UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended June 30, 2018

OR



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

For the transition period from
                     to

Commission file number: 814-00704





GLADSTONE INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 83-0423116                          
|(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)

Not Applicable

(Former
name, former address and former fiscal year,

if changed since last report)





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

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

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



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  | ☐                                                |  | Accelerated filer         |  | ☒
|                        |  |                                                  | 
|Non-accelerated filer   |  | ☐  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | ☐
|                        |  |                                                  | 
|Emerging growth company |  | ☐                                                |  |                           |  |  

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

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

The number of shares of the
issuers Common Stock, $0.001 par value per share, outstanding as of July 31, 2018, was 32,822,459.









---

GLADSTONE INVESTMENT CORPORATION

TABLE OF CONTENTS



|           |  |                                                                                                     |    |  |    | 
|---------- |  | --------------------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I.    |  | FINANCIAL INFORMATION:                                                                              |    |  |    | 
|           |  |                                                                                                    
|Item 1.    |  | Financial Statements (Unaudited)                                                                    |    |  |    | 
|           |  | Consolidated Statements of Assets and Liabilities as of June 30, 2018 and March 
31, 2018           |    |  | 2  | 
|           |  | Consolidated Statements of Operations for the three months ended June 30, 2018 and
2017             |    |  | 3  | 
|           |  | Consolidated Statements of Changes in Net Assets for the three months ended June 
30, 2018 and 2017 |    |  | 5  | 
|           |  | Consolidated Statements of Cash Flows for the three months ended June 30, 2018 and
2017             |    |  | 6  | 
|           |  | Consolidated Schedules of Investments as of June 30, 2018 and March 31,
2018                        |    |  | 8  | 
|           |  | Notes to Consolidated Financial Statements                                                          |    |  | 20 | 
|           |  |                                                                                                    
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations               |    |  |    | 
|           |  | Overview                                                                                            |    |  | 43 | 
|           |  | Results of Operations                                                                               |    |  | 48 | 
|           |  | Liquidity and Capital Resources                                                                     |    |  | 53 | 
|           |  |                                                                                                    
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                          |    |  | 60 | 
|           |  |                                                                                                    
|Item 4.    |  | Controls and Procedures                                                                             |    |  | 60 | 
|           |  |                                                                                                    
|PART II.   |  | OTHER INFORMATION:                                                                                  |    |  |    | 
|           |  |                                                                                                    
|Item 1.    |  | Legal Proceedings                                                                                   |    |  | 61 | 
|           |  |                                                                                                    
|Item 1A.   |  | Risk Factors                                                                                        |    |  | 61 | 
|           |  |                                                                                                    
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                         |    |  | 61 | 
|           |  |                                                                                                    
|Item 3.    |  | Defaults Upon Senior Securities                                                                     |    |  | 61 | 
|           |  |                                                                                                    
|Item 4.    |  | Mine Safety Disclosures                                                                             |    |  | 62 | 
|           |  |                                                                                                    
|Item 5.    |  | Other Information                                                                                   |    |  | 62 | 
|           |  |                                                                                                    
|Item 6.    |  | Exhibits                                                                                            |    |  | 62 | 
|           | 
|SIGNATURES |  |                                                                                                     | 63 | 



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)



|                                                                                                                                                               |  |          |         |   |           |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ------- | - | --------- | - | ------- | -
|                                                                                                                                                               |  | June 30, |         |   | March 31, |  
|                                                                                                                                                               |  | 2018     |         |   | 2018      |  
|ASSETS                                                                                                                                                         |  |          |         |   |           |   |         |  
|Investments at fair value                                                                                                                                      |  |          |         |   |           |   |         |  
|Non-Control/Non-Affiliate
investments (Cost of $234,640 and $220,087, respectively)                                                                            |  | $        | 258,109 |   |           | $ | 247,297 |  
|Affiliate investments (Cost of $340,797 and $343,247, respectively)                                                                                            |  |          | 355,514 |   |           |   | 339,393 |  
|Control investments (Cost of $21,512 and $21,512 respectively)                                                                                                 |  |          | 15,695  |   |           |   | 12,457  |  
|Cash and cash equivalents                                                                                                                                      |  |          | 2,080   |   |           |   | 3,639   |  
|Restricted cash and cash equivalents                                                                                                                           |  |          | 1,234   |   |           |   | 328     |  
|Interest receivable                                                                                                                                            |  |          | 3,134   |   |           |   | 3,532   |  
|Due from administrative agent                                                                                                                                  |  |          | 1,740   |   |           |   | 2,324   |  
|Deferred financing costs, net                                                                                                                                  |  |          | 879     |   |           |   | 976     |  
|Other assets, net                                                                                                                                              |  |          | 653     |   |           |   | 953     |  
|                                                                                                                                                               |  |          |         |   |           |   |         |  
|TOTAL ASSETS                                                                                                                                                   |  | $        | 639,038 |   |           | $ | 610,899 |  
|                                                                                                                                                               |  |          |         |   |           |   |         |  
|LIABILITIES                                                                                                                                                    |  |          |         |   |           |   |         |  
|Borrowings:                                                                                                                                                    |  |          |         |   |           |   |         |  
|Line of credit at fair value (Cost of $102,500 and $107,000, respectively)                                                                                     |  | $        | 102,907 |   |           | $ | 107,500 |  
|Secured borrowing                                                                                                                                              |  |          | 5,096   |   |           |   | 5,096   |  
|                                                                                                                                                               |  |          |         |   |           |   |         |  
|Total borrowings                                                                                                                                               |  |          | 108,003 |   |           |   | 112,596 |  
|Mandatorily redeemable preferred stock, $0.001 par value, $25 liquidation preference; 6,356,000shares authorized; 5,566,000 shares issued and outstanding, net |  |          | 135,811 |   |           |   | 135,615 |  
|Accounts payable and accrued expenses                                                                                                                          |  |          | 832     |   |           |   | 916     |  
|Fees due to Adviser(A)                                                                                                                                         |  |          | 12,786  |   |           |   | 6,671   |  
|Fee due to Administrator(A)                                                                                                                                    |  |          | 285     |   |           |   | 317     |  
|Other liabilities                                                                                                                                              |  |          | 1,513   |   |           |   | 584     |  
|                                                                                                                                                               |  |          |         |   |           |   |         |  
|TOTAL LIABILITIES                                                                                                                                              |  | $        | 259,230 |   |           | $ | 256,699 |  
|                                                                                                                                                               |  |          |         |   |           |   |         |  
|Commitments and contingencies(B)                                                                                                                               |  |          |         |   |           |   |         |  
|NET ASSETS                                                                                                                                                     |  | $        | 379,808 |   |           | $ | 354,200 |  
|                                                                                                                                                               |  |          |         |   |           |   |         |  
|ANALYSIS OF NET ASSETS                                                                                                                                         |  |          |         |   |           |   |         |  
|Common stock, $0.001 par value per share, 100,000,000 shares authorized, 32,822,459
and 32,653,635 shares issued and outstanding, respectively                 |  | $        | 33      |   |           | $ | 33      |  
|Capital in excess of par value                                                                                                                                 |  |          | 332,301 |   |           |   | 330,661 |  
|Cumulative net unrealized appreciation of investments                                                                                                          |  |          | 32,369  |   |           |   | 14,301  |  
|Cumulative net unrealized appreciation of other                                                                                                                |  |          | (407    | ) |           |   | (500    | )
|(Overdistributed) underdistributed net investment income                                                                                                       |  |          | (2,509  | ) |           |   | 3,660   |  
|Accumulated net realized gain in excess of distributions                                                                                                       |  |          | 18,021  |   |           |   | 6,045   |  
|                                                                                                                                                               |  |          |         |   |           |   |         |  
|TOTAL NET ASSETS                                                                                                                                               |  | $        | 379,808 |   |           | $ | 354,200 |  
|                                                                                                                                                               |  |          |         |   |           |   |         |  
|NET ASSET VALUE PER SHARE AT END OF PERIOD                                                                                                                     |  | $        | 11.57   |   |           | $ | 10.85   |  
|                                                                                                                                                               |  |          |         |   |           |   |         |  



|(A) | Refer to Note 4  Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(B) | Refer to Note 10  Commitments and Contingencies in the accompanying Notes to Consolidated Financial Statements for additional information.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

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



2



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)



