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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-K





(Mark One)

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

For the fiscal year ended September 30, 2018

OR



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

For the transition period from
 to

Commission file number 814-00237





GLADSTONE CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)







|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Maryland                                                      |  | 54-2040781                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              | 
|1521 Westbranch Drive, Suite 100McLean, Virginia              |  | 22102                              
|(Address of principal executive offices)                      |  | (Zip Code)                         

(703) 287-5800

(Registrants telephone number, including area code)

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



|                                                                                                                     |  |                                                        
|-------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------
|Title of each class                                                                                                  |  | Name of each exchange on which
registered              
|Common Stock, $0.001 par value per share                                                                             |  | Nasdaq Global Select Market                            
|6.00% Series 2024 Term Preferred Stock, $0.001 par value per share
6.125% Notes due 2023, $25.00 par value per share |  | Nasdaq Global Select Market
Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

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

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

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

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



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  | ☐ |  | Accelerated filer         |  | ☒
|                        |  |   | 
|Non-accelerated filer   |  | ☐ |  | Smaller reporting company |  | ☐
|                        |  |   | 
|Emerging growth company |  | ☐ |  |                           |  |  

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

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

The aggregate market value of the voting common stock
held by non-affiliates of the Registrant on March 29, 2018, based on the closing price on that date of $8.60 on the Nasdaq Global Select Market, was $217,196,999. For the purposes of calculating this
amount only, all directors and executive officers of the Registrant have been treated as affiliates. There were 28,504,745 shares of the Registrants common stock, $0.001 par value per share, outstanding as of November 13, 2018.

Documents Incorporated by Reference. Portions of the Registrants definitive proxy statement filed with the Securities and Exchange Commission
pursuant to Regulation 14A in connection with the Registrants 2019 Annual Meeting of Stockholders, which will be filed subsequent to the date hereof, are incorporated by reference into Part III of this Form
10-K. Such proxy statement will be filed with the Securities and Exchange Commission not later than 120 days following the end of the Registrants fiscal year ended September 30, 2018.









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GLADSTONE CAPITAL CORPORATION

FORM 10-K FOR THE FISCAL YEAR ENDED

SEPTEMBER 30, 2018

TABLE OF CONTENTS



|           |  |         |  |                                                                                                               |  |  |     | 
|---------- |  | ------- |  | ------------------------------------------------------------------------------------------------------------- |  |  | --- | 
|PART I     |  | ITEM 1  |  | Business                                                                                                      |  |  | 2   | 
|           |  | ITEM 1A |  | Risk Factors                                                                                                  |  |  | 18  | 
|           |  | ITEM 1B |  | Unresolved Staff Comments                                                                                     |  |  | 39  | 
|           |  | ITEM 2  |  | Properties                                                                                                    |  |  | 39  | 
|           |  | ITEM 3  |  | Legal Proceedings                                                                                             |  |  | 39  | 
|           |  | ITEM 4  |  | Mine Safety Disclosures                                                                                       |  |  | 39  | 
|PART II    |  | ITEM 5  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer
 Purchases of Equity Securities |  |  | 40  | 
|           |  | ITEM 6  |  | Selected Financial Data                                                                                       |  |  | 42  | 
|           |  | ITEM 7  |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                         |  |  | 44  | 
|           |  | ITEM 7A |  | Quantitative and Qualitative Disclosures About Market Risk                                                    |  |  | 65  | 
|           |  | ITEM 8  |  | Financial Statements and Supplementary Data                                                                   |  |  | 66  | 
|           |  | ITEM 9  |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                          |  |  | 115 | 
|           |  | ITEM 9A |  | Controls and Procedures                                                                                       |  |  | 115 | 
|           |  | ITEM 9B |  | Other Information                                                                                             |  |  | 115 | 
|PART III   |  | ITEM 10 |  | Directors, Executive Officers and Corporate Governance                                                        |  |  | 116 | 
|           |  | ITEM 11 |  | Executive Compensation                                                                                        |  |  | 116 | 
|           |  | ITEM 12 |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters               |  |  | 116 | 
|           |  | ITEM 13 |  | Certain Relationships and Related Transactions, and Director
Independence                                     |  |  | 116 | 
|           |  | ITEM 14 |  | Principal Accountant Fees and Services                                                                        |  |  | 116 | 
|PART IV    |  | ITEM 15 |  | Exhibits and Financial Statement Schedules                                                                    |  |  | 117 | 
|           |  | ITEM 16 |  | Form 10-K Summary                                                                                             |  |  | 119 | 
|SIGNATURES |  |         |  |                                                                                                               |  |  | 120 | 



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FORWARD-LOOKING STATEMENTS

All statements contained herein, other than historical facts, may constitute forward-looking statements. These statements may relate to, among
other things, our future operating results, our business prospects and the prospects of our portfolio companies, actual and potential conflicts of interest with Gladstone Management Corporation, our adviser, and its affiliates, the use of borrowed
money to finance our investments, the adequacy of our financing sources and working capital, and our ability to co-invest, among other factors. In some cases, you can identify forward-looking statements by
terminology such as estimate, may, might, believe, will, provided, anticipate, future, could, growth, plan,
intend, expect, should, would, if, seek, possible, potential, likely or the negative of such terms or comparable terminology. These
forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: (1) the recurrence of adverse events in the economy and the capital markets; (2) risks associated with
negotiation and consummation of pending and future transactions; (3) the loss of one or more of our executive officers, in particular David Gladstone, Terry Lee Brubaker or Robert L. Marcotte; (4) changes in our investment objectives and
strategy; (5) availability, terms (including the possibility of interest rate volatility) and deployment of capital; (6) changes in our industry, interest rates, exchange rates or the general economy; (7) the degree and nature of our
competition; (8) our ability to maintain our qualification as a regulated investment company, or RIC, and as a business development company, or BDC; and (9) those factors described in theRisk Factorssection of this Annual Report on Form 10-K. We caution readers not to place undue reliance on 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. We have based forward-looking statements on information available to us on the date of this Annual Report on Form
10-K. Except as required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise, after the date of this Annual Report on Form 10-K. 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 Securities and Exchange Commission, including quarterly reports on Form 10-Q and current reports on Form 8-K.

In this Annual Report on Form 10-K, or Annual Report, the Company, we, us, and our refer to Gladstone Capital Corporation and its wholly-owned subsidiaries unless the context otherwise
indicates. Dollar amounts are in thousands unless otherwise indicated.

PART I

The information contained in this section should be read in conjunction with our accompanying Consolidated Financial Statements and the notes thereto
appearing elsewhere in this Annual Report on Form 10-K.

ITEM 1. BUSINESS

Overview

Organization

Gladstone Capital Corporation was incorporated under the Maryland General Corporation Law on May 30, 2001 and completed an initial public offering on
August 24, 2001. We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development
company (BDC) under the Investment Company Act of 1940, as amended (the 1940 Act), and is applying the guidance of the Financial Accounting Standards Board (the FASB) Accounting Standards Codification
(ASC) Topic 946 Financial Services-Investment Companies (ASC 946). In addition, we have elected to be treated for tax purposes as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as
amended (the Code). We were established for the purpose of investing in debt and equity securities of established private businesses operating in the United States (U.S.).

Our shares of common stock and mandatorily redeemable preferred stock are traded on the Nasdaq Global Select Market (Nasdaq) under the trading
symbols GLAD and GLADN, respectively and our Notes due 2023 trade on Nasdaq under the trading symbol GLADD.



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Investment Adviser and Administrator

We are externally managed by our affiliated investment adviser, Gladstone Management Corporation (the Adviser), pursuant to an investment advisory
and management agreement (the Advisory Agreement). Administrative services are provided by our affiliate, Gladstone Administration, LLC (the Administrator), pursuant to an administration agreement (the Administration
Agreement). Each of the Adviser and Administrator are privately-held companies that are indirectly owned and controlled by David Gladstone, our chairman and chief executive officer. Mr. Gladstone and Terry Lee Brubaker, our vice chairman
and chief operating officer, also serve on the board of directors of the Adviser, the board of managers of the Administrator, and serve as executive officers of the Adviser and the Administrator. The Administrator employs, among others, our chief
financial officer and treasurer, chief valuation officer, chief compliance officer, general counsel and secretary (who also serves as the president of the Administrator) and their respective staffs. The Adviser and Administrator have extensive
experience in our lines of business and also provide investment advisory and administrative services, respectively, to our affiliates, including, but not limited to: Gladstone Commercial Corporation (Gladstone Commercial), a
publicly-traded real estate investment trust; Gladstone Investment Corporation (Gladstone Investment), a publicly-traded BDC and RIC; and Gladstone Land Corporation, a publicly-traded real estate investment trust (Gladstone
Land, with Gladstone Commercial, and Gladstone Investment, collectively the Affiliated Public Funds). In the future, the Adviser and Administrator may provide investment advisory and administrative services,
respectively, to other funds and companies, both public and private.

The Adviser was organized as a corporation under the laws of the State of Delaware
on July 2, 2002, and is a U.S. Securities and Exchange Commission (the SEC) registered investment adviser under the Investment Advisers Act of 1940, as amended. The Administrator was organized as a limited liability company under
the laws of the State of Delaware on March 18, 2005. The Adviser and Administrator are headquartered in McLean, Virginia, a suburb of Washington, D.C.

Investment Objectives and Strategy

Our investment
objectives are to: (1) achieve and grow current income by investing in debt securities of established lower middle market companies (which we generally define as companies with annual earnings before interest, taxes, depreciation and
amortization (EBITDA) of $3 million to $15 million) in the U.S. that we believe will provide stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions
to stockholders that grow over time; and (2) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of established businesses that we believe can grow over time to permit us to
sell our equity investments for capital gains. To achieve our objectives, our primary investment strategy is to invest in several categories of debt and equity securities, with each investment generally ranging from $8 million to
$30 million, although investment size may vary, depending upon our total assets or available capital at the time of investment. We lend to borrowers that need funds for growth capital, to finance acquisitions, or to recapitalize or refinance
their existing debt facilities. We seek to avoid investing in high-risk, early-stage enterprises. Our targeted portfolio companies are generally considered too small for the larger capital marketplace. We intend for our investment portfolio to
consist of approximately 90.0% debt investments and 10.0% equity investments, at cost. As of September 30, 2018, our investment portfolio was made up of approximately 91.4% debt investments and 8.6% equity investments, at cost.

We invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity. If we are participating in an
investment with one or more co-investors, our investment is likely to be smaller than if we were investing alone.

In July 2012, the SEC granted us an exemptive order (the Co-Investment Order) that expands our ability to co-invest with certain of our affiliates under certain circumstances and any future business development company or closed-end management investment company that is advised
(or sub-advised if it controls the fund) by the Adviser, or any combination of the foregoing, subject to the conditions in the SECs order.

In general, our investments in debt securities have a term of no more than seven years, accrue interest at variable rates (based on the one month London
Interbank Offered Rate (LIBOR)) and, to a lesser extent, at fixed rates. We seek debt instruments that pay interest monthly or, at a minimum, quarterly, and which may include a yield enhancement, such as a success fee or deferred
interest provision and may include interest only with all principal and any accrued but unpaid interest due at maturity. Generally, success fees accrue at a set rate and are contractually due upon a change of control of the business. Some debt
securities have deferred interest whereby some portion of the interest payment is added to the principal balance so that the interest is paid, together with the principal, at maturity. This form of deferred interest is often called paid-in-kind (PIK) interest. Typically, our equity investments take the form of preferred or common stock, limited liability company interests, or warrants or
options to purchase the foregoing. Often, these equity investments occur in connection with our original investment, recapitalizing a business, or refinancing existing debt.



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Since our initial public offering in 2001 and through September 30, 2018, we have invested in over 226
different companies, while making 188 consecutive monthly or quarterly cash distributions to common stockholders. We expect that our investment portfolio will primarily include the following three categories of investments in private companies
operating in the U.S.:



| |  |  | First Lien Secured Debt Securities: We seek to invest a portion of our assets in first lien secured debt
securities also known as senior loans, senior term loans, lines of credit and senior notes. Using its assets as collateral, the borrower typically uses first lien debt to cover a substantial portion of the funding needs of the business. These debt
securities usually take the form of first priority liens on all, or substantially all, of the assets of the business. First lien debt securities may include investments sourced from the syndicated loan market.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Second Lien Secured Debt Securities:We seek to invest a portion of our assets in second lien secured debt
securities, also known as subordinated loans, subordinated notes and mezzanine loans. These second lien secured debt securities rank junior to the borrowers first lien secured debt securities and may be secured by second priority liens on all
or a portion of the assets of the business. Additionally, we may receive other yield enhancements in addition to or in lieu of success fees such as warrants to buy common and preferred stock or limited liability interests in connection with these
second lien secured debt securities. Second lien debt securities may include investments sourced from the syndicated loan market.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Preferred and Common Equity/Equivalents:In some cases we will purchase equity securities which
consist of preferred and common equity or limited liability company interests, or warrants or options to acquire such securities, and are in combination with our debt investment in a business. Additionally, we may receive equity investments derived
from restructurings on some of our existing debt investments. In some cases, we will own a significant portion of the equity and in other cases we may have voting control of the businesses in which we invest.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pursuant to the 1940 Act, we must maintain at least 70.0% of our total assets in qualifying assets, which generally include each of the investment types
listed above. Therefore, the 1940 Act permits us to invest up to 30.0% of our assets in other non-qualifying assets. See Regulation as a BDC  Qualifying Assets for a discussion of the
types of qualifying assets in which we are permitted to invest pursuant to Section 55(a) of the 1940 Act.

Because the majority of the loans in our
portfolio consist of term debt in private companies that typically cannot or will not expend the resources to have their debt securities rated by a credit rating agency, we expect that most, if not all, of the debt securities we acquire will be
unrated. Investors should assume that these loans would be rated below what is today considered investment grade quality. Investments rated below investment grade are often referred to as high yield securities or junk bonds and may be
considered higher risk, as compared to investment-grade debt instruments. In addition, many of the debt securities we hold typically do not amortize prior to maturity.

Investment Policies

We seek to achieve a high
level of current income and capital gains through investments in debt securities and preferred and common stock that we generally acquire in connection with buyouts and other recapitalizations. The following investment policies, along with these
investment objectives, may not be changed without the approval of our board of directors (the Board of Directors):



| |  |  | We will at all times conduct our business so as to retain our status as a BDC. In order to retain that status, we
must operate for the purpose of investing in certain categories of qualifying assets. In addition, we may not acquire any assets (other than non-investment assets necessary and appropriate to our operations as
a BDC or qualifying assets) if, after giving effect to such acquisition, the value of our qualifying assets is less than 70.0% of the value of our total assets. We anticipate that the securities we seek to acquire will generally be
qualifying assets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | We will at all times endeavor to conduct our business so as to retain our status as a RIC under the Code. To do
so, we must meet income source, asset diversification and annual distribution requirements. We may issue senior securities, such as debt or preferred stock, to the extent permitted by the 1940 Act for the purpose of making investments, to fund share
repurchases, or for temporary emergency or other purposes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

With the exception of our policy to conduct our business as a BDC, these
policies are not fundamental and may be changed without stockholder approval.

Investment Concentrations

As of September 30, 2018, our investment portfolio consisted of investments in 50 companies located in 24 states across 18 different industries with an
aggregate fair value of $390.0 million. Our five largest investments at fair value as of September 30, 2018, totaled $122.8 million, or 31.5% of our total investment portfolio.

The following table outlines our investments by security type at September 30, 2018 and 2017:



|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|------------------------- |  | ------------------ | ------- |  | ------------------ |  | ----- | ---- |  | - | ---------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                          |  | September 30, 2018 |         |  | September 30, 2017 | 
|                          |  | Cost               |         |  | Fair Value         |  |       | Cost |  |   | Fair Value | 
|Secured first lien debt   |  | $                  | 206,523 |  |                    |  | 48.3  | %    |  | $ | 199,625    |  |  |  | 51.2  | % |  | $ | 198,942 |  |  |  | 48.4  | % |  | $ | 173,896 |  |  |  | 49.4  | %
|Secured second lien debt  |  |                    | 180,274 |  |                    |  | 42.2  |      |  |   | 156,373    |  |  |  | 40.1  |   |  |   | 168,247 |  |  |  | 40.9  |   |  |   | 155,249 |  |  |  | 44.1  |  
|Unsecured debt            |  |                    | 3,708   |  |                    |  | 0.9   |      |  |   | 3,655      |  |  |  | 0.9   |   |  |   | 3,324   |  |  |  | 0.8   |   |  |   | 3,324   |  |  |  | 0.9   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total debt investments    |  |                    | 390,505 |  |                    |  | 91.4  |      |  |   | 359,653    |  |  |  | 92.2  |   |  |   | 370,513 |  |  |  | 90.1  |   |  |   | 332,469 |  |  |  | 94.4  |  
|Preferred equity          |  |                    | 12,920  |  |                    |  | 3.0   |      |  |   | 7,749      |  |  |  | 2.0   |   |  |   | 18,794  |  |  |  | 4.5   |   |  |   | 6,561   |  |  |  | 1.9   |  
|Common equity/equivalents |  |                    | 24,042  |  |                    |  | 5.6   |      |  |   | 22,644     |  |  |  | 5.8   |   |  |   | 22,128  |  |  |  | 5.4   |   |  |   | 13,343  |  |  |  | 3.7   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total equity investments  |  |                    | 36,962  |  |                    |  | 8.6   |      |  |   | 30,393     |  |  |  | 7.8   |   |  |   | 40,922  |  |  |  | 9.9   |   |  |   | 19,904  |  |  |  | 5.6   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total Investments         |  | $                  | 427,467 |  |                    |  | 100.0 | %    |  | $ | 390,046    |  |  |  | 100.0 | % |  | $ | 411,435 |  |  |  | 100.0 | % |  | $ | 352,373 |  |  |  | 100.0 | %
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  

Our investments at fair value consisted of the following industry classifications at September 30, 2018 and 2017:



|                                                                      |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|--------------------------------------------------------------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                                                                      |  | September 30, 2018 |         |  | September 30, 2017            | 
|Industry Classification                                               |  | Fair Value         |         |  | Percentageof TotalInvestments |  |       | Fair Value |  |   | Percentageof TotalInvestments | 
|                                                                      |  |                    |         | 
|Diversified/Conglomerate Service                                      |  | $                  | 79,066  |  |                               |  | 20.3  | %          |  | $ | 80,723                        |  |  |  | 22.9  | %
|Healthcare, education and childcare                                   |  |                    | 53,916  |  |                               |  | 13.8  |            |  |   | 46,288                        |  |  |  | 13.1  |  
|Oil and gas                                                           |  |                    | 50,172  |  |                               |  | 12.9  |            |  |   | 34,712                        |  |  |  | 9.9   |  
|Telecommunications                                                    |  |                    | 47,794  |  |                               |  | 12.3  |            |  |   | 31,350                        |  |  |  | 8.9   |  
|Diversified/Conglomerate Manufacturing                                |  |                    | 43,421  |  |                               |  | 11.1  |            |  |   | 40,843                        |  |  |  | 11.6  |  
|Diversified natural resources, precious metals and minerals           |  |                    | 23,040  |  |                               |  | 5.9   |            |  |   | 18,949                        |  |  |  | 5.4   |  
|Automobile                                                            |  |                    | 18,209  |  |                               |  | 4.7   |            |  |   | 20,082                        |  |  |  | 5.7   |  
|Cargo Transportation                                                  |  |                    | 15,164  |  |                               |  | 3.9   |            |  |   | 13,081                        |  |  |  | 3.7   |  
|Beverage, food and tobacco                                            |  |                    | 13,727  |  |                               |  | 3.5   |            |  |   | 14,103                        |  |  |  | 4.0   |  
|Machinery                                                             |  |                    | 11,058  |  |                               |  | 2.8   |            |  |   | 5,114                         |  |  |  | 1.4   |  
|Home and Office Furnishings, Housewares and Durable Consumer Products |  |                    | 10,125  |  |                               |  | 2.6   |            |  |   | 10,100                        |  |  |  | 2.9   |  
|Textiles and leather                                                  |  |                    | 6,556   |  |                               |  | 1.7   |            |  |   | 4,879                         |  |  |  | 1.4   |  
|Hotels, Motels, Inns, and Gaming                                      |  |                    | 6,337   |  |                               |  | 1.6   |            |  |   | 7,136                         |  |  |  | 2.0   |  
|Personal and non-durable consumer products                            |  |                    | 4,892   |  |                               |  | 1.3   |            |  |   | 7,035                         |  |  |  | 2.0   |  
|Buildings and real estate                                             |  |                    | 2,455   |  |                               |  | 0.6   |            |  |   | 3,004                         |  |  |  | 0.9   |  
|Printing and publishing                                               |  |                    | 1,998   |  |                               |  | 0.5   |            |  |   | 3,628                         |  |  |  | 1.0   |  
|Leisure, Amusement, Motion Pictures, Entertainment                    |  |                    |        |  |                               |  |      |            |  |   | 9,225                         |  |  |  | 2.6   |  
|Other, < 2.0%                                                         |  |                    | 2,116   |  |                               |  | 0.5   |            |  |   | 2,121                         |  |  |  | 0.6   |  
|                                                                      |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total Investments                                                     |  | $                  | 390,046 |  |                               |  | 100.0 | %          |  | $ | 352,373                       |  |  |  | 100.0 | %
|                                                                      |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  



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Our investments at fair value were included in the following U.S. geographic regions and Canada at
September 30, 2018 and 2017:



|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|----------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                  |  | September 30, 2018 |         |  | September 30, 2017            | 
|Location          |  | Fair Value         |         |  | Percentageof TotalInvestments |  |       | Fair Value |  |   | Percentageof TotalInvestments | 
|South             |  | $                  | 168,917 |  |                               |  | 43.3  | %          |  | $ | 150,727                       |  |  |  | 42.8  | %
|West              |  |                    | 114,286 |  |                               |  | 29.3  |            |  |   | 116,302                       |  |  |  | 33.0  |  
|Midwest           |  |                    | 61,733  |  |                               |  | 15.8  |            |  |   | 58,915                        |  |  |  | 16.7  |  
|Northeast         |  |                    | 37,589  |  |                               |  | 9.7   |            |  |   | 26,429                        |  |  |  | 7.5   |  
|Canada            |  |                    | 7,521   |  |                               |  | 1.9   |            |  |   |                              |  |  |  |      |  
|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total Investments |  | $                  | 390,046 |  |                               |  | 100.0 | %          |  | $ | 352,373                       |  |  |  | 100.0 | %
|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  

The geographic composition is determined by the location of the headquarters for each of our portfolio companies. A portfolio
company may have a number of other business locations in other geographic locations.

Investment Process

Overview of Investment and Approval Process

To
originate investments, the Advisers investment professionals use an extensive referral network comprised primarily of private equity sponsors, leveraged buyout funds, investment bankers, attorneys, accountants, commercial bankers, and business
brokers. The Advisers investment professionals review information received from these and other sources in search of potential financing opportunities. If a potential opportunity matches our investment objectives, the investment professionals
will seek an initial screening of the opportunity with our president, Robert L. Marcotte, to authorize the submission of an indication of interest (IOI) to the prospective portfolio company. If the prospective portfolio company passes
this initial screening and the IOI is accepted by the prospective company, the investment professionals will seek approval to issue a letter of intent (LOI) to the prospective company from the Advisers investment committee, which
is composed of Messers. Gladstone, Brubaker and Marcotte. If this LOI is issued, then the Adviser and Gladstone Securities, LLC (Gladstone Securities) (collectively, the Due Diligence Team) will conduct a due diligence
investigation and create a detailed profile summarizing the prospective portfolio companys historical financial statements, industry, competitive position and management team, analyzing its conformity to our general investment criteria. The
investment professionals then present this profile to the Advisers investment committee, which must approve each investment. Further, each investment is available for review by the members of our Board of Directors, a majority of whom are not
interested persons, as defined in Section 2(a)(19) of the 1940 Act.

Prospective Portfolio Company Characteristics

We have identified certain characteristics that we believe are important in identifying and investing in prospective portfolio companies. The criteria listed
below provide general guidelines for our investment decisions, although not all of these criteria may be met by each portfolio company.



| |  |  | Growth-and-Income Orientation
and Positive Cash Flow. Our investment philosophy places a premium on fundamental analysis from an investors perspective and has a distinct growth-and-income
orientation. In seeking income, we typically invest in companies that generate growing sales and cash flow to provide some assurance that they will be able to service their debt and deleverage over time. We do not expect to invest in start-up companies or companies with what we believe to be cyclical industries or speculative business plans.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Experienced Management. We typically require that the businesses in which we invest have experienced
management teams. We also require the businesses to have proper incentives in place to induce management teams to succeed and act in concert with our interests as an investor, including having significant equity or other interests in the financial
performance of their respective companies.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Strong Competitive Position in an Industry. We seek to invest in businesses that have developed strong
market positions within their respective markets and that we believe are well-positioned to capitalize on growth opportunities. We seek businesses that demonstrate significant competitive advantages versus their competitors, which we believe will
help to protect their market positions and profitability.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Enterprise Collateral Value. The projected enterprise valuation of the business, based on market based
comparable cash flow multiples, is an important factor in our investment analysis in determining the collateral coverage of our debt securities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Extensive Due Diligence

The Due Diligence Team
conducts what we believe are extensive due diligence investigations of our prospective portfolio companies and investment opportunities. The due diligence investigation may begin with a review of publicly available information followed by in depth
business analysis, including, but not limited to, any of the following:



| |  |  | a review of the prospective portfolio companys historical and projected financial information, including a
quality of earnings analysis;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | detailed review of the track record of the private equity firm or ownership group acquiring or controlling any
prospective borrower;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | visits to the prospective portfolio companys business site(s);
| | - |  | ---------------------------------------------------------------



| |  |  | interviews with the prospective portfolio companys management, employees, customers, and vendors;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | review of loan documents and material contracts;
| | - |  | ------------------------------------------------



| |  |  | background checks and a management capabilities assessment on the prospective portfolio companys management
team and controlling shareholders; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | research on the prospective portfolio companys products, services or particular industry and its
competitive position therein.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

Upon completion of a due diligence investigation and a decision to proceed with an investment, the
Advisers investment professionals who have primary responsibility for the investment present the investment opportunity to the Advisers investment committee. The investment committee then determines whether to pursue the potential
investment. Prior to the closing of an investment, additional due diligence may be conducted on our behalf by attorneys, independent accountants, and other outside advisers, as appropriate.

We also rely on the long-term relationships that the Advisers investment professionals have with leveraged buyout funds, investment bankers, commercial
bankers, private equity sponsors, attorneys, accountants, and business brokers. In addition, the extensive direct experiences of our executive officers and managing directors in the operations of lower middle market companies and providing debt and
equity capital to lower middle market companies plays a significant role in our investment evaluation and assessment of risk.

Investment Structure

Once the Adviser has determined that an investment meets our standards and investment criteria, the Adviser works with the management of that
company, the private equity firm or ownership group controlling any prospective borrower, and other capital providers to structure the transaction in a way that we believe will provide us with the greatest opportunity to maximize our return on the
investment, while providing appropriate incentives to the shareholders and management of the company. As discussed above, the capital classes through which we typically structure a deal include first lien secured debt, second lien secured debt, and
preferred and common equity or equivalents. Through its risk management process, the Adviser seeks to limit the downside risk of our investments by:



| |  |  | seeking collateral or superior positions in the portfolio companys capital structure where possible;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | negotiating covenants in connection with our investments that afford our portfolio companies as much flexibility
as possible in managing their businesses, consistent with preserving our capital;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | securing board observation rights at the portfolio company;
| | - |  | -----------------------------------------------------------



| |  |  | incorporating call protection into the investment structure where possible; and
| | - |  | -------------------------------------------------------------------------------



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| |  |  | making investments with an expected total return (including both interest and potential equity appreciation) that
it believes compensates us for the credit risk of the investment.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We expect to hold most of our debt investments until maturity or
repayment, but may sell our investments (including our equity investments) earlier if a liquidity event takes place, such as the sale or recapitalization of a portfolio company. Occasionally, we may sell some or all of our investment interests in a
portfolio company to a third party in a privately negotiated transaction to manage our credit or sector exposures or to enhance our portfolio yield.

Competitive Advantages

A large number of entities
compete with us and make the types of investments that we seek to make in lower middle market privately-owned businesses. Such competitors include other BDCs, non-equity based investment funds, and other
financing sources, including traditional financial services companies such as commercial banks. Many of our competitors are substantially larger than we are and have considerably greater funding sources or are able to access capital more cost
effectively. In addition, certain of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments, serve a broader customer base, and establish a greater market
share. Furthermore, many of these competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or the regulatory requirements we must comply with as a publicly traded company. However, we believe that we have
the following competitive advantages over other providers of financing to lower middle market companies.

Management Expertise

Our Adviser has a separate investment committee for the Company and each of the Affiliated Public Funds. The Advisers investment committee for the
Company is comprised of Messrs. Gladstone, Brubaker and Marcotte, each of whom have a wealth of experience in our area of operation. Mr. Gladstone and Mr. Brubaker also serve on the Advisers investment committee for the other
Affiliated Public Funds. Mr. Gladstone and Mr. Marcotte both have over 25 years of experience in investing in middle market companies and with operating in the BDC marketplace in general. Mr. Brubaker has over 25 years of experience
in acquisitions and operations of companies. Messrs. Gladstone and Brubaker also have principal management responsibility for the Adviser as its executive officers. These three individuals dedicate a significant portion of their time to managing our
investment portfolio. Our senior management has extensive experience providing capital to lower middle market companies and Messrs. Gladstone and Brubaker have worked together at the Gladstone Companies for more than 15 years. In addition, we have
access to the resources and expertise of the Advisers investment professionals and support staff who possess a broad range of transactional, financial, managerial, and investment skills. See the additional discussion regarding management of
portfolio companies by our Adviser below under Ongoing Management of Investments and Portfolio Company Relationships.

Increased Access to Investment Opportunities Developed Through Extensive Research Capability and Network of Contacts

The Adviser seeks to identify potential investments through active origination and due diligence and through its dialogue with numerous private equity firms
and other members of the financial community with whom the Advisers investment professionals have long-term relationships. We believe that the Advisers investment professionals have developed a broad network of contacts within the
investment, commercial banking, private equity and investment management communities, and that their reputation, experience and focus on investing in lower middle market companies enables us to source and identify well-positioned prospective
portfolio companies that provide attractive investment opportunities. Additionally, the Adviser expects to generate information from its professionals network of accountants, consultants, lawyers and management teams of portfolio companies and
other contacts to support the Advisers investment activities.

Disciplined, Value and Income-Oriented Investment Philosophy with a Focus on
Preservation of Capital

In making its investment decisions, the Adviser focuses on the risk and reward profile of each prospective portfolio company,
seeking to minimize the risk of capital loss without foregoing the potential for capital appreciation. We expect the Adviser to use the same investment philosophy that its professionals use in the management of the other Gladstone Companies and to
commit resources to manage downside exposure. The Advisers approach seeks to reduce our risk in investments by using some or all of the following approaches:



| |  |  | focusing on companies with sustainable market positions and cash flow;
| | - |  | ----------------------------------------------------------------------



| |  |  | investing in businesses with experienced and established management teams;
| | - |  | --------------------------------------------------------------------------



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| |  |  | engaging in extensive due diligence from the perspective of a long-term investor;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | investing in businesses backed by successful private equity sponsors or owner operators; and
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | adopting flexible transaction structures by drawing on the experience of the investment professionals of the
Adviser and its affiliates.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

Longer Investment Horizon

Unlike private equity funds that are typically organized as finite-life partnerships, we are not subject to standard periodic capital return requirements. The
partnership agreements of most private equity funds typically provide that these funds may only invest investors capital once and must return all capital and realized gains to investors within a finite time period, often seven to ten years.
These provisions often force private equity funds to seek returns on their investments by causing their portfolio companies to pursue mergers, public equity offerings, or other liquidity events more quickly than might otherwise be optimal or
desirable, potentially resulting in a lower overall return to investors and/or an adverse impact on their portfolio companies. In contrast, we are an exchange-traded corporation of perpetual duration. We believe that our flexibility to make
investments with a long-term view and without the capital return requirements of traditional private investment vehicles provides us with the opportunity to achieve greater long-term returns on invested capital.

Flexible Transaction Structuring

We believe our
management teams broad expertise and years of combined experience enables the Adviser to identify, assess, and structure investments successfully across all levels of a companys capital structure and manage potential risk and return at
all stages of the economic cycle. We are not subject to many of the regulatory limitations that govern traditional lending institutions, such as banks. As a result, we are flexible in selecting and structuring investments, adjusting investment
criteria and transaction structures and, in some cases, the types of securities in which we invest. We believe that this approach enables the Adviser to craft a financing structure which best fits the investment and growth profile of the underlying
business and yields attractive investment opportunities that will continue to generate current income and capital gain potential throughout the economic cycle, including during turbulent periods in the capital markets.

Ongoing Management of Investments and Portfolio Company Relationships

The Advisers investment professionals actively oversee each investment by continuously evaluating the portfolio companys performance and typically
working collaboratively with the portfolio companys management to identify and incorporate best resources and practices that help us achieve our projected investment performance.

Monitoring

The Advisers investment
professionals monitor the financial performance, trends, and changing risks of each portfolio company on an ongoing basis to determine if each company is performing within expectations and to guide the portfolio companys management in taking
the appropriate courses of action. The Adviser employs various methods of evaluating and monitoring the performance of our investments in portfolio companies, which can include the following:



| |  |  | monthly analysis of financial and operating performance;
| | - |  | --------------------------------------------------------



| |  |  | assessment of the portfolio companys performance against its business plan and our investment expectations;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | attendance at and/or participation in the portfolio companys board of directors or management meetings;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | assessment of portfolio company management, sponsor, governance, and strategic direction;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | assessment of the portfolio companys industry and competitive environment; and
| | - |  | -------------------------------------------------------------------------------



| |  |  | review and assessment of the portfolio companys operating outlook and financial projections.
| | - |  | ---------------------------------------------------------------------------------------------



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Relationship Management

The Advisers investment professionals interact with various parties involved with a portfolio company, or investment, by actively engaging with internal
and external constituents, including:



| |  |  | management;
| | - |  | -----------



| |  |  | boards of directors;
| | - |  | --------------------



| |  |  | private equity sponsors;
| | - |  | ------------------------



| |  |  | capital partners; and
| | - |  | ---------------------



| |  |  | advisers and consultants.
| | - |  | -------------------------

Managerial Assistance and Services

As a BDC, we
make available significant managerial assistance, as defined in the 1940 Act, to our portfolio companies and provide other services (other than such managerial assistance) to such portfolio companies. Neither we, nor the Adviser, currently receive
fees in connection with the managerial assistance we make available. At times, the Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance. Such
services may include, but are not limited to: (i) assistance obtaining, sourcing or structuring credit facilities, long term loans or additional equity from unaffiliated third parties; (ii) negotiating important contractual financial
relationships; (iii) consulting services regarding restructuring of the portfolio company and financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties; and (iv) taking a primary role in
interviewing, vetting and negotiating employment contracts with candidates in connection with adding and retaining key portfolio company management team members. The Adviser non-contractually, unconditionally,
and irrevocably credits 100% of these fees against the base management fee that we would otherwise be required to pay to the Adviser as discussed below in Transactions with Related Parties  Investment Advisory and Management
Agreement  Base Management Fee. However, pursuant to the terms of the Advisory Agreement, a small percentage of certain of such fees is retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel
of the Adviser, primarily for the valuation of portfolio companies.

Gladstone Securities also provides other services (such as investment banking and due
diligence services) to certain of our portfolio companies; see Transactions with Related Parties  Other Transactions below.

Valuation Process

The following is a general
description of the investment valuation policy (the Policy) (which has been approved by our Board of Directors) that the professionals of the Adviser and Administrator, with oversight and direction from our chief valuation officer, an
employee of the Administrator who reports directly to our Board of Directors (collectively, the Valuation Team), use each quarter to determine the value of our investment portfolio. In accordance with the 1940 Act, our Board of Directors
has the ultimate responsibility for reviewing and approving, in good faith, the fair value of our investments based on the Policy. The Adviser values our investments in accordance with the requirements of the 1940 Act and accounting principles
generally accepted in the U.S. (GAAP). There is no single standard for determining fair value (especially for privately-held businesses), as fair value depends upon the specific facts and circumstances of each individual investment. Each
quarter, our Board of Directors reviews the Policy to determine if changes thereto are advisable and assesses whether the Valuation Team has applied the Policy consistently. With respect to the valuation of our investment portfolio, the Valuation
Team performs the following steps each quarter:



| |  |  | Each investment is initially assessed by the Valuation Team using the Policy, which may include:
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | obtaining fair value quotes or utilizing input from third party valuation firms; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | using techniques, such as total enterprise value, yield analysis, market quotes and other factors, including but
not limited to: the nature and realizable value of the collateral, including external parties guaranties; any relevant offers or letters of intent to acquire the portfolio company; and the markets in which the portfolio company operates.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Preliminary valuation conclusions are then discussed amongst the Valuation Team and with our management and
documented for review by our Board of Directors. Written valuation recommendations and supporting material are sent to the Board of Directors in advance of the quarterly meetings.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Valuation Committee of the Board of Directors (comprised entirely of independent directors) meets to review
this documentation and discusses the information provided by our Valuation Team, and determines whether the Valuation Team has followed the Policy, determines whether the Valuation Teams recommended fair value is reasonable in light of the
Policy and reviews other facts and circumstances. Then, the Valuation Committee and chief valuation officer present the Valuation Committees findings to the entire Board of Directors, so that the full Board of Directors may review and approve,
with a vote, to accept or reject the fair value recommendations in accordance with the Policy.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fair value measurements of our
investments may involve subjective judgment and estimates. Due to the inherent uncertainty of determining these fair values, the fair value of our investments may fluctuate, from period to period. Our valuation policies, procedures and processes are
more fully described in Note 2Summary of Significant Accounting Policies in our accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form
10-K.

Transactions with Related Parties

Investment Advisory and Management Agreement

In
2006, we entered into the Advisory Agreement, which was subsequently amended in October 2015, as approved unanimously by our Board of Directors, including the unanimous approval of our independent directors, to reduce the base management fee payable
to the Adviser effective July 1, 2015, as discussed further below. In accordance with the Advisory Agreement, we pay the Adviser fees as compensation for its services, consisting of a base management fee and an incentive fee. On July 10,
2018, our Board of Directors, including a majority of the directors who are not parties to the agreement or interested person of any such party, unanimously approved the annual renewal of the Advisory Agreement with the Adviser through
August 31, 2019. Mr. Gladstone, our chairman and chief executive officer, controls the Adviser. The Board of Directors considered the following factors as the basis for its decision to renew the Advisory Agreement: (1) the nature,
extent and quality of services provided by the Adviser to our shareholders; (2) the investment performance of the Company and the Adviser; (3) the costs of the services to be provided and profits to be realized by the Adviser and its
affiliates from the relationship with the Company; (4) the extent to which economies of scale will be realized as the Company and the Affiliated Public Funds grow and whether the fee level under the Advisory Agreement reflects the economies of
scale for the Companys investors; (5) the fee structure of the advisory and administrative agreements of comparable funds; (6) indirect profits to the Adviser created through the Company; and (7) in light of the foregoing
considerations, the overall fairness of the advisory fee paid under the Advisory Agreement.

Based on the information reviewed and the considerations
detailed above, our Board of Directors, including all of the directors who are not interested persons as that term is defined in the 1940 Act, concluded that the investment advisory fee rates and terms are fair and reasonable in relation
to the services provided and approved the Advisory Agreement, as being in the best interests of our stockholders.

Base Management Fee

The base management fee is payable quarterly to the Adviser pursuant to our Advisory Agreement and is assessed at an annual rate of 1.75%, computed on the
basis of the value of our average total assets at the end of the two most recently-completed quarters (inclusive of the current quarter), which are total assets, including investments made with proceeds of borrowings, less any uninvested cash or
cash equivalents resulting from borrowings and adjusted appropriately for any share issuances or repurchases during the period. Prior to July 1, 2015, the annual rate was 2.0%. Our Board of Directors may (as it has for the years ended
September 30, 2018, 2017 and 2016) accept an unconditional and irrevocable credit from the Adviser to reduce the annual 1.75% (or prior to July 1, 2015, 2.0%) base management fee on syndicated loan participations to 0.5%, to the extent
that proceeds resulting from borrowings were used to purchase such syndicated loan participations.

Additionally, pursuant to the requirements of the 1940
Act, the Adviser makes available significant managerial assistance to our portfolio companies. The Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial
assistance. The Adviser non-contractually, unconditionally, and irrevocably credits 100% of these fees against the base management fee that we would otherwise be required to pay to the Adviser; however,
pursuant to the terms of the Advisory Agreement, a small percentage of certain of such fees is retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser, primarily for the



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valuation of portfolio companies. Loan servicing fees that are payable to the Adviser pursuant to our Fifth Amended and Restated Credit Agreement, with KeyBank National Association
(KeyBank), as administrative agent, lead arranger and a lender, as amended (our Credit Facility), are also 100% credited against the base management fee as discussed below, Loan Servicing Fee Pursuant to Credit
Agreement.

Incentive Fee

The incentive
fee consists of two parts: an income-based incentive fee and a capital gains-based incentive fee. The income-based incentive fee rewards the Adviser if our quarterly net investment income (before giving effect to any incentive fee) exceeds 1.75% of
our net assets, which we define as total assets less indebtedness and before taking into account any incentive fees payable or contractually due but not payable during the period, at the end of the immediately preceding calendar quarter, adjusted
appropriately for any share issuances or repurchases during the period (the hurdle rate). The income-based incentive fee with respect to our pre-incentive fee net investment income is generally
payable quarterly to the Adviser and is computed as follows:



| |  |  | no incentive fee in any calendar quarter in which our pre-incentive fee
net investment income does not exceed the hurdle rate (7.0% annualized);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 100.0% of our pre-incentive fee net investment income with respect to
that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% of our net assets, adjusted appropriately for any share issuances or repurchases
during the period, in any calendar quarter (8.75% annualized); and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 20.0% of the amount of our pre-incentive fee net investment income, if
any, that exceeds 2.1875% of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter (8.75% annualized).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Quarterly Incentive Fee Based on Net Investment Income

Pre-incentive fee net investment income

(expressed as a percentage of the value of net assets)



LOGO

Percentage of pre-incentive fee net investment income

allocated to income-related portion of incentive fee

The second part of the incentive fee is a capital gains-based incentive fee that will be determined and payable in arrears as of the end of each fiscal year
(or upon termination of the Advisory Agreement, as of the termination date) and equals 20.0% of our realized capital gains, less any realized capital losses and unrealized depreciation, as of the end of the fiscal year. In determining the capital
gains-based incentive fee payable to the Adviser, we calculate the cumulative aggregate realized capital gains and cumulative aggregate realized capital losses since our inception, and the entire portfolios aggregate unrealized capital
depreciation, if any and excluding any unrealized capital appreciation, as of the date of the calculation. For this purpose, cumulative aggregate realized capital gains, if any, equals the sum of the differences between the net sales price of each
investment, when sold, and the original cost of such investment since inception. Cumulative aggregate realized capital losses equals the sum of the amounts by which the net sales price of each investment, when sold, is less than the original cost of
such investment since inception. The entire portfolios aggregate unrealized capital depreciation, if any, equals the sum of the difference, between the valuation of each investment as of the applicable calculation date and the original cost of
such investment. At the end of the applicable fiscal year, the amount of capital gains that serves as the basis for our calculation of the capital gains-based incentive fee equals the cumulative aggregate realized capital gains less cumulative
aggregate realized capital losses, less the entire portfolios aggregate unrealized capital depreciation, if any. If this number is positive at the end of such fiscal year, then the capital gains-based incentive fee for such year equals 20.0%
of such amount, less the aggregate amount of any capital gains-based incentive fees paid in respect of our portfolio in all prior years. No capital gains-based incentive fee has been recorded or paid from our inception through September 30,
2018, as cumulative unrealized capital depreciation has exceeded cumulative realized capital gains net of cumulative realized capital losses.



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Additionally, in accordance with GAAP, a capital gains-based incentive fee accrual is calculated using the
aggregate cumulative realized capital gains and losses and aggregate unrealized capital depreciation included in the calculation of the capital gains-based incentive fee plus the aggregate unrealized capital appreciation. If such amount is positive
at the end of a period, then GAAP requires us to record a capital gains-based incentive fee equal to 20.0% of such amount, less the aggregate amount of actual capital gains-based incentive fees paid in all prior years. If such amount is negative,
then there is no accrual for such period. GAAP requires that the capital gains-based incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains-based incentive fee would be payable
if such unrealized capital appreciation were realized. There can be no assurance that such unrealized capital appreciation will be realized in the future. No GAAP accrual for a capital gains-based incentive fee has been recorded or paid from our
inception through September 30, 2018.

Our Board of Directors accepted non-contractual, unconditional and
irrevocable credits from the Adviser to reduce the income-based incentive fee to the extent net investment income did not cover 100.0% of distributions to common stockholders for the years ended September 30, 2018, 2017, and 2016, which credits
totaled $1.7 million, $2.3 million, and $1.4 million, respectively.

Loan Servicing Fee Pursuant to Credit Agreement

The Adviser also services the loans held by our wholly-owned subsidiary, Gladstone Business Loan, LLC (Business Loan) (the borrower under our
Credit Facility), in return for which the Adviser receives a 1.5% annual fee payable monthly based on the monthly aggregate outstanding balance of loans pledged under our Credit Facility. Since Business Loan is a consolidated subsidiary of ours, and
the total base management fee paid to the Adviser pursuant to the Advisory Agreement cannot exceed 1.75% of total assets (as reduced by cash and cash equivalents pledged to creditors and adjusted appropriately for any share issuances or repurchases
during the period) during any given calendar year, we treat payment of the loan servicing fee pursuant to our line of credit as a pre-payment of the base management fee under the Advisory Agreement.
Accordingly, these loan servicing fees are 100% non-contractually, unconditionally, and irrevocably credited back to us by the Adviser.

Administration Agreement

We pay the Administrator
pursuant to the Administration Agreement for our allocable portion of the Administrators expenses incurred while performing services to us, which are primarily rent and salaries and benefits expenses of the Administrators employees,
including our chief financial officer and treasurer, chief compliance officer, chief valuation officer and general counsel and secretary (who also serves as the Administrators president), and their respective staffs.

Our allocable portion of the Administrators expenses are generally derived by multiplying the Administrators total expenses by the approximate
percentage of time during the current quarter the Administrators employees performed services for us in relation to their time spent performing services for all companies serviced by the Administrator. On July 10, 2018, our Board of
Directors, including a majority of the directors who are not parties to the Advisory Agreement or interested persons of such party, approved the annual renewal of the Administration Agreement through August 31, 2019.

Other Transactions

Mr. Gladstone also serves
on the board of managers of our affiliate, Gladstone Securities, a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation. Gladstone Securities is 100%
indirectly owned and controlled by Mr. Gladstone and has provided other services, such as investment banking and due diligence services, to certain of our portfolio companies, for which Gladstone Securities receives a fee. Any such fees paid by
portfolio companies to Gladstone Securities do not impact the fees we pay to the Adviser or the non-contractual, unconditional, and irrevocable credits against the base management fee or incentive fee. For
additional information refer to Note 4  RelatedParty Transactions of our accompanying Notes to Consolidated Financial Statements.



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Material U.S. Federal Income Tax Considerations

RIC Status

To qualify for treatment as a RIC under
Subchapter M of the Code, we must generally distribute to our stockholders, for each taxable year, at least 90.0% of our investment company taxable income, which is our ordinary income plus the excess of our net short-term capital gains over net
long-term capital losses. We refer to this as the annual distribution requirement. We must also meet several additional requirements, including:



| |  |  | Business Development Company status. At all times during the taxable year, we must maintain our status as
a BDC.
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Income source requirements. At least 90.0% of our gross income for each taxable year must be from
dividends, interest, payments with respect to securities, loans, gains from sales or other dispositions of securities or other income derived with respect to our business of investing in securities, and net income derived from an interest in a
qualified publicly traded partnership.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Asset diversification requirements. As of the close of each quarter of our taxable year: (1) at least
50.0% of the value of our assets must consist of cash, cash items, U.S. government securities, the securities of other regulated investment companies and other securities to the extent that (a) we do not hold more than 10.0% of the outstanding
voting securities of an issuer of such other securities, and (b) such other securities of any one issuer do not represent more than 5.0% of our total assets; and (2) no more than 25.0% of the value of our total assets may be invested in
the securities of one issuer (other than U.S. government securities or the securities of other regulated investment companies), or of two or more issuers that are controlled by us and are engaged in the same or similar or related trades or
businesses or in the securities of one or more qualified publicly traded partnerships.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Failure to Qualify as a RIC

If we are unable to qualify for treatment as a RIC, we will be subject to tax on all of our taxable income at regular corporate rates. We would not be able to
deduct distributions to stockholders, nor would we be required to make such distributions. Distributions would be taxable to our stockholders as dividend income to the extent of our current and accumulated earnings and profits. Subject to certain
limitations under the Code, corporate distributees would be eligible for the dividends received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the
stockholders adjusted tax basis, and then as a gain realized from the sale or exchange of property. If we fail to meet the RIC requirements for more than two consecutive years and then seek to requalify as a RIC, we generally would be subject
to corporate-level federal income tax on any unrealized appreciation with respect to our assets to the extent that any such unrealized appreciation is recognized during a specified period up to five years.

Qualification as a RIC

If we qualify as a RIC and
distribute to stockholders each year in a timely manner at least 90.0% of our investment company taxable income, we will not be subject to federal income tax on the portion of our taxable income and gains we distribute to stockholders. We would,
however, be subject to a 4.0% nondeductible federal excise tax if we do not distribute, actually or on a deemed basis, an amount at least equal to the sum of (1) 98.0% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in
excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and capital gains in excess of capital losses for preceding years that were not
distributed during such years. For the years ended December 31, 2017, 2016 and 2015, we did not incur any excise taxes.

The federal excise tax would
apply only to the amount by which the required distributions exceed the amount of income we distribute, actually or on a deemed basis, to stockholders. We will be subject to regular corporate income tax, currently a flat rate of 21.0%, on any
undistributed income, including both ordinary income and capital gains.

If we acquire debt obligations that (i) were originally issued at a
discount, (ii) bear interest at rates that are not either fixed rates or certain qualified variable rates, or (iii) are not unconditionally payable at least annually over the life of the obligation, we will be required to include in
taxable income each year a portion of the original issue discount (OID) that accrues over the life of the obligation. Additionally, PIK interest, which is computed at the contractual rate specified in a loan agreement and is added to the
principal balance of a loan, is also a non cash source of income that we are required to include in taxable income each year. Both OID and PIK income will be included in our investment company taxable income even though we



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receive no cash corresponding to such amounts. As a result, we may be required to make additional distributions corresponding to such OID and PIK amounts in order to satisfy the annual
distribution requirement and to continue to qualify as a RIC or to avoid the imposition of federal income and excise taxes. In this event, we may be required to sell investments or other assets to meet the RIC distribution requirements. For the year
ended September 30, 2018, we recorded $0.2 million of OID income and the unamortized balance of OID investments (which are primarily all syndicated loans) as of September 30, 2018 totaled $0.4 million. As of September 30,
2018, we had five investments which had a PIK interest component and we recorded PIK interest income of $3.8 million during the year ended September 30, 2018.

Regulation as a BDC

We are a closed-end, non-diversified management investment company that has elected to be regulated as a BDC under Section 54 of the 1940 Act. As such, we are subject to
regulation under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of
the directors be persons other than interested persons, as defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless
approved by a majority of our outstanding voting securities, as defined in the 1940 Act.

We intend to conduct our business so as to retain
our status as a BDC. A BDC may use capital provided by public stockholders and from other sources to invest in long-term private investments in businesses. A BDC provides stockholders the ability to retain the liquidity of a publicly traded stock
while sharing in the possible benefits, if any, of investing in primarily privately owned companies. In general, a BDC must have been organized and have its principal place of business in the U.S. and must be operated for the purpose of making
investments in qualifying assets, as described in Sections 55(a)(1) through (a)(3) of the 1940 Act.

Qualifying Assets

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as
qualifying assets, unless, at the time the acquisition is made, qualifying assets, other than certain interests in furniture, equipment, real estate, or leasehold improvements (operating assets) represent at least 70.0% of total assets,
exclusive of operating assets. The types of qualifying assets in which we may invest under the 1940 Act include, but are not limited to, the following:



| | (1) | Securities purchased in transactions not involving any public offering from the issuer of such securities,
which issuer is an eligible portfolio company. An eligible portfolio company is generally defined in the 1940 Act as any issuer which:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) | is organized under the laws of, and has its principal place of business in, any State or States in the U.S.;
| | --- | ------------------------------------------------------------------------------------------------------------



| | (b) | is not an investment company (other than a small business investment company wholly owned by the BDC or
otherwise excluded from the definition of investment company); and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | satisfies one of the following:
| | --- | -------------------------------



| | (i) | it does not have any class of securities with respect to which a broker or dealer may extend margin credit;
| | --- | -----------------------------------------------------------------------------------------------------------



| | (ii) | it is controlled by the BDC and for which an affiliate of the BDC serves as a director;
| | ---- | ---------------------------------------------------------------------------------------



| | (iii) | it has total assets of not more than $4.0 million and capital and surplus of not less than
$2 million;
| | ----- | ------------------------------------------------------------------------------------------------------



| | (iv) | it does not have any class of securities listed on a national securities exchange; or
| | ---- | -------------------------------------------------------------------------------------



| | (v) | it has a class of securities listed on a national securities exchange, with an aggregate market value of
outstanding voting and non-voting equity of less than $250.0 million.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Securities received in exchange for or distributed on or with respect to securities described in
(1) above, or pursuant to the exercise of options, warrants or rights relating to such securities.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Cash, cash items, government securities or high quality debt securities maturing in one year or less from the
time of investment.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



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Asset Coverage

Pursuant to Section 61(a)(2) of the 1940 Act, we are permitted, under specified conditions, to issue multiple classes of senior securities
representing indebtedness. However, pursuant to Section 18(c) of the 1940 Act, we are permitted to issue only one class of senior securities that is stock. In either case, we may only issue such senior securities if such class
of senior securities, after such issuance, has an asset coverage, as defined in Section 18(h) of the 1940 Act, of at least 200% (as the law applies to the Company currently) or 150% (as the law will apply to the Company effective April 10,
2019; refer to Managements Discussion and Analysis of Financial Condition and Results of Operations  Overview  Regulatory Compliance for a discussion of changes to the asset coverage requirements pursuant to the
Small Business Credit Availability Act (SBCAA)).

In addition, our ability to pay dividends or distributions (other than dividends payable in
our stock) to holders of any class of our capital stock would be restricted if our senior securities representing indebtedness fail to have an asset coverage of at least 200% (measured at the time of declaration of such distribution and
accounting for such distribution). The 1940 Act does not apply this limitation to privately arranged debt that is not intended to be publicly distributed, unless this limitation is specifically negotiated by the lender. In addition, our ability to
pay dividends or distributions (other than dividends payable in our common stock) to our common stockholders would also be restricted if our senior securities that are stock fail to have an asset coverage of at least 200% (measured at
the time of declaration of such distribution and accounting for such distribution). If the value of our assets declines, we might be unable to satisfy these asset coverage requirements. To satisfy the 200% asset coverage requirement in the event
that we are seeking to pay a distribution, we might either have to (i) liquidate a portion of our loan portfolio to repay a portion of our indebtedness or (ii) issue common stock. This may occur at a time when a sale of a portfolio asset
may be disadvantageous, or when we have limited access to capital markets on agreeable terms. In addition, any amounts that we use to service our indebtedness or for offering expenses will not be available for distributions to our stockholders. If
we are unable to regain the requisite asset coverage through these methods, we may be forced to suspend the payment of such dividends or distributions.

Significant Managerial Assistance

Generally, a
BDC must make available significant managerial assistance to issuers of certain of its portfolio securities that the BDC counts as qualifying assets for the 70.0% test described above. Making available significant managerial assistance means, among
other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and
policies of a portfolio company. Significant managerial assistance also includes the exercise of a controlling influence over the management and policies of the portfolio company. However, with respect to certain, but not all such securities, where
the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance, or the BDC may exercise such control jointly.

Code of Ethics

We, and all of the Gladstone
companies, have adopted a code of ethics and business conduct applicable to all of the officers, directors and employees of such companies that complies with the guidelines set forth in Item 406 of Regulation
S-K of the Securities Act of 1933 (the Securities Act) and Rule 17j-1 of the 1940 Act. As required by the 1940 Act, this code establishes procedures for
personal investments, restricts certain transactions by such personnel and requires the reporting of certain transactions and holdings by such personnel. This code of ethics and business conduct is publicly available on our website under
Corporate Governance at www.GladstoneCapital.com. We intend to provide any required disclosure of any amendments to or waivers of the provisions of this code by posting information regarding any such amendment or waiver to our
website or in a Current Report on Form 8-K.

Compliance Policies and Procedures

We and the Adviser have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws, and
our Board of Directors is required to review these compliance policies and procedures annually to assess their adequacy and the effectiveness of their implementation. We have designated a chief compliance officer, John Dellafiora, Jr., who also
serves as chief compliance officer for all of the Gladstone companies.

Staffing

We do not currently have any employees and do not expect to have any employees in the foreseeable future. Currently, services necessary for our business are
provided by individuals who are employees of the Adviser and the Administrator pursuant to the terms of the Advisory Agreement and the Administration Agreement, respectively. No employee of the Adviser or the Administrator will dedicate all of his
or her time to us. However, we expect that 25 to 30 full time employees of the Adviser and the Administrator will spend substantial time on our matters during the remainder of calendar year 2018 and all of calendar year 2019. As of November 14,
2018, the Adviser and the Administrator collectively had 67 full-time employees. A breakdown of these employees is summarized by functional area in the table below:



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| |  |                       |  |                                                                            
| |  | --------------------- |  | ---------------------------------------------------------------------------
| |  | Number of Individuals |  | Functional Area                                                            
| |  | 12                    |  | Executive management                                                       
| |  | 20                    |  | Accounting, administration, compliance, human resources, legal and treasury
| |  | 35                    |  | Investment management, portfolio management and due diligence              

Available Information

Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments, if any, to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange
Act) are available free of charge through our website at www.GladstoneCapital.com as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. Information on our website should not be
considered part of this Annual Report on Form 10-K. A request for any of these reports may also be submitted to us by sending a written request addressed to Investor Relations, Gladstone Capital Corporation,
1521 Westbranch Drive, Suite 100, McLean, VA 22102, or by calling our toll-free investor relations line at 1-866-366-5745. The
SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.



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|ITEM 1A. | RISK FACTORS
|-------- | ------------

You should carefully consider these risk factors, together with all of the other information included in this Annual Report on Form 10-K and the other reports and documents filed or furnished by us with the SEC. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us, or not presently
deemed material by us, may also impair our operations and performance. If any of the following events occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected. In such case, our net
asset value and the trading price of our securities could decline, and you may lose all or part of your investment. The risk factors described below are the principal risk factors associated with an investment in our securities as well as those
factors generally associated with an investment company with investment objectives, investment policies, capital structure or trading markets similar to ours.

Risks Related to the Economy

Market conditions
could negatively impact our business, results of operations, cash flows and financial condition.

The market in which we operate is affected by a
number of factors that are largely beyond our control but can nonetheless have a potentially significant, negative impact on us. These factors include, among other things:



| |  |  | changes in interest rates and credit spreads;
| | - |  | ---------------------------------------------



| |  |  | the availability of credit, including the price, terms and conditions under which it can be obtained;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | the quality, pricing and availability of suitable investments and credit losses with respect to our investments;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | the ability to obtain accurate market-based valuations;
| | - |  | -------------------------------------------------------



| |  |  | loan values relative to the value of the underlying assets;
| | - |  | -----------------------------------------------------------



| |  |  | default rates on the loans underlying our investments and the amount of related losses;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | prepayment rates, delinquency rates and legislative / regulatory changes with respect to our investments and
loans, and the timing and amount of servicer advances;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competition;
| | - |  | ------------



| |  |  | the actual and perceived state of the economy and public capital markets generally;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | the impact of potential changes to the tax code; and
| | - |  | ----------------------------------------------------



| |  |  | the attractiveness of other types of investments relative to investments in lower middle market companies
generally.
| | - |  | --------------------------------------------------------------------------------------------------------------------

Changes in these factors are difficult to predict, and a change in one factor can affect other factors resulting in adverse
effects to our financial condition.

The illiquidity of our investments may make it difficult for us to sell such investments if required. As a result,
we may realize significantly less than the value at which we have recorded our investments.

