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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-K





(Mark One)

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

For the fiscal year ended September 30, 2015

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 of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)



|                                                  |  |           
|------------------------------------------------- |  | ----------
|1521 Westbranch Drive, Suite 100
McLean, 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              
|6.75% Series 2021 Term Preferred Stock,$0.001 par value per share |  | 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  x

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  x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    YES   ̈    NO   ̈

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



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12 b-2 of the
Act).    YES   ̈    NO  x.

The aggregate market value of the voting common stock held by non-affiliates of the Registrant on March 31, 2015, based on the closing price on that date
of $8.81 on the NASDAQ Global Select Market, was $174,201,704. For the purposes of calculating this amount only, all directors and executive officers of the Registrant have been treated as affiliates. There were 23,431,622 shares of the
Registrants common stock, $0.001 par value per share, outstanding as of November 20, 2015.

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 2016 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, 2015.









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GLADSTONE CAPITAL CORPORATION

FORM 10-K FOR THE FISCAL YEAR ENDED

SEPTEMBER 30, 2015

TABLE OF CONTENTS



|           |  |         |  |                                                                                                              |  |  |     | 
|---------- |  | ------- |  | ------------------------------------------------------------------------------------------------------------ |  |  | --- | 
|PART I     |  | ITEM 1  |  | Business                                                                                                     |  |  | 2   | 
|           |  | ITEM 1A |  | Risk Factors                                                                                                 |  |  | 18  | 
|           |  | ITEM 1B |  | Unresolved Staff Comments                                                                                    |  |  | 38  | 
|           |  | ITEM 2  |  | Properties                                                                                                   |  |  | 38  | 
|           |  | ITEM 3  |  | Legal Proceedings                                                                                            |  |  | 38  | 
|           |  | ITEM 4  |  | Mine Safety Disclosures                                                                                      |  |  | 38  | 
|PART II    |  | ITEM 5  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities |  |  | 39  | 
|           |  | ITEM 6  |  | Selected Financial Data                                                                                      |  |  | 40  | 
|           |  | ITEM 7  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  |  | 42  | 
|           |  | ITEM 7A |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  |  | 68  | 
|           |  | ITEM 8  |  | Financial Statements and Supplementary Data                                                                  |  |  | 69  | 
|           |  | ITEM 9  |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  |  | 114 | 
|           |  | ITEM 9A |  | Controls and Procedures                                                                                      |  |  | 114 | 
|           |  | ITEM 9B |  | Other Information                                                                                            |  |  | 114 | 
|PART III   |  | ITEM 10 |  | Directors, Executive Officers and Corporate Governance                                                       |  |  | 114 | 
|           |  | ITEM 11 |  | Executive Compensation                                                                                       |  |  | 114 | 
|           |  | ITEM 12 |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  |  | 115 | 
|           |  | ITEM 13 |  | Certain Relationships and Related Transactions, and Director Independence                                    |  |  | 115 | 
|           |  | ITEM 14 |  | Principal Accountant Fees and Services                                                                       |  |  | 115 | 
|PART IV    |  | ITEM 15 |  | Exhibits and Financial Statement Schedules                                                                   |  |  | 115 | 
|SIGNATURES |  |         |  |                                                                                                              |  |  | 118 | 



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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 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 RIC and as business development company; 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

We were incorporated under the Maryland General Corporation Law on May 30, 2001, and completed our initial public offering on August 24, 2001. We
operate as an externally managed, closed-end, non-diversified management investment company and have elected to be treated as a business development company (BDC) under the Investment Company Act of 1940, as amended (the 1940
Act). For federal income tax purposes, we have elected to be treated as a regulated investment company (RIC) under the Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). In order 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.

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 GLADO, respectively.



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Investment Objectives and Strategy

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 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 objectives, our investment strategy is to invest in several categories of debt and equity securities, with each
investment generally ranging from $5 million to $25 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 expect that our investment portfolio over time will consist of approximately 90.0% in debt investments and 10.0% in equity investments, at cost. As of September 30, 2015, our investment portfolio was made up of approximately 91.2% in debt
investments and 8.8% in 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 Securities and Exchange Commission (SEC) granted us an exemptive 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 our external investment adviser, or any combination of the
foregoing, subject to the conditions in the SECs order. We believe this ability to co-invest will continue to enhance our ability to further our investment objectives and strategies.

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 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 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.

As of September 30, 2015, our investment portfolio consisted of
investments in 48 companies located in 20 states in 20 different industries with an aggregate fair value of $365.9 million. Since our initial public offering in 2001 through September 30, 2015, we have invested in over 196 different companies,
while making 153 consecutive monthly or quarterly cash distributions to common stockholders totaling approximately $258.3 million or $15.37 per share. We expect that our investment portfolio will primarily include the following four categories of
investments in private U.S. companies:



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



| |  |  | Senior Secured Subordinated Debt Securities:We seek to invest a portion of our assets in secured second lien debt securities, also known as senior subordinated loans and senior subordinated notes. These secured
second lien debts rank junior to the borrowers senior debt and may be secured by a first priority lien on a portion of the assets of the business and may be designated as second lien notes (including our participation and investment in
syndicated second lien loans). Additionally, we may receive other yield enhancements, such as success fees, in connection with these senior secured subordinated debt securities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Junior Subordinated Debt Securities: We seek to invest a portion of our assets in junior subordinated debt securities, also known as subordinated loans, subordinated notes and mezzanine loans. These junior
subordinated debts may be secured by certain assets of the borrower or unsecured loans. 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 junior subordinated debt securities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Additionally, 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 Concentrations

Year over year, our investment concentration as a percentage of fair value and of cost has remained relatively unchanged. As of September 30, 2015, our
portfolio allocation is approximately 91.2% debt investments and 8.8% equity investments, at cost. Our portfolio consists primarily of proprietary investments, however, we continue to invest in syndicated investments where we participate with a
group of other lenders. As of September 30, 2015, we held 15 syndicated investments totaling $61.4 million at cost and $55.0 million at fair value, or 15.0% of our total aggregate portfolio at cost and at fair value, respectively. We held 16
syndicated investments totaling $61.1 million at cost and $59.5 million at fair value, or 17.5% and 21.1%, of our total aggregate portfolio at cost and at fair value, respectively, as of September 30, 2014.

The following table outlines our investments by security type at September 30, 2015 and 2014:



|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|------------------------- |  | ------------------ | ------- |  | ------------------ |  | ----- | ---- |  | - | ---------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                          |  | September 30, 2015 |         |  | September 30, 2014 | 
|                          |  | Cost               |         |  | Fair Value         |  |       | Cost |  |   | Fair Value | 
|Secured first lien debt   |  | $                  | 248,050 |  |                    |  | 60.5  | %    |  | $ | 206,840    |  |  |  | 56.5  | % |  | $ | 182,086 |  |  |  | 52.1  | % |  | $ | 129,750 |  |  |  | 46.1  | %
|Secured second lien debt  |  |                    | 125,875 |  |                    |  | 30.7  |      |  |   | 120,303    |  |  |  | 32.9  |   |  |   | 137,719 |  |  |  | 39.5  |   |  |   | 124,551 |  |  |  | 44.3  |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total debt investments    |  |                    | 373,925 |  |                    |  | 91.2  |      |  |   | 327,143    |  |  |  | 89.4  |   |  |   | 319,805 |  |  |  | 91.6  |   |  |   | 254,301 |  |  |  | 90.4  |  
|                          |  |                    |         |  |                    |  |       |     
|Preferred equity          |  |                    | 22,616  |  |                    |  | 5.5   |      |  |   | 22,262     |  |  |  | 6.1   |   |  |   | 21,936  |  |  |  | 6.2   |   |  |   | 13,684  |  |  |  | 4.9   |  
|Common equity/equivalents |  |                    | 13,703  |  |                    |  | 3.3   |      |  |   | 16,486     |  |  |  | 4.5   |   |  |   | 7,544   |  |  |  | 2.2   |   |  |   | 13,301  |  |  |  | 4.7   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total equity investments  |  |                    | 36,319  |  |                    |  | 8.8   |      |  |   | 38,748     |  |  |  | 10.6  |   |  |   | 29,480  |  |  |  | 8.4   |   |  |   | 26,985  |  |  |  | 9.6   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total Investments         |  | $                  | 410,244 |  |                    |  | 100.0 | %    |  | $ | 365,891    |  |  |  | 100.0 | % |  | $ | 349,285 |  |  |  | 100.0 | % |  | $ | 281,286 |  |  |  | 100.0 | %
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  

Our five largest investments at fair value as of September 30, 2015, totaled $109.6 million, or 30.0% of our total
aggregate portfolio, as compared to our five largest investments at fair value as of September 30, 2014, totaling $94.3 million, or 33.5% of our total aggregate portfolio.



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Our investments at fair value consisted of the following industry classifications at September 30, 2015 and
2014:



|                                                            |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|----------------------------------------------------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                                                            |  | September 30, 2015 |         |  | September 30, 2014            | 
|Industry Classification                                     |  | Fair Value         |         |  | Percentageof TotalInvestments |  |       | Fair Value |  |   | Percentageof TotalInvestments | 
|                                                            |  |                    |         | 
|Diversified/conglomerate manufacturing                      |  | $                  | 56,504  |  |                               |  | 15.4  | %          |  | $ | 27,634                        |  |  |  | 9.8   | %
|Oil and gas                                                 |  |                    | 51,110  |  |                               |  | 14.0  |            |  |   | 42,831                        |  |  |  | 15.2  |  
|Healthcare, education and childcare                         |  |                    | 44,994  |  |                               |  | 12.3  |            |  |   | 47,538                        |  |  |  | 16.9  |  
|Personal and non-durable consumer products                  |  |                    | 43,418  |  |                               |  | 11.9  |            |  |   | 30,157                        |  |  |  | 10.7  |  
|Printing and publishing                                     |  |                    | 25,452  |  |                               |  | 7.0   |            |  |   | 23,999                        |  |  |  | 8.5   |  
|Beverage, food and tobacco                                  |  |                    | 22,817  |  |                               |  | 6.2   |            |  |   | 6,235                         |  |  |  | 2.2   |  
|Automobile                                                  |  |                    | 17,699  |  |                               |  | 4.8   |            |  |   | 19,489                        |  |  |  | 6.9   |  
|Diversified natural resources, precious metals and minerals |  |                    | 16,072  |  |                               |  | 4.4   |            |  |   | 7,176                         |  |  |  | 2.6   |  
|Diversified/Conglomerate Service                            |  |                    | 13,763  |  |                               |  | 3.8   |            |  |   |                              |  |  |  |      |  
|Electronics                                                 |  |                    | 13,550  |  |                               |  | 3.7   |            |  |   | 24,811                        |  |  |  | 8.8   |  
|Cargo Transportation                                        |  |                    | 13,434  |  |                               |  | 3.7   |            |  |   | 12,838                        |  |  |  | 4.6   |  
|Leisure, Amusement, Motion Pictures, Entertainment          |  |                    | 8,500   |  |                               |  | 2.3   |            |  |   |                              |  |  |  |      |  
|Finance                                                     |  |                    | 8,356   |  |                               |  | 2.3   |            |  |   | 4,205                         |  |  |  | 1.5   |  
|Textiles and leather                                        |  |                    | 6,911   |  |                               |  | 1.9   |            |  |   | 8,171                         |  |  |  | 2.9   |  
|Broadcast and entertainment                                 |  |                    | 5,235   |  |                               |  | 1.4   |            |  |   | 6,386                         |  |  |  | 2.3   |  
|Buildings and real estate                                   |  |                    | 2,385   |  |                               |  | 0.7   |            |  |   | 6,617                         |  |  |  | 2.4   |  
|Aerospace and defense                                       |  |                    | 1,647   |  |                               |  | 0.4   |            |  |   | 6,920                         |  |  |  | 2.5   |  
|Other, < 2.0%                                               |  |                    | 14,044  |  |                               |  | 3.8   |            |  |   | 6,279                         |  |  |  | 2.2   |  
|                                                            |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total Investments                                           |  | $                  | 365,891 |  |                               |  | 100.0 | %          |  | $ | 281,286                       |  |  |  | 100.0 | %
|                                                            |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  

Our investments at fair value were included in the following U.S. geographic regions at September 30, 2015 and 2014:



|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|----------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                  |  | September 30, 2015 |         |  | September 30, 2014            | 
|Geographic Region |  | Fair Value         |         |  | Percentage ofTotalInvestments |  |       | Fair Value |  |   | Percentageof TotalInvestments | 
|Midwest           |  | $                  | 124,924 |  |                               |  | 34.1  | %          |  | $ | 107,387                       |  |  |  | 38.2  | %
|South             |  |                    | 117,367 |  |                               |  | 32.1  |            |  |   | 92,355                        |  |  |  | 32.8  |  
|West              |  |                    | 112,575 |  |                               |  | 30.8  |            |  |   | 80,744                        |  |  |  | 28.7  |  
|Northeast         |  |                    | 11,025  |  |                               |  | 3.0   |            |  |   | 800                           |  |  |  | 0.3   |  
|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total Investments |  | $                  | 365,891 |  |                               |  | 100.0 | %          |  | $ | 281,286                       |  |  |  | 100.0 | %
|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  

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

Investment Adviser and Administrator

Gladstone Management Corporation (the Adviser) is our affiliate, investment adviser and a privately-held company led by a management team that has
extensive experience in our lines of business. Another of our and the Advisers affiliates, a privately-held company, Gladstone Administration, LLC (the Administrator), employs, among others, our chief financial officer and
treasurer, chief compliance officer, chief valuation officer, general counsel and secretary (who also serves as our Administrators president) and their respective staffs. Two of our executive officers, David Gladstone (our chairman and chief
executive officer) and Terry Brubaker (our vice chairman and chief operating officer) serve as directors and executive officers of the following of our affiliates: Gladstone Commercial Corporation (Gladstone Commercial), a publicly
traded real estate investment trust; Gladstone Investment Corporation (Gladstone Investment), a publicly traded BDC and RIC; Gladstone Land Corporation (Gladstone Land), a publicly traded real estate investment trust that
invests in farmland and farm related property; the Adviser; and the Administrator. Our chief financial officer and treasurer is also the chief accounting officer of the Adviser and acting principal financial officer of Gladstone Investment through
December 2015. Our president is also an executive managing director of the Adviser. David Gladstone also serves on the board of managers of our affiliate, Gladstone Securities, LLC (Gladstone Securities), a privately-held broker-dealer
registered with the Financial Industry Regulatory Authority (FINRA) and insured by the Securities Investor Protection Corporation.



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The Adviser and Administrator also provide investment advisory and administrative services, respectively, to our
affiliates, including, but not limited to: Gladstone Commercial; Gladstone Investment; and Gladstone Land. In the future, the Adviser and Administrator may provide investment advisory and administrative services, respectively, to other funds and
companies, both public and private.

We have been externally managed by the Adviser pursuant to an investment advisory and management agreement since
October 1, 2004. The investment advisory and management agreement originally included administrative services; however, it was amended and restated on October 1, 2006 and at that time we entered into an administration agreement with the
Administrator to provide such services. The Adviser was organized as a corporation under the laws of the State of Delaware on July 2, 2002, and is a 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. The Adviser also has offices
in several other states.

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, venture capitalists, 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) from the Advisers investment committee, which is
composed of Mr. Gladstone (our chairman and chief executive officer), Terry Lee Brubaker (our vice chairman and chief operating officer) and Mr. Marcotte, to the prospective company. If this LOI is issued, then the Adviser and Gladstone
Securities (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 and 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 (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.



| |  |  | Value-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 value-and-income orientation. In
seeking value, we focus on established companies in which we can invest at relatively low multiples of earnings before interest, taxes, depreciation and amortization (EBITDA), and that have positive operating cash flow at the time of
investment. In seeking income, we typically invest in companies that generate relatively stable to growing sales and cash flow to provide some assurance that they will be able to service their debt. We do not expect to invest in start-up companies
or companies with what we believe to be 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 in place proper incentives to induce management to
succeed and act in concert with our interests as investors, including having significant equity or other interests in the financial performance of their 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Enterprise Collateral Value. The projected enterprise valuation of the business, based on market based comparable cashflow multiples, is an important factor in our investment analysis in determining the
collateral coverage of our debt securities.
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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, some or all of the following:



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



| |  |  | 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
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | 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. Additional due diligence of a potential investment
may be conducted on our behalf by attorneys and independent accountants, as well as other outside advisers, prior to the closing of the investment, as appropriate.

We also rely on the long-term relationships that the Advisers investment professionals have with venture capitalists, 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 and providing debt and equity
capital to small and medium-sized private businesses 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 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 management of the
company. As discussed above, the capital classes through which we typically structure a deal include senior debt, senior subordinated debt, junior subordinated 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;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | 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.
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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 or, in the case of an equity investment in a company, its initial public offering. Occasionally, we may sell
some or all of our investment interests in a portfolio company to a third party, such as an existing investor in the portfolio company, in a privately negotiated transaction.

Competitive Advantages

A large number of entities
compete with us and make the types of investments that we seek to make in small and medium-sized privately-owned businesses. Such competitors include 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. However, we believe that we have the following competitive advantages over other providers of financing to small and medium-sized businesses.

Management Expertise

Mr. Gladstone, our
chairman and chief executive officer, is also the chairman and chief executive officer of the Adviser and its affiliated companies, other than Gladstone Securities, (the Gladstone Companies), and has been involved in all aspects of the
Gladstone Companies investment activities, including currently serving as a member of the Advisers investment committee. Mr. Gladstone and Mr. Marcotte, our president, both have over twenty-five years of experience in investing
in middle market companies and with operating in the BDC marketplace in general. Mr. Brubaker, our vice chairman and chief operating officer, has over twenty-five 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 small and medium-sized companies and Messrs. Gladstone and Brubaker have worked together at the Gladstone Companies for more than ten 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.

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 management teams,
members of the financial community and potential corporate partners 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 small and medium-sized 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 value and income-oriented 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 at low price-to-cash flow multiples; 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
and venture capital 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 and venture capital 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 and venture capital 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 its ability to draw upon many 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.

Leverage

For the purpose of making
investments and taking advantage of favorable interest rates, we may issue senior securities up to the maximum amount permitted by the 1940 Act. The 1940 Act currently permits us to issue senior securities representing indebtedness and
senior securities that are stock in amounts such that we maintain an asset coverage ratio, as defined in Section 18(h) of the 1940 Act, of at least 200.0% on each of our senior securities immediately after issuance of each such
senior security. We are exposed to the risks of leverage as a result of incurring indebtedness generally, such as through our revolving line of credit, which is considered a senior security representing indebtedness, or issuing
senior securities that are stock, such as our 6.75% Series 2021 Term Preferred Stock (our Series 2021 Term Preferred Stock). 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 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. Our Board of Directors is authorized to provide for the issuance of senior securities with such preferences, powers, rights and privileges as it deems appropriate, subject to the
requirements of the 1940 Act. See Regulation as a BDCAsset Coverage for a discussion of our leveraging constraints and Risk FactorsRisks Related to Our External Financing for further discussion of
certain leveraging risks.

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;
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| |  |  | 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.
| | - |  | ---------------------------------------------------------------------------------------------

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



| |  |  | financial sponsors;
| | - |  | -------------------



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



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

Managerial Assistance and Services

As a BDC, we make available significant managerial assistance to our portfolio companies and provide other services to such portfolio companies. Neither we,
nor the Adviser, currently receive fees in connection with the managerial assistance we make available. Refer to Regulation as a BDC  Significant Managerial Assistance.

Since February 2011, Gladstone Securities has provided other services, such as investment banking and due diligence services to certain of our portfolio
companies. Any such fees paid by portfolio companies to Gladstone Securities do not impact the overall fees we pay to the Adviser or the overall fees credited against the base management fee.

Valuation Process

The following is a general
description of the investment valuation policy (the Policy) (which has been approved by our Board of Directors) 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 Valuation Team 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 and the Valuation Committee of our Board of Directors (the Valuation Committee), which is comprised entirely of independent 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 portfolio company or investment is initially assessed by the Advisers investment professionals responsible for the investment along with our chief valuation officer, 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 the Valuation Committee and Board of Directors.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Next, prior to its quarterly meetings, our Board of Directors receives written valuation recommendations and supporting materials provided by the Valuation Team. Then, the Valuation Committee meets to review the
Valuation Teams valuation recommendations and supporting materials. Lastly, after the Valuation Committee concludes its meeting, it along with our 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 the notes to our accompanying Consolidated Financial Statements included elsewhere in this report.

Transactions with Related Parties

Investment Advisory and Management Agreement

In
2006, we entered into an amended and restated investment advisory and management agreement with the Adviser (the Advisory Agreement), which was subsequently amended in October 2015, as approved unanimously by our Board of Directors,
including the unanimous approval 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 14, 2015, our Board of Directors, including a majority of the directors who are not parties to the agreement or interested person of any such
party, approved the annual renewal of the Advisory Agreement with the Adviser through August 31, 2016. Mr. Gladstone, our chairman and chief executive officer, controls the Adviser. In reaching a decision to approve the Advisory Agreement,
our Board of Directors reviewed a significant amount of information and considered, among other things:



| |  |  | the nature, quality and extent of the advisory and other services to be provided to us by the Adviser;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | our investment performance and that of the Adviser;
| | - |  | ---------------------------------------------------



| |  |  | the costs of the services to be provided and profits to be realized by the Adviser from the relationship with us;
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| |  |  | the fee structures of comparable externally managed business development companies that engage in similar investing activities; and
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| |  |  | various other matters.
| | - |  | ----------------------

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 Under the Advisory Agreement

The base management fee is computed and generally payable quarterly to the Adviser and, effective July 1, 2015, is assessed at an annual rate of 1.75%,
computed on the basis of the value of our average gross 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, 2015, 2014 and 2013) 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 senior syndicated loan participations to
0.5%, to the extent that proceeds resulting from borrowings were used to purchase such senior syndicated loan participations.

The Adviser generally
voluntarily and irrevocably credits 100% of certain other fees against the base management fee that we would otherwise be required to pay the Adviser. These fees are for services that the Adviser provides to our portfolio companies,



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which are not the significant managerial assistance that the Adviser is required to provide under the 1940 Act. 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) interviewing, vetting and negotiating employment contracts with candidates in connection with adding
and retaining key portfolio company management team members. As stated above, 100% of these fees are generally credited against the base management fee; however, pursuant to the terms of the Advisory Agreement, a small percentage of certain of such
fees, primarily for the valuation of portfolio companies, is retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser. Loan servicing fees that are payable to the Adviser pursuant to our
revolving line of credit, are also 100% credited against the base management fee as discussed below Loan Servicing Fee Pursuant to Credit Agreement.

Incentive Fee Under the Advisory Agreement

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 (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% 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% 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 is 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 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 our
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 our 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 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 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



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respect of our portfolio in all prior years. We have not incurred capital gains-based incentive fees from inception through September 30, 2015, as cumulative unrealized capital depreciation
has exceeded cumulative realized capital gains net of cumulative realized capital losses.

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 cumulative unrealized capital depreciation included in the calculation of the capital gains-based incentive fee plus the aggregate
cumulative 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 year. 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 any such unrealized capital appreciation will be realized in the future. There has been no
GAAP accrual recorded for a capital gains-based incentive fee since our inception through September 30, 2015.

Our Board of Directors accepted an
unconditional and irrevocable credit from the Adviser to reduce the income-based incentive fee to the extent net investment income did not cover 100.0% of the distributions to common stockholders for the years ended September 30, 2015, 2014 and
2013, which credits totaled $1.4 million, $1.2 million, and $1.0 million, respectively.

Loan Servicing Fee Pursuant to Credit Agreement

The Adviser also services the loans held by Business Loan (the borrower under our line of credit), 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 line of credit. 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) 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, for the years ended September 30, 2015, 2014 and 2013, these loan servicing fees were 100% voluntarily, irrevocably and unconditionally credited back to us by the Adviser.

Administration Agreement

In 2006, we entered into
an administration agreement with the Administrator (the Administration Agreement), whereby we pay separately for administrative services. The Administration Agreement provides for payments equal to 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). Prior to July 1, 2014, our allocable portion of the expenses were derived by multiplying that portion of the Administrators
expenses allocable to all funds managed by the Adviser by the percentage of our total assets at the beginning of each quarter in comparison to the total assets at the beginning of each quarter of all funds managed by the Adviser.

Effective July 1, 2014, our allocable portion of the Administrators expenses are 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 under contractual
agreements. These administrative fees are accrued at the end of the quarter when the services are performed and generally paid the following quarter. On July 14, 2015, our Board of Directors approved the annual renewal of the Administration
Agreement through August 31, 2016.

Material U.S. Federal Income Tax Considerations

Regulated Investment Company Status

To maintain
the qualification for treatment as a RIC under the Code, we must distribute to our stockholders, for each taxable year, at least 90.0% of our investment company taxable income, which is generally 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------



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| |  |  | 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 ten 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, 2014, 2013 and 2012, 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 at rates up to 35.0%, 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 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, 2015, we incurred $0.3 million of OID income and the unamortized balance of OID investments (which are primarily all syndicated loans) as of
September 30, 2015 totaled $0.6 million. As of September 30, 2015, we had four investments which had a PIK interest component and we recorded PIK interest income of $0.6 million during the year ended September 30, 2015.



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Taxation of Our U.S. Stockholders

Distributions

For any period during which we
qualify as a RIC for federal income tax purposes, distributions to our stockholders attributable to our investment company taxable income generally will be taxable as ordinary income to stockholders to the extent of our current or accumulated
earnings and profits. We first allocate our earnings and profits to distributions to our preferred stockholders and then to distributions to our common stockholders based on priority in our capital structure. Any distributions in excess of our
current and accumulated earnings and profits will first be treated as a return of capital to the extent of the stockholders adjusted basis in his or her shares of common stock and thereafter as gain from the sale of shares of our common stock.
Distributions of our long-term capital gains, reported by us as such, will be taxable to stockholders as long-term capital gains regardless of the stockholders holding period for its common stock and whether the distributions are paid in cash
or invested in additional common stock. Corporate stockholders are generally eligible for the 70.0% dividends received deduction with respect to dividends received from us, other than capital gains dividends, but only to the extent such amount is
attributable to dividends received by us from taxable domestic corporations. Certain U.S. stockholders who are individuals, estates and trusts generally are subject to a 3.8% Medicate tax on dividends on shares of our stock.

Any dividend declared by us in October, November or December of any calendar year, payable to stockholders of record on a specified date in such a
month and actually paid during January of the following year, will be treated as if it were paid by us and received by the stockholders on December 31 of the previous year. In addition, we may elect (in accordance with Section 855(a)
of the Code) to relate a dividend back to the prior taxable year if we (1) declare such dividend prior to the later of the due date for filing our return for that taxable year or the 15th day
of the ninth month following the close of the taxable year, (2) make the election in that return, and (3) distribute the amount in the 12-month period following the close of the taxable year but not later than the first regular dividend
payment of the same type following the declaration. Any such election will not alter the general rule that a stockholder will be treated as receiving a dividend in the taxable year in which the distribution is made, subject to the October, November,
December rule described above.

If a common stockholder participates in our opt in dividend reinvestment plan, any distributions
reinvested under the plan will be taxable to the common stockholder to the same extent, and with the same character, as if the common stockholder had received the distribution 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 day on which the shares are credited to the common
stockholders account. We may use newly issued shares under the guidelines of our dividend reinvestment plan, or we may purchase shares in the open market in connection with the obligations under the plan. We do not have a dividend reinvestment
plan for our preferred stockholders.

Sale of Our Shares

A U.S. stockholder generally will recognize taxable gain or loss if the U.S. stockholder sells or otherwise disposes of his, her or its shares of our
common or preferred stock. Any gain arising from such sale or disposition generally will be treated as long-term capital gain or loss if the U.S. stockholder has held his, her or its shares for more than one year. Otherwise, it will be
classified as short-term capital gain or loss. However, any capital loss arising from the sale or disposition of shares of our common stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital
gain dividends received, or undistributed capital gain deemed received, with respect to such shares. Under the tax laws in effect as of the date of this filing, individual U.S. stockholders are subject to a maximum federal income tax rate of
20.0% on their net capital gain (i.e. the excess of realized net long-term capital gain over realized net short-term capital loss for a taxable year) including any long-term capital gain derived from an investment in our shares. Such rate is
lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. stockholders currently are subject to federal income tax on net capital gain at the same rates applied to their ordinary income (currently up to a
maximum of 35.0%). Capital losses are subject to limitations on use for both corporate and non-corporate stockholders. Certain U.S. stockholders who are individuals, estates or trusts generally are subject to a 3.8% Medicare tax on, among other
things, dividends on, and capital gain from the sale or other disposition of, shares of our common stock.

Required Withholding

We may be required to withhold federal income tax, or backup withholding, currently at a rate of 28.0%, from all taxable distributions to any non-corporate
U.S. stockholder (1) who fails to furnish us with a correct taxpayer identification number or a certificate that such stockholder is exempt from backup withholding, or (2) with respect to whom the Internal Revenue



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Service (IRS) notifies us that such stockholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect. An
individuals taxpayer identification number is generally his or her social security number. Any amount withheld under backup withholding is allowed as a credit against the U.S. stockholders federal income tax liability, provided that
proper information is provided to the IRS.

The Foreign Account Tax Compliance Act (FATCA) imposes a federal withholding tax on certain types
of payments made to foreign financial institutions and certain other non-U.S. entities unless certain due diligence, reporting, withholding, and certification obligation requirements are satisfied. Under delayed effective dates provided
for in the Treasury Regulations and other IRS guidance, such required withholding will not begin until January 1, 2019 with respect to gross proceeds from a sale or other disposition of our stock.

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 our 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 200.0%.

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 200.0% (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 200.0% (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 200.0% 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.

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 a qualifying asset 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.

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 acquire in connection with buyout and other recapitalizations. The following investment policies, along with these investment
objectives, may not be changed without the approval of our 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 be operated 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.



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Code of Ethics

We, and all of the Gladstone family of 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 family of 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 2015 and all of calendar year 2016. To the extent we
acquire more investments, we anticipate that the number of employees of the Adviser and the Administrator who devote time to our matters will increase.

As of November 17, 2015, the Adviser and the Administrator collectively had 64 full-time employees. A breakdown of these employees is summarized by
functional area in the table below:



| |  |                       |  |                                                                            
| |  | --------------------- |  | ---------------------------------------------------------------------------
| |  | Number of Individuals |  | Functional Area                                                            
| |  | 12                    |  | Executive management                                                       
| |  | 15                    |  | Accounting, administration, compliance, human resources, legal and treasury
| |  | 37                    |  | 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. 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 public may read and copy materials that we file with the SEC at the SECs Public Reference Room at 100 F Street, NE, Washington, DC
20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. 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.

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 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.



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Risks Related to the Economy

Capital markets may experience periods of disruption and instability. Such market conditions may materially and adversely affect debt and equity capital
markets in the United States and abroad, which may have a negative impact on our business and operations.

From time to time, capital markets may
experience periods of disruption and instability. For example, between 2007 and 2009, the global capital markets experienced an extended period of disruption as evidenced by a lack of liquidity in the debt capital markets, write-offs in the
financial services sector, the re-pricing of credit risk and the failure of certain major financial institutions. Despite actions of the United States federal government and foreign governments, these events contributed to worsening general economic
conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. While the adverse effects of
these conditions have abated to a degree, global financial markets experienced significant volatility following the downgrade by Standard & Poors on August 5, 2011 of the long-term credit rating of U.S. Treasury debt from AAA to
AA+. These market conditions have historically and could again have a material adverse effect on debt and equity capital markets in the United States and Europe, which could have a materially negative impact on our business, financial condition and
results of operations. We and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital. In such circumstances, equity capital may be difficult to raise because subject to some
limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than net asset value without general approval by our stockholders, which we currently have, and subsequent approval of the
specific issuance by our Board of Directors. In addition, our ability to incur additional indebtedness or issue additional preferred stock is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at
least 200% immediately after each time we incur indebtedness under our revolving line of credit or issue additional preferred stock. Any inability to raise capital could have a negative effect on our business, financial condition and results of
operations.

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 extreme 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, including the extreme
volatility and disruption, 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.

Rising
interest rates may adversely affect the value of our portfolio investments which could have an adverse effect on our business, financial condition and results of operations.

Our debt investments may be based on floating rates. General interest rate fluctuations may have a substantial negative impact on our investments, the value
of our common stock and our rate of return on invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income. An increase in
interest rates could decrease the value of any investments we hold which earn fixed interest rates, including subordinated loans, and senior and junior secured debt securities and loans, and also could increase our interest expense, thereby
decreasing our net income. Also, 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 and higher interest
rates would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of our common stock to decrease.

A further downgrade of the U.S. credit rating and economic crisis in Europe could negatively impact our business, financial condition and earnings.



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Although U.S. lawmakers passed legislation to raise the federal debt ceiling and Standard & Poors
Ratings Services affirmed its AA+ long-term sovereign credit rating on the United States and revised the outlook on the long-term rating from negative to stable in June of 2013, U.S. debt ceiling and budget deficit concerns together with signs of
deteriorating sovereign debt conditions in Europe continue to present the possibility of a credit-rating downgrade, economic slowdowns, or a recession for the United States. The impact of any further downgrades to the U.S. governments
sovereign credit rating or downgraded sovereign credit ratings of European countries or the Russian Federation, or their perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. These
developments, along with any further European sovereign debt issues, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. Continued adverse economic conditions
could have a material adverse effect on our business, financial condition and results of operations.

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.

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 senior and senior subordinated 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 small and medium-sized companies. We compete with public and private buyout funds, commercial and investment
banks, commercial financing companies, and, to the extent that they provide an 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 small and medium-sized
portfolio companies are extremely risky and could cause you to lose all or a part of your investment.

Investments in small and medium-sized portfolio
companies are subject to a number of significant risks including the following:



| |  |  | Small and medium-sized businesses 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Small and medium-sized businesses 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
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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, 2015, two portfolio companies were either fully or partially on non-accrual status with an aggregate debt cost basis of approximately $26.8 million, or 7.1% of the cost basis of all debt
investments in our portfolio. Subsequent to September 30, 2015, one of these portfolio companies was exited at a realized loss. While we are working with the portfolio companies 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 most 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.
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| |  |  | Small and medium-sized businesses typically have narrower product lines and smaller market shares than large businesses. Because our target portfolio companies are smaller 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.
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| |  |  | 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 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.
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| |  |  | Small and medium-sized businesses 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 our loan would be jeopardized.
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| |  |  | Small and medium-sized businesses are more likely to be dependent on one or two persons. Typically, the success of a small or medium-sized 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.
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| |  |  | Small and medium-sized businesses 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.
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| |  |  | Debt securities of small and medium-sized private companies typically are not rated by a credit rating agency.Typically a small or medium-sized 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.
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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, 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, 2015 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 the notes to our accompanying Consolidated Financial Statements included elsewhere in this report.

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.

Our most recent NAV was calculated on September 30, 2015 and our NAV when calculated effective December 31, 2015 and thereafter may be higher or
lower.

As of September 30, 2015, our NAV per share was $9.06, which was based on the fair value 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, 2015 may be higher or lower than $9.06 based on
potential changes in valuations, our issuance of 2.3 million shares of common stock in October and November 2015, 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, 2015 fair value is less than the September 30, 2015 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 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 cash.

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



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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 Adviser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 Advisers determinations regarding the fair value of our investments are materially different from the values that we ultimately realize upon our disposal of such securities.

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, 2015, syndicated loans made up approximately 15.0% of our portfolio at
cost, or $61.4 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.

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 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.

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. After repaying such senior creditors, such portfolio company may not have any remaining assets to use
for repaying its obligation to us. 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.



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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, 2015, we received principal payments of a combined $40.3 million, of which only $2.5 million resulted from one portfolio company
who paid off early at par. We will first use any proceeds from prepayments to repay any borrowings outstanding on our revolving line of credit. 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.

Higher taxation of our portfolio
companies may impact our quarterly and annual operating results.

The recessions adverse effect on federal, state, and municipality revenues may
induce these government entities to raise various taxes to make up for lost revenues. Additional taxation may have an adverse affect on our portfolio companies earnings and reduce their ability to repay our loans to them, thus affecting our
quarterly and annual operating results.

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, 2015, we had investments in 48 portfolio companies, of which there were five investments that comprised approximately $109.6 million or 30.0% 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, 2015, our largest industry
concentrations of our total investments at fair value were in diversified/conglomerate manufacturing companies, representing 15.4%; oil and gas companies, representing 14.0%; and healthcare, education and childcare companies, representing 12.3%.
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.

There may be circumstances where our debt investments could be subordinated to claims of
other creditors or we could be subject to lender liability claims.

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. Holders of debt instruments ranking senior to our investments typically



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would be entitled to receive payment in full before we receive any distributions. 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 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.

Portfolio
company litigation could result in additional costs and the diversion of management time and resources.

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.

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

When we make a subordinated loan, 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 warrants 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 revolving line of credit 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, 2015, we had $127.3 million in borrowings outstanding under our fifth amended and restated credit agreement (our Credit Facility), which provides for maximum borrowings of $170.0 million,
with a revolving period end date of January 19, 2019. 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 Gladstone Business Loan (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 20 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, which equates to $205.0 million as of
September 30, 2015, (ii) asset coverage with respect to senior securities representing indebtedness of at least 200.0%, 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, 2015, 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 19, 2019 (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 May 1, 2020. Subject to certain terms and conditions,
our Credit Facility may be expanded to a total of $250.0 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.

The last equity offering we completed was on October 27, 2015 and November 5, 2015 for a total of 2.3 million shares of common stock at a
public offering price of $8.55 per share, and 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
senior securities that are stock, such as our Series 2021 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 200.0% 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 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 200.0%. If the aggregate value of our assets declines, we might be unable to satisfy that
200.0% requirement. To satisfy the 200.0% 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
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| | 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 is 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 for the last several 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 2021 Term
Preferred Stock. However, pending legislation in the U.S House of Representatives, if passed, would modify this section of the 1940 Act and allow the issuance of multiple classes of senior securities that are stock, which may lessen our
dependence on the issuance of common stock as a financing source.
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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 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) |  |                                                  | (22.3 | )% |  |  | (12.3 | )% |  |  | (2.3 | )% |  |  | 7.7 | % |  |  | 17.7 | %



|(A) | The hypothetical return to common stockholders is calculated by multiplying our total assets as of September 30, 2015 by the assumed rates of return and
subtracting all interest accrued on our debt for the year ended September 30, 2015, adjusted for the dividends on our Series 2021 Term Preferred Stock; and then dividing the resulting difference by our total assets attributable to common stock.
Based on $382.5 million in total assets, $127.3 million drawn on our Credit Facility (at cost), $61.0 million in aggregate liquidation preference of our Series 2021 Term Preferred Stock, and $191.4 million in net assets, each as of
September 30, 2015.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based on the outstanding balance on our Credit Facility of $127.3 million at cost, as of September 30, 2015,
the effective annual interest rate of 4.1% as of that date, and aggregate liquidation preference of our Series 2021 Term Preferred Stock of $61.0 million, our investment portfolio at fair value would have had to produce an annual return of at least
2.0% to cover annual interest payments on the outstanding debt and dividends on our Series 2021 Term Preferred Stock.

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



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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.

Ultimately, we expect approximately 90.0% of the loans in our portfolio to be at variable rates determined on the basis of the LIBOR and
approximately 10.0% to be at fixed rates. As of September 30, 2015, based on the total principal balance of debt outstanding, our portfolio consisted of approximately 84.1% of loans at variable rates with floors, approximately 15.9% at fixed
rates.

We currently hold one interest rate cap agreement. 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. For additional information regarding asset coverage
ratio and RIC requirements, see BusinessMaterial U.S. Federal Income Tax ConsiderationsRegulated Investment Company Status.

From time to time, 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.

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 example, from making follow-on investments in existing portfolio companies (which could result in the dilution of our



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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.

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 Business Development Company.

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 over the rights of the holders of our common stock, which it did in connection with our issuance of approximately 2.4 million



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shares of Series 2021 Term Preferred Stock. Preferred stock, including our Series 2021 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.

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.

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.



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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 $54.5 million as of September 30, 2015, at cost, which are primarily all syndicated loan investments. For the year ended September 30, 2015, we incurred $0.3 million of OID income and the unamortized balance of OID
investments as of September 30, 2015 totaled $0.6 million. As of September 30, 2015, we had four investments which had a PIK interest component and we recorded PIK interest income of $0.6 million during the year ended September 30,
2015. We collected $0 in PIK interest in cash for the year ended September 30, 2015.

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 president of Gladstone Land, chairman of the board and chief executive officer of the Adviser, Gladstone Investment, Gladstone Commercial and
Gladstone Land. In addition, Mr. Brubaker, our vice chairman and chief operating officer, is the vice chairman and chief operating officer of the Adviser, Gladstone Investment, Gladstone Commercial and Gladstone Land. 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 Gladstone



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affiliate 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.

More specifically, 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, 2015, 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 syndicated loans whereby neither we nor any affiliate has the ability to dictate the terms of the loans.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Additionally, pursuant to an exemptive order granted by the SEC in July 2012, 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.

In the course of our investing activities, we will pay 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, 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. Since our
2007 fiscal year, our Board of Directors has accepted on a quarterly basis voluntary, unconditional and irrevocable credits to reduce the annual base management fee, which was previously 2.0%, but following an amendment to the Advisory Agreement,
effective July 1, 2015 is now 1.75%, on senior syndicated loan participations to 0.5% to the extent that proceeds resulting from borrowings were used to purchase such syndicated loan participations, and 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 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.



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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.

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
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



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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.

The market
price of our shares may fluctuate significantly.

The trading price of our common stock and our mandatorily redeemable preferred stock may fluctuate
substantially. Due to the extreme volatility and disruptions that have affected the capital and credit markets over the past few years, our stock has experienced greater than usual stock price volatility.

The market price and marketability of our shares may from time to time be significantly affected by numerous factors, including many over which we have no
control and that may not be directly related to us. These factors include, but are not limited to, the following:



| |  |  | general economic trends and other external factors;
| | - |  | ---------------------------------------------------



| |  |  | price and volume fluctuations in the stock market from time to time, which are often unrelated to the operating performance of particular companies;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | significant volatility in the market price and trading volume of shares of RICs, BDCs or other companies in our sector, which is not necessarily related to the operating performance of these companies;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in stock index definitions or policies, which may impact an investors desire to hold shares of BDCs;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | loss of BDC or RIC status;
| | - |  | --------------------------



| |  |  | changes in our earnings or variations in our operating results;
| | - |  | ---------------------------------------------------------------



| |  |  | changes in prevailing interest rates;
| | - |  | -------------------------------------



| |  |  | changes in the value of our portfolio of investments;
| | - |  | -----------------------------------------------------



| |  |  | any shortfall in our revenue or net income or any increase in losses from levels expected by securities analysts;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | departure of key personnel;
| | - |  | ---------------------------



| |  |  | operating performance of companies comparable to us;
| | - |  | ----------------------------------------------------



| |  |  | short-selling pressure with respect to our shares or BDCs generally;
| | - |  | --------------------------------------------------------------------



| |  |  | the announcement of proposed, or completed, offerings of our securities, including a rights offering; and
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | loss of a major funding source.
| | - |  | -------------------------------

Fluctuations in the trading prices of our shares may adversely affect the
liquidity of the trading market for our shares and, if we seek to raise capital through future equity financings, our ability to raise such equity capital.

The issuance of subscription rights to our existing stockholders may dilute the ownership and voting powers of existing stockholders in our common stock,
dilute the NAV of their shares and have a material adverse effect on the trading price of our common stock.

There are significant capital raising
constraints applicable to us under the 1940 Act when our common stock is trading below its NAV per share. In the event that we issue subscription rights to our existing stockholders to subscribe for and purchase



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additional shares of our common stock, there is a significant possibility that the rights offering will dilute the ownership interest and voting power of stockholders who do not fully exercise
their subscription rights. Stockholders who do not fully exercise their subscription rights should expect that they will, upon completion of the rights offering, own a smaller proportional interest in us than would otherwise be the case if they
fully exercised their subscription rights. In addition, because the subscription price of the rights offering is likely to be less than our most recently determined NAV per common share, our common stockholders are likely to experience an immediate
dilution of the per share NAV of their shares as a result of the offer. As a result of these factors, any future rights offerings of our common stock, or our announcement of our intention to conduct a rights offering, could have a material adverse
impact on the trading price of our common stock.

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. Subsequent to September 30, 2015, our common stock has traded at discounts of up to 10.3% of our NAV per share, which was $9.06 as of September 30, 2015. 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.

At our most recent annual meeting of stockholders on February 12, 2015, our stockholders approved a proposal designed to allow us
to sell shares of our common stock below the then current NAV per share of our common stock in one or more offerings for a period of one year from the date of such approval, subject to certain conditions (including, but not limited to, that the
number of common shares issued and sold pursuant to such authority does not exceed 25.0% of our then outstanding common stock immediately prior to each such sale). Absent such stockholder approval, we would not be able to access the capital markets
in an offering at below the then current NAV per share due to restrictions applicable to BDCs under the 1940 Act.

