pfloat-20260331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2026

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

Commission File Number 814-00908

Prospect Floating Rate and Alternative Income Fund, Inc.

(Exact name of Registrant as specified in its charter)


Maryland						45-2460782
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

10 East 40th Street, 42nd Floor
New York, NY						10016
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (212) 448-0702

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

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 o

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

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


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

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

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

As of May 11, 2026, the Registrant had 9,444,489 and 2,237 shares of Class A and Class I Common Stock outstanding, $0.001 par value per share, respectively. As of May 11, 2026, there were no shares of Class S or Class D Common Stock outstanding, $0.001 par value per share, respectively.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

TABLE OF CONTENTS


		Page
	Forward-Looking Statements	1
PART I
Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Assets and Liabilities as of March 31, 202 6 (Unaudited) and June 30, 2025	3
	Consolidated Statements of Operations for the three and nine months ended March 31, 202 6 and 202 5 (Unaudited)	3
	Consolidated Statements of Changes in Net Assets for the three and nine months ended March 31, 202 6 and 202 5 (Unaudited)	5
	Consolidated Statements of Cash Flows for the nine months ended March 31, 202 6 and 202 5 (Unaudited)	6
	Consolidated Schedules of Investments as of March 31, 202 6 (Unaudited) and June 30, 2025	10
	Notes to Consolidated Financial Statements (Unaudited)	23
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	57
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 4.	Controls and Procedures	79
PART II
Item 1.	Legal Proceedings	79
Item 1A.	Risk Factors	79
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 3.	Default Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	80
	Signatures	82

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q (the "Quarterly Report") constitute forward-looking statements, which relate to future events or our performance or financial condition. The forward-looking statements contained in this Quarterly Report involve risks, uncertainties and other factors, some of which are beyond our control, including, but not limited to, statements as to:

•our, or our portfolio companies’, future operating results;

•our business prospects and the prospects of our portfolio companies;

•the return or impact of current or future investments that we expect to make;

•our contractual arrangements and relationships with third parties;

•the willingness of our investment adviser to waive fees;

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

•the impact of global events outside of our control, including the consequences of the ongoing conflict between Russia and Ukraine and in the Middle East, on our and our portfolio companies’ businesses and the global economy;

•the impact of alternative reference rates on our business and certain of our investments;

•uncertainty surrounding inflation and the financial stability of the United States, Europe, and China;

•trade negotiations and related government actions may create regulatory uncertainty for our portfolio companies and our investment strategies and adversely affect the profitability of our portfolio companies;

•the financial condition and ability of our current and prospective portfolio companies to achieve their objectives;

•difficulty in obtaining financing or raising capital, especially in the current credit and equity environment, and the impact of a protracted decline in the liquidity of credit markets on our and our portfolio companies’ business;

•the level, duration and volatility of prevailing interest rates and credit spreads, magnified by the current turmoil in the credit markets;

•adverse developments in the availability of desirable loan and investment opportunities whether they are due to competition, regulation or otherwise;

•a compression of the yield on our investments and the cost of our liabilities, as well as the level of leverage available to us;

•the impact of changes in laws or regulations governing our operations or the operations of our portfolio companies;

•our regulatory structure and tax treatment, including our ability to operate as a business development company and a regulated investment company;

•the adequacy of our cash resources and working capital;

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

•the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments;

•the timing, form and amount of any dividend distributions;

•authoritative generally accepted accounting principles or policy changes from such standard-setting bodies as the Financial Accounting Standards Board, the Securities and Exchange Commission (the "SEC"), Internal Revenue Service, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business; and

•any of the other risks, uncertainties and other factors we identify in this Quarterly Report or in our Annual Report on Form 10-K for the year ended June 30, 2025.

Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words "trend," "opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate," "current," "intention," "estimate," "position," "assume," "potential," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may," or similar expressions. The forward looking statements contained in this Quarterly Report involve risks and uncertainties and undue reliance should not be placed on them. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as "Risk Factors" in this Quarterly Report, our Annual Report on Form 10-K and our other SEC filings.

We have based the forward-looking statements included in this report on information available to us on the date of this Quarterly Report, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. Although we undertake no obligation to revise or update any forward-looking statements, 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 have filed or in the future may file with the SEC, including quarterly reports on Form 10-Q, annual reports on Form 10-K, and current reports on Form 8-K.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

Item 1. Consolidated Financial Statements


Assets	March 31, 2026		June 30, 2025
	(Unaudited)
Investments at fair value:
Non-control/non-affiliate investments (amortized cost of $69,812,379 and $88,404,806, respectively) (Notes 7 and 8)	$	63,037,631	$	85,016,596
Cash and cash equivalents	23,292,770		16,499,200
Deferred financing costs (Note 10)	807,461		530,441
Interest receivable	662,202		564,755
Due from Adviser (Note 4)	305,792		—
Receivable for repayments of portfolio investments	220,434		74,284
Deferred offering costs	86,567		106,129
Prepaid expenses and other assets	20,338		133,985
Total Assets	88,433,195		102,925,390

Liabilities
Senior Secured Revolving Credit Facility (Note 10)	—		45,500,000
OZK Credit Facility (Note 10)	35,178,847		—
Payable for open trades	14,989,596		14,988,042
Due to Administrator (Note 4)	1,815,286		2,015,442
Distributions payable	670,680		152,652
Accrued expenses	162,875		68,489
Accrued audit fees	136,250		133,750
Interest payable	102,952		29,810
Accrued legal fees	26,988		49,068

Due to Affiliates (Note 4)	300		—
Total Liabilities	53,083,774		62,937,253
Commitments and Contingencies (Note 9)
Net Assets	$	35,349,421	$	39,988,137

Components of Net Assets
Common Stock, par value $0.001 per share (75,000,000 shares authorized; 9,281,506 and 8,895,933 Class A and Class I shares issued and outstanding, respectively) (Note 3)	$	9,282	$	8,897
Paid-in capital in excess of par (Note 3 and Note 6)	55,000,817		53,680,378
Distributions in excess of earnings (Note 6)	(19,660,678)		(13,701,138)
Net Assets	$	35,349,421	$	39,988,137

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES


NET ASSET VALUE PER SHARE	March 31, 2026		June 30, 2025
	(Unaudited)
Class A Shares:
Net assets	$	35,340,903	$	39,978,083
Common Shares outstanding ($0.001 par value, 37,500,000 authorized)	9,279,269		8,893,696
Net asset value per share	$	3.81	$	4.50

Class I Shares:
Net assets	$	8,518	$	10,054
Common Shares outstanding ($0.001 par value, 12,500,000 authorized)	2,237		2,237
Net asset value per share	$	3.81	$	4.50

Class S Shares:
Net assets	—		—
Common Shares outstanding ($0.001 par value, 12,500,000 authorized)	—		—
Net asset value per share	—		—

Class D Shares:
Net assets	—		—
Common Shares outstanding ($0.001 par value, 12,500,000 authorized)	—		—
Net asset value per share	—		—

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended March 31,				Nine Months Ended March 31,
	2026		2025		2026		2025
Investment Income
Interest income from non-control/non-affiliate investments (excluding Paid-in-Kind ("PIK") interest income)	$	1,818,253	$	2,272,318	$	5,894,351	$	6,566,697
PIK interest income from non-control/non-affiliate investments	12,701		189,903		157,722		356,889
Total Investment Income	1,830,954		2,462,221		6,052,073		6,923,586

Operating Expenses
Interest expense and credit facility expenses (Note 10)	664,614		968,724		2,227,493		2,780,363
Base management fees (Note 4)	266,636		312,824		839,951		916,005
Administrator Costs (Note 4)	165,156		185,000		497,656		486,000
Transfer agent’s fees and expenses	84,528		88,932		195,814		241,378
General and administrative	74,897		44,611		145,802		94,527
Audit and tax expense	63,750		73,750		232,343		328,250
Offering costs	29,587		154,522		111,672		427,341
Legal expense	24,326		45,807		113,922		174,364
Insurance expense	23,134		30,572		58,006		94,387
Valuation services	5,570		13,581		29,844		43,468
Total Operating Expenses	1,402,198		1,918,323		4,452,503		5,586,083
Expense limitation reimbursement (Note 4)	(737,584)		(312,824)		(2,225,010)		(916,005)
Waiver of Administrator Costs (Note 4)	(200,000)		—		(200,000)		—
Total Net Operating Expenses	464,614		1,605,499		2,027,493		4,670,078

Net Investment Income (Loss) before income taxes	1,366,340		856,722		4,024,580		2,253,508
Excise tax expense	—		—		26,328		—
Net Investment Income (Loss)	1,366,340		856,722		3,998,252		2,253,508

Net Realized Losses and Net Change in Unrealized Gains/(Losses) on Investments
Net realized losses:
Non-control/non-affiliate investments	(1,257,763)		(502,209)		(3,159,340)		(1,623,306)
Net realized losses	(1,257,763)		(502,209)		(3,159,340)		(1,623,306)
Net change in unrealized gains/(losses):
Non-control/non-affiliate investments	1,256,861		(493,957)		(3,386,538)		(177,501)
Net change in unrealized gains/(losses)	1,256,861		(493,957)		(3,386,538)		(177,501)
Net Realized Losses and Net Change in Unrealized Losses on Investments	(902)		(996,166)		(6,545,878)		(1,800,807)
Extinguishment of debt	—		—		(495,849)		—
Net Increase/(Decrease) in Net Assets Resulting from Operations	$	1,365,438	$	(139,444)	$	(3,043,475)	$	452,701

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)


	Common Stock
For the Three Months Ended March 31, 2026	Common Stock Outstanding - Class A(1)	Common Stock Outstanding - Class I(1)	Par		Paid-in Capital in Excess of Par		Distributable Earnings (Loss)		Net Assets
Balance as of December 31, 2025	9,138,938	2,237	$	9,142	$	54,423,731	$	(19,721,227)	$	34,711,646
Net increase in net assets resulting from operations
Net investment income (losses)	—	—	—		—		1,366,340		1,366,340
Net realized gains (losses) on investments	—	—	—		—		(1,257,763)		(1,257,763)

Net change in unrealized gains (losses) on investments	—	—	—		—		1,256,861		1,256,861
Net increase (decrease) from operations	—	—	—		—		1,365,438		1,365,438
Distributions to Shareholders (Note 6)(2)
Class A:
Distributions from earnings	—	—	—		—		(1,304,573)		(1,304,573)
Net increase (decrease) from distributions	—	—	—		—		(1,304,573)		(1,304,573)
Class I:
Distributions from earnings	—	—	—		—		(316)		(316)
Net increase (decrease) from distributions	—	—	—		—		(316)		(316)
Capital Transactions (Note 3)
Class A:
Shares issued through reinvestment of distributions	205,025	—	205		821,567		—		821,772
Repurchase of common shares	(64,694)	—	(65)		(244,481)		—		(244,546)
Net increase (decrease) from share transactions	140,331	—	140		577,086		—		577,226
Tax Reclassification of Net Assets (Note 6)	—	—	—		—		—		—
Balance as of March 31, 2026	9,279,269	2,237	$	9,282	$	55,000,817	$	(19,660,678)	$	35,349,421

(1) In connection with the Multi-Class Offering, the Company authorized the issuance of separate classes of its common stock and designated such classes Class S, Class D and Class I common stock. The registration statement was declared effective by the SEC on May 10, 2024, however, as of March 31, 2026, there are no shares of Class S or Class D common stock outstanding.

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)


	Common Stock
For the Three Months Ended March 31, 2025	Common Stock Outstanding - Class A(1)	Common Stock Outstanding - Class I(1)	Par		Paid-in Capital in Excess of Par		Distributable Earnings (Loss)		Net Assets
Balance as of December 31, 2024(2)	8,898,082	2,237	$	8,901	$	53,688,654	$	(12,866,834)	$	40,830,721
Net increase in net assets resulting from operations
Net investment income (losses)	—	—	—		—		856,722		856,722
Net realized (losses) on investments	—	—	—		—		(502,209)		(502,209)
Net change in unrealized gains (losses) on investments	—	—	—		—		(493,957)		(493,957)
Net increase (decrease) from operations	—	—	—		—		(139,444)		(139,444)
Distributions to Shareholders (Note 6)
Class A:
Distributions from earnings	—	—	—		—		(869,987)		(869,987)
Return of capital distributions	—	—	—		—		—		—
Net increase (decrease) from distributions	—	—	—		—		(869,987)		(869,987)
Class I:
Distributions from earnings	—	—	—		—		(218)		(218)
Return of capital distributions	—	—	—		—		—		—
Net increase (decrease) from distributions	—	—	—		—		(218)		(218)
Capital Transactions
Class A:

Shares issued through reinvestment of distributions	163,941	—	164		749,904		—		750,068
Repurchase of common shares	(151,171)	—	(151)		(696,751)		—		(696,902)
Net increase (decrease) from share transactions	12,770	—	13		53,153		—		53,166
Class I:
Shares issued	—	—	—		—		—		—


Net increase (decrease) from share transactions	—	—	—		—		—		—
Tax Reclassification of Net Assets (Note 6)	—	—	—		293,496		(293,496)		—
Balance as of March 31, 2025	8,910,852	2,237	$	8,914	$	54,035,303	$	(14,169,979)	$	39,874,238

(1) In connection with the Multi-Class Offering, the Company authorized the issuance of separate classes of its common stock and designated such classes Class S, Class D and Class I common stock. The registration statement was declared effective by the SEC on May 10, 2024, however, as of March 31, 2025, there are no shares of Class S or Class D common stock outstanding.

(2) Certain reclassifications have been made in the presentation of prior year and prior quarter amounts to conform to the presentation for the fiscal year ended June 30, 2024. See Note 2 and 6 within the accompanying notes to the consolidated financial statements for further discussion.

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)


	Common Stock
For the Nine Months Ended March 31, 2026	Common Stock Outstanding - Class A(1)	Common Stock Outstanding - Class I(1)	Par		Paid-in Capital in Excess of Par		Distributable Earnings (Loss)		Net Assets
Balance as of June 30, 2025	8,893,696	2,237	$	8,897	$	53,680,378	$	(13,701,138)	$	39,988,137
Net increase in net assets resulting from operations
Net investment income (losses)	—	—	—		—		3,998,252		3,998,252
Net realized gains (losses) on investments	—	—	—		—		(3,159,340)		(3,159,340)
Net realized losses on debt	—	—	—		—		(495,849)		(495,849)
Net change in unrealized gains (losses) on investments	—	—	—		—		(3,386,538)		(3,386,538)
Net increase (decrease) from operations	—	—	—		—		(3,043,475)		(3,043,475)
Distributions to Shareholders (Note 6)(2)
Class A:
Distributions from earnings	—	—	—		—		(3,272,198)		(3,272,198)
Net increase (decrease) from distributions	—	—	—		—		(3,272,198)		(3,272,198)
Class I:
Distributions from earnings	—	—	—		—		(805)		(805)
Net increase (decrease) from distributions	—	—	—		—		(805)		(805)
Capital Transactions (Note 3)
Class A:
Shares issued through reinvestment of distributions	568,629	—	569		2,435,860		—		2,436,429
Repurchase of common shares	(183,056)	—	(184)		(758,483)		—		(758,667)
Net increase (decrease) from share transactions	385,573	—	385		1,677,377		—		1,677,762
Tax Reclassification of Net Assets (Note 6)	—	—	—		(356,938)		356,938		—
Balance as of March 31, 2026	9,279,269	2,237	$	9,282	$	55,000,817	$	(19,660,678)	$	35,349,421

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)


	Common Stock
For the Nine Months Ended March 31, 2025	Common Stock Outstanding - Class A(1)	Common Stock Outstanding - Class I(1)		Par		Paid-in Capital in Excess of Par		Distributable Earnings (Loss)		Net Assets
Balance as of June 30, 2024(2)	6,661,373	$	—	$	6,662	$	43,901,672	$	(12,644,774)	$	31,263,560
Net increase in net assets resulting from operations
Net investment income (losses)	—	—		—		—		2,253,508		2,253,508
Net realized gains (losses) on investments	—	—		—		—		(1,623,306)		(1,623,306)
Net change in unrealized gains (losses) on investments	—	—		—		—		(177,501)		(177,501)
Net increase (decrease) from operations	—	—		—		—		452,701		452,701
Distributions to Shareholders (Note 6)
Class A:
Distributions from earnings	—	—		—		—		(2,332,807)		(2,332,807)
Return of capital distributions	—	—		—		(242,330)		—		(242,330)
Net increase (decrease) from distributions	—	—		—		(242,330)		(2,332,807)		(2,575,137)
Class I:
Distributions from earnings	—	—		—		—		(407)		(407)
Return of capital distributions	—	—		—		(31)		—		(31)
Net increase (decrease) from distributions	—	—		—		(31)		(407)		(438)
Capital Transactions
Class A:
Shares issued	2,096,436	—		2,096		9,997,904		—		10,000,000
Shares issued through reinvestment of distributions	454,852	—		455		2,111,766		—		2,112,221
Repurchase of common shares	(301,809)	—		(301)		(1,388,768)		—		(1,389,069)
Net increase (decrease) from share transactions	2,249,479	—		2,250		10,720,902		—		10,723,152
Class I:
Shares issued	—	2,237		2		10,398		—		10,400


Net increase (decrease) from share transactions	—	2,237		2		10,398		—		10,400
Tax Reclassification of Net Assets (Note 6)	—	—		—		(355,308)		355,308		—
Balance as of March 31, 2025	8,910,852	2,237		$	8,914	$	54,035,303	$	(14,169,979)	$	39,874,238

(1) In connection with the Multi-Class Offering, the Company authorized the issuance of separate classes of its common stock and designated such classes Class S, Class D and Class I common stock. The registration statement was declared effective by the SEC on May 10, 2024, however, as of March 31, 2025, there are no shares of Class S or Class D common stock outstanding.

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended March 31,
	2026		2025
Cash flows from operating activities:
Net increase/(decrease) in net assets resulting from operations	$	(3,043,475)	$	452,701
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Repayments and sales of portfolio investments	22,421,838		16,850,812
Purchases of investments	(6,866,513)		(42,748,135)
Net change in unrealized (gains)/losses on investments	3,386,538		177,501
Net realized losses on investments	3,159,340		1,623,306
Net realized losses on extinguishment of debt	495,849		—
Net Reductions to Subordinated Structured Notes and related investment cost	228,707		561,569
Amortization of deferred financing costs	186,236		309,964
Amortization of premiums (accretion of purchase discounts) on investments, net	(192,591)		(308,936)
Payment-in-kind interest	(157,722)		(356,889)
Amortization of offering costs	111,672		427,341
Settlement of Treasury Bills	(634)		(199)
Changes in other assets and liabilities:
(Increase) Decrease in operating assets
Due from Adviser (Note 4)	(305,792)		—
Receivable for repayments of portfolio investments	(146,150)		(81,881)
Prepaid expenses and other assets	113,647		87,787
Interest receivable	(97,447)		(279,680)
Increase (Decrease) in operating liabilities
Due to Administrator (Note 4)	(200,156)		441,000
Accrued legal fees	(114,190)		(312,336)
Accrued expenses	94,386		(38,946)
Interest payable	73,142		(122,280)
Accrued audit fees	2,500		76,250
Payable for open trades	1,554		(81,856)
Due to Affiliates	300		—
Net cash provided by/(used in) operating activities	19,151,039		(23,322,907)
Cash flows from financing activities:
Gross proceeds from shares sold	—		10,010,400
Distributions paid to stockholders	(318,544)		(378,127)
Repurchase of common stock	(758,667)		(1,389,069)
Borrowings under Senior Secured Revolving Credit Facility (Note 10)	3,400,000		43,600,000
Repayments under Senior Secured Revolving Credit Facility (Note 10)	(48,900,000)		(23,600,000)
Borrowings under OZK Credit Facility (Note 10)	52,775,000		—
Repayments under OZK Credit Facility (Note 10)	(17,596,153)		—
Financing costs paid and deferred	(959,105)		(19,201)
Net cash provided by/(used in) financing activities	(12,357,469)		28,224,003
Net increase (decrease) in Cash and Cash Equivalents	6,793,570		4,901,096
Cash and Cash Equivalents at beginning of period	16,499,200		15,406,421
Cash and Cash Equivalents at end of period	$	23,292,770	$	20,307,517
Supplemental disclosures:
Cash paid for interest	$	1,874,043	$	2,592,679
Non-cash financing activities:
Value of shares issued through reinvestment of distributions	$	2,436,429	$	2,112,221

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF MARCH 31, 2026 (Unaudited)


										March 31, 2026
Portfolio Company / Security Type(x)	Industry (r)	Acquisition Date	All-in Rate		Ref. Rate	Spread	PIK (z)	Floor	Legal Maturity	Shares/Units	Principal		Amortized Cost (d)		Fair Value (c)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control):
Senior Secured Loans-First Lien(k)
Aventiv Technologies, LLC - Second Out Super Priority First Lien Term Loan(h)(m)(n)	Telecommunications	6/28/2024	11.46	%	3M SOFR	7.50%	11.46%	1.00%	9/30/2026		$	91,599	$	91,599	$	91,599	0.26	%
Aventiv Technologies, LLC - Second Out Super Priority First Lien Term Loan Bridge(h)(j)(n)		12/23/2024	13.95	%	3M SOFR	10.00%		1.00%	9/30/2026		95,193		95,193		95,193		0.27	%
BCPE North Star US Holdco 2, Inc.(f)(i)(j)	Beverage, Food & Tobacco	2/2/2022	7.78	%	3M SOFR	4.00%		0.75%	6/12/2028		2,985,946		2,899,437		2,981,169		8.43	%
Burgess Point Purchaser Corporation(f)(i)	Automotive	7/26/2024	9.02	%	1M SOFR	5.35%		0.50%	7/25/2029		2,946,701		2,808,579		2,577,774		7.29	%
Discovery Point Retreat, LLC(f)(h)	Healthcare & Pharmaceuticals	6/14/2024	11.71	%	3M SOFR	7.75%		3.25%	6/14/2029		3,895,000		3,895,000		3,895,000		11.02	%
DRI Holding Inc.(f)(h)(j)	Media: Advertising, Printing & Publishing	12/21/2021	9.02	%	1M SOFR	5.25%		0.50%	12/21/2028		2,397,239		2,324,677		2,396,280		6.78	%
Druid City Infusion, LLC - First Lien Term Loan(f)(h)(j)	Healthcare & Pharmaceuticals	9/30/2024	11.20	%	3M SOFR	7.50%		3.00%	10/4/2029		4,566,228		4,566,228		4,566,228		12.92	%
Druid City Infusion, LLC - First Lien Convertible Note to Druid City Intermediate, Inc.(f)(h)(m)		9/30/2024	8.00	%			2.00%	—%	10/4/2033		51,530		51,530		99,257		0.28	%
Emerge Intermediate, Inc.(h)(j)	Healthcare & Pharmaceuticals	2/26/2024	9.92	%	3M SOFR	6.25%		1.00%	8/31/2027		5,251,280		5,251,280		5,067,485		14.34	%
First Brands Group - First Lien DIP Term Loan A (g)(i)(o)(q)	Automotive	10/2/2025	13.67	%	3M SOFR	10.00%	13.67%	1.00%	6/29/2026		1,176,268		1,087,652		286,774		0.81	%
First Brands Group - First Lien DIP Term Loan B (g)(i)(o)(q)	Automotive	11/10/2025	10.67	%	3M SOFR	7.00%	10.67%	1.00%	6/29/2026		3,361,495		3,241,856		2,353		0.01	%
First Brands Group - First Lien Term Loan (g)(i)(o)(q)	Automotive	2/8/2024	10.78	%	3M SOFR	7.00%	10.78%	1.00%	3/30/2027		2,096,603		1,967,705		6,080		0.02	%
		3/8/2024	10.78	%	3M SOFR	7.00%	10.78%	1.00%	3/30/2027		834,662		660,920		2,421		0.01	%
Global Tel*Link Corporation (d/b/a ViaPath Technologies)(f)(h)	Telecommunications	8/6/2024	11.17	%	1M SOFR	7.50%		3.00%	8/6/2029		4,900,011		4,822,566		4,874,041		13.79	%
Healthcare Venture Partners, LLC(f)(h)	Healthcare & Pharmaceuticals	8/29/2025	11.70	%	3M SOFR	8.00%		3.50%	8/29/2030		3,970,000		3,970,000		3,970,000		11.23	%
Imperative Worldwide, LLC (f/k/a MAGNATE WORLDWIDE, LLC)(f)(h)	Transportation: Cargo	12/3/2024	9.20	%	3M SOFR	5.50%		0.75%	12/30/2028		2,943,835		2,898,814		2,943,835		8.33	%
iQOR Holdings, Inc.(f)(h)	Services: Consumer	6/11/2024	11.46	%	3M SOFR	7.50%		2.50%	6/11/2029		4,476,697		4,476,697		4,476,697		12.66	%
New WPCC Parent, LLC(f)(h)(j)(m)(t)	Healthcare & Pharmaceuticals	5/8/2025	13.17	%	3M SOFR	9.50%		2.00%	5/9/2030		1,506,016		1,457,199		1,506,016		4.26	%
Recovery Solutions Parent, LLC(f)(h)(t)	Healthcare & Pharmaceuticals	1/27/2025	11.20	%	3M SOFR	7.50%		2.00%	1/27/2030		676,522		416,881		676,522		1.91	%
Research Now Group, LLC & Dynata, LLC- First Lien First Out Term Loan(f)(h)(j)(n)	Services: Business	7/15/2024	8.91	%	3M SOFR	5.00%		1.00%	7/15/2028		1,443,991		1,435,341		1,442,402		4.08	%
Research Now Group, LLC & Dynata, LLC- First Lien Second Out Term Loan(h)(n)		7/15/2024	9.41	%	3M SOFR	5.50%		1.00%	10/15/2028		1,280,372		1,270,672		1,165,267		3.30	%
S&S Holdings LLC(f)(i)	Wholesale	7/16/2024	8.79	%	3M SOFR	5.00%		0.50%	3/11/2028		2,945,736		2,928,344		2,794,915		7.91	%

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF MARCH 31, 2026 (Unaudited)