Given the volatility and dislocation that the capital
markets have historically experienced, many BDCs have faced, and may in the future face, a challenging environment in which to raise capital. We may in the future have difficulty accessing debt and equity capital, and a severe disruption in the
global financial markets or deterioration in credit and financing conditions could have a material adverse effect on our business, financial condition and results of operations. In addition, significant changes in the capital markets have had, and
may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could
have a material adverse impact on our business, financial condition or results of operations.



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Market interest rates may have an effect on the value of our common stock.

One of the factors that will influence the price of our common stock will be the distribution yield on our common stock (as a percentage of the price of our
common stock) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of our common stock to expect a higher distribution yield. In
addition, higher interest rates would likely increase our borrowing costs and potentially decrease funds available for distribution. As a result, higher market interest rates could cause the market price of our common stock to decrease.

Rising interest rates may negatively impact our investments and have an adverse effect on our business, financial condition, results of operations, and
cash flows.

In recent years, the Fed has incrementally raised the target range for the federal funds rate, with additional increases expected to come
over the next year. As interest rates increase, generally, the cost of borrowing increases, affecting our ability to make new investments on favorable terms or at all. More generally, interest rate fluctuations and changes in credit spreads on
floating rate loans may have a negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our rate of return on invested capital, our net investment income, our net asset value and the
market price of our securities. A substantial portion of our debt investments have variable interest rates that reset periodically and are generally based on LIBOR, so an increase in interest rates from the current interest rate may make it more
difficult for our portfolio companies to service their obligations under the debt investments that we hold. To the extent that interest rates increase, this may negatively impact the operating performance of our portfolio companies due to increasing
debt service obligations and, therefore, may affect our results of operations. In addition, to the extent that an increase in interest rates makes it difficult or impossible to make payments on outstanding indebtedness to us or other financial
sponsors or refinance debt that is maturing in the near term, some of our portfolio companies may be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection. There can be no
guaranty the Fed will raise rates at the gradual pace they originally proposed, nor can there be any assurance that the Fed will make sound decisions as to when to raise rates. The increase in interest rates could have a negative effect on our
investments, which could negatively impact our operating results, financial condition, and cash flows.

We may experience fluctuations in our quarterly
and annual results based on the impact of inflation in the U.S.

The majority of our portfolio companies are in industries that are directly impacted
by inflation, such as consumer goods and services and manufacturing. Our portfolio companies may not be able to pass on to customers increases in their costs of operations which could greatly affect their operating results, impacting their ability
to repay our loans. In addition, any projected future decreases in our portfolio companies operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could
result in future unrealized losses and therefore reduce our net assets resulting from operations.

Volatility of oil and natural gas prices could
impair certain of our portfolio companies operations and ability to satisfy obligations to their respective lenders and investors, including us, which could negatively impact our financial condition.

Our portfolio includes a concentration of companies related to the oil and gas industry with the fair value of these investments representing approximately
$50.2 million, or 12.9% of our total portfolio at fair value as of September 30, 2018. These businesses provide services to oil and gas companies and are indirectly impacted by the prices of, and demand for, oil and natural gas, which have
recently experienced volatility, including significant decline in prices, and such volatility could continue or increase in the future. A substantial or extended decline in oil and natural gas demand or prices may adversely affect the business,
financial condition, cash flows, liquidity or results of operations of these portfolio companies and might impair their ability to meet capital expenditure obligations and financial commitments. A prolonged or continued decline in oil prices could
therefore have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Investments

We operate in a highly competitive market for investment opportunities.

There has been increased competitive pressure in the BDC and investment company marketplace for first and second lien secured debt, resulting in lower yields
for increasingly riskier investments. A large number of entities compete with us and make the types of investments that we seek to make in lower middle market companies. We compete with public and private buyout funds, commercial and investment
banks, commercial financing companies, and, to the extent that they provide an



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alternative form of financing, hedge funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example,
some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which would allow them to consider a
wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. The competitive pressures we face could have a
material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time and we can offer no
assurance that we will be able to identify and make investments that are consistent with our investment objective. We do not seek to compete based on the interest rates we offer, and we believe that some of our competitors may make loans with
interest rates that will be comparable to or lower than the rates we offer. We may lose investment opportunities if we do not match our competitors pricing, terms, and structure. However, if we match our competitors pricing, terms, and
structure, we may experience decreased net interest income and increased risk of credit loss.

Our investments in lower middle market companies are
extremely risky and could cause you to lose all or a part of your investment.

Investments in lower middle market companies are subject to a number of
significant risks including the following:



| |  |  | Lower middle market companies are likely to have greater exposure to economic downturns than larger
businesses. Our portfolio companies may have fewer resources than larger businesses, and thus any economic downturns or recessions are more likely to have a material adverse effect on them. If one of our portfolio companies is adversely impacted
by a recession, its ability to repay our loan or engage in a liquidity event, such as a sale, recapitalization or initial public offering would be diminished.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lower middle market companies may have limited financial resources and may not be able to repay the loans we
make to them. Our strategy includes providing financing to portfolio companies that typically do not have readily available access to financing. While we believe that this provides an attractive opportunity for us to generate profits, this may
make it difficult for the portfolio companies to repay their loans to us upon maturity. A borrowers ability to repay its loan may be adversely affected by numerous factors, including the failure to meet its business plan, a downturn in its
industry, or negative economic conditions. Deterioration in a borrowers financial condition and prospects usually will be accompanied by deterioration in the value of any collateral and a reduction in the likelihood of us realizing on any
guaranties we may have obtained from the borrowers management. As of September 30, 2018, loans to one portfolio company were on non-accrual status with an aggregate debt cost basis of approximately
$26.9 million, or 6.9% of the cost basis of all debt investments in our portfolio. While we are working with the portfolio company to improve their profitability and cash flows, there can be no assurance that our efforts will prove
successful. Although we will sometimes seek to be the senior, secured lender to a borrower, in some of our loans we expect to be subordinated to a senior lender, and our interest in any collateral would, accordingly, likely be subordinate to another
lenders security interest.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lower middle market companies typically have narrower product lines and smaller market shares than large
businesses. Because our target portfolio companies are lower middle market businesses, they will tend to be more vulnerable to competitors actions and market conditions, as well as general economic downturns. In addition, our portfolio
companies may face intense competition, including competition from companies with greater financial resources, more extensive development, manufacturing, marketing, and other capabilities and a larger number of qualified managerial, and technical
personnel.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | There is generally little or no publicly available information about these businesses. Because we seek to
invest in privately owned businesses, there is generally little or no publicly available operating and financial information about our potential portfolio companies. As a result, we rely on our officers, the Adviser and its employees, Gladstone
Securities and certain consultants to perform due diligence investigations of these portfolio companies, their operations, and their prospects. We may not learn all of the material information we need to know regarding these businesses through our
investigations to make a well-informed investment decision.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Lower middle market companies generally have less predictable operating results. We expect that our
portfolio companies may have significant variations in their operating results, may from time to time be exposed to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, may require
substantial additional capital to support their operations, to finance expansion or to maintain their competitive position, may otherwise have a weak financial position, or may be adversely affected by changes in the business cycle. Our portfolio
companies may not meet net income, cash flow, and other coverage tests typically imposed by their senior lenders. A borrowers failure to satisfy financial or operating covenants imposed by senior lenders could lead to defaults and,
potentially, foreclosure on its senior credit facility, which could additionally trigger cross-defaults in other agreements. If this were to occur, it is possible that the borrowers ability to repay any of our loans would be jeopardized.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lower middle market companies are more likely to be dependent on one or two persons. Typically, the
success of a lower middle market business also depends on the management talents and efforts of one or two persons or a small group of persons. The death, disability, or resignation of one or more of these persons could have a material adverse
impact on our borrower and, in turn, on us.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lower middle market companies may have limited operating histories. While we intend to target stable
companies with proven track records, we may make loans to new companies that meet our other investment criteria. Portfolio companies with limited operating histories will be exposed to all of the operating risks that new businesses face and may be
particularly susceptible to, among other risks, market downturns, competitive pressures and the departure of key executive officers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Debt securities of lower middle market companies typically are not rated by a credit rating agency.Typically a lower middle market private business cannot or will not expend the resources to have their debt securities rated by a credit rating agency. We expect that most, if not all, of the debt securities we acquire will be unrated. Investors
should assume that these loans would be at rates below what is today considered investment grade quality. Investments rated below investment grade are often referred to as high yield securities or junk bonds and may be considered high
risk as compared to investment-grade debt instruments.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because the loans we make and equity securities we receive when we make loans
are not publicly traded, there is uncertainty regarding the value of our privately held securities that could adversely affect our determination of our net asset value (NAV).

Our portfolio investments are, and we expect will continue to be, in the form of securities that are not publicly traded. The fair value of securities and
other investments that are not publicly traded may not be readily determinable. Our Board of Directors has ultimate responsibility for reviewing and approving, in good faith, the fair value of our investments, based on the Policy. Our Board of
Directors reviews valuation recommendations that are provided by the Valuation Team. In valuing our investment portfolio, several techniques are used, including, a total enterprise value approach, a yield analysis, market quotes, and independent
third party assessments. Currently, ICE Data Pricing and Reference Data, LLC (formerly Standard & Poors Securities Evaluation, Inc.) provides estimates of fair value on our proprietary debt investments and we use another independent
valuation firm to provide valuation inputs for our significant equity investments, including earnings multiple ranges, as well as other information. In addition to these techniques, other factors are considered when determining fair value of our
investments, including but limited to: the nature and realizable value of the collateral, including external parties guaranties; any relevant offers or letters of intent to acquire the portfolio company; and the markets in which the portfolio
company operates. If applicable, new and follow-on proprietary debt and equity investments made during the current three month reporting period ended September 30, 2018 are generally valued at original
cost basis. For additional information on our valuation policies, procedures and processes, refer to Note 2Summary of Significant Accounting Policies in our accompanying Notes to Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K.

Fair value measurements of our investments may involve subjective
judgments and estimates and due to the inherent uncertainty of determining these fair values, the fair value of our investments may fluctuate from period to period. Additionally, changes in the market environment and other events that may occur over
the life of the investment may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned. 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 it is recorded.

Our NAV would be adversely affected if the fair value of our investments that are approved by our Board of Directors are higher than the values that we
ultimately realize upon the disposal of such securities.



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Our most recent NAV was calculated on September 30, 2018 and our NAV when calculated effective
December 31, 2018 and thereafter may be higher or lower.

As of September 30, 2018, our NAV per share was $8.32, which was based on the fair
value of our investments that were reviewed and approved by the Valuation Committee and Board of Directors in connection with financial statements that were audited by our independent registered public accounting firm. NAV per share as of
December 31, 2018 may be higher or lower than $8.32 based on potential changes in valuations, our issuance of shares of common stock under our at-the-market program
subsequent to September 30, 2018, or dividends paid and earnings for the quarter then ended. Our Board of Directors determines the fair value of our portfolio investments on a quarterly basis and if our December 31, 2018 fair value is less
than the September 30, 2018 fair value, we will record an unrealized loss on our investment portfolio. If the fair value is greater, we will record an unrealized gain on our investment portfolio. Upon publication of our next quarterly NAV per
share determination (generally in our next Quarterly Report on Form 10-Q), the market price of our common stock may fluctuate materially.

The valuation process for certain of our portfolio holdings creates a conflict of interest.

A substantial portion of our portfolio investments are made in the form of securities that are not publicly traded. As a result, our Board of Directors
determines the fair value of these securities in good faith pursuant to the Policy. In connection with that determination, the Valuation Team prepares portfolio company valuations based upon the most recent portfolio company financial statements
available and projected financial results of each portfolio company. The participation of the Advisers investment professionals in our valuation process, and the pecuniary interest in the Adviser by Mr. Gladstone, may result in a conflict
of interest as the management fees that we pay the Adviser are based on our gross assets less uninvested cash or cash equivalents from borrowings, and adjusted appropriately for any share issuances or repurchases during the period.

The lack of liquidity of our privately held investments may adversely affect our business.

We will generally make investments in private companies whose securities are not traded in any public market. Substantially all of the investments we
presently hold and the investments we expect to acquire in the future are, and will be, subject to legal and other restrictions on resale and will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make
it difficult for us to quickly obtain cash equal to the value at which we record our investments if the need arises. This could cause us to miss important investment opportunities. In addition, if we are required to liquidate all or a portion of our
portfolio quickly, we may record substantial realized losses upon liquidation. We may also face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we, the Adviser, or our respective officers,
employees or affiliates have material non-public information regarding such portfolio company.

Due to the
uncertainty inherent in valuing these securities, the Valuation Teams determinations of fair value may differ materially from the values that could be obtained if a ready market for these securities existed. Our NAV could be materially
affected if the Valuation Teams determinations regarding the fair value of our investments that are ultimately approved by our Board of Directors are materially different from the values that we ultimately realize upon our disposal of such
securities. Additional discussion regarding risks associated with determinations made by the Adviser is found in the risk factor The valuation process for certain of our portfolio holdings creates a conflict of interest.

When we are a debt or minority equity investor in a portfolio company, which we expect will generally be the case, we may not be in a position to control
the entity, and its management may make decisions that could decrease the value of our investment.

We anticipate that most of our investments will
continue to be either debt or minority equity investments in our portfolio companies. Therefore, we are and will remain subject to the risk that a portfolio company may make business decisions with which we disagree, and the shareholders and
management of such company may take risks or otherwise act in ways that do not serve our best interests. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

In addition, we will generally not be in a position to control any portfolio company by investing in its debt securities. This is particularly true when we
invest in syndicated loans, which are loans made by a larger group of investors whose investment objectives may not be completely aligned with ours. As of September 30, 2018, syndicated loans made up approximately 9.6% of our portfolio at cost,
or $41.0 million. We therefore are subject to the risk that other lenders in these investments may make decisions that could decrease the value of our portfolio holdings.



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The interest rates of some of our term loans to our portfolio companies are priced using a spread over LIBOR,
which may be phased out in the future.

LIBOR is the basic rate of interest used in lending between banks on the London interbank market and is widely
used as a reference for setting the interest rate on loans globally. In general, our investments in debt securities have a term of five to seven years, accrue interest at variable rates based on LIBOR and, to a lesser extent, at fixed rates. As of
September 30, 2018, based on the total principal balance of debt outstanding, our portfolio consisted of approximately 90.6% of loans at variable rates with floors and approximately 9.4% at fixed rates.

On July 27, 2017, the United Kingdoms Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end
of 2021. It is unclear if at that time whether or not LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The Fed, in conjunction with the Alternative Reference Rates
Committee, a steering committee comprised of large U.S. financial institutions, announced replacement of U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by U.S. Treasury securities called the Secured
Overnight Financing Rate (SOFR). The first publication of SOFR was released in April 2018. Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question and the future of LIBOR at this time is uncertain. If
LIBOR ceases to exist, we may need to renegotiate the loan documents with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

We generally will not be involved in the day-to-day operations and decision
making of our portfolio companies.

We generally are not, and do not expect to be, involved in the day-to-day operations and decision making of our portfolio companies, even though we may have board observation rights and our debt agreements may contain certain restrictive covenants. As a result, we are
subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common stock, may take risks or otherwise act in ways
that do not serve our interests of maximizing our investment value.

We typically invest in transactions involving acquisitions, buyouts and
recapitalizations of companies, which will subject us to the risks associated with change in control transactions.

Our strategy, in part, includes
making debt and minority equity investments in companies in connection with acquisitions, buyouts and recapitalizations, which subjects us to the risks associated with change in control transactions. Change in control transactions often present a
number of uncertainties. Companies undergoing change in control transactions often face challenges retaining key employees and maintaining relationships with customers and suppliers. While we hope to avoid many of these difficulties by participating
in transactions where the management team is retained and by conducting thorough due diligence in advance of our decision to invest, if our portfolio companies experience one or more of these problems, we may not realize the value that we expect in
connection with our investments, which would likely harm our operating results and financial condition.

Our portfolio companies may incur debt that
ranks equally with, or senior to, our investments in such companies and/or we could be subject to lender liability claims.

We invest primarily in
debt securities issued by our portfolio companies. In some cases portfolio companies will be permitted to have other debt that ranks equally with, or senior to, the debt securities in which we invest. By their terms, such debt instruments may
provide that the holders thereof are entitled to receive payment of interest and principal on or before the dates on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency,
liquidation, dissolution, reorganization, or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any
distribution in respect of our investment. In addition, even though we have structured some of our investments as senior loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to
which we actually provided managerial assistance to that portfolio company, a bankruptcy court might re-characterize our debt investments and subordinate all, or a portion, of our claims to that of other
creditors. After repaying such senior creditors, such portfolio company may not have any remaining assets to use to repay its obligation to us. We may also be subject to lender liability claims for actions taken by us with respect to a
borrowers business or in instances in which



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we exercised control over the borrower. It is possible that we could become subject to a lenders liability claim, including as a result of actions taken in rendering significant
managerial assistance. In the case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation,
dissolution, reorganization, or bankruptcy of a portfolio company.

Prepayments of our investments by our portfolio companies could adversely impact
our results of operations and reduce our return on equity.

In addition to risks associated with delays in investing our capital, we are also subject
to the risk that investments we make in our portfolio companies may be repaid prior to maturity. For the year ended September 30, 2018, we received prepayments of investments totaling $58.9 million. We will generally first use any proceeds
from prepayments to repay any borrowings outstanding on our Credit Facility. In the event that funds remain after repayment of our outstanding borrowings, then we will generally reinvest these proceeds in government securities, pending their future
investment in new debt and/or equity securities. These government securities will typically have substantially lower yields than the debt securities being prepaid and we could experience significant delays in reinvesting these amounts. As a result,
our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in
the market price of our common stock.

Our portfolio is concentrated in a limited number of companies and industries, which subjects us to an increased
risk of significant loss if any one of these companies does not repay us or if the industries experience downturns.

As of September 30, 2018, we
had investments in 50 portfolio companies, of which there were five investments that comprised approximately $122.8 million, or 31.5% of our total investment portfolio, at fair value. A consequence of a concentration in a limited number of
investments is that the aggregate returns we realize may be substantially adversely affected by the unfavorable performance of a small number of such investments or a substantial write-down of any one investment. Beyond our regulatory and income tax
diversification requirements, we do not have fixed guidelines for industry concentration and our investments could potentially be concentrated in relatively few industries. In addition, while we do not intend to invest 25.0% or more of our total
assets in a particular industry or group of industries at the time of investment, it is possible that as the values of our portfolio companies change, one industry or a group of industries may comprise in excess of 25.0% of the value of our total
assets. As a result, a downturn in an industry in which we have invested a significant portion of our total assets could have a materially adverse effect on us. As of September 30, 2018, our largest industry concentrations of our total
investments at fair value were in diversified/conglomerate service companies, representing 20.3%; healthcare, education and childcare companies, representing 13.8%; and oil and gas companies, representing 12.9%. Therefore, we are susceptible to the
economic circumstances in these industries, and a downturn in one or more of these industries could have a material adverse effect on our results of operations and financial condition.

Our investments are typically long term and will require several years to realize liquidation events.

Since we generally make five to seven year term loans and hold our loans and related warrants or other equity positions until the loans mature, you should not
expect realization events, if any, to occur over the near term. In addition, we expect that any warrants or other equity positions that we receive when we make loans may require several years to appreciate in value and we cannot give any assurance
that such appreciation will occur.

The disposition of our investments may result in contingent liabilities.

Currently, all of our investments involve private securities. In connection with the disposition of an investment in private securities, we may be required to
make representations about the business and financial affairs of the underlying portfolio company typical of those made in connection with the sale of a business. We may also be required to indemnify the purchasers of such investment to the
extent that any such representations turn out to be inaccurate or with respect to certain potential liabilities. These arrangements may result in contingent liabilities that ultimately yield funding obligations that must be satisfied through
our return of certain distributions previously made to us.

Portfolio company litigation or other litigation or claims against us or our personnel
could result in additional costs and the diversion of management time and resources.



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In the course of investing in and often providing significant managerial assistance to certain of our portfolio
companies, certain persons employed by the Adviser may serve as directors on the boards of such companies. To the extent that litigation arises out of our investments in these companies, even if without merit, we or such employees may be named as
defendants in such litigation, which could result in additional costs, including defense costs, and the diversion of management time and resources. Additionally, other litigations or claims against us or our personnel could result in additional
costs, including defense costs, and the diversion of management time and resources. We may be unable to accurately estimate our exposure to litigation risk if we record balance sheet reserves for probable loss contingencies. As a result, any
reserves we establish to cover any settlements or judgments may not be sufficient to cover our actual financial exposure, which may have a material impact on our results of operations, financial condition, or cash flows.

While the Company believes it would have valid defenses to potential claims brought due to our investment in any portfolio company, and will defend any such
claims vigorously, it may nevertheless expend significant amounts of money in defense costs and expenses. Further, if the Company enters into settlements or suffers an adverse outcome in any litigation, the Company could be required to pay
significant amounts. In addition, if any of the Companys portfolio companies become subject to direct or indirect claims or other obligations, such as defense costs or damages in litigation or settlement, the Companys investment in such
companies could diminish in value and the Company could suffer indirect losses. Further, these matters could cause the Company to expend significant management time and effort in connection with assessment and defense of any claims.

We may not realize gains from our equity investments and other yield enhancements.

When we make an investment, we may receive warrants to purchase stock issued by the borrower or other yield enhancements, such as success fees. Our goal is to
ultimately dispose of these equity interests and realize gains upon our disposition of such interests. We expect that, over time, the gains we realize on these warrants and other yield enhancements will offset any losses we experience on loan
defaults. However, any equity interests we receive may not appreciate in value and, in fact, may decline in value and any other yield enhancements, such as success fees, may not be realized. Accordingly, we may not be able to realize gains from our
equity interests or other yield enhancements and any gains we do recognize may not be sufficient to offset losses we experience on our loan portfolio.

Any unrealized depreciation we experience on our investment portfolio may be an indication of future realized losses, which could reduce our income
available for distribution.

As a BDC we are required to carry our investments at market value or, if no market value is ascertainable, at fair value
as determined in good faith by or under the direction of our Board of Directors. We will record decreases in the market values or fair values of our investments as unrealized depreciation. Since our inception, we have, at times, incurred a
cumulative net unrealized depreciation of our portfolio. Any unrealized depreciation in our investment portfolio could result in realized losses in the future and ultimately in reductions of our income available for distribution to stockholders in
future periods.

Risks Related to Our External Financing

In addition to regulatory limitations on our ability to raise capital, our Credit Facility contains various covenants which, if not complied with, could
accelerate our repayment obligations under the facility, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.

We will have a continuing need for capital to finance our investments. As of September 30, 2018, we had $110.0 million in borrowings, at cost,
outstanding under our Credit Facility, which provides for maximum borrowings of $190.0 million, with a revolving period end date of January 15, 2021. Our Credit Facility permits us to fund additional loans and investments as long as we are
within the conditions set forth in the credit agreement. Our Credit Facility contains covenants that require our wholly-owned subsidiary Business Loan to maintain its status as a separate legal entity, prohibit certain significant corporate
transactions (such as mergers, consolidations, liquidations or dissolutions) and restrict material changes to our credit and collection policies without lenders consent. The Credit Facility also limits distributions to our stockholders on a
fiscal year basis to the sum of our net investment income, net capital gains and amounts deemed to have been paid during the prior year in accordance with Section 855(a) of the Code. We are also subject to certain limitations on the type of
loan investments we can make, including restrictions on geographic concentrations, sector concentrations, loan size, interest rate type, payment frequency and status, average life and lien property. Our Credit Facility further requires us to comply
with other financial and operational covenants, which obligate us to, among other things, maintain certain financial ratios, including asset and interest coverage, and a minimum number of 25 obligors in the borrowing base. Additionally, we are
subject to a performance guaranty that requires us to maintain (i) a minimum net worth (defined in our Credit Facility to include our mandatorily redeemable preferred stock) of $205.0 million plus 50.0% of all equity and subordinated debt
raised after May 1, 2015 less 50% of any equity and subordinated debt retired or redeemed after May 1, 2015, which equates to $232.8 million as of September 30, 2018, (ii) asset coverage with respect to senior securities
representing indebtedness of at least 200%, in accordance with Section 18 of the 1940 Act and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of September 30, 2018, and as defined in the performance
guaranty of our Credit Facility, we were in compliance with all of our Credit Facility covenants; however, our continued compliance depends on many factors, some of which are beyond our control.



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Given the continued uncertainty in the capital markets, the cumulative unrealized depreciation in our portfolio
may increase in future periods and threaten our ability to comply with the minimum net worth covenant and other covenants under our Credit Facility. Our failure to satisfy these covenants could result in foreclosure by our lenders, which would
accelerate our repayment obligations under the facility and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.

Any inability to renew, extend or replace our Credit Facility on terms favorable to us, or at all, could adversely impact our liquidity and ability to fund
new investments or maintain distributions to our stockholders.

The revolving period end date of our Credit Facility is January 15, 2021 (the
Revolving Period End Date) and if our Credit Facility is not renewed or extended by the Revolving Period End Date, all principal and interest will be due and payable on or before April 15, 2022. Subject to certain terms and
conditions, our Credit Facility may be expanded to a total of $265.0 million through the addition of other lenders to the facility. However, if additional lenders are unwilling to join the facility on its terms, we will be unable to expand the
facility and thus will continue to have limited availability to finance new investments under our Credit Facility. There can be no guarantee that we will be able to renew, extend or replace our Credit Facility upon its Revolving Period End Date on
terms that are favorable to us, if at all. Our ability to expand our Credit Facility, and to obtain replacement financing at or before the Revolving Period End Date, will be constrained by then-current economic conditions affecting the credit
markets. In the event that we are not able to expand our Credit Facility, or to renew, extend or refinance our Credit Facility by the Revolving Period End Date, this could have a material adverse effect on our liquidity and ability to fund new
investments, our ability to make distributions to our stockholders and our ability to qualify as a RIC under the Code.

If we are unable to secure
replacement financing, we may be forced to sell certain assets on disadvantageous terms, which may result in realized losses, and such realized losses could materially exceed the amount of any unrealized depreciation on these assets as of our most
recent balance sheet date, which would have a material adverse effect on our results of operations. Such circumstances would also increase the likelihood that we would be required to redeem some or all of our outstanding mandatorily redeemable
preferred stock, which could potentially require us to sell more assets. In addition to selling assets, or as an alternative, we may issue equity in order to repay amounts outstanding under our Credit Facility. Based on the recent trading prices of
our stock, such an equity offering may have a substantial dilutive impact on our existing stockholders interest in our earnings, assets and voting interest in us. If we are not able to renew, extend or refinance our Credit Facility prior to
its maturity, it could result in significantly higher interest rates and related charges and may impose significant restrictions on the use of borrowed funds to fund investments or maintain distributions to stockholders.

Our business plan is dependent upon external financing, which is constrained by the limitations of the 1940 Act.

We completed an equity offering of our Series 2024 Term Preferred Stock in September 2017 and sold 2,341,296 common shares under our at-the-market program during the year ended September 30, 2018. In addition, in November 2018, we completed a public debt offering of $57.5 million aggregate
principal amount of 6.125% Notes due 2023 (the 2023 Notes), inclusive of the overallotment. However, there can be no assurance that we will be able to raise capital through issuing equity in the near future. Our business requires a
substantial amount of cash to operate and grow. We may acquire such additional capital from the following sources:



| |  |  | Senior Securities.We may issue senior securities representing indebtedness (including
borrowings under our Credit Facility and our 2023 Notes) and senior securities that are stock, such as our Series 2024 Term Preferred Stock, up to the maximum amount permitted by the 1940 Act. The 1940 Act currently permits us, as a BDC,
to issue such senior securities in amounts such that our asset coverage, as defined in Section 18(h) of the 1940 Act, is at least 200% (as the law applies to the Company currently) or 150% (as the law will apply to the Company effective
April 10, 2019; refer to Managements Discussion and Analysis of Financial Condition and Results of Operations  Overview  Regulatory Compliance for a discussion of changes to the asset coverage requirements
pursuant to the SBCAA) on such senior security immediately after each issuance of such senior security. As a result of incurring indebtedness (in whatever form), we will be exposed to the risks associated with leverage. Although borrowing money for
investments increases the potential for gain, it also increases the risk of a loss. A decrease in the value of our investments will have a greater impact on the value of our common stock to the extent that we have borrowed money to
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | make investments. There is a possibility that the costs of borrowing could exceed the income we receive on the investments we make with such borrowed funds. In addition, our ability to pay distributions, issue senior securities or
repurchase shares of our common stock would be restricted if the asset coverage on each of our senior securities is not at least 200% or 150%, as applicable. If the aggregate value of our assets declines, we might be unable to satisfy that 200% or
150% requirement, as applicable. To satisfy the 200% or 150%, as applicable, asset coverage requirement in the event that we are seeking to pay a distribution, we might either have to (i) liquidate a portion of our loan portfolio to repay a
portion of our indebtedness or (ii) issue common stock. This may occur at a time when a sale of a portfolio asset may be disadvantageous, or when we have limited access to capital markets on agreeable terms. In addition, any amounts that we use
to service our indebtedness or for offering expenses will not be available for distributions to stockholders. Furthermore, if we have to issue common stock at below NAV per common share, any non-participating
stockholders will be subject to dilution, as described below. Pursuant to Section 61(a)(2) of the 1940 Act, we are permitted, under specified conditions, to issue multiple classes of senior securities representing indebtedness.
However, pursuant to Section 18(c) of the 1940 Act, we are permitted to issue only one class of senior securities that are stock.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Common and Convertible Preferred Stock.Because we are constrained in our ability to issue debt or senior
securities for the reasons given above, we are dependent on the issuance of equity as a financing source. If we raise additional funds by issuing more common stock, the percentage ownership of our stockholders at the time of the issuance would
decrease and our existing common stockholder may experience dilution. In addition, under the 1940 Act, we will generally not be able to issue additional shares of our common stock at a price below NAV per common share to purchasers, other than to
our existing stockholders through a rights offering, without first obtaining the approval of our stockholders and our independent directors. If we were to sell shares of our common stock below our then-current NAV per common share, such sales would
result in an immediate dilution to the NAV per common share. This dilution would occur as a result of the sale of shares at a price below the then-current NAV per share of our common stock and a proportionately greater decrease in a
stockholders interest in our earnings and assets and voting percentage than the increase in our assets resulting from such issuance. For example, if we issue and sell an additional 10.0% of our common stock at a 5.0% discount from NAV, a
stockholder who does not participate in that offering for its proportionate interest will suffer NAV dilution of up to 0.5% or $5 per $1,000 of NAV. This imposes constraints on our ability to raise capital when our common stock is trading below NAV
per common share, as it generally has in previous years. As noted above, the 1940 Act prohibits the issuance of multiple classes of senior securities that are stock. As a result, we would be prohibited from issuing convertible preferred
stock to the extent that such a security was deemed to be a separate class of stock from our outstanding Series 2024 Term Preferred Stock.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We financed certain of our investments with borrowed money and capital from the issuance of senior securities, which will magnify the potential for gain or
loss on amounts invested and may increase the risk of investing in us.

The use of leverage, including through the issuance of senior securities that
are debt or stock, magnifies the potential for gain or loss on amounts invested, and, if we incur additional leverage as permitted by the SBCAA, this potential will be further magnified. We have incurred leverage in the past and currently incur
leverage through the Credit Facility, shares of our mandatorily redeemable preferred stock and the 2023 Notes and, from time to time, intend to incur additional leverage to the extent permitted under the 1940 Act. The use of leverage is generally
considered a speculative investment technique and increases the risks associated with investing in our securities. In the future, we may borrow from, and issue senior securities, to banks and other lenders. Holders of these senior securities will
have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such holders to seek recovery against our assets in the event of a default. The following table illustrates the effect of leverage
on returns from an investment in our common stock assuming various annual returns on our portfolio, net of expenses. The calculations in the table below are hypothetical, and actual returns may be higher or lower than those appearing in the table
below.



|                                              |  |                                                  |       |    |  |  |      |    |  |  |      |    |  |  |     |   |  |  |      |  
|--------------------------------------------- |  | ------------------------------------------------ | ----- | -- |  |  | ---- | -- |  |  | ---- | -- |  |  | --- | - |  |  | ---- | -
|                                              |  | Assumed Return on Our Portfolio(Net of Expenses) |      
|                                              |  |                                                  |       |    | 
|                                              |  |                                                  | (10.0 | )% |  |  | (5.0 | )% |  |  | 0.0  | %  |  |  | 5.0 | % |  |  | 10.0 | %
|                                              |  |                                                  |       |    |  |  |      |    |  |  |      |    |  |  |     |   |  |  |      |  
|Corresponding return to common stockholder(A) |  |                                                  | (18.4 | )% |  |  | (9.9 | )% |  |  | (1.5 | )% |  |  | 6.9 | % |  |  | 15.3 | %



|(A) | The hypothetical return to common stockholders is calculated by multiplying our total assets as of
September 30, 2018 by the assumed rates of return and subtracting all interest accrued on our debt for the year ended September 30, 2018, adjusted for the dividends on our Series 2024 Term Preferred Stock; and then dividing the resulting
difference by our total assets attributable to common stock. Based on $399.5 million in total assets, $110.0 million drawn on our Credit Facility (at cost), $51.8 million in aggregate liquidation preference of our Series 2024 Term
Preferred Stock, and $237.1 million in net assets, each as of September 30, 2018.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based on the outstanding balance on our
Credit Facility of $110.0 million at cost, as of September 30, 2018, the effective annual interest rate of 5.1% as of that date, and aggregate liquidation preference of our Series 2024 Term Preferred Stock of $51.8 million, our
investment portfolio at fair value would have had to produce an annual return of at least 2.2% to cover annual interest payments on the outstanding debt and dividends on our Series 2024 Term Preferred Stock.



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A change in interest rates may adversely affect our profitability and our hedging strategy may expose us to
additional risks.

We anticipate using a combination of equity and long-term and short-term borrowings to finance our investment activities. As a
result, a portion of our income will depend upon the difference between the rate at which we borrow funds and the rate at which we loan these funds. Higher interest rates on our borrowings will decrease the overall return on our portfolio.

As of September 30, 2018, based on the total principal balance of debt outstanding, our portfolio consisted of approximately 90.6% of loans at variable
rates with floors and approximately 9.4% at fixed rates.

As of September 30, 2018, we did not have any hedging arrangement, such as interest rate
hedges. While hedging activities may insulate us against adverse fluctuations in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments
resulting from changes in interest rates or any future hedging transactions could have a material adverse effect on our business, financial condition and results of operations. Our ability to receive payments pursuant to an interest rate cap
agreement is linked to the ability of the counter-party to that agreement to make the required payments. To the extent that the counter-party to the agreement is unable to pay pursuant to the terms of the agreement, we may lose the hedging
protection of the interest rate cap agreement. For additional information on market interest rate fluctuations, see Managements Discussion and Analysis of Financial Condition and Results of OperationsQuantitative and Qualitative
Disclosures About Market Risk.

Risks Related to Our Regulation and Structure

We will be subject to corporate-level tax if we are unable to satisfy Code requirements for RIC qualification.

To maintain our qualification as a RIC, we must meet income source, asset diversification, and annual distribution requirements. The annual distribution
requirement is satisfied if we distribute at least 90.0% of our investment company taxable income to our stockholders on an annual basis. Because we use leverage, we are subject to certain asset coverage ratio requirements under the 1940 Act and
could, under certain circumstances, be restricted from making distributions necessary to qualify as a RIC. Warrants we receive with respect to debt investments will create original issue discount, which we must recognize as ordinary
income over the term of the debt investment or PIK interest which is accrued generally over the term of the debt investment but not paid in cash, both of which will increase the amounts we are required to distribute to maintain RIC status. Because
such OIDs and PIK interest will not produce distributable cash for us at the same time as we are required to make distributions, we will need to use cash from other sources to satisfy such distribution requirements. The asset diversification
requirements must be met at the end of each calendar quarter. If we fail to meet these tests, we may need to quickly dispose of certain investments to prevent the loss of RIC status. Since most of our investments will be illiquid, such dispositions,
if even possible, may not be made at prices advantageous to us and, in fact, may result in substantial losses. If we fail to qualify as a RIC for any reason and become fully subject to corporate income tax, the resulting corporate taxes could
substantially reduce our net assets, the amount of income available for distribution, and the actual amount distributed. Such a failure would have a material adverse effect on us and our shares. Refer to Business  Material U.S.
Federal Income Tax Considerations  RIC Status for additional information regarding asset coverage ratio and RIC requirements and to Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview  Regulatory Compliance for a discussion of changes to the asset coverage requirements pursuant to the SBCAA.

Some of our
debt investments may include success fees that would generate payments to us if the business is ultimately sold. Because the satisfaction of these success fees, and the ultimate payment of these fees, is uncertain, we generally only recognize them
as income when the payment is received. Success fee amounts are characterized as ordinary income for tax purposes and, as a result, we are required to distribute such amounts to our stockholders in order to maintain RIC status.

If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to
our current business strategy.

As a BDC, we may not acquire any assets other than qualifying assets unless, at the time of and after
giving effect to such acquisition, at least 70% of our total assets are qualifying assets, as defined in Section 55(a) of the 1940 Act.

We believe
that most of the investments that we may acquire in the future will constitute qualifying assets. However, we may be precluded from investing in what we believe to be attractive investments if such investments are not qualifying assets for purposes
of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could violate the 1940 Act provisions applicable to BDCs. As a result of such violation, specific rules under the 1940 Act could prevent us, for



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example, from making follow-on investments in existing portfolio
companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to come into compliance with the 1940 Act. If we need to dispose of such investments quickly, it could be
difficult to dispose of such investments on favorable terms. We may not be able to find a buyer for such investments and, even if we do find a buyer, we may have to sell the investments at a substantial loss. Any such outcomes would have a material
adverse effect on our business, financial condition, results of operations and cash flows.

If we do not maintain our status as a BDC, we would be subject
to regulation as a registered closed-end investment company under the 1940 Act. As a registered closed-end investment company, we would be subject to substantially more
regulatory restrictions under the 1940 Act, which would significantly decrease our operating flexibility. Refer to Business  Regulation as a BDC  Qualifying Assets for additional information regarding qualifying
assets.

Changes in laws or regulations governing our operations, or changes in the interpretation thereof, and any failure by us to comply with laws
or regulations governing our operations may adversely affect our business.

We and our portfolio companies are subject to regulation by laws at the
local, state and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Accordingly, any change in these laws or regulations, or their interpretation, or any failure by us or our portfolio
companies to comply with these laws or regulations may adversely affect our business. For additional information regarding the regulations to which we are subject, see BusinessMaterial U.S. Federal Income Tax Considerations
and Business Regulation as a BDC.

We are subject to restrictions that may discourage a change of control. Certain provisions
contained in our articles of incorporation and Maryland law may prohibit or restrict a change of control and adversely impact the price of our shares.

Our Board of Directors is divided into three classes, with the term of the directors in each class expiring every third year. At each annual meeting of
stockholders, the successors to the class of directors whose term expires at such meeting will be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. After
election, a director may only be removed by our stockholders for cause. Election of directors for staggered terms with limited rights to remove directors makes it more difficult for a hostile bidder to acquire control of us. The existence of this
provision may negatively impact the price of our securities and may discourage third-party bids to acquire our securities. This provision may reduce any premiums paid to stockholders in a change in control transaction.

Certain provisions of Maryland law applicable to us prohibit business combinations with:



| |  |  | any person who beneficially owns 10.0% or more of the voting power of our common stock (an interested
stockholder);
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | an affiliate of ours who at any time within the two-year period prior to
the date in question was an interested stockholder; or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | an affiliate of an interested stockholder.
| | - |  | ------------------------------------------

These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder. Thereafter, any
business combination with the interested stockholder must be recommended by our Board of Directors and approved by the affirmative vote of at least 80.0% of the votes entitled to be cast by holders of our outstanding shares of common stock and two-thirds of the votes entitled to be cast by holders of our common stock other than shares held by the interested stockholder. These requirements could have the effect of inhibiting a change in control even if a
change in control were in our stockholders interest. These provisions of Maryland law do not apply, however, to business combinations that are approved or exempted by our Board of Directors prior to the time that someone becomes an interested
stockholder.

Our articles of incorporation permit our Board of Directors to issue up to 50.0 million shares of capital stock. In addition, our Board
of Directors, without any action by our stockholders, may amend our articles of incorporation from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series of stock that we have authority to
issue. Our Board of Directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms
or conditions of redemption of any such stock. Thus, our Board of Directors could authorize the issuance of preferred stock with terms and conditions that could have a priority as to distributions and amounts payable upon liquidation



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over the rights of the holders of our common stock, which it did in connection with our issuance of approximately
2.1 million shares of Series 2024 Term Preferred Stock. Preferred stock, including our Series 2024 Term Preferred Stock, could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary
transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock.

We may not be permitted to declare a dividend or make any distribution to stockholders or repurchase shares until such time as we satisfy the asset
coverage tests under the provisions of the 1940 Act that apply to BDCs. As a BDC, we have the ability to issue senior securities only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150%, provided
certain conditions are met) after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature
of our leverage, repay a portion of our debt at a time when such sales and/or repayments may be disadvantageous.

Regulations governing our operation
as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth. As a result of the annual distribution requirement to qualify as
a RIC, we may need to periodically access the capital markets to raise cash to fund new investments. We may issue senior securities representing indebtedness, including borrowing money from banks or other financial institutions or
senior securities that are stock, such as our mandatorily redeemable preferred stock, only in amounts such that our asset coverage on each senior security, as defined in the 1940 Act, equals at least 200% or 150% (effective
April 10, 2019; refer to Managements Discussion and Analysis of Financial Condition and Results of Operations  Overview  Regulatory Compliance for a discussion of changes to the asset coverage requirements
pursuant to the SBCAA) after each such incurrence or issuance. Further, we may not be permitted to declare a dividend or make any distribution to our outstanding stockholders or repurchase shares until such time as we satisfy these tests. Our
ability to issue different types of securities is also limited. Compliance with these requirements may unfavorably limit our investment opportunities and reduce our ability in comparison to other companies to profit from favorable spreads between
the rates at which we can borrow and the rates at which we can lend. As a BDC, therefore, we intend to continuously issue equity at a rate more frequent than our privately owned competitors, which may lead to greater stockholder dilution. We have
incurred leverage to generate capital to make additional investments. If the value of our assets declines, we may be unable to satisfy the asset coverage test under the 1940 Act, which could prohibit us from paying distributions and could prevent us
from qualifying as a RIC. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales and
repayments may be disadvantageous.

Recently-enacted legislation allows us to incur additional leverage under the 1940 Act, distinct from certain of
our obligations under our Credit Facility and our Term Preferred Stock.

Historically, as a BDC, under the 1940 Act, we are generally required to
maintain asset coverage of 200% for senior securities representing indebtedness (i.e., debt) or stock (i.e., preferred stock). On March 23, 2018, President Trump signed into legislation the Consolidated Appropriations Act of 2018, also known as
the omnibus spending package. Included in Title VIII therein is the SBCAA that includes certain regulations under the federal securities laws impacting BDCs. Among other items, the SBCAA allows a BDC to increase the amount of debt it may
incur by modifying the asset coverage percentage from 200% to 150% (subject to specific approval and disclosure requirements).

On April 10, 2018,
our Board of Directors, including a required majority (as such term is defined in Section 57(o) of the 1940 Act) thereof, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as
amended by the SBCAA. As a result, the Companys asset coverage requirements for senior securities will be changed from 200% to 150%, effective one year after the date of the Board of Directors approval; or on April 10, 2019. Under
the current 200% asset coverage standard, we may borrow debt or issue senior securities in the amount of $1.00 for every $1.00 of equity in the Company. Starting from April 10, 2019, under the 150% asset coverage standard, we may borrow debt or
issue senior securities in the amount of $2.00 for every $1.00 of equity in the Company. This reduction in the asset coverage ratio will allow us to double the amount of debt that we may incur and, therefore, your risk of an investment in us may
increase. In addition, our management fee is based on our average gross assets, which include investments made with proceeds of borrowings, and, as a result, if we were to incur additional leverage, management fees paid to the Adviser would
increase.

Notwithstanding the modified asset coverage leverage ratio under the 1940 Act described above, we remain subject to a minimum asset coverage
requirement of 200% with respect to certain provisions of our Credit Facility and our Series 2024 Term Preferred Stock. If we drop below the 200% minimum asset coverage requirement, we may under certain circumstances be required to repay all
outstanding indebtedness under our Credit Facility and redeem our Series 2024 Term Preferred Stock. In addition, in the event we fall below the 200% minimum asset coverage requirement, we may need to renegotiate our Credit Facility and issue
additional series of term preferred stock with a lower asset coverage requirement. Such events, if they were to occur, could have a significant adverse effect on our business, financial condition, results of operations, and cash flows.



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The recently enacted legislation informally titled the Tax Cuts and Jobs Act and other legislative, regulatory
and administrative developments may adversely affect the Company or its stockholders.

On December 22, 2017, President Trump signed into law P.L.
115-97, informally titled the Tax Cuts and Jobs Act (the Tax Act). The Tax Act makes major changes to the Code, including a number of provisions of the Code that affect the taxation of RICs and
their stockholders. Certain provisions of the Tax Act that may impact us and our stockholders include:



| |  |  | temporarily reducing individual U.S. federal income tax rates on ordinary income; the highest individual U.S.
federal income tax rate will be reduced from 39.6% to 37% (through taxable years ending in 2025);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reducing the maximum corporate income tax rate from 35% to 21%;
| | - |  | ---------------------------------------------------------------



| |  |  | permitting a deduction for certain pass-through business income, which generally will allow individuals, trusts,
and estates to deduct up to 20% of such amounts, resulting in an effective maximum U.S. federal income tax rate of 29.6% on such dividends (through taxable years ending in 2025);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limiting the deduction for net operating losses to 80% of taxable income (prior to the application of the
dividends paid deduction);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | amending the limitation on the deduction of net interest expense for all businesses, other than certain electing
businesses; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | eliminating the corporate alternative minimum tax.
| | - |  | --------------------------------------------------

The individual and collective impact of these provisions and other provisions of the Tax Act on the Company and its stockholders remains uncertain, and may
not become evident for some period of time. In addition, other legislative, regulatory or administrative changes may be enacted or promulgated, either prospectively or with retroactive effect, and may adversely affect the Company or its
stockholders. The Companys stockholders should consult their individual tax advisors regarding the implications of the Tax Act and other potential legislative, regulatory or administrative changes on their investment in the Companys
securities.

Risks Related to Our External Management

We are dependent upon our key management personnel and the key management personnel of the Adviser, particularly David Gladstone, Terry Lee Brubaker and
Robert L. Marcotte and on the continued operations of the Adviser, for our future success.

We have no employees. Our chief executive officer, chief
operating officer, chief financial officer and treasurer, and the employees of the Adviser, do not spend all of their time managing our activities and our investment portfolio. We are particularly dependent upon David Gladstone, Terry Lee Brubaker,
and Robert L. Marcotte for their experience, skills and networks. Our executive officers and the employees of the Adviser allocate some, and in some cases a material portion, of their time to businesses and activities that are not related to our
business. We have no separate facilities and are completely reliant on the Adviser, which has significant discretion as to the implementation and execution of our business strategies and risk management practices. We are subject to the risk of
discontinuation of the Advisers operations or termination of the Advisory Agreement and the risk that, upon such event, no suitable replacement will be found. We believe that our success depends to a significant extent upon the Adviser and
that discontinuation of its operations or the loss of its key management personnel could have a material adverse effect on our ability to achieve our investment objectives.

Our success depends on the Advisers ability to attract and retain qualified personnel in a competitive environment.

The Adviser experiences competition in attracting and retaining qualified personnel, particularly investment professionals and senior executives, and we may
be unable to maintain or grow our business if we cannot attract and retain such personnel. The Advisers ability to attract and retain personnel with the requisite credentials, experience and skills depends on several factors including, but not
limited to, its ability to offer competitive wages, benefits and professional growth opportunities. The Adviser competes with investment funds (such as private equity funds and mezzanine funds) and traditional financial services companies for
qualified personnel, many of which have greater resources than us. Searches for qualified personnel may divert managements time from the operation of our business. Strain on the existing personnel resources of the Adviser, in the event
that it is unable to attract experienced investment professionals and senior executives, could have a material adverse effect on our business.



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In addition, we depend upon the Adviser to maintain its relationships with private equity sponsors, placement
agents, investment banks, management groups and other financial institutions, and we expect to rely to a significant extent upon these relationships to provide us with potential investment opportunities. If the Adviser or members of our investment
team fail to maintain such relationships, or to develop new relationships with other sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom the Adviser has relationships are not
obligated to provide us with investment opportunities, and we can offer no assurance that these relationships will generate investment opportunities for us in the future.

The Adviser can resign on 60 days notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our
operations that could adversely affect our financial condition, business and results of operations.

The Adviser has the right to resign under the
Advisory Agreement at any time upon not less than 60 days written notice, whether we have found a replacement or not. If the Adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar
expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of
operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we
are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the
integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.

Our incentive fee may induce the Adviser to make certain investments, including speculative investments.

The management compensation structure that has been implemented under the Advisory Agreement may cause the Adviser to invest in high-risk investments or take
other risks. In addition to its management fee, the Adviser is entitled under the Advisory Agreement to receive incentive compensation based in part upon our achievement of specified levels of income. In evaluating investments and other management
strategies, the opportunity to earn incentive compensation based on net income may lead the Adviser to place undue emphasis on the maximization of net income at the expense of other criteria, such as preservation of capital, maintaining sufficient
liquidity, or management of credit risk or market risk, in order to achieve higher incentive compensation. Investments with higher yield potential are generally riskier or more speculative. This could result in increased risk to the value of our
investment portfolio.

We may be obligated to pay the Adviser incentive compensation even if we incur a loss.

The Advisory Agreement entitles the Adviser to incentive compensation for each fiscal quarter in an amount equal to a percentage of the excess of our
investment income for that quarter (before deducting incentive compensation, net operating losses and certain other items) above a threshold return for that quarter. When calculating our incentive compensation, our
pre-incentive fee net investment income excludes realized and unrealized capital losses that we may incur in the fiscal quarter, even if such capital losses result in a net loss on our statement of operations
for that quarter. Thus, we may be required to pay the Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or we incur a net loss for that quarter. For additional information on incentive
compensation under the Advisory Agreement with the Adviser, see Business  Transactions with Related Parties.

We may be
required to pay the Adviser incentive compensation on income accrued, but not yet received in cash.

That part of the incentive fee payable by us that
relates to our net investment income is computed and paid on income that may include interest that has been accrued but not yet received in cash, such as debt instruments with PIK interest or OID. If a portfolio company defaults on a loan, it is
possible that such accrued interest previously used in the calculation of the incentive fee will become uncollectible. Consequently, we may make incentive fee payments on income accruals that we may not collect in the future and with respect to
which we do not have a clawback right against the Adviser. Our OID investments totaled $20.7 million as of September 30, 2018, at cost, which are all syndicated loan investments. For the year ended September 30, 2018, we recognized
$0.2 million of OID income and the unamortized balance of OID investments as of September 30, 2018 totaled $0.4 million. As of September 30, 2018, we had five investments which had a PIK interest component and we recorded PIK
interest income of $3.8 million during the year ended September 30, 2018. We collected $0.8 million in PIK interest in cash for the year ended September 30, 2018.



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The Advisers failure to identify and invest in securities that meet our investment criteria or perform
its responsibilities under the Advisory Agreement would likely adversely affect our ability for future growth.

Our ability to achieve our investment
objectives will depend on our ability to grow, which in turn will depend on the Advisers ability to identify and invest in securities that meet our investment criteria. Accomplishing this result on a cost-effective basis will be largely a
function of the Advisers structuring of the investment process, its ability to provide competent and efficient services to us, and our access to financing on acceptable terms. The senior management team of the Adviser has substantial
responsibilities under the Advisory Agreement. In order to grow, the Adviser will need to hire, train, supervise, and manage new employees successfully. Any failure to manage our future growth effectively would likely have a material adverse effect
on our business, financial condition, and results of operations.

There are significant potential conflicts of interest, including with the Adviser,
which could impact our investment returns.

Our executive officers and directors, and the officers and directors of the Adviser, serve or may serve as
officers, directors, or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by our affiliates. Accordingly, they may have obligations to investors in those entities, the fulfillment
of which might not be in the best interests of us or our stockholders. For example, Mr. Gladstone, our chairman and chief executive officer, is the chairman of the board and chief executive officer of each of the Gladstone Companies. In
addition, Mr. Brubaker, our vice chairman and chief operating officer, is the vice chairman and chief operating officer of each of the Gladstone Companies. Mr. Marcotte is an executive managing director of the Adviser. Moreover, the
Adviser may establish or sponsor other investment vehicles which from time to time may have potentially overlapping investment objectives with ours and accordingly may invest in, whether principally or secondarily, asset classes we target. While the
Adviser generally has broad authority to make investments on behalf of the investment vehicles that it advises, the Adviser has adopted investment allocation procedures to address these potential conflicts and intends to direct investment
opportunities to the Affiliated Public Fund with the investment strategy that most closely fits the investment opportunity. Nevertheless, the management of the Adviser may face conflicts in the allocation of investment opportunities to other
entities managed by the Adviser. As a result, it is possible that we may not be given the opportunity to participate in certain investments made by other funds managed by the Adviser. Our Board of Directors approved a revision of our investment
objectives and strategies that became effective on January 1, 2013, which may enhance the potential for conflicts in the allocation of investment opportunities to us and other entities managed by the Adviser.

In certain circumstances, we may make investments in a portfolio company in which one of our affiliates has or will have an investment, subject to
satisfaction of any regulatory restrictions and, where required, to the prior approval of our Board of Directors. As of September 30, 2018, our Board of Directors has approved the following types of
co-investment transactions:



| |  |  | Our affiliate, Gladstone Commercial, may, under certain circumstances, lease property to portfolio companies that
we do not control. We may pursue such transactions only if (i) the portfolio company is not controlled by us or any of our affiliates, (ii) the portfolio company satisfies the tenant underwriting criteria of Gladstone Commercial, and
(iii) the transaction is approved by a majority of our independent directors and a majority of the independent directors of Gladstone Commercial. We expect that any such negotiations between Gladstone Commercial and our portfolio companies
would result in lease terms consistent with the terms that the portfolio companies would be likely to receive were they not portfolio companies of ours.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may invest simultaneously with our affiliate Gladstone Investment in senior loans in the broadly syndicated
market whereby neither we nor any affiliate has the ability to dictate the terms of the loans.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pursuant to the Co-Investment Order, under certain circumstances, we may co-invest with Gladstone Investment and any future BDC or closed-end management investment company that is advised by the Adviser (or
sub-advised by the Adviser if it controls the fund), or any combination of the foregoing, subject to the conditions included therein.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Certain of our officers, who are also officers of the Adviser, may from time to time serve as directors of certain of our portfolio companies. If an officer
serves in such capacity with one of our portfolio companies, such officer will owe fiduciary duties to stockholders of the portfolio company, which duties may from time to time conflict with the interests of our stockholders.



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In the course of our investing activities, we will pay base management and incentive fees to the Adviser and will
reimburse the Administrator for certain expenses it incurs. As a result, investors in our common stock will invest on a gross basis and receive distributions on a net basis after expenses, resulting in, among other things, a
lower rate of return than one might achieve through our investors themselves making direct investments. As a result of this arrangement, there may be times when the management team of the Adviser has interests that differ from those of our
stockholders, giving rise to a conflict. In addition, as a BDC, we make available significant managerial assistance to our portfolio companies and provide other services to such portfolio companies. While, neither we nor the Adviser currently
receives fees in connection with managerial assistance, the Adviser and Gladstone Securities have, at various times, provided other services to certain of our portfolio companies and received fees for these other services.

The Adviser is not obligated to provide a credit of the base management fee or incentive fee, which could negatively impact our earnings and our ability to
maintain our current level of distributions to our stockholders.

The Advisory Agreement provides for a base management fee based on our gross assets
and an incentive fee which consists of two parts: an income-based incentive fee and a capital gains-based incentive fee. Our Board of Directors has historically accepted and may accept in the future quarterly or annual
non-contractual, unconditional and irrevocable credits to reduce the annual base management fee. Further, our Board of Directors has accepted on a quarterly basis
non-contractual, unconditional and irrevocable credits from the Adviser to reduce the income-based incentive fee to the extent net investment income did not cover 100.0% of distributions to common
stockholders. Any waived fees may not be recouped by the Adviser in the future. However, the Adviser is not required to issue these or other credits of fees under the Advisory Agreement, and to the extent our investment portfolio grows in the
future, we expect these management and incentive fees will increase. If the Adviser does not issue these credits in future quarters, it could negatively impact our earnings and may compromise our ability to maintain our current level of
distributions to our stockholders, which could have a material adverse impact on our stock price.

Our business model is dependent upon developing and
sustaining strong referral relationships with investment bankers, business brokers and other intermediaries and any change in our referral relationships may impact our business plan.

We are dependent upon informal relationships with investment bankers, business brokers and traditional lending institutions to provide us with deal flow. If
we fail to maintain our relationship with such funds or institutions, or if we fail to establish strong referral relationships with other funds, we will not be able to grow our portfolio of investments and fully execute our business plan.

Our base management fee may induce the Adviser to incur leverage.

The fact that our base management fee is payable based upon our gross assets, which would include any investments made with proceeds of borrowings, may
encourage the Adviser to use leverage to make additional investments. Under certain circumstances, the use of increased leverage may increase the likelihood of default, which would disfavor holders of our securities. Given the subjective nature of
the investment decisions made by the Adviser on our behalf, we will not be able to monitor this potential conflict of interest.

Risks Related to an
Investment in Our Securities

We may experience fluctuations in our quarterly and annual operating results.

We may experience fluctuations in our quarterly and annual operating results due to a number of factors, including, among others, variations in our investment
income, the interest rates payable on the debt securities we acquire, the default rates on such securities, variations in and the timing of the recognition of realized and unrealized gains or losses, the level of our expenses, the degree to which we
encounter competition in our markets, and general economic conditions, including the impacts of inflation. The majority of our portfolio companies are in industries that are directly impacted by inflation, such as manufacturing and consumer goods
and services. Our portfolio companies may not be able to pass on to customers increases in their costs of production which could greatly affect their operating results, impacting their ability to repay our loans. In addition, any projected future
decreases in our portfolio companies operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized and unrealized losses and
therefore reduce our net assets resulting from operations. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

There is a risk that you may not receive distributions or that distributions may not grow over time.



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We intend to distribute at least 90.0% of our investment company taxable income to our stockholders on a
quarterly basis by paying monthly distributions. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or
year-to-year increases in cash distributions. Furthermore, we expect to retain some or all net realized long-term capital gains by first offsetting them with realized
capital losses, and secondly through a deemed distribution to supplement our equity capital and support the growth of our portfolio, although our Board of Directors may determine in certain cases to distribute these gains to our common stockholders.
In addition, our Credit Facility restricts the amount of distributions we are permitted to make. We cannot assure you that we will achieve investment results or maintain a tax status that will allow or require any specified level of cash
distributions.

Investing in our securities may involve an above average degree of risk.

The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and a higher
risk of volatility or loss of principal. Our investments in portfolio companies may be highly speculative, and therefore, an investment in our shares may not be suitable for someone with lower risk tolerance.

Distributions to our stockholders have included and may in the future include a return of capital.

Quarterly, our Board of Directors declares monthly distributions based on then-current estimates of taxable income for each fiscal year, which may differ, and
in the past have differed, from actual results. Because our distributions are based on estimates of taxable income that may differ from actual results, future distributions payable to our stockholders may also include a return of capital. Moreover,
to the extent that we distribute amounts that exceed our current and accumulated earnings and profits, these distributions constitute a return of capital. A return of capital represents a return of a stockholders original investment in shares
of our stock and should not be confused with a distribution from earnings and profits. Although return of capital distributions may not be taxable, such distributions may increase an investors tax liability for capital gains upon the sale of
our shares by reducing the investors tax basis for such shares. Such returns of capital reduce our asset base and also adversely impact our ability to raise debt capital as a result of the leverage restrictions under the 1940 Act, which could
have material adverse impact on our ability to make new investments.

Shares of closed-end investment companies
frequently trade at a discount from NAV.

Shares of closed-end investment companies frequently trade at a
discount from NAV per common share. Since our inception, our common stock has at times traded above NAV, and at times below NAV per share. This characteristic of shares of closed-end investment companies
is separate and distinct from the risk that our NAV per share will decline. As with any stock, the price of our shares will fluctuate with market conditions and other factors. If shares are sold, the price received may be more or less than
the original investment. Whether investors will realize gains or losses upon the sale of our shares will not depend directly upon our NAV, but will depend upon the market price of the shares at the time of sale. Since the market price of
our shares will be affected by such factors as the relative demand for and supply of the shares in the market, general market and economic conditions and other factors beyond our control, we cannot predict whether the shares will trade at, below, or
above our NAV.