We exercised this right with our Board
of Directors approval when we sold an aggregate of 131,462 shares of our common stock under our at-the-market program for gross proceeds of a combined $1.2 million at an average price of $8.89 per share, which was below our then current NAV of an
average $9.41 per share during March and April 2015. In addition, subsequent to September 30, 2015, we exercised this right again with our Board of Directors approval when we completed a public offering of 2.3 million shares of our common
stock, inclusive of the overallotment for gross proceeds totaling $17.1 million, at a public offering price of $8.55 per share, which was below our then current NAV of $9.06 per share.

At the upcoming annual stockholders meeting scheduled for February 11, 2016, our stockholders will again be asked to vote in favor of renewing this
proposal for another year. During the past year, our common stock has traded consistently below NAV. Any decision to sell shares of our common stock below the then current NAV per share of our common stock would be subject to the determination by
our Board of Directors that such issuance is in our and our stockholders best interests.

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



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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.

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% 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% 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.

If we fail to pay dividends on our Series 2021 Term Preferred Stock for two years, the holders of our Series 2021 Term Preferred Stock will be entitled to
elect a majority of our directors.

The terms of our Series 2021 Term Preferred Stock provide for annual dividends in the amount of $1.6875 per
outstanding share of Series 2021 Term Preferred Stock. In accordance with the terms of our Series 2021 Term Preferred Stock, if dividends thereon are unpaid in an amount equal to at least two years of dividends, the holders of Series 2021 Term
Preferred Stock will be entitled to elect a majority of our Board of Directors.

Other Risks

We could face losses and potential liability if intrusion, viruses or similar disruptions to our technology jeopardize our confidential information, whether
through breach of our network security or otherwise.

Maintaining our network security is of critical importance because our systems store highly
confidential financial models and portfolio company information. Although we have implemented, and will continue to implement, security measures, our technology platform is and will continue to be vulnerable to intrusion, computer viruses or similar
disruptive problems caused by transmission from unauthorized users. The misappropriation of proprietary information could expose us to a risk of loss or litigation.

Terrorist attacks, acts of war, or national disasters may affect any market for our common stock, impact the businesses in which we invest, and harm our
business, operating results, and financial conditions.

Terrorist acts, acts of war, or national disasters have created, and continue to create,
economic and political uncertainties and have contributed to global economic instability. Future terrorist activities, military or security operations, or national disasters could further weaken the domestic/global economies and create additional
uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results, and financial condition. Losses from terrorist attacks and
national disasters are generally uninsurable.



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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.

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.



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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. The Adviser and Administrator are both headquartered in McLean, Virginia, a suburb of Washington,
D.C., and the Adviser also has offices in several other states.

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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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. The following table reflects, by quarter, the high and low intraday sales
prices per share of our common stock on the NASDAQ, the high and low sales prices as a percentage of NAV per common share and quarterly distributions declared per share for each quarter during the last two fiscal years. Amounts presented for each
quarter of fiscal years 2015 and 2014 represent the cumulative amount of the distributions declared per common share for the months composing such quarter.



|        |  |              |          |  |         |     |       |             |  |   |                                    |  |  |                                   |      |  |                             |  |      |   |  |  |       |    |  |   |       | 
|------- |  | ------------ | -------- |  | ------- | --- | ----- | ----------- |  | - | ---------------------------------- |  |  | --------------------------------- | ---- |  | --------------------------- |  | ---- | - |  |  | ----- | -- |  | - | ----- | 
|        |  | QuarterEnded |          |  | NAV (A) |     |       | Sales Price |  |   | Premium(Discount) ofHigh to NAV(B) |  |  | (Discount)Premium ofLow to NAV(B) |      |  | DeclaredCommonDistributions | 
|        |  |              | High     |  |         | Low |       |             |  |  
|FY2015  |  |              | 09/30/15 |  |         | $   | 9.06  |             |  | $ | 9.25                               |  |  | $                                 | 7.58 |  |                             |  | 2.1  | % |  |  | (16.3 | )% |  | $ | 0.210 | 
|        |  |              | 06/30/15 |  |         |     | 9.49  |             |  |   | 8.99                               |  |  |                                   | 7.84 |  |                             |  | (5.3 | ) |  |  | (17.4 | )  |  |   | 0.210 | 
|        |  |              | 03/31/15 |  |         |     | 9.55  |             |  |   | 9.10                               |  |  |                                   | 7.25 |  |                             |  | (4.7 | ) |  |  | (24.1 | )  |  |   | 0.210 | 
|        |  |              | 12/31/15 |  |         |     | 9.31  |             |  |   | 9.41                               |  |  |                                   | 8.02 |  |                             |  | 1.1  |   |  |  | (13.9 | )  |  |   | 0.210 | 
|FY 2014 |  |              | 09/30/14 |  |         | $   | 9.51  |             |  | $ | 10.27                              |  |  | $                                 | 8.06 |  |                             |  | 8.0  | % |  |  | (15.2 | )% |  | $ | 0.210 | 
|        |  |              | 06/30/14 |  |         |     | 8.62  |             |  |   | 10.21                              |  |  |                                   | 9.41 |  |                             |  | 18.4 |   |  |  | 9.2   |    |  |   | 0.210 | 
|        |  |              | 03/31/14 |  |         |     | 9.79  |             |  |   | 10.37                              |  |  |                                   | 9.27 |  |                             |  | 5.9  |   |  |  | (5.3  | )  |  |   | 0.210 | 
|        |  |              | 12/31/13 |  |         |     | 10.10 |             |  |   | 9.92                               |  |  |                                   | 8.60 |  |                             |  | (1.8 | ) |  |  | (14.9 | )  |  |   | 0.210 | 



|(A) | NAV per common share is determined as of the last day in the relevant quarter and, therefore, may not reflect the NAV per common share on the date of the high and low sales prices during such quarter. The per share NAVs
shown above are based on outstanding common shares at the end of each period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | The premiums (discounts) set forth in these columns represent the high or low, as applicable, sales price per share for the relevant quarter minus the NAV per common share as of the end of such quarter, and therefore
may not reflect the premium (discount) to NAV per common share on the date of the high and low intraday sales prices.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of
November 20, 2015, there were approximately 37 record owners of our common stock.

Distributions

We currently 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 intend to retain some or all of our long-term capital gains, if any, but 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 and Purchases of Equity Securities

We did not sell any unregistered shares of stock during the fiscal year ended September 30, 2015. We did not repurchase any shares of our
stock during the fourth quarter ended September 30, 2015.



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ITEM 6. SELECTED FINANCIAL DATA

The following consolidated selected financial data for the fiscal years ended September 30, 2015, 2014, 2013, 2012 and 2011 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 Consolidated Financial Statements and notes thereto and
Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report.

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SELECTED FINANCIAL AND OTHER DATA

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)



|                                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  |  |      |            |   |  |   |            |  
|------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- |  |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                                                        |  | Year Ended September 30, |           
|                                                                                                        |  | 2015                     |            |   | 2014 |   |            | 2013 |  |   | 2012       |  |  | 2011 |           
|Statement of Operations Data:                                                                           |  |                          |            |   |      |   |            |      |  |   |            |  |  |      |            |   |  |   |            |  
|Total Investment Income                                                                                 |  | $                        | 38,058     |   |      | $ | 36,585     |      |  | $ | 36,154     |  |  | $    | 40,322     |   |  | $ | 35,211     |  
|Total Expenses, Net of Credits from Adviser                                                             |  |                          | 20,358     |   |      |   | 18,217     |      |  |   | 17,768     |  |  |      | 21,278     |   |  |   | 16,799     |  
|                                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  |  |      |            |   |  |   |            |  
|Net Investment Income                                                                                   |  |                          | 17,700     |   |      |   | 18,368     |      |  |   | 18,386     |  |  |      | 19,044     |   |  |   | 18,412     |  
|                                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  |  |      |            |   |  |   |            |  
|Net Realized and Unrealized (Loss) Gain on Investments, Borrowings and Other                            |  |                          | (9,216     | ) |      |   | (7,135     | )    |  |   | 13,833     |  |  |      | (27,052    | ) |  |   | (39,511    | )
|                                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  |  |      |            |   |  |   |            |  
|Net Increase (Decrease) in Net Assets Resulting from Operations                                         |  | $                        | 8,484      |   |      | $ | 11,233     |      |  | $ | 32,219     |  |  | $    | (8,008     | ) |  | $ | (21,099    | )
|                                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  |  |      |            |   |  |   |            |  
|Per Share Data:                                                                                         |  |                          |            |   |      |   |            |      |  |   |            |  |  |      |            |   |  |   |            |  
|Net Investment Income per Common Share  Basic and Diluted(A)                                           |  | $                        | 0.84       |   |      | $ | 0.87       |      |  | $ | 0.88       |  |  | $    | 0.91       |   |  | $ | 0.88       |  
|Net Increase (Decrease) in Net Assets Resulting from Operations per Common Share - Basic and Diluted(A) |  |                          | 0.40       |   |      |   | 0.53       |      |  |   | 1.53       |  |  |      | (0.38      | ) |  |   | (1.00      | )
|Distributions Declared and Paid Per Common Share                                                        |  |                          | 0.84       |   |      |   | 0.84       |      |  |   | 0.84       |  |  |      | 0.84       |   |  |   | 0.84       |  
|Statement of Assets and Liabilities Data:                                                               |  |                          |            |   |      |   |            |      |  |   |            |  |  |      |            |   |  |   |            |  
|Total Assets                                                                                            |  | $                        | 382,482    |   |      | $ | 301,429    |      |  | $ | 295,091    |  |  | $    | 293,402    |   |  | $ | 317,624    |  
|Net Assets                                                                                              |  |                          | 191,444    |   |      |   | 199,660    |      |  |   | 205,992    |  |  |      | 188,564    |   |  |   | 213,721    |  
|Net Asset Value Per Common Share                                                                        |  |                          | 9.06       |   |      |   | 9.51       |      |  |   | 9.81       |  |  |      | 8.98       |   |  |   | 10.16      |  
|Common Shares Outstanding                                                                               |  |                          | 21,131,622 |   |      |   | 21,000,160 |      |  |   | 21,000,160 |  |  |      | 21,000,160 |   |  |   | 21,039,242 |  
|Weighted Common Shares Outstanding  Basic and Diluted                                                  |  |                          | 21,066,844 |   |      |   | 21,000,160 |      |  |   | 21,000,160 |  |  |      | 21,011,123 |   |  |   | 21,039,242 |  
|Senior Securities Data:                                                                                 |  |                          |            |   |      |   |            |      |  |   |            |  |  |      |            |   |  |   |            |  
|Borrowings under Credit Facility, at cost(B)                                                            |  | $                        | 127,300    |   |      | $ | 36,700     |      |  | $ | 46,900     |  |  | $    | 58,800     |   |  | $ | 99,400     |  
|Mandatorily redeemable preferred stock(B)                                                               |  |                          | 61,000     |   |      |   | 61,000     |      |  |   | 38,497     |  |  |      | 38,497     |   |  |   |           |  



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

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



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|                                                             |  |                          |         |   |      |   |        |      |  |   |         |   |  |      |        |   |  |   |         |  
|------------------------------------------------------------ |  | ------------------------ | ------- | - | ---- | - | ------ | ---- |  | - | ------- | - |  | ---- | ------ | - |  | - | ------- | -
|                                                             |  | Year Ended September 30, |        
|                                                             |  | 2015                     |         |   | 2014 |   |        | 2013 |  |   | 2012    |   |  | 2011 |       
|Other Unaudited Data:                                        |  |                          |         |   |      |   |        |      |  |   |         |   |  |      |        |   |  |   |         |  
|Number of Portfolio Companies at Year End                    |  |                          | 48      |   |      |   | 45     |      |  |   | 47      |   |  |      | 50     |   |  |   | 59      |  
|Average Size of Portfolio Company Investment at Cost         |  | $                        | 8,547   |   |      | $ | 7,762  |      |  | $ | 7,069   |   |  | $    | 7,300  |   |  | $ | 6,488   |  
|Principal Amount of New Investments                          |  |                          | 102,299 |   |      |   | 81,731 |      |  |   | 80,418  |   |  |      | 45,050 |   |  |   | 110,903 |  
|Proceeds from Loan Repayments, Investments Sold and Exits(C) |  |                          | 40,273  |   |      |   | 72,560 |      |  |   | 117,048 |   |  |      | 73,857 |   |  |   | 50,002  |  
|Weighted Average Yield on Investments(D)                     |  |                          | 10.93   | % |      |   | 11.47  | %    |  |   | 11.63   | % |  |      | 11.25  | % |  |   | 11.21   | %
|Total Return(E)                                              |  |                          | 2.40    |   |      |   | 9.62   |      |  |   | 9.90    |   |  |      | 41.39  |   |  |   | (33.77  | )



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

|(D) | Weighted average yield on investments equals interest income on investments divided by the weighted average interest-bearing principal balance throughout the fiscal year.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | 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, please 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 business development company (BDC) under the Investment
Company Act of 1940, as amended (the 1940 Act). In addition, for federal income tax purposes we have elected to be treated as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as amended (the
Code). As a BDC and a RIC, we are subject to certain constraints, including limitations imposed by the 1940 Act and the Code.

We were
established for the purpose of investing in debt and equity securities of established private business 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 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 $5 million to $25 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,
2015, our investment portfolio was made up of approximately 91.2% debt investments and 8.8% equity investments, at cost.

We focus on investing in small
and medium-sized private businesses 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. 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 Securities and Exchange Commission (SEC) granted us an exemptive order that expands our ability to co-invest with certain of our
affiliates by permitting us, under certain circumstances, to co-invest with Gladstone Investment Corporation (Gladstone Investment) and any future business development company or closed-end management investment company that is advised
(or sub-advised if it controls the fund) by our external investment adviser or any combination of the foregoing subject to the conditions in the SECs order. We believe this ability to co-invest will continue to enhance our ability to further
our investment objectives and strategies.

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 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, 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 in 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.



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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.

We are externally managed by our investment advisor, Gladstone Management Corporation (the Adviser), a SEC registered investment adviser and an
affiliate of ours, pursuant to an investment advisory and management agreement (the Advisory Agreement). The Adviser manages our investment activities. We have also entered into an administration agreement (the Administration
Agreement) with Gladstone Administration, LLC (the Administrator), an affiliate of ours and the Adviser, whereby we pay separately for administrative services.

Our shares of common stock and 6.75% Series 2021 Term Preferred Stock (our Series 2021 Term Preferred Stock) are traded on the NASDAQ Global
Select Market (NASDAQ) under the trading symbols GLAD and GLADO, respectively.

Business Environment

The strength of the global economy and the U.S. economy in particular, continues to be uncertain, although economic conditions generally appear to
be improving, albeit slowly. Many of our portfolio companies, as well as those small and medium-sized companies that we evaluate for prospective investment, may remain vulnerable to the impacts of the uncertain economy which may impact their ability
to repay our loans or engage in a liquidity event, such as a sale, recapitalization or initial public offering. Uncertain political, regulatory and economic conditions could also disproportionately impact some of the industries in which we have
invested, causing us to be more vulnerable to losses in our portfolio, resulting in an increase in the number of our non-performing assets and a decrease in the fair market value of our portfolio.

We believe several factors impacting commercial banks, including consolidation, capital constraints and regulatory changes, have benefited our fund and other
lenders like us. There has been, however, increased competitive pressure in the middle market lending marketplace from other BDCs and other investment companies, as well as small banks and some private investors, for senior secured and senior
secured subordinated debt. We have seen an increase in refinancing and recapitalization transactions and there have been increased competitive pressures resulting in reduced investment yields and/or higher leverage and increasingly riskier
investments in the middle market segment we focus on. In addition, there has been an increase in new entrants (financial services companies, BDCs and other investment funds) seeking to capitalize on middle market lending opportunities. Many of our
competitors have lower cost of capital than we do and also may be willing to take on riskier investments than we are. We do not know if general economic conditions will continue to improve or if adverse conditions will recur and we do not know the
full extent to which the inability of the U.S. government to address its fiscal condition in the near and long term will affect us. If market instability persists or intensifies, we may experience difficulty in raising capital. In summary, we
believe we are in a prolonged economic recovery; however, we do not know the full extent to which the impact of the of the current economic conditions will affect us or our portfolio companies.

Portfolio Activity

While conditions remain
somewhat challenging in the marketplace, we believe that the current credit environment provides many investment opportunities that are consistent with our investment objectives and strategies and whereby we can achieve attractive risk-adjusted
returns. During the year ended September 30, 2015, we invested in 11 new proprietary and syndicate investments totaling $102.3 million; however, five portfolio companies paid off early or were sold during the year, for an aggregate of $14.9
million in unscheduled payoffs. Additionally, we have continued to focus on challenged investments over our 2015 fiscal year and sold two portfolio companies that were on non-accrual status at the time of sale and restructured one portfolio company
that was previously on non-accrual, for aggregate net proceeds of $7.1 million and a combined realized loss of $34.1 million, resulting in a net expansion of three portfolio companies year over year. We will continue to manage any non-strategic
investments to an orderly exit.

During the year ended September 30, 2015, our eight new proprietary investments provided a weighted average current
pay interest rate of 10.1%, a going in weighted average leverage of 3.3x, a current weighted average life of 4.5 years and a mix of approximately 92.1% secured first lien and 7.9% secured second lien investments, all based on the originating debt
principal balances. One portfolio company where we co-invested with Gladstone Investment was included in these new proprietary investments, as discussed further under Investment Highlights.



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Capital Raising Efforts

Despite the challenges in the economy for the past several years, in fiscal 2015, and immediately subsequent to, we met our capital needs through the
extension, expansion and enhancement to our $170.0 million revolving line of credit (our Credit Facility) and by accessing the capital markets in the form of offerings of our common stock. In May, 2015, we, through Business Loan, entered
into a Fifth Amended and Restated Credit Facility (the Credit Facility), which increased the commitment amount from $137.0 million to $140.0 million, extended the revolving period end date by three years to January 19, 2019,
decreased the marginal interest rate added to 30-day LIBOR from 3.75% to 3.25% per annum, set the unused commitment fee at 0.50% on all undrawn amounts, expanded the scope of eligible collateral, and amended certain other terms and conditions.
In June 2015, we through Business Loan, entered into certain joinder and assignment agreements with three new lenders to increase borrowing capacity under our Credit Facility by $30.0 million to $170.0 million. Most recently, we issued
2.3 million shares of common stock for gross proceeds of $19.7 million in October and November 2015. Refer to (Liquidity and Capital Resources  Revolving Credit Facility, and Equity  Common
Stock) for further discussion of our revolving line of credit and recent common stock offerings.

Although we were able to access the capital
markets over the last year, we believe uncertain market conditions continue to affect the trading price of our capital stock and thus may inhibit our ability to finance new investments through the issuance of equity. The current volatility in the
credit market and the uncertainty surrounding the U.S. economy have led to significant stock market fluctuations, particularly with respect to the stock of financial services companies like ours. During times of increased price volatility, our
common stock may be more likely to trade at a price below our net asset value (NAV) per share, which is not uncommon for BDCs like us.

On
November 20, 2015, the closing market price of our common stock was $8.68, a 4.2% discount to our September 30, 2015, NAV per share of $9.06. When our stock trades below NAV per common share, as it has fairly consistently over the last
several 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. At our annual meeting of stockholders held on February 12, 2015, our stockholders approved a proposal which authorizes us to sell
shares of our common stock at a price below our then current NAV per common share subject to certain limitations (including, but not limited to, that the number of shares issued and sold pursuant to such authority does not exceed 25.0% of our then
outstanding common stock immediately prior to each such sale) for a period of one year from the date of approval, provided that our board of directors (our Board of Directors) makes certain determinations prior to any such sale. With our
Board of Directors subsequent approval, we issued shares of our common stock under an at-the-market program (refer to Recent Developments  At-the-Market Program) and in an overnight offering in October 2015 with the
overallotment closing in November 2015 at a price per share below the then current NAV per share. The resulting proceeds, in part, will allow us to grow the portfolio by making new investments, generate additional income through new investments, and
provide us additional equity capital to help ensure continued compliance with regulatory tests. Refer to Liquidity and Capital Resources  Equity  Common Stock for further discussion of our common stock offerings.

The current uncertain and volatile economic conditions may also continue to cause the value of the collateral securing some of our loans, as well as the value
of our equity investments, to fluctuate, which has impacted and may continue to impact our ability to borrow under our Credit Facility. Additionally, our Credit Facility contains covenants regarding the maintenance of certain minimum loan
concentrations and net worth, which are affected by the decrease in value of our portfolio. Failure to meet these requirements would result in a default which, if we are unable to obtain a waiver from our lenders, would cause an acceleration of our
repayment obligations under our Credit Facility. As of September 30, 2015, we were in compliance with all of our Credit Facilitys covenants.

Regulatory Compliance

Challenges in the current
market are intensified for us by certain regulatory limitations under the Code and the 1940 Act, as well as contractual restrictions under the agreement governing our Credit Facility that further constrain our ability to access the capital markets.
To qualify to be taxed as a RIC, we must distribute 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. Because we
are required to satisfy the RIC annual stockholder distribution requirement, and because the illiquidity of many of our investments makes it difficult for us to finance new investments through the sale of current investments, our ability to make new
investments is highly dependent upon external financing. Our external financing sources include the issuance of equity securities, debt securities or other leverage, such as borrowings under our Credit



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Facility. 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 ratio (as defined in Section 18(h) of the 1940 Act), of at least 200.0% on our senior securities representing indebtedness, inclusive of additional external debt financing that we seek to
incur. Furthermore, to issue additional senior securities that are stock (such as our series of mandatorily redeemable preferred stock) Section 18 of the 1940 Act requires that we must have an asset coverage ratio of at least 200%
on our senior securities that are stock.

We expect that, given these regulatory and contractual constraints in combination with current
market conditions, debt and equity capital may be costly for us to access in the near term. However, we believe that our recent amendments to our Credit Facility to decrease the interest rate on advances and extend its maturity until 2019 and our
ability to co-invest with Gladstone Investment and certain other affiliated investment funds, should increase our ability to make investments in businesses that we believe will be generally resistant to a recession and, as a result, will be likely
to achieve attractive long-term returns for our stockholders.

Going into fiscal year 2016, we intend to continue to work through some of the older
investments in our portfolio to enhance overall returns and hope to show our stockholders new conservative investments in businesses with steady cash flows. We are focused on building our pipeline and making investments that meet our objectives and
strategies and that provide appropriate returns, in light of the accompanying risks.

Investment Highlights

During the year ended September 30, 2015, we invested an aggregate of $102.3 million in 11 new portfolio companies and an aggregate of $33.8 million in
existing portfolio companies. Also, during the year ended September 30, 2015, we exited our investments in two non-accrual portfolio companies, and restructured one of our portfolio companies that was previously on non-accrual, for net proceeds
of a combined $7.1 million, and we received scheduled and unscheduled principal repayments of a combined $40.3 million from existing portfolio companies, including $26.7 million from early payoffs at par and sales. Since our initial public offering
in August 2001, we have made 398 different loans to, or investments in, 196 companies for a total of approximately $1.4 billion, before giving effect to principal repayments on investments and divestitures.

Investment Activity

During the year ended
September 30, 2015, we executed the following transactions with certain of our portfolio companies:

Issuances and Originations

During the year ended September 30, 2015, we invested an aggregate of $89.8 million to eight new proprietary portfolio companies and an aggregate of $12.5
million in three new syndicated portfolio companies (PSC Industrial Holdings Corp., SourceHOV LLC and Vertellus Specialties Inc.). Below are significant issuances and originations during the year ended September 30, 2015:



| |  |  | B+T Holdings Inc. In December 2014, we invested $8.1 million, along with an unfunded line of credit of $0.3 million, in B+T Holdings Inc. (B+T), through a combination of secured first
lien debt and equity. B+T, headquartered in Tulsa, Oklahoma, is a full-service provider of structural engineering, construction, and technical services to the wireless tower industry for tower upgrades and modifications. This was a co-investment
with one of our affiliated funds, Gladstone Investment. Gladstone Investment invested an additional $19.6 million under the same terms as us.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | LWO Acquisitions Company, LLC In December 2014, we invested $13.5 million, along with an unfunded line of credit of $1.5 million, in LWO Acquisitions Company, LLC, (LWO Acquisitions)
through a combination of secured first lien debt and equity. LWO Acquisitions, headquartered in Dallas, Texas, is a premier electronic manufacturing services company focused on the design and production of specialized printed circuit board
assemblies and related services.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Vision Government Solutions, Inc.  In December 2014, we invested $10.0 million, along with an unfunded line of credit of $1.0 million, in Vision Government Solutions, Inc. (Vision)
through secured first lien debt. Vision, headquartered in Northboro, Massachusetts, is a leading provider of land parcel management software technology and appraisal services to local government organizations, enabling efficient assessment, billing,
collections, mapping, and permitting.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | United Flexible, Inc.  In February 2015, we invested $21.2 million, along with an unfunded line of credit of $4.0 million, in United Flexible, Inc. (formerly known as Precision Metal Hose, Inc.)
(United Flexible) through a combination of secured first lien debt and equity. United Flexible, headquartered in Romeoville, Illinois, is a global leader in the design, development, manufacture and support of performance critical
flexible engineered solutions for the transfer of fluids and gasses in extreme environments.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mikawaya In July 2015, we invested $7.2 million, in Mikawaya, through a combination of secured second lien debt and equity. Mikawaya, headquartered in Vernon, California, is a producers of Japanese
pastries and specialty frozen desserts.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | TWS Acquisition Corporation In July 2015, we invested $13.0 million, along with an unfunded line of credit of $1.5 million, in TWS Acquisition Corporation (TWS) through secured first
lien debt. TWS, headquartered in Phoenix, Arizona, is the parent company of Tulsa Welding School and The Refrigeration School, Inc., which are post-secondary skilled trade schools.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Triple H Food Processors, Inc. In August 2015, we invested $8.3 million, along with an unfunded line of credit of $1.5 million in Triple H Food Processors, Inc. (Triple H) through a
combination of secured first lien debt and an equity co-investments. Triple H, headquartered in Riverside, California, provides co-packing services to a wide variety of branded and private label liquid and related food products.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Flight Fit N Fun LLC In September 2015, we invested $8.5 million in Flight Fit N Fun LLC (Flight) through a combination of secured first lien debt and equity. Flight, headquartered in
Springfield, Virginia, operates trampoline parks that provide entertainment facilities where jumpers of all ages can participate in active social outings, lively corporate gatherings, intense individual workouts or memorable birthday parties.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Repayments and Exits

During the
year ended September 30, 2015, 29 borrowers made principal repayments totaling $40.3 million in the aggregate, consisting of $39.1 million of unscheduled principal and revolver repayments, as well as $1.2 million in contractual principal
amortization. Below are significant repayments and exits during the year ended September 30, 2015:



| |  |  | Included in the unscheduled principal payments were the net proceeds from the early payoffs and sales, at or above par of the following:
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Syndicated investment sales: Blue Coat Systems, Inc. of $3.1 million, Envision Acquisition Company, LLC of $2.6 million, Sensus USA, Inc. of $0.5 million and Ardent Medical Services, Inc. of $7.2 million. These
syndicated payoffs had a weighted average internal rate of return (IRR) of 12.2% at payoff
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | North American Aircraft Services, LLC.  In October 2014, North American Aircraft Services, LLC. (NAAS), paid off early resulting in a $1.6 million realized gain and success fees of $0.6 million
recorded in the quarter ended December 31, 2014. The resulting internal rate of return on payoff was 18.0%.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Midwest Metal Distribution, Inc.  In December 2014, we sold our investment in Midwest Metal Distribution, Inc. (Midwest Metal) for net proceeds of $6.1 million, which resulted in a realized loss
of $14.5 million recorded in the quarter ended December 31, 2014. Midwest Metal was on non-accrual status at the time of the sale.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sunburst Media  Louisiana, LLC In June 2015, we exited our investment in Sunburst Media  Louisiana, LLC (Sunburst) for net proceeds of $4.7 million, which resulted in a
realized loss of $1.3 million recorded in the quarter ended June 30, 2015.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Saunders & Associates In August 2015, we exited our investment in Saunders & Associates (Saunders) for net proceeds of $1.0 million and a realized loss of $8.9 million
recorded in the quarter ended September 30, 2015. Saunders was on non-accrual status at the time of the sale.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | GFRC Holding, LLC In September 2015, we restructured our investment in GFRC Holding, LLC (GFRC), resulting in a realized loss of $10.8 million recorded in the quarter ended September 30,
2015. GFRC was on non-accrual status at the time of the restructure and was reinstated to accrual status effective September 30, 2015.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Refer to Note 15Subsequent Events in our accompanying Consolidated Financial Statements
included elsewhere in this Annual Report on Form 10-K for investment activity occurring subsequent to September 30, 2015. Of note, the following significant exits occurred subsequent to September 30, 2015:



| |  |  | Allison Publications, LLC  In October 2015, Allison Publications, LLC paid off at par for net proceeds of $8.2 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Ameriqual Group, LLC  In October 2015, Ameriqual Group, LLC paid off at par for net proceeds of $7.4 million.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | First American Payment Systems, L.P. In October 2015, we sold our investment in First American Payment Systems, L.P. for net proceeds of $4.0 million, which resulted in a realized loss of $0.2
million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Funko, LLC In October 2015, we sold our investment in Funko, LLC (Funko) for net proceeds of $27.1 million, which resulted in a realized gain of $16.6 million and a small remaining equity
investment.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Heartland Communications Group In October 2015, we exited our investment in Heartland Communications Group (Heartland) for net proceeds of $1.5 million, which resulted in a realized loss of
$2.7 million. Heartland had been on non-accrual status at the time of the sale.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent Developments

Common Stock Offering

In October 2015, we
completed a public offering of 2.0 million shares of our common stock. Gross proceeds totaled $17.1 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were approximately $16.0 million. In November,
2015, the underwriters fully exercised their overallotment option to purchase 300,000 additional shares of our common stock, resulting in net proceeds, after deducting underwriting discounts and offering costs borne by us, of approximately $2.4
million

Base Management Fee

In October 2015,
we amended our existing advisory agreement with the Adviser, to reduce the base management fee under the agreement from 2.0% per annum (0.5% per quarter) of average total assets (excluding cash or equivalents) to 1.75% per annum (0.4375%
per quarter) effective July 1, 2015. All other terms of the advisory agreement remained unchanged. The amendment was approved unanimously by our Board of Directors.

At-the-Market Program

In February 2015, we
entered into equity distribution agreements (commonly referred to as at-the-market agreements or our Sales Agreements) with KeyBanc Capital Markets Inc. and Cantor Fitzgerald & Co., each a Sales Agent,
under which we may 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 of which we have $48.8 million of availability remaining as of September 30, 2015.
During the twelve months ended September 30, 2015, we sold an aggregate of 131,462 shares of our common stock for gross proceeds of $1.2 million. No shares of common stock have been sold under these Sales Agreements subsequent to
September 30, 2015.



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RESULTS OF OPERATIONS

Comparison of the Year Ended September 30, 2015 to the Year Ended September 30, 2014



|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|---------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | -------- |  | - | ------- | - |  |  | ------ | -
|                                                           |  | For the Year Ended September 30, |        
|                                                           |  | 2015                             |         |   | 2014 |   |         | $ Change |  |   | %Change |  
|INVESTMENT INCOME                                          |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|Interest income                                            |  | $                                | 34,895  |   |      | $ | 32,170  |          |  | $ | 2,725   |   |  |  | 8.5    | %
|Other income                                               |  |                                  | 3,163   |   |      |   | 4,415   |          |  |   | (1,252  | ) |  |  | (28.4  | )
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|Total investment income                                    |  |                                  | 38,058  |   |      |   | 36,585  |          |  |   | 1,473   |   |  |  | 4.0    |  
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|EXPENSES                                                   |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|Base management fee                                        |  |                                  | 6,888   |   |      |   | 5,864   |          |  |   | 1,024   |   |  |  | 17.5   |  
|Loan servicing fee                                         |  |                                  | 3,816   |   |      |   | 3,503   |          |  |   | 313     |   |  |  | 8.9    |  
|Incentive fee                                              |  |                                  | 4,083   |   |      |   | 4,297   |          |  |   | (214    | ) |  |  | (5.0   | )
|Administration fee                                         |  |                                  | 1,033   |   |      |   | 853     |          |  |   | 180     |   |  |  | 21.1   |  
|Interest expense on borrowings                             |  |                                  | 3,828   |   |      |   | 2,628   |          |  |   | 1,200   |   |  |  | 45.7   |  
|Dividend expense on mandatorily redeemable preferred stock |  |                                  | 4,116   |   |      |   | 3,338   |          |  |   | 778     |   |  |  | 23.3   |  
|Amortization of deferred financing fees                    |  |                                  | 1,106   |   |      |   | 1,247   |          |  |   | (141    | ) |  |  | (11.3  | )
|Other expenses                                             |  |                                  | 2,188   |   |      |   | 2,084   |          |  |   | 104     |   |  |  | 5.0    |  
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|Expenses, before credits from Adviser                      |  |                                  | 27,058  |   |      |   | 23,814  |          |  |   | 3,244   |   |  |  | 13.6   |  
|Credit to base management fee  loan servicing fee         |  |                                  | (3,816  | ) |      |   | (3,503  | )        |  |   | (313    | ) |  |  | (8.9   | )
|Credit to fees from Adviser - other                        |  |                                  | (2,884  | ) |      |   | (2,094  | )        |  |   | (790    | ) |  |  | (37.7  | )
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|Total expenses, net of credits                             |  |                                  | 20,358  |   |      |   | 18,217  |          |  |   | 2,141   |   |  |  | 11.8   |  
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|                                                           |  |                                  |         |  
|NET INVESTMENT INCOME                                      |  |                                  | 17,700  |   |      |   | 18,368  |          |  |   | (668    | ) |  |  | (3.6   | )
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|                                                           |  |                                  |         |  
|NET REALIZED AND UNREALIZED (LOSS) GAIN                    |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|Net realized loss on investments and escrows               |  |                                  | (34,176 | ) |      |   | (12,113 | )        |  |   | (22,063 | ) |  |  | (182.1 | )
|Net realized loss on extinguishment of debt                |  |                                  |        |   |      |   | (1,297  | )        |  |   | 1,297   |   |  |  | NM     |  
|Net unrealized appreciation of investments                 |  |                                  | 23,647  |   |      |   | 7,389   |          |  |   | 16,258  |   |  |  | 220.0  |  
|Net unrealized depreciation (appreciation) of other        |  |                                  | 1,313   |   |      |   | (1,114  | )        |  |   | 2,427   |   |  |  | 217.9  |  
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|Net loss from investments, escrows and other               |  |                                  | (9,216  | ) |      |   | (7,135  | )        |  |   | (2,081  | ) |  |  | (29.2  | )
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|                                                           |  |                                  |         |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS       |  | $                                | 8,484   |   |      | $ | 11,233  |          |  | $ | (2,749  | ) |  |  | (24.5  | )
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|PER BASIC AND DILUTED COMMON SHARE                         |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|Net investment income                                      |  | $                                | 0.84    |   |      | $ | 0.87    |          |  | $ | (0.03   | ) |  |  | (25.2  | )
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  
|Net increase in net assets resulting from operations       |  | $                                | 0.40    |   |      | $ | 0.53    |          |  | $ | (0.13   | ) |  |  | (3.4   | )
|                                                           |  |                                  |         |   |      |   |         |          |  |   |         |   |  |  |        |  

NM = Not Meaningful

Investment Income

Total interest income increased
by 8.5% for the year ended September 30, 2015, as compared to the prior year period. This increase was due primarily to the funding of several new investments during the period, partially offset by several early payoffs at par during the prior
year. The level of interest income on our investments is directly related to the principal balance of our interest-bearing investment portfolio outstanding during the year, multiplied by the weighted average yield. The weighted average principal
balance of our interest-bearing investment portfolio during the year ended September 30, 2015, was $319.1 million, compared to $280.4 million for the prior year, an increase of $38.7 million, or 13.8%. The weighted average yield on our
interest-bearing investments is based on the current stated interest rate on interest-bearing investments for the year ended September 30, 2015 was 10.9% compared to 11.5% for the year ended September 30, 2014, inclusive of any allowances
on interest receivables made during those periods.

As of September 30, 2015, two portfolio companies were on non-accrual status, with an aggregate
debt cost basis of approximately $26.4 million, or 7.1% of the cost basis of all debt investments in our portfolio. During the quarter ended December 31, 2014, we sold our investment in Midwest Metal, which had been on non-accrual
status. Effective January 1, 2015, we placed GFRC Holdings LLC (GFRC) on non-accrual status and restored two tranches of Sunshine Media Holdings (Sunshine) debt to accrual status and effective April 1, 2015, we
placed Saunders on non-accrual status. During the quarter ended September 30, 2015, we sold our investment in Saunders which was on non-accrual and restructured our



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investment in GFRC and restored it to accrual status. As of September 30, 2014, three portfolio companies were on non-accrual status, with an aggregate debt cost basis of approximately $51.4
million, or 16.1%, of the cost basis of all debt investments in our portfolio. Effective January 1, 2014, we placed Heartland on non-accrual status and effective June 1, 2014 we placed Midwest Metal on non-accrual status. During the
quarter ended December 31, 2013, we sold our investment in LocalTel, LLC (LocalTel), which had been on non-accrual status. See Overview  Investment Highlights for more information.

For the year ended September 30, 2015, other income consisted primarily of $0.6 million in success fees related to the early payoff of NAAS at a realized
gain, $0.8 million in success fees prepaid by Defiance, $0.5 million in dividend income received from Funko, $0.3 million in success fees prepaid by Francis Drilling Fluids, Ltd. (FDF), $0.3 million in dividend income and prepaid success
fees from Southern Petroleum Laboratories, Inc. (SPL), $0.3 million in settlement fees received from Sunburst, $0.2 million in dividend income received from FDF and $0.2 million of success fees received related to our sale of
substantially all of the assets in Lindmark Acquisition, LLC (Lindmark) in September 2013. For the year ended September 30, 2014, other income consisted primarily of $0.7 million in dividend income received from FedCap Partners, LLC
(FedCap), $0.5 million in success fees received related to the early payoff of Thibaut Acquisition Co. (Thibaut) at par, $0.4 million in legal settlement proceeds received related to a portfolio company previously sold, $0.8
million in aggregate of prepaid success fees, dividend income and other fees received from FDF, $0.1 million in prepayment fees received from Pop Radio, LLC (POP), an aggregate of $0.3 million in prepayment fees from the early payoff of
five syndicate investments at par and $1.4 million in success fees received related to our sale of substantially all of the assets of Lindmark in 2013.

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, 2015 |         |  | Year Ended September 30, 2015 | 
|Portfolio Company                      |  | Fair Value               |         |  | % of Portfolio                |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|Funko, LLC                             |  | $                        | 26,814  |  |                               |  | 7.3   | %                |  | $ | 1,385                      |  |  |  | 3.6   | %
|WadeCo Specialties, Inc.               |  |                          | 21,920  |  |                               |  | 6.0   |                  |  |   | 1,896                      |  |  |  | 5.0   |  
|RBC Acquisition Corp.                  |  |                          | 20,617  |  |                               |  | 5.6   |                  |  |   | 2,343                      |  |  |  | 6.2   |  
|United Flexible, Inc.(A)               |  |                          | 20,355  |  |                               |  | 5.6   |                  |  |   | 1,226                      |  |  |  | 3.2   |  
|Francis Drilling Fluids, Ltd.          |  |                          | 19,928  |  |                               |  | 5.5   |                  |  |   | 2,946                      |  |  |  | 7.7   |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments      |  |                          | 109,634 |  |                               |  | 30.0  |                  |  |   | 9,796                      |  |  |  | 25.7  |  
|Other portfolio companies              |  |                          | 256,257 |  |                               |  | 70.0  |                  |  |   | 28,257                     |  |  |  | 74.3  |  
|Other non-portfolio company income     |  |                          |        |  |                               |  |      |                  |  |   | 5                          |  |  |  |      |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Total Investment Portfolio             |  | $                        | 365,891 |  |                               |  | 100.0 | %                |  | $ | 38,058                     |  |  |  | 100.0 | %
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|                                       |  |                         
|                                       |  | As of September 30, 2014 |         |  | Year Ended September 30, 2014 | 
|Portfolio Company                      |  | Fair Value               |         |  | % of Portfolio                |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|RBC Acquisition Corp.                  |  | $                        | 28,283  |  |                               |  | 10.1  | %                |  | $ | 2,879                      |  |  |  | 7.9   | %
|Francis Drilling Fluids, Ltd.          |  |                          | 22,837  |  |                               |  | 8.1   |                  |  |   | 2,847                      |  |  |  | 7.8   |  
|J. America, Inc. (A)                   |  |                          | 16,648  |  |                               |  | 5.9   |                  |  |   | 1,444                      |  |  |  | 4.0   |  
|Funko, LLC                             |  |                          | 13,508  |  |                               |  | 4.8   |                  |  |   | 1,100                      |  |  |  | 3.0   |  
|Defiance Integrated Technologies, Inc. |  |                          | 13,006  |  |                               |  | 4.6   |                  |  |   | 743                        |  |  |  | 2.0   |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments      |  |                          | 94,282  |  |                               |  | 33.5  |                  |  |   | 9,013                      |  |  |  | 24.7  |  
|Other portfolio companies              |  |                          | 187,004 |  |                               |  | 66.5  |                  |  |   | 27,557                     |  |  |  | 75.3  |  
|Other non-portfolio company income     |  |                          |        |  |                               |  |      |                  |  |   | 15                         |  |  |  |      |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Total Investment Portfolio             |  | $                        | 281,286 |  |                               |  | 100.0 | %                |  | $ | 36,585                     |  |  |  | 100.0 | %
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  

(A) - New investment during applicable period.



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Expenses

Expenses, net of credits from the Adviser, increased for the year ended September 30, 2015, by 11.8% as compared to the prior year. This increase was
primarily due to increases in our net base management fees to the Advisor, interest expense on borrowings, and dividend expense on our mandatorily redeemable preferred stock, partially offset by a decrease in the net incentive fee to the Adviser.

Interest expense increased by $1.2 million, or 45.7%, during the year ended September 30, 2015, as compared to the prior year, primarily due to
increased borrowings outstanding throughout the period on our Credit Facility. The weighted average balance outstanding on our Credit Facility during the year ended September 30, 2015, was approximately $92.5 million, as compared to $41.9
million in the prior year period, an increase of 120.9%. This was partially offset by lower average borrowing rates on our Credit Facility. The weighted average borrowing rate during the year ended September 30, 2015, was approximately 4.1%
compared to 6.3% in the prior year period, a decrease of 34.9%.

The increase of $0.8 million, or 23.3%, in dividend expense on our mandatorily redeemable
preferred stock during the year ended September 30, 2015, as compared to the prior year, was primarily due to the higher monthly distribution amount on our Series 2021 Term Preferred Stock, which was issued in May 2014, and which was partially
offset by the voluntary redemption of our Series 2016 Term Preferred Stock, which was issued in November 2011 and redeemed in May 2014. Refer to Liquidity and Capital Resources EquityTerm Preferred
Stock for further discussion of our term preferred stock.

The increase of $0.4 million in the net base management fee earned by the Adviser
during the year ended September 30, 2015, as compared to the prior year, was due primarily to an increase in the average total assets outstanding as a result of the net growth in our investment portfolio during the period. This was partially
offset by a decrease in the annual base management fee from 2.0% to 1.75% effective July 1, 2015. The base management, loan servicing and incentive fees and associated unconditional, non-contractual, and irrevocable voluntary credits are
computed quarterly, as described under Investment Advisory and Management Agreement and Loan Servicing Fee Pursuant to Credit Agreement in Note 4 of the notes to our accompanying Condensed Consolidated
Financial Statements and are summarized in the following table:



|                                                         |  |                          |             |   |      |   |         |  
|-------------------------------------------------------- |  | ------------------------ | ----------- | - | ---- | - | ------- | -
|                                                         |  | Year Ended September 30, |            
|                                                         |  | 2015                     |             |   | 2014 |  
|Average total assets subject to base management fee(A)   |  | $                        | 355,510     |   |      | $ | 293,200 |  
|Multiplied by annual base management fee of 1.75% - 2.0% |  |                          | 1.75% - 2.0 | % |      |   | 2.0     | %
|                                                         |  |                          |             |   |      |   |         |  
|Base management fee(B)                                   |  |                          | 6,888       |   |      |   | 5,864   |  
|Portfolio fee credit                                     |  |                          | (1,399      | ) |      |   | (797    | )
|Senior syndicated loan fee credit                        |  |                          | (118        | ) |      |   | (117    | )
|                                                         |  |                          |             |   |      |   |         |  
|Net Base Management Fee                                  |  | $                        | 5,371       |   |      | $ | 4,950   |  
|                                                         |  |                          |             |   |      |   |         |  
|                                                         |  |                         
|Loan servicing fee(B)                                    |  | $                        | 3,816       |   |      | $ | 3,503   |  
|Credit to base management fee  loan servicing fee(B)    |  |                          | (3,816      | ) |      |   | (3,503  | )
|                                                         |  |                          |             |   |      |   |         |  
|Net Loan Servicing Fee                                   |  | $                        |            |   |      | $ |        |  
|                                                         |  |                          |             |   |      |   |         |  
|                                                         |  |                         
|Incentive fee(B)                                         |  | $                        | 4,083       |   |      | $ | 4,297   |  
|Incentive fee credit                                     |  |                          | (1,367      | ) |      |   | (1,180  | )
|                                                         |  |                          |             |   |      |   |         |  
|Net Incentive Fee                                        |  | $                        | 2,716       |   |      | $ | 3,117   |  
|                                                         |  |                          |             |   |      |   |         |  
|                                                         |  |                         
|Portfolio fee credit                                     |  | $                        | (1,399      | ) |      | $ | (797    | )
|Senior syndicated loan fee credit                        |  |                          | (118        | ) |      |   | (117    | )
|Incentive fee credit                                     |  |                          | (1,367      | ) |      |   | (1,180  | )
|                                                         |  |                          |             |   |      |   |         |  
|Credit to Fees from Adviser - Other(B)                   |  | $                        | (2,884      | ) |      | $ | (2,094  | )
|                                                         |  |                          |             |   |      |   |         |  



|(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 appropriately adjusted 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 report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Realized Loss and Unrealized Appreciation

Net Realized Loss on Investments and Escrows

For the year
ended September 30, 2015, we recorded a net realized loss on investments and escrows of $34.2 million, which resulted primarily from the sales of Midwest Metal, Sunburst, Saunders and the restructure of GFRC for a combined realized loss of
$34.1 million and net proceeds of $7.1 million. This realized loss was partially offset by the realized gain of $1.6 million we recognized on the early payoff of NAAS.