										March 31, 2026
Portfolio Company / Security Type(x)	Industry (r)	Acquisition Date	All-in Rate		Ref. Rate	Spread	PIK (z)	Floor	Legal Maturity	Shares/Units	Principal		Amortized Cost (d)		Fair Value (c)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control):
Senior Secured Loans-First Lien(k)
Shoes West, LLC (d/b/a Taos Footwear) - First Lien Term Loan(f)(h)(s)	Consumer Goods: Non-Durable	1/23/2025	10.96	%	3M SOFR	7.00%		3.00%	1/23/2030		$	4,690,625	$	4,690,625	$	4,690,625	13.27	%
Shoes West, LLC (d/b/a Taos Footwear) - First Lien Convertible Note to Taos Footwear(f)(h)(m)(s)			11.00	%			2.00%	—%	1/23/2030		204,854		204,854		322,686		0.91	%
Verify Diagnostics, LLC(f)(h)(u)	Healthcare & Pharmaceuticals	5/15/2025	13.94	%	3M SOFR	10.28%		3.50%	5/15/2030		2,459,722		2,459,722		2,459,722		6.96	%
WatchGuard Technologies, Inc.(f)(h)(j)	High Tech Industries	2/8/2024	8.92	%	1M SOFR	5.25%		0.75%	6/30/2029		3,412,551		3,365,963		3,407,773		9.64	%
Total Senior Secured Loans-First Lien													$	63,339,334	$	56,798,114	160.69	%
Senior Secured Loans-Second Lien(k)
QC Holdings, LLC(a)(f)(h)(m)(w)	Finance	6/30/2025	23.50	%	3M SOFR	18.50%		5.00%	6/30/2030		$	2,500,000	$	2,500,000	$	2,500,000	7.07	%
QC Holdings TopCo, LLC - Delayed Draw Term Loan(a)(h)(j)(m)(w)(y)	Finance	9/29/2025	23.50	%	3M SOFR	18.50%		5.00%	6/30/2030		113,527		113,527		113,527		0.32	%
Total Senior Secured Loans-Second Lien													$	2,613,527	$	2,613,527	7.39	%
Structured Subordinated Notes (a)(e)(h)(l)(k)
Apidos CLO XXVI(v)	Structured Finance	7/25/2019	—	%	Residual Interest/Current Yield				7/18/2029		$	250,000	$	13,974	$	14,125	0.04	%
Carlyle Global Market Strategies CLO 2017-5, Ltd.(v)	Structured Finance	12/18/2017	—	%	Residual Interest/Current Yield				1/22/2030		500,000		—		—		—	%
Galaxy XIX CLO, Ltd.(v)	Structured Finance	12/5/2016	—	%	Residual Interest/Current Yield				7/24/2030		246,767		—		—		—	%
Madison Park Funding XIII, Ltd.(v)	Structured Finance	11/6/2015	—	%	Residual Interest/Current Yield				4/22/2030		250,000		—		8,675		0.02	%
Octagon Investment Partners XV, Ltd.	Structured Finance	5/23/2019	—	%	Residual Interest/Current Yield				7/19/2030		500,000		—		—		—	%
Octagon Investment Partners XXI, Ltd.(j)	Structured Finance	1/6/2016	—	%	Residual Interest/Current Yield				2/14/2031		387,538		1,641		1,589		—	%
Octagon Investment Partners 30, Ltd.(v)	Structured Finance	11/16/2017	—	%	Residual Interest/Current Yield				3/17/2030		475,000		—		—		—	%
Octagon Investment Partners 31, Ltd.(v)	Structured Finance	12/20/2019	—	%	Residual Interest/Current Yield				7/20/2030		250,000		—		—		—	%
Octagon Investment Partners 36, Ltd.	Structured Finance	12/20/2019	—	%	Residual Interest/Current Yield				4/15/2031		500,000		4,092		4,050		0.01	%
Octagon Investment Partners 39, Ltd.	Structured Finance	1/9/2020	—	%	Residual Interest/Current Yield				10/21/2030		250,000		5,650		5,600		0.02	%
OZLM XII, Ltd.(v)	Structured Finance	1/17/2017	—	%	Residual Interest/Current Yield				4/30/2027		275,000		—		—		—	%
Sound Point CLO II, Ltd.	Structured Finance	5/16/2019	—	%	Residual Interest/Current Yield				1/26/2031		1,500,000		—		—		—	%
Sound Point CLO VII-R, Ltd.	Structured Finance	8/23/2019	—	%	Residual Interest/Current Yield				10/23/2031		150,000		—		—		—	%
Sound Point CLO XVIII, Ltd.	Structured Finance	5/16/2019	—	%	Residual Interest/Current Yield				1/21/2031		250,000		—		—		—	%
THL Credit Wind River 2013-1 CLO, Ltd.	Structured Finance	11/1/2017	—	%	Residual Interest/Current Yield				7/22/2030		325,000		—		—		—	%
Venture XXXIV CLO, Ltd.	Structured Finance	7/30/2019	—	%	Residual Interest/Current Yield				10/15/2031		250,000		—		—		—	%
Voya IM CLO 2013-1, Ltd.(j)	Structured Finance	6/9/2016	—	%	Residual Interest/Current Yield				10/15/2030		278,312		21,657		16,615		0.05	%
Voya CLO 2016-1, Ltd.	Structured Finance	1/22/2016	—	%	Residual Interest/Current Yield				1/21/2031		250,000		23,387		17,800		0.05	%
Total Structured Subordinated Notes													$	70,401	$	68,454	0.19	%
Common Equity/Other(g)(h)(k)
ACON IWP Investors I, L.L.C.	Healthcare & Pharmaceuticals	4/30/2015								472,357			$	472,357	$	814,500	2.30	%
FullBeauty Brands Holding, Common Stock	Retail	2/7/2019								72			198,026		—		—	%
iQOR Holdings, Inc. (Bloom Aggregator, LP)	Services: Consumer	6/11/2024								50			50,000		64,461		0.18	%

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF MARCH 31, 2026 (Unaudited)


									March 31, 2026
Portfolio Company / Security Type(x)	Industry (r)	Acquisition Date	All-in Rate	Ref. Rate	Spread	PIK (z)	Floor	Legal Maturity	Shares/Units	Principal	Amortized Cost (d)		Fair Value (c)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control):
Common Equity/Other(g)(h)(k)
New WPCC Parent, LLC (Class A Common Stock) (t)	Healthcare & Pharmaceuticals	5/8/2025							18,449		93,822		281,898		0.80	%
QC Holdings Topco, LLC(a)	Finance	6/30/2025							1,000		100,000		165,820		0.47	%
Recovery Solutions Parent, LLC, Membership Interest (t)	Healthcare & Pharmaceuticals	1/27/2025							37,391		1,085,835		1,323,260		3.74	%
Research Now Group, LLC & Dynata, LLC (Common Stock of New Insight Holdings, Inc)	Services: Business	6/14/2024							17,876		282,262		67,393		0.19	%
Rising Tide Holdings, Inc., Common Stock	Consumer goods: Non-Durable	9/11/2023							2,500		997,560		—		—	%
Total Common Equity/Other											$	3,279,862	$	2,717,332	7.69	%

Preferred Stock(h)(k)
Discovery MSO HoldCo LLC(g)(m)(p)	Healthcare & Pharmaceuticals	6/14/2024				12.00%			56		$	50,000	$	79,317	0.22	%
Healthcare Venture Partners, LLC - Series A Preferred Units of TCSPV Holdings IV, LLC(g)	Healthcare & Pharmaceuticals	8/29/2025							100,000		100,000		167,000		0.47	%
New WPCC PARENT, LLC (Series A Preferred Stock)(m)(t)	Healthcare & Pharmaceuticals	5/8/2025				13.00%			17,452		204,447		254,801		0.72	%
Shoes West, LLC (d/b/a Taos Footwear) - Preferred Equity(m)(s)	Consumer Goods: Non-Durable	1/23/2025				8.00%		2/28/2030	50		54,808		121,086		0.34	%
Verify Diagnostic Holdings LLC(g)	Healthcare & Pharmaceuticals	5/14/2025				12.00%			100,000		100,000		218,000		0.62	%
Total Preferred Stock											$	509,255	$	840,204	2.37	%

Total Portfolio Investments											$	69,812,379	$	63,037,631	178.33	%

(a) Indicates assets that Prospect Floating Rate and Alternative Income Fund, Inc. (the "Company") believes do not represent "qualifying assets" under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act"). Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. Of the Company’s total investments as of March 31, 2026, 5% are non-qualifying assets as a percentage of total assets.

(b) The majority of the investments bear interest at a rate that may be determined by reference to the Secured Overnight Financing Rate ("SOFR") which resets monthly, quarterly, or semiannually. For each such investment, the Company has provided the spread over SOFR or the prime lending rate ("Prime") and the current contractual interest rate in effect at March 31, 2026. Certain investments are subject to a SOFR or Prime interest rate floor. The one-month ("1M SOFR") and three-month ("3M SOFR") SOFR rates are based on the applicable SOFR rate for each investment on its reset date. As of March 31, 2026, the one-and-three month SOFR rates were 3.66% and 3.68%, respectively.

(d) See Note 6 for a discussion of the tax cost of the portfolio.

(e) The structured subordinated notes are considered equity positions in the Collateralized Loan Obligations ("CLOs"), which is referred to as "Subordinated Structured Notes", or "SSN". The CLO equity investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The current estimated yield is calculated using amortized cost based on the current projections of this excess cash flow taking into account assumptions which have been made regarding expected prepayments, losses and future reinvestment rates. These assumptions are periodically reviewed and adjusted. Ultimately, the actual yield may be higher or lower than the estimated yield if actual results differ from those used for the assumptions.

(f) Security, or a portion thereof, is held by Prospect Flexible Funding, LLC (“PFF”), our wholly owned subsidiary and a bankruptcy remote special purpose entity, and is pledged as collateral for the OZK Credit Facility and such security is not available as collateral to our general creditors (see Note 10). The fair value of the investments used as collateral by the Company for the OZK Credit Facility at March 31, 2026 was $52,130,208, representing 83% of our total investments.

(g) Represents non-income producing security that has not paid interest or dividends in the year preceding the reporting date.

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF MARCH 31, 2026 (Unaudited)

(h) Investment(s) is (are) valued using significant unobservable inputs and are categorized as Level 3 investments in accordance with ASC 820. See Notes 2 and 8 within the accompanying notes to the consolidated financial statements.

(i) Investment is categorized as Level 2 investments in accordance with ASC 820. See Note 2 within the accompanying notes to the consolidated financial statements.

(j) Acquisition date represents the date of the Company's initial investment. Follow-on acquisitions have occurred on the following dates to arrive at the Company's current investment (excluding effects of capitalized PIK interest, premium/original issue discount amortization/accretion, and partial repayments):

Portfolio Company

Investment

Follow-On Acquisition Dates

Follow-On Acquisitions (Excluding initial investment cost)

Aventiv Technologies, LLC

Aventiv Technologies, LLC - Second Out Super Priority First Lien Term Loan Bridge

1/2/2025

12,629

BCPE North Star US Holdco 2, Inc

Senior Secured Loans-First Lien

6/10/2024, 7/1/2024, 7/11/2024

4,048,942

DRI Holding, Inc.

Senior Secured Loans-First Lien

5/16/2024

2,415,300

Druid City Infusion, LLC - First Lien Term Loan

Senior Secured Loans-First Lien

3/6/2026

636,364

Emerge Intermediate, Inc.

Senior Secured Loans-First Lien

6/14/2024

131,333

New WPCC Parent, LLC

Senior Secured Loans-First Lien

9/13/2025, 1/15/2026

939,806

Octagon Investment Partners XXI, Ltd.

Structured Subordinated Notes

2/14/2019

35,015

QC Holdings TopCo, LLC - Delayed Draw Term Loan

Senior Secured Loans-Second Lien

1/5/2026

56,140

Research Now Group, LLC & Dynata, LLC- First Lien Second Out Term Loan

Senior Secured Loans-First Lien

8/12/2024

2,925,712

Voya IM CLO 2013-1, Ltd.

Structured Subordinated Notes

10/17/2017, 7/1/2019

20,584

WatchGuard Technologies, Inc.

Senior Secured Loans-First Lien

6/26/2024, 7/17/2024

3,994,924

(k) The securities in which the Company has invested were acquired in transactions that were exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). These securities may be resold only in transactions that are exempt from registration under the Securities Act.

(l) The effective yield has been estimated to be 0% as expected future cash flows are anticipated to not be sufficient to repay the investment at cost. If the expected investment proceeds increase, there is a potential for future investment income from the investment. Distributions, once received, will be recognized as return of capital, and when called, any remaining unamortized investment costs will be written off if the actual distributions are less than the amortized investment cost. To the extent that the cost basis of the SSN is fully recovered, any future distributions will be recorded as realized gains.

(m) The interest rate on these investments, excluding those on non-accrual, contains a paid-in-kind ("PIK") provision, whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities. The interest rate in the schedule represents the current interest rate in effect for these investments. The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed under the existing credit agreements, as of and for the nine months ended March 31, 2026:


Security Name	PIK Rate - Capitalized		PIK Rate - Paid as cash		Maximum Current PIK Rate

Aventiv Technologies, LLC - Second Out Super Priority First Lien Term Loan	11.46	%	—	%	11.46	%	(A)
Druid City Infusion, LLC - First Lien Convertible Note	2.00	%	—	%	2.00	%
Emerge Intermediate, Inc. - First Lien Term Loan	4.00	%	—	%	4.00	%	(B)
New WPCC Parent, LLC. - Series A Preferred Stock	13.00	%	—	%	13.00	%
QC Holdings TopCo, LLC - Second Lien Term Loan	—	%	14.00	%	14.00	%	(C)
QC Holdings TopCo, LLC - Delayed Draw Term Loan	—	%	14.00	%	14.00	%	(C)
Shoes West, LLC (d/b/a Taos Footwear) - First Lien Convertible Note to Taos Footwear	2.00	%	—	%	2.00	%
Shoes West, LLC (d/b/a Taos Footwear) - Preferred Equity	8.00	%	—	%	8.00	%
(A) On December 29, 2023, the Aventiv Technologies, LLC Second Out Super Priority First Lien Term Loan and Second Out Super Priority First Lien Bridge Loan was amended to allow a portion of interest accruing in cash to be payable in kind. On March 28, 2025, the Aventiv Technologies, LLC Third Out Super Priority First Lien Term Loan was amended to allow a portion of interest accruing in cash to be payable in kind.
(B) On November 28, 2025, the Emerge Intermediate, Inc. First Lien term loan investment paid and capitalized interest as PIK. As of December 31, 2025 interest is accruing in cash.
(C)The Amended QC Holdings TopCo, LLC Senior Secured Term Loan Agreement dated September 30, 2025, allows for a portion of interest accruing in cash to be payable in kind.

(n) The Company has entered into an intercreditor agreement that entitles the Company to the “last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the "first out" lenders and the Consolidated Schedule of Investments above reflects such higher rate.

(o) Investment on non-accrual status as of the reporting date (See Note 2).

(p) Discovery Point Retreat, LLC, Discovery MSO LLC, Eating Disorder Solutions of Texas LLC, and Discovery Point Retreat Waxahachie, LLC are joint borrowers on the First Lien Term Loan.

(q) First Brands Group and certain of its affiliates filed voluntary petitions for Chapter 11 bankruptcy protection.

(r) The following table shows the composition of our investment portfolio at fair value by control designation, investment type and by industry as of March 31, 2026:

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF MARCH 31, 2026 (Unaudited)


Industry	Senior Secured Loans-First Lien		Senior Secured Loans-Second Lien		Structured Subordinated notes		Equity(B)		Fair Value Total		Fair Value % of Net Assets
Healthcare & Pharmaceuticals	$	22,240,230	$	—	$	—	$	3,138,776	$	25,379,006	72	%
Consumer Goods: Non-Durable	5,013,311		—		—		121,086		5,134,397		15	%
Telecommunications	5,060,833		—		—		—		5,060,833		14	%
Services: Consumer	4,476,697		—		—		64,461		4,541,158		13	%
High Tech Industries	3,407,773		—		—		—		3,407,773		10	%
Beverage, Food & Tobacco	2,981,169		—		—		—		2,981,169		8	%
Transportation: Cargo	2,943,835		—		—		—		2,943,835		8	%
Automotive	2,875,402		—		—		—		2,875,402		8	%
Wholesale	2,794,915		—		—		—		2,794,915		8	%
Finance	—		2,613,527		—		165,820		2,779,347		8	%
Services: Business	2,607,669		—		—		67,393		2,675,062		8	%
Media: Advertising, Printing & Publishing	2,396,280		—		—		—		2,396,280		7	%
Structured Finance (A)			—		68,454		—		68,454		—	%
Total Portfolio	$	56,798,114	$	2,613,527	$	68,454	$	3,557,536	$	63,037,631	179	%

(A) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.
(B) Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.

The following shows the composition of our investment portfolio at amortized cost by control designation, investment type and by industry as of March 31, 2026:


Industry	Senior Secured Loans-First Lien		Senior Secured Loans-Second Lien		Structured Subordinated notes		Equity(B)		Amortized Cost Total
Healthcare & Pharmaceuticals	$	22,067,840	$	—	$	—	$	2,106,461	$	24,174,301
Automotive	9,766,712		—		—		—		9,766,712
Consumer Goods: Non-Durable	4,895,479		—		—		1,052,368		5,947,847
Telecommunications	5,009,358		—		—		—		5,009,358
Services: Consumer	4,476,697		—		—		50,000		4,526,697
High Tech Industries	3,365,963		—		—		—		3,365,963
Services: Business	2,706,013		—		—		282,262		2,988,275
Wholesale	2,928,344		—		—		—		2,928,344
Beverage, Food & Tobacco	2,899,437		—		—		—		2,899,437
Transportation: Cargo	2,898,814		—		—		—		2,898,814
Finance	—		2,613,527		—		100,000		2,713,527
Media: Advertising, Printing & Publishing	2,324,677		—		—		—		2,324,677
Retail	—		—		—		198,026		198,026
Structured Finance (A)	—		—		70,401		—		70,401
Total Portfolio	$	63,339,334	$	2,613,527	$	70,401	$	3,789,117	$	69,812,379

(A) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.
(B) Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.

(s) Shoes West, LLC and Shoes West Distribution, LLC are joint borrowers on the First Lien Term Loan A and First Lien Term Loan B.

(t) Our position in New WPCC Parent and Recovery Solutions stemmed from a restructuring of Wellpath, Inc. of which we held a first lien term loan and DIP financing loans.

(u) The investment represents a unitranche loan with characteristics of a traditional first lien senior secured loan, but which pursuant to an agreement among lenders is divided among unaffiliated lenders into “first out” and “last out” tranches yielding different interest rates, where our investment is the “last out” tranche(s) of such unitranche loan, subject to payment priority in favor of a first out tranche held by an unaffiliated lender; or, the Company has entered into an intercreditor agreement that entitles the Company to the “last out” tranche of the first lien secured loans, whereby the “first out” tranche will receive priority as to the “last out” tranche(s) with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company may receive a higher interest rate than the “first out” lenders and the Consolidated Schedule of Investments above reflects such higher rate, as applicable.

(v) Security was called for redemption and the liquidation of the underlying loan portfolio is ongoing.

(w) As of March 31, 2026, an affiliated fund of our Advisor owns 95.40% of the equity in QC Holdings TopCo, LLC and is considered a controlling beneficial interest per the 1940 Act.

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF MARCH 31, 2026 (Unaudited)

(x) As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities. There were no transactions with affiliated investments during the nine months ended March 31, 2026.

Affiliated Companies

Fair Value at June 30, 2025

Gross Additions (Cost)

Gross Reductions (Cost)

Net unrealized
gains (losses)

Fair Value at March 31, 2026

Interest
income

Dividend
income

Other
income

Net realized
gains (losses)

—

Total

—

(y) On September 29, 2025, PFLOAT committed to a $187,133 second-lien delayed draw term loan, of which $113,527 is drawn as of March 31, 2026.

(z) Investments may have a portion, or all, of their income received from Paid-in-Kind (“PIK”) interest or dividends. PIK interest income and cumulative dividend income represent income not paid currently in cash. The difference between the All-In Rate and PIK Rate represents the cash rate as of March 31, 2026.

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2025


						June 30, 2025
Portfolio Company / Security Type	Industry (r)(u)	Acquisition Date	Coupon/Yield (b)	Floor	Legal Maturity	Principal/ Quantity		Amortized Cost (d)		Fair Value (c)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control):
Senior Secured Loans-First Lien(f)(k)
Aventiv Technologies, LLC - Third Out Super Priority First Lien Term Loan (i)(j)(m)(n)	Telecommunications	3/28/2024	9.65% (3M SOFR+5.09%)	1.00	3/31/2026	$	3,202,711	$	3,174,893	$	2,287,376	5.72	%
Aventiv Technologies, LLC - Second Out Super Priority First Lien Term Loan(h)(m)(n)		6/28/2024	12.06% (3M SOFR+7.50%)	1.00	3/31/2026	84,422		84,514		84,422		0.21	%
Aventiv Technologies, LLC - Second Out Super Priority First Lien Term Loan Bridge(h)(j)(n)		12/23/2024	14.59% (3M SOFR+10.00%)	1.00	3/31/2026	95,193		93,354		95,193		0.24	%
Amneal Pharmaceuticals LLC(i)	Healthcare & Pharmaceuticals	4/22/2024	9.83% (1M SOFR+5.50%)	—	5/4/2028	2,905,660		2,893,170		2,960,287		7.40	%
BCPE North Star US Holdco 2, Inc.(i)(j)	Beverage, Food & Tobacco	2/2/2022	8.44% (3M SOFR+4.00%)	0.75	6/9/2028	5,009,381		4,820,318		4,954,278		12.39	%
Burgess Point Purchaser Corporation(i)	Automotive	7/26/2024	9.65% (1M SOFR+5.35%)	0.50	7/25/2029	2,969,543		2,821,071		2,551,135		6.38	%
CareerBuilder, LLC(h)(j)(m)(o)	Services: Consumer	4/13/2023	6.94% (1M SOFR+2.50%) plus 4.25% PIK	1.00	7/31/2026	745,615		719,993		10,066		0.03	%
Discovery Point Retreat, LLC(h)	Healthcare & Pharmaceuticals	6/14/2024	12.31% (3M SOFR+7.75%)	3.25	6/14/2029	3,940,000		3,940,000		3,940,000		9.85	%
DRI Holding Inc.(h)(j)	Media: Advertising, Printing & Publishing	12/21/2021	9.68% (1M SOFR+5.25%)	0.50	12/21/2028	3,415,967		3,293,835		3,413,576		8.54	%
Druid City Infusion, LLC - First Lien Term Loan(h)	Healthcare & Pharmaceuticals	9/30/2024	11.80% (3M SOFR+7.50%)	3.00	10/4/2029	4,963,043		4,963,043		4,963,043		12.41	%
Druid City Infusion, LLC - First Lien Convertible Note to Druid City Intermediate, Inc.(h)(m)		9/30/2024	6.00% plus 2.00% PIK	—	10/4/2033	50,752		50,752		80,929		0.20	%
Emerge Intermediate, Inc.(h)(m)(n)	Healthcare & Pharmaceuticals	2/26/2024	6.00% plus 4.50% PIK	1.00	8/31/2027	5,186,659		5,186,659		4,843,302		12.11	%
First Brands Group(i)	Automotive	2/8/2024	9.54% (3M SOFR+5.00%)	1.00	3/30/2027	1,969,152		1,967,705		1,865,771		4.67	%
		3/8/2024	9.54% (3M SOFR+5.00%)	1.00	3/30/2027	3,939,631		3,902,776		3,728,860		9.32	%
Global Tel*Link Corporation (d/b/a ViaPath Technologies)(h)	Telecommunications	8/6/2024	11.83% (1M SOFR+7.50%)	3.00	8/6/2029	4,962,500		4,844,386		4,888,559		12.23	%
Imperative Worldwide, LLC (f/k/a MAGNATE WORLDWIDE, LLC)(h)	Transportation: Cargo	12/3/2024	9.80% (3M SOFR+5.50%)	0.75	12/30/2028	4,466,250		4,386,823		4,466,250		11.17	%
iQOR Holdings, Inc.(h)	Services: Consumer	6/11/2024	11.81% (3M SOFR+7.50%)	2.50	6/11/2029	4,570,447		4,570,447		4,570,447		11.43	%
MoneyGram International, Inc.(h)	Banking	4/23/2024	9.07% (3M SOFR+4.75%)	0.50	6/1/2030	2,962,500		2,926,825		2,682,544		6.71	%
New WPCC Parent, LLC (h)(m)(t)	Healthcare & Pharmaceuticals	5/8/2025	13.80% (3M SOFR+9.50%)	2.00	5/9/2030	825,238		825,238		825,238		2.06	%
PlayPower, Inc.-First Lien Term Loan(h)	Consumer goods: Durable	8/28/2024	9.55% (3M SOFR+5.25%)	0.75	8/28/2030	4,310,859		4,222,652		4,296,202		10.74	%
PlayPower, Inc.-First Lien Revolving Line of Credit - Commitment(h)(q)						—		—		—		—	%
Recovery Solutions Parent, LLC(h)	Healthcare & Pharmaceuticals	1/27/2025	11.80% (3M SOFR+7.50%)	2.00	1/27/2030	681,533		391,227		681,533		1.70	%
Research Now Group, LLC & Dynata, LLC- First Lien First Out Term Loan(h)(j)	Services: Business	7/15/2024	9.59% (3M SOFR+5.00%)	1.00	7/15/2028	2,955,013		2,926,551		2,923,690		7.31	%
Research Now Group, LLC & Dynata, LLC- First Lien Second Out Term Loan(h)		7/15/2024	10.09% (3M SOFR+5.50%)	1.00	10/15/2028	1,290,146		1,284,051		1,122,427		2.81	%
S&S Holdings LLC(i)	Wholesale	7/16/2024	9.42% (3M SOFR+5.00%)	0.50	3/11/2028	2,968,992		2,957,298		2,916,144		7.29	%
Shoes West, LLC (d/b/a Taos Footwear) - First Lien Term Loan(h)(s)	Consumer Goods: Non-Durable	1/23/2025	11.56% (3M SOFR+7.00%)	3.00	1/23/2030	4,726,250		4,726,250		4,726,250		11.82	%
Shoes West, LLC (d/b/a Taos Footwear) - First Lien Convertible Note to Taos Footwear(h)(m)(s)			9.00% plus 2.00% PIK	—	1/23/2030	201,762		201,762		252,767		0.63	%
Verify Diagnostics, LLC(h)(x)	Healthcare & Pharmaceuticals	5/14/2025	14.58% (3M SOFR+10.28%)	3.50	5/15/2030	2,500,000		2,500,000		2,450,000		6.13	%

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2025 (Continued)