Under the 1940 Act, we are generally not able to issue additional shares of our common stock at a price below NAV per share to purchasers
other than our existing stockholders through a rights offering without first obtaining the approval of our common stockholders and our independent directors. Additionally, when our common stock is trading below its NAV per share, our dividend yield
may exceed the weighted average returns that we would expect to realize on new investments that would be made with the proceeds from the sale of such stock, making it unlikely that we would determine to issue additional shares in such circumstances.
Thus, for as long as our common stock may trade below NAV, we will be subject to significant constraints on our ability to raise capital through the issuance of common stock. Additionally, an extended period of time in which we are unable to raise
capital may restrict our ability to grow and adversely impact our ability to increase or maintain our distributions.

Common stockholders may incur
dilution if we sell shares of our common stock in one or more offerings at prices below the then-current NAV per share of our common stock.

We did
not request that our stockholders approve the Companys ability to issue shares of common stock at a price below NAV per share at our annual meetings of stockholders held on February 9, 2017 and February 8, 2018. Absent such
stockholder approval, we are not able to access the capital markets in an offering at prices below the then-current NAV per share due to restrictions applicable to BDCs under the 1940 Act. Should we decide to issue shares of common stock at a price
below NAV per share in the future, we will seek the requisite approval of our stockholders at such time.



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If we were to sell shares of our common stock below NAV per share, such sales would result in an immediate
dilution to the NAV per share. This dilution would occur as a result of the sale of shares at a price below the then-current NAV per share of our common stock and a proportionately greater decrease in a stockholders interest in our earnings
and assets and voting interest in us than the increase in our assets resulting from such issuance. The greater the difference between the sale price and the NAV per share at the time of the offering, the more significant the dilutive impact would
be. Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect, if any, cannot be currently predicted. However, if, for example, we sold an additional 10.0%
of our common stock at a 5.0% discount from NAV, a stockholder who did not participate in that offering for its proportionate interest would suffer NAV dilution of up to 0.5% or $5 per $1,000 of NAV.

If we fail to pay dividends on our Series 2024 Term Preferred Stock for two years, the holders of our Series 2024 Term Preferred Stock will be entitled to
elect a majority of our directors.

The terms of our Series 2024 Term Preferred Stock provide for annual dividends in the amount of $1.50 per
outstanding share of Series 2024 Term Preferred Stock. In accordance with the terms of our Series 2024 Term Preferred Stock, if dividends thereon are unpaid in an amount equal to at least two years of dividends, the holders of Series 2024 Term
Preferred Stock will be entitled to elect a majority of our Board of Directors.

Risks Related to the 2023 Notes

The 2023 Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future and will rank
pari passu with, or equal to, all outstanding and future unsecured indebtedness issued by us and our general liabilities (total liabilities, less debt).

The 2023 Notes are not secured by any of our assets or any of the assets of our subsidiaries. As a result, the 2023 Notes are subordinated to any secured
indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In
any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that
indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the 2023 Notes. In addition, the 2023 Notes rank pari passu with, or equal to, all outstanding and
future unsecured indebtedness issued by us and our general liabilities (total liabilities, less debt).

The 2023 Notes will be structurally
subordinated to the indebtedness and other liabilities of our subsidiaries.

The 2023 Notes are obligations exclusively of the Company and not of any
of our subsidiaries. None of our subsidiaries is a guarantor of the 2023 Notes and the 2023 Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. Except to the extent we are a creditor with recognized
claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the 2023 Notes) with respect to the
assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or
other liabilities of any such subsidiary senior to our claims. Consequently, the 2023 Notes are structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries and any subsidiaries that we may in the future acquire or
establish. As of September 30, 2018, there was $110.0 million outstanding under the Credit Facility. Borrowings under the Credit Facility are the obligation of Business Loan, and are structurally senior to the 2023 Notes. In addition, our
subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the 2023 Notes.

The indenture
under which the 2023 Notes were issued contains limited protection for holders of the 2023 Notes.

The indenture under which the 2023 Notes were
issued offers limited protection to holders of the 2023 Notes. The terms of the indenture and the 2023 Notes do not restrict our or any of our subsidiaries ability to engage in, or otherwise be a party to, a variety of corporate transactions,
circumstances or events that could have an adverse impact on your investment in the 2023 Notes. In particular, the terms of the indenture and the 2023 Notes do not place any restrictions on our or our subsidiaries ability to:



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| |  |  | issue securities or otherwise incur additional indebtedness or other obligations, including (1) any
indebtedness or other obligations that would be equal in right of payment to the 2023 Notes, (2) any indebtedness or other obligations that would be secured and therefore effectively rank senior in right of payment to the 2023 Notes to the
extent of the values of the assets securing such debt, (3) our indebtedness that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the 2023 Notes and (4) securities, indebtedness or obligations
issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the 2023 Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of
indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by such provisions of Section 61(a) of the 1940 Act as may be applicable to us from time to time or any successor provisions, whether or not
we continue to be subject to such provisions of the 1940 Act, which generally prohibit us incurring additional debt or issuing additional debt or preferred securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% (or
150% effective April 10, 2019) after such incurrance or issuance. See the risk factor Recently-enacted legislation allows us to incur additional leverage under the 1940 Act, distinct from certain of our obligations under our Credit
Facility and our term preferred stock below;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities
ranking junior in right of payment to the 2023 Notes, including our preferred stock and any subordinated indebtedness, in each case other than dividends, purchases, redemptions or payments that would cause our asset coverage to fall below the
threshold specified in Section 18(a)(1)(B) as modified by such provisions of Section 61(a) of the 1940 Act as may be applicable to us from time to time or any successor provisions, giving effect to any no-action relief granted by the SEC
to another BDC (or to us if we determine to seek such similar SEC no-action or other relief) permitting the BDC to declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by such
provisions of Section 61(a) of the 1940 Act as may be applicable to us from time to time in order to maintain the BDCs status as a RIC under Subchapter M of the Code;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or
substantially all of our assets);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | enter into transactions with affiliates;
| | - |  | ----------------------------------------



| |  |  | create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | make investments; or
| | - |  | --------------------



| |  |  | create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
| | - |  | ---------------------------------------------------------------------------------------------

In addition, the indenture and the 2023 Notes will not require us to make an offer to purchase the Notes in connection with a change of
control or any other event.

Furthermore, the terms of the indenture and the 2023 Notes do not protect holders of the 2023 Notes in the event that we
experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, if any, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of
net worth, revenues, income, cash flow, or liquidity.

Our ability to recapitalize, incur additional debt (including additional debt that matures prior to
the maturity of the 2023 Notes), and take a number of other actions that are not limited by the terms of the 2023 Notes may have important consequences for you as a holder of the 2023 Notes, including making it more difficult for us to satisfy our
obligations with respect to the 2023 Notes or negatively affecting the trading value of the 2023 Notes.

Other debt we issue or incur in the future could
contain more protections for its holders than the indenture and the 2023 Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for trading levels
and prices of the 2023 Notes.



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If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the
2023 Notes.

Any default under the agreements governing our indebtedness, including a default under the Credit Facility or other indebtedness to which
we may be a party, that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal and interest on the 2023 Notes and substantially decrease the market value of
the 2023 Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal and interest on our indebtedness, or if we otherwise fail to comply with the various
covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such
indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Credit Facility or other debt we may incur in the future could elect to terminate their
commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to refinance or restructure our
debt, including the 2023 Notes, sell assets, reduce or delay capital investments, seek to raise additional capital or seek to obtain waivers from the required lenders under the Credit Facility or other debt that we may incur in the future to avoid
being in default. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the 2023 Notes or our other debt. If we breach our covenants under the Credit Facility or other debt and seek
a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default under the Credit Facility or other debt, the lenders or holders could exercise their rights as described above, and we could
be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under the Credit Facility, could proceed against the collateral securing the debt. Because the Credit Facility has,
and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness under the 2023 Notes or the Credit Facility or under any future credit facility is accelerated, we may be unable to repay or finance the
amounts due.

We may choose to redeem the 2023 Notes when prevailing interest rates are relatively low.

On or after November 1, 2020, we may choose to redeem the 2023 Notes from time to time, especially if prevailing interest rates are lower than the rate borne
by the 2023 Notes. If prevailing rates are lower at the time of redemption, and we redeem the 2023 Notes, you likely would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest
rate on the 2023 Notes being redeemed. Our redemption right also may adversely impact your ability to sell the 2023 Notes as the optional redemption date or period approaches.

A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or our securities, could cause the liquidity or market value
of the 2023 Notes to decline significantly.

Any credit rating assigned to us or the 2023 Notes represents an assessment by the assigning rating
agency of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the 2023 Notes. These credit ratings may not reflect the potential impact of risks relating to
the structure or marketing of the 2023 Notes. Credit ratings are paid for by the issuer and are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion.

Other Risks

Cybersecurity risks and cyber
incidents may adversely affect our business by causing a disruption to our operations, or the operations of businesses in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships, all of
which could negatively impact our business, financial condition and operating results.

A cyber incident is considered to be any adverse event that
threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of
misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or
information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those
provided to us by third-party service providers. We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and
extent of a risk of a cyber incident, do not guarantee that a cyber incident will not occur and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident. In addition, any such
incident, disruption or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations, and damage our and our
Advisers reputations, and cause a loss of confidence in us and our Advisers services, which could adversely affect our business.



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We are dependent on information systems and systems failures could significantly disrupt our business, which
may, in turn, negatively affect the market price of our common stock and our ability to pay dividends.

Our business is dependent on our and third
parties communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our
activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially
beyond our control and adversely affect our business. There could be:



| |  |  | sudden electrical or telecommunications outages;
| | - |  | ------------------------------------------------



| |  |  | natural disasters such as earthquakes, tornadoes and hurricanes;
| | - |  | ----------------------------------------------------------------



| |  |  | disease pandemics;
| | - |  | ------------------



| |  |  | events arising from local or larger scale political or social matters, including terrorist acts; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | cyber-attacks.
| | - |  | --------------

These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our
ability to pay dividends to our stockholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We do not own any real estate or other physical properties material to our operations. The Adviser is the current leaseholder of all properties in
which we operate. We occupy these premises pursuant to the Advisory and Administration Agreements with the Adviser and Administrator, respectively.

ITEM 3. LEGAL PROCEEDINGS

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal
proceeding threatened against us.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.



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##### Table of Contents

PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the Nasdaq under the symbol GLAD. As of November 13, 2018, there were 39 record owners of our common
stock.

Distributions

We generally intend to
distribute in the form of cash distributions a minimum of 90.0% of our investment company taxable income, if any, on a quarterly basis to our stockholders in the form of monthly distributions. We generally intend to retain some or all of our
long-term capital gains, if any, but generally intend to designate the retained amount as a deemed distribution, after giving effect to any prior year realized losses that are carried forward, to supplement our equity capital and support the growth
of our portfolio. However, in certain cases, our Board of Directors may choose to distribute our net realized long-term capital gains, if any, by paying a one-time special distribution. Additionally, our
Credit Facility contains a covenant that limits distributions to our stockholders on an annual basis to the sum of our net investment income, net capital gains and amounts deemed to have been paid during the prior year in accordance with
Section 855(a) of the Code.

Recent Sales of Unregistered Securities

We did not sell any unregistered shares of stock during the fiscal year ended September 30, 2018.

Purchases of Equity Securities

We did not repurchase any
shares of our stock during the fourth quarter ended September 30, 2018.



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##### Table of Contents

Stock Performance Graph

The following graph shows the total stockholder return on an investment of $100 in cash on September 30, 2013 for (i) our common stock, (ii) the Nasdaqs
100 total return index (Nasdaq 100 TR), (iii) the Standard & Poors 500 total return Index (the S&P 500 TR), and (iv) the Wells Fargo BDC Total Return index (WF BDC TR). This year we replaced our peer
group of four companies included in our 2017 annual report with the WF BDC TR. By utilizing the WF BDC TR, which includes over 40 BDCs, we are able to include a larger representation of the BDC landscape. The WF BDC TR includes BDCs that are listed
on the Nasdaq or the New York Stock Exchange and have a market capitalization greater than $100 million on the evaluation date. We believe the WF BDC TR is a more appropriate comparative market index because, among other reasons, it better reflects
the price volatility that BDCs experience.

The following stock performance graph compares our cumulative total return with that of both the newly
selected index and the peer group used in our 2017 annual report to stockholders. The returns on each investment assume reinvestment of dividends. This stock performance graph and the related textual information are not necessarily
indicative of future performance.



LOGO



|          |  |      |        |  |              |   |        |           |  |   |          |  |  |           |        |  |  |   |        | 
|--------- |  | ---- | ------ |  | ------------ | - | ------ | --------- |  | - | -------- |  |  | --------- | ------ |  |  | - | ------ | 
|          |  | GLAD |        |  | Nasdaq100 TR |   |        | S&P 500TR |  |   | WF BDCTR |  |  | PeerGroup |       
|9/30/2013 |  | $    | 100.00 |  |              | $ | 100.00 |           |  | $ | 100.00   |  |  | $         | 100.00 |  |  | $ | 100.00 | 
|9/30/2014 |  |      | 111.51 |  |              |   | 127.52 |           |  |   | 119.73   |  |  |           | 100.57 |  |  |   | 102.71 | 
|9/30/2015 |  |      | 114.19 |  |              |   | 133.21 |           |  |   | 119.00   |  |  |           | 89.47  |  |  |   | 87.49  | 
|9/30/2016 |  |      | 127.51 |  |              |   | 157.37 |           |  |   | 137.36   |  |  |           | 109.71 |  |  |   | 109.61 | 
|9/30/2017 |  |      | 163.08 |  |              |   | 195.26 |           |  |   | 162.92   |  |  |           | 119.62 |  |  |   | 123.83 | 
|9/28/2018 |  |      | 178.63 |  |              |   | 251.72 |           |  |   | 192.10   |  |  |           | 123.92 |  |  |   | 136.22 | 



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ITEM 6. SELECTED FINANCIAL DATA

The following consolidated selected financial data for the fiscal years ended September 30, 2018, 2017, 2016, 2015 and 2014 are derived from our audited
accompanying Consolidated Financial Statements. The other data included in the second table below is unaudited. The data should be read in conjunction with our accompanying Notes to Consolidated Financial Statements and notes
thereto and Managements Discussion and Analysis of Financial Condition and Results of Operationsincluded elsewhere in this Annual Report on Form 10-K.

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SELECTED FINANCIAL AND OTHER DATA

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)



|                                                                                             |  |                          |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|-------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                                             |  | Year Ended September 30, |           
|                                                                                             |  | 2018                     |            |   | 2017 |   |            | 2016 |  |   | 2015       |   |  | 2014 |           
|Statement of Operations Data:                                                                |  |                          |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total Investment Income                                                                      |  | $                        | 45,581     |   |      | $ | 39,233     |      |  | $ | 39,112     |   |  | $    | 38,058     |   |  | $ | 36,585     |  
|Total Expenses, Net of Credits from Adviser                                                  |  |                          | 22,493     |   |      |   | 17,800     |      |  |   | 19,625     |   |  |      | 20,358     |   |  |   | 18,217     |  
|                                                                                             |  |                          |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net Investment Income                                                                        |  |                          | 23,088     |   |      |   | 21,433     |      |  |   | 19,487     |   |  |      | 17,700     |   |  |   | 18,368     |  
|                                                                                             |  |                          |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net Realized and Unrealized (Loss) Gain                                                      |  |                          | (4,440     | ) |      |   | (4,253     | )    |  |   | (8,120     | ) |  |      | (9,216     | ) |  |   | (7,135     | )
|                                                                                             |  |                          |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net Increase in Net Assets Resulting from Operations                                         |  | $                        | 18,648     |   |      | $ | 17,180     |      |  | $ | 11,367     |   |  | $    | 8,484      |   |  | $ | 11,233     |  
|                                                                                             |  |                          |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Per Share Data:                                                                              |  |                          |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net Investment Income per Common Share  Basic and Diluted(A)                                |  | $                        | 0.85       |   |      | $ | 0.84       |      |  | $ | 0.84       |   |  | $    | 0.84       |   |  | $ | 0.87       |  
|Net Increase in Net Assets Resulting from Operations per Common Share - Basic and Diluted(A) |  |                          | 0.69       |   |      |   | 0.67       |      |  |   | 0.49       |   |  |      | 0.40       |   |  |   | 0.53       |  
|Distributions Declared and Paid Per Common
Share(B)                                          |  |                          | 0.84       |   |      |   | 0.84       |      |  |   | 0.84       |   |  |      | 0.84       |   |  |   | 0.84       |  
|Statement of Assets and Liabilities Data:                                                    |  |                          |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total Assets                                                                                 |  | $                        | 399,508    |   |      | $ | 365,860    |      |  | $ | 337,178    |   |  | $    | 382,482    |   |  | $ | 301,429    |  
|Net Assets                                                                                   |  |                          | 237,092    |   |      |   | 219,650    |      |  |   | 201,207    |   |  |      | 191,444    |   |  |   | 199,660    |  
|Net Asset Value Per Common Share                                                             |  |                          | 8.32       |   |      |   | 8.40       |      |  |   | 8.62       |   |  |      | 9.06       |   |  |   | 9.51       |  
|Common Shares Outstanding                                                                    |  |                          | 28,501,980 |   |      |   | 26,160,684 |      |  |   | 23,344,422 |   |  |      | 21,131,622 |   |  |   | 21,000,160 |  
|Weighted Common Shares Outstanding  Basic and Diluted                                       |  |                          | 27,104,077 |   |      |   | 25,495,117 |      |  |   | 23,200,642 |   |  |      | 21,066,844 |   |  |   | 21,000,160 |  
|Senior Securities Data:                                                                      |  |                          |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total borrowings, at cost(C)                                                                 |  | $                        | 110,000    |   |      | $ | 93,000     |      |  | $ | 71,300     |   |  | $    | 127,300    |   |  | $ | 36,700     |  
|Mandatorily redeemable
preferredstock(C)(D)                                                  |  |                          | 51,750     |   |      |   | 51,750     |      |  |   | 61,000     |   |  |      | 61,000     |   |  |   | 61,000     |  



|(A) | Per share data is based on the weighted average common stock outstanding for both basic and diluted.
|--- | ----------------------------------------------------------------------------------------------------

|(B) | The tax character of distributions is determined on an annual basis. For further information on the estimated
character of our distributions to common stockholders, please refer to Note 9Distributions to Common Stockholders in the accompanying Notes to Consolidated Financial Statementsincluded elsewhere in this Annual Report on Form 10-K.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | See Managements Discussion and Analysis of Financial Condition and Results of
Operations for more information regarding our level of indebtedness.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Represents the total liquidation preference of our mandatorily redeemable term preferred stock.
|--- | -----------------------------------------------------------------------------------------------



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|                                                                                |  |                          |        |   |      |   |        |      |  |   |         |   |  |      |         |   |  |   |        |  
|------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------ | -
|                                                                                |  | Year Ended September 30, |       
|                                                                                |  | 2018                     |        |   | 2017 |   |        | 2016 |  |   | 2015    |   |  | 2014 |        
|Other Unaudited Data:                                                           |  |                          |        |   |      |   |        |      |  |   |         |   |  |      |         |   |  |   |        |  
|Number of Portfolio Companies                                                   |  |                          | 50     |   |      |   | 47     |      |  |   | 45      |   |  |      | 48      |   |  |   | 45     |  
|Average Size of Portfolio Company Investment at Cost                            |  | $                        | 8,549  |   |      | $ | 8,754  |      |  | $ | 8,484   |   |  | $    | 8,547   |   |  | $ | 7,762  |  
|Principal Amount of New Investments                                             |  |                          | 67,936 |   |      |   | 99,241 |      |  |   | 79,401  |   |  |      | 102,299 |   |  |   | 81,731 |  
|Disbursements to Existing Portfolio Companies                                   |  |                          | 38,679 |   |      |   | 12,851 |      |  |   | 10,145  |   |  |      | 33,824  |   |  |   | 20,314 |  
|Proceeds from Loan Repayments, Investments Sold and Exits(A)                    |  |                          | 67,944 |   |      |   | 83,444 |      |  |   | 121,144 |   |  |      | 40,273  |   |  |   | 72,560 |  
|Weighted Average Yield on Investments, excluding loans on
non-accrual status(B) |  |                          | 11.80  | % |      |   | 11.57  | %    |  |   | 11.08   | % |  |      | 10.93   | % |  |   | 11.47  | %
|Weighted Average Yield on Investments, including loans on
non-accrual status(C) |  |                          | 10.72  |   |      |   | 10.61  |      |  |   | 10.27   |   |  |      | 9.84    |   |  |   | 9.99   |  
|Total Return(D)                                                                 |  |                          | 9.53   |   |      |   | 27.90  |      |  |   | 11.68   |   |  |      | 2.40    |   |  |   | 9.62   |  



|(A) | Includes non-cash reductions in cost basis.
|--- | -------------------------------------------

|(B) | Weighted average yield on investments, excluding loans on non-accrual
status, equals interest income on investments divided by the weighted average interest-bearing principal balance throughout the fiscal year.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Weighted average yield on investments, including loans on non-accrual
status, equals interest income on investments divided by the weighted average total principal balance throughout the fiscal year.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Total return equals the change in the ending market value of our common stock from the beginning of the fiscal
year, taking into account dividends reinvested in accordance with the terms of the dividend reinvestment plan. Total return does not take into account distributions that may be characterized as a return of capital. For further information on the
estimated character of our distributions to common stockholders, refer to Note 9Distributions to Common Stockholders elsewhere in this Annual Report on Form 10-K.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following analysis of our financial condition and results of operations should be read in conjunction with our
accompanyingConsolidated Financial Statementsand the notes thereto contained elsewhere in this Annual Report on Form 10-K. Historical financial condition and results of operations
and percentage relationships among any amounts in the financial statements are not necessarily indicative of financial condition, results of operations or percentage relationships for any future periods. Except per share amounts, dollar amounts in
the tables included herein are in thousands unless otherwise indicated.

OVERVIEW

General

We were incorporated under the Maryland
General Corporation Law on May 30, 2001. We operate as an externally managed, closed-end, non-diversified management investment company, and have elected to be
treated as a BDC under the 1940 Act. In addition, for federal income tax purposes we have elected to be treated as a RIC under the Code. To continue to qualify as a RIC for federal income tax purposes and obtain favorable RIC tax treatment, we must
meet certain requirements, including certain minimum distribution requirements.

We were established for the purpose of investing in debt and equity
securities of established private businesses operating in the U.S. Our investment objectives are to: (1) achieve and grow current income by investing in debt securities of established businesses that we believe will provide stable earnings and
cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions to stockholders that grow over time; and (2) provide our stockholders with long-term capital appreciation in the value of our
assets by investing in equity securities of established businesses that we believe can grow over time to permit us to sell our equity investments for capital gains. To achieve our investment objectives, our investment strategy is to invest in
several categories of debt and equity securities, with each investment generally ranging from $8 million to $30 million, although investment size may vary, depending upon our total assets or available capital at the time of investment. We
expect that our investment portfolio over time will consist of approximately 90.0% debt investments and 10.0% equity investments, at cost. As of September 30, 2018, our investment portfolio was made up of approximately 91.4% debt investments
and 8.6% equity investments, at cost.

We focus on investing in lower middle market companies (which we generally define as companies with annual earnings
before interest, taxes, depreciation and amortization of $3 million to $15 million) in the U.S. that meet certain criteria, including, but not limited to, the following: the sustainability of the business free cash flow and its ability to
grow it over time, adequate assets for loan collateral, experienced management teams with a significant ownership interest in the borrower, reasonable capitalization of the borrower, including an ample equity contribution or cushion based on
prevailing enterprise valuation multiples and, to a lesser extent, the potential to realize appreciation and gain liquidity in our equity position, if any. We lend to borrowers that need funds for growth capital or to finance acquisitions or
recapitalize or refinance their existing debt facilities. We seek to avoid investing in high-risk, early-stage enterprises. Our targeted portfolio companies are generally considered too small for the larger capital marketplace. We invest by
ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity and have opportunistically made several co-investments with our affiliate Gladstone Investment, a
BDC also managed by our Adviser, pursuant to an exemptive order granted by the SEC. We believe this ability to co-invest will continue to enhance our ability to further our investment objectives and
strategies. If we are participating in an investment with one or more co-investors, our investment is likely to be smaller than if we were investing alone.

Business

Portfolio and Investment Activity

In general, our investments in debt securities have a term of no more than seven years, accrue interest at variable rates (generally based on the one-month LIBOR) and, to a lesser extent, at fixed rates. We seek debt instruments that pay interest monthly or, at a minimum, quarterly, may have a success fee or deferred interest provision and are primarily
interest only, with all principal and any accrued but unpaid interest due at maturity. Generally, success fees accrue at a set rate and are contractually due upon a change of control of a portfolio company, typically from an exit or sale. Some debt
securities have deferred interest whereby some portion of the interest payment is added to the principal balance so that the interest is paid, together with the principal, at maturity. This form of deferred interest is often called PIK interest.



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Typically, our equity investments consist of common stock, preferred stock, limited liability company interests,
or warrants to purchase the foregoing. Often, these equity investments occur in connection with our original investment, recapitalizing a business, or refinancing existing debt.

During the year ended September 30, 2018, we invested $67.9 million in ten new portfolio companies and extended $38.7 million of investments to
existing portfolio companies. In addition, during the year ended September 30, 2018, we exited seven portfolio companies through sales and early payoffs. We received a total of $66.9 million in combined net proceeds and principal
repayments from the aforementioned portfolio company exits as well as existing portfolio companies during the year ended September 30, 2018. This activity resulted in a net increase in our overall portfolio by three portfolio companies to 50
and a net increase of $16.0 million in our portfolio at cost since September 30, 2017. From our initial public offering in August 2001 through September 30, 2018, we have made 495 different loans to, or investments in, 226 companies
for a total of approximately $1.8 billion, before giving effect to principal repayments on investments and divestitures.

During the year ended
September 30, 2018, the following significant transactions occurred:



| |  |  | In October 2017, we sold our investment in Flight Fit N Fun LLC for a realized gain of $0.6 million. In
connection with the sale, we received net cash proceeds of approximately $9.4 million, including the repayment of our debt investment of $7.8 million at par.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2017, we invested $11.0 million in Applied Voice & Speech Technologies, Inc. through
secured first lien debt.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2017, our investment in PSC Industrial Holdings, LLC paid off at par for net cash proceeds of
$3.5 million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $7.5 million in Arc Drilling Holdings LLC through a combination of secured
first lien debt and equity.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $7.5 million in Gray Matter Systems, LLC through secured second lien debt. In
March 2018, we invested an additional $3.6 million in Gray Matter Systems, LLC, through secured second lien debt.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, our investment in DataPipe, Inc. paid off at par for net cash proceeds of $2.0 million.
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $5.0 million in DigiCert Holdings, Inc. through secured second lien debt. In
March 2018, we sold $2.0 million of this investment for net cash proceeds of $2.0 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $4.0 million in Red Ventures, LLC through secured second lien debt.
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $1.0 million in ABG Intermediate Holdings 2, LLC through secured second lien
debt. In January 2018, we sold this investment for net cash proceeds of $1.0 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2017, we invested $20.0 million in Impact! Chemical Technologies, Inc. through secured first
lien debt.
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | In January 2018, we invested $8.1 million in XMedius Solutions Inc. through secured first lien debt.
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | In February 2018, we invested an additional $4.0 million in an existing portfolio company, Lignetics, Inc.,
through secured first lien debt.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March, July and September 2018, an existing portfolio company, EL Academies, Inc., drew $1.4 million,
$4.4 million and $3.2 million, respectively, on the unused portion of its secured first lien delayed draw term loan.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March 2018, we sold our $1.0 million investment in Neustar, Inc. for net cash proceeds of
$1.0 million.
| | - |  | ----------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | In April 2018, we invested $3.0 million in CHA Holdings, Inc. through secured second lien debt.
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | In May 2018, our investment in TapRoot Partners, Inc. paid off, which resulted in prepayment fees of
$0.5 million and success fee income of $0.4 million. In connection with the pay off, we received net cash proceeds of $22.9 million, including the repayment of our debt investment of $22.0 million at par.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In May 2018, we invested an additional $10.0 million in an existing portfolio company, Merlin International,
Inc., through secured second lien debt.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In June 2018, we invested an additional $7.0 million in an existing portfolio company, IA Tech, LLC, through
secured first lien debt.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In July 2018, our investment in NetSmart Technologies, Inc. paid off at par for net cash proceeds of
$3.7 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | In July 2018, the holding company for Impact! Chemical Technologies, Inc. (Impact) merged with and
into the holding company for WadeCo Specialties, Inc. (WadeCo) to form Chemical & Injection Holdings Company, LLC (Chemical & Injection Holdings). Our preferred equity ownership related to WadeCo with a
cost basis of $0.6 million, was converted into preferred equity ownership in the newly formed Chemical & Injection Holdings with the same cost basis. Our existing debt investments in Impact and WadeCo remained unchanged in
conjunction with the merger.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In September 2018, we restructured our $30.0 million investment in Sunshine Media Holdings
(Sunshine) resulting in a $28.2 million realized loss and a new $2.0 million investment in TNCP Intermediate HoldCo, LLC.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Refer to Note 15Subsequent Events in the accompanying Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for portfolio activity occurring subsequent to September 30, 2018.

Capital Raising

We have been able to meet our capital needs through extensions of and increases to the Credit Facility and by accessing the capital markets in the form of
public equity offerings of common and preferred stock. We have successfully extended the Credit Facilitys revolving period multiple times, most recently to January 2021, and currently have a total commitment amount of $190.0 million.
Additionally, we issued 2.1 million shares of our 6.00% Series 2024 Term Preferred Stock, par value $0.001 per share (Series 2024 Term Preferred Stock) at a public offering price of $25 per share, for gross proceeds of
$51.8 million in September 2017, inclusive of the overallotment, and approximately 2.2 million shares of our common stock for gross proceeds of $17.3 million in October 2016, inclusive of the November 2016 overallotment. Additionally,
during the year ended September 30, 2018, we sold 2,341,296 shares of our common stock under our at-the-market program at a weighted-average price of $9.39 per
share and raised $22.0 million of gross proceeds. Refer to Liquidity and Capital Resources  Equity  Common Stock and Liquidity and Capital Resources  Equity  Term Preferred Stock for
further discussion of our common stock and mandatorily redeemable preferred stock and Liquidity and Capital Resources  Revolving Credit Facility for further discussion of the Credit Facility.

Although we were able to access the capital markets historically and in recent years, we believe uncertain market conditions could affect the trading price of
our capital stock and thus may inhibit our ability to finance new investments through the issuance of equity. When our common stock trades below NAV per common share, as it has often done in previous years, our ability to issue equity is constrained
by provisions of the 1940 Act, which generally prohibits the issuance and sale of our common stock below NAV per common share without first obtaining approval from our stockholders and our independent directors, other than through sales to our
then-existing stockholders pursuant to a rights offering. We did not request that our stockholders approve the Companys ability to issue shares of common stock at a price below NAV per share at our annual meeting of stockholders held on
February 8, 2018. Should we decide to issue shares of common stock at a price below NAV per share in the future, we will seek the requisite approval of our stockholders at such time.

On November 13, 2018, the closing market price of our common stock was $9.28, an 11.5% premium to our September 30, 2018 NAV per share of $8.32.

Refer to Note 15Subsequent Events in the notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a
discussion of additional capital raised in connection with issuance of the 2023 Notes.



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Regulatory Compliance

Our ability to seek external debt financing, to the extent that it is available under current market conditions, is further subject to the asset coverage
limitations of the 1940 Act, which require us to have an asset coverage (as defined in Sections 18 and 61 of the 1940 Act) of at least 200% (currently) or 150% (effective April 10, 2019) on our senior securities representing
indebtedness and our senior securities that are stock.

On April 10, 2018, our Board of Directors, including a required
majority (as such term is defined in Section 57(o) of the 1940 Act) thereof, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Small Business Credit Availability Act.
As a result, the Companys asset coverage requirements for senior securities will be changed from 200% to 150%, effective one year after the date of the Board of Directors approval; or April 10, 2019. Under the current 200% asset
coverage standard, we may borrow debt or issue senior securities in the amount of $1.00 for every $1.00 of equity in the Company. Starting from April 10, 2019, under the 150% asset coverage standard, we may borrow debt or issue senior
securities in the amount of $2.00 for every $1.00 of equity in the Company. Notwithstanding the modified asset coverage requirement under the 1940 Act described above, we are separately subject to a minimum asset coverage requirement of 200% with
respect to certain provisions of our Credit Facility and our Series 2024 Term Preferred Stock.

As of September 30, 2018, our asset coverage on our
senior securities representing indebtedness was 359.0% and our asset coverage on our senior securities that are stock was 244.4%.

Recent Developments

Debt Offering

In November 2018, we completed a public debt offering of $57.5 million aggregate principal amount of 6.125% Notes due 2023 (the 2023
Notes), inclusive of the overallotment, for net proceeds of $55.5 million after deducting underwriting discounts, commissions and offering expenses borne by us. The Notes will mature on November 1, 2023, and may be redeemed in
whole or in part at any time or from time to time at the Companys option on or after November 1, 2020. The 2023 Notes are traded under the ticker symbol GLADD on the Nasdaq Global Select Market.

Distributions

On October 9, 2018, our Board
of Directors declared the following monthly cash distributions to common and preferred stockholders:



|                  |  |                       |  |                             |      |  |                                               |   |       | 
|----------------- |  | --------------------- |  | --------------------------- | ---- |  | --------------------------------------------- | - | ----- | 
|Record Date       |  | Payment Date          |  | Distributionper CommonShare |      |  | Distributionper Series2024 TermPreferredShare |  
|October 19, 2018  |  | October 31, 2018      |  | $                           | 0.07 |  |                                               | $ | 0.125 | 
|November 20, 2018 |  | November 30, 2018     |  |                             | 0.07 |  |                                               |   | 0.125 | 
|December 20, 2018 |  | December 31, 2018     |  |                             | 0.07 |  |                                               |   | 0.125 | 
|                  |  |                       |  |                             |      |  |                                               |   |       | 
|                  |  | Total for the Quarter |  | $                           | 0.21 |  |                                               | $ | 0.375 | 
|                  |  |                       |  |                             |      |  |                                               |   |       | 

Portfolio and Investment Activity

In October 2018, our investment in TWS Acquisition Corporation paid off at par for net cash proceeds of $2.0 million.

In October and November 2018, we invested a total of $1.6 million in 8th Avenue Food &
Provisions, Inc. through secured second lien debt.

In November 2018, we invested $2.0 million in GOBP Holdings, Inc. (d/b/a Grocery Outlet) through
secured second lien debt.

In November 2018, our investment in Red Ventures, LLC paid off at par for net cash proceeds of $3.1 million.



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##### Table of Contents

RESULTS OF OPERATIONS

Comparison of the Year Ended September 30, 2018 to the Year Ended September 30, 2017



|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|---------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------ | -------- |  | - | ------- | - |  |  | ------- | -
|                                                           |  | For the Year Ended September 30, |        
|                                                           |  | 2018                             |         |   | 2017 |   |        | $ Change |  |   | %Change |  
|INVESTMENT INCOME                                          |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|Interest income                                            |  | $                                | 43,958  |   |      | $ | 37,073 |          |  | $ | 6,885   |   |  |  | 18.6    | %
|Other income                                               |  |                                  | 1,623   |   |      |   | 2,160  |          |  |   | (537    | ) |  |  | (24.9   | )
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|Total investment income                                    |  |                                  | 45,581  |   |      |   | 39,233 |          |  |   | 6,348   |   |  |  | 16.2    |  
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|EXPENSES                                                   |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|Base management fee                                        |  |                                  | 7,033   |   |      |   | 5,781  |          |  |   | 1,252   |   |  |  | 21.7    |  
|Loan servicing fee                                         |  |                                  | 5,042   |   |      |   | 4,146  |          |  |   | 896     |   |  |  | 21.6    |  
|Incentive fee                                              |  |                                  | 5,348   |   |      |   | 4,779  |          |  |   | 569     |   |  |  | 11.9    |  
|Administration fee                                         |  |                                  | 1,250   |   |      |   | 1,102  |          |  |   | 148     |   |  |  | 13.4    |  
|Interest expense on borrowings                             |  |                                  | 5,858   |   |      |   | 3,073  |          |  |   | 2,785   |   |  |  | 90.6    |  
|Dividend expense on mandatorily redeemable preferred stock |  |                                  | 3,105   |   |      |   | 4,152  |          |  |   | (1,047  | ) |  |  | (25.2   | )
|Amortization of deferred financing fees                    |  |                                  | 1,014   |   |      |   | 1,094  |          |  |   | (80     | ) |  |  | (7.3    | )
|Other expenses                                             |  |                                  | 1,966   |   |      |   | 1,945  |          |  |   | 21      |   |  |  | 1.1     |  
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|Expenses, before credits from Adviser                      |  |                                  | 30,616  |   |      |   | 26,072 |          |  |   | 4,544   |   |  |  | 17.4    |  
|Credit to base management fee  loan servicing fee         |  |                                  | (5,042  | ) |      |   | (4,146 | )        |  |   | (896    | ) |  |  | 21.6    |  
|Credit to fees from Adviser - other                        |  |                                  | (3,081  | ) |      |   | (4,126 | )        |  |   | 1,045   |   |  |  | (25.3   | )
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|Total expenses, net of credits                             |  |                                  | 22,493  |   |      |   | 17,800 |          |  |   | 4,693   |   |  |  | 26.4    |  
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|                                                           |  |                                  |         |  
|NET INVESTMENT INCOME                                      |  |                                  | 23,088  |   |      |   | 21,433 |          |  |   | 1,655   |   |  |  | 7.7     |  
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|                                                           |  |                                  |         |  
|NET REALIZED AND UNREALIZED (LOSS) GAIN                    |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|Net realized loss on investments                           |  |                                  | (26,063 | ) |      |   | (3,475 | )        |  |   | (22,588 | ) |  |  | 650.0   |  
|Net realized loss on other                                 |  |                                  | (133    | ) |      |   | (1,288 | )        |  |   | 1,155   |   |  |  | (89.7   | )
|Net unrealized appreciation of investments                 |  |                                  | 21,641  |   |      |   | 625    |          |  |   | 21,016  |   |  |  | 3,362.6 |  
|Net unrealized appreciation (depreciation) of other        |  |                                  | 115     |   |      |   | (115   | )        |  |   | 230     |   |  |  | (200.0  | )
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|Net loss from investments and other                        |  |                                  | (4,440  | ) |      |   | (4,253 | )        |  |   | (187    | ) |  |  | 4.4     |  
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|                                                           |  |                                  |         |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS       |  | $                                | 18,648  |   |      | $ | 17,180 |          |  | $ | 1,468   |   |  |  | 8.5     | %
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|PER BASIC AND DILUTED COMMON SHARE                         |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|Net investment income                                      |  | $                                | 0.85    |   |      | $ | 0.84   |          |  | $ | 0.01    |   |  |  | 1.2     | %
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  
|Net increase in net assets resulting from operations       |  | $                                | 0.69    |   |      | $ | 0.67   |          |  | $ | 0.02    |   |  |  | 3.0     | %
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |         |  

Investment Income

Interest income increased by 18.6% for the year ended September 30, 2018, as compared to the prior year. This increase was due primarily to an increase in
the weighted average balance outstanding on our interest-bearing portfolio and an increase in the weighted average yield on our interest-bearing portfolio. The weighted average principal balance of our interest-bearing investment portfolio during
the year ended September 30, 2018, was $372.2 million, compared to $320.1 million for the prior year, an increase of $52.1 million, or 16.3%. The weighted average yield on our interest-bearing investments is based on the current
stated interest rates on interest-bearing investments which increased to 11.8% for the year ended September 30, 2018 compared to 11.6% for the year ended September 30, 2017, inclusive of any allowances on interest receivables made during
those periods.

As of September 30, 2018, one portfolio company, Francis Drilling Fluids, Ltd. (FDF) was on non-accrual status, with an aggregate debt cost basis of approximately $26.9 million, or 6.9% of the cost basis of all debt investments in our portfolio. As of September 30, 2017, two portfolio companies,
Sunshine and Alloy Die Casting Co. (ADC), were on non-accrual status, with an aggregate debt cost basis of approximately $27.9 million, or 7.5% of the cost basis of all debt investments in our
portfolio.



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Other income decreased by 24.9% during the year ended September 30, 2018, as compared to the prior year.
This decrease was primarily due to a $1.1 million decrease in success fees recognized year over year. For the year ended September 30, 2018, other income consisted primarily of $0.6 million in prepayment fees received,
$0.5 million in dividend income, and $0.4 million in success fees recognized. For the year ended September 30, 2017, other income consisted primarily of $1.5 million in success fees recognized, $0.3 million in dividend
income, and $0.3 million in prepayment fees received.

The following tables list the investment income for our five largest portfolio company
investments at fair value during the respective years:



|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|-------------------------------------- |  | ------------------------ | ------- |  | ----------------------------- |  | ----- | ---------------- |  | - | -------------------------- |  |  |  | ----- | -
|                                       |  | As of September 30, 2018 |         |  | Year Ended September 30, 2018 | 
|Portfolio Company                      |  | Fair Value               |         |  | % of Portfolio                |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|IA Tech, LLC                           |  | $                        | 30,900  |  |                               |  | 7.9   | %                |  | $ | 3,208                      |  |  |  | 7.0   | %
|NetFortris Corp.                       |  |                          | 24,325  |  |                               |  | 6.2   |                  |  |   | 2,522                      |  |  |  | 5.5   |  
|Lignetics, Inc.                        |  |                          | 23,040  |  |                               |  | 5.9   |                  |  |   | 2,410                      |  |  |  | 5.3   |  
|Impact! Chemical Technologies, Inc.(A) |  |                          | 22,472  |  |                               |  | 5.8   |                  |  |   | 1,849                      |  |  |  | 4.1   |  
|EL Academies, Inc.                     |  |                          | 22,018  |  |                               |  | 5.7   |                  |  |   | 1,535                      |  |  |  | 3.4   |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments      |  |                          | 122,755 |  |                               |  | 31.5  |                  |  |   | 11,524                     |  |  |  | 25.3  |  
|Other portfolio companies              |  |                          | 267,291 |  |                               |  | 68.5  |                  |  |   | 34,018                     |  |  |  | 74.7  |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Total Investment Portfolio             |  | $                        | 390,046 |  |                               |  | 100.0 | %                |  | $ | 45,542                     |  |  |  | 100.0 | %
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  



|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|--------------------------------- |  | ------------------------ | ------- |  | ----------------------------- |  | ----- | ---------------- |  | - | -------------------------- |  |  |  | ----- | -
|                                  |  | As of September 30, 2017 |         |  | Year Ended September 30, 2017 | 
|Portfolio Company                 |  | Fair Value               |         |  | % of Portfolio                |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|NetFortris Corp.(A)               |  | $                        | 24,240  |  |                               |  | 6.9   | %                |  | $ | 1,566                      |  |  |  | 4.0   | %
|IA Tech, LLC                      |  |                          | 23,633  |  |                               |  | 6.7   |                  |  |   | 2,813                      |  |  |  | 7.2   |  
|HB Capital Resources, Ltd.(A)     |  |                          | 22,110  |  |                               |  | 6.3   |                  |  |   | 1,107                      |  |  |  | 2.8   |  
|WadeCo Specialties, Inc.          |  |                          | 22,016  |  |                               |  | 6.2   |                  |  |   | 1,936                      |  |  |  | 4.9   |  
|Lignetics, Inc.                   |  |                          | 18,949  |  |                               |  | 5.4   |                  |  |   | 1,862                      |  |  |  | 4.8   |  
|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments |  |                          | 110,948 |  |                               |  | 31.5  |                  |  |   | 9,284                      |  |  |  | 23.7  |  
|Other portfolio companies         |  |                          | 241,425 |  |                               |  | 68.5  |                  |  |   | 29,922                     |  |  |  | 76.3  |  
|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Total Investment Portfolio        |  | $                        | 352,373 |  |                               |  | 100.0 | %                |  | $ | 39,206                     |  |  |  | 100.0 | %
|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  

(A)New investment during applicable period.

Expenses

Expenses, net of any non-contractual, unconditional and irrevocable credits to fees from the Adviser, increased
$4.7 million, or 26.4%, for the year ended September 30, 2018 as compared to the prior year period. This increase was primarily due to a $2.9 million increase in our net base management and incentive fees to the Adviser and a
$2.8 million increase in interest expense on borrowings, partially offset by a $1.0 million decrease in dividend expense on mandatorily redeemable preferred stock.

Interest expense increased by 90.6% during the year ended September 30, 2018, as compared to the prior year, due primarily to an increase in the weighted
average balance outstanding on our Credit Facility. The weighted average balance outstanding during the year ended September 30, 2018, was $114.7 million, as compared to $58.4 million in the prior year, an increase of 96.4%. The
effective interest rate on our Credit Facility, including unused commitment fees incurred but excluding the impact of deferred financing costs, was 5.1% during the year ended September 30, 2018, compared to 5.3% during the prior year. The
decrease in the effective interest rate was driven by a decrease in the marginal interest rate on our Credit Facility effective March 9, 2018 and a decrease in unused commitment fees paid in the current year due to a greater amount outstanding
on the credit facility. These factors were partially offset by an increase in LIBOR as compared to the prior year.



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The net base management fee earned by the Adviser increased by $1.7 million, or 42.2%, during the year ended
September 30, 2018, as compared to the prior year, resulting from an increase in average total assets subject to the base management fee and a decrease in credits from the Adviser year over year.

The net income-based incentive fee increased by $1.2 million, or 48.3%, for the year ended September 30, 2018, as compared to the prior year, due to
higher pre-incentive fee net investment income, partially offset by an increase in net assets, which drives the hurdle, over the prior year. Our Board of Directors accepted a
non-contractual, unconditional and irrevocable credit from the Adviser of $1.7 million to reduce the income-based incentive fee to the extent net investment income did not cover 100.0% of our
distributions to common stockholders during the year ended September 30, 2018. The credit granted during the year ended September 30, 2017, totaled $2.3 million.

The base management, loan servicing and incentive fees, and associated non-contractual, unconditional and irrevocable
credits, are computed quarterly, as described under Transactions with the Adviser in Note 4Related Party Transactions of the accompanying Notes to Consolidated Financial Statements and are summarized in the following table:



|                                                       |  |                          |         |   |      |   |         |  
|------------------------------------------------------ |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                       |  | Year Ended September 30, |        
|                                                       |  | 2018                     |         |   | 2017 |  
|Average total assets subject to base management fee(A) |  | $                        | 401,886 |   |      | $ | 330,343 |  
|Multiplied by annual base management fee of 1.75%      |  |                          | 1.75    | % |      |   | 1.75    | %
|                                                       |  |                          |         |   |      |   |         |  
|Base management fee(B)                                 |  |                          | 7,033   |   |      |   | 5,781   |  
|Portfolio company fee credit                           |  |                          | (1,020  | ) |      |   | (1,588  | )
|Syndicated loan fee credit                             |  |                          | (364    | ) |      |   | (221    | )
|                                                       |  |                          |         |   |      |   |         |  
|Net Base Management Fee                                |  | $                        | 5,649   |   |      | $ | 3,972   |  
|                                                       |  |                          |         |   |      |   |         |  
|                                                       |  |                         
|Loan servicing fee(B)                                  |  | $                        | 5,042   |   |      | $ | 4,146   |  
|Credit to base management fee  loan servicing fee(B)  |  |                          | (5,042  | ) |      |   | (4,146  | )
|                                                       |  |                          |         |   |      |   |         |  
|Net Loan Servicing Fee                                 |  | $                        |        |   |      | $ |        |  
|                                                       |  |                          |         |   |      |   |         |  
|                                                       |  |                         
|Incentive fee(B)                                       |  | $                        | 5,348   |   |      | $ | 4,779   |  
|Incentive fee credit                                   |  |                          | (1,697  | ) |      |   | (2,317  | )
|                                                       |  |                          |         |   |      |   |         |  
|Net Incentive Fee                                      |  | $                        | 3,651   |   |      | $ | 2,462   |  
|                                                       |  |                          |         |   |      |   |         |  
|                                                       |  |                         
|Portfolio company fee credit                           |  | $                        | (1,020  | ) |      | $ | (1,588  | )
|Syndicated loan fee credit                             |  |                          | (364    | ) |      |   | (221    | )
|Incentive fee credit                                   |  |                          | (1,697  | ) |      |   | (2,317  | )
|                                                       |  |                          |         |   |      |   |         |  
|Credit to Fees from Adviser -
Other(B)                 |  | $                        | (3,081  | ) |      | $ | (4,126  | )
|                                                       |  |                          |         |   |      |   |         |  



|(A) | Average total assets subject to the base management fee is defined as total assets, including investments made
with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the four most recently completed quarters within the respective years and adjusted appropriately for any share issuances or
repurchases during the applicable year.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(B) | Reflected, on a gross basis, as a line item on our accompanyingConsolidated Statement of Operations
located elsewhere in this Annual Report on Form 10-K.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

Realized Loss and Unrealized
Appreciation

Net Realized Loss on Investments

For the year ended September 30, 2018, we recorded a net realized loss on investments of $26.1 million, which resulted primarily from the restructure
of our investment in Sunshine, previously on non-accrual status, and the associated recognition of a $28.2 million realized loss. This was partially offset by a $0.7 million realized gain from the
sale of a portion of our equity investment in Funko Acquisition Holdings, LLC (Funko) and a $0.6 million realized gain associated with the sale of our investment in Flight Fit N Fun LLC.

For the year ended September 30, 2017, we recorded a net realized loss on investments of $3.5 million, which resulted primarily from the sale of
substantially all the assets of RBC Acquisition Corp. (RBC) for a $2.3 million realized loss and the write-off of $5.0 million on our investment in Sunshine, partially offset by the sale
of Behrens Manufacturing, LLC (Behrens) for a $2.5 million realized gain and a $1.2 million realized gain related to an additional earn-out from Funko, LLC, which we exited in the prior
year.



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Net Realized Loss on Other

We incurred a loss on extinguishment of debt of $1.3 million during the year ended September 30, 2017, which resulted from the write-off of unamortized deferred issuance costs at the time of redemption of our 6.75% Series 2021 Term Preferred Stock, par value $0.001 per share (Series 2021 Preferred Stock) in September 2017.

Net Unrealized Appreciation of Investments

During the
year ended September 30, 2018, we recorded net unrealized appreciation of investments in the aggregate amount of $21.6 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the year
ended September 30, 2018, were as follows:



|                                              |  |                               |         |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|--------------------------------------------- |  | ----------------------------- | ------- | - | ------------------------------------ | - | ------ | ----------------------------------------------- |  | - | -------------- | - |  | - | ------ | -
|                                              |  | Year Ended September 30, 2018 |        
|Portfolio Company                             |  | Realized Gain(Loss)           |         |   | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealizedDepreciation(Appreciation) |  |   | Net Gain(Loss) |  
|Edge Adhesives Holdings, Inc.                 |  | $                             |        |   |                                      | $ | 2,830  |                                                 |  | $ |               |   |  | $ | 2,830  |  
|United Flexible, Inc.                         |  |                               |        |   |                                      |   | 2,475  |                                                 |  |   |               |   |  |   | 2,475  |  
|Alloy Die Casting Co.                         |  |                               |        |   |                                      |   | 2,341  |                                                 |  |   |               |   |  |   | 2,341  |  
|AG Transportation Holdings, LLC               |  |                               |        |   |                                      |   | 2,083  |                                                 |  |   |               |   |  |   | 2,083  |  
|Targus Cayman HoldCo, Ltd.                    |  |                               |        |   |                                      |   | 1,677  |                                                 |  |   |               |   |  |   | 1,677  |  
|PIC 360, LLC                                  |  |                               |        |   |                                      |   | 1,306  |                                                 |  |   |               |   |  |   | 1,306  |  
|Funko Acquisition Holdings, LLC               |  |                               | 745     |   |                                      |   | 869    |                                                 |  |   | (356           | ) |  |   | 1,258  |  
|Sea Link International IRB, Inc.              |  |                               |        |   |                                      |   | 559    |                                                 |  |   |               |   |  |   | 559    |  
|Leeds Novamark Capital I, L.P.                |  |                               |        |   |                                      |   | 526    |                                                 |  |   |               |   |  |   | 526    |  
|Merlin International, Inc.                    |  |                               |        |   |                                      |   | 450    |                                                 |  |   |               |   |  |   | 450    |  
|WadeCo Specialties, Inc.                      |  |                               |        |   |                                      |   | 385    |                                                 |  |   |               |   |  |   | 385    |  
|EL Academies, Inc.                            |  |                               |        |   |                                      |   | 379    |                                                 |  |   |               |   |  |   | 379    |  
|Precision International, LLC                  |  |                               |        |   |                                      |   | 306    |                                                 |  |   |               |   |  |   | 306    |  
|RBC Acquisition Corp.                         |  |                               | 284     |   |                                      |   |       |                                                 |  |   |               |   |  |   | 284    |  
|IA Tech, LLC                                  |  |                               |        |   |                                      |   | 267    |                                                 |  |   |               |   |  |   | 267    |  
|Triple H Food Processors, LLC                 |  |                               |        |   |                                      |   | 236    |                                                 |  |   |               |   |  |   | 236    |  
|Canopy Safety Brands, LLC                     |  |                               |        |   |                                      |   | 195    |                                                 |  |   |               |   |  |   | 195    |  
|Funko, LLC                                    |  |                               | 127     |   |                                      |   |       |                                                 |  |   |               |   |  |   | 127    |  
|Flight Fit N Fun LLC                          |  |                               | 630     |   |                                      |   |       |                                                 |  |   | (725           | ) |  |   | (95    | )
|HB Capital Resources, Ltd.                    |  |                               |        |   |                                      |   | 330    |                                                 |  |   | (440           | ) |  |   | (110   | )
|Vision Government Solutions, Inc.             |  |                               |        |   |                                      |   | (412   | )                                               |  |   |               |   |  |   | (412   | )
|Frontier Financial Group, Inc.                |  |                               |        |   |                                      |   | (500   | )                                               |  |   |               |   |  |   | (500   | )
|GFRC Holdings, LLC                            |  |                               |        |   |                                      |   | (519   | )                                               |  |   |               |   |  |   | (519   | )
|Meridian Rack & Pinion, Inc.                  |  |                               |        |   |                                      |   | (671   | )                                               |  |   |               |   |  |   | (671   | )
|Vacation Rental Pros Property Management, LLC |  |                               |        |   |                                      |   | (1,020 | )                                               |  |   |               |   |  |   | (1,020 | )
|Defiance Integrated Technologies, Inc.        |  |                               |        |   |                                      |   | (1,768 | )                                               |  |   |               |   |  |   | (1,768 | )
|Sunshine Media Holdings                       |  |                               | (28,169 | ) |                                      |   | (1,319 | )                                               |  |   | 27,660         |   |  |   | (1,828 | )
|Arc Drilling Holding LLC                      |  |                               |        |   |                                      |   | (2,006 | )                                               |  |   |               |   |  |   | (2,006 | )
|New Trident Holdcorp, Inc.                    |  |                               |        |   |                                      |   | (2,794 | )                                               |  |   |               |   |  |   | (2,794 | )
|LWO Acquisitions Company, LLC                 |  |                               |        |   |                                      |   | (3,190 | )                                               |  |   |               |   |  |   | (3,190 | )
|Francis Drilling Fluids, Ltd.                 |  |                               |        |   |                                      |   | (7,436 | )                                               |  |   |               |   |  |   | (7,436 | )
|Other, net (<$250)                            |  |                               | 320     |   |                                      |   | 28     |                                                 |  |   | (105           | ) |  |   | 243    |  
|                                              |  |                               |         |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|Total:                                        |  | $                             | (26,063 | ) |                                      | $ | (4,393 | )                                               |  | $ | 26,034         |   |  | $ | (4,422 | )
|                                              |  |                               |         |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  

The primary drivers of our net unrealized appreciation for the year ended September 30, 2018, were the reversal of
previously recorded depreciation on our investment in Sunshine upon restructure and improved performance on certain of our portfolio companies, namely Edge Adhesives Holdings, Inc. These factors were partially offset by a decline in performance of
certain of our other portfolio companies, namely FDF.



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During the year ended September 30, 2017, we recorded net unrealized appreciation of investments in the
aggregate amount of $0.6 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the year ended September 30, 2017, were as follows:



|                                       |  |                               |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|-------------------------------------- |  | ----------------------------- | ------ | - | ------------------------------------ | - | ------ | ----------------------------------------------- |  | - | -------------- | - |  | - | ------ | -
|                                       |  | Year Ended September 30, 2017 |       
|Portfolio Company                      |  | Realized Gain(Loss)           |        |   | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealizedDepreciation(Appreciation) |  |   | Net Gain(Loss) |  
|WadeCo Specialties, Inc.               |  | $                             |       |   |                                      | $ | 2,900  |                                                 |  | $ |               |   |  | $ | 2,900  |  
|SourceHOV LLC                          |  |                               | (218   | ) |                                      |   | 1,756  |                                                 |  |   | 97             |   |  |   | 1,635  |  
|Funko, LLC                             |  |                               | 1,273  |   |                                      |   | (106   | )                                               |  |   |               |   |  |   | 1,167  |  
|Targus Cayman HoldCo, Ltd.             |  |                               |       |   |                                      |   | 662    |                                                 |  |   |               |   |  |   | 662    |  
|LWO Acquisitions Company, LLC          |  |                               |       |   |                                      |   | 608    |                                                 |  |   |               |   |  |   | 608    |  
|Flight Fit N Fun LLC                   |  |                               |       |   |                                      |   | 456    |                                                 |  |   |               |   |  |   | 456    |  
|IA Tech, LLC                           |  |                               |       |   |                                      |   | 403    |                                                 |  |   |               |   |  |   | 403    |  
|Vitera Healthcare Solutions, LLC       |  |                               |       |   |                                      |   | 213    |                                                 |  |   | 115            |   |  |   | 328    |  
|PIC 360, LLC                           |  |                               |       |   |                                      |   | 315    |                                                 |  |   |               |   |  |   | 315    |  
|B+T Group Acquisition Inc.             |  |                               |       |   |                                      |   | 305    |                                                 |  |   |               |   |  |   | 305    |  
|Travel Sentry, Inc.                    |  |                               |       |   |                                      |   | 255    |                                                 |  |   |               |   |  |   | 255    |  
|Leeds Novamark Capital I, L.P.         |  |                               |       |   |                                      |   | 229    |                                                 |  |   |               |   |  |   | 229    |  
|NetFortris Corp.                       |  |                               | (14    | ) |                                      |   | 239    |                                                 |  |   |               |   |  |   | 225    |  
|PSC Industrial Holdings Corp.          |  |                               |       |   |                                      |   | 219    |                                                 |  |   |               |   |  |   | 219    |  
|United Flexible, Inc.                  |  |                               |       |   |                                      |   | 177    |                                                 |  |   |               |   |  |   | 177    |  
|Drumcree, LLC                          |  |                               |       |   |                                      |   | 169    |                                                 |  |   | (15            | ) |  |   | 154    |  
|Merlin International, Inc.             |  |                               |       |   |                                      |   | 150    |                                                 |  |   |               |   |  |   | 150    |  
|Vision Government Solutions, Inc.      |  |                               |       |   |                                      |   | 141    |                                                 |  |   |               |   |  |   | 141    |  
|TWS Acquisition Corporation            |  |                               |       |   |                                      |   | 127    |                                                 |  |   |               |   |  |   | 127    |  
|Westland Technologies, Inc.            |  |                               | 126    |   |                                      |   |       |                                                 |  |   |               |   |  |   | 126    |  
|Meridian Rack & Pinion, Inc.           |  |                               |       |   |                                      |   | (246   | )                                               |  |   |               |   |  |   | (246   | )
|L Discovery                            |  |                               |       |   |                                      |   | (265   | )                                               |  |   |               |   |  |   | (265   | )
|Edge Adhesives Holdings, Inc.          |  |                               |       |   |                                      |   | (468   | )                                               |  |   |               |   |  |   | (468   | )
|FedCap Partners, LLC                   |  |                               |       |   |                                      |   | (514   | )                                               |  |   |               |   |  |   | (514   | )
|Behrens Manufacturing, LLC             |  |                               | 2,544  |   |                                      |   |       |                                                 |  |   | (3,211         | ) |  |   | (667   | )
|New Trident Holdcorp, Inc.             |  |                               |       |   |                                      |   | (878   | )                                               |  |   |               |   |  |   | (878   | )
|Defiance Integrated Technologies, Inc. |  |                               |       |   |                                      |   | (1,125 | )                                               |  |   |               |   |  |   | (1,125 | )
|RBC Acquisition Corp.                  |  |                               | (2,330 | ) |                                      |   |       |                                                 |  |   | 1,119          |   |  |   | (1,211 | )
|Vertellus Holdings LLC                 |  |                               | 109    |   |                                      |   | (1,456 | )                                               |  |   |               |   |  |   | (1,347 | )
|Francis Drilling Fluids, Ltd.          |  |                               |       |   |                                      |   | (2,066 | )                                               |  |   |               |   |  |   | (2,066 | )
|Alloy Die Casting, Corp.               |  |                               |       |   |                                      |   | (2,303 | )                                               |  |   |               |   |  |   | (2,303 | )
|Sunshine Media Holdings                |  |                               | (5,000 | ) |                                      |   | (995   | )                                               |  |   | 3,612          |   |  |   | (2,383 | )
|Other, net (<$250)                     |  |                               | 35     |   |                                      |   | 33     |                                                 |  |   | (27            | ) |  |   | 41     |  
|                                       |  |                               |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|Total:                                 |  | $                             | (3,475 | ) |                                      | $ | (1,065 | )                                               |  | $ | 1,690          |   |  | $ | (2,850 | )
|                                       |  |                               |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  

The primary drivers of our net unrealized appreciation for the year ended September 30, 2017, were an increase in the
value of WadeCo, increased performance on certain of our portfolio companies, and the reversal of previously recorded depreciation on our investment in Sunshine upon partial write-off. These factors were
partially offset by a decline in performance and decrease in comparable multiples used in the valuation of certain of our other portfolio companies and the reversal of $3.2 million of previously recorded unrealized appreciation on our
investment in Behrens upon exit.