|                                                       |  |                            |        |   |      |   |        |  
|------------------------------------------------------ |  | -------------------------- | ------ | - | ---- | - | ------ | -
|                                                       |  | Three Months EndedJune 30, |       
|                                                       |  | 2018                       |        |   | 2017 |  
|INVESTMENT INCOME                                      |  |                            |        |   |      |   |        |  
|Interest income                                        |  |                            |        |   |      |   |        |  
|Non-Control/Non-Affiliate
investments                  |  | $                          | 6,266  |   |      | $ | 4,466  |  
|Affiliate investments                                  |  |                            | 6,829  |   |      |   | 6,072  |  
|Control investments                                    |  |                            | 209    |   |      |   | 206    |  
|Cash and cash equivalents                              |  |                            | 10     |   |      |   | 2      |  
|                                                       |  |                            |        |   |      |   |        |  
|Total interest income                                  |  |                            | 13,314 |   |      |   | 10,746 |  
|Dividend income                                        |  |                            |        |   |      |   |        |  
|Non-Control/Non-Affiliate
investments                  |  |                            | 66     |   |      |   |       |  
|Affiliate investments                                  |  |                            |       |   |      |   | 865    |  
|                                                       |  |                            |        |   |      |   |        |  
|Total dividend income                                  |  |                            | 66     |   |      |   | 865    |  
|Success fee income                                     |  |                            |        |   |      |   |        |  
|Non-Control/Non-Affiliate
investments                  |  |                            | 124    |   |      |   | 2,009  |  
|Control investments                                    |  |                            | 2,000  |   |      |   |       |  
|                                                       |  |                            |        |   |      |   |        |  
|Total success fee income                               |  |                            | 2,124  |   |      |   | 2,009  |  
|                                                       |  |                            |        |   |      |   |        |  
|Total investment income                                |  |                            | 15,504 |   |      |   | 13,620 |  
|                                                       |  |                            |        |   |      |   |        |  
|EXPENSES                                               |  |                            |        |   |      |   |        |  
|Base management fee(A)                                 |  |                            | 3,111  |   |      |   | 2,516  |  
|Loan servicing fee(A)                                  |  |                            | 1,740  |   |      |   | 1,564  |  
|Incentive fee(A)                                       |  |                            | 7,586  |   |      |   | 1,172  |  
|Administration fee(A)                                  |  |                            | 285    |   |      |   | 307    |  
|Interest expense on borrowings                         |  |                            | 1,742  |   |      |   | 729    |  
|Dividends on mandatorily redeemable preferred stock    |  |                            | 2,251  |   |      |   | 2,251  |  
|Amortization of deferred financing costs and discounts |  |                            | 367    |   |      |   | 367    |  
|Professional fees                                      |  |                            | 411    |   |      |   | 319    |  
|Other general and administrative expenses              |  |                            | 653    |   |      |   | 1,072  |  
|                                                       |  |                            |        |   |      |   |        |  
|Expenses before credits from Adviser                   |  |                            | 18,146 |   |      |   | 10,297 |  
|                                                       |  |                            |        |   |      |   |        |  
|Credits to base management feeloan servicing
fee(A)   |  |                            | (1,740 | ) |      |   | (1,564 | )
|Credits to fees from
Adviserother(A)                  |  |                            | (960   | ) |      |   | (548   | )
|                                                       |  |                            |        |   |      |   |        |  
|Total expenses, net of credits to fees                 |  |                            | 15,446 |   |      |   | 8,185  |  
|                                                       |  |                            |        |   |      |   |        |  
|NET INVESTMENT INCOME                                  |  | $                          | 58     |   |      | $ | 5,435  |  
|                                                       |  |                            |        |   |      |   |        |  
|REALIZED AND UNREALIZED GAIN (LOSS)                    |  |                            |        |   |      |   |        |  
|Net realized gain (loss):                              |  |                            |        |   |      |   |        |  
|Non-Control/Non-Affiliate
investments                  |  |                            | 13,786 |   |      |   | 941    |  
|Affiliate investments                                  |  |                            | 322    |   |      |   | 224    |  
|                                                       |  |                            |        |   |      |   |        |  
|Total net realized gain                                |  |                            | 14,108 |   |      |   | 1,165  |  
|Net unrealized appreciation (depreciation):            |  |                            |        |   |      |   |        |  
|Non-Control/Non-Affiliate
investments                  |  |                            | (3,741 | ) |      |   | 1,831  |  
|Affiliate investments                                  |  |                            | 18,571 |   |      |   | 2,335  |  
|Control investments                                    |  |                            | 3,238  |   |      |   | (2,625 | )
|Other                                                  |  |                            | 93     |   |      |   |       |  
|                                                       |  |                            |        |   |      |   |        |  
|Total net unrealized appreciation                      |  |                            | 18,161 |   |      |   | 1,541  |  
|                                                       |  |                            |        |   |      |   |        |  
|Net realized and unrealized gain                       |  |                            | 32,269 |   |      |   | 2,706  |  
|                                                       |  |                            |        |   |      |   |        |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS   |  | $                          | 32,327 |   |      | $ | 8,141  |  
|                                                       |  |                            |        |   |      |   |        |  



|(A) | Refer to Note 4  Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

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



3



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)



|                                                     |  |   |            |  |  |   |            | 
|---------------------------------------------------- |  | - | ---------- |  |  | - | ---------- | 
|BASIC AND DILUTED PER COMMON SHARE:                  |  |   |            |  |  |   |            | 
|Net investment income                                |  | $ |           |  |  | $ | 0.17       | 
|                                                     |  |   |            |  |  |   |            | 
|Net increase in net assets resulting from operations |  | $ | 0.99       |  |  | $ | 0.26       | 
|                                                     |  |   |            |  |  |   |            | 
|Distributions                                        |  | $ | 0.26       |  |  | $ | 0.25       | 
|                                                     |  |   |            |  |  |   |            | 
|WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING: |  |   |            |  |  |   |            | 
|Basic and diluted                                    |  |   | 32,762,848 |  |  |   | 31,474,284 | 

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



4



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(IN THOUSANDS)

(UNAUDITED)



|                                                                        |  |                             |         |   |      |   |         |  
|----------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                        |  | Three Months Ended June 30, |        
|                                                                        |  | 2018                        |         |   | 2017 |  
|OPERATIONS                                                              |  |                             |         |   |      |   |         |  
|Net investment income                                                   |  | $                           | 58      |   |      | $ | 5,435   |  
|Net realized gain on investments                                        |  |                             | 14,108  |   |      |   | 1,165   |  
|Net unrealized appreciation of investments                              |  |                             | 18,068  |   |      |   | 1,541   |  
|Net unrealized depreciation of other                                    |  |                             | 93      |   |      |   |        |  
|                                                                        |  |                             |         |   |      |   |         |  
|Net increase in net assets from operations                              |  |                             | 32,327  |   |      |   | 8,141   |  
|                                                                        |  |                             |         |   |      |   |         |  
|DISTRIBUTIONS                                                           |  |                             |         |   |      |   |         |  
|Distributions to common stockholders from net investment income         |  |                             | (6,914  | ) |      |   | (6,091  | )
|Distributions to common stockholders from realized gains                |  |                             | (1,641  | ) |      |   | (1,951  | )
|                                                                        |  |                             |         |   |      |   |         |  
|Net decrease in net assets from distributions                           |  |                             | (8,555  | ) |      |   | (8,042  | )
|                                                                        |  |                             |         |   |      |   |         |  
|CAPITAL ACTIVITY                                                        |  |                             |         |   |      |   |         |  
|Issuance of common stock                                                |  |                             | 1,873   |   |      |   | 21,154  |  
|Discounts, commissions, and offering costs for issuance of common stock |  |                             | (37     | ) |      |   | (1,100  | )
|                                                                        |  |                             |         |   |      |   |         |  
|Net increase in net assets from capital activity                        |  |                             | 1,836   |   |      |   | 20,054  |  
|                                                                        |  |                             |         |   |      |   |         |  
|TOTAL INCREASE IN NET ASSETS                                            |  |                             | 25,608  |   |      |   | 20,153  |  
|NET ASSETS, BEGINNING OF PERIOD                                         |  |                             | 354,200 |   |      |   | 301,082 |  
|                                                                        |  |                             |         |   |      |   |         |  
|NET ASSETS, END OF PERIOD                                               |  | $                           | 379,808 |   |      | $ | 321,235 |  
|                                                                        |  |                             |         |   |      |   |         |  

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



5



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)



|                                                                                                                            |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                            |  | Three Months Ended June 30, |        
|                                                                                                                            |  | 2018                        |         |   | 2017 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                        |  |                             |         |   |      |   |         |  
|Net increase in net assets resulting from operations                                                                        |  | $                           | 32,327  |   |      | $ | 8,141   |  
|Adjustments to reconcile net increase in net assets resulting from operations to net cash provided
by operating activities: |  |                             |         |   |      |   |         |  
|Purchase of investments                                                                                                     |  |                             | (30,052 | ) |      |   | (2,148  | )
|Principal repayments of investments                                                                                         |  |                             | 14,514  |   |      |   | 13,660  |  
|Net proceeds from the sale of investments                                                                                   |  |                             | 17,548  |   |      |   | 5,797   |  
|Net realized gain on investments                                                                                            |  |                             | (14,108 | ) |      |   | (1,176  | )
|Net unrealized appreciation of investments                                                                                  |  |                             | (18,068 | ) |      |   | (1,541  | )
|Net unrealized depreciation of other                                                                                        |  |                             | (93     | ) |      |   |        |  
|Amortization of premiums, discounts, and acquisition costs, net                                                             |  |                             | (5      | ) |      |   | (2      | )
|Amortization of deferred financing costs and discounts                                                                      |  |                             | 367     |   |      |   | 367     |  
|Bad debt expense, net of recoveries                                                                                         |  |                             | 251     |   |      |   | 539     |  
|Changes in assets and liabilities:                                                                                          |  |                             |         |   |      |   |         |  
|Decrease in interest receivable                                                                                             |  |                             | 367     |   |      |   | 235     |  
|Decrease (increase) in due from administrative agent                                                                        |  |                             | 584     |   |      |   | (435    | )
|Decrease in other assets, net                                                                                               |  |                             | 166     |   |      |   | 2,292   |  
|(Decrease) increase in accounts payable and accrued expenses                                                                |  |                             | (127    | ) |      |   | 498     |  
|Increase in fees due to Adviser(A)                                                                                          |  |                             | 6,115   |   |      |   | 291     |  
|(Decrease) increase in fee due to
Administrator(A)                                                                          |  |                             | (32     | ) |      |   | 11      |  
|Increase (decrease) in other liabilities                                                                                    |  |                             | 929     |   |      |   | (185    | )
|                                                                                                                            |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                                                                   |  |                             | 10,683  |   |      |   | 26,344  |  
|                                                                                                                            |  |                             |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                        |  |                             |         |   |      |   |         |  
|Proceeds from issuance of common stock                                                                                      |  |                             | 1,873   |   |      |   | 21,154  |  
|Discounts, commissions, and offering costs for issuance of common stock                                                     |  |                             | (28     | ) |      |   | (1,084  | )
|Proceeds from line of credit                                                                                                |  |                             | 37,900  |   |      |   | 9,400   |  
|Repayments on line of credit                                                                                                |  |                             | (42,400 | ) |      |   | (45,100 | )
|Deferred financing and offering costs                                                                                       |  |                             | (126    | ) |      |   | (75     | )
|Distributions paid to common stockholders                                                                                   |  |                             | (8,555  | ) |      |   | (8,042  | )
|                                                                                                                            |  |                             |         |   |      |   |         |  
|Net cash used in financing activities                                                                                       |  |                             | (11,336 | ) |      |   | (23,747 | )
|                                                                                                                            |  |                             |         |   |      |   |         |  
|NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH
EQUIVALENTS                         |  |                             | (653    | ) |      |   | 2,597   |  
|                                                                                                                            |  |                             |         |   |      |   |         |  
|CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS AT BEGINNING OF
PERIOD                             |  |                             | 3,967   |   |      |   | 4,099   |  
|                                                                                                                            |  |                             |         |   |      |   |         |  
|CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS AT END OF
PERIOD                                   |  | $                           | 3,314   |   |      | $ | 6,696   |  
|                                                                                                                            |  |                             |         |   |      |   |         |  
|CASH PAID FOR INTEREST                                                                                                      |  | $                           | 1,743   |   |      | $ | 626     |  
|                                                                                                                            |  |                             |         |   |      |   |         |  
|NON-CASH ACTIVITIES(B)                                                                                                      |  | $                           |        |   |      | $ | 9,379   |  
|                                                                                                                            |  |                             |         |   |      |   |         |  

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



6



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)



|    |  |                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Refer to Note 4  Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.
|(B) |  | 2017:                                                                                                                                   |  | Significant non-cash operating activities consisted principally of the following transaction:
 In June 2017, one of our portfolio companies, Mathey Investments, Inc.
(Mathey) merged with and into another one of our portfolio companies, SBS Industries, LLC (SBS). As a result of this transaction, our debt investments in Mathey, which totaled $8.6 million at principal and cost, were
assumed by SBS and combined with our existing debt investment in SBS, which totaled $11.4 million at principal and cost, into a new secured first lien term loan totaling $20.0 million. Our common equity investment in Mathey, with a cost
basis of $0.8 million, was converted into a preferred equity investment in SBS with the same cost basis.