						June 30, 2025
Portfolio Company / Security Type	Industry (r)(u)	Acquisition Date	Coupon/Yield (b)	Floor	Legal Maturity	Principal/ Quantity		Amortized Cost (d)		Fair Value (c)		% of Net Assets
Senior Secured Loans-First Lien (Continued)(f)(k)
WatchGuard Technologies, Inc.(h)(j)	High Tech Industries	2/8/2024	9.58% (1M SOFR+5.25%)	0.75	6/30/2029	$	4,939,073	$	4,867,983	$	4,915,366	12.29	%
Total Senior Secured Loans-First Lien								$	79,543,576	$	77,495,655	193.80	%

Senior Secured Loans-Second Lien(f)(k)
QC Holdings, LLC(a)(h)(w)	Finance	6/30/2025	24.00% (3M SOFR+19.00%)	5.00	6/30/2030	$	2,500,000	$	2,500,000	$	2,500,000	6.25	%
Shutterfly Finance, LLC(i)(m)	Media: Diversified and Production	6/9/2023	9.33% (3M SOFR+5.00%)	1.00	10/1/2027	1,873,803		1,839,325		1,749,570		4.38	%
Total Senior Secured Loans-Second Lien								$	4,339,325	$	4,249,570	10.63	%

Structured Subordinated Notes (a)(f)(e)(h)(l)(k)
Apidos CLO XXIV	Structured Finance	5/17/2019	Residual Interest, current yield 0%	N/A	10/20/2030	$	250,000	$	102,206	$	77,000	0.19	%
Apidos CLO XXVI(v)	Structured Finance	7/25/2019	Residual Interest, current yield 0%	N/A	7/18/2029	250,000		96,650		80,000		0.20	%
Carlyle Global Market Strategies CLO 2017-5, Ltd.(v)	Structured Finance	12/18/2017	Residual Interest, current yield 0%	N/A	1/22/2030	500,000		4,281		9,700		0.02	%
Galaxy XIX CLO, Ltd.(v)	Structured Finance	12/5/2016	Residual Interest, current yield 0%	N/A	7/24/2030	246,767		—		—		—	%
GoldenTree Loan Opportunities IX, Ltd.(v)	Structured Finance	7/19/2017	Residual Interest, current yield 0%	N/A	10/29/2029	250,000		—		—		—	%
Madison Park Funding XIII, Ltd.(v)	Structured Finance	11/6/2015	Residual Interest, current yield 0%	N/A	4/22/2030	250,000		—		12,875		0.03	%
Madison Park Funding XIV, Ltd.	Structured Finance	11/16/2015	Residual Interest, current yield 0%	N/A	10/22/2030	250,000		95,293		73,625		0.18	%
Octagon Investment Partners XIV, Ltd.	Structured Finance	12/1/2017	Residual Interest, current yield —%	N/A	7/16/2029	850,000		—		—		—	%
Octagon Investment Partners XV, Ltd.	Structured Finance	5/23/2019	Residual Interest, current yield 0%	N/A	7/19/2030	500,000		60,795		60,350		0.15	%
Octagon Investment Partners XXI, Ltd.(j)	Structured Finance	1/6/2016	Residual Interest, current yield 0%	N/A	2/14/2031	387,538		112,058		86,576		0.22	%
Octagon Investment Partners 30, Ltd.(v)	Structured Finance	11/16/2017	Residual Interest, current yield 0%	N/A	3/17/2030	475,000		7,365		16,340		0.04	%
Octagon Investment Partners 31, Ltd.(v)	Structured Finance	12/20/2019	Residual Interest, current yield 0%	N/A	7/20/2030	250,000		2,425		2,200		0.01	%
Octagon Investment Partners 36, Ltd.	Structured Finance	12/20/2019	Residual Interest, current yield 0%	N/A	4/15/2031	500,000		90,770		70,950		0.18	%
Octagon Investment Partners 39, Ltd.	Structured Finance	1/9/2020	Residual Interest, current yield 0%	N/A	10/21/2030	250,000		76,834		57,300		0.14	%
OZLM XII, Ltd.(v)	Structured Finance	1/17/2017	Residual Interest, current yield —%	N/A	4/30/2027	275,000		—		—		—	%
Sound Point CLO II, Ltd.	Structured Finance	5/16/2019	Residual Interest, current yield 0%	N/A	1/26/2031	1,500,000		907		750		—	%
Sound Point CLO VII-R, Ltd.	Structured Finance	8/23/2019	Residual Interest, current yield 0%	N/A	10/23/2031	150,000		—		—		—	%
Sound Point CLO XVIII, Ltd.	Structured Finance	5/16/2019	Residual Interest, current yield 0%	N/A	1/21/2031	250,000		30,954		22,425		0.06	%
THL Credit Wind River 2013-1 CLO, Ltd.	Structured Finance	11/1/2017	Residual Interest, current yield 0%	N/A	7/22/2030	325,000		14,976		10,693		0.03	%
Venture XXXIV CLO, Ltd.	Structured Finance	7/30/2019	Residual Interest, current yield 0%	N/A	10/15/2031	250,000		73,912		54,800		0.14	%
Voya IM CLO 2013-1, Ltd.(j)	Structured Finance	6/9/2016	Residual Interest, current yield 0%	N/A	10/15/2030	278,312		39,977		29,752		0.07	%

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2025 (Continued)


						June 30, 2025
Portfolio Company / Security Type	Industry (r)(u)	Acquisition Date	Coupon/Yield (b)	Floor	Legal Maturity	Principal/ Quantity		Amortized Cost (d)		Fair Value (c)		% of Net Assets
Structured Subordinated Notes (a)(f)(e)(h)(l)(k)
Voya CLO 2016-1, Ltd.	Structured Finance	1/22/2016	Residual Interest, current yield 0%	N/A	1/21/2031	$	250,000	$	55,518	$	43,925	0.11	%
Total Structured Subordinated Notes								$	864,921	$	709,261	1.77	%

Common Equity/Other(f)(g)(h)(k)
ACON IWP Investors I, L.L.C. - 472,357 units	Healthcare & Pharmaceuticals	4/30/2015	N/A	N/A	N/A			$	472,357	$	617,500	1.54	%
AP Special Sits Camaro Holdings, LLC(y) - 553 units	Healthcare & Pharmaceuticals	1/2/2025	N/A	N/A	N/A			—		—		—	%
FullBeauty Brands Holding, Common Stock - 72 units	Retail	2/7/2019	N/A	N/A	N/A			198,026		—		—	%
iQOR Holdings, Inc. (Bloom Aggregator, LP) - 50 units	Services: Consumer	6/11/2024	N/A	N/A	N/A			50,000		75,151		0.19	%
New WPCC Parent, LLC (Class A Common Stock) (t) - 18,449 units	Healthcare & Pharmaceuticals	5/8/2025	N/A	N/A	N/A			93,822		142,240		0.35	%
QC Holdings Topco, LLC(a) - 1,000 units	Finance	6/30/2025	N/A	N/A	N/A			100,000		100,000		0.25	%
Recovery Solutions Parent, LLC, Membership Interest - 37,391 units	Healthcare & Pharmaceuticals	1/27/2025	N/A	N/A	N/A			1,085,835		987,491		2.47	%
Research Now Group, LLC & Dynata, LLC (Common Stock of New Insight Holdings, Inc) - 17,876 units	Services: Business	6/14/2024	N/A	N/A	N/A			282,262		138,718		0.35	%
Rising Tide Holdings, Inc., Common Stock - 2,500 units	Consumer goods: Non-Durable	9/11/2023	N/A	N/A	N/A			997,560		—		—	%
Total Common Equity/Other								$	3,279,862	$	2,061,100	5.15	%

Preferred Stock(f)(g)(h)(k)
Discovery MSO HoldCo LLC(m)(p) - 53 units	Healthcare & Pharmaceuticals	6/14/2024	8.00% PIK	N/A	N/A			$	50,000	$	68,802	0.17	%
New WPCC PARENT, LLC (Series A Preferred Stock) (t) - 17,452 units	Healthcare & Pharmaceuticals	5/8/2025	N/A	N/A	N/A			177,122		231,764		0.58	%
Shoes West, LLC (d/b/a Taos Footwear) - Preferred Equity(m)(s) - 50 units	Consumer Goods: Non-Durable	1/23/2025	8.00% PIK	N/A	N/A			50,000		90,444		0.23	%
Verify Diagnostic Holdings LLC - 100,000 units	Healthcare & Pharmaceuticals	5/14/2025	N/A	N/A	N/A			100,000		110,000		0.28	%
Total Preferred Stock								$	377,122	$	501,010	1.25	%

Total Portfolio Investments								$	88,404,806	$	85,016,596	212.60	%

(a) Indicates assets that the Company believes do not represent "qualifying assets" under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act"). Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. Of the Company’s total investments as of June 30, 2025, 4% are non-qualifying assets as a percentage of total assets.

(b) The majority of the investments bear interest at a rate that may be determined by reference to the Secured Overnight Financing Rate ("SOFR") which resets monthly, quarterly, or semiannually. For each such investment, the Company has provided the spread over SOFR or the prime lending rate ("Prime") and the current contractual interest rate in effect at June 30, 2025. Certain investments are subject to a SOFR or Prime interest rate floor. The one-month ("1M SOFR") and three-month ("3M SOFR") SOFR rates are based on the applicable SOFR rate for each investment on its reset date. As of June 30, 2025, the one-and-three month SOFR rates were 4.32% and 4.29%, respectively.

(d) See Note 6 for a discussion of the tax cost of the portfolio.

(f) Security is held by the Company and is pledged as collateral for the Senior Secured Revolving Credit Facility (see Note 10). The fair value of the investments used as collateral by the Company for the Senior Secured Revolving Credit Facility at June 30, 2025 was $85,016,596, representing 100% of our total investments.

(g) Represents non-income producing security that has not paid interest or dividends in the year preceding the reporting date.

(i) Investment is categorized as Level 2 investments in accordance with ASC 820. See Note 2 within the accompanying notes to the consolidated financial statements.

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2025 (Continued)

Portfolio Company

Investment

Follow-On Acquisition Dates

Follow-On Acquisitions (Excluding initial investment cost)

Aventiv Technologies, LLC

Aventiv Technologies, LLC - Second Out Super Priority First Lien Term Loan Bridge

1/2/2025

12,629

BCPE North Star US Holdco 2, Inc

Senior Secured Loans-First Lien

6/10/2024, 7/1/2024, 7/11/2024

4,048,942

CareerBuilder, LLC

Senior Secured Loans-First Lien

6/5/2020

690,000

DRI Holding, Inc.

Senior Secured Loans-First Lien

5/16/2024

2,415,300

Emerge Intermediate, Inc.

Senior Secured Loans-First Lien

6/14/2024

131,333

Octagon Investment Partners XXI, Ltd.

Structured Subordinated Notes

2/14/2019

35,015

Research Now Group, LLC & Dynata, LLC- First Lien Second Out Term Loan

Senior Secured Loans-First Lien

8/12/2024

2,925,712

Voya IM CLO 2013-1, Ltd.

Structured Subordinated Notes

10/17/2017, 7/1/2019

20,584

WatchGuard Technologies, Inc.

Senior Secured Loans-First Lien

6/26/2024, 7/17/2024

3,994,924


Security Name	PIK Rate - Capitalized		PIK Rate - Paid as cash		Maximum Current PIK Rate

Aventiv Technologies, LLC - Third Out Super Priority First Lien Term Loan	9.65	%	—	%	9.65	%	(A)
Aventiv Technologies, LLC - Second Out Super Priority First Lien Term Loan	12.06	%	—	%	12.06	%	(A)
Discovery MSO HoldCo LLC	12.00	%	—	%	8.00	%
Druid City Infusion, LLC - First Lien Convertible Note	2.00	%	—	%	2.00	%
Emerge Intermediate, Inc.	4.50	%	—	%	4.50	%
New WPCC Parent, LLC. - First Lien Term Loan	—	%	8.00	%	8.00	%
QC Holdings TopCo, LLC - Second Lien Term Loan	—	%	14.50	%	14.50	%	(B)
Shoes West, LLC (d/b/a Taos Footwear) - First Lien Convertible Note to Taos Footwear	2.00	%	—	%	2.00	%
Shoes West, LLC (d/b/a Taos Footwear) - Preferred Equity	8.00	%	—	%	8.00	%
(A) On December 29, 2023, the Aventiv Technologies, LLC Second Out Super Priority First Lien Term Loan and Second Out Super Priority First Lien Bridge Loan was amended to allow a portion of interest accruing in cash to be payable in kind. On March 28, 2025, the Aventiv Technologies, LLC Third Out Super Priority First Lien Term Loan was amended to allow a portion of interest accruing in cash to be payable in kind.
(B) The QC Holdings TopCo, LLC Senior Secured Term Loan Agreement, dated June 30, 2025, allows for a portion of interest accruing in cash to be payable in kind. The first interest payment was due September 30, 2025.

(o) Investment on non-accrual status as of the reporting date (See Note 2).

(p) Discovery Point Retreat, LLC, Discovery MSO LLC, Eating Disorder Solutions of Texas LLC, and Discovery Point Retreat Waxahachie, LLC are joint borrowers on the First Lien Term Loan.

(q) On August 28, 2024, PFLOAT committed to a $656,566 first-lien revolving line of credit, which is undrawn as of June 30, 2025.

(r) The following table shows the composition of our investment portfolio at fair value by control designation, investment type and by industry as of June 30, 2025:

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2025 (Continued)


Industry	Senior Secured Loans-First Lien		Senior Secured Loans-Second Lien		Structured Subordinated notes		Equity(B)		Fair Value Total		Fair Value % of Net Assets
Healthcare & Pharmaceuticals	$	20,744,332	$	—	$	—	$	2,157,797	$	22,902,129	57	%
Automotive	8,145,766		—		—		—		8,145,766		20	%
Telecommunications	7,355,550		—		—		—		7,355,550		18	%
Consumer Goods: Non-Durable	4,979,017		—		—		90,444		5,069,461		13	%
Beverage, Food & Tobacco	4,954,278		—		—		—		4,954,278		12	%
High Tech Industries	4,915,366		—		—		—		4,915,366		12	%
Services: Consumer	4,580,513		—		—		75,151		4,655,664		12	%
Transportation: Cargo	4,466,250		—		—		—		4,466,250		11	%
Services: Business	4,046,117		—		—		138,718		4,184,835		10	%
Consumer Goods: Durable	4,296,202		—		—		—		4,296,202		11	%
Media: Advertising, Printing & Publishing	3,413,576		—		—		—		3,413,576		9	%
Wholesale	2,916,144		—		—		—		2,916,144		7	%
Banking	2,682,544		—		—		—		2,682,544		7	%
Finance	—		2,500,000		—		100,000		2,600,000		7	%
Media: Diversified and Production	—		1,749,570		—		—		1,749,570		4	%
Structured Finance (A)	—		—		709,261		—		709,261		2	%
Total Portfolio	$	77,495,655	$	4,249,570	$	709,261	$	2,562,110	$	85,016,596	213	%

(A) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.
(B) Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.

The following shows the composition of our investment portfolio at amortized cost by control designation, investment type and by industry as of June 30, 2025:


Industry	Senior Secured Loans-First Lien		Senior Secured Loans-Second Lien		Structured Subordinated notes		Equity(B)		Amortized Cost Total
Healthcare & Pharmaceuticals	$	20,750,089	$	—	$	—	$	1,979,136	$	22,729,225
Automotive	8,691,552		—		—		—		8,691,552
Telecommunications	8,197,147		—		—		—		8,197,147
Consumer Goods: Non-Durable	4,928,012		—		—		1,047,560		5,975,572
Services: Consumer	5,290,440		—		—		50,000		5,340,440
High Tech Industries	4,867,983		—		—		—		4,867,983
Beverage, Food & Tobacco	4,820,318		—		—		—		4,820,318
Services: Business	4,210,602		—		—		282,262		4,492,864
Transportation: Cargo	4,386,823		—		—				4,386,823
Consumer Goods: Durable	4,222,652		—		—		—		4,222,652
Media: Advertising, Printing & Publishing	3,293,835		—		—		—		3,293,835
Wholesale	2,957,298		—		—		—		2,957,298
Banking	2,926,825		—		—		—		2,926,825
Finance	—		2,500,000		—		100,000		2,600,000
Media: Diversified and Production	—		1,839,325		—		—		1,839,325
Structured Finance	—		—		864,921		—		864,921
Retail	—		—		—		198,026		198,026
Total Portfolio	$	79,543,576	$	4,339,325	$	864,921	$	3,656,984	$	88,404,806

(A) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.
(B) Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.

(s) Shoes West, LLC and Shoes West Distribution, LLC are joint borrowers on the First Lien Term Loan A and First Lien Term Loan B.

(t) Our position in New WPCC Parent stemmed from a restructuring of Wellpath, Inc. of which we held a first lien term loan.

(u) As of June 30, 2025, certain industries classifications have been revised compared to June 30, 2024 to align with updated industry structures.

(v) Security was called for redemption and the liquidation of the underlying loan portfolio is ongoing.

(w) As of June 30, 2025, an affiliated fund of our Advisor owns a 99.55% equity interest in QC Holdings TopCo, LLC (“QC TopCo”). QC TopCo owns 100% of QC Holdings, LLC (“QC Holdings”), representing 95.40% fully diluted ownership and a controlling beneficial interest in QC Holdings by the affiliated fund per the 1940 Act.

(x) The investment represents a unitranche loan with characteristics of a traditional first lien senior secured loan, but which pursuant to an agreement among lenders is divided among unaffiliated lenders into “first out” and “last out” tranches yielding different interest rates, where our investment is the “last out” tranche(s) of such unitranche loan, subject to payment priority in favor of a first out tranche held by an unaffiliated lender; or, the Company has entered into an intercreditor agreement that entitles the Company to the “last out” tranche of the first lien secured loans, whereby the

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2025 (Continued)

“first out” tranche will receive priority as to the “last out” tranche(s) with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company may receive a higher interest rate than the “first out” lenders and the Consolidated Schedule of Investments above reflects such higher rate, as applicable.

(y) We hold warrants in AP Special Sits Camaro Holdings, LLC which is the parent company of Careerbuilder LLC, in which we own a first-lien term loan investment.

See notes to consolidated financial statements

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - NATURE OF OPERATIONS

Prospect Floating Rate and Alternative Income Fund, Inc. (the "Company", "PFLOAT", "our", "us", "we"), incorporated in Maryland on April 29, 2011, is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). Our investment objective is to generate current income and, as a secondary objective, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns. Under normal market conditions, we will invest at least 80% of our net assets (plus any borrowings for investment purposes) in floating rate loans and other income producing investments. We intend to meet our investment objective by primarily lending to and investing in the debt of privately-owned U.S. middle market companies, which we define as companies with annual revenue between $50 million and $2.5 billion. We expect that at least 70% of our portfolio of investments will consist primarily of directly originated or syndicated senior secured first lien loans, directly originated or syndicated senior secured second lien loans, and to a lesser extent, subordinated debt, and that up to 30% of our portfolio of investments will consist of other securities, including private equity (both common and preferred), dividend-paying equity, royalties, and the equity and junior debt tranches of a type of pools of broadly syndicated loans known as collateralized loan obligations ("CLOs"), which we also refer to as subordinated structured notes ("SSNs"). Pursuant to our Articles of Incorporation, as amended, restated and supplemented, the Company is authorized to issue 75,000,000 shares of common stock with a par value of $0.001 per share. Additionally, the Company is authorized to issue 25,000,000 shares of preferred stock with a par value of $0.001 per share. Effective September 19, 2022, the Company engaged Preferred Capital Securities, LLC ("PCS") as the Company’s dealer manager for the Company’s offering to "accredited investors" (within the meaning of Rule 501(a) under the Securities Act of 1933, as amended (the "Securities Act")) of shares of its common stock (the "Private Offering") on the terms and conditions set forth in the Company’s confidential private placement memorandum. The Company relied on the exemption provided by Rule 506(b) of Regulation D and Section 4(a)(2) of the Securities Act in connection with the Private Offering. On September 13, 2023, the Company filed with the SEC an initial registration statement on Form N-2 for the offer and sale of up to $300,000,000 shares of its Class S, Class D and Class I common stock (the "Multi-Class Offering"). In connection with the Multi-Class Offering, the Company authorized the issuance of separate classes of its common stock and designated such classes Class S, Class D and Class I common stock, respectively. The registration statement was declared effective by the SEC on May 10, 2024. On January 26, 2026, the Company signed an agreement with PCS to terminate its Dealer Manager Agreement (the "Prior Dealer Manager Agreement") with PCS dated May 13, 2024 under which PCS was acting as dealer manager in the Company's Multi-Class Offering. The termination of the Prior Dealer Manager Agreement became effective on March 29, 2026. On January 26, 2026, the Company entered into a Distribution Agreement (the "Distribution Agreement") with Ultimus Fund Distributors, LLC (the "Distributor") to act as distributor in the Company's Multi-Class Offering. The Distribution Agreement became effective on March 29, 2026.

On April 20, 2021, we entered into the Investment Advisory Agreement with the Adviser, which was unanimously approved by the Company’s Board of Directors, including by all of the directors who are not "interested persons" (as defined in the 1940 Act), on February 18, 2021, subject to stockholder approval of the Investment Advisory Agreement. The Company’s stockholders approved the Investment Advisory Agreement at a Special Meeting of Stockholders held on March 31, 2021.

On November 5, 2021, we amended and restated the Investment Advisory Agreement (the "Amended and Restated Advisory Agreement") to reduce the advisory fees payable thereunder, effective as of January 1, 2022 and until the one-year anniversary of the listing of our common stock on a national securities exchange. The Amended and Restated Advisory Agreement was unanimously approved by our Board of Directors, including by all of the directors who are not "interested persons" (as defined in the 1940 Act), and became effective on January 1, 2022. The Amended and Restated Advisory Agreement was most recently approved by our Board of Directors, including all of our directors who are not "interested persons" (as defined in the 1940 Act), on June 18, 2025. On March 4, 2026, the Amended and Restated Advisory Agreement was further amended and restated to effect certain immaterial changes requested by certain state securities regulatory authorities based on the North American Securities Administrators Association (“NASAA”) Omnibus Guidelines (“Omnibus Guidelines”) (the “Second Amended and Restated Advisory Agreement”). The Second Amended and Restated Advisory Agreement was unanimously approved by our Board of Directors, including by all of the directors who are not "interested persons" (as defined in the 1940 Act), and became effective on March 4, 2026. See "Note 4 - Related Party Transactions and Arrangements - Investment Advisory Agreement" for additional information.

The Adviser was formed in Delaware as a private investment management firm and is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended, or the Advisers Act. The Adviser oversees the management of our activities and is responsible for making the investment decisions with respect to our investment portfolio, subject to the oversight of our Board of Directors.

On May 16, 2019, we formed a wholly-owned subsidiary, TP Flexible Funding, LLC (the "SPV"), a Delaware limited liability company and a bankruptcy remote special purpose entity, which holds certain of our portfolio loan investments that were used

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

as collateral for the Credit Facility (as defined in Note 10) at the SPV. This subsidiary has been consolidated since operations commenced. On and effective August 5, 2020, the Company changed the name of the SPV to Prospect Flexible Funding, LLC.

We consolidate certain of our wholly owned companies formed by us in order to facilitate our investment strategy. The following company is included in our consolidated financial statements and is referred to as the “Consolidated Holding Company”: Prospect Discovery Holdings I, Inc.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation. The accompanying interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and, pursuant to the requirements for reporting on Form 10-Q, ASC 946, Financial Services - Investment Companies (“ASC 946”), and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with GAAP are omitted. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending June 30, 2026. Under the 1940 Act, ASC 946, and the regulations pursuant to Article 6 of Regulation S-X, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit us. Our consolidated financial statements include the accounts of PFLOAT, the SPV and the Consolidated Holding Company. All intercompany balances and transactions have been eliminated in consolidation.

Management Estimates and Assumptions. The preparation of the consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income, expenses, and gains and losses during the reported period. Changes in the economic environment, financial markets, creditworthiness of the issuers of our investment portfolio and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.

Cash and Cash Equivalents. All cash balances are maintained with high credit quality financial institutions. Cash and cash equivalents consist of demand deposits and highly liquid investments (e.g., U.S. treasury notes) with original maturities of three months or less. Cash held at financial institutions may exceed the Federal Deposit Insurance Corporation ("FDIC") insured limit. The Company has not incurred any losses on these accounts, and the credit risk exposure is mitigated by the financial strength of the banking institutions where the amounts are held. Cash and cash equivalents are carried at cost, which approximates fair value. Cash equivalents are classified as Level 1 in the fair value hierarchy. As of March 31, 2026 and June 30, 2025, cash equivalents were $14,989,596 and $14,988,042, respectively. Our cash equivalents as of March 31, 2026 consisted of U.S. treasury notes with maturity dates of April 07, 2026 and April 09, 2026, respectively. Our cash equivalents as of June 30, 2025 consisted of a U.S. treasury note with a maturity date of July 8, 2025.

Investment Transactions. Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. We determine the fair value of our investments on a quarterly basis (as discussed in Investment Valuation below), with quarter over quarter fluctuations in fair value reflected as a net change in unrealized gains (losses) from investments in the Consolidated Statements of Operations. Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. Realized gains or losses on the sale of investments are calculated using the specific identification method. Amounts for investments and or cash equivalents traded but not yet settled are reported in payable for open trades or receivable for investments sold in the Consolidated Statements of Assets and Liabilities. Amounts for principal repayments from our investments are reported in receivable for repayments of portfolio investments. As of March 31, 2026 and June 30, 2025, we had one asset going through bankruptcy.

Investment Valuation. As a BDC, and in accordance with the 1940 Act, we fair value our investment portfolio on a quarterly basis, with any unrealized gains and losses reflected in net increase (decrease) in net assets resulting from operations on our Consolidated Statements of Operations. To value our investments, we follow the guidance of ASC 820, Fair Value Measurement ("ASC 820"), that defines fair value, establishes a framework for measuring fair value in conformity with GAAP, and requires disclosures about fair value measurements. In accordance with ASC 820, the fair value of our investments is defined as the price that we would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market in which that investment is transacted.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Level 1. Quoted prices in active markets for identical assets or liabilities, accessible by us at the measurement date.

Level 2. Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3. Unobservable inputs for the asset or liability.

Our Board of Directors has established procedures for the valuation of our investment portfolio. These procedures are detailed below.

Investments for which market quotations are readily available are valued at such market quotations.

For most of our investments, market quotations are not available. With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, due to factors such as volume and frequency of price quotes, our Board of Directors has approved a multi-step valuation process each quarter, as described below.

1. Each portfolio company or investment is reviewed by our investment professionals with independent valuation firms engaged by our Board of Directors.

2. The independent valuation firms prepare independent valuations for each investment based on their own independent assessments and issue their report.