As of September 30, 2018, the fair value of our investment portfolio was less than its cost basis by approximately
$37.4 million and our entire investment portfolio was valued at 91.2% of cost, as compared to cumulative net unrealized depreciation of $59.1 million and a valuation of our entire portfolio at 85.6% of cost as of September 30, 2017.
This year over year increase in the cumulative unrealized depreciation on investments represents net unrealized appreciation of $21.6 million for the year ended September 30, 2018.

The cumulative net unrealized depreciation of our investments does not have an impact on our current ability to pay distributions to stockholders; however, it
may be an indication of future realized losses, which could ultimately reduce our income available for distribution to stockholders.



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Net Unrealized (Appreciation) Depreciation of Other

During the year ended September 30, 2018, we recorded $0.1 million of unrealized appreciation on our Credit Facility at fair value as compared to
$0.1 million of unrealized depreciation during the year ended September 30, 2017.

Comparison of the Year Ended September 30, 2017 to the
Year Ended September 30, 2016



|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|---------------------------------------------------------- |  | -------------------------------- | ------ | - | ---- | - | ------- | -------- |  | - | ------- | - |  |  | -------- | -
|                                                           |  | For the Year Ended September 30, |       
|                                                           |  | 2017                             |        |   | 2016 |   |         | $ Change |  |   | %Change |  
|INVESTMENT INCOME                                          |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|Interest income                                            |  | $                                | 37,073 |   |      | $ | 35,219  |          |  | $ | 1,854   |   |  |  | 5.3      | %
|Other income                                               |  |                                  | 2,160  |   |      |   | 3,893   |          |  |   | (1,733  | ) |  |  | (44.5    | )
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|Total investment income                                    |  |                                  | 39,233 |   |      |   | 39,112  |          |  |   | 121     |   |  |  | 0.3      |  
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|EXPENSES                                                   |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|Base management fee                                        |  |                                  | 5,781  |   |      |   | 5,684   |          |  |   | 97      |   |  |  | 1.7      |  
|Loan servicing fee                                         |  |                                  | 4,146  |   |      |   | 3,890   |          |  |   | 256     |   |  |  | 6.6      |  
|Incentive fee                                              |  |                                  | 4,779  |   |      |   | 4,514   |          |  |   | 265     |   |  |  | 5.9      |  
|Administration fee                                         |  |                                  | 1,102  |   |      |   | 1,182   |          |  |   | (80     | ) |  |  | (6.8     | )
|Interest expense on borrowings                             |  |                                  | 3,073  |   |      |   | 2,899   |          |  |   | 174     |   |  |  | 6.0      |  
|Dividend expense on mandatorily redeemable preferred stock |  |                                  | 4,152  |   |      |   | 4,118   |          |  |   | 34      |   |  |  | 0.8      |  
|Amortization of deferred financing fees                    |  |                                  | 1,094  |   |      |   | 1,075   |          |  |   | 19      |   |  |  | 1.8      |  
|Other expenses                                             |  |                                  | 1,945  |   |      |   | 2,459   |          |  |   | (514    | ) |  |  | (20.9    | )
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|Expenses, before credits from Adviser                      |  |                                  | 26,072 |   |      |   | 25,821  |          |  |   | 251     |   |  |  | 1.0      |  
|Credit to base management fee  loan servicing fee         |  |                                  | (4,146 | ) |      |   | (3,890  | )        |  |   | (256    | ) |  |  | 6.6      |  
|Credit to fees from Adviser - other                        |  |                                  | (4,126 | ) |      |   | (2,306  | )        |  |   | (1,820  | ) |  |  | 78.9     |  
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|Total expenses, net of credits                             |  |                                  | 17,800 |   |      |   | 19,625  |          |  |   | (1,825  | ) |  |  | (9.3     | )
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|NET INVESTMENT INCOME                                      |  |                                  | 21,433 |   |      |   | 19,487  |          |  |   | 1,946   |   |  |  | 10.0     |  
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|NET REALIZED AND UNREALIZED (LOSS) GAIN                    |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|Net realized (loss) gain on investments                    |  |                                  | (3,475 | ) |      |   | 7,216   |          |  |   | (10,691 | ) |  |  | (148.2   | )
|Net realized loss on other                                 |  |                                  | (1,288 | ) |      |   | (64     | )        |  |   | (1,224  | ) |  |  | (1,912.5 | )
|Net unrealized appreciation (depreciation) of investments  |  |                                  | 625    |   |      |   | (15,334 | )        |  |   | 15,959  |   |  |  | 104.1    |  
|Net unrealized (depreciation) appreciation of other        |  |                                  | (115   | ) |      |   | 62      |          |  |   | (177    | ) |  |  | (285.5   | )
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|Net loss from investments and other                        |  |                                  | (4,253 | ) |      |   | (8,120  | )        |  |   | 3,867   |   |  |  | 47.6     |  
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS       |  | $                                | 17,180 |   |      | $ | 11,367  |          |  | $ | 5,813   |   |  |  | 51.1     | %
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|PER BASIC AND DILUTED COMMON SHARE                         |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|Net investment income                                      |  | $                                | 0.84   |   |      | $ | 0.84    |          |  | $ |        |   |  |  |         | %
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  
|Net increase in net assets resulting from operations       |  | $                                | 0.67   |   |      | $ | 0.49    |          |  | $ | 0.18    |   |  |  | 36.7     | %
|                                                           |  |                                  |        |   |      |   |         |          |  |   |         |   |  |  |          |  

Investment Income

Interest income increased by 5.3% for the year ended September 30, 2017, as compared to the prior year. This increase was due primarily to an increase in
the weighted average yield on our interest-bearing portfolio. The weighted average yield on our interest-bearing investments is based on the current stated interest rate on interest-bearing investments which increased to 11.6% for the year ended
September 30, 2017 compared to 11.1% for the year ended September 30, 2016, inclusive of any allowances on interest receivables made during those periods. The weighted average principal balance of our interest-bearing investment portfolio
during the year ended September 30, 2017, was $320.1 million, compared to $317.0 million for the prior year, an increase of $3.1 million, or 1.0%.

As of September 30, 2017, certain loans to two portfolio companies, Sunshine and ADC, were on non-accrual status,
with an aggregate debt cost basis of approximately $27.9 million, or 7.5% of the cost basis of all debt investments in our portfolio. As of September 30, 2016, certain loans to two portfolio companies, Sunshine and Vertellus Holdings, LLC,
were on non-accrual status, with an aggregate debt cost basis of approximately $26.5 million, or 7.7% of the cost basis of all debt investments in our portfolio.



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Other income decreased by 44.5% during the year ended September 30, 2017, as compared to the prior year.
This decrease was primarily due to a $1.9 million decrease in success fees recognized year over year. For the year ended September 30, 2017, other income consisted primarily of $1.5 million in success fees recognized,
$0.3 million in dividend income, and $0.3 million in prepayment fees received. For the year ended September 30, 2016, other income consisted primarily of $3.4 million in success fees recognized, $0.3 million in dividend
income, and $0.2 million in prepayment fees.

The following tables list the investment income for our five largest portfolio company investments at
fair value during the respective years:



|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|--------------------------------- |  | ------------------------ | ------- |  | ----------------------------- |  | ----- | ---------------- |  | - | -------------------------- |  |  |  | ----- | -
|                                  |  | As of September 30, 2017 |         |  | Year Ended September 30, 2017 | 
|Portfolio Company                 |  | Fair Value               |         |  | % of Portfolio                |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|NetFortris Corp.(A)               |  | $                        | 24,240  |  |                               |  | 6.9   | %                |  | $ | 1,566                      |  |  |  | 4.0   | %
|IA Tech, LLC                      |  |                          | 23,633  |  |                               |  | 6.7   |                  |  |   | 2,813                      |  |  |  | 7.2   |  
|HB Capital Resources, Ltd.(A)     |  |                          | 22,110  |  |                               |  | 6.3   |                  |  |   | 1,107                      |  |  |  | 2.8   |  
|WadeCo Specialties, Inc.          |  |                          | 22,016  |  |                               |  | 6.2   |                  |  |   | 1,936                      |  |  |  | 4.9   |  
|Lignetics, Inc.                   |  |                          | 18,949  |  |                               |  | 5.4   |                  |  |   | 1,862                      |  |  |  | 4.8   |  
|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments |  |                          | 110,948 |  |                               |  | 31.5  |                  |  |   | 9,284                      |  |  |  | 23.7  |  
|Other portfolio companies         |  |                          | 241,425 |  |                               |  | 68.5  |                  |  |   | 29,922                     |  |  |  | 76.3  |  
|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Total Investment Portfolio        |  | $                        | 352,373 |  |                               |  | 100.0 | %                |  | $ | 39,206                     |  |  |  | 100.0 | %
|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|                                  |  |                         
|                                  |  | As of September 30, 2016 |         |  | Year Ended September 30, 2016 | 
|Portfolio Company                 |  | Fair Value               |         |  | % of Portfolio                |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|RBC Acquisition Corp.             |  | $                        | 37,345  |  |                               |  | 11.6  | %                |  | $ | 3,347                      |  |  |  | 8.6   | %
|IA Tech, LLC(A)                   |  |                          | 23,230  |  |                               |  | 7.2   |                  |  |   | 888                        |  |  |  | 2.3   |  
|WadeCo Specialties, Inc.          |  |                          | 18,980  |  |                               |  | 5.9   |                  |  |   | 2,059                      |  |  |  | 5.3   |  
|United Flexible, Inc.             |  |                          | 17,744  |  |                               |  | 5.5   |                  |  |   | 2,108                      |  |  |  | 5.4   |  
|Lignetics, Inc.                   |  |                          | 14,821  |  |                               |  | 4.6   |                  |  |   | 1,708                      |  |  |  | 4.3   |  
|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments |  |                          | 112,120 |  |                               |  | 34.8  |                  |  |   | 10,110                     |  |  |  | 25.9  |  
|Other portfolio companies         |  |                          | 209,994 |  |                               |  | 65.2  |                  |  |   | 28,997                     |  |  |  | 74.1  |  
|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Total Investment Portfolio        |  | $                        | 322,114 |  |                               |  | 100.0 | %                |  | $ | 39,107                     |  |  |  | 100.0 | %
|                                  |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  

(A)New investment during applicable period.

Expenses

Expenses, net of credits from the Adviser, decreased by 9.3% for the year ended September 30, 2017 as compared to the prior year. This decrease was
primarily due to decreases in our net base management and incentive fees to the Advisor.

Interest expense increased by 6.0% during the year ended
September 30, 2017, as compared to the prior year, due to an increase in the LIBOR component of the effective interest rate partially offset by a lower weighted average balance outstanding. The effective interest rate on our Credit Facility,
excluding the impact of deferred financing costs, was 5.3% during the year ended September 30, 2017 compared to 4.5% during the prior year period. The weighted average balance outstanding on our Credit Facility during the year ended
September 30, 2017, was approximately $58.4 million, as compared to $64.0 million in the prior year period, a decrease of 8.8%.

Other
expenses decreased by 20.9% during the year ended September 30, 2017, as compared to the prior year, primarily due to decreases in shareholder related costs and professional fees.



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Net base management fee earned by the Adviser decreased by $0.8 million, or 17.4%, during the year ended
September 30, 2017, as compared to the prior year period, resulting from an increase in portfolio company fee credits due to new investments made in the current year period.

Our Board of Directors accepted non-contractual, unconditional and irrevocable credits from the Adviser to reduce the
income-based incentive fee to the extent net investment income did not cover 100.0% of our distributions to common stockholders during the years ended September 30, 2017 and 2016, which credits totaled $2.3 million and $1.4 million,
respectively.

The base management, loan servicing and incentive fees, and associated non-contractual,
unconditional and irrevocable credits, are computed quarterly, as described under Transactions with the Adviser in Note 4Related Party Transactions of the accompanying Notes to Consolidated Financial
Statements and are summarized in the following table:



|                                                       |  |                          |         |   |      |   |         |  
|------------------------------------------------------ |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                       |  | Year Ended September 30, |        
|                                                       |  | 2017                     |         |   | 2016 |  
|Average total assets subject to base management fee(A) |  | $                        | 330,343 |   |      | $ | 324,800 |  
|Multiplied by annual base management fee of 1.75%      |  |                          | 1.75    | % |      |   | 1.75    | %
|                                                       |  |                          |         |   |      |   |         |  
|Base management fee(B)                                 |  |                          | 5,781   |   |      |   | 5,684   |  
|Portfolio company fee credit                           |  |                          | (1,588  | ) |      |   | (785    | )
|Syndicated loan fee credit                             |  |                          | (221    | ) |      |   | (92     | )
|                                                       |  |                          |         |   |      |   |         |  
|Net Base Management Fee                                |  | $                        | 3,972   |   |      | $ | 4,807   |  
|                                                       |  |                          |         |   |      |   |         |  
|                                                       |  |                         
|Loan servicing fee(B)                                  |  | $                        | 4,146   |   |      | $ | 3,890   |  
|Credit to base management fee  loan servicing fee(B)  |  |                          | (4,146  | ) |      |   | (3,890  | )
|                                                       |  |                          |         |   |      |   |         |  
|Net Loan Servicing Fee                                 |  | $                        |        |   |      | $ |        |  
|                                                       |  |                          |         |   |      |   |         |  
|                                                       |  |                         
|Incentive fee(B)                                       |  | $                        | 4,779   |   |      | $ | 4,514   |  
|Incentive fee credit                                   |  |                          | (2,317  | ) |      |   | (1,429  | )
|                                                       |  |                          |         |   |      |   |         |  
|Net Incentive Fee                                      |  | $                        | 2,462   |   |      | $ | 3,085   |  
|                                                       |  |                          |         |   |      |   |         |  
|                                                       |  |                         
|Portfolio company fee credit                           |  | $                        | (1,588  | ) |      | $ | (785    | )
|Syndicated loan fee credit                             |  |                          | (221    | ) |      |   | (92     | )
|Incentive fee credit                                   |  |                          | (2,317  | ) |      |   | (1,429  | )
|                                                       |  |                          |         |   |      |   |         |  
|Credit to Fees from Adviser -
Other(B)                 |  | $                        | (4,126  | ) |      | $ | (2,306  | )
|                                                       |  |                          |         |   |      |   |         |  



|(C) | Average total assets subject to the base management fee is defined as total assets, including investments made
with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the four most recently completed quarters within the respective years and adjusted appropriately for any share issuances or
repurchases during the applicable year.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Reflected, on a gross basis, as a line item on our accompanyingConsolidated Statement of Operations
located elsewhere in this Annual Report on Form 10-K.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

Realized Loss and Unrealized
Appreciation

Net Realized Loss on Investments

For the year ended September 30, 2017, we recorded a net realized loss on investments of $3.5 million, which resulted primarily from the sale of
substantially all the assets of RBC for a $2.3 million realized loss and the write-off of $5.0 million on our investment in Sunshine, partially offset by the sale of Behrens for a $2.5 million
realized gain and a $1.2 million realized gain related to an additional earn-out from Funko, LLC, which we exited in the prior year.

For the year ended September 30, 2016, we recorded a net realized gain on investments of $7.2 million, which resulted primarily from the sales of
Funko, LLC, Southern Petroleum Laboratories, Inc., Westland Technologies, Inc., and Ashland Acquisitions, LLC (Ashland) for a combined realized gain of $18.7 million and net proceeds of $35.4 million. This realized gain was
partially offset by a combined realized loss of $11.7 million recognized from the sale of Heartland Communications Group and the restructures of Targus Group International, Inc. (Targus) and Precision Acquisition Group Holdings,
Inc. during the year ended September 30, 2016. We also recognized a realized loss of $0.6 million during the year ended September 30, 2016 related to a settlement associated with WP Evenflo Group Holdings, Inc., which we previously
exited at a realized gain of $1.0 million in September 2014.



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Net Realized Loss on Other

We incurred a loss on extinguishment of debt of $1.3 million during the year ended September 30, 2017, which resulted from the write-off of unamortized deferred issuance costs at the time of redemption of our Series 2021 Preferred Stock in September 2017. During the year ended September 30, 2016, we recorded a net realized loss of
$0.1 million due to the expiration of our interest rate cap agreement in January 2016.

Net Unrealized Appreciation of Investments

During the year ended September 30, 2017, we recorded net unrealized appreciation of investments in the aggregate amount of $0.6 million. The net
realized gain (loss) and unrealized appreciation (depreciation) across our investments for the year ended September 30, 2017, were as follows:



|                                       |  |                               |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|-------------------------------------- |  | ----------------------------- | ------ | - | ------------------------------------ | - | ------ | ----------------------------------------------- |  | - | -------------- | - |  | - | ------ | -
|                                       |  | Year Ended September 30, 2017 |       
|Portfolio Company                      |  | Realized Gain(Loss)           |        |   | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealizedDepreciation(Appreciation) |  |   | Net Gain(Loss) |  
|WadeCo Specialties, Inc.               |  | $                             |       |   |                                      | $ | 2,900  |                                                 |  | $ |               |   |  | $ | 2,900  |  
|SourceHOV LLC                          |  |                               | (218   | ) |                                      |   | 1,756  |                                                 |  |   | 97             |   |  |   | 1,635  |  
|Funko, LLC                             |  |                               | 1,273  |   |                                      |   | (106   | )                                               |  |   |               |   |  |   | 1,167  |  
|Targus Cayman HoldCo, Ltd.             |  |                               |       |   |                                      |   | 662    |                                                 |  |   |               |   |  |   | 662    |  
|LWO Acquisitions Company, LLC          |  |                               |       |   |                                      |   | 608    |                                                 |  |   |               |   |  |   | 608    |  
|Flight Fit N Fun LLC                   |  |                               |       |   |                                      |   | 456    |                                                 |  |   |               |   |  |   | 456    |  
|IA Tech, LLC                           |  |                               |       |   |                                      |   | 403    |                                                 |  |   |               |   |  |   | 403    |  
|Vitera Healthcare Solutions, LLC       |  |                               |       |   |                                      |   | 213    |                                                 |  |   | 115            |   |  |   | 328    |  
|PIC 360, LLC                           |  |                               |       |   |                                      |   | 315    |                                                 |  |   |               |   |  |   | 315    |  
|B+T Group Acquisition Inc.             |  |                               |       |   |                                      |   | 305    |                                                 |  |   |               |   |  |   | 305    |  
|Travel Sentry, Inc.                    |  |                               |       |   |                                      |   | 255    |                                                 |  |   |               |   |  |   | 255    |  
|Leeds Novamark Capital I, L.P.         |  |                               |       |   |                                      |   | 229    |                                                 |  |   |               |   |  |   | 229    |  
|NetFortris Corp.                       |  |                               | (14    | ) |                                      |   | 239    |                                                 |  |   |               |   |  |   | 225    |  
|PSC Industrial Holdings Corp.          |  |                               |       |   |                                      |   | 219    |                                                 |  |   |               |   |  |   | 219    |  
|United Flexible, Inc.                  |  |                               |       |   |                                      |   | 177    |                                                 |  |   |               |   |  |   | 177    |  
|Drumcree, LLC                          |  |                               |       |   |                                      |   | 169    |                                                 |  |   | (15            | ) |  |   | 154    |  
|Merlin International, Inc.             |  |                               |       |   |                                      |   | 150    |                                                 |  |   |               |   |  |   | 150    |  
|Vision Government Solutions, Inc.      |  |                               |       |   |                                      |   | 141    |                                                 |  |   |               |   |  |   | 141    |  
|TWS Acquisition Corporation            |  |                               |       |   |                                      |   | 127    |                                                 |  |   |               |   |  |   | 127    |  
|Westland Technologies, Inc.            |  |                               | 126    |   |                                      |   |       |                                                 |  |   |               |   |  |   | 126    |  
|Meridian Rack & Pinion, Inc.           |  |                               |       |   |                                      |   | (246   | )                                               |  |   |               |   |  |   | (246   | )
|L Discovery                            |  |                               |       |   |                                      |   | (265   | )                                               |  |   |               |   |  |   | (265   | )
|Edge Adhesives Holdings, Inc.          |  |                               |       |   |                                      |   | (468   | )                                               |  |   |               |   |  |   | (468   | )
|FedCap Partners, LLC                   |  |                               |       |   |                                      |   | (514   | )                                               |  |   |               |   |  |   | (514   | )
|Behrens Manufacturing, LLC             |  |                               | 2,544  |   |                                      |   |       |                                                 |  |   | (3,211         | ) |  |   | (667   | )
|New Trident Holdcorp, Inc.             |  |                               |       |   |                                      |   | (878   | )                                               |  |   |               |   |  |   | (878   | )
|Defiance Integrated Technologies, Inc. |  |                               |       |   |                                      |   | (1,125 | )                                               |  |   |               |   |  |   | (1,125 | )
|RBC Acquisition Corp.                  |  |                               | (2,330 | ) |                                      |   |       |                                                 |  |   | 1,119          |   |  |   | (1,211 | )
|Vertellus Holdings LLC                 |  |                               | 109    |   |                                      |   | (1,456 | )                                               |  |   |               |   |  |   | (1,347 | )
|Francis Drilling Fluids, Ltd.          |  |                               |       |   |                                      |   | (2,066 | )                                               |  |   |               |   |  |   | (2,066 | )
|Alloy Die Casting, Corp.               |  |                               |       |   |                                      |   | (2,303 | )                                               |  |   |               |   |  |   | (2,303 | )
|Sunshine Media Holdings                |  |                               | (5,000 | ) |                                      |   | (995   | )                                               |  |   | 3,612          |   |  |   | (2,383 | )
|Other, net (<$250)                     |  |                               | 35     |   |                                      |   | 33     |                                                 |  |   | (27            | ) |  |   | 41     |  
|                                       |  |                               |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|Total:                                 |  | $                             | (3,475 | ) |                                      | $ | (1,065 | )                                               |  | $ | 1,690          |   |  | $ | (2,850 | )
|                                       |  |                               |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  

The primary drivers of our net unrealized appreciation for the year ended September 30, 2017, were an increase in the
value of WadeCo, increased performance on certain of our portfolio companies, and the reversal of previously recorded depreciation on our investment in Sunshine upon partial write-off. These factors were
partially offset by a decline in performance and decrease in comparable multiples used in the valuation of certain of our other portfolio companies and the reversal of $3.2 million of previously recorded unrealized appreciation on our
investment in Behrens upon exit.



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The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the year ended
September 30, 2016, were as follows:



|                                           |  |                               |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|------------------------------------------ |  | ----------------------------- | ------ | - | ------------------------------------ | - | ------ | ----------------------------------------------- |  | - | -------------- | - |  | - | ------ | -
|                                           |  | Year Ended September 30, 2016 |       
|Portfolio Company                          |  | Realized Gain(Loss)           |        |   | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealizedDepreciation(Appreciation) |  |   | Net Gain(Loss) |  
|RBC Acquisition Corp.                      |  | $                             | 1,207  |   |                                      | $ | 11,896 |                                                 |  | $ |               |   |  | $ | 13,103 |  
|Legend Communications of Wyoming, LLC      |  |                               |       |   |                                      |   | 2,857  |                                                 |  |   | 27             |   |  |   | 2,884  |  
|Behrens Manufacturing, LLC                 |  |                               |       |   |                                      |   | 2,206  |                                                 |  |   |               |   |  |   | 2,206  |  
|Funko, LLC                                 |  |                               | 16,874 |   |                                      |   | 98     |                                                 |  |   | (16,009        | ) |  |   | 963    |  
|Southern Petroleum Laboratories, Inc.      |  |                               | 873    |   |                                      |   | 871    |                                                 |  |   | (995           | ) |  |   | 749    |  
|Precision Acquisition Group Holdings, Inc. |  |                               | (3,821 | ) |                                      |   | (1,282 | )                                               |  |   | 5,805          |   |  |   | 702    |  
|Westland Technologies, Inc.                |  |                               | 909    |   |                                      |   | 622    |                                                 |  |   | (866           | ) |  |   | 665    |  
|J. America, Inc.                           |  |                               |       |   |                                      |   | 482    |                                                 |  |   |               |   |  |   | 482    |  
|Triple H Food Processors, LLC              |  |                               |       |   |                                      |   | 351    |                                                 |  |   |               |   |  |   | 351    |  
|RP Crown Parent, LLC                       |  |                               |       |   |                                      |   | 276    |                                                 |  |   |               |   |  |   | 276    |  
|GFRC Holdings, LLC                         |  |                               |       |   |                                      |   | (271   | )                                               |  |   |               |   |  |   | (271   | )
|Ashland Acquisitions, LLC                  |  |                               | 72     |   |                                      |   | 183    |                                                 |  |   | (572           | ) |  |   | (317   | )
|Mikawaya                                   |  |                               |       |   |                                      |   | (379   | )                                               |  |   |               |   |  |   | (379   | )
|FedCap Partners, LLC                       |  |                               |       |   |                                      |   | (381   | )                                               |  |   |               |   |  |   | (381   | )
|New Trident Holdcorp, Inc.                 |  |                               |       |   |                                      |   | (442   | )                                               |  |   |               |   |  |   | (442   | )
|AG Transportation Holdings, LLC            |  |                               |       |   |                                      |   | (454   | )                                               |  |   |               |   |  |   | (454   | )
|WP Evenflo Group Holdings, Inc.            |  |                               | (550   | ) |                                      |   |       |                                                 |  |   |               |   |  |   | (550   | )
|WadeCo Specialties, Inc.                   |  |                               |       |   |                                      |   | (722   | )                                               |  |   |               |   |  |   | (722   | )
|Vision Government Solutions, Inc.          |  |                               |       |   |                                      |   | (779   | )                                               |  |   |               |   |  |   | (779   | )
|Vertellus Specialties Inc.                 |  |                               |       |   |                                      |   | (975   | )                                               |  |   |               |   |  |   | (975   | )
|Lignetics, Inc.                            |  |                               |       |   |                                      |   | (1,251 | )                                               |  |   |               |   |  |   | (1,251 | )
|SourceHOV LLC                              |  |                               |       |   |                                      |   | (1,380 | )                                               |  |   |               |   |  |   | (1,380 | )
|LWO Acquisitions Company, LLC              |  |                               |       |   |                                      |   | (3,170 | )                                               |  |   |               |   |  |   | (3,170 | )
|Defiance Integrated Technologies, Inc.     |  |                               |       |   |                                      |   | (3,184 | )                                               |  |   |               |   |  |   | (3,184 | )
|Sunshine Media Holdings                    |  |                               |       |   |                                      |   | (3,360 | )                                               |  |   |               |   |  |   | (3,360 | )
|Targus Cayman HoldCo, Ltd.                 |  |                               | (5,500 | ) |                                      |   | (2,952 | )                                               |  |   | 4,198          |   |  |   | (4,254 | )
|Francis Drilling Fluids, Ltd.              |  |                               |       |   |                                      |   | (8,156 | )                                               |  |   |               |   |  |   | (8,156 | )
|Other, net (<$250)                         |  |                               | (2,848 | ) |                                      |   | (528   | )                                               |  |   | 2,902          |   |  |   | (474   | )
|                                           |  |                               |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|Total:                                     |  | $                             | 7,216  |   |                                      | $ | (9,824 | )                                               |  | $ | (5,510         | ) |  | $ | (8,118 | )
|                                           |  |                               |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  

The primary drivers of our net unrealized depreciation for the year ended September 30, 2016, were a decline in financial
and operation performance of certain portfolio companies and the reversal of $16.0 million of previously recorded unrealized appreciation on our investment in Funko, LLC upon exit. This depreciation was partially offset by unrealized
appreciation, primarily on RBC of $11.9 million, which was driven by proceeds received associated with the sale of RBC in November 2016, and the reversal of $4.2 million of previously recorded unrealized depreciation on our investment in
Targus upon restructure.

As of September 30, 2017, the fair value of our investment portfolio was less than its cost basis by approximately
$59.1 million and our entire investment portfolio was valued at 85.6% of cost, as compared to cumulative net unrealized depreciation of $59.7 million and a valuation of our entire portfolio at 84.4% of cost as of September 30, 2016.
This year over year increase in the cumulative unrealized depreciation on investments represents net unrealized appreciation of $0.6 million for the year ended September 30, 2017.

The cumulative net unrealized depreciation of our investments does not have an impact on our current ability to pay distributions to stockholders; however, it
may be an indication of future realized losses, which could ultimately reduce our income available for distribution to stockholders.

Net Unrealized
(Appreciation) Depreciation of Other

During the year ended September 30, 2017, we recorded $0.1 million of unrealized depreciation on our
Credit Facility at fair value. During the year ended September 30, 2016, we reversed $0.1 million of unrealized depreciation related to the expiration of our interest rate cap agreement in January 2016.



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LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Our cash flows from operating
activities are primarily generated from the interest payments on debt securities that we receive from our portfolio companies, as well as net proceeds received through repayments or sales of our investments. We utilize this cash primarily to fund
new investments, make interest payments on our Credit Facility, make distributions to our stockholders, pay management and administrative fees to the Adviser and Administrator, and for other operating expenses.

Net cash used in operating activities for the year ended September 30, 2018 was $17.6 million as compared to $12.9 million for the year ended
September 30, 2017. The change was primarily due to a decrease in principal repayments and net proceeds from sales of investments partially offset by a decrease in purchases of investments year over year. Repayments and net proceeds from sales
were $67.9 million during the year ended September 30, 2018 compared to $83.4 million during the year ended September 30, 2017. Purchase of investments was $106.6 million during the year ended September 30, 2018,
compared to $112.1 million during the year ended September 30, 2017.

Net cash used in operating activities for the year ended
September 30, 2017 was $12.9 million as compared to net cash provided by operating activities of $60.0 million for the year ended September 30, 2016. The change was primarily due to an increase in purchases of investments and a
decrease in principal repayments on investments and net proceeds from sale of investments period over period. Purchases of investments were $112.1 million during the year ended September 30, 2017 compared to $80.0 million during the
prior year period. Repayments and net proceeds from sales were $83.4 million during the year ended September 30, 2017 compared to $121.1 million during the year ended September 30, 2016.

As of September 30, 2018, we had loans to, syndicated participations in or equity investments in 50 companies, with an aggregate cost basis of
approximately $427.5 million. As of September 30, 2017, we had loans to, syndicated participations in or equity investments in 47 companies, with an aggregate cost basis of approximately $411.4 million.

The following table summarizes our total portfolio investment activity during the years ended September 30, 2018 and 2017:



|                                                         |  |                          |         |   |      |   |         |  
|-------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                         |  | Year Ended September 30, |        
|                                                         |  | 2018                     |         |   | 2017 |  
|Beginning investment portfolio, at fair value            |  | $                        | 352,373 |   |      | $ | 322,114 |  
|New investments                                          |  |                          | 67,936  |   |      |   | 99,241  |  
|Disbursements to existing portfolio companies            |  |                          | 38,679  |   |      |   | 12,851  |  
|Scheduled principal repayments                           |  |                          | (6,455  | ) |      |   | (3,646  | )
|Unscheduled principal repayments                         |  |                          | (58,941 | ) |      |   | (71,558 | )
|Net proceeds from sales of investments                   |  |                          | (2,548  | ) |      |   | (8,240  | )
|Net unrealized depreciation of investments               |  |                          | (4,393  | ) |      |   | (1,065  | )
|Reversal of prior period net depreciation of investments |  |                          | 26,034  |   |      |   | 1,690   |  
|Net realized loss on investments                         |  |                          | (26,818 | ) |      |   | (3,475  | )
|Increase in investment balance due to PIK
interest(A)    |  |                          | 4,060   |   |      |   | 4,729   |  
|Net change in premiums, discounts and amortization       |  |                          | 119     |   |      |   | (268    | )
|                                                         |  |                          |         |   |      |   |         |  
|Ending Investment Portfolio, at Fair Value               |  | $                        | 390,046 |   |      | $ | 352,373 |  
|                                                         |  |                          |         |   |      |   |         |  



|(A) | PIK interest is a non-cash source of income and is calculated at the
contractual rate stated in a loan agreement and added to the principal balance of a loan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the
contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments, at September 30, 2018.



|                                                        |  |        |         |  
|------------------------------------------------------- |  | ------ | ------- | -
|Year Ending September 30,                               |  | Amount |        
|2019                                                    |  | $      | 39,272  |  
|2020                                                    |  |        | 81,633  |  
|2021                                                    |  |        | 68,819  |  
|2022                                                    |  |        | 46,687  |  
|2023                                                    |  |        | 115,796 |  
|Thereafter                                              |  |        | 38,975  |  
|                                                        |  |        |         |  
|Total contractual repayments                            |  | $      | 391,182 |  
|Equity investments                                      |  |        | 36,961  |  
|Adjustments to cost basis on debt investments           |  |        | (676    | )
|                                                        |  |        |         |  
|Investment Portfolio as of September 30, 2018, at Cost: |  | $      | 427,467 |  
|                                                        |  |        |         |  



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Financing Activities

Net cash provided by financing activities for the year ended September 30, 2018 was $14.5 million, which consisted primarily of $17.0 million in
net borrowings on our Credit Facility and $22.0 million in proceeds from the issuance of common stock, partially offset by $22.8 million in distributions to common stockholders.

Net cash provided by financing activities for the year ended September 30, 2017 was $11.7 million, which consisted primarily of $21.7 million
in net borrowings on our Credit Facility and $22.7 million in proceeds from the issuance of common stock, partially offset by $21.4 million in distributions to common stockholders and a net decrease of $9.3 million in term preferred
stock due to the redemption of our Series 2021 Term Preferred Stock and issuance of a lesser amount of Series 2024 Term Preferred Stock.

Net cash used in
financing activities for the year ended September 30, 2016 was $57.7 million, which consisted primarily of $56.0 million in net repayments on our Credit Facility and $19.5 million in distributions to common stockholders,
partially offset by $19.7 million in proceeds from the issuance of common stock, net of underwriting costs.

Distributions to Stockholders

Common Stock Distributions

To qualify
to be taxed as a RIC and thus avoid corporate level federal income tax on the income we distribute to our stockholders, we are required to distribute to our stockholders on an annual basis at least 90.0% of our investment company taxable income.
Additionally, our Credit Facility has a covenant that generally restricts the amount of distributions to stockholders that we can pay out to be no greater than our aggregate net investment income, net capital gains and amounts elected to have been
paid during the prior year in accordance with Section 855(a) of the Code. In accordance with these requirements, we paid monthly cash distributions of $0.07 per common share for each month during the years ended September 30, 2018, 2017
and 2016, which totaled an aggregate of $22.8 million, $21.4 million and $19.5 million, respectively. In October 2018, our Board of Directors declared a monthly distribution of $0.07 per common share for each of October, November and
December 2018. Our Board of Directors declared these distributions to our stockholders based on our estimates of our investment company taxable income for the fiscal year ending September 30, 2019. From inception through September 30,
2018, we have paid 188 either monthly or quarterly consecutive distributions to common stockholders totaling approximately $320.6 million or $18.61 per share.

For each of the fiscal years ended September 30, 2018, 2017, and 2016, Investment Company Taxable Income exceeded distributions declared and paid, and,
in accordance with Section 855(a) of the Code, we elected to treat $0.3 million, $0.3 million, and $5.5 million, respectively, of the first distributions paid to common stockholders in the respective subsequent fiscal year as
having been paid in the respective prior year.

Preferred Stock Dividends

Our Board of Directors declared and we paid monthly cash dividends of $0.140625 per share to holders of our Series 2021 Term Preferred Stock for each month
during the years ended September 30, 2017 and 2016, which totaled an aggregate of $4.1 million during each of the years ended September 30, 2017 and 2016. In October 2017, our Board of Directors declared a combined dividend for the pro-rated period from and including the issuance date, September 27, 2017, to and including September 30, 2017 and the full month of October 2017, which totaled $0.141667 per share, to the holders of our
Series 2024 Term Preferred Stock and monthly cash dividends of $0.125 per share to holders of our Series 2024 Term Preferred Stock for each of the eleven months from November 2017 through September 2018.

In accordance with GAAP, we treat these monthly dividends as an operating expense. For federal income tax purposes, the dividends paid by us to preferred
stockholders generally constitute ordinary income to the extent of our current and accumulated earnings and profits and is reported after the end of the calendar year based on tax information for the full fiscal year. Such a characterization made on
an interim, quarterly basis may not be representative of the actual tax characterization for the full year.



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Dividend Reinvestment Plan

Our common stockholders who hold their shares through our transfer agent, Computershare, Inc. (Computershare), have the option to participate in a
dividend reinvestment plan offered by Computershare, as the plan agent. This is an opt in dividend reinvestment plan, meaning that common stockholders may elect to have their cash distributions automatically reinvested in additional
shares of our common stock. Common stockholders who do make such election will receive their distributions in cash. Common stockholders who receive distributions in the form of stock will be subject to the same federal, state and local tax
consequences as stockholders who elect to receive their distributions in cash. The common stockholder will have an adjusted basis in the additional common shares purchased through the plan equal to the amount of the reinvested distribution. The
additional shares will have a new holding period commencing on the day following the date on which the shares are credited to the common stockholders account. Computershare purchases shares in the open market in connection with the obligations
under the plan. The Computershare dividend reinvestment plan is not open to holders of our preferred stock.

Equity

Registration Statement

We filed Post-Effective
Amendment No. 5 to our current universal shelf registration statement on Form N-2 (our Registration Statement) (File No. 333-208637) with the SEC
on December 19, 2017, which was declared effective by the SEC on February 1, 2018. Our Registration Statement permits us to issue, through one or more transactions, up to an aggregate of $300.0 million in securities, consisting of
common stock, preferred stock, subscription rights, debt securities and warrants to purchase common stock, preferred stock or debt securities. As of September 30, 2018, we had the ability to issue up to $202.6 million in securities under
the Registration Statement.

Common Stock

In
February 2015, we entered into equity distribution agreements (commonly referred to as at-the-market agreements or the Sales Agreements) with
KeyBanc Capital Markets Inc. and Cantor Fitzgerald & Co., each a Sales Agent, under which we had the ability to issue and sell, from time to time, through the Sales Agents, up to an aggregate offering price of $50.0 million
shares of our common stock. In May 2017, we terminated the Sales Agreement with KeyBanc Capital Markets Inc. and amended the Sales Agreement with Cantor Fitzgerald & Co. to reference our current registration statement. All other material
terms of the Sales Agreement with Cantor Fitzgerald & Co. remained unchanged. During the year ended September 30, 2018, we sold 2,341,296 shares of our common stock under the Sales Agreement with Cantor Fitzgerald & Co., at a
weighted-average price of $9.39 per share and raised $22.0 million of gross proceeds. Net proceeds, after deducting commissions and offering costs borne by us, were approximately $21.6 million. As of September 30, 2018, we had a
remaining capacity to sell up to $20.5 million of common stock under the Sales Agreement with Cantor Fitzgerald & Co. During the year ended September 30, 2017, we sold 642,818 shares of our common stock under the Sales Agreement
with Cantor Fitzgerald & Co., at a weighted-average price of $9.88 per share and raised $6.4 million of gross proceeds. Net proceeds, after deducting commissions and offering costs borne by us, were approximately $6.1 million.

Pursuant to our Registration Statement, in October 2016, we completed a public offering of 2.0 million shares of our common stock at a public
offering price of $7.98 per share, which was below our then-current NAV per share. In November 2016, the underwriters partially exercised their overallotment option to purchase an additional 173,444 shares of our common stock. Gross proceeds totaled
$17.3 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were approximately $16.4 million. The net proceeds of this offering were used to repay borrowings under our Credit Facility.

We anticipate issuing equity securities to obtain additional capital in the future. However, we cannot determine the timing or terms of any future equity
issuances or whether we will be able to issue equity on terms favorable to us, or at all. To the extent that our common stock trades at a market price below our NAV per share, we will generally be precluded from raising equity capital through public
offerings of our common stock, other than pursuant to stockholder and independent director approval or a rights offering to existing common stockholders. We did not request that our stockholders approve the Companys ability to issue shares of
common stock at a price below NAV at our annual meeting of stockholders held on February 8, 2018. Should we decide to issue shares of common stock at a price below NAV in the future, we will seek the requisite approval of our stockholders at
such time.

On November 13, 2018, the closing market price of our common stock was $9.28, an 11.5% premium to our September 30, 2018 NAV per
share of $8.32.



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Term Preferred Stock

Pursuant to our Registration Statement, in September 2017, we completed a public offering of approximately 2.1 million shares of our Series 2024 Term
Preferred Stock at a public offering price of $25.00 per share. Gross proceeds totaled $51.8 million and net proceeds, after deducting underwriting discounts, commissions and offering expenses borne by us, were approximately $49.8 million.
We incurred approximately $1.9 million in total underwriting discounts and offering costs related to the issuance of the Series 2024 Term Preferred Stock, which have been recorded as discounts to the liquidation value on our accompanying
Consolidated Statements of Assets and Liabilities and are being amortized over the period from issuance through September 30, 2024, the mandatory redemption date. The offering proceeds plus borrowings under our Credit Facility were used to
voluntarily redeem all 2.4 million outstanding shares of our then existing Series 2021 Term Preferred Stock, par value $0.001 per share. In connection with the voluntary redemption of our Series 2021 Term Preferred Stock, we incurred a loss on
extinguishment of debt of $1.3 million, which has been reflected in Realized loss on other in our accompanying Consolidated Statement of Operations and which is primarily comprised of the unamortized deferred issuance costs at the time of
redemption.

The shares of our Series 2024 Term Preferred Stock are traded under the ticker symbol GLADN on the Nasdaq Global Select Market.
Our Series 2024 Term Preferred Stock is not convertible into our common stock or any other security and provides for a fixed dividend equal to 6.00% per year, payable monthly (which equates in total to approximately $3.1 million per year). We
are required to redeem all of the outstanding Series 2024 Term Preferred Stock on September 30, 2024 for cash at a redemption price equal to $25.00 per share plus an amount equal to all unpaid dividends and distributions per share accumulated
to (but excluding) the date of redemption (the Redemption Price). We may additionally be required to mandatorily redeem some or all of the shares of our Series 2024 Term Preferred Stock early, at the Redemption Price, in the event of the
following: (1) upon the occurrence of certain events that would constitute a change in control, or (2) if we fail to maintain an asset coverage of at least 200% on our senior securities that are stock (which is currently only
our Series 2024 Term Preferred Stock) and the failure remains for a period of 30 days following the filing date of our next SEC quarterly or annual report. The asset coverage on our senior securities that are stock as of
September 30, 2018 was 244.4%, calculated in accordance with Sections 18 and 61 of the 1940 Act.

We may also voluntarily redeem all or a portion of
the Series 2024 Term Preferred Stock at our option at the Redemption Price at any time after September 30, 2019. If we fail to redeem our Series 2024 Term Preferred Stock pursuant to the mandatory redemption required on September 30, 2024,
or in any other circumstance in which we are required to mandatorily redeem our Series 2024 Term Preferred Stock, then the fixed dividend rate will increase by 4.0% for so long as such failure continues. As of September 30, 2018, we have not
redeemed, nor have we been required to redeem, any shares of our outstanding Series 2024 Term Preferred Stock.

Revolving Credit Facility

On March 9, 2018, we, through Business Loan, entered into Amendment No. 4 to our Credit Facility with KeyBank, which increased the
commitment amount from $170.0 million to $190.0 million, extended the revolving period end date by approximately 2 years to January 15, 2021, decreased the marginal interest rate added to 30-day
LIBOR from 3.25% to 2.85% per annum, and changed the unused commitment fee from 0.50% of the total unused commitment amount to 0.50% when the average unused commitment amount for the reporting period is less than or equal to 50%, 0.75% when the
average unused commitment amount for the reporting period is greater than 50% but less than or equal to 65%, and 1.00% when the average unused commitment amount for the reporting period is greater than 65%. If our Credit Facility is not renewed or
extended by January 15, 2021, all principal and interest will be due and payable on or before April 15, 2022 (fifteen months after the revolving period end date). Subject to certain terms and conditions, our Credit Facility may be expanded
up to a total of $265.0 million through additional commitments of new or existing lenders. We incurred fees of approximately $1.2 million in connection with this amendment, which are being amortized through our Credit Facilitys
revolving period end date of January 15, 2021.

Interest is payable monthly during the term of our Credit Facility. Available borrowings are subject
to various constraints imposed under our Credit Facility, based on the aggregate loan balance pledged by Business Loan, which varies as loans are added and repaid, regardless of whether such repayments are prepayments or made as contractually
required. Our Credit Facility also requires that any interest or principal payments on pledged loans be remitted directly by the borrower into a lockbox account with KeyBank and with The Bank of New York Mellon Trust Company, N.A. as custodian.
KeyBank, which also serves as the trustee of the account, generally remits the collected funds to us once a month.



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Our Credit Facility contains covenants that require Business Loan to maintain its status as a separate legal
entity, prohibit certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions), and restrict material changes to our credit and collection policies without the lenders consents. Our Credit Facility
generally limits distributions to our stockholders on a fiscal year basis to the sum of our net investment income, net capital gains and amounts elected to have been paid during the prior year in accordance with Section 855(a) of the Code.
Business Loan is also subject to certain limitations on the type of loan investments it can apply as collateral towards the borrowing base to receive additional borrowing availability under our Credit Facility, including restrictions on geographic
concentrations, sector concentrations, loan size, payment frequency and status, average life, portfolio company leverage and lien property. Our Credit Facility further requires Business Loan to comply with other financial and operational covenants,
which obligate Business Loan to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of 25 obligors required in the borrowing base.

Additionally, we are subject to a performance guaranty that requires us to maintain (i) a minimum net worth (defined in our Credit Facility to include
our mandatorily redeemable preferred stock) of $205.0 million plus 50% of all equity and subordinated debt raised after May 1, 2015 less 50% of any equity and subordinated debt retired or redeemed after May 1, 2015, which equates to
$232.8 million as of September 30, 2018, (ii) asset coverage with respect to senior securities representing indebtedness of at least 200%, in accordance with Sections 18 and 61 of the 1940 Act and (iii) our status as a BDC
under the 1940 Act and as a RIC under the Code.

As of September 30, 2018, and as defined in the performance guaranty of our Credit Facility, we had
a net worth of $285.8 million, asset coverage on our senior securities representing indebtedness of 359.0% and an active status as a BDC and RIC. In addition, we had 32 obligors in our Credit Facilitys borrowing base as of
September 30, 2018. As of September 30, 2018, we were in compliance with all of our Credit Facility covenants. Refer to Note 5Borrowings of our accompanying Note to Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-K for additional information regarding our Credit Facility.

Off-Balance Sheet Arrangements

We generally recognize success fee income when the payment has been received. As
of September 30, 2018 and 2017, we had off-balance sheet success fee receivables on our accruing debt investments of $5.1 million and $4.6 million (or approximately $0.18 per common share for
each period), respectively, that would be owed to us, generally upon a change of control of the portfolio companies. Consistent with GAAP, we generally have not recognized our success fee receivables and related income in our Consolidated Financial
Statements until earned. Due to the contingent nature of our success fees, there are no guarantees that we will be able to collect all of these success fees or know the timing of such collections.

Contractual Obligations

We have lines of credit,
delayed draw term loans, and an uncalled capital commitment with certain of our portfolio companies that have not been fully drawn. Since these commitments have expiration dates and we expect many will never be fully drawn, the total commitment
amounts do not necessarily represent future cash requirements. We estimate the fair value of the combined unused lines of credit, the unused delayed draw term loans and the uncalled capital commitment as of September 30, 2018 and
September 30, 2017 to be immaterial.

The following table shows our contractual obligations as of September 30, 2018, at cost:



|                                        |  |                        |        |  |           |   |         |           |  |   |                  |  |  |       |   |  |  |   |         | 
|--------------------------------------- |  | ---------------------- | ------ |  | --------- | - | ------- | --------- |  | - | ---------------- |  |  | ----- | - |  |  | - | ------- | 
|                                        |  | Payments Due by Period |       
|Contractual
Obligations(A)              |  | Less than1 Year        |        |  | 1-3 Years |   |         | 3-5 Years |  |   | More than5 Years |  |  | Total |  
|Credit Facility(B)                      |  | $                      |       |  |           | $ | 110,000 |           |  | $ |                 |  |  | $     |  |  |  | $ | 110,000 | 
|Mandatorily Redeemable Preferred Stock  |  |                        |       |  |           |   |        |           |  |   | 51,750           |  |  |       |  |  |  |   | 51,750  | 
|Interest expense on debt
obligations(C) |  |                        | 9,249  |  |           |   | 24,932  |           |  |   | 6,210            |  |  |       |  |  |  |   | 40,391  | 
|                                        |  |                        |        |  |           |   |         |           |  |   |                  |  |  |       |   |  |  |   |         | 
|Total                                   |  | $                      | 9, 249 |  |           | $ | 134,932 |           |  | $ | 57,960           |  |  | $     |  |  |  | $ | 202,141 | 
|                                        |  |                        |        |  |           |   |         |           |  |   |                  |  |  |       |   |  |  |   |         | 



|(A) | Excludes our unused line of credit commitments, an unused delayed draw term loan and uncalled capital
commitments to our portfolio companies in an aggregate amount of $10.1 million, at cost, as of September 30, 2018.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Principal balance of borrowings outstanding under our Credit Facility, based on the current contractual
revolver period end date to the revolving nature of the facility.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Includes estimated interest payments on our Credit Facility and dividend obligations on our Series 2024 Term
Preferred Stock. The amount of interest expense calculated for purposes of this table was based upon rates and balances as of September 30, 2018. Dividend payments on our Series 2024 Term Preferred Stock assume quarterly dividend declarations
and monthly dividend distributions through the date of mandatory redemption.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the
reported consolidated amounts of assets and liabilities, including disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ materially
from those estimates under different assumptions or conditions. We have identified our investment valuation policy (which has been approved by our Board of Directors) (the Policy) as our most critical accounting policy, which is
described in Note 2Summary of Significant Accounting Policies in the accompanying notes to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Additionally, refer to Note 3Investments in our accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional
information regarding fair value measurements and our application of Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures. We have also identified our revenue
recognition policy as a critical accounting policy, which is described in Note 2Summary of Significant Accounting Policies in our accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report
on Form 10-K.

Investment Valuation

Credit Monitoring and Risk Rating

The Adviser monitors a
wide variety of key credit statistics that provide information regarding our portfolio companies to help us assess credit quality and portfolio performance and, in some instances, used as inputs in our valuation techniques. Generally, we, through
the Adviser, participate in periodic board meetings of our portfolio companies in which we hold board seats and also require them to provide annual audited and monthly unaudited financial statements. Using these statements or comparable information
and board discussions, the Adviser calculates and evaluates certain credit statistics.

The Adviser risk rates all of our investments in debt securities.
The Adviser does not risk rate our equity securities. For syndicated loans that have been rated by an SEC registered Nationally Recognized Statistical Rating Organization (NRSRO), the Adviser generally uses the average of two corporate
level NRSROs risk ratings for such security. For all other debt securities, the Adviser uses a proprietary risk rating system. While the Adviser seeks to mirror the NRSRO systems, we cannot provide any assurance that the Advisers risk
rating system will provide the same risk rating as an NRSRO would for these securities. The Advisers risk rating system is used to estimate the probability of default on debt securities and the expected loss if there is a default. The
Advisers risk rating system uses a scale of 0 to >10, with >10 being the lowest probability of default. It is the Advisers understanding that most debt securities of medium-sized companies do
not exceed the grade of BBB on an NRSRO scale, so there would be no debt securities in the middle market that would meet the definition of AAA, AA or A. Therefore, the Advisers scale begins with the designation >10 as the best risk rating
which may be equivalent to a BBB from an NRSRO; however, no assurance can be given that a >10 on the Advisers scale is equal to a BBB or Baa2 on an NRSRO scale. The Advisers risk rating system covers both qualitative and quantitative
aspects of the business and the securities we hold.

The following table reflects risk ratings for all proprietary loans in our portfolio (all of which
were risk rated by our Adviser) at September 30, 2018 and 2017, representing approximately 92.3% and 91.9%, respectively, of the principal balance of all debt investments in our portfolio at the end of each period:



|                 |  |                     |      |  |      |  |     | 
|---------------- |  | ------------------- | ---- |  | ---- |  | --- | 
|                 |  | As of September 30, |     
|Rating           |  | 2018                |      |  | 2017 | 
|Highest          |  |                     | 10.0 |  |      |  | 9.0 | 
|Average          |  |                     | 6.7  |  |      |  | 5.7 | 
|Weighted Average |  |                     | 6.8  |  |      |  | 5.8 | 
|Lowest           |  |                     | 0.0  |  |      |  | 1.0 | 



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The following table reflects the risk ratings for all syndicated loans in our portfolio that were rated by an
NRSRO at September 30, 2018 and 2017, representing approximately 5.7% and 6.9%, respectively, of the principal balance of all debt investments in our portfolio at the end of each fiscal year:



|                 |  |                     |     |  |      |  |     | 
|---------------- |  | ------------------- | --- |  | ---- |  | --- | 
|                 |  | As of September 30, |    
|Rating           |  | 2018                |     |  | 2017 | 
|Highest          |  |                     | 6.0 |  |      |  | 6.0 | 
|Average          |  |                     | 3.7 |  |      |  | 4.4 | 
|Weighted Average |  |                     | 4.0 |  |      |  | 4.6 | 
|Lowest           |  |                     | 1.0 |  |      |  | 3.0 | 

The following table reflects the risk ratings for all syndicated loans in our portfolio that were not rated by an NRSRO at
September 30, 2018 and 2017, representing approximately 2.0% and 1.2%, respectively, of the principal balance of all debt investments in our portfolio at the end of each fiscal year:



|                 |  |                     |     |  |      |  |     | 
|---------------- |  | ------------------- | --- |  | ---- |  | --- | 
|                 |  | As of September 30, |    
|Rating           |  | 2018                |     |  | 2017 | 
|Highest          |  |                     | 5.0 |  |      |  | 3.0 | 
|Average          |  |                     | 4.3 |  |      |  | 3.0 | 
|Weighted Average |  |                     | 4.7 |  |      |  | 3.0 | 
|Lowest           |  |                     | 3.0 |  |      |  | 3.0 | 

Tax Status

We
intend to continue to maintain our qualification as a RIC under Subchapter M of the Code for federal income tax purposes and also to limit certain federal excise taxes imposed on RICs. Refer to Note 10Federal and State Income Taxes in
our accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information regarding our tax status.

Recent Accounting Pronouncements

Refer to Note
2Summary of Significant Accounting Policies in the notes to our accompanying Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a description of
recent accounting pronouncements.



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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (DOLLAR
AMOUNTS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

Market risk includes risks that arise from changes in interest rates, foreign currency exchange
rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies whose
securities are owned by us; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and interest rate fluctuations.

The primary risk we believe we are exposed to is interest rate risk. Because we borrow money to make investments, our net investment income is dependent upon
the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net
investment income. We use a combination of debt and equity capital to finance our investing activities. We may use interest rate risk management techniques from time to time to limit our exposure to interest rate fluctuations. Such techniques may
include various interest rate hedging activities to the extent permitted by the 1940 Act.

All of our variable-rate debt investments have rates generally
associated with either the current LIBOR or prime rate. As of September 30, 2018, our portfolio of debt investments on a principal basis consisted of the following:



| |        |  |  |                                                
| | ------ |  |  | -----------------------------------------------
| | 90.6%  |  |  | Variable rates with a LIBOR or prime rate floor
| | 9.4    |  |  | Fixed rates                                    
| |        |  |  |                                                
| | 100.0% |  |  | total                                          
| |        |  |  |                                                

To illustrate the potential impact of changes in market interest rates on our net increase in net assets resulting from
operations, we have performed the following hypothetical analysis, which assumes that our balance sheet and contractual interest rates remain constant as of September 30, 2018 and no further actions are taken to alter our existing interest rate
sensitivity.



|                       |  |                                      |        |   |                                       |   |        |                                                     |  |   |       |  
|---------------------- |  | ------------------------------------ | ------ | - | ------------------------------------- | - | ------ | --------------------------------------------------- |  | - | ----- | -
|Basis Point Change (A) |  | Increase(Decrease) inInterest Income |        |   | Increase(Decrease) inInterest Expense |   |        | Net Increase in Net AssetsResulting from Operations | 
|Up 300 basis points    |  | $                                    | 10,300 |   |                                       | $ | 3,300  |                                                     |  | $ | 7,000 |  
|Up 200 basis points    |  |                                      | 6,754  |   |                                       |   | 2,200  |                                                     |  |   | 4,554 |  
|Up 100 basis points    |  |                                      | 3,209  |   |                                       |   | 1,100  |                                                     |  |   | 2,109 |  
|Down 226 basis points  |  |                                      | (3,481 | ) |                                       |   | (2,487 | )                                                   |  |   | (994  | )



|(A) | As of September 30, 2018, our effective average LIBOR was 2.26%, therefore, the largest decrease in basis
points that could occur was 226 basis points.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

Although management believes that this analysis is indicative of our existing interest
rate sensitivity, it does not adjust for potential changes in credit quality, size and composition of our loan portfolio on the balance sheet and other business developments that could affect net increase in net assets resulting from operations.
Accordingly, actual results could differ significantly from those in the hypothetical analysis in the table above.

We may also experience risk associated
with investing in securities of companies with foreign operations. Some of our portfolio companies have operations located outside the U.S. These risks include, but are not limited to, fluctuations in foreign currency exchange rates, imposition of
foreign taxes, changes in exportation regulations and political and social instability.



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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements



|                                                                                                        |  |  |    | 
|------------------------------------------------------------------------------------------------------- |  |  | -- | 
|Managements Annual Report on Internal Control over Financial Reporting                                 |  |  | 67 | 
|Report of Independent Registered Public Accounting Firm                                                 |  |  | 68 | 
|Consolidated Statements of Assets and Liabilities as of September 
30, 2018 and 2017                    |  |  | 69 | 
|Consolidated Statements of Operations for the years ended September 
30, 2018, 2017 and 2016            |  |  | 70 | 
|Consolidated Statements of Changes in Net Assets for the years ended September 30,
 2018, 2017 and 2016 |  |  | 71 | 
|Consolidated Statements of Cash Flows for the years ended September 
30, 2018, 2017 and 2016            |  |  | 72 | 
|Consolidated Schedules of Investments as of September 
30, 2018 and 2017                                |  |  | 73 | 
|Notes to Consolidated Financial Statements                                                              |  |  | 85 | 



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Managements Annual Report on Internal Control over Financial
Reporting

To the Stockholders and Board of Directors of Gladstone Capital Corporation:

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles and include those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of
September 30, 2018, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework (2013). Based on its assessment, management has concluded that
our internal control over financial reporting was effective as of September 30, 2018.

The effectiveness of the Companys internal control over
financial reporting as of September 30, 2018 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

November 14, 2018



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and the Stockholders of Gladstone Capital Corporation:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of Gladstone Capital
Corporation and its subsidiaries (the Company) as of September 30, 2018 and 2017, and the related consolidated statements of operations, changes in net assets and cash flows for each of the three years in the period ended September 30,
2018, including the related notes and financial statement schedules listed in the index appearing under item 15(a)(2) (collectively referred to as the consolidated financial statements). We also have audited the Companys internal
control over financial reporting as of September 30, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
September 30, 2018 and 2017, and the results of their operations, changes in their net assets and their cash flows for each of the three years in the period ended September 30, 2018 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2018, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.

Basis for Opinions

The Companys management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the
Companys consolidated financial statements and on the Companys internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities
owned as of September 30, 2018 and 2017 by correspondence with the custodian and portfolio company investees. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal
Control over Financial Reporting

A companys internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial
statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

McLean, VA

November 14, 2018

We have served as the Companys auditor
since 2002.