For the year ended September 30, 2014, we recorded a net realized loss on investments and escrows of $12.1 million, which primarily consisted of realized
losses of $10.8 million due to our sale of LocalTel for proceeds contingent on an earn-out and $2.8 million due to our sale of BAS Broadcasting (BAS) for net proceeds of $4.7 million. Partially offsetting these realized losses, was the
realized gain of $1.0 million we recognized on the exit of WP Evenflo Group Holdings, Inc. (WP Evenflo).

Net Unrealized Appreciation of
Investments

Net unrealized appreciation (depreciation) of investments is the net change in the fair value of our investment portfolio during the year,
including the reversal of previously recorded unrealized appreciation or depreciation when gains and losses are actually realized. During the year ended September 30, 2015, we recorded net unrealized appreciation of investments in the aggregate
amount of $23.6 million, which included the reversal of an aggregate of $34.6 million in cumulative unrealized depreciation primarily related to the sales of Midwest Metal, Sunburst, Saunders and restructure of GFRC during the fiscal year. Excluding
reversals, we recorded $11.0 million in net unrealized depreciation for the year ended September 30, 2015. Over our entire portfolio, the net unrealized depreciation (excluding reversals) for the year ended September 30, 2015, consisted of
approximately $15.2 million of depreciation on our debt investments and approximately $4.2 million of appreciation on our equity investments.



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The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the year ended
September 30, 2015, were as follows:



|                                           |  |                               |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|------------------------------------------ |  | ----------------------------- | ------- | - | ------------------------------------ | - | ------- | ----------------------------------------------- |  | - | -------------- | - |  | - | ------- | -
|                                           |  | Year Ended September 30, 2015 |        
|Portfolio Company                          |  | Realized (Loss)Gain           |         |   | UnrealizedAppreciation(Depreciation) |   |         | Reversal ofUnrealizedDepreciation(Appreciation) |  |   | Net Gain(Loss) |  
|Funko, LLC                                 |  | $                             |        |   |                                      | $ | 11,451  |                                                 |  | $ |               |   |  | $ | 11,451  |  
|Sunburst Media  Louisiana, LLC            |  |                               | (1,333  | ) |                                      |   | 2,130   |                                                 |  |   | 2,295          |   |  |   | 3,092   |  
|Precision Acquisition Group Holdings, Inc. |  |                               |        |   |                                      |   | 2,831   |                                                 |  |   |               |   |  |   | 2,831   |  
|Sunshine Media Holdings                    |  |                               |        |   |                                      |   | 1,861   |                                                 |  |   |               |   |  |   | 1,861   |  
|Heartland Communications Group             |  |                               |        |   |                                      |   | 1,123   |                                                 |  |   |               |   |  |   | 1,123   |  
|Behrens Manufacturing, LLC                 |  |                               |        |   |                                      |   | 1,102   |                                                 |  |   |               |   |  |   | 1,102   |  
|Ameriqual Group, LLC                       |  |                               |        |   |                                      |   | 1,063   |                                                 |  |   |               |   |  |   | 1,063   |  
|Westland Technologies, Inc.                |  |                               |        |   |                                      |   | 899     |                                                 |  |   |               |   |  |   | 899     |  
|Midwest Metal Distribution, Inc.           |  |                               | (14,980 | ) |                                      |   |        |                                                 |  |   | 15,578         |   |  |   | 598     |  
|Ashland Acquisitions, LLC                  |  |                               |        |   |                                      |   | 571     |                                                 |  |   |               |   |  |   | 571     |  
|AG Transportation Holdings, LLC            |  |                               |        |   |                                      |   | 516     |                                                 |  |   |               |   |  |   | 516     |  
|New Trident Holdcorp, Inc.                 |  |                               |        |   |                                      |   | (282    | )                                               |  |   |               |   |  |   | (282    | )
|Vertellus Specialties Inc.                 |  |                               |        |   |                                      |   | (315    | )                                               |  |   |               |   |  |   | (315    | )
|LWO Acquisitions                           |  |                               |        |   |                                      |   | (390    | )                                               |  |   |               |   |  |   | (390    | )
|SourceHOV LLC                              |  |                               |        |   |                                      |   | (473    | )                                               |  |   |               |   |  |   | (473    | )
|FedCap Partners, LLC                       |  |                               |        |   |                                      |   | (507    | )                                               |  |   |               |   |  |   | (507    | )
|North American Aircraft Services, LLC      |  |                               | 1,578   |   |                                      |   |        |                                                 |  |   | (2,216         | ) |  |   | (638    | )
|WadeCo. Specialties, Inc.                  |  |                               |        |   |                                      |   | (818    | )                                               |  |   |               |   |  |   | (818    | )
|Alloy Die Casting                          |  |                               |        |   |                                      |   | (1,251  | )                                               |  |   |               |   |  |   | (1,251  | )
|Targus Group International, Inc.           |  |                               |        |   |                                      |   | (1,254  | )                                               |  |   |               |   |  |   | (1,254  | )
|Meridian Rack & Pinion, Inc.               |  |                               |        |   |                                      |   | (1,647  | )                                               |  |   |               |   |  |   | (1,647  | )
|B+T Group Acquisition Inc.                 |  |                               |        |   |                                      |   | (1,934  | )                                               |  |   |               |   |  |   | (1,934  | )
|Francis Drilling Fluids, Ltd.              |  |                               |        |   |                                      |   | (2,575  | )                                               |  |   |               |   |  |   | (2,575  | )
|PLATO Learning, Inc.                       |  |                               |        |   |                                      |   | (2,663  | )                                               |  |   |               |   |  |   | (2,663  | )
|Edge Adhesives Holdings, Inc.              |  |                               |        |   |                                      |   | (3,196  | )                                               |  |   | 6              |   |  |   | (3,190  | )
|Saunders & Associates                      |  |                               | (8,884  | ) |                                      |   | (3,255  | )                                               |  |   | 8,680          |   |  |   | (3,459  | )
|GFRC Holdings, LLC                         |  |                               | (10,797 | ) |                                      |   | (5,308  | )                                               |  |   | 10,483         |   |  |   | (5,622  | )
|RBC Acquisition Corp.                      |  |                               |        |   |                                      |   | (7,647  | )                                               |  |   |               |   |  |   | (7,647  | )
|Other, net (<$250)                         |  |                               | 240     |   |                                      |   | (985    | )                                               |  |   | (226           | ) |  |   | (971    | )
|                                           |  |                               |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|Total:                                     |  | $                             | (34,176 | ) |                                      | $ | (10,953 | )                                               |  | $ | 34,600         |   |  | $ | (10,529 | )
|                                           |  |                               |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  

The largest driver of our net unrealized depreciation (excluding reversals) for the year ended September 30, 2015, were
the decreases in comparable multiples used in valuations and a decline in the financial and operational performance of GFRC and RBC Acquisition Corp. (RBC), resulting in $5.6 million and $7.6 million, respectively, of net unrealized
depreciation during the year. Partially offsetting this net unrealized depreciation for the year ended September 30, 2015, was the net unrealized appreciation on Funko of $11.5 million due to increases in comparable multiples used in valuations
and incremental improvements in the financial and operational performance of these portfolio companies.

During the year ended September 30, 2014, we
recorded net unrealized appreciation of investments in the aggregate amount of $7.4 million, which included the reversal of an aggregate of $18.0 million in cumulative unrealized depreciation primarily related to the repayment of principal in full
at par on International Junior Golf Training Acquisition Company (Junior) and the sales of BAS and LocalTel during the fiscal year. Excluding reversals, we recorded $10.6 million in net unrealized depreciation for the year ended
September 30, 2014. Over our entire portfolio, the net unrealized depreciation (excluding reversals) for the year ended September 30, 2014, consisted of approximately $16.3 million of depreciation on our debt investments and approximately
$5.7 million of appreciation on our equity investments.



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The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the year ended
September 30, 2014, were as follows:



|                                                       |  |                               |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|------------------------------------------------------ |  | ----------------------------- | ------- | - | ------------------------------------ | - | ------- | ----------------------------------------------- |  | - | -------------- | - |  | - | ------- | -
|                                                       |  | Year Ended September 30, 2014 |        
|Portfolio Company                                      |  | Realized (Loss)Gain           |         |   | UnrealizedAppreciation(Depreciation) |   |         | Reversal ofUnrealizedDepreciation(Appreciation) |  |   | Net Gain(Loss) |  
|Defiance Integrated Technologies, Inc.                 |  | $                             |        |   |                                      | $ | 4,594   |                                                 |  | $ |               |   |  | $ | 4,594   |  
|BAS Broadcasting                                       |  |                               | (2,765  | ) |                                      |   | 187     |                                                 |  |   | 6,905          |   |  |   | 4,327   |  
|Funko, LLC                                             |  |                               |        |   |                                      |   | 4,162   |                                                 |  |   |               |   |  |   | 4,162   |  
|Legend Communications of Wyoming, LLC                  |  |                               |        |   |                                      |   | 2,729   |                                                 |  |   |               |   |  |   | 2,729   |  
|International Junior Golf Training Acquisition Company |  |                               |        |   |                                      |   | (6      | )                                               |  |   | 2,261          |   |  |   | 2,255   |  
|Sunshine Media Holdings                                |  |                               |        |   |                                      |   | 1,955   |                                                 |  |   |               |   |  |   | 1,955   |  
|North American Aircraft Services, LLC                  |  |                               |        |   |                                      |   | 1,755   |                                                 |  |   |               |   |  |   | 1,755   |  
|Francis Drilling Fluids, Ltd.                          |  |                               |        |   |                                      |   | 1,186   |                                                 |  |   |               |   |  |   | 1,186   |  
|WP Evenflo Group Holdings, Inc.                        |  |                               | 988     |   |                                      |   | 1,105   |                                                 |  |   | (1,002         | ) |  |   | 1,091   |  
|Sunburst Media  Louisiana, LLC                        |  |                               |        |   |                                      |   | 974     |                                                 |  |   |               |   |  |   | 974     |  
|Edge Adhesives Holdings, Inc.                          |  |                               |        |   |                                      |   | 579     |                                                 |  |   |               |   |  |   | 579     |  
|Westland Technologies, Inc.                            |  |                               |        |   |                                      |   | 405     |                                                 |  |   |               |   |  |   | 405     |  
|J. America, Inc.                                       |  |                               |        |   |                                      |   | (352    | )                                               |  |   |               |   |  |   | (352    | )
|LocalTel, LLC                                          |  |                               | (10,768 | ) |                                      |   |        |                                                 |  |   | 10,218         |   |  |   | (550    | )
|Alloy Die Casting Co.                                  |  |                               |        |   |                                      |   | (643    | )                                               |  |   |               |   |  |   | (643    | )
|Lindmark Acquisition, LLC                              |  |                               |        |   |                                      |   | (827    | )                                               |  |   |               |   |  |   | (827    | )
|FedCap Partners, LLC                                   |  |                               |        |   |                                      |   | (827    | )                                               |  |   |               |   |  |   | (827    | )
|Ameriqual Group, LLC                                   |  |                               |        |   |                                      |   | (838    | )                                               |  |   |               |   |  |   | (838    | )
|Saunders and Associates                                |  |                               |        |   |                                      |   | (3,945  | )                                               |  |   |               |   |  |   | (3,945  | )
|Precision Acquisition Group Holdings, Inc.             |  |                               |        |   |                                      |   | (4,601  | )                                               |  |   |               |   |  |   | (4,601  | )
|RBC Acquisition Corp.                                  |  |                               |        |   |                                      |   | (5,330  | )                                               |  |   |               |   |  |   | (5,330  | )
|Midwest Metal Distribution, Inc.                       |  |                               |        |   |                                      |   | (12,892 | )                                               |  |   |               |   |  |   | (12,892 | )
|Other, net (<$250)                                     |  |                               | 432     |   |                                      |   | 43      |                                                 |  |   | (406           | ) |  |   | 69      |  
|                                                       |  |                               |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|Total:                                                 |  | $                             | (12,113 | ) |                                      | $ | (10,587 | )                                               |  | $ | 17,976         |   |  | $ | (4,724  | )
|                                                       |  |                               |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  

The largest driver of our net unrealized depreciation (excluding reversals) for the year ended September 30, 2014, was
the decreases in comparable multiples used in valuations and a decline in the financial and operational performance of Midwest Metal and RBC Acquisition Corp. (RBC) resulting in $12.9 million and $5.3 million, respectively, of net
unrealized depreciation during the year. Partially offsetting this net unrealized depreciation for the year ended September 30, 2014, was the net unrealized appreciation on Defiance Integrated Technologies, Inc. (Defiance) of $4.6
million and on Funko of $4.2 million due to increases in comparable multiples used in valuations and incremental improvements in the financial and operational performance of these portfolio companies.

As of September 30, 2015, the fair value of our investment portfolio was less than its cost basis by approximately $44.4 million and our entire
investment portfolio was valued at 89.2% of cost, as compared to cumulative net unrealized depreciation of $68.0 million and a valuation of our entire portfolio at 80.5% of cost as of September 30, 2014. This decrease year over year in the
cumulative unrealized depreciation on investments represents net unrealized appreciation of $23.6 million for the year ended September 30, 2015. Of our current investment portfolio, 10 portfolio companies originated before December 31,
2008, which represented 25.8% of the entire cost basis of our portfolio, were valued at 60.0% of cost and included our two investments on non-accrual status. Our 38 portfolio companies that originated after December 31, 2008, representing 74.2%
of the entire cost basis of our portfolio, were valued at 99.3% of cost and none of which were on non-accrual status.

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

Net unrealized (appreciation) depreciation of other includes the net change in the fair value of our Credit Facility and our interest rate swap during the
year, including the reversal of previously recorded unrealized appreciation or depreciation when gains and losses are realized. During the year ended September 30, 2015, we recorded a net unrealized depreciation of other of $1.3 million,
compared to a net unrealized appreciation of $1.1 million for the year ended September 30, 2014. Our Credit Facility was fair valued at $127.3 million and $38.0 million as of September 30, 2015 and 2014, respectively. The interest rate
swap was fair valued at $0 as of September 30, 2015 and 2014.



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Comparison of the Year Ended September 30, 2014 to the Year Ended September 30, 2013



|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|---------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------ | -------- |  | - | ------- | - |  |  | ------ | --
|                                                           |  | For the Year Ended September 30, |        
|                                                           |  | 2014                             |         |   | 2013 |   |        | $ Change |  |   | %Change |  
|INVESTMENT INCOME                                          |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|Interest income                                            |  | $                                | 32,170  |   |      | $ | 33,533 |          |  | $ | (1,363  | ) |  |  | (4.1   | )%
|Other income                                               |  |                                  | 4,415   |   |      |   | 2,621  |          |  |   | 1,794   |   |  |  | 68.4   |   
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|Total investment income                                    |  |                                  | 36,585  |   |      |   | 36,154 |          |  |   | 431     |   |  |  | 1.2    |   
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|EXPENSES                                                   |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|Base management fee                                        |  |                                  | 5,864   |   |      |   | 5,622  |          |  |   | 242     |   |  |  | 4.3    |   
|Loan servicing fee                                         |  |                                  | 3,503   |   |      |   | 3,656  |          |  |   | (153    | ) |  |  | (4.2   | ) 
|Incentive fee                                              |  |                                  | 4,297   |   |      |   | 4,343  |          |  |   | (46     | ) |  |  | (1.1   | ) 
|Administration fee                                         |  |                                  | 853     |   |      |   | 647    |          |  |   | 206     |   |  |  | 31.8   |   
|Interest expense on borrowings                             |  |                                  | 2,628   |   |      |   | 3,182  |          |  |   | (554    | ) |  |  | (17.4  | ) 
|Dividend expense on mandatorily redeemable preferred stock |  |                                  | 3,338   |   |      |   | 2,744  |          |  |   | 594     |   |  |  | 21.6   |   
|Amortization of deferred financing fees                    |  |                                  | 1,247   |   |      |   | 1,211  |          |  |   | 36      |   |  |  | 3.0    |   
|Other expenses                                             |  |                                  | 2,084   |   |      |   | 1,540  |          |  |   | 544     |   |  |  | 35.3   |   
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|Expenses, before credits from Adviser                      |  |                                  | 23,814  |   |      |   | 22,945 |          |  |   | 869     |   |  |  | 3.8    |   
|Credit to base management fee  loan servicing fee         |  |                                  | (3,503  | ) |      |   | (3,656 | )        |  |   | 153     |   |  |  | 4.2    |   
|Credit to fees from Adviser - other                        |  |                                  | (2,094  | ) |      |   | (1,521 | )        |  |   | (573    | ) |  |  | (37.7  | ) 
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|Total expenses, net of credits                             |  |                                  | 18,217  |   |      |   | 17,768 |          |  |   | 449     |   |  |  | 2.5    |   
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|                                                           |  |                                  |         |  
|NET INVESTMENT INCOME                                      |  |                                  | 18,368  |   |      |   | 18,386 |          |  |   | (18     | ) |  |  | (0.1   | ) 
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|                                                           |  |                                  |         |  
|NET REALIZED AND UNREALIZED (LOSS) GAIN                    |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|Net realized loss on investments and escrows               |  |                                  | (12,113 | ) |      |   | (5,231 | )        |  |   | (6,882  | ) |  |  | (131.6 | ) 
|Net realized loss on extinguishment of debt                |  |                                  | (1,297  | ) |      |   |       |          |  |   | (1,297  | ) |  |  | (100.0 | ) 
|Net unrealized appreciation of investments                 |  |                                  | 7,389   |   |      |   | 15,673 |          |  |   | (8,284  | ) |  |  | (52.9  | ) 
|Net unrealized (appreciation) depreciation of other        |  |                                  | (1,114  | ) |      |   | 3,391  |          |  |   | (4,505  | ) |  |  | NM     |   
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|Net (loss) gain from investments, escrows and other        |  |                                  | (7,135  | ) |      |   | 13,833 |          |  |   | (20,968 | ) |  |  | NM     |   
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|                                                           |  |                                  |         |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS       |  | $                                | 11,233  |   |      | $ | 32,219 |          |  | $ | (20,986 | ) |  |  | (65.1  | ) 
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|PER BASIC AND DILUTED COMMON SHARE                         |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|Net investment income                                      |  | $                                | 0.87    |   |      | $ | 0.88   |          |  | $ | (0.01   | ) |  |  | (1.1   | ) 
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   
|Net increase in net assets resulting from operations       |  | $                                | 0.53    |   |      | $ | 1.53   |          |  | $ | (1.00   | ) |  |  | (65.4  | ) 
|                                                           |  |                                  |         |   |      |   |        |          |  |   |         |   |  |  |        |   

NM = Not Meaningful

Investment Income

Total interest income decreased
by 4.1% for the year ended September 30, 2014, as compared to the prior year period. This decrease was due primarily to the increase in early payoffs at par during the year, resulting in a lower weighted average principal balance of
interest-bearing investments compared to the prior year, offset by new investments funding later in the current year. The level of interest income on our investments is directly related to the principal balance of our interest-bearing investment
portfolio outstanding during the year, multiplied by the weighted average yield. The weighted average principal balance of our interest-bearing investment portfolio during the year ended September 30, 2014, was $280.4 million, compared to
$287.3 million for the prior year, a decrease of $6.9 million, or 2.4%. The weighted average yield on our interest-bearing investments is based on the current stated interest rate on interest-bearing investments and remained consistent year over
year at 11.5% for the year ended September 30, 2014 and 11.6% for the year ended September 30, 2013.

As of September 30, 2014, three
portfolio companies were on non-accrual status, with an aggregate debt cost basis of approximately $51.4 million, or 16.1% of the cost basis of all debt investments in our portfolio. As of September 30, 2013, two portfolio companies were on
non-accrual status, with an aggregate debt cost basis of approximately $39.5 million, or 12.6%, of the cost basis of all debt investments in our portfolio. Effective January 1, 2014, we placed Heartland on non-accrual status and effective
June 1, 2014 we placed Midwest Metal on non-accrual status. During the year ended September 30, 2014, we sold our investment in LocalTel that had been on non-accrual status. During the year ended September 30, 2013, we sold our
investments in three portfolio companies that had been on non-accrual status and wrote off our investment in one portfolio company that had been on non-accrual status. There were no other new non-accruals added and no non-accruals were placed on
accrual during the years ended September 30, 2014 and 2013.



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Other income for the year ended September 30, 2014, consisted primarily of $0.7 million in dividend income
received from FedCap, $0.5 million in success fees received related to the early payoff of Thibaut at par, $0.4 million in legal settlement proceeds received related to a portfolio company previously sold, $0.8 million in aggregate of prepaid
success fees, dividend income and other fees received from FDF, $0.1 million in prepayment fees received from POP, an aggregate of $0.3 million in prepayment fees from the early payoff of five syndicate investments at par and $1.4 million in success
fees received related to our sale of substantially all of the assets of Lindmark and the ensuing pay down of our debt investments in Lindmark at par in September 2013. For the year ended September 30, 2013, other income consisted primarily of
$1.1 million in success fees received related to the early payoff of Westlake Hardware, Inc. (Westlake) at par, $0.6 million in success fees related to the early payoff of CMI Acquisition, LLC (CMI) at par and an aggregate of
$0.9 million in prepayment fees from the early payoffs of eight of our syndicate investments at par during the prior year.

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, 2014 |         |  | Year Ended September 30, 2014 | 
|Portfolio Company                      |  | Fair Value               |         |  | % of Portfolio                |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|RBC Acquisition Corp.                  |  | $                        | 28,283  |  |                               |  | 10.1  | %                |  | $ | 2,879                      |  |  |  | 7.9   | %
|Francis Drilling Fluids, Ltd.          |  |                          | 22,837  |  |                               |  | 8.1   |                  |  |   | 2,847                      |  |  |  | 7.8   |  
|J. America, Inc.(A)                    |  |                          | 16,648  |  |                               |  | 5.9   |                  |  |   | 1,444                      |  |  |  | 4.0   |  
|Funko, LLC                             |  |                          | 13,508  |  |                               |  | 4.8   |                  |  |   | 1,100                      |  |  |  | 3.0   |  
|Defiance Integrated Technologies, Inc. |  |                          | 13,006  |  |                               |  | 4.6   |                  |  |   | 743                        |  |  |  | 2.0   |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments      |  |                          | 94,282  |  |                               |  | 33.5  |                  |  |   | 9,013                      |  |  |  | 24.7  |  
|Other portfolio companies              |  |                          | 187,004 |  |                               |  | 66.5  |                  |  |   | 27,557                     |  |  |  | 75.3  |  
|Other non-portfolio company income     |  |                          |        |  |                               |  |      |                  |  |   | 15                         |  |  |  |      |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Total Investment Portfolio             |  | $                        | 281,286 |  |                               |  | 100.0 | %                |  | $ | 36,585                     |  |  |  | 100.0 | %
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|                                       |  |                         
|                                       |  | As of September 30, 2013 |         |  | Year Ended September 30, 2013 | 
|Portfolio Company                      |  | Fair Value               |         |  | % of Portfolio                |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|RBC Acquisition Corp.                  |  | $                        | 30,991  |  |                               |  | 12.1  | %                |  | $ | 2,416                      |  |  |  | 6.7   | %
|Allen Edmonds Shoe Corporation(A)      |  |                          | 19,604  |  |                               |  | 7.6   |                  |  |   | 1,717                      |  |  |  | 4.8   |  
|Midwest Metal Distribution, Inc.       |  |                          | 17,733  |  |                               |  | 6.9   |                  |  |   | 2,240                      |  |  |  | 6.2   |  
|Francis Drilling Fluids, Ltd.          |  |                          | 14,667  |  |                               |  | 5.7   |                  |  |   | 1,977                      |  |  |  | 5.4   |  
|AG Transportation Holdings, LLC(A)     |  |                          | 12,984  |  |                               |  | 5.1   |                  |  |   | 1,407                      |  |  |  | 3.9   |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments      |  |                          | 95,979  |  |                               |  | 37.4  |                  |  |   | 9,757                      |  |  |  | 27.0  |  
|Other portfolio companies              |  |                          | 160,899 |  |                               |  | 62.6  |                  |  |   | 26,265                     |  |  |  | 72.6  |  
|Other non-portfolio company income     |  |                          |        |  |                               |  |      |                  |  |   | 132                        |  |  |  | 0.4   |  
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  
|Total Investment Portfolio             |  | $                        | 256,878 |  |                               |  | 100.0 | %                |  | $ | 36,154                     |  |  |  | 100.0 | %
|                                       |  |                          |         |  |                               |  |       |                  |  |   |                            |  |  |  |       |  



|(A) | New investment during applicable year.
|--- | --------------------------------------

Expenses

Expenses, net of credits from the Adviser, increased for the year ended September 30, 2014, by 2.5% as compared to the prior year. This increase was
primarily due to increases in dividend expense on our mandatorily redeemable preferred stock and other expenses, which were partially offset by decreases in the net base management and incentive fees and interest expense on our Credit Facility.

The increase of $0.6 million in dividend expense on our mandatorily redeemable preferred stock during the year ended September 30, 2014, as compared to
the prior year, was primarily due to the higher monthly distribution amount on our



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Series 2021 Term Preferred Stock, which was issued in May 2014 and voluntary redemption of our Series 2016 Term Preferred Stock, which was issued in November 2011 and redeemed in May 2014,
(resulting in more shares of our Series 2021 Term Preferred Stock being issued and outstanding, partially offset by a lower rate on the new issuance). Refer to Liquidity and Capital Resources EquityTerm
Preferred Stock for further discussion of our mandatorily redeemable preferred stock.

The increase of $0.5 million in other expenses during the
year ended September 30, 2014, as compared to the prior year, was primarily due to the receipt of certain previously reserved for reimbursable deal expenses in the prior year. Additionally, there were increased due diligence expenses related to
certain prospective portfolio companies during the year ended September 30, 2014, when compared to the prior year.

Partially offsetting these
increases in expenses were decreases in the net base management and incentive fees of $0.2 million each when compared to the prior year, which were due primarily to the larger credits of each of these fees during the year ended September 30,
2014. During both fiscal years ended September 30, 2014 and 2013, there were incentive fees earned during the year; however, partial incentive fee credits were provided by the Adviser to ensure distributions to stockholders were covered
entirely by net investment income.

The base management fee, loan servicing fee, incentive fee and associated irrevocable, unconditional and
non-contractual credits are computed quarterly, as described under Investment Advisory and Management Agreement and Loan Servicing Fee Pursuant to the Credit Agreement in Note 4 of the notes to our accompanying
Consolidated Financial Statements and are summarized in the table below:



|                                                       |  |                          |         |   |      |   |         |  
|------------------------------------------------------ |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                       |  | Year Ended September 30, |        
|                                                       |  | 2014                     |         |   | 2013 |  
|Average total assets subject to base management fee(A) |  | $                        | 293,200 |   |      | $ | 281,100 |  
|Multiplied by annual base management fee of 2.0%       |  |                          | 2.0     | % |      |   | 2.0     | %
|                                                       |  |                          |         |   |      |   |         |  
|Base management fee(B)                                 |  |                          | 5,864   |   |      |   | 5,622   |  
|Portfolio fee credit                                   |  |                          | (797    | ) |      |   | (324    | )
|Senior syndicated loan fee credit                      |  |                          | (117    | ) |      |   | (183    | )
|                                                       |  |                          |         |   |      |   |         |  
|Net Base Management Fee                                |  | $                        | 4,950   |   |      | $ | 5,115   |  
|                                                       |  |                          |         |   |      |   |         |  
|                                                       |  |                         
|Loan servicing fee(B)                                  |  | $                        | 3,503   |   |      | $ | 3,656   |  
|Credit to base management fee  loan servicing fee(B)  |  |                          | (3,503  | ) |      |   | (3,656  | )
|                                                       |  |                          |         |   |      |   |         |  
|Net Loan Servicing Fee                                 |  | $                        |        |   |      | $ |        |  
|                                                       |  |                          |         |   |      |   |         |  
|                                                       |  |                         
|Incentive fee(B)                                       |  | $                        | 4,297   |   |      | $ | 4,343   |  
|Incentive fee credit                                   |  |                          | (1,180  | ) |      |   | (1,014  | )
|                                                       |  |                          |         |   |      |   |         |  
|Net Incentive Fee                                      |  | $                        | 3,117   |   |      | $ | 3,329   |  
|                                                       |  |                          |         |   |      |   |         |  
|                                                       |  |                         
|Portfolio fee credit                                   |  | $                        | (797    | ) |      | $ | (324    | )
|Senior syndicated loan fee credit                      |  |                          | (117    | ) |      |   | (183    | )
|Incentive fee credit                                   |  |                          | (1,180  | ) |      |   | (1,014  | )
|                                                       |  |                          |         |   |      |   |         |  
|Credit to Fees from Adviser - Other(B)                 |  | $                        | (2,094  | ) |      | $ | (1,521  | )
|                                                       |  |                          |         |   |      |   |         |  



|(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 appropriately adjusted 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 report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

Interest expense on our Credit Facility decreased by $0.6 million for the year ended September 30, 2014, as compared to the prior year, due primarily to
decreased borrowings under our Credit Facility, resulting primarily from the repayments made from proceeds on the Series 2021 Term Preferred Stock offering in May 2014. The weighted average balance outstanding on our Credit Facility decreased year
over year from $53.2 million as of September 30, 2013 to $41.9 million as of September 30, 2014, a decrease of 21.2%. Additionally, the decrease in interest expense for the year ended September 30, 2014, as compared to the prior year,
was due to the January 2013 amendment of our Credit Facility to remove the LIBOR minimum of 1.5% on advances.



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Realized Loss and Unrealized Appreciation

Net Realized Loss on Investments and Escrows

For the year
ended September 30, 2014, we recorded a net realized loss on investments and escrows of $12.1 million, which primarily consisted of realized losses of $10.8 million due to our sale of LocalTel for proceeds contingent on an earn-out and $2.8
million due to our sale of BAS for net proceeds of $4.7 million. Partially offsetting these realized losses, was the realized gain of $1.0 million we recognized on the exit of WP Evenflo.

For the year ended September 30, 2013, we recorded a net realized loss on investments and escrows of $5.2 million, which primarily consisted of realized
losses of $2.9 million related to the sale of Kansas Cable Holdings, Inc. (KCH) for net proceeds of $0.6 million, $2.4 million related to the sale of Viapack, Inc. (Viapack) for net proceeds of $5.9 million and $0.9 million
related to the write off of Access TV. These realized losses were partially offset by realized gains of $1.0 million, which consisted of a combined $0.5 million of escrowed proceeds and tax refunds received in connection with exits on two
investments in fiscal year 2012 and an aggregate of $0.5 million of unamortized discounts related to the early payoffs at par of 12 syndicated investments during the year.

Realized Loss on Extinguishment of Debt

Realized loss on
extinguishment of debt of $1.3 million for the year ended September 30, 2014, is comprised primarily of our unamortized deferred financing costs at the time of the voluntary redemption of our then existing Series 2016 Term Preferred Stock in
May 2014.

Net Unrealized Appreciation of Investments

Net unrealized appreciation (depreciation) of investments is the net change in the fair value of our investment portfolio during the year, including the
reversal of previously recorded unrealized appreciation or depreciation when gains and losses are actually realized. During the year ended September 30, 2014, we recorded net unrealized appreciation of investments in the aggregate amount of
$7.4 million, which included the reversal of an aggregate of $18.0 million in cumulative unrealized depreciation primarily related to the repayment of principal in full at par on Junior Golf and the sales of BAS and LocalTel during the fiscal year.
Excluding reversals, we recorded $10.6 million in net unrealized depreciation for the year ended September 30, 2014. Over our entire portfolio, the net unrealized depreciation (excluding reversals) for the year ended September 30, 2014,
consisted of approximately $16.3 million of depreciation on our debt investments and approximately $5.7 million of appreciation on our equity investments.



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The net realized (loss) gain and unrealized appreciation (depreciation) across our investments for the year ended
September 30, 2014, were as follows:



|                                                       |  |                               |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|------------------------------------------------------ |  | ----------------------------- | ------- | - | ------------------------------------ | - | ------- | ----------------------------------------------- |  | - | -------------- | - |  | - | ------- | -
|                                                       |  | Year Ended September 30, 2014 |        
|Portfolio Company                                      |  | Realized (Loss)Gain           |         |   | UnrealizedAppreciation(Depreciation) |   |         | Reversal ofUnrealizedDepreciation(Appreciation) |  |   | Net Gain(Loss) |  
|Defiance Integrated Technologies, Inc.                 |  | $                             |        |   |                                      | $ | 4,594   |                                                 |  | $ |               |   |  | $ | 4,594   |  
|BAS Broadcasting                                       |  |                               | (2,765  | ) |                                      |   | 187     |                                                 |  |   | 6,905          |   |  |   | 4,327   |  
|Funko, LLC                                             |  |                               |        |   |                                      |   | 4,162   |                                                 |  |   |               |   |  |   | 4,162   |  
|Legend Communications of Wyoming, LLC                  |  |                               |        |   |                                      |   | 2,729   |                                                 |  |   |               |   |  |   | 2,729   |  
|International Junior Golf Training Acquisition Company |  |                               |        |   |                                      |   | (6      | )                                               |  |   | 2,261          |   |  |   | 2,255   |  
|Sunshine Media Holdings                                |  |                               |        |   |                                      |   | 1,955   |                                                 |  |   |               |   |  |   | 1,955   |  
|North American Aircraft Services, LLC                  |  |                               |        |   |                                      |   | 1,755   |                                                 |  |   |               |   |  |   | 1,755   |  
|Francis Drilling Fluids, Ltd.                          |  |                               |        |   |                                      |   | 1,186   |                                                 |  |   |               |   |  |   | 1,186   |  
|WP Evenflo Group Holdings, Inc.                        |  |                               | 988     |   |                                      |   | 1,105   |                                                 |  |   | (1,002         | ) |  |   | 1,091   |  
|Sunburst Media  Louisiana, LLC                        |  |                               |        |   |                                      |   | 974     |                                                 |  |   |               |   |  |   | 974     |  
|Edge Adhesives Holdings, Inc.                          |  |                               |        |   |                                      |   | 579     |                                                 |  |   |               |   |  |   | 579     |  
|Westland Technologies, Inc.                            |  |                               |        |   |                                      |   | 405     |                                                 |  |   |               |   |  |   | 405     |  
|J. America, Inc.                                       |  |                               |        |   |                                      |   | (352    | )                                               |  |   |               |   |  |   | (352    | )
|LocalTel, LLC                                          |  |                               | (10,768 | ) |                                      |   |        |                                                 |  |   | 10,218         |   |  |   | (550    | )
|Alloy Die Casting Co.                                  |  |                               |        |   |                                      |   | (643    | )                                               |  |   |               |   |  |   | (643    | )
|Lindmark Acquisition, LLC                              |  |                               |        |   |                                      |   | (827    | )                                               |  |   |               |   |  |   | (827    | )
|FedCap Partners, LLC                                   |  |                               |        |   |                                      |   | (827    | )                                               |  |   |               |   |  |   | (827    | )
|Ameriqual Group, LLC                                   |  |                               |        |   |                                      |   | (838    | )                                               |  |   |               |   |  |   | (838    | )
|Saunders and Associates                                |  |                               |        |   |                                      |   | (3,945  | )                                               |  |   |               |   |  |   | (3,945  | )
|Precision Acquisition Group Holdings, Inc.             |  |                               |        |   |                                      |   | (4,601  | )                                               |  |   |               |   |  |   | (4,601  | )
|RBC Acquisition Corp.                                  |  |                               |        |   |                                      |   | (5,330  | )                                               |  |   |               |   |  |   | (5,330  | )
|Midwest Metal Distribution, Inc.                       |  |                               |        |   |                                      |   | (12,892 | )                                               |  |   |               |   |  |   | (12,892 | )
|Other, net (<$250)                                     |  |                               | 432     |   |                                      |   | 43      |                                                 |  |   | (406           | ) |  |   | 69      |  
|                                                       |  |                               |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|Total:                                                 |  | $                             | (12,113 | ) |                                      | $ | (10,587 | )                                               |  | $ | 17,976         |   |  | $ | (4,724  | )
|                                                       |  |                               |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  

The largest driver of our net unrealized depreciation (excluding reversals) for the year ended September 30, 2014, was
the decreases in comparable multiples used in valuations and a decline in the financial and operational performance of Midwest Metal and RBC resulting in $12.9 million and $5.3 million, respectively, of net unrealized depreciation during the year.
Partially offsetting this net unrealized depreciation for the year ended September 30, 2014, was the net unrealized appreciation on Defiance of $4.6 million and on Funko of $4.2 million due to increases in comparable multiples used in
valuations and incremental improvements in the financial and operational performance of these portfolio companies.

During the year ended
September 30, 2013, we recorded net unrealized appreciation of investments in the aggregate amount of $15.7 million, which included the reversal of an aggregate of $26.0 million in unrealized depreciation primarily related to the repayment of
principal in full at par on Lindmark, the sales of Viapack and KCH, and the write off of Access TV. Excluding reversals, we recorded $10.4 million in net unrealized depreciation for the year ended September 30, 2013. Over our entire portfolio,
the net unrealized depreciation (excluding reversals) for the year ended September 30, 2013, consisted of approximately $5.3 million of depreciation on our debt investments and approximately $5.1 million of depreciation on our equity
investments.



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The net realized (loss) gain and unrealized (depreciation) appreciation across our investments for the year ended
September 30, 2013, were as follows:



|                                           |  |                               |        |   |                                      |   |         |                                                 |  |   |                |   |  |   |        |  
|------------------------------------------ |  | ----------------------------- | ------ | - | ------------------------------------ | - | ------- | ----------------------------------------------- |  | - | -------------- | - |  | - | ------ | -
|                                           |  | Year Ended September 30, 2013 |       
|Portfolio Company                          |  | Realized (Loss)Gain           |        |   | Unrealized(Depreciation)Appreciation |   |         | Reversal ofUnrealizedDepreciation(Appreciation) |  |   | Net Gain(Loss) |  
|Lindmark Acquisition, LLC                  |  | $                             |       |   |                                      | $ | (224    | )                                               |  | $ | 14,006         |   |  | $ | 13,782 |  
|Viapack, Inc.                              |  |                               | (2,407 | ) |                                      |   |        |                                                 |  |   | 6,660          |   |  |   | 4,253  |  
|RBC Acquisition Corp.                      |  |                               |       |   |                                      |   | 2,159   |                                                 |  |   |               |   |  |   | 2,159  |  
|Sunshine Media Holdings                    |  |                               |       |   |                                      |   | 1,632   |                                                 |  |   |               |   |  |   | 1,632  |  
|Westlake Hardware, Inc.                    |  |                               |       |   |                                      |   |        |                                                 |  |   | 640            |   |  |   | 640    |  
|GFRC Holdings, LLC                         |  |                               |       |   |                                      |   | 572     |                                                 |  |   |               |   |  |   | 572    |  
|North American Aircraft Services LLC       |  |                               |       |   |                                      |   | 505     |                                                 |  |   | 8              |   |  |   | 513    |  
|CMI Acquisition, LLC                       |  |                               |       |   |                                      |   | (927    | )                                               |  |   | 1,426          |   |  |   | 499    |  
|Kansas Cable Holdings, Inc.                |  |                               | (2,906 | ) |                                      |   | 401     |                                                 |  |   | 2,922          |   |  |   | 417    |  
|Funko, LLC                                 |  |                               |       |   |                                      |   | 396     |                                                 |  |   |               |   |  |   | 396    |  
|FedCap Partners, LLC                       |  |                               |       |   |                                      |   | 384     |                                                 |  |   |               |   |  |   | 384    |  
|Allison Publications, LLC                  |  |                               |       |   |                                      |   | 265     |                                                 |  |   |               |   |  |   | 265    |  
|Access Television Network, Inc.            |  |                               | (872   | ) |                                      |   |        |                                                 |  |   | 903            |   |  |   | 31     |  
|Saunders & Associates                      |  |                               |       |   |                                      |   | (296    | )                                               |  |   |               |   |  |   | (296   | )
|WP Evenflo Group Holdings, Inc.            |  |                               |       |   |                                      |   | (443    | )                                               |  |   | 3              |   |  |   | (440   | )
|Francis Drilling Fluids, Ltd.              |  |                               |       |   |                                      |   | (718    | )                                               |  |   |               |   |  |   | (718   | )
|Westland Technologies, Inc.                |  |                               |       |   |                                      |   | (825    | )                                               |  |   |               |   |  |   | (825   | )
|Targus Group International, Inc.           |  |                               |       |   |                                      |   | (881    | )                                               |  |   |               |   |  |   | (881   | )
|Heartland Communications Group             |  |                               |       |   |                                      |   | (951    | )                                               |  |   |               |   |  |   | (951   | )
|AG Transportation Holdings, LLC            |  |                               |       |   |                                      |   | (1,078  | )                                               |  |   |               |   |  |   | (1,078 | )
|Precision Acquisition Group Holdings, Inc. |  |                               |       |   |                                      |   | (1,193  | )                                               |  |   |               |   |  |   | (1,193 | )
|LocalTel, LLC                              |  |                               |       |   |                                      |   | (1,209  | )                                               |  |   |               |   |  |   | (1,209 | )
|BAS Broadcasting                           |  |                               |       |   |                                      |   | (1,493  | )                                               |  |   |               |   |  |   | (1,493 | )
|Legend Communications of Wyoming, LLC      |  |                               |       |   |                                      |   | (1,557  | )                                               |  |   |               |   |  |   | (1,557 | )
|Sunburst Media  Louisiana, LLC            |  |                               |       |   |                                      |   | (1,650  | )                                               |  |   |               |   |  |   | (1,650 | )
|Midwest Metal Distribution, Inc.           |  |                               |       |   |                                      |   | (2,101  | )                                               |  |   |               |   |  |   | (2,101 | )
|Defiance Integrated Technologies, Inc.     |  |                               |       |   |                                      |   | (2,246  | )                                               |  |   |               |   |  |   | (2,246 | )
|Other, net (<$250)                         |  |                               | 954    |   |                                      |   | 1,123   |                                                 |  |   | (540           | ) |  |   | 1,537  |  
|                                           |  |                               |        |   |                                      |   |         |                                                 |  |   |                |   |  |   |        |  
|Total:                                     |  | $                             | (5,231 | ) |                                      | $ | (10,355 | )                                               |  | $ | 26,028         |   |  | $ | 10,442 |  
|                                           |  |                               |        |   |                                      |   |         |                                                 |  |   |                |   |  |   |        |  

The largest driver of our net unrealized depreciation (excluding reversals) for the year ended September 30, 2013, was
due to a decline in financial and operational performance of Defiance and Midwest Metal resulting in $2.2 million and $2.1 million, respectively, of net unrealized depreciation during the year. Partially offsetting this net unrealized depreciation
was the net unrealized appreciation on RBC of $2.2 million during the year ended September 30, 2013, due to an incremental improvement in the financial and operational performance of this portfolio company.

As of September 30, 2014, the fair value of our investment portfolio was less than its cost basis by approximately $68.0 million and our entire
investment portfolio was valued at 80.5% of cost, as compared to cumulative net unrealized depreciation of $75.4 million and a valuation of our entire portfolio at 77.3% of cost as of September 30, 2013. This decrease year over year in the
cumulative unrealized depreciation on investments represents net unrealized appreciation of $10.1 million for the year ended September 30, 2014. Of our current investment portfolio, 11 portfolio companies originated before December 31,
2007, which represented 39.0% of the entire cost basis of our portfolio, were valued at 54.0% of cost and included our three investments on non-accrual status. Our 34 portfolio companies that originated after December 31, 2007, representing
61.0% of the entire cost basis of our portfolio, were valued at 97.5% of cost and none of which were on non-accrual status.