3. The Audit Committee of our Board of Directors reviews and discusses with the independent valuation firms the valuation reports, and then makes a recommendation to the Board of Directors of the value for each investment.

4. The Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Adviser, the respective independent valuation firm and the Audit Committee.

For intra-quarter periods and pursuant to Rule 2a-5, the Board of Directors has designated the Adviser as the valuation designee (the "Valuation Designee") for the purpose of performing fair value determinations for investments for which market quotations are not readily available, or when such market quotations are deemed not to represent fair value. The Board of Directors has approved a multi-step valuation process for such intra-quarter investment valuations, as described below, and such investments are classified in Level 3 of the fair value hierarchy:

1.The Adviser will start with the most recent quarterly valuations determined pursuant to the process described above.

2.The Adviser will calculate the estimated earnings per share for each investment in order to adjust the valuation of that investment for income that is expected to be realized.

3.The Adviser will consider other factors that should be taken into account in order to adjust the valuations, including, market changes in expected returns for similar investments; performance improvement or deterioration which would change the margin added to the base interest rate charged; the nature and realizable value of any collateral; the issuer’s ability to make payments and its earnings and discounted cash flow; the markets in which the issuer does business; comparisons to publicly traded securities; and other relevant factors.

Our non-CLO investments that are classified as Level 3 are valued utilizing a yield technique, enterprise value ("EV") technique, net asset value technique, asset recovery technique, discounted cash flow technique, or a combination of techniques, as appropriate. The yield technique uses loan spreads for loans and other relevant information implied by market data involving identical or comparable assets or liabilities. Under the EV technique, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e., "waterfall" allocation). To determine the EV, we typically use a market (multiples) valuation approach that considers relevant and applicable market trading data of guideline public companies, transaction metrics from precedent merger and acquisitions transactions, and/or a discounted cash flow technique. The net asset value technique, an income approach, is used to derive a value of an underlying investment by dividing a relevant earnings stream by an appropriate capitalization rate. For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions. The asset recovery technique is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets. The discounted cash flow technique converts future cash flows or earnings to a range of fair values from which a single estimate may be derived utilizing an appropriate discount rate. The fair value measurement is based on the net present value indicated by current market expectations about those future amounts.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In applying these methodologies, additional factors that we consider in valuing our investments may include, as we deem relevant: security covenants, call protection provisions, and information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the principal markets in which the portfolio company does business; publicly available financial ratios of peer companies; the principal market; and enterprise values, among other factors.

Our investments in CLOs are classified as Level 3 fair value measured securities under ASC 820 and are valued using a discounted multi-path cash flow model. The CLO structures are analyzed to identify the risk exposures and to determine an appropriate call date (i.e., expected maturity). These risk factors are sensitized in the multi-path cash flow model using Monte Carlo simulations, which is a simulation used to model the probability of different outcomes, to generate probability-weighted (i.e., multi-path) cash flows from the underlying assets and liabilities. These cash flows are discounted using appropriate market discount rates, and relevant data in the CLO market as well as certain benchmark credit indices are considered, to determine the value of each CLO investment. In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the implied discount rate that would be effective for the value derived from the multi-path cash flows. We are not responsible for and have no influence over the asset management of the portfolios underlying the CLO investments we hold, as those portfolios are managed by non-affiliated third-party CLO collateral managers. The main risk factors are default risk, prepayment risk, interest rate risk, downgrade risk, and credit spread risk.

Investment Risks

Our investments are subject to a variety of risks. Those risks include the following:

Market Risk

Market risk represents the potential loss that can be caused by a change in the fair value of the financial instrument.

Credit Risk

Credit risk represents the risk that we would incur if the counterparties failed to perform pursuant to the terms of their agreements with us.

Credit Spread Risk

Credit spread risk represents the risk that with higher interest rates comes a higher risk of defaults.

Default Risk

Default risk is the risk that a borrower will be unable to make the required payments on their debt obligation.

Downgrade Risk

Downgrade risk results when rating agencies lower their rating on a bond which are usually accompanied by bond price declines.

Liquidity Risk

Liquidity risk represents the possibility that we may not be able to rapidly adjust the size of our investment positions in times of high volatility and financial stress at a reasonable price.

Interest Rate Risk

Interest rate risk represents a change in interest rates, which could result in an adverse change in the fair value of an interest-bearing financial instrument.

Prepayment Risk

Many of our debt investments allow for prepayment of principal without penalty. Downward changes in interest rates may cause prepayments to occur at a faster than expected rate, thereby effectively shortening the maturity of the security and making us less likely to fully earn all of the expected income of that security and reinvesting in a lower yielding instrument.

Other Risks

Political developments, including civil conflicts and war, sanctions or other measures by the United States or other governments, natural disasters, public health crises and other events outside the Company’s control can directly or indirectly have a material adverse impact on the Company and our portfolio companies.

Structured Credit Related Risk

CLO investments may be riskier and less transparent to us than direct investments in underlying companies. CLOs typically will have no significant assets other than their underlying senior secured loans. Therefore, payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investment Classification. We are a non-diversified company within the meaning of the 1940 Act. As required by the 1940 Act, we classify our investments by level of control. As defined in the 1940 Act, "Control Investments" are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less, a beneficial ownership of more than 25% of the voting securities of an investee company. Under the 1940 Act, "Affiliate Investments" are defined by a lesser degree of influence and are deemed to exist through the possession outright or via the right to acquire within 60 days or less, beneficial ownership of 5% or more of the outstanding voting securities of another person. "Non-Control/Non-Affiliate Investments" are those that are neither Control Investments nor Affiliate Investments.

As a BDC, we must not acquire any assets other than "qualifying assets" specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). As of March 31, 2026 and June 30, 2025, our qualifying assets as a percentage of total assets stood at 95.40% and 96.04%, respectively.

Revenue Recognition. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Accretion of such purchase discounts or amortization of such premiums is calculated using the effective interest method as of the settlement date and adjusted only for material amendments or prepayments. Upon the prepayment of a loan or bond, any unamortized discount or premium is recorded as interest income. The Company records dividend income on the ex-dividend date. The Company does not accrue as a receivable interest or dividends on loans and securities if it has reason to doubt its ability to collect such income. Loans are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Unpaid accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans are either applied to the cost basis or interest income, depending upon management’s judgment of the collectability of the loan receivable. Non-accrual loans are restored to accrual status when past due principal and interest is paid and in management’s judgment, is likely to remain current and future principal and interest collections when due are probable. Interest received and applied against cost while a loan is on non-accrual, and payment-in-kind ("PIK") interest capitalized but not recognized while on non-accrual, is recognized prospectively on the effective yield basis through maturity of the loan when placed back on accrual status, to the extent deemed collectible by management. As of March 31, 2026, approximately 0.34% of our total assets at fair value were on non-accrual status. As of June 30, 2025, approximately 0.01% of our total assets at fair value were on non-accrual status. Upfront structuring fees are recorded as fee income when earned. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.

Some of our loans and other investments may have contractual PIK interest or dividends. PIK income computed at the contractual rate is accrued into income and reflected as receivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On these payment dates, we capitalize the accrued interest (reflecting such amounts in the basis as additional securities received). PIK generally becomes due at maturity of the investment or upon the investment being called by the issuer. At the point that we believe PIK is not fully expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are reversed from the related receivable through interest or dividend income, respectively. We do not reverse previously capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if we believe that PIK is expected to be realized.

Interest income from investments in Structured Subordinated Notes (typically preferred shares, income notes or subordinated notes of CLO funds) is recorded based on an estimation of an effective yield to expected maturity utilizing assumed future cash flows in accordance with ASC 325-40, Beneficial Interest in the Securitized Financial Assets. The Company monitors the expected cash inflows from CLO equity investments, including the expected residual payments, and the estimated effective yield is determined and updated periodically.

The Company recognizes realized losses for certain CLO equity investments when the Company determines that a CLO’s expected remaining cash flows do not exceed amortized cost basis. In such situations, the amortized cost basis of the CLO is written down and recognized as a realized loss.

Due from and to Adviser. Amounts due from the Adviser are for amounts waived under the ELA, respectively (as such terms are defined in Note 4) and amounts due to the Adviser are for base management fees, incentive fees, operating expenses and offering and organization expenses paid on our behalf. All balances due from and to the Adviser are settled quarterly.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Payment-In-Kind Interest. The Company has certain investments in its portfolio that contain a PIK interest provision, which represents contractual interest or dividends that are added to the principal balance and recorded as income. For the three months ended March 31, 2026 and 2025, PIK interest included in interest income totaled $12,701 and $189,903, respectively. For the nine months ended March 31, 2026 and 2025, PIK interest included in interest income totaled $157,722 and $356,889, respectively. To maintain regulated investment company ("RIC") tax treatment, and to avoid corporate tax, substantially all of this income must be paid out to the stockholders in the form of distributions, even though the Company has not yet collected the cash.

Offering Costs and Expenses. The Company will incur certain costs and expenses in connection with offering shares of its common stock. These costs and expenses principally relate to certain costs and expenses for advertising and sales, printing and marketing costs, professional and filing fees. Offering costs incurred by the Company were capitalized to deferred offering costs on the Consolidated Statements of Assets and Liabilities and will be amortized to expense over the 12 month period following the effectiveness of the registration to sell shares of its common stock on a straight line basis.

Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Dividends and Distributions. Dividends and distributions to common stockholders are recorded on the record date. The amount, if any, to be paid as a monthly dividend or distribution is approved by our Board of Directors quarterly and generally depends on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as our Board of Directors deems relevant from time to time. Net realized capital gains, if any, are distributed at least annually. Our distributions may exceed our earnings, and therefore, portions of the distributions that we make may be a return of the money originally invested and represent a return of capital distribution to shareholders for tax purposes.

Financing Costs. We record origination expenses related to our Senior Secured Revolving Credit Facility and our OZK Credit Facility (both as defined herein) as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method over the stated life of the obligation of our Senior Secured Revolving Credit Facility and our OZK Credit Facility. (See Note 10 for further discussion.)

Per Share Information. Net increase or decrease in net assets resulting from operations per share is calculated using the weighted average number of common stock outstanding for the period presented. (See Note 11 for further discussion.)

Net Realized and Net Change in Unrealized Gains or Losses. Gains or losses on the sale of investments are calculated by using the specific identification method. The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees. Net change in unrealized gains or losses reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gains or losses when gains or losses are realized.

Federal and State Income Taxes. The Company has elected to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and intends to continue to comply with the requirements of the Code applicable to RICs. As a RIC, the Company is required to distribute at least 90% of its investment company taxable income and intends to distribute (or retain through a deemed distribution) all of its investment company taxable income and net capital gain to stockholders; therefore, the Company has made no provision for income taxes. The character of income and gains that the Company will distribute is determined in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified to paid-in capital.

If the Company does not distribute (or is not deemed to have distributed) at least 98% of its annual ordinary income and 98.2% of its net capital gains in the calendar year earned, it will generally be required to pay an excise tax equal to 4% of the amount by which 98% of its annual ordinary income and 98.2% of its capital gains exceeds the distributions from such taxable income for the year. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, it accrues excise taxes, if any, on estimated excess taxable income. As of March 31, 2026, the Company expects to have no material excise tax due for the 2026 calendar year. For the three and nine months ended March 31, 2026, the Company has accrued $0 and $26,328, respectively, of excise tax.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

If the Company fails to satisfy the annual distribution requirement or otherwise fails to qualify as a RIC in any taxable year, it would be subject to tax on all of its taxable income at the regular corporate income tax rate. The Company would not be able to deduct distributions to stockholders, nor would it be required to make distributions. Distributions would generally be taxable to the Company’s individual and other non-corporate taxable stockholders as ordinary dividend income eligible for the reduced maximum rate applicable to qualified dividend income to the extent of its current and accumulated earnings and profits, provided certain holding period and other requirements are met. Subject to certain limitations under the Code, corporate distributions would be eligible for the dividends-received deduction. To qualify again to be taxed as a RIC in a subsequent year, the Company would be required to distribute to its shareholders its accumulated earnings and profits attributable to non-RIC years. In addition, if the Company failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, it would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of five years.

The Company follows ASC 740, Income Taxes ("ASC 740"). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. As of March 31, 2026, the Company did not record any unrecognized tax benefits or liabilities. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Although the Company files both federal and state income tax returns, its major tax jurisdiction is federal. The Company’s federal tax returns for the taxable years ended December 31, 2022 and thereafter remain subject to examination by the Internal Revenue Service.

Taxable Subsidiaries. Certain of our consolidated subsidiaries are subject to U.S. federal and state corporate-level income taxes. As of March 31, 2026, and June 30, 2025, no net tax benefit or expense was recorded since they did not result in a material provision for income taxes. As of March 31, 2026, and June 30, 2025, the net deferred tax asset or liability was not material to the financial statements after taking into account valuation allowances.

Segment Reporting

In accordance with ASC Topic 280 - Segment Reporting (“ASC 280”), the Company has determined that it has a single operating and reporting segment. As a result, the Company’s segment accounting policies are the same as described herein and the Company does not have any intra-segment sales and transfers of assets.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standard updates ("ASU") issued by the Financial Accounting Standards Board ("FASB"). ASUs not listed were assessed by the Company and either determined to be not applicable or expected to have minimal impact on its consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”)," which intends to improve the transparency of income tax disclosures. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. The Company has adopted ASU 2023-09 effective September 30, 2025 and concluded that the application of this guidance did not have a material impact on its consolidated financial statements.

NOTE 3 - SHARE TRANSACTIONS

Below is a summary of transactions with respect to shares of common stock of the Company during the three months ended March 31, 2026 and 2025 and the nine months ended March 31, 2026 and 2025. There were no shares transactions with Class I Common stock for the three and nine months ended March 31, 2026.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Three Months Ended March 31, 2026			Nine Months Ended March 31, 2026
	PFLOAT Class A Common Stock			PFLOAT Class A Common Stock
	Shares	Amount		Shares	Amount
Shares issued through reinvestment of distributions	205,025	$	821,772	568,629	$	2,436,429
Repurchase of common stock	(64,694)	(244,546)		(183,056)	(758,667)
Net increase/(decrease) from capital transactions	140,331	$	577,226	385,573	$	1,677,762


	Three Months Ended March 31, 2025			Nine Months Ended March 31, 2025
	PFLOAT Class A Common Stock			PFLOAT Class A Common Stock
	Shares	Amount		Shares	Amount
Shares issued	—	$	—	2,096,436	$	10,000,000
Shares issued through reinvestment of distributions	163,941	750,068		454,852	2,112,221
Repurchase of common stock	(151,171)	(696,902)		(301,809)	(1,389,069)
Net increase/(decrease) from capital transactions	12,770	$	53,166	2,249,479	$	10,723,152


	Three Months Ended March 31, 2025			Nine Months Ended March 31, 2025
	PFLOAT Class I Common Stock			PFLOAT Class I Common Stock
	Shares	Amount		Shares	Amount
Shares issued	—	$	—	2,237	$	10,400
Shares issued through reinvestment of distributions	—	—		—	—
Repurchase of common stock	—	—		—	—
Net increase/(decrease) from capital transactions	—	$	—	2,237	$	10,400

On June 28, 2024, the Company accepted a subscription agreement from the Adviser for the sale of $10.0 million of the Company’s Class A common stock at a purchase price per Share equal to the Company’s net asset value per Share as of June 30, 2024. A total of 2,096,436 shares were issued on July 1, 2024. The offer and sale of these shares are exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof and Regulation D thereunder.

Share Repurchase Program

The Company may conduct quarterly tender offers pursuant to its share repurchase program. The Company’s Board of Directors will consider the following factors, among others, in making its determination regarding whether to cause the Company to offer to repurchase shares of common stock and under what terms:

• the effect of such repurchases on the Company’s qualification as a RIC (including the consequences of any necessary asset sales);

• the liquidity of the Company’s assets (including fees and costs associated with disposing of assets);

• the Company’s investment plans and working capital requirements;

• the relative economies of scale with respect to the Company’s size;

• the Company’s history in repurchasing shares of common stock or portions thereof; and

• the condition of the securities markets.

The Company currently intends to limit the number of shares of common stock to be repurchased during any calendar year to the number of shares of common stock it can repurchase with the cash retained as a result of issuing shares under its distribution reinvestment plan to those stockholders who have elected to receive their distributions in the form of additional shares rather than in cash. At the discretion of the Company’s Board of Directors, the Company may also use cash on hand, cash available from borrowings and cash from the liquidation of securities investments as of the end of the applicable period to repurchase shares of common stock. In addition, the Company will limit the number of shares of common stock to be repurchased in any calendar year to 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter, though the actual number of shares of common stock that the Company offers to repurchase may be less in light of the limitations noted above.

Our Board of Directors reserves the right, in its sole discretion, to limit the number of shares to be repurchased for each class by applying the limitations on the number of shares to be repurchased, noted above, on a per class basis. We further anticipate that

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

we will offer to repurchase such shares on each date of repurchase at a price equal to the net asset value per share on each date of repurchase. If the amount of repurchase requests exceeds the number of shares we seek to repurchase, we will repurchase shares on a pro-rata basis. As a result, we may repurchase less than the full amount of shares that stockholders submit for repurchase. If we do not repurchase the full amount of the shares that stockholders have requested to be repurchased, or we determine not to make repurchases of our shares, stockholders may not be able to dispose of their shares. Any periodic repurchase offers will be subject in part to our available cash and compliance with the 1940 Act.

Below is a summary of transactions with respect to shares of common stock during each tender offer:


Quarterly Offer Date	Repurchase Effective Date	Class A Shares Repurchased	Class I Shares Repurchased	Percentage of Shares Tendered That Were Repurchased		Repurchase Price Per Share		Aggregate Consideration for Repurchased Shares

Nine months ended March 31, 2026
September 30, 2025	August 22, 2025	65,840	—	100	%	$	4.53	$	298,256
December 31, 2025	November 18, 2025	52,522	—	100	%	$	4.11	215,865
March 31, 2026	February 12, 2026	64,694	—	100	%	$	3.78	244,546
Total for the nine months ended March 31, 2026		183,056	—					$	758,667

Year ended June 30, 2025
September 30, 2024	September 23, 2024	47,845	—	15	%	$	4.67	$	223,438
December 31, 2024	November 25, 2024	102,793	—	45	%	$	4.56	468,729
March 31, 2025	February 21, 2025	151,171	—	100	%	$	4.61	696,902
June 30, 2025	May 20, 2025	155,049	—	100	%	$	4.46	691,519
Total for the year ended June 30, 2025		456,858	—					$	2,080,588

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 4 - RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

Administration Agreement

The Administrator, an affiliate of the Adviser, became the administrator for the Company pursuant to an administrative agreement, as amended and restated as of June 17, 2019 and as of March 4, 2026 (the "Administration Agreement"). The Administrator performs, oversees and arranges for the performance of administrative services necessary for the operation of the Company. These services include, but are not limited to, accounting, finance and legal services. For providing these services, facilities and personnel, the Company reimburses the Administrator for the Company’s actual and allocable portion of expenses and overhead incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the costs of administrative personnel.

For the three months ended March 31, 2026 and 2025, allocation of overhead from the Administrator to the Company was $165,156 and $165,000, respectively, of which $165,156 was waived by the Administrator under the Expense Limitation Agreement during the three months ended March 31, 2026. The Administrator also waived $200,000 of past overhead fees during the three months ended March 31, 2026 that were previously recorded and recognized in the Consolidated Statement of Operations. The Administrator did not waive any overhead fees during the three months ended March 31, 2025.

For the nine months ended March 31, 2026 and 2025, allocation of overhead from the Administrator to the Company was $497,656 and $436,000, respectively, of which $497,656 was waived by the Administrator under the Expense Limitation Agreement during the nine months ended March 31, 2026. The Administrator also waived $200,000 of past overhead fees during the nine months ended March 31, 2026 that were previously recorded and recognized in the Consolidated Statement of Operations. The Administrator did not waive any overhead fees during the nine months ended March 31, 2025.

During the three months ended March 31, 2026 and 2025, $0 and $20,000, respectively, of US Bank, BNY and Sumitomo Mitsui Banking Corporation ("SMBC") fees are being included within the Administrator costs incurred by the Company.

During the nine months ended March 31, 2026 and 2025, $2,500 and $50,000, respectively, of US Bank, BNY and SMBC fees are being included within the Administrator costs incurred by the Company.

As of March 31, 2026 and June 30, 2025, $1,815,286 and $2,015,442, respectively, was payable to the Administrator, US Bank and SMBC by the Company.

Investment Advisory Agreement

On April 20, 2021, the Company entered into the Investment Advisory Agreement with the Adviser, which was unanimously approved by the Company’s Board of Directors, including by all of the directors who are not "interested persons" (as defined in the 1940 Act), on February 18, 2021, subject to stockholder approval of the Investment Advisory Agreement. The Company’s stockholders approved the Investment Advisory Agreement at a Special Meeting of Stockholders held on March 31, 2021.

On November 5, 2021, we amended and restated the Investment Advisory Agreement to reduce the advisory fees payable thereunder, effective as of January 1, 2022 and until the one-year anniversary of the listing of our common stock on a national securities exchange (the "Listing Anniversary"), as further discussed below. The Amended and Restated Advisory Agreement was unanimously approved by our Board of Directors, including by all of the directors who are not "interested persons" (as defined in the 1940 Act), and became effective on January 1, 2022. Under the Amended and Restated Advisory Agreement, we reduced the base management fee from an annual rate of 1.75% to 1.20% and eliminated the incentive fee payable thereunder, effective as of January 1, 2022 and until the Listing Anniversary. Until such effective date, the advisory fees payable to the Adviser were as set forth in the Investment Advisory Agreement. The Amended and Restated Advisory Agreement has an initial two-year term and may be continued thereafter for successive one-year periods if such continuance is approved in the manner provided for under Section 15 of the 1940 Act.

On March 4, 2026, the Amended and Restated Advisory Agreement was further amended and restated to effect certain immaterial changes requested by certain state securities regulatory authorities based on the NASAA Omnibus Guidelines. The Second Amended and Restated Advisory Agreement was unanimously approved by our Board of Directors, including by all of the directors who are not "interested persons" (as defined in the 1940 Act), and became effective on March 4, 2026.

The Investment Advisory Agreement, as amended and restated, is further discussed below.

Investment Advisory Agreement

Pursuant to the Investment Advisory Agreement, we pay the Adviser a fee for investment advisory and management services consisting of a base management fee and an incentive fee. The cost of both the base management fee payable to the Adviser and any incentive fees it earns will ultimately be borne by our stockholders. See "Amended and Restated Advisory Agreement" below for additional information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Base Management Fee

The base management fee was calculated at an annual rate of 1.75% (0.4375% quarterly) of our average total assets, which includes any borrowings for investment purposes. For the first quarter of our operations commencing with the date of the Investment Advisory Agreement, the base management fee was calculated based on the average value of our total assets as of the date of the Investment Advisory Agreement and at the end of the calendar quarter in which the date of the Investment Advisory Agreement fell, and was appropriately adjusted for any share issuances or repurchases during the then current calendar quarter. Subsequently, the base management fee is payable quarterly in arrears, and is calculated based on the average value of our total assets at the end of the two most recently completed calendar quarters, and is appropriately adjusted for any share issuances or repurchases during the then current calendar quarter. Base management fees for any partial month or quarter is appropriately pro-rated. At the Adviser’s option, the base management fee for any period may be deferred, without interest thereon, and paid to the Adviser at any time subsequent to any such deferral as the Adviser determines.

Incentive Fee

The incentive fee consisted of two parts: (1) the subordinated incentive fee on income and (2) the capital gains incentive fee.

Incentive Fee- Subordinated Incentive Fee on Income

The first part of the incentive fee, which is referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears based upon our "pre-incentive fee net investment income" for the immediately preceding calendar quarter. For purpose of this fee "pre-incentive fee net investment income" means interest income, dividend income and distribution cash flows from equity investments and any other income (including any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, expenses reimbursed under the Investment Advisory Agreement and the Administration Agreement, any interest expense and dividends paid on any issued and outstanding preferred shares, but excluding the organization and offering expenses and incentive fees on income and capital gains). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a preferred return, or "hurdle," of 1.5% per quarter (6.0% annualized) and a "catch-up" feature measured as of the end of each calendar quarter as discussed below. The subordinated incentive fee on income for each calendar quarter is paid to our Adviser as follows: (1) no incentive fee is payable to our Adviser in any calendar quarter in which our pre-incentive fee net investment income does not exceed the fixed preferred return rate of 1.5%; (2) 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the fixed preferred return but is less than or equal to 1.875% in any calendar quarter (7.5% annualized); and (3) 20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 1.875% in any calendar quarter (7.5% annualized). This reflects that once the fixed preferred return is reached and the catch-up is achieved, 20.0% of all pre-incentive fee net investment income thereafter is allocated to our Adviser. These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.

Incentive Fee- Capital Gains Incentive Fee

The second part of the incentive fee, which is referred to as the capital gains incentive fee, is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.00% of our realized capital gains for the calendar year, if any, computed net of all realized capital losses and unrealized capital depreciation at the end of such year; provided that the incentive fee determined as of December 31, 2021 will be calculated for a period of shorter than twelve calendar months to take into account any net realized capital gains, if any, computed net of all realized capital losses and unrealized capital depreciation for the period commencing as of the date of the Investment Advisory Agreement and ending on December 31, 2021. In determining the capital gains incentive fee payable to our Adviser, we calculate the aggregate realized capital gains, aggregate realized capital losses and aggregate unrealized capital depreciation, as applicable, with respect to each investment that has been in our portfolio. For the purpose of this calculation, an "investment" is defined as the total of all rights and claims which may be asserted against a portfolio company arising from our participation in the debt, equity, and other financial instruments issued by that company. Aggregate realized capital gains, if any, equal the sum of the differences between the aggregate net sales price of each investment and the aggregate amortized cost basis of such investment when sold or otherwise disposed. Aggregate realized capital losses equal the sum of the amounts by which the aggregate net sales price of each investment is less than the aggregate amortized cost basis of such investment when sold or otherwise disposed. Aggregate unrealized capital depreciation equals the sum of the differences, if negative, between the aggregate valuation of each investment and the aggregate amortized cost basis of such investment as of the applicable calendar year-end. At the end of the applicable calendar year, the amount of capital gains that serves as the basis for our calculation of

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the capital gains incentive fee involves netting aggregate realized capital gains against aggregate realized capital losses on a since-inception basis and then reducing this amount by the aggregate unrealized capital depreciation. If this number is positive, then the capital gains incentive fee payable is equal to 20.00% of such amount, less the aggregate amount of any capital gains incentive fees paid since inception. Operating expenses are not taken into account when determining capital gains incentive fees.