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



|                                                                                                                                                                                                                                          |  |               |          |   |      |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ---- | - | -------- | -
|                                                                                                                                                                                                                                          |  | September 30, |         
|                                                                                                                                                                                                                                          |  | 2018          |          |   | 2017 |  
|ASSETS                                                                                                                                                                                                                                    |  |               |          |   |      |   |          |  
|Investments at fair value:
Non-Control/Non-Affiliate investments
(Cost of $359,304and $318,952, respectively)                                                                                                                             |  | $             | 325,567  |   |      | $ | 290,860  |  
|Affiliate investments (Cost of $54,667 and $49,868, respectively)                                                                                                                                                                         |  |               | 48,856   |   |      |   | 42,648   |  
|Control investments (Cost of $13,496and $42,615, respectively)                                                                                                                                                                            |  |               | 15,623   |   |      |   | 18,865   |  
|Cash and cash equivalents                                                                                                                                                                                                                 |  |               | 1,971    |   |      |   | 5,012    |  
|Restricted cash and cash equivalents                                                                                                                                                                                                      |  |               | 33       |   |      |   | 258      |  
|Interest receivable, net                                                                                                                                                                                                                  |  |               | 2,601    |   |      |   | 1,699    |  
|Due from administrative agent                                                                                                                                                                                                             |  |               | 2,807    |   |      |   | 3,086    |  
|Deferred financing fees                                                                                                                                                                                                                   |  |               | 1,363    |   |      |   | 853      |  
|Other assets, net                                                                                                                                                                                                                         |  |               | 687      |   |      |   | 2,579    |  
|                                                                                                                                                                                                                                          |  |               |          |   |      |   |          |  
|TOTAL ASSETS                                                                                                                                                                                                                              |  | $             | 399,508  |   |      | $ | 365,860  |  
|                                                                                                                                                                                                                                          |  |               |          |   |      |   |          |  
|                                                                                                                                                                                                                                          |  |              
|LIABILITIES                                                                                                                                                                                                                               |  |               |          |   |      |   |          |  
|Borrowings at fair value (Cost of $110,000and $93,000, respectively)                                                                                                                                                                      |  | $             | 110,000  |   |      | $ | 93,115   |  
|Mandatorily redeemable preferred stock, $0.001 par value per share, $25 liquidation preference
per share; 5,440,000 and 5,440,000shares authorized, respectively, and 2,070,000 and 2,070,000 shares issued and outstanding, respectively |  |               | 50,077   |   |      |   | 49,849   |  
|Accounts payable and accrued expenses                                                                                                                                                                                                     |  |               | 290      |   |      |   | 522      |  
|Interest payable                                                                                                                                                                                                                          |  |               | 330      |   |      |   | 264      |  
|Fees due to Adviser(A)                                                                                                                                                                                                                    |  |               | 1,084    |   |      |   | 1,292    |  
|Fee due to Administrator(A)                                                                                                                                                                                                               |  |               | 317      |   |      |   | 244      |  
|Other liabilities                                                                                                                                                                                                                         |  |               | 318      |   |      |   | 924      |  
|                                                                                                                                                                                                                                          |  |               |          |   |      |   |          |  
|TOTAL LIABILITIES                                                                                                                                                                                                                         |  | $             | 162,416  |   |      | $ | 146,210  |  
|                                                                                                                                                                                                                                          |  |               |          |   |      |   |          |  
|Commitments and contingencies(B)                                                                                                                                                                                                          |  |               |          |   |      |   |          |  
|                                                                                                                                                                                                                                          |  |              
|NET ASSETS                                                                                                                                                                                                                                |  |               |          |   |      |   |          |  
|Common stock, $0.001 par value, 44,560,000 and 44,560,000 shares authorized,
respectively, and 28,501,980and26,160,684 shares issued and outstanding, respectively                                                                        |  | $             | 29       |   |      | $ | 26       |  
|Capital in excess of par value(C)                                                                                                                                                                                                         |  |               | 343,076  |   |      |   | 348,248  |  
|Cumulative net unrealized depreciation of investments                                                                                                                                                                                     |  |               | (37,421  | ) |      |   | (59,062  | )
|Cumulative net unrealized depreciation of other                                                                                                                                                                                           |  |               |         |   |      |   | (115     | )
|Overdistributed net investment
income(C)                                                                                                                                                                                                  |  |               | (219     | ) |      |   | (139     | )
|Accumulated net realized losses                                                                                                                                                                                                           |  |               | (68,373  | ) |      |   | (69,308  | )
|                                                                                                                                                                                                                                          |  |               |          |   |      |   |          |  
|Total distributable loss                                                                                                                                                                                                                  |  |               | (106,013 | ) |      |   | (128,624 | )
|                                                                                                                                                                                                                                          |  |               |          |   |      |   |          |  
|TOTAL NET ASSETS                                                                                                                                                                                                                          |  | $             | 237,092  |   |      | $ | 219,650  |  
|                                                                                                                                                                                                                                          |  |               |          |   |      |   |          |  
|NET ASSET VALUE PER COMMON SHARE AT END OF YEAR                                                                                                                                                                                           |  | $             | 8.32     |   |      | $ | 8.40     |  
|                                                                                                                                                                                                                                          |  |               |          |   |      |   |          |  



|(A) | Refer to Note 4Related Party Transactions for additional information.
|--- | ----------------------------------------------------------------------

|(B) | Refer to Note 11Commitments and Contingencies for additional information.
|--- | --------------------------------------------------------------------------

|(C) | Refer to Note 9Distributions to Common Stockholders for additional information.
|--- | --------------------------------------------------------------------------------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|--------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                      |  | Year ended September 30, |           
|                                                                      |  | 2018                     |            |   | 2017 |   |            | 2016 | 
|INVESTMENT INCOME                                                     |  |                          |            |   |      |   |            |      |  |   |            |  
|Interest income                                                       |  |                          |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate
investments                                 |  | $                        | 33,497     |   |      | $ | 26,147     |      |  | $ | 24,171     |  
|Affiliate investments                                                 |  |                          | 4,800      |   |      |   | 4,282      |      |  |   | 7,459      |  
|Control investments                                                   |  |                          | 1,817      |   |      |   | 1,626      |      |  |   | 1,226      |  
|Cash and cash equivalents                                             |  |                          | 39         |   |      |   | 27         |      |  |   | 5          |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total interest income (excluding PIK interest income)                 |  |                          | 40,153     |   |      |   | 32,082     |      |  |   | 32,861     |  
|PIK interest income                                                   |  |                          |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate
investments                                 |  |                          | 3,524      |   |      |   | 4,299      |      |  |   | 1,095      |  
|Affiliate investments                                                 |  |                          | 281        |   |      |   | 692        |      |  |   | 1,263      |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total PIK interest income                                             |  |                          | 3,805      |   |      |   | 4,991      |      |  |   | 2,358      |  
|Total interest income                                                 |  |                          | 43,958     |   |      |   | 37,073     |      |  |   | 35,219     |  
|Success fee income                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate
investments                                 |  |                          | 430        |   |      |   | 392        |      |  |   | 1,566      |  
|Affiliate investments                                                 |  |                          |           |   |      |   | 1,142      |      |  |   | 914        |  
|Control investments                                                   |  |                          |           |   |      |   |           |      |  |   | 958        |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total success fee income                                              |  |                          | 430        |   |      |   | 1,534      |      |  |   | 3,438      |  
|Other income                                                          |  |                          | 1,193      |   |      |   | 626        |      |  |   | 455        |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total investment income                                               |  |                          | 45,581     |   |      |   | 39,233     |      |  |   | 39,112     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|EXPENSES                                                              |  |                          |            |   |      |   |            |      |  |   |            |  
|Base management fee(A)                                                |  |                          | 7,033      |   |      |   | 5,781      |      |  |   | 5,684      |  
|Loan servicing fee(A)                                                 |  |                          | 5,042      |   |      |   | 4,146      |      |  |   | 3,890      |  
|Incentive fee(A)                                                      |  |                          | 5,348      |   |      |   | 4,779      |      |  |   | 4,514      |  
|Administration fee(A)                                                 |  |                          | 1,250      |   |      |   | 1,102      |      |  |   | 1,182      |  
|Interest expense on borrowings                                        |  |                          | 5,858      |   |      |   | 3,073      |      |  |   | 2,899      |  
|Dividend expense on mandatorily redeemable preferred stock            |  |                          | 3,105      |   |      |   | 4,152      |      |  |   | 4,118      |  
|Amortization of deferred financing fees                               |  |                          | 1,014      |   |      |   | 1,094      |      |  |   | 1,075      |  
|Professional fees                                                     |  |                          | 880        |   |      |   | 828        |      |  |   | 1,113      |  
|Other general and administrative expenses                             |  |                          | 1,086      |   |      |   | 1,117      |      |  |   | 1,346      |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Expenses, before credits from Adviser                                 |  |                          | 30,616     |   |      |   | 26,072     |      |  |   | 25,821     |  
|Credit to base management fee - loan servicing
fee(A)                 |  |                          | (5,042     | ) |      |   | (4,146     | )    |  |   | (3,890     | )
|Credit to fees from
Adviserother(A)                                  |  |                          | (3,081     | ) |      |   | (4,126     | )    |  |   | (2,306     | )
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total expenses, net of credits                                        |  |                          | 22,493     |   |      |   | 17,800     |      |  |   | 19,625     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|NET INVESTMENT INCOME                                                 |  |                          | 23,088     |   |      |   | 21,433     |      |  |   | 19,487     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|NET REALIZED AND UNREALIZED (LOSS) GAIN                               |  |                          |            |   |      |   |            |      |  |   |            |  
|Net realized (loss) gain:                                             |  |                          |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate
investments                                 |  |                          | 1,812      |   |      |   | 3,849      |      |  |   | 6,253      |  
|Affiliate investments                                                 |  |                          | 325        |   |      |   | (2,330     | )    |  |   | 1,280      |  
|Control investments                                                   |  |                          | (28,200    | ) |      |   | (4,994     | )    |  |   | (317       | )
|Other                                                                 |  |                          | (133       | ) |      |   | (1,288     | )    |  |   | (64        | )
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total net realized (loss) gain                                        |  |                          | (26,196    | ) |      |   | (4,763     | )    |  |   | 7,152      |  
|Net unrealized (depreciation) appreciation:                           |  |                          |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate
investments                                 |  |                          | (5,645     | ) |      |   | (3,133     | )    |  |   | (14,946    | )
|Affiliate investments                                                 |  |                          | 1,409      |   |      |   | 1,951      |      |  |   | 5,858      |  
|Control investments                                                   |  |                          | 25,877     |   |      |   | 1,807      |      |  |   | (6,246     | )
|Other                                                                 |  |                          | 115        |   |      |   | (115       | )    |  |   | 62         |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total net unrealized appreciation (depreciation)                      |  |                          | 21,756     |   |      |   | 510        |      |  |   | (15,272    | )
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Net realized and unrealized loss                                      |  |                          | (4,440     | ) |      |   | (4,253     | )    |  |   | (8,120     | )
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                  |  | $                        | 18,648     |   |      | $ | 17,180     |      |  | $ | 11,367     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|BASIC AND DILUTED PER COMMON SHARE:                                   |  |                          |            |   |      |   |            |      |  |   |            |  
|Net investment income                                                 |  | $                        | 0.85       |   |      | $ | 0.84       |      |  | $ | 0.84       |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Net increase in net assets resulting from operations                  |  | $                        | 0.69       |   |      | $ | 0.67       |      |  | $ | 0.49       |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:Basic and Diluted |  |                          | 27,104,077 |   |      |   | 25,495,117 |      |  |   | 23,200,642 |  



|(A) | Refer to Note 4Related Party Transactions for additional information.
|--- | ----------------------------------------------------------------------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                          |  | Year ended September 30, |        
|                                                          |  | 2018                     |         |   | 2017 |   |         | 2016 | 
|OPERATIONS                                                |  |                          |         |   |      |   |         |      |  |   |         |  
|Net investment income                                     |  | $                        | 23,088  |   |      | $ | 21,433  |      |  | $ | 19,487  |  
|Net realized (loss) gain on investments                   |  |                          | (26,063 | ) |      |   | (3,475  | )    |  |   | 7,216   |  
|Net realized loss on other                                |  |                          | (133    | ) |      |   | (1,288  | )    |  |   | (64     | )
|Net unrealized appreciation (depreciation) of investments |  |                          | 21,641  |   |      |   | 625     |      |  |   | (15,334 | )
|Net unrealized appreciation (depreciation) of other       |  |                          | 115     |   |      |   | (115    | )    |  |   | 62      |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|Net increase in net assets from operations                |  |                          | 18,648  |   |      |   | 17,180  |      |  |   | 11,367  |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|DISTRIBUTIONS                                             |  |                          |         |   |      |   |         |      |  |   |         |  
|Distributions to common stockholders from ordinary income |  |                          | (22,801 | ) |      |   | (21,433 | )    |  |   | (16,298 | )
|Distributions to common stockholders from realized gains  |  |                          |        |   |      |   |        |      |  |   | (3,189  | )
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|Net decrease in net assets from distributions             |  |                          | (22,801 | ) |      |   | (21,433 | )    |  |   | (19,487 | )
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|CAPITAL TRANSACTIONS                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Issuance of common stock                                  |  |                          | 21,991  |   |      |   | 23,695  |      |  |   | 19,665  |  
|Offering costs for issuance of common stock               |  |                          | (396    | ) |      |   | (999    | )    |  |   | (1,210  | )
|Repurchase of common stock, net of costs                  |  |                          |        |   |      |   |        |      |  |   | (572    | )
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|Net increase in net assets from capital transactions      |  |                          | 21,595  |   |      |   | 22,696  |      |  |   | 17,883  |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|NET INCREASE IN NET ASSETS                                |  |                          | 17,442  |   |      |   | 18,443  |      |  |   | 9,763   |  
|NET ASSETS, BEGINNING OF YEAR                             |  |                          | 219,650 |   |      |   | 201,207 |      |  |   | 191,444 |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|NET ASSETS, END OF YEAR                                   |  | $                        | 237,092 |   |      | $ | 219,650 |      |  | $ | 201,207 |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                                                      |  | Year ended September 30, |         
|                                                                                                                                      |  | 2018                     |          |   | 2017 |   |          | 2016 | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|Net increase in net assets resulting from operations                                                                                  |  | $                        | 18,648   |   |      | $ | 17,180   |      |  | $ | 11,367   |  
|Adjustments to reconcile net increase in net assets resulting from operations to net cash (used
in) provided by operating activities: |  |                          |          |   |      |   |          |      |  |   |          |  
|Purchase of investments                                                                                                               |  |                          | (106,115 | ) |      |   | (112,092 | )    |  |   | (80,024  | )
|Principal repayments on investments                                                                                                   |  |                          | 64,896   |   |      |   | 75,204   |      |  |   | 99,705   |  
|Net proceeds from sale of investments                                                                                                 |  |                          | 2,892    |   |      |   | 8,240    |      |  |   | 21,439   |  
|Increase in investments due to
paid-in-kind interest or other                                                                         |  |                          | (4,060   | ) |      |   | (4,729   | )    |  |   | (5,002   | )
|Net change in premiums, discounts and amortization                                                                                    |  |                          | (119     | ) |      |   | 268      |      |  |   | (70      | )
|Cost adjustments on non-accrual loans                                                                                                 |  |                          |         |   |      |   |         |      |  |   | (388     | )
|Net realized loss (gain) on investments                                                                                               |  |                          | 26,063   |   |      |   | 3,475    |      |  |   | (7,216   | )
|Net unrealized (appreciation) depreciation of investments                                                                             |  |                          | (21,641  | ) |      |   | (625     | )    |  |   | 15,333   |  
|Net realized loss on other                                                                                                            |  |                          |         |   |      |   | 1,288    |      |  |   | 64       |  
|Net unrealized (depreciation) appreciation of other                                                                                   |  |                          | (115     | ) |      |   | 115      |      |  |   | (62      | )
|Changes in assets and liabilities:                                                                                                    |  |                          |          |   |      |   |          |      |  |   |          |  
|Decrease (increase) in restricted cash and cash equivalents                                                                           |  |                          | 225      |   |      |   | 148      |      |  |   | (123     | )
|(Increase) decrease in interest receivable, net                                                                                       |  |                          | (902     | ) |      |   | 634      |      |  |   | 3,248    |  
|Decrease (increase) in funds due from administrative agent                                                                            |  |                          | 279      |   |      |   | (922     | )    |  |   | (978     | )
|Amortization of deferred financing fees                                                                                               |  |                          | 1,014    |   |      |   | 1,094    |      |  |   | 1,075    |  
|Decrease (increase) in other assets, net                                                                                              |  |                          | 1,857    |   |      |   | (1,731   | )    |  |   | 723      |  
|(Decrease) increase in accounts payable and accrued expenses                                                                          |  |                          | (232     | ) |      |   | (497     | )    |  |   | 422      |  
|Increase (decrease) in interest payable                                                                                               |  |                          | 66       |   |      |   | 63       |      |  |   | (72      | )
|(Decrease) increase in fees due to
Adviser(A)                                                                                         |  |                          | (208     | ) |      |   | 70       |      |  |   | 318      |  
|Increase (decrease) in fee due to
Administrator(A)                                                                                    |  |                          | 73       |   |      |   | (38      | )    |  |   | 32       |  
|(Decrease) increase in other liabilities                                                                                              |  |                          | (192     | ) |      |   | (23      | )    |  |   | 232      |  
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |          |  
|Net cash (used in) provided by operating activities                                                                                   |  |                          | (17,571  | ) |      |   | (12,878  | )    |  |   | 60,023   |  
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|Proceeds from borrowings                                                                                                              |  |                          | 118,900  |   |      |   | 138,700  |      |  |   | 103,000  |  
|Repayments on borrowings                                                                                                              |  |                          | (101,900 | ) |      |   | (117,000 | )    |  |   | (159,000 | )
|Proceeds from issuance of mandatorily redeemable preferred stock                                                                      |  |                          |         |   |      |   | 51,750   |      |  |   |         |  
|Redemption of mandatorily redeemable preferred stock                                                                                  |  |                          |         |   |      |   | (61,000  | )    |  |   |         |  
|Repurchase of common stock                                                                                                            |  |                          |         |   |      |   |         |      |  |   | (572     | )
|Deferred financing fees                                                                                                               |  |                          | (1,329   | ) |      |   | (1,975   | )    |  |   | (75      | )
|Proceeds from issuance of common stock                                                                                                |  |                          | 21,991   |   |      |   | 23,695   |      |  |   | 19,665   |  
|Offering costs for issuance of common stock                                                                                           |  |                          | (331     | ) |      |   | (999     | )    |  |   | (1,210   | )
|Distributions paid to common stockholders                                                                                             |  |                          | (22,801  | ) |      |   | (21,433  | )    |  |   | (19,487  | )
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) financing activities                                                                                   |  |                          | 14,530   |   |      |   | 11,738   |      |  |   | (57,679  | )
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |          |  
|                                                                                                                                      |  |                          |         
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                                                  |  |                          | (3,041   | ) |      |   | (1,140   | )    |  |   | 2,344    |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                                                          |  |                          | 5,012    |   |      |   | 6,152    |      |  |   | 3,808    |  
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |          |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                                                                                                |  | $                        | 1,971    |   |      | $ | 5,012    |      |  | $ | 6,152    |  
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |          |  
|                                                                                                                                      |  |                          |         
|CASH PAID DURING YEAR FOR INTEREST                                                                                                    |  | $                        | 5,792    |   |      | $ | 3,010    |      |  | $ | 2,971    |  
|NON-CASH ACTIVITIES(B)                                                                                                                |  |                          | 500      |   |      |   |         |      |  |   | 9,522    |  



|(A) | Refer to Note 4Related Party Transactions for additional information.
|--- | ----------------------------------------------------------------------

|(B) | Significant non-cash operating activities consisted principally of the
following transactions:
|--- | ----------------------------------------------------------------------------------------------

In September 2016, our investment in Precision Acquisition Group Holdings, Inc. was
restructured, resulting in non-cash activity of $1.9 million and new investments in PIC 360, LLC and Precision International, LLC, which are listed on the accompanying Consolidated Schedule of
Investments as of September 30, 2017 and 2016.

In February 2016, our investment in Targus Group International, Inc. was
restructured resulting in non-cash activity of $3.9 million and a new investment in Targus Cayman HoldCo Limited, which is listed on the accompanying Consolidated Schedule of Investments as of
September 30, 2017 and September 30, 2016.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------- | --------- |  | - | ------- | 
|Company and
Investment(A)(B)(W)(Y)                                                                        |  | Principal/Shares/Units(J)(X) |        |  | Cost |   |         | FairValue | 
|NON-CONTROL/NON-AFFILIATE
INVESTMENTS(M)  137.3%                                                         |  |                              |        |  |      |   |         |           |  |   |         | 
|Secured First Lien Debt  75.3%                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|Automobile  1.3%                                                                                         |  |                              |        |  |      |   |         |           |  |   |         | 
|Meridian Rack & Pinion, Inc.(S)
 Term Debt (L + 11.5%, 13.8% Cash, Due 6/2019)(C)                        |  | $                            | 4,140  |  |      | $ | 4,140   |           |  | $ | 3,105   | 
|Beverage, Food, and Tobacco  2.6%                                                                        |  |                              |        |  |      |   |         |           |  |   |         | 
|Triple H Food Processors, LLC  Line of Credit, $750 available (L + 6.8%, 9.0% Cash, Due
8/2020)(C)       |  |                              |       |  |      |   |        |           |  |   |        | 
|Triple H Food Processors, LLC  Term Debt (L + 8.3%, 10.5% Cash, Due 8/2020)(C)                           |  |                              | 6,000  |  |      |   | 6,000   |           |  |   | 6,135   | 
|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                          |  |                              |        |  |      |   | 6,000   |           |  |   | 6,135   | 
|Buildings and Real Estate  0.9%                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|GFRC Holdings, LLC  Line of Credit, $0 available (L + 8.0%, 10.3% Cash, Due 9/2018)(E)                   |  |                              | 1,150  |  |      |   | 1,150   |           |  |   | 1,150   | 
|GFRC Holdings, LLC  Term Debt (L + 8.0%, 10.3% Cash, Due 9/2018)(E)                                      |  |                              | 1,000  |  |      |   | 1,000   |           |  |   | 1,000   | 
|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                          |  |                              |        |  |      |   | 2,150   |           |  |   | 2,150   | 
|Diversified/Conglomerate Service  21.3%                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|IA Tech, LLC  Term Debt (L + 11.0%, 13.3% Cash, Due 6/2023)(C)                                           |  |                              | 30,000 |  |      |   | 30,000  |           |  |   | 30,900  | 
|Travel Sentry, Inc.  Term Debt (L + 8.0%, 10.4% Cash, Due 12/2021)(C)(U)                                 |  |                              | 8,415  |  |      |   | 8,415   |           |  |   | 8,646   | 
|Vision Government Solutions, Inc.  Line of Credit, $0 available (L + 8.8%, 11.0% Cash, Due
6/2021)(C)    |  |                              | 1,450  |  |      |   | 1,446   |           |  |   | 1,305   | 
|Vision Government Solutions, Inc.  Delayed Draw Term Loan, $900 available (10.0% Cash, Due
6/2021)(C)(F) |  |                              | 1,600  |  |      |   | 1,596   |           |  |   | 1,448   | 
|Vision Government Solutions, Inc.  Term Debt (L + 8.8%, 11.0% Cash, Due 6/2021)(C)                       |  |                              | 9,000  |  |      |   | 8,978   |           |  |   | 8,100   | 
|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                          |  |                              |        |  |      |   | 50,435  |           |  |   | 50,399  | 
|Healthcare, education, and childcare  9.7%                                                               |  |                              |        |  |      |   |         |           |  |   |         | 
|EL Academies, Inc.  Line of Credit, $2,000 available (L + 9.5%, 11.8% Cash, Due 8/2020)(C)               |  |                              |       |  |      |   |        |           |  |   |        | 
|EL Academies, Inc.  Delayed Draw Term Loan, $1,010 available (L + 9.5%, 11.8% Cash, Due
8/2022)(C)       |  |                              | 8,990  |  |      |   | 8,990   |           |  |   | 9,069   | 
|EL Academies, Inc.  Term Debt (L + 9.5%, 11.8% Cash, Due 8/2022)(C)                                      |  |                              | 12,000 |  |      |   | 12,000  |           |  |   | 12,105  | 
|TWS Acquisition Corporation  Term Debt (L + 8.0%, 10.3% Cash, Due 7/2020)(Q)(AA)                         |  |                              | 2,000  |  |      |   | 2,000   |           |  |   | 2,000   | 
|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                          |  |                              |        |  |      |   | 22,990  |           |  |   | 23,174  | 
|Machinery  2.7%                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|Arc Drilling Holdings LLC  Line of Credit, $1,000 available (L + 8.0%, 10.3% Cash, Due
11/2020)(C)       |  |                              |       |  |      |   |        |           |  |   |        | 
|Arc Drilling Holdings LLC  Term Debt (L + 9.5%, 11.8% Cash, 3.0% PIK, Due 11/2022)(C)                    |  |                              | 5,960  |  |      |   | 5,960   |           |  |   | 5,454   | 
|Precision International, LLC  Term Debt (10.0%, Due 9/2021)(C)(F)                                        |  |                              | 836    |  |      |   | 836     |           |  |   | 836     | 
|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                          |  |                              |        |  |      |   | 6,796   |           |  |   | 6,290   | 
|Oil and Gas  17.0%                                                                                       |  |                              |        |  |      |   |         |           |  |   |         | 
|Impact! Chemical Technologies, Inc.  Line of Credit, $0 available (L + 8.8%, 11.0% Cash, Due
12/2020)(C) |  |                              | 2,500  |  |      |   | 2,500   |           |  |   | 2,497   | 
|Impact! Chemical Technologies, Inc.  Term Debt (L + 8.8%, 11.0% Cash, Due 12/2020)(C)                    |  |                              | 20,000 |  |      |   | 20,000  |           |  |   | 19,975  | 
|WadeCo Specialties, Inc.  Line of Credit, $1,100 available (L + 7.0%, 9.3% Cash, Due 3/2019)(C)          |  |                              | 900    |  |      |   | 900     |           |  |   | 909     | 
|WadeCo Specialties, Inc.  Term Debt (L + 7.0%, 9.3% Cash, Due 3/2019)(C)                                 |  |                              | 9,691  |  |      |   | 9,691   |           |  |   | 9,788   | 
|WadeCo Specialties, Inc.  Term Debt (L + 9.0%, 12.0% Cash, Due 3/2019)(C)                                |  |                              | 7,000  |  |      |   | 7,000   |           |  |   | 7,035   | 
|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                          |  |                              |        |  |      |   | 40,091  |           |  |   | 40,204  | 
|Printing and Publishing  0.0%                                                                            |  |                              |        |  |      |   |         |           |  |   |         | 
|Chinese Yellow Pages Company  Line of Credit, $0 available (PRIME + 4.0%, 9.3% Cash, Due
2/2015)(E)(V)   |  |                              | 107    |  |      |   | 107     |           |  |   |        | 
|Telecommunications  19.8%                                                                                |  |                              |        |  |      |   |         |           |  |   |         | 
|Applied Voice & Speech Technologies, Inc.  Term Debt (L + 9.3%, 11.5% Cash, Due
10/2022)(C)              |  |                              | 10,100 |  |      |   | 10,100  |           |  |   | 9,948   | 
|B+T Group Acquisition, Inc.(S)  Term
Debt (L + 11.0%, 13.3% Cash, Due 12/2019)(C)                        |  |                              | 6,000  |  |      |   | 6,000   |           |  |   | 6,000   | 
|NetFortris Corp.  Term Debt (L + 8.4%, 10.7% Cash, Due 2/2021)(C)                                        |  |                              | 23,700 |  |      |   | 23,700  |           |  |   | 23,522  | 
|XMedius Solutions Inc.  Term Debt (L + 9.3%, 11.5% Cash, Due 10/2022)(C)                                 |  |                              | 7,493  |  |      |   | 7,493   |           |  |   | 7,521   | 
|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                          |  |                              |        |  |      |   | 47,293  |           |  |   | 46,991  | 
|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|Total Secured First Lien Debt                                                                             |  |                              |        |  |      | $ | 180,002 |           |  | $ | 178,448 | 
|                                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



73



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|---------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------- | --------- |  | - | ------- | 
|Company and
Investment(A)(B)(W)(Y)                                                                         |  | Principal/Shares/Units(J)(X) |        |  | Cost |   |         | FairValue | 
|Secured Second Lien Debt  53.5%                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|Automobile  2.1%                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|Sea Link International IRB, Inc.  Term Debt (11.3% Cash, Due 3/2023)(C)(F)                                |  | $                            | 5,000  |  |      | $ | 4,980   |           |  | $ | 5,094   | 
|Beverage, Food, and Tobacco  2.9%                                                                         |  |                              |        |  |      |   |         |           |  |   |         | 
|The Mochi Ice Cream Company  Term Debt (L + 10.5%, 12.8% Cash, Due 12/2023)(C)                            |  |                              | 6,750  |  |      |   | 6,726   |           |  |   | 6,767   | 
|Cargo Transportation 5.5%                                                                                 |  |                              |        |  |      |   |         |           |  |   |         | 
|AG Transportation Holdings, LLC.  Term Debt (L + 10.0%, 13.3% Cash, Due 3/2020)(C)                        |  |                              | 13,000 |  |      |   | 13,000  |           |  |   | 13,097  | 
|Chemicals, Plastics, and Rubber  0.5%                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|Vertellus Holdings LLC  Term Debt (L + 12.0%, 14.3% Cash, Due 10/2021)(C)                                 |  |                              | 1,099  |  |      |   | 1,099   |           |  |   | 1,096   | 
|Diversified/Conglomerate Manufacturing  8.7%                                                              |  |                              |        |  |      |   |         |           |  |   |         | 
|Alloy Die Casting Co.(S)  Term Debt (L +
4.0%, 6.3% Cash, Due 4/2021)(C)                                  |  |                              | 5,235  |  |      |   | 5,235   |           |  |   | 4,934   | 
|Alloy Die Casting Co.(S)  Term Debt (L +
4.0%, 6.3% Cash, Due 4/2021)(C)                                  |  |                              | 75     |  |      |   | 75      |           |  |   | 71      | 
|Alloy Die Casting Co.(S)  Term Debt (L +
4.0%, 6.3% Cash, Due 4/2021)(C)                                  |  |                              | 390    |  |      |   | 390     |           |  |   | 368     | 
|United Flexible, Inc.  Term Debt (L + 9.3%, 11.5% Cash, Due 2/2022)(C)                                    |  |                              | 15,300 |  |      |   | 15,232  |           |  |   | 15,300  | 
|                                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                           |  |                              |        |  |      |   | 20,932  |           |  |   | 20,673  | 
|Diversified/Conglomerate Service  12.1%                                                                   |  |                              |        |  |      |   |         |           |  |   |         | 
|CHA Holdings, Inc.  Term Debt (L + 8.8%, 11.1% Cash, Due 4/2026)(D)(U)                                    |  |                              | 3,000  |  |      |   | 2,942   |           |  |   | 3,030   | 
|DigiCert Holdings, Inc.  Term Debt (L + 8.0%, 10.3% Cash, Due 10/2025)(D)                                 |  |                              | 3,000  |  |      |   | 2,977   |           |  |   | 2,989   | 
|Gray Matter Systems, LLC  Delayed Draw Term Loan, $2,000 available (12.0% Cash, Due 11/2023)(C)(F)        |  |                              |       |  |      |   |        |           |  |   |        | 
|Gray Matter Systems, LLC  Term Debt (12.0% Cash, Due 11/2023)(C)(F)                                       |  |                              | 11,100 |  |      |   | 11,100  |           |  |   | 11,045  | 
|Keystone Acquisition Corp.  Term Debt (L + 9.3%, 11.6% Cash, Due 5/2025)(D)(U)                            |  |                              | 4,000  |  |      |   | 3,929   |           |  |   | 4,015   | 
|LDiscovery, LLC  Term Debt (L + 10.0%, 12.3% Cash, Due 12/2023)(D)                                        |  |                              | 5,000  |  |      |   | 4,836   |           |  |   | 4,400   | 
|Red Ventures, LLC  Term Debt (L + 8.0%, 10.3% Cash, Due 11/2025)(D)(AA)                                   |  |                              | 3,125  |  |      |   | 3,069   |           |  |   | 3,188   | 
|                                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                           |  |                              |        |  |      |   | 28,853  |           |  |   | 28,667  | 
|Healthcare, education, and childcare  10.0%                                                               |  |                              |        |  |      |   |         |           |  |   |         | 
|Medical Solutions Holdings, Inc.  Term Debt (L + 8.3%, 10.5% Cash, Due 6/2025)(D)                         |  |                              | 3,000  |  |      |   | 2,960   |           |  |   | 3,000   | 
|Merlin International, Inc.  Term Debt (L + 10.0%, 12.3% Cash, Due 10/2022)(C)                             |  |                              | 20,000 |  |      |   | 20,000  |           |  |   | 20,600  | 
|New Trident Holdcorp, Inc.  Term Debt (L + 10.0%, 5.5% Cash, 6.8% PIK, Due 7/2020)(E)                     |  |                              | 4,382  |  |      |   | 4,382   |           |  |   |        | 
|                                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                           |  |                              |        |  |      |   | 27,342  |           |  |   | 23,600  | 
|Home and Office Furnishings, Housewares and Durable Consumer Products  4.3%                               |  |                              |        |  |      |   |         |           |  |   |         | 
|Belnick, Inc.  Term Debt (11.0% Cash, Due 8/2023)(C)(F)                                                   |  |                              | 10,000 |  |      |   | 10,000  |           |  |   | 10,125  | 
|Hotels, Motels, Inns, and Gaming  2.6%                                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Vacation Rental Pros Property Management, LLC  Term Debt (L + 10.0%, 12.3% Cash, 3.0% PIK,
Due 6/2023)(C) |  |                              | 7,366  |  |      |   | 7,366   |           |  |   | 6,337   | 
|Oil and Gas  3.2%                                                                                         |  |                              |        |  |      |   |         |           |  |   |         | 
|Francis Drilling Fluids, Ltd.  Term Debt (L + 10.4%, 12.6% Cash, Due 4/2020)(E)(H)(I)                     |  |                              | 18,510 |  |      |   | 18,427  |           |  |   | 5,281   | 
|Francis Drilling Fluids, Ltd.  Term Debt (L + 9.3%, 11.5% Cash, Due 4/2020) (E)(H)(I)                     |  |                              | 8,473  |  |      |   | 8,434   |           |  |   | 2,417   | 
|                                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                           |  |                              |        |  |      |   | 26,861  |           |  |   | 7,698   | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  1.6%                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|Canopy Safety Brands, LLC  Term Debt (L + 10.5%, 12.8% Cash, Due 7/2022)(C)                               |  |                              | 3,750  |  |      |   | 3,750   |           |  |   | 3,802   | 
|                                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|Total Secured Second Lien Debt                                                                             |  |                              |        |  |      | $ | 150,909 |           |  | $ | 126,956 | 
|                                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|Unsecured Debt  1.5%                                                                                      |  |                              |        |  |      |   |         |           |  |   |         | 
|Healthcare, education, and childcare  1.5%                                                                |  |                              |        |  |      |   |         |           |  |   |         | 
|Edmentum Ultimate Holdings, LLC  Term Debt (10.0% PIK, Due 6/2020)(C)(F)                                  |  | $                            | 3,613  |  |      | $ | 3,613   |           |  | $ | 3,603   | 
|Preferred Equity  1.9%                                                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Automobile  0.0%                                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|Meridian Rack & Pinion, Inc.(S) Preferred Stock(E)(G)                                                     |  |                              | 1,449  |  |      | $ | 1,449   |           |  | $ |        | 
|Buildings and Real Estate  0.1%                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|GFRC Holdings, LLC  Preferred
Stock(E)(G)                                                                 |  |                              | 1,000  |  |      |   | 1,025   |           |  |   | 305     | 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



74



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- | - | ----- | - | ----- | --------- |  | - | ----- | 
|Company and
Investment(A)(B)(W)(Y)                                                                        |  | Principal/Shares/Units(J)(X) |           |   | Cost  |   |       | FairValue | 
|Diversified/Conglomerate Manufacturing  0.5%                                                             |  |                              |           |   |       |   |       |           |  |   |       | 
|Alloy Die Casting Co.(S) Preferred
Stock(E)(G)                                                           |  |                              | 2,192     |   |       |   | 2,192 |           |  |   | 533   | 
|United Flexible, Inc.  Preferred
Stock(E)(G)                                                             |  |                              | 538       |   |       |   | 538   |           |  |   | 708   | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 2,730 |           |  |   | 1,241 | 
|Diversified/Conglomerate Service  0.0%                                                                   |  |                              |           |   |       |   |       |           |  |   |       | 
|Frontier Financial Group Inc.  Preferred
Stock(E)(G)                                                     |  |                              | 766       |   |       |   | 500   |           |  |   |      | 
|Frontier Financial Group Inc.  Preferred Stock Warrant(E)(G)                                             |  |                              | 169       |   |       |   |      |           |  |   |      | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 500   |           |  |   |      | 
|Oil and Gas  0.9%                                                                                        |  |                              |           |   |       |   |       |           |  |   |       | 
|Chemical & Injection Holdings Company, LLC  Preferred Equity Units(E)(G)                                 |  |                              | 13,830    |   |       |   | 618   |           |  |   | 2,137 | 
|Francis Drilling Fluids, Ltd.  Preferred Equity Units(E)(G)(I)                                           |  |                              | 1,656     |   |       |   | 1,215 |           |  |   |      | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 1,833 |           |  |   | 2,137 | 
|Telecommunications  0.4%                                                                                 |  |                              |           |   |       |   |       |           |  |   |       | 
|B+T Group Acquisition, Inc.(S) 
Preferred Stock(E)(G)                                                    |  |                              | 5,503     |   |       |   | 1,799 |           |  |   |      | 
|NetFortris Corp.  Preferred
Stock(E)(G)                                                                  |  |                              | 2,677,070 |   |       |   | 268   |           |  |   | 803   | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   | 2,067 |   |       | 803       | 
|Total Preferred Equity                                                                                    |  |                              |           |   |       | $ | 9,604 |           |  | $ | 4,486 | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|Common Equity  5.1%                                                                                      |  |                              |           |   |       |   |       |           |  |   |       | 
|Aerospace and Defense  0.3%                                                                              |  |                              |           |   |       |   |       |           |  |   |       | 
|FedCap Partners, LLC  Class A Membership Units ($0 Uncalled Commitment)(G)(K)(R)                         |  |                              | 80        |   |       | $ | 1,449 |           |  | $ | 616   | 
|Automobile 0.4%                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|Sea Link International IRB, Inc. Common Equity Units(E)(G)                                               |  |                              | 494,902   |   |       |   | 495   |           |  |   | 857   | 
|Beverage, Food, and Tobacco  0.3%                                                                        |  |                              |           |   |       |   |       |           |  |   |       | 
|The Mochi Ice Cream Company  Common
Stock(E)(G)                                                          |  |                              | 450       |   |       |   | 450   |           |  |   | 230   | 
|Triple H Food Processors, LLC  Common
Stock(E)(G)                                                        |  |                              | 250,000   |   |       |   | 250   |           |  |   | 595   | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 700   |           |  |   | 825   | 
|Buildings and Real Estate  0.0%                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|GFRC Holdings, LLC  Common Stock
Warrants(E)(G)                                                          |  |                              | 45.0      | % |       |   |      |           |  |   |      | 
|Cargo Transportation  0.9%                                                                               |  |                              |           |   |       |   |       |           |  |   |       | 
|AG Transportation Holdings, LLC  Member Profit Participation(E)(G)                                       |  |                              | 18.0      | % |       |   | 1,000 |           |  |   | 1,375 | 
|AG Transportation Holdings, LLC  Profit Participation Warrants(E)(G)                                     |  |                              | 12.0      | % |       |   | 244   |           |  |   | 692   | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 1,244 |           |  |   | 2,067 | 
|Chemicals, Plastics, and Rubber  0.2%                                                                    |  |                              |           |   |       |   |       |           |  |   |       | 
|Vertellus Holdings LLC  Common Stock
Units(E)(G)                                                         |  |                              | 879,121   |   |       |   | 3,017 |           |  |   | 404   | 
|Diversified/Conglomerate Manufacturing  0.9%                                                             |  |                              |           |   |       |   |       |           |  |   |       | 
|Alloy Die Casting Co.(S)  Common Stock(E)(G)                                                             |  |                              | 270       |   |       |   | 18    |           |  |   |      | 
|United Flexible, Inc.  Common
Stock(E)(G)                                                                |  |                              | 1,158     |   |       |   | 148   |           |  |   | 2,247 | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 166   |           |  |   | 2,247 | 
|Healthcare, education, and childcare  1.4%                                                               |  |                              |           |   |       |   |       |           |  |   |       | 
|Edmentum Ultimate Holdings, LLC  Common
Stock(E)(G)                                                      |  |                              | 21,429    |   |       |   | 2,636 |           |  |   |      | 
|EL Academies, Inc.  Common
Stock(E)(G)                                                                   |  |                              | 649       |   |       |   | 649   |           |  |   | 844   | 
|Leeds Novamark Capital I, L.P.  Limited Partnership Interest ($843 uncalled capital
commitment)(G)(L)(R) |  |                              | 3.5       | % |       |   | 2,152 |           |  |   | 2,695 | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 5,437 |           |  |   | 3,539 | 
|Machinery  0.1%                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|Arc Drilling Holdings LLC  Common
Stock(E)(G)                                                            |  |                              | 16.7      | % |       |   | 1,500 |           |  |   |      | 
|Precision International, LLC  Membership Unit Warrant(E)(G)                                              |  |                              | 33.3      | % |       |   |      |           |  |   | 296   | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 1,500 |           |  |   | 296   | 
|Oil and Gas  0.1%                                                                                        |  |                              |           |   |       |   |       |           |  |   |       | 
|Francis Drilling Fluids, Ltd.  Common Equity Units(E)(G)(I)                                              |  |                              | 1,656     |   |       |   | 1     |           |  |   |      | 
|W3, Co.  Common Equity(E)(G)                                                                             |  |                              | 435       |   |       |   | 499   |           |  |   | 133   | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 500   |           |  |   | 133   | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.5%                                    |  |                              |           |   |       |   |       |           |  |   |       | 
|Canopy Safety Brands, LLC  Participation
Warrant(E)(G)                                                   |  |                              | 1         |   |       |   | 500   |           |  |   | 418   | 
|Funko Acquisition Holdings, LLC(S) 
Common Units(G)(T)                                                   |  |                              | 39,483    |   |       |   | 167   |           |  |   | 672   | 
|                                                                                                          |  |                              |           |   |       |   |       |           |  |   |       | 
|                                                                                                          |  |                              |           |   |       |   | 667   |           |  |   | 1,090 | 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



75



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|----------------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- |  | ---- | - | ------- | --------- |  | - | ------- | 
|Company and
Investment(A)(B)(W)(Y)                                                                          |  | Principal/Shares/Units(J)(X) |           |  | Cost |   |         | FairValue | 
|Telecommunications  0.0%                                                                                   |  |                              |           |  |      |   |         |           |  |   |         | 
|NetFortris Corp. Common Stock
Warrant(E)(G)                                                                |  |                              | 1         |  |      |   | 1       |           |  |   |        | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Total Common Equity                                                                                         |  |                              |           |  |      | $ | 15,176  |           |  | $ | 12,074  | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Total
Non-Control/Non-Affiliate Investments                                                                 |  |                              |           |  |      | $ | 359,304 |           |  | $ | 325,567 | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|AFFILIATE INVESTMENTS(N)
20.6%                                                                             |  |                              |           |  |      |   |         |           |  |   |         | 
|Secured First Lien Debt  7.1%                                                                              |  |                              |           |  |      |   |         |           |  |   |         | 
|Diversified/Conglomerate Manufacturing  7.1%                                                               |  |                              |           |  |      |   |         |           |  |   |         | 
|Edge Adhesives Holdings, Inc.(S)  Term
Debt (L + 10.5%, 12.8% Cash, Due 2/2019)(C)                         |  | $                            | 6,200     |  |      | $ | 6,200   |           |  | $ | 6,061   | 
|Edge Adhesives Holdings, Inc.(S)  Term
Debt (L + 11.8%, 14.0% Cash, Due 2/2019)(C)                         |  |                              | 1,600     |  |      |   | 1,600   |           |  |   | 1,572   | 
|LWO Acquisitions Company LLC  Line of Credit, $0 available (L + 5.5%, 7.8% Cash, 2.0% PIK,
Due 12/2019)(C) |  |                              | 3,205     |  |      |   | 3,205   |           |  |   | 3,105   | 
|LWO Acquisitions Company LLC  Term Debt (L + 8.5%, 10.8% Cash, 2.0% PIK, Due 12/2019)(C)                   |  |                              | 11,166    |  |      |   | 11,166  |           |  |   | 6,089   | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|                                                                                                            |  |                              |           |  |      |   | 22,171  |           |  |   | 16,827  | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Total Secured First Lien Debt                                                                               |  |                              |           |  |      | $ | 22,171  |           |  | $ | 16,827  | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Secured Second Lien Debt  9.0%                                                                             |  |                              |           |  |      |   |         |           |  |   |         | 
|Diversified Natural Resources, Precious Metals and Minerals  9.0%                                          |  |                              |           |  |      |   |         |           |  |   |         | 
|Lignetics, Inc.  Term Debt (L + 9.0%, 12.0% Cash, Due 11/2022)(C)                                          |  | $                            | 6,000     |  |      | $ | 6,000   |           |  | $ | 6,014   | 
|Lignetics, Inc.  Term Debt (L + 9.0%, 12.0% Cash, Due 11/2022)(C)                                          |  |                              | 8,000     |  |      |   | 8,000   |           |  |   | 8,020   | 
|Lignetics, Inc.  Term Debt (L + 9.0%, 12.0% Cash, Due 11/2022)(C)                                          |  |                              | 3,300     |  |      |   | 3,300   |           |  |   | 3,308   | 
|Lignetics, Inc.  Term Debt (L + 9.0%, 12.0% Cash, Due 11/2022)(C)                                          |  |                              | 4,000     |  |      |   | 4,000   |           |  |   | 4,010   | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|                                                                                                            |  |                              |           |  |      |   | 21,300  |           |  |   | 21,352  | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Total Secured Second Lien Debt                                                                              |  |                              |           |  |      | $ | 21,300  |           |  | $ | 21,352  | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Unsecured Debt  0.0%                                                                                       |  |                              |           |  |      |   |         |           |  |   |         | 
|Diversified/Conglomerate Manufacturing  0.0%                                                               |  |                              |           |  |      |   |         |           |  |   |         | 
|LWO Acquisitions Company LLC  Term Debt (Due 6/2020)(C)(P)                                                 |  | $                            | 95        |  |      | $ | 95      |           |  | $ | 52      | 
|Preferred Equity  1.4%                                                                                     |  |                              |           |  |      |   |         |           |  |   |         | 
|Diversified/Conglomerate Manufacturing  1.0%                                                               |  |                              |           |  |      |   |         |           |  |   |         | 
|Edge Adhesives Holdings, Inc.(S) 
Preferred Stock(E)(G)                                                    |  |                              | 2,516     |  |      | $ | 2,516   |           |  | $ | 2,381   | 
|Diversified Natural Resources, Precious Metals and Minerals  0.4%                                          |  |                              |           |  |      |   |         |           |  |   |         | 
|Lignetics, Inc.  Preferred
Stock(E)(G)                                                                     |  |                              | 40,000    |  |      |   | 800     |           |  |   | 882     | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Total Preferred Equity                                                                                      |  |                              |           |  |      | $ | 3,316   |           |  | $ | 3,263   | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Common Equity  3.1%                                                                                        |  |                              |           |  |      |   |         |           |  |   |         | 
|Diversified/Conglomerate Manufacturing  0.0%                                                               |  |                              |           |  |      |   |         |           |  |   |         | 
|LWO Acquisitions Company LLC  Common
Units(E)(G)                                                           |  |                              | 921,000   |  |      | $ | 921     |           |  | $ |        | 
|Diversified Natural Resources, Precious Metals and Minerals  0.3%                                          |  |                              |           |  |      |   |         |           |  |   |         | 
|Lignetics, Inc.  Common
Stock(E)(G)                                                                        |  |                              | 152,603   |  |      |   | 1,855   |           |  |   | 806     | 
|Textiles and Leather  2.8%                                                                                 |  |                              |           |  |      |   |         |           |  |   |         | 
|Targus Cayman HoldCo, Ltd.  Common
Stock(E)(G)                                                             |  |                              | 3,076,414 |  |      |   | 5,009   |           |  |   | 6,556   | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Total Common Equity                                                                                         |  |                              |           |  |      | $ | 7,785   |           |  | $ | 7,362   | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 
|Total Affiliate Investments                                                                                 |  |                              |           |  |      | $ | 54,667  |           |  | $ | 48,856  | 
|                                                                                                            |  |                              |           |  |      |   |         |           |  |   |         | 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



76



---

##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)





|                                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|-------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- |  | ---- | - | ------- | --------- |  | - | ------- | 
|Company and
Investment(A)(B)(W)(Y)                                                           |  | Principal/Shares/Units(J)(X) |         |  | Cost |   |         | FairValue | 
|CONTROL INVESTMENTS(O) 
6.6%                                                                |  |                              |         |  |      |   |         |           |  |   |         | 
|Secured First Lien Debt  1.8%                                                               |  |                              |         |  |      |   |         |           |  |   |         | 
|Machinery  1.2%                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|PIC 360, LLC  Term Debt (14.0% Cash, Due 9/2019)(E)(F)                                      |  | $                            | 2,850   |  |      | $ | 2,850   |           |  | $ | 2,850   | 
|Printing and Publishing  0.6%                                                               |  |                              |         |  |      |   |         |           |  |   |         | 
|TNCP Intermediate HoldCo, LLC  Line of Credit, $500 available (8.0% Cash, Due 9/2021)(E)(F) |  | $                            | 1,500   |  |      |   | 1,500   |           |  |   | 1,500   | 
|                                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|Total Secured First Lien Debt                                                                |  |                              |         |  |      | $ | 4,350   |           |  | $ | 4,350   | 
|                                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|Secured Second Lien Debt  3.4%                                                              |  |                              |         |  |      |   |         |           |  |   |         | 
|Automobile 3.4%                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|Defiance Integrated Technologies, Inc.  Term Debt (L + 9.5%, 11.8% Cash, Due 8/2023)(E)     |  | $                            | 8,065   |  |      | $ | 8,065   |           |  | $ | 8,065   | 
|Common Equity  1.4%                                                                         |  |                              |         |  |      |   |         |           |  |   |         | 
|Automobile 0.5%                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|Defiance Integrated Technologies, Inc.  Common Stock(E)(G)                                  |  |                              | 33,321  |  |      | $ | 580     |           |  | $ | 1,088   | 
|Machinery  0.7%                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|PIC 360, LLC  Common Equity
Units(E)(G)                                                     |  |                              | 750     |  |      |   | 1       |           |  |   | 1,622   | 
|Printing and Publishing  0.2%                                                               |  |                              |         |  |      |   |         |           |  |   |         | 
|TNCP Intermediate HoldCo, LLC  Common Equity Units(E)(G)                                    |  |                              | 790,000 |  |      |   | 500     |           |  |   | 498     | 
|                                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|Total Common Equity                                                                          |  |                              |         |  |      | $ | 1,081   |           |  | $ | 3,208   | 
|                                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|Total Control Investments                                                                    |  |                              |         |  |      | $ | 13,496  |           |  | $ | 15,623  | 
|                                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 
|TOTAL INVESTMENTS(Z) 
164.5%                                                                |  |                              |         |  |      | $ | 427,467 |           |  | $ | 390,046 | 
|                                                                                             |  |                              |         |  |      |   |         |           |  |   |         | 



|(A) | Certain of the securities listed in this schedule are issued by affiliate(s) of the indicated portfolio
company. The majority of the securities listed, totaling $332.3 million at fair value, are pledged as collateral to our revolving line of credit, as described further in Note 5Borrowings in the accompanying Notes to Consolidated
Financial Statements.Under the Investment Company Act of 1940, as amended, (the 1940 Act), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying
assets represent at least 70% of our total assets. As of September 30, 2018, our investments in FedCap Partners, LLC (FedCap), Leeds Novamark Capital I, L.P. (Leeds), Funko Acquisition Holdings, LLC (Funko),
and XMedius Solutions Inc. (XMedius) are considered non-qualifying assets under Section 55 of the 1940 Act. Such non-qualifying assets represent 2.9% of
total investments, at fair value, as of September 30, 2018.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(B) | Unless indicated otherwise, all cash interest rates are indexed to
30-day London Interbank Offered Rate (LIBOR or L), which was 2.27% as of September 30, 2018. If applicable,
paid-in-kind (PIK) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash
interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(C) | Fair value was based on an internal yield analysis or on estimates of value submitted by ICE Data Pricing and
Reference Data, LLC (ICE)(formerly Standard and Poors Securities Evaluations, Inc.).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(D) | Fair value was based on the indicative bid price on or near September 30, 2018, offered by the respective
syndication agents trading desk.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



|(E) | Fair value was based on the total enterprise value of the portfolio company, which was then allocated to the
portfolio companys securities in order of their relative priority in the capital structure.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(F) | Debt security has a fixed interest rate.
|--- | ----------------------------------------



|(G) | Security is non-income producing.
|--- | ---------------------------------



|(H) | Debt security is on non-accrual status.
|--- | ---------------------------------------



|(I) | On September 29, 2018, Francis Drilling Fluids, Ltd. filed for Chapter 11 bankruptcy protection.
|--- | ------------------------------------------------------------------------------------------------



|(J) | Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned
within such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(K) | There are certain limitations on our ability to transfer our units owned, withdraw or resign prior to
dissolution of the entity, which must occur no later than May 3, 2020.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(L) | There are certain limitations on our ability to withdraw our partnership interest prior to dissolution of the
entity, which must occur no later than May 9, 2024 or two years after all outstanding leverage has matured.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(M) | Non-Control/Non-Affiliate
investments, as defined by the 1940 Act, are those that are neither Control nor Affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



77



---

##### Table of Contents

|(N) | Affiliate investments, as defined by the 1940 Act, are those in which we own, with the power to vote, between
and inclusive of 5.0% and 25.0% of the issued and outstanding voting securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(O) | Control investments, as defined by the 1940 Act, are those where we have the power to exercise a controlling
influence over the management or policies of the portfolio company, which may include owning, with the power to vote, more than 25.0% of the issued and outstanding voting securities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(P) | Debt security does not have a stated interest rate that is payable thereon.
|--- | ---------------------------------------------------------------------------

|(Q) | Fair value was based on the expected exit or payoff amount, where such event has occurred or is expected to
occur imminently.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(R) | Fair value was based on net asset value provided by the fund as a practical expedient.
|--- | --------------------------------------------------------------------------------------

|(S) | One of our affiliated funds, Gladstone Investment Corporation,
co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(T) | Our investment in Funko was valued using Level 2 inputs within the FASB Accounting Standard Codification
(ASC) Topic 820, Fair Value Measurements and Disclosures (ASC 820) fair value hierarchy. Our common units in Funko are convertible to class A common stock in Funko, Inc. upon meeting certain requirements. Fair
value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Stock Market under the trading symbol FNKO. Refer to Note
3Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(U) | The cash interest rate on this investment was indexed to 90-day LIBOR,
which was 2.40% as of September 30, 2018.
|--- | ----------------------------------------------------------------------------------------------------------------

|(V) | The cash interest rate on this investment was indexed to the U.S. Prime Rate (PRIME), which was
5.25% as of September 30, 2018.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(W) | Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the ASC 820 fair
value hierarchy. Refer to Note 3Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(X) | Represents the principal balance for debt investments and the number of shares/units held for equity
investments. Warrants are represented as a percentage of ownership, as applicable.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Y) | Category percentages represent the fair value of each category and subcategory as a percentage of net assets as
of September 30, 2018.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

|(Z) | Cumulative gross unrealized depreciation for federal income tax purposes is $62.7 million; cumulative
gross unrealized appreciation for federal income tax purposes is $15.4 million. Cumulative net unrealized depreciation is $47.4 million, based on a tax cost of $437.4 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(AA) | Investment was exited subsequent to September 30, 2018. Refer to Note 15Subsequent Eventsin
the accompanyingNotes to Consolidated Financial Statements for additional information.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



