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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

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



FOR THE QUARTER ENDED JUNE 30, 2014

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  x    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, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|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  x.

The number of shares of the issuers common stock, $0.001 par value, outstanding as of August 6, 2014 was 14,898,056.







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PENNANTPARK FLOATING RATE CAPITAL LTD.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2014

TABLE OF CONTENTS



|                                                                                                               |  |  |    | 
|-------------------------------------------------------------------------------------------------------------- |  |  | -- | 
|PART I. CONSOLIDATED FINANCIAL INFORMATION                                                                     |  |  |    | 
|                                                                                                               | 
|Item 1. Consolidated Financial Statements                                                                      |  |  |    | 
|                                                                                                               | 
|Consolidated Statements of Assets and Liabilities as of June 30, 2014 (unaudited) and September 
30, 2013      |  |  | 4  | 
|                                                                                                               | 
|Consolidated Statements of Operations for the three and nine months ended June 
30, 2014 and 2013 (unaudited)  |  |  | 5  | 
|                                                                                                               | 
|Consolidated Statements of Changes in Net Assets for the nine months ended June 
30, 2014 and 2013 (unaudited) |  |  | 6  | 
|                                                                                                               | 
|Consolidated Statements of Cash Flows for the nine months ended June 30, 2014 and 2013
(unaudited)             |  |  | 7  | 
|                                                                                                               | 
|Consolidated Schedules of Investments as of June 30, 2014 (unaudited) and September 30,
2013                   |  |  | 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 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 consolidated subsidiary; 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 senior secured revolving credit facility, as amended, or the Credit Facility, and our business include investments we make through our wholly owned
consolidated subsidiary, PennantPark Floating Rate Funding I, LLC, or Funding I.



3



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

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES



|                                                                                                                     |  |                          |             |   |                    |   |             |  
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | ------------------ | - | ----------- | -
|                                                                                                                     |  | June 30, 2014(unaudited) |             |   | September 30, 2013 |  
|Assets                                                                                                               |  |                          |             |   |                    |   |             |  
|Investments at fair value                                                                                            |  |                          |             |   |                    |   |             |  
|Non-controlled, non-affiliated investments (cost$362,225,391 and $319,283,468, respectively)                        |  | $                        | 365,891,603 |   |                    | $ | 317,803,894 |  
|Cash equivalents (See Note 7)                                                                                        |  |                          | 9,940,930   |   |                    |   | 4,578,249   |  
|Interest receivable                                                                                                  |  |                          | 1,914,432   |   |                    |   | 2,140,802   |  
|Receivable for investments sold                                                                                      |  |                          | 3,284,879   |   |                    |   | 3,659,185   |  
|Prepaid expenses and other assets                                                                                    |  |                          | 575,972     |   |                    |   | 619,737     |  
|                                                                                                                     |  |                          |             |   |                    |   |             |  
|Total assets                                                                                                         |  |                          | 381,607,816 |   |                    |   | 328,801,867 |  
|                                                                                                                     |  |                          |             |   |                    |   |             |  
|Liabilities                                                                                                          |  |                          |             |   |                    |   |             |  
|Distributions payable                                                                                                |  |                          | 1,340,825   |   |                    |   | 1,303,580   |  
|Payable for investments purchased                                                                                    |  |                          | 2,194,497   |   |                    |   | 14,021,588  |  
|Unfunded investments                                                                                                 |  |                          | 2,705,882   |   |                    |   | 934,555     |  
|Credit Facility payable (cost$154,900,000 and $99,600,000, respectively) (See Notes 5 and 9)                        |  |                          | 154,900,000 |   |                    |   | 99,600,000  |  
|Interest payable on Credit Facility                                                                                  |  |                          | 282,449     |   |                    |   | 189,934     |  
|Management fee payable (See Note 3)                                                                                  |  |                          | 953,096     |   |                    |   | 731,635     |  
|Performance-based incentive fee payable (See Note 3)                                                                 |  |                          | 2,352,551   |   |                    |   | 1,164,090   |  
|Accrued other expenses                                                                                               |  |                          | 606,450     |   |                    |   | 790,091     |  
|                                                                                                                     |  |                          |             |   |                    |   |             |  
|Total liabilities                                                                                                    |  |                          | 165,335,750 |   |                    |   | 118,735,473 |  
|                                                                                                                     |  |                          |             |   |                    |   |             |  
|Commitments and contingencies (See Note 10)                                                                          |  |                          |             |   |                    |   |             |  
|Net assets                                                                                                           |  |                          |             |   |                    |   |             |  
|Common stock, 14,898,056 shares issued and outstanding.Par value $0.001 per share and 100,000,000 shares
authorized. |  |                          | 14,898      |   |                    |   | 14,898      |  
|Paid-in capital in excess of par value                                                                               |  |                          | 207,481,368 |   |                    |   | 207,481,368 |  
|(Distributions in excess of) Undistributed net investment income                                                     |  |                          | (240,033    | ) |                    |   | 474,766     |  
|Accumulated net realized gain on investments                                                                         |  |                          | 5,349,621   |   |                    |   | 3,574,936   |  
|Net unrealized appreciation (depreciation) on investments                                                            |  |                          | 3,666,212   |   |                    |   | (1,479,574  | )
|                                                                                                                     |  |                          |             |   |                    |   |             |  
|Total net assets                                                                                                     |  | $                        | 216,272,066 |   |                    | $ | 210,066,394 |  
|                                                                                                                     |  |                          |             |   |                    |   |             |  
|Total liabilities and net assets                                                                                     |  | $                        | 381,607,816 |   |                    | $ | 328,801,867 |  
|                                                                                                                     |  |                          |             |   |                    |   |             |  
|Net asset value per share                                                                                            |  | $                        | 14.52       |   |                    | $ | 14.10       |  
|                                                                                                                     |  |                          |             |   |                    |   |             |  

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



4



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|--------------------------------------------------------------------------------------- |  | --------------------------- | --------- | - | -------------------------- | - | ---------- | ---- |  | - | ---------- |  |  | - | ---------- | -
|                                                                                        |  | Three Months Ended June 30, |           |   | Nine Months Ended June 30, |  
|                                                                                        |  | 2014                        |           |   | 2013                       |   |            | 2014 |  |   | 2013       | 
|Investment income from:                                                                 |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Non-controlled, non-affiliated investments:                                             |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Interest                                                                                |  | $                           | 7,524,629 |   |                            | $ | 4,192,816  |      |  | $ | 21,808,074 |  |  | $ | 11,807,059 |  
|Other income                                                                            |  |                             | 143,904   |   |                            |   | 477,487    |      |  |   | 327,828    |  |  |   | 965,794    |  
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Total investment income                                                                 |  |                             | 7,668,533 |   |                            |   | 4,670,303  |      |  |   | 22,135,902 |  |  |   | 12,772,853 |  
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Expenses:                                                                               |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Base management fee (See Note 3)                                                        |  |                             | 953,096   |   |                            |   | 548,779    |      |  |   | 2,787,848  |  |  |   | 1,464,403  |  
|Performance-based incentive fee (See Note 3)                                            |  |                             | 825,796   |   |                            |   | 37,709     |      |  |   | 2,926,261  |  |  |   | 1,017,929  |  
|Interest and expenses on the Credit Facility (See Note 9)                               |  |                             | 888,718   |   |                            |   | 375,640    |      |  |   | 2,588,843  |  |  |   | 1,342,103  |  
|Administrative services expenses (See Note 3)                                           |  |                             | 276,000   |   |                            |   | 144,052    |      |  |   | 678,000    |  |  |   | 452,876    |  
|Other general and administrative expenses                                               |  |                             | 241,985   |   |                            |   | 317,192    |      |  |   | 766,639    |  |  |   | 956,400    |  
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Expenses before excise tax and amendment costs                                          |  |                             | 3,185,595 |   |                            |   | 1,423,372  |      |  |   | 9,747,591  |  |  |   | 5,233,711  |  
|Excise tax                                                                              |  |                             | 120,000   |   |                            |   | 29,355     |      |  |   | 360,000    |  |  |   | 96,768     |  
|Credit Facility amendment costs (See Notes 5 and 9)                                     |  |                             |          |   |                            |   |           |      |  |   | 712,930    |  |  |   | 500,000    |  
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Total expenses                                                                          |  |                             | 3,305,595 |   |                            |   | 1,452,727  |      |  |   | 10,820,521 |  |  |   | 5,830,479  |  
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Net investment income                                                                   |  |                             | 4,362,938 |   |                            |   | 3,217,576  |      |  |   | 11,315,381 |  |  |   | 6,942,374  |  
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Realized and unrealized gain (loss) on investments and Credit Facility:                 |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Net realized gain on non-controlled, non-affiliated investments                         |  |                             | 697,831   |   |                            |   | 1,659,391  |      |  |   | 1,774,685  |  |  |   | 3,206,861  |  
|Net change in unrealized (depreciation) appreciation on:                                |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Non-controlled, non-affiliated investments                                              |  |                             | (118,995  | ) |                            |   | (3,309,840 | )    |  |   | 5,145,786  |  |  |   | (3,233,442 | )
|Credit Facility appreciation (See Note 5)                                               |  |                             |          |   |                            |   |           |      |  |   |           |  |  |   | (377,500   | )
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Net change in unrealized (depreciation) appreciation on investments and Credit Facility |  |                             | (118,995  | ) |                            |   | (3,309,840 | )    |  |   | 5,145,786  |  |  |   | (3,610,942 | )
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Net realized and unrealized gain (loss) from investments and Credit Facility            |  |                             | 578,836   |   |                            |   | (1,650,449 | )    |  |   | 6,920,471  |  |  |   | (404,081   | )
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Net increase in net assets resulting from operations                                    |  | $                           | 4,941,774 |   |                            | $ | 1,567,127  |      |  | $ | 18,235,852 |  |  | $ | 6,538,293  |  
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Net increase in net assets resulting from operations per common share (See Note 6)      |  | $                           | 0.33      |   |                            | $ | 0.15       |      |  | $ | 1.22       |  |  | $ | 0.81       |  
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  
|Net investment income per common share                                                  |  | $                           | 0.29      |   |                            | $ | 0.31       |      |  | $ | 0.76       |  |  | $ | 0.86       |  
|                                                                                        |  |                             |           |   |                            |   |            |      |  |   |            |  |  |   |            |  

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                                    |  |                            |             |   |      |   |             |  
|------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                    |  | Nine Months Ended June 30, |            
|                                                                    |  | 2014                       |             |   | 2013 |  
|Net increase in net assets from operations:                         |  |                            |             |   |      |   |             |  
|Net investment income                                               |  | $                          | 11,315,381  |   |      | $ | 6,942,374   |  
|Net realized gain on investments                                    |  |                            | 1,774,685   |   |      |   | 3,206,861   |  
|Net change in unrealized appreciation (depreciation) on investments |  |                            | 5,145,786   |   |      |   | (3,233,442  | )
|Net change in unrealized appreciation on Credit Facility            |  |                            |            |   |      |   | (377,500    | )
|                                                                    |  |                            |             |   |      |   |             |  
|Net increase in net assets resulting from operations                |  |                            | 18,235,852  |   |      |   | 6,538,293   |  
|                                                                    |  |                            |             |   |      |   |             |  
|Distributions to stockholders:                                      |  |                            | (12,030,180 | ) |      |   | (6,147,019  | )
|                                                                    |  |                            |             |   |      |   |             |  
|Capital transactions:                                               |  |                            |             |   |      |   |             |  
|Public offering and distributions reinvested                        |  |                            |            |   |      |   | 48,357,975  |  
|Offering costs                                                      |  |                            |            |   |      |   | (400,000    | )
|                                                                    |  |                            |             |   |      |   |             |  
|Net increase in net assets resulting from capital transactions      |  |                            |            |   |      |   | 47,957,975  |  
|                                                                    |  |                            |             |   |      |   |             |  
|Net increase in net assets                                          |  |                            | 6,205,672   |   |      |   | 48,349,249  |  
|                                                                    |  |                            |             |   |      |   |             |  
|Net assets:                                                         |  |                            |             |   |      |   |             |  
|Beginning of period                                                 |  |                            | 210,066,394 |   |      |   | 95,743,877  |  
|                                                                    |  |                            |             |   |      |   |             |  
|End of period                                                       |  | $                          | 216,272,066 |   |      | $ | 144,093,126 |  
|                                                                    |  |                            |             |   |      |   |             |  
|Distributions in excess of net investment income, end of period     |  | $                          | (240,033    | ) |      | $ | (517,645    | )
|                                                                    |  |                            |             |   |      |   |             |  
|Capital share activity:                                             |  |                            |             |   |      |   |             |  
|Shares issued from public offering                                  |  |                            |            |   |      |   | 3,450,000   |  
|                                                                    |  |                            |             |   |      |   |             |  
|Shares issued from reinvestment of distributions                    |  |                            |            |   |      |   | 4,025       |  
|                                                                    |  |                            |             |   |      |   |             |  

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6



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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                                         |  |                            |              |   |      |   |              |  
|------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | ------------ | - | ---- | - | ------------ | -
|                                                                                                                         |  | Nine Months Ended June 30, |             
|                                                                                                                         |  | 2014                       |              |   | 2013 |  
|Cash flows from operating activities:                                                                                    |  |                            |              |   |      |   |              |  
|Net increase in net assets resulting from operations                                                                     |  | $                          | 18,235,852   |   |      | $ | 6,538,293    |  
|Adjustments to reconcile net increase in net assets resulting from operations to net cash used for operating
activities: |  |                            |              |   |      |   |              |  
|Net change in unrealized (appreciation) depreciation on investments                                                      |  |                            | (5,145,786   | ) |      |   | 3,233,442    |  
|Net change in unrealized appreciation on Credit Facility                                                                 |  |                            |             |   |      |   | 377,500      |  
|Net realized gain on investments                                                                                         |  |                            | (1,774,685   | ) |      |   | (3,206,861   | )
|Net accretion of discount and amortization of premium                                                                    |  |                            | (958,309     | ) |      |   | (853,119     | )
|Purchases of investments                                                                                                 |  |                            | (184,986,373 | ) |      |   | (198,297,678 | )
|Payment-in-kind income                                                                                                   |  |                            | (220,392     | ) |      |   | (211,887     | )
|Proceeds from dispositions of investments                                                                                |  |                            | 146,769,163  |   |      |   | 120,656,091  |  
|Decrease in interest receivable                                                                                          |  |                            | 226,370      |   |      |   | 221,786      |  
|Decrease (increase) in receivable for investments sold                                                                   |  |                            | 374,306      |   |      |   | (3,247,899   | )
|Decrease (increase) in prepaid expenses and other assets                                                                 |  |                            | 43,765       |   |      |   | (85,795      | )
|(Decrease) increase in payable for investments purchased                                                                 |  |                            | (11,827,091  | ) |      |   | 27,157,500   |  
|Increase (decrease) in interest payable on Credit Facility                                                               |  |                            | 92,515       |   |      |   | (11,415      | )
|Increase in management fee payable                                                                                       |  |                            | 221,461      |   |      |   | 124,032      |  
|Increase in performance-based incentive fee payable                                                                      |  |                            | 1,188,461    |   |      |   | 152,231      |  
|(Decrease) increase in accrued other expenses                                                                            |  |                            | (183,641     | ) |      |   | 334,587      |  
|                                                                                                                         |  |                            |              |   |      |   |              |  
|Net cash used for operating activities                                                                                   |  |                            | (37,944,384  | ) |      |   | (47,119,192  | )
|                                                                                                                         |  |                            |              |   |      |   |              |  
|Cash flows from financing activities:                                                                                    |  |                            |              |   |      |   |              |  
|Public offering                                                                                                          |  |                            |             |   |      |   | 48,300,000   |  
|Offering costs                                                                                                           |  |                            |             |   |      |   | (400,000     | )
|Deferred sales load paid                                                                                                 |  |                            |             |   |      |   | (2,055,000   | )
|Distributions paid to stockholders                                                                                       |  |                            | (11,992,935  | ) |      |   | (5,735,436   | )
|Borrowings under Credit Facility (See Notes 5 and 9)                                                                     |  |                            | 130,500,000  |   |      |   | 121,450,000  |  
|Repayments under Credit Facility (See Notes 5 and 9)                                                                     |  |                            | (75,200,000  | ) |      |   | (111,350,000 | )
|                                                                                                                         |  |                            |              |   |      |   |              |  
|Net cash provided by financing activities                                                                                |  |                            | 43,307,065   |   |      |   | 50,209,564   |  
|                                                                                                                         |  |                            |              |   |      |   |              |  
|Net increase in cash equivalents                                                                                         |  |                            | 5,362,681    |   |      |   | 3,090,372    |  
|Cash equivalents, beginning of period                                                                                    |  |                            | 4,578,249    |   |      |   | 3,845,803    |  
|                                                                                                                         |  |                            |              |   |      |   |              |  
|Cash equivalents, end of period                                                                                          |  | $                          | 9,940,930    |   |      | $ | 6,936,175    |  
|                                                                                                                         |  |                            |              |   |      |   |              |  
|Supplemental disclosure of cash flow information:                                                                        |  |                            |              |   |      |   |              |  
|Interest paid                                                                                                            |  | $                          | 2,461,328    |   |      | $ | 1,353,513    |  
|                                                                                                                         |  |                            |              |   |      |   |              |  
|Excise taxes paid                                                                                                        |  | $                          | 256,392      |   |      | $ | 79,140       |  
|                                                                                                                         |  |                            |              |   |      |   |              |  
|Distributions reinvested                                                                                                 |  | $                          |             |   |      | $ | 57,975       |  
|                                                                                                                         |  |                            |              |   |      |   |              |  
|Conversions and non-cash exchanges                                                                                       |  | $                          | 6,902,784    |   |      | $ |             |  
|                                                                                                                         |  |                            |              |   |      |   |              |  