Amended and Restated Advisory Agreement

On November 5, 2021, we amended and restated the Investment Advisory Agreement to reduce the base management fee from an annual rate of 1.75% (0.4375% quarterly) to 1.20% (0.30% quarterly) and eliminate the incentive fee payable thereunder, effective as of January 1, 2022 and until the Listing Anniversary. As such, until the Listing Anniversary, the base management fee will be calculated at an annual rate of 1.20% (0.30% quarterly) and the Adviser will not be entitled to any incentive fee. Following the Listing Anniversary (1) the base management fee will be calculated at an annual rate of 1.75% (0.4375% quarterly), commencing with the first base management fee calculation that occurs after such anniversary, and (2) the Adviser will be entitled to receive the same incentive fee, including the subordinated incentive fee on income and the capital gains incentive fee, as set forth in the Investment Advisory Agreement and discussed above, commencing with the first calendar quarter after such anniversary. The Amended and Restated Advisory Agreement became effective on January 1, 2022. Until such effective date, the advisory fees payable to the Adviser were as set forth in the Investment Advisory Agreement. See "Investment Advisory Agreement" above.

During the three months ended March 31, 2026 and 2025, the total base management fee incurred by the Adviser was $266,636 and $312,824, respectively, which was waived by the Adviser under the Expense Limitation Agreement.

During the nine months ended March 31, 2026 and 2025, the total base management fee incurred by the Adviser was $839,951 and $916,005, respectively, which was waived by the Adviser under the Expense Limitation Agreement.

As of March 31, 2026 and June 30, 2025, the total base management fee due to the Adviser after the waiver was $0 and $0, respectively.

Co-Investments

On January 6, 2026, we, our Adviser and certain affiliates received an exemptive order from the SEC (the “Order”), which superseded a prior co-investment exemptive order granted on January 13, 2020 (and amended on August 2, 2022), that permits us, among other things, to participate with other funds managed or owned by our Adviser or certain affiliates, including Prospect Capital Corporation, Priority Income Fund, Inc. and Prospect Enhanced Yield Fund, in certain co-investment transactions, where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions included therein.

Under the terms of the Order, we generally are permitted to co-invest with certain of our affiliates if such co-investments are done on the same terms and at the same time, as further detailed in the Order. The Order requires that a “required majority” (as defined in Section 57(o) of the 1940 Act) of our Board of Directors make certain findings (1) in most instances when we co-invest with our affiliate in an issuer where our affiliate has an existing investment in the issuer, and either (i) we do not have an existing investment in the issuer or (ii) we do have an existing investment in the issuer, but we are not co-investing on a pro-rata basis with our affiliate, and (2) if we dispose of an asset acquired in a transaction under the Order unless the disposition is done on a pro rata basis. Pursuant to the Order, our Board of Directors oversees our participation in the co-investment program. As required by the Order, we have adopted, and our Board of Directors has approved, policies and procedures reasonably designed to ensure compliance with the terms of the Order, and our Adviser and our Chief Compliance Officer will provide reporting to the Board of Directors. The Order also imposes reporting and record keeping requirements and limitations and restrictions on transaction fees. We may only co-invest with other funds managed or owned by our Adviser or certain affiliates in accordance with such Order and existing regulatory guidance.

In certain situations where a co-investment with one or more funds managed by the Adviser or its affiliates is not covered by the Order, such as when there is an opportunity to invest in different securities of the same issuer, the personnel of the Adviser or its affiliates will need to decide which fund will proceed with the investment. Such personnel will make these determinations based on policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable laws, rules and regulations.

Officers and Directors

Certain officers and directors of the Company are also officers and directors of the Adviser and its affiliates. There were no fees paid to the independent directors of the Company as the Company did not exceed the minimum net asset value required (i.e., greater than $100 million) to receive a fee for the three and nine months ended March 31, 2026 and 2025. The officers do not receive any direct compensation from the Company.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Expense Limitation and Expense Reimbursement Agreements

Expense Limitation Agreement with the Adviser

On and effective April 20, 2021, we entered into a new expense limitation agreement with the Adviser, as amended and restated on July 7, 2021, to extend the period during which the Adviser was required to waive its investment advisory fees under the Investment Advisory Agreement, from September 30, 2021 to June 30, 2022 (the "First Amended and Restated ELA"). On August 23, 2022, we entered into the Second Amended and Restated Expense Limitation Agreement (the "Second Amended and Restated ELA") to extend the period during which the Adviser was required to waive its investment advisory fees under the Investment Advisory Agreement from June 30, 2022 to December 31, 2022. On April 24, 2023, we entered into a Third Amended and Restated Expense Limitation Agreement (the "Third Amended and Restated ELA") to extend the period during which the Adviser was required to waive its investment advisory fees under the Investment Advisory Agreement from December 31, 2022 to June 30, 2024. On May 13, 2024, we entered into a Fourth Amended and Restated Expense Limitation Agreement (the "Fourth Amended and Restated ELA") to extend the period during which the Adviser will be required to waive its investment advisory fees under the Investment Advisory Agreement from June 30, 2024 to December 31, 2024. Other than the change in time periods, the terms and conditions of the Fourth Amended and Restated ELA are identical to those of the First Amended and Restated ELA, the Second Amended and Restated ELA, and the Third Amended and Restated ELA. On February 12, 2025, we entered into a Fifth Amended and Restated Expense Limitation Agreement (the "Fifth Amended and Restated ELA") to extend the period during which the Adviser will be required to waive its investment advisory fees under the Investment Advisory Agreement from December 31, 2024 to June 30, 2025 as well as reduce the Annual Limit (as defined below) from 8.00% to 4.00%, as discussed below.

On July 25, 2025, the Company entered into a Sixth Amended and Restated Expense Limitation Agreement (the "Sixth Amended and Restated ELA" and, together with the First Amended and Restated ELA, the Second Amended and Restated ELA, the Third Amended and Restated ELA, the Fourth Amended and Restated ELA, and the Fifth Amended and Restated ELA, the "ELA") with the Adviser, which amended and restated the ELA, which was previously amended and restated on July 7, 2021, August 23, 2022, April 24, 2023, May 13, 2024, and February 12, 2025 to extend the period during which the Adviser has agreed to waive its investment advisory fees under the Investment Advisory Agreement, dated April 20, 2021, by and between the Company and the Adviser, and also requires the Adviser to reimburse the Company for certain other expenses in order to limit the Company’s operating expenses to an annual rate, expressed as a percentage of the Company’s average quarterly net assets, equal to 0.00%. The Sixth Amended and Restated ELA is in effect from July 1, 2025 until the quarter ending December 31, 2026. The Sixth Amended and Restated ELA permits for expenses waived or reimbursed by the Adviser to be recouped by the Adviser in accordance with the terms of the Sixth Amended and Restated ELA. However, pursuant to the terms of the Sixth Amended and Restated ELA, given the 0.00% annual rate, the expenses waived or reimbursed by the Adviser under the Sixth Amended and Restated ELA will effectively not be subject to recoupment. Other than these changes, the terms and conditions of the Sixth Amended and Restated ELA are identical to those of the Fifth Amended and Restated ELA.

For purposes of the ELA, the term "Operating Expenses" with respect to the Company, is defined to include all expenses necessary or appropriate for the operation of the Company, including but not limited to our Adviser’s base management fee, any and all costs and expenses that qualify as line item "operating" expenses in the consolidated financial statements of the Company as the same are filed with the SEC and other expenses described in the Investment Advisory Agreement, but does not include any portfolio transaction or other investment-related costs (including brokerage commissions, dealer and underwriter spreads, prime broker fees and expenses and dividend expenses related to short sales), shareholder servicing and/or distribution fees, interest expenses and other financing costs, extraordinary expenses and acquired fund fees and expenses. Upfront shareholder transaction expenses, such as sales commissions, dealer manager fees and similar expenses, are not Operating Expenses. Our Adviser waived expenses, pursuant to the ELA, in an amount of $737,584 and $312,824 for the three months ended March 31, 2026 and 2025, respectively, and in an amount of $2,225,010 and $916,005 for the nine months ended March 31, 2026 and 2025, respectively.

As of March 31, 2026, pursuant to the Sixth Amended and Restated ELA, we are due $305,792 from our Adviser. This amount includes all of the Company's Operating Expenses. As of June 30, 2025, there was no amount due from the Adviser.

Any amount waived pursuant to the ELA is subject to repayment to our Adviser (an "ELA Reimbursement") by us within three years of the date on which the waiver was made by our Adviser and subject to the terms of the ELA. If the ELA is terminated or expires pursuant to its terms, our Adviser will maintain its right to repayment for any waiver it has made under the ELA, subject to the Repayment Limitations (discussed below).

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

aggregate quarterly distribution to its shareholders, at a minimum annualized rate of at least 6.00% (based on the gross offering prices of Company shares) (the "Distribution") from the sum of (x) the Company’s net investment income (loss) for such quarter plus (y) the Company’s net realized gains (losses) for such quarter (collectively, the "Repayment Limitations"). For the purposes of the calculations pursuant to (i) and (ii) of the preceding sentence, any ELA Reimbursement will be treated as an expense of the Company for such quarter. In the event that the Company is unable to make a full payment of any ELA Reimbursements due for any applicable quarter because the Company does not have sufficient excess cash on hand, any such unpaid amount shall become a payable of the Company for accounting purposes and shall be paid when the Company has sufficient cash on hand (subject to the Repayment Limitations); provided, that in the case of any ELA Reimbursements, such payment shall be made no later than the date that is three years after the date on which the applicable waiver was made by our Adviser. For purposes of the Repayment Limitations, the “Applicable Annual Limit” is the lesser of (i) the Annual Limit in place at the time that the waiver was made or (ii) any Annual Limit in place at the time of such ELA Reimbursement.


Period Ended	ELA Reimbursement waived by the Adviser		ELA Reimbursement Payment to the Adviser	Unreimbursed ELA Amounts		Annual Limit	Operating Expense Ratio	Annualized Distribution Rate	Eligible to be Repaid Through
December 31, 2022	105,950		—	105,950		8.00%	3.30%	7.49%	December 31, 2025
March 31, 2023	105,279		—	105,279		8.00%	3.33%	7.18%	March 31, 2026
June 30, 2023	99,018		—	99,018		8.00%	2.79%	6.97%	June 30, 2026
September 30, 2023	83,359		—	83,359		8.00%	4.06%	7.85%	September 30, 2026
December 31, 2023	74,073		—	74,073		8.00%	5.00%	7.43%	December 31, 2026
March 31, 2024	105,128		—	105,128		8.00%	3.14%	7.51%	March 31, 2027
June 30, 2024	184,993		—	184,993		8.00%	2.75%	7.57%	June 30, 2027
September 30, 2024	289,161		—	289,161		8.00%	2.82%	7.64%	September 30, 2027
December 31, 2024	314,020		—	314,020		4.00%	2.06%	8.59%	December 31, 2027
March 31, 2025	312,824		—	312,824		4.00%	2.36%	8.72%	March 31, 2028
June 30, 2025	244,340		—	244,340		4.00%	2.03%	4.97%	June 30, 2028
September 30, 2025	763,365		—	763,365		0.00%	1.98%	10.87%	September 30, 2028
December 31, 2025	724,061		—	724,061		0.00%	2.01%	10.89%	December 31, 2028
March 31, 2026	737,584		—	737,584		0.00%	2.11%	24.73%	March 31, 2029
Total	$	4,143,155		$	4,143,155

Prior Dealer Manager Agreement

On May 13, 2024, we entered into the Prior Dealer Manager Agreement with PCS. Pursuant to the terms of the Prior Dealer Manager Agreement, we paid PCS over time a shareholder servicing and/or distribution fee with respect to our outstanding Class S and Class D shares equal to 0.85% and 0.25%, respectively, per annum of the aggregate NAV of our outstanding Class S and Class D shares, including any Class S and Class D shares issued pursuant to our distribution reinvestment plan, which was included in the 10% underwriting compensation limit. The shareholder servicing and/or distribution fees were paid monthly in arrears. PCS reallowed (paid) all or a portion of the shareholder servicing and/or distribution fees to participating brokers for ongoing shareholder services performed by such participating brokers.

Our Adviser or an affiliate may also pay directly, or reimburse PCS if PCS paid on our behalf, any organization and offering expenses (other than any underwriting compensation, including upfront selling commissions and shareholder servicing and/or distribution fees, subject to FINRA Rule 2310). Additionally, our Adviser paid PCS a distribution services fee of 0.848% of the sales price of each share sold, except for sales arranged by our Adviser, an affiliate of our Adviser, or their respective personnel.

On January 26, 2026, the Company signed an agreement with PCS to terminate the Prior Dealer Manager Agreement. The termination of the Prior Dealer Manager Agreement became effective on March 29, 2026.

Distribution Agreement

On January 26, 2026, the Company entered into the Distribution Agreement with the Distributor to act as distributor in the Company's Multi-Class Offering. The Distribution Agreement became effective on March 29, 2026. Either party may terminate the Distribution Agreement upon 60 days’ written notice to the other party. Pursuant to the Distribution Agreement, the Company will indemnify the Distributor, its officers, directors, employees and other agents in certain circumstances, except that such parties will not be indemnified for any liability to which they would otherwise be subject by reason of willful misfeasance,

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

bad faith or gross negligence in the performance of their duties, or by reason of their reckless disregard of their obligations and duties under the Distribution Agreement.

License Agreement

We entered into a license agreement with an affiliate of our Adviser, pursuant to which the affiliate granted us a non-exclusive, royalty free license to use the "Prospect" name. Under this license agreement, we have the right to use such name for so long as our Adviser or another affiliate of the Adviser is our investment adviser. Other than with respect to this limited license, we have no legal right to the "Prospect" name or logo.

NOTE 5 - DISTRIBUTIONS

The following table reflects the cash distributions per share that the Company declared on its common stock during the nine months ended March 31, 2026 and 2025:


	Distributions
For the Nine Months Ended March 31, 2026	PFLOAT Class A Common Stock, per share		PFLOAT Class A Common Stock, Amount Distributed		PFLOAT Class I Common Stock, per share		PFLOAT Class I Common Stock, Amount Distributed
July 25, 2025	$	0.03428	$	305,897	$	0.03428	$	77
August 29, 2025	0.04285		382,143		0.04285		96
September 26, 2025	0.03452		310,410		0.03452		77
October 31, 2025	0.04315		390,644		0.04315		95
November 28, 2025	0.03176		288,276		0.03176		71
December 26, 2025	0.03176		290,255		0.03176		73
January 30, 2026	0.03970		365,316		0.03970		89
February 27, 2026	0.02916		268,739		0.02916		65
March 27, 2026 (a)	0.07226		670,518		0.07226		162
Total for the Nine Months Ended March 31, 2026			$	3,272,198			$	805

(a) The March 27, 2026 distribution includes a bonus distribution of $0.04310 per share.


	Distributions
For the Nine Months Ended March 31, 2025	PFLOAT Class A Common Stock, per share		PFLOAT Class A Common Stock, Amount Distributed		PFLOAT Class I Common Stock, per share		PFLOAT Class I Common Stock, Amount Distributed
July 26, 2024	$	0.02724	$	239,396	$	—	$	—
August 30, 2024	0.03650		322,325		—		—
September 27, 2024	0.03048		269,443		—		—
October 25, 2024	0.03048		270,932		0.03048		68
December 2, 2024	0.03780		333,979		0.03780		84
December 27, 2024	0.03024		269,075		0.03024		68
January 31, 2025	0.03780		338,255		0.03780		84
February 28, 2025	0.02992		265,119		0.02992		67
March 28, 2025	0.02992		266,613		0.02992		67
Total for the Nine Months Ended March 31, 2025			$	2,575,137			$	438

The Company has adopted an "opt in" distribution reinvestment plan for its stockholders. As a result, if the Company makes a cash distribution, its stockholders will receive distributions in cash unless they specifically "opt in" to the distribution reinvestment plan so as to have their cash distributions reinvested in additional shares of the Company’s common stock. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a stockholder’s ability to participate in the distribution reinvestment plan.

The Company may fund its cash distributions to stockholders from any sources of funds legally available to it, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies and expense reimbursements from the Adviser. The Company has not established limits on the amount of funds it may use from available sources to make distributions.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the three months ended March 31, 2026 and 2025, the Company's officers and directors did not purchase any shares of our stock. During the nine months ended March 31, 2026, the Company's officers and directors did not purchase any shares of our stock. During the nine months ended March 31, 2025, the Company accepted subscriptions from the Adviser for the sale of $10.0 million of the Company’s Class A common stock and a total of 2,096,436 shares were issued.

NOTE 6 - INCOME TAXES

While our fiscal year end for financial reporting purposes is June 30 of each year, our taxable year end is December 31 of each year. The information presented in this footnote is based on our taxable year end for each period presented, unless otherwise specified.

For income tax purposes, distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or combination thereof.

The tax character of distributions paid to the Company's shareholders during the taxable years ended December 31, 2025 and 2024 were as follows:


	Taxable Year Ended
	December 31, 2025			December 31, 2024
Ordinary income	$	3,487,407		$	2,046,754
Return of capital	—			642,930
Total distributions paid to stockholders	$	3,487,407	(1)	$	2,689,684	(2)

(1) For the taxable year ended December 31, 2025, $38,250 of the 2024 declared distributions are allocable to 2025 for federal income tax purposes and are reported on the 2025 Form 1099-DIV.

(2) For the taxable year ended December 31, 2024, $87,789 of the 2023 declared distributions are allocable to 2024 for federal income tax purposes and are reported on the 2024 Form 1099-DIV. For the taxable year ended December 31, 2024, $38,250 of the 2024 declared distributions are allocable to 2025 for federal income tax purposes and will be reported on the 2025 Form 1099-DIV.

As of September 12, 2024 when our prior annual report on Form 10-K was filed for the fiscal year ended June 30, 2024, we estimated our distributions for the fiscal and taxable years disclosed therein to be distributions of ordinary income. Subsequent to September 12, 2024, we obtained more information from our underlying investments as to the character of the distributions for the taxable year ended December 31, 2024, which resulted in changes to distributions previously disclosed in our annual report on Form 10-K for the fiscal year ended June 30, 2024. As a result of these changes, our total distributable loss on our Consolidated Statements of Assets and Liabilities in our annual report on Form 10-K for the fiscal year ended June 30, 2024 changed from $12,387,890 to $12,644,774, with $256,884 being reclassified to ordinary income from return of capital.

The Company's cost basis of investments as of March 31, 2026 for tax purposes was $70,336,335, resulting in an estimated net unrealized loss of $7,298,705. The gross unrealized gains and losses as of March 31, 2026 were $2,250,480 and $9,549,185, respectively. The Company's cost basis of investments as of June 30, 2025 for tax purposes was $88,771,185, resulting in an estimated net unrealized loss of $3,754,589. The gross unrealized gains and losses as of June 30, 2025 were $1,675,136 and $5,429,725, respectively.

Taxable income generally differs from net increase (decrease) in net assets resulting from operations for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized gains or losses, as unrealized gains or losses are generally not included in taxable income until they are realized. The following reconciles the net increase (decrease) in net assets resulting from operations to taxable income for the taxable years ended December 31, 2025 and 2024.


	Taxable Year Ended December 31, 2025		Taxable Year Ended December 31, 2024
Net increase (decrease) in net assets resulting from operations	$	(3,814,243)	$	102,228
Net realized (gains) losses on investments	2,880,695		3,366,992
Net change in unrealized (gains) losses on investments	5,307,259		(1,783,495)
Other temporary book-to-tax differences	115,853		(33,001)
Permanent differences	356,938		355,308
Taxable income (loss) before deductions for distributions	$	4,846,502	$	2,008,032

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Capital losses in excess of capital gains earned in a taxable year may generally be carried forward and used to offset capital gains, subject to certain limitations. For the taxable year ended December 31, 2025 and December 31, 2024, we had capital loss carryforwards of $9,373,790 and $7,727,035, respectively, available for use in later taxable years. The unused balance each year will be carried forward and utilized as gains are realized, subject to limitations. While our ability to utilize losses in the future depends upon a variety of factors that cannot be known in advance, some of the Company’s capital loss carryforwards may become permanently unavailable due to limitations by the Code.

As of our most recent taxable year ended December 31, 2025, we had undistributed ordinary income in excess of cumulative distributions, capital gain in excess of cumulative distributions, and capital loss carryforwards as follows:


	Tax Year Ended December 31, 2025
Undistributed ordinary income	$	1,359,095
Undistributed long-term capital gains	$	—
Capital loss carryforwards	$	(9,373,790)

In general, we make certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which may include merger-related items, differences in the book and tax basis of certain assets and liabilities, amortization of offering costs, expense payments, nondeductible federal excise taxes and net operating losses, among other items. During the taxable year ended December 31, 2025, we increased overdistributed net investment income by $356,938 and decreased capital in excess of par value by $356,938. During the taxable year ended December 31, 2024, we increased overdistributed net investment income by $355,308 and decreased capital in excess of par value by $355,308. Due to the difference between our fiscal and taxable year end, the reclassifications for the taxable year ended December 31, 2025 were recorded in the fiscal year ending June 30, 2026 and the reclassifications for the taxable year ended December 31, 2024 were recorded in the fiscal year ended June 30, 2025.

NOTE 7 - INVESTMENT PORTFOLIO

The original cost basis of debt and equity securities acquired, including follow-on investments for existing portfolio companies, payment-in-kind interest, and structuring fees, totaled $1,201,795 and $5,327,223 during the three months ended March 31, 2026 and 2025, respectively.

The original cost basis of debt and equity securities acquired, including follow-on investments for existing portfolio companies, payment-in-kind interest, and structuring fees, totaled $7,133,326 and $43,332,729 during the nine months ended March 31, 2026 and 2025, respectively.

The original cost basis of debt and equity securities disposed from noncash restructured investments totaled $0 and $1,457,792 during the three months ended March 31, 2026 and 2025, respectively.

The original cost basis of debt and equity securities disposed from noncash restructured investments totaled $3,241,856 and $4,360,010 during the nine months ended March 31, 2026 and 2025, respectively.

Debt repayments and considerations from sales of debt and equity securities, excluding noncash restructured investments, of approximately $2,067,435 and $3,925,879 were received during the three months ended March 31, 2026 and 2025, respectively.

Debt repayments and considerations from sales of debt and equity securities, excluding noncash restructured investments, of approximately $22,421,838 and $16,850,812 were received during the nine months ended March 31, 2026 and 2025, respectively.

Debt repayments and considerations from sales of debt and equity securities, including noncash restructured investments, of approximately $2,067,435 and $5,383,672 were received during the three months ended March 31, 2026 and 2025, respectively.

Debt repayments and considerations from sales of debt and equity securities, including noncash restructured investments, of approximately $25,663,693 and $21,210,823 were received during the nine months ended March 31, 2026 and 2025, respectively.

As of March 31, 2026 and June 30, 2025, 94% and 91%, respectively, of the Company's portfolio was invested in floating rate investments based on fair value, totaling $59,058,152 and $77,277,488, respectively. As of March 31, 2026 and June 30, 2025, 94% and 90% respectively, of the Company's portfolio was invested in floating rate investments based on amortized cost, totaling $65,766,878 and $79,308,649, respectively.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize the composition of the Company’s investment portfolio at amortized cost and fair value as of March 31, 2026 and June 30, 2025:


	March 31, 2026
	Investments at Amortized Cost(1)		Investments at Fair Value		Fair Value Percentage of Total Portfolio
Senior Secured Loans-First Lien	$	63,339,334	$	56,798,114	90	%
Senior Secured Loans-Second Lien	2,613,527		2,613,527		4	%
Structured Subordinated Notes	70,401		68,454		—	%
Common Equity/Other	3,279,862		2,717,332		5	%
Preferred Equity	509,255		840,204		1	%
Total Portfolio Investments	$	69,812,379	$	63,037,631	100	%

	June 30, 2025
	Investments at Amortized Cost(1)		Investments at Fair Value		Fair Value Percentage of Total Portfolio
Senior Secured Loans-First Lien	$	79,543,576	$	77,495,655	91	%
Senior Secured Loans-Second Lien	4,339,325		4,249,570		5	%
Structured Subordinated Notes	864,921		709,261		1	%
Common Equity/Other	3,279,862		2,061,100		2	%
Preferred Equity	377,122		501,010		1	%
Total Portfolio Investments	$	88,404,806	$	85,016,596	100	%

(1) Amortized cost represents the original cost adjusted for PIK interest and the amortization of premiums and/or accretion of discounts, as applicable, on investments.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of March 31, 2026 and June 30, 2025:


	March 31, 2026
Industry	Investments at Fair Value		Percentage of Portfolio
Healthcare & Pharmaceuticals	$	25,379,006	40	%
Consumer Goods: Non-Durable	5,134,397		8	%
Telecommunications	5,060,833		8	%
Services: Consumer	4,541,158		7	%
High Tech Industries	3,407,773		5	%
Beverage, Food & Tobacco	2,981,169		5	%
Transportation: Cargo	2,943,835		5	%
Automotive	2,875,402		5	%
Wholesale	2,794,915		5	%
Finance	2,779,347		4	%
Services: Business	2,675,062		4	%
Media: Advertising, Printing & Publishing	2,396,280		4	%
Structured Finance (1)	68,454		—	%
Total	$	63,037,631	100	%

(1) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.

	June 30, 2025
Industry	Investments at Fair Value		Percentage of Portfolio
Healthcare & Pharmaceuticals	$	22,902,129	27	%
Automotive	8,145,766		10	%
Telecommunications	7,355,550		9	%
Consumer Goods: Non-Durable	5,069,461		6	%
Beverage, Food & Tobacco	4,954,278		6	%
High Tech Industries	4,915,366		6	%
Services: Consumer	4,655,664		5	%
Transportation: Cargo	4,466,250		5	%
Consumer Goods: Durable	4,296,202		5	%
Services: Business	4,184,835		5	%
Media: Advertising, Printing & Publishing	3,413,576		4	%
Wholesale	2,916,144		3	%
Banking	2,682,544		3	%
Finance	2,600,000		3	%
Media: Diversified and Production	1,749,570		2	%
Structured Finance(1)	709,261		1	%
Total	$	85,016,596	100	%

(1) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the fair value of our investments that are measured at fair value on a recurring basis disaggregated into the three levels of the ASC 820 valuation hierarchy as of March 31, 2026 and June 30, 2025, respectively:


	As of March 31, 2026
	Level 1		Level 2		Level 3		Total
Portfolio Investments
Senior Secured Loans-First Lien	$	—	$	8,651,486	$	48,146,628	$	56,798,114
Senior Secured Loans-Second Lien	—		—		2,613,527		2,613,527
Structured Subordinated Notes	—		—		68,454		68,454
Common Equity/Other	—		—		2,717,332		2,717,332
Preferred Equity	—		—		840,204		840,204
Total Portfolio Investments	$	—	$	8,651,486	$	54,386,145	$	63,037,631

	As of June 30, 2025
	Level 1		Level 2		Level 3		Total
Portfolio Investments
Senior Secured Loans-First Lien	$	—	$	21,263,851	$	56,231,804	$	77,495,655
Senior Secured Loans-Second Lien	—		1,749,570		2,500,000		4,249,570
Structured Subordinated Notes	—		—		709,261		709,261
Common Equity/Other	—		—		2,061,100		2,061,100
Preferred Equity	—		—		501,010		501,010
Total Portfolio Investments	$	—	$	23,013,421	$	62,003,175	$	85,016,596

Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, management and the independent valuation firm look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. These investments are classified as Level 1 or Level 2 in the fair value hierarchy.