78



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|---------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------- | --------- |  | - | ------- | 
|Company and
Investment(A)(B)(W)(Z)                                                                   |  | Principal/Shares/Units(J)(X) |        |  | Cost |   |         | FairValue | 
|NON-CONTROL/NON-AFFILIATE
INVESTMENTS(M)  132.4%                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Secured First Lien Debt  67.2%                                                                      |  |                              |        |  |      |   |         |           |  |   |         | 
|Automobile  1.7%                                                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Meridian Rack & Pinion, Inc.(S)
 Term Debt (13.5%, Due 12/2018)(C)                                  |  | $                            | 4,140  |  |      | $ | 4,140   |           |  | $ | 3,643   | 
|Beverage, Food, and Tobacco  3.2%                                                                   |  |                              |        |  |      |   |         |           |  |   |         | 
|Triple H Food Processors, LLCLine of Credit, $1,500 available (8.0%, Due 8/2018)(C)                 |  |                              |       |  |      |   |        |           |  |   |        | 
|Triple H Food Processors, LLC  Term Debt (9.5%, Due 8/2020)(C)                                      |  |                              | 6,800  |  |      |   | 6,800   |           |  |   | 6,928   | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                     |  |                              |        |  |      |   | 6,800   |           |  |   | 6,928   | 
|Buildings and Real Estate  1.0%                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|GFRC Holdings, LLC  Line of Credit, $20 available (9.2%, Due 9/2018)(E)                             |  |                              | 1,180  |  |      |   | 1,180   |           |  |   | 1,180   | 
|GFRC Holdings, LLC  Term Debt (9.2%, Due
9/2018)(E)                                                 |  |                              | 1,000  |  |      |   | 1,000   |           |  |   | 1,000   | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                     |  |                              |        |  |      |   | 2,180   |           |  |   | 2,180   | 
|Diversified/Conglomerate Service  20.1%                                                             |  |                              |        |  |      |   |         |           |  |   |         | 
|IA Tech, LLC  Term Debt (12.2%, Due
6/2021)(C)                                                      |  |                              | 23,000 |  |      |   | 23,000  |           |  |   | 23,633  | 
|Travel Sentry, Inc.  Term Debt (10.3%, Due 12/2021)(C)(U)                                           |  |                              | 8,902  |  |      |   | 8,902   |           |  |   | 9,170   | 
|Vision Government Solutions, Inc.  Line of Credit, $0 available (10.0%, Due 1/2019)(C)              |  |                              | 1,450  |  |      |   | 1,450   |           |  |   | 1,420   | 
|Vision Government Solutions, Inc.  Delayed Draw Term Loan, $900 available (10.0%, Due 1/2019)(C)(F) |  |                              | 1,600  |  |      |   | 1,600   |           |  |   | 1,485   | 
|Vision Government Solutions, Inc.  Term Debt (10.0%, Due 1/2019)(C)                                 |  |                              | 9,000  |  |      |   | 9,000   |           |  |   | 8,390   | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                     |  |                              |        |  |      |   | 43,952  |           |  |   | 44,098  | 
|Diversified/Conglomerate Manufacturing  1.6%                                                        |  |                              |        |  |      |   |         |           |  |   |         | 
|Alloy Die Casting Corp.(S)  Term Debt
(13.5%, Due 10/2018)(C)(H)                                    |  |                              | 5,235  |  |      |   | 5,235   |           |  |   | 3,272   | 
|Alloy Die Casting Corp.(S)  Term Debt
(13.5%, Due 10/2018)(C)(H)                                    |  |                              | 75     |  |      |   | 75      |           |  |   | 47      | 
|Alloy Die Casting Corp.(S)  Term Debt
(Due 10/2018)(C)(P)                                           |  |                              | 390    |  |      |   | 390     |           |  |   | 246     | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                     |  |                              |        |  |      |   | 5,700   |           |  |   | 3,565   | 
|Healthcare, education, and childcare  9.8%                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|EL Academies, Inc.  Line of Credit (10.7%, Due 8/2020)(I)                                           |  |                              |       |  |      |   |        |           |  |   |        | 
|EL Academies, Inc.  Delayed Draw Term Loan (10.7%, Due 8/2022)(I)                                   |  |                              |       |  |      |   |        |           |  |   |        | 
|EL Academies, Inc.  Term Debt (10.7%, Due 8/2022)(I)                                                |  |                              | 12,000 |  |      |   | 12,000  |           |  |   | 12,000  | 
|TWS Acquisition Corporation  Term Debt (9.2%, Due 7/2020)(C)                                        |  |                              | 9,432  |  |      |   | 9,432   |           |  |   | 9,609   | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                     |  |                              |        |  |      |   | 21,432  |           |  |   | 21,609  | 
|Leisure, Amusement, Motion Pictures, Entertainment  3.6%                                            |  |                              |        |  |      |   |         |           |  |   |         | 
|Flight Fit N Fun LLC  Term Debt (15.2%, Due 9/2020)(Q)(Y)                                           |  |                              | 7,800  |  |      |   | 7,800   |           |  |   | 7,800   | 
|Machinery  0.4%                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|Precision International, LLC  Term Debt (10.0% PIK, Due 9/2021)(C)(F)                               |  |                              | 808    |  |      |   | 808     |           |  |   | 798     | 
|Oil and Gas  9.2%                                                                                   |  |                              |        |  |      |   |         |           |  |   |         | 
|WadeCo Specialties, Inc.  Line of Credit, $425 available (8.2%, Due 4/2018)(E)                      |  |                              | 2,575  |  |      |   | 2,575   |           |  |   | 2,575   | 
|WadeCo Specialties, Inc.  Term Debt (8.2%, Due 3/2019)(E)                                           |  |                              | 10,441 |  |      |   | 10,427  |           |  |   | 10,440  | 
|WadeCo Specialties, Inc.  Term Debt (12.0%, Due 3/2019)(E)                                          |  |                              | 7,000  |  |      |   | 7,000   |           |  |   | 7,000   | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                     |  |                              |        |  |      |   | 20,002  |           |  |   | 20,015  | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only) 3.0%                                |  |                              |        |  |      |   |         |           |  |   |         | 
|Canopy Safety Brands, LLC  Line of Credit, $500 available (7.7%, Due 9/2019)(C)                     |  |                              |       |  |      |   |        |           |  |   |        | 
|Canopy Safety Brands, LLC  Term Debt (10.7%, Due 9/2021)(C)                                         |  |                              | 6,600  |  |      |   | 6,600   |           |  |   | 6,616   | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                     |  |                              |        |  |      |   | 6,600   |           |  |   | 6,616   | 
|Printing and Publishing  0.0%                                                                       |  |                              |        |  |      |   |         |           |  |   |         | 
|Chinese Yellow Pages Company  Line of Credit, $0 available (8.0%, Due 2/2015)(E)(V)                 |  |                              | 107    |  |      |   | 107     |           |  |   |        | 
|Telecommunications  13.6%                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|B+T Group Acquisition Inc.(S)  Term Debt
(13.0%, Due 12/2019)(C)                                    |  |                              | 6,000  |  |      |   | 6,000   |           |  |   | 5,955   | 
|NetFortris Corp.  Line of Credit, $2,000 available (11.2%, Due 11/2017)(C)                          |  |                              |       |  |      |   |        |           |  |   |        | 
|NetFortris Corp.  Term Debt (9.6%, Due
2/2021)(C)                                                   |  |                              | 24,000 |  |      |   | 24,000  |           |  |   | 24,240  | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                                     |  |                              |        |  |      |   | 30,000  |           |  |   | 30,195  | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|Total Secured First Lien Debt                                                                        |  |                              |        |  |      | $ | 149,521 |           |  | $ | 147,447 | 
|                                                                                                     |  |                              |        |  |      |   |         |           |  |   |         | 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|------------------------------------------------------------------------------------------ |  | ---------------------------- | ------ |  | ---- | - | ------- | --------- |  | - | ------- | 
|Company and
Investment(A)(B)(W)(Z)                                                         |  | Principal/Shares/Units(J)(X) |        |  | Cost |   |         | FairValue | 
|Secured Second Lien Debt  59.1%                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|Automobile  2.2%                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|Sea Link International IRB, Inc.  Term Debt (11.3%, Due 11/2021)(C)(F)                    |  | $                            | 5,000  |  |      | $ | 4,975   |           |  | $ | 5,025   | 
|Beverage, Food, and Tobacco  3.1%                                                         |  |                              |        |  |      |   |         |           |  |   |         | 
|The Mochi Ice Cream Company  Term Debt (11.7%, Due 1/2021)(C)                             |  |                              | 6,750  |  |      |   | 6,750   |           |  |   | 6,809   | 
|Cargo Transportation 6.0%                                                                 |  |                              |        |  |      |   |         |           |  |   |         | 
|AG Transportation Holdings, LLC.  Term Debt (13.3%, Due 3/2020)(C)                        |  |                              | 13,000 |  |      |   | 13,000  |           |  |   | 13,081  | 
|Chemicals, Plastics, and Rubber  0.4%                                                     |  |                              |        |  |      |   |         |           |  |   |         | 
|Vertellus Holdings LLC  Term Debt (13.2%, Due 10/2021)(D)                                 |  |                              | 1,099  |  |      |   | 1,099   |           |  |   | 929     | 
|Diversified/Conglomerate Service  16.4%                                                   |  |                              |        |  |      |   |         |           |  |   |         | 
|DataPipe, Inc.  Term Debt (9.2%, Due
9/2019)(D)(Y)                                        |  |                              | 2,000  |  |      |   | 1,966   |           |  |   | 2,005   | 
|HB Capital Resources, Ltd.  Term Debt (11.5%, Due 10/2022)(C)                             |  |                              | 22,000 |  |      |   | 22,000  |           |  |   | 22,110  | 
|Keystone Acquisition Corp. Term Debt (10.5%, Due 5/2025)(D)                               |  |                              | 4,000  |  |      |   | 3,922   |           |  |   | 3,960   | 
|LDiscovery, LLC  Term Debt (11.3%, Due
12/2023)(D)                                        |  |                              | 5,000  |  |      |   | 4,815   |           |  |   | 4,550   | 
|PSC Industrial Holdings Corp. Term Debt (9.5%, Due 12/2021)(Q)(Y)                         |  |                              | 3,500  |  |      |   | 3,452   |           |  |   | 3,500   | 
|                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                           |  |                              |        |  |      |   | 36,155  |           |  |   | 36,125  | 
|Diversified/Conglomerate Manufacturing  8.2%                                              |  |                              |        |  |      |   |         |           |  |   |         | 
|United Flexible, Inc. Term Debt (10.7%, 2.0% PIK, Due 2/2022)(C)                          |  |                              | 17,993 |  |      |   | 17,909  |           |  |   | 17,903  | 
|Healthcare, education, and childcare  8.8%                                                |  |                              |        |  |      |   |         |           |  |   |         | 
|Medical Solutions Holdings, Inc.  Term Debt (9.5%, Due 12/2023)(D)                        |  |                              | 3,000  |  |      |   | 2,956   |           |  |   | 2,970   | 
|Merlin International, Inc.  Term Debt (11.2%, Due 8/2022)(C)                              |  |                              | 10,000 |  |      |   | 10,000  |           |  |   | 10,150  | 
|NetSmart Technologies, Inc. Term Debt (10.7%, Due 10/2023)(D)                             |  |                              | 3,660  |  |      |   | 3,609   |           |  |   | 3,678   | 
|New Trident Holdcorp, Inc. Term Debt (10.7%, Due 7/2020)(D)                               |  |                              | 4,000  |  |      |   | 4,000   |           |  |   | 2,412   | 
|                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                           |  |                              |        |  |      |   | 20,565  |           |  |   | 19,210  | 
|Home and Office Furnishings, Housewares and Durable Consumer Products  4.6%               |  |                              |        |  |      |   |         |           |  |   |         | 
|Belnick, Inc.  Term Debt (11.0%, Due
8/2023)(C)(F)                                        |  |                              | 10,000 |  |      |   | 10,000  |           |  |   | 10,100  | 
|Hotels, Motels, Inns, and Gaming  3.2%                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Vacation Rental Pros Property Management, LLC  Term Debt (11.2%, 3.0% PIK, Due 6/2023)(C) |  |                              | 7,145  |  |      |   | 7,145   |           |  |   | 7,136   | 
|Oil and Gas  5.7%                                                                         |  |                              |        |  |      |   |         |           |  |   |         | 
|Francis Drilling Fluids, Ltd.  Term Debt (11.9% PIK, Due 4/2020)(C)                       |  |                              | 16,739 |  |      |   | 16,611  |           |  |   | 8,626   | 
|Francis Drilling Fluids, Ltd.  Term Debt (10.8% PIK, Due 4/2020)(C)                       |  |                              | 7,733  |  |      |   | 7,673   |           |  |   | 3,931   | 
|                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                           |  |                              |        |  |      |   | 24,284  |           |  |   | 12,557  | 
|Telecommunications  0.5%                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|Neustar, Inc.  Term Debt (9.2%, Due
8/2025)(D)                                            |  |                              | 1,000  |  |      |   | 1,000   |           |  |   | 1,015   | 
|                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|Total Secured Second Lien Debt                                                             |  |                              |        |  |      | $ | 142,882 |           |  | $ | 129,890 | 
|                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|Unsecured Debt  1.5%                                                                      |  |                              |        |  |      |   |         |           |  |   |         | 
|Healthcare, education, and childcare  1.5%                                                |  |                              |        |  |      |   |         |           |  |   |         | 
|Edmentum Ultimate Holdings, LLC  Term Debt (10.0% PIK, Due 6/2020)(C)(F)                  |  | $                            | 3,324  |  |      | $ | 3,324   |           |  | $ | 3,324   | 
|Preferred Equity  2.6%                                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Automobile  0.1%                                                                          |  |                              |        |  |      |   |         |           |  |   |         | 
|Meridian Rack & Pinion, Inc.(S) Preferred Stock(E)(G)                                     |  |                              | 1,449  |  |      | $ | 1,449   |           |  | $ | 133     | 
|Buildings and Real Estate  0.3%                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|GFRC Holdings, LLC  Preferred
Stock(E)(G)                                                 |  |                              | 1,000  |  |      |   | 1,025   |           |  |   | 824     | 
|Diversified/Conglomerate Service  0.2%                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Frontier Financial Group Inc.  Preferred
Stock(I)(G)                                      |  |                              | 766    |  |      |   | 500     |           |  |   | 500     | 
|Frontier Financial Group Inc.  Preferred Stock Warrant(I)(G)                              |  |                              | 168    |  |      |   |        |           |  |   |        | 
|                                                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                           |  |                              |        |  |      |   | 500     |           |  |   | 500     | 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|----------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ----- | - | ------ | --------- |  | - | ----- | 
|Company and
Investment(A)(B)(W)(Z)                                                                          |  | Principal/Shares/Units(J)(X) |         |   | Cost  |   |        | FairValue | 
|Diversified/Conglomerate Manufacturing  0.3%                                                               |  |                              |         |   |       |   |        |           |  |   |       | 
|Alloy Die Casting, Corp.(S) Preferred
Stock(E)(G)                                                          |  |                              | 2,192   |   |       |   | 2,192  |           |  |   |      | 
|United Flexible, Inc. Preferred
Stock(E)(G)                                                                |  |                              | 538     |   |       |   | 538    |           |  |   | 554   | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|                                                                                                            |  |                              |         |   |       |   | 2,730  |           |  |   | 554   | 
|Leisure, Amusement, Motion Pictures, Entertainment  0.6%                                                   |  |                              |         |   |       |   |        |           |  |   |       | 
|Flight Fit N Fun LLC  Preferred
Stock(G)(Q)(Y)                                                             |  |                              | 700,000 |   |       |   | 700    |           |  |   | 1,425 | 
|Oil and Gas  0.9%                                                                                          |  |                              |         |   |       |   |        |           |  |   |       | 
|Francis Drilling Fluids, Ltd.  Preferred Equity Units(E)(G)                                                |  |                              | 1,656   |   |       |   | 1,215  |           |  |   |      | 
|WadeCo. Specialties, Inc.  Preferred
Stock(E)(G)                                                           |  |                              | 1,000   |   |       |   | 618    |           |  |   | 2,000 | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|                                                                                                            |  |                              |         |   |       |   | 1,833  |           |  |   | 2,000 | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.1%                                      |  |                              |         |   |       |   |        |           |  |   |       | 
|Funko Acquisition Holdings, LLC(S) 
Preferred Equity Units(E)(G)                                           |  |                              | 260     |   |       |   | 167    |           |  |   | 159   | 
|Telecommunications  0.1%                                                                                   |  |                              |         |   |       |   |        |           |  |   |       | 
|B+T Group Acquisition, Inc.(S) 
Preferred Stock(E)(G)(J)                                                   |  |                              | 5,503   |   |       |   | 1,799  |           |  |   | 140   | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|Total Preferred Equity                                                                                      |  |                              |         |   |       | $ | 10,203 |           |  | $ | 5,735 | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|Common Equity  2.0%                                                                                        |  |                              |         |   |       |   |        |           |  |   |       | 
|Aerospace and Defense  0.3%                                                                                |  |                              |         |   |       |   |        |           |  |   |       | 
|FedCap Partners, LLC  Class A Membership Units ($0 Uncalled Commitment)(G)(K)(R)                           |  |                              | 80      |   |       | $ | 1,634  |           |  | $ | 751   | 
|Automobile 0.2%                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|Sea Link International IRB, Inc. Common Equity Units(E)(G)                                                 |  |                              | 494,902 |   |       |   | 495    |           |  |   | 362   | 
|Beverage, Food, and Tobacco  0.2%                                                                          |  |                              |         |   |       |   |        |           |  |   |       | 
|The Mochi Ice Cream Company  Common
Stock(E)(G)                                                            |  |                              | 450     |   |       |   | 450    |           |  |   |      | 
|Triple H Food Processors, LLC  Common
Stock(E)(G)                                                          |  |                              | 250,000 |   |       |   | 250    |           |  |   | 366   | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|                                                                                                            |  |                              |         |   |       |   | 700    |           |  |   | 366   | 
|Buildings and Real Estate  0.0%                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|GFRC Holdings, LLC  Common Stock
Warrants(E)(G)                                                            |  |                              | 45.0    | % |       |   |       |           |  |   |      | 
|Cargo Transportation  0.0%                                                                                 |  |                              |         |   |       |   |        |           |  |   |       | 
|AG Transportation Holdings, LLC  Member Profit Participation(E)(G)                                         |  |                              | 18.0    | % |       |   | 1,000  |           |  |   |      | 
|AG Transportation Holdings, LLC  Profit Participation Warrants(E)(G)                                       |  |                              | 12.0    | % |       |   | 244    |           |  |   |      | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|                                                                                                            |  |                              |         |   |       |   | 1,244  |           |  |   |      | 
|Chemicals, Plastics, and Rubber  0.2%                                                                      |  |                              |         |   |       |   |        |           |  |   |       | 
|Vertellus Holdings LLC  Common Stock
Units(E)(G)                                                           |  |                              | 879,121 |   |       |   | 3,018  |           |  |   | 442   | 
|Diversified/Conglomerate Manufacturing  0.0%                                                               |  |                              |         |   |       |   |        |           |  |   |       | 
|Alloy Die Casting, Corp.(S)  Common
Stock(E)(G)                                                            |  |                              | 270     |   |       |   | 18     |           |  |   |      | 
|United Flexible, Inc.  Common
Stock(E)(G)                                                                  |  |                              | 1,158   |   |       |   | 148    |           |  |   |      | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|                                                                                                            |  |                              |         |   |       |   | 166    |           |  |   |      | 
|Healthcare, education, and childcare  0.9%                                                                 |  |                              |         |   |       |   |        |           |  |   |       | 
|Edmentum Ultimate Holdings, LLC  Common
Stock(E)(G)                                                        |  |                              | 21,429  |   |       |   | 2,636  |           |  |   |      | 
|EL Academies, Inc.  Common
Stock(G)(I)                                                                     |  |                              | 500     |   |       |   | 500    |           |  |   | 500   | 
|Leeds Novamark Capital I, L.P.  Limited Partnership Interest ($1,581 uncalled capital
commitment)(G)(L)(R) |  |                              | 3.5     | % |       |   | 1,628  |           |  |   | 1,645 | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|                                                                                                            |  |                              |         |   | 4,764 |   |        | 2,145     | 
|Machinery  0.0%                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|Precision International, LLC  Membership Unit Warrant(E)(G)                                                |  |                              | 33.3    | % |       |   |       |           |  |   |      | 
|Oil and Gas  0.1%                                                                                          |  |                              |         |   |       |   |        |           |  |   |       | 
|Francis Drilling Fluids, Ltd.  Common Equity Units(E)(G)                                                   |  |                              | 1,656   |   |       |   | 1      |           |  |   |      | 
|W3, Co.  Common Equity(D)(G)                                                                               |  |                              | 435     |   |       |   | 499    |           |  |   | 139   | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|                                                                                                            |  |                              |         |   |       |   | 500    |           |  |   | 139   | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.1%                                      |  |                              |         |   |       |   |        |           |  |   |       | 
|Canopy Safety Brands, LLC  Participation
Warrant(E)(G)                                                     |  |                              | 1       |   |       |   | 500    |           |  |   | 259   | 
|Funko Acquisition Holdings, LLC(S) 
Common Stock(E)(G)                                                     |  |                              | 975     |   |       |   |       |           |  |   |      | 
|                                                                                                            |  |                              |         |   |       |   |        |           |  |   |       | 
|                                                                                                            |  |                              |         |   |       |   | 500    |           |  |   | 259   | 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



81



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and
Investment(A)(B)(W)(Z)                                                          |  | Principal/Shares/Units(J)(X) |           |  | Cost |   |         | Fair Value | 
|Telecommunications  0.0%                                                                   |  |                              |           |  |      |   |         |            |  |   |         | 
|NetFortris Corp. Common Stock
Warrant(E)(G)                                                |  |                              | 1         |  |      |   | 1       |            |  |   |        | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                         |  |                              |           |  |      | $ | 13,022  |            |  | $ | 4,464   | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Total
Non-Control/Non-Affiliate Investments                                                 |  |                              |           |  |      | $ | 318,952 |            |  | $ | 290,860 | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|AFFILIATE INVESTMENTS(N)
19.4%                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  8.6%                                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|Diversified/Conglomerate Manufacturing  8.6%                                               |  |                              |           |  |      |   |         |            |  |   |         | 
|Edge Adhesives Holdings, Inc.(S)  Term
Debt (12.5%, Due 2/2019)(C)                         |  | $                            | 6,200     |  |      | $ | 6,200   |            |  | $ | 5,704   | 
|Edge Adhesives Holdings, Inc.(S)  Term
Debt (13.8%, Due 2/2019)(C)                         |  |                              | 1,600     |  |      |   | 1,600   |            |  |   | 1,480   | 
|LWO Acquisitions Company LLC  Line of Credit, $0 available (6.7%, 2.0% PIK, Due 3/2018)(C) |  |                              | 2,748     |  |      |   | 2,746   |            |  |   | 2,336   | 
|LWO Acquisitions Company LLC  Term Debt (9.7%, 2.0% PIK, Due 12/2019)(C)                   |  |                              | 10,942    |  |      |   | 10,921  |            |  |   | 9,301   | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                            |  |                              |           |  |      |   | 21,467  |            |  |   | 18,821  | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Secured First Lien Debt                                                               |  |                              |           |  |      | $ | 21,467  |            |  | $ | 18,821  | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured Second Lien Debt  7.8%                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Diversified Natural Resources, Precious Metals and Minerals  7.8%                          |  |                              |           |  |      |   |         |            |  |   |         | 
|Lignetics, Inc.  Term Debt (12.0%, Due
2/2021)(C)                                          |  | $                            | 6,000     |  |      | $ | 6,000   |            |  | $ | 5,998   | 
|Lignetics, Inc.  Term Debt (12.0%, Due
2/2021)(C)                                          |  |                              | 8,000     |  |      |   | 8,000   |            |  |   | 7,997   | 
|Lignetics, Inc.  Term Debt (12.0%, Due
2/2021)(C)                                          |  |                              | 3,300     |  |      |   | 3,300   |            |  |   | 3,299   | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                            |  |                              |           |  |      |   | 17,300  |            |  |   | 17,294  | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Secured Second Lien Debt                                                              |  |                              |           |  |      | $ | 17,300  |            |  | $ | 17,294  | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Preferred Equity  0.4%                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|Diversified/Conglomerate Manufacturing  0.0%                                               |  |                              |           |  |      |   |         |            |  |   |         | 
|Edge Adhesives Holdings, Inc.(S) 
Preferred Stock(E)(G)                                    |  |                              | 2,516     |  |      | $ | 2,516   |            |  | $ |        | 
|Diversified Natural Resources, Precious Metals and Minerals  0.4%                          |  |                              |           |  |      |   |         |            |  |   |         | 
|Lignetics, Inc.  Preferred
Stock(E)(G)                                                     |  |                              | 40,000    |  |      |   | 800     |            |  |   | 826     | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Preferred Equity                                                                      |  |                              |           |  |      | $ | 3,316   |            |  | $ | 826     | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Common Equity  2.6%                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Diversified/Conglomerate Manufacturing  0.0%                                               |  |                              |           |  |      |   |         |            |  |   |         | 
|LWO Acquisitions Company LLC  Common
Units(E)(G)                                           |  |                              | 921,000   |  |      | $ | 921     |            |  | $ |        | 
|Diversified Natural Resources, Precious Metals and Minerals  0.4%                          |  |                              |           |  |      |   |         |            |  |   |         | 
|Lignetics, Inc.  Common
Stock(E)(G)                                                        |  |                              | 152,603   |  |      |   | 1,855   |            |  |   | 828     | 
|Textiles and Leather  2.2%                                                                 |  |                              |           |  |      |   |         |            |  |   |         | 
|Targus Cayman HoldCo, Ltd.  Common
Stock(E)(G)                                             |  |                              | 3,076,414 |  |      |   | 5,009   |            |  |   | 4,879   | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                         |  |                              |           |  |      | $ | 7,785   |            |  | $ | 5,707   | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Affiliate Investments                                                                 |  |                              |           |  |      | $ | 49,868  |            |  | $ | 42,648  | 
|                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|CONTROL INVESTMENTS(O) 
8.6%                                                               |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  3.5%                                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|Machinery  1.8%                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|PIC 360, LLC  Term Debt (14.0%, Due
12/2017)(E)(F)                                         |  | $                            | 4,000     |  |      | $ | 4,000   |            |  | $ | 4,000   | 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|--------------------------------------------------------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------- | --------- |  | - | ------- | 
|Company and
Investment(A)(B)(W)(Z)                                                |  | Principal/Shares/Units(J)(X) |        |  | Cost |   |         | FairValue | 
|Printing and Publishing  1.7%                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Sunshine Media Holdings  Line of Credit, $672 available (8.0%, Due 5/2018)(E)(F) |  |                              | 1,328  |  |      |   | 1,328   |           |  |   | 1,328   | 
|Sunshine Media Holdings  Term Debt (8.0%, Due 5/2018)(E)(F)(H)                   |  |                              | 5,000  |  |      |   | 3,525   |           |  |   | 679     | 
|Sunshine Media Holdings  Term Debt (4.8%, Due 5/2018)(E)(H)                      |  |                              | 11,948 |  |      |   | 8,401   |           |  |   | 1,621   | 
|Sunshine Media Holdings  Term Debt (5.5%, Due 5/2018)(E)(H)                      |  |                              | 10,700 |  |      |   | 10,700  |           |  |   |        | 
|                                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                  |  |                              |        |  |      |   | 23,954  |           |  |   | 3,628   | 
|                                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|Total Secured First Lien Debt                                                     |  |                              |        |  |      | $ | 27,954  |           |  | $ | 7,628   | 
|                                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|Secured Second Lien Debt  3.7%                                                   |  |                              |        |  |      |   |         |           |  |   |         | 
|Automobile 3.7%                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|Defiance Integrated Technologies, Inc.  Term Debt (11.0%, Due 2/2019)(E)         |  | $                            | 8,065  |  |      | $ | 8,065   |           |  | $ | 8,065   | 
|Preferred Equity  0.0%                                                           |  |                              |        |  |      |   |         |           |  |   |         | 
|Printing and Publishing  0.0%                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Sunshine Media Holdings  Preferred
Stock(E)(G)(J)                                |  |                              | 15,270 |  |      | $ | 5,275   |           |  | $ |        | 
|Common Equity  1.4%                                                              |  |                              |        |  |      |   |         |           |  |   |         | 
|Automobile 1.3%                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|Defiance Integrated Technologies, Inc.  Common Stock(E)(G)                       |  |                              | 33,321 |  |      | $ | 580     |           |  | $ | 2,856   | 
|Machinery  0.1%                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|PIC 360, LLC  Common Equity
Units(E)(G)                                          |  |                              | 1      |  |      |   | 1       |           |  |   | 316     | 
|Printing and Publishing  0.0%                                                    |  |                              |        |  |      |   |         |           |  |   |         | 
|Sunshine Media Holdings  Common
Stock(E)(G)                                      |  |                              | 1,867  |  |      |   | 740     |           |  |   |        | 
|Sunshine Media Holdings  Common Stock
Warrants(E)(G)                             |  |                              | 72     |  |      |   |        |           |  |   |        | 
|                                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|                                                                                  |  |                              |        |  |      |   | 740     |           |  |   |        | 
|                                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|Total Common Equity                                                               |  |                              |        |  |      | $ | 1,321   |           |  | $ | 3,172   | 
|                                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|Total Control Investments                                                         |  |                              |        |  |      | $ | 42,615  |           |  | $ | 18,865  | 
|                                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 
|TOTAL INVESTMENTS(T) 
160.4%                                                     |  |                              |        |  |      | $ | 411,435 |           |  | $ | 352,373 | 
|                                                                                  |  |                              |        |  |      |   |         |           |  |   |         | 



|(A) | Certain of the securities listed in this schedule are issued by affiliate(s) of the indicated portfolio company.
The majority of the securities listed, totaling $317.4 million at fair value, are pledged as collateral to our Credit Facility, as described further in Note 5Borrowings.Under the Investment Company Act of 1940, as amended, (the
1940 Act), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2017,
two of our investments (FedCap Partners, LLC and Leeds Novamark Capital I, L.P.) are considered non-qualifying assets under Section 55 of the 1940 Act. Such
non-qualifying assets represent 0.7% of total investments, at fair value, as of September 30, 2017.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Interest rate percentages represent cash interest rates in effect at September 30, 2017, and due dates
represent the contractual maturity date. Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (LIBOR), which was 1.23% as of September 30,
2017. If applicable, paid-in-kind (PIK) interest rates are noted separately from the cash interest rates and any unused line of credit fees are excluded.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Fair value was based on an internal yield analysis or on estimates of value submitted by Standard &
Poors Securities Evaluations, Inc. (SPSE).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Fair value was based on the indicative bid price on or near September 30, 2017, offered by the respective
syndication agents trading desk.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(E) | Fair value was based on the total enterprise value of the portfolio company, which was then allocated to the
portfolio companys securities in order of their relative priority in the capital structure.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | Debt security has a fixed interest rate.
|--- | ----------------------------------------

|(G) | Security is non-income producing.
|--- | ---------------------------------

|(H) | Debt security is on non-accrual status.
|--- | ---------------------------------------

|(I) | New investment valued at cost, as it was determined that the price paid during the quarter ended
September 30, 2017 best represents fair value as of September 30, 2017.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(J) | Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned within
such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(K) | There are certain limitations on our ability to transfer our units owned, withdraw or resign prior to
dissolution of the entity, which must occur no later than May 3, 2020.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(L) | There are certain limitations on our ability to withdraw our partnership interest prior to dissolution of the
entity, which must occur no later than May 9, 2024 or two years after all outstanding leverage has matured.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

THE
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.



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|(M) | Non-Control/Non-Affiliate
investments, as defined by the 1940 Act, are those that are neither Control nor Affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(N) | Affiliate investments, as defined by the 1940 Act, are those in which we own, with the power to vote, between
and inclusive of 5.0% and 25.0% of the issued and outstanding voting securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(O) | Control investments, as defined by the 1940 Act, are those where we have the power to exercise a controlling
influence over the management or policies of the portfolio company, which may include owning, with the power to vote, more than 25.0% of the issued and outstanding voting securities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(P) | Debt security does not have a stated interest rate that is payable thereon.
|--- | ---------------------------------------------------------------------------

|(Q) | Fair value was based on the expected exit or payoff amount, where such event has occurred or is expected to
occur imminently.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(R) | Fair value was based on net asset value provided by the fund as a practical expedient.
|--- | --------------------------------------------------------------------------------------

|(S) | One of our affiliated funds, Gladstone Investment Corporation,
co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(T) | Cumulative gross unrealized depreciation for federal income tax purposes is $71.7 million; cumulative gross
unrealized appreciation for federal income tax purposes is $7.5 million. Cumulative net unrealized depreciation is $64.3 million, based on a tax cost of $416.6 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(U) | The cash interest rate on this investment was indexed to 90-day LIBOR,
which was 1.33% as of September 30, 2017.
|--- | ----------------------------------------------------------------------------------------------------------------

|(V) | The cash interest rate on this investment was indexed to the U.S. Prime Rate, which was 4.25% as of
September 30, 2017.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(W) | Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB
Accounting Standard Codification (ASC) Topic 820, Fair Value Measurements and Disclosures (ASC 820) fair value hierarchy. Refer to Note 3Investments in the accompanying Notes to Consolidated
Financial Statements for additional information.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(X) | Represents the principal balance for debt investments and the number of shares/units held for equity
investments. Warrants are represented as a percentage of ownership, as applicable.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Y) | Investment was exited subsequent to September 30, 2017. Refer to Note 15Subsequent Eventsin
the accompanyingNotes to Consolidated Financial Statements for additional information.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Z) | Category percentages represent the fair value of each category and subcategory as a percentage of net assets as
of September 30, 2017.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.



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GLADSTONE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND AS OTHERWISE INDICATED)

NOTE 1. ORGANIZATION

Gladstone Capital Corporation
was incorporated under the Maryland General Corporation Law on May 30, 2001 and completed an initial public offering on August 24, 2001. The terms the Company, we, our and us all refer to
Gladstone Capital Corporation and its consolidated subsidiaries. We are an externally managed, closed-end, non-diversified management investment company that has elected
to be treated as a business development company (BDC) under the Investment Company Act of 1940, as amended (the 1940 Act), and is applying the guidance of the Financial Accounting Standards Board (the FASB)
Accounting Standards Codification (ASC) Topic 946 Financial Services-Investment Companies(ASC 946). In addition, we have elected to be treated for tax purposes as a regulated investment company (RIC) under
the Internal Revenue Code of 1986, as amended (the Code). We were established for the purpose of investing in debt and equity securities of established private businesses operating in the United States (U.S.). Our investment
objectives are to: (1) achieve and grow current income by investing in debt securities of established lower middle market companies (which we generally define as companies with annual earnings before interest, taxes, depreciation and
amortization (EBITDA) of $3 million to $15 million) in the U.S. that we believe will provide stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions
to stockholders that grow over time; and (2) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of established businesses that we believe can grow over time to permit us to
sell our equity investments for capital gains.

Gladstone Business Loan, LLC (Business Loan), a wholly-owned subsidiary of ours, was
established on February 3, 2003, for the sole purpose of owning a portion of our portfolio of investments in connection with our line of credit. The financial statements of Business Loan are consolidated with those of Gladstone Capital
Corporation. We also have significant subsidiaries (as defined under Rule 1-02(w) of the U.S. Securities and Exchange Commissions (SEC) Regulation S-X)
whose financial statements are not consolidated with ours. Refer to Note 14  Unconsolidated Significant Subsidiaries for additional information regarding our unconsolidated significant subsidiaries.

We are externally managed by Gladstone Management Corporation (the Adviser), a Delaware corporation and an SEC registered investment adviser and
an affiliate of ours, pursuant to an investment advisory and management agreement (the Advisory Agreement). Administrative services are provided by our affiliate, Gladstone Administration, LLC (the Administrator), a Delaware
limited liability company, pursuant to an administration agreement (the Administration Agreement). Refer to Note 4Related Party Transactions for additional information regarding these arrangements.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

We prepare our Consolidated
Financial Statements and the accompanying notes in accordance with accounting principles generally accepted in the U.S. (GAAP) and conform to Regulation S-X under the Securities Exchange Act of
1934, as amended. Management believes it has made all necessary adjustments so that our accompanying Consolidated Financial Statements are presented fairly and that all such adjustments are of a normal recurring nature. Our accompanying
Consolidated Financial Statements include our accounts and the accounts of our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Consolidation

In accordance with Article 6 of Regulation
S-X under the Securities Act of 1933, as amended, we do not consolidate portfolio company investments. Under the investment company rules and regulations pursuant to the American Institute of Certified Public
Accountants Audit and Accounting Guide for Investment Companies, codified in ASC 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating
company that provides substantially all of its services to the investment company or its consolidated subsidiaries.



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Use of Estimates

Preparing financial statements requires management to make estimates and assumptions that affect the amounts reported in our accompanying Consolidated
Financial Statements and accompanying notes. Actual results may differ from those estimates.

Reclassifications

Certain amounts have been reclassified to conform to the current year presentation.

In April 2015, the FASB issued Accounting Standards Update 2015-03, Simplifying the Presentation of Debt
Issuance Costs (ASU 2015-03), which simplifies the presentation of debt issuance costs. ASU 2015-03 requires the presentation of debt issuance
costs as a deduction from the carrying amount of the related debt liability instead of as a deferred financing cost asset on the balance sheet. In August 2015, the FASB issued Accounting Standards Update
2015-15, Interest  Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (ASU 2015-15), which codifies an SEC staff announcement that entities are permitted
to defer and present debt issuance costs related to line of credit arrangements as assets. ASU 2015-03 was effective for annual reporting periods beginning after December 15, 2015 and interim periods
within those years, and we adopted ASU 2015-03 during the three months ended December 31, 2016. ASU 2015-15 was effective immediately and, as a result, we continue
to present debt issuance costs related to line of credit arrangements as assets.

As of September 30, 2016, we had unamortized deferred financing
costs related to our mandatorily redeemable preferred stock of $1.6 million. These costs have been reclassified from Deferred financing costs, net, to Mandatorily redeemable preferred stock, net. All periods presented have been retrospectively
adjusted.

The following table summarizes the retrospective adjustment and the overall impact on the previously reported consolidated financial
statements:



|                                            |  |                       |        |  |                          |   |        | 
|------------------------------------------- |  | --------------------- | ------ |  | ------------------------ | - | ------ | 
|                                            |  | September 30, 2016    |       
|                                            |  | As PreviouslyReported |        |  | RetrospectiveApplication |  
|Deferred financing costs, net               |  | $                     | 3,161  |  |                          | $ | 1,521  | 
|Mandatorily redeemable preferred stock, net |  |                       | 61,000 |  |                          |   | 59,360 | 

Classification of Investments

In accordance with the BDC regulations in the 1940 Act, we classify portfolio investments on our accompanying Consolidated Financial Statements into the
following categories:



| |  |  | Control InvestmentsControl investments are those where we have the power to exercise a controlling
influence over the management or policies of the portfolio company, which may include owning, with the power to vote, more than 25.0% of the issued and outstanding voting securities;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Affiliate InvestmentsAffiliate investments are those in which we own, with the power to vote,
between 5.0% and 25.0% of the issued and outstanding voting securities that are not classified as Control Investments; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Non-Control/Non-Affiliate
InvestmentsNon-Control/Non-Affiliate investments are those that are neither control nor affiliate investments and in which we own less than 5.0% of the issued
and outstanding voting securities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents

We consider all short-term, highly liquid investments that are both readily convertible to cash and have a maturity of three months or less at the time of
purchase to be cash equivalents. Cash is carried at cost, which approximates fair value. We place our cash with financial institutions, and at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit.
We seek to mitigate this concentration of credit risk by depositing funds with major financial institutions.



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Restricted Cash and Cash Equivalents

Restricted cash is cash held in escrow that was generally received as part of an investment exit. Restricted cash is carried at cost, which approximates fair
value.

Investment Valuation Policy

Accounting
Recognition

We record our investments at fair value in accordance with the FASB ASC Topic 820, Fair Value Measurements and
Disclosures (ASC 820) and the 1940 Act. Investment transactions are recorded on the trade date. Realized gains or losses are generally measured by the difference between the net proceeds from the repayment or sale and the cost
basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the period, net of recoveries. Unrealized appreciation or depreciation primarily reflects the change
in investment fair values, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Board Responsibility

In accordance with the 1940 Act,
our Board of Directors has the ultimate responsibility for reviewing and approving, in good faith, the fair value of our investments based on our investment valuation policy (which has been approved by our Board of Directors) (the
Policy). Such review occurs in three phases. First, prior to its quarterly meetings, the Board of Directors receives written valuation recommendations and supporting materials provided by professionals of the Adviser and
Administrator with oversight and direction from the chief valuation officer (the Valuation Team). Second, the Valuation Committee of our Board of Directors (comprised entirely of independent directors) meets to review the valuation
recommendations and supporting materials presented by the chief valuation officer. Third, after the Valuation Committee concludes its meeting, it and the chief valuation officer present the Valuation Committees findings to the entire
Board of Directors so that the full Board of Directors may review and approve the fair value of our investments in accordance with the Policy.

There is no
single standard for determining fair value (especially for privately-held businesses), as fair value depends upon the specific facts and circumstances of each individual investment. In determining the fair value of our investments, the
Valuation Team, led by the chief valuation officer, uses the Policy and each quarter the Valuation Committee and Board of Directors review the Policy to determine if changes thereto are advisable and also review whether the Valuation Team has
applied the Policy consistently.

Use of Third Party Valuation Firms

The Valuation Team engages third party valuation firms to provide independent assessments of fair value of certain of our investments. ICE, Data Pricing and
Reference Data, LLC (ICE) (formerly Standard and Poors Securities Evaluations, Inc.), a valuation specialist, generally provides estimates of fair value on our proprietary debt investments. The Valuation Team generally assigns
ICEs estimates of fair value to our debt investments where we do not have the ability to effectuate a sale of the applicable portfolio company. The Valuation Team corroborates ICEs estimates of fair value using one or more of the
valuation techniques discussed below. The Valuation Teams estimate of value on a specific debt investment may significantly differ from ICEs. When this occurs, our Valuation Committee and Board of Directors review whether the Valuation
Team has followed the Policy and whether the Valuation Teams recommended fair value is reasonable in light of the Policy and other facts and circumstances and then votes to accept or reject the Valuation Teams recommended fair value.

We may engage other independent valuation firms to provide earnings multiple ranges, as well as other information, and evaluate such information for
incorporation into the total enterprise value (TEV) of certain of our investments. Generally, at least once per year, we engage an independent valuation firm to value or review the valuation of our significant equity investments,
which includes providing the information noted above. The Valuation Team evaluates such information for incorporation into our TEV, including review of all inputs provided by the independent valuation firm. The Valuation Team then makes a
recommendation to our Valuation Committee and Board of Directors as to the fair value. Our Board of Directors reviews the recommended fair value, and whether it is reasonable in light of the Policy, and other relevant facts and circumstances
and then votes to accept or reject the Valuation Teams recommended fair value.



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Valuation Techniques

In accordance with ASC 820, the Valuation Team uses the following techniques when valuing our investment portfolio:



| |  |  | Total Enterprise Value  In determining the fair value using a TEV, the Valuation Team first
calculates the TEV of the portfolio company by incorporating some or all of the following factors: the portfolio companys ability to make payments and other specific portfolio company attributes; the earnings of the portfolio company (the
trailing or projected twelve month revenue or EBITDA); EBITDA obtained from our indexing methodology whereby the original transaction EBITDA at the time of our closing is indexed to a general subset of comparable disclosed transactions and EBITDA
from recent sales to third parties of similar securities in similar industries; a comparison to publicly traded securities in similar industries, and other pertinent factors. The Valuation Team generally reviews industry statistics and may use
outside experts when gathering this information. Once the TEV is determined for a portfolio company, the Valuation Team generally allocates the TEV to the portfolio companys securities based on the facts and circumstances of the securities,
which typically results in the allocation of fair value to securities based on the order of their relative priority in the capital structure. Generally, the Valuation Team uses TEV to value our equity investments and, in the circumstances where we
have the ability to effectuate a sale of a portfolio company, our debt investments.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

TEV is primarily calculated using
EBITDA; however, TEV may also be calculated using revenue multiples or a discounted cash flow (DCF) analysis whereby future expected cash flows of the portfolio company are discounted to determine a net present value using estimated
risk-adjusted discount rates, which incorporate adjustments for nonperformance and liquidity risks. Generally, the Valuation Team uses a DCF analysis to calculate TEV to corroborate estimates of value for our equity investments where we do not have
the ability to effectuate a sale of a portfolio company or for debt of credit impaired portfolio companies.



| |  |  | Yield Analysis  The Valuation Team generally determines the fair value of our debt investments
(where we do not have the ability to effectuate a sale of a portfolio company) using the yield analysis, which includes a DCF calculation and assumptions that the Valuation Team believes market participants would use, including, but not limited to,
estimated remaining life, current market yield, current leverage, and interest rate spreads. This technique develops a modified discount rate that incorporates risk premiums including, among other things, increased probability of default, increased
loss upon default and increased liquidity risk. Generally, the Valuation Team uses the yield analysis to corroborate both estimates of value provided by ICE and market quotes.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Market Quotes  For our investments for which a limited market exists, we generally base fair value
on readily available and reliable market quotations which are corroborated by the Valuation Team (generally by using the yield analysis explained above). In addition, the Valuation Team assesses trading activity for similar investments and evaluates
variances in quotations and other market insights to determine if any available quoted prices are reliable. Typically, the Valuation Team uses the lower indicative bid price (IBP) in the bid-to-ask price range obtained from the respective originating syndication agents trading desk on or near the valuation date. The Valuation Team may take further steps to consider additional
information to validate that price in accordance with the Policy. For securities that are publicly traded, we generally base fair value on the closing market price of our shares as of the reporting date. For restricted securities that are publicly
traded, we generally base fair value on the closing market price of our shares as of the reporting date less a discount for the restriction, which includes consideration of the nature and term to expiration of the restriction.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Investments in Funds  For equity investments in other funds, where we cannot effectuate a sale, the
Valuation Team generally determines the fair value of our uninvested capital at par value and of our invested capital at the Net Asset Value (NAV) provided by the fund. The Valuation Team may also determine fair value of our investments
in other investment funds based on the capital accounts of the underlying entity.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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In addition to the valuation techniques listed above, the Valuation Team may also consider other factors when
determining the fair value of our investments, including, but not limited to: the nature and realizable value of the collateral, including external parties guaranties, any relevant offers or letters of intent to acquire the portfolio company,
timing of expected loan repayments, and the markets in which the portfolio company operates. New and follow-on debt and equity investments made during the current reporting quarter are generally valued at our
original cost basis, as appropriate, as near-measurement date transaction value generally is a reasonable indicator of fair value.

Fair value
measurements of our investments may involve subjective judgments and estimates and due to the uncertainty inherent in valuing these securities, the determinations of fair value may fluctuate from period to period and may differ materially from the
values that could be obtained if a ready market for these securities existed. Our NAV could be materially affected if the determinations regarding the fair value of our investments are materially different from the values that we ultimately realize
upon our disposal of such securities. Additionally, changes in the market environment and other events that may occur over the life of the investment may cause the gains or losses ultimately realized on these investments to be different than the
valuations currently assigned. 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 it is recorded.

Refer to Note 3Investments for
additional information regarding fair value measurements and our application of ASC 820.

Revenue Recognition

Interest Income Recognition

Interest income, including
the amortization of premiums, acquisition costs and amendment fees, the accretion of original issue discounts (OID), and paid-in-kind (PIK)
interest, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when a loan becomes 90 days or more past due or if our qualitative assessment indicates that the debtor is unable to service its debt
or other obligations, we will place the loan on non-accrual status and cease recognizing interest income on that loan for financial reporting purposes until the borrower has demonstrated the ability and intent
to pay contractual amounts due. However, we remain contractually entitled to this interest. Interest payments received on non-accrual loans may be recognized as income or applied to the cost basis depending
upon managements judgment. Generally, non-accrual loans are restored to accrual status when past due principal and interest are paid and, in managements judgment, are likely to remain current, or
due to a restructuring such that the interest income is deemed to be collectible. At September 30, 2018, loans to one portfolio company were on non-accrual status with an aggregate debt cost basis of
approximately $26.9 million, or 6.9% of the cost basis of all debt investments in our portfolio, and an aggregate fair value of approximately $7.7 million, or 2.1% of the fair value of all debt investments in our portfolio. At
September 30, 2017, certain loans to two portfolio companies were on non-accrual status with an aggregate debt cost basis of approximately $27.9 million, or 7.5% of the cost basis of all debt
investments in our portfolio, and an aggregate fair value of approximately $5.6 million, or 1.7% of the fair value of all debt investments in our portfolio.

We currently hold, and we expect to hold in the future, some loans in our portfolio that contain OID or PIK provisions. We recognize OID for loans originally
issued at discounts and recognize the income over the life of the obligation based on an effective yield calculation. PIK interest, computed at the contractual rate specified in a loan agreement, is added to the principal balance of a loan and
recorded as income over the life of the obligation. Thus, the actual collection of PIK income may be deferred until the time of debt principal repayment. To maintain our ability to be taxed as a RIC, we may need to pay out both OID and PIK non-cash income amounts in the form of distributions, even though we have not yet collected the cash on either.

As of
each of September 30, 2018 and 2017, we had six OID loans, primarily from the syndicated loans in our portfolio. We recorded OID income of $0.2 million, $0.3 million, and $0.1 million for the years ended September 30, 2018,
2017, and 2016, respectively. The unamortized balance of OID investments as of each of September 30, 2018 and 2017 totaled $0.4 million. As of September 30, 2018 and 2017, we had five and six investments which had a PIK interest
component, respectively. We recorded PIK interest income of $3.8 million, $5.0 million and $2.4 million for the years ended September 30, 2018, 2017, and 2016, respectively. We collected $0.8 million, $2.0 million, and
$0.1 million of PIK interest in cash during the years ended September 30, 2018, 2017, and 2016, respectively.

Success Fee Income Recognition

We record success fees as income when earned, which often occurs upon receipt of cash. Success fees are generally contractually due upon a change of
control in a portfolio company, typically resulting from an exit or sale.



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Dividend Income Recognition

We accrue dividend income on preferred and common equity securities to the extent that such amounts are expected to be collected and if we have the option to
collect such amounts in cash or other consideration. During the year ended September 30, 2017, we recharacterized $0.2 million of dividend income from our investment in Behrens Manufacturing, LLC recorded during our fiscal year ended
September 30, 2016 as a return of capital.

Deferred Financing and Offering Costs

Deferred financing and offering costs consist of costs incurred to obtain financing, including lender fees and legal fees. Certain costs associated with our
revolving line of credit are deferred and amortized using the straight-line method over the term of the revolving line of credit. Costs associated with the issuance of our mandatorily redeemable preferred stock are presented as discounts to the
liquidation value of the mandatorily redeemable preferred stock and are amortized using the straight-line method, which approximates the effective interest method, over the terms of the respective financings. Refer to Note 5  BorrowingsandNote 6  Mandatorily Redeemable Preferred Stock for further discussion.

Related Party Fees

In accordance with the Advisory Agreement, we pay the Adviser fees as compensation for its services, consisting of a base management fee and an incentive fee.
Additionally, we pay the Adviser a loan servicing fee as compensation for its services as servicer under the terms of our Fifth Amended and Restated Credit Agreement with KeyBank National Association (KeyBank), as administrative agent,
lead arranger and a lender (our Credit Facility). These fees are accrued at the end of the quarter when the services are performed and generally paid the following quarter.

We pay separately for administrative services pursuant to the Administration Agreement. These administrative fees are accrued at the end of the quarter when
the services are performed and generally paid the following quarter. Refer to Note 4Related Party Transactions for additional information regarding these related party fees and agreements.

Income Taxes

We intend to continue to qualify for
treatment as a RIC under subchapter M of the Code, which generally allows us to avoid paying corporate income taxes on any income or gains that we distribute to our stockholders. We intend to continue to distribute sufficient dividends to eliminate
taxable income. Refer to Note 10 Federal and State Income Taxes for additional information regarding our RIC requirements.

ASC 740,
Income Taxes 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 authorities. Tax positions not deemed to satisfy the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current fiscal year. We have evaluated the implications of ASC 740, for all open tax years and in all major tax jurisdictions, and determined that there is no material impact on our accompanying
Consolidated Financial Statements. Our federal tax returns for fiscal years 20152017 remain subject to examination by the Internal Revenue Service (IRS).

Distributions

Distributions to stockholders are recorded
on the ex-dividend date. We are required to pay out at least 90.0% of our investment company taxable income, which is generally our net ordinary income plus the excess of our net short-term capital gains over
net long-term capital losses for each taxable year as a distribution to our stockholders in order to maintain our ability to be taxed as a RIC under Subchapter M of the Code. It is our policy to pay out as a distribution up to 100.0% of those
amounts. The amount to be paid is determined by our Board of Directors each quarter and is based on the annual earnings estimated by our management. Based on that estimate, a distribution is declared each quarter and is paid out monthly over the
course of the respective quarter. Refer to Note 9Distributions to Common Stockholders for further information.



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Our transfer agent, Computershare, Inc., offers a dividend reinvestment plan for our common stockholders. This is
an opt in dividend reinvestment plan, meaning that common stockholders may elect to have their cash distributions automatically reinvested in additional shares of our common stock. Common stockholders who do not make such election will
receive their distributions in cash. Common stockholders who receive distributions in the form of stock will be subject to the same federal, state and local tax consequences as stockholders who elect to receive their distributions in cash. As plan
agent, Computershare, Inc. purchases shares in the open market in connection with the obligations under the plan. We do not have a dividend reinvestment plan for our preferred stock stockholders.

Recent Accounting Pronouncements

In August 2018, the SEC
adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative,
overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders equity for interim financial statements. Under the amendments, an analysis of changes in each caption of
stockholders equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of
comprehensive income is required to be filed. This final rule became effective on November 5, 2018. We are in the process of evaluating the impact of the final rule, but do not anticipate a material impact on our consolidated financial
statements.

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement
(Topic 820): Disclosure FrameworkChanges to the Disclosure Requirements for Fair Value (ASU 2018-13), which modifies the disclosure requirements in ASC 820. We are currently
assessing the impact of ASU 2018-13 and do not anticipate a material impact on our disclosures. ASU 2018-13 is effective for annual reporting periods beginning
after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.

In November 2016, the FASB issued
Accounting Standards Update 2016-18, Restricted Cash (a consensus of the Emerging Issues Task Force) (ASU 2016-18), which requires that the
statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. We have assessed the impact of ASU 2016-18 and do not anticipate a material impact on our financial position, results of operations or cash flows. ASU 2016-18 is effective for annual reporting periods
beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted.

In August 2016, the FASB
issued Accounting Standards Update 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (ASU
2016-15), which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. We have assessed the impact of ASU 2016-15 and do not anticipate a material impact on our cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including
interim periods within those fiscal years, with early adoption permitted.

In March 2016, the FASB issued Accounting Standards Update 2016-06, Contingent Put and Call Options in Debt Instruments (ASU 2016-06), which clarifies the requirements for assessing whether contingent
call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related. ASU 2016-06 is effective for annual reporting periods beginning after December 15,
2016, including interim periods within those fiscal years, and we adopted ASU 2016-06 effective October 1, 2017. The adoption of ASU 2016-06 did not have a material
impact on our financial position, results of operations or cash flows.

In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial InstrumentsOverall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which
changes how entities measure certain equity investments and how entities present changes in the fair value of financial liabilities measured under the fair value option that are attributable to instrument-specific credit risk. We are currently
assessing the impact of ASU 2016-01 and do not anticipate a material impact on our financial position, results of operations or cash flows. ASU 2016-01 is effective for
annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted for certain aspects of ASU 2016-01 relating to the
recognition of changes in fair value of financial liabilities when the fair value option is elected.

In February 2015, the FASB issued Accounting
Standards Update 2015-02, Amendments to the Consolidation Analysis (ASU 2015-02), which amends or supersedes the scope and consolidation
guidance under existing GAAP. The adoption of ASU 2015-02 did not have a material impact on our financial position, results of operations or cash flows. ASU 2015-02 is
effective for annual reporting periods beginning after December 15, 2015 and interim periods within those years, and we



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adopted ASU 2015-02 effective April 1, 2016. In October 2016, the FASB issued Accounting Standards Update
2016-17, Interests Held through Related Parties That Are under Common Control (ASU 2016-17), which amends the consolidation guidance in
ASU 2015-02 regarding the treatment of indirect interests held through related parties that are under common control. ASU 2016-17 is effective for annual reporting
periods beginning after December 15, 2016 and interim periods within those years, and we adopted ASU 2015-02 effective October 1, 2017. The adoption of ASU
2016-17 did not have a material impact on our financial position, results of operations or cash flows.

In May
2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which was amended in March
2016 by FASB Accounting Standards Update 2016-08, Principal versus Agent Considerations (ASU 2016-08), in April 2016 by FASB Accounting
Standards Update 2016-10, Identifying Performance Obligations and Licensing(ASU 2016-10), in May 2016 by FASB Accounting Standards Update
2016-12, Narrow-Scope Improvements and Practical Expedients(ASU 2016-12), and in December 2016 by FASB Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606(ASU 2016-20). ASU 2014-09, as amended,
supersedes or replaces nearly all GAAP revenue recognition guidance. The new guidance establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time and will
expand disclosures about revenue. In July 2015, the FASB issued Accounting Standards Update 2015-14, Deferral of the Effective Date, which deferred the effective date of ASU 2014-09. ASU 2014-09, as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20, is now effective for annual reporting periods beginning after December 15, 2017 and interim
periods within those years, with early adoption permitted for annual reporting periods beginning after December 15, 2016 and interim periods within those years. We continue to assess the impact of ASU
2014-09, as amended, and expect to identify similar performance obligations as compared to existing guidance. As a result, we do not anticipate a material change in the timing of revenue recognition or a
material impact on our financial position, results of operations, or cash flows from adopting this standard.

NOTE 3. INVESTMENTS

In accordance with ASC 820, the fair value of each investment is determined to be the price that would be received for an investment in a current sale, which
assumes an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use
of market-based inputs over entity-specific inputs. ASC 820 also establishes the following three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date.



| |  |  | Level1  inputs to the valuation methodology are quoted prices (unadjusted) for
identical financial instruments in active markets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level2 inputs to the valuation methodology include quoted prices for similar
financial instruments in active or inactive markets, and inputs that are observable for the financial instrument, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs are in those markets
for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement. Unobservable inputs are those inputs that reflect assumptions that market participants would use when pricing the financial instrument and can include the Valuation Teams assumptions based upon the best available
information.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

When a determination is made to classify our investments within Level 3 of the valuation hierarchy, such
determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable, or Level 3, inputs, observable
inputs (or, components that are actively quoted and can be validated to external sources). The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the
fair value measurement. Investments in funds measured using net asset value as a practical expedient are not categorized within the fair value hierarchy.

As of September 30, 2018, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy, except for our investment
in Funko, which was valued using Level 2 inputs and our investments in FedCap and Leeds, which were valued using net asset value as a practical expedient. As of September 30, 2017, all of our investments were valued using Level 3
inputs within the ASC 820 fair value hierarchy, except for our investments in FedCap and Leeds, which were valued using net asset value as a practical expedient.





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We transfer investments in and out of Level 1, 2, and 3 of the valuation hierarchy as of the beginning
balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. During the year ended September 30, 2018, we transferred our investment in Funko from Level 3 to
Level 2 as a result of the initial public offering of Funko, Inc. in November 2017 due to convertibility of our investment into shares of Funko, Inc. During the year ended September 30, 2017, there were no investments transferred into or
out of Levels 1, 2 or 3 of the valuation hierarchy.