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7



---

##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS

JUNE 30, 2014

(Unaudited)



|                                                                                                                 |  |          |            |  |          |                                             |                   |  |       |                                     |  |  |                     |     |  |      |            |  |                 |   |            |  |  |   |            | 
|---------------------------------------------------------------------------------------------------------------- |  | -------- | ---------- |  | -------- | ------------------------------------------- | ----------------- |  | ----- | ----------------------------------- |  |  | ------------------- | --- |  | ---- | ---------- |  | --------------- | - | ---------- |  |  | - | ---------- | 
|Issuer Name                                                                                                      |  | Maturity |            |  | Industry |                                             | Current    Coupon |  |       | Basis Point    SpreadAboveIndex (1) |  |  | Par
/        Shares |     |  | Cost |            |  | Fair Value  (2) |  
|                                                                                                                
|Investments in Non-Controlled, Non-Affiliated Portfolio Companies169.2% (3), (4) First Lien
Secured Debt149.0% | 
|AKA Diversified Holdings, Inc.                                                                                   |  |          | 04/02/2018 |  |          | Retail                                      |                   |  | 11.90 | %                                   |  |  | L+1,175             | (9) |  |      | 6,717,598  |  |                 | $ | 6,559,391  |  |  | $ | 6,853,115  | 
|AKA Diversified Holdings, Inc. (10)                                                                              |  |          | 04/02/2018 |  |          | Retail                                      |                   |  |      |                                     |  |  |                    |     |  |      | 2,000,000  |  |                 |   | 2,000,000  |  |  |   | 2,000,000  | 
|ALG USA Holdings, LLC                                                                                            |  |          | 02/28/2019 |  |          | Hotel, Gaming and Leisure                   |                   |  | 7.00  | %                                   |  |  | L+575               |     |  |      | 7,356,001  |  |                 |   | 7,307,366  |  |  |   | 7,356,001  | 
|Alvogen Pharma US, Inc.                                                                                          |  |          | 05/23/2018 |  |          | Healthcare and Pharmaceuticals              |                   |  | 7.00  | %                                   |  |  | L+575               |     |  |      | 2,764,276  |  |                 |   | 2,736,864  |  |  |   | 2,812,651  | 
|AMF Bowling Centers, Inc.                                                                                        |  |          | 06/29/2018 |  |          | Retail                                      |                   |  | 8.75  | %                                   |  |  | L+750               |     |  |      | 7,800,000  |  |                 |   | 7,607,393  |  |  |   | 7,946,250  | 
|Ancile Solutions, Inc.                                                                                           |  |          | 07/16/2018 |  |          | High Tech Industries                        |                   |  | 6.25  | %                                   |  |  | L+500               |     |  |      | 4,812,500  |  |                 |   | 4,774,793  |  |  |   | 4,818,516  | 
|AP Gaming I, LLC                                                                                                 |  |          | 12/21/2020 |  |          | Hotel, Gaming and Leisure                   |                   |  | 9.25  | %                                   |  |  | L+825               |     |  |      | 1,393,000  |  |                 |   | 1,353,758  |  |  |   | 1,406,930  | 
|ARC Automotive Group, Inc.                                                                                       |  |          | 11/15/2018 |  |          | Automotive                                  |                   |  | 6.00  | %                                   |  |  | L+475               |     |  |      | 2,444,016  |  |                 |   | 2,426,437  |  |  |   | 2,450,126  | 
|Ascend Learning, LLC                                                                                             |  |          | 07/31/2019 |  |          | Media: Broadcasting and Subscription        |                   |  | 6.00  | %                                   |  |  | L+500               |     |  |      | 3,483,747  |  |                 |   | 3,470,345  |  |  |   | 3,520,779  | 
|Aspen Dental Management, Inc.                                                                                    |  |          | 10/06/2016 |  |          | Consumer Services                           |                   |  | 7.00  | %                                   |  |  | L+550               |     |  |      | 2,925,000  |  |                 |   | 2,906,557  |  |  |   | 2,934,155  | 
|ATI Holdings, Inc.                                                                                               |  |          | 12/20/2019 |  |          | Healthcare and Pharmaceuticals              |                   |  | 5.00  | %                                   |  |  | L+400               |     |  |      | 2,955,000  |  |                 |   | 2,931,066  |  |  |   | 2,980,856  | 
|Azure Midstream Energy LLC                                                                                       |  |          | 11/15/2018 |  |          | Energy: Oil and Gas                         |                   |  | 6.50  | %                                   |  |  | L+550               |     |  |      | 5,362,500  |  |                 |   | 5,292,408  |  |  |   | 5,396,016  | 
|BBB Industries, LLC                                                                                              |  |          | 03/27/2019 |  |          | Automotive                                  |                   |  | 5.50  | %                                   |  |  | L+425               |     |  |      | 2,812,500  |  |                 |   | 2,793,620  |  |  |   | 2,810,166  | 
|BBTS Borrower LP                                                                                                 |  |          | 06/04/2019 |  |          | Energy: Oil and Gas                         |                   |  | 7.75  | %                                   |  |  | L+650               |     |  |      | 7,909,975  |  |                 |   | 7,851,322  |  |  |   | 7,977,209  | 
|Blue Bird Body Company                                                                                           |  |          | 06/29/2020 |  |          | Automotive                                  |                   |  | 7.75  | %                                   |  |  | P+450               |     |  |      | 5,000,000  |  |                 |   | 4,925,019  |  |  |   | 4,925,000  | 
|CBAC Borrower, LLC                                                                                               |  |          | 07/02/2020 |  |          | Hotel, Gaming and Leisure                   |                   |  | 8.25  | %                                   |  |  | L+700               |     |  |      | 5,000,000  |  |                 |   | 4,958,338  |  |  |   | 5,175,000  | 
|Charming Charlie LLC                                                                                             |  |          | 12/24/2019 |  |          | Retail                                      |                   |  | 9.00  | %                                   |  |  | L+800               |     |  |      | 4,488,750  |  |                 |   | 4,425,783  |  |  |   | 4,522,416  | 
|Chicken Soup for the Soul Publishing, LLC                                                                        |  |          | 01/08/2019 |  |          | Media: Advertising, Printing and Publishing |                   |  | 7.25  | %                                   |  |  | L+600               |     |  |      | 5,000,000  |  |                 |   | 4,951,783  |  |  |   | 5,000,000  | 
|Creative Circle, LLC                                                                                             |  |          | 06/25/2020 |  |          | Media: Advertising, Printing and Publishing |                   |  | 5.50  | %                                   |  |  | L+450               |     |  |      | 6,000,000  |  |                 |   | 5,940,108  |  |  |   | 5,940,000  | 
|Curo Health Services, LLC                                                                                        |  |          | 06/08/2020 |  |          | Healthcare and Pharmaceuticals              |                   |  | 5.75  | %                                   |  |  | L+475               |     |  |      | 2,000,000  |  |                 |   | 1,950,340  |  |  |   | 1,973,340  | 
|DCS Business Services, Inc.                                                                                      |  |          | 03/19/2018 |  |          | Business Services                           |                   |  | 7.25  | %                                   |  |  | L+575               |     |  |      | 3,262,078  |  |                 |   | 3,223,994  |  |  |   | 3,180,526  | 
|Document Technologies, LLC                                                                                       |  |          | 12/03/2018 |  |          | Business Services                           |                   |  | 5.50  | %                                   |  |  | L+425               |     |  |      | 946,759    |  |                 |   | 940,864    |  |  |   | 942,025    | 
|Edmentum, Inc.                                                                                                   |  |          | 05/17/2018 |  |          | Media: Broadcasting and Subscription        |                   |  | 5.50  | %                                   |  |  | L+450               |     |  |      | 927,318    |  |                 |   | 927,318    |  |  |   | 928,087    | 
|Emerald Performance Materials, LLC                                                                               |  |          | 05/18/2018 |  |          | Chemicals, Plastics and Rubber              |                   |  | 6.75  | %                                   |  |  | L+550               |     |  |      | 2,451,237  |  |                 |   | 2,435,293  |  |  |   | 2,451,237  | 
|eResearchTechnology, Inc.                                                                                        |  |          | 05/02/2018 |  |          | Healthcare and Pharmaceuticals              |                   |  | 6.00  | %                                   |  |  | L+475               |     |  |      | 2,858,864  |  |                 |   | 2,846,203  |  |  |   | 2,858,864  | 
|e-Rewards, Inc.                                                                                                  |  |          | 10/29/2018 |  |          | High Tech Industries                        |                   |  | 6.00  | %                                   |  |  | L+500               |     |  |      | 9,875,000  |  |                 |   | 9,704,101  |  |  |   | 9,825,625  | 
|FHC Health Systems, Inc.                                                                                         |  |          | 01/09/2018 |  |          | Healthcare and Pharmaceuticals              |                   |  | 5.75  | %                                   |  |  | L+475               |     |  |      | 4,500,000  |  |                 |   | 4,464,159  |  |  |   | 4,500,000  | 
|Fishnet Security, Inc.                                                                                           |  |          | 11/30/2017 |  |          | High Tech Industries                        |                   |  | 6.25  | %                                   |  |  | L+500               |     |  |      | 3,619,875  |  |                 |   | 3,598,896  |  |  |   | 3,597,251  | 
|Fox US Bidco Corp.                                                                                               |  |          | 06/17/2019 |  |          | Consumer Goods: Durable                     |                   |  | 9.00  | %                                   |  |  | L+750               |     |  |      | 3,294,118  |  |                 |   | 3,261,292  |  |  |   | 3,261,176  | 
|Fox US Bidco Corp.(10)                                                                                           |  |          | 06/17/2019 |  |          | Consumer Goods: Durable                     |                   |  |      |                                     |  |  |                    | (9) |  |      | 705,882    |  |                 |   | 705,882    |  |  |   | 705,882    | 
|GlobalLogic Holdings, Inc.                                                                                       |  |          | 05/31/2019 |  |          | High Tech Industries                        |                   |  | 6.25  | %                                   |  |  | L+525               |     |  |      | 3,980,000  |  |                 |   | 3,942,244  |  |  |   | 3,830,750  | 
|Golden Nugget, Inc.                                                                                              |  |          | 11/21/2019 |  |          | Hotel, Gaming and Leisure                   |                   |  | 5.50  | %                                   |  |  | L+450               |     |  |      | 7,960,000  |  |                 |   | 7,910,417  |  |  |   | 8,109,250  | 
|Granite Broadcasting Corporation                                                                                 |  |          | 05/23/2018 |  |          | Media: Broadcasting and Subscription        |                   |  | 6.75  | %                                   |  |  | L+550               |     |  |      | 1,104,430  |  |                 |   | 1,102,013  |  |  |   | 1,101,669  | 
|Greenway Health, LLC                                                                                             |  |          | 11/04/2020 |  |          | High Tech Industries                        |                   |  | 6.00  | %                                   |  |  | L+500               |     |  |      | 6,965,000  |  |                 |   | 6,903,065  |  |  |   | 6,956,294  | 
|Help/Systems Holdings, Inc.                                                                                      |  |          | 06/28/2019 |  |          | High Tech Industries                        |                   |  | 5.50  | %                                   |  |  | L+450               |     |  |      | 4,962,500  |  |                 |   | 4,919,212  |  |  |   | 4,931,484  | 
|Hostway Corporation                                                                                              |  |          | 12/13/2019 |  |          | High Tech Industries                        |                   |  | 6.00  | %                                   |  |  | L+475               |     |  |      | 4,937,500  |  |                 |   | 4,893,063  |  |  |   | 4,912,812  | 
|Howard Berger Co. LLC                                                                                            |  |          | 08/03/2017 |  |          | Wholesale                                   |                   |  | 7.00  | %                                   |  |  | L+575               |     |  |      | 2,566,352  |  |                 |   | 2,543,088  |  |  |   | 2,412,371  | 
|IDQ Holdings, Inc. (5), (8)                                                                                      |  |          | 03/30/2017 |  |          | Automotive                                  |                   |  | 11.50 | %                                   |  |  |                    |     |  |      | 2,000,000  |  |                 |   | 1,975,506  |  |  |   | 2,205,000  | 
|iEnergizer Limited and Aptara, Inc.(6)                                                                           |  |          | 05/01/2019 |  |          | Business Services                           |                   |  | 7.25  | %                                   |  |  | L+600               |     |  |      | 12,763,968 |  |                 |   | 12,613,837 |  |  |   | 12,381,049 | 
|InfuSystem Holdings, Inc.                                                                                        |  |          | 11/30/2016 |  |          | Healthcare and Pharmaceuticals              |                   |  | 13.07 | %                                   |  |  | P+982               |     |  |      | 1,500,000  |  |                 |   | 1,500,000  |  |  |   | 1,542,370  | 
|Instant Web, LLC, Term Loan A                                                                                    |  |          | 03/28/2019 |  |          | Media: Advertising, Printing and Publishing |                   |  | 5.50  | %                                   |  |  | L+450               |     |  |      | 5,476,304  |  |                 |   | 5,397,312  |  |  |   | 5,476,304  | 
|Instant Web, LLC, Term Loan B                                                                                    |  |          | 03/28/2019 |  |          | Media: Advertising, Printing and Publishing |                   |  | 12.00 | %                                   |  |  | L+1,100             |     |  |      | 4,500,000  |  |                 |   | 4,434,540  |  |  |   | 4,500,000  | 
|Jackson Hewitt Tax Service Inc.                                                                                  |  |          | 10/16/2017 |  |          | Consumer Services                           |                   |  | 10.00 | %                                   |  |  | L+850               |     |  |      | 5,140,179  |  |                 |   | 5,056,074  |  |  |   | 5,101,627  | 
|JHCI Acquisition, Inc.                                                                                           |  |          | 07/11/2019 |  |          | Transportation: Cargo                       |                   |  | 7.00  | %                                   |  |  | L+575               |     |  |      | 1,870,909  |  |                 |   | 1,847,090  |  |  |   | 1,880,264  | 
|K2 Pure Solutions NoCal, L.P. (8)                                                                                |  |          | 08/19/2019 |  |          | Chemicals, Plastics and Rubber              |                   |  | 10.00 | %                                   |  |  | L+900               |     |  |      | 6,157,648  |  |                 |   | 6,048,089  |  |  |   | 6,100,053  | 
|Lanyon Solutions, Inc. (f/k/a The Active Network, Inc. and Lanyon, Inc.)                                         |  |          | 11/13/2020 |  |          | High Tech Industries                        |                   |  | 5.50  | %                                   |  |  | L+450               |     |  |      | 1,990,002  |  |                 |   | 1,981,672  |  |  |   | 1,978,818  | 
|LifeCare Holdings LLC (8)                                                                                        |  |          | 11/30/2018 |  |          | Healthcare and Pharmaceuticals              |                   |  | 6.50  | %                                   |  |  | L+525               |     |  |      | 5,940,000  |  |                 |   | 5,865,356  |  |  |   | 5,806,350  | 
|Meritas Schools Holdings, LLC                                                                                    |  |          | 06/25/2019 |  |          | Consumer Services                           |                   |  | 7.00  | %                                   |  |  | L+575               |     |  |      | 2,970,000  |  |                 |   | 2,944,406  |  |  |   | 2,973,713  | 
|National Surgical Hospitals, Inc.                                                                                |  |          | 08/01/2019 |  |          | Healthcare and Pharmaceuticals              |                   |  | 6.44  | %                                   |  |  | P+325               |     |  |      | 8,151,250  |  |                 |   | 8,092,398  |  |  |   | 8,171,628  | 
|New Trident HoldCorp, Inc.                                                                                       |  |          | 07/31/2019 |  |          | Healthcare and Pharmaceuticals              |                   |  | 6.50  | %                                   |  |  | L+525               |     |  |      | 9,925,000  |  |                 |   | 9,843,385  |  |  |   | 9,915,075  | 
|Northfield Park Associates LLC                                                                                   |  |          | 12/19/2018 |  |          | Hotel, Gaming and Leisure                   |                   |  | 9.00  | %                                   |  |  | L+775               |     |  |      | 4,431,273  |  |                 |   | 4,361,672  |  |  |   | 4,503,281  | 
|Old Guard Risk Services, Inc.                                                                                    |  |          | 11/27/2018 |  |          | Banking, Finance, Insurance and Real Estate |                   |  | 12.50 | %                                   |  |  | L+1,150             |     |  |      | 7,560,000  |  |                 |   | 7,288,542  |  |  |   | 7,635,600  | 
|Packaging Coordinators, Inc.                                                                                     |  |          | 05/11/2020 |  |          | Containers, Packaging and Glass             |                   |  | 5.50  | %                                   |  |  | L+425               |     |  |      | 2,481,250  |  |                 |   | 2,471,221  |  |  |   | 2,475,047  | 
|Polyconcept Finance B.V.                                                                                         |  |          | 06/28/2019 |  |          | Consumer Goods: Non-Durable                 |                   |  | 6.00  | %                                   |  |  | L+475               |     |  |      | 7,737,766  |  |                 |   | 7,669,661  |  |  |   | 7,679,733  | 
|Premier Dental Services, Inc.                                                                                    |  |          | 11/01/2018 |  |          | Consumer Services                           |                   |  | 6.00  | %                                   |  |  | L+500               |     |  |      | 8,324,176  |  |                 |   | 8,201,213  |  |  |   | 8,334,581  | 
|Quality Home Brands Holdings LLC                                                                                 |  |          | 12/17/2018 |  |          | Consumer Goods: Durable                     |                   |  | 7.75  | %                                   |  |  | L+650               |     |  |      | 4,975,000  |  |                 |   | 4,930,832  |  |  |   | 5,012,313  | 
|RCS Capital Corporation                                                                                          |  |          | 04/29/2019 |  |          | Banking, Finance, Insurance and Real Estate |                   |  | 6.50  | %                                   |  |  | L+550               |     |  |      | 5,000,000  |  |                 |   | 4,951,440  |  |  |   | 5,102,100  | 
|RiverBoat Corporation of Mississippi
(8)                                                                         |  |          | 11/29/2016 |  |          | Hotel, Gaming and Leisure                   |                   |  | 10.00 | %                                   |  |  | L+875               |     |  |      | 4,250,000  |  |                 |   | 4,200,608  |  |  |   | 4,260,625  | 
|SCE Partners, LLC                                                                                                |  |          | 08/14/2019 |  |          | Hotel, Gaming and Leisure                   |                   |  | 8.25  | %                                   |  |  | L+725               |     |  |      | 12,000,000 |  |                 |   | 11,899,493 |  |  |   | 10,920,000 | 
|Securus Technologies Holdings, Inc.                                                                              |  |          | 04/30/2020 |  |          | Telecommunications                          |                   |  | 4.75  | %                                   |  |  | L+350               |     |  |      | 1,985,001  |  |                 |   | 1,967,527  |  |  |   | 1,991,611  | 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8