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



7



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

JUNE 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|---------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                                   |  | Principal/Shares/Units(F)(J) |           |  | Cost |   |         | Fair Value | 
|NON-CONTROL/NON-AFFILIATE
INVESTMENTS(N)  68.0%                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  36.7%                                                                      |  |                              |           |  |      |   |         |            |  |   |         | 
|Containers, Packaging, and Glass  2.5%                                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|Frontier Packaging, Inc.  Term Debt (L+10.0%, 12.1% Cash, Due 12/2019)(L)                           |  |                              | 9,500     |  |      | $ | 9,500   |            |  | $ | 9,500   | 
|Diversified/Conglomerate Services  15.8%                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Bassett Creek Restoration, Inc.  Term Debt (L+10.0%, 12.1% Cash,Due 4/2023)(T)                      |  |                              | 23,000    |  |      |   | 23,000  |            |  |   | 23,000  | 
|Counsel Press, Inc.  Term Debt (L+11.8%, 13.8% Cash, Due 3/2020)(L)                                 |  |                              | 18,000    |  |      |   | 18,000  |            |  |   | 18,000  | 
|Counsel Press, Inc.  Term Debt (L+13.0%, 15.1% Cash, Due 3/2020)(L)                                 |  |                              | 5,500     |  |      |   | 5,500   |            |  |   | 5,500   | 
|Nth Degree, Inc.  Term Debt (L+11.5%, 13.6% Cash, Due 3/2023)(L)                                    |  |                              | 13,290    |  |      |   | 13,290  |            |  |   | 13,290  | 
|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                     |  |                              |           |  |      |   | 59,790  |            |  |   | 59,790  | 
|Farming and Agriculture  4.2%                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|Jackrabbit, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 10/2018)(L)                                   |  |                              | 11,000    |  |      |   | 11,000  |            |  |   | 11,000  | 
|Star Seed, Inc.  Term Debt (L+10.0%, 12.5% Cash, Due 5/2020)(L)                                     |  |                              | 5,000     |  |      |   | 5,000   |            |  |   | 5,000   | 
|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                     |  |                              |           |  |      |   | 16,000  |            |  |   | 16,000  | 
|Leisure, Amusement, Motion Pictures, and Entertainment  7.3%                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Schylling, Inc.  Term Debt (L+11.0%, 13.1%, Due 11/2018)(L)                                         |  |                              | 13,081    |  |      |   | 13,081  |            |  |   | 13,081  | 
|Schylling, Inc.  Term Debt (L+11.0%, 13.1%, Due 11/2018)(L)                                         |  |                              | 8,500     |  |      |   | 8,500   |            |  |   | 8,500   | 
|Schylling, Inc.  Term Debt (L+11.0%, 13.1%, Due 11/2018)(L)                                         |  |                              | 6,000     |  |      |   | 6,000   |            |  |   | 6,000   | 
|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                     |  |                              |           |  |      |   | 27,581  |            |  |   | 27,581  | 
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  5.3%                             |  |                              |           |  |      |   |         |            |  |   |         | 
|SBS Industries, LLC  Term Debt (L+12.0%, 14.1% Cash, Due 6/2020)(L)                                 |  |                              | 19,957    |  |      |   | 19,957  |            |  |   | 19,957  | 
|Oil and Gas  0.8%                                                                                   |  |                              |           |  |      |   |         |            |  |   |         | 
|Tread Corporation  Line of Credit, $634 available (L+10.0%, 12.5% Cash, Due 3/2021)(L)              |  |                              | 3,216     |  |      |   | 3,216   |            |  |   | 3,216   | 
|Personal, Food, and Miscellaneous Services  0.8%                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|B-Dry, LLC  Line of Credit, $100 available (L+0.3%,
2.3% Cash (0.8% Unused Fee), Due 12/2018)(G)(L) |  |                              | 4,550     |  |      |   | 4,550   |            |  |   | 3,045   | 
|B-Dry, LLC  Term Debt (L+0.3%, 2.3% Cash, Due
12/2019)(G)(L)                                        |  |                              | 6,443     |  |      |   | 6,443   |            |  |   |        | 
|B-Dry, LLC  Term Debt (L+0.3%, 2.3% Cash, Due
12/2019)(G)(L)                                        |  |                              | 840       |  |      |   | 840     |            |  |   |        | 
|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                     |  |                              |           |  |      |   | 11,833  |            |  |   | 3,045   | 
|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Secured First Lien Debt                                                                        |  |                              |           |  |      | $ | 147,877 |            |  | $ | 139,089 | 
|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured Second Lien Debt  8.0%                                                                      |  |                              |           |  |      |   |         |            |  |   |         | 
|Automobile  1.1%                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Country Club Enterprises, LLC  Term Debt (L+11.0%, 18.7% Cash,Due 5/2019)(L)                        |  | $                            | 4,000     |  |      | $ | 4,000   |            |  | $ | 4,000   | 
|Cargo Transport  3.4%                                                                               |  |                              |           |  |      |   |         |            |  |   |         | 
|Diligent Delivery Systems  Term Debt (L+9.0%, 11.1% Cash,Due 11/2022)(Q)                            |  |                              | 13,000    |  |      |   | 12,920  |            |  |   | 13,000  | 
|Home and Office Furnishings, Housewares, and Durable ConsumerProducts 
3.5%                         |  |                              |           |  |      |   |         |            |  |   |         | 
|Ginsey Home Solutions, Inc.  Term Debt (L+10.0%, 13.5% Cash,Due 1/2021)(H)(L)                       |  |                              | 13,300    |  |      |   | 13,300  |            |  |   | 13,300  | 
|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Secured Second Lien Debt                                                                       |  |                              |           |  |      | $ | 30,220  |            |  | $ | 30,300  | 
|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|Preferred Equity  19.2%                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Automobile  0.2%                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Country Club Enterprises, LLC  Preferred
Stock(C)(L)                                                |  |                              | 7,304,792 |  |      | $ | 7,725   |            |  | $ | 786     | 
|Country Club Enterprises, LLC  Guaranty
($2,000)(U)                                                 |  |                              |          |  |      |   |        |            |  |   |        | 
|                                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                     |  |                              |           |  |      |   | 7,725   |            |  |   | 786     | 

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



8



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

JUNE 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|----------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ------ | ---------- |  | - | ------ | 
|Company and
Investment(A)(B)(D)(E)                                            |  | Principal/Shares/Units(F)(J) |            |   | Cost |   |        | Fair Value | 
|Containers, Packaging, and Glass  0.4%                                       |  |                              |            |   |      |   |        |            |  |   |        | 
|Frontier Packaging, Inc.  Preferred
Stock(C)(L)                              |  |                              | 1,373      |   |      | $ | 1,373  |            |  | $ | 1,456  | 
|Diversified/Conglomerate Services  11.5%                                     |  |                              |            |   |      |   |        |            |  |   |        | 
|Bassett Creek Restoration, Inc.  Preferred
Stock(C)(T)                       |  |                              | 4,900      |   |      |   | 4,900  |            |  |   | 4,900  | 
|Counsel Press, Inc.  Preferred
Stock(C)(L)                                   |  |                              | 6,995      |   |      |   | 6,995  |            |  |   | 7,699  | 
|Nth Degree, Inc.  Preferred
Stock(C)(L)                                      |  |                              | 5,660      |   |      |   | 5,660  |            |  |   | 31,016 | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   | 17,555 |            |  |   | 43,615 | 
|Farming and Agriculture  1.5%                                                |  |                              |            |   |      |   |        |            |  |   |        | 
|Jackrabbit, Inc.  Preferred
Stock(C)(L)                                      |  |                              | 3,556      |   |      |   | 3,556  |            |  |   | 3,404  | 
|Star Seed, Inc.  Preferred
Stock(C)(L)                                       |  |                              | 1,499      |   |      |   | 1,499  |            |  |   | 2,431  | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   | 5,055  |            |  |   | 5,835  | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products  3.4% |  |                              |            |   |      |   |        |            |  |   |        | 
|Ginsey Home Solutions, Inc.  Preferred
Stock(C)(L)                           |  |                              | 19,280     |   |      |   | 9,583  |            |  |   | 12,845 | 
|Leisure, Amusement, Motion Pictures, and Entertainment  0.5%                 |  |                              |            |   |      |   |        |            |  |   |        | 
|Schylling, Inc.  Preferred
Stock(C)(L)                                       |  |                              | 4,000      |   |      |   | 4,000  |            |  |   | 2,080  | 
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  0.5%      |  |                              |            |   |      |   |        |            | 
|SBS Industries, LLC  Preferred
Stock(C)(L)                                   |  |                              | 27,705     |   |      |   | 2,771  |            |  |   | 1,838  | 
|Oil and Gas  1.2%                                                            |  |                              |            |   |      |   |        |            |  |   |        | 
|Tread Corporation  Preferred
Stock(C)(L)                                     |  |                              | 12,998,639 |   |      |   | 3,768  |            |  |   | 4,550  | 
|Personal, Food, and Miscellaneous Services  0.0%                             |  |                              |            |   |      |   |        |            |  |   |        | 
|B-Dry, LLC  Preferred Stock(C)(L)                                            |  |                              | 2,500      |   |      |   | 2,516  |            |  |   |       | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|Total Preferred Equity                                                        |  |                              |            |   |      | $ | 54,346 |            |  | $ | 73,005 | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|Common Equity  4.1%                                                          |  |                              |            |   |      |   |        |            |  |   |        | 
|Cargo Transport  0.6%                                                        |  |                              |            |   |      |   |        |            |  |   |        | 
|Diligent Delivery Systems  Common Stock Warrants(C)(Q)                       |  |                              | 8          | % |      | $ | 500    |            |  | $ | 2,384  | 
|Containers, Packaging, and Glass  2.7%                                       |  |                              |            |   |      |   |        |            |  |   |        | 
|Frontier Packaging, Inc.  Common
Stock(C)(L)                                 |  |                              | 152        |   |      |   | 152    |            |  |   | 10,435 | 
|Farming and Agriculture  0.6%                                                |  |                              |            |   |      |   |        |            |  |   |        | 
|Jackrabbit, Inc.  Common
Stock(C)(L)                                         |  |                              | 548        |   |      |   | 94     |            |  |   |       | 
|Star Seed, Inc.  Common
Stock(C)(L)                                          |  |                              | 600        |   |      |   | 1      |            |  |   | 2,184  | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   | 95     |            |  |   | 2,184  | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products 
0.0% |  |                              |            |   |      |   |        |            | 
|Ginsey Home Solutions, Inc.  Common
Stock(C)(L)                              |  |                              | 63,747     |   |      |   | 8      |            |  |   |       | 
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  0.0%      |  |                              |            |   |      |   |        |            | 
|SBS Industries, LLC  Common
Stock(C)(L)                                      |  |                              | 221,500    |   |      |   | 222    |            |  |   |       | 
|Oil and Gas  0.0%                                                            |  |                              |            |   |      |   |        |            |  |   |        | 
|Tread Corporation  Common
Stock(C)(L)                                        |  |                              | 10,089,048 |   |      |   | 753    |            |  |   |       | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.2%        |  |                              |            |   |      |   |        |            | 
|Funko Acquisition Holdings, LLC(M) 
Common Units(C)(S)                       |  |                              | 67,873     |   |      |   | 167    |            |  |   | 712    | 