As of September 30, 2018 and 2017, our investments, by security type, at fair value were
categorized as follows within the ASC 820 fair value hierarchy:



|                                        |  |            |         |     |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 
|--------------------------------------- |  | ---------- | ------- | --- | ---------------------------------------------------------- | - | - | ----------------------------------------- |  | - | -------------------------------------- | --- |  | - | ------- | 
|                                        |  |            |         |     | Fair Value Measurements                                    |  
|                                        |  | Fair Value |         |     | Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level 3) |    
|As of September 30, 2018:               |  |            |         |     |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 
|Secured first lien debt                 |  | $          | 199,625 |     |                                                            | $ |  |                                           |  | $ |                                       |     |  | $ | 199,625 | 
|Secured second lien debt                |  |            | 156,373 |     |                                                            |   |  |                                           |  |   |                                       |     |  |   | 156,373 | 
|Unsecured debt                          |  |            | 3,655   |     |                                                            |   |  |                                           |  |   |                                       |     |  |   | 3,655   | 
|Preferred equity                        |  |            | 7,749   |     |                                                            |   |  |                                           |  |   |                                       |     |  |   | 7,749   | 
|Common equity/equivalents               |  |            | 19,333  | (B) |                                                            |   |  |                                           |  |   | 672                                    | (A) |  |   | 18,661  | 
|                                        |  |            |         |     |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 
|Total Investments at September 30, 2018 |  | $          | 386,735 |     |                                                            | $ |  |                                           |  | $ | 672                                    |     |  | $ | 386,063 | 
|                                        |  |            |         |     |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 



|                                        |  |            |         |     |                                                           |   |   |                                           |  |   |                                        |  |  |   |         | 
|--------------------------------------- |  | ---------- | ------- | --- | --------------------------------------------------------- | - | - | ----------------------------------------- |  | - | -------------------------------------- |  |  | - | ------- | 
|                                        |  |            |         |     | Fair Value Measurements                                   |  
|                                        |  | Fair Value |         |     | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level 3) | 
|As of September 30, 2017:               |  |            |         |     |                                                           |   |   |                                           |  |   |                                        |  |  |   |         | 
|Secured first lien debt                 |  | $          | 173,896 |     |                                                           | $ |  |                                           |  | $ |                                       |  |  | $ | 173,896 | 
|Secured second lien debt                |  |            | 155,249 |     |                                                           |   |  |                                           |  |   |                                       |  |  |   | 155,249 | 
|Unsecured debt                          |  |            | 3,324   |     |                                                           |   |  |                                           |  |   |                                       |  |  |   | 3,324   | 
|Preferred equity                        |  |            | 6,561   |     |                                                           |   |  |                                           |  |   |                                       |  |  |   | 6,561   | 
|Common equity/equivalents               |  |            | 10,947  | (B) |                                                           |   |  |                                           |  |   |                                       |  |  |   | 10,947  | 
|                                        |  |            |         |     |                                                           |   |   |                                           |  |   |                                        |  |  |   |         | 
|Total Investments at September 30, 2017 |  | $          | 349,977 |     |                                                           | $ |  |                                           |  | $ |                                       |  |  | $ | 349,977 | 
|                                        |  |            |         |     |                                                           |   |   |                                           |  |   |                                        |  |  |   |         | 



|(A) | Fair value was determined based on the closing market price of shares of Funko, Inc. (our units in Funko can be
converted into shares of Funko, Inc.) at the reporting date less a discount for lack of marketability, as our investment was subject to certain restrictions.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Excludes our investments in FedCap and Leeds with fair values of $0.6 million and $2.7 million,
respectively, as of September 30, 2018 and fair values of $0.8 million and $1.6 million, respectively, as of September 30, 2017. FedCap and Leeds were valued using net asset value as a practical expedient.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table presents our portfolio investments, valued using Level 3 inputs within the ASC 820 fair
value hierarchy, and carried at fair value as of September 30, 2018 and 2017, by caption on our accompanying Consolidated Statements of Assets and Liabilities, and by security type:



|                                                     |  |                                                                                                 |         |     |                    |   |         |    
|---------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- | ------- | --- | ------------------ | - | ------- | ---
|                                                     |  | Total Recurring Fair Value Measurements Reported in                                             |        
|                                                     |  | Consolidated Statements of Assets and LiabilitiesUsingSignificant Unobservable Inputs (Level
3) |        
|                                                     |  | September 30, 2018                                                                              |         |     | September 30, 2017 |  
|Non-Control/Non-Affiliate
Investments                |  |                                                                                                 |         |     |                    |   |         |    
|Secured first lien debt                              |  | $                                                                                               | 178,448 |     |                    | $ | 147,447 |    
|Secured second lien debt                             |  |                                                                                                 | 126,956 |     |                    |   | 129,890 |    
|Unsecured debt                                       |  |                                                                                                 | 3,603   |     |                    |   | 3,324   |    
|Preferred equity                                     |  |                                                                                                 | 4,486   |     |                    |   | 5,735   |    
|Common equity/equivalents                            |  |                                                                                                 | 8,091   | (A) |                    |   | 2,068   | (B)
|                                                     |  |                                                                                                 |         |     |                    |   |         |    
|Total Non-Control/Non-Affiliate 
Investments         |  | $                                                                                               | 321,584 |     |                    | $ | 288,464 |    
|                                                     |  |                                                                                                 |         |     |                    |   |         |    
|Affiliate Investments                                |  |                                                                                                 |         |     |                    |   |         |    
|Secured first lien debt                              |  | $                                                                                               | 16,827  |     |                    | $ | 18,821  |    
|Secured second lien debt                             |  |                                                                                                 | 21,352  |     |                    |   | 17,294  |    
|Unsecured debt                                       |  |                                                                                                 | 52      |     |                    |   |        |    
|Preferred equity                                     |  |                                                                                                 | 3,263   |     |                    |   | 826     |    
|Common equity/equivalents                            |  |                                                                                                 | 7,362   |     |                    |   | 5,707   |    
|                                                     |  |                                                                                                 |         |     |                    |   |         |    
|Total Affiliate Investments                          |  | $                                                                                               | 48,856  |     |                    | $ | 42,648  |    
|                                                     |  |                                                                                                 |         |     |                    |   |         |    
|Control Investments                                  |  |                                                                                                 |         |     |                    |   |         |    
|Secured first lien debt                              |  | $                                                                                               | 4,350   |     |                    | $ | 7,628   |    
|Secured second lien debt                             |  |                                                                                                 | 8,065   |     |                    |   | 8,065   |    
|Common equity/equivalents                            |  |                                                                                                 | 3,208   |     |                    |   | 3,172   |    
|                                                     |  |                                                                                                 |         |     |                    |   |         |    
|Total Control Investments                            |  | $                                                                                               | 15,623  |     |                    | $ | 18,865  |    
|                                                     |  |                                                                                                 |         |     |                    |   |         |    
|Total Investments at Fair Value Using Level 3 Inputs |  | $                                                                                               | 386,063 |     |                    | $ | 349,977 |    
|                                                     |  |                                                                                                 |         |     |                    |   |         |    



|(A) | Excludes our investments in FedCap, Leeds, and Funko with fair values of $0.6 million, $2.7 million,
and $0.7 million, respectively, as of September 30, 2018. FedCap and Leeds were valued using net asset value as a practical expedient and Funko was valued using Level 2 inputs.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Excludes our investments in FedCap and Leeds with fair values of $0.8 million and $1.6 million,
respectively, as of September 30, 2017, which were valued using net asset value as a practical expedient.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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In accordance with ASC 820, the following table provides quantitative information about our Level 3 fair
value measurements of our investments as of September 30, 2018 and 2017. The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they
relate to our fair value measurements. The weighted average calculations in the table below are based on the principal balances for all debt related calculations and on the cost basis for all equity related calculations for the particular input.



|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  |                                |  |                          |  |                          
|----------------------------------------------- |  | -------------------------------------------------------------- | ------- |  | ----------------- | - | ------- | --------------------------------- |  | ----------------- |  | ------------------------------ |  | ------------------------ |  | -------------------------
|                                                |  | Quantitative Information about Level 3 Fair Value Measurements
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  | Range / Weighted Average as of
|                                                |  | September 30,2018                                              |         |  | September 30,2017 |   |         | ValuationTechniques/Methodologies |  | UnobservableInput |  | September 30,2018              |  | September 30,2017       
|                                                |  |                                                                |         |  |                   |  
|Secured first lien debt(A)                      |  | $                                                              | 193,125 |  |                   | $ | 136,272 |                                   |  | Yield Analysis    |  | Discount Rate                  |  | 6.9%24.3% /12.7%        |  | 8.0%25.0%/12.5%         
|                                                |  |                                                                | 6,500   |  |                   |   | 37,624  |                                   |  | TEV               |  | EBITDA multiple                |  | 3.3x 3.3x /3.3x         |  | 3.2x  10.1x / 8.2x      
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  | EBITDA                         |  | $1,507$1,507 /$1,507    |  | $1,378$9,420 / $6,676   
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  | Revenue multiple               |  | 0.3x  0.5x / 0.4x       |  | 0.3x  0.4x / 0.3x       
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  | Revenue                        |  | $4,909$7,400 /$5,933    |  | $6,934 $12,094 / $11,733
|Secured second lien debt(B)                     |  |                                                                | 119,988 |  |                   |   | 122,165 |                                   |  | Yield Analysis    |  | Discount Rate                  |  | 10.7%23.2% /12.6%       |  | 10.8%23.3% /14.0%       
|                                                |  |                                                                | 20,622  |  |                   |   | 22,607  |                                   |  | Market Quote      |  | IBP                            |  | 88.0%102.0% /97.6%      |  | 84.5%101.5% / 97.2%     
|                                                |  |                                                                | 15,763  |  |                   |   | 10,477  |                                   |  | TEV               |  | EBITDA multiple                |  | 5.5x  6.6x /5.8x        |  | 4.8x  6.6x /5.4x        
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  | EBITDA                         |  | $2,500$55,375 /$13,341  |  | $3,000$73,650 /$26,424  
|Unsecured debt                                  |  |                                                                | 3,655   |  |                   |   | 3,324   |                                   |  | Yield Analysis    |  | Discount Rate                  |  | 10.2%20.3% / 10.4%      |  | 10.0%10.0% / 10.0%      
|Preferred and common equity /
equivalents(C)(D) |  |                                                                | 26,410  |  |                   |   | 17,370  |                                   |  | TEV               |  | EBITDA multiple                |  | 3.3x  11.9x / 6.6x      |  | 3.2x  10.1x / 6.1x      
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  | EBITDA                         |  | $459 -$39,352 /$14,216   |  | $890 -$84,828/ $12,835   
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  | Revenue multiple               |  | 0.3x  1.5x / 0.7x       |  | 0.3x  6.5 x /0.7x       
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  | Revenue                        |  | $473 -$543,360 /$313,688 |  | $2,317 $503,620/$128,819
|                                                |  |                                                                |        |  |                   |   | 138     |                                   |  | Market Quotes     |  | IBP                            |  |                         |  | 27.9%27.9% / 27.9%      
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  |                                |  |                          |  |                          
|Total Level 3 Investments, at Fair Value        |  | $                                                              | 386,063 |  |                   | $ | 349,977 |                                   |  |                   |  |                                |  |                          |  |                          
|                                                |  |                                                                |         |  |                   |   |         |                                   |  |                   |  |                                |  |                         



|(A) | Fair value as of September 30, 2018 includes one proprietary debt investment totaling $2.0 million
which was valued at the expected payoff as the unobservable input. Fair value as of September 30, 2017 includes one new proprietary debt investment totaling $12.0 million, which was valued at cost, using the transaction price as the
unobservable input, and one proprietary debt investment totaling $7.8 million, which was valued at the expected payoff amount as the unobservable input.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Fair value as of September 30, 2017 includes one proprietary debt investment totaling $3.5 million
which was valued at the expected payoff as the unobservable input.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Fair value as of September 30, 2017 includes two new proprietary investments totaling $1.0 million,
which were valued at cost, using transaction price as the unobservable input, and one proprietary investment totaling $1.4 million, which was valued at the expected payoff amount as the unobservable input.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Fair value as of September 30, 2018 excludes our investments in FedCap, Leeds and Funko with fair values
of $0.6 million, $2.7 million, and $0.7 million, respectively, as of September 30, 2018. FedCap and Leeds were valued using net asset value as a practical expedient and Funko was valued using Level 2 inputs as of
September 30, 2018. Fair value as of September 30, 2017 excludes our investments in FedCap and Leeds with fair values of $0.8 million and $1.6 million, respectively, as of September 30, 2017, which were valued using net
asset value as a practical expedient.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



95



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Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in discount
rates, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of our investments. Generally, an increase/(decrease) in market yields, discount rates, or an increase/(decrease) in EBITDA
or EBITDA multiples (or revenue or revenue multiples) may result in a corresponding increase/(decrease), respectively, in the fair value of certain of our investments.

Changes in Level 3 Fair Value Measurements of Investments

The following tables provide the changes in fair value, broken out by security type, during the years ended September 30, 2018 and 2017 for all
investments for which the Adviser determines fair value using unobservable (Level 3) factors.



|                                                                           |  |                        |         |   |                        |   |         |               |  |   |                 |   |  |                          |        |   |       |   |        |   |  |   |         |  
|-------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ---------------------- | - | ------- | ------------- |  | - | --------------- | - |  | ------------------------ | ------ | - | ----- | - | ------ | - |  | - | ------- | -
|Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)    | 
|Year Ended September 30, 2018                                              |  | Secured FirstLien Debt |         |   | SecuredSecondLien Debt |   |         | UnsecuredDebt |  |   | PreferredEquity |   |  | CommonEquity/Equivalents |        |   | Total |  
|                                                                           |  |                        |         |   |                        |  
|Fair Value as of September 30, 2017                                        |  | $                      | 173,896 |   |                        | $ | 155,249 |               |  | $ | 3,324           |   |  | $                        | 6,561  |   |       | $ | 10,947 |   |  | $ | 349,977 |  
|Total gains (losses):                                                      | 
|Net realized (loss) gain(A)                                                |  |                        | (22,646 | ) |                        |   | 38      |               |  |   |                |   |  |                          | (4,684 | ) |       |   | 474    |   |  |   | (26,818 | )
|Net unrealized (depreciation)
appreciation(B)                              |  |                        | (5,534  | ) |                        |   | (8,320  | )             |  |   | (52             | ) |  |                          | 2,503  |   |       |   | 5,564  |   |  |   | (5,839  | )
|Reversal of prior period net depreciation (appreciation) on realization(B) |  |                        | 21,645  |   |                        |   | (545    | )             |  |   |                |   |  |                          | 4,550  |   |       |   | 740    |   |  |   | 26,390  |  
|                                                                          
|New investments, repayments and settlements:(C)                            | 
|Issuances/originations                                                     |  |                        | 65,866  |   |                        |   | 41,480  |               |  |   | 383             |   |  |                          | 268    |   |       |   | 2,153  |   |  |   | 110,150 |  
|Settlements/repayments                                                     |  |                        | (23,438 | ) |                        |   | (41,654 | )             |  |   |                |   |  |                          |       |   |       |   |       |   |  |   | (65,092 | )
|Sales                                                                      |  |                        | (1      | ) |                        |   | (38     | )             |  |   |                |   |  |                          | (1,290 | ) |       |   | (1,217 | ) |  |   | (2,546  | )
|Transfers                                                                  |  |                        | (10,163 | ) |                        |   | 10,163  |               |  |   |                |   |  |                          | (159   | ) |       |   |       |   |  |   | (159    | )
|                                                                           |  |                        |         |   |                        |   |         |               |  |   |                 |   |  |                          |        |   |       |   |        |   |  |   |         |  
|Fair Value as of September 30, 2018                                        |  | $                      | 199,625 |   |                        | $ | 156,373 |               |  | $ | 3,655           |   |  | $                        | 7,749  |   |       | $ | 18,661 |   |  | $ | 386,063 |  
|                                                                           |  |                        |         |   |                        |   |         |               |  |   |                 |   |  |                          |        |   |       |   |        |   |  |   |         |  



|                                                                           |  |                        |         |   |                        |   |         |               |  |   |                 |   |  |                          |        |   |       |   |        |   |  |   |         |  
|-------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ---------------------- | - | ------- | ------------- |  | - | --------------- | - |  | ------------------------ | ------ | - | ----- | - | ------ | - |  | - | ------- | -
|Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)    | 
|Year Ended September 30, 2017                                              |  | Secured FirstLien Debt |         |   | SecuredSecondLien Debt |   |         | UnsecuredDebt |  |   | PreferredEquity |   |  | CommonEquity/Equivalents |        |   | Total |  
|                                                                           |  |                        |         |   |                        |  
|Fair Value as of September 30, 2016                                        |  | $                      | 198,721 |   |                        | $ | 100,320 |               |  | $ | 3,012           |   |  | $                        | 10,262 |   |       | $ | 7,755  |   |  | $ | 320,070 |  
|Total gains (losses):                                                      | 
|Net realized (loss) gain(A)                                                |  |                        | (4,913  | ) |                        |   | (217    | )             |  |   |                |   |  |                          | 1,503  |   |       |   | 152    |   |  |   | (3,475  | )
|Net unrealized appreciation
(depreciation)(B)                              |  |                        | 958     |   |                        |   | 548     |               |  |   | (51             | ) |  |                          | 1,558  |   |       |   | (3,793 | ) |  |   | (780    | )
|Reversal of prior period net depreciation (appreciation) on realization(B) |  |                        | 2,099   |   |                        |   | 280     |               |  |   |                |   |  |                          | (1,059 | ) |       |   | 370    |   |  |   | 1,690   |  
|                                                                          
|New investments, repayments and settlements:(C)                            | 
|Issuances/originations                                                     |  |                        | 45,501  |   |                        |   | 67,115  |               |  |   | 323             |   |  |                          | 2,145  |   |       |   | 1,100  |   |  |   | 116,184 |  
|Settlements/repayments                                                     |  |                        | (61,778 | ) |                        |   | (13,734 | )             |  |   | 40              |   |  |                          |       |   |       |   |       |   |  |   | (75,472 | )
|Sales                                                                      |  |                        | (86     | ) |                        |   | 217     |               |  |   |                |   |  |                          | (7,848 | ) |       |   | (523   | ) |  |   | (8,240  | )
|Transfers                                                                  |  |                        | (6,606  | ) |                        |   | 720     |               |  |   |                |   |  |                          |       |   |       |   | 5,886  |   |  |   |        |  
|                                                                           |  |                        |         |   |                        |   |         |               |  |   |                 |   |  |                          |        |   |       |   |        |   |  |   |         |  
|Fair Value as of September 30, 2017                                        |  | $                      | 173,896 |   |                        | $ | 155,249 |               |  | $ | 3,324           |   |  | $                        | 6,561  |   |       | $ | 10,947 |   |  | $ | 349,977 |  
|                                                                           |  |                        |         |   |                        |   |         |               |  |   |                 |   |  |                          |        |   |       |   |        |   |  |   |         |  



96



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|(A) | Included in net realized (loss) gain on investments on our accompanying Consolidated Statements of
Operations for the years ended September 30, 2018 and 2017.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Included in net unrealized appreciation (depreciation) on investments on our accompanyingConsolidated
Statements of Operations for the years ended September 30, 2018 and 2017.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Includes increases in the cost basis of investments resulting from new portfolio investments, accretion of
discounts, PIK, and other non-cash disbursements to portfolio companies, as well as decreases in the cost basis of investments resulting from principal repayments or sales, the amortization of premiums and
acquisition costs and other cost-basis adjustments.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investment Activity

Proprietary Investments

As of September 30, 2018
and 2017, we held 39 and 35 proprietary investments with an aggregate fair value of $357.6 million and $318.6 million, or 91.7% and 90.4% of the total portfolio at fair value, respectively. The following significant proprietary investment
transactions occurred during the year ended September 30, 2018:



| |  |  | In October 2017, we sold our investment in Flight Fit N Fun LLC for a realized gain of $0.6 million. In
connection with the sale, we received net cash proceeds of approximately $9.4 million, including the repayment of our debt investment of $7.8 million at par.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2017, we invested $11.0 million in Applied Voice & Speech Technologies, Inc. through
secured first lien debt.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $7.5 million in Arc Drilling Holdings LLC through a combination of secured
first lien debt and equity.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $7.5 million in Gray Matter Systems, LLC through secured second lien debt. In
March 2018, we invested an additional $3.6 million in Gray Matter Systems, LLC, through secured second lien debt.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2017, we invested $20.0 million in Impact! Chemical Technologies, Inc. through secured first
lien debt.
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | In January 2018, we invested $8.1 million in XMedius Solutions Inc. through secured first lien debt.
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | In February 2018, we invested an additional $4.0 million in an existing portfolio company, Lignetics, Inc.,
through secured first lien debt.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March, July and September 2018, an existing portfolio company, EL Academies, Inc., drew $1.4 million,
$4.4 million and $3.2 million, respectively, on the unused portion of its secured first lien delayed draw term loan.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In May 2018, our investment in TapRoot Partners, Inc. paid off, which resulted in prepayment fees of
$0.5 million and success fee income of $0.4 million. In connection with the pay off, we received net cash proceeds of $22.9 million, including the repayment of our debt investment of $22.0 million at par.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In May 2018, we invested an additional $10.0 million in an existing portfolio company, Merlin International,
Inc., through secured second lien debt.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In June 2018, we invested an additional $7.0 million in an existing portfolio company, IA Tech, LLC, through
secured first lien debt.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In July 2018, the holding company for Impact! Chemical Technologies, Inc. (Impact) merged with and
into the holding company for WadeCo Specialties, Inc. (WadeCo) to form Chemical & Injection Holdings Company, LLC (Chemical & Injection Holdings). Our preferred equity ownership related to WadeCo with a
cost basis of $0.6 million, was converted into preferred equity ownership in the newly formed Chemical & Injection Holdings with the same cost basis. Our existing debt investments in Impact and WadeCo remained unchanged in
conjunction with the merger.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



97



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##### Table of Contents

| |  |  | In September 2018, we restructured our $30.0 million investment in Sunshine Media Holdings
(Sunshine) resulting in a $28.2 million realized loss and a new $2.0 million investment in TNCP Intermediate HoldCo, LLC.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Syndicated Investments

As of September 30, 2018 and
September 30, 2017, we held 11 and 12 syndicated investments with an aggregate fair value of $32.4 million and $33.8 million, or 8.3% and 9.6% of the total portfolio at fair value, respectively. The following significant syndicated
investment transactions occurred during the year ended September 30, 2018:



| |  |  | In October 2017, our investment in PSC Industrial Holdings, LLC paid off at par for net cash proceeds of
$3.5 million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, our investment in DataPipe, Inc. paid off at par for net cash proceeds of $2.0 million.
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $5.0 million in DigiCert Holdings, Inc. through secured second lien debt. In
March 2018, we sold $2.0 million of this investment for net cash proceeds of $2.0 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $4.0 million in Red Ventures, LLC through secured second lien debt.
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | In November 2017, we invested $1.0 million in ABG Intermediate Holdings 2, LLC through secured second lien
debt. In January 2018, we sold this investment for net cash proceeds of $1.0 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March 2018, we sold our $1.0 million investment in Neustar, Inc. for net cash proceeds of
$1.0 million.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | In April 2018, we invested $3.0 million in CHA Holdings, Inc. through secured second lien debt.
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | In July 2018, our investment in NetSmart Technologies, Inc. paid off for net cash proceeds of $3.7 million.
| | - |  | -----------------------------------------------------------------------------------------------------------

Investment Concentrations

As of
September 30, 2018, our investment portfolio consisted of investments in 50 portfolio companies located in 24 states in 18 different industries, with an aggregate fair value of $390.0 million. The five largest investments at fair value
totaled $122.8 million, or 31.5% of our total investment portfolio, as compared to the five largest investments at fair value as of September 30, 2017 totaling $110.9 million, or 31.5% of our total investment portfolio. As
September 30, 2018 and 2017 our average investment by obligor was $8.5 million and $8.8 million at cost, respectively.

The following table
outlines our investments by security type at September 30, 2018 and 2017:



|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|------------------------- |  | ------------------ | ------- |  | ------------------ |  | ----- | ---- |  | - | ---------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                          |  | September 30, 2018 |         |  | September 30, 2017 | 
|                          |  | Cost               |         |  | Fair Value         |  |       | Cost |  |   | Fair Value | 
|Secured first lien debt   |  | $                  | 206,523 |  |                    |  | 48.3  | %    |  | $ | 199,625    |  |  |  | 51.2  | % |  | $ | 198,942 |  |  |  | 48.4  | % |  | $ | 173,896 |  |  |  | 49.4  | %
|Secured second lien debt  |  |                    | 180,274 |  |                    |  | 42.2  |      |  |   | 156,373    |  |  |  | 40.1  |   |  |   | 168,247 |  |  |  | 40.9  |   |  |   | 155,249 |  |  |  | 44.1  |  
|Unsecured debt            |  |                    | 3,708   |  |                    |  | 0.9   |      |  |   | 3,655      |  |  |  | 0.9   |   |  |   | 3,324   |  |  |  | 0.8   |   |  |   | 3,324   |  |  |  | 0.9   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total debt investments    |  |                    | 390,505 |  |                    |  | 91.4  |      |  |   | 359,653    |  |  |  | 92.2  |   |  |   | 370,513 |  |  |  | 90.1  |   |  |   | 332,469 |  |  |  | 94.4  |  
|Preferred equity          |  |                    | 12,920  |  |                    |  | 3.0   |      |  |   | 7,749      |  |  |  | 2.0   |   |  |   | 18,794  |  |  |  | 4.5   |   |  |   | 6,561   |  |  |  | 1.9   |  
|Common equity/equivalents |  |                    | 24,042  |  |                    |  | 5.6   |      |  |   | 22,644     |  |  |  | 5.8   |   |  |   | 22,128  |  |  |  | 5.4   |   |  |   | 13,343  |  |  |  | 3.7   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total equity investments  |  |                    | 36,962  |  |                    |  | 8.6   |      |  |   | 30,393     |  |  |  | 7.8   |   |  |   | 40,922  |  |  |  | 9.9   |   |  |   | 19,904  |  |  |  | 5.6   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total Investments         |  | $                  | 427,467 |  |                    |  | 100.0 | %    |  | $ | 390,046    |  |  |  | 100.0 | % |  | $ | 411,435 |  |  |  | 100.0 | % |  | $ | 352,373 |  |  |  | 100.0 | %
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  



98



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##### Table of Contents

Our investments at fair value consisted of the following industry classifications at September 30, 2018 and
2017:



|                                                                      |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|--------------------------------------------------------------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                                                                      |  | September 30, 2018 |         |  | September 30, 2017            | 
|Industry Classification                                               |  | Fair Value         |         |  | Percentageof TotalInvestments |  |       | Fair Value |  |   | Percentage ofTotalInvestments | 
|                                                                      |  |                    |         | 
|Diversified/Conglomerate Service                                      |  | $                  | 79,066  |  |                               |  | 20.3  | %          |  | $ | 80,723                        |  |  |  | 22.9  | %
|Healthcare, education and childcare                                   |  |                    | 53,916  |  |                               |  | 13.8  |            |  |   | 46,288                        |  |  |  | 13.1  |  
|Oil and gas                                                           |  |                    | 50,172  |  |                               |  | 12.9  |            |  |   | 34,712                        |  |  |  | 9.9   |  
|Telecommunications                                                    |  |                    | 47,794  |  |                               |  | 12.3  |            |  |   | 31,350                        |  |  |  | 8.9   |  
|Diversified/Conglomerate Manufacturing                                |  |                    | 43,421  |  |                               |  | 11.1  |            |  |   | 40,843                        |  |  |  | 11.6  |  
|Diversified natural resources, precious metals and minerals           |  |                    | 23,040  |  |                               |  | 5.9   |            |  |   | 18,949                        |  |  |  | 5.4   |  
|Automobile                                                            |  |                    | 18,209  |  |                               |  | 4.7   |            |  |   | 20,082                        |  |  |  | 5.7   |  
|Cargo Transportation                                                  |  |                    | 15,164  |  |                               |  | 3.9   |            |  |   | 13,081                        |  |  |  | 3.7   |  
|Beverage, food and tobacco                                            |  |                    | 13,727  |  |                               |  | 3.5   |            |  |   | 14,103                        |  |  |  | 4.0   |  
|Machinery                                                             |  |                    | 11,058  |  |                               |  | 2.8   |            |  |   | 5,114                         |  |  |  | 1.4   |  
|Home and Office Furnishings, Housewares and Durable Consumer Products |  |                    | 10,125  |  |                               |  | 2.6   |            |  |   | 10,100                        |  |  |  | 2.9   |  
|Textiles and leather                                                  |  |                    | 6,556   |  |                               |  | 1.7   |            |  |   | 4,879                         |  |  |  | 1.4   |  
|Hotels, Motels, Inns, and Gaming                                      |  |                    | 6,337   |  |                               |  | 1.6   |            |  |   | 7,136                         |  |  |  | 2.0   |  
|Personal and non-durable consumer products                            |  |                    | 4,892   |  |                               |  | 1.3   |            |  |   | 7,035                         |  |  |  | 2.0   |  
|Buildings and real estate                                             |  |                    | 2,455   |  |                               |  | 0.6   |            |  |   | 3,004                         |  |  |  | 0.9   |  
|Printing and publishing                                               |  |                    | 1,998   |  |                               |  | 0.5   |            |  |   | 3,628                         |  |  |  | 1.0   |  
|Leisure, Amusement, Motion Pictures, Entertainment                    |  |                    |        |  |                               |  |      |            |  |   | 9,225                         |  |  |  | 2.6   |  
|Other, < 2.0%                                                         |  |                    | 2,116   |  |                               |  | 0.5   |            |  |   | 2,121                         |  |  |  | 0.6   |  
|                                                                      |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total Investments                                                     |  | $                  | 390,046 |  |                               |  | 100.0 | %          |  | $ | 352,373                       |  |  |  | 100.0 | %
|                                                                      |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  

Our investments at fair value were included in the following U.S. geographic regions and other countries at September 30,
2018 and 2017:



|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|----------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                  |  | September 30, 2018 |         |  | September 30, 2017            | 
|Location          |  | Fair Value         |         |  | Percentage ofTotalInvestments |  |       | Fair Value |  |   | Percentage ofTotalInvestments | 
|South             |  | $                  | 168,917 |  |                               |  | 43.3  | %          |  | $ | 150,727                       |  |  |  | 42.8  | %
|West              |  |                    | 114,286 |  |                               |  | 29.3  |            |  |   | 116,302                       |  |  |  | 33.0  |  
|Midwest           |  |                    | 61,733  |  |                               |  | 15.8  |            |  |   | 58,915                        |  |  |  | 16.7  |  
|Northeast         |  |                    | 37,589  |  |                               |  | 9.7   |            |  |   | 26,429                        |  |  |  | 7.5   |  
|Canada            |  |                    | 7,521   |  |                               |  | 1.9   |            |  |   |                              |  |  |  |      |  
|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total Investments |  | $                  | 390,046 |  |                               |  | 100.0 | %          |  | $ | 352,373                       |  |  |  | 100.0 | %
|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  

The geographic composition indicates the location of the headquarters for our portfolio companies. A portfolio company may
have a number of other business locations in other geographic locations.

Investment Principal Repayment

The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments,
at September 30, 2018.



|                                                        |  |        |         |  
|------------------------------------------------------- |  | ------ | ------- | -
|Year Ending September 30,                               |  | Amount |        
|2019                                                    |  | $      | 39,272  |  
|2020                                                    |  |        | 81,633  |  
|2021                                                    |  |        | 68,819  |  
|2022                                                    |  |        | 46,687  |  
|2023                                                    |  |        | 115,796 |  
|Thereafter                                              |  |        | 38,975  |  
|                                                        |  |        |         |  
|Total contractual repayments                            |  | $      | 391,182 |  
|Equity investments                                      |  |        | 36,961  |  
|Adjustments to cost basis on debt investments           |  |        | (676    | )
|                                                        |  |        |         |  
|Investment Portfolio as of September 30, 2018, at Cost: |  | $      | 427,467 |  
|                                                        |  |        |         |  



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Receivables from Portfolio Companies

Receivables from portfolio companies represent non-recurring costs incurred on behalf of such portfolio companies and
are included in other assets on our accompanying Consolidated Statements of Assets and Liabilities. We generally maintain an allowance for uncollectible receivables from portfolio companies when the receivable balance becomes 90 days or more
past due or if it is determined, based upon managements judgment, that the portfolio company is unable to pay its obligations. We write-off accounts receivable when we have exhausted collection efforts
and have deemed the receivables uncollectible. As of September 30, 2018 and 2017, we had gross receivables from portfolio companies of $0.3 million and $0.5 million, respectively. The allowance for uncollectible receivables was $32
and $44 at September 30, 2018 and 2017, respectively.

NOTE 4. RELATED PARTY TRANSACTIONS

Transactions with the Adviser

We have been externally
managed by the Adviser pursuant to the Advisory Agreement since October 1, 2004 pursuant to which we pay the Adviser a base management fee and an incentive fee for its services. The Advisory Agreement originally included administrative
services; however, it was amended and restated on October 1, 2006. Simultaneously, we entered into the Administration Agreement with the Administrator (discussed further below) to provide those services. With the unanimous approval of our Board
of Directors, the Advisory Agreement was later amended in October 2015 to reduce the base management fee payable thereunder from 2.0% per annum to 1.75% per annum, effective July 1, 2015, with all other terms remaining unchanged. On
July 10, 2018, our Board of Directors, including a majority of the directors who are not parties to the Advisory Agreement or interested persons of such party, unanimously approved the annual renewal of the Advisory Agreement through
August 31, 2019.

We also pay the Adviser a loan servicing fee for its role of servicer pursuant to our Credit Facility. The entire loan servicing
fee paid to the Adviser by Business Loan is non-contractually, unconditionally and irrevocably credited against the base management fee otherwise payable to the Adviser, since Business Loan is a consolidated
subsidiary of ours, and overall, the base management fee (including any loan servicing fee) cannot exceed 1.75% of total assets (as reduced by cash and cash equivalents pledged to creditors) during any given fiscal year pursuant to the Advisory
Agreement.

Two of our executive officers, David Gladstone (our chairman and chief executive officer) and Terry Lee Brubaker (our vice chairman and chief
operating officer), serve as directors and executive officers of the Adviser, which is 100% indirectly owned and controlled by Mr. Gladstone. Robert Marcotte (our president) also serves as an executive managing director of the Adviser.

The following table summarizes the base management fee, incentive fee, and loan servicing fee and associated
non-contractual, unconditional and irrevocable credits reflected in our accompanying Consolidated Statements of Operations:



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|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------ |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                       |  | Year Ended September 30, |        
|                                                       |  | 2018                     |         |   | 2017 |   |         | 2016 | 
|Average total assets subject to base management fee(A) |  | $                        | 401,886 |   |      | $ | 330,343 |      |  | $ | 324,800 |  
|Multiplied by annual base management fee of 1.75%      |  |                          | 1.75    | % |      |   | 1.75    | %    |  |   | 1.75    | %
|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Base management fee(B)                                 |  |                          | 7,033   |   |      |   | 5,781   |      |  |   | 5,684   |  
|Portfolio company fee credit                           |  |                          | (1,020  | ) |      |   | (1,588  | )    |  |   | (785    | )
|Syndicated loan fee credit                             |  |                          | (364    | ) |      |   | (221    | )    |  |   | (92     | )
|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Net Base Management Fee                                |  | $                        | 5,649   |   |      | $ | 3,972   |      |  | $ | 4,807   |  
|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                       |  |                          |        
|Loan servicing fee(B)                                  |  | $                        | 5,042   |   |      | $ | 4,146   |      |  | $ | 3,890   |  
|Credit to base management fee - loan servicing
fee(B)  |  |                          | (5,042  | ) |      |   | (4,146  | )    |  |   | (3,890  | )
|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Net Loan Servicing Fee                                 |  | $                        |        |   |      | $ |        |      |  | $ |        |  
|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                       |  |                          |        
|Incentive fee(B)                                       |  | $                        | 5,348   |   |      | $ | 4,779   |      |  | $ | 4,514   |  
|                                                       |  |                          |        
|Incentive fee credit                                   |  |                          | (1,697  | ) |      |   | (2,317  | )    |  |   | (1,429  | )
|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Net Incentive Fee                                      |  | $                        | 3,651   |   |      | $ | 2,462   |      |  | $ | 3,085   |  
|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                       |  |                          |        
|Portfolio company fee credit                           |  | $                        | (1,020  | ) |      | $ | (1,588  | )    |  | $ | (785    | )
|Syndicated loan fee credit                             |  |                          | (364    | ) |      |   | (221    | )    |  |   | (92     | )
|Incentive fee credit                                   |  |                          | (1,697  | ) |      |   | (2,317  | )    |  |   | (1,429  | )
|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|Credit to Fees from Adviser -
Other(B)                 |  | $                        | (3,081  | ) |      | $ | (4,126  | )    |  | $ | (2,306  | )
|                                                       |  |                          |         |   |      |   |         |      |  |   |         |  



|(A) | Average total assets subject to the base management fee is defined as total assets, including investments made
with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective periods and adjusted appropriately for any share issuances or repurchases during
the periods.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Reflected, on a gross basis, as a line item, on our accompanying Consolidated Statements of Operations.
|--- | -------------------------------------------------------------------------------------------------------

Base Management Fee

The base
management fee is payable quarterly to the Adviser pursuant to our Advisory Agreement and is assessed at an annual rate of 1.75%, computed on the basis of the value of our average total assets at the end of the two most recently-completed quarters
(inclusive of the current quarter), which are total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings and adjusted appropriately for any share issuances or
repurchases during the period.

Additionally, pursuant to the requirements of the 1940 Act, the Adviser makes available significant managerial assistance
to our portfolio companies. The Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance. Such services may include, but are not limited to:
(i) assistance obtaining, sourcing or structuring credit facilities, long term loans or additional equity from unaffiliated third parties; (ii) negotiating important contractual financial relationships; (iii) consulting services
regarding restructuring of the portfolio company and financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties; and (iv) primary role in interviewing, vetting and negotiating employment
contracts with candidates in connection with adding and retaining key portfolio company management team members. The Adviser non-contractually, unconditionally, and irrevocably credits 100% of these fees
against the base management fee that we would otherwise be required to pay to the Adviser; however, pursuant to the terms of the Advisory Agreement, a small percentage of certain of such fees, totaling $0.1 million for each of the years ended
September 30, 2018, 2017, and 2016, was retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser primarily for the valuation of portfolio companies.

Our Board of Directors accepted a non-contractual, unconditional and irrevocable credit from the Adviser to reduce the
annual base management fee on syndicated loan participations to 0.5%, to the extent that proceeds resulting from borrowings were used to purchase such syndicated loan participations, for each of the years ended September 30, 2018 and 2017.

Incentive Fee

The incentive fee consists of two parts:
an income-based incentive fee and a capital gains incentive fee. The income-based incentive fee rewards the Adviser if our quarterly net investment income (before giving effect to any incentive fee) exceeds 1.75% of our net assets, which we define
as total assets less indebtedness and before taking into account any incentive fees payable or contractually due but not payable during the period, at the end of the immediately preceding calendar quarter, adjusted appropriately for any share
issuances or repurchases during the period (the hurdle rate). The income-based incentive fee with respect to our pre-incentive fee net investment income is generally payable quarterly to the
Adviser and is computed as follows:



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| | no incentive fee in any calendar quarter in which our pre-incentive fee
net investment income does not exceed the hurdle rate (7.0% annualized);
|- | ------------------------------------------------------------------------------------------------------------------------------------------------



| | 100.0% of our pre-incentive fee net investment income with respect to
that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% of our net assets, adjusted appropriately for any share issuances or repurchases
during the period, in any calendar quarter (8.75% annualized); and
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 20.0% of the amount of our pre-incentive fee net investment income, if
any, that exceeds 2.1875% of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter (8.75% annualized).
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The second part of the incentive fee is a capital gains-based incentive fee that will be determined and payable in arrears as of the end of each fiscal year
(or upon termination of the Advisory Agreement, as of the termination date) and equals 20.0% of our net realized capital gains (as defined herein) as of the end of the fiscal year. In determining the capital gains-based incentive fee
payable to the Adviser, we calculate net realized capital gains at the end of each applicable year by subtracting the sum of our cumulative aggregate realized capital losses and our entire portfolios aggregate unrealized capital
depreciation from our cumulative aggregate realized capital gains. For this purpose, cumulative aggregate realized capital gains, if any, equals the sum of the differences between the net sales price of each investment, when sold, and the original
cost of such investment since inception. Cumulative aggregate realized capital losses equals the sum of the amounts by which the net sales price of each investment, when sold, is less than the original cost of such investment since inception. The
entire portfolios aggregate unrealized capital depreciation, if any, equals the sum of the difference, between the valuation of each investment as of the applicable calculation date and the original cost of such investment. At the end of the
applicable fiscal year, the amount of capital gains that serves as the basis for our calculation of the capital gains-based incentive fee equals the cumulative aggregate realized capital gains less cumulative aggregate realized capital losses, less
the entire portfolios aggregate unrealized capital depreciation, if any. If this number is positive at the end of such fiscal year, then the capital gains-based incentive fee for such year equals 20.0% of such amount, less the aggregate amount
of any capital gains-based incentive fees paid in respect of our portfolio in all prior years. No capital gains-based incentive fee has been recorded or paid since our inception through September 30, 2018, as cumulative unrealized capital
depreciation has exceeded cumulative realized capital gains net of cumulative realized capital losses.

In accordance with GAAP, a capital gains-based
incentive fee accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the capital gains-based incentive fee. If such amount is
positive at the end of a period, then GAAP requires us to record a capital gains-based incentive fee equal to 20.0% of such amount, less the aggregate amount of actual capital gains-based incentive fees paid in all prior years. If such amount is
negative, then there is no accrual for such period. GAAP requires that the capital gains-based incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains-based incentive fee would
be payable if such unrealized capital appreciation were realized. There can be no assurance that such unrealized capital appreciation will be realized in the future. No GAAP accrual for a capital gains-based incentive fee has been recorded from our
inception through September 30, 2018.

Our Board of Directors accepted non-contractual, unconditional and
irrevocable credits from the Adviser to reduce the income-based incentive fee to the extent net investment income did not 100.0% cover distributions to common stockholders for the years ended September 30, 2018, 2017, and 2016.

Loan Servicing Fee

The Adviser also services the loans
held by Business Loan (the borrower under the Credit Facility), in return for which the Adviser receives a 1.5% annual fee payable monthly based on the aggregate outstanding balance of loans pledged under our Credit Facility. As discussed in the
notes to the table above, we treat payment of the loan servicing fee pursuant to our line of credit as a pre-payment of the base management fee under the Advisory Agreement. Accordingly, these loan servicing
fees are 100% non-contractually, unconditionally and irrevocably credited back to us by the Adviser.



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Transactions with the Administrator

We pay the Administrator pursuant to the Administration Agreement for the portion of expenses the Administrator incurs while performing services for us. The
Administrators expenses are primarily rent and the salaries, benefits and expenses of the Administrators employees, including, but not limited to, our chief financial officer and treasurer, chief compliance officer, chief valuation
officer, and general counsel and secretary (who also serves as the Administrators president, general counsel and secretary) and their respective staffs. Two of our executive officers, David Gladstone (our chairman and chief executive officer)
and Terry Lee Brubaker (our vice chairman and chief operating officer) serve as members of the board of managers and executive officers of the Administrator, which is 100% indirectly owned and controlled by Mr. Gladstone.

Our portion of the Administrators expenses are generally derived by multiplying the Administrators total expenses by the approximate percentage of
time during the current quarter the Administrators employees performed services for us in relation to their time spent performing services for all companies serviced by the Administrator. These administrative fees are accrued at the end of the
quarter when the services are performed and recorded on our accompanying Consolidated Statements of Operations and generally paid the following quarter to the Administrator. On July 10, 2018, our Board of Directors, including a majority
of the directors who are not parties to the Administration Agreement or interested persons of such party, approved the annual renewal of the Administration Agreement through August 31, 2019.

Other Transactions

Gladstone Securities, LLC
(Gladstone Securities), a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation, which is 100% indirectly owned and controlled by
Mr. Gladstone, our chairman and chief executive officer, has provided other services, such as investment banking and due diligence services, to certain of our portfolio companies, for which Gladstone Securities receives a fee. Any such fees
paid by portfolio companies to Gladstone Securities do not impact the fees we pay to the Adviser or the non-contractual, unconditional and irrevocable credits against the base management fee or incentive fee.
Gladstone Securities received fees from portfolio companies totaling $0.8 million, $1.0 million, and $0.5 million during the years ended September 30, 2018, 2017, and 2016, respectively.

Related Party Fees Due

Amounts due to related parties on
our accompanying Consolidated Statements of Assets and Liabilities were as follows:



|                                   |  |                   |       |  |                    |   |       | 
|---------------------------------- |  | ----------------- | ----- |  | ------------------ | - | ----- | 
|                                   |  | September 30,2018 |       |  | September 30, 2017 |  
|Base management fee due to Adviser |  | $                 | 378   |  |                    | $ | 45    | 
|Loan servicing fee due to Adviser  |  |                   | 281   |  |                    |   | 242   | 
|Incentive fee due to Adviser       |  |                   | 425   |  |                    |   | 1,005 | 
|                                   |  |                   |       |  |                    |   |       | 
|Total fees due to Adviser          |  |                   | 1,084 |  |                    |   | 1,292 | 
|                                   |  |                   |       |  |                    |   |       | 
|Fee due to Administrator           |  |                   | 317   |  |                    |   | 244   | 
|                                   |  |                   |       |  |                    |   |       | 
|Total Related Party Fees Due       |  | $                 | 1,401 |  |                    | $ | 1,536 | 
|                                   |  |                   |       |  |                    |   |       | 

In addition to the above fees, other operating expenses due to the Adviser as of September 30, 2018 and
September 30, 2017, totaled $19 and $12, respectively. In addition, net expenses payable to Gladstone Investment Corporation (for reimbursement purposes), which includes certain co-investment expenses,
totaled $0 and $55 as of September 30, 2018 and September 30, 2017, respectively. These amounts are generally settled in the quarter subsequent to being incurred and have been included in other liabilities on the accompanying
Consolidated Statements of Assets and Liabilitiesas of September 30, 2018 and 2017.



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NOTE 5. BORROWINGS

Revolving Credit Facility

On March 9, 2018, we,
through Business Loan, entered into Amendment No. 4 to our Credit Facility with KeyBank, which increased the commitment amount from $170.0 million to $190.0 million, extended the revolving period end date by approximately two years to
January 15, 2021, decreased the marginal interest rate added to 30-day LIBOR from 3.25% to 2.85% per annum, and changed the unused commitment fee from 0.50% of the total unused commitment amount to 0.50%
when the average unused commitment amount for the reporting period is less than or equal to 50%, 0.75% when the average unused commitment amount for the reporting period is greater than 50% but less than or equal to 65%, and 1.00% when the average
unused commitment amount for the reporting period is greater than 65%. If our Credit Facility is not renewed or extended by January 15, 2021, all principal and interest will be due and payable on or before April 15, 2022 (fifteen months
after the revolving period end date). Subject to certain terms and conditions, our Credit Facility may be expanded up to a total of $265.0 million through additional commitments of new or existing lenders. We incurred fees of approximately
$1.2 million in connection with this amendment, which are being amortized through our Credit Facilitys revolving period end date of January 15, 2021.

The following tables summarize noteworthy information related to our Credit Facility (at cost):



|                                |  |                     |         |  |      |   |         | 
|------------------------------- |  | ------------------- | ------- |  | ---- | - | ------- | 
|                                |  | As of September 30, |        
|                                |  | 2018                |         |  | 2017 |  
|Commitment amount               |  | $                   | 190,000 |  |      | $ | 170,000 | 
|Borrowings outstanding, at cost |  |                     | 110,000 |  |      |   | 93,000  | 
|Availability(A)                 |  |                     | 68,116  |  |      |   | 58,576  | 



|                                                 |  |                          |         |   |      |   |        |      |  |   |        |  
|------------------------------------------------ |  | ------------------------ | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                 |  | Year Ended September 30, |        
|                                                 |  | 2018                     |         |   | 2017 |   |        | 2016 | 
|Weighted average borrowings outstanding, at cost |  | $                        | 114,716 |   |      | $ | 58,384 |      |  | $ | 64,055 |  
|Weighted average interest
rate(B)                |  |                          | 5.1     | % |      |   | 5.3    | %    |  |   | 4.5    | %
|Commitment (unused) fees incurred                |  | $                        | 338     |   |      | $ | 564    |      |  | $ | 539    |  



|(A) | Available borrowings are subject to various constraints imposed under our Credit Facility, based on the
aggregate loan balance pledged by Business Loan, which varies as loans are added and repaid, regardless of whether such repayments are prepayments or made as contractually required.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Includes unused commitment fees and excludes the impact of deferred financing fees.
|--- | -----------------------------------------------------------------------------------

Our Credit Facility also requires that any interest or principal payments on pledged loans be remitted directly by the borrower into a lockbox account with
KeyBank. KeyBank is also the trustee of the account and generally remits the collected funds to us once a month. Amounts collected in the lockbox account with KeyBank are presented as Due from administrative agent on the accompanying Consolidated
Statement of Assets and Liabilities as of September 30, 2018 and 2017.

Our Credit Facility contains covenants that require Business Loan to
maintain its status as a separate legal entity, prohibit certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions), and restrict material changes to our credit and collection policies without the
lenders consent. Our Credit Facility also generally limits distributions to our stockholders on a fiscal year basis to the sum of our net investment income, net capital gains and amounts elected to have been paid during the prior year in
accordance with Section 855(a) of the Code. Business Loan is also subject to certain limitations on the type of loan investments it can apply as collateral towards the borrowing base to receive additional borrowing availability under our Credit
Facility, including restrictions on geographic concentrations, sector concentrations, loan size, payment frequency and status, average life and lien property. Our Credit Facility further requires Business Loan to comply with other financial and
operational covenants, which obligate Business Loan to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of 25 obligors required in the borrowing base.

Additionally, we are subject to a performance guaranty that requires us to maintain (i) a minimum net worth (defined in our Credit Facility to include
our mandatorily redeemable preferred stock) of $205.0 million plus 50.0% of all equity and subordinated debt raised after May 1, 2015 less 50% of any equity and subordinated debt retired or redeemed after May 1, 2015, which equates to
$232.8 million as of September 30, 2018, (ii) asset coverage with respect to senior securities representing indebtedness of at least 200%, in accordance with Sections 18 and 61 of the 1940 Act, and (iii) our
status as a BDC under the 1940 Act and as a RIC under the Code.



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As of September 30, 2018, and as defined in the performance guaranty of our Credit Facility, we had a net
worth of $285.8 million, asset coverage on our senior securities representing indebtedness of 359.0%, calculated in compliance with the requirements of Section 18 and 61 of the 1940 Act, and an active status as a BDC and RIC.
In addition, we had 32 obligors in our Credit Facilitys borrowing base as of September 30, 2018. As of September 30, 2018, we were in compliance with all of our Credit Facility covenants.

Fair Value

We elected to apply the fair value option of
ASC 825, Financial Instruments, specifically for the Credit Facility, which was consistent with our application of ASC 820 to our investments. Generally, the fair value of our Credit Facility is determined using a yield analysis
which includes a DCF calculation and the assumptions that the Valuation Team believes market participants would use, including, but not limited to, the estimated remaining life, counterparty credit risk, current market yield and interest rate
spreads of similar securities as of the measurement date. As of September 30, 2018, the discount rate used to determine the fair value of our Credit Facility was 30-day LIBOR, plus 2.85% per annum, plus a
0.50% unused fee. As of September 30, 2017, the discount rate used to determine the fair value of our Credit Facility was 30-day LIBOR, plus 3.15% per annum, plus a 0.50% unused fee. Generally, an
increase or decrease in the discount rate used in the DCF calculation may result in a corresponding increase or decrease, respectively, in the fair value of our Credit Facility. As of September 30, 2018 and 2017, our Credit Facility was valued
using Level 3 inputs and any changes in its fair value are recorded in net unrealized depreciation (appreciation) of other on our accompanying Consolidated Statements of Operations.

The following tables provide relevant information and disclosures about the Credit Facility as of and for the years ended September 30, 2018 and 2017, as
required by ASC 820:



|                |  |                                                    |         |  |      |   |        | 
|--------------- |  | -------------------------------------------------- | ------- |  | ---- | - | ------ | 
|                |  | Total Recurring Fair Value Measurement Reported in |        
|                |  | Consolidated Statements of Assets and Liabilities  |        
|                |  | Using Significant Unobservable Inputs (Level 3)    |        
|                |  | As of September 30,                                |        
|                |  | 2018                                               |         |  | 2017 |  
|                |  |                                                   
|Credit Facility |  | $                                                  | 110,000 |  |      | $ | 93,115 | 
|                |  |                                                    |         |  |      |   |        | 

Fair Value Measurements Using Significant Unobservable Data Inputs (Level 3)



|                                                           |  |                          |          |   |      |   |          |  
|---------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | -
|                                                           |  | Year Ended September 30, |         
|                                                           |  | 2018                     |          |   | 2017 |  
|Fair value as of September 30, 2017 and 2016, respectively |  | $                        | 93,115   |   |      | $ | 71,300   |  
|Borrowings                                                 |  |                          | 118,900  |   |      |   | 138,700  |  
|Repayments                                                 |  |                          | (101,900 | ) |      |   | (117,000 | )
|Net unrealized (depreciation) appreciation (A)             |  |                          | (115     | ) |      |   | 115      |  
|                                                           |  |                          |          |   |      |   |          |  
|Fair Value as of September 30, 2018 and 2017, respectively |  | $                        | 110,000  |   |      | $ | 93,115   |  
|                                                           |  |                          |          |   |      |   |          |  



|(A) | Included in net unrealized appreciation of other on our accompanying Consolidated Statements of Assets and
Liabilities for the years ended September 30, 2018 and 2017.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of the collateral under our Credit Facility
totaled approximately $332.3 million and $317.4 million as of September 30, 2018 and 2017, respectively.

NOTE 6. MANDATORILY REDEEMABLE
PREFERRED STOCK

In September 2017, we completed a public offering of approximately 2.1 million shares of 6.00% Series 2024 Term Preferred Stock,
par value $0.001 per share (Series 2024 Term Preferred Stock), at a public offering price of $25.00 per share. Gross proceeds totaled $51.8 million and net proceeds, after deducting underwriting discounts, commissions and offering
expenses borne by us, were approximately $49.8 million. We incurred approximately $1.9 million in total underwriting discounts and offering costs related to the issuance of the Series 2024 Term Preferred Stock, which have been recorded as
discounts to the liquidation value on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized from issuance through September 30, 2024, the mandatory redemption date. The offering proceeds plus
borrowings under our Credit Facility were used to voluntarily redeem all 2.4 million outstanding shares of our then existing 6.75% Series 2021 Term Preferred Stock, par value $0.001 per share (Series 2021 Term Preferred Stock). In
connection with the voluntary redemption of our Series 2021 Term Preferred Stock, we incurred a loss on extinguishment of debt of $1.3 million during the three months ended September 30, 2017, which is primarily comprised of the
unamortized deferred issuance costs at the time of redemption.



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The shares of our Series 2024 Term Preferred Stock are traded under the ticker symbol GLADN on the
Nasdaq Global Select Market. Our Series 2024 Term Preferred Stock is not convertible into our common stock or any other security and provides for a fixed dividend equal to 6.00% per year, payable monthly (which equates in total to approximately
$3.1 million per year). We are required to redeem all of the outstanding Series 2024 Term Preferred Stock on September 30, 2024 for cash at a redemption price equal to $25.00 per share plus an amount equal to all unpaid dividends and
distributions per share accumulated to (but excluding) the date of redemption (the Redemption Price). We may additionally be required to mandatorily redeem some or all of the shares of our Series 2024 Term Preferred Stock early, at the
Redemption Price, in the event of the following: (1) upon the occurrence of certain events that would constitute a change in control, or (2) if we fail to maintain an asset coverage of at least 200% on our senior securities that are
stock (which is currently only our Series 2024 Term Preferred Stock) and the failure remains for a period of 30 days following the filing date of our next SEC quarterly or annual report. The asset coverage on our senior securities that
are stock as of September 30, 2018 was 244.4%, calculated in accordance with Sections 18 and 61 of the 1940 Act.

We may also voluntarily
redeem all or a portion of the Series 2024 Term Preferred Stock at our option at the Redemption Price at any time after September 30, 2019. If we fail to redeem our Series 2024 Term Preferred Stock pursuant to the mandatory redemption date of
September 30, 2024, or in any other circumstance in which we are required to mandatorily redeem our Series 2024 Term Preferred Stock, then the fixed dividend rate will increase by 4.0% for so long as such failure continues. As of
September 30, 2018, we have not redeemed, nor have we been required to redeem, any shares of our outstanding Series 2024 Term Preferred Stock.

In
May 2014, we completed a public offering of approximately 2.4 million shares of Series 2021 Term Preferred Stock, at a public offering price of $25.00 per share. Gross proceeds totaled $61.0 million and net proceeds, after deducting
underwriting discounts, commissions and offering expenses borne by us, were approximately $58.5 million, a portion of which was used to voluntarily redeem all 1.5 million outstanding shares of our then existing 7.125% Series 2016 Term
Preferred Stock, par value $0.001 per share and the remainder was used to repay a portion of outstanding borrowings under our Credit Facility. We incurred $2.5 million in total offering costs related to the issuance of our Series 2021 Term
Preferred Stock, which were recorded as discounts to the liquidation value on our accompanyingConsolidated Statements of Assets and Liabilities and were amortized over the redemption period ending June 30, 2021. In September 2017, when
we voluntarily redeemed all of our outstanding Series 2021 Term Preferred Stock, the remaining unamortized costs were fully written off as part of the realized loss discussed above.

We paid the following monthly dividends on our Series 2024 Term Preferred Stock for the year ended September 30, 2018:



|                                      |  |                  |                  |  |             |  |                    |              |  |  |                                                    |  |  |   |          | 
|------------------------------------- |  | ---------------- | ---------------- |  | ----------- |  | ------------------ | ------------ |  |  | -------------------------------------------------- |  |  | - | -------- | 
|Fiscal Year                           |  | Declaration Date |                  |  | Record Date |  |                    | Payment Date |  |  | Distribution perSeries 2024 TermPreferred Share(A) | 
|                                      |  |                  |                  | 
|2018                                  |  |                  | October 10, 2017 |  |             |  | October 20, 2017   |              |  |  | October 31, 2017                                   |  |  | $ | 0.141667 | 
|                                      |  |                  | October 10, 2017 |  |             |  | November 20, 2017  |              |  |  | November 30, 2017                                  |  |  |   | 0.125    | 
|                                      |  |                  | October 10, 2017 |  |             |  | December 19, 2017  |              |  |  | December 29, 2017                                  |  |  |   | 0.125    | 
|                                      |  |                  | January 9, 2018  |  |             |  | January 22, 2018   |              |  |  | January 31, 2018                                   |  |  |   | 0.125    | 
|                                      |  |                  | January 9, 2018  |  |             |  | February 16, 2018  |              |  |  | February 28, 2018                                  |  |  |   | 0.125    | 
|                                      |  |                  | January 9, 2018  |  |             |  | March 20, 2018     |              |  |  | March 30, 2018                                     |  |  |   | 0.125    | 
|                                      |  |                  | April 10, 2018   |  |             |  | April 20, 2018     |              |  |  | April 30, 2018                                     |  |  |   | 0.125    | 
|                                      |  |                  | April 10, 2018   |  |             |  | May 22, 2018       |              |  |  | May 31, 2018                                       |  |  |   | 0.125    | 
|                                      |  |                  | April 10, 2018   |  |             |  | June 20, 2018      |              |  |  | June 29, 2018                                      |  |  |   | 0.125    | 
|                                      |  |                  | July 10, 2018    |  |             |  | July 20, 2018      |              |  |  | July 31, 2018                                      |  |  |   | 0.125    | 
|                                      |  |                  | July 10, 2018    |  |             |  | August 21, 2018    |              |  |  | August 31, 2018                                    |  |  |   | 0.125    | 
|                                      |  |                  | July 10, 2018    |  |             |  | September 19, 2018 |              |  |  | September 28, 2018                                 |  |  |   | 0.125    | 
|                                      |  |                  |                  |  |             |  |                    |              |  |  |                                                    |  |  |   |          | 
|Fiscal Year Ended September 30, 2018: |  |                  |                  |  |             |  |                    |              |  |  |                                                    |  |  | $ | 1.516667 | 
|                                      |  |                  |                  |  |             |  |                    |              |  |  |                                                    | 



|(A) | The dividend paid on October 31, 2017 included the pro-rated
period from and including the issuance date of September 27, 2017 to and including September 30, 2017, and the full month of October 2017.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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We paid the following monthly dividends on our Series 2021 Term Preferred Stock for the year ended
September 30, 2017:



|                                      |  |                  |                  |  |             |  |                    |              |  |  |                                                 |  |  |   |           | 
|------------------------------------- |  | ---------------- | ---------------- |  | ----------- |  | ------------------ | ------------ |  |  | ----------------------------------------------- |  |  | - | --------- | 
|Fiscal Year                           |  | Declaration Date |                  |  | Record Date |  |                    | Payment Date |  |  | Distribution perSeries 2021 TermPreferred Share | 
|                                      |  |                  |                  | 
|2017                                  |  |                  | October 11, 2016 |  |             |  | October 21, 2016   |              |  |  | October 31, 2016                                |  |  | $ | 0.1406250 | 
|                                      |  |                  | October 11, 2016 |  |             |  | November 17, 2016  |              |  |  | November 30, 2016                               |  |  |   | 0.1406250 | 
|                                      |  |                  | October 11, 2016 |  |             |  | December 20, 2016  |              |  |  | December 30, 2016                               |  |  |   | 0.1406250 | 
|                                      |  |                  | January 10, 2017 |  |             |  | January 20, 2017   |              |  |  | January 31, 2017                                |  |  |   | 0.1406250 | 
|                                      |  |                  | January 10, 2017 |  |             |  | February 16, 2017  |              |  |  | February 28, 2017                               |  |  |   | 0.1406250 | 
|                                      |  |                  | January 10, 2017 |  |             |  | March 22, 2017     |              |  |  | March 31, 2017                                  |  |  |   | 0.1406250 | 
|                                      |  |                  | April 11, 2017   |  |             |  | April 21, 2017     |              |  |  | April 28, 2017                                  |  |  |   | 0.1406250 | 
|                                      |  |                  | April 11, 2017   |  |             |  | May 19, 2017       |              |  |  | May 31, 2017                                    |  |  |   | 0.1406250 | 
|                                      |  |                  | April 11, 2017   |  |             |  | June 21, 2017      |              |  |  | June 30, 2017                                   |  |  |   | 0.1406250 | 
|                                      |  |                  | July 11, 2017    |  |             |  | July 21, 2017      |              |  |  | July 31, 2017                                   |  |  |   | 0.1406250 | 
|                                      |  |                  | July 11, 2017    |  |             |  | August 21, 2017    |              |  |  | August 31, 2017                                 |  |  |   | 0.1406250 | 
|                                      |  |                  | July 11, 2017    |  |             |  | September 20, 2017 |              |  |  | September 29, 2017                              |  |  |   | 0.1406250 | 
|                                      |  |                  |                  |  |             |  |                    |              |  |  |                                                 |  |  |   |           | 
|Fiscal Year Ended September 30, 2017: |  |                  |                  |  |             |  |                    |              |  |  |                                                 |  |  | $ | 1.6875000 | 
|                                      |  |                  |                  |  |             |  |                    |              |  |  |                                                 |  |  |   |           | 

The federal income tax characteristics of dividends paid to our preferred stockholders generally constitute ordinary income to
the extent of our current and accumulated earnings and profits and is reported after the end of the calendar year based on tax information for the full fiscal year. Estimates of tax characterization made on a quarterly basis may not be
representative of the actual tax characterization of dividends for the full year. Estimates made on a quarterly basis are updated as of each interim reporting date. The tax characterization of dividends paid to our preferred stockholders during the
calendar years ended December 31, 2017 and 2016 was 100% from ordinary income.

In accordance with ASC 480, Distinguishing Liabilities from
Equity, mandatorily redeemable financial instruments should be classified as liabilities in the balance sheet. Our mandatorily redeemable preferred stock is recorded at the liquidation preference, less discounts, on our accompanyingConsolidated Statements of Assets and Liabilities as of September 30, 2018 and 2017. The related dividend payments to our mandatorily redeemable preferred stockholders are treated as dividend expense on our statement of operations as of the
ex-dividend date.

The fair value, based on the last quoted closing price, for our Series 2024 Term Preferred
Stock as of September 30, 2018 and 2017 was $52.7 million and $52.7 million, respectively. We consider our mandatorily redeemable preferred stock to be a Level 1 input within the ASC 820 hierarchy.

NOTE 7. REGISTRATION STATEMENT AND COMMON EQUITY OFFERINGS

We filed Post-Effective Amendment No. 5 to our current universal shelf registration statement on Form N-2 (our
Registration Statement) (File No. 333-208637) with the SEC on December 19, 2017, which was declared effective by the SEC on February 1, 2018. Our Registration Statement permits us to
issue, through one or more transactions, up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities and warrants to purchase common stock, preferred stock or debt
securities. As of September 30, 2018, we had the ability to issue up to $202.6 million in securities under the Registration Statement.

Common Stock Offerings

In February 2015, we entered into
equity distribution agreements (commonly referred to as at-the-market agreements or the Sales Agreements) with KeyBanc Capital Markets Inc. and
Cantor Fitzgerald & Co., each a Sales Agent, under which we had the ability to issue and sell, from time to time, through the Sales Agents, up to an aggregate offering price of $50.0 million shares of our common stock. In
May 2017, we terminated the Sales Agreement with KeyBanc Capital Markets Inc. and amended the Sales Agreement with Cantor Fitzgerald & Co. to reference our current registration statement. All other material terms of the Sales Agreement with
Cantor Fitzgerald & Co. remained unchanged. During the year ended September 30, 2018, we sold 2,341,296 shares of our common stock under the Sales Agreement with Cantor Fitzgerald & Co., at a weighted-average price of $9.39
per share and raised $22.0 million of gross proceeds. Net proceeds, after deducting commissions and offering costs borne by us, were approximately $21.6 million. As of September 30, 2018, we had a remaining capacity to sell
up to $20.5 million of common stock under the Sales Agreement with Cantor Fitzgerald & Co. During the year ended September 30, 2017, we sold 642,818 shares at a weighted-average price of $9.88 per share and raised
$6.4 million of gross proceeds. Net proceeds, after deducting commissions and offering costs borne by us, were approximately $6.1 million.