---

##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

JUNE 30, 2014

(Unaudited)



|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|------------------------------------------------------------------------ |  | -------- | ---------- |  | -------- | ------------------------------------------- | ----------------- |  | --------------- | ----------------------------------- |  |  | ----------------- | - | ----------- | ---- | --------- | - | --------------- | - | ----------- |  |  | - | ----------- | 
|Issuer Name                                                              |  | Maturity |            |  | Industry |                                             | Current    Coupon |  |                 | Basis Point    SpreadAboveIndex (1) |  |  | Par /      Shares |   |             | Cost |           |   | Fair Value  (2) |  
|Sotera Defense Solutions, Inc.                                           |  |          | 04/21/2017 |  |          | Aerospace and Defense                       |                   |  | 10.00           | %                                   |  |  | L+850             |   |             |      | 2,601,999 |   |                 | $ | 2,587,646   |  |  | $ | 2,354,809   | 
|St. Georges University Scholastic Services LLC                          |  |          | 12/20/2017 |  |          | Consumer Services                           |                   |  | 8.50            | %                                   |  |  | L+700             |   |             |      | 1,591,471 |   |                 |   | 1,568,099   |  |  |   | 1,601,418   | 
|Surgical Specialties Corporation (US), Inc.                              |  |          | 08/22/2018 |  |          | Healthcare and Pharmaceuticals              |                   |  | 7.25            | %                                   |  |  | L+575             |   |             |      | 3,420,000 |   |                 |   | 3,391,473   |  |  |   | 3,420,000   | 
|Sutherland Global Services, Inc.                                         |  |          | 03/06/2019 |  |          | Business Services                           |                   |  | 7.25            | %                                   |  |  | L+600             |   |             |      | 937,500   |   |                 |   | 922,143     |  |  |   | 942,188     | 
|Systems Maintenance Services Holding, Inc.                               |  |          | 10/18/2019 |  |          | High Tech Industries                        |                   |  | 5.25            | %                                   |  |  | L+425             |   |             |      | 5,970,000 |   |                 |   | 5,945,004   |  |  |   | 5,940,150   | 
|The National Underwriter Company                                         |  |          | 05/31/2018 |  |          | Media: Advertising, Printing and Publishing |                   |  | 6.00            | %                                   |  |  | L+475             |   |             |      | 4,162,500 |   |                 |   | 4,128,304   |  |  |   | 4,162,500   | 
|Therakos, Inc.                                                           |  |          | 12/27/2017 |  |          | Healthcare and Pharmaceuticals              |                   |  | 7.50            | %                                   |  |  | L+625             |   |             |      | 4,843,177 |   |                 |   | 4,770,019   |  |  |   | 4,861,339   | 
|UniTek Global Services, Inc. (8)                                         |  |          | 04/16/2018 |  |          | Telecommunications                          |                   |  | 15.00(PIK 4.00  | %%)                                 |  |  | L+1,350           |   |             |      | 2,162,142 |   |                 |   | 2,127,997   |  |  |   | 2,183,764   | 
|Virtual Radiologic Corporation (8)                                       |  |          | 12/22/2016 |  |          | Business Services                           |                   |  | 7.25            | %                                   |  |  | L+550             |   |             |      | 2,933,163 |   |                 |   | 2,922,423   |  |  |   | 2,082,546   | 
|Wilton Brands, LLC                                                       |  |          | 08/30/2018 |  |          | Consumer Goods: Non-Durable                 |                   |  | 7.50            | %                                   |  |  | L+625             |   |             |      | 3,060,153 |   |                 |   | 3,017,172   |  |  |   | 2,943,500   | 
|YP LLC (8)                                                               |  |          | 06/04/2018 |  |          | Media: Advertising, Printing and Publishing |                   |  | 8.00            | %                                   |  |  | L+675             |   |             |      | 3,470,807 |   |                 |   | 3,397,588   |  |  |   | 3,488,161   | 
|Zest Holdings, LLC                                                       |  |          | 08/17/2020 |  |          | Healthcare and Pharmaceuticals              |                   |  | 6.50            | %                                   |  |  | L+550             |   |             |      | 8,932,500 |   |                 |   | 8,775,593   |  |  |   | 8,932,500   | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total First Lien Secured Debt                                            |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   | 320,579,130 |  |  |   | 322,163,846 | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Second Lien Secured Debt14.2%                                           |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|American Gilsonite Company(5), (8)                                       |  |          | 09/01/2017 |  |          | Metals and Mining                           |                   |  | 11.50           | %                                   |  |  |                  |   |             |      | 1,000,000 |   |                 |   | 1,000,000   |  |  |   | 1,080,000   | 
|Arsloane Acquisition, LLC                                                |  |          | 10/01/2020 |  |          | Business Services                           |                   |  | 11.75           | %                                   |  |  | L+1,050           |   |             |      | 5,500,000 |   |                 |   | 5,422,445   |  |  |   | 5,555,000   | 
|Cannery Casino Resorts, LLC(8)                                           |  |          | 10/02/2019 |  |          | Hotel, Gaming and Leisure                   |                   |  | 10.00           | %                                   |  |  | L+875             |   |             |      | 1,700,000 |   |                 |   | 1,674,122   |  |  |   | 1,733,150   | 
|Carolina Beverage Group, LLC (5), (8)                                    |  |          | 08/01/2018 |  |          | Beverage, Food and Tobacco                  |                   |  | 10.63           | %                                   |  |  |                  |   |             |      | 3,500,000 |   |                 |   | 3,500,000   |  |  |   | 3,771,250   | 
|ILC Industries, LLC                                                      |  |          | 06/14/2019 |  |          | High Tech Industries                        |                   |  | 11.50           | %                                   |  |  | L+1,000           |   |             |      | 2,000,000 |   |                 |   | 1,926,616   |  |  |   | 1,960,000   | 
|J.A. Cosmetics Holdings, Inc. (8)                                        |  |          | 07/31/2019 |  |          | Consumer Goods: Durable                     |                   |  | 11.00           | %                                   |  |  | L+1,000           |   |             |      | 4,000,000 |   |                 |   | 3,923,872   |  |  |   | 3,994,336   | 
|Language Line, LLC                                                       |  |          | 12/20/2016 |  |          | Consumer Services                           |                   |  | 10.50           | %                                   |  |  | L+875             |   |             |      | 7,100,000 |   |                 |   | 7,017,396   |  |  |   | 7,059,175   | 
|Penton Media, Inc. (8)                                                   |  |          | 10/02/2020 |  |          | Media: Diversified and Production           |                   |  | 9.00            | %                                   |  |  | L+775             |   |             |      | 5,600,000 |   |                 |   | 5,526,187   |  |  |   | 5,637,352   | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Second Lien Secured Debt                                           |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   | 29,990,638  |  |  |   | 30,790,263  | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Subordinated Debt/Corporate Notes4.8%
(8)                               |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Affinion Group Holdings, Inc. (5)                                        |  |          | 09/14/2018 |  |          | Consumer Goods: Durable                     |                   |  | 14.50(PIK 14.50 | %%)                                 |  |  |                  |   |             |      | 3,749,000 |   |                 |   | 3,203,746   |  |  |   | 3,711,510   | 
|Affinion Investments LLC (5)                                             |  |          | 08/15/2018 |  |          | Consumer Goods: Durable                     |                   |  | 13.50           | %                                   |  |  |                  |   |             |      | 1,734,000 |   |                 |   | 1,734,000   |  |  |   | 1,803,360   | 
|Credit Infonet, Inc.                                                     |  |          | 10/26/2018 |  |          | High Tech Industries                        |                   |  | 12.25           | %                                   |  |  |                  |   |             |      | 1,987,500 |   |                 |   | 1,954,165   |  |  |   | 1,933,408   | 
|Vestcom International, Inc.                                              |  |          | 06/27/2019 |  |          | Media: Advertising, Printing and Publishing |                   |  | 12.00           | %                                   |  |  |                  |   |             |      | 2,859,027 |   |                 |   | 2,811,851   |  |  |   | 2,901,912   | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Subordinated Debt/Corporate Notes                                  |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   | 9,703,762   |  |  |   | 10,350,190  | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Preferred Equity0.2%(7),
(8)                                            |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|J.A. Cosmetics US, Inc.(J.A. Cosmetics Holdings, Inc.)                   |  |          |           |  |          | Consumer Goods: Durable                     |                   |  | 8.00            | %                                   |  |  |                  |   |             |      | 400       |   |                 |   | 399,704     |  |  |   | 460,266     | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Common Equity/Warrants1.0%
(7), (8)                                     |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Affinion Group Holdings, Inc., Series A (Warrants)                       |  |          | 12/12/2023 |  |          | Consumer Goods: Durable                     |                   |  |                |                                     |  |  |                  |   |             |      | 554,715   |   |                 |   | 1,186,649   |  |  |   | 1,469,996   | 
|Affinion Group Holdings, Inc., Series B (Warrants)                       |  |          | 12/12/2023 |  |          | Consumer Goods: Durable                     |                   |  |                |                                     |  |  |                  |   |             |      | 1,135,743 |   |                 |   |            |  |  |   | 22,715      | 
|J.A. Cosmetics US, Inc.(J.A. Cosmetics Holdings, Inc.)                   |  |          |           |  |          | Consumer Goods: Durable                     |                   |  |                |                                     |  |  |                  |   |             |      | 30        |   |                 |   | 296         |  |  |   | 24,040      | 
|Old Guard Risk Services, Inc. (Warrants)                                 |  |          | 11/27/2023 |  |          | Banking, Finance, Insurance and Real Estate |                   |  |                |                                     |  |  |                  |   |             |      | 4,175     |   |                 |   | 58,241      |  |  |   | 103,094     | 
|UniTek Global Services, Inc. (Warrants)                                  |  |          |           |  |          | Telecommunications                          |                   |  |                |                                     |  |  |                  |   |             |      | 56,717    |   |                 |   | 95,285      |  |  |   | 22,687      | 
|Vestcom Parent Holdings, Inc.(Vestcom International, Inc.)               |  |          |           |  |          | Media: Advertising, Printing and Publishing |                   |  |                |                                     |  |  |                  |   |             |      | 15,179    |   |                 |   | 166,667     |  |  |   | 421,326     | 
|Z Wireless Holdings, Inc. (AKA Diversified Holdings, Inc.) (Warrants)    |  |          | 10/21/2021 |  |          | Retail                                      |                   |  |                |                                     |  |  |                  |   |             |      | 463       |   |                 |   | 45,019      |  |  |   | 63,180      | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Common Equity/Warrants                                             |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   | 1,552,157   |  |  |   | 2,127,038   | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies  |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   | 362,225,391 |      |           |   | 365,891,603     |  
|Cash Equivalents4.6%                                                    |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|BlackRock Liquidity Funds, Temp Cash and Temp Fund, Institutional Shares |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   | 9,940,930   |      |           |   | 9,940,930       |  
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Investments and Cash Equivalents173.8%                            |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   | $ | 372,166,321 |      |           | $ | 375,832,533     |  
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Liabilities in Excess of Other Assets(73.8)%                            |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   | (159,560,467    | )
|Net Assets100.0%                                                        |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  | $ | 216,272,066 | 
|                                                                         |  |          |            |  |          |                                             |                   |  |                 |                                     |  |  |                   |   |             |      |           |   |                 |   |             |  |  |   |             | 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