Net Unrealized
(Appreciation) Depreciation of Other

Net unrealized (appreciation) depreciation of other includes the net change in the fair value of our Credit
Facility and our interest rate swap during the year, including the reversal of previously recorded unrealized appreciation or depreciation when gains and losses are realized. During the year ended September 30, 2014, we recorded a net
unrealized appreciation of other of $1.1 million, compared to a net unrealized depreciation of $3.4 million for the year ended September 30, 2013. Our Credit Facility was fair valued at $38.0 million and $47.1 million as of September 30,
2014 and 2013, respectively. The interest rate swap was fair valued at $0 and $4 as of September 30, 2014 and 2013, respectively.



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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 fees to the Adviser, and for other operating expenses. Net cash used by operating activities for the year ended September 30,
2015, was $74.5 million as compared to net cash provided by operating activities of $0.5 million for the year ended September 30, 2014. The increase in cash used by operating activities was primarily due to the increase in purchases of
investments and a decrease in repayments on investments during the year ended September 30, 2015. For the year ended September 30, 2013, net cash provided by operating activities was $32.1 million, which was primarily driven by principal
repayments and net proceeds from sales of investments during fiscal year 2013.

As of September 30, 2015, we had loans to, syndicated participations
in or equity investments in 48 private companies, with an aggregate cost basis of approximately $410.2 million. As of September 30, 2014, we had loans to, syndicated participations in or equity investments in 45 private companies, with an
aggregate cost basis of approximately $349.3 million.

The following table summarizes our total portfolio investment activity during the years ended
September 30, 2015 and 2014:



|                                                                        |  |                          |         |   |      |   |         |  
|----------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                        |  | Year Ended September 30, |        
|                                                                        |  | 2015                     |         |   | 2014 |  
|Beginning investment portfolio, at fair value                           |  | $                        | 281,286 |   |      | $ | 256,878 |  
|New investments                                                         |  |                          | 102,299 |   |      |   | 81,731  |  
|Disbursements to existing portfolio companies                           |  |                          | 33,824  |   |      |   | 20,314  |  
|Scheduled principal repayments                                          |  |                          | (1,182  | ) |      |   | (2,802  | )
|Unscheduled principal repayments                                        |  |                          | (12,559 | ) |      |   | (65,058 | )
|Net proceeds from sales of investments                                  |  |                          | (28,602 | ) |      |   | (4,700  | )
|Net unrealized depreciation of investments                              |  |                          | (10,953 | ) |      |   | (10,587 | )
|Reversal of prior period net depreciation of investments on realization |  |                          | 34,600  |   |      |   | 17,976  |  
|Net realized loss on investments                                        |  |                          | (33,666 | ) |      |   | (12,163 | )
|Increase in investment balance due to PIK interest(A)                   |  |                          | 665     |   |      |   | 288     |  
|Cost adjustments on non-accrual loans                                   |  |                          | 328     |   |      |   | (717    | )
|Net change in premiums, discounts and amortization                      |  |                          | (149    | ) |      |   | 126     |  
|                                                                        |  |                          |         |   |      |   |         |  
|Ending Investment Portfolio, at Fair Value                              |  | $                        | 365,891 |   |      | $ | 281,286 |  
|                                                                        |  |                          |         |   |      |   |         |  



|(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, 2015.



|                                                        |  |        |         |  
|------------------------------------------------------- |  | ------ | ------- | -
|Year Ending September 30,                               |  | Amount |        
|2016                                                    |  | $      | 102,851 |  
|2017                                                    |  |        | 11,072  |  
|2018                                                    |  |        | 34,499  |  
|2019                                                    |  |        | 62,609  |  
|Thereafter                                              |  |        | 163,904 |  
|                                                        |  |        |         |  
|Total contractual repayments                            |  | $      | 374,935 |  
|Equity investments                                      |  |        | 36,319  |  
|Adjustments to cost basis on debt investments           |  |        | (1,010  | )
|                                                        |  |        |         |  
|Investment Portfolio as of September 30, 2015, at Cost: |  | $      | 410,244 |  
|                                                        |  |        |         |  

Financing Activities

Net cash provided by financing activities for the year ended September 30, 2015 of $72.0 million consisted primarily of $90.6 million in net borrowings on
our Credit Facility and $17.7 million in distributions to common stockholders.

Net cash used in financing activities for the year ended
September 30, 2014 of $8.1 million consisted primarily of $17.6 million in distributions to common stockholders and $10.2 million in net repayments on our Credit Facility. These financing activities were partially offset by the gross proceeds
of $61.0 million from the issuance of our Series 2021 Term Preferred Stock, net of the voluntary redemption of $38.5 million of the then existing Series 2016 Term Preferred Stock in May 2014.



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Net cash used in financing activities for the year ended September 30, 2013 of $28.1 million consisted
primarily of $17.6 million in distributions to common stockholders and $11.9 million in net repayments on our Credit Facility.

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 and capital gains in each fiscal year. 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, 2015, 2014 and 2013, which totaled an aggregate of $17.7 million, $17.6 million and $17.6 million, respectively. In October 2015, our Board of Directors declared a monthly distribution of $0.07 per common share for each of
October, November and December 2015. 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, 2016.

From inception through September 30, 2015, we have paid 153 either monthly or quarterly consecutive distributions to common stockholders totaling
approximately $256.8 million or $15.31 per share.

For the year ended September 30, 2015, our current and accumulated earnings and profits (after
taking into account our mandatorily redeemable preferred dividends) exceeded our common stockholder distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $1.7 million of the first common
distributions paid in fiscal year 2016 as having been paid in the respective prior year. For each of the years ended September 30, 2014 and 2013, common stockholder distributions declared and paid exceeded our current and accumulated earnings
and profits (after taking into account our mandatorily redeemable preferred dividends), which resulted in an estimated partial return of capital of approximately $15.2 million and $1.3 million, respectively. The returns of capital resulted primarily
from accounting principles generally accepted in the U.S. (GAAP) realized losses being recognized as ordinary losses for federal income tax purposes in each of those fiscal years.

Preferred Stock Dividends

We paid monthly cash
dividends of $0.140625 per share of our Series 2021 Term Preferred Stock for each month during the year ended September 30, 2015, which totaled an aggregate of $4.1 million. During the year ended September 30, 2015 we paid monthly cash
dividends of $0.1484375 per share of our Series 2021 Term Preferred Stock for each of the nine months from October 2013 through May 2014, which totaled an aggregate of $2.3 million. In May 2014, our Board of Directors declared, and we paid, a
combined May and June 2014 cash distribution of $0.1968750 per share of our Series 2021 Term Preferred Stock. This covered a prorated portion of May 2014 from the time the stock was issued and outstanding and the full month of June 2014. We paid a
monthly dividends of $0.140625 per share of Series 2021 Term Preferred Stock for each of July, August and September 2014. In October 2015, our Board of Directors declared a monthly dividends of $0.140625 per share of Series 2021 Term Preferred Stock
for each of October, November and December 2015.

For federal income tax purposes, dividends paid by us to preferred stockholders generally constitute
ordinary income to the extent of our current and accumulated earnings and profits and have been characterized as ordinary income to our preferred stockholders since our Series 2016 Term Preferred Stock was issued in November 2011 and we anticipate
the same characterization for our Series 2021 Term Preferred Stock, issued in May 2014.

Equity

Registration Statement

We filed Post-effective
Amendment No. 4 to our universal shelf registration statement (our Registration Statement) on Form N-2 (File No. 333-185191) with the SEC on December 1, 2014, and subsequently filed Post-effective Amendment No. 5
to our Registration Statement on January 29, 2015, which the SEC declared effective January 30, 2015. Our Registration Statement registered an aggregate of $300.0 million in securities, consisting of common stock, preferred stock,
subscription rights, debt securities and warrants to purchase common stock or preferred stock. As of September 30, 2015, we have the ability to issue up to $237.8 million in securities under our Registration Statement through one or more
transactions.



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We sold an aggregate of 131,462 shares, or $1.2 million in gross proceeds, of our common stock under the Sales Agreements during the year ended September 30, 2015. In addition on
October 27, 2015 we sold 2.3 million shares, or $19.7 million in gross proceeds, inclusive of the overallotment, which occurred in November 2015  both discussed in more detail below.

Common Stock

Pursuant to our Registration
Statement, on October 27, 2015, we completed a public offering of 2.0 million shares of our common stock at a public offering price of $8.55 per share. Gross proceeds totaled $17.1 million and net proceeds, after deducting underwriting
discounts and offering expenses borne by us, were approximately $16.0 million, which was used to repay borrowings under our Credit Facility. In connection with the offering, in November 2015, the underwriters exercised their option to purchase an
additional 300,000 shares at the public offering price to cover over-allotments, which resulted in gross proceeds of $2.6 million and net proceeds, after deducting underwriting discounts and offering expenses borne by us, were approximately $2.4
million.

We anticipate issuing equity securities to obtain additional capital in the future. However, we cannot determine the 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 continues to trade 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.

At our Annual Meeting of Stockholders held on February 12, 2015, our stockholders approved a proposal authorizing us to sell shares of our common stock
at a price below our then current NAV per share subject to certain limitations (including, but not limited to, that the number of shares issued and sold pursuant to such authority does not exceed 25.0% of our then outstanding common stock
immediately prior to each such sale) for a period of one year from the date of approval, provided that our Board of Directors makes certain determinations prior to any such sale. At the upcoming annual stockholders meeting scheduled for
February 11, 2016, our stockholders will again be asked to vote in favor of renewing this proposal for another year.

On February 27, 2015, we
entered into the Sales Agreements (commonly referred to as at-the-market agreements) under which we may 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. During the year ended September 2015, we sold an aggregate of 131,462 shares of our common stock for $1.0 million, net of underwriters commissions and other offering expenses borne by us, under the Sales Agreements. The remaining
availability under our Sales Agreements is approximately $48.8 million.

Term Preferred Stock

Pursuant to our Registration Statement, in May 2014, we completed a public offering of approximately 2.4 million shares of our Series 2021 Term Preferred
Stock, par value $0.001 per share, at a public offering price of $25.00 per share and a 6.75% rate. Gross proceeds totaled $61.0 million and net proceeds, after deducting underwriting discounts, commissions and offering expenses borne by us, were
$58.5 million, a portion of which was used to voluntarily redeem all 1.5 million outstanding shares of our then existing Series 2016 Term Preferred Stock and the remainder was used to repay a portion of outstanding borrowings under our Credit
Facility.

Our Series 2021 Term Preferred Stock is not convertible into our common stock or any other security and provides for a fixed dividend rate
equal to 6.75% per year, payable monthly (which equates in total to approximately $4.1 million per year). We are required to redeem all of the outstanding Series 2021 Term Preferred Stock on June 30, 2021 for cash at a redemption price
equal to $25.00 per share plus an amount equal to all unpaid dividends and distributions on such 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 2021 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, and (2) if we fail to
maintain an asset coverage ratio of at least 200.0% on our senior securities that are stock and the failure remains for a period of 30 days following the filing date of our next SEC quarterly or annual report. We may also voluntarily
redeem all or a portion of the Series 2021 Term Preferred Stock at our option at the Redemption Price at any time on or after June 30, 2017.

The
asset coverage on our senior securities that are stock as of September 30, 2015 was 199.3%. However, we were not required to redeem any shares of our Series 2021 Term Preferred Stock because, pursuant to the 1940 Act, on the date
that we were required to measure the asset coverage on our senior securities that are stock, (October 13, 2015), which was when our Board of Directors declared a distribution on our common stock and mandatorily redeemable preferred
stock dividends, the asset coverage on



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our senior securities that are stock was 202.6%. If we fail to redeem our Series 2021 Term Preferred Stock pursuant to the mandatory redemption required on June 30, 2021, or in
any other circumstance in which we are required to mandatorily redeem our Series 2021 Term Preferred Stock, then the fixed dividend rate will increase by 4.0% for so long as such failure continues. As of September 30, 2015, we have not
redeemed, nor have we been required to redeem, any shares of our outstanding Series 2021 Term Preferred Stock. If we fail to redeem our Series 2021 Term Preferred Stock pursuant to the mandatory redemption required on June 30, 2021, or in any
other circumstance in which we are required to mandatorily redeem our Series 2021 Term Preferred Stock, then the fixed dividend rate will increase by 4.0% for so long as such failure continues. As of September 30, 2015, we have not redeemed,
nor have we been required to redeem, any shares of our outstanding Series 2021 Term Preferred Stock.

Pursuant to our prior registration statement, in
November 2011, we completed a public offering of approximately 1.5 million shares of our Series 2016 Term Preferred Stock at a public offering price of $25.00 per share and a 7.125% rate. Gross proceeds totaled $38.5 million and net proceeds,
after deducting underwriting discounts, commissions and offering expenses borne by us, were $36.4 million, a portion of which was used to repay a portion of outstanding borrowings under our Credit Facility. Our Series 2016 Term Preferred Stock
provided for a fixed dividend rate equal to 7.125% per year, payable monthly (which equated in total to approximately $2.7 million per year).

Revolving Credit Facility

On May 1, 2015,
we, through Business Loan, entered into a Fifth Amended and Restated Credit Facility, which increased the commitment amount from $137.0 million to $140.0 million, extended the revolving period end date by three years to January 19, 2019,
decreased the marginal interest rate added to 30-day LIBOR from 3.75% to 3.25% per annum, set the unused commitment fee at 0.50% on all undrawn amounts, expanded the scope of eligible collateral, and amended other terms and conditions to among
other items. Our Credit Facility was arranged by KeyBank, as administrative agent, lead arranger and a lender. If our Credit Facility is not renewed or extended by January 19, 2019, all principal and interest will be due and payable on or
before May 1, 2020. Subject to certain terms and conditions, our Credit Facility may be expanded up to a total of $250.0 million through additional commitments of new or existing lenders. We incurred fees of approximately $1.1 million in
connection with this amendment, which are being amortized through our Credit Facilitys revolving period end date of January 19, 2019. On June 19, 2015, we through Business Loan, entered into certain joinder and assignment agreements
with three new lenders to increase borrowing capacity on our Credit Facility by $30.0 million to $170.0 million. We incurred fees of approximately $0.6 million in connection with this expansion, which are being amortized through our Credit
Facilitys revolving period end date of January 19, 2019.

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 Key Equipment as custodian. Key Equipment, who also serves as the
trustee of the account, generally remits the collected funds to us once a month.

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 deemed 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, which equates to $205.0 million as of September 30, 2015, (ii) asset coverage with respect to senior securities representing indebtedness of at least 200.0%, 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, 2015, and as defined in the performance
guaranty of our Credit Facility, we had a net worth of $252.4 million, asset coverage on our senior securities representing indebtedness of 294.6% and an active status as a BDC and RIC. In addition, we had 36 obligors in our Credit
Facilitys borrowing base as of September 30, 2015. As of September 30, 2015 we were in compliance with all of our Credit Facility covenants.



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Off-Balance Sheet Arrangements

We have lines of credit 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. As of September 30, 2015 and 2014, our unused line of credit commitments totaled $14.7 million and $5.9 million, at cost,
respectively.

When investing in certain private equity funds, we may have uncalled capital commitments depending on the agreed upon terms of our
committed ownership interest. These capital commitments usually have a specific date in the future set as a closing date, at which time the commitment is either funded or terminates. As of September 30, 2015 and 2014, we had uncalled capital
commitments related to our partnership interest in Leeds Novamark Capital I, L.P. of $2.2 million and $2.8 million, at cost, respectively.

Of our
interest bearing debt investments as of September 30, 2015, 30.2% had a success fee component, which enhances the yield on our debt investments. Unlike PIK income, we generally recognize success fees as income only when the payment has been
received. As a result, as of September 30, 2015 and 2014, we had aggregate off-balance sheet success fee receivables of $7.7 million and $11.0 million (or approximately $0.37 per common share and $0.52 per common share), respectively, on our
accruing debt investments that would be owed to us based on our current portfolio if fully paid off. Consistent with GAAP, we have not recognized our success fee receivable on our balance sheet or income statement. Due to our success fees
contingent nature, 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

The following table shows
our contractual obligations as of September 30, 2015, at cost:



|                                        |  |                        |       |  |           |   |        |           |  |   |                  |  |  |       |   |  |  |   |         | 
|--------------------------------------- |  | ---------------------- | ----- |  | --------- | - | ------ | --------- |  | - | ---------------- |  |  | ----- | - |  |  | - | ------- | 
|                                        |  | Payments Due by Period |      
|Contractual Obligations(A)              |  | Less than1 Year        |       |  | 1-3 Years |   |        | 3-5 Years |  |   | More than 5Years |  |  | Total |  
|Credit Facility(B)                      |  | $                      |      |  |           | $ |       |           |  | $ | 127,300          |  |  | $     |  |  |  | $ | 127,300 | 
|Mandatorily Redeemable Preferred Stock  |  |                        |      |  |           |   |       |           |  |   | 61,000           |  |  |       |  |  |  |   | 61,000  | 
|Interest expense on debt obligations(C) |  |                        | 8,787 |  |           |   | 26,360 |           |  |   | 12,750           |  |  |       |  |  |  |   | 47,897  | 
|                                        |  |                        |       |  |           |   |        |           |  |   |                  |  |  |       |   |  |  |   |         | 
|Total                                   |  | $                      | 8,787 |  |           | $ | 26,360 |           |  | $ | 201,050          |  |  | $     |  |  |  | $ | 236,197 | 
|                                        |  |                        |       |  |           |   |        |           |  |   |                  |  |  |       |   |  |  |   |         | 



|(A) | Excludes our unused line of credit and uncalled capital commitments to our portfolio companies in an aggregate amount of $16.9 million, at cost, as of September 30, 2015.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 2021Term Preferred Stock. The amount of interest expense calculated for purposes of this table was based upon rates and
balances as of September 30, 2015. Dividend payments on our Series 2021 Term Preferred Stock assume quarterly dividend declarations and monthly dividend distributions through the date of mandatory redemption.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.

Investment
Valuation

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.



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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. Refer to Note 2Summary of Significant Accounting Policiesand Note 3 Investments in the notes
to our accompanying Consolidated Financial Statements included elsewhere in this report for additional information regarding fair value measurements.

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 a Nationally Recognized Statistical Rating Organization (NRSRO) (as defined in Rule 2a-7 under the 1940 Act), 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 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. During the quarter ended June 30, 2014, we modified our risk rating model to incorporate additional factors in our qualitative and quantitative analysis. While the overall process did not change, we believe the
additional factors enhance the quality of the risk ratings of our investments. No adjustments were made to prior periods as a result of this modification.

The following table reflects risk ratings for all proprietary loans in our portfolio at September 30, 2015 and 2014, representing approximately 84.1% and
80.8%, respectively, of the principal balance of all debt investments in our portfolio at the end of each fiscal year:



|                 |  |                     |     |  |      |  |     | 
|---------------- |  | ------------------- | --- |  | ---- |  | --- | 
|                 |  | As of September 30, |    
|Rating           |  | 2015                |     |  | 2014 | 
|Highest          |  |                     | 8.0 |  |      |  | 9.0 | 
|Average          |  |                     | 5.9 |  |      |  | 5.9 | 
|Weighted Average |  |                     | 6.0 |  |      |  | 5.2 | 
|Lowest           |  |                     | 4.0 |  |      |  | 2.0 | 

The following table reflects the risk ratings for all syndicated loans in our portfolio that were rated by an NRSRO at
September 30, 2015 and 2014, representing approximately 10.8% and 16.6%, respectively, of the principal balance of all debt investments in our portfolio at the end of each fiscal year:



|                 |  |                     |     |  |      |  |     | 
|---------------- |  | ------------------- | --- |  | ---- |  | --- | 
|                 |  | As of September 30, |    
|Rating           |  | 2015                |     |  | 2014 | 
|Highest          |  |                     | 6.0 |  |      |  | 6.0 | 
|Average          |  |                     | 4.8 |  |      |  | 4.6 | 
|Weighted Average |  |                     | 4.9 |  |      |  | 4.8 | 
|Lowest           |  |                     | 3.0 |  |      |  | 3.5 | 



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The following table reflects the risk ratings for all syndicated loans in our portfolio that were not rated by an
NRSRO at September 30, 2015 and 2014, representing approximately 5.1% and 2.6%, respectively, of the principal balance of all debt investments in our portfolio at the end of each fiscal year:



|                 |  |                     |     |  |      |  |     | 
|---------------- |  | ------------------- | --- |  | ---- |  | --- | 
|                 |  | As of September 30, |    
|Rating           |  | 2015                |     |  | 2014 | 
|Highest          |  |                     | 6.0 |  |      |  | 4.0 | 
|Average          |  |                     | 4.8 |  |      |  | 4.0 | 
|Weighted Average |  |                     | 4.3 |  |      |  | 4.0 | 
|Lowest           |  |                     | 3.0 |  |      |  | 4.0 | 

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
the notes to our accompanying Consolidated Financial Statements included elsewhere in this report for additional information regarding our tax status.

Revenue Recognition

Interest Income
Recognition

Interest income, adjusted for amortization of premiums, acquisition costs and amendment fees and the accretion of original issue
discounts, 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.

Other Income Recognition

We generally record success fees upon receipt of cash. Success fees are contractually due upon a change of control in a portfolio company, typically from an
exit or sale. Dividend income on equity investments is accrued to the extent that such amounts are expected to be collected and if we have the option to collect such amounts in cash. We generally record prepayment fees upon receipt of cash.
Prepayment fees are contractually due at the time of an investments exit, based on the prepayment fee schedule. Success fees, prepayment fees and dividend income are all recorded in other income in our accompanying Consolidated Statements
of Operations.

Refer to Note 2Summary of Significant Accounting Policies in the notes to our accompanying Consolidated Financial
Statements included elsewhere in this report for additional information regarding revenue recognition.

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 report for a description and our application of recent accounting pronouncements. We are currently assessing whether additional disclosure requirements will be necessary in future periods and anticipate no impact from
adoption of recent accounting pronouncements on our financial position or results of operations.



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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.

We target to have approximately 10.0% of the loans in our
portfolio at fixed rates, with approximately 90.0% made at variable rates or variable rates with a floor. All of our variable-rate loans have rates generally associated with either the current LIBOR or prime rate. As of September 30, 2015, our
portfolio consisted of the following:



| |        |  |  |                                                
| | ------ |  |  | -----------------------------------------------
| | 84.1%  |  |  | Variable rates with a LIBOR or prime rate floor
| | 15.9   |  |  | Fixed rates                                    
| |        |  |  |                                                
| | 100.0% |  |  | total                                          
| |        |  |  |                                                

Pursuant to the terms under our Credit Facility, in July 2013, we, through Business Loan, entered into an interest rate cap
agreement with KeyBank, effective July 9, 2013 and expiring January 19, 2016, for a notional amount of $35.0 million that effectively limits the interest rate on a portion of our borrowings under our Credit Facility. This agreement will
entitle us to receive payments, if any, equal to the amount by which interest payments on the current notional amount at the one month LIBOR exceed the payments on the current notional amount at 5.0%. The agreement therefore helps mitigate our
exposure to increases in interest rates on our borrowings on our Credit Facility, which are at variable rates. As of September 30, 2015 and September 30, 2014, our interest rate cap agreement had a fair value of $0.

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, 2015 and no further actions are taken to alter our existing interest rate sensitivity.



|                       |  |                            |       |  |                                        |   |       |                                                               |  |   |        |  
|---------------------- |  | -------------------------- | ----- |  | -------------------------------------- | - | ----- | ------------------------------------------------------------- |  | - | ------ | -
|Basis Point Change (A) |  | Increase inInterest Income |       |  | Increase (Decrease) inInterest Expense |   |       | Net (Decrease) Increase inNet Assets Resulting fromOperations | 
|Up 300 basis points    |  | $                          | 2,520 |  |                                        | $ | 3,819 |                                                               |  | $ | (1,299 | )
|Up 200 basis points    |  |                            | 1,005 |  |                                        |   | 2,546 |                                                               |  |   | (1,541 | )
|Up 100 basis points    |  |                            | 350   |  |                                        |   | 1,273 |                                                               |  |   | (923   | )
|Down 20 basis points   |  |                            |      |  |                                        |   | (253  | )                                                             |  |   | 253    |  



|(A) | As of September 30, 2015, our effective average LIBOR was 0.20%, therefore, the largest decrease in basis points that could occur was 15 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 (decrease) 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



|                                                                                                       |  |  |    | 
|------------------------------------------------------------------------------------------------------ |  |  | -- | 
|Report of Management on Internal Controls                                                              |  |  | 70 | 
|Report of Independent Registered Public Accounting Firm                                                |  |  | 71 | 
|Consolidated Statements of Assets and Liabilities as of September 30, 2015 and 2014                    |  |  | 72 | 
|Consolidated Statements of Operations for the years ended September 30, 2015, 2014 and 2013            |  |  | 73 | 
|Consolidated Statements of Changes in Net Assets for the years ended September 30, 2015, 2014 and
2013 |  |  | 74 | 
|Consolidated Statements of Cash Flows for the years ended September 30, 2015, 2014 and 2013            |  |  | 75 | 
|Consolidated Schedules of Investments as of September 30, 2015 and 2014                                |  |  | 76 | 
|Notes to Consolidated Financial Statements                                                             |  |  | 86 | 



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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, 2015, 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, 2015.

The effectiveness of the Companys internal control over
financial reporting as of September 30, 2015 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

November 23, 2015



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Report of Independent Registered Public Accounting Firm

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

In our opinion, the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, and the
related consolidated statements of operations, of changes in net assets, and of cash flows present fairly, in all material respects, the financial position of Gladstone Capital Corporation and its subsidiaries (the Company) at
September 30, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2015 in conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2015, based on criteria established in Internal Control
- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for these financial statements and financial statement schedule, 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 these financial statements, on the financial statement schedule, and on the Companys internal control over financial reporting based on our integrated audits. We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. 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. Our procedures included confirmation of securities at September 30, 2015 and 2014, by correspondence with the custodian, and where replies were not
received, we performed alternative auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

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 23, 2015             



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



|                                                                                                                                                                                                                               |  |               |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                                                                                               |  | September 30, |        
|                                                                                                                                                                                                                               |  | 2015          |         |   | 2014 |  
|ASSETS                                                                                                                                                                                                                         |  |               |         |   |      |   |         |  
|Investments at fair value:                                                                                                                                                                                                     |  |               |         |   |      |   |         |  
|Non-Control/Non-Affiliate investments (Cost of $287,055and $225,845, respectively)                                                                                                                                             |  | $             | 277,411 |   |      | $ | 198,926 |  
|Affiliate investments (Cost of $81,427 and $61,281, respectively)                                                                                                                                                              |  |               | 66,029  |   |      |   | 57,006  |  
|Control investments (Cost of $41,762and $62,159, respectively)                                                                                                                                                                 |  |               | 22,451  |   |      |   | 25,354  |  
|                                                                                                                                                                                                                               |  |               |         |   |      |   |         |  
|Total investments at fair value (Cost of $410,244and $349,285, respectively)                                                                                                                                                   |  |               | 365,891 |   |      |   | 281,286 |  
|Cash and cash equivalents                                                                                                                                                                                                      |  |               | 3,808   |   |      |   | 6,314   |  
|Restricted cash and cash equivalents                                                                                                                                                                                           |  |               | 283     |   |      |   | 675     |  
|Interest receivable, net                                                                                                                                                                                                       |  |               | 5,581   |   |      |   | 2,767   |  
|Due from custodian                                                                                                                                                                                                             |  |               | 1,186   |   |      |   | 6,022   |  
|Deferred financing fees                                                                                                                                                                                                        |  |               | 4,161   |   |      |   | 3,340   |  
|Other assets, net                                                                                                                                                                                                              |  |               | 1,572   |   |      |   | 1,025   |  
|                                                                                                                                                                                                                               |  |               |         |   |      |   |         |  
|TOTAL ASSETS                                                                                                                                                                                                                   |  | $             | 382,482 |   |      | $ | 301,429 |  
|                                                                                                                                                                                                                               |  |               |         |   |      |   |         |  
|                                                                                                                                                                                                                               |  |              
|LIABILITIES                                                                                                                                                                                                                    |  |               |         |   |      |   |         |  
|Borrowings at fair value (Cost of $127,300and $36,700, respectively)                                                                                                                                                           |  | $             | 127,300 |   |      | $ | 38,013  |  
|Mandatorily redeemable preferred stock, $0.001 par value per share, $25 liquidation preference per share; 4,000,000 shares
authorized and 2,440,000 shares issued and outstanding at September 30, 2015 and 2014, respectively |  |               | 61,000  |   |      |   | 61,000  |  
|Accounts payable and accrued expenses                                                                                                                                                                                          |  |               | 597     |   |      |   | 462     |  
|Interest payable                                                                                                                                                                                                               |  |               | 272     |   |      |   | 146     |  
|Fees due to Adviser(A)                                                                                                                                                                                                         |  |               | 904     |   |      |   | 875     |  
|Fee due to Administrator(A)                                                                                                                                                                                                    |  |               | 250     |   |      |   | 218     |  
|Other liabilities                                                                                                                                                                                                              |  |               | 715     |   |      |   | 1,055   |  
|                                                                                                                                                                                                                               |  |               |         |   |      |   |         |  
|TOTAL LIABILITIES                                                                                                                                                                                                              |  | $             | 191,038 |   |      | $ | 101,769 |  
|                                                                                                                                                                                                                               |  |               |         |   |      |   |         |  
|Commitments and contingencies(B)                                                                                                                                                                                               |  |               |         |   |      |   |         |  
|                                                                                                                                                                                                                               |  |              
|NET ASSETS                                                                                                                                                                                                                     |  |               |         |   |      |   |         |  
|Common stock, $0.001 par value, 46,000,000 shares authorized and 21,131,622and21,000,160 shares issued and
outstanding, respectively                                                                                           |  | $             | 21      |   |      | $ | 21      |  
|Capital in excess of par value(C)                                                                                                                                                                                              |  |               | 307,862 |   |      |   | 307,348 |  
|Note receivable from employee(A)                                                                                                                                                                                               |  |               |        |   |      |   | (100    | )
|Cumulative net unrealized depreciation of investments                                                                                                                                                                          |  |               | (44,353 | ) |      |   | (67,999 | )
|Cumulative net unrealized appreciation of other                                                                                                                                                                                |  |               | (61     | ) |      |   | (1,374  | )
|Overdistributed net investment income(C)                                                                                                                                                                                       |  |               | (1,541  | ) |      |   | (1,928  | )
|Accumulated net realized losses                                                                                                                                                                                                |  |               | (70,484 | ) |      |   | (36,308 | )
|                                                                                                                                                                                                                               |  |               |         |   |      |   |         |  
|TOTAL NET ASSETS                                                                                                                                                                                                               |  | $             | 191,444 |   |      | $ | 199,660 |  
|                                                                                                                                                                                                                               |  |               |         |   |      |   |         |  
|                                                                                                                                                                                                                               |  |              
|NET ASSET VALUE PER COMMON SHARE AT END OF YEAR                                                                                                                                                                                |  | $             | 9.06    |   |      | $ | 9.51    |  
|                                                                                                                                                                                                                               |  |               |         |   |      |   |         |  



|(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, |           
|                                                                      |  | 2015                     |            |   | 2014 |   |            | 2013 | 
|INVESTMENT INCOME                                                     |  |                          |            |   |      |   |            |      |  |   |            |  
|Interest income                                                       |  |                          |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate investments                                 |  | $                        | 27,343     |   |      | $ | 25,117     |      |  | $ | 27,704     |  
|Affiliate investments                                                 |  |                          | 6,434      |   |      |   | 3,721      |      |  |   | 216        |  
|Control investments                                                   |  |                          | 1,113      |   |      |   | 3,317      |      |  |   | 5,481      |  
|Other                                                                 |  |                          | 5          |   |      |   | 15         |      |  |   | 132        |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total interest income                                                 |  |                          | 34,895     |   |      |   | 32,170     |      |  |   | 33,533     |  
|Other income                                                          |  |                          |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate investments                                 |  |                          | 2,180      |   |      |   | 1,885      |      |  |   | 2,621      |  
|Affiliate investments                                                 |  |                          |           |   |      |   | 701        |      |  |   |           |  
|Control investments                                                   |  |                          | 983        |   |      |   | 1,829      |      |  |   |           |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total other income                                                    |  |                          | 3,163      |   |      |   | 4,415      |      |  |   | 2,621      |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total investment income                                               |  |                          | 38,058     |   |      |   | 36,585     |      |  |   | 36,154     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|EXPENSES                                                              |  |                          |            |   |      |   |            |      |  |   |            |  
|Base management fee(A)                                                |  |                          | 6,888      |   |      |   | 5,864      |      |  |   | 5,622      |  
|Loan servicing fee(A)                                                 |  |                          | 3,816      |   |      |   | 3,503      |      |  |   | 3,656      |  
|Incentive fee(A)                                                      |  |                          | 4,083      |   |      |   | 4,297      |      |  |   | 4,343      |  
|Administration fee(A)                                                 |  |                          | 1,033      |   |      |   | 853        |      |  |   | 647        |  
|Interest expense on borrowings                                        |  |                          | 3,828      |   |      |   | 2,628      |      |  |   | 3,182      |  
|Dividend expense on mandatorily redeemable preferred stock            |  |                          | 4,116      |   |      |   | 3,338      |      |  |   | 2,744      |  
|Amortization of deferred financing fees                               |  |                          | 1,106      |   |      |   | 1,247      |      |  |   | 1,211      |  
|Professional fees                                                     |  |                          | 999        |   |      |   | 993        |      |  |   | 514        |  
|Other general and administrative expenses                             |  |                          | 1,189      |   |      |   | 1,091      |      |  |   | 1,026      |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Expenses, before credits from Adviser                                 |  |                          | 27,058     |   |      |   | 23,814     |      |  |   | 22,945     |  
|Credit to base management fee - loan servicing fee(A)                 |  |                          | (3,816     | ) |      |   | (3,503     | )    |  |   | (3,656     | )
|Credit to fees from Adviser - other(A)                                |  |                          | (2,884     | ) |      |   | (2,094     | )    |  |   | (1,521     | )
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total expenses, net of credits                                        |  |                          | 20,358     |   |      |   | 18,217     |      |  |   | 17,768     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|NET INVESTMENT INCOME                                                 |  |                          | 17,700     |   |      |   | 18,368     |      |  |   | 18,386     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|NET REALIZED AND UNREALIZED (LOSS) GAIN                               |  |                          |            |   |      |   |            |      |  |   |            |  
|Net realized (loss) gain:                                             |  |                          |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate investments                                 |  |                          | (8,410     | ) |      |   | (1,431     | )    |  |   | (439       | )
|Control investments                                                   |  |                          | (25,256    | ) |      |   | (10,732    | )    |  |   | (5,314     | )
|Escrows                                                               |  |                          | (510       | ) |      |   | 50         |      |  |   | 522        |  
|Extinguishment of debt                                                |  |                          |           |   |      |   | (1,297     | )    |  |   |           |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total net realized loss                                               |  |                          | (34,176    | ) |      |   | (13,410    | )    |  |   | (5,231     | )
|Net unrealized appreciation (depreciation):                           |  |                          |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate investments                                 |  |                          | 9,116      |   |      |   | 9,925      |      |  |   | (7,125     | )
|Control investments                                                   |  |                          | 25,654     |   |      |   | 6,304      |      |  |   | 22,414     |  
|Affiliate investments                                                 |  |                          | (11,123    | ) |      |   | (8,840     | )    |  |   | 384        |  
|Other                                                                 |  |                          | 1,313      |   |      |   | (1,114     | )    |  |   | 3,391      |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Total net unrealized appreciation                                     |  |                          | 24,960     |   |      |   | 6,275      |      |  |   | 19,064     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Net realized and unrealized (loss) gain                               |  |                          | (9,216     | ) |      |   | (7,135     | )    |  |   | 13,833     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                  |  | $                        | 8,484      |   |      | $ | 11,233     |      |  | $ | 32,219     |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|BASIC AND DILUTED PER COMMON SHARE:                                   |  |                          |            |   |      |   |            |      |  |   |            |  
|Net investment income                                                 |  | $                        | 0.84       |   |      | $ | 0.87       |      |  | $ | 0.88       |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Net increase in net assets resulting from operations                  |  | $                        | 0.40       |   |      | $ | 0.53       |      |  | $ | 1.53       |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|Distributions declared and paid per share                             |  | $                        | 0.84       |   |      | $ | 0.84       |      |  | $ | 0.84       |  
|                                                                      |  |                          |            |   |      |   |            |      |  |   |            |  
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:Basic and Diluted |  |                          | 21,066,844 |   |      |   | 21,000,160 |      |  |   | 21,000,160 |  



|(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, |        
|                                                          |  | 2015                     |         |   | 2014 |   |         | 2013 | 
|OPERATIONS                                                |  |                          |         |   |      |   |         |      |  |   |         |  
|Net investment income                                     |  | $                        | 17,700  |   |      | $ | 18,368  |      |  | $ | 18,386  |  
|Net realized loss on investments and escrows              |  |                          | (34,176 | ) |      |   | (12,113 | )    |  |   | (5,231  | )
|Realized loss on extinguishment of debt                   |  |                          |        |   |      |   | (1,297  | )    |  |   |        |  
|Net unrealized appreciation of investments                |  |                          | 23,647  |   |      |   | 7,389   |      |  |   | 15,673  |  
|Net unrealized depreciation (appreciation) of other       |  |                          | 1,313   |   |      |   | (1,114  | )    |  |   | 3,391   |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|Net increase in net assets from operations                |  |                          | 8,484   |   |      |   | 11,233  |      |  |   | 32,219  |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                          |  |                          |        
|DISTRIBUTIONS                                             |  |                          |         |   |      |   |         |      |  |   |         |  
|Distributions to common stockholders from ordinary income |  |                          | (17,700 | ) |      |   | (2,430  | )    |  |   | (16,309 | )
|Return of capital to common stockholders                  |  |                          |        |   |      |   | (15,210 | )    |  |   | (1,331  | )
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|Net decrease in net assets from distributions             |  |                          | (17,700 | ) |      |   | (17,640 | )    |  |   | (17,640 | )
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                          |  |                          |        
|CAPITAL TRANSACTIONS                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Repayment of principal on employee notes(A)               |  |                          | 100     |   |      |   | 75      |      |  |   | 2,849   |  
|Issuance of common stock                                  |  |                          | 1,169   |   |      |   |        |      |  |   |        |  
|Offering costs for issuance of common stock               |  |                          | (269    | ) |      |   |        |      |  |   |        |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|Net increase in net assets from capital transactions      |  |                          | 1,000   |   |      |   | 75      |      |  |   | 2,849   |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                          |  |                          |        
|NET (DECREASE) INCREASE IN NET ASSETS                     |  |                          | (8,216  | ) |      |   | (6,332  | )    |  |   | 17,428  |  
|NET ASSETS, BEGINNING OF YEAR                             |  |                          | 199,660 |   |      |   | 205,992 |      |  |   | 188,564 |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|NET ASSETS, END OF YEAR                                   |  | $                        | 191,444 |   |      | $ | 199,660 |      |  | $ | 205,992 |  
|                                                          |  |                          |         |   |      |   |         |      |  |   |         |  



|(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 CASH FLOWS

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                                                                                      |  | Year ended September 30, |         
|                                                                                                                                      |  | 2015                     |          |   | 2014 |   |          | 2013 | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                  |  |                          |          |   |      |   |          |      |  |   |         |  
|Net increase in net assets resulting from operations                                                                                  |  | $                        | 8,484    |   |      | $ | 11,233   |      |  | $ | 32,219  |  
|Adjustments to reconcile net increase in net assets resulting from operations to net cash (used in) provided by operating
activities: |  |                          |          |   |      |   |          |      |  |   |         |  
|                                                                                                                                      |  |                          |         
|Purchase of investments                                                                                                               |  |                          | (136,123 | ) |      |   | (102,045 | )    |  |   | (90,157 | )
|Principal repayments on investments                                                                                                   |  |                          | 13,741   |   |      |   | 67,860   |      |  |   | 110,491 |  
|Net proceeds from sale of investments                                                                                                 |  |                          | 28,602   |   |      |   | 4,700    |      |  |   | 6,557   |  
|Increase in investment balance due to paid-in-kind interest                                                                           |  |                          | (665     | ) |      |   | (288     | )    |  |   | (234    | )
|Net change in premiums, discounts and amortization                                                                                    |  |                          | 149      |   |      |   | (126     | )    |  |   | 345     |  
|Cost adjustments on non-accrual loans                                                                                                 |  |                          | (328     | ) |      |   | 717      |      |  |   |        |  
|Net realized loss on investments                                                                                                      |  |                          | 33,666   |   |      |   | 12,163   |      |  |   | 5,753   |  
|Net unrealized appreciation of investments                                                                                            |  |                          | (23,647  | ) |      |   | (7,389   | )    |  |   | (15,673 | )
|Realized loss on extinguishment of debt                                                                                               |  |                          |         |   |      |   | 1,297    |      |  |   |        |  
|Net unrealized appreciation (depreciation) of other                                                                                   |  |                          | (1,313   | ) |      |   | 1,114    |      |  |   | (3,391  | )
|Decrease (increase) in restricted cash and cash equivalents                                                                           |  |                          | 392      |   |      |   | 501      |      |  |   | (371    | )
|(Increase) decrease in interest receivable                                                                                            |  |                          | (2,814   | ) |      |   | (279     | )    |  |   | 208     |  
|Decrease (increase) in funds due from custodian                                                                                       |  |                          | 4,836    |   |      |   | 10,451   |      |  |   | (14,296 | )
|Amortization of deferred financing fees                                                                                               |  |                          | 1,106    |   |      |   | 1,247    |      |  |   | 1,211   |  
|Decrease (increase) in other assets                                                                                                   |  |                          | (547     | ) |      |   | 61       |      |  |   | (136    | )
|Increase (decrease) in accounts payable and accrued expenses                                                                          |  |                          | 135      |   |      |   | (32      | )    |  |   | 19      |  
|Increase (decrease) in interest payable                                                                                               |  |                          | 126      |   |      |   | (24      | )    |  |   | (15     | )
|Increase (decrease) in fees due to Adviser(A)                                                                                         |  |                          | 29       |   |      |   | (831     | )    |  |   | (124    | )
|Increase (decrease) in fee due to Administrator(A)                                                                                    |  |                          | 32       |   |      |   | 92       |      |  |   | (48     | )
|(Decrease) increase in other liabilities                                                                                              |  |                          | (340     | ) |      |   | 51       |      |  |   | (222    | )
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |         |  
|Net cash (used in) provided by operating activities                                                                                   |  |                          | (74,479  | ) |      |   | 473      |      |  |   | 32,136  |  
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                  |  |                          |          |   |      |   |          |      |  |   |         |  
|Proceeds from borrowings                                                                                                              |  |                          | 147,500  |   |      |   | 108,800  |      |  |   | 84,800  |  
|Repayments on borrowings                                                                                                              |  |                          | (56,900  | ) |      |   | (119,000 | )    |  |   | (96,700 | )
|Proceeds from issuance of mandatorily redeemable preferred stock                                                                      |  |                          |         |   |      |   | 61,000   |      |  |   |        |  
|Redemption of previously issued mandatorily redeemable preferred stock                                                                |  |                          |         |   |      |   | (38,497  | )    |  |   |        |  
|Purchase of derivative                                                                                                                |  |                          |         |   |      |   |         |      |  |   | (62     | )
|Deferred financing fees                                                                                                               |  |                          | (1,927   | ) |      |   | (2,797   | )    |  |   | (1,340  | )
|Proceeds from issuance of common stock                                                                                                |  |                          | 1,169    |   |      |   |         |      |  |   |        |  
|Offering costs for issuance of common stock                                                                                           |  |                          | (269     | ) |      |   |         |      |  |   |        |  
|Distributions paid to common stockholders                                                                                             |  |                          | (17,700  | ) |      |   | (17,640  | )    |  |   | (17,640 | )
|Receipt of principal on employee notes(A)                                                                                             |  |                          | 100      |   |      |   | 75       |      |  |   | 2,849   |  
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |         |  
|Net cash provided by (used in) financing activities                                                                                   |  |                          | 71,973   |   |      |   | (8,059   | )    |  |   | (28,093 | )
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |         |  
|                                                                                                                                      |  |                          |         
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                                                  |  |                          | (2,506   | ) |      |   | (7,586   | )    |  |   | 4,043   |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                                                          |  |                          | 6,314    |   |      |   | 13,900   |      |  |   | 9,857   |  
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |         |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                                                                                                |  | $                        | 3,808    |   |      | $ | 6,314    |      |  | $ | 13,900  |  
|                                                                                                                                      |  |                          |          |   |      |   |          |      |  |   |         |  
|                                                                                                                                      |  |                          |         
|CASH PAID DURING YEAR FOR INTEREST                                                                                                    |  | $                        | 3,702    |   |      | $ | 2,650    |      |  | $ | 3,230   |  
|CASH PAID DURING YEAR FOR DIVIDENDS ON MANDATORILY REDEEMABLE PREFERRED STOCK                                                         |  |                          | 4,116    |   |      |   | 3,338    |      |  |   | 2,744   |  
|NON-CASH ACTIVITIES(B)                                                                                                                |  |                          | 1,905    |   |      |   |         |      |  |   |        |  



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

|(B) | In September 2015, GFRC Holdings, LLC (GFRC) was restructured. As part of this restructure we converted our outstanding debt which had a cost basis of
$12.7 million into a term note, a line of credit and preferred stock, which resulted in a realized loss of $10.8 million recognized in our accompanying Consolidated Statements of Operations during the quarter ended September 30, 2015.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