The fair value of debt investments specifically classified as Level 2 in the fair value hierarchy are generally valued by an independent pricing agent or more than one principal market maker, if available, otherwise a principal market maker or a primary market dealer. We generally value over-the-counter securities by using the prevailing bid and ask prices from dealers during the relevant period end, which were provided by an independent pricing agent and screened for validity by such service.

In determining the range of values for debt instruments where market quotations are not available, and are therefore classified as Level 3 in the fair value hierarchy, except CLOs and debt investments in controlling portfolio companies, management and the independent valuation firm estimated corporate and security credit ratings and identified corresponding yields to maturity for each loan from relevant market data. A discounted cash flow technique was then applied using the appropriate yield to maturity as the discount rate, to determine a range of values. In determining the range of values for equity investments of portfolio companies , the enterprise value was determined by applying a market approach such as using earnings before interest, taxes, depreciation and amortization ("EBITDA") multiples, net income and/or book value multiples for similar guideline public companies and/or similar recent investment transactions and/or an income approach, such as the discounted cash flow technique. The enterprise value technique may also be used to value debt investments which are credit impaired. For stressed debt and equity investments, asset recovery analysis was used.

In determining the range of values for our investments in CLOs, the independent valuation firm uses a discounted multi-path cash flow model. The valuations were accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date (i.e., expected maturity). These risk factors are sensitized in the multi-path cash flow model using Monte Carlo simulations to generate probability-weighted (i.e., multi-path) cash flows for the underlying assets and liabilities. These cash flows are discounted using appropriate market discount rates, which consider relevant data in the CLO market and certain benchmark credit indices, to determine the value of each CLO investment. In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the implied discount rate that would be effective for the value derived from the corresponding multi-path cash flow model.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our portfolio consists of residual interests in CLOs, which involve a number of significant risks. CLOs are typically very highly levered (10 - 14 times), and therefore the residual interest tranches that we invest in are subject to a higher degree of risk of total loss. In particular, investors in CLO residual interests indirectly bear risks of the underlying loan investments held by such CLOs. We generally have the right to receive payments only from the CLOs, and generally do not have direct rights against the underlying borrowers or the entity that sponsored the CLOs. While the CLOs we target generally enable the investor to acquire interests in a pool of senior loans without the expenses associated with directly holding the same investments, the prices of indices and securities underlying our CLOs will rise or fall. These prices (and, therefore, the prices of the CLOs) will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally. The failure by a CLO investment in which we invest to satisfy financial covenants, including with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us. In the event that a CLO fails certain tests, holders of debt senior to us would be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting CLO or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.

The interests we have acquired in CLOs are generally thinly traded or have only a limited trading market. CLOs are typically privately offered and sold, even in the secondary market. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLO residual interests carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) our investments in CLO tranches will likely be subordinate to other senior classes of note tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO investment or unexpected investment results. Our net asset value may also decline over time if our principal recovery with respect to CLO residual interests is less than the cost of those investments. Our CLO investments and/or the CLOs’ underlying senior secured loans may prepay more quickly than expected, which could have an adverse impact on our value. These investments are classified as Level 3 in the fair value hierarchy.

An increase in interest rates would materially increase the CLO’s financing costs. Since most of the collateral positions within the CLOs have interest rate floors, there may not be corresponding increases in investment income (if interest rates increase but stay below the interest rate floor of such investments) resulting in materially smaller distribution payments to the residual interest investors.

We hold more than a 10% interest in certain foreign corporations that are treated as controlled foreign corporations ("CFC") for U.S. federal income tax purposes (including our residual interest tranche investments in CLOs). Therefore, we are treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporations in an amount equal to our pro rata share of the corporation’s income for that taxable year (including both ordinary earnings and capital gains). We are required to include such deemed distributions from a CFC in our taxable income and we are required to distribute at least 90% of such income to maintain our RIC status, regardless of whether or not the CFC makes an actual distribution during such year.

If we acquire shares in "passive foreign investment companies" ("PFICs") (including residual interest tranche investments in CLOs that are PFICs), we may be subject to federal income tax on a portion of any "excess distribution" or gain from the disposition of such shares even if such income is distributed as a taxable dividend to our stockholders. Certain elections may be available to mitigate or eliminate such tax on excess distributions, but such elections (if available) will generally require us to recognize our share of the PFIC’s income for each year regardless of whether we receive any distributions from such PFICs. We must nonetheless distribute such income to maintain our status as a RIC.

Legislation known as FATCA and regulations thereunder impose a withholding tax of 30% on payments of U.S. source interest and dividends to certain non-U.S. entities, including certain non-U.S. financial institutions and investment funds, unless such non-U.S. entity complies with certain reporting requirements regarding its United States account holders and its United States owners. Most CLOs in which we invest will be treated as non-U.S. financial entities for this purpose, and therefore will be required to comply with these reporting requirements to avoid the 30% withholding. If a CLO in which we invest fails to properly comply with these reporting requirements, it could reduce the amounts available to distribute to residual interest and junior debt holders in such CLO vehicle, which could materially and adversely affect our operating results and cash flows.

If we are required to include amounts in income prior to receiving distributions representing such income, we may have to sell some of our investments at times and/or at prices management would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose.

A portion of the Company’s portfolio is concentrated in CLOs, which is subject to a risk of loss if that sector experiences a market downturn. The Company is subject to credit risk in the normal course of pursuing its investment objectives. The Company’s maximum risk of loss from credit risk for the portfolio of CLO investments is the inability of the CLOs collateral managers to return up to the cost value due to defaults occurring in the underlying loans of the CLOs.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments in CLOs residual interests generally offer less liquidity than other investment grade or high-yield corporate debt, and may be subject to certain transfer restrictions. The Company’s ability to sell certain investments quickly in response to changes in economic and other conditions and to receive a fair price when selling such investments may be limited, which could prevent the Company from making sales to mitigate losses on such investments. In addition, CLOs are subject to the possibility of liquidation upon an event of default of certain minimum required coverage ratios, which could result in full loss of value to the CLOs interests and junior debt investors.

The fair value of the Company’s investments may be significantly affected by changes in interest rates. The Company’s investments in senior secured loans through CLOs are sensitive to interest rate levels and volatility. In the event of a significant rising interest rate environment and/or economic downturn, loan defaults may increase and result in credit losses which may adversely affect the Company’s cash flow, fair value of its investments and operating results. In the event of a declining interest rate environment, a faster than anticipated rate of prepayments is likely to result in a lower than anticipated yield.

The significant unobservable input used to value our investments based on the yield technique and discounted cash flow technique is the market yield (or applicable discount rate) used to discount the estimated future cash flows expected to be received from the underlying investment, which includes both future principal and interest/dividend payments. Increases or decreases in the market yield (or applicable discount rate) would result in a decrease or increase, respectively, in the fair value measurement. Management and the independent valuation firms may consider the following factors when selecting market yields or discount rates: risk of default, rating of the investment and comparable company investments, and call provisions.

The significant unobservable inputs used to value our investments based on the EV analysis may include market multiples of specified financial measures such as EBITDA, net income, or book value of identified guideline public companies, implied valuation multiples from precedent M&A transactions, and/or discount rates applied in a discounted cash flow technique. The independent valuation firm identifies a population of publicly traded companies with similar operations and key attributes to that of the portfolio company. Using valuation and operating metrics of these guideline public companies and/or as implied by relevant precedent transactions, a range of multiples of the latest twelve months EBITDA, or other measure such as net income or book value, is typically calculated. The independent valuation firm utilizes the determined multiples to estimate the portfolio company’s EV generally based on the latest twelve months EBITDA of the portfolio company (or other meaningful measure). Increases or decreases in the multiple would result in an increase or decrease, respectively, in EV which would result in an increase or decrease in the fair value measurement of the debt of controlled companies and/or equity investment, as applicable. In certain instances, a discounted cash flow analysis may be considered in estimating EV, in which case, discount rates based on a weighted average cost of capital and application of the capital asset pricing model may be utilized.

Changes in market yields, discount rates, EBITDA multiples, each in isolation, may change the fair value measurement of certain of our investments. Generally, an increase in market yields, discount rates, or a decrease in EBITDA (or other) multiples may result in a decrease in the fair value measurement of certain of our investments.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the currently assigned valuations.

Changes in Valuation Techniques

During the nine months ended March 31, 2026, the valuation methodology for Rising Tide Holdings Inc. (“Rising Tide”) for the Class A Common Units changed from the enterprise value waterfall to a combination of enterprise value waterfall and asset recovery analysis, given the performance of Rising Tide. The fair value of our investment in Rising Tide’s Class A Units was $0 as of March 31, 2026, a discount of $997,560, from its amortized cost, with no change from June 30, 2025.

During the nine months ended March 31, 2026, the valuation methodology for Druid City Infusion, LLC (“Druid City”) for the Convertible First Lien Term Loan changed from a combination of the yield analysis, Black-Scholes Option Pricing Method, and enterprise value waterfall, to solely the enterprise value waterfall, given Druid City’s continued performance in excess of underwriting expectations, which resulted in comparable valuation outcomes across methodologies and a valuation increasingly driven by expected recovery rather than optionality. The fair value of our investment in the Convertible First Lien Term Loan increased to $99,257 as of March 31, 2025, a premium of $47,727 from its amortized cost, compared to the $30,177 unrealized premium recorded at June 30, 2025.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the nine months ended March 31, 2026, the valuation methodology for WatchGuard Technologies, Inc. for the First Lien Term Loan changed from the a combination of the yield analysis and market quotes to solely the yield analysis, given market quotes were less active in the current period. As a result, the fair value of our investment increased to $3,407,773, as of March 31, 2026, a premium of $41,809 to its amortized cost, compared to the $47,382 unrealized premium recorded at June 30, 2025.

The following table shows industries that comprise of greater than 10% of our portfolio at fair value as of March 31, 2026 and June 30, 2025:


	March 31, 2026
	Cost		Fair Value		% of Portfolio
Healthcare & Pharmaceuticals	$	24,174,301	$	25,379,006	40	%
All Other Industries	45,638,078		37,658,625		60	%
Total	$	69,812,379	$	63,037,631	100	%


	June 30, 2025
	Cost		Fair Value		% of Portfolio
Healthcare & Pharmaceuticals	$	22,729,225	$	22,902,129	27	%
All Other Industries	65,675,581		62,114,467		73	%
Total	$	88,404,806	$	85,016,596	100	%

As of March 31, 2026, investments in California and South Carolina comprised 11.9% and 10.8%, respectively, of our investments at fair value, with a cost of $7,274,964 and $6,629,722 and a fair value of $7,530,677 and $6,814,722, respectively.

As of June 30, 2025, investments in California and New Jersey comprised 12.0% and 10.8%, respectively, of our investments at fair value, with a cost of $10,111,172 and $10,269,586, respectively, and a fair value of $10,232,607 and $9,158,337, respectively.

The following is a reconciliation for the three and nine months ended March 31, 2026 and 2025 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
	Senior Secured Loans - First Lien		Senior Secured Loans - Second Lien		Structured Subordinated Notes		Preferred Equity		Common Equity/Other		Total
Fair Value at December 31, 2025	$	47,117,403	$	2,557,387	$	169,710	$	828,866	$	2,487,602	$	53,160,968
Net realized gains (losses) on investments	—		—		(73,534)		—		—		(73,534)
Net change in unrealized gains (losses) on investments	200,177		—		21,045		2,465		229,730		453,417
Net realized and unrealized gains (losses) on investments	200,177		—		(52,489)		2,465		229,730		379,883
Purchases of investments	1,113,864		56,140		—		—		—		1,170,004
Payment-in-kind interest	3,828		—		—		8,873		—		12,701
Accretion (amortization) of purchase discount and premium, net	35,539		—		—		—		—		35,539
Net Reductions to Subordinated Structured Notes and related investment cost	—		—		(48,767)		—		—		(48,767)
Repayments and sales of portfolio investments	(324,183)		—		—		—		—		(324,183)
Transfers into Level 3(1)	—		—		—		—		—		—
Transfers out of Level 3(1)	—		—		—		—		—		—
Fair Value at March 31, 2026	$	48,146,628	$	2,613,527	$	68,454	$	840,204	$	2,717,332	$	54,386,145

Net change in unrealized gains (losses) attributable to Level 3 investments still held at the end of the period	$	200,177	$	—	$	21,045	$	2,465	$	229,730	$	453,417

(1)Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred.


	Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
	Senior Secured Loans - First Lien		Senior Secured Loans - Second Lien		Structured Subordinated Notes		Preferred Equity		Common Equity/Other		Total
Fair Value at June 30, 2025	$	56,231,804	$	2,500,000	$	709,261	$	501,010	$	2,061,100	$	62,003,175
Net realized gains (losses) on investments	(576,639)		—		(491,564)		—		—		(1,068,203)
Net change in unrealized gains (losses) on investments	932,047		—		153,717		207,059		656,232		1,949,055
Net realized and unrealized gains (losses) on investments	355,408		—		(337,847)		207,059		656,232		880,852
Purchases of investments	5,576,170		113,527		—		100,000		—		5,789,697
Payment-in-kind interest	114,754		—		—		32,135		—		146,889
Accretion (amortization) of purchase discount and premium, net	162,637		—		—		—		—		162,637
Net Reductions to Subordinated Structured Notes and related investment cost	—		—		(228,707)		—		—		(228,707)
Repayments and sales of portfolio investments	(11,611,601)		—		(74,253)		—		—		(11,685,854)
Transfers into Level 3(1)	—		—		—		—		—		—
Transfers out of Level 3(1)	(2,682,544)		—		—		—		—		(2,682,544)
Fair Value at March 31, 2026	$	48,146,628	$	2,613,527	$	68,454	$	840,204	$	2,717,332	$	54,386,145

Net change in unrealized gains (losses) attributable to Level 3 investments still held at the end of the period	$	295,670	$	—	$	106,842	$	207,059	$	656,232	$	1,265,803

(1)Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the nine months ended March 31, 2026, one of our first lien loans transferred out of Level 3 to Level 2 due to an increase in the level of market activity during the period.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
	Senior Secured Loans - First Lien		Senior Secured Loans - Second Lien		Structured Subordinated Notes		Preferred Equity		Common Equity/Other		Total
Fair Value at December 31, 2024	$	60,606,047	$	1,628,610	$	1,978,432	$	60,853	$	1,116,841	$	65,390,783
Net realized gains (losses) on investments	—		—		(502,268)		—		—		(502,268)
Net change in unrealized gains (losses) on investments	187,691		—		(100,654)		17,741		(262,870)		(158,092)
Net realized and unrealized gains (losses) on investments	187,691		—		(602,922)		17,741		(262,870)		(660,360)
Purchases of investments	4,962,321						50,000		—		5,012,321
Payment-in-kind interest	97,254		—		—		—		—		97,254
Accretion (amortization) of purchase discount and premium, net	(1,738)		—		—		—		—		(1,738)
Net Reductions to Subordinated Structured Notes and related investment cost	—		—		(174,303)		—		—		(174,303)
Repayments and sales of portfolio investments	(140,172)		—		—		—		—		(140,172)
Transfers within Level 3(1)(2)	(1,085,835)		—		—		—		1,085,835		—
Transfers into Level 3(1)	—		—		—		—		—		—
Transfers out of Level 3(1)	(12,166,512)		(1,628,610)		—		—		—		(13,795,122)
Fair Value at March 31, 2025	52,459,056		—		1,201,207		128,594		1,939,806		$	55,728,663

Net change in unrealized gains (losses) attributable to Level 3 investments still held at the end of the period	$	229,778	$	—	$	(100,654)	$	17,741	$	(262,871)	$	(116,006)

(1) Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the three months ended March 31, 2025, three of our first lien loans and one of our second lien loans transferred out of Level 3 to Level 2 due to an increase in the level of market activity during the period. During the three months ended March 31, 2025, none of our first lien loans transferred out of Level 2 to Level 3.
(2) Includes reorganizations and restructuring of investments.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
	Senior Secured Loans - First Lien		Senior Secured Loans - Second Lien		Structured Subordinated Notes		Preferred Equity		Common Equity/Other		Total
Fair Value at June 30, 2024	$	36,140,975	$	1,559,701	$	2,956,672	$	100,000	$	743,301	$	41,500,649
Net realized gains (losses) on investments	—		—		(1,373,613)		—		(297,076)		(1,670,689)
Net change in unrealized gains (losses) on investments	651,048		61,814		179,718		(21,406)		(171,593)		699,581
Net realized and unrealized gains (losses) on investments	651,048		61,814		(1,193,895)		(21,406)		(468,669)		(971,108)
Purchases of investments	31,853,401		—		—		50,000		—		31,903,401
Payment-in-kind interest	226,374		37,865		—		—		—		264,239
Accretion (amortization) of purchase discount and premium, net	262,820		(13,130)		—		—		—		249,690
Net Reductions to Subordinated Structured Notes and related investment cost	—		—		(561,570)		—		—		(561,570)
Repayments and sales of portfolio investments	(10,485,360)		(17,640)		—		—		—		(10,503,000)
Transfers within Level 3(1)(2)	(1,665,174)		—		—		—		1,665,174		—
Transfers into Level 3(1)	7,641,484		—		—		—		—		7,641,484
Transfers out of Level 3(1)	(12,166,512)		(1,628,610)		—		—		—		(13,795,122)
Fair Value at March 31, 2025	$	52,459,056	$	—	$	1,201,207	$	128,594	$	1,939,806	$	55,728,663

Net change in unrealized gains (losses) attributable to Level 3 investments still held at the end of the period	$	271,503	$	—	$	179,718	$	(21,406)	$	(171,593)	$	258,222

(1) Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the nine months ended March 31, 2025, one of our first lien loans and one of our second lien loans transferred out of Level 3 to Level 2 due to an increase in the level of market activity during the period. During the nine months ended March 31, 2025, one of our first lien loans transferred out of Level 2 to Level 3 due to a decrease in the level of market activity during the period and thus this investment was valued using observable inputs such as market yield analysis and indicative dealer quotes.
(2) Includes reorganizations and restructuring of investments.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides quantitative information regarding significant unobservable inputs used in the fair value measurement of Level 3 investments as of March 31, 2026:

Unobservable Inputs

Asset Category

Fair Value

Primary Valuation
Technique

Inputs

Range

Weighted
Average

Senior Secured First Lien Debt

45,355,355

Discounted Cash Flow (Yield Analysis)

Market yield

7.98%

15.64%

11.44%

Senior Secured First Lien Debt

186,792

Enterprise Value Waterfall (Market Approach)

EBITDA multiple

5.00x

7.75x

6.38x

Enterprise Value Waterfall (Discounted cash flow)

Discount Rate

10.75

12.75

11.75%

Senior Secured First Lien Debt

322,686

Discounted Cash Flow (Yield Analysis)

Market yield

13.14%

Option Pricing Model

Expected Volatility

50.00%

60.00%

Senior Secured First Lien Debt

2,281,795

Enterprise Value Waterfall (Market Approach)

EBITDA multiple

6.25x

9.25x

7.34x

Senior Secured Loans-Second Lien

2,613,527

Enterprise Value Waterfall (Market Approach)

EBITDA multiple

6.25x

7.25x

Common Equity/Other

2,717,332

Enterprise Value Waterfall (Market Approach)

EBITDA multiple

4.00x

9.25x

7.77x

Common Equity/Other

—

Enterprise Value Waterfall (Market Approach)

Revenue Multiple

0.28x

0.48x

0.38x

Discount Rate

0.22x

0.27x

0.25x

Preferred Equity

297,317

Option Pricing Model

Expected Volatility

60.00%

70.00%

Enterprise Value Waterfall (Market approach)

EBITDA multiple

6.00x

7.50x

7.13x

Preferred Equity

542,887

Enterprise Value Waterfall (Market approach)

EBITDA multiple

4.50x

7.50x

6.42x

Subordinated Structured Notes

68,454

Discounted Cash Flow

Discount rate

13.73%

13.74%

(1)(2)

13.74%

(1)(2)

54,386,145

(1) Represents the implied discount rate based on our internally generated single-cash flows that is derived from the fair value estimated by the corresponding multi-path cash flow model utilized by the independent valuation firm.

(2) Excludes investments that have been called for redemption or are currently marked to zero fair market value.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides quantitative information regarding significant unobservable inputs used in the fair value measurement of Level 3 investments as of June 30, 2025:

Unobservable Inputs

Asset Category

Fair Value

Primary Valuation
Technique

Inputs

Range

Weighted
Average

Senior Secured First Lien Debt

51,519,112

Discounted Cash Flow (Yield Analysis)

Market yield

7.84%

15.85%

10.88%

Senior Secured First Lien Debt

179,615

Enterprise Value Waterfall (Market Approach)

EBITDA multiple

4.75x

7.75x

6.25x

Enterprise Value Waterfall (Discounted cash flow)

Discount Rate

15.00

17.00

16.00%

Senior Secured First Lien Debt

2,682,544

Market Quotes

Indicative Dealer Quotes

89.68%

91.43%

90.55%

Senior Secured First Lien Debt

252,767

Discounted Cash Flow (Yield Analysis)

Market yield

17.21%

Option Pricing Model

Expected Volatility

45.00%

55.00%

Senior Secured First Lien Debt

80,929

Discounted Cash Flow (Yield Analysis)

Market yield

26.38%

Option Pricing Model

Expected Volatility

45%

55%

Enterprise Value Waterfall (Market Approach)

EBITDA multiple

8.00x

9.00x

Senior Secured First Lien Debt

1,506,771

Enterprise Value Waterfall (Market Approach)

EBITDA multiple

5.50x

7.50x

6.45x

Senior Secured First Lien Debt

10,066

Liquidation Scenario

EBITDA multiple

1.00x

Senior Secured Loans-Second Lien

2,500,000

Enterprise Value Waterfall (Market Approach)

Purchase Price

N/A

Common Equity/Other

1,961,100

Enterprise Value Waterfall (Market Approach)

EBITDA multiple

4.00x

9.00x

7.22x

Common Equity/Other

100,000

Enterprise Value Waterfall (Market Approach)

Purchase Price

N/A

Common Equity/Warrants

—

Enterprise Value Waterfall (Market Approach)

Revenue multiple

0.00x

0.45x

0.00x

Preferred Equity

178,802

Option Pricing Model

Expected Volatility

55.00%

70.00%

64.00%

Enterprise Value Waterfall (Market approach)

EBITDA multiple

3.25x

6.75x

4.90x

Preferred Equity

322,208

Enterprise Value Waterfall (Market approach)

EBITDA multiple

5.50x

7.25x

6.35x

Subordinated Structured Notes

709,261

Discounted Cash Flow

Discount rate

15.21%

17.32%

(1)(2)

16.61%

(1)(2)

62,003,175

(2) Excludes investments that have been called for redemption or are currently marked to zero fair market value.

For the three months ended March 31, 2026 and 2025, there were $19,091 and $125,000, respectively, of structuring fees recognized as part of interest income on the Consolidated Statements of Operations.

For the nine months ended March 31, 2026 and 2025, there were $109,092 and $227,705 respectively, structuring fees recognized as part of interest income on the Consolidated Statements of Operations.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the three months ended March 31, 2026 and 2025, there were accelerated original issue discounts due to repayments of $0 and $33,096, respectively, included in interest income.

For the nine months ended March 31, 2026 and 2025, there were accelerated original issue discounts due to repayments of $57,976 and $260,935, respectively, included in interest income.

For the three and nine months ended March 31, 2026 and 2025, there was no early repayment income included in interest income.

Financial Instruments Disclosed, But Not Carried at Fair Value

The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of March 31, 2026 and the level of each financial liability within the fair value hierarchy:


	Carrying value		Fair Value		Level 1		Level 2		Level 3
OZK Credit Facility(1)	$	35,178,847	$	35,178,847	$	—	$	—	$	35,178,847
	$	35,178,847	$	35,178,847	$	—	$	—	$	35,178,847

(1)As of March 31, 2026, the fair value of the OZK Credit Facility was $35,178,847, the balance outstanding, and is categorized as Level 3 under ASC 820. The fair value of the OZK Credit Facility approximates the carrying value since the OZK Credit Facility bears a floating rate and re-prices to market frequently.

The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of June 30, 2025 and the level of each financial liability within the fair value hierarchy:


	Carrying value		Fair Value		Level 1		Level 2		Level 3
Senior Secured Revolving Credit Facility(1)	$	45,500,000	$	45,500,000	$	—	$	—	$	45,500,000
	$	45,500,000	$	45,500,000	$	—	$	—	$	45,500,000

(1)As of June 30, 2025, the fair value of the Senior Secured Revolving Credit Facility was $45,500,000, the balance outstanding, and is categorized as Level 3 under ASC 820. The fair value of the Senior Revolving Credit Facility approximates the carrying value since the Senior Secured Revolving Credit Facility bears a floating rate and re-prices to market frequently.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. Management has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

The Company has a conditional obligation to reimburse the Adviser for any payments made by the Adviser under the Expense Limitation Agreement. The Expense Limitation Agreement payments are subject to repayment by the Company within the three years following the end of the quarter in which the payment was made by the Adviser; subject to the Repayment Limitations.

The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material adverse effect upon its financial condition or results of operations.

Undrawn committed revolver loans to our portfolio companies incur commitment and unused fees of 0.50%. As of March 31, 2026 and June 30, 2025, we had $53,606 and $656,566, respectively, of undrawn delayed draw term loan and revolver commitments to our portfolio companies. The fair value of our undrawn delayed draw term loan and revolver commitments was $0 and $0 as of March 31, 2026 and June 30, 2025, respectively, as they were all floating rate instruments that repriced frequently.