9



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

JUNE 30, 2014

(Unaudited)



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                           |  | 
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                           |  | 
|(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, 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 deemed as non-controlled when we own less than 25% of a portfolio companys voting securities and controlled when we own 25% or more of a 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 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 are not pledged as collateral under the Credit Facility. All other securities are pledged as collateral under
the Credit Facility.                                                                                                                                                                                                                                                        
|(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.                                                                                                                                                                              

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2013



|                                                                                                                 |  |            |  |                                             |  |                   |                |        |                                     |  |         |                   |  |  |            |  |  |                  |            |  |  |   |            | 
|---------------------------------------------------------------------------------------------------------------- |  | ---------- |  | ------------------------------------------- |  | ----------------- | -------------- | ------ | ----------------------------------- |  | ------- | ----------------- |  |  | ---------- |  |  | ---------------- | ---------- |  |  | - | ---------- | 
|Issuer Name                                                                                                      |  | Maturity   |  | Industry                                    |  | Current    Coupon |                |        | Basis Point    SpreadAboveIndex (1) |  |         | Par /      Shares |  |  | Cost       |  |  | Fair Value  
(2) |           
|                                                                                                                
|Investments in Non-Controlled, Non-Affiliated Portfolio Companies151.3% (3), (4) First Lien Secured Debt133.8% | 
|AKA Diversified Holdings, Inc.                                                                                   |  | 12/21/2016 |  | Retail                                      |  |                   | 12.50(PIK 1.50 | %(9)%) |                                     |  | L+1,225 |                   |  |  | 2,728,141  |  |  | $                | 2,684,231  |  |  | $ | 2,755,278  | 
|ALG USA Holdings, LLC                                                                                            |  | 02/28/2019 |  | Hotel, Gaming and Leisure                   |  |                   | 7.00           | %      |                                     |  | L+575   |                   |  |  | 8,457,500  |  |  |                  | 8,394,246  |  |  |   | 8,457,500  | 
|Alvogen Pharma US, Inc. (8)                                                                                      |  | 05/23/2018 |  | Healthcare and Pharmaceuticals              |  |                   | 7.00           | %      |                                     |  | L+575   |                   |  |  | 1,995,000  |  |  |                  | 1,976,374  |  |  |   | 1,980,037  | 
|AMF Bowling Centers, Inc. (8)                                                                                    |  | 06/29/2018 |  | Retail                                      |  |                   | 8.75           | %      |                                     |  | L+750   |                   |  |  | 7,950,000  |  |  |                  | 7,711,500  |  |  |   | 7,870,500  | 
|Ancile Solutions, Inc.                                                                                           |  | 07/16/2018 |  | High Tech Industries                        |  |                   | 6.25           | %      |                                     |  | L+500   |                   |  |  | 5,000,000  |  |  |                  | 4,951,516  |  |  |   | 4,962,500  | 
|ARC Automotive Group, Inc.                                                                                       |  | 11/15/2018 |  | Automotive                                  |  |                   | 6.25           | %      |                                     |  | L+500   |                   |  |  | 2,530,875  |  |  |                  | 2,510,159  |  |  |   | 2,530,875  | 
|Aspen Dental Management, Inc.                                                                                    |  | 10/06/2016 |  | Consumer Services                           |  |                   | 7.00           | %      |                                     |  | L+550   |                   |  |  | 2,947,500  |  |  |                  | 2,916,715  |  |  |   | 2,829,600  | 
|ATI Holdings, Inc.                                                                                               |  | 12/20/2019 |  | Healthcare and Pharmaceuticals              |  |                   | 5.75           | %      |                                     |  | L+450   |                   |  |  | 2,977,500  |  |  |                  | 2,951,133  |  |  |   | 2,999,831  | 
|BBB Industries, LLC                                                                                              |  | 03/27/2019 |  | Automotive                                  |  |                   | 5.50           | %      |                                     |  | L+425   |                   |  |  | 2,925,000  |  |  |                  | 2,903,031  |  |  |   | 2,917,687  | 
|BBTS Borrower LP (8)                                                                                             |  | 06/04/2019 |  | Energy: Oil and Gas                         |  |                   | 7.75           | %      |                                     |  | L+650   |                   |  |  | 6,965,000  |  |  |                  | 6,899,024  |  |  |   | 7,034,650  | 
|Bellisio Foods, Inc.                                                                                             |  | 08/01/2019 |  | Beverage, Food and Tobacco                  |  |                   | 5.25           | %      |                                     |  | L+425   |                   |  |  | 4,237,288  |  |  |                  | 4,216,574  |  |  |   | 4,216,102  | 
|Bellisio Foods, Inc. (10)                                                                                        |  | 08/01/2019 |  | Beverage, Food and Tobacco                  |  |                   |               | (9)    |                                     |  |        |                   |  |  | 762,712    |  |  |                  | 759,021    |  |  |   | 758,898    | 
|BioScrip, Inc.                                                                                                   |  | 07/31/2020 |  | Healthcare and Pharmaceuticals              |  |                   | 6.50           | %      |                                     |  | L+525   |                   |  |  | 2,000,000  |  |  |                  | 1,970,525  |  |  |   | 2,010,000  | 
|CBAC Borrower, LLC (8)                                                                                           |  | 07/02/2020 |  | Hotel, Gaming and Leisure                   |  |                   | 8.25           | %      |                                     |  | L+700   |                   |  |  | 5,000,000  |  |  |                  | 4,950,774  |  |  |   | 5,137,500  | 
|Cetera Financial Group, Inc. (8)                                                                                 |  | 08/07/2019 |  | Banking, Finance, Insurance and Real Estate |  |                   | 6.50           | %      |                                     |  | L+550   |                   |  |  | 5,000,000  |  |  |                  | 4,902,298  |  |  |   | 4,954,150  | 
|CPG International Inc.                                                                                           |  | 09/30/2020 |  | Construction and Building                   |  |                   | 4.75           | %      |                                     |  | L+375   |                   |  |  | 5,000,000  |  |  |                  | 4,975,000  |  |  |   | 4,975,000  | 
|Cydcor LLC                                                                                                       |  | 06/12/2017 |  | Business Services                           |  |                   | 9.75           | %      |                                     |  | L+725   |                   |  |  | 1,958,125  |  |  |                  | 1,958,125  |  |  |   | 1,958,125  | 
|DCS Business Services, Inc.                                                                                      |  | 03/19/2018 |  | Business Services                           |  |                   | 7.25           | %      |                                     |  | L+575   |                   |  |  | 3,603,061  |  |  |                  | 3,554,898  |  |  |   | 3,603,061  | 
|Document Technologies, Inc. (8)                                                                                  |  | 12/03/2018 |  | Business Services                           |  |                   | 5.50           | %      |                                     |  | L+425   |                   |  |  | 961,264    |  |  |                  | 954,199    |  |  |   | 961,263    | 
|EAG, Inc. (8)                                                                                                    |  | 07/28/2017 |  | Business Services                           |  |                   | 6.00           | %      |                                     |  | L+450   |                   |  |  | 888,721    |  |  |                  | 888,721    |  |  |   | 888,721    | 
|Edmentum, Inc.                                                                                                   |  | 05/17/2018 |  | Media: Broadcasting and Subscription        |  |                   | 6.00           | %      |                                     |  | L+475   |                   |  |  | 938,438    |  |  |                  | 938,438    |  |  |   | 941,563    | 
|EIG Investors Corp.                                                                                              |  | 11/12/2019 |  | High Tech Industries                        |  |                   | 6.25           | %      |                                     |  | L+500   |                   |  |  | 2,209,435  |  |  |                  | 2,191,417  |  |  |   | 2,216,350  | 
|Emerald Performance Materials, LLC                                                                               |  | 05/18/2018 |  | Chemicals, Plastics and Rubber              |  |                   | 6.75           | %      |                                     |  | L+550   |                   |  |  | 2,469,992  |  |  |                  | 2,451,906  |  |  |   | 2,482,342  | 
|eResearchtechnology, Inc.                                                                                        |  | 05/02/2018 |  | Healthcare and Pharmaceuticals              |  |                   | 6.00           | %      |                                     |  | L+475   |                   |  |  | 2,970,056  |  |  |                  | 2,955,416  |  |  |   | 2,970,056  | 
|FHC Health Systems, Inc.                                                                                         |  | 01/09/2018 |  | Healthcare and Pharmaceuticals              |  |                   | 5.75           | %      |                                     |  | L+475   |                   |  |  | 4,937,500  |  |  |                  | 4,890,024  |  |  |   | 4,962,187  | 
|Fishnet Security, Inc.                                                                                           |  | 11/30/2017 |  | High Tech Industries                        |  |                   | 6.25           | %      |                                     |  | L+500   |                   |  |  | 3,647,438  |  |  |                  | 3,623,608  |  |  |   | 3,632,228  | 
|Granite Broadcasting Corporation                                                                                 |  | 05/23/2018 |  | Media: Broadcasting and Subscription        |  |                   | 6.75           | %      |                                     |  | L+550   |                   |  |  | 2,985,000  |  |  |                  | 2,978,216  |  |  |   | 2,987,478  | 
|Graton Economic Development Authority (5),
(8)                                                                   |  | 09/02/2019 |  | Hotel, Gaming and Leisure                   |  |                   | 9.63           | %      |                                     |  |        |                   |  |  | 3,000,000  |  |  |                  | 3,000,000  |  |  |   | 3,300,000  | 
|GSE Environmental, Inc. (8)                                                                                      |  | 05/27/2016 |  | Environmental Industries                    |  |                   | 8.99           | %      |                                     |  | L+750   |                   |  |  | 2,934,372  |  |  |                  | 2,926,116  |  |  |   | 2,567,575  | 
|GSE Environmental, Inc. (8), (10)                                                                                |  | 10/31/2013 |  | Environmental Industries                    |  |                   |               |        |                                     |  |        |                   |  |  | 175,657    |  |  |                  | 175,657    |  |  |   | 153,700    | 
|Help/Systems Holdings, Inc. (8)                                                                                  |  | 06/28/2019 |  | High Tech Industries                        |  |                   | 5.50           | %      |                                     |  | L+450   |                   |  |  | 5,000,000  |  |  |                  | 4,952,010  |  |  |   | 4,962,500  | 
|Howard Berger Co. LLC (8)                                                                                        |  | 08/03/2017 |  | Wholesale                                   |  |                   | 7.00           | %      |                                     |  | L+575   |                   |  |  | 2,585,993  |  |  |                  | 2,555,979  |  |  |   | 2,456,693  | 
|IDQ Holdings, Inc. (5), (8)                                                                                      |  | 03/30/2017 |  | Automotive                                  |  |                   | 11.50          | %      |                                     |  |        |                   |  |  | 2,000,000  |  |  |                  | 1,969,758  |  |  |   | 2,155,000  | 
|iEnergizer Limited and Aptara, Inc.(6)                                                                           |  | 05/01/2019 |  | Business Services                           |  |                   | 7.25           | %      |                                     |  | L+600   |                   |  |  | 8,775,000  |  |  |                  | 8,632,866  |  |  |   | 8,687,250  | 
|InfuSystem Holdings, Inc.                                                                                        |  | 11/30/2016 |  | Healthcare and Pharmaceuticals              |  |                   | 11.95          | %      |                                     |  | P+625   |                   |  |  | 2,175,000  |  |  |                  | 2,175,000  |  |  |   | 2,195,331  | 
|Instant Web, Inc. (8)                                                                                            |  | 08/07/2014 |  | Media: Advertising, Printing and Publishing |  |                   | 3.55           | %(9)   |                                     |  | L+338   |                   |  |  | 6,836,389  |  |  |                  | 6,698,584  |  |  |   | 5,469,111  | 
|Jackson Hewitt Tax Service Inc.                                                                                  |  | 10/16/2017 |  | Consumer Services                           |  |                   | 10.00          | %      |                                     |  | L+850   |                   |  |  | 5,521,875  |  |  |                  | 5,406,642  |  |  |   | 5,439,047  | 
|JHCI Acquisition, Inc.                                                                                           |  | 07/11/2019 |  | Transportation: Cargo                       |  |                   | 7.00           | %      |                                     |  | L+575   |                   |  |  | 1,995,000  |  |  |                  | 1,965,824  |  |  |   | 1,981,454  | 
|K2 Pure Solutions NoCal, L.P. (8)                                                                                |  | 08/19/2019 |  | Chemicals, Plastics and Rubber              |  |                   | 10.00          | %      |                                     |  | L+900   |                   |  |  | 6,157,648  |  |  |                  | 6,034,495  |  |  |   | 6,065,283  | 
|LifeCare Holdings LLC (8)                                                                                        |  | 11/30/2018 |  | Healthcare and Pharmaceuticals              |  |                   | 6.50           | %      |                                     |  | L+525   |                   |  |  | 5,985,000  |  |  |                  | 5,900,289  |  |  |   | 5,865,300  | 
|Meritas Schools Holdings, LLC                                                                                    |  | 06/25/2019 |  | Consumer Services                           |  |                   | 7.00           | %      |                                     |  | L+575   |                   |  |  | 2,992,500  |  |  |                  | 2,963,605  |  |  |   | 2,987,503  | 
|Milk Specialties Company                                                                                         |  | 11/09/2018 |  | Consumer Goods: Non-Durable                 |  |                   | 7.00           | %      |                                     |  | L+575   |                   |  |  | 3,383,000  |  |  |                  | 3,354,728  |  |  |   | 3,374,542  | 
|Mood Media Corporation (6)                                                                                       |  | 05/07/2018 |  | Media: Diversified and Production           |  |                   | 7.00           | %      |                                     |  | L+550   |                   |  |  | 2,348,510  |  |  |                  | 2,344,859  |  |  |   | 2,345,574  | 
|NAB Holdings, LLC                                                                                                |  | 04/24/2018 |  | Banking, Finance, Insurance and Real Estate |  |                   | 7.00           | %      |                                     |  | L+550   |                   |  |  | 937,500    |  |  |                  | 926,724    |  |  |   | 941,016    | 
|National Surgical Hospitals, Inc.                                                                                |  | 08/01/2019 |  | Healthcare and Pharmaceuticals              |  |                   | 5.75           | %      |                                     |  | L+450   |                   |  |  | 6,500,000  |  |  |                  | 6,436,491  |  |  |   | 6,475,625  | 
|New Trident HoldCorp, Inc.                                                                                       |  | 07/31/2019 |  | Healthcare and Pharmaceuticals              |  |                   | 6.50           | %      |                                     |  | L+525   |                   |  |  | 10,000,000 |  |  |                  | 9,903,508  |  |  |   | 9,975,000  | 
|Northfield Park Associates LLC                                                                                   |  | 12/19/2018 |  | Hotel, Gaming and Leisure                   |  |                   | 9.00           | %      |                                     |  | L+775   |                   |  |  | 4,500,000  |  |  |                  | 4,421,591  |  |  |   | 4,635,000  | 
|OCI Beaumont LLC, Term B-1 Loan                                                                                  |  | 08/20/2019 |  | Chemicals, Plastics and Rubber              |  |                   | 6.25           | %      |                                     |  | L+500   |                   |  |  | 3,125,000  |  |  |                  | 3,079,073  |  |  |   | 3,125,000  | 
|OCI Beaumont LLC, Term B-2 Loan                                                                                  |  | 08/20/2019 |  | Chemicals, Plastics and Rubber              |  |                   | 6.25           | %      |                                     |  | L+500   |                   |  |  | 5,875,000  |  |  |                  | 5,788,657  |  |  |   | 5,875,000  | 
|Orbitz Worldwide, Inc., Term Loan C                                                                              |  | 03/25/2019 |  | Transportation: Consumer                    |  |                   | 5.75           | %      |                                     |  | L+475   |                   |  |  | 3,990,000  |  |  |                  | 3,990,000  |  |  |   | 4,003,287  | 
|Packaging Coordinators, Inc.                                                                                     |  | 05/11/2020 |  | Containers, Packaging and Glass             |  |                   | 5.50           | %      |                                     |  | L+425   |                   |  |  | 2,500,000  |  |  |                  | 2,488,883  |  |  |   | 2,500,000  | 
|Paladin Brands Holding, Inc.                                                                                     |  | 08/16/2019 |  | Capital Equipment                           |  |                   | 6.75           | %      |                                     |  | L+550   |                   |  |  | 3,000,000  |  |  |                  | 2,956,071  |  |  |   | 2,964,390  | 
|Pelican Products, Inc.                                                                                           |  | 07/11/2018 |  | Containers, Packaging and Glass             |  |                   | 7.00           | %      |                                     |  | L+550   |                   |  |  | 1,481,250  |  |  |                  | 1,456,674  |  |  |   | 1,473,844  | 
|Penton Media, Inc.                                                                                               |  | 08/01/2014 |  | Media: Diversified and Production           |  |                   | 6.00(PIK 2.00  | %%)    |                                     |  | L+500   |                   |  |  | 7,517,838  |  |  |                  | 7,234,538  |  |  |   | 7,433,263  | 
|Polyconcept Finance B.V.                                                                                         |  | 06/28/2019 |  | Consumer Goods: Non-Durable                 |  |                   | 6.00           | %      |                                     |  | L+475   |                   |  |  | 7,832,755  |  |  |                  | 7,757,882  |  |  |   | 7,744,636  | 
|Premier Dental Services, Inc.                                                                                    |  | 11/01/2018 |  | Consumer Services                           |  |                   | 8.25           | %      |                                     |  | L+700   |                   |  |  | 3,374,503  |  |  |                  | 3,286,903  |  |  |   | 3,382,939  | 
|RiverBoat Corporation of Mississippi
(8)                                                                         |  | 11/29/2016 |  | Hotel, Gaming and Leisure                   |  |                   | 10.00          | %      |                                     |  | L+875   |                   |  |  | 4,250,000  |  |  |                  | 4,188,136  |  |  |   | 4,250,000  | 
|Sabre Industries, Inc.                                                                                           |  | 08/24/2018 |  | Construction and Building                   |  |                   | 5.75           | %      |                                     |  | L+475   |                   |  |  | 4,972,500  |  |  |                  | 4,923,269  |  |  |   | 5,009,794  | 
|SCE Partners, LLC                                                                                                |  | 08/14/2019 |  | Hotel, Gaming and Leisure                   |  |                   | 8.25           | %      |                                     |  | L+725   |                   |  |  | 12,000,000 |  |  |                  | 11,881,935 |  |  |   | 11,880,000 | 
|Securus Technologies Holdings, Inc.                                                                              |  | 04/30/2020 |  | Telecommunications                          |  |                   | 4.75           | %      |                                     |  | L+350   |                   |  |  | 2,000,000  |  |  |                  | 1,981,121  |  |  |   | 1,962,500  | 