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Pursuant to our prior Registration Statement, in October 2016, we completed a public offering of 2.0 million
shares of our common stock at a public offering price of $7.98 per share, which was below our then-current NAV per share. In November 2016, the underwriters partially exercised their overallotment option to purchase an additional 173,444 shares of
our common stock. Gross proceeds totaled $17.3 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were approximately $16.4 million.

NOTE 8. NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE

The following table sets forth the computation of basic and diluted net increase in net assets resulting from operations per weighted average common share for
the years ended September 30, 2018, 2017, and 2016:



|                                                                                                         |  |                          |            |  |      |   |            |      |  |   |            |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- |  | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                         |  | Year Ended September 30, |           
|                                                                                                         |  | 2018                     |            |  | 2017 |   |            | 2016 | 
|Numerator: net increase in net assets resulting from operations                                          |  | $                        | 18,648     |  |      | $ | 17,180     |      |  | $ | 11,367     | )
|Denominator: basic and diluted weighted average common shares                                            |  |                          | 27,104,077 |  |      |   | 25,495,117 |      |  |   | 23,200,642 |  
|                                                                                                         |  |                          |            |  |      |   |            |      |  |   |            |  
|Basic and Diluted Net Increase in Net Assets Resulting from Operations per Weighted Average
Common Share |  | $                        | 0.69       |  |      | $ | 0.67       |      |  | $ | 0.49       |  
|                                                                                                         |  |                          |            |  |      |   |            |      |  |   |            |  

NOTE 9. DISTRIBUTIONS TO COMMON STOCKHOLDERS

To qualify to be taxed as a RIC under Subchapter M of the Code, we must generally distribute to our stockholders, for each taxable year, at least 90% of our
taxable ordinary income plus the excess of our net short-term capital gains over net long-term capital losses (Investment Company Taxable Income). The amount to be paid out as distributions to our stockholders is determined by our Board
of Directors quarterly and is based on managements estimate of Investment Company Taxable Income. Based on that estimate, our Board of Directors declares three monthly distributions to common stockholders each quarter.

The federal income tax characteristics of all distributions will be reported to stockholders on the IRS Form 1099 at the end of each calendar year. For
calendar years ended December 31, 2017 and 2016, 100% of distributions to common stockholders during these periods were deemed to be paid from ordinary income for 1099 stockholder reporting purposes.



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We paid the following monthly distributions to common stockholders for the fiscal years ended September 30,
2018 and 2017:



|                        |  |                  |                  |  |             |  |                    |              |  |  |                             |  |  |   |      | 
|----------------------- |  | ---------------- | ---------------- |  | ----------- |  | ------------------ | ------------ |  |  | --------------------------- |  |  | - | ---- | 
|Fiscal Year             |  | Declaration Date |                  |  | Record Date |  |                    | Payment Date |  |  | Distributionper CommonShare | 
|2018                    |  |                  | October 10, 2017 |  |             |  | October 20, 2017   |              |  |  | October 31, 2017            |  |  | $ | 0.07 | 
|                        |  |                  | October 10, 2017 |  |             |  | November 20, 2017  |              |  |  | November 30, 2017           |  |  |   | 0.07 | 
|                        |  |                  | October 10, 2017 |  |             |  | December 19, 2017  |              |  |  | December 29, 2017           |  |  |   | 0.07 | 
|                        |  |                  | January 9, 2018  |  |             |  | January 22, 2018   |              |  |  | January 31, 2018            |  |  |   | 0.07 | 
|                        |  |                  | January 9, 2018  |  |             |  | February 16, 2018  |              |  |  | February 28, 2018           |  |  |   | 0.07 | 
|                        |  |                  | January 9, 2018  |  |             |  | March 20, 2018     |              |  |  | March 30, 2018              |  |  |   | 0.07 | 
|                        |  |                  | April 10, 2018   |  |             |  | April 20, 2018     |              |  |  | April 30, 2018              |  |  |   | 0.07 | 
|                        |  |                  | April 10, 2018   |  |             |  | May 22, 2018       |              |  |  | May 31, 2018                |  |  |   | 0.07 | 
|                        |  |                  | April 10, 2018   |  |             |  | June 20, 2018      |              |  |  | June 29, 2018               |  |  |   | 0.07 | 
|                        |  |                  | July 10, 2018    |  |             |  | July 20, 2018      |              |  |  | July 31, 2018               |  |  |   | 0.07 | 
|                        |  |                  | July 10, 2018    |  |             |  | August 21, 2018    |              |  |  | August 31, 2018             |  |  |   | 0.07 | 
|                        |  |                  | July 10, 2018    |  |             |  | September 19, 2018 |              |  |  | September 28, 2018          |  |  |   | 0.07 | 
|                        |  |                  |                  |  |             |  |                    |              |  |  |                             |  |  |   |      | 
|Fiscal Year 2018 Total: |  |                  |                  |  |             |  |                    |              |  |  |                             |  |  | $ | 0.84 | 
|                        |  |                  |                  |  |             |  |                    |              |  |  |                             | 
|2017                    |  |                  | October 11, 2016 |  |             |  | October 21, 2016   |              |  |  | October 31, 2016            |  |  | $ | 0.07 | 
|                        |  |                  | October 11, 2016 |  |             |  | November 17, 2016  |              |  |  | November 30, 2016           |  |  |   | 0.07 | 
|                        |  |                  | October 11, 2016 |  |             |  | December 20, 2016  |              |  |  | December 30, 2016           |  |  |   | 0.07 | 
|                        |  |                  | January 10, 2017 |  |             |  | January 20, 2017   |              |  |  | January 31, 2017            |  |  |   | 0.07 | 
|                        |  |                  | January 10, 2017 |  |             |  | February 16, 2017  |              |  |  | February 28, 2017           |  |  |   | 0.07 | 
|                        |  |                  | January 10, 2017 |  |             |  | March 22, 2017     |              |  |  | March 31, 2017              |  |  |   | 0.07 | 
|                        |  |                  | April 11, 2017   |  |             |  | April 21, 2017     |              |  |  | April 28, 2017              |  |  |   | 0.07 | 
|                        |  |                  | April 11, 2017   |  |             |  | May 19, 2017       |              |  |  | May 31, 2017                |  |  |   | 0.07 | 
|                        |  |                  | April 11, 2017   |  |             |  | June 21, 2017      |              |  |  | June 30, 2017               |  |  |   | 0.07 | 
|                        |  |                  | July 11, 2017    |  |             |  | July 21, 2017      |              |  |  | July 31, 2017               |  |  |   | 0.07 | 
|                        |  |                  | July 11, 2017    |  |             |  | August 21, 2017    |              |  |  | August 31, 2017             |  |  |   | 0.07 | 
|                        |  |                  | July 11, 2017    |  |             |  | September 20, 2017 |              |  |  | September 29, 2017          |  |  |   | 0.07 | 
|                        |  |                  |                  |  |             |  |                    |              |  |  |                             |  |  |   |      | 
|Fiscal Year 2017 Total: |  |                  |                  |  |             |  |                    |              |  |  |                             |  |  | $ | 0.84 | 
|                        |  |                  |                  |  |             |  |                    |              |  |  |                             | 

Aggregate distributions declared and paid to our common stockholders were approximately $22.8 million and
$21.4 million for the years ended September 30, 2018 and 2017, respectively, and were declared based on estimates of investment company taxable income for the respective fiscal years. For each of the fiscal years ended September 30,
2018, 2017, and 2016, Investment Company Taxable Income exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $0.3 million, $0.3 million, and $5.5 million, respectively,
of the first distributions paid to common stockholders in the respective subsequent fiscal year as having been paid in the respective prior year.

The
components of our net assets on a tax basis were as follows:



|                                                      |  |                          |         |   |      |   |         |  
|----------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                      |  | Year Ended September 30, |        
|                                                      |  | 2018                     |         |   | 2017 |  
|Common stock                                          |  | $                        | 29      |   |      | $ | 26      |  
|Capital in excess of par value                        |  |                          | 343,076 |   |      |   | 348,248 |  
|Cumulative net unrealized depreciation of investments |  |                          | (37,421 | ) |      |   | (59,062 | )
|Cumulative net unrealized appreciation of other       |  |                          |        |   |      |   | (115    | )
|Undistributed Ordinary Income                         |  |                          | 289     |   |      |   | 339     |  
|Capital loss carryforward                             |  |                          | (37,364 | ) |      |   | (64,350 | )
|Post-October tax loss deferral                        |  |                          | (20,648 | ) |      |   |        |  
|Other temporary differences                           |  |                          | (10,869 | ) |      |   | (5,436  | )
|                                                      |  |                          |         |   |      |   |         |  
|Net Assets                                            |  | $                        | 237,092 |   |      | $ | 219,650 |  
|                                                      |  |                          |         |   |      |   |         |  

We intend to retain some or all of our realized capital gains first to the extent we have available capital loss carryforwards
and second, through treating the retained amount as a deemed distribution. As of September 30, 2018, $26.4 million of our capital loss carryforwards expired. We have $0.9 million of capital loss carryforwards that will
expire as of September 30, 2019. Additionally, as of September 30, 2018, we had $36.5 million of capital loss carryforwards that do not expire.



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For the years ended September 30, 2018 and 2017, we recorded the following adjustments for permanent book-tax differences to reflect tax character. Results of operations, total net assets and cash flows were not affected by these adjustments.



|                                    |  |                          |         |   |      |   |        |  
|----------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------ | -
|                                    |  | Year Ended September 30, |        
|                                    |  | 2018                     |         |   | 2017 |  
|Undistributed net investment income |  | $                        | (366    | ) |      | $ | (4,416 | )
|Accumulated net realized losses     |  |                          | 27,131  |   |      |   | 6,541  |  
|Capital in excess of par value      |  |                          | (26,765 | ) |      |   | (2,125 | )

NOTE 10. FEDERAL AND STATE INCOME TAXES

We intend to continue to maintain our qualifications as a RIC for federal income tax purposes. As a RIC, we are not subject to federal income tax on the
portion of our taxable income and gains that we distribute to stockholders. To maintain our qualification as a RIC, we must meet certain source-of-income and asset
diversification requirements. In addition, to qualify to be taxed as a RIC, we must also meet certain annual stockholder distribution requirements. To satisfy the RIC annual distribution requirement, we must distribute to stockholders at least 90.0%
of our investment company taxable income. Our policy generally is to make distributions to our stockholders in an amount up to 100.0% of our investment company taxable income. Because we have distributed more than 90.0% of our investment company
taxable income, no income tax provisions have been recorded for the years ended September 30, 2018, 2017, and 2016.

In an effort to limit certain
federal excise taxes imposed on RICs, we generally distribute during each calendar year, an amount at least equal to the sum of (1) 98.0% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for
the one-year period ending on October 31 of the calendar year and (3) any ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such
years. No excise tax provisions have been recorded for the years ended September 30, 2018, 2017, and 2016.

Under the RIC Modernization Act, we are
permitted to carry forward capital losses incurred in taxable years beginning after September 30, 2011, for an unlimited period. However, any losses incurred during post-enactment taxable years will be required to be utilized prior to the
losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more
likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses.

NOTE 11. COMMITMENTS AND CONTINGENCIES

Legal
Proceedings

We are party to certain legal proceedings incidental to the normal course of our business. We are required to establish reserves for
litigation matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves. Based on current knowledge, we do not believe that
loss contingencies, if any, arising from pending investigations, litigation or regulatory matters will have a material adverse effect on our financial condition, results of operations or cash flows. Additionally, based on our current knowledge, we
do not believe such loss contingencies are both probable and estimable and therefore, as of September 30, 2018 and 2017, we have not established reserves for such loss contingencies.

Escrow Holdbacks

From time to time, we will enter into
arrangements as it relates to exits of certain investments whereby specific amounts of the proceeds are held in escrow in order to be used to satisfy potential obligations as stipulated in the sales agreements. We record escrow amounts in restricted
cash and cash equivalents on our accompanying Consolidated Statements of Assets and Liabilities. We establish a reserve against the escrow amounts if we determine that it is probable and estimable that a portion of the escrow amounts will not
be ultimately received at the end of the escrow period. There were no aggregate reserves recorded against the escrow amounts as of September 30, 2018 and 2017.

Financial Commitments and Obligations

We have lines of
credit, delayed draw term loans, and an uncalled capital commitment with certain of our portfolio companies that have not been fully drawn. Since these commitments have expiration dates and we expect many will never be fully drawn, the total
commitment amounts do not necessarily represent future cash requirements. We estimate the fair value of the combined unused lines of credit, the unused delayed draw term loans and the uncalled capital commitment as of September 30, 2018 and
2017 to be immaterial.



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The following table summarizes the amounts of our unused lines of credit, delayed draw term loans and uncalled
capital commitment, at cost, as of September 30, 2018 and 2017, which are not reflected as liabilities in the accompanying Consolidated Statements of Assets and Liabilities:



|                                  |  |                     |        |  |      |   |        | 
|--------------------------------- |  | ------------------- | ------ |  | ---- | - | ------ | 
|                                  |  | As of September 30, |       
|                                  |  | 2018                |        |  | 2017 |  
|Unused line of credit commitments |  | $                   | 5,350  |  |      | $ | 7,517  | 
|Delayed draw term loans           |  |                     | 3,910  |  |      |   | 10,900 | 
|Uncalled capital commitment       |  |                     | 843    |  |      |   | 1,367  | 
|                                  |  |                     |        |  |      |   |        | 
|Total                             |  | $                   | 10,103 |  |      | $ | 19,784 | 
|                                  |  |                     |        |  |      |   |        | 



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NOTE 12. FINANCIAL HIGHLIGHTS



|                                                        |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|------------------------------------------------------- |  | ------------------------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                        |  | As of and for the Year Ended September 30, |           
|                                                        |  | 2018                                       |            |   | 2017 |   |            | 2016 |  |   | 2015       |   |  | 2014 |           
|Per Common Share Data:                                  |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net asset value at beginning of year(A)                 |  | $                                          | 8.40       |   |      | $ | 8.62       |      |  | $ | 9.06       |   |  | $    | 9.51       |   |  | $ | 9.81       |  
|Income from operations(B)                               |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net investment income                                   |  |                                            | 0.85       |   |      |   | 0.84       |      |  |   | 0.84       |   |  |      | 0.84       |   |  |   | 0.87       |  
|Net realized and unrealized loss on investments         |  |                                            | (0.16      | ) |      |   | (0.12      | )    |  |   | (0.35      | ) |  |      | (0.50      | ) |  |   | (0.23      | )
|Net realized and unrealized (loss) gain on other        |  |                                            |           |   |      |   | (0.05      | )    |  |   |           |   |  |      | 0.06       |   |  |   | (0.11      | )
|                                                        |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total from operations                                   |  |                                            | 0.69       |   |      |   | 0.67       |      |  |   | 0.49       |   |  |      | 0.40       |   |  |   | 0.53       |  
|                                                        |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Distributions to common stockholders
from(B)(C)         |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net Investment Income                                   |  |                                            | (0.84      | ) |      |   | (0.84      | )    |  |   | (0.70      | ) |  |      | (0.84      | ) |  |   | (0.12      | )
|Realized gains                                          |  |                                            |           |   |      |   |           |      |  |   | (0.14      | ) |  |      |           |   |  |   |           |  
|Return of capital                                       |  |                                            |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   | (0.72      | )
|                                                        |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total distributions                                     |  |                                            | (0.84      | ) |      |   | (0.84      | )    |  |   | (0.84      | ) |  |      | (0.84      | ) |  |   | (0.84      | )
|                                                        |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Capital share transactions(B)                           |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Discounts, commissions, and offering costs              |  |                                            | (0.01      | ) |      |   | (0.04      | )    |  |   | (0.05      | ) |  |      | (0.01      | ) |  |   |           |  
|Repurchase of common stock                              |  |                                            |           |   |      |   |           |      |  |   | 0.02       |   |  |      |           |   |  |   |           |  
|Net dilutive effect of equity
offering(D)               |  |                                            | 0.08       |   |      |   | (0.02      | )    |  |   | (0.05      | ) |  |      |           |   |  |   |           |  
|                                                        |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total capital share transactions                        |  |                                            | 0.07       |   |      |   | (0.06      | )    |  |   | (0.08      | ) |  |      | (0.01      | ) |  |   |           |  
|                                                        |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Other, net(B)(E)                                        |  |                                            |           |   |      |   | 0.01       |      |  |   | (0.01      | ) |  |      |           |   |  |   | 0.01       |  
|                                                        |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net asset value at end of year(A)                       |  | $                                          | 8.32       |   |      | $ | 8.40       |      |  | $ | 8.62       |   |  | $    | 9.06       |   |  | $ | 9.51       |  
|                                                        |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Per common share market value at beginning of year      |  | $                                          | 9.50       |   |      | $ | 8.13       |      |  | $ | 8.13       |   |  | $    | 8.77       |   |  | $ | 8.73       |  
|Per common share market value at end of year            |  |                                            | 9.50       |   |      |   | 9.50       |      |  |   | 8.13       |   |  |      | 8.13       |   |  |   | 8.77       |  
|Total return(F)                                         |  |                                            | 9.53       | % |      |   | 27.90      | %    |  |   | 11.68      | % |  |      | 2.40       | % |  |   | 9.62       | %
|Common stock outstanding at end of
year(A)              |  |                                            | 28,501,980 |   |      |   | 26,160,684 |      |  |   | 23,344,422 |   |  |      | 21,131,622 |   |  |   | 21,000,160 |  
|Statement of Assets and Liabilities Data:               |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net assets at end of year                               |  | $                                          | 237,092    |   |      | $ | 219,650    |      |  | $ | 201,207    |   |  | $    | 191,444    |   |  | $ | 199,660    |  
|Average net assets(G)                                   |  |                                            | 234,092    |   |      |   | 215,421    |      |  |   | 193,228    |   |  |      | 198,864    |   |  |   | 201,009    |  
|Senior securities Data:                                 |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Borrowings under Credit Facility, at cost               |  | $                                          | 110,000    |   |      | $ | 93,000     |      |  | $ | 71,300     |   |  | $    | 127,300    |   |  | $ | 36,700     |  
|Mandatorily redeemable preferred stock                  |  |                                            | 51,750     |   |      |   | 51,750     |      |  |   | 61,000     |   |  |      | 61,000     |   |  |   | 61,000     |  
|Ratios/Supplemental Data:                               |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Ratio of net expenses to average net
assets(H)(I)       |  |                                            | 9.61       |   |      |   | 8.26       |      |  |   | 10.16      |   |  |      | 10.24      |   |  |   | 9.06       |  
|Ratio of net investment income to average net assets(J) |  |                                            | 9.86       |   |      |   | 9.95       |      |  |   | 10.08      |   |  |      | 8.90       |   |  |   | 9.14       |  



|(A) | Based on actual shares outstanding at the end of the corresponding fiscal year.
|--- | -------------------------------------------------------------------------------

|(B) | Based on weighted average basic per share data.
|--- | -----------------------------------------------

|(C) | The tax character of distributions are determined based on taxable income calculated in accordance with income
tax regulations, which may differ from amounts determined under GAAP.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | During the fiscal year ended September 30, 2018, the anti-dilution was a result of issuing common shares
during the period at a price above the then-current NAV per share. During the fiscal years ended September 30, 2017, 2016 and 2015, the net dilution was a result of issuing common shares during the period at a price below the then-current NAV
per share.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | Represents the impact of the different share amounts (weighted average shares outstanding during the fiscal
year and shares outstanding at the end of the fiscal year) in the per share data calculations and rounding impacts.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | Total return equals the change in the ending market value of our common stock from the beginning of the fiscal
year, taking into account distributions reinvested in accordance with the terms of our dividend reinvestment plan. Total return does not take into account distributions that may be characterized as a return of capital. For further information on the
estimated character of our distributions to common stockholders, refer to Note 9Distributions to Common Stockholders.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(G) | Computed using the average of the balance of net assets at the end of each month of the fiscal year.
|--- | ----------------------------------------------------------------------------------------------------

|(H) | Ratio of net expenses to average net assets is computed using total expenses, net of credits from the Adviser,
to the base management, loan servicing and incentive fees.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(I) | Had we not received any non-contractual, unconditional and irrevocable
credits of the incentive fee due to the Adviser, the ratio of net expenses to average net assets would have been 10.34%, 9.38%, 10.90%, 10.93%, and 9.65% for the fiscal years ended September 30, 2018, 2017, 2016, 2015 and 2014, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(J) | Had we not received any non-contractual, unconditional and irrevocable
credits of the incentive fee due to the Adviser, the ratio of net investment income to average net assets would have been 9.14%, 8.85%, 9.35%, 8.22%, and 8.55% for the fiscal years ended September 30, 2018, 2017, 2016, 2015 and 2014,
respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTE 13. SELECTED QUARTERLY DATA (UNAUDITED)



|                                                                                                                      |  |                               |        |  |                           |   |        |                          |  |   |                               |  |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------ |  | ------------------------- | - | ------ | ------------------------ |  | - | ----------------------------- |  |  | - | ------ | -
|                                                                                                                      |  | Year Ended September 30, 2018 |       
|                                                                                                                      |  | QuarterEndedDecember 31,2017  |        |  | QuarterEndedMarch 31,2018 |   |        | QuarterEndedJune 30,2018 |  |   | QuarterEndedSeptember 30,2018 | 
|                                                                                                                      |  |                               |        | 
|Total investment income                                                                                               |  | $                             | 10,859 |  |                           | $ | 11,086 |                          |  | $ | 12,379                        |  |  | $ | 11,257 |  
|Net investment income                                                                                                 |  |                               | 5,577  |  |                           |   | 5,613  |                          |  |   | 5,996                         |  |  |   | 5,902  |  
|Net increase (decrease) in net assets resulting from operations                                                       |  |                               | 7,160  |  |                           |   | 9,304  |                          |  |   | 12,093                        |  |  |   | (9,909 | )
|                                                                                                                      |  |                               |        | 
|Net increase (decrease) in net assets resulting from operations per weighted average common
share (basic and diluted) |  | $                             | 0.27   |  |                           | $ | 0.35   |                          |  | $ | 0.45                          |  |  | $ | (0.35  | )
|                                                                                                                      | 
|                                                                                                                      |  | Year Ended September 30, 2017 |       
|                                                                                                                      |  | QuarterEndedDecember 31,2016  |        |  | QuarterEndedMarch 31,2017 |   |        | QuarterEndedJune 30,2017 |  |   | QuarterEndedSeptember 30,2017 | 
|                                                                                                                      |  |                               |        | 
|Total investment income                                                                                               |  | $                             | 9,974  |  |                           | $ | 8,793  |                          |  | $ | 9,632                         |  |  | $ | 10,834 |  
|Net investment income                                                                                                 |  |                               | 5,207  |  |                           |   | 5,359  |                          |  |   | 5,379                         |  |  |   | 5,488  |  
|Net increase in net assets resulting from operations                                                                  |  |                               | 916    |  |                           |   | 4,656  |                          |  |   | 6,163                         |  |  |   | 5,445  |  
|                                                                                                                      |  |                               |        | 
|Net increase in net assets resulting from operations per weighted average common share (basic
and diluted)            |  | $                             | 0.04   |  |                           | $ | 0.18   |                          |  | $ | 0.24                          |  |  | $ | 0.21   |  



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NOTE 14. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES

In accordance with the SECs Regulation S-X, we do not consolidate portfolio company investments. Further, in
accordance with ASC 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to
the investment company or its consolidated subsidiaries. We had certain unconsolidated subsidiaries which met at least one of the significance conditions under Rule 1-02(w) of the SECs Regulation S-X as of or during at least one of the years ended September 30, 2018, 2017, and 2016. Accordingly, audited and unaudited financial statements, as applicable, have been included as exhibits to this Form 10-K pursuant to Rule 3-09.

NOTE 15. SUBSEQUENT EVENTS

Debt Offering

In November 2018, we completed a public
debt offering of $57.5 million aggregate principal amount of 6.125% Notes due 2023 (the 2023 Notes), inclusive of the overallotment, for net proceeds of $55.5 million after deducting underwriting discounts, commissions and
offering expenses borne by us. The Notes will mature on November 1, 2023, and may be redeemed in whole or in part at any time or from time to time at the Companys option on or after November 1, 2020. The 2023 Notes are traded
under the ticker symbol GLADD on the Nasdaq Global Select Market.

Distributions

On October 9, 2018, our Board of Directors declared the following monthly cash distributions to common and preferred stockholders:



|                      |  |              |                   |  |                             |   |      |                                                |  |   |       | 
|--------------------- |  | ------------ | ----------------- |  | --------------------------- | - | ---- | ---------------------------------------------- |  | - | ----- | 
|Record Date           |  | Payment Date |                   |  | Distributionper CommonShare |   |      | Distribution perSeries 2024Term PreferredShare | 
|October 19, 2018      |  |              | October 31, 2018  |  |                             | $ | 0.07 |                                                |  | $ | 0.125 | 
|November 20, 2018     |  |              | November 30, 2018 |  |                             |   | 0.07 |                                                |  |   | 0.125 | 
|December 20, 2018     |  |              | December 31, 2018 |  |                             |   | 0.07 |                                                |  |   | 0.125 | 
|                      |  |              |                   |  |                             |   |      |                                                |  |   |       | 
|Total for the Quarter |  |              |                   |  |                             | $ | 0.21 |                                                |  | $ | 0.375 | 
|                      |  |              |                   |  |                             |   |      |                                                |  |   |       | 

Portfolio and Investment Activity

In October 2018, our investment in TWS Acquisition Corporation paid off at par for net cash proceeds of $2.0 million.

In October and November 2018, we invested a total of $1.6 million in 8th Avenue Food &
Provisions, Inc. through secured second lien debt.

In November 2018, we invested $2.0 million in GOBP Holdings, Inc. (d/b/a Grocery Outlet) through
secured second lien debt.

In November 2018, our investment in Red Ventures, LLC paid off at par for net cash proceeds of $3.1 million.



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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

a) Disclosure Controls and Procedures

As of September 30,
2018 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness and design and operation of our disclosure controls and procedures. Based on that evaluation, our
management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, of
material information about us required to be included in periodic SEC filings. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can
provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

b) Managements Annual Report on Internal Control Over Financial Reporting

Refer to the Managements Report on Internal Control over Financial Reporting located in Item 8 of this Form 10-K.

c) Attestation Report of the Registered Public Accounting Firm

Refer to the Report of Independent Registered Public Accounting Firm located in Item 8 of this Form 10-K.

d) Change in Internal Control over Financial Reporting

There
were no changes in internal controls for the three months ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.



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PART III

We will file a definitive Proxy Statement for our 2019 Annual Meeting of Stockholders (the 2019 Proxy Statement) with the SEC, pursuant to
Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K.
Only those sections of the 2019 Proxy Statement that specifically address the items set forth herein are incorporated herein by reference.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is hereby incorporated by reference from
our 2019 Proxy Statement under the captions Election of Directors and Section 16(a) Beneficial Ownership Reporting Compliance.

We have adopted a Code of Business Conduct and Ethics (the Code) that applies to all of our officers and directors and to the employees of our
Adviser and our Administrator. The Code is available in the Investor Relations section of our website at www.gladstonecapital.com.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is hereby incorporated by reference from our 2019 Proxy Statement under
the captions Executive Compensation and Director Compensation for Fiscal Year 2018.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is hereby
incorporated by reference from our 2019 Proxy Statement under the caption Security Ownership of Certain Beneficial Owners and Management.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 is hereby incorporated
by reference from our 2019 Proxy Statement under the captions Certain Transactions and Information Regarding our Board of Directors and Corporate GovernanceDirector Independence.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 is hereby incorporated by reference from our 2019 Proxy Statement under the caption Principal Accounting Firm Fees
and Services.



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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



|a. | DOCUMENTS FILED AS PART OF THIS ANNUAL REPORT ON FORM 10-K
|-- | ----------------------------------------------------------



|1. | The following financial statements are filed herewith:
|-- | ------------------------------------------------------



|                                                                                                         |  |  |    | 
|-------------------------------------------------------------------------------------------------------- |  |  | -- | 
|Managements Annual Report on Internal Controls over Financial Reporting                                 |  |  | 67 | 
|Report of Independent Registered Public Accounting Firm                                                  |  |  | 68 | 
|Consolidated Statements of Assets and Liabilities as of September 30,
 2018 and 2017                     |  |  | 69 | 
|Consolidated Statements of Operations for the years ended September 30,
 2018, 2017, and 2017            |  |  | 70 | 
|Consolidated Statements of Changes in Net Assets for the years ended September
 30, 2018, 2017, and 2016 |  |  | 71 | 
|Consolidated Statements of Cash Flows for the years ended September 30,
 2018, 2017, and 2016            |  |  | 72 | 
|Consolidated Schedules 
of Investments as of September 30, 2018 and 2017                                 |  |  | 73 | 
|Notes to Consolidated Financial Statements                                                               |  |  | 85 | 



|2. | The following financial statement schedule is filed herewith:
|-- | -------------------------------------------------------------



|                                                                                            |  |  |     | 
|------------------------------------------------------------------------------------------- |  |  | --- | 
|Schedule 12-14 Investments in and Advances
 to Affiliates as of September 30, 2018 and 2017 |  |  | 121 | 

No other financial statement schedules are filed herewith because (1) such schedules are not required or (2) the
information has been presented in the aforementioned financial statements.

3. Exhibits

The following exhibits are filed as part of this report or are hereby incorporated by reference to exhibits previously filed with the SEC:



|     |  |                                                                                                                                                                                                                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3.1  |  | Articles of Amendment and Restatement to the Articles of Incorporation, incorporated by reference to Exhibit 99.a.2 to Pre-Effective Amendment No. 1 to the Registration Statement on FormN-2 (File No.333-63700), filed July 27, 2001.                                                                                                                         
|     | 
|3.2  |  | Articles Supplementary Establishing and Fixing the Rights and Preferences of Term Preferred Shares, including Appendix 
A thereto relating to the Term Preferred Shares, 7.125% Series 2016, incorporated by reference to Exhibit 2.a.2 to Post-Effective Amendment No. 5 to the Registration Statement on FormN-2 (File No.333-162592), filed October 31, 2011.
|     | 
|3.3  |  | Certificate of Correction to Articles Supplementary Establishing and Fixing the Rights and Preferences of Term Preferred Shares, incorporated by reference
 to Exhibit 3.1 to the Current Report on Form 8-K (File No.814-00237), filed October 29, 2015.                                                                                                       
|     | 
|3.4  |  | Articles Supplementary, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File
 No.814-00237), filed September 21, 2017.                                                                                                                                                                                                              
|     | 
|3.5  |  | Articles Supplementary Establishing and Fixing the Rights and Preferences of Term Preferred Shares, including Exhibit A thereto relating to the
6.00% Series 2024 Term Preferred Stock, incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No.814-00237), filed
September 21, 2017.                                               
|     | 
|3.6  |  | Bylaws, incorporated by reference to Exhibit 
99.b to Pre-Effective Amendment No. 1 to the Registration Statement on FormN-2 (File No.333-63700), filed July 27, 2001.                                                                                                                                                                                          
|     | 
|3.7  |  | Amendment to Bylaws, incorporated by reference to Exhibit 3.3 to the Quarterly Report on Form 10-Q (File
 No.814-00237), filed February 17, 2004.                                                                                                                                                                                                               
|     | 
|3.8  |  | Second Amendment to Bylaws, incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No.814-00237), filed July 10, 2007.                                                                                                                                                                                                               
|     | 
|3.9  |  | Third Amendment to Bylaws, incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File
 No.814-00237), filed June 10, 2011.                                                                                                                                                                                                               
|     | 
|3.10 |  | Fourth Amendment to Bylaws, incorporated by reference to Exhibit 3.1 to the Current Report on Form8-K (File No.814-00237), filed November 29, 2016.                                                                                                                                                                                                             
|     | 
|4.1  |  | Form of Certificate for Common Stock, incorporated by reference to Exhibit 99.d.2 to Pre-Effective Amendment
 No. 3 to the Registration Statement on Form N-2 (File No.333-63700), filed August 23, 2001.                                                                                                                                                       
|     | 
|4.2  |  | Form of Certificate for 6.00% Series 2024 Term Preferred Stock , incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No.814-00237), filed September 21, 2017.                                                                                                                                                                      



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|4.3   |  | Indenture between the Registrant and U.S. Bank National Association, dated as of November 
6, 2018, incorporated by reference to Exhibit 2.d.10 to Post-Effective Amendment No. 7 to the Registration Statement on Form N-2 (File No.333-208637), filed November 6, 2018.                                                                                                                                                                                                                                                                      
|      | 
|4.4   |  | First Supplemental Indenture between the Registrant and U.S. Bank National Association, dated as of November 
6, 2018, incorporated by reference to Exhibit 2.d.11 to Post-Effective Amendment No. 7 to the Registration Statement on Form N-2 (File No.333-208637), filed November 6, 2018.                                                                                                                                                                                                                                                   
|      | 
|10.1  |  | Stock Transfer Agency Agreement between the Registrant and The Bank of New York, incorporated by reference to Exhibit 99.k.1 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No.333-63700), filed July 27, 2001.                                                                                                                                                                                                                                                                                              
|      | 
|10.2  |  | Custody Agreement between the Registrant and The Bank of New York, dated as of May 
5, 2006, incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q (File No.814-00237), filed August 1, 2006.                                                                                                                                                                                                                                                                                                                         
|      | 
|10.3  |  | Amended and Restated Investment Advisory and Management Agreement between the Registrant and Gladstone Management Corporation, dated as of
 October 1, 2006, incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No.814-00237), filed October 5,
2006.                                                                                                                                                                                                                                                           
|      | 
|10.4  |  | Amendment No. 
1 to Amended and Restated Investment Advisory and Management Agreement between the Registrant and Gladstone Management Corporation, dated as of October 13, 2015 incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.814-00237), filed October 14, 2015.                                                                                                                                                                                                                                       
|      | 
|10.5  |  | Administration Agreement between the Registrant and Gladstone Administration, LLC, dated as of October 
1, 2006, incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K (File No.814-00237), filed October 5, 2006.                                                                                                                                                                                                                                                                                                       
|      | 
|10.6  |  | Fifth Amended and Restated Credit Agreement, dated as of May 
1, 2015, by and among Gladstone Business Loan, LLC, as Borrower, Gladstone Management Corporation, as Servicer, the Lenders and Managing Agents named therein, and Keybank National Association, as Administrative Agent, incorporated by reference to Exhibit
 10.1 to the Current Report on Form 8-K (File No.814-00237), filed May 5, 2015.                                                                                                                                   
|      | 
|10.7  |  | Amendment No. 1 to Fifth Amended and Restated Credit Agreement, dated as of October 
9, 2015, by and among Gladstone Business Loan, LLC, as Borrower, Gladstone Management Corporation, as Servicer, Keybank National Association, Alostar Bank of Commerce, ING Capital LLC, Newbridge Bank, Santander Bank, N.A. and Talmer Bank and Trust, collectively
 as Lenders, incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No.814-00237), filed February 8, 2016.                                            
|      | 
|10.8  |  | Amendment No. 2 to Fifth Amended and Restated Credit Agreement, dated as of August 
18, 2016, by and among Gladstone Business Loan, LLC, as Borrower, Gladstone Management Corporation, as Servicer, Keybank National Association, Alostar Bank of Commerce, ING Capital LLC, Newbridge Bank, Santander Bank, N.A. and Talmer Bank and Trust, collectively
 as Lenders, incorporated by reference to Exhibit 99.2.K.8 to Post-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File
No.333-208637), filed October 28, 2016.
|      | 
|10.9  |  | Amendment No. 3 to Fifth Amended and Restated Credit Agreement, dated August 
24, 2017, by and among Gladstone Business Loan, LLC, as Borrower, Gladstone Management Corporation, as Servicer, Keybank National Association, as administrative agent, swingline lender, managing agent and lead arranger and certain other lenders party thereto,
incorporated by reference to Exhibit 10.1 to the Current Report on Form8-K(File No.814-00237), filed
August 29, 2017.                                                                        
|      | 
|10.10 |  | Amendment No. 
4 to Fifth Amended and Restated Credit Agreement, dated as of March 9, 2018, by and among Gladstone Business Loan, LLC, as Borrower, Gladstone Management Corporation, as Servicer, KeyBank National Association, as administrative agent, swingline lender,
 managing agent and lead arranger and certain other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8K (File No. 81400237), filed March 12, 2018.                                                                 
|      | 
|10.11 |  | Joinder Agreement, dated as of June 
19, 2015, by and among Gladstone Business Loan, LLC, Gladstone Management Corporation, Keybank National Association and Santander Bank, N.A., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File
 No.814-00237), filed June 23, 2015.                                                                                                                                                                                                                                      
|      | 
|10.12 |  | Assignment, Acceptance and Joinder, dated as of June 
19, 2015, by and between Keybank National Association and Alostar Bank of Commerce, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No.814-00237), filed June 23, 2015.                                                                                                                                                                                                                                                                                
|      | 
|10.13 |  | Assignment and Acceptance, dated as of June 
19, 2015, by and between Keybank National Association and Newbridge Bank, incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No.814-00237), filed June 23, 2015.                                                                                                                                                                                                                                                                                                   
|      | 
|10.14 |  | Custodial Agreement, incorporated by reference to Exhibit 2.j.2 to Post-Effective Amendment No. 1 to Form N-2 (File No.333-185191), filed December 23, 2013.                                                                                                                                                                                                                                                                                                                                                                                   
|      | 
|10.15 |  | Amendment No. 1 to Custodial Agreement, incorporated by reference to Exhibit 2.j.3 to Post-Effective Amendment No. 
1 to the Registration Statement on Form N-2 (File No.333-185191), filed December 23, 2013.                                                                                                                                                                                                                                                                                                                                 



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|      |  |                                                                                                                                                                                                                                                                                                                                                                   
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.16 |  | Amendment No. 2 to Custodial Agreement, incorporated by reference to Exhibit 2.j.4 to Post-Effective Amendment No. 
1 to the Registration Statement on Form N-2 (File No.333-185191), filed December 23, 2013.                                                                                                                                                    
|      | 
|10.17 |  | Equity Distribution Agreement between the Registrant, Gladstone Management Corporation, Gladstone Administration, LLC and Cantor Fitzgerald
 & Co., dated February 27, 2015, incorporated by reference to Exhibit 2.h.2 to Post-Effective Amendment No. 6 to the Registration Statement on Form N-2 (File No.333-333-185191), filed February 27, 2015.            
|      | 
|10.18 |  | Amendment No. 1 to Equity Distribution Agreement, dated May 
22, 2017, by and among the Registrant, Gladstone Management Corporation, Gladstone Administration, LLC and Cantor Fitzgerald & Co., incorporated by reference to Exhibit 2.h.3 to Post-Effective Amendment No. 
3 to the Registration Statement on Form N-2 (File No.333-208637), filed May 22, 2017.
|      | 
|14    |  | Code of Ethics and Business Conduct.                                                                                                                                                                                                                                                                                                                              
|      | 
|21    |  | Subsidiaries of the Registrant (filed herewith).                                                                                                                                                                                                                                                                                                                  
|      | 
|31.1  |  | Certification of Chief Executive Officer pursuant to section 302 of The Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                              
|      | 
|31.2  |  | Certification of Chief Financial Officer pursuant to section 302 of The Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                              
|      | 
|32.1  |  | Certification of Chief Executive Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002 (furnished herewith).                                                                                                                                                                                                                                          
|      | 
|32.2  |  | Certification of Chief Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002 (furnished herewith).                                                                                                                                                                                                                                          
|      | 
|99.1  |  | Financial Statements of Defiance Integrated Technologies, Inc. as of and for the years ended December 31, 2017, 2016 and 2015 (audited) (filed herewith).                                                                                                                                                                                                         
|      | 
|99.2  |  | Financial Statements of Sunshine Media Group, Inc. and Subsidiaries as of and for the year ended December 31, 2017 and 2016 (unaudited) (filed herewith).                                                                                                                                                                                                         
|      | 
|99.3  |  | Financial Statements of Sunshine Media Group, Inc. and Subsidiaries as of and for the years ended December 31, 2016 and 2015 (audited) (filed herewith).                                                                                                                                                                                                          

ITEM 16.FORM 10-K SUMMARY

None.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



|                        |  |  |  |                               |  |                                      
|----------------------- |  |  |  | ----------------------------- |  | -------------------------------------
|                        |  |  |  | GLADSTONE CAPITAL CORPORATION
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By:                           |  | /s/ NICOLE SCHALTENBRAND             
|                        |  |  |  |                               |  | Nicole Schaltenbrand                 
|                        |  |  |  |                               |  | Chief Financial Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.



|                        |  |  |  |     |  |                                                                                             
|----------------------- |  |  |  | --- |  | --------------------------------------------------------------------------------------------
|Date: November 14, 2018 |  |  |  | By: |  | /s/ DAVID GLADSTONE                                                                         
|                        |  |  |  |     |  | David Gladstone                                                                             
|                        |  |  |  |     |  | Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By: |  | /s/ TERRY LEE BRUBAKER                                                                      
|                        |  |  |  |     |  | Terry Lee Brubaker                                                                          
|                        |  |  |  |     |  | Vice Chairman of the Board of Directors, Chief Operating Officer                            
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By: |  | /s/ ROBERT L. MARCOTTE                                                                      
|                        |  |  |  |     |  | Robert L. Marcotte                                                                          
|                        |  |  |  |     |  | President                                                                                   
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By: |  | /s/ NICOLE SCHALTENBRAND                                                                    
|                        |  |  |  |     |  | Nicole Schaltenbrand                                                                        
|                        |  |  |  |     |  | Chief Financial Officer and Treasurer (principal financial and accounting officer)          
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By: |  | /s/ ANTHONY W. PARKER                                                                       
|                        |  |  |  |     |  | Anthony W. Parker                                                                           
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By: |  | /s/ JOHN OUTLAND                                                                            
|                        |  |  |  |     |  | John Outland                                                                                
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By: |  | /s/ MICHELA A. ENGLISH                                                                      
|                        |  |  |  |     |  | Michela A. English                                                                          
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By: |  | /s/ PAUL ADELGREN                                                                           
|                        |  |  |  |     |  | Paul Adelgren                                                                               
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By: |  | /s/ WALTER H. WILKINSON, JR.                                                                
|                        |  |  |  |     |  | Walter H. Wilkinson, Jr.                                                                    
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 14, 2018 |  |  |  | By: |  | /s/ CAREN D. MERRICK                                                                        
|                        |  |  |  |     |  | Caren D. Merrick                                                                            
|                        |  |  |  |     |  | Director                                                                                    



120



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SCHEDULE 12-14

GLADSTONE CAPITAL CORPORATION

INVESTMENTS IN AND ADVANCES TO AFFILIATES

(AMOUNTS IN THOUSANDS)



|                                                                                                         |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|-------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | ---- | -------------------------------- | - | - | ---------------------------- |  | - | ---------------------------- |  |  | ----------------- | ------ |  | ------------------ | - | ----- | --------------------------------------- |  | - | ---------------------------- | - |  | - | ------ | - |  | - | ------ | 
|Company and Investment(A)(B)(I)(L)(M)                                                                    |  | Principal/Shares/Units(K) |         |      | NetRealizedGain (Loss)for Period |   |   | Amount ofInvestmentIncome(C) |  |   | Value as ofSeptember 30,2017 |  |  | GrossAdditions(D) |        |  | GrossReductions(E) |   |       | NetUnrealizedAppreciation(Depreciation) |  |   | Value as ofSeptember 30,2018 |  
|AFFILIATE INVESTMENTS
20.6%                                                                             |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Secured First Lien Debt  7.1%                                                                           |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Diversified/Conglomerate Manufacturing  7.1%                                                            |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Edge Adhesives Holdings, Inc. Term Debt
(L + 10.5%, 12.6% Cash, Due 2/2019)                             |  | $                         | 6,200   |      |                                  | $ |  |                              |  | $ | 787                          |  |  | $                 | 5,704  |  |                    | $ |      |                                         |  | $ |                             |   |  | $ | 357    |   |  | $ | 6,061  | 
|Edge Adhesives Holdings, Inc. Term Debt
(L + 11.8%, 13.8% Cash, Due 2/2019)                             |  |                           | 1,600   |      |                                  |   |  |                              |  |   | 223                          |  |  |                   | 1,480  |  |                    |   |      |                                         |  |   |                             |   |  |   | 92     |   |  |   | 1,572  | 
|LWO Acquisitions Company LLC  Line of Credit, $0 available (L + 5.5%, 7.6% Cash, 2.0% PIK,
Due 12/2019) |  |                           | 3,205   |      |                                  |   |  |                              |  |   | 269                          |  |  |                   | 2,336  |  |                    |   | 759   |                                         |  |   | (300                         | ) |  |   | 310    |   |  |   | 3,105  | 
|LWO Acquisitions Company LLC  Term Debt (L + 8.5% 9.7% Cash, 2.0% PIK, Due 12/2019)                     |  |                           | 11,166  |      |                                  |   |  |                              |  |   | 1,414                        |  |  |                   | 9,301  |  |                    |   | 245   |                                         |  |   |                             |   |  |   | (3,457 | ) |  |   | 6,089  | 
|                                                                                                         |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|                                                                                                         |  |                           |         |      |                                  | $ |  |                              |  | $ | 2,693                        |  |  | $                 | 18,821 |  |                    | $ | 1,004 |                                         |  | $ | (300                         | ) |  | $ | (2,698 | ) |  | $ | 16,827 | 
|                                                                                                         |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Secured Second Lien Debt  9.0%                                                                          |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Diversified Natural Resources, Precious Metals and Minerals  9.0%                                       |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Lignetics, Inc.  Term Debt (L + 9.0%, 12.0% Cash, Due 11/2022)                                          |  | $                         | 6,000   |      |                                  | $ |  |                              |  | $ | 730                          |  |  | $                 | 5,998  |  |                    | $ |      |                                         |  | $ |                             |   |  | $ | 16     |   |  | $ | 6,014  | 
|Lignetics, Inc.  Term Debt (L + 9.0%, 12.0% Cash, Due 11/2022)                                          |  |                           | 8,000   |      |                                  |   |  |                              |  |   | 973                          |  |  |                   | 7,997  |  |                    |   |      |                                         |  |   |                             |   |  |   | 23     |   |  |   | 8,020  | 
|Lignetics, Inc.  Term Debt (L + 9.0%, 12.0% Cash, Due 11/2022)                                          |  |                           | 3,300   |      |                                  |   |  |                              |  |   | 402                          |  |  |                   | 3,299  |  |                    |   |      |                                         |  |   |                             |   |  |   | 9      |   |  |   | 3,308  | 
|Lignetics, Inc.  Term Debt (L + 9.0%, 12.0% Cash, Due 11/2022)                                          |  |                           | 4,000   |      |                                  |   |  |                              |  |   | 305                          |  |  |                   |       |  |                    |   | 4,000 |                                         |  |   |                             |   |  |   | 10     |   |  |   | 4,010  | 
|                                                                                                         |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|                                                                                                         |  |                           |         |      |                                  | $ |  |                              |  | $ | 2,410                        |  |  | $                 | 17,294 |  |                    | $ | 4,000 |                                         |  | $ |                             |   |  | $ | 58     |   |  | $ | 21,352 | 
|                                                                                                         |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Unsecured Debt  0.0%                                                                                    |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Diversified/Conglomerate Manufacturing  0.0%                                                            |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|LWO Acquisitions Company LLC  Term Debt (Due 6/2020)                                                    |  | $                         |         | $$95 |                                  |   |  |                              |  |   |                             |  |  |                   |       |  |                    |   | 95    |                                         |  |   |                             |   |  |   | (43    | ) |  |   | 52     | 
|Preferred Equity  1.4%                                                                                  |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Diversified/Conglomerate Manufacturing  1.0%                                                            |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Edge Adhesives Holdings, Inc. Preferred
Stock                                                           |  |                           | 2,516   |      |                                  | $ |  |                              |  | $ |                             |  |  | $                 |       |  |                    | $ |      |                                         |  | $ |                             |   |  | $ | 2,381  |   |  | $ | 2,381  | 
|Diversified Natural Resources, Precious Metals and Minerals  0.4%                                       |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Lignetics, Inc.  Preferred Stock                                                                        |  |                           | 40,000  |      |                                  |   |  |                              |  |   |                             |  |  |                   | 826    |  |                    |   |      |                                         |  |   |                             |   |  |   | 56     |   |  |   | 882    | 
|                                                                                                         |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Total Preferred Equity                                                                                   |  |                           |         |      |                                  | $ |  |                              |  | $ |                             |  |  | $                 | 826    |  |                    | $ |      |                                         |  | $ |                             |   |  | $ | 2,437  |   |  | $ | 3,263  | 
|                                                                                                         |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Common Equity  3.1%                                                                                     |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Diversified/Conglomerate Manufacturing  0.0%                                                            |  |                           |         |      |                                  |   |   |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|LWO Acquisitions Company LLC  Common Units                                                              |  |                           | 921,000 |      |                                  | $ |  |                              |  | $ |                             |  |  | $                 |       |  |                    | $ |      |                                         |  | $ |                             |   |  | $ |       |   |  | $ |       | 



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##### Table of Contents

|                                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|----------------------------------------------------------------------------------------- |  | ------------------------- | --------- |  | -------------------------------- | - | ------- | ---------------------------- |  | - | ---------------------------- |  |  | ----------------- | ------ |  | ------------------ | - | ----- | --------------------------------------- |  | - | ---------------------------- | - |  | - | ------ | - |  | - | ------ | 
|Company and Investment(A)(B)(I)(L)(M)                                                     |  | Principal/Shares/Units(K) |           |  | NetRealizedGain (Loss)for Period |   |         | Amount ofInvestmentIncome(C) |  |   | Value as ofSeptember 30,2017 |  |  | GrossAdditions(D) |        |  | GrossReductions(E) |   |       | NetUnrealizedAppreciation(Depreciation) |  |   | Value as ofSeptember 30,2018 |  
|Diversified Natural Resources, Precious Metals and Minerals  0.3%                        |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Lignetics, Inc.  Common Stock                                                            |  |                           | 152,603   |  |                                  |   |        |                              |  |   |                             |  |  |                   | 828    |  |                    |   |      |                                         |  |   |                             |   |  |   | (22    | ) |  |   | 806    | 
|Textiles and Leather  2.8%                                                               |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Targus Cayman HoldCo, Ltd.  Common Stock                                                 |  |                           | 3,076,414 |  |                                  |   |        |                              |  |   |                             |  |  |                   | 4,879  |  |                    |   |      |                                         |  |   |                             |   |  |   | 1,677  |   |  |   | 6,556  | 
|                                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Total Common Equity                                                                       |  |                           |           |  |                                  | $ |        |                              |  | $ |                             |  |  | $                 | 5,707  |  |                    | $ |      |                                         |  | $ |                             |   |  | $ | 1,655  |   |  | $ | 7,362  | 
|                                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|TOTAL AFFILIATE INVESTMENTS                                                               |  |                           |           |  |                                  | $ |        |                              |  | $ | 5,103                        |  |  | $                 | 42,648 |  |                    | $ | 5,099 |                                         |  | $ | (300                         | ) |  | $ | 1,409  |   |  | $ | 48,856 | 
|                                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|CONTROL INVESTMENTS  6.6%                                                                |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Secured First Lien Debt  1.8%                                                            |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Machinery  1.2%                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|PIC 360, LLC  Term Debt (14.0% Cash, Due
9/2019)(J)                                      |  | $                         | 2,850     |  |                                  | $ |        |                              |  | $ | 758                          |  |  | $                 | 4,000  |  |                    | $ |      |                                         |  | $ | (1,150                       | ) |  | $ |       |   |  | $ | 2,850  | 
|Printing and Publishing  0.6%                                                            |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Sunshine Media Holdings  Line of Credit, $0 available (8.0%, Due 5/2018)(G) (J)          |  |                           |          |  |                                  |   |        |                              |  |   | 108                          |  |  |                   | 1,328  |  |                    |   |      |                                         |  |   | (1,328                       | ) |  |   |       |   |  |   |       | 
|Sunshine Media Holdings  Term Debt (8.0%, Due 5/2018)(F) (G) (J)                         |  |                           |          |  |                                  |   | (3,525  | )                            |  |   |                             |  |  |                   | 679    |  |                    |   |      |                                         |  |   | (3,525                       | ) |  |   | 2,846  |   |  |   |       | 
|Sunshine Media Holdings  Term Debt (L + 3.8%, 6.0% Cash, Due 5/2018)(F) (G)              |  |                           |          |  |                                  |   | (8,423  | )                            |  |   | 22                           |  |  |                   | 1,621  |  |                    |   |      |                                         |  |   | (8,401                       | ) |  |   | 6,780  |   |  |   |       | 
|Sunshine Media Holdings  Term Debt (L + 4.0%, 6.3% Cash, Due 5/2018)(F) (G)              |  |                           |          |  |                                  |   | (10,700 | )                            |  |   |                             |  |  |                   |       |  |                    |   |      |                                         |  |   | (10,700                      | ) |  |   | 10,700 |   |  |   |       | 
|TNCP Intermediate HoldCo, LLC  Line of Credit, $500 available (8.0% Cash, Due 9/2021)(J) |  |                           | 1,500     |  |                                  |   |        |                              |  |   |                             |  |  |                   |       |  |                    |   | 1,500 |                                         |  |   |                             |   |  |   |       |   |  |   | 1,500  | 
|                                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|                                                                                          |  |                           |           |  |                                  |   | (22,648 | )                            |  |   | 130                          |  |  |                   | 3,628  |  |                    |   | 1,500 |                                         |  |   | (23,954                      | ) |  |   | 20,326 |   |  |   | 1,500  | 
|                                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Total Secured First Lien Debt                                                             |  |                           |           |  |                                  | $ | (22,648 | )                            |  | $ | 888                          |  |  | $                 | 7,628  |  |                    | $ | 1,500 |                                         |  | $ | (25,104                      | ) |  | $ | 20,326 |   |  | $ | 4,350  | 
|                                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Secured Second Lien Debt  3.4%                                                           |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Automobile 3.4%                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Defiance Integrated Technologies, Inc.  Term Debt (L + 9.5%, 11.6% Cash, Due 8/2023)     |  | $                         | 8,065     |  |                                  | $ |        |                              |  | $ | 923                          |  |  | $                 | 8,065  |  |                    | $ |      |                                         |  | $ |                             |   |  | $ |       |   |  | $ | 8,065  | 
|Preferred Equity  0.0%                                                                   |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Printing and Publishing  0.0%                                                            |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Sunshine Media Holdings  Preferred
Stock(G)                                              |  |                           |          |  |                                  | $ | (5,281  | )                            |  | $ |                             |  |  | $                 |       |  |                    | $ |      |                                         |  | $ | (5,275                       | ) |  | $ | 5,275  |   |  | $ |       | 
|Common Equity  1.4%                                                                      |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Automobile 0.5%                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Defiance Integrated Technologies, Inc.  Common Stock                                     |  |                           | 33,321    |  |                                  |   |        |                              |  |   |                             |  |  |                   | 2,856  |  |                    |   |      |                                         |  |   |                             |   |  |   | (1,768 | ) |  |   | 1,088  | 
|Machinery  0.7%                                                                          |  |                           |           |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|PIC 360, LLC  Common Equity Units                                                        |  |                           | 750       |  |                                  |   |        |                              |  |   |                             |  |  |                   | 316    |  |                    |   |      |                                         |  |   |                             |   |  |   | 1,306  |   |  |   | 1,622  | 



---

##### Table of Contents

|                                                    |  |                           |         |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|--------------------------------------------------- |  | ------------------------- | ------- |  | -------------------------------- | - | ------- | ---------------------------- |  | - | ---------------------------- |  |  | ----------------- | ------ |  | ------------------ | - | ----- | --------------------------------------- |  | - | ---------------------------- | - |  | - | ------ | - |  | - | ------ | 
|Company and Investment(A)(B)(I)(L)(M)               |  | Principal/Shares/Units(K) |         |  | NetRealizedGain (Loss)for Period |   |         | Amount ofInvestmentIncome(C) |  |   | Value as ofSeptember 30,2017 |  |  | GrossAdditions(D) |        |  | GrossReductions(E) |   |       | NetUnrealizedAppreciation(Depreciation) |  |   | Value as ofSeptember 30,2018 |  
|Printing and Publishing  0.0%                      |  |                           |         |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Sunshine Media Holdings  Common
Stock(G)           |  |                           |        |  |                                  |   | (240    | )                            |  |   |                             |  |  |                   |       |  |                    |   |      |                                         |  |   | (740                         | ) |  |   | 740    |   |  |   |       | 
|Sunshine Media Holdings  Common Stock
Warrants(G)  |  |                           |        |  |                                  |   |        |                              |  |   |                             |  |  |                   |       |  |                    |   |      |                                         |  |   |                             |   |  |   |       |   |  |   |       | 
|TNCP Intermediate HoldCo, LLC  Common Equity Units |  |                           | 790,000 |  |                                  |   |        |                              |  |   |                             |  |  |                   |       |  |                    |   | 500   |                                         |  |   |                             |   |  |   | (2     | ) |  |   | 498    | 
|                                                    |  |                           |         |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|                                                    |  |                           |         |  |                                  |   | (240    | )                            |  |   |                             |  |  |                   |       |  |                    |   | 500   |                                         |  |   | (740                         | ) |  |   | 738    |   |  |   | 498    | 
|                                                    |  |                           |         |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|Total Common Equity                                 |  |                           |         |  |                                  | $ | (240    | )                            |  | $ |                             |  |  | $                 | 3,172  |  |                    | $ | 500   |                                         |  | $ | (740                         | ) |  | $ | 276    |   |  | $ | 3,208  | 
|                                                    |  |                           |         |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 
|TOTAL CONTROL INVESTMENTS                           |  |                           |         |  |                                  | $ | (28,169 | )                            |  | $ | 1,811                        |  |  | $                 | 18,865 |  |                    | $ | 2,000 |                                         |  | $ | (31,119                      | ) |  | $ | 25,877 |   |  | $ | 15,623 | 
|                                                    |  |                           |         |  |                                  |   |         |                              |  |   |                              |  |  |                   |        |  |                    |   |       |                                         |  |   |                              |   |  |   |        |   |  |   |        | 



|(A) | Certain of the securities listed in this schedule are issued by affiliate(s) of the indicated portfolio company.
|--- | ----------------------------------------------------------------------------------------------------------------



|(B) | Common stock, warrants, options, membership units and, in some cases, preferred stock are generally non-income producing and restricted.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|(C) | Represents the total amount of interest, dividends and other income credited to investment income for the
portion of the fiscal year an investment was a control or affiliate investment, as appropriate.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(D) | Gross additions include increases in investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and fees, and the exchange of one or more existing securities for one or more new securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(E) | Gross reductions include decreases in investments resulting from principal collections related to investment
repayments or sales, the amortization of premiums and acquisition costs, and the exchange of one or more existing securities for one or more new securities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(F) | Debt security was on non-accrual status as of (or during the year ended)
September 30, 2018, and, therefore, was considered non-income producing for a period of time during the fiscal year ended September 30, 2018.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(G) | In September 2018, we restructured our investment in Sunshine Media Holdings resulting in a $28.2 million
realized loss and a new $2.0 million investment in TNCP Intermediate HoldCo, LLC.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(H) | Reserved.
|--- | ---------

|(I) | Interest rate percentages represent cash interest rates in effect at September 30, 2018, and due dates
represent the contractual maturity date. Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (LIBOR), which was 2.27% as of September 30,
2018. If applicable, paid-in-kind (PIK) interest rates are noted separately from the cash interest rates and any unused line of credit fees are excluded.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(J) | Debt security has a fixed interest rate.
|--- | ----------------------------------------

|(K) | Represents the principal balance for debt investments and the number of shares/units held for equity
investments. Warrants are represented as a percentage of ownership, as applicable.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(L) | Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB
Accounting Standard Codification (ASC) Topic 820, Fair Value Measurements and Disclosures (ASC 820) fair value hierarchy. Refer to Note 3Investments in the accompanying Notes to Consolidated Financial
Statements for additional information.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(M) | Category percentages represent the fair value of each category and subcategory as a percentage of net assets as
of September 30, 2018.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



|** | Information related to the amount of equity in the net profit and loss for the year for the investments listed
has not been included in this schedule. This information is not considered to be meaningful due to the complex capital structures of the portfolio companies, with different classes of equity securities outstanding with different preferences in
liquidation. These investments are not consolidated, nor are they accounted for under the equity method of accounting.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------