75



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2015

(DOLLAR AMOUNTS IN THOUSANDS)



|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|----------------------------------------- |  | -------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | --------- | ------ |  | ---- | - | ------ | --------- |  | - | ------ | 
|Company(A)                                |  | Industry                                           |  | Investment(B)                                                                 |  | Principal |        |  | Cost |   |        | FairValue | 
|NON-CONTROL/NON-AFFILIATE INVESTMENTS(P): |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |          
|Proprietary Investments:                  |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |  
|AG Transportation Holdings, LLC           |  | Cargo transport                                    |  | Secured Second Lien Debt (13.3%, Due 3/2018)(D)                               |  | $         | 13,000 |  |      | $ | 12,980 |           |  | $ | 12,870 | 
|                                          |  |                                                    |  | Member Profit Participation (18.0% ownership)(F)(H)                           |  |           |        |  |      |   | 1,000  |           |  |   | 564    | 
|                                          |  |                                                    |  | Profit Participation Warrants (7.0% ownership)(F)(H)                          |  |           |        |  |      |   | 244    |           |  |   |       | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 14,224 |           |  |   | 13,434 | 
|                                          |  |                                                    |  |                                                                               | 
|Allison Publications, LLC                 |  | Printing and publishing                            |  | Secured First Lien Line of Credit, $250 available (8.3%, Due 9/2016)(D)       |  |           | 350    |  |      |   | 350    |           |  |   | 347    | 
|                                          |  |                                                    |  | Secured First Lien Debt (8.3%, Due 9/2018)(D)                                 |  |           | 2,444  |  |      |   | 2,444  |           |  |   | 2,422  | 
|                                          |  |                                                    |  | Secured First Lien Debt (13.0%, Due 9/2018)(C) (D)                            |  |           | 5,400  |  |      |   | 5,400  |           |  |   | 5,360  | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 8,194  |           |  |   | 8,129  | 
|                                          |  |                                                    |  |                                                                               | 
|Alloy Die Casting Corp.                   |  | Diversified/conglomerate manufacturing             |  | Secured First Lien Debt (13.5%, Due 10/2018)(D)                               |  |           | 5,235  |  |      |   | 5,235  |           |  |   | 4,947  | 
|                                          |  |                                                    |  | Preferred Stock (1,742 shares)(F)(H)                                          |  |           |        |  |      |   | 1,742  |           |  |   | 153    | 
|                                          |  |                                                    |  | Common Stock (270 shares)(F)(H)                                               |  |           |        |  |      |   | 18     |           |  |   |       | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 6,995  |           |  |   | 5,100  | 
|                                          |  |                                                    |  |                                                                               | 
|Behrens Manufacturing, LLC                |  | Diversified/conglomerate manufacturing             |  | Secured First Lien Debt (13.0%, Due 12/2018)(D)                               |  |           | 4,275  |  |      |   | 4,275  |           |  |   | 4,264  | 
|                                          |  |                                                    |  | Preferred Stock (1,253 shares)(F)(H)(K)                                       |  |           |        |  |      |   | 1,253  |           |  |   | 2,268  | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 5,528  |           |  |   | 6,532  | 
|                                          |  |                                                    |  |                                                                               | 
|B+T Group Acquisition Inc.                |  | Telecommunications                                 |  | Secured First Lien Debt (13.0%, Due 12/2019)(D)                               |  |           | 6,000  |  |      |   | 6,000  |           |  |   | 5,865  | 
|                                          |  |                                                    |  | Preferred Stock (5,503 shares)(F)(H)(K)                                       |  |           |        |  |      |   | 1,799  |           |  |   |       | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 7,799  |           |  |   | 5,865  | 
|                                          |  |                                                    |  |                                                                               | 
|Chinese Yellow Pages Company              |  | Printing and publishing                            |  | Secured First Lien Line of Credit, $0 available (7.3%, Due 2/2015)(D)         |  |           | 108    |  |      |   | 108    |           |  |   | 32     | 
|                                          |  |                                                    |  |                                                                               | 
|Flight Fit N Fun LLC                      |  | Leisure, Amusement, Motion Pictures, Entertainment |  | Secured First Lien Debt (12.0%, Due 9/2020)(J)                                |  |           | 7,800  |  |      |   | 7,800  |           |  |   | 7,800  | 
|                                          |  |                                                    |  | Preferred Stock (700,000 units)(H)(J)                                         |  |           |        |  |      |   | 700    |           |  |   | 700    | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 8,500  |           |  |   | 8,500  | 
|                                          |  |                                                    |  |                                                                               | 
|Francis Drilling Fluids, Ltd.             |  | Oil and gas                                        |  | Secured Second Lien Debt (11.4%, Due 4/2020)(D)                               |  |           | 15,000 |  |      |   | 15,000 |           |  |   | 12,938 | 
|                                          |  |                                                    |  | Secured Second Lien Debt (10.3%, Due 4/2020)(D)                               |  |           | 7,000  |  |      |   | 7,000  |           |  |   | 6,037  | 
|                                          |  |                                                    |  | Preferred Equity Units (999 units)(F)(H)                                      |  |           |        |  |      |   | 648    |           |  |   | 747    | 
|                                          |  |                                                    |  | Common Equity Units (999 units)(F)(H)                                         |  |           |        |  |      |   | 1      |           |  |   | 206    | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 22,649 |           |  |   | 19,928 | 
|                                          |  |                                                    |  |                                                                               | 
|Funko, LLC                                |  | Personal and non-durable consumer products         |  | Secured First Lien Debt (9.3%, Due 5/2019)(F)(G)                              |  |           | 7,500  |  |      |   | 7,500  |           |  |   | 7,500  | 
|                                          |  |                                                    |  | Secured First Lien Debt (9.3%, Due 5/2019)(F)(G)                              |  |           | 2,000  |  |      |   | 2,000  |           |  |   | 2,000  | 
|                                          |  |                                                    |  | Preferred Equity Units (1,305 units)(L)(H)                                    |  |           |        |  |      |   | 1,305  |           |  |   | 17,314 | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 10,805 |           |  |   | 26,814 | 
|                                          |  |                                                    |  |                                                                               | 
|GFRC Holdings, LLC                        |  | Buildings and real estate                          |  | Secured First Lien Line of Credit, $840 available (9.0%, Due 9/2018)(J)       |  |           | 360    |  |      |   | 360    |           |  |   | 360    | 
|                                          |  |                                                    |  | Secured First Lien Debt (9.0%, Due 9/2018)(J)                                 |  |           | 1,000  |  |      |   | 1,000  |           |  |   | 1,000  | 
|                                          |  |                                                    |  | Preferred Stock (1,000 shares)(H)(J)                                          |  |           |        |  |      |   | 1,025  |           |  |   | 1,025  | 
|                                          |  |                                                    |  | Common stock warrant (45% ownership) (H)(J)                                   |  |           |        |  |      |   |       |           |  |   |       | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 2,385  |           |  |   | 2,385  | 
|                                          |  |                                                    |  |                                                                               | 
|Heartland Communications Group            |  | Broadcasting and entertainment                     |  | Secured First Lien Line of Credit, $0 available (5.0%, Due 10/2015)(F)(G)(I)  |  |           | 91     |  |      |   | 82     |           |  |   | 31     | 
|                                          |  |                                                    |  | Secured First Lien Line of Credit, $0 available (10.0%, Due 10/2015)(F)(G)(I) |  |           | 91     |  |      |   | 74     |           |  |   | 31     | 
|                                          |  |                                                    |  | Secured First Lien Debt (5.0%, Due 10/2015)(F)(G)(I)                          |  |           | 3,931  |  |      |   | 3,568  |           |  |   | 1,338  | 
|                                          |  |                                                    |  | Common Stock Warrants (8.8% ownership)(F)(H)                                  |  |           |        |  |      |   | 66     |           |  |   |       | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                    |  |                                                                               |  |           |        |  |      |   | 3,790  |           |  |   | 1,400  | 



76



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|----------------------------------------------------- |  | ------------------------------------------------------- | ---------------------------------------------- | --------------------------------------------------------------------------------------- |  | --------- | ------ |  | ---- | ----- | ------ | --------- |  | ----- | ------ | 
|Company(A)                                            |  | Industry                                                |                                                | Investment(B)                                                                           |  | Principal |        |  | Cost |       |        | FairValue | 
|NON-CONTROL/NON-AFFILIATE INVESTMENTS(P) (Continued): | 
|J.America, Inc.                                       |  | Personal and non-durable consumer products              |                                                | Secured Second Lien Debt (10.4%, 1.0% PIK, Due 12/2019)(D)(G)                           |  | $         | 7,538  |  |      | $     | 7,538  |           |  | $     | 7,331  | 
|                                                      |  |                                                         |                                                | Secured Second Lien Debt (11.5%, 1.0% PIK, Due 12/2019)(D)(G)                           |  |           | 9,548  |  |      |       | 9,548  |           |  |       | 9,274  | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 17,086 |           |  |       | 16,605 | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|Leeds Novamark Capital I, L.P.                        |  | Private equity fundhealthcare, education and childcare |                                                | Limited Partnership Interest (3.5% ownership, $2,214 uncalled capital commitment)(H)(O) |  |           |        |  |      |       | 781    |           |  |       | 555    | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|Legend Communications of Wyoming, LLC                 |  | Broadcasting and entertainment                          |                                                | Secured First Lien Debt (11.0%, Due 11/2014)(D)                                         |  |           | 6,699  |  |      |       | 6,699  |           |  |       | 3,816  | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|Meridian Rack & Pinion, Inc.                          |  | Automobile                                              |                                                | Secured First Lien Debt (13.5%, Due 12/2018)(D)                                         |  |           | 4,140  |  |      |       | 4,140  |           |  |       | 4,036  | 
|                                                      |  |                                                         |                                                | Preferred Stock (1,449 shares)(F)(H)                                                    |  |           |        |  |      |       | 1,449  |           |  |       |       | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 5,589  |           |  |       | 4,036  | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|Mikawaya                                              |  | Beverage, Food and Tobacco                              |                                                | Secured Second Lien Debt (11.5%, Due 1/2021)(J)                                         |  |           | 6,750  |  |      |       | 6,750  |           |  |       | 6,750  | 
|                                                      |  |                                                         |                                                | Common Stock (2.49% ownership)(H)(J)                                                    |  |           |        |  |      |       | 450    |           |  |       | 450    | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 7,200  |           |  |       | 7,200  | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|Precision Acquisition Group
Holdings, Inc.            |  | Machinery                                               |                                                | Secured First Lien Equipment Note (11.0%, Due 4/2016)(D)                                |  |           | 1,000  |  |      |       | 1,000  |           |  |       | 1,104  | 
|                                                      |  |                                                         | Secured First Lien Debt (11.0%, Due 4/2016)(D) |                                                                                         |  | 4,125     |        |  |      | 4,125 |        |           |  | 2,910 |       
|                                                      |  |                                                         |                                                | Secured First Lien Debt (11.0%, Due 4/2016)(C)(D)                                       |  |           | 4,053  |  |      |       | 4,053  |           |  |       | 640    | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 9,178  |           |  |       | 4,654  | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|Southern Petroleum Laboratories, Inc.                 |  | Oil and gas                                             |                                                | Secured Second Lien Debt (11.5%, Due 2/2020)(D)                                         |  |           | 8,000  |  |      |       | 8,000  |           |  |       | 7,600  | 
|                                                      |  |                                                         |                                                | Preferred Stock (4,054,054 shares)(F)(H)                                                |  |           |        |  |      |       | 750    |           |  |       | 1,274  | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 8,750  |           |  |       | 8,874  | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|Triple H Food Processors                              |  | Beverage, Food and Tobacco                              |                                                | Secured First Lien Line of Credit, $1,500 available (7.8%, Due 8/2018)(J)               |  |           |       |  |      |       |       |           |  |       |       | 
|                                                      |  |                                                         |                                                | Secured First Lien Debt (9.8%, Due 8/2020)(J)                                           |  |           | 8,000  |  |      |       | 8,000  |           |  |       | 8,000  | 
|                                                      |  |                                                         |                                                | Common Stock (250,000 units)(H)(J)                                                      |  |           |        |  |      |       | 250    |           |  |       | 250    | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 8,250  |           |  |       | 8,250  | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|TWS Acquisition Corporation                           |  | Healthcare, education and childcare                     |                                                | Secured First Lien Line of Credit, $1,500 available (10.0%, Due 7/2017)(J)              |  |           |       |  |      |       |       |           |  |       |       | 
|                                                      |  |                                                         |                                                | Secured First Lien Debt (10.0%, Due 7/2020)(J)                                          |  |           | 13,000 |  |      |       | 13,000 |           |  |       | 13,000 | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 13,000 |           |  |       | 13,000 | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|United Flexible, Inc.                                 |  | Diversified/conglomerate manufacturing                  |                                                | Secured First Lien Line of Credit, $4,000 available (7.0%, Due 2/2018)(D)               |  |           |       |  |      |       |       |           |  |       |       | 
|                                                      |  |                                                         |                                                | Secured First Lien Debt (9.3%, Due 2/2020)(D)                                           |  |           | 20,284 |  |      |       | 20,284 |           |  |       | 20,030 | 
|                                                      |  |                                                         |                                                | Preferred Stock (245 shares)(F)(H)                                                      |  |           |        |  |      |       | 245    |           |  |       | 261    | 
|                                                      |  |                                                         |                                                | Common Stock (500 shares)(F)(H)                                                         |  |           |        |  |      |       | 5      |           |  |       | 64     | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 20,534 |           |  |       | 20,355 | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|Vision Government Solutions, Inc.                     |  | Diversified/conglomerate service                        |                                                | Secured First Lien Line of Credit, $550 available (7.5%, Due 12/2017)(D)                |  |           | 1,450  |  |      |       | 1,450  |           |  |       | 1,434  | 
|                                                      |  |                                                         |                                                | Secured First Lien Debt (9.75%, Due 12/2019)(D)                                         |  |           | 9,000  |  |      |       | 9,000  |           |  |       | 8,899  | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 10,450 |           |  |       | 10,333 | 
|                                                      |  |                                                         |                                                |                                                                                         | 
|WadeCo Specialties, Inc.                              |  | Oil and gas                                             |                                                | Secured First Lien Line of Credit, $2,525 available (8.0%, Due 3/2016)(D)               |  |           | 2,475  |  |      |       | 2,475  |           |  |       | 2,388  | 
|                                                      |  |                                                         |                                                | Secured First Lien Debt (8.0%, Due 3/2019)(D)                                           |  |           | 12,750 |  |      |       | 12,750 |           |  |       | 12,307 | 
|                                                      |  |                                                         |                                                | Secured First Lien Debt (12.0%, Due 3/2019)(D)                                          |  |           | 7,000  |  |      |       | 7,000  |           |  |       | 6,748  | 
|                                                      |  |                                                         |                                                | Preferred Stock (1,000 shares)(F)(H)                                                    |  |           |        |  |      |       | 477    |           |  |       | 477    | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       |        |           |  |       |        | 
|                                                      |  |                                                         |                                                |                                                                                         |  |           |        |  |      |       | 22,702 |           |  |       | 21,920 | 



77



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|-------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ---------------------------------- | ----------------------------------------------------------------------------- |  | --------- | ------ | ------- | ------- | ----- | ------ | --------- | ------- | --- | ----- | 
|Company(A)                                                                                         |  | Industry                               |                                    | Investment(B)                                                                 |  | Principal |        |         | Cost    |       |        | FairValue |        
|NON-CONTROL/NON-AFFILIATE INVESTMENTS(P) (Continued):                                              | 
|Westland Technologies, Inc.                                                                        |  | Diversified/conglomerate
manufacturing |                                    | Secured First Lien Debt (12.5%, Due 4/2016)(D)                                |  | $         | 4,000  |         |         | $     | 4,000  |           |         | $   | 4,013 | 
|                                                                                                   |  |                                        | Common Stock (58,333 shares)(F)(H) |                                                                               |  |           |        |         |         | 408   |        |           |         | 639 |      
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       | 4,408  |           |         |     | 4,652 | 
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|Subtotal  Non-Control/Non-Affiliate Proprietary Investments                                       |  |                                        |                                    |                                                                               |  |           |        | $       | 225,604 |       |        | $         | 222,369 |    
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|Syndicated Investments:                                                                            |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|Ameriqual Group, LLC                                                                               |  | Beverage, food and tobacco             |                                    | Secured First Lien Debt (9.0% and 1.3% PIK, Due 3/2016)(E)                    |  | $         | 7,367  |         |         | $     | 7,352  |           |         | $   | 7,367 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|Autoparts Holdings Limited                                                                         |  | Automobile                             |                                    | Secured Second Lien Debt (11.0%, Due 1/2018)(E)                               |  |           | 700    |         |         |       | 698    |           |         |     | 692   | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|First American Payment Systems, L.P.                                                               |  | Finance                                |                                    | Secured Second Lien Debt (10.8%, Due 4/2019)(L)                               |  |           | 4,195  |         |         |       | 4,172  |           |         |     | 4,006 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|GTCR Valor Companies, Inc.                                                                         |  | Electronics                            |                                    | Secured Second Lien Debt (9.5%, Due 11/2021)(E)                               |  |           | 3,000  |         |         |       | 2,984  |           |         |     | 2,940 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|New Trident Holdcorp, Inc.                                                                         |  | Healthcare, education and childcare    |                                    | Secured Second Lien Debt (10.3%, Due 7/2020)(E)                               |  |           | 4,000  |         |         |       | 3,989  |           |         |     | 3,720 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|PLATO Learning, Inc.                                                                               |  | Healthcare, education and
childcare    |                                    | Secured Second Lien Debt (10.0% PIK, Due 6/2020)(D)(G)                        |  |           | 2,718  |         |         |       | 2,666  |           |         |     | 2,715 | 
|                                                                                                   |  |                                        | Common Stock (21,429 shares)(F)(H) |                                                                               |  |           |        |         |         | 2,637 |        |           |         |    |      
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       | 5,303  |           |         |     | 2,715 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|PSC Industrial Holdings Corp.                                                                      |  | Diversified/conglomerate service       |                                    | Secured Second Lien Debt (9.3%, Due 12/2021)(E)                               |  |           | 3,500  |         |         |       | 3,436  |           |         |     | 3,430 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|RP Crown Parent, LLC                                                                               |  | Electronics                            |                                    | Secured Second Lien Debt (11.3%, Due 12/2019)(E)                              |  |           | 2,000  |         |         |       | 1,971  |           |         |     | 1,720 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|SourceHOV LLC                                                                                      |  | Finance                                |                                    | Secured Second Lien Debt (11.5%, Due 4/2020)(E)                               |  |           | 5,000  |         |         |       | 4,822  |           |         |     | 4,350 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|Targus Group International, Inc.                                                                   |  | Textiles and leather                   |                                    | Secured First Lien Debt (13.8% and 1.0% PIK, Due 5/2016)(E)                   |  |           | 8,976  |         |         |       | 8,950  |           |         |     | 6,911 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|The Active Network, Inc.                                                                           |  | Electronics                            |                                    | Secured Second Lien Debt (9.5%, Due 11/2021)(E)                               |  |           | 1,000  |         |         |       | 996    |           |         |     | 930   | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|Vertellus Specialties Inc.                                                                         |  | Chemicals, plastics and rubber         |                                    | Secured First Lien Debt (10.5%, Due 10/2019)(E)                               |  |           | 3,960  |         |         |       | 3,839  |           |         |     | 3,524 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|Vision Solutions, Inc.                                                                             |  | Electronics                            |                                    | Secured Second Lien Debt (9.5%, Due 7/2017)(E)                                |  |           | 8,000  |         |         |       | 7,968  |           |         |     | 7,960 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|Vitera Healthcare Solutions, LLC                                                                   |  | Healthcare, education and childcare    |                                    | Secured Second Lien Debt (9.3%, Due 11/2021)(E)                               |  |           | 4,500  |         |         |       | 4,476  |           |         |     | 4,388 | 
|                                                                                                   |  |                                        |                                    |                                                                               | 
|W3 Co.                                                                                             |  | Oil and gas                            |                                    | Secured Second Lien Debt (9.3%, Due 9/2020)(E)                                |  |           | 499    |         |         |       | 495    |           |         |     | 389   | 
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|Subtotal  Non-Control/Non-Affiliate Syndicated Investments                                        |  |                                        |                                    |                                                                               |  | $         | 61,451 |         |         | $     | 55,042 |          
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|Total Non-Control/Non-Affiliate Investments (represented 75.8% of total investments at fair value) |  |                                        | $                                  | 287,055                                                                       |  |           | $      | 277,411 |        
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|                                                                                                   |  |                                        |                                    |                                                                              
|AFFILATE INVESTMENTS(Q):                                                                           |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |    
|Proprietary Investments:                                                                           |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|Ashland Acquisition LLC                                                                            |  | Printing and publishing                |                                    | Secured First Lien Line of Credit, $1,500 available (12.0%, Due 7/2016)(D)(G) |  | $         |       |         |         | $     |       |           |         | $   |      | 
|                                                                                                   |  |                                        |                                    | Secured First Lien Debt (12.0%, Due 7/2018)(D)(G)                             |  |           | 7,000  |         |         |       | 7,000  |           |         |     | 7,017 | 
|                                                                                                   |  |                                        |                                    | Preferred Equity Units (4,400 units)(F)(H)                                    |  |           |        |         |         |       | 440    |           |         |     | 574   | 
|                                                                                                   |  |                                        |                                    | Common Equity Units (4,400 units)(F)(H)                                       |  |           |        |         |         |       |       |           |         |     | 238   | 
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       |        |           |         |     |       | 
|                                                                                                   |  |                                        |                                    |                                                                               |  |           |        |         |         |       | 7,440  |           |         |     | 7,829 | 



78



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|---------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------- | - | -------------------------------------------------------------------------- |  | --------- | ------ | ------ | ---- | - | ------ | --------- |  | - | ------ | 
|Company(A)                                                                                     |  | Industry                                                    |   | Investment(B)                                                              |  | Principal |        |        | Cost |   |        | FairValue | 
|AFFILATE INVESTMENTS(Q)(Continued):                                                            | 
|Edge Adhesives Holdings, Inc.                                                                  |  | Diversified/conglomerate manufacturing                      |   | Secured First Lien Debt (12.5%, Due 2/2019)(D)                             |  | $         | 6,200  |        |      | $ | 6,200  |           |  | $ | 6,123  | 
|                                                                                               |  |                                                             |   | Secured First Lien Debt (13.8%, Due 2/2019)(D)                             |  |           | 1,600  |        |      |   | 1,600  |           |  |   | 1,582  | 
|                                                                                               |  |                                                             |   | Preferred Stock (2,516 shares)(F)(H)                                       |  |           |        |        |      |   | 2,516  |           |  |   |       | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   | 10,316 |           |  |   | 7,705  | 
|                                                                                               |  |                                                             |   |                                                                            | 
|FedCap Partners, LLC                                                                           |  | Private equity fund  aerospace and defense                 |   | Class A Membership Units (80 units)(H)(N)                                  |  |           |        |        |      |   | 1,634  |           |  |   | 1,647  | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                               |  |                                                             |   |                                                                            | 
|Lignetics, Inc.                                                                                |  | Diversified natural resources, precious metals and minerals |   | Secured Second Lien Debt (12.0%, Due 2/2021)(D)                            |  |           | 6,000  |        |      |   | 6,000  |           |  |   | 5,940  | 
|                                                                                               |  |                                                             |   | Secured Second Lien Debt (12.0%, Due 2/2021)(D)                            |  |           | 8,000  |        |      |   | 8,000  |           |  |   | 7,920  | 
|                                                                                               |  |                                                             |   | Common Stock (152,603 shares)(F)(H)                                        |  |           |        |        |      |   | 1,855  |           |  |   | 2,211  | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   | 15,855 |           |  |   | 16,071 | 
|                                                                                               |  |                                                             |   |                                                                            | 
|LWO Acquisitions Company LLC                                                                   |  | Diversified/conglomerate manufacturing                      |   | Secured First Lien Line of Credit, $1,950 available (6.5%, Due 12/2017)(D) |  |           | 1,050  |        |      |   | 1,050  |           |  |   | 1,049  | 
|                                                                                               |  |                                                             |   | Secured First Lien Debt (9.5%, Due 12/2019)(D)                             |  |           | 10,579 |        |      |   | 10,579 |           |  |   | 10,566 | 
|                                                                                               |  |                                                             |   | Common Stock (921,000 shares)(F)(H)                                        |  |           |        |        |      |   | 921    |           |  |   | 545    | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   | 12,550 |           |  |   | 12,160 | 
|                                                                                               |  |                                                             |   |                                                                            | 
|RBC Acquisition Corp.                                                                          |  | Healthcare, education and childcare                         |   | Secured First Lien Line of Credit, $0 available (9.0%, Due 12/2015)(F)     |  |           | 4,000  |        |      |   | 4,000  |           |  |   | 4,000  | 
|                                                                                               |  |                                                             |   | Secured First Lien Mortgage Note (9.5%, Due 12/2015)(F)(G)                 |  |           | 6,871  |        |      |   | 6,871  |           |  |   | 6,871  | 
|                                                                                               |  |                                                             |   | Secured First Lien Debt (12.0%, Due 12/2015)(C)(F)                         |  |           | 11,392 |        |      |   | 11,392 |           |  |   | 9,746  | 
|                                                                                               |  |                                                             |   | Secured First Lien Debt (12.5%, Due 12/2015)(F)(G)                         |  |           | 6,000  |        |      |   | 6,000  |           |  |   |       | 
|                                                                                               |  |                                                             |   | Preferred Stock (4,999,000 shares)(F)(H)(K)                                |  |           |        |        |      |   | 4,999  |           |  |   |       | 
|                                                                                               |  |                                                             |   | Common Stock (2,000,000 shares)(F)(H)                                      |  |           |        |        |      |   | 370    |           |  |   |       | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   | 33,632 |           |  |   | 20,617 | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|Total Affiliate Proprietary Investments (represented 18.1% of total investments at fair value) |  |                                                             | $ | 81,427                                                                     |  |           | $      | 66,029 |     
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                               |  |                                                             |   |                                                                           
|CONTROL INVESTMENTS(R):                                                                        |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |  
|Proprietary Investments:                                                                       |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|Defiance Integrated Technologies, Inc.                                                         |  | Automobile                                                  |   | Secured Second Lien Debt (11.0%, Due 2/2019)(F)                            |  | $         | 6,385  |        |      | $ | 6,385  |           |  | $ | 6,384  | 
|                                                                                               |  |                                                             |   | Common Stock (15,500 shares)(F)(H)                                         |  |           |        |        |      |   | 1      |           |  |   | 6,586  | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   | 6,386  |           |  |   | 12,970 | 
|                                                                                               |  |                                                             |   |                                                                            | 
|Lindmark Acquisition, LLC                                                                      |  | Broadcasting and entertainment                              |   | Secured First Lien Debt, $0 available (25.0%, Due Upon Demand)(F)(G)       |  |           |       |        |      |   |       |           |  |   |       | 
|                                                                                               |  |                                                             |   | Success Fee on Secured Second Lien Debt(F)                                 |  |           |       |        |      |   |       |           |  |   | 20     | 
|                                                                                               |  |                                                             |   | Common Stock (100 shares)(F)(H)                                            |  |           |        |        |      |   | 317    |           |  |   |       | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                               |  |                                                             |   |                                                                            |  |           |        |        |      |   | 317    |           |  |   | 20     | 



79



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2015

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                            |  |                         |   |                                                                            |  |           |        |        |      |   |         |           |  |   |         | 
|------------------------------------------------------------------------------------------- |  | ----------------------- | - | -------------------------------------------------------------------------- |  | --------- | ------ | ------ | ---- | - | ------- | --------- |  | - | ------- | 
|Company(A)                                                                                  |  | Industry                |   | Investment(B)                                                              |  | Principal |        |        | Cost |   |         | FairValue | 
|CONTROL INVESTMENTS(R): Continued                                                           |  |                         |   |                                                                            |  |           |        |        |      |   |         |          
|Sunshine Media Holdings                                                                     |  | Printing and publishing |   | Secured First Lien Line of Credit, $604 available (8.0%, Due 5/2016)(F)(G) |  | $         | 1,396  |        |      | $ | 1,396   |           |  | $ | 1,396   | 
|                                                                                            |  |                         |   | Secured First Lien Debt (8.0%, Due 5/2016)(F)(G)                           |  |           | 5,000  |        |      |   | 5,000   |           |  |   | 2,379   | 
|                                                                                            |  |                         |   | Secured First Lien Debt (4.8%, Due 5/2016)(F)(I)                           |  |           | 11,948 |        |      |   | 11,948  |           |  |   | 5,686   | 
|                                                                                            |  |                         |   | Secured First Lien Debt (5.5%, Due 5/2016)(C)(F)(I)                        |  |           | 10,700 |        |      |   | 10,700  |           |  |   |        | 
|                                                                                            |  |                         |   | Preferred Stock (15,270 shares)(F)(H)(K)                                   |  |           |        |        |      |   | 5,275   |           |  |   |        | 
|                                                                                            |  |                         |   | Common Stock (1,867 shares)(F)(H)                                          |  |           |        |        |      |   | 740     |           |  |   |        | 
|                                                                                            |  |                         |   | Common Stock Warrants (72 shares)(F)(H)                                    |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                            |  |                         |   |                                                                            |  |           |        |        |      |   |         |           |  |   |         | 
|                                                                                            |  |                         |   |                                                                            |  |           |        |        |      |   | 35,059  |           |  |   | 9,461   | 
|                                                                                            |  |                         |   |                                                                            |  |           |        |        |      |   |         |           |  |   |         | 
|Total Control Proprietary Investments (represented 6.1% of total investments at fair value) |  |                         | $ | 41,762                                                                     |  |           | $      | 22,451 |     
|                                                                                            |  |                         |   |                                                                            |  |           |        |        |      |   |         |           |  |   |         | 
|TOTAL INVESTMENTS(S)                                                                        |  |                         |   |                                                                            |  |           |        |        |      | $ | 410,244 |           |  | $ | 365,891 | 
|                                                                                            |  |                         |   |                                                                            |  |           |        |        |      |   |         |           |  |   |         | 



|(A) | Certain of the securities listed in the above schedule are issued by affiliate(s) of the indicated portfolio company. Additionally, the majority of the securities listed above, totaling $312.0 million at fair value, are
pledged as collateral to our Credit Facility, as described further in Note 5Borrowings.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Percentages represent cash interest rates (which are generally indexed off of the 30-day London Interbank Offered Rate (LIBOR)) in effect at September 30, 2015, and due dates represent the contractual
maturity date. If applicable, paid-in-kind (PIK) interest rates are noted separately from the cash interest rates. Senior debt securities generally take the form of first priority liens on the assets of the underlying businesses.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Last out tranche (LOT) of debt, meaning if the portfolio company is liquidated, the holder of the LOT is paid after all other debt holders.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

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

|(E) | Fair value was based on the indicative bid price on or near September 30, 2015, offered by the respective syndication agents trading desk.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(F) | 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(H) | Investment is non-income producing.
|--- | -----------------------------------

|(I) | Investment is on non-accrual status.
|--- | ------------------------------------

|(J) | New, or restructured proprietary investment valued at cost, as it was determined that the price paid during the quarter ended September 30, 2015 best represents fair value as of September 30, 2015.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(K) | Aggregates all shares of such class of stock owned without regard to specific series owned within such class, some series of which may or may not be voting shares.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(L) | Subsequent to September 30, 2015, the investment was sold, and as such the fair value as of September 30, 2015 was based upon the sales amount.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(N) | 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(O) | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(P) | Non-Control/Non-Affiliate investments, as defined by the Investment Company Act of 1940, as amended, (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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(R) | 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(S) | Cumulative gross unrealized depreciation for federal income tax purposes is $70.4 million; cumulative gross unrealized appreciation for federal income tax purposes is $25.7 million. Cumulative net unrealized
depreciation is $44.7 million, based on a tax cost of $410.6 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



80



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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2014

(DOLLAR AMOUNTS IN THOUSANDS)



|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|----------------------------------------- |  | --------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | --------- | ------ |  | ---- | - | ------ | --------- |  | - | ------ | 
|Company(A)                                |  | Industry                                                  |  | Investment(B)                                                                            |  | Principal |        |  | Cost |   |        | FairValue | 
|NON-CONTROL/NON-AFFILIATE INVESTMENTS(P): |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |          
|Proprietary investments:                  |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |  
|AG Transportation Holdings, LLC           |  | Cargo transport                                           |  | Secured Second Lien Debt (13.3%, Due 3/2018)(D)                                          |  | $         | 13,000 |  |      | $ | 12,899 |           |  | $ | 12,838 | 
|                                          |  |                                                           |  | Member Profit Participation (18.0% ownership)(F) (H)                                     |  |           |        |  |      |   | 1,000  |           |  |   |       | 
|                                          |  |                                                           |  | Profit Participation Warrants (7.0% ownership)(F) (H)                                    |  |           |        |  |      |   | 244    |           |  |   |       | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   | 14,143 |           |  |   | 12,838 | 
|                                          |  |                                                           |  |                                                                                          | 
|Allison Publications, LLC                 |  | Printing and publishing                                   |  | Secured First Lien Line of Credit, $0 available (8.3%, Due 9/2016)(D)                    |  |           | 600    |  |      |   | 600    |           |  |   | 598    | 
|                                          |  |                                                           |  | Secured First Lien Debt (8.3%, Due 9/2018)(D)                                            |  |           | 2,875  |  |      |   | 2,875  |           |  |   | 2,864  | 
|                                          |  |                                                           |  | Secured First Lien Debt (13.0%, Due 9/2018)(C) (D)                                       |  |           | 5,400  |  |      |   | 5,400  |           |  |   | 5,380  | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   | 8,875  |           |  |   | 8,842  | 
|                                          |  |                                                           |  |                                                                                          | 
|Alloy Die Casting Co.                     |  | Diversified/conglomerate manufacturing                    |  | Secured First Lien Debt (13.5%, Due 10/2018)(D)                                          |  |           | 5,235  |  |      |   | 5,235  |           |  |   | 5,228  | 
|                                          |  |                                                           |  | Preferred Stock (1,742 shares)(F) (H)                                                    |  |           |        |  |      |   | 1,742  |           |  |   | 1,122  | 
|                                          |  |                                                           |  | Common Stock (270 shares)(F) (H)                                                         |  |           |        |  |      |   | 18     |           |  |   |       | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   | 6,995  |           |  |   | 6,350  | 
|                                          |  |                                                           |  |                                                                                          | 
|Behrens Manufacturing, LLC                |  | Diversified/conglomerate manufacturing                    |  | Secured First Lien Debt (13.0%, Due 12/2018)(D)                                          |  |           | 4,275  |  |      |   | 4,275  |           |  |   | 4,280  | 
|                                          |  |                                                           |  | Preferred Stock (1,253 shares)(F) (H) (M)                                                |  |           |        |  |      |   | 1,253  |           |  |   | 1,150  | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   | 5,528  |           |  |   | 5,430  | 
|                                          |  |                                                           |  |                                                                                          | 
|Chinese Yellow Pages Company              |  | Printing and publishing                                   |  | Secured First Lien Line of Credit, $0 available (7.3%, Due 2/2015)(D)                    |  |           | 108    |  |      |   | 108    |           |  |   | 95     | 
|                                          |  |                                                           |  |                                                                                          | 
|Francis Drilling Fluids, Ltd.             |  | Oil and gas                                               |  | Secured Second Lien Debt (12.4%, Due 11/2017)(D)(K)                                      |  |           | 15,000 |  |      |   | 15,000 |           |  |   | 14,550 | 
|                                          |  |                                                           |  | Secured Second Lien Debt (11.3%, Due 11/2017)(J)(K)                                      |  |           | 7,000  |  |      |   | 7,000  |           |  |   | 7,000  | 
|                                          |  |                                                           |  | Preferred Equity Units (999 units)(F) (H)                                                |  |           |        |  |      |   | 983    |           |  |   | 1,081  | 
|                                          |  |                                                           |  | Common Equity Units (999 units)(F) H)                                                    |  |           |        |  |      |   | 1      |           |  |   | 206    | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   | 22,984 |           |  |   | 22,837 | 
|                                          |  |                                                           |  |                                                                                          | 
|Funko, LLC                                |  | Personal and non-durable consumer products                |  | Secured First Lien Debt (12.0% and 1.5% PIK, Due 5/2019)(D)                              |  |           | 7,645  |  |      |   | 7,645  |           |  |   | 7,817  | 
|                                          |  |                                                           |  | Preferred Equity Units (1,305 units)(F) (H)                                              |  |           |        |  |      |   | 1,305  |           |  |   | 5,691  | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   | 8,950  |           |  |   | 13,508 | 
|                                          |  |                                                           |  |                                                                                          | 
|GFRC Holdings, LLC                        |  | Buildings and real estate                                 |  | Secured First Lien Line of Credit, $130 available (10.5%, Due 12/2014)(D)                |  |           | 270    |  |      |   | 270    |           |  |   | 149    | 
|                                          |  |                                                           |  | Secured First Lien Debt (10.5%, Due 6/2016)(D)                                           |  |           | 4,924  |  |      |   | 4,924  |           |  |   | 2,708  | 
|                                          |  |                                                           |  | Secured First Lien Debt (13.0%, Due 6/2016)(D)                                           |  |           | 6,598  |  |      |   | 6,598  |           |  |   | 3,761  | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   | 11,792 |           |  |   | 6,618  | 
|                                          |  |                                                           |  |                                                                                          | 
|Heartland Communications Group            |  | Broadcasting and entertainment                            |  | Secured First Lien Line of Credit, $0 available (5.0%, Due 9/2014)(D) (G) (I)            |  |           | 100    |  |      |   | 97     |           |  |   | 65     | 
|                                          |  |                                                           |  | Secured First Lien Line of Credit, $0 available (10.0%, Due 9/2014)(D) (G) (I)           |  |           | 100    |  |      |   | 93     |           |  |   | 65     | 
|                                          |  |                                                           |  | Secured First Lien Debt (5.0%, Due 9/2014)(D) (G) (I)                                    |  |           | 4,342  |  |      |   | 4,196  |           |  |   | 809    | 
|                                          |  |                                                           |  | Common Stock Warrants (8.8% ownership)(F) (H)                                            |  |           |        |  |      |   | 66     |           |  |   |       | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   | 4,452  |           |  |   | 939    | 
|                                          |  |                                                           |  |                                                                                          | 
|J.America, Inc.                           |  | Personal and non-durable consumer products                |  | Secured Second Lien Debt (10.4%, Due 12/2019)(D)(G)                                      |  |           | 7,500  |  |      |   | 7,500  |           |  |   | 7,350  | 
|                                          |  |                                                           |  | Secured Second Lien Debt (11.5%, Due 12/2019)(D)(G)                                      |  |           | 9,500  |  |      |   | 9,500  |           |  |   | 9,298  | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   |        |           |  |   |        | 
|                                          |  |                                                           |  |                                                                                          |  |           |        |  |      |   | 17,000 |           |  |   | 16,648 | 
|                                          |  |                                                           |  |                                                                                          | 
|Leeds Novamark Capital I, L.P.            |  | Private equity fund  healthcare, education and childcare |  | Limited Partnership Interest (3.5% ownership, $2,827 uncalled capital commitment)(H) (O) |  |           |        |  |      |   | 173    |           |  |   | 36     | 
|                                          |  |                                                           |  |                                                                                          | 
|Legend Communications of Wyoming, LLC     |  | Broadcasting and entertainment                            |  | Secured First Lien Debt (12.0%, Due 1/2014)(D)                                           |  |           | 6,699  |  |      |   | 6,699  |           |  |   | 3,757  | 



81



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2014

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|------------------------------------------------------------ |  | -------------------------------------- |  | ----------------------------------------------------------------------- |  | --------- | ------- |  | ---- | - | ------- | --------- |  | - | ------ | 
|Company(A)                                                   |  | Industry                               |  | Investment(B)                                                           |  | Principal |         |  | Cost |   |         | FairValue | 
|NON-CONTROL/NON-AFFILIATE INVESTMENTS(P) (Continued):        |  |                                        |  |                                                                         |  |           |         |  |      |   |         |          
|Meridian Rack & Pinion, Inc.                                 |  | Automobile                             |  | Secured First Lien Debt (13.5%, Due 12/2018)(D)                         |  | $         | 4,140   |  |      | $ | 4,140   |           |  | $ | 4,135  | 
|                                                             |  |                                        |  | Convertible Preferred Stock (1,449 shares)(F) (H)                       |  |           |         |  |      |   | 1,449   |           |  |   | 1,549  | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   | 5,589   |           |  |   | 5,684  | 
|                                                             |  |                                        |  |                                                                         | 
|North American Aircraft Services, LLC                        |  | Aerospace and defense                  |  | Secured Second Lien Debt (12.5%, Due 8/2016)(F) (L)                     |  |           | 2,115   |  |      |   | 2,115   |           |  |   | 2,115  | 
|                                                             |  |                                        |  | Success Fee on Secured Second Lien Debt(F) (L)                          |  |           |         |  |      |   |        |           |  |   | 639    | 
|                                                             |  |                                        |  | Common Stock Warrants (35,000 shares)(F) (H) (L)                        |  |           |         |  |      |   | 350     |           |  |   | 1,928  | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   | 2,465   |           |  |   | 4,682  | 
|                                                             |  |                                        |  |                                                                         | 
|Precision Acquisition Group Holdings, Inc.                   |  | Machinery                              |  | Secured First Lien Equipment Note (9.0%, Due 3/2015)(D)                 |  |           | 1,000   |  |      |   | 1,000   |           |  |   | 881    | 
|                                                             |  |                                        |  | Secured First Lien Debt (9.0%, Due 3/2015)(D)                           |  |           | 4,125   |  |      |   | 4,125   |           |  |   | 485    | 
|                                                             |  |                                        |  | Secured First Lien Debt (9.0%, Due 3/2015)(C) (D)                       |  |           | 4,053   |  |      |   | 4,053   |           |  |   | 457    | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   | 9,178   |           |  |   | 1,823  | 
|                                                             |  |                                        |  |                                                                         | 
|Saunders & Associates                                        |  | Electronics                            |  | Secured First Lien Line of Credit, $0 available (11.3%, Due 5/2013)(D)  |  |           | 917     |  |      |   | 917     |           |  |   | 413    | 
|                                                             |  |                                        |  | Secured First Lien Debt (11.3%, Due 5/2013)(D)                          |  |           | 8,947   |  |      |   | 8,947   |           |  |   | 4,026  | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   | 9,864   |           |  |   | 4,439  | 
|                                                             |  |                                        |  |                                                                         | 
|Southern Petroleum Laboratories, Inc.                        |  | Oil and gas                            |  | Secured Second Lien Debt (11.5%, Due 2/2020)(J)                         |  |           | 8,000   |  |      |   | 8,000   |           |  |   | 8,000  | 
|                                                             |  |                                        |  | Preferred Stock (4,054,054 shares)(H) (J)                               |  |           |         |  |      |   | 750     |           |  |   | 750    | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   | 8,750   |           |  |   | 8,750  | 
|                                                             |  |                                        |  |                                                                         | 
|Sunburst Media - Louisiana, LLC                              |  | Broadcasting and entertainment         |  | Secured First Lien Debt (8.5%, Due 2/2016)(F) (G)                       |  |           | 6,026   |  |      |   | 6,026   |           |  |   | 1,600  | 
|                                                             |  |                                        |  |                                                                         | 
|WadeCo Specialties, Inc.                                     |  | Oil and gas                            |  | Secured First Lien Line of Credit, $526 available (8.0%, Due 3/2015)(D) |  |           | 1,474   |  |      |   | 1,474   |           |  |   | 1,452  | 
|                                                             |  |                                        |  | Secured First Lien Debt (8.0%, Due 3/2019)(D)                           |  |           | 4,500   |  |      |   | 4,500   |           |  |   | 4,433  | 
|                                                             |  |                                        |  | Secured First Lien Debt (12.0%, Due 3/2019)(D)                          |  |           | 4,500   |  |      |   | 4,500   |           |  |   | 4,421  | 
|                                                             |  |                                        |  | Preferred Stock (1,000 shares)(F) (H)                                   |  |           |         |  |      |   | 250     |           |  |   | 454    | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   | 10,724  |           |  |   | 10,760 | 
|                                                             |  |                                        |  |                                                                         | 
|Westland Technologies, Inc.                                  |  | Diversified/conglomerate manufacturing |  | Secured First Lien Debt (7.5%, Due 4/2016)(D)                           |  |           | 50      |  |      |   | 50      |           |  |   | 46     | 
|                                                             |  |                                        |  | Secured First Lien Debt (12.5%, Due 4/2016)(D)                          |  |           | 4,000   |  |      |   | 4,000   |           |  |   | 3,699  | 
|                                                             |  |                                        |  | Common Stock (58,333 shares)(H)                                         |  |           |         |  |      |   | 408     |           |  |   | 58     | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   | 4,458   |           |  |   | 3,803  | 
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|Subtotal  Non-Control/Non-Affiliate Proprietary investments |  |                                        |  |                                                                         |  | $         | 164,753 |  |      | $ | 139,439 |          
|                                                             |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|                                                             |  |                                        |  |                                                                         | 
|Syndicated Investments:                                      |  |                                        |  |                                                                         |  |           |         |  |      |   |         |           |  |   |        | 
|Ameriqual Group, LLC                                         |  | Beverage, food and tobacco             |  | Secured First Lien Debt (9.0% and 1.5% PIK, Due 3/2016)(E)              |  | $         | 7,335   |  |      | $ | 7,283   |           |  | $ | 6,235  | 
|                                                             |  |                                        |  |                                                                         | 
|Ardent Medical Services, Inc.                                |  | Healthcare, education and childcare    |  | Secured Second Lien Debt (11.0%, Due 1/2019)(E)                         |  |           | 7,143   |  |      |   | 7,135   |           |  |   | 7,224  | 
|                                                             |  |                                        |  |                                                                         | 
|Autoparts Holdings Limited                                   |  | Automobile                             |  | Secured Second Lien Debt (10.5%, Due 1/2018)(E)                         |  |           | 833     |  |      |   | 830     |           |  |   | 800    | 
|                                                             |  |                                        |  |                                                                         | 
|Blue Coat Systems, Inc.                                      |  | Electronics                            |  | Secured Second Lien Debt (9.5%, Due 6/2020)(E)                          |  |           | 3,000   |  |      |   | 2,974   |           |  |   | 3,038  | 
|                                                             |  |                                        |  |                                                                         | 
|Envision Acquisition Company, LLC                            |  | Healthcare, education and childcare    |  | Secured Second Lien Debt (9.8%, Due 11/2021)(E)                         |  |           | 2,500   |  |      |   | 2,454   |           |  |   | 2,500  | 
|                                                             |  |                                        |  |                                                                         | 
|First American Payment Systems, L.P.                         |  | Finance                                |  | Secured Second Lien Debt (10.8%, Due 4/2019)(E)                         |  |           | 4,195   |  |      |   | 4,167   |           |  |   | 4,205  | 
|                                                             |  |                                        |  |                                                                         | 
|GTCR Valor Companies, Inc.                                   |  | Electronics                            |  | Secured Second Lien Debt (9.5%, Due 11/2021)(E)                         |  |           | 3,000   |  |      |   | 2,982   |           |  |   | 2,970  | 
|                                                             |  |                                        |  |                                                                         | 
|New Trident Holdcorp, Inc.                                   |  | Healthcare, education and Childcare    |  | Secured Second Lien Debt (10.3%, Due 7/2020)(E)                         |  |           | 4,000   |  |      |   | 3,987   |           |  |   | 4,000  | 