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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

SEPTEMBER 30, 2013



|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|----------------------------------------------------------------------- |  | -------- | ---------- |  | -------- | ------------------------------------------- | ----------------- |  | -------------- | ----------------------------------- |  |  | --------------- | - | ----------- | ---- | --------- | - | --------------- | - | ----------- |  |  | - | ----------- | 
|Issuer Name                                                             |  | Maturity |            |  | Industry |                                             | Current    Coupon |  |                | Basis Point    SpreadAboveIndex (1) |  |  | Par /    Shares |   |             | Cost |           |   | Fair Value  (2) |  
|Sotera Defense Solutions, Inc.                                          |  |          | 04/21/2017 |  |          | Aerospace and Defense                       |                   |  | 7.50           | %                                   |  |  | L+600           |   |             |      | 2,646,725 |   |                 | $ | 2,629,647   |  |  | $ | 2,382,052   | 
|St. Georges University Scholastic Services LLC                         |  |          | 12/20/2017 |  |          | Consumer Services                           |                   |  | 8.50           | %                                   |  |  | L+700           |   |             |      | 1,948,471 |   |                 |   | 1,915,350   |  |  |   | 1,955,778   | 
|Surgical Specialties Corporation(US), Inc.                              |  |          | 08/22/2018 |  |          | Healthcare and Pharmaceuticals              |                   |  | 7.25           | %                                   |  |  | L+575           |   |             |      | 3,555,000 |   |                 |   | 3,520,302   |  |  |   | 3,590,550   | 
|Sutherland Global Services, Inc.                                        |  |          | 03/06/2019 |  |          | Business Services                           |                   |  | 7.25           | %                                   |  |  | L+600           |   |             |      | 975,000   |   |                 |   | 957,196     |  |  |   | 971,344     | 
|The National Underwriter Company                                        |  |          | 05/31/2018 |  |          | Media: Advertising, Printing and Publishing |                   |  | 6.00           | %                                   |  |  | L+475           |   |             |      | 4,415,625 |   |                 |   | 4,374,813   |  |  |   | 4,393,547   | 
|Therakos, Inc.                                                          |  |          | 12/27/2017 |  |          | Healthcare and Pharmaceuticals              |                   |  | 7.50           | %                                   |  |  | L+625           |   |             |      | 2,977,500 |   |                 |   | 2,899,121   |  |  |   | 2,973,778   | 
|UniTek Global Services, Inc. (8)                                        |  |          | 04/16/2018 |  |          | Telecommunications                          |                   |  | 15.00(PIK 4.00 | %%)                                 |  |  | L+1,350         |   |             |      | 2,112,349 |   |                 |   | 2,074,200   |  |  |   | 2,096,507   | 
|Univita Health Inc.                                                     |  |          | 06/19/2017 |  |          | Consumer Services                           |                   |  | 6.50           | %                                   |  |  | L+500           |   |             |      | 2,932,500 |   |                 |   | 2,912,802   |  |  |   | 2,800,538   | 
|Viamedia Services Corp.                                                 |  |          | 04/19/2016 |  |          | Media: Advertising, Printing and Publishing |                   |  | 7.00           | %                                   |  |  | L+550           |   |             |      | 3,304,277 |   |                 |   | 3,280,480   |  |  |   | 3,304,277   | 
|Virtual Radiologic Corporation (8)                                      |  |          | 12/22/2016 |  |          | Business Services                           |                   |  | 7.25           | %                                   |  |  | L+550           |   |             |      | 2,932,500 |   |                 |   | 2,916,949   |  |  |   | 1,847,475   | 
|Wilton Brands, LLC (8)                                                  |  |          | 08/30/2018 |  |          | Consumer Goods: Non-Durable                 |                   |  | 7.50           | %                                   |  |  | L+625           |   |             |      | 3,230,000 |   |                 |   | 3,177,789   |  |  |   | 3,165,400   | 
|YP LLC (8)                                                              |  |          | 06/04/2018 |  |          | Media: Advertising, Printing and Publishing |                   |  | 8.06           | %                                   |  |  | L+675           |   |             |      | 5,085,000 |   |                 |   | 4,964,517   |  |  |   | 5,046,863   | 
|Zest Anchors, LLC                                                       |  |          | 08/17/2020 |  |          | Healthcare and Pharmaceuticals              |                   |  | 6.50           | %                                   |  |  | L+550           |   |             |      | 9,000,000 |   |                 |   | 8,822,056   |  |  |   | 8,887,500   | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total First Lien Secured Debt                                           |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   | 281,260,179 |  |  |   | 281,046,248 | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Second Lien Secured Debt13.1%                                          |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|American GilsoniteCompany(5), (8)                                       |  |          | 09/01/2017 |  |          | Metals and Mining                           |                   |  | 11.50          | %                                   |  |  |                |   |             |      | 3,000,000 |   |                 |   | 3,000,000   |  |  |   | 3,067,500   | 
|Arsloane Acquisition, LLC                                               |  |          | 10/01/2020 |  |          | Business Services                           |                   |  | 11.75          | %                                   |  |  | L+1,050         |   |             |      | 5,000,000 |   |                 |   | 4,900,000   |  |  |   | 4,983,350   | 
|Brand Energy and Infrastructure Services, Inc.
(8)                      |  |          | 10/23/2019 |  |          | Energy: Oil and Gas                         |                   |  | 11.00          | %                                   |  |  | L+975           |   |             |      | 1,906,607 |   |                 |   | 1,861,523   |  |  |   | 1,946,322   | 
|Cannery Casino Resorts, LLC(8)                                          |  |          | 10/02/2019 |  |          | Hotel, Gaming and Leisure                   |                   |  | 10.00          | %                                   |  |  | L+875           |   |             |      | 1,700,000 |   |                 |   | 1,671,746   |  |  |   | 1,576,750   | 
|Carolina Beverage Group,LLC (5),
(8)                                    |  |          | 08/01/2018 |  |          | Beverage, Food and Tobacco                  |                   |  | 10.63          | %                                   |  |  |                |   |             |      | 3,500,000 |   |                 |   | 3,500,000   |  |  |   | 3,578,750   | 
|Gastar Exploration USA, Inc.(5), (8)                                    |  |          | 05/15/2018 |  |          | Energy: Oil and Gas                         |                   |  | 8.63           | %                                   |  |  |                |   |             |      | 2,000,000 |   |                 |   | 2,000,000   |  |  |   | 1,890,000   | 
|ILC Industries, LLC                                                     |  |          | 06/14/2019 |  |          | High Tech Industries                        |                   |  | 11.50          | %                                   |  |  | L+1,000         |   |             |      | 2,000,000 |   |                 |   | 1,920,000   |  |  |   | 1,840,000   | 
|Language Line, LLC                                                      |  |          | 12/20/2016 |  |          | Consumer Services                           |                   |  | 10.50          | %                                   |  |  | L+875           |   |             |      | 7,100,000 |   |                 |   | 6,998,223   |  |  |   | 6,981,643   | 
|Seven Seas Cruises (5), (6), (8)                                        |  |          | 05/15/2019 |  |          | Hotel, Gaming and Leisure                   |                   |  | 9.13           | %                                   |  |  |                |   |             |      | 1,500,000 |   |                 |   | 1,500,000   |  |  |   | 1,635,000   | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Second Lien Secured Debt                                          |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   | 27,351,492  |  |  |   | 27,499,315  | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Subordinated
Debt/CorporateNotes4.3% (8)                               |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Affinion Group Holdings, Inc.                                           |  |          | 11/15/2015 |  |          | Consumer Goods: Durable                     |                   |  | 11.63          | %                                   |  |  |                |   |             |      | 4,100,000 |   |                 |   | 3,873,657   |  |  |   | 2,357,500   | 
|Credit Infonet, Inc.                                                    |  |          | 10/26/2018 |  |          | High Tech Industries                        |                   |  | 12.25          | %                                   |  |  |                |   |             |      | 1,987,500 |   |                 |   | 1,949,883   |  |  |   | 1,997,517   | 
|Varel International Energy Mezzanine Funding Corp.                      |  |          | 01/15/2018 |  |          | Energy: Oil and Gas                         |                   |  | 14.00(PIK 4.00 | %%)                                 |  |  |                |   |             |      | 1,810,934 |   |                 |   | 1,780,211   |  |  |   | 1,793,834   | 
|Vestcom International, Inc.                                             |  |          | 06/27/2019 |  |          | Media: Advertising, Printing and Publishing |                   |  | 12.00          | %                                   |  |  |                |   |             |      | 2,859,027 |   |                 |   | 2,806,095   |  |  |   | 2,854,319   | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Subordinated Debt/Corporate Notes                                 |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   | 10,409,846  |  |  |   | 9,003,170   | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Common Equity/Warrants0.1% (7),
(8)                                    |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  | 
|UniTek Global Services, Inc. (Warrants)                                 |  |          |           |  |          | Telecommunications                          |                   |  |               |                                     |  |  |                |   |             |      | 56,717    |   |                 |   | 95,284      |  |  |   | 66,926      | 
|Vestcom Parent Holdings, Inc.(Vestcom International, Inc.)              |  |          |           |  |          | Media: Advertising, Printing and Publishing |                   |  |               |                                     |  |  |                |   |             |      | 15,179    |   |                 |   | 166,667     |  |  |   | 188,235     | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Common Equity/Warrants                                            |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   | 261,951     |  |  |   | 255,161     | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   | 319,283,468 |      |           |   | 317,803,894     |  
|Cash Equivalents2.2%                                                   |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|BlackRock Liquidity Funds, Temp Cash, Institutional Shares              |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   | 2,747,327   |      |           |   | 2,747,327       |  
|BlackRock Liquidity Funds, Temp Fund, Institutional Shares              |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   | 1,830,922   |      |           |   | 1,830,922       |  
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Cash Equivalents                                                  |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   | 4,578,249   |  |  |   | 4,578,249   | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Total Investments and Cash Equivalents153.5%                           |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 | $ | 323,861,717 |      |           | $ | 322,382,143     |  
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 
|Liabilities in Excess of Other Assets(53.5)%                           |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   | (112,315,749    | )
|Net Assets100.0%                                                       |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  | $ | 210,066,394 | 
|                                                                        |  |          |            |  |          |                                             |                   |  |                |                                     |  |  |                 |   |             |      |           |   |                 |   |             |  |  |   |             | 

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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

SEPTEMBER 30, 2013



|     |  |                                                                                                                                                                                                                                                                                                                                                                             |  | 
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|     |  |                                                                                                                                                                                                                                                                                                                                                                             |  | 
|(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.                                                                                                
|(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 deemed as non-controlled when we own less than 25% of a portfolio companys voting securities and controlled when we own 25% or more of a 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 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 are not pledged as collateral under the Credit Facility. All other securities are pledged as collateral under
the Credit Facility.                                                                                                                                                                                                                          
|(9)  |  | Coupon is not subject to a LIBOR or Prime rate floor.                                                                                                                                                                                                                                                                                                                      
|(10) |  | Represents the purchase of a security with delayed settlement (unfunded investment). This security does not have a basis point spread above an index.                                                                                                                                                                                                                      

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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2014

(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. We seek to achieve our investment objective by investing primarily in Floating Rate Loans and other investments made to U.S. middle-market private companies whose debt is rated below investment
grade. Floating Rate Loans or variable-rate investments 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 loans, 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 second lien, high yield, mezzanine and distressed debt securities and, to a lesser extent, equity investments.

In April 2011, we closed our initial public offering and our common stock trades on the NASDAQ Global Select Market under the symbol
PFLT. From inception to date, we have issued 14,889,367 shares of common stock for gross proceeds of $216.3 million, or $210.0 million after deducting the sales load and underwriting expenses paid by us.

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 any 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 five-year Credit Facility allows Funding I to borrow up to $200 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.