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



9



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

JUNE 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and
Investment(A)(B)(D)(E)                                                                                  |  | Principal/Shares/Units(F)(J) |        |  | Cost |   |         | Fair Value | 
|Personal, Food, and Miscellaneous Services  0.0%                                                                   |  |                              |        |  |      |   |         |            |  |   |         | 
|B-Dry, LLC  Common Stock(C)(L)                                                                                     |  |                              | 2,500  |  |      | $ | 300     |            |  | $ |        | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                                                 |  |                              |        |  |      | $ | 2,197   |            |  | $ | 15,715  | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|Total
Non-Control/Non-Affiliate Investments                                                                         |  |                              |        |  |      | $ | 234,640 |            |  | $ | 258,109 | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|AFFILIATE INVESTMENTS(O) 
93.6%                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  45.3%                                                                                     |  |                              |        |  |      |   |         |            |  |   |         | 
|Automobile  2.0%                                                                                                   |  |                              |        |  |      |   |         |            |  |   |         | 
|Meridian Rack & Pinion, Inc.(M)
 Term Debt (L+11.5%, 13.6% Cash, Due 6/2019)(K)                                    |  | $                            | 9,660  |  |      | $ | 9,660   |            |  | $ | 7,728   | 
|Beverage, Food, and Tobacco  2.4%                                                                                  |  |                              |        |  |      |   |         |            |  |   |         | 
|Head Country, Inc.  Term Debt (L+10.5%, 12.6% Cash, Due 2/2019)(L)                                                 |  |                              | 9,050  |  |      |   | 9,050   |            |  |   | 9,050   | 
|Diversified/Conglomerate Manufacturing  5.1%                                                                       |  |                              |        |  |      |   |         |            |  |   |         | 
|D.P.M.S., Inc.  Term Debt (10.0% Cash, Due 10/2021)(I)(L)                                                          |  |                              | 8,795  |  |      |   | 8,795   |            |  |   | 7,844   | 
|Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+10.5%, 12.6% Cash, Due 2/2019)(K)                                   |  |                              | 9,300  |  |      |   | 9,300   |            |  |   | 9,068   | 
|Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+11.8%, 13.8% Cash, Due 2/2019)(K)                                   |  |                              | 2,400  |  |      |   | 2,400   |            |  |   | 2,352   | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   | 20,495  |            |  |   | 19,264  | 
|Diversified/Conglomerate Services  11.3%                                                                           |  |                              |        |  |      |   |         |            |  |   |         | 
|ImageWorks Display and Marketing Group, Inc.  Line of Credit, $3,000 available (L+9.0%,
11.1% Cash, Due 8/2018)(L) |  |                              |       |  |      |   |        |            |  |   |        | 
|ImageWorks Display and Marketing Group, Inc.  Term Debt (L+11.0%, 13.1% Cash, Due 11/2022)(L)                      |  |                              | 22,000 |  |      |   | 22,000  |            |  |   | 22,000  | 
|J.R. Hobbs Co.  Atlanta, LLC  Term Debt (L+11.5%, 13.6% Cash, Due 2/2022)(L)                                      |  |                              | 21,000 |  |      |   | 21,000  |            |  |   | 21,000  | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   | 43,000  |            |  |   | 43,000  | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products 
8.9%                                       |  |                              |        |  |      |   |         |            | 
|Brunswick Bowling Products, Inc.  Term Debt (L+10.0%, 12.1% Cash, Due 1/2023)(L)                                   |  |                              | 17,700 |  |      |   | 17,700  |            |  |   | 17,700  | 
|Old World Christmas, Inc.  Term Debt (L+11.3%, 13.3% Cash, Due 10/2019)(L)                                         |  |                              | 15,770 |  |      |   | 15,770  |            |  |   | 15,770  | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   | 33,470  |            |  |   | 33,470  | 
|Leisure, Amusement, Motion Pictures, and Entertainment  4.0%                                                       |  |                              |        |  |      |   |         |            |  |   |         | 
|SOG Specialty Knives & Tools, LLC  Term Debt (L+7.3%, 9.3% Cash, Due 8/2020)(L)                                    |  |                              | 6,200  |  |      |   | 6,200   |            |  |   | 6,200   | 
|SOG Specialty Knives & Tools, LLC  Term Debt (L+8.3%, 10.3% Cash, Due 8/2020)(L)                                   |  |                              | 12,200 |  |      |   | 12,200  |            |  |   | 8,883   | 
|SOG Specialty Knives & Tools, LLC  Term Debt (Due 8/2020)(L)(R)                                                    |  |                              | 538    |  |      |   | 538     |            |  |   | 441     | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   | 18,938  |            |  |   | 15,524  | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  5.5%                                              |  |                              |        |  |      |   |         |            |  |   |         | 
|Pioneer Square Brands, Inc.  Term Debt (L+12.0%, 14.1% Cash, Due 8/2022)(L)                                        |  |                              | 21,000 |  |      |   | 21,000  |            |  |   | 21,000  | 
|Telecommunications  3.7%                                                                                           |  |                              |        |  |      |   |         |            |  |   |         | 
|B+T Group Acquisition, Inc.(M)  Term
Debt (L+11.0%, 13.1% Cash, Due 12/2019)(L)                                    |  |                              | 14,000 |  |      |   | 14,000  |            |  |   | 14,000  | 
|Textiles and Leather  2.4%                                                                                         |  |                              |        |  |      |   |         |            |  |   |         | 
|Logo Sportswear, Inc.  Term Debt (L+10.5%, 12.6% Cash, Due 3/2020)(L)                                              |  |                              | 9,200  |  |      |   | 9,200   |            |  |   | 9,200   | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|Total Secured First Lien Debt                                                                                       |  |                              |        |  |      | $ | 178,813 |            |  | $ | 172,236 | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 