82



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2014

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|-------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------- |  | ------------------------------------------------------------------------------ |  | --------- | ------- |  | ---- | - | ------- | --------- |  | - | ------ | 
|Company(A)                                                                                         |  | Industry                                                    |  | Investment(B)                                                                  |  | Principal |         |  | Cost |   |         | FairValue | 
|NON-CONTROL/NON-AFFILIATE INVESTMENTS(P) (Continued):                                              |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |          
|PLATO Learning, Inc.                                                                               |  | Healthcare, education and childcare                         |  | Secured Second Lien Debt (11.3%, Due 5/2019)(E)                                |  | $         | 5,000   |  |      | $ | 4,925   |           |  | $ | 5,000  | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|RP Crown Parent, LLC                                                                               |  | Electronics                                                 |  | Secured Second Lien Debt (11.3%, Due 12/2019)(E)                               |  |           | 2,000   |  |      |   | 1,967   |           |  |   | 1,898  | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|Sensus USA, Inc.                                                                                   |  | Electronics                                                 |  | Secured Second Lien Debt (8.5%, Due 5/2018)(E)                                 |  |           | 500     |  |      |   | 497     |           |  |   | 495    | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|Targus Group International, Inc.                                                                   |  | Textiles and leather                                        |  | Secured First Lien Debt (11.0% and 1.0% PIK, Due 5/2016)(D)                    |  |           | 9,034   |  |      |   | 8,956   |           |  |   | 8,171  | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|The Active Network                                                                                 |  | Electronics                                                 |  | Secured Second Lien Debt (9.5%, Due 11/2021)(E)                                |  |           | 1,000   |  |      |   | 995     |           |  |   | 1,000  | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|Vision Solutions, Inc.                                                                             |  | Electronics                                                 |  | Secured Second Lien Debt (9.5%, Due 7/2017)(E)                                 |  |           | 11,000  |  |      |   | 10,953  |           |  |   | 10,972 | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|Vitera Healthcare Solutions, LLC                                                                   |  | Healthcare, education and childcare                         |  | Secured Second Lien Debt (9.3%, Due 11/2021)(E)                                |  |           | 500     |  |      |   | 493     |           |  |   | 495    | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|W3, Co.                                                                                            |  | Oil and Gas                                                 |  | Secured Second Lien Debt (9.3%, Due 9/2020)(E)                                 |  |           | 499     |  |      |   | 494     |           |  |   | 484    | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|Subtotal  Non-Control/Non-Affiliate Syndicated investments                                        |  |                                                             |  |                                                                                |  | $         | 61,092  |  |      | $ | 59,487  |          
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|Total Non-Control/Non-Affiliate Investments (represented 70.7% of total investments at fair value) |  |                                                             |  |                                                                                |  | $         | 225,845 |  |      | $ | 198,926 |          
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|                                                                                                  
|AFFILATE INVESTMENTS(Q):                                                                           | 
|Ashland Acquisition, LLC                                                                           |  | Printing and publishing                                     |  | Secured First Lien Line of Credit, $1,500 available (12.0%, Due 7/2016)(D) (G) |  | $         |        |  |      | $ |        |           |  | $ |       | 
|                                                                                                   |  |                                                             |  | Secured First Lien Debt (12.0%, Due 7/2018)(D) (G)                             |  |           | 7,000   |  |      |   | 7,000   |           |  |   | 7,053  | 
|                                                                                                   |  |                                                             |  | Preferred Equity Units (4,400 units)(F) (H)                                    |  |           |         |  |      |   | 440     |           |  |   | 206    | 
|                                                                                                   |  |                                                             |  | Common Equity Units (4,400 units)(F) (H)                                       |  |           |         |  |      |   |        |           |  |   |       | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   | 7,440   |           |  |   | 7,259  | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|Edge Adhesives Holdings, Inc.                                                                      |  | Diversified/conglomerate manufacturing                      |  | Secured First Lien Line of Credit, $230 available (12.5%, Due 8/2015)(D)       |  |           | 770     |  |      |   | 770     |           |  |   | 768    | 
|                                                                                                   |  |                                                             |  | Secured First Lien Debt (12.5%, Due 2/2019)(D)                                 |  |           | 6,200   |  |      |   | 6,200   |           |  |   | 6,208  | 
|                                                                                                   |  |                                                             |  | Secured First Lien Debt (13.8%, Due 2/2019)(D)                                 |  |           | 1,600   |  |      |   | 1,600   |           |  |   | 1,604  | 
|                                                                                                   |  |                                                             |  | Secured First Lien Debt (13.8%, Due 11/2014)(J)                                |  |           | 585     |  |      |   | 585     |           |  |   | 585    | 
|                                                                                                   |  |                                                             |  | Preferred Stock (2,316 shares)(F) (H)                                          |  |           |         |  |      |   | 2,316   |           |  |   | 2,885  | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   | 11,471  |           |  |   | 12,050 | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|FedCap Partners, LLC                                                                               |  | Private equity fund  aerospace and defense                 |  | Class A Membership Units (80 units)(H) (N)                                     |  |           |         |  |      |   | 1,718   |           |  |   | 2,238  | 
|                                                                                                   |  |                                                             |  |                                                                                | 
|Lignetics, Inc.                                                                                    |  | Diversified natural resources, precious metals and minerals |  | Secured Second Lien Debt (12.0%, Due 3/2020)(D)                                |  |           | 6,000   |  |      |   | 6,000   |           |  |   | 6,007  | 
|                                                                                                   |  |                                                             |  | Common Stock (100,000 shares)(F) (H)                                           |  |           |         |  |      |   | 1,000   |           |  |   | 1,169  | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   | 7,000   |           |  |   | 7,176  | 
|RBC Acquisition Corp.                                                                              |  | Healthcare, education and childcare                         |  | Secured First Lien Line of Credit, $0 available (9.0%, Due 6/2014)(F)          |  |           | 4,000   |  |      |   | 4,000   |           |  |   | 4,000  | 
|                                                                                                   |  |                                                             |  | Secured First Lien Mortgage Note (9.5%,Due 12/2014)(F)(G)                      |  |           | 6,891   |  |      |   | 6,891   |           |  |   | 6,891  | 
|                                                                                                   |  |                                                             |  | Secured First Lien Debt (12.0%, Due 12/2014)(C) (F)                            |  |           | 11,392  |  |      |   | 11,392  |           |  |   | 11,392 | 
|                                                                                                   |  |                                                             |  | Secured First Lien Debt (12.5%, Due 12/2014)(F)(G)                             |  |           | 6,000   |  |      |   | 6,000   |           |  |   | 6,000  | 
|                                                                                                   |  |                                                             |  | Preferred Stock (4,999,000 shares)(F) (H) (M)                                  |  |           |         |  |      |   | 4,999   |           |  |   |       | 
|                                                                                                   |  |                                                             |  | Common Stock (2,000,000 shares)(F) (H)                                         |  |           |         |  |      |   | 370     |           |  |   |       | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   | 33,652  |           |  |   | 28,283 | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|Total Affiliate Proprietary Investments (represented 20.3% of total investments at fair value)     |  |                                                             |  |                                                                                |  | $         | 61,281  |  |      | $ | 57,006  |          
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|                                                                                                   | 
|CONTROL INVESTMENTS(R):                                                                            |  |                                                             |  |                                                                               
|Defiance Integrated Technologies, Inc.                                                             |  | Automobile                                                  |  | Secured Second Lien Debt (11.0%, Due 4/2016)(C) (F)                            |  | $         | 6,545   |  |      | $ | 6,545   |           |  | $ | 6,545  | 
|                                                                                                   |  |                                                             |  | Common Stock (15,500 shares)(F) (H)                                            |  |           |         |  |      |   | 1       |           |  |   | 6,461  | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   |         |           |  |   |        | 
|                                                                                                   |  |                                                             |  |                                                                                |  |           |         |  |      |   | 6,546   |           |  |   | 13,006 | 



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##### Table of Contents

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2014

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   |         |           |  |   |         | 
|------------------------------------------------------------------------------------------- |  | ------------------------------------------- | - | --------------------------------------------------------------------------- |  | --------- | ------ | ------ | ---- | - | ------- | --------- |  | - | ------- | 
|Company(A)                                                                                  |  | Industry                                    |   | Investment(B)                                                               |  | Principal |        |        | Cost |   |         | FairValue | 
|CONTROL INVESTMENTS(R) (Continued):                                                         |  |                                             |   |                                                                             |  |           |        |        |      |   |         |          
|Lindmark Acquisition, LLC                                                                   |  | Broadcasting and entertainment              |   | Secured First Lien Debt, $3,120 available (25.0%, Due Upon Demand)(F) (G)   |  | $         |       |        |      | $ |        |           |  | $ |        | 
|                                                                                            |  |                                             |   | Success Fee on Secured Second Lien Debt(F)                                  |  |           |        |        |      |   |        |           |  |   | 89      | 
|                                                                                            |  |                                             |   | Common Stock (100 shares)(F) (H)                                            |  |           |        |        |      |   | 317     |           |  |   |        | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   |         |           |  |   |         | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   | 317     |           |  |   | 89      | 
|                                                                                            |  |                                             |   |                                                                             | 
|Midwest Metal Distribution, Inc.                                                            |  | Mining, steel, iron and non-precious metals |   | Secured Second Lien Debt (12.0%, Due 7/2015)(F) (I)                         |  |           | 18,281 |        |      |   | 17,720  |           |  |   | 4,455   | 
|                                                                                            |  |                                             |   | Preferred Stock (2,000 shares)(F) (H) (M)                                   |  |           |        |        |      |   | 2,175   |           |  |   |        | 
|                                                                                            |  |                                             |   | Common Stock (501 shares)(F) (H)                                            |  |           |        |        |      |   | 138     |           |  |   |        | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   |         |           |  |   |         | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   | 20,033  |           |  |   | 4,455   | 
|                                                                                            |  |                                             |   |                                                                             | 
|Sunshine Media Holdings                                                                     |  | Printing and publishing                     |   | Secured First Lien Line of Credit, $400 available (4.8%, Due 5/2016)(D) (I) |  |           | 1,600  |        |      |   | 1,600   |           |  |   | 424     | 
|                                                                                            |  |                                             |   | Secured First Lien Debt (4.8%, Due 5/2016)(D) (I)                           |  |           | 16,948 |        |      |   | 16,948  |           |  |   | 4,491   | 
|                                                                                            |  |                                             |   | Secured First Lien Debt (5.5%, Due 5/2016)(C) (D) (I)                       |  |           | 10,700 |        |      |   | 10,700  |           |  |   | 2,889   | 
|                                                                                            |  |                                             |   | Preferred Stock (15,270 shares)(F) (H) (M)                                  |  |           |        |        |      |   | 5,275   |           |  |   |        | 
|                                                                                            |  |                                             |   | Common Stock (1,867 shares)(F) (H)                                          |  |           |        |        |      |   | 740     |           |  |   |        | 
|                                                                                            |  |                                             |   | Common Stock Warrants (72 shares)(F) (H)                                    |  |           |        |        |      |   |        |           |  |   |        | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   |         |           |  |   |         | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   | 35,263  |           |  |   | 7,804   | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   |         |           |  |   |         | 
|Total Control Proprietary Investments (represented 9.0% of total investments at fair value) |  |                                             | $ | 62,159                                                                      |  |           | $      | 25,354 |     
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   |         |           |  |   |         | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   |         |           |  |   |         | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   |         |           |  |   |         | 
|TOTAL INVESTMENTS(S)                                                                        |  |                                             |   |                                                                             |  |           |        |        |      | $ | 349,285 |           |  | $ | 281,286 | 
|                                                                                            |  |                                             |   |                                                                             |  |           |        |        |      |   |         |           |  |   |         | 



|(A) | Certain of the securities listed in the above schedule are issued by affiliate(s) of the indicated portfolio company. Additionally, the majority of the securities listed above, totaling $222.0 million at fair value, are
pledged as collateral to our Credit Facility, as described further in Note 5Borrowings.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Percentages represent cash interest rates (which are generally indexed off of the 30-day LIBOR) in effect at September 30, 2014, and due dates represent the contractual maturity date. If applicable, PIK interest
rates are noted separately from the cash interest rates. Senior debt securities generally take the form of first priority liens on the assets of the underlying businesses.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | LOT of debt, meaning if the portfolio company is liquidated, the holder of the LOT is paid after all other debt holders.
|--- | ------------------------------------------------------------------------------------------------------------------------

|(D) | Fair value was based on an internal yield analysis or on estimates of value submitted by SPSE.
|--- | ----------------------------------------------------------------------------------------------

|(E) | Fair value was based on the indicative bid price on or near September 30, 2014, offered by the respective syndication agents trading desk.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(F) | 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(H) | Investment is non-income producing.
|--- | -----------------------------------

|(I) | Investment is on non-accrual status.
|--- | ------------------------------------

|(J) | New or follow-on proprietary investment valued at cost, as it was determined that the price paid during the quarter ended September 30, 2014 best represents fair value as of September 30, 2014.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(K) | Subsequent to September 30, 2014, the debt interest rates on Francis Drilling Fluids, Ltd. were decreased to approximately 11.9% and 10.8%, respectively, based
on a leverage grid.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(L) | Subsequent to September 30, 2014, North American Aircraft Services, LLC debt and equity investment cost basis were paid off, resulting in a realized gain of $1.6 million and success fees of $0.6 million. As such,
the fair value as of September 30, 2014 was based upon the payoff amount.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(M) | Aggregates all shares of such class of stock owned without regard to specific series owned within such class, some series of which may or may not be voting shares.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(N) | 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(O) | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(P) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(R) | 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.
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|(S) | Cumulative gross unrealized depreciation for federal income tax purposes is $84.3 million; cumulative gross unrealized appreciation for federal income tax purposes is $15.6 million. Cumulative net unrealized
depreciation is $68.7 million, based on a tax cost of $349.9 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 2015

(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 23, 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 Topic 946 Financial Services-Investment
Companies. 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
small and medium-sized businesses 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 investments in connection with our revolving line of credit.

Gladstone Financial Corporation
(Gladstone Financial), a wholly-owned subsidiary of ours, was established on November 21, 2006, for the purpose of holding a license to operate as a Specialized Small Business Investment Company. Gladstone Financial acquired this
license in February 2007. The license enables us, through this subsidiary, to make investments in accordance with the United States Small Business Administration guidelines for specialized small business investment companies. As of
September 30, 2015 and 2014, we held no investments through Gladstone Financial.

The financial statements of the foregoing two subsidiaries are
consolidated with those of ours. We also have significant subsidiaries 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 our investment adviser, Gladstone Management Corporation (the Adviser),
a Delaware corporation and a Securities and Exchange Commission (the SEC) registered investment adviser and an affiliate of ours, pursuant to an investment advisory and management agreement. Administrative services are provided by our
affiliate, Gladstone Administration, LLC (the Administrator), a Delaware limited liability company, pursuant to an administration agreement.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Our Consolidated Financial
Statements and the accompanying notes are prepared 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.

Reclassifications

Certain amounts in our prior fiscal
years consolidated financial statements have been reclassified to conform to the presentation for the year ended September 30, 2015 with no effect on our financial condition, results of operations or cash flows.



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Consolidation

Under Article 6 of Regulation S-X under the Securities Act of 1933, as amended, and the authoritative accounting guidance provided by the American
Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, we are not permitted to consolidate any subsidiary or other entity that is not an investment company, including those in which we have a controlling
interest.

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.

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.

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 Accounting Standards Codification 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 measured by the difference between the net proceeds from the repayment or sale and amortized cost basis of the investment, without regard to unrealized depreciation or appreciation previously recognized, and include investments charged
off during the period, net of recoveries. Unrealized depreciation or appreciation primarily reflects the change in investment fair values, including the reversal of previously recorded unrealized depreciation or appreciation when gains or losses are
realized.



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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, our Board of Directors receives
written valuation recommendations and supporting materials provided by professionals of the Adviser and Administrator with oversight and direction from our 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. Third, after the Valuation Committee concludes its meeting, it and our chief valuation
officer present the Valuation Committees findings to the entire Board of Directors at a meeting the next day.

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 our
chief valuation officer, who reports directly to our Board of Directors, uses the Policy and each quarter the Valuation Committee and Board of Directors reviews the Policy to determine if changes thereto are advisable and also reviews 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.

Standard & Poors Securities Evaluation, Inc. (SPSE) provides estimates of fair value on our debt investments. The Valuation Team,
in accordance with the Policy, generally assigns SPSE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 SPSE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 SPSEs. When this occurs, the 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 the Valuation team with oversight from the Valuation Committee, evaluates such information for incorporation into the total enterprise value of certain of our investments. We generally engage an independent valuation firm
quarterly to value or review our valuation of our significant equity investments, on a rotating basis so that each significant equity investment is reviewed once a year. Such third party inputs are taken into consideration as one of the many data
points in determining fair value under the Policy.

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 total enterprise value (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 earnings before interest, taxes,
depreciation and amortization (EBITDA)); EBITDA or revenue multiples obtained from our indexing methodology whereby the original transaction EBITDA or revenue multiple at the time of our closing is indexed to a general subset of
comparable disclosed transactions and EBITDA or revenue multiples from recent sales to third parties of similar securities in similar industries; a comparison to publicly traded securities in similar industries, inputs provided by a third party
independent valuation firm, if any, and other pertinent factors. The Valuation Team generally references industry statistics and may use outside experts when gathering this information. Once the TEV is determined for a portfolio company, the
Valuation Team then allocates the TEV to the portfolio companys securities in 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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TEV is primarily calculated using EBITDA or revenue multiples; however, TEV may also be
calculated using 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 the DCF to calculate the 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 using the yield analysis, which includes a DCF calculation and the Valuation Teams own assumptions,
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 SPSE and market quotes.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Market Quotes  For our syndicate investments for which a limited market exists, fair value is generally based 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 syndicated 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the above valuation techniques, the Valuation Team may also consider other factors when determining fair values 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; and the markets in which the portfolio company operates.
If applicable, new and follow-on proprietary debt and equity investments made during the current reporting quarter (the quarter ended September 30, 2015) are generally valued at original cost basis.

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.

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

Interest Income
Recognition

Interest income, adjusted for amortization of premiums, acquisition costs and amendment fees, accretion of original issue discounts
(OID) and paid-in-kind (PIK), 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



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September 30, 2015, two portfolio companies were either fully or partially on non-accrual status with an aggregate debt cost basis of approximately $26.4 million, or 7.1% of the cost basis
of all debt investments in our portfolio, and an aggregate fair value of approximately $7.1 million, or 2.2% of the fair value of all debt investments in our portfolio. At September 30, 2014, three portfolio companies were on non-accrual status
with an aggregate debt cost basis of approximately $51.4 million, or 16.1% of the cost basis of all debt investments in our portfolio, and an aggregate fair value of approximately $13.2 million, or 5.2% 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
of our 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
September 30, 2015 and 2014, we had 17 OID loans, primarily from the syndicated loans in our portfolio. We recorded OID income of $0.3 million, $0.2 million and $0.3 million for the years ended September 30, 2015, 2014 and 2013,
respectively. The unamortized balance of OID investments as of September 30, 2015 and 2014 totaled $0.6 million. As of September 30, 2015 and 2014, we had four and three investments which had a PIK interest component, respectively. We
recorded PIK interest income of $0.7 million, $0.3 million and $0.3 million for the years ended September 30, 2015, 2014 and 2013, respectively. We collected $0, $0.1 million and $0 of PIK interest in cash for the years ended September 30,
2015, 2014 and 2013, respectively.

Other Income Recognition

We generally record success fees upon receipt of cash. Success fees are contractually due upon a change of control in a portfolio company, typically from an
exit or sale. We recorded an aggregate of $1.9 million in success fees during the year ended September 30, 2015, which resulted from $0.6 million related to the early payoff of North American Aircraft Services, LLC (NAAS) at a
realized gain, $0.3 million prepayment of success fees by Francis Drilling Fluids, Ltd (FDF), $0.7 million prepayment of success fees by Defiance Integrated Technologies, Inc. (Defiance), $0.1 million prepayment of success
fees by Southern Petroleum Laboratories, Inc. (SPL) and $0.2 million of success fees related to our sale of substantially all of the assets in Lindmark Acquisition, LLC (Lindmark) and the ensuing pay down of our debt
investments in Lindmark at par in September 2013. We received an aggregate of $2.4 million in success fees during the year ended September 30, 2014, which resulted from $0.5 million related to the early payoff at par of Thibaut Acquisition Co.
(Thibaut), $0.5 million prepayment by FDF and $1.4 million from Lindmark.

Dividend income on equity investments is accrued to the extent that
such amounts are expected to be collected and if we have the option to collect such amounts in cash. During the year ended September 30, 2015, we recorded an aggregate of $0.9 million of dividend income, which resulted from $0.1 million from
our preferred equity investment in FDF, $0.5 from our preferred equity investment in Funko, LLC (Funko) and $0.3 million from our preferred equity investment in SPL. During the year ended September 30, 2014, we recorded an aggregate
of $1.0 million of dividend income, net of estimated income taxes payable, which resulted from $0.2 million on our preferred equity investment in FDF, $0.7 million on our investment in FedCap Partners, LLC (FedCap) and $0.1 million on
our preferred equity investment in Funko.

We generally record prepayment fees upon receipt of cash. Prepayment fees are contractually due at the time of
an investments exit, based on the prepayment fee schedule. During the year ended September 30, 2015, we did not receive any prepayment fees. During the year ended September 30, 2014, we received an aggregate of $0.5 million in
prepayment fees from the early payoffs at par of one of our proprietary investments and six of our syndicated investments (including one partial paydown).

Success fees, prepayment fees and dividend income are all recorded in other income in our accompanying Consolidated Statements of Operations. In
addition, we received $0.3 million in a legal settlement related to a previously exited portfolio company that was recorded in other income during the year ended September 30, 2015. During the year ended September 30, 2014 we recorded $0.4
million in May 2014 in a legal settlement related to a previously exited portfolio company.

Deferred Financing Fees

Deferred financing costs consist of costs incurred to obtain financing, including legal fees, origination fees and administration fees. Costs associated with
our revolving line of credit and the issuance of our mandatorily redeemable preferred stock are



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deferred and amortized in our accompanying Consolidated Statements of Operationsusing the straight-line method, which approximates the effective interest method, over the terms of the
respective financing instrument. Refer to Note 6Mandatorily Redeemable Preferred Stock for additional information regarding our preferred stock and Note 5 Borrowingsfor additional information regarding our revolving line
of credit.

Related Party Fees

We have entered into
an investment advisory and management agreement (the Advisory Agreement) with the Adviser. 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. These fees are accrued at the end of the quarter when the services are performed and generally paid the following quarter.

The Adviser
also services the loans held by Business Loan in return for which the Adviser receives a 1.5% annual fee based on the monthly aggregate outstanding balance of loans pledged under our revolving line of credit. This fee is also accrued at the end of
the quarter when the service is performed and generally paid the following quarter.

We have entered into an administration agreement (the
Administration Agreement) with the Administrator whereby we pay separately for administrative services. 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.

We have certain wholly-owned taxable subsidiaries (the Taxable Subsidiaries), each of which holds one or more
of the portfolio investments that are listed on our accompanying Consolidated Schedules of Investments. The purpose of the Taxable Subsidiaries is to permit us to hold certain portfolio companies that are organized as limited liability
companies (LLCs) (or other forms of pass-through entities) while satisfying the RIC tax requirement that at least 90.0% of the RICs gross revenue for income tax purposes consist of qualifying investment income. When LLCs (or other
pass-through entities) are owned by the Taxable Subsidiaries, their income is taxed to the Taxable Subsidiaries and does not flow through to the RIC, thereby helping us preserve our RIC status. The Taxable Subsidiaries are not consolidated for
income tax purposes and may generate income tax expense as a result of their ownership of the portfolio companies. This income tax expense totaled $7.5 million, $0 and $0 for the years ended September 30, 2015, 2014 and 2013, respectively, and
was recorded in net realized appreciation (depreciation) on our accompanying Consolidated Statements of Operations.

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 2012 - 2014 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.

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



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reinvested in additional shares of our common stock. Common stockholders who do not so elect 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 2015, the FASB issued Accounting Standards Update 2015-15, Interest  Imputation of Interest (Subtopic 835-30) (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. We have assessed the impact of ASU 2015-15 and identified no impact on
our financial position, results of operations or cash flows from adopting this standard. ASU 2015-15 was effective immediately.

In May 2015, the FASB
issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value Per Share (or its Equivalent) (ASU 2015-07), which eliminates the requirement to categorize investments in the fair
value hierarchy if their fair value measures at net asset value per share (or its equivalent) using the practical expedient in the FASBs fair value measurement guidance. We are currently assessing the impact of ASU 2015-07 and do not
anticipate a material impact on our financial position, results of operations or cash flows from adopting this standard. ASU 2015-07 is required to be adopted retrospectively and is effective for annual reporting periods beginning after
December 15, 2015 and interim periods within those years, with early adoption permitted.

In April 2015, the FASB issued ASU 2015-03,
Simplifying the Presentation of Debt Issuance Costs (ASU-2015-03), which simplifies the presentation of debt issuance costs. We are currently assessing the impact of ASU 2015-03 and do not anticipate a material impact
on our financial position, results of operations or cash flows from adopting this standard. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2015 and interim periods within those years, with early adoption
permitted.

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (ASU 2015-02), which
amends or supersedes the scope and consolidation guidance under existing GAAP. The new standard changes the way a reporting entity evaluates whether a) limited partnerships and similar entities should be consolidated, b) fees paid to decision makers
or service providers are variable interests in a variable interest entity (VIE), and c) variable interests in a VIE held by related parties require the reporting entity to consolidate the VIE. ASU 2015-02 also eliminates the VIE
consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. We are currently assessing the impact of ASU 2015-02 and do not anticipate a material impact on our financial position,
results of operations or cash flows from adopting this standard. ASU 2015-02 is effective for annual reporting periods beginning after December 15, 2015 and interim periods within those years, with early adoption permitted.

In August 2014, the FASB issued Accounting Standards Update 201415 (ASU 2014-15), Presentation of Financial Statements  Going
Concern (Subtopic 205  40): Disclosure of Uncertainties About an Entitys Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate whether there are conditions or events that raise substantial doubt
about the entitys ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial
statements are issued. Since this guidance is primarily around certain disclosures to the financial statements, we anticipate no impact on our financial position or results of operations from adopting this standard. We are currently assessing the
additional disclosure requirements, if any, of ASU 2014-15. ASU 2014-15 is effective for the annual period ended December 31, 2016 and for annual periods and interim periods thereafter with early adoption permitted.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which 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. We are currently
assessing the impact of ASU 2014-09 and anticipate no impact on our financial position or results of operations from adopting this standard. In July 2015, the FASB voted to defer the effective date of ASU 2014-09 until January 1, 2018, with
early adoption permitted beginning January 1, 2017.

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



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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.



| |  |  | Level 1  inputs to the valuation methodology are quoted prices (unadjusted) for identical financial instruments in active markets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2 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
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3 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. As of September 30, 2015 and 2014, all of our investments were valued using Level 3 inputs and during the years ended
September 30, 2015 and 2014, there were no transfers in or out of Level 1, 2 and 3.

The following table presents our investments carried at fair
value as of September 30, 2015 and 2014, by caption on our accompanying Consolidated Statements of Assets and Liabilitiesand by security type, all of which are valued using level 3 inputs:



|                                            |  |                                                                                                                                                                        |         |  |      |   |         | 
|------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- |  | ---- | - | ------- | 
|                                            |  | Total Recurring Fair Value Measurements Reported inConsolidated Statements of Assets 
and LiabilitiesUsingSignificant Unobservable Inputs (Level 3)As of September 30, |        
|                                            |  | 2015                                                                                                                                                                   |         |  | 2014 |  
|Non-Control/Non-Affiliate Investments       |  |                                                                                                                                                                        |         |  |      |   |         | 
|Secured first lien debt                     |  | $                                                                                                                                                                      | 150,426 |  |      | $ | 78,031  | 
|Secured second lien debt                    |  |                                                                                                                                                                        | 100,039 |  |      |   | 106,869 | 
|Preferred equity                            |  |                                                                                                                                                                        | 21,767  |  |      |   | 10,593  | 
|Common equity/equivalents                   |  |                                                                                                                                                                        | 5,179   |  |      |   | 3,433   | 
|                                            |  |                                                                                                                                                                        |         |  |      |   |         | 
|Total Non-Control/Non-Affiliate Investments |  | $                                                                                                                                                                      | 277,411 |  |      | $ | 198,926 | 
|                                            |  |                                                                                                                                                                        |         |  |      |   |         | 
|                                            |  |                                                                                                                                                                       
|Affiliate Investments                       |  |                                                                                                                                                                        |         |  |      |   |         | 
|Secured first lien debt                     |  | $                                                                                                                                                                      | 46,953  |  |      | $ | 43,915  | 
|Secured second lien debt                    |  |                                                                                                                                                                        | 13,860  |  |      |   | 6,593   | 
|Preferred equity                            |  |                                                                                                                                                                        | 495     |  |      |   | 3,091   | 
|Common equity/equivalents                   |  |                                                                                                                                                                        | 4,721   |  |      |   | 3,407   | 
|                                            |  |                                                                                                                                                                        |         |  |      |   |         | 
|Total Affiliate Investments                 |  | $                                                                                                                                                                      | 66,029  |  |      | $ | 57,006  | 
|                                            |  |                                                                                                                                                                        |         |  |      |   |         | 
|                                            | 
|Control Investments                         |  |                                                                                                                                                                        |         | 
|Secured first lien debt                     |  | $                                                                                                                                                                      | 9,461   |  |      | $ | 7,804   | 
|Secured second lien debt                    |  |                                                                                                                                                                        | 6,404   |  |      |   | 11,089  | 
|Preferred equity                            |  |                                                                                                                                                                        |        |  |      |   |        | 
|Common equity/equivalents                   |  |                                                                                                                                                                        | 6,586   |  |      |   | 6,461   | 
|                                            |  |                                                                                                                                                                        |         |  |      |   |         | 
|Total Control Investments                   |  | $                                                                                                                                                                      | 22,451  |  |      | $ | 25,354  | 
|                                            |  |                                                                                                                                                                        |         |  |      |   |         | 
|                                            |  |                                                                                                                                                                       
|Total Investments, at Fair Value            |  | $                                                                                                                                                                      | 365,891 |  |      | $ | 281,286 | 
|                                            |  |                                                                                                                                                                        |         |  |      |   |         | 



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In accordance with ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair
Value Measurement and Disclosure Requirements in U.S. GAAP and International Reporting Standards (IFRS), (ASU 2011-04), the following table provides quantitative information about our Level 3 fair value measurements of
our investments as of September 30, 2015 and 2014. 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
|                                              |  | As of September 30,                                            |         |  |      |   |         |                                     | Range / Weighted Average as ofSeptember 30,
|                                              |  | 2015                                                           |         |  | 2014 |   |         | Valuation
Techniques/
Methodologies |                                             | Unobservable
Input   |  | 2015             |  | 2014                    
|                                              |  |                                                                |         |  |      |  
|Secured first lien debt(A)                    |  | $                                                              | 130,900 |  |      | $ | 68,252  |                                     |                                             | Yield Analysis       |  | Discount Rate    |  | 6.6% - 30.0% /13.0%      |  | 8.4% - 18.8% /13.3%    
|                                              |  |                                                                | 58,138  |  |      |   | 55,263  |                                     |                                             | TEV                  |  | EBITDA multiple  |  | 2.4x  7.4x /6.3x        |  | 4.0x - 7.6x / 6.2x     
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  | EBITDA           |  | $1,333 - $55,042 /$7,895 |  | $247 - $3,700 /$1,906  
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  | Revenue multiple |  | 0.3x  0.8x /0.7x        |  | 0.6x  0.8x /0.7x      
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  | Revenue          |  | $1,838 - $6,387 /$2,968  |  | $2,416 - $5,327 /$4,151
|                                              |  |                                                                | 17,802  |  |      |   | 6,235   |                                     |                                             | Market Quotes        |  | IBP              |  | 77.0% - 100.0% /87.7%    |  | 85.0% - 85.0% /85.0%   
|                                              |  |                                                                |         |  |      |  
|Secured second lien debt(B)                   |  |                                                                | 34,525  |  |      |   | 65,628  |                                     |                                             | Yield Analysis       |  | Discount Rate    |  | 10.2% - 16.2% /13.9%     |  | 11.3% - 13.8% /12.5%   
|                                              |  |                                                                | 72,624  |  |      |   | 45,080  |                                     |                                             | Market Quotes        |  | IBP              |  | 78.0% - 99.5% /94.9%     |  | 94.9% - 101.3% /99.8%  
|                                              |  |                                                                | 13,154  |  |      |   | 13,843  |                                     |                                             | TEV                  |  | EBITDA multiple  |  | 5.0x  6.4x / 5.7x       |  | 4.3x  7.1x / 6.1x     
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  | EBITDA           |  | $3,740 - $6,878 /$5,353  |  | $3,520 - $6,219 /$3,901
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  | Revenue multiple |  |                         |  |                       
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  | Revenue          |  |                         |  |                       
|                                              |  |                                                                |         |  |      |  
|Preferred and common equity / equivalents (C) |  |                                                                | 36,547  |  |      |   | 24,711  |                                     |                                             | TEV                  |  | EBITDA multiple  |  | 2.4x  7.7x /6.3x        |  | 4.3x  7.6x / 6.1x     
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  | EBITDA           |  | $249 - $55,042/$9,258    |  | $998 - $15,685 /$4,135 
|                                              |  |                                                                |         |  |      |  
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  | Revenue multiple |  |                         |  |                       
|                                              |  |                                                                |         |  |      |  
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  | Revenue          |  |                         |  |                       
|                                              |  |                                                                | 2,201   |  |      |   | 2,274   |                                     |                                             | Investments in
Funds |  |                  |  |                          |  |                        
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  |                  |  |                          |  |                        
|Total Investments, at Fair Value              |  | $                                                              | 365,891 |  |      | $ | 281,286 |                                     |                                             |                      |  |                  |  |                          |  |                        
|                                              |  |                                                                |         |  |      |   |         |                                     |                                             |                      |  |                  |  |                          |  |                        



|(A) | September 30, 2015 includes three new proprietary investments for $28.8 million, one restructured investment for $2.4 million, which was valued at cost, and two proprietary investments, which were valued at payoff
amounts totaling $28.2 million.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | September 30, 2015 includes one new proprietary investment for $6.8 million, which was valued at cost, and one syndicated investment, which was valued at payoff
totaling $4.0 million. September 30, 2014 includes one new proprietary investment for $8.0 million and two follow-on proprietary investments for a combined $7.6 million, which were valued at cost, and one proprietary investment, which was
valued at the payoff amount totaling $2.8 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | September 30, 2015 includes three new proprietary investments for $1.4 million, which were valued at cost. September 30, 2014 includes one new proprietary
investment for $0.8 million, which was valued at cost, and one proprietary investment, which was valued at the payoff amount totaling $1.9 million.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in market yields, discounts rates, leverage, EBITDA or
EBITDA multiples (or revenue or revenue multiples), each in isolation, may change



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the fair value of certain of our investments. Generally, an increase or decrease in market yields, discount rates or leverage or a decrease in EBITDA or EBITDA multiples (or revenue or revenue
multiples) may result in a corresponding decrease or increase, 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, 2015 and 2014 for all investments for which the Adviser determines fair value using unobservable (Level 3) factors.

Fair Value Measurements Using Significant Unobservable Data Inputs (Level 3)



|                                                                           |  |                        |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|-------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ---------------------- | - | ------- | --------------- |  | - | ------------------------ | - |  | ----- | ------ | - |  | - | ------- | -
|Year Ended September 30, 2015:                                             |  | Secured FirstLien Debt |         |   | SecuredSecondLien Debt |   |         | PreferredEquity |  |   | CommonEquity/Equivalents |   |  | Total |       
|                                                                           |  |                        |         |   |                       
|Fair value as of September 30, 2014                                        |  | $                      | 129,750 |   |                        | $ | 124,551 |                 |  | $ | 13,684                   |   |  | $     | 13,301 |   |  | $ | 281,286 |  
|Total (losses) gains:                                                      |  |                        |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Net realized (loss) gain(A)                                                |  |                        | (21,016 | ) |                        |   | (11,915 | )               |  |   | (2,175                   | ) |  |       | 1,440  |   |  |   | (33,666 | )
|Net unrealized (depreciation) appreciation(B)                              |  |                        | (10,334 | ) |                        |   | (4,807  | )               |  |   | 5,722                    |   |  |       | (1,534 | ) |  |   | (10,953 | )
|Reversal of prior period net depreciation (appreciation) on
realization(B) |  |                        | 21,463  |   |                        |   | 12,402  |                 |  |   | 2,175                    |   |  |       | (1,440 | ) |  |   | 34,600  |  
|                                                                           |  |                        |         |   |                       
|New investments, repayments, and settlements:(C)                           |  |                        |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Issuances/originations                                                     |  |                        | 101,733 |   |                        |   | 27,691  |                 |  |   | 3,269                    |   |  |       | 4,095  |   |  |   | 136,788 |  
|Settlements/repayments                                                     |  |                        | (7,179  | ) |                        |   | (5,536  | )               |  |   | (413                     | ) |  |       | (434   | ) |  |   | (13,562 | )
|Sales                                                                      |  |                        | (7,577  | ) |                        |   | (19,447 | )               |  |   |                         |   |  |       | (1,578 | ) |  |   | (28,602 | )
|Transfers                                                                  |  |                        |        |   |                        |   | (2,636  | )               |  |   |                         |   |  |       | 2,636  |   |  |   |         |  
|                                                                           |  |                        |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair Value as of September 30, 2015                                        |  | $                      | 206,840 |   |                        | $ | 120,303 |                 |  | $ | 22,262                   |   |  | $     | 16,486 |   |  | $ | 365,891 |  
|                                                                           |  |                        |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  



|                                                                           |  |                   |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|-------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------------- | - | ------- | --------------- |  | - | ------------------------ | - |  | ----- | ------ | - |  | - | ------- | -
|Year Ended September 30, 2014:                                             |  | SecuredFirst Lien |         |   | SecuredSecondLien Debt |   |         | PreferredEquity |  |   | CommonEquity/Equivalents |   |  | Total |       
|                                                                           |  |                   |         |   |                       
|Fair value as of September 30, 2013                                        |  | $                 | 122,949 |   |                        | $ | 122,421 |                 |  | $ | 5,066                    |   |  | $     | 6,442  |   |  | $ | 256,878 |  
|Total (losses) gains:                                                      |  |                   |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Net realized (loss) gain(A)                                                |  |                   | (13,445 | ) |                        |   | 225     |                 |  |   | 362                      |   |  |       | 695    |   |  |   | (12,163 | )
|Net unrealized (depreciation) appreciation(B)                              |  |                   | (2,737  | ) |                        |   | (13,530 | )               |  |   | (241                     | ) |  |       | 5,921  |   |  |   | (10,587 | )
|Reversal of prior period net depreciation (appreciation) on
realization(B) |  |                   | 19,294  |   |                        |   | (246    | )               |  |   | (370                     | ) |  |       | (702   | ) |  |   | 17,976  |  
|                                                                           |  |                   |         |   |                       
|New investments, repayments, and settlements:(C)                           |  |                   |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Issuances/originations                                                     |  |                   | 33,893  |   |                        |   | 56,584  |                 |  |   | 9,780                    |   |  |       | 2,076  |   |  |   | 102,333 |  
|Settlements/repayments                                                     |  |                   | (25,504 | ) |                        |   | (40,903 | )               |  |   | (913                     | ) |  |       | (1,131 | ) |  |   | (68,451 | )
|Sales                                                                      |  |                   | (4,700  | ) |                        |   |        |                 |  |   |                         |   |  |       |       |   |  |   | (4,700  | )
|                                                                           |  |                   |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair Value as of September 30, 2014                                        |  | $                 | 129,750 |   |                        | $ | 124,551 |                 |  | $ | 13,684                   |   |  | $     | 13,301 |   |  | $ | 281,286 |  
|                                                                           |  |                   |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  



|(A) | Included in net realized (loss) gain on investments on our accompanying Consolidated Statements of Operations for the years ended September 30, 2015 and 2014.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Included in net unrealized appreciation (depreciation) on investments on our accompanyingConsolidated Statements of Operations for the years ended September 30, 2015 and 2014.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Includes increases in the cost basis of investments resulting from new portfolio investments, the amortization of discounts and PIK; 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Proprietary Investments

As of September 30, 2015 and 2014, we held 33 and 29 proprietary investments with an aggregate fair value of $310.9 million and $221.8 million, or 85.0%
and 78.9% of the total aggregate portfolio, respectively. During the year ended September 30, 2015, we invested in eight new proprietary investments totaling $89.8 million; sold three proprietary investments for net proceeds of $11.8 million in
the aggregate, resulting in a combined realized loss of $24.7 million; and had one proprietary investment pay off early generating net proceeds of $2.5 million and a realized gain of $1.6 million, for which we received success fees of $0.6 million.
Additionally, during the year ended September 30, 2015, we funded a combined $27.8 million to existing proprietary portfolio companies through revolver draws and follow-on investments, while scheduled and unscheduled principal repayments were
$7.7 million in the aggregate from existing proprietary portfolio companies. The following significant proprietary investment transactions occurred during the year ended September 30, 2015:



| |  |  | B+T Holdings Inc.  In December 2014, we invested $8.1 million, along with an unfunded line of credit of $0.3 million, in B+T Holdings Inc. (B+T), through a combination of secured first lien debt
and equity. B+T, headquartered in Tulsa, Oklahoma, is a full-service provider of structural engineering, construction, and technical services to the wireless tower industry for tower upgrades and modifications. This was a co-investment with one of
our affiliated funds, Gladstone Investment Corporation (Gladstone Investment). Gladstone Investment invested an additional $19.6 million under the same terms.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Midwest Metal Distribution, Inc.  In December 2014, we sold our investment in Midwest Metal Distribution, Inc. (Midwest Metal) for net proceeds of $6.1 million, which resulted in a realized loss
of $14.5 million recorded in the quarter ended December 31, 2014. Midwest Metal had been on non-accrual status at the time of the sale.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | LWO Acquisitions Company, LLC,  In December 2014, we invested $13.5 million, along with an unfunded line of credit of $1.5 million, in LWO Acquisitions Company, LLC, (LWO Acquisitions) through a
combination of secured first lien debt and equity. LWO Acquisitions, headquartered in Dallas, Texas, is a premier electronic manufacturing services company focused on the design and production of specialized printed circuit board assemblies and
related services.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Vision Government Solutions, Inc.  In December 2014, we invested $10.0 million, along with an unfunded line of credit of $1.0 million, in Vision Government Solutions, Inc. (Vision) through
secured first lien debt. Vision, headquartered in Northboro, Massachusetts, is a leading provider of land parcel management software technology and appraisal services to local government organizations, enabling efficient assessment, billing,
collections, mapping, and permitting.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | United Flexible, Inc.  In February 2015, we invested $21.2 million, along with an unfunded line of credit of $4.0 million, in United Flexible, Inc. (formerly known as Precision Metal Hose, Inc.)
(United Flexible) through a combination of secured first lien debt and equity. United Flexible, headquartered in Romeoville, Illinois, is a global leader in the design, development, manufacture and support of performance critical
flexible engineered solutions for the transfer of fluids and gasses in extreme environments.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sunburst Media  Louisiana, LLC  In June 2015, we exited our investment in Sunburst Media  Louisiana, LLC (Sunburst) for net proceeds of $4.7 million, which resulted in a
realized loss of $1.3 million recorded in the quarter ended June 30, 2015.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mikawaya  In July 2015, we invested $7.2 million, in Mikawaya, through a combination of secured second lien debt and equity. Mikawaya, headquartered in Vernon, California, is a producer of Japanese pastries
and specialty frozen desserts.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | TWS Acquisition Corporation  In July 2015, we invested $13.0 million, along with an unfunded line of credit of $1.5 million, in TWS Acquisition Corporation (TWS) through secured first lien debt.
TWS, headquartered in Phoenix, Arizona, is the parent company of Tulsa Welding School and The Refrigeration School, Inc., which are post-secondary skilled trade schools.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Triple H Food Processors, Inc. In August 2015, we invested $8.3 million, along with an unfunded line of credit of $1.5 million in Triple H Food Processors, Inc. (Triple H) through a combination
of secured senior debt and equity. Triple H, headquartered in Riverside, provides co-packing services to a wide variety of branded and private label liquid and related food products.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Saunders & Associates  In August 2015, we exited our investment in Saunders & Associates (Saunders) for net proceeds of $1.0 million, which resulted in a realized loss of $8.9
million recorded in the quarter ended September 30, 2015. Saunders was on non-accrual status at the time of the sale.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Flight Fit N Fun LLC  In September 2015, we invested $8.5 million in Flight Fit N Fun LLC (Flight) through a combination of secured first lien debt and equity. Flight, headquartered in
Springfield, Virginia, operates trampoline parks that provide entertainment facilities where jumpers of all ages can participate in active social outings, lively corporate gatherings, intense individual workouts or memorable birthday parties.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | GFRC Holdings, LLC  In September 2015, we restructured our investment in GFRC Holdings, LLC (GFRC) which resulted in a realized loss of $10.8 million recorded in the quarter ended
September 30, 2015. GFRC was on non-accrual status at the time of the restructure and was reinstated to accrual status effective September 30, 2015.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Syndicated Investments

We held a total of 15 and 16
syndicate loans with an aggregate fair value of $55.0 million and $59.5 million, or 15.0% and 21.1% of our total investment portfolio, as of September 30, 2015 and 2014, respectively. During the year ended September 30, 2015, we invested
in three new syndicated investments for a combined $12.5 million and also invested an additional $4.0 million in an existing syndicated portfolio company. Additionally, during the year ended September 30, 2015, we sold four syndicated
investments for combined net proceeds of $13.3 million, resulting in a combined realized gain of $0.2 million.