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. 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 reclassified certain prior period
amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to the Accounting Standards Codification, 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 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, described in this Report, and a consistently applied valuation process. 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.

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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JUNE 30, 2014

(Unaudited)



| | (4) | The audit committee of our board of directors quarterly 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/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 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. Investments of sufficient
credit quality purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.

(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 unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or
depreciation reflects the change in the fair value 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, 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 are capitalized, on liabilities which we do not fair value, and then accreted or amortized using the effective interest method as interest income. 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 subject to taxation as a RIC. As a result, we account for income taxes using the asset 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 PennantPark Floating Rate Capital Ltd.s qualification and election to be subject to tax as a RIC, we do not anticipate paying any material level of federal income taxes in the future. Although we are
not subject to tax on income as a RIC, we have elected to retain a portion of our calendar year income. As a result, for the three and nine months ended June 30, 2014, we accrued estimated excise taxes of $0.1 million and $0.4 million,
respectively. For the three and nine months ended June 30, 2013, we accrued estimated excise taxes of less than $0.1 million and $0.1 million, respectively.

PennantPark Floating Rate Capital Ltd. recognizes in its Consolidated Financial Statements the effect of a tax position when it is more likely than not, based on the technical merits, that the position
will be sustained upon examination. We did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, nor did we have any unrecognized tax benefits as of the periods presented herein. Although we file
federal and state tax returns, our major tax jurisdiction is federal. Our tax returns for each of our federal tax years since 2011 remain subject to examination by the Internal Revenue Service.

Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment
income and realized gains recognized for financial reporting purposes. Differences 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) 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 Funding I in our Consolidated Financial Statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

JUNE 30, 2014

(Unaudited)



(f) 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 Funding Is assets and such assets are not intended to be available to the creditors of PennantPark Floating
Rate Capital Ltd. or any affiliate of the Company.

(g) Recent Accounting Pronouncements

In June 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2013-08, Financial
ServicesInvestment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements (ASU 2013-08). ASU 2013-08 provides an approach to assess whether a company is an investment company, clarifies the
characteristics of an investment company, and provides new measurement and disclosure requirements. ASU 2013-08 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is
prohibited. We are currently evaluating ASU 2013-08 to determine the effect, if any, on our Consolidated Financial Statements and disclosures.

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 2014. 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 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. 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, 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
delayed draw loans, 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 and nine months ended June 30, 2014, the Investment Adviser earned base management fees of $1.0
million and $2.8 million, respectively, from us. For the three and nine months ended June 30, 2013, the Investment Adviser earned base management fees of $0.5 million and $1.5 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 commitment, origination, 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 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), 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 adjusted for any share issuances or repurchases during the
relevant quarter. For the three and nine months ended June 30, 2014, the Investment Adviser earned an incentive fee on net investment income as calculated under the Investment Management Agreement of $0.7 million and $1.5 million, respectively,
from us. For the three and nine months ended June 30, 2013, the Investment Adviser earned an incentive fee on net investment income as calculated under the Investment Management Agreement of $0.4 million and $1.0 million, respectively, 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, from our inception. For the three and nine months ended June 30, 2014, the Investment Adviser earned
an incentive fee on capital gains of less than $0.1 million and $0.8 million, respectively, as calculated under the Investment Management Agreement. For the three and nine months ended June 30, 2013, 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 will be realized in the future. For the three and nine months ended June 30, 2014, the
Investment Adviser accrued an incentive fee on unrealized and realized capital gains as calculated under GAAP of $0.1 million and $0.6 million, respectively. For the three and nine months ended June 30, 2013, the Investment Adviser accrued an
incentive fee on unrealized and realized capital gains as calculated under GAAP of $(0.3) million, representing an expense reversal, and zero, respectively.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

JUNE 30, 2014

(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 2014. 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 our Administration Agreement, including
rent, technology systems, insurance 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 Statement of Operations. For the three and
nine months ended June 30, 2014, the Investment Adviser was reimbursed approximately $0.1 million and $0.4 million, respectively, from us, including expenses incurred on behalf of the Administrator, for the services described above. For the
three and nine months ended June 30, 2013, the Investment Adviser was reimbursed approximately $0.1 million and $0.3 million, respectively, from us, including expenses incurred on behalf of the Administrator, for the services described above.

4. INVESTMENTS

Purchases of investments, including PIK, for the three and nine months ended June 30, 2014 totaled $30.7 million and $185.2 million, respectively. For the same periods in the prior year, purchases of
investments, including PIK, totaled $114.4 million and $198.5 million, respectively. Sales and repayments of investments for the three and nine months ended June 30, 2014 totaled $55.6 million and $146.8 million, respectively. For the same
periods in the prior year, sales and repayments of investments totaled $46.4 million and $120.7 million, respectively.

Investments and cash equivalents consisted of the following:



|                                            |  |               |             |  |                    |   |             |      |  |   |             |  |  |   |             | 
|------------------------------------------- |  | ------------- | ----------- |  | ------------------ | - | ----------- | ---- |  | - | ----------- |  |  | - | ----------- | 
|                                            |  | June 30, 2014 |             |  | September 30,
2013 |  
|Investment Classification                   |  | Cost          |             |  | Fair Value         |   |             | Cost |  |   | Fair Value  | 
|First lien                                  |  | $             | 320,579,130 |  |                    | $ | 322,163,846 |      |  | $ | 281,260,179 |  |  | $ | 281,046,248 | 
|Second lien                                 |  |               | 29,990,638  |  |                    |   | 30,790,263  |      |  |   | 27,351,492  |  |  |   | 27,499,315  | 
|Subordinated debt / corporate notes         |  |               | 9,703,762   |  |                    |   | 10,350,190  |      |  |   | 10,409,846  |  |  |   | 9,003,170   | 
|Preferred equity / common equity / warrants |  |               | 1,951,861   |  |                    |   | 2,587,304   |      |  |   | 261,951     |  |  |   | 255,161     | 
|                                            |  |               |             |  |                    |   |             |      |  |   |             |  |  |   |             | 
|Total investments                           |  |               | 362,225,391 |  |                    |   | 365,891,603 |      |  |   | 319,283,468 |  |  |   | 317,803,894 | 
|                                            |  |               |             |  |                    |   |             |      |  |   |             |  |  |   |             | 
|Cash equivalents                            |  |               | 9,940,930   |  |                    |   | 9,940,930   |      |  |   | 4,578,249   |  |  |   | 4,578,249   | 
|                                            |  |               |             |  |                    |   |             |      |  |   |             |  |  |   |             | 
|Total investments and cash equivalents      |  | $             | 372,166,321 |  |                    | $ | 375,832,533 |      |  | $ | 323,861,717 |  |  | $ | 322,382,143 | 
|                                            |  |               |             |  |                    |   |             |      |  |   |             |  |  |   |             | 

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



|                                            |  |               |  |                   
|------------------------------------------- |  | ------------- |  | ------------------
|Industry Classification                     |  | June 30, 2014 |  | September 30, 2013
|Healthcare and Pharmaceuticals              |  | 16%           |  | 17%               
|High Tech Industries                        |  | 14            |  | 6                 
|Hotel, Gaming and Leisure                   |  | 12            |  | 13                
|Media: Advertising, Printing and Publishing |  | 9             |  | 7                 
|Consumer Services                           |  | 8             |  | 8                 
|Business Services                           |  | 7             |  | 8                 
|Consumer Goods: Durable                     |  | 6             |  | 1                 
|Retail                                      |  | 6             |  | 3                 
|Energy: Oil and Gas                         |  | 4             |  | 4                 
|Automotive                                  |  | 3             |  | 2                 
|Banking, Finance, Insurance and Real Estate |  | 3             |  | 2                 
|Consumer Goods: Non-Durable                 |  | 3             |  | 4                 
|Chemicals, Plastics and Rubber              |  | 2             |  | 6                 
|Aerospace and Defense                       |  | 1             |  | 1                 
|Beverage, Food and Tobacco                  |  | 1             |  | 3                 
|Containers, Packaging and Glass             |  | 1             |  | 1                 
|Media: Broadcasting and Subscription        |  | 1             |  | 1                 
|Media: Diversified and Production           |  | 1             |  | 3                 
|Telecommunications                          |  | 1             |  | 1                 
|Construction and Building                   |  |              |  | 3                 
|Transportation: Consumer                    |  |              |  | 1                 
|All Other                                   |  | 1             |  | 5                 
|                                            |  |               |  |                   
|Total                                       |  | 100%          |  | 100%              
|                                            |  |               |  |                   



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

JUNE 30, 2014

(Unaudited)



5. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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



|         |  |                                                                                                                                                                                                                                                                                                                                                                  
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | 
|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. A review of fair value hierarchy classifications is conducted on a quarterly basis.

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 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 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 loans, 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 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 nine months ended June 30, 2014, our ability to observe valuation inputs resulted in no reclassification of assets between any levels. This compares to the nine months ended June 30, 2013, which resulted
in the reclassification of one asset from Level 3 to 2 and no other transfers between levels.

In addition to using the above
inputs in cash equivalents, investments and our long-term 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 include a disclaimer, may not have corroborating evidence 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, including our long-term Credit Facility, is 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

JUNE 30, 2014

(Unaudited)



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



|                          |  |                                 |             |  |                     |                         |                   |                         |                                  |                     
|------------------------- |  | ------------------------------- | ----------- |  | ------------------- | ----------------------- | ----------------- | ----------------------- | -------------------------------- | --------------------
|Description               |  | Fair Value atJune 30, 2014      |             |  | Valuation Technique |                         | UnobservableInput |                         | Range of
Input(Weighted Average)
|Debt investments          |  | $                               | 301,722,773 |  |                     | Market Comparable       |                   | Broker/Dealerbid quotes |                                  | N/A                 
|Debt investments          |  |                                 | 56,066,656  |  |                     | Market Comparable       |                   | Market Yield            |                                  | 6.4%  13.9% (10.8%)
|Equity investments        |  |                                 | 1,492,711   |  |                     | Market Comparable       |                   | Broker/Dealerbid quotes |                                  | N/A                 
|Equity investments        |  |                                 | 1,071,906   |  |                     | Enterprise Market Value |                   | EBITDA multiple         |                                  | 4.5x  9.5x (8.1x)  
|                          |  |                                 |             |  |                     |                         |                   |                         |                                  |                     
|Total Level 3 investments |  |                                 | 360,354,046 |  |                     |                         |                   |                         |                                  |                     
|                          |  |                                 |             |  |                     |                         |                   |                         |                                  |                     
|Long-Term Credit Facility |  | $                               | 154,900,000 |  |                     | Market Comparable       |                   | Market Yield            |                                  | 3.4%                
|                          |  |                                 |             |  |                     |                         |                   |                         |                                  |                     
|                          |  |                                 |             | 
|Description               |  | Fair Value atSeptember 30, 2013 |             |  | Valuation Technique |                         | UnobservableInput |                         | Range of
Input(Weighted Average)
|Debt investments          |  | $                               | 298,655,677 |  |                     | Market Comparable       |                   | Broker/Dealerbid quotes |                                  | N/A                 
|Debt investments          |  |                                 | 14,900,556  |  |                     | Market Comparable       |                   | Market Yield            |                                  | 7.3%  15.2% (11.7%)
|Equity investments        |  |                                 | 188,235     |  |                     | Enterprise Market Value |                   | EBITDA multiple         |                                  | 7.0x                
|                          |  |                                 |             |  |                     |                         |                   |                         |                                  |                     
|Total Level 3 investments |  |                                 | 313,744,468 |  |                     |                         |                   |                         |                                  |                     
|                          |  |                                 |             |  |                     |                         |                   |                         |                                  |                     
|Long-Term Credit Facility |  | $                               | 99,600,000  |  |                     | Market Comparable       |                   | Market Yield            |                                  | 3.6%                
|                          |  |                                 |             |  |                     |                         |                   |                         |                                  |                     

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



|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|------------------------------------------------------ |  | -------------------------------- | ----------- |  | ------- | - | --------- | ------- |  | - | --------- |  |  | - | ----------- | 
|                                                       |  | Fair Value at June 30, 2014      |            
|Description                                            |  | Fair Value                       |             |  | Level 1 |   |           | Level 2 |  |   | Level 3   | 
|Debt investments (First lien)                          |  | $                                | 322,163,846 |  |         | $ |          |         |  | $ |          |  |  | $ | 322,163,846 | 
|Debt investments (Second lien)                         |  |                                  | 30,790,263  |  |         |   |          |         |  |   |          |  |  |   | 30,790,263  | 
|Debt investments (Subordinated debt / corporate notes) |  |                                  | 10,350,190  |  |         |   |          |         |  |   | 5,514,870 |  |  |   | 4,835,320   | 
|Equity investments                                     |  |                                  | 2,587,304   |  |         |   |          |         |  |   | 22,687    |  |  |   | 2,564,617   | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|Total investments                                      |  |                                  | 365,891,603 |  |         |   |          |         |  |   | 5,537,557 |  |  |   | 360,354,046 | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|Cash equivalents                                       |  |                                  | 9,940,930   |  |         |   | 9,940,930 |         |  |   |          |  |  |   |            | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|Total investments and cash equivalents                 |  | $                                | 375,832,533 |  |         | $ | 9,940,930 |         |  | $ | 5,537,557 |  |  | $ | 360,354,046 | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|Long-Term Credit Facility                              |  | $                                | 154,900,000 |  |         | $ |          |         |  | $ |          |  |  | $ | 154,900,000 | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|                                                       | 
|                                                       |  | Fair Value at September 30, 2013 |            
|Description                                            |  | Fair Value                       |             |  | Level 1 |   |           | Level 2 |  |   | Level 3   | 
|Debt investments (First lien)                          |  | $                                | 281,046,248 |  |         | $ |          |         |  | $ |          |  |  | $ | 281,046,248 | 
|Debt investments (Second lien)                         |  |                                  | 27,499,315  |  |         |   |          |         |  |   | 1,635,000 |  |  |   | 25,864,315  | 
|Debt investments (Subordinated debt / corporate notes) |  |                                  | 9,003,170   |  |         |   |          |         |  |   | 2,357,500 |  |  |   | 6,645,670   | 
|Equity investments                                     |  |                                  | 255,161     |  |         |   |          |         |  |   | 66,926    |  |  |   | 188,235     | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|Total investments                                      |  |                                  | 317,803,894 |  |         |   |          |         |  |   | 4,059,426 |  |  |   | 313,744,468 | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|Cash equivalents                                       |  |                                  | 4,578,249   |  |         |   | 4,578,249 |         |  |   |          |  |  |   |            | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|Total investments and cash equivalents                 |  | $                                | 322,382,143 |  |         | $ | 4,578,249 |         |  | $ | 4,059,426 |  |  | $ | 313,744,468 | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 
|Long-Term Credit Facility                              |  | $                                | 99,600,000  |  |         | $ |          |         |  | $ |          |  |  | $ | 99,600,000  | 
|                                                       |  |                                  |             |  |         |   |           |         |  |   |           |  |  |   |             | 



19



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

JUNE 30, 2014

(Unaudited)