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



10



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

JUNE 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|------------------------------------------------------------------------------------ |  | ---------------------------- | ------ |  | ---- | - | ------ | ---------- |  | - | ------ | 
|Company and Investment(A)(B)(D)(E)                                                   |  | Principal/Shares/Units(F)(J) |        |  | Cost |   |        | Fair Value | 
|Secured Second Lien Debt  16.3%                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|Chemicals, Plastics, and Rubber  6.5%                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|PSI Molded Plastics, Inc.  Term Debt (L+12.0%, 14.1% Cash, Due 1/2024)(G)(L)        |  | $                            | 24,618 |  |      | $ | 24,618 |            |  | $ | 24,618 | 
|Diversified/Conglomerate Manufacturing  3.2%                                        |  |                              |        |  |      |   |        |            |  |   |        | 
|Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.1% Cash, Due 4/2021)(K)              |  |                              | 12,215 |  |      |   | 12,215 |            |  |   | 10,993 | 
|Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.1% Cash, Due 4/2021)(K)              |  |                              | 175    |  |      |   | 175    |            |  |   | 158    | 
|Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.1% Cash, Due 4/2021)(K)              |  |                              | 910    |  |      |   | 910    |            |  |   | 824    | 
|                                                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                     |  |                              |        |  |      |   | 13,300 |            |  |   | 11,975 | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products 
4.2%        |  |                              |        |  |      |   |        |            | 
|Cambridge Sound Management, Inc.  Term Debt (L+11.0%, 13.1% Cash, Due 8/2021)(L)    |  |                              | 16,000 |  |      |   | 16,000 |            |  |   | 16,000 | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  2.4%               |  |                              |        |  |      |   |        |            |  |   |        | 
|The Mountain Corporation  Term Debt (L+4.0%, 7.0% Cash, Due 8/2021)(G)(L)           |  |                              | 18,600 |  |      |   | 18,600 |            |  |   | 6,133  | 
|The Mountain Corporation  Term Debt (Due
8/2021)(L)(R)                              |  |                              | 1,000  |  |      |   | 1,000  |            |  |   | 1,000  | 
|The Mountain Corporation  Term Debt (Due
8/2021)(L)(R)                              |  |                              | 1,500  |  |      |   | 1,500  |            |  |   | 1,500  | 
|The Mountain Corporation  Delayed Draw Term Debt, $500 available (Due 8/2021)(L)(R) |  |                              | 500    |  |      |   | 500    |            |  |   | 500    | 
|                                                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                     |  |                              |        |  |      |   | 21,600 |            |  |   | 9,133  | 
|                                                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|Total Secured Second Lien Debt                                                       |  |                              |        |  |      | $ | 75,518 |            |  | $ | 61,726 | 
|                                                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|Preferred Equity  32.0%                                                             |  |                              |        |  |      |   |        |            |  |   |        | 
|Automobile  0.0%                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|Meridian Rack & Pinion, Inc.(M)
 Preferred Stock(C)(L)                              |  |                              | 3,381  |  |      | $ | 3,381  |            |  | $ |       | 
|Beverage, Food, and Tobacco  0.7%                                                   |  |                              |        |  |      |   |        |            |  |   |        | 
|Head Country, Inc.  Preferred
Stock(C)(L)                                           |  |                              | 4,000  |  |      |   | 4,000  |            |  |   | 2,499  | 
|Cargo Transport  0.0%                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|NDLI, Inc.  Preferred
Stock(C)(L)(V)                                                |  |                              | 3,600  |  |      |   | 3,600  |            |  |   |       | 
|Chemicals, Plastics, and Rubber  0.0%                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|PSI Molded Plastics, Inc.  Preferred
Stock(C)(L)                                    |  |                              | 51,098 |  |      |   | 8,980  |            |  |   |       | 
|Diversified/Conglomerate Manufacturing  1.0%                                        |  |                              |        |  |      |   |        |            |  |   |        | 
|Alloy Die Casting Co.(M)  Preferred
Stock(C)(L)                                     |  |                              | 5,114  |  |      |   | 5,114  |            |  |   |       | 
|Channel Technologies Group, LLC  Preferred
Stock(C)(L)                              |  |                              | 2,279  |  |      |   | 1,841  |            |  |   |       | 
|Edge Adhesives Holdings, Inc.(M) 
Preferred Stock(C)(L)                             |  |                              | 3,774  |  |      |   | 3,774  |            |  |   | 3,842  | 
|                                                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                     |  |                              |        |  |      |   | 10,729 |            |  |   | 3,842  | 
|Diversified/Conglomerate Services  6.4%                                             |  |                              |        |  |      |   |        |            |  |   |        | 
|ImageWorks Display and Marketing Group, Inc.  Preferred Stock(C)(L)                 |  |                              | 67,490 |  |      |   | 6,750  |            |  |   | 9,410  | 
|J.R. Hobbs Co.  Atlanta, LLC  Preferred Stock(C)(L)                                |  |                              | 5,920  |  |      |   | 5,920  |            |  |   | 15,031 | 
|                                                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                     |  |                              |        |  |      |   | 12,670 |            |  |   | 24,441 | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products 
18.5%       |  |                              |        |  |      |   |        |            | 
|Brunswick Bowling Products, Inc.  Preferred Stock(C)(L)                             |  |                              | 4,943  |  |      |   | 4,943  |            |  |   | 20,550 | 
|Cambridge Sound Management, Inc.  Preferred Stock(C)(L)                             |  |                              | 4,500  |  |      |   | 4,500  |            |  |   | 38,732 | 
|Old World Christmas, Inc.  Preferred
Stock(C)(L)                                    |  |                              | 6,180  |  |      |   | 6,180  |            |  |   | 10,976 | 
|                                                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                     |  |                              |        |  |      |   | 15,623 |            |  |   | 70,258 | 
|Leisure, Amusement, Motion Pictures, and Entertainment  0.0%                        |  |                              |        |  |      |   |        |            |  |   |        | 
|SOG Specialty Knives & Tools, LLC  Preferred Stock(C)(L)                            |  |                              | 9,749  |  |      |   | 9,749  |            |  |   |       | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  2.5%               |  |                              |        |  |      |   |        |            |  |   |        | 
|The Mountain Corporation  Preferred
Stock(C)(L)                                     |  |                              | 6,899  |  |      |   | 6,899  |            |  |   |       | 
|Pioneer Square Brands, Inc.  Preferred
Stock(C)(L)                                  |  |                              | 5,502  |  |      |   | 5,500  |            |  |   | 9,609  | 
|                                                                                     |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                     |  |                              |        |  |      |   | 12,399 |            |  |   | 9,609  | 
|Telecommunications  0.0%                                                            |  |                              |        |  |      |   |        |            |  |   |        | 
|B+T Group Acquisition, Inc.(M) 
Preferred Stock(C)(L)                               |  |                              | 12,841 |  |      |   | 4,196  |            |  |   |       | 

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



11



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

JUNE 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                                                  |  | Principal/Shares/Units(F)(J) |           |  | Cost |   |         | Fair Value | 
|Textiles and Leather  2.9%                                                                                         |  |                              |           |  |      |   |         |            |  |   |         | 
|Logo Sportswear, Inc.  Preferred
Stock(C)(L)                                                                       |  |                              | 1,550     |  |      | $ | 1,096   |            |  | $ | 10,903  | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Preferred Equity                                                                                              |  |                              |           |  |      | $ | 86,423  |            |  | $ | 121,552 | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Common Equity  0.0%                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Cargo Transport  0.0%                                                                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|NDLI, Inc.  Common
Stock(C)(L)(V)                                                                                  |  |                              | 545       |  |      | $ |        |            |  | $ |        | 
|Diversified/Conglomerate Manufacturing  0.0%                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|Alloy Die Casting Co.(M)  Common Stock(C)(L)                                                                       |  |                              | 630       |  |      |   | 41      |            |  |   |        | 
|Channel Technologies Group, LLC  Common
Stock(C)(L)                                                                |  |                              | 2,319,184 |  |      |   |        |            |  |   |        | 
|D.P.M.S., Inc.  Common
Stock(C)(L)                                                                                 |  |                              | 627       |  |      |   | 1       |            |  |   |        | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |           |  |      |   | 42      |            |  |   |        | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.0%                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|The Mountain Corporation  Common
Stock(C)(L)                                                                       |  |                              | 751       |  |      |   | 1       |            |  |   |        | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                                                 |  |                              |           |  |      | $ | 43      |            |  | $ |        | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Affiliate Investments                                                                                         |  |                              |           |  |      | $ | 340,797 |            |  | $ | 355,514 | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|CONTROL INVESTMENTS(P) 
4.1%:                                                                                      |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  1.3%                                                                                      |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  1.3%                                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Line of Credit, $0 available (L+4.5%, 6.6% Cash (1.0%
Unused Fee), Due 8/2019)(L) |  | $                            | 5,000     |  |      | $ | 5,000   |            |  | $ | 5,000   | 
|Secured Second Lien Debt  1.3%                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  1.3%                                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Term Debt (L+6.0%, 10.0% Cash, Due 8/2019)(L)                                     |  | $                            | 5,000     |  |      | $ | 5,000   |            |  | $ | 5,000   | 
|Preferred Equity  1.5%                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  1.5%                                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Preferred Stock(C)(L)                                                             |  |                              | 5,517,444 |  |      | $ | 11,464  |            |  | $ | 5,695   | 
|Common Equity  0.0%                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  0.0%                                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Common
Stock(C)(L)                                                                |  |                              | 88,843    |  |      | $ | 48      |            |  | $ |        | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Control Investments                                                                                           |  |                              |           |  |      | $ | 21,512  |            |  | $ | 15,695  | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|TOTAL INVESTMENTS  165.7%                                                                                          |  |                              |           |  |      | $ | 596,949 |            |  | $ | 629,318 | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 

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



12



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

JUNE 30, 2018

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|(A) | Certain of the securities listed are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $533.0 million at fair value, are pledged as collateral to our
revolving line of credit, as described further in Note 5  Borrowings in the accompanying Notes to Consolidated Financial Statements. Additionally, under Section 55 of the Investment Company Act of 1940, as amended
(the 1940 Act), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of June 30, 2018,
our investment in Funko Acquisition Holdings, LLC (Funko) is considered a non-qualifying asset under Section 55 of the 1940 Act and represents less than 0.2% of total investments, at fair
value.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (LIBOR or L), which was 2.1% as of June 30,
2018. If applicable, paid-in-kind (PIK) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate
floor. The cash interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

|(H) | $5.1 million of the debt security was participated to a third party, but is accounted for as collateral for a secured borrowing under accounting principles generally accepted in the U.S. and presented as Secured
borrowing on our accompanying Consolidated Statements of Assets and Liabilitiesas of June 30, 2018.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(K) | Fair value was based on internal yield analysis or on estimates of value submitted by ICE Data Pricing and Reference Data, LLC (formerly Standard and Poors Securities Evaluations, Inc.). Refer to Note 3 
Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(L) | Fair value was based on the total enterprise value of the portfolio company, which is generally allocated to the portfolio companys securities in order of their relative priority in the capital structure. Refer to
Note 3  Investments in the accompanyingNotes to Consolidated Financial Statements for additional information.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(O) | Affiliate investments, as defined by the 1940 Act, are those that are not Control investments and in which we own, with the power to vote, between and inclusive of 5.0% and 25.0% of the issued and outstanding voting
securities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(R) | Debt security does not have a stated current interest rate.
|--- | -----------------------------------------------------------

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

|(T) | New portfolio investment valued at cost, as it was determined that the price paid during the three months ended June 30, 2018 best represents fair value as of June 30, 2018.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(U) | Refer to Note 11  Commitments and Contingencies in the accompanyingNotes to Consolidated Financial Statements for additional information regarding this guaranty.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(V) | Investment was exited subsequent to June 30, 2018. Refer to Note 13  Subsequent Events in the accompanyingNotes to Consolidated Financial
Statements for additional information
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