Investment Concentrations

As of September 30, 2015, our investment portfolio consisted of investments in 48 portfolio companies located in 20 states in 20 different industries,
with an aggregate fair value of $365.9 million. The five largest investments at fair value as of September 30, 2015 totaled $109.6 million, or 30.0% of our total investment portfolio, as compared to the five largest investments at fair value as
of September 30, 2014 totaling $94.3 million, or 33.5% of our total investment portfolio. As of September 30, 2015, our average investment by obligor was $8.5 million at cost, compared to $7.8 million at cost as of September 30, 2014.

The following table outlines our investments by security type at September 30, 2015 and 2014:



|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|------------------------- |  | ------------------ | ------- |  | ------------------ |  | ----- | ---- |  | - | ---------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                          |  | September 30, 2015 |         |  | September 30, 2014 | 
|                          |  | Cost               |         |  | Fair Value         |  |       | Cost |  |   | Fair Value | 
|Secured first lien debt   |  | $                  | 248,050 |  |                    |  | 60.5  | %    |  | $ | 206,840    |  |  |  | 56.5  | % |  | $ | 182,086 |  |  |  | 52.1  | % |  | $ | 129,750 |  |  |  | 46.1  | %
|Secured second lien debt  |  |                    | 125,875 |  |                    |  | 30.7  |      |  |   | 120,303    |  |  |  | 32.9  |   |  |   | 137,719 |  |  |  | 39.5  |   |  |   | 124,551 |  |  |  | 44.3  |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total debt investments    |  |                    | 373,925 |  |                    |  | 91.2  |      |  |   | 327,143    |  |  |  | 89.4  |   |  |   | 319,805 |  |  |  | 91.6  |   |  |   | 254,301 |  |  |  | 90.4  |  
|                          |  |                    |         |  |                    |  |       |     
|Preferred equity          |  |                    | 22,616  |  |                    |  | 5.5   |      |  |   | 22,262     |  |  |  | 6.1   |   |  |   | 21,936  |  |  |  | 6.2   |   |  |   | 13,684  |  |  |  | 4.9   |  
|Common equity/equivalents |  |                    | 13,703  |  |                    |  | 3.3   |      |  |   | 16,486     |  |  |  | 4.5   |   |  |   | 7,544   |  |  |  | 2.2   |   |  |   | 13,301  |  |  |  | 4.7   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total equity investments  |  |                    | 36,319  |  |                    |  | 8.8   |      |  |   | 38,748     |  |  |  | 10.6  |   |  |   | 29,480  |  |  |  | 8.4   |   |  |   | 26,985  |  |  |  | 9.6   |  
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total Investments         |  | $                  | 410,244 |  |                    |  | 100.0 | %    |  | $ | 365,891    |  |  |  | 100.0 | % |  | $ | 349,285 |  |  |  | 100.0 | % |  | $ | 281,286 |  |  |  | 100.0 | %
|                          |  |                    |         |  |                    |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  



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Our investments at fair value consisted of the following industry classifications at September 30, 2015 and
2014:



|                                                            |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|----------------------------------------------------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                                                            |  | September 30, 2015 |         |  | September 30, 2014            | 
|Industry Classification                                     |  | Fair Value         |         |  | Percentage ofTotalInvestments |  |       | Fair Value |  |   | Percentage ofTotalInvestments | 
|                                                            |  |                    |         | 
|Diversified/conglomerate manufacturing                      |  | $                  | 56,504  |  |                               |  | 15.4  | %          |  | $ | 27,634                        |  |  |  | 9.8   | %
|Oil and gas                                                 |  |                    | 51,110  |  |                               |  | 14.0  |            |  |   | 42,831                        |  |  |  | 15.2  |  
|Healthcare, education and childcare                         |  |                    | 44,994  |  |                               |  | 12.3  |            |  |   | 47,538                        |  |  |  | 16.9  |  
|Personal and non-durable consumer products                  |  |                    | 43,418  |  |                               |  | 11.9  |            |  |   | 30,157                        |  |  |  | 10.7  |  
|Printing and publishing                                     |  |                    | 25,452  |  |                               |  | 7.0   |            |  |   | 23,999                        |  |  |  | 8.5   |  
|Beverage, food and tobacco                                  |  |                    | 22,817  |  |                               |  | 6.2   |            |  |   | 6,235                         |  |  |  | 2.2   |  
|Automobile                                                  |  |                    | 17,699  |  |                               |  | 4.8   |            |  |   | 19,489                        |  |  |  | 6.9   |  
|Diversified natural resources, precious metals and minerals |  |                    | 16,072  |  |                               |  | 4.4   |            |  |   | 7,176                         |  |  |  | 2.6   |  
|Diversified/Conglomerate Service                            |  |                    | 13,763  |  |                               |  | 3.8   |            |  |   |                              |  |  |  |      |  
|Electronics                                                 |  |                    | 13,550  |  |                               |  | 3.7   |            |  |   | 24,811                        |  |  |  | 8.8   |  
|Cargo Transportation                                        |  |                    | 13,434  |  |                               |  | 3.7   |            |  |   | 12,838                        |  |  |  | 4.6   |  
|Leisure, Amusement, Motion Pictures, Entertainment          |  |                    | 8,500   |  |                               |  | 2.3   |            |  |   |                              |  |  |  |      |  
|Finance                                                     |  |                    | 8,356   |  |                               |  | 2.3   |            |  |   | 4,205                         |  |  |  | 1.5   |  
|Textiles and leather                                        |  |                    | 6,911   |  |                               |  | 1.9   |            |  |   | 8,171                         |  |  |  | 2.9   |  
|Broadcast and entertainment                                 |  |                    | 5,235   |  |                               |  | 1.4   |            |  |   | 6,386                         |  |  |  | 2.3   |  
|Buildings and real estate                                   |  |                    | 2,385   |  |                               |  | 0.7   |            |  |   | 6,617                         |  |  |  | 2.4   |  
|Aerospace and defense                                       |  |                    | 1,647   |  |                               |  | 0.4   |            |  |   | 6,920                         |  |  |  | 2.5   |  
|Other, < 2.0%                                               |  |                    | 14,044  |  |                               |  | 3.8   |            |  |   | 6,279                         |  |  |  | 2.2   |  
|                                                            |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total Investments                                           |  | $                  | 365,891 |  |                               |  | 100.0 | %          |  | $ | 281,286                       |  |  |  | 100.0 | %
|                                                            |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  

Our investments at fair value were included in the following U.S. geographic regions at September 30, 2015 and 2014:



|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|----------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                  |  | September 30, 2015 |         |  | September 30, 2014            | 
|Geographic Region |  | Fair Value         |         |  | Percentage ofTotalInvestments |  |       | Fair Value |  |   | Percentage ofTotalInvestments | 
|Midwest           |  | $                  | 124,924 |  |                               |  | 34.1  | %          |  | $ | 107,387                       |  |  |  | 38.2  | %
|South             |  |                    | 117,367 |  |                               |  | 32.1  |            |  |   | 92,355                        |  |  |  | 32.8  |  
|West              |  |                    | 112,575 |  |                               |  | 30.8  |            |  |   | 80,744                        |  |  |  | 28.7  |  
|Northeast         |  |                    | 11,025  |  |                               |  | 3.0   |            |  |   | 800                           |  |  |  | 0.3   |  
|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total Investments |  | $                  | 365,891 |  |                               |  | 100.0 | %          |  | $ | 281,286                       |  |  |  | 100.0 | %
|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  

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

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, 2015:



|                                                        |  |        |         |  
|------------------------------------------------------- |  | ------ | ------- | -
|Year Ending September 30,                               |  | Amount |        
|2016                                                    |  | $      | 102,851 |  
|2017                                                    |  |        | 11,072  |  
|2018                                                    |  |        | 34,499  |  
|2019                                                    |  |        | 62,609  |  
|Thereafter                                              |  |        | 163,904 |  
|                                                        |  |        |         |  
|Total contractual repayments                            |  | $      | 374,935 |  
|Equity investments                                      |  |        | 36,319  |  
|Adjustments to cost basis on debt investments           |  |        | (1,010  | )
|                                                        |  |        |         |  
|Investment Portfolio as of September 30, 2015, at Cost: |  | $      | 410,244 |  
|                                                        |  |        |         |  



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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. As of September 30, 2015 and 2014, we had gross receivables from portfolio companies of $0.6 million and $0.4 million, respectively. The allowance for uncollectible
receivables was $0 and $0.1 million at both September 30, 2015 and 2014. In addition, as of September 2015 and 2014, we had an allowance for uncollectible interest receivables of $1.2 million and $0.4 million, respectively, which is reflected
in interest receivable, net 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.

NOTE 4.
RELATED PARTY TRANSACTIONS

Investment Advisory and Management Agreement

In accordance with the Advisory Agreement, we pay the Adviser certain fees as compensation for its services, such fees consisting of a base management fee and
an incentive fee. The Adviser is controlled by our chairman and chief executive officer. On July 14, 2015, our Board of Directors, including a majority of the directors who are not parties to the agreement or interested persons of any such
party, approved the annual renewal of the Advisory Agreement through August 31, 2016. Pursuant to the terms of our revolving line of credit, we also pay the Adviser a loan servicing fee for its role as servicer thereunder. We expect that
this fee will remain in place so long as the Adviser continues its role as servicer under our revolving line of credit. The following table summarizes the base management fees, incentive fees, and loan servicing fees and associated voluntary,
unconditional and irrevocable credits reflected in our accompanying Consolidated Statements of Operations:



|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                         |  | Year Ended September 30, |           
|                                                         |  | 2015                     |            |   | 2014 |   |         | 2013 | 
|Average total assets subject to base management fee(A)   |  | $                        | 355,510    |   |      | $ | 293,200 |      |  | $ | 281,100 |  
|Multiplied by annual base management fee of 1.75% - 2.0% |  |                          | 2.0  1.75 | % |      |   | 2.0     | %    |  |   | 2.0     | %
|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  
|Base management fee(B)                                   |  |                          | 6,888      |   |      |   | 5,864   |      |  |   | 5,622   |  
|Portfolio company fee credit(C)                          |  |                          | (1,399     | ) |      |   | (797    | )    |  |   | (324    | )
|Senior syndicated loan fee credit(D)                     |  |                          | (118       | ) |      |   | (117    | )    |  |   | (183    | )
|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  
|Net Base Management Fee                                  |  | $                        | 5,371      |   |      | $ | 4,950   |      |  | $ | 5,115   |  
|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  
|                                                         |  |                          |           
|Loan servicing fee(B)                                    |  |                          | 3,816      |   |      |   | 3,503   |      |  |   | 3,656   |  
|Credit to base management fee - loan servicing fee(B)(F) |  |                          | (3,816     | ) |      |   | (3,503  | )    |  |   | (3,656  | )
|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  
|Net Loan Servicing Fee                                   |  | $                        |           |   |      | $ |        |      |  | $ |        |  
|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  
|                                                         |  |                          |           
|Incentive fee(B)                                         |  | $                        | 4,083      |   |      | $ | 4,297   |      |  | $ | 4,343   |  
|Incentive fee credit(E)                                  |  |                          | (1,367     | ) |      |   | (1,180  | )    |  |   | (1,014  | )
|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  
|Net Incentive Fee                                        |  | $                        | 2,716      |   |      | $ | 3,117   |      |  | $ | 3,329   |  
|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  
|                                                         |  |                          |           
|Portfolio company fee credit(C)                          |  | $                        | (1,399     | ) |      | $ | (797    | )    |  | $ | (324    | )
|Senior syndicated loan fee credit(D)                     |  |                          | (118       | ) |      |   | (117    | )    |  |   | (183    | )
|Incentive fee credit(E)                                  |  |                          | (1,367     | ) |      |   | (1,180  | )    |  |   | (1,014  | )
|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  
|Credit to Fees from Adviser - Other(B)                   |  | $                        | (2,884     | ) |      | $ | (2,094  | )    |  | $ | (1,521  | )
|                                                         |  |                          |            |   |      |   |         |      |  |   |         |  



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

|(C) | Pursuant to the requirements of the 1940 Act, the Adviser makes available significant managerial assistance to our portfolio companies. It may also provide
services other than managerial assistance to our portfolio companies and receive fees therefore. 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. At the end of each quarter, 100% of these fees are voluntarily and irrevocably credited against the base management fee that we would otherwise be required to pay to the Adviser, with the exception of a small percentage of certain
fees, primarily for the valuation of portfolio companies, which are retained by the Adviser, pursuant to the terms of the Advisory Agreement, in the form of reimbursement at cost for tasks completed by personnel of the Adviser.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(D) | Our Board of Directors accepted an unconditional and irrevocable voluntary credit from the Adviser to reduce the annual base management fee on senior syndicated loan
participations to 0.5%, to the extent that proceeds resulting from borrowings were used to purchase such senior syndicated loan participations, for the years ended September 30, 2015, 2014 and 2013.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | Our Board of Directors accepted an unconditional and irrevocable voluntary credit 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, 2015, 2014 and 2013.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | The entire loan servicing fee paid monthly to the Adviser by Business Loan is voluntarily and irrevocably credited against the base management fee otherwise payable to the Adviser since Business Loan is a consolidated
subsidiary of the Company, and overall, the base management fee, inclusive of the loan servicing fee, cannot exceed 1.75% of total assets (as reduced by cash and cash equivalents pledged to creditors) (or 2.0% prior to the advisory agreement
amendment effective July 1, 2015) during any given calendar year pursuant to the Advisory Agreement.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Base Management Fee

On October 13, 2015, we amended our existing advisory agreement with the Adviser to reduce the base management fee under the agreement from
2.0% per annum (0.5% per quarter) of average total assets (excluding cash or equivalents) to 1.75% per annum (0.4375% per quarter) effective July 1, 2015. All other terms of the advisory agreement remained unchanged. The
amendment was approved unanimously by our Board of Directors.

Pursuant to the amended agreement, the base management fee is computed and generally
payable quarterly to the Adviser 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. The base management fee is then adjusted by certain credits from the Adviser as explained in the notes to the
table above.

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 (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% 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% in any calendar quarter (8.75% annualized).
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------

Our Board of Directors accepted an unconditional and irrevocable voluntary credit 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, 2015, 2014 and 2013.

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 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



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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 since our inception through September 30, 2015, as cumulative unrealized capital depreciation has exceeded cumulative realized capital gains net of cumulative realized capital losses.

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 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 since our inception through September 30, 2015.

Loan Servicing Fee Pursuant to Credit Agreement

The
Adviser also services the loans held by Business Loan (the borrower under our line of credit), 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 line of
credit. 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%
voluntarily, irrevocably and unconditionally credited back to us by the Adviser.

Administration Agreement

The Administration Agreement provides for payments equal to our allocable portion of the Administrators expenses incurred while performing services to
us, which are primarily rent and the salaries and benefits expenses of the Administrators employees, including, but not limited to, our chief financial officer and treasurer, chief compliance officer, and general counsel and secretary (who
also serves as the Administrators president). Prior to July 1, 2014, our allocable portion of the expenses were derived by multiplying that portion of the Administrators expenses allocable to all funds managed by the Adviser by the
percentage of our total assets at the beginning of each quarter in comparison to the total assets at the beginning of each quarter of all funds managed by the Adviser.

Effective July 1, 2014, our allocable portion of the Administrators expenses are 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 under contractual
agreements. 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 14, 2015, our Board of Directors approved the annual renewal of the Administration Agreement through August 31, 2016.

Related Party
Fees Due

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



|                                   |  |                     |       |  |      |   |       | 
|---------------------------------- |  | ------------------- | ----- |  | ---- | - | ----- | 
|                                   |  | As of September 30, |      
|                                   |  | 2015                |       |  | 2014 |  
|Base management fee due to Adviser |  | $                   | 60    |  |      | $ | 411   | 
|Loan servicing fee due to Adviser  |  |                     | 241   |  |      |   | 193   | 
|Incentive fee due to Adviser       |  |                     | 603   |  |      |   | 271   | 
|                                   |  |                     |       |  |      |   |       | 
|Total fees due to Adviser          |  |                     | 904   |  |      |   | 875   | 
|                                   |  |                     |       |  |      |   |       | 
|                                   |  |                    
|Fee due to Administrator           |  |                     | 250   |  |      |   | 218   | 
|                                   |  |                     |       |  |      |   |       | 
|Total Related Party Fees Due       |  | $                   | 1,154 |  |      | $ | 1,093 | 
|                                   |  |                     |       |  |      |   |       | 

Other operating expenses due to the Adviser as of September 30, 2015 and 2014, totaled $7 and $20, respectively. In
addition, other co-investment expenses due to Gladstone Investment totaled $0.1 million and $41 for the years ended September 30, 2015 and 2014, respectively. These expenses were paid in full subsequent to each fiscal year end and have been
included in other liabilities on our accompanying Consolidated Statements of Assets and Liabilitiesas of September 30, 2015 and 2014.



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Note Receivable from Former Employee

Our employee note receivable was paid in full in May 2015 and all shares of common stock that were held as collateral were released at that time. During
each of the years ended September 30, 2015, and September 30, 2014, we received $0.1 million in principal repayments from the former employee, paying off the note in full. We recognized interest income from the employee note of $4,
$14 and $0.1 million for the years ended September 30, 2015, 2014 and 2013 respectively.

NOTE 5. BORROWINGS

Revolving Credit Facility

On May 1, 2015, we,
through Business Loan, entered into a Fifth Amended and Restated Credit Facility (our Credit Facility), which increased the commitment amount from $137.0 million to $140.0 million, extended the revolving period end date by three years to
January 19, 2019, decreased the marginal interest rate added to 30-day LIBOR from 3.75% to 3.25% per annum, set the unused commitment fee at 0.50% on all undrawn amounts, expanded the scope of eligible collateral, and amended certain other
terms and conditions. Our Credit Facility was arranged by KeyBank National Association (KeyBank), as administrative agent, lead arranger and a lender. If our Credit Facility is not renewed or extended by January 19, 2019, all
principal and interest will be due and payable on or before May 1, 2020. Subject to certain terms and conditions, our Credit Facility may be expanded up to a total of $250.0 million through additional commitments of new or existing lenders. We
incurred fees of approximately $1.1 million in connection with this amendment, which are being amortized through our Credit Facilitys revolving period end date of January 19, 2019.

On June 19, 2015, we through Business Loan, entered into certain joinder and assignment agreements with three new lenders to increase borrowing capacity
under our Credit Facility by $30.0 million to $170.0 million. We incurred fees of approximately $0.6 million in connection with this expansion, which are being amortized through our Credit Facilitys revolving period end date of
January 19, 2019.

The following tables summarize noteworthy information related to our Credit Facility (at cost) as of September 30, 2015 and
2014 and during the years ended September 30, 2015, 2014 and 2013.



|                                |  |                     |         |  |      |   |         | 
|------------------------------- |  | ------------------- | ------- |  | ---- | - | ------- | 
|                                |  | As of September 30, |        
|                                |  | 2015                |         |  | 2014 |  
|Commitment amount               |  | $                   | 170,000 |  |      | $ | 137,000 | 
|Borrowings outstanding, at cost |  |                     | 127,300 |  |      |   | 36,700  | 
|Availability                    |  |                     | 22,360  |  |      |   | 57,500  | 



|                                                 |  |                          |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------ |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                 |  | Year Ended September 30, |       
|                                                 |  | 2015                     |        |   | 2014 |   |        | 2013 | 
|Weighted average borrowings outstanding, at cost |  | $                        | 92,488 |   |      | $ | 41,866 |      |  | $ | 53,207 |  
|Weighted average interest rate(A)                |  |                          | 4.1    | % |      |   | 6.3    | %    |  |   | 6.0    | %
|Commitment (unused) fees incurred                |  | $                        | 383    |   |      | $ | 959    |      |  | $ | 853    |  



|(A) | Excludes the impact of deferred financing fees and includes the weighted average unused commitment fees.
|--- | --------------------------------------------------------------------------------------------------------

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 requires that any interest or principal payments on pledged loans be remitted directly by the borrower into a lockbox account with Key
Equipment as custodian. Key Equipment, who also serves as the trustee of the account, generally remits the collected funds to us monthly.

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 deemed to have been paid during the prior year in accordance with Section 855(a) of the Code. Business Loan is also subject



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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 term preferred stock) of $205.0 million plus 50.0% of all equity and subordinated debt raised after May 1, 2015, which equates to $205.0 million as of September 30, 2015, (ii) asset coverage with respect to
senior securities representing indebtedness of at least 200.0%, 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, 2015, and as defined in the performance guaranty of our Credit Facility, we had a net worth of $252.4 million, asset coverage on our
senior securities representing indebtedness of 294.6%, calculated in compliance with the requirements of Section 18 of the 1940 Act, and an active status as a BDC and RIC. In addition, we had 36 obligors in our Credit
Facilitys borrowing base as of September 30, 2015. As of September 30, 2015, we were in compliance with all of our Credit Facility covenants.

Pursuant to the terms of our Credit Facility, on July 15, 2013, we, through Business Loan, entered into an interest rate cap agreement with KeyBank,
effective July 9, 2013 and expiring January 19, 2016, for a notional amount of $35.0 million that effectively limits the interest rate on a portion of our borrowings under our Credit Facility. The one month LIBOR cap is set at 5.0%. We
incurred a premium fee of $62 in conjunction with this agreement, which is recorded in other assets on our accompanyingCondensed Consolidated Statements of Assets and Liabilities. As of September 30, 2015 and 2014, the fair
value of our interest rate cap agreement was $0.

Fair Value

We elected to apply the fair value option of ASC 825, Financial Instruments, specifically for our 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 also takes into account the Valuation Teams own assumptions, 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, 2015 and 2014, the discount rate used to determine
the fair value of our Credit Facility was 3.6% and 4.0%, respectively. 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, 2015 and 2014, 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 present our Credit Facility carried at fair value as of September 30, 2015 and 2014, on our
accompanying Consolidated Statements of Assets and Liabilities for Level 3 of the hierarchy established by ASC 820 and the changes in fair value of our Credit Facility during the years ended September 30, 2015 and 2014:



|                |  |                                                                                                                                                                        |         |  |      |   |        | 
|--------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- |  | ---- | - | ------ | 
|                |  | Total Recurring Fair Value Measurement Reported inConsolidated Statements of Assets 
and LiabilitiesUsing Significant Unobservable Inputs (Level 3)As of September 30, |        
|                |  | 2015                                                                                                                                                                   |         |  | 2014 |  
|                |  |                                                                                                                                                                       
|Credit Facility |  | $                                                                                                                                                                      | 127,300 |  |      | $ | 38,013 | 
|                |  |                                                                                                                                                                        |         |  |      |   |        | 

Fair Value Measurements Using Significant Unobservable Data Inputs (Level 3)



|                                                           |  |                          |         |   |      |   |          |  
|---------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | -------- | -
|                                                           |  | Year Ended September 30, |        
|                                                           |  | 2015                     |         |   | 2014 |  
|Fair value as of September 30, 2014 and 2013, respectively |  | $                        | 38,013  |   |      | $ | 47,102   |  
|Borrowings                                                 |  |                          | 147,500 |   |      |   | 108,800  |  
|Repayments                                                 |  |                          | (56,900 | ) |      |   | (119,000 | )
|Net unrealized (depreciation) appreciation (A)             |  |                          | (1,313  | ) |      |   | 1,111    |  
|                                                           |  |                          |         |   |      |   |          |  
|Fair Value as of September 30, 2015 and 2014, respectively |  | $                        | 127,300 |   |      | $ | 38,013   |  
|                                                           |  |                          |         |   |      |   |          |  



|(A) | Included in net unrealized appreciation (depreciation) of other on our accompanying Consolidated Statements of Assets and Liabilities for the years ended September 30, 2015 and 2014.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The fair value of the collateral under our Credit Facility was approximately $312.0 million and $222.0 million in
aggregate as of September 30, 2015 and 2014, respectively.

NOTE 6. MANDATORILY REDEEMABLE PREFERRED STOCK

In May 2014, we completed a public offering of approximately 2.4 million shares of 6.75% Series 2021 Term Preferred Stock, par value $0.001 per share
(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 (Series 2016 Term Preferred
Stock) and the remainder was used to repay a portion of outstanding borrowings under our Credit Facility. In connection with the voluntary redemption of our Series 2016 Term Preferred Stock, we recognized a realized loss on extinguishment of
debt of $1.3 million, which has been reflected on our accompanying Consolidated Statement of Operations and is primarily comprised of the unamortized deferred issuance costs at the time of redemption.

We incurred approximately $2.5 million in total offering costs related to the issuance of our Series 2021 Term Preferred Stock, which are recorded as deferred
financing fees on our accompanyingConsolidated Statements of Assets and Liabilities and are being amortized over the redemption period ending June 30, 2021. The shares of our Series 2021 Term Preferred Stock have a mandatory redemption
date of June 30, 2021, and are traded under the ticker symbol GLADO on the NASDAQ Global Select Market. Our Series 2021 Term Preferred Stock is not convertible into our common stock or any other security and provides for a fixed
dividend equal to 6.75% per year, payable monthly (which equates in total to approximately $4.1 million per year). We are required to redeem all of the outstanding Series 2021 Term Preferred Stock on June 30, 2021 for cash at a redemption
price equal to $25.00 per share plus an amount equal to all unpaid dividends and distributions on such 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 2021 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, and (2) if we fail
to maintain an asset coverage ratio of at least 200.0% on our senior securities that are stock and the failure remains for a period of 30 days following the filing date of our next SEC quarterly or annual report. We may also voluntarily
redeem all or a portion of the Series 2021 Term Preferred Stock at our option at the Redemption Price at any time on or after June 30, 2017.

The
asset coverage on our senior securities that are stock as of September 30, 2015 was 199.3%. However, we were not required to redeem any shares of our Series 2021 Term Preferred Stock because, pursuant to the 1940 Act, on the date
that we were required to measure the asset coverage on our senior securities that are stock, (October 13, 2015), which was when our Board of Directors declared a distribution on our common stock and mandatorily redeemable preferred
stock dividends, the asset coverage on our senior securities that are stock was 202.6%. If we fail to redeem our Series 2021 Term Preferred Stock pursuant to the mandatory redemption required on June 30, 2021, or in any other
circumstance in which we are required to mandatorily redeem our Series 2021 Term Preferred Stock, then the fixed dividend rate will increase by 4.0% for so long as such failure continues. As of September 30, 2015, we have not redeemed, nor have
we been required to redeem, any shares of our outstanding Series 2021 Term Preferred Stock.

In November 2011, we completed a public offering of
approximately 1.5 million shares of our Series 2016 Term Preferred Stock, at a public offering price of $25.00 per share. Gross proceeds totaled $38.5 million and net proceeds, after deducting underwriting discounts, commissions and offering
expenses borne by us, were $36.4 million, a portion of which was used to repay a portion of outstanding borrowings under our Credit Facility. We incurred $2.1 million in total offering costs related to these transactions, which were recorded as
deferred financing fees on our accompanying Consolidated Statements of Assets and Liabilities and were amortized over the redemption period ending December 31, 2016. In May 2014, when we voluntarily redeemed our Series 2016 Term
Preferred Stock, the remaining unamortized costs were fully written off as part of the realized loss on extinguishment of debt discussed above. Our Series 2016 Term Preferred Stock provided for a fixed dividend equal to 7.125% per year, payable
monthly (which equated in total to approximately $2.7 million per year). The shares of our Series 2016 Term Preferred were traded under the ticker symbol of GLADP on the NASDAQ Global Select Market. In connection with the voluntary
redemption, shares of our Series 2016 Term Preferred Stock were removed from listing on May 22, 2014.



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We paid the following monthly dividends on our Series 2021 Term Preferred Stock for the year ended
September 30, 2015:



|                                      |  |                  |  |                    |  |                    |  |                                                 |           | 
|------------------------------------- |  | ---------------- |  | ------------------ |  | ------------------ |  | ----------------------------------------------- | --------- | 
|Fiscal Year                           |  | Declaration Date |  | Record Date        |  | Payment Date       |  | Distribution perSeries 2021 TermPreferred Share |          
|                                      |  |                  |  |                   
|2015                                  |  | October 7, 2014  |  | October 22, 2014   |  | October 31, 2014   |  | $                                               | 0.1406250 | 
|                                      |  | October 7, 2014  |  | November 17, 2014  |  | November 26, 2014  |  |                                                 | 0.1406250 | 
|                                      |  | October 7, 2014  |  | December 19, 2014  |  | December 31, 2014  |  |                                                 | 0.1406250 | 
|                                      |  | January 13, 2015 |  | January 23, 2015   |  | February 3, 2015   |  |                                                 | 0.1406250 | 
|                                      |  | January 13, 2015 |  | February 18, 2015  |  | February 27, 2015  |  |                                                 | 0.1406250 | 
|                                      |  | January 13, 2015 |  | March 20, 2015     |  | March 31, 2015     |  |                                                 | 0.1406250 | 
|                                      |  | April 14, 2015   |  | April 24, 2015     |  | May 5, 2015        |  |                                                 | 0.1406250 | 
|                                      |  | April 14, 2015   |  | May 19, 2015       |  | May 29, 2015       |  |                                                 | 0.1406250 | 
|                                      |  | April 14, 2015   |  | June 19, 2015      |  | June 30, 2015      |  |                                                 | 0.1406250 | 
|                                      |  | July 13, 2015    |  | July 24, 2015      |  | August 4, 2015     |  |                                                 | 0.1406250 | 
|                                      |  | July 13, 2015    |  | August 20, 2015    |  | August 31, 2015    |  |                                                 | 0.1406250 | 
|                                      |  | July 13, 2015    |  | September 21, 2015 |  | September 30, 2015 |  |                                                 | 0.1406250 | 
|                                      |  |                  |  |                    |  |                    |  |                                                 |           | 
|Fiscal Year Ended September 30, 2015: |  |                  |  |                    |  |                    |  | $                                               | 1.6875000 | 
|                                      |  |                  |  |                    |  |                    |  |                                                 |           | 

We paid the following monthly dividends on our Series 2021 Term Preferred Stock for the year ended September 30, 2014 (no
distributions were paid on our Series 2021 Term Preferred Stock prior to June 30, 2014):



|                                      |  |                  |  |                    |  |                    |  |                                                 |            | 
|------------------------------------- |  | ---------------- |  | ------------------ |  | ------------------ |  | ----------------------------------------------- | ---------- | 
|Fiscal Year                           |  | Declaration Date |  | Record Date        |  | Payment Date       |  | Distribution perSeries 2021 TermPreferred Share |           
|                                      |  |                  |  |                   
|2014                                  |  | May 29, 2014     |  | June 19, 2014      |  | June 30, 2014(A)   |  | $                                               | 0.19687500 | 
|                                      |  | July 15, 2014    |  | July 25, 2014      |  | August 5, 2014     |  |                                                 | 0.14062500 | 
|                                      |  | July 15, 2014    |  | August 20, 2014    |  | August 29, 2014    |  |                                                 | 0.14062500 | 
|                                      |  | July 15, 2014    |  | September 19, 2014 |  | September 30, 2014 |  |                                                 | 0.14062500 | 
|                                      |  |                  |  |                    |  |                    |  |                                                 |            | 
|Fiscal Year Ended September 30, 2014: |  |                  |  |                    |  |                    |  | $                                               | 0.61875000 | 
|                                      |  |                  |  |                    |  |                    |  |                                                 |            | 



|(A) | The dividend declared on May 29, 2014 on our Series 2021 Term Preferred Stock covered the partial period from May 20, 2014 through May 31, 2014 and
also covered the June 2014 dividend.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We paid the following monthly dividends on our Series 2016 Term Preferred Stock for the year ended
September 30, 2014:



|                                      |  |                  |  |                   |  |                   |  |                                     |            | 
|------------------------------------- |  | ---------------- |  | ----------------- |  | ----------------- |  | ----------------------------------- | ---------- | 
|Fiscal Year                           |  | Declaration Date |  | Record Date       |  | Payment Date      |  | Distribution perTerm PreferredShare |           
|2014                                  |  | October 8, 2013  |  | October 22, 2013  |  | October 31, 2013  |  | $                                   | 0.14843750 | 
|                                      |  | October 8, 2013  |  | November 14, 2013 |  | November 29, 2013 |  |                                     | 0.14843750 | 
|                                      |  | October 8, 2013  |  | December 16, 2013 |  | December 31, 2013 |  |                                     | 0.14843750 | 
|                                      |  | January 7, 2014  |  | January 22, 2014  |  | January 31, 2014  |  |                                     | 0.14843750 | 
|                                      |  | January 7, 2014  |  | February 19, 2014 |  | February 28, 2014 |  |                                     | 0.14843750 | 
|                                      |  | January 7, 2014  |  | March 17, 2014    |  | June 30, 2014     |  |                                     | 0.14843750 | 
|                                      |  | April 8, 2014    |  | April 21, 2014    |  | April 30, 2014    |  |                                     | 0.14843750 | 
|                                      |  | April 8, 2014    |  | May 20, 2014      |  | May 23, 2014(B)   |  |                                     | 0.14843750 | 
|                                      |  |                  |  |                   |  |                   |  |                                     |            | 
|Fiscal Year Ended September 30, 2014: |  |                  |  |                   |  |                   |  | $                                   | 1.18750000 | 
|                                      |  |                  |  |                   |  |                   |  |                                     |            | 



|(B) | We redeemed all of the outstanding shares of our Series 2016 Term Preferred Stock on May 23, 2014 and at that time, we paid the May dividends in full for record
holders as of May 20, 2014.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In accordance with ASC 480, Distinguishing Liabilities from Equity, mandatorily
redeemable financial instruments should be classified as liabilities in the balance sheet and we have recorded our mandatorily redeemable preferred stock as a liability, at cost, as of September 30, 2015 and 2014. The related distribution
payments to our mandatorily redeemable preferred stockholders are treated as dividend expense on our statement of operations as of the ex-dividend date. For disclosure purposes, the fair value, based on the last quoted closing price, for our Series
2021 Term Preferred Stock as of September 30, 2015 and September 30, 2014, was approximately $62.4 million and $63.0 million, respectively. We consider our mandatorily redeemable preferred stock to be a Level 1 liability within the ASC 820
hierarchy.



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Aggregate preferred stockholder dividends declared and paid on our Series 2021 Term Preferred Stock for the years
ended September 30, 2015 and September 30, 2014, were approximately $4.1 million and $1.5 million, respectively. Aggregate preferred stockholder dividends declared and paid on our Series 2016 Term Preferred Stock for the year ended
September 30, 2014, was approximately $1.8 million. For federal income tax purposes, dividends paid by us to preferred stockholders generally constitute ordinary income to the extent of our current and accumulated earnings and profits.

NOTE 7. REGISTRATION STATEMENT AND COMMON EQUITY OFFERINGS

We filed Post-Effective Amendment No. 4 to our universal shelf registration statement (our Registration Statement) on Form N-2 (File
No. 333-185191) with the SEC on December 1, 2014, and subsequently filed Post-Effective Amendment No. 5 on January 29, 2015, which the SEC declared effective January 30, 2015. 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 or preferred stock.

On February 27, 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 may 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.

As of September 30, 2015, we had the ability to issue up to $237.8 million in securities under our Registration
Statement. We sold an aggregate of 131,462 shares, or $1.2 million in gross proceeds, of common stock under the Sales Agreements during the year ended September 30, 2015. No other securities had been sold under our Registration Statement as of
September 30, 2015. See Note 15  Subsequent Events for further discussion of our common stock offering subsequent to fiscal year end.

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, 2015, 2014 and 2013:



|                                                                                                                       |  |                          |            |  |      |   |            |      |  |   |            | 
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- |  | ---- | - | ---------- | ---- |  | - | ---------- | 
|                                                                                                                       |  | Year Ended September 30, |           
|                                                                                                                       |  | 2015                     |            |  | 2014 |   |            | 2013 | 
|Numerator for basic and diluted net increase in net assets resulting from operations per weighted average common share |  | $                        | 8,484      |  |      | $ | 11,233     |      |  | $ | 32,219     | 
|Denominator for basic and diluted weighted average common shares                                                       |  |                          | 21,066,844 |  |      |   | 21,000,160 |      |  |   | 21,000,160 | 
|                                                                                                                       |  |                          |            |  |      |   |            |      |  |   |            | 
|Basic and Diluted Net Increase in Net Assets Resulting from Operations per Weighted Average Common Share               |  | $                        | 0.40       |  |      | $ | 0.53       |      |  | $ | 1.53       | 
|                                                                                                                       |  |                          |            |  |      |   |            |      |  |   |            | 

NOTE 9. DISTRIBUTIONS TO COMMON STOCKHOLDERS

To qualify to be taxed as a RIC, we are required to distribute to our stockholders 90.0% of our 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 the fiscal year earnings. Based on that estimate, our Board of Directors declares three monthly distributions each
quarter.

The federal income tax characteristics of all distributions will be reported to stockholders on the Internal Revenue Service Form 1099 at the
end of each calendar year. For the nine months ended September 30, 2015, approximately 100.0% of our common distributions were deemed to be paid from ordinary income. For the nine months ended September 30, 2014, approximately 100.0% of
our common distributions were deemed to be paid from a return of capital and for the quarter ended December 31, 2014, approximately 100.0% of our common distributions were deemed to be paid from ordinary income for Form 1099 reporting
purposes. For the nine months ended September 30, 2013, approximately 92.0% of our common distributions were deemed to be paid from ordinary income, with the remainder of approximately 8.0% deemed to be from a return of capital for Form
1099 reporting purposes. For the quarter ended December 31, 2013, approximately 100.0% of our common distributions were deemed to be paid from ordinary income, with none deemed to be from a return of capital for Form 1099 reporting purposes.
The return of capital in both the 2014 and 2013 calendar years resulted primarily from GAAP realized losses being recognized as ordinary losses for federal income tax purposes.



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We paid the following monthly distributions to common stockholders for the fiscal years ended September 30,
2015 and 2014:



|                        |  |                  |  |                    |  |                    |  |                             |      | 
|----------------------- |  | ---------------- |  | ------------------ |  | ------------------ |  | --------------------------- | ---- | 
|Fiscal Year             |  | Declaration Date |  | Record Date        |  | Payment Date       |  | Distributionper CommonShare |     
|2015                    |  | October 7, 2014  |  | October 22, 2014   |  | October 31, 2014   |  | $                           | 0.07 | 
|                        |  | October 7, 2014  |  | November 17, 2014  |  | November 26, 2014  |  |                             | 0.07 | 
|                        |  | October 7, 2014  |  | December 19, 2014  |  | December 31, 2014  |  |                             | 0.07 | 
|                        |  | January 13, 2015 |  | January 23, 2015   |  | February 3, 2015   |  |                             | 0.07 | 
|                        |  | January 13, 2015 |  | February 18, 2015  |  | February 27, 2015  |  |                             | 0.07 | 
|                        |  | January 13, 2015 |  | March 20, 2015     |  | March 31, 2015     |  |                             | 0.07 | 
|                        |  | April 14, 2015   |  | April 24, 2015     |  | May 5, 2015        |  |                             | 0.07 | 
|                        |  | April 14, 2015   |  | May 19, 2015       |  | May 29, 2015       |  |                             | 0.07 | 
|                        |  | April 14, 2015   |  | June 19, 2015      |  | June 30, 2015      |  |                             | 0.07 | 
|                        |  | July 13, 2015    |  | July 24, 2015      |  | August 4, 2015     |  |                             | 0.07 | 
|                        |  | July 13, 2015    |  | August 20, 2015    |  | August 31, 2015    |  |                             | 0.07 | 
|                        |  | July 13, 2015    |  | September 21, 2015 |  | September 30, 2015 |  |                             | 0.07 | 
|                        |  |                  |  |                    |  |                    |  |                             |      | 
|Fiscal Year 2015 Total: |  |                  |  |                    |  |                    |  | $                           | 0.84 | 
|                        |  |                  |  |                    |  |                    |  |                             |      | 
|                        |  |                  |  |                   
|2014                    |  | October 8, 2013  |  | October 22, 2013   |  | October 31, 2013   |  | $                           | 0.07 | 
|                        |  | October 8, 2013  |  | November 14, 2013  |  | November 29, 2013  |  |                             | 0.07 | 
|                        |  | October 8, 2013  |  | December 16, 2013  |  | December 31, 2013  |  |                             | 0.07 | 
|                        |  | January 7, 2014  |  | January 22, 2014   |  | January 31, 2014   |  |                             | 0.07 | 
|                        |  | January 7, 2014  |  | February 19, 2014  |  | February 28, 2014  |  |                             | 0.07 | 
|                        |  | January 7, 2014  |  | March 17, 2014     |  | March 31, 2014     |  |                             | 0.07 | 
|                        |  | April 8, 2014    |  | April 21, 2014     |  | April 30, 2014     |  |                             | 0.07 | 
|                        |  | April 8, 2014    |  | May 20, 2014       |  | May 30, 2014       |  |                             | 0.07 | 
|                        |  | April 8, 2014    |  | June 19, 2014      |  | June 30, 2014      |  |                             | 0.07 | 
|                        |  | July 15, 2014    |  | July 25, 2014      |  | August 5, 2014     |  |                             | 0.07 | 
|                        |  | July 15, 2014    |  | August 20, 2014    |  | August 29, 2014    |  |                             | 0.07 | 
|                        |  | July 15, 2014    |  | September 19, 2014 |  | September 30, 2014 |  |                             | 0.07 | 
|                        |  |                  |  |                    |  |                    |  |                             |      | 
|Fiscal Year 2014 Total: |  |                  |  |                    |  |                    |  | $                           | 0.84 | 
|                        |  |                  |  |                    |  |                    |  |                             |      | 

Aggregate distributions declared and paid to our common stockholders were approximately $17.7 million and $17.6 million for
each of the years ended September 30, 2015 and 2014, and were declared based on estimates of investment company taxable income for the respective fiscal years. For the year ended September 30, 2015, our current and accumulated earnings and
profits (after taking into account mandatorily redeemable preferred stock dividends) exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $1.7 million of the first common
distributions paid in fiscal year 2016 as having been paid in the respective prior year. For each of the years ended September 30, 2014 and 2013, common stockholder distributions to be declared and paid exceeded our current and accumulated
earnings and profits (after taking into account mandatorily redeemable preferred stock dividends), which resulted in an estimated partial return of capital of approximately $15.2 million and $1.3 million, respectively. The returns of capital
primarily resulted from GAAP realized losses being recognized as ordinary losses for federal income tax purposes in each of those fiscal years.