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



|                                                                                                                                                                                                                                    |  |                                 |              |   |                                                     |   |             |        |  |   |              |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------------ | - | --------------------------------------------------- | - | ----------- | ------ |  | - | ------------ | -
|                                                                                                                                                                                                                                    |  | Nine Months Ended June 30, 2014 |             
|Description                                                                                                                                                                                                                         |  | First Lien                      |              |   | Second lien,subordinated debtand equity investments |   |             | Totals | 
|Beginning Balance                                                                                                                                                                                                                   |  | $                               | 281,046,248  |   |                                                     | $ | 32,698,220  |        |  | $ | 313,744,468  |  
|Realized gains                                                                                                                                                                                                                      |  |                                 | 1,194,362    |   |                                                     |   | 578,987     |        |  |   | 1,773,349    |  
|Unrealized appreciation                                                                                                                                                                                                             |  |                                 | 1,798,648    |   |                                                     |   | 1,433,096   |        |  |   | 3,231,744    |  
|Purchases, PIK, net discount accretion and non-cash exchanges                                                                                                                                                                       |  |                                 | 171,711,192  |   |                                                     |   | 15,019,955  |        |  |   | 186,731,147  |  
|Sales, repayments and non-cash exchanges                                                                                                                                                                                            |  |                                 | (133,586,604 | ) |                                                     |   | (11,540,058 | )      |  |   | (145,126,662 | )
|Transfers in and/or out of Level 3                                                                                                                                                                                                  |  |                                 |             |   |                                                     |   |            |        |  |   |             |  
|                                                                                                                                                                                                                                    |  |                                 |              |   |                                                     |   |             |        |  |   |              |  
|Ending Balance                                                                                                                                                                                                                      |  | $                               | 322,163,846  |   |                                                     | $ | 38,190,200  |        |  | $ | 360,354,046  |  
|                                                                                                                                                                                                                                    |  |                                 |              |   |                                                     |   |             |        |  |   |              |  
|Net change in unrealized appreciation reported within the net change in unrealized appreciation on investments in our
Consolidated Statement of Operations attributable to our Level 3 assets still held at the reporting date.     |  | $                               | 1,006,992    |   |                                                     | $ | 1,421,519   |        |  | $ | 2,428,511    |  
|                                                                                                                                                                                                                                    |  |                                 |              |   |                                                     |   |             |        |  |   |              |  
|                                                                                                                                                                                                                                    | 
|                                                                                                                                                                                                                                    |  | Nine Months Ended June 30, 2013 |             
|Description                                                                                                                                                                                                                         |  | First Lien                      |              |   | Second lien,subordinated debtand equity investments |   |             | Totals | 
|Beginning Balance                                                                                                                                                                                                                   |  | $                               | 150,209,747  |   |                                                     | $ | 18,836,653  |        |  | $ | 169,046,400  |  
|Realized gains                                                                                                                                                                                                                      |  |                                 | 1,470,514    |   |                                                     |   | 1,736,347   |        |  |   | 3,206,861    |  
|Unrealized depreciation                                                                                                                                                                                                             |  |                                 | (1,398,938   | ) |                                                     |   | (1,030,393  | )      |  |   | (2,429,331   | )
|Purchases, PIK and net discount accretion                                                                                                                                                                                           |  |                                 | 181,863,473  |   |                                                     |   | 17,429,350  |        |  |   | 199,292,823  |  
|Sales, repayments and non-cash exchanges                                                                                                                                                                                            |  |                                 | (103,617,239 | ) |                                                     |   | (17,038,852 | )      |  |   | (120,656,091 | )
|Transfers in and/or out of Level 3                                                                                                                                                                                                  |  |                                 |             |   |                                                     |   | (1,586,250  | )      |  |   | (1,586,250   | )
|                                                                                                                                                                                                                                    |  |                                 |              |   |                                                     |   |             |        |  |   |              |  
|Ending Balance                                                                                                                                                                                                                      |  | $                               | 228,527,557  |   |                                                     | $ | 18,346,855  |        |  | $ | 246,874,412  |  
|                                                                                                                                                                                                                                    |  |                                 |              |   |                                                     |   |             |        |  |   |              |  
|Net change in unrealized (depreciation) reported within the net change in unrealized (depreciation) on investments in our
Consolidated Statement of Operations attributable to our Level 3 assets still held at the reporting date. |  | $                               | (388,299     | ) |                                                     | $ | (2,694,643  | )      |  | $ | (3,082,942   | )
|                                                                                                                                                                                                                                    |  |                                 |              |   |                                                     |   |             |        |  |   |              |  



20



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

JUNE 30, 2014

(Unaudited)



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



|                                                                     |  |                            |             |   |      |   |              |  
|-------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ------------ | -
|                                                                     |  | Carrying/Fair Value        |            
|                                                                     |  | Nine Months Ended June 30, |            
|Long-Term Credit Facility                                            |  | 2014                       |             |   | 2013 |  
|Beginning Balance (cost  $99,600,000 and $75,500,000, respectively) |  | $                          | 99,600,000  |   |      | $ | 75,122,500   |  
|Total unrealized appreciation included in earnings                   |  |                            |            |   |      |   | 377,500      |  
|Borrowings                                                           |  |                            | 130,500,000 |   |      |   | 121,450,000  |  
|Repayments                                                           |  |                            | (75,200,000 | ) |      |   | (111,350,000 | )
|Transfers in and/or out of Level 3                                   |  |                            |            |   |      |   |             |  
|                                                                     |  |                            |             |   |      |   |              |  
|Ending Balance (cost  $154,900,000 and $85,600,000, respectively)   |  | $                          | 154,900,000 |   |      | $ | 85,600,000   |  
|                                                                     |  |                            |             |   |      |   |              |  

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 incurred expenses of zero and $0.7 million, respectively, relating to amendment fees on the Credit Facility during
the three and nine months ended June 30, 2014. For the same periods in the prior year, we incurred expenses of zero and $0.5 million, respectively. 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 Statement of Assets and Liabilities and changes in fair value of the Credit Facility are reported in our Consolidated Statement of Operations.
We elected not to apply ASC 825-10 to any other financial assets or liabilities. For each of the three and nine months ended June 30, 2014, our Credit Facility had a net change in unrealized appreciation of zero. For the three and nine months
ended June 30, 2013, our Credit Facility had a net change in unrealized appreciation of zero and $0.4 million, respectively. As of June 30, 2014 and September 30, 2013, the Credit Facility had unrealized appreciation of zero. We use a
nationally recognized independent valuation service to measure the fair value of the 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 June 30, |            |  | Nine Months Ended June 30, |  
|                                                                                 |  | 2014                        |            |  | 2013                       |   |            | 2014 |  |   | 2013       | 
|Numerator for net increase in net assets resulting from operations               |  | $                           | 4,941,774  |  |                            | $ | 1,567,127  |      |  | $ | 18,235,852 |  |  | $ | 6,538,293 | 
|Denominator for basic and diluted weighted average shares                        |  |                             | 14,898,056 |  |                            |   | 10,302,918 |      |  |   | 14,898,056 |  |  |   | 8,067,406 | 
|Basic and diluted net increase in net assets per share resulting from operations |  | $                           | 0.33       |  |                            | $ | 0.15       |      |  | $ | 1.22       |  |  | $ | 0.81      | 

7. 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 June 30, 2014 and September 30, 2013, cash equivalents consisted of money market funds in the amounts of $9.9 million and $4.6 million,
respectively.



21



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##### Table of Contents

PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

JUNE 30, 2014

(Unaudited)



8. FINANCIAL HIGHLIGHTS

Below are the financial highlights:



|                                                                    |  |                            |             |   |      |   |             |  
|------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                    |  | Nine Months Ended June 30, |            
|                                                                    |  | 2014                       |             |   | 2013 |  
|Per Share Data:                                                     |  |                            |             |   |      |   |             |  
|Net asset value, beginning of period                                |  | $                          | 14.10       |   |      | $ | 13.98       |  
|Net investment income(1)                                            |  |                            | 0.76        |   |      |   | 0.86        |  
|Net realized and unrealized gain (loss)
(1)                         |  |                            | 0.46        |   |      |   | (0.05       | )
|                                                                    |  |                            |             |   |      |   |             |  
|Net increase in net assets resulting from operations(1)             |  |                            | 1.22        |   |      |   | 0.81        |  
|Distributions to stockholders(1), (2)                               |  |                            | (0.80       | ) |      |   | (0.76       | )
|Effect of common stock issuance and offering costs                  |  |                            |            |   |      |   | (0.05       | )
|                                                                    |  |                            |             |   |      |   |             |  
|Net asset value, end of period                                      |  | $                          | 14.52       |   |      | $ | 13.98       |  
|                                                                    |  |                            |             |   |      |   |             |  
|Per share market value, end of period                               |  | $                          | 14.29       |   |      | $ | 14.14       |  
|                                                                    |  |                            |             |   |      |   |             |  
|Total return* (3)                                                   |  |                            | 9.91        | % |      |   | 17.94       | %
|Shares outstanding at end of period                                 |  |                            | 14,898,056  |   |      |   | 10,304,692  |  
|                                                                    |  |                            |             |   |      |   |             |  
|Ratios** / Supplemental Data:                                       |  |                            |             |   |      |   |             |  
|Ratio of operating expenses to average net assets
(4)               |  |                            | 4.69        | % |      |   | 4.70        | %
|Ratio of Credit Facility related expenses to average net assets (5) |  |                            | 1.95        | % |      |   | 1.90        | %
|                                                                    |  |                            |             |   |      |   |             |  
|Ratio of total expenses to average net assets                       |  |                            | 6.64        | % |      |   | 6.60        | %
|Ratio of net investment income to average net assets
(5)            |  |                            | 7.17        | % |      |   | 8.03        | %
|Net assets at end of period                                         |  | $                          | 216,272,066 |   |      | $ | 144,093,126 |  
|                                                                    |  |                            |             |   |      |   |             |  
|Average debt outstanding                                            |  | $                          | 146,395,971 |   |      | $ | 66,821,154  |  
|                                                                    |  |                            |             |   |      |   |             |  
|Average debt per share (1)                                          |  | $                          | 9.83        |   |      | $ | 8.28        |  
|Asset coverage per unit (6)                                         |  | $                          | 2,396       |   |      | $ | 2,683       |  
|Portfolio turnover ratio                                            |  |                            | 54.41       | % |      |   | 85.26       | %
|                                                                    |  |                            |             |   |      |   |             |  



|* | 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) | Operating expenses exclude Credit Facility related costs.
|--- | ---------------------------------------------------------

|(5) | Credit Facility amendment costs 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 Credit Facility with affiliates of SunTrust Bank, or the Lender, is $200 million, has an interest rate spread above LIBOR
of 200 basis points, matures in May 2018 and its reinvestment period ends in May 2016. In November 2013, we expanded the Credit Facility to allow Funding I to borrow up to $200 million, up from $125 million. The Credit Facility is subject to
satisfaction of certain conditions and the regulatory restrictions that the 1940 Act imposes on us as a BDC. As of June 30, 2014 and September 30, 2013, we had $154.9 million and $99.6 million of outstanding borrowings under the Credit
Facility, respectively, and carried an annual interest rate of 2.16% and 2.18%, respectively, excluding the 0.375% undrawn commitment fee. The annualized weighted average cost of debt for the nine months ended June 30, 2014 and 2013, inclusive
of the fee on the undrawn commitment on the Credit Facility but excluding amendment costs, was 2.36% and 2.68%, respectively.

Until May 2016, or 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 May 2018. 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.

We own 100% of the equity interest in Funding I and will 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 fees) 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 Lender, (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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PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

JUNE 30, 2014

(Unaudited)



10. COMMITMENTS AND CONTINGENCIES

From time to time, we, the Investment Adviser or the Administrator may be a party to legal proceedings in the ordinary course of business,
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 investments described in the Consolidated Statement of Assets and Liabilities represent unfunded delayed draws on investments and/or revolving lines of credit, if any.



23



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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 Subsidiary:

We have reviewed the
accompanying consolidated statements of assets and liabilities of PennantPark Floating Rate Capital Ltd. and its Subsidiary (the Company), including the consolidated schedule of investments, as of June 30, 2014, the consolidated
statements of operations for the three and nine months ended June 30, 2014 and the consolidated statements of changes in net assets, and cash flows for the nine months ended June 30, 2014. 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 consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.





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New York, New York

August 6, 2014



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##### Table of Contents

|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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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 subsidiary 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;
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| |  |  | our business prospects and the prospects of our prospective portfolio companies;
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| |  |  | the dependence of our future success on the general economy and its impact on the industries in which we invest;
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| |  |  | the impact of a protracted decline in the liquidity of credit markets on our business;
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| |  |  | the impact of investments that we expect to make;
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| |  |  | the impact of fluctuations in interest rates on our business and our portfolio companies;
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| |  |  | our contractual arrangements and relationships with third parties;
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| |  |  | the valuation of our investments in portfolio companies, particularly those having no liquid trading market;
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| |  |  | the ability of our prospective portfolio companies to achieve their objectives;
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| |  |  | our expected financings and investments;
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| |  |  | the adequacy of our cash resources and working capital;
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| |  |  | the timing of cash flows, if any, from the operations of our prospective portfolio companies;
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| |  |  | the ability of the Investment Adviser to locate suitable investments for us and to monitor and administer our investments; and
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| |  |  | the impact of future legislation and regulation on our business and our portfolio companies.
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We use words such as anticipates, believes, expects, intends, seeks,
plans, estimates and similar expressions to identify forward-looking statements. You should not place undue influence on the forward-looking statements as our actual results could differ materially from those projected in the
forward-looking statements for any reason, including the factors in Risk Factors and elsewhere in this Report.

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

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

You should understand that under Section 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the
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 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 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 adjusted returns 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 that operate in
various industries and geographical regions.

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 loans, 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 second-lien, high yield, mezzanine and distressed debt securities and, to a lesser extent, equity investments. Our
investment size may generally range between $1 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.



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##### Table of Contents

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 distributions, if any, on
investment securities that we may acquire in portfolio companies. Our debt investments, whether in the form of senior secured loans 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, some of 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 and market discount or premium are capitalized, and we accrete or amortize such amounts as income or expense, as applicable, using the effective interest method. 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
base management fee to our Investment Adviser, 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 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;
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| |  |  | the cost of effecting sales and repurchases of shares of our common stock and other securities;
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| |  |  | 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;
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| |  |  | expenses incurred by the Investment Adviser in performing due diligence and reviews of investments;
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| |  |  | transfer agent and custodial fees;
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| |  |  | fees and expenses associated with marketing efforts;
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| |  |  | federal and state registration fees and any stock exchange listing fees;
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| |  |  | fees and expenses associated with independent audits and outside legal costs;
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| |  |  | federal, state and local taxes;
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| |  |  | independent directors fees and expenses;
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| |  |  | brokerage commissions;
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| |  |  | fidelity bond, directors and officers, errors and omissions liability insurance and other insurance premiums;
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| |  |  | direct costs such as printing, mailing, long distance telephone and staff;
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| |  |  | costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and
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| |  |  | 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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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.



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##### Table of Contents

PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2014, our portfolio totaled $365.9 million and consisted of $322.2 million of senior secured loans, $30.8 million of
second lien secured debt, $10.3 million of subordinated debt and $2.6 million of preferred and common equity investments. Our debt portfolio consisted of 95% variable-rate investments (including 93% with a LIBOR or prime floor) and 5% fixed-rate
investments. Overall, the portfolio had unrealized appreciation of $3.7 million. Our overall portfolio consisted of 80 companies with an average investment size of $4.6 million, a weighted average yield on debt investments of 8.2%, and was invested
88% in senior secured loans, 8% in second lien secured debt and 4% in subordinated debt, preferred and common equity investments.

As of September 30, 2013, our portfolio totaled $317.8 million and consisted of $281.0 million of senior secured loans, $27.5 million of second lien secured debt and $9.3 million of subordinated
debt, preferred and common equity investments. Our debt portfolio consisted of 92% variable-rate investments (including 89% with a LIBOR or prime floor) and 8% fixed-rate investments. Overall, the portfolio had net unrealized depreciation of $1.5
million. Our overall portfolio consisted of 83 companies with an average investment size of $3.8 million, had a weighted average yield on debt investments of 8.1%, and was invested 88% in senior secured loans, 9% in second lien secured debt and 3%
in subordinated debt, preferred and common equity investments.