13



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

MARCH 31, 2018

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | --------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                                           |  | Principal/Shares/Units(F)(J) |           |  | Cost |   |         | Fair Value | 
|NON-CONTROL/NON-AFFILIATE
INVESTMENTS(N)  69.8%                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  35.8%                                                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|Chemicals, Plastics, and Rubber  2.8%                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|Drew Foam Companies, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 7/2018)(Q)                                   |  | $                            | 9,913     |  |      | $ | 9,913   |            |  | $ | 9,987   | 
|Containers, Packaging, and Glass  2.7%                                                                      |  |                              |           |  |      |   |         |            |  |   |         | 
|Frontier Packaging, Inc.  Term Debt (L+10.0%, 12.0% Cash, Due 12/2019)(L)                                   |  |                              | 9,500     |  |      |   | 9,500   |            |  |   | 9,500   | 
|Diversified/Conglomerate Services  10.4%                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Counsel Press, Inc.  Term Debt (L+11.8%, 13.6% Cash, Due 3/2020)(L)                                         |  |                              | 18,000    |  |      |   | 18,000  |            |  |   | 18,000  | 
|Counsel Press, Inc.  Term Debt (L+13.0%, 14.9% Cash, Due 3/2020)(L)                                         |  |                              | 5,500     |  |      |   | 5,500   |            |  |   | 5,500   | 
|Nth Degree, Inc.  Term Debt (L+11.5%, 13.4% Cash, Due 12/2020)(L)                                           |  |                              | 13,290    |  |      |   | 13,290  |            |  |   | 13,290  | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                             |  |                              |           |  |      |   | 36,790  |            |  |   | 36,790  | 
|Farming and Agriculture  4.5%                                                                               |  |                              |           |  |      |   |         |            |  |   |         | 
|Jackrabbit, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 4/2018)(L)                                            |  |                              | 11,000    |  |      |   | 11,000  |            |  |   | 11,000  | 
|Star Seed, Inc.  Term Debt (L+10.0%, 12.5% Cash, Due 5/2020)(L)                                             |  |                              | 5,000     |  |      |   | 5,000   |            |  |   | 5,000   | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                             |  |                              |           |  |      |   | 16,000  |            |  |   | 16,000  | 
|Leisure, Amusement, Motion Pictures, and Entertainment  7.8%                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Schylling, Inc.  Term Debt (L+11.0%, 13.0%, Due 11/2018)(L)                                                 |  |                              | 13,081    |  |      |   | 13,081  |            |  |   | 13,081  | 
|Schylling, Inc.  Term Debt (L+11.0%, 13.0%, Due 11/2018)(T)                                                 |  |                              | 8,500     |  |      |   | 8,500   |            |  |   | 8,500   | 
|Schylling, Inc.  Term Debt (L+11.0%, 13.0%, Due 11/2018)(T)                                                 |  |                              | 6,000     |  |      |   | 6,000   |            |  |   | 6,000   | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                             |  |                              |           |  |      |   | 27,581  |            |  |   | 27,581  | 
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  5.6%                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|SBS Industries, LLC  Line of Credit, $1,500 available (L+8.5%, 10.4% Cash (1.0% Unused Fee),
Due 6/2018)(L) |  |                              |          |  |      |   |        |            |  |   |        | 
|SBS Industries, LLC  Term Debt (L+12.0%, 14.0% Cash, Due 6/2020)(L)                                         |  |                              | 19,957    |  |      |   | 19,957  |            |  |   | 19,957  | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                             |  |                              |           |  |      |   | 19,957  |            |  |   | 19,957  | 
|Oil and Gas  0.9%                                                                                           |  |                              |           |  |      |   |         |            |  |   |         | 
|Tread Corporation  Line of Credit, $634 available (L+10.0%, 12.5% Cash, Due 3/2021)(G)(L)                   |  |                              | 3,216     |  |      |   | 3,216   |            |  |   | 3,216   | 
|Personal, Food, and Miscellaneous Services  1.1%                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|B-Dry, LLC  Line of Credit, $100 available (L+0.3%,
2.1% Cash (0.8% Unused Fee), Due 12/2018)(L)            |  |                              | 4,550     |  |      |   | 4,550   |            |  |   | 3,882   | 
|B-Dry, LLC  Term Debt (L+0.3%, 2.1% Cash, Due
12/2019)(L)                                                   |  |                              | 6,443     |  |      |   | 6,443   |            |  |   |        | 
|B-Dry, LLC  Term Debt (L+0.3%, 2.1% Cash, Due
12/2019)(L)                                                   |  |                              | 840       |  |      |   | 840     |            |  |   |        | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                             |  |                              |           |  |      |   | 11,833  |            |  |   | 3,882   | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Secured First Lien Debt                                                                                |  |                              |           |  |      | $ | 134,790 |            |  | $ | 126,913 | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured Second Lien Debt  8.6%                                                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|Automobile  1.1%                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Country Club Enterprises, LLC  Term Debt (L+11.0%, 18.7% Cash, Due 5/2018)(L)                               |  | $                            | 4,000     |  |      | $ | 4,000   |            |  | $ | 4,000   | 
|Cargo Transport  3.7%                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|Diligent Delivery Systems  Term Debt (L+8.0%, 10.0% Cash, Due 11/2022)(Q)                                   |  |                              | 13,000    |  |      |   | 12,916  |            |  |   | 13,000  | 
|Home and Office Furnishings, Housewares, and Durable Consumer
Products  3.8%                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Ginsey Home Solutions, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 1/2021)(H)(L)                              |  |                              | 13,300    |  |      |   | 13,300  |            |  |   | 13,300  | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Secured Second Lien Debt                                                                               |  |                              |           |  |      | $ | 30,216  |            |  | $ | 30,300  | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Preferred Equity  17.3%                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|Automobile  0.3%                                                                                            |  |                              |           |  |      |   |         |            |  |   |         | 
|Country Club Enterprises, LLC  Preferred
Stock(C)(L)                                                        |  |                              | 7,304,792 |  |      | $ | 7,725   |            |  | $ | 1,010   | 
|Country Club Enterprises, LLC  Guaranty
($2,000)(U)                                                         |  |                              |          |  |      |   |        |            |  |   |        | 
|                                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                             |  |                              |           |  |      |   | 7,725   |            |  |   | 1,010   | 

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



14



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2018

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|----------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ------ | ---------- |  | - | ------ | 
|Company and Investment(A)(B)(D)(E)                                            |  | Principal/Shares/Units(F)(J) |            |   | Cost |   |        | Fair Value | 
|Chemicals, Plastics, and Rubber  1.0%                                        |  |                              |            |   |      |   |        |            |  |   |        | 
|Drew Foam Companies, Inc.  Preferred
Stock(C)(Q)                             |  |                              | 34,045     |   |      | $ | 3,375  |            |  | $ | 3,375  | 
|Containers, Packaging, and Glass  0.4%                                       |  |                              |            |   |      |   |        |            |  |   |        | 
|Frontier Packaging, Inc.  Preferred
Stock(C)(L)                              |  |                              | 1,373      |   |      |   | 1,373  |            |  |   | 1,428  | 
|Diversified/Conglomerate Services  9.2%                                      |  |                              |            |   |      |   |        |            |  |   |        | 
|Counsel Press, Inc.  Preferred
Stock(C)(L)                                   |  |                              | 6,995      |   |      |   | 6,995  |            |  |   | 6,303  | 
|Nth Degree, Inc.  Preferred
Stock(C)(L)                                      |  |                              | 5,660      |   |      |   | 5,660  |            |  |   | 26,424 | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   | 12,655 |            |  |   | 32,727 | 
|Farming and Agriculture  1.4%                                                |  |                              |            |   |      |   |        |            |  |   |        | 
|Jackrabbit, Inc.  Preferred
Stock(C)(L)                                      |  |                              | 3,556      |   |      |   | 3,556  |            |  |   | 2,518  | 
|Star Seed, Inc.  Preferred
Stock(C)(L)                                       |  |                              | 1,499      |   |      |   | 1,499  |            |  |   | 2,376  | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   | 5,055  |            |  |   | 4,894  | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products 
3.5% |  |                              |            |   |      |   |        |            |  |   |        | 
|Ginsey Home Solutions, Inc.  Preferred
Stock(C)(L)                           |  |                              | 19,280     |   |      |   | 9,583  |            |  |   | 12,555 | 
|Leisure, Amusement, Motion Pictures, and Entertainment  0.0%                 |  |                              |            |   |      |   |        |            |  |   |        | 
|Schylling, Inc.  Preferred
Stock(C)(L)                                       |  |                              | 4,000      |   |      |   | 4,000  |            |  |   |       | 
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  0.6%      |  |                              |            |   |      |   |        |            |  |   |        | 
|SBS Industries, LLC  Preferred
Stock(C)(L)                                   |  |                              | 27,705     |   |      |   | 2,771  |            |  |   | 1,958  | 
|Oil and Gas  0.9%                                                            |  |                              |            |   |      |   |        |            |  |   |        | 
|Tread Corporation  Preferred
Stock(C)(L)                                     |  |                              | 12,998,639 |   |      |   | 3,768  |            |  |   | 3,335  | 
|Personal, Food, and Miscellaneous Services  0.0%                             |  |                              |            |   |      |   |        |            |  |   |        | 
|B-Dry, LLC  Preferred Stock(C)(L)                                            |  |                              | 2,500      |   |      |   | 2,516  |            |  |   |       | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|Total Preferred Equity                                                        |  |                              |            |   |      | $ | 52,821 |            |  | $ | 61,282 | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|Common Equity  8.1%                                                          |  |                              |            |   |      |   |        |            |  |   |        | 
|Cargo Transport  0.7%                                                        |  |                              |            |   |      |   |        |            |  |   |        | 
|Diligent Delivery Systems  Common Stock Warrants(C)(Q)                       |  |                              | 8          | % |      | $ | 500    |            |  | $ | 2,816  | 
|Chemicals, Plastics, and Rubber  4.1%                                        |  |                              |            |   |      |   |        |            |  |   |        | 
|Drew Foam Companies, Inc.  Common
Stock(C)(Q)                                |  |                              | 5,372      |   |      |   | 63     |            |  |   | 14,744 | 
|Containers, Packaging, and Glass  3.0%                                       |  |                              |            |   |      |   |        |            |  |   |        | 
|Frontier Packaging, Inc.  Common
Stock(C)(L)                                 |  |                              | 152        |   |      |   | 152    |            |  |   | 10,459 | 
|Farming and Agriculture  0.2%                                                |  |                              |            |   |      |   |        |            |  |   |        | 
|Jackrabbit, Inc.  Common
Stock(C)(L)                                         |  |                              | 548        |   |      |   | 94     |            |  |   |       | 
|Star Seed, Inc.  Common
Stock(C)(L)                                          |  |                              | 600        |   |      |   | 1      |            |  |   | 589    | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   | 95     |            |  |   | 589    | 
|Home and Office Furnishings, Housewares, and Durable Consumer
Products 0.0%  |  |                              |            |   |      |   |        |            |  |   |        | 
|Ginsey Home Solutions, Inc.  Common
Stock(C)(L)                              |  |                              | 63,747     |   |      |   | 8      |            |  |   |       | 
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  0.0%      |  |                              |            |   |      |   |        |            |  |   |        | 
|SBS Industries, LLC  Common
Stock(C)(L)                                      |  |                              | 221,500    |   |      |   | 222    |            |  |   |       | 
|Oil and Gas  0.0%                                                            |  |                              |            |   |      |   |        |            |  |   |        | 
|Tread Corporation  Common
Stock(C)(L)                                        |  |                              | 10,089,048 |   |      |   | 753    |            |  |   |       | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.1%        |  |                              |            |   |      |   |        |            |  |   |        | 
|Funko Acquisition Holdings, LLC(M) 
Common Units(C)(S)                       |  |                              | 67,873     |   |      |   | 167    |            |  |   | 194    | 