The
components of our net assets on a tax basis were as follows:



|                                                      |  |                          |         |   |      |   |         |  
|----------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                      |  | Year Ended September 30, |        
|                                                      |  | 2015                     |         |   | 2014 |  
|Common stock                                          |  | $                        | 21      |   |      | $ | 21      |  
|Capital in excess of par value                        |  |                          | 307,862 |   |      |   | 307,348 |  
|Note receivable from employee                         |  |                          |        |   |      |   | (100    | )
|Cumulative net unrealized depreciation of investments |  |                          | (44,736 | ) |      |   | (68,659 | )
|Cumulative net unrealized appreciation of other       |  |                          | (61     | ) |      |   | (1,374  | )
|Capital loss carryforward                             |  |                          | (34,650 | ) |      |   | (36,228 | )
|Post-October tax loss deferral                        |  |                          | (35,754 | ) |      |   |        |  
|Other temporary differences                           |  |                          | (1,238  | ) |      |   | (1,348  | )
|                                                      |  |                          |         |   |      |   |         |  
|Net Assets                                            |  | $                        | 191,444 |   |      | $ | 199,660 |  
|                                                      |  |                          |         |   |      |   |         |  



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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, 2015, we had $26.4 million and $0.9 million of capital loss carryforwards that expire in 2017 and 2018,
respectively. Additionally, as of September 30, 2015, we had $43.6 million of capital loss carryforwards that do not expire.

For the years ended
September 30, 2015 and 2014, we recorded the following adjustments for book-tax differences to reflect tax character. Results of operations, net assets nor cash flows were affected by these adjustments.



|                                      |  |                          |      |   |      |   |         |  
|------------------------------------- |  | ------------------------ | ---- | - | ---- | - | ------- | -
|                                      |  | Year Ended September 30, |     
|                                      |  | 2015                     |      |   | 2014 |  
|Overdistributed net investment income |  | $                        | 387  |   |      | $ | (2,556  | )
|Accumulated net realized losses       |  |                          |     |   |      |   | 18,144  |  
|Capital in excess of par value        |  |                          | (387 | ) |      |   | (15,588 | )

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, 2015, 2014 and 2013.

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, 2015, 2014 and 2013.

Under the RIC Modernization Act (the RIC 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 rather
than being considered all short-term as permitted under the Treasury regulations applicable to pre-enactment capital losses.

NOTE 11. COMMITMENTS AND
CONTINGENCIES

Legal Proceedings

We are party to
certain legal proceedings incidental to the normal course of our business, including the enforcement of our rights under contracts with our portfolio companies. 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 operation 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 as of September 30, 2015 and 2014, we have not established reserves for such loss contingencies.



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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
contingent liability 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. We had no aggregate contingent liabilities
against the escrow amounts as of September 30, 2015 and 2014.

Financial Commitments and Obligations

We have lines of credit 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.

In addition to the lines of credit
with portfolio companies, we, from time to time, have also extended certain guarantees on behalf of some of our portfolio companies during the normal course of business. In January 2012, we executed a guarantee for one of our Control investments,
Viapack, to irrevocably and unconditionally guarantee payment and performance of Viapacks obligations regarding purchase agreements and expenses to one of its vendors. This guarantee, for a maximum amount of $0.3 million, was terminated
effective January 4, 2013, as part of the sale of our investment in Viapack. We were never required to make any payments on this guarantee. As of September 30, 2015 and 2014, we were not party to any guarantees.

When investing in certain private equity funds, we may have uncalled capital commitments depending on the agreed upon terms of our committed ownership
interest. These capital commitments usually have a specific date in the future set as a closing date, at which time the commitment is either funded or terminates. As of September 30, 2015 and 2014, we had uncalled capital commitments related to
our partnership interest in Leeds Novamark Capital I, L.P.

The following table summarizes the dollar balances of our unused line of credit and uncalled
capital commitments, at cost, as of September 30, 2015 and 2014, which are not reflected as liabilities in our accompanying Consolidated Statements of Assets and Liabilities.



|                                  |  |                     |        |  |      |   |       | 
|--------------------------------- |  | ------------------- | ------ |  | ---- | - | ----- | 
|                                  |  | As of September 30, |       
|                                  |  | 2015                |        |  | 2014 |  
|Unused line of credit commitments |  | $                   | 14,655 |  |      | $ | 5,905 | 
|Uncalled capital commitment       |  |                     | 2,214  |  |      |   | 2,827 | 
|                                  |  |                     |        |  |      |   |       | 
|Total                             |  | $                   | 16,869 |  |      | $ | 8,732 | 
|                                  |  |                     |        |  |      |   |       | 



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NOTE 12. FINANCIAL HIGHLIGHTS



|                                                          |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|--------------------------------------------------------- |  | ------------------------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | --
|                                                          |  | As of and for the Year Ended September 30, |           
|                                                          |  | 2015                                       |            |   | 2014 |   |            | 2013 |  |   | 2012       |   |  | 2011 |           
|Per Common Share Data:                                    |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Net asset value at beginning of year(A)                   |  | $                                          | 9.51       |   |      | $ | 9.81       |      |  | $ | 8.98       |   |  | $    | 10.16      |   |  | $ | 11.85      |   
|Income from operations(B)                                 |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Net investment income                                     |  |                                            | 0.84       |   |      |   | 0.87       |      |  |   | 0.88       |   |  |      | 0.91       |   |  |   | 0.88       |   
|Net realized loss on investments and escrows              |  |                                            | (1.62      | ) |      |   | (0.58      | )    |  |   | (0.25      | ) |  |      | (0.61      | ) |  |   | (0.06      | ) 
|Net unrealized appreciation (depreciation) of investments |  |                                            | 1.12       |   |      |   | 0.35       |      |  |   | 0.74       |   |  |      | (0.53      | ) |  |   | (1.84      | ) 
|Realized loss on extinguishment of debt                   |  |                                            |           |   |      |   | (0.06      | )    |  |   |           |   |  |      |           |   |  |   |           |   
|Net unrealized depreciation (appreciation) of other       |  |                                            | 0.06       |   |      |   | (0.05      | )    |  |   | 0.16       |   |  |      | (0.15      | ) |  |   | 0.02       |   
|                                                          |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Total from operations                                     |  |                                            | 0.40       |   |      |   | 0.53       |      |  |   | 1.53       |   |  |      | (0.38      | ) |  |   | (1.00      | ) 
|                                                          |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Distributions to common stockholders from(B)(C)           |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Ordinary income                                           |  |                                            | (0.84      | ) |      |   | (0.12      | )    |  |   | (0.78      | ) |  |      | (0.77      | ) |  |   | (0.84      | ) 
|Return of capital                                         |  |                                            |           |   |      |   | (0.72      | )    |  |   | (0.06      | ) |  |      | (0.07      | ) |  |   |           |   
|                                                          |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Total distributions                                       |  |                                            | (0.84      | ) |      |   | (0.84      | )    |  |   | (0.84      | ) |  |      | (0.84      | ) |  |   | (0.84      | ) 
|                                                          |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Capital share transactions(B)                             |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Issuance of common stock                                  |  |                                            | 0.06       |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |   
|Offering costs for issuance of common stock               |  |                                            | (0.01      | ) |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |   
|Repayment of principal on employee notes                  |  |                                            |           |   |      |   |           |      |  |   | 0.14       |   |  |      | 0.02       |   |  |   | 0.15       |   
|Dilutive effect of common stock issuance                  |  |                                            | (0.06      | ) |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |   
|                                                          |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Total capital share transactions                          |  |                                            | (0.01      | ) |      |   |           |      |  |   | 0.14       |   |  |      | 0.02       |   |  |   | 0.15       |   
|                                                          |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Other, net(B)(D)                                          |  |                                            |           |   |      |   | 0.01       |      |  |   |           |   |  |      | 0.02       |   |  |   |           |   
|                                                          |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Net asset value at end of year(A)                         |  | $                                          | 9.06       |   |      | $ | 9.51       |      |  | $ | 9.81       |   |  | $    | 8.98       |   |  | $ | 10.16      |   
|                                                          |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|                                                          |  |                                            |            |   |     
|Per common share market value at beginning of year        |  | $                                          | 8.77       |   |      | $ | 8.73       |      |  | $ | 8.75       |   |  | $    | 6.86       |   |  | $ | 11.27      |   
|Per common share market value at end of year              |  |                                            | 8.13       |   |      |   | 8.77       |      |  |   | 8.73       |   |  |      | 8.75       |   |  |   | 6.86       |   
|Total return(E)                                           |  |                                            | 2.40       | % |      |   | 9.62       | %    |  |   | 9.90       | % |  |      | 41.39      | % |  |   | (33.77     | )%
|Common stock outstanding at end of year(A)                |  |                                            | 21,131,622 |   |      |   | 21,000,160 |      |  |   | 21,000,160 |   |  |      | 21,000,160 |   |  |   | 21,039,242 |   
|                                                          |  |                                            |            |   |     
|Statement of Assets and Liabilities Data:                 |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Net assets at end of year                                 |  | $                                          | 191,444    |   |      | $ | 199,660    |      |  | $ | 205,992    |   |  | $    | 188,564    |   |  | $ | 213,721    |   
|Average net assets(F)                                     |  |                                            | 198,864    |   |      |   | 201,009    |      |  |   | 189,599    |   |  |      | 201,012    |   |  |   | 235,901    |   
|Senior securities Data:                                   |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Borrowings under Credit Facility, at cost                 |  | $                                          | 127,300    |   |      | $ | 36,700     |      |  | $ | 46,900     |   |  | $    | 58,800     |   |  | $ | 99,400     |   
|Mandatorily redeemable preferred stock                    |  |                                            | 61,000     |   |      |   | 61,000     |      |  |   | 38,497     |   |  |      | 38,497     |   |  |   |           |   
|Ratios/Supplemental Data:                                 |  |                                            |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |   
|Ratio of operating expenses to average net assets         |  |                                            | 9.06       | % |      |   | 8.26       | %    |  |   | 8.34       | % |  |      | 8.87       | % |  |   | 7.08       | % 
|Ratio of net operating expenses to average net assets(G)  |  |                                            | 5.69       |   |      |   | 5.47       |      |  |   | 5.61       |   |  |      | 6.55       |   |  |   | 5.38       |   
|Ratio of net expenses to average net assets(G)(H)         |  |                                            | 10.24      |   |      |   | 9.06       |      |  |   | 9.37       |   |  |      | 10.59      |   |  |   | 7.12       |   
|Ratio of net investment income to average net assets(I)   |  |                                            | 8.90       |   |      |   | 9.14       |      |  |   | 9.70       |   |  |      | 9.47       |   |  |   | 7.81       |   



|(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 investment company taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | 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, please refer to Note
9Distributions to Common Stockholders.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | Computed using the average of the balance of net assets at the end of each month of the fiscal year.
|--- | ----------------------------------------------------------------------------------------------------

|(G) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(H) | Had we not received any voluntary, unconditional and irrevocable credits of the incentive fee due to the Adviser, the ratio of net expenses to average net assets would have been 10.93%, 9.65%, 9.91%, 10.72% and 7.13%
for the fiscal years ended September 30, 2015, 2014, 2013, 2012 and 2011, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(I) | Had we not received any voluntary, 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 8.22%, 8.55%, 9.17%, 9.13% and
7.64%, for the fiscal years ended September 30, 2015, 2014, 2013, 2012 and 2011, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTE 13. SELECTED QUARTERLY DATA (UNAUDITED)



|                                                                                                                      |  |                               |        |  |                           |   |        |                          |  |   |                               |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------ |  | ------------------------- | - | ------ | ------------------------ |  | - | ----------------------------- | - |  | - | ------ | -
|                                                                                                                      |  | Year Ended September 30, 2015 |       
|                                                                                                                      |  | QuarterEndedDecember 31,2014  |        |  | QuarterEndedMarch 31,2015 |   |        | QuarterEndedJune 30,2015 |  |   | QuarterEndedSeptember 30,2015 |  
|                                                                                                                      |  |                               |        | 
|Total investment income                                                                                               |  | $                             | 8,726  |  |                           | $ | 9,223  |                          |  | $ | 9,935                         |   |  | $ | 10,174 |  
|Net investment income                                                                                                 |  |                               | 3,691  |  |                           |   | 3,693  |                          |  |   | 4,836                         |   |  |   | 5,480  |  
|Net increase (decrease) in net assets resulting from operations                                                       |  |                               | 331    |  |                           |   | 9,542  |                          |  |   | 3,307                         |   |  |   | (4,696 | )
|                                                                                                                      |  |                               |        | 
|Net Increase (Decrease) in Net Assets Resulting From Operations per Weighted Average Common Share (Basic and Diluted) |  | $                             | 0.02   |  |                           | $ | 0.45   |                          |  | $ | 0.16                          |   |  | $ | (0.22  | )
|                                                                                                                      | 
|                                                                                                                      |  | Year Ended September 30, 2014 |       
|                                                                                                                      |  | QuarterEndedDecember 31,2013  |        |  | QuarterEndedMarch 31,2014 |   |        | QuarterEndedJune 30,2014 |  |   | QuarterEndedSeptember 30,2014 |  
|                                                                                                                      |  |                               |        | 
|Total investment income                                                                                               |  | $                             | 8,392  |  |                           | $ | 9,331  |                          |  | $ | 10,180                        |   |  | $ | 8,682  |  
|Net investment income                                                                                                 |  |                               | 4,410  |  |                           |   | 4,485  |                          |  |   | 5,063                         |   |  |   | 4,410  |  
|Net increase (decrease) in net assets resulting from operations                                                       |  |                               | 10,506 |  |                           |   | (2,102 | )                        |  |   | (20,175                       | ) |  |   | 23,004 |  
|                                                                                                                      |  |                               |        | 
|Net Increase (Decrease) in Net Assets Resulting From Operations per Weighted Average Common Share (Basic and Diluted) |  | $                             | 0.50   |  |                           | $ | (0.10  | )                        |  | $ | (0.96                         | ) |  | $ | 1.09   |  

NOTE 14. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES

In accordance with the SECs Regulation S-X and GAAP, we are not permitted to consolidate any subsidiary or other entity that is not an investment
company, including those in which we have a controlling interest. We had certain unconsolidated subsidiaries as of September 30, 2015 and 2014 and for the years ended September 30, 2015, 2014 and 2013, that met at least one of the
significant conditions of the SECs Regulation S-X. Accordingly, pursuant to Rule 4-08 of Regulation S-X, summarized, comparative financial information is presented below for our unconsolidated significant subsidiaries as of September 30,
2015 and 2014 and for the years ended September 30, 2015, 2014 and 2013.



|                                    |  |                        |  |                     |        |  |      |   |                                  |                  |  |                     |  |   |         |   |  |      |         |   |  |   |        |  
|----------------------------------- |  | ---------------------- |  | ------------------- | ------ |  | ---- | - | -------------------------------- | ---------------- |  | ------------------- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------ | -
|                                    |  |                        |  | As of September 30, |        |  |      |   | For the Year Ended September 30, |                 
|Portfolio Company                   |  | Balance Sheet          |  | 2015                |        |  | 2014 |   |                                  | Income Statement |  | 2015                |  |   | 2014    |   |  | 2013 |        
|Defiance Integrated                 |  | Current assets         |  | $                   | 7,006  |  |      | $ | 8,244                            |                  |  | Net sales           |  | $ | 28,345  |   |  | $    | 28,565  |   |  | $ | 24,012 |  
|Technologies, Inc.                  |  | Noncurrent assets      |  |                     | 12,782 |  |      |   | 11,237                           |                  |  | Gross profit        |  |   | 5,049   |   |  |      | 6,589   |   |  |   | 4,282  |  
|                                    |  | Current liabilities    |  |                     | 2,282  |  |      |   | 4,056                            |                  |  | Net (loss) income   |  |   | (447    | ) |  |      | 2,040   |   |  |   | 597    |  
|                                    |  | Noncurrent liabilities |  |                     | 10,854 |  |      |   | 8,370                            |                  |  |                     |  |   |         |   |  |      |         |   |  |   |        |  
|                                    |  |                        |  |                     |        |  |     
|GFRC Holdings LLC                   |  | Current assets         |  |                     | 2,177  |  |      |   | 3,868                            |                  |  | Net sales           |  |   | 6,387   |   |  |      | 10,452  |   |  |   | 10,288 |  
|                                    |  | Noncurrent assets      |  |                     | 641    |  |      |   | 11,022                           |                  |  | Gross profit (loss) |  |   | (370    | ) |  |      | 1,488   |   |  |   | 2,243  |  
|                                    |  | Current liabilities    |  |                     | 4,241  |  |      |   | 3,530                            |                  |  | Net loss            |  |   | (12,839 | ) |  |      | (1,413  | ) |  |   | (618   | )
|                                    |  | Noncurrent liabilities |  |                     | 13,741 |  |      |   | 13,727                           |                  |  |                     |  |   |         |   |  |      |         |   |  |   |        |  
|                                    |  |                        |  |                     |        |  |     
|Lindmark Acquisition, LLC(A)        |  | Current assets         |  |                     | 488    |  |      |   | 983                              |                  |  | Net sales           |  |   | 38      |   |  |      | 62      |   |  |   | 7,236  |  
|                                    |  | Noncurrent assets      |  |                     | 88     |  |      |   | 270                              |                  |  | Gross profit (loss) |  |   | 15      |   |  |      | (60     | ) |  |   | 4,346  |  
|                                    |  | Current liabilities    |  |                     |       |  |      |   | 16                               |                  |  | Net (loss) income   |  |   | (643    | ) |  |      | (1,910  | ) |  |   | 8,408  |  
|                                    |  | Noncurrent liabilities |  |                     | 7,137  |  |      |   | 7,141                            |                  |  |                     |  |   |         |   |  |      |         |   |  |   |        |  
|                                    |  |                        |  |                     |        |  |     
|Midwest Metal Distribution, Inc.(B) |  | Current assets         |  |                     |       |  |      |   | 31,371                           |                  |  | Net sales           |  |   | 17,148  |   |  |      | 102,485 |   |  |   | 98,691 |  
|                                    |  | Noncurrent assets      |  |                     |       |  |      |   | 6,668                            |                  |  | Gross profit        |  |   | 1,888   |   |  |      | 12,495  |   |  |   | 11,362 |  
|                                    |  | Current liabilities    |  |                     |       |  |      |   | 47,663                           |                  |  | Net loss            |  |   | (1,181  | ) |  |      | (1,250  | ) |  |   | (1,892 | )
|                                    |  | Noncurrent liabilities |  |                     |       |  |      |   | 48                               |                  |  |                     |  |   |         |   |  |      |         |   |  |   |        |  
|                                    |  |                        |  |                     |        |  |     
|RBC Acquisition Corp.               |  | Current assets         |  |                     | 6,202  |  |      |   | 7,928                            |                  |  | Net sales           |  |   | 11,710  |   |  |      | 13,060  |   |  |   | 13,786 |  
|                                    |  | Noncurrent assets      |  |                     | 19,733 |  |      |   | 21,304                           |                  |  | Gross profit        |  |   | 368     |   |  |      | 1,897   |   |  |   | 1,498  |  
|                                    |  | Current liabilities    |  |                     | 5,577  |  |      |   | 30,308                           |                  |  | Net loss            |  |   | (4,768  | ) |  |      | (5,351  | ) |  |   | (3,586 | )
|                                    |  | Noncurrent liabilities |  |                     | 29,876 |  |      |   | 2,998                            |                  |  |                     |  |   |         |   |  |      |         |   |  |   |        |  
|                                    |  |                        |  |                     |        |  |     
|Sunshine Media Group, Inc.          |  | Current assets         |  |                     | 3,413  |  |      |   | 3,481                            |                  |  | Net sales           |  |   | 16,083  |   |  |      | 15,707  |   |  |   | 14,977 |  
|                                    |  | Noncurrent assets      |  |                     | 1,308  |  |      |   | 1,453                            |                  |  | Gross profit        |  |   | 7,286   |   |  |      | 7,523   |   |  |   | 6,304  |  
|                                    |  | Current liabilities    |  |                     | 8,311  |  |      |   | 7,198                            |                  |  | Net loss            |  |   | (1,406  | ) |  |      | (439    | ) |  |   | (1,832 | )
|                                    |  | Noncurrent liabilities |  |                     | 29,137 |  |      |   | 29,394                           |                  |  |                     |  |   |         |   |  |      |         |   |  |   |        |  
|                                    |  |                        |  |                     |        |  |     
|Viapack, Inc.(C)                    |  | Current assets         |  |                     |       |  |      |   |                                 |                  |  | Net sales           |  |   |        |   |  |      |        |   |  |   | 3,848  |  
|                                    |  | Noncurrent assets      |  |                     |       |  |      |   |                                 |                  |  | Gross profit        |  |   |        |   |  |      |        |   |  |   | 456    |  
|                                    |  | Current liabilities    |  |                     |       |  |      |   |                                 |                  |  | Net loss            |  |   |        |   |  |      |        |   |  |   | (154   | )
|                                    |  | Noncurrent liabilities |  |                     |       |  |      |   |                                 |                  |  |                     |  |   |         |   |  |      |         |   |  |   |        |  



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|(A) | Substantially all assets were sold in September 2013.
|--- | -----------------------------------------------------

|(B) | Investment exited in December 2014. The financial information presented for the income statement for the year ended September 30, 2015 is from October 1, 2014 through the date of exit in November 2014.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Investment exited in November 2012. The financial information presented for the income statement for the year ended September 30, 2013 is from October 1, 2012 through the date of exit in November 2012.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Defiance Integrated Technologies, Inc. (Defiance) was incorporated in Delaware on May 22, 2009 and is headquartered in
Defiance, Ohio. Defiance is a leading manufacturer of axle nut and washer systems for heavy (Class 8) truck industry in North America and also provides a wheel bearing retainer nut, used primarily on light trucks, and brake cable tension limiters.

GFRC was incorporated in Texas on August 27, 2007 and is headquartered in Garland, Texas. GFRC designs, engineers, fabricates and delivers glass
fiber reinforced concrete panels for commercial construction.

Lindmark was incorporated in Delaware on January 15, 2009 and is a single member
limited liability company. Lindmark was primarily engaged in the outdoor advertising business operating approximately 1,600 billboard advertising displays in six states.

Midwest Metal was incorporated in Delaware, on May 18, 2010 and is a distributor and processor of custom cut aluminum and stainless steel sheet plate and
bar products. Midwest Metal is headquartered in Midwest Metal, Ohio.

RBC Acquisition Corp. (RBC) was incorporated in Delaware on
March 7, 2013 and is a Food and Drug Administration inspected developer manufacturer of active pharmaceutical ingredients. RBC is headquartered in St Louis, Missouri.

Sunshine Media Group, Inc. (Sunshine) was incorporated in Delaware on December 20, 2000 and is headquartered in Chattanooga, Tennessee.
Sunshine is a fully integrated publishing, media and marketing services company that provides custom media and branded content solutions across multiple platforms, with an emphasis on healthcare and financial services.

Viapack, Inc. (Viapack) was incorporated in Delaware on March 31, 2004 and is headquartered in Dalton, Georgia. Viapack was a regional
manufacturer and marketer of polyethylene film serving the packaging and plastic film converting industries.

NOTE 15. SUBSEQUENT EVENTS

Portfolio Activity

Subsequent to September 30, 2015,
the following significant portfolio activity occurred:



| |  |  | Allison Publications, LLC  In October 2015, Allison Publications, LLC paid off at par for net proceeds of $8.2 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Ameriqual Group, LLC  In October 2015, Ameriqual Group, LLC paid off at par for net proceeds of $7.4 million.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | First American Payment Systems, L.P. In October 2015, we sold our investment in First American Payment Systems, L.P. for net proceeds of $4.0 million, which resulted in a realized loss of $0.2
million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Funko, LLC In October 2015, we sold our investment in Funko, LLC for net proceeds of $27.1 million, which resulted in a realized gain of $16.6 million and a small remaining equity investment.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Heartland Communications Group In October 2015, we exited our investment in Heartland Communications Group (Heartland) for net proceeds of $1.5 million, which resulted in a realized loss of
$2.7 million. Heartland was on non-accrual status at the time of the sale.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | J. America, Inc.  In November 2015, we received a partial paydown of $7.1 million on our investment in J. America, Inc.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



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Common Stock Offering

In October 2015, we completed a public offering of 2.0 million shares of our common stock. Gross proceeds totaled $17.1 million and net proceeds, after
deductive underwriting discounts and offering costs borne by us, were approximately $16.0 million. In November, 2015, the underwriters fully exercised their overallotment option to purchase 0.3 million additional shares of our common stock,
resulting in net proceeds, after deducting underwriting discounts and offering costs borne by us, of approximately $2.4 million

Distributions

On October 14, 2015, our Board of Directors declared the following monthly cash distributions to common and preferred stockholders:



|                      |  |                   |  |                             |      |  |                                                |   |          | 
|--------------------- |  | ----------------- |  | --------------------------- | ---- |  | ---------------------------------------------- | - | -------- | 
|Record Date           |  | Payment Date      |  | Distributionper CommonShare |      |  | Distribution perSeries 2021Term PreferredShare |  
|October 26, 2015      |  | November 4, 2015  |  | $                           | 0.07 |  |                                                | $ | 0.140625 | 
|November 17, 2015     |  | November 30, 2015 |  |                             | 0.07 |  |                                                |   | 0.140625 | 
|December 18, 2015     |  | December 31, 2015 |  |                             | 0.07 |  |                                                |   | 0.140625 | 
|                      |  |                   |  |                             |      |  |                                                |   |          | 
|Total for the Quarter |  |                   |  | $                           | 0.21 |  |                                                | $ | 0.421875 | 
|                      |  |                   |  |                             |      |  |                                                |   |          | 



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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOUSRE

None.

ITEM 9A. CONTROLS AND PROCEDURES

a) Disclosure Controls and Procedures

As of September 30,
2015 (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 fiscal year ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

We will file a definitive Proxy Statement for our 2016 Annual Meeting of Stockholders (the 2016 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 2016 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 2016 Proxy Statement
under the captions Election of Directors and Section 
16(a) Beneficial Ownership Reporting Compliance.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is hereby incorporated by reference from our 2016 Proxy Statement under the captions Executive
Compensation and Director Compensation for Fiscal Year 2015.



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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 2016 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 2016 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 2016 Proxy Statement under the caption Principal Accounting Firm
Fees and Services.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



|a. | DOCUMENTS FILED AS PART OF THIS REPORT
|-- | --------------------------------------



|1. | The following financial statements are filed herewith:
|-- | ------------------------------------------------------



|                                                                                                       |  |  |    | 
|------------------------------------------------------------------------------------------------------ |  |  | -- | 
|Report of Management on Internal Controls                                                              |  |  | 70 | 
|Report of Independent Registered Public Accounting Firm                                                |  |  | 71 | 
|Consolidated Statements of Assets and Liabilities as of September 30, 2015 and 2014                    |  |  | 72 | 
|Consolidated Statements of Operations for the years ended September 30, 2015, 2014 and 2013            |  |  | 73 | 
|Consolidated Statements of Changes in Net Assets for the years ended September 30, 2015, 2014 and
2013 |  |  | 74 | 
|Consolidated Statements of Cash Flows for the years ended September 30, 2015, 2014 and 2013            |  |  | 75 | 
|Consolidated Schedule of Investments as of September 30, 2015                                          |  |  | 76 | 
|Consolidated Schedule of Investments as of September 30, 2014                                          |  |  | 81 | 
|Notes to Consolidated Financial Statements                                                             |  |  | 86 | 



|2. | The following financial statement schedule is filed herewith:
|-- | -------------------------------------------------------------



|                                                         |  |  |     | 
|-------------------------------------------------------- |  |  | --- | 
|Schedule 12-14 Investments in and Advances to Affiliates |  |  | 119 | 

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 Form N-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 Form N-2 (File No. 333-162592), filed October 31, 2011.3.3

Articles Supplementary Establishing and Fixing the Rights and Preferences of Term Preferred Shares, 6.75% Series 2021, including Appendix A thereto, incorporated by reference to Exhibit 3.3 to Form 8-A (File
No. 001-35332), filed May 15, 2014.




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3.4

Certificate of Correction to Articles Supplementary Establishing and Fixing the Rights and Preferences of Term Preferred Shares, 6.75% Series 2021, incorporated by reference to Exhibit 3.4 to the Quarterly Report on Form
10-Q (File No. 811-000000), filed July 30, 2014.3.5

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, 2015.3.6

By-laws, incorporated by reference to Exhibit 99.b to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-63700), filed July 27, 2001.3.7

Amendment to By-laws, 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 By-laws, 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 By-laws, incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No. 814-00237), filed June 10, 2011.4.1

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 6.75% Series 2021 Term Preferred Stock, incorporated by reference to Exhibit 4.3 to Form 8-A (File No. 001-35332), filed May 15, 2014.10.1

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 Restarted 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

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, 2015.10.8

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, 2015.10.9

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, 2015.10.10

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, 2013.10.11

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, 2013.10.12

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, 2013.11

Computation of Per Share Earnings (included in the notes to the audited financial statements contained in this report).12

Statements Re: Computation of Ratios (filed herewith).14

Code of Ethics and Business Conduct, updated January 28, 2013, incorporated by reference to Exhibit 14 to the Annual Report on Form 10-K (File No. 814-00237), filed November 20, 2013.21

Subsidiaries of the Registrant (filed herewith).




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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, 2014 and 2013 (unaudited) (filed herewith).99.2

Financial Statements of Defiance Integrated Technologies, Inc. as of and for the years ended December 31, 2013 and 2012 (audited) (filed herewith).99.3

Financial Statements of Midwest Metal Distribution, Inc. and Subsidiaries as of and for the years ended December 31, 2013 and 2012 (audited) (filed herewith).99.4

Financial Statements of Sunshine Media Group, Inc. as of and for the years ended December 31, 2014 and 2013 (audited) (filed herewith).




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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 23, 2015 |  |  |  | By:                           |  | /s/ MELISSA MORRISON                 
|                        |  |  |  |                               |  | Melissa Morrison                     
|                        |  |  |  |                               |  | 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 23, 2015 |  |  |  | By: |  | /s/ DAVID GLADSTONE                                                                         
|                        |  |  |  |     |  | David Gladstone                                                                             
|                        |  |  |  |     |  | Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)
|                        |  |  | 
|Date: November 23, 2015 |  |  |  | By: |  | /s/ TERRY LEE BRUBAKER                                                                      
|                        |  |  |  |     |  | Terry Lee Brubaker                                                                          
|                        |  |  |  |     |  | Vice Chairman of the Board of Directors, Chief Operating Officer                            
|                        |  |  | 
|Date: November 23, 2015 |  |  |  | By: |  | /s/ ROBERT L. MARCOTTE                                                                      
|                        |  |  |  |     |  | Robert L. Marcotte                                                                          
|                        |  |  |  |     |  | President                                                                                   
|                        |  |  | 
|Date: November 23, 2015 |  |  |  | By: |  | /s/ MELISSA MORRISON                                                                        
|                        |  |  |  |     |  | Melissa Morrison                                                                            
|                        |  |  |  |     |  | Chief Financial Officer and Treasurer (principal financial and accounting officer)          
|                        |  |  | 
|Date: November 23, 2015 |  |  |  | By: |  | /s/ ANTHONY W. PARKER                                                                       
|                        |  |  |  |     |  | Anthony W. Parker                                                                           
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 23, 2015 |  |  |  | By: |  | /s/ JOHN OUTLAND                                                                            
|                        |  |  |  |     |  | John Outland                                                                                
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 23, 2015 |  |  |  | By: |  | /s/ MICHELA A. ENGLISH                                                                      
|                        |  |  |  |     |  | Michela A. English                                                                          
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 23, 2015 |  |  |  | By: |  | /s/ PAUL ADELGREN                                                                           
|                        |  |  |  |     |  | Paul Adelgren                                                                               
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 23, 2015 |  |  |  | By: |  | /s/ WALTER H. WILKINSON, JR.                                                                
|                        |  |  |  |     |  | Walter H. Wilkinson, Jr.                                                                    
|                        |  |  |  |     |  | Director                                                                                    
|                        |  |  | 
|Date: November 23, 2015 |  |  |  | By: |  | /s/ CAREN D. MERRICK                                                                        
|                        |  |  |  |     |  | Caren D. Merrick                                                                            
|                        |  |  |  |     |  | Director                                                                                    



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SCHEDULE 12-14

GLADSTONE CAPITAL CORPORATION

INVESTMENTS IN AND ADVANCES TO AFFILIATES

(AMOUNTS IN THOUSANDS)



|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|-------------------------------------- | --------------------------------------- | ------------------------------------------- |  | ---------------------------------------------- | ----- |  | ---------------------------- | ----- | ------ | ----------------- |  | ------ | ------------------- |  |  | ---------------------------- | ------- | - |  | ------ | ------ | 
|Name of Issuer(A)                      |                                         | Title of Issue
or Nature of Indebtedness(B) |  | Amount ofInterest,Dividends,and OtherIncome(C) |       |  | Value as ofSeptember 30,2014 |       |        | GrossAdditions(D) |  |        | Gross Reductions(E) |  |  | Value as ofSeptember 30,2015 |        
|CONTROL INVESTMENTS:                   |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                |       | 
|Defiance Integrated Technologies, Inc. |                                         | Secured Second Lien Debt                    |  | $                                              | 1,464 |  |                              | $     | 6,545  |                   |  | $      |                    |  |  | $                            | (161    | ) |  | $      | 6,384  | 
|                                       | Common Stock                            |                                             |  |                                               |       |  |                              | 6,461 |        |                   |  | 1,874  |                     |  |  | (1,749                       | )       |   |  | 6,586  |       
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                | 1,464 |  |                              |       | 13,006 |                   |  |        | 1,874               |  |  |                              | (1,910  | ) |  |        | 12,970 | 
|                                       |                                         |                                             |  |                                                |       | 
|Lindmark Acquisition, LLC              |                                         | Secured First Lien Debt                     |  |                                                | 232   |  |                              |       |       |                   |  |        |                    |  |  |                              |        |   |  |        |       | 
|                                       | Success Fee on Secured Second Lien Debt |                                             |  |                                               |       |  |                              | 89    |        |                   |  |       |                     |  |  | (69                          | )       |   |  | 20     |       
|                                       | Common Stock                            |                                             |  |                                               |       |  |                              |      |        |                   |  |       |                     |  |  |                             |         |   |  |       |       
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                | 232   |  |                              |       | 89     |                   |  |        |                    |  |  |                              | (69     | ) |  |        | 20     | 
|                                       |                                         |                                             |  |                                                |       | 
|Midwest Metal Distributions, Inc.      |                                         | Secured Second Lien Debt(F)(H)              |  |                                                |      |  |                              |       | 4,455  |                   |  |        | 14,197              |  |  |                              | (18,652 | ) |  |        |       | 
|                                       | Common Stock Warrants(H)                |                                             |  |                                               |       |  |                              |      |        |                   |  | 2,175  |                     |  |  | (2,175                       | )       |   |  |       |       
|                                       | Preferred Stock(H)                      |                                             |  |                                               |       |  |                              |      |        |                   |  | 138    |                     |  |  | (138                         | )       |   |  |       |       
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                |      |  |                              |       | 4,455  |                   |  |        | 16,510              |  |  |                              | (20,965 | ) |  |        |       | 
|                                       |                                         |                                             |  |                                                |       | 
|Sunshine Media Holdings                |                                         | Secured First Lien Line of Credit(F)        |  |                                                | 93    |  |                              |       | 424    |                   |  |        | 1,200               |  |  |                              | (228    | ) |  |        | 1,396  | 
|                                       |                                         | Secured First Lien Debt(I)                  |  |                                                | 303   |  |                              |       |       |                   |  |        | 6,038               |  |  |                              | (3,659  | ) |  |        | 2,379  | 
|                                       |                                         | Secured First Lien Debt(F)                  |  |                                                |      |  |                              |       | 4,491  |                   |  |        | 6,449               |  |  |                              | (5,254  | ) |  |        | 5,686  | 
|                                       |                                         | Secured First Lien Debt(F)                  |  |                                                |      |  |                              |       | 2,889  |                   |  |        | 263                 |  |  |                              | (3,152  | ) |  |        |       | 
|                                       |                                         | Preferred Stock                             |  |                                                |      |  |                              |       |       |                   |  |        |                    |  |  |                              |        |   |  |        |       | 
|                                       |                                         | Common Stock                                |  |                                                |      |  |                              |       |       |                   |  |        |                    |  |  |                              |        |   |  |        |       | 
|                                       |                                         | Common Stock Warrants                       |  |                                                |      |  |                              |       |       |                   |  |        |                    |  |  |                              |        |   |  |        |       | 
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                | 396   |  |                              |       | 7,804  |                   |  |        | 13,950              |  |  |                              | (12,293 | ) |  |        | 9,461  | 
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|TOTAL CONTROL INVESTMENTS              |                                         |                                             |  | $                                              | 2,452 |  |                              | $     | 25,354 |                   |  | $      | 32,334              |  |  | $                            | (35,237 | ) |  | $      | 22,451 | 
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                |       | 
|AFFILIATE INVESTMENTS:                 |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                |       | 
|Ashland Acquisition, LLC               |                                         | Secured First Lien Line of Credit           |  | $                                              | 15    |  |                              | $     |       |                   |  | $      |                    |  |  | $                            |        |   |  | $      |       | 
|                                       |                                         | Secured First Lien Debt                     |  |                                                | 852   |  |                              |       | 7,053  |                   |  |        | 26                  |  |  |                              | (62     | ) |  |        | 7,017  | 
|                                       |                                         | Preferred Equity Units                      |  |                                                |      |  |                              |       | 206    |                   |  |        | 369                 |  |  |                              | (1      | ) |  |        | 574    | 
|                                       |                                         | Common Equity Units                         |  |                                                |      |  |                              |       |       |                   |  |        | 240                 |  |  |                              | (2      | ) |  |        | 238    | 
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                | 867   |  |                              |       | 7,259  |                   |  |        | 635                 |  |  |                              | (65     | ) |  |        | 7,829  | 
|                                       |                                         |                                             |  |                                                |       | 
|Edge Adhesives Holdings, Inc.          |                                         | Secured First Lien Line of Credit(H)        |  |                                                | 86    |  |                              |       | 768    |                   |  |        | 827                 |  |  |                              | (1,595  | ) |  |        |       | 
|                                       | Secured First Lien Debt                 |                                             |  | 785                                            |       |  |                              | 6,208 |        |                   |  | 15     |                     |  |  | (100                         | )       |   |  | 6,123  |       
|                                       | Secured First Lien Debt                 |                                             |  | 223                                            |       |  |                              | 1,604 |        |                   |  | 4      |                     |  |  | (26                          | )       |   |  | 1,582  |       
|                                       | Secured First Lien Debt(H)              |                                             |  | 12                                             |       |  |                              | 585   |        |                   |  |       |                     |  |  | (585                         | )       |   |  |       |       
|                                       | Preferred Stock                         |                                             |  |                                               |       |  |                              | 2,885 |        |                   |  | 200    |                     |  |  | (3,085                       | )       |   |  |       |       
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                | 1,106 |  |                              |       | 12,050 |                   |  |        | 1,046               |  |  |                              | (5,391  | ) |  |        | 7,705  | 
|                                       |                                         |                                             |  |                                                |       | 
|FedCap Partners, LLC                   |                                         | Class A Membership Units                    |  |                                                |      |  |                              |       | 2,238  |                   |  |        |                    |  |  |                              | (591    | ) |  |        | 1,647  | 
|                                       |                                         |                                             |  |                                                |       | 
|Lignetics, Inc.                        |                                         | Secured Second Lien Debt                    |  |                                                | 730   |  |                              |       | 6,007  |                   |  |        | 15                  |  |  |                              | (82     | ) |  |        | 5,940  | 
|                                       |                                         | Secured Second Lien Debt(I)                 |  |                                                | 473   |  |                              |       |       |                   |  |        | 8,000               |  |  |                              | (80     | ) |  |        | 7,920  | 
|                                       |                                         | Common Stock                                |  |                                                |      |  |                              |       | 1,169  |                   |  |        | 1,215               |  |  |                              | (173    | ) |  |        | 2,211  | 
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                | 1,203 |  |                              |       | 7,176  |                   |  |        | 9,230               |  |  |                              | (335    | ) |  |        | 16,071 | 
|                                       |                                         |                                             |  |                                                |       | 
|LWO Acquisitions Company, LLC          |                                         | Secured First Lien Line of Credit(I)        |  |                                                | 95    |  |                              |       |       |                   |  |        | 2,466               |  |  |                              | (1,417  | ) |  |        | 1,049  | 
|                                       | Secured First Lien Debt(I)              |                                             |  | 819                                            |       |  |                              |      |        |                   |  | 11,119 |                     |  |  | (553                         | )       |   |  | 10,566 |       
|                                       | Common Stock(I)                         |                                             |  |                                               |       |  |                              |      |        |                   |  | 1,176  |                     |  |  | (631                         | )       |   |  | 545    |       
|                                       |                                         |                                             |  |                                                |       |  |                              |       |        |                   |  |        |                     |  |  |                              |         |   |  |        |        | 
|                                       |                                         |                                             |  |                                                | 914   |  |                              |       |       |                   |  |        | 14,761              |  |  |                              | (2,601  | ) |  |        | 12,160 | 



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##### Table of Contents

|                                   |  |                                             |  |                                                |       |  |                              |   |        |                   |  |   |                     |  |  |                              |         |   |  |   |        | 
|---------------------------------- |  | ------------------------------------------- |  | ---------------------------------------------- | ----- |  | ---------------------------- | - | ------ | ----------------- |  | - | ------------------- |  |  | ---------------------------- | ------- | - |  | - | ------ | 
|Name of Issuer(A)                  |  | Title of Issue
or Nature of Indebtedness(B) |  | Amount ofInterest,Dividends,and OtherIncome(C) |       |  | Value as ofSeptember 30,2014 |   |        | GrossAdditions(D) |  |   | Gross Reductions(E) |  |  | Value as ofSeptember 30,2015 |        
|AFFILIATE INVESTMENTS (Continued): |  |                                             |  |                                                |       |  |                              |   |        |                   |  |   |                     |  |  |                              |         |   |  |   |        | 
|RBC Acquisition Corp.              |  | Secured First Lien Line of Credit           |  | $                                              | 269   |  |                              | $ | 4,000  |                   |  | $ |                    |  |  | $                            |        |   |  | $ | 4,000  | 
|                                   |  | Secured First Lien Mortgage Note            |  |                                                | 493   |  |                              |   | 6,891  |                   |  |   |                    |  |  |                              | (20     | ) |  |   | 6,871  | 
|                                   |  | Secured First Lien Debt                     |  |                                                | 1,014 |  |                              |   | 11,392 |                   |  |   |                    |  |  |                              | (1,646  | ) |  |   | 9,746  | 
|                                   |  | Secured Second Lien Debt                    |  |                                                | 553   |  |                              |   | 6,000  |                   |  |   |                    |  |  |                              | (6,000  | ) |  |   |       | 
|                                   |  | Preferred Stock                             |  |                                                |      |  |                              |   |       |                   |  |   |                    |  |  |                              |        |   |  |   |       | 
|                                   |  | Common Stock                                |  |                                                |      |  |                              |   |       |                   |  |   |                    |  |  |                              |        |   |  |   |       | 
|                                   |  |                                             |  |                                                |       |  |                              |   |        |                   |  |   |                     |  |  |                              |         |   |  |   |        | 
|                                   |  |                                             |  |                                                | 2,329 |  |                              |   | 28,283 |                   |  |   |                    |  |  |                              | (7,666  | ) |  |   | 20,617 | 
|                                   |  |                                             |  |                                                |       |  |                              |   |        |                   |  |   |                     |  |  |                              |         |   |  |   |        | 
|TOTAL AFFILIATE INVESTMENTS        |  |                                             |  | $                                              | 6,419 |  |                              | $ | 57,006 |                   |  | $ | 25,672              |  |  | $                            | (16,649 | ) |  | $ | 66,029 | 
|                                   |  |                                             |  |                                                |       |  |                              |   |        |                   |  |   |                     |  |  |                              |         |   |  |   |        | 



|(A) | Certain of the listed securities are issued by affiliates(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. The principal amount of debt and the number of shares of common and preferred
stock and number of membership units are shown in our accompanying Consolidated Schedules of Investments as of September 30, 2015 and 2014.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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. Gross additions also include net increases in
unrealized appreciation or decreases in unrealized depreciation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | Gross reductions include decreases in investments resulting from principal collections related to investment repayments or sales, the amortization of premiums and acquisition costs. Gross reductions also include net
increases in unrealized depreciation or decreases in unrealized appreciation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | Debt security was on non-accrual status as of (or during the year ended) September 30, 2015, and, therefore, was considered non-income producing for a period of time during the fiscal year ended September 30,
2015.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(H) | We exited this investment during the year ended September 30, 2015.
|--- | -------------------------------------------------------------------

|(I) | New investment during the year ended September 30, 2015.
|--- | --------------------------------------------------------

|** | 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.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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