NOTE 10 - REVOLVING CREDIT FACILITIES

Senior Secured Revolving Credit Facility

On September 21, 2023, the Company entered into a senior secured revolving credit agreement (the "Senior Secured Revolving Credit Facility"), by and among the Company, as borrower, the lenders party thereto, and SMBC, as administrative agent. In conjunction with the closing of the Senior Secured Revolving Credit Facility, we terminated the previous credit facility.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

that existing and/or new lenders, at their election, provide up to $150,000,000 in aggregate. The Senior Secured Revolving Credit Facility provided for swingline loans in an aggregate principal amount at any time outstanding that will not exceed $5,000,000. On January 30, 2024, the Company entered into the first amendment (the "First Amendment") to the Senior Secured Revolving Credit Facility. Among other changes, the First Amendment amended the original Senior Secured Revolving Credit Facility to provide for an increase in the aggregate commitment from $20,000,000 to $65,000,000. On February 1, 2024, there was an automatic commitment increase which increased the aggregate commitment from $65,000,000 to $75,000,000. Availability under the Senior Secured Revolving Credit Facility will terminate on the earlier of the commitment termination date of September 19, 2025 ("Commitment Termination Date") or the date of termination of the revolving commitments thereunder, and the outstanding loans under the Senior Secured Revolving Credit Facility will mature on September 21, 2026. The Senior Secured Revolving Credit Facility also required mandatory prepayment of interest and principal upon certain events, including after the date of termination of the revolving commitments thereunder from asset sales, extraordinary receipts, returns of capital, equity issuances, and incurrence of indebtedness, with certain exceptions and minimum amount thresholds.

Borrowings under the Senior Secured Revolving Credit Facility were subject to compliance with a borrowing base test. Amounts drawn under the Senior Secured Revolving Credit Facility in U.S. dollars would bear interest at either term SOFR plus a credit spread adjustment of 0.10% plus 2.5%, or the prime rate plus 1.5%. The Company could elect either the term SOFR or prime rate at the time of drawdown, and loans denominated in U.S. dollars could be converted from one rate to another at any time at the Company’s option, subject to certain conditions. Amounts drawn under the Senior Secured Revolving Credit Facility in other permitted currencies bore interest at the relevant rate specified therein plus 2.5%.

During the period commencing on September 21, 2023 and ending on the earlier of the Commitment Termination Date or the date of termination of the revolving commitments under the Senior Secured Revolving Credit Facility, the Company paid a commitment fee of 0.375% per annum (based on the immediately preceding quarter’s average usage) on the daily unused amount of the commitments then available thereunder.

In connection with the Senior Secured Revolving Credit Facility, the Company had made certain representations and warranties and must comply with various covenants and reporting requirements customary for facilities of this type. In addition, the Company complied with the following financial covenants with respect to the Company and its consolidated subsidiaries: (a) the Company maintained a minimum shareholders’ equity, measured as of each fiscal quarter end; and (b) the Company must maintain at all times an asset coverage ratio not less than 150%.

The Senior Secured Revolving Credit Facility contained events of default customary for facilities of this type. Upon the occurrence of an event of default, the administrative agent, at the request of the required lenders, may terminate the commitments and declare the outstanding advances and all other obligations under the Senior Secured Revolving Credit Facility immediately due and payable.

The Company’s obligations under the Senior Secured Revolving Credit Facility were guaranteed by Prospect Flexible Funding, LLC, a subsidiary of the Company, and will be guaranteed by certain domestic subsidiaries of the Company that are formed or acquired by the Company in the future. The Company’s obligations under the Senior Secured Revolving Credit Facility were secured by a first priority security interest in substantially all of the assets of the Company and certain of the Company’s subsidiaries.

During the three months ended March 31, 2026 and 2025, we had no realized loss on the extinguishment of debt.

During the nine months ended March 31, 2026 and 2025, we realized a loss on the extinguishment of debt in the amount of $495,849 and $0, respectively related to the Senior Secured Revolving Credit Facility.

OZK Credit Facility

On August 12, 2025, the Company, as servicer, entered into a $75 million senior secured revolving credit facility (the “OZK Credit Facility”) with Bank OZK acting as facility agent. In connection with the OZK Credit Facility, the Company’s wholly-owned financing subsidiary, Prospect Flexible Funding, LLC (the “Borrower”), as borrower, and each of the other parties thereto entered into a Loan and Servicing Agreement, dated as of August 12, 2025 (the “Loan Agreement”). In conjunction with the closing of the OZK Credit Facility, we terminated and fully paid down the Senior Secured Revolving Credit Facility.

The OZK Credit Facility is scheduled to mature on August 10, 2029 and generally bears interest at a rate of one-month SOFR + 2.50%. The OZK Credit Facility is secured by assets of the Borrower. Under the Loan Agreement, the Borrower has made certain customary representations and warranties and is required to comply with various covenants, including borrowing restrictions, reporting requirements and other customary requirements for similar credit facilities. The Loan Agreement includes usual and customary events of default for credit facilities of this nature.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

maximum size of funded loans, interest rate payment frequency of funded loans, maturity dates of funded loans and minimum equity requirements, among other items. The OZK Credit Facility also contains certain requirements relating to portfolio performance, including limitations on delinquencies and charge-offs, a violation of which could result in the early termination of the OZK Credit Facility. As of March 31, 2026, we were in compliance with the applicable covenants of the OZK Credit Facility.

As of March 31, 2026, we had $35,178,847 outstanding on our OZK Credit Facility. As of March 31, 2026, the investments used as collateral for the OZK Credit Facility had an aggregate fair value of $52,130,208, which represents 83% of our total investments for the period. As of March 31, 2026, cash balances of $7,866,751 were used as collateral for the OZK Credit Facility. The fair value of the OZK Credit Facility was $35,178,847 and is categorized as Level 3 under ASC 820 as of March 31, 2026. The fair value of the OZK Credit Facility approximates its carrying value as the OZK Credit Facility is repriced to a market rate of interest frequently.

In connection with the origination of the OZK Credit Facility, we incurred $959,106 in fees, all of which are being amortized over the term of the OZK Credit Facility. As of March 31, 2026, $807,461 remains to be amortized and is reflected as deferred financing costs on the Consolidated Statements of Assets and Liabilities.

During the three months ended March 31, 2026 and 2025, we recorded $664,614 and $0, respectively, of interest costs and amortization of financing costs on the OZK Credit Facility as interest expense.

During the nine months ended March 31, 2026 and 2025, we recorded $2,227,493 and $0, respectively, of interest costs and amortization of financing costs on the OZK Credit Facility as interest expense.

For the three months ended March 31, 2026, the average stated interest rate (i.e., rate in effect plus the spread) was 6.18% under the OZK Credit Facility.

For the three months ended March 31, 2025, the average stated interest rate (i.e., rate in effect plus the spread) was 6.95% under the Senior Secured Revolving Credit Facility.

For the nine months ended March 31, 2025, the average stated interest rate (i.e., rate in effect plus the spread) was 7.42% under the Senior Secured Revolving Credit Facility.

For the three months ended March 31, 2026, average outstanding borrowings under the OZK Credit Facility was $36,857,276.

For the three months ended March 31, 2025, average outstanding borrowings under the Senior Secured Revolving Credit Facility was $48,601,111.

For the nine months ended March 31, 2026, average outstanding borrowings under the OZK Credit Facility and Senior Secured Revolving Credit Facility were $38,857,610.

For the nine months ended March 31, 2025, average outstanding borrowings under the Senior Secured Revolving Credit Facility was $42,666,058.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11- FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights for the three and nine months ended March 31, 2026 and 2025:


	Three Months Ended March 31,												Nine Months Ended March 31,
	2026						2025						2026						2025
Per Share Data(a):	Class A			Class I			Class A			Class I			Class A			Class I			Class A			Class I(f)
Net asset value at beginning of period	$	3.80		$	3.80		$	4.59		$	4.59		$	4.50		$	4.50		$	4.69		$	4.65
Net investment income (loss)	0.15			0.15			0.10			0.10			0.44			0.44			0.25			0.18
Net realized and unrealized gains (losses) on investments	—			—			(0.11)			(0.11)			(0.73)			(0.73)			(0.20)			(0.16)
Net realized (losses) on extinguishment of debt	—			—			—			—			(0.05)			(0.05)			—			—
Net increase (decrease) in net assets resulting from operations	0.15			0.15			(0.01)			(0.01)			(0.34)			(0.34)			0.05			0.02
Distributions(b)
Return of capital distributions	—			—			—			—			—			—			(0.02)			(0.01)
Distributions from net investment income	(0.14)			(0.14)			(0.10)			(0.10)			(0.36)			(0.36)			(0.27)			(0.19)
Total Distributions	(0.14)			(0.14)			(0.10)			(0.10)			(0.36)			(0.36)			(0.29)			(0.20)
Other(c)	—			—			(0.01)			(0.01)			0.01			0.01			0.02			—
Net asset value at end of period	$	3.81		$	3.81		$	4.47		$	4.47		$	3.81		$	3.81		$	4.47		$	4.47
Total return based on net asset value(d)	3.96		%	3.96		%	(0.53)		%	(0.53)		%	(7.75)		%	(7.75)		%	1.45		%	0.31		%

Supplemental Data:
Net assets at end of period	$	35,340,903		$	8,518		$	39,864,232		$	10,006		$	35,340,903		$	8,518		$	39,864,232		$	10,006
Average net assets	$	35,022,094		$	8,441		$	40,342,353		$	10,126		$	36,809,879		$	8,872		$	38,254,074		$	10,187
Weighted average shares outstanding	9,230,601			2,237			8,931,406			2,237			9,088,964			2,237			8,866,831			2,237
Ratio to average net assets:
Total annual expenses(e)	16.01		%	16.01		%	19.02		%	19.02		%	16.12		%	16.12		%	19.47		%	18.55		%
Total annual expenses (after expense limitation agreement/expense waivers)(e)(g)	5.31		%	5.31		%	15.91		%	15.91		%	7.34		%	7.34		%	16.27		%	15.47		%
Net investment income (loss)(e)	15.60		%	15.60		%	8.49		%	8.49		%	14.48		%	14.48		%	7.85		%	7.98		%

Portfolio Turnover	1.84		%	1.84		%	4.70		%	4.70		%	9.76		%	9.76		%	21.69		%	10.91		%

(a) Calculated based on weighted average shares outstanding.
(b) The per share data for distributions is the actual amount of distributions paid or payable per share of common stock outstanding during the period. Distributions per share are rounded to the nearest $0.01.
(c) The amount shown represents the balancing figure derived from the other figures in the schedule, and is primarily attributable to the accretive effects from the sales of the Company’s shares and the effects of share repurchases during the period.
(d) Total return is based upon the change in net asset value per share between the opening and ending net asset values per share during the period and assumes that distributions are reinvested in accordance with the Company’s distribution reinvestment plan. The computation does not reflect the sales load for any class of shares. Total return based on market value is not presented since the Company’s shares are not publicly traded.

(e) Annualized for the three and nine months ended March 31, 2026 and 2025.
(f) In connection with the Multi-Class Offering, the Company authorized the issuance of separate classes of its common stock and designated such classes Class S, Class D and Class I common stock. The registration statement was declared effective by the SEC on May 10, 2024, however, as of December 31, 2025, there are no shares of Class S or Class D common stock outstanding. As of September 30, 2024, there are no shares of Class I common stock outstanding.The nine months ended March 31, 2025 represents the period from October 1, 2024 (the date the stockholders were admitted into the Company) to March 31, 2025.
(g) The Administrator voluntarily waived $200,000 of past overhead fees during the three and nine months ended March 31, 2026 under the Administration Agreement, which reduced annualized expenses by 2.28% for the three months ended March 31, 2026 and 0.72% for the nine months ended March 31, 2026.

PROSPECT FLOATING RATE AND ALTERNATIVE INCOME FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Information about our senior securities is shown in the following table since June 30, 2022. As of March 31, 2026 and June 30, 2025, our asset coverage ratio stood at 201% and 188%, respectively, based on the outstanding principal amount of our senior securities representing indebtedness.


Revolving Credit Facility	Total Amount Outstanding		Asset Coverage per Unit(1)		Involuntary Liquidating Preference per Unit(2)	Average Market Value per Unit(2)
March 31, 2026	$	35,178,847	$	2,005
December 31, 2025	$	37,040,732	$	1,937	—	—
September 30, 2025	$	39,246,250	$	1,949	—	—
June 30, 2025	$	45,500,000	$	1,879	—	—
June 30, 2024	$	27,800,000	$	2,125	—	—
June 30, 2023	$	8,600,000	$	2,709	—	—
June 30, 2022	$	20,500,000	$	1,815	—	—

(1) The asset coverage ratio is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by secured senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage Per Unit.
(2) This column is inapplicable.

NOTE 12 - NET INCREASE (DECREASE) IN NET ASSETS PER SHARE

The following information sets forth the computation of net increase in net assets resulting from operations per share during the three and nine months ended March 31, 2026 and 2025.


	Three Months Ended March 31,								Nine Months Ended March 31,
	2026				2025				2026				2025
	Class A		Class I		Class A		Class I(a)		Class A		Class I		Class A		Class I
Net increase/(decrease) in net assets resulting from operations	$	1,365,110	$	329	$	(139,409)	$	(35)	$	(3,042,713)	$	(758)	$	452,653	$	49
Weighted average common stock outstanding	9,230,601		2,237		8,931,406		2,237		9,088,964		2,237		8,866,831		2,237
Net increase/(decrease) in net assets resulting from operations per share	$	0.15	$	0.15	$	(0.02)	$	(0.02)	$	(0.34)	$	(0.34)	$	0.05	$	0.02

(a) In connection with the Multi-Class Offering, the Company authorized the issuance of separate classes of its common stock and designated such classes Class S, Class D and Class I common stock. The registration statement was declared effective by the SEC on May 10, 2024, however, as of March 31, 2026, there are no shares of Class S and Class D common stock outstanding. The nine months ended March 31, 2025 represents the period from October 1, 2024 (the date the stockholders were admitted into the Company) to March 31, 2025.

NOTE 13 - SEGMENT REPORTING

The Company operates through a single operating and reporting segment with an investment objective to generate both current income and capital appreciation. The chief operating decision maker (“CODM”) is the Company’s chief executive officer and the CODM assesses the performance and makes operating decisions of the Company on a consolidated basis primarily based on the Company’s net increase (decrease) in net assets resulting from operations applicable to common stockholders (“net income”). In addition to numerous other factors and metrics, the CODM utilizes net income as a key metric in determining the amount of dividends to be distributed to the Company’s common stockholders. As the Company’s operations comprise of a single reporting segment, the segment assets are reflected on the accompanying consolidated statements of assets and liabilities as “total assets” and the significant segment expenses are listed on the accompanying consolidated statement of operations.

NOTE 14 - SUBSEQUENT EVENTS

Management has evaluated all known subsequent events through the date of issuance of these consolidated financial statements and notes the following:

Distributions:

On February 26, 2026, our Board of Directors declared a distribution for the month of April 2026, which reflects a targeted annualized distribution rate of 10.0% based on the net asset value per share for the second fiscal quarter ended December 31, 2025. The distribution has a record date as of the close of business of the last Friday of April 2026. The distribution will be payable to stockholders of record as of the monthly record date set forth below.

Record Date

Payment Date

PFLOAT Class A Common Stock, per share

PFLOAT Class I Common Stock, per share

April 24, 2026

May 1, 2026

$0.02916

Issuance of Common Stock

For the period beginning April 1, 2026 and ending May 11, 2026, the Company issued 222,751 shares of its Class A common stock pursuant to its distribution reinvestment plan in the amount of $841,997.

Repurchase Offer

On March 27, 2026, under our share repurchase program, we made a tender offer to purchase up to the number of shares of our issued and outstanding Class A and Class I common stock we could repurchase with the cash we retained during the quarter ended December 31, 2025 as a result of issuing shares through our distribution reinvestment plan to those shareholders who elected to receive their distributions in the form of additional shares rather than in cash. The total cash retained during the quarter ended December 31, 2025 as a result of issuing shares through our distribution reinvestment plan prior to this tender offer was approximately $858,697. The tender offer was for cash at a price equal to the net asset value per share as of April 30, 2026. The offer expired at 4:00 P.M., Eastern Time, on April 29, 2026 and a total of 57,531 Shares were validly tendered and not withdrawn pursuant to the Offer as of such date. In accordance with the terms of the Offer, the Company purchased all 57,531 Shares validly tendered and not withdrawn at a price equal to $3.83 per Share for an aggregate purchase price of approximately $220,342.

OZK Credit Facility

On April 23, 2026, the Company drew $3,100,000 on the OZK Credit Facility. On April 2, 2026 and April 17, 2026, the Company repaid $350,000 and $550,000, respectively, on the OZK Credit Facility. As of May 11, 2026, the outstanding balance on the OZK Credit Facility was $37,378,847.

Investment Activity

During the period beginning April 1, 2026 and ending May 11, 2026, the Company made two investments in a portfolio company totaling $3,100,000.

During the period beginning April 1, 2026 and ending May 11, 2026, the Company did not sell investments in portfolio companies.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this quarterly report on Form 10-Q (the "Quarterly Report"). In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results may differ significantly from any results expressed or implied by these forward-looking statements due to the factors discussed in Part I, "Item 1A. Risk Factors" and "Forward-Looking Statements" appearing elsewhere herein.

The terms "PFLOAT," the "Company," "we," "us" and "our" mean Prospect Floating Rate and Alternative Income Fund, Inc. unless the context specifically requires otherwise.

Overview

We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). Our investment objective is to generate current income and, as a secondary objective, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns. Under normal market conditions, we will invest at least 80% of our net assets (plus any borrowings for investment purposes) in floating rate loans and other income producing investments. We will provide shareholders with 60 days' advanced notice prior to changing this 80% investment policy. We intend to meet our investment objective by primarily lending to and investing in the debt of privately-owned U.S. middle market companies, which we define as companies with annual revenue between $50 million and $2.5 billion. We have elected and intend to continue to qualify annually to be taxed for U.S. federal income tax purposes as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code").

On November 5, 2021, we amended and restated the Investment Advisory Agreement (the "Amended and Restated Advisory Agreement") to reduce the base management fee and eliminate the incentive fee payable to the Adviser thereunder, effective as of January 1, 2022 and until the one-year anniversary of the listing of the Company’s common stock on a national securities exchange. The Amended and Restated Advisory Agreement was most recently approved by our Board of Directors, including all of our directors who are not “interested persons” (as defined in the 1940 Act), on June 18, 2025.

On March 4, 2026, the Amended and Restated Advisory Agreement was further amended and restated to effect certain immaterial changes requested by certain state securities regulatory authorities based on the North American Securities Administrators Association (“NASAA”) Omnibus Guidelines (“Omnibus Guidelines”) (the “Second Amended and Restated Advisory Agreement”).

For additional information regarding the Amended and Restated Advisory Agreement, please refer to "Investment Advisory Fees" below.

Our Adviser

Our Adviser is a Delaware limited liability company and is registered as an investment adviser under the Advisers Act. Our Adviser is led by John F. Barry III and M. Grier Eliasek, two senior executives with significant investment advisory and business experience. Mr. Barry currently controls our Adviser.

Third Quarter Highlights

Investment Transactions

We seek to be a long-term investor with our portfolio companies. During the three and nine months ended March 31, 2026, we purchased $1,170,004 and $6,866,513, respectively, in investment securities (excluding short-term securities). During the three months ended March 31, 2026, there was no noncash restructured investment. During the nine months ended March 31, 2026, there was a noncash restructured investment of $3,241,856.

During the three months ended March 31, 2026, sales and redemptions of investment securities (excluding short-term securities) were $2,067,435, resulting in a total net portfolio decline of $897,431 for the three months ended March 31, 2026.

During the nine months ended March 31, 2026, sales and redemptions of investment securities (excluding short-term securities) were $22,421,838, resulting in a total net portfolio decline of $15,555,325 for the nine months ended March 31, 2026.

Debt Issuances and Redemptions

On August 12, 2025, the Company, as servicer, entered into a $75 million senior secured revolving credit facility (the “OZK Credit Facility”) with Bank OZK, as facility agent, the Company’s wholly-owned financing subsidiary, Prospect Flexible Funding, LLC, as borrower, and the lenders party thereto. As of March 31, 2026, there was a $35,178,847 balance on the OZK Credit Facility.

Equity Issuances

As part of the distribution reinvestment plan, we issued 62,731, 79,022, and 63,272 shares of our common stock on January 2, 2026, February 6, 2026 and March 6, 2026, respectively.

On December 29, 2025, under our share repurchase program, we made a tender offer to purchase up to the number of shares of our issued and outstanding Class A and Class I common stock we could repurchase with the cash we retained during the quarter ended September 30, 2025 as a result of issuing shares through our distribution reinvestment plan to those shareholders who elected to receive their distributions in the form of additional shares rather than in cash. The total cash retained during the quarter ended September 30, 2025 as a result of issuing shares through our distribution reinvestment plan prior to this tender offer was approximately $879,611. The tender offer was for cash at a price equal to the net asset value per share as of January 31, 2026. The offer expired at 4:00 P.M., Eastern Time, on January 30, 2026 and a total of 64,694 Shares were validly tendered and not withdrawn pursuant to the Offer as of such date. In accordance with the terms of the Offer, the Company purchased all 64,694 Shares validly tendered and not withdrawn at a price equal to $3.78 per Share for an aggregate purchase price of approximately $244,546.

Investments

Our investment objective is to generate current income and, as a secondary objective, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns. Under normal market conditions, we will invest at least 80% of our net assets (plus any borrowings for investment purposes) in floating rate loans and other income producing investments. We intend to meet our investment objective by primarily lending to and investing in the debt of privately-owned U.S. middle market companies. We may on occasion invest in smaller or larger companies if an attractive opportunity presents itself, especially when there are dislocations in the capital markets. We expect to focus primarily on directly originating senior secured first lien loans and senior secured second lien loans and making investments in syndicated senior secured first lien loans, syndicated senior secured second lien loans, and to a lesser extent, subordinated debt, of middle market companies in a broad range of industries. Syndicated secured loans refer to commercial loans provided by a group of lenders that are structured, arranged, and administered by one or several commercial or investment banks, known as arrangers. These loans are then sold (or syndicated) to other banks or institutional investors. Syndicated secured loans may have a first priority lien on a borrower’s assets (i.e., senior secured first lien loans), a second priority lien on a borrower’s assets (i.e., senior secured second lien loans), or a lower lien or unsecured position on the borrower’s assets (i.e., subordinated debt). We expect our target credit investments will typically have initial maturities between three and ten years and generally range in size between $1 million and $100 million, although the investment size will vary with the size of our capital base. We expect that the majority of our debt investments will bear interest at floating interest rates, but our portfolio may also include fixed-rate investments. We also expect to make our investments directly through the primary issuance by the borrower or in the secondary market. "Risk-adjusted returns" refers to a measure of investment return per unit of risk and provides a framework to compare and evaluate investment opportunities with differing risk/return profiles. The term "risk-adjusted returns" does not imply that we employ low-risk strategies or that an investment should be considered a low-risk or no risk investment.

We will generally source our investments primarily through our Adviser. We believe the investment management team of our Adviser has a significant amount of experience in the credit business, including originating, underwriting, principal investing and loan structuring. Our Adviser has access to over 120 professionals, approximately 50 of whom perform investment advisory functions.

We expect to dynamically allocate our assets in varying types of investments based on our analysis of the credit markets, which may result in our portfolio becoming more concentrated in particular types of credit instruments (such as senior secured loans) and less invested in other types of credit instruments. The loans in which we intend to invest are often rated by a nationally recognized ratings organization, and generally carry a rating below investment grade (rated lower than "Baa3" by Moody’s Investors Service or lower than "BBB-" by Standard & Poor’s Corporation - also known as "high yield" or "junk bonds"). However, we may also invest in non-rated debt securities.

To seek to enhance our returns, we may employ leverage as market conditions permit and at the discretion of our Adviser, but in no event will leverage employed exceed the maximum amount permitted by the 1940 Act.

As part of our investment objective to generate current income, we expect that at least 70% of our investments will consist primarily of directly originated or syndicated senior secured first lien loans, directly originated or syndicated senior secured second lien loans, and to a lesser extent, subordinated debt. We expect that up to 30% of our investments will consist of other securities, including private equity (both common and preferred), dividend-paying equity, royalties, and the equity and junior debt tranches of collateralized loan obligations ("CLOs"), which we also refer to as subordinated structured notes ("SSNs"). The senior secured loans underlying our CLO investments are expected typically to be BB or B rated (non-investment grade, which are often referred to as "high yield" or "junk") and in limited circumstances, unrated, senior secured loans.

As a BDC, we are subject to certain regulatory restrictions in making our investments. For example, we have in the past and expect in the future to co-invest on a concurrent basis with certain affiliates, consistent with applicable regulations and our allocation procedures. On January 6, 2026, we, our Adviser and certain affiliates received an exemptive order from the SEC (the “Order”), permitting us, among other things, to participate with other funds managed or owned by our Adviser or certain affiliates, including Prospect Capital Corporation, Priority Income Fund, Inc. and Prospect Enhanced Yield Fund, in certain co-investment transactions, where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions included therein. Under the terms of the Order, we generally are permitted to co-invest with certain of our affiliates if such co-investments are done on the same terms and at the same time, as further detailed in the Order. The Order requires that a “required majority” (as defined in Section 57(o) of the 1940 Act) of our Board of Directors make certain findings (1) in most instances when we co-invest with our affiliate in an issuer where our affiliate has an existing investment in the issuer, and either (i) we do not have an existing investment in the issuer or (ii) we do have an existing investment in the issuer, but we are not co-investing on a pro-rata basis with our affiliate, and (2) if we dispose of an asset acquired in a transaction under the Order unless the disposition is done on a pro rata basis. Pursuant to the Order, our Board of Directors oversees our participation in the co-investment program. As required by the Order, we have adopted, and our Board of Directors has approved, policies and procedures reasonably designed to ensure compliance with the terms of the Order, and our Adviser and our Chief Compliance Officer will provide reporting to the Board of Directors. The Order also imposes reporting and record keeping requirements and limitations and restrictions on transaction fees. We may only co-invest with other funds managed or owned by our Adviser or certain affiliates in accordance with such Order and existing regulatory guidance. See Note 4 of the Consolidated Financial Statements. These co-investment transactions may give rise to conflicts of interest or perceived conflicts of interest among us and the other participating accounts. To mitigate these conflicts, our Adviser and its affiliates will seek to allocate portfolio transactions for all of the participating investment accounts, including us, on a fair and equitable basis, taking into account such factors as the relative amounts of capital available for new investments, the applicable investment programs and portfolio positions, the clients for which participation is appropriate and any other factors deemed appropriate. We intend to make all of our investments in compliance with the 1940 Act and in a manner that will not jeopardize our status as a BDC or RIC.