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



15



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2018

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                                                  |  | Principal/Shares/Units(F)(J) |        |  | Cost |   |         | Fair Value | 
|Personal, Food, and Miscellaneous Services  0.0%                                                                   |  |                              |        |  |      |   |         |            |  |   |         | 
|B-Dry, LLC  Common Stock(C)(L)                                                                                     |  |                              | 2,500  |  |      | $ | 300     |            |  | $ |        | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                                                 |  |                              |        |  |      | $ | 2,260   |            |  | $ | 28,802  | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|Total
Non-Control/Non-Affiliate Investments                                                                         |  |                              |        |  |      | $ | 220,087 |            |  | $ | 247,297 | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|AFFILIATE INVESTMENTS(O) 
95.8%                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  49.1%                                                                                     |  |                              |        |  |      |   |         |            |  |   |         | 
|Automobile  2.3%                                                                                                   |  |                              |        |  |      |   |         |            |  |   |         | 
|Meridian Rack & Pinion, Inc.(M)
 Term Debt (L+11.5%, 13.5% Cash,Due 4/2019)(K)                                     |  | $                            | 9,660  |  |      | $ | 9,660   |            |  | $ | 8,018   | 
|Beverage, Food, and Tobacco  2.6%                                                                                  |  |                              |        |  |      |   |         |            |  |   |         | 
|Head Country, Inc.  Term Debt (L+10.5%, 12.5% Cash, Due 2/2019)(L)                                                 |  |                              | 9,050  |  |      |   | 9,050   |            |  |   | 9,050   | 
|Diversified/Conglomerate Manufacturing  5.0%                                                                       |  |                              |        |  |      |   |         |            |  |   |         | 
|D.P.M.S., Inc.  Term Debt (10.0% Cash, Due 10/2021)(I)(L)                                                          |  |                              | 8,795  |  |      |   | 8,795   |            |  |   | 7,028   | 
|Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+10.5%, 12.5% Cash,Due 2/2019)(K)                                    |  |                              | 9,300  |  |      |   | 9,300   |            |  |   | 8,742   | 
|Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+11.8%, 13.8% Cash,Due 2/2019)(K)                                    |  |                              | 2,400  |  |      |   | 2,400   |            |  |   | 2,268   | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   | 20,495  |            |  |   | 18,038  | 
|Diversified/Conglomerate Services  12.2%                                                                           |  |                              |        |  |      |   |         |            |  |   |         | 
|ImageWorks Display and Marketing Group, Inc.  Line of Credit, $2,700 available (L+9.0%,
10.9% Cash, Due 5/2018)(L) |  |                              | 300    |  |      |   | 300     |            |  |   | 300     | 
|ImageWorks Display and Marketing Group, Inc.  Term Debt (L+11.0%, 13.0% Cash, Due 11/2022)(L)                      |  |                              | 22,000 |  |      |   | 22,000  |            |  |   | 22,000  | 
|J.R. Hobbs Co.  Atlanta, LLC  Term Debt (L+11.5%, 13.4% Cash, Due 2/2022)(L)                                      |  |                              | 21,000 |  |      |   | 21,000  |            |  |   | 21,000  | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   | 43,300  |            |  |   | 43,300  | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products 
9.4%                                       |  |                              |        |  |      |   |         |            |  |   |         | 
|Brunswick Bowling Products, Inc.  Term Debt (L+10.0%, 12.0% Cash, Due 1/2023)(L)                                   |  |                              | 17,700 |  |      |   | 17,700  |            |  |   | 17,700  | 
|Old World Christmas, Inc.  Term Debt (L+11.3%, 13.3% Cash, Due 10/2019)(L)                                         |  |                              | 15,770 |  |      |   | 15,770  |            |  |   | 15,770  | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   | 33,470  |            |  |   | 33,470  | 
|Leisure, Amusement, Motion Pictures, and Entertainment  4.4%                                                       |  |                              |        |  |      |   |         |            |  |   |         | 
|SOG Specialty Knives & Tools, LLC  Term Debt (L+7.3%, 9.3%
Cash,Due 8/2020)(L)                                     |  |                              | 6,200  |  |      |   | 6,200   |            |  |   | 6,200   | 
|SOG Specialty Knives & Tools, LLC  Term Debt (L+8.3%, 10.3%
Cash,Due 8/2020)(L)                                    |  |                              | 12,200 |  |      |   | 12,200  |            |  |   | 8,827   | 
|SOG Specialty Knives & Tools, LLC  Term Debt (Due 8/2020)(L)(R)                                                    |  |                              | 538    |  |      |   | 538     |            |  |   | 440     | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   | 18,938  |            |  |   | 15,467  | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  6.6%                                              |  |                              |        |  |      |   |         |            |  |   |         | 
|Pioneer Square Brands, Inc.  Line of Credit, $600 available (L+9.0%, 10.9% Cash (1.0% Unused
Fee), Due 4/2018)(L)  |  |                              | 2,400  |  |      |   | 2,400   |            |  |   | 2,400   | 
|Pioneer Square Brands, Inc.  Term Debt (L+12.0%, 13.9% Cash, Due 8/2022)(L)                                        |  |                              | 21,000 |  |      |   | 21,000  |            |  |   | 21,000  | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |        |  |      |   | 23,400  |            |  |   | 23,400  | 
|Telecommunications  4.0%                                                                                           |  |                              |        |  |      |   |         |            |  |   |         | 
|B+T Group Acquisition, Inc.(M)  Term
Debt (L+11.0%, 13.0% Cash,Due 12/2019)(L)                                     |  |                              | 14,000 |  |      |   | 14,000  |            |  |   | 14,000  | 
|Textiles and Leather  2.6%                                                                                         |  |                              |        |  |      |   |         |            |  |   |         | 
|Logo Sportswear, Inc.  Term Debt (L+10.5%, 12.5% Cash, Due 3/2020)(L)                                              |  |                              | 9,200  |  |      |   | 9,200   |            |  |   | 9,200   | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 
|Total Secured First Lien Debt                                                                                       |  |                              |        |  |      | $ | 181,513 |            |  | $ | 173,943 | 
|                                                                                                                    |  |                              |        |  |      |   |         |            |  |   |         | 

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



16



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2018

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|----------------------------------------------------------------------------------- |  | ---------------------------- | ------ |  | ---- | - | ------ | ---------- |  | - | ------ | 
|Company and Investment(A)(B)(D)(E)                                                  |  | Principal/Shares/Units(F)(J) |        |  | Cost |   |        | Fair Value | 
|Secured Second Lien Debt  17.5%                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|Chemicals, Plastics, and Rubber  7.0%                                              |  |                              |        |  |      |   |        |            |  |   |        | 
|PSI Molded Plastics, Inc.  Term Debt (L+12.0%, 13.9% Cash, Due 1/2024)(L)          |  | $                            | 24,618 |  |      | $ | 24,618 |            |  | $ | 24,618 | 
|Diversified/Conglomerate Manufacturing  2.8%                                       |  |                              |        |  |      |   |        |            |  |   |        | 
|Alloy Die Casting Co.(M)  Term
Debt (L+11.5%, 13.5% Cash, Due 4/2021)(G)(K)        |  |                              | 12,215 |  |      |   | 12,215 |            |  |   | 9,161  | 
|Alloy Die Casting Co.(M)  Term
Debt (L+11.5%, 13.5% Cash, Due 4/2021)(G)(K)        |  |                              | 175    |  |      |   | 175    |            |  |   | 131    | 
|Alloy Die Casting Co.(M)  Term Debt
(Due 4/2021)(K)(R)                             |  |                              | 910    |  |      |   | 910    |            |  |   | 687    | 
|                                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                    |  |                              |        |  |      |   | 13,300 |            |  |   | 9,979  | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products 
4.5%       |  |                              |        |  |      |   |        |            |  |   |        | 
|Cambridge Sound Management, Inc.  Term Debt (L+11.0%, 13.0% Cash, Due 8/2021)(L)   |  |                              | 16,000 |  |      |   | 16,000 |            |  |   | 16,000 | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  3.2%              |  |                              |        |  |      |   |        |            |  |   |        | 
|The Mountain Corporation  Term Debt (L+4.0%, 7.0% Cash, Due 8/2021)(L)             |  |                              | 18,600 |  |      |   | 18,600 |            |  |   | 8,692  | 
|The Mountain Corporation  Term Debt (Due
8/2021)(L)(R)                             |  |                              | 1,000  |  |      |   | 1,000  |            |  |   | 1,000  | 
|The Mountain Corporation  Term Debt (Due
8/2021)(L)(R)                             |  |                              | 1,500  |  |      |   | 1,500  |            |  |   | 1,500  | 
|The Mountain Corporation  Delayed Draw Term Debt, $750 available(Due 8/2021)(L)(R) |  |                              | 250    |  |      |   | 250    |            |  |   | 250    | 
|                                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                    |  |                              |        |  |      |   | 21,350 |            |  |   | 11,442 | 
|                                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|Total Secured Second Lien Debt                                                      |  |                              |        |  |      | $ | 75,268 |            |  | $ | 62,039 | 
|                                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|Preferred Equity  29.2%                                                            |  |                              |        |  |      |   |        |            |  |   |        | 
|Automobile  0.2%                                                                   |  |                              |        |  |      |   |        |            |  |   |        | 
|Meridian Rack & Pinion, Inc.(M)
 Preferred Stock(C)(L)                             |  |                              | 3,381  |  |      | $ | 3,381  |            |  | $ | 802    | 
|Beverage, Food, and Tobacco  0.7%                                                  |  |                              |        |  |      |   |        |            |  |   |        | 
|Head Country, Inc.  Preferred
Stock(C)(L)                                          |  |                              | 4,000  |  |      |   | 4,000  |            |  |   | 2,555  | 
|Cargo Transport  0.0%                                                              |  |                              |        |  |      |   |        |            |  |   |        | 
|NDLI, Inc.  Preferred
Stock(C)(L)                                                  |  |                              | 3,600  |  |      |   | 3,600  |            |  |   |       | 
|Chemicals, Plastics, and Rubber  0.9%                                              |  |                              |        |  |      |   |        |            |  |   |        | 
|PSI Molded Plastics, Inc.  Preferred
Stock(C)(L)                                   |  |                              | 51,098 |  |      |   | 8,980  |            |  |   | 3,016  | 
|Diversified/Conglomerate Manufacturing  0.5%                                       |  |                              |        |  |      |   |        |            |  |   |        | 
|Alloy Die Casting Co.(M)  Preferred
Stock(C)(L)                                    |  |                              | 5,114  |  |      |   | 5,114  |            |  |   |       | 
|Channel Technologies Group, LLC  Preferred
Stock(C)(L)                             |  |                              | 2,279  |  |      |   | 1,841  |            |  |   |       | 
|Edge Adhesives Holdings, Inc.(M) 
Preferred Stock(C)(L)                            |  |                              | 3,774  |  |      |   | 3,774  |            |  |   | 1,925  | 
|                                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                    |  |                              |        |  |      |   | 10,729 |            |  |   | 1,925  | 
|Diversified/Conglomerate Services  6.8%                                            |  |                              |        |  |      |   |        |            |  |   |        | 
|ImageWorks Display and Marketing Group, Inc.  Preferred Stock(C)(L)                |  |                              | 67,490 |  |      |   | 6,750  |            |  |   | 9,422  | 
|J.R. Hobbs Co.  Atlanta, LLC  Preferred Stock(C)(L)                               |  |                              | 5,920  |  |      |   | 5,920  |            |  |   | 14,480 | 
|                                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                    |  |                              |        |  |      |   | 12,670 |            |  |   | 23,902 | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products 
15.0%      |  |                              |        |  |      |   |        |            |  |   |        | 
|Brunswick Bowling Products, Inc.  Preferred Stock(C)(L)                            |  |                              | 4,943  |  |      |   | 4,943  |            |  |   | 16,615 | 
|Cambridge Sound Management, Inc.  Preferred Stock(C)(L)                            |  |                              | 4,500  |  |      |   | 4,500  |            |  |   | 26,178 | 
|Old World Christmas, Inc.  Preferred
Stock(C)(L)                                   |  |                              | 6,180  |  |      |   | 6,180  |            |  |   | 10,411 | 
|                                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                    |  |                              |        |  |      |   | 15,623 |            |  |   | 53,204 | 
|Leisure, Amusement, Motion Pictures, and Entertainment  0.0%                       |  |                              |        |  |      |   |        |            |  |   |        | 
|SOG Specialty Knives & Tools, LLC  Preferred Stock(C)(L)                           |  |                              | 9,749  |  |      |   | 9,749  |            |  |   |       | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  2.2%              |  |                              |        |  |      |   |        |            |  |   |        | 
|The Mountain Corporation  Preferred
Stock(C)(L)                                    |  |                              | 6,899  |  |      |   | 6,899  |            |  |   |       | 
|Pioneer Square Brands, Inc.  Preferred
Stock(C)(L)                                 |  |                              | 5,502  |  |      |   | 5,500  |            |  |   | 7,800  | 
|                                                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                                    |  |                              |        |  |      |   | 12,399 |            |  |   | 7,800  | 
|Telecommunications  0.0%                                                           |  |                              |        |  |      |   |        |            |  |   |        | 
|B+T Group Acquisition, Inc.(M) 
Preferred Stock(C)(L)                              |  |                              | 12,841 |  |      |   | 4,196  |            |  |   |       | 

