1287032--9/28/2007--PROSPECT_CAPITAL

related topics

{investment, property, distribution}

{tax, income, asset}

{loan, real, estate}

{acquisition, growth, future}

{competitive, industry, competition}

{debt, indebtedness, cash}

{stock, price, operating}

{regulation, change, law}

{cost, contract, operation}

{personnel, key, retain}

{control, financial, internal}

{condition, economic, financial}

{stock, price, share}

Risks Relating To Our Business And Structure We are dependent upon Prospect Management s key management personnel for our future success. Our Investment Adviser and its senior management have limited experience managing a business development company under the 1940 Act. We are a relatively new company with limited operating history. Our financial condition and results of operations will depend on our ability to manage our future growth effectively. We operate in a highly competitive market for investment opportunities. Regulations governing our operation as a business development company affect our ability to raise, and the way in which we raise, additional capital. If we fail to qualify as a RIC, we will have to pay corporate-level taxes on our income, and our income available for distribution would be reduced. We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income. If we issue senior securities, including debt, you will be exposed to additional risks, including the typical risks associated with leverage. Changes in interest rates may affect our cost of capital and net investment income. We need to raise additional capital to grow because we must distribute most of our income. Most of our portfolio investments are recorded at fair value as determined in good faith by our Board of Directors and, as a result, there is uncertainty as to the value of our portfolio investments. The lack of liquidity in our investments may adversely affect our business. We may experience fluctuations in our quarterly results. Potential conflicts of interest could impact our investment returns. Changes in laws or regulations governing our operations may adversely affect our business. Risks Related To Our Investments We may not realize gains or income from our investments. The energy industry is subject to many risks. Our investments in prospective portfolio companies may be risky and you could lose all or part of your investment. Economic recessions or downturns could impair our portfolio companies and harm our operating results. Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies. We may not be able to fully realize the value of the collateral securing our debt investments. Our incentive fee could induce Prospect Management to make speculative investments. Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments. Risks Relating To Our Securities There is a risk that you may not receive dividends or that our dividends may not grow over time.

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1287032--9/28/2007--PROSPECT_CAPITAL_CORP