                                              
|                       |  |                                        |  | Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)
|                       |  |                                       
|Date: February 9, 2017 |  | By:                                    |  | /s/ Aviv Efrat                                                                              
|                       |  |                                        |  | Aviv Efrat                                                                                  
|                       |  |                                        |  | Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)          



35