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



17



---

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2018

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                                                  |  | Principal/Shares/Units(F)(J) |           |  | Cost |   |         | Fair Value | 
|Textiles and Leather  2.9%                                                                                         |  |                              |           |  |      |   |         |            |  |   |         | 
|Logo Sportswear, Inc.  Preferred
Stock(C)(L)                                                                       |  |                              | 1,550     |  |      | $ | 1,096   |            |  | $ | 10,207  | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Preferred Equity                                                                                              |  |                              |           |  |      | $ | 86,423  |            |  | $ | 103,411 | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Common Equity  0.0%                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Cargo Transport  0.0%                                                                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|NDLI, Inc.  Common
Stock(C)(L)                                                                                     |  |                              | 545       |  |      | $ |        |            |  | $ |        | 
|Diversified/Conglomerate Manufacturing  0.0%                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|Alloy Die Casting Co.(M)  Common Stock(C)(L)                                                                       |  |                              | 630       |  |      |   | 41      |            |  |   |        | 
|Channel Technologies Group, LLC  Common
Stock(C)(L)                                                                |  |                              | 2,319,184 |  |      |   |        |            |  |   |        | 
|D.P.M.S., Inc.  Common
Stock(C)(L)                                                                                 |  |                              | 627       |  |      |   | 1       |            |  |   |        | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                                    |  |                              |           |  |      |   | 42      |            |  |   |        | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.0%                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|The Mountain Corporation  Common
Stock(C)(L)                                                                       |  |                              | 751       |  |      |   | 1       |            |  |   |        | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                                                 |  |                              |           |  |      | $ | 43      |            |  | $ |        | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Affiliate Investments                                                                                         |  |                              |           |  |      | $ | 343,247 |            |  | $ | 339,393 | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|CONTROL INVESTMENTS(P) 
3.5%:                                                                                      |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  1.4%                                                                                      |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  1.4%                                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Line of Credit, $0 available (L+4.5%, 6.5% Cash (1.0%
Unused Fee), Due 8/2019)(L) |  | $                            | 5,000     |  |      | $ | 5,000   |            |  | $ | 5,000   | 
|Secured Second Lien Debt  1.4%                                                                                     |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  1.4%                                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Term Debt (L+6.0%, 10.0% Cash, Due 8/2019)(L)                                     |  | $                            | 5,000     |  |      | $ | 5,000   |            |  | $ | 5,000   | 
|Preferred Equity  0.7%                                                                                             |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  0.7%                                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Preferred Stock(C)(L)                                                             |  |                              | 5,517,444 |  |      | $ | 11,464  |            |  | $ | 2,457   | 
|Common Equity  0.0%                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  0.0%                                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Common
Stock(C)(L)                                                                |  |                              | 88,843    |  |      | $ | 48      |            |  | $ |        | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Control Investments                                                                                           |  |                              |           |  |      | $ | 21,512  |            |  | $ | 12,457  | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 
|TOTAL INVESTMENTS 
169.2%(V)                                                                                       |  |                              |           |  |      | $ | 584,846 |            |  | $ | 599,147 | 
|                                                                                                                    |  |                              |           |  |      |   |         |            |  |   |         | 

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



18



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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2018

(DOLLAR AMOUNTS IN THOUSANDS)



|(A) | Certain of the securities listed are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $504.0 million at fair value, are pledged as collateral to our
revolving line of credit, as described further in Note 5 Borrowings in the accompanying Notes to Consolidated Financial Statements. Additionally, under Section 55 of the Investment Company Act of 1940, as amended (the
1940 Act), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of March 31, 2018, our
investment in Funko Acquisition Holdings, LLC (Funko) is considered a non-qualifying asset under Section 55 of the 1940 Act and represents less than 0.1% of total investments, at fair value.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (LIBOR or L), which was 1.9% as of March 31,
2018. If applicable, paid-in-kind (PIK) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate
floor. The cash interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(D) | Category percentages represent the fair value of each category and subcategory as a percentage of net assets as of March 31, 2018.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

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

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

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

|(H) | $5.1 million of the debt security was participated to a third party, but is accounted for as collateral for a secured borrowing under accounting principles generally accepted in the U.S. and presented as Secured
borrowing on our accompanying Consolidated Statements of Assets and Liabilitiesas of March 31, 2018.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(K) | Fair value was based on internal yield analysis or on estimates of value submitted by ICE Data Pricing and Reference Data, LLC (formerly Standard and Poors Securities Evaluations, Inc.). Refer to Note 3 
Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(L) | Fair value was based on the total enterprise value of the portfolio company, which is generally allocated to the portfolio companys securities in order of their relative priority in the capital structure. Refer to
Note 3  Investments in the accompanyingNotes to Consolidated Financial Statements for additional information.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(O) | Affiliate investments, as defined by the 1940 Act, are those that are not Control investments and in which we own, with the power to vote, between and inclusive of 5.0% and 25.0% of the issued and outstanding voting
securities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(R) | Debt security does not have a stated current interest rate.
|--- | -----------------------------------------------------------

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

|(T) | New portfolio investment valued at cost, as it was determined that the price paid during the three months ended March 31, 2018 best represents fair value as of March 31, 2018.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(U) | Refer to Note 11Commitments and Contingencies in the accompanyingNotes to Consolidated Financial Statements for additional information regarding this guaranty.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(V) | Cumulative gross unrealized depreciation for federal income tax purposes is $95.2 million; cumulative gross unrealized appreciation for federal income tax purposes is $113.6 million. Cumulative net unrealized
appreciation is $18.4 million, based on a tax cost of $580.8 million.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



19



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GLADSTONE INVESTMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2018

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

(UNAUDITED)

NOTE 1. ORGANIZATION

Gladstone Investment Corporation (Gladstone Investment) was incorporated under the General Corporation Law of the State of Delaware on
February 18, 2005, and completed an initial public offering on June 22, 2005. The terms the Company, we, our and us all refer to Gladstone Investment and its consolidated subsidiaries. We are
an externally advised, 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 Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 Financial
Services-Investment Companies (ASC 946). In addition, we have elected to be treated for tax purposes as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as amended (the Code). We
were established for the purpose of investing in debt and equity securities of established private businesses in the United States (U.S.). Debt investments primarily take the form of two types of loans: secured first lien loans and
secured second lien loans. Equity investments primarily take the form of preferred or common equity (or warrants or options to acquire the foregoing), often in connection with buyouts and other recapitalizations. Our investment objectives are to:
(i) 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 (ii) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of established businesses, generally in combination with
the aforementioned debt securities, that we believe can grow over time to permit us to sell our equity investments for capital gains. We intend that our investment portfolio over time will consist of approximately 75.0% in debt investments and 25.0%
in equity investments, at cost.

Gladstone Business Investment, LLC (Business Investment), a wholly-owned subsidiary of