As a BDC, we are permitted under the 1940 Act to borrow funds to finance portfolio investments. To enhance our opportunity for gain, we intend to employ leverage as market conditions permit. At the 2019 Annual Meeting, Triton Pacific Investment Corporation, Inc.’s ("TPIC") stockholders approved a proposal allowing us to modify our asset coverage ratio requirement from 200% to 150%. As a result, we were allowed to increase our leverage capacity effective as of March 16, 2019. The use of leverage, although it may increase returns, may also increase the risk of loss to our investors, particularly if the level of our leverage is high and the value of our investments declines.

Revenues

We generate revenue in the form of dividends, interest and capital gains on the debt securities, equity interests and CLOs that we hold. In addition, we may generate revenue from our portfolio companies in the form of commitment, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. Any such fees will be recognized as earned.

Expenses

Our primary operating expenses will be the payment of advisory fees and other expenses under the Investment Advisory Agreement with the Adviser. The advisory fees will compensate our Adviser for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.

We will bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to:

• corporate and organizational expenses relating to offerings of our common stock, subject to limitations included in the investment advisory and management services agreement;

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

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

• investment advisory fees;

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

• transfer agent and custodial fees;

• fees and expenses associated with marketing efforts;

• federal and state registration fees;

• federal, state and local taxes;

• independent directors’ fees and expenses;

• costs of proxy statements, stockholders’ reports and notices;

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

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

• fees and expenses associated with independent audits and outside legal costs, including compliance with the Sarbanes-Oxley Act;

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

• brokerage commissions for our investments;

• legal, accounting and other costs associated with structuring, negotiating, documenting and completing our investment transactions;

• all other expenses incurred by our Adviser, in performing its obligations, subject to the limitations included in the Investment Advisory Agreement; and

• all other expenses incurred by either our Administrator or us in connection with administering our business, including payments to our Administrator under the Administration Agreement (as defined herein) that will be based upon our allocable portion of its overhead and other expenses incurred in performing its obligations under the Administration Agreement, including our allocable portion of the costs of compensation and related expenses of administrative personnel.

Reimbursement of our Administrator for Administrative Services

We will reimburse our Administrator for the administrative expenses necessary for its performance of services to us. Such costs will be reasonably allocated to us on the basis of assets, revenues, time records or other reasonable methods. However, such reimbursement is made in an amount equal to the lower of the Administrator’s actual costs or the amount that we would be required to pay for comparable administrative services in the same geographic location. We will not reimburse our Administrator for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of our Administrator.

For the three months ended March 31, 2026, allocation of overhead from the Administrator to the Company was $165,156, of which $165,156 was waived by the Administrator under the Expense Limitation Agreement during the three months ended March 31, 2026.

For the nine months ended March 31, 2026, allocation of overhead from the Administrator to the Company was $497,656 of which $497,656 was waived by the Administrator under the Expense Limitation Agreement during the nine months ended March 31, 2026.

The Administrator also waived $200,000 of past overhead fees during the three months ended March 31, 2026 that were previously recorded and recognized in the Consolidated Statement of Operations. The Administrator did not waive any overhead fees during the three months ended March 31, 2025.

The Administrator also waived $200,000 of past overhead fees during the nine months ended March 31, 2026 that were previously recorded and recognized in the Consolidated Statement of Operations. The Administrator did not waive any overhead fees during the nine months ended March 31, 2025.

Portfolio and Investment Activity

months ended March 31, 2026, there was no noncash restructured investment. During the nine months ended March 31, 2026, there was a noncash restructured investment of $3,241,856.

As of March 31, 2026, our investment portfolio, with a total fair value of $63,037,631, consisted of interests in 59 investments (94% in senior secured loans, 6% in equity/other and less than 1% in CLO - subordinated notes).

Our financial condition, including the fair value and performance of certain of our portfolio investments, may be materially impacted after March 31, 2026 by circumstances and events that are not yet known. To the extent our portfolio investments are adversely impacted by the renewed hostilities in the Middle East, the ongoing conflict between Russia and Ukraine, rising interest rates, inflationary pressures, or by other factors, we may experience a material adverse impact on our future net investment income, the underlying value of our investments, our financial condition and the financial condition of our portfolio investments. For additional information concerning risks and their potential impact on our business and our operating results, see “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed on September 3, 2025.

During the three and nine month period ended March 31, 2025, we purchased $5,012,321 and $42,748,135, respectively, in investment securities (excluding short-term securities).

During the same three and nine month period ended March 31, 2025, there was a noncash restructured investment in the amount of $1,457,792 and $4,360,010, respectively.

During the same three and nine month period ended March 31, 2025, sales and redemptions of investment securities (excluding short-term securities) were $3,925,879 and $16,850,812, respectively, resulting in a total net portfolio growth of $1,086,442 and $25,897,322, respectively, for the three and nine months ended March 31, 2025.

As of March 31, 2025, our investment portfolio, with a total fair value of $83,655,981, consisted of interests in 62 investments (96% in senior secured loans, 2% in equity/other and 2% in CLO - subordinated notes).

Portfolio Holdings

As of March 31, 2026, our investment portfolio, with a total fair value of $63,037,631, consisted of interests in 22 portfolio companies and 18 structured subordinated notes. The following table presents certain selected information regarding our portfolio composition and weighted average yields as of March 31, 2026 and June 30, 2025:


	As of March 31, 2026							As of June 30, 2025
	Amortized Cost			Fair Value		As Percent of Total Fair Value		Amortized Cost			Fair Value		As Percent of Total Fair Value
Senior Secured Loans-First Lien	$	63,339,334		$	56,798,114	90	%	$	79,543,576		$	77,495,655	91	%
Senior Secured Loans-Second Lien	2,613,527			2,613,527		4	%	4,339,325			4,249,570		5	%
Structured subordinated notes	70,401			68,454		—	%	864,921			709,261		1	%
Common Equity/Other	3,279,862			2,717,332		5	%	3,279,862			2,061,100		2	%
Preferred Equity	509,255			840,204		1	%	377,122			501,010		1	%
Total	$	69,812,379		$	63,037,631	100	%	$	88,404,806		$	85,016,596	100	%

Number of portfolio companies	22							27
Number of Structured subordinated notes	18							22

% Variable Rate (based on fair value)	98%			(1)				94%			(4)
% Fixed Rate (based on fair value)	2		%	(1)				6		%	(4)

% Weighted Average Yield Variable Rate (based on principal outstanding)	10.20		%	(2)				11.14		%	(5)
% Weighted Average Yield Fixed Rate (based on principal outstanding)	8.76		%	(1)				10.64		%	(4)
% Weighted Average Yield on Structured Subordinated Notes (based on cost)	—		%					—		%
% Weighted Average Yield on Fixed Rate Debt, Variable Rate Debt and Structured Subordinated Notes (based on cost)	10.34		%	(3)				11.17		%	(6)
% Weighted Average Yield (based on cost) for the entire portfolio	9.85		%					10.70		%

(1) The interest rate by type information is calculated using the Company’s debt and preferred equity portfolio and excludes common equity investments.
(2) The interest rate by type information is calculated using the Company’s debt and preferred equity portfolio and excludes structured subordinated notes.
(3) The interest rate by type information is calculated excluding the Company’s common equity investments.
(4) The interest rate by type information is calculated using the Company’s debt portfolio and excludes all equity investments.
(5) The interest rate by type information is calculated using the Company’s debt portfolio and excludes structured subordinated notes.
(6) The interest rate by type information is calculated excluding the Company’s entire equity investments.

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of March 31, 2026 and June 30, 2025:


	March 31, 2026
Industry	Investments at Amortized Cost		Percentage of Portfolio		Investments at Fair Value		Percentage of Portfolio
Healthcare & Pharmaceuticals	$	24,174,301	35	%	$	25,379,006	40	%
Consumer Goods: Non-Durable	5,947,847		9	%	5,134,397		8	%
Telecommunications	5,009,358		7	%	5,060,833		8	%
Services: Consumer	4,526,697		6	%	4,541,158		7	%
High Tech Industries	3,365,963		5	%	3,407,773		5	%
Beverage, Food & Tobacco	2,899,437		4	%	2,981,169		5	%
Transportation: Cargo	2,898,814		4	%	2,943,835		5	%
Automotive	9,766,712		14	%	2,875,402		5	%
Wholesale	2,928,344		4	%	2,794,915		4	%
Finance	2,713,527		4	%	2,779,347		4	%
Services: Business	2,988,275		4	%	2,675,062		4	%
Media: Advertising, Printing & Publishing	2,324,677		3	%	2,396,280		4	%
Structured Finance	70,401		—	%	68,454		—	%
Retail	198,026		1	%	—		—	%
Total	$	69,812,379	100	%	$	63,037,631	100	%


	June 30, 2025
Industry	Investments at Amortized Cost		Percentage of Portfolio		Investments at Fair Value		Percentage of Portfolio
Healthcare & Pharmaceuticals	$	22,729,225	26	%	$	22,902,129	27	%
Automotive	8,691,552		10	%	8,145,766		9	%
Telecommunications	8,197,147		9	%	7,355,550		9	%
Consumer Goods: Non-Durable	5,975,572		7	%	5,069,461		6	%
Beverage, Food & Tobacco	4,820,318		5	%	4,954,278		6	%
High Tech Industries	4,867,983		6	%	4,915,366		6	%
Services: Consumer	5,340,440		6	%	4,655,664		5	%
Transportation: Cargo	4,386,823		5	%	4,466,250		5	%
Consumer Goods: Durable	4,222,652		5	%	4,296,202		5	%
Services: Business	4,492,864		5	%	4,184,835		5	%
Media: Advertising, Printing & Publishing	3,293,835		4	%	3,413,576		4	%
Wholesale	2,957,298		3	%	2,916,144		3	%
Banking	2,926,825		3	%	2,682,544		3	%
Finance	2,600,000		3	%	2,600,000		3	%
Media: Diversified and Production	1,839,325		2	%	1,749,570		2	%
Structured Finance	864,921		1	%	709,261		1	%
Retail	198,026		—	%	—		—	%
Total	$	88,404,806	100	%	$	85,016,596	100	%

As of March 31, 2026 and June 30, 2025, we did not "control" any of our portfolio companies, as defined in the 1940 Act.

The following table shows the composition of our investment portfolio by level of control as of March 31, 2026 and June 30, 2025:


	March 31, 2026								June 30, 2025
Level of Control	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
Non-Control/Non-Affiliate	$	69,812,379	100	%	$	63,037,631	100	%	$	88,404,806	100	%	$	85,016,596	100	%
Total Investments	$	69,812,379	100	%	$	63,037,631	100	%	$	88,404,806	100	%	$	85,016,596	100	%

Net Asset Value

During the three months ended March 31, 2026, our net asset value increased by $637,775 and our net asset value per share increased by $0.01.

During the nine months ended March 31, 2026, our net asset value decreased by $4,638,716 and our net asset value per share decreased by $0.69.

For the three months ended March 31, 2026, the increase in net asset value per share was primarily attributable to an increase in net investment income less total distributions of $61,451, or $0.01 per weighted average share.

For the nine months ended March 31, 2026, the decrease in net asset value per share was primarily attributable to an increase in net realized and net change in unrealized losses on investments of $6,545,878, or $0.73 per weighted average share and a realized loss on the extinguishment of debt of $495,849, or $0.05 per weighted average share. The decrease in net asset value per share was partially offset by net investment income exceeding distributions by $725,249 or $0.08 per weighted average share.

The following table shows the calculation of net asset value per share as of March 31, 2026 and June 30, 2025.


NET ASSET VALUE PER SHARE	March 31, 2026		June 30, 2025
Class A Shares:
Net assets	$	35,340,903	$	39,978,083
Common Shares outstanding ($0.001 par value, 37,500,000 authorized)	9,279,269		8,893,696
Net asset value per share	$	3.81	$	4.50

Class I Shares:
Net assets	$	8,518	$	10,054
Common Shares outstanding ($0.001 par value, 12,500,000 authorized)	2,237		2,237
Net asset value per share	$	3.81	$	4.50

Results of Operations

Investment Income

For the three months ended March 31, 2026 and 2025, we generated $1,830,954 and $2,462,221, respectively, in investment income in the form of interest earned on our debt portfolio.

For the nine months ended March 31, 2026 and 2025, we generated $6,052,073 and $6,923,586, respectively, in investment income in the form of interest earned on our debt portfolio.

Such revenues were primarily cash income and non-cash portions related to the accretion of discounts and PIK. Investment income was lower for the three and nine months ended March 31, 2026 compared to the three and nine months ended March 31, 2025, due to decreases in SOFR, as most of the portfolio consist of floating rate investments, as well as a portfolio company placed on non-accrual status.

For the three and nine months ended March 31, 2026, our income from our structured subordinated notes decreased due to 18 investments with an effective yield estimated to be 0%, as expected future cash flows are anticipated to not be sufficient to repay these investments at cost as well as many investments exiting the reinvestment period.

For the three months ended March 31, 2026 and 2025, PIK interest included in interest income totaled $12,701 and $189,903, respectively.

For the nine months ended March 31, 2026 and 2025, PIK interest included in interest income totaled $157,722 and $356,889, respectively.

For the three and nine months ended March 31, 2026, PIK interest included in interest income in aggregate was lower due to a higher number of investments paying cash interest.

Operating Expenses

Total operating expenses before expense limitation support totaled $1,402,198 and $1,918,323 for the three months ended March 31, 2026 and 2025, respectively. Total operating expenses before expense limitation support totaled $4,452,503 and $5,586,083 for the nine months ended March 31, 2026 and 2025, respectively. These operating expenses consisted primarily of interest and credit facility expense, offering costs, base management fees, administrator costs, legal expense, valuation services and audit and tax expense.

The base management fees for the three months ended March 31, 2026 and 2025, respectively, were $266,636 and $312,824. The base management fees for the nine months ended March 31, 2026 and 2025, respectively, were $839,951 and $916,005. Base management fees were lower for the three and nine months ended March 31, 2026 compared to the three and nine months ended March 31, 2025 due to the decrease in assets. Management fees for the three and nine months ended March 31, 2026 and 2025 were waived.

The interest and credit facility expense for the three months ended March 31, 2026 and 2025, respectively, were $664,614 and $968,724. The interest and credit facility expense for the nine months ended March 31, 2026 and 2025, respectively, were $2,227,493 and $2,780,363. The interest and credit facility expenses were lower for the three and nine months ended March 31, 2026 compared to the three and nine months ended March 31, 2025, due to a decrease in interest rates as well as a decrease in the average outstanding borrowings.

For the three months ended March 31, 2026, the average stated interest rate (i.e., rate in effect plus the spread) was 6.18% under the OZK Credit Facility. For the three months ended March 31, 2025, the average stated interest rate (i.e., rate in effect plus the spread) was 6.95% under the Senior Secured Revolving Credit Facility.

For the nine months ended March 31, 2026, the average stated interest rate (i.e., rate in effect plus the spread) was 6.51% under the OZK Credit Facility and the Senior Secured Revolving Credit Facility. For the nine months ended March 31, 2025, the average stated interest rate (i.e., rate in effect plus the spread) was 7.42% under the Senior Secured Revolving Credit Facility.

For the three months ended March 31, 2026, average outstanding borrowings under the OZK Credit Facility was $36,857,276. For the three months ended March 31, 2025, average outstanding borrowings under the Senior Secured Revolving Credit Facility was $48,601,111.

For the nine months ended March 31, 2026, average outstanding borrowings under the OZK Credit Facility and Senior Secured Revolving Credit Facility were $38,857,610. For the nine months ended March 31, 2025, average outstanding borrowings under the Senior Secured Revolving Credit Facility was $42,666,058.

The offering costs for the three months ended March 31, 2026 and 2025, respectively, were $29,587 and $154,522. The offering costs for the nine months ended March 31, 2026 and 2025, respectively, were $111,672 and $427,341. The offering costs for the three and nine months ended March 31, 2026 were lower compared to the three and nine months ended March 31, 2025 due to the commencement of our Multi-Class Offering and the amortization of the initial costs associated with our registration statement that was declared effective by the SEC on May 10, 2024.

The legal expenses for the three months ended March 31, 2026 and 2025, respectively, were $24,326 and $45,807. The legal expenses for the nine months ended March 31, 2026 and 2025, respectively, were $113,922 and $174,364. The legal expenses for the three and nine months ended March 31, 2026 were lower in aggregate compared to the three and nine months ended March 31, 2025 due to additional costs associated with launching our Multi-Class Offering.

The valuation services for the three months ended March 31, 2026 and 2025, respectively, were $5,570 and $13,581. The valuation services for the nine months ended March 31, 2026 and 2025, respectively, were $29,844 and $43,468. The valuation costs for the three and nine months ended March 31, 2026 were lower compared to the three and nine months ended March 31, 2025 due to a decrease in investments requiring valuation by a third party service.

The audit expenses for the three months ended March 31, 2026 and 2025, respectively, were $63,750 and $73,750. The audit expenses for the nine months ended March 31, 2026 and 2025, respectively, were $232,343 and $328,250. The audit costs for the three and nine months ended March 31, 2026 were lower compared to the three and nine months ended March 31, 2025 due to the additional procedures related to the re-issuance of the prior year audit opinion from the previous auditor.

The general and administrative expense for the three months ended March 31, 2026 and 2025, respectively, were $74,897 and $44,611. The general and administrative expense for the nine months ended March 31, 2026 and 2025, respectively, were $145,802 and $94,527. The general and administrative expenses were higher for the three and nine months ended March 31, 2026 due to additional expenses incurred in relation to the new OZK Credit Facility.

Pursuant to the expense limitation support payment (discussed below), the Adviser reimbursed the Company $737,584 and $312,824 for the three months ended March 31, 2026 and 2025, respectively.

Pursuant to the expense limitation support payment (discussed below), the Adviser reimbursed the Company $2,225,010 and $916,005 for the nine months ended March 31, 2026 and 2025, respectively.

Net Investment Income (Loss)

Our net investment income (loss) totaled $1,366,340 and $856,722 for the three months ended March 31, 2026 and 2025, respectively. Our net investment income (loss) totaled $3,998,252 and $2,253,508 for the nine months ended March 31, 2026 and 2025, respectively. The net investment income for the three and nine months ended March 31, 2026 was higher due to the Adviser covering a larger percentage of the Company's expense pursuant to an Amended and Restated ELA.

Net Realized Gains/Losses from Investments

We measure realized gains or losses by the difference between the net proceeds from the disposition and the amortized cost basis of investment, without regard to unrealized gains or losses previously recognized.

For the three months ended March 31, 2026 and 2025, we received proceeds from sales and repayments on unaffiliated investments of $2,067,435 and $0, respectively, from which we realized losses of $1,183,938.

For the nine months ended March 31, 2026 and 2025, we received proceeds from sales and repayments on unaffiliated investments of $22,421,838 and $16,850,812, respectively, from which we realized gains/(losses) of $(2,780,293) and $0, respectively.

During the nine months ended March 31, 2026, we recognized a realized loss from debt extinguishment of $495,849 related to the termination of the Senior Secured Revolving Credit Facility.

During the nine months ended March 31, 2025, we did not recognize a realized loss from debt extinguishment.

During the nine months ended March 31, 2025, our Research Now Group, LLC and Dynata, LLC First Lien Term Loan was restructured to new First Lien Debt and Common Stock of New Insight Holdings, Inc. A portion of the cost basis exchanged was written-off for tax purposes and we recorded a realized loss of $297,076 to our investment in Research Now Group, LLC and Dynata, LLC.

During the three months ended March 31, 2026 and 2025, we recognized a realized loss of $73,534 and $502,268, respectively, on our Structured Subordinated Notes.

During the nine months ended March 31, 2026 and 2025, we recognized a realized loss of $491,564 and $1,373,613, respectively, on our Structured Subordinated Notes.

Net Unrealized Gains/Losses on Investments

For the three months ended March 31, 2026 and 2025, net change in unrealized gains (losses) totaled $1,256,861 and $(493,957), respectively. For the nine months ended March 31, 2026 and 2025, net change in unrealized gains (losses) totaled $(3,386,538) and $(177,501), respectively. For the three and nine months ended March 31, 2026, the fair value of our investments was negatively impacted by macro-economic challenges such as reduced demand, economic volatility, and inflationary pressures. During the nine months ended March 31, 2026, First Brands Group and certain of its affiliates filed voluntary petitions for Chapter 11 bankruptcy protection which resulted in a net change in unrealized losses of $9,021 for the three months ended March 31, 2026 and $6,384,655 for the nine months ended March 31, 2026.

Financial Condition, Liquidity and Capital Resources

We generate cash primarily from cash flows from fees (such as management fees), interest and dividends earned from our investments and principal repayments and proceeds from sales of our investments. Our primary use of funds is investments in companies, payments of our expenses and distributions to holders of our common stock.

Because many of our operating costs are not proportional to our size, including accounting/auditing, legal, insurance and administrative costs (which includes the reimbursement of the compensation of the chief financial officer, CCO, treasurer, secretary and other administrative personnel of our Administrator), we must raise sufficient capital in order to build a portfolio that generates sufficient revenue to cover our expenses. As of March 31, 2026, we have not raised sufficient capital to build a large enough portfolio to generate sufficient revenue to cover our operating expenses. We have entered into an Expense Limitation Agreement ("ELA") with our Adviser, which, as a result of our Adviser waiving fees that we would otherwise be

required to pay to it, has allowed us to make distributions to shareholders and pay some expenses. However, after December 31, 2026, our Adviser will no longer be contractually obligated to waive fees. Our Adviser, in its capacity as an affiliate of our former adviser, has in the past agreed to voluntarily waive fees, but there is no guarantee that it will do so and, if it does not, we will be required to sell our investments to cover our expenses.

We are conducting our continuous Multi-Class Offering of our Class S shares, Class D shares, and Class I shares, in a maximum aggregate amount of $300,000,000. Because the Multi-Class Offering is a "best efforts" offering, Ultimus Fund Distributors, LLC, our distributor in our Multi-Class Offering (the "Distributor"), is only required to use its best efforts to sell the shares, which means that no underwriter, broker or other person will be obligated to purchase any shares.

We may borrow funds to make investments at any time, including before we have fully invested the proceeds of any offering, to the extent we determine that additional capital would allow us to take advantage of investment opportunities, or if our Board of Directors determines that leveraging our portfolio would be in our best interests and the best interests of our stockholders. We have not yet decided, however, whether, and to what extent, we will finance portfolio investments using debt. We do not currently anticipate issuing any preferred stock.

The North American Securities Administrators Association, in its Omnibus Guidelines Statement of Policy adopted on March 29, 1992 and as amended on May 7, 2007 and from time to time, requires that our sponsor and its affiliates have an aggregate financial net worth, exclusive of home, automobile and home furnishings, of 5% of the first $20,000,000 of both the gross amount of securities currently being offered and the gross amount of any originally issued direct participation program sold by our sponsor and its affiliates within the last 12 months, plus 1% of all amounts in excess of the first $20,000,000. Based on these requirements, our sponsor and its affiliates have an aggregate net worth in excess of those amounts required by the Omnibus Guidelines Statement of Policy.

For the nine months ended March 31, 2026 and 2025, our operating activities (used) provided $19,151,039 and $(23,322,907), respectively. The change is primarily driven by an increase in repayment and sales of portfolio investments, a decrease in purchases, an increase in interest receivable, an increase in a payable for accrued legal and administrator fees and a decrease in the amortization of deferred financing costs.

For the nine months ended March 31, 2026 and 2025, operating activities included the purchases of investments of $6,866,513 and $42,748,135, respectively.

For the nine months ended March 31, 2026 and 2025, operating activities included the repayments and sales of portfolio investments of $22,421,838 and $16,850,812, respectively.

Financing activities provided/(used) $(12,357,469) and $28,224,003 of cash during the nine months ended March 31, 2026 and 2025, respectively. During the nine months ended March 31, 2026 and 2025 respectively, these included dividend payments of $318,544 and $378,127 and borrowings under the Secured Revolving Credit Facility of $3,400,000 and $43,600,000, respectively. During the nine months ended March 31, 2026, financing activities also included borrowings under the OZK Credit Facility of $52,775,000.

For the nine months ended March 31, 2026 and 2025, respectively, we repaid, in aggregate, $66,496,153 and $23,600,000, under the OZK Credit Facility and the Secured Revolving Credit Facility.

Senior Secured Revolving Credit Facility

The Senior Secured Revolving Credit Facility provided for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $20,000,000 with an option for the Company to request, at one or more times, that existing and/or new lenders, at their election, provide up to $150,000,000 in aggregate. The Senior Secured Revolving Credit Facility provided for swingline loans in an aggregate principal amount at any time outstanding that will not exceed $5,000,000. On January 30, 2024, the Company entered into the first amendment (the "First Amendment") to the Senior Secured Revolving Credit Facility. Among other changes, the First Amendment amended the original Senior Secured Revolving Credit Facility to provide for an increase in the aggregate commitment from $20,000,000 to $65,000,000. On February 1, 2024, there was an automatic commitment increase which increased the aggregate commitment from $65,000,000 to $75,000,000. Availability under the Senior Secured Revolving Credit Facility will terminate on the earlier of the commitment termination date of September 19, 2025 ("Commitment Termination Date") or the date of termination of the revolving commitments thereunder, and the outstanding loans under the Senior Secured Revolving Credit Facility will mature on September 21, 2026. The Senior Secured Revolving Credit Facility also required mandatory prepayment of interest and principal upon certain events, including after the date of termination of the revolving commitments thereunder from asset sales,

extraordinary receipts, returns of capital, equity issuances, and incurrence of indebtedness, with certain exceptions and minimum amount thresholds.

OZK Credit Facility

During the three months ended March 31, 2026 and 2025, we had no realized loss on the extinguishment of debt.

During the nine months ended March 31, 2026 and 2025, we realized a loss on the extinguishment of debt in the amount of $495,849 and $0, respectively.

The OZK Credit Facility requires the Borrower to pledge assets as collateral in order to borrow under the OZK Credit Facility. The OZK Credit Facility contains restrictions pertaining to the geographic and industry concentrations of funded loans, maximum size of funded loans, interest rate payment frequency of funded loans, maturity dates of funded loans and minimum equity requirements, among other items. The OZK Credit Facility also contains certain requirements relating to portfolio performance, including limitations on delinquencies and charge-offs, a violation of which could result in the early termination of the OZK Credit Facility. As of March 31, 2026, we were in compliance with the applicable covenants of the OZK Credit Facility.