For the three months ended June 30, 2014, we invested
$30.6 million in four new and seven existing portfolio companies with a weighted average yield on debt investments of 7.1%. Sales and repayments of investments for the three months ended June 30, 2014 totaled $55.6 million. For the nine months
ended June 30, 2014, we invested $185.0 million in 29 new and 25 existing portfolio companies with a weighted average yield on debt investments of 7.8%. Sales and repayments of investments for the nine months ended June 30, 2014 totaled
$146.8 million.

For the three months ended June 30, 2013, we invested $114.3 million in 26 new and five existing
portfolio companies with a weighted average yield on debt investments of 7.5%. Sales and repayments of investments for the three months ended June 30, 2013 totaled $46.4 million. For the nine months ended June 30, 2013, we invested $198.3
million in 54 new and 11 existing portfolio companies with a weighted average yield on debt investments of 8.0%. Sales and repayments of investments for the nine months ended June 30, 2013 totaled $120.7 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. 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 reclassified 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.

Valuation of Portfolio Investments

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 described in this Report and a consistently applied valuation process.
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 differ from our valuation and the difference may be material.

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;
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| | (2) | Preliminary valuation conclusions are then documented and discussed with the management of our Investment Adviser;
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| | (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;
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| | (4) | The audit committee of our board of directors quarterly 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
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| | (5) | Our board of directors discusses the valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of our Investment
Adviser, the independent valuation firms and the audit committee.
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Our investments generally consist of illiquid
securities, including debt and equity investments. 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/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 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. Investments of sufficient credit quality purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.

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



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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 incurred expenses of zero and $0.7 million, respectively, relating to amendment fees on the Credit Facility during the three and
nine months ended June 30, 2014. For the same periods in the prior year, we incurred expenses of zero and $0.5 million, respectively. 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 Statement of Assets and Liabilities and changes in fair value of the Credit Facility are reported in our Consolidated Statement of Operations. We elected not to apply
ASC 825-10 to any other financial assets or liabilities. For each of the three and nine months ended June 30, 2014, our Credit Facility had a net change in unrealized appreciation of zero. For the three and nine months ended June 30, 2013,
our Credit Facility had a net change in unrealized appreciation of zero and $0.4 million, respectively. As of June 30, 2014 and September 30, 2013, the Credit Facility had unrealized appreciation of zero. We use a nationally recognized
independent valuation service to measure the fair value of the 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 contractual interest accrued and added to the loan balance that generally becomes due at maturity, we will generally
not accrue PIK interest if 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 determine that it is probable that we will not be able to
collect such interest. Loan origination fees, OID and market discount or premium are capitalized, and we then accrete or amortize such amounts as interest income or expense, as applicable, using the effective interest method. We record contractual
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 portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

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. For us to maintain our status as a
RIC, substantially all of this income must be paid out to stockholders in the form of distributions, even though we have not collected any cash with respect to interest on PIK securities.

Federal Income Taxes

We have elected to be taxed, and intend to
qualify annually to maintain our election to be taxed, as a RIC under Subchapter M of the Code. To maintain our RIC tax election, we must, among other requirements, meet certain source-of-income and quarterly asset diversification requirements. We
also must annually distribute at least 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, if any, out of the assets legally available for distribution. 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 during each calendar year an amount at least equal to the sum of (1) 98% of our net
ordinary income for the calendar year, (2) 98.2% of the sum of our net capital gain income (i.e., the excess, if any, of capital gains over capital losses) for the one-year period ending on October 31 of the calendar year and (3) the
sum of any net ordinary income plus net capital gain income for preceding years that were not distributed during such years. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of
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 net ordinary income 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 realized gains recognized for financial reporting purposes. Differences 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.

Recent Accounting Pronouncements

In June 2013, the FASB issued ASU
2013-08. ASU 2013-08 provides an approach to assess whether a company is an investment company, clarifies the characteristics of an investment company, and provides new measurement and disclosure requirements. ASU 2013-08 is effective for interim
and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is prohibited. We are currently evaluating ASU 2013-08 to determine the effect, if any, on our Consolidated Financial Statements and
disclosures.



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RESULTS OF OPERATIONS

Set forth below are the results of operations for the three and nine months ended June 30, 2014 and 2013.

Investment Income

Investment income for the three and nine months
ended June 30, 2014 was $7.7 million and $22.1 million, respectively, and was attributable to $6.2 million and $17.9 million from senior secured loan investments, and $1.5 million and $4.2 million from second lien secured debt and subordinated
debt investments. This compares to investment income for the three and nine months ended June 30, 2013, which was $4.7 million and $12.8 million, respectively, and was attributable to $3.9 million and $10.8 million from senior secured loan
investments, and $0.8 million and $2.0 million from second lien secured debt and subordinated debt investments. The increase in investment income over the prior year was primarily due to the growth of our portfolio.

Expenses

Expenses for the three and nine months ended June 30, 2014 totaled $3.3 million and $10.8 million, respectively. Base management fee
for the same periods totaled $1.0 million and $2.8 million, incentive fees totaled $0.8 million (including $0.1 million on net unrealized gains accrued but not payable) and $2.9 million (including $0.6 million on net unrealized gains accrued but not
payable), Credit Facility expenses totaled $0.9 million and $3.3 million (including $0.7 million of Credit Facility amendment expenses), general and administrative expenses totaled $0.5 million and $1.4 million and excise taxes were $0.1 million and
$0.4 million, respectively.

This compares to expenses for the three and nine months ended June 30, 2013, which totaled
$1.5 million and $5.8 million, respectively. Base management fee for the same periods totaled $0.5 million and $1.5 million, incentive fees totaled less than $0.1 million and $1.0 million, Credit Facility expenses totaled $0.4 million and $1.8
million (including $0.5 million of Credit Facility amendment expenses), general and administrative expenses totaled $0.5 million and $1.4 million and excise taxes were $0.1 million, respectively. The increase in expenses was due to the growth of our
portfolio and expanding our borrowing capacity under our Credit Facility.

Net Investment Income

Net investment income totaled $4.4 million and $11.3 million, or $0.29 and $0.76 per share, for the three and nine months ended
June 30, 2014, respectively. Net investment income totaled $3.2 million and $7.0 million, or $0.31 and $0.86 per share, for the three and nine months ended June 30, 2013, respectively. The increase in net investment income was due to a
larger portfolio, which was partially offset by amendment costs. For the three months ended June 30, 2014, net investment income per share increased due to changes in yield environment over the prior year, whereas, for the nine months ended
June 30, 2014, net investment income per share decreased over the prior year as a result of both changes in yield environment and share issuances of common stock during 2013.

Net Realized Gains or Losses

Sales and repayments of investments
for the three and nine months ended June 30, 2014 totaled $55.6 million and $146.8 million and net realized gains totaled $0.7 million and $1.8 million, respectively. Sales and repayments of investments totaled $46.4 million and $120.7 million
and realized gains totaled $1.7 million and $3.2 million for the three and nine months ended June 30, 2013, respectively. The decrease in realized gains was driven by fewer exits of our portfolio companies.

Unrealized Appreciation or Depreciation on Investments and Credit Facility

For the three and nine months ended June 30, 2014, we reported net unrealized (depreciation) appreciation on investments of $(0.1)
million and $5.1 million, respectively. For the three and nine months ended June 30, 2013, we reported net unrealized (depreciation) on investments of $(3.3) million and $(3.2) million, respectively. As of June 30, 2014 and
September 30, 2013, net unrealized appreciation (depreciation) on investments totaled $3.7 million and $(1.5) million, respectively. The change compared to September 30, 2013 was the result of changes in market values.

For each of the three and nine months ended June 30, 2014, our Credit Facility had an unrealized appreciation of zero. For the three
and nine months ended June 30, 2013, our Credit Facility had an unrealized appreciation of zero and $0.4 million, respectively. As of June 30, 2014 and September 30, 2013, net unrealized appreciation on our Credit Facility totaled
zero. The change compared to last year was due to changes in the capital markets.

Net Increase in Net Assets Resulting from Operations

Net increase in net assets resulting from operations totaled $4.9 million and $18.2 million, or $0.33 and $1.22 per
share, respectively, for the three and nine months ended June 30, 2014. This compares to a net increase in net assets resulting from operations which totaled $1.6 million and $6.5 million, or $0.15 and $0.81 per share, respectively, for the
three and nine months ended June 30, 2013. We continue to find attractive investment opportunities to grow net assets from operations.

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 Credit Facility with affiliates of
SunTrust Bank, or the Lender, is $200 million, has an interest rate spread above LIBOR of 200 basis points, matures in May 2018 and its reinvestment period ends in May 2016. In November 2013, we expanded the Credit Facility to allow Funding I to
borrow up to $200 million, up from $125 million. The Credit Facility is subject to satisfaction of certain conditions and the regulatory restrictions that the 1940 Act imposes on us as a BDC. As of June 30, 2014 and September 30, 2013,
Funding I had $154.9 million and $99.6 million of outstanding borrowings under the Credit Facility, respectively, and carried an annual interest rate of 2.16% and 2.18%, respectively, excluding the 0.375% undrawn commitment fee. The annualized
weighted average cost of debt for the nine months ended June 30, 2014 and 2013, inclusive of the fee on the undrawn commitment on the Credit Facility but excluding amendment costs, was 2.36% and 2.68%, respectively.

Until May 2016, or 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 May 2018. 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 June 30, 2014, we were in
compliance with the terms of our Credit Facility.

We own 100% of the equity interest in Funding I and will 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.



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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 Lender, (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.

We may
raise equity or debt capital through both registered offerings and private offerings of securities and by securitizing a portion of our investments among other considerations. 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.

On June 30, 2014 and September 30, 2013, we had cash
equivalents of $9.9 million and $4.6 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 $37.9 million for the nine months ended June 30, 2014, and our financing activities provided
cash of $43.3 million for the same period. Our operating activities used cash primarily for our investment activities and our financing activities provided cash primarily from net draws under the Credit Facility.

Our operating activities used cash of $47.1 million for the nine months ended June 30, 2013, and our financing activities provided
cash of $50.2 million for the same period. Our operating activities used cash primarily for our investment activity that was offset by our financing activities, which provided cash primarily from a public offering and net repayments under the Credit
Facility.

Contractual Obligations

A summary of our significant contractual payment obligations as of June 30, 2014, including borrowings under our Credit Facility and other contractual obligations, is as follows:



|                              |  |                                   |       |  |                 |   |   |          |  |   |          |  |  |                  |       |  |  |   |   | 
|----------------------------- |  | --------------------------------- | ----- |  | --------------- | - | - | -------- |  | - | -------- |  |  | ---------------- | ----- |  |  | - | - | 
|                              |  | Payments due by period (millions) |      
|                              |  | Total                             |       |  | Less than1 year |   |   | 1-3years |  |   | 3-5years |  |  | More than5 years |      
|Credit Facility               |  | $                                 | 154.9 |  |                 | $ |  |          |  | $ |         |  |  | $                | 154.9 |  |  | $ |  | 
|Unfunded investments (1)      |  |                                   | 2.7   |  |                 |   |  |          |  |   |         |  |  |                  | 2.7   |  |  |   |  | 
|                              |  |                                   |       |  |                 |   |   |          |  |   |          |  |  |                  |       |  |  |   |   | 
|Total contractual obligations |  | $                                 | 157.6 |  |                 | $ |  |          |  | $ |         |  |  | $                | 157.6 |  |  | $ |  | 
|                              |  |                                   |       |  |                 |   |   |          |  |   |          |  |  |                  |       |  |  |   |   | 



|(1) | Unfunded investments described in the Consolidated Statements of Assets and Liabilities represent unfunded delayed draws on investments and/or
revolving lines of credit.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 2014, PennantPark Investment
Advisers serves as our Investment Adviser. Payments under our Investment Management Agreement in each reporting period are equal to (1) a base 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 2014, 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, technology systems, insurance and our allocable portion of the costs of our Chief Compliance Officer, Chief Financial Officer and their respective staffs.

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

Off-Balance Sheet Arrangements

We currently engage in no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Distributions

In order to qualify as a RIC and to not be subject to corporate-level tax on income, we are required, under Subchapter M of the Code, to annually distribute at least 90% of the sum of our ordinary income
and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. 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 during each calendar year an amount at least equal to the sum of (1) 98% of our net ordinary income for the calendar year, (2) 98.2% of our capital
gain net income (i.e., the excess, if any, of capital gains over capital losses) for the one-year period ending on October 31 of the calendar year and (3) the sum of any net ordinary income plus capital gain net income for preceding years
that were not distributed during such years. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of 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 net ordinary income to provide us with additional liquidity. As a RIC, we are generally not subject to tax and have
elected to retain a portion of our calendar year income. For the three and nine months ended June 30, 2014, we accrued estimated excise taxes of $0.1 million and $0.4 million, respectively. For the three and nine months ended June 30,
2013, we accrued estimated excise taxes of less than $0.1 million and $0.1 million, respectively.

During the three and nine
months ended June 30, 2014, we declared to stockholders distributions of $0.270 and $0.808 per share, respectively, for total distributions of $4.0 million and $12.0 million, respectively. For the same periods in the prior year, we declared
distributions of $0.263 and $0.765 per share, respectively, for total distributions of $2.7 million and $6.1 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, a portion of those distributions may be deemed to be a tax return of capital to our common stockholders. Tax characteristics of distributions
will be reported to stockholders 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 determined by our board of directors quarterly.



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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 test for borrowings applicable to us as a BDC under the 1940 Act and 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 RIC status. We cannot assure stockholders that they will receive any
distributions at a particular level.

We may distribute our common stock as a dividend of our taxable income and a stockholder
could receive a portion of the dividends declared and distributed by us in shares of our common stock with the remaining amount in cash. A stockholder will be considered to have recognized dividend income equal to the fair market value of the stock
paid by us plus cash received with respect to such dividend. We have not elected to distribute stock as a dividend but reserve the right to do so.



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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 June 30, 2014, our debt portfolio consisted of 95% variable-rate investments (including 93% with a LIBOR or prime
floor) and 5% 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.

Assuming that the most recent statement 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 InterestIncome, Net Of InterestExpense (in thousands) |        |   | Per Share |  
|Up 1%                    |  | $                                                               | (1,455 | ) |           | $ | (0.10 | )
|Up 2%                    |  | $                                                               | 71     |   |           | $ | 0.00  |  
|Up 3%                    |  | $                                                               | 2,005  |   |           | $ | 0.14  |  
|Up 4%                    |  | $                                                               | 3,938  |   |           | $ | 0.26  |  

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 fluctuations by using standard hedging instruments such as futures, options and forward contracts
subject to the requirements of the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest 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 June 30, 2014 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
|------- | -----------------

Neither we nor our Investment Adviser nor 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 our Administrator may be a party to certain legal proceedings in the ordinary course of
business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will
have a material effect upon our financial condition or results of operations.



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

In addition
to the other information set forth in this Report, you should consider carefully the factors discussed in Part I Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013, 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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|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 the Registrants Annual Report on Form 10-K (File No. 814-00891), filed on November 14,
2013).                                                     
|       | 
|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).                               
|       | 
|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 Section 13(a) or 15(d) 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: August 6, 2014 |  | By:                                    |  | /s/    Arthur H.
Penn                                                                       
|                     |  |                                        |  | Arthur H. Penn                                                                              
|                     |  |                                        |  | Chairman of the Board of Directors and Chief Executive Officer
(Principal Executive Officer)
|                     |  |                                       
|Date: August 6, 2014 |  | By:                                    |  | /s/    Aviv
Efrat                                                                           
|                     |  |                                        |  | Aviv Efrat                                                                                  
|                     |  |                                        |  | Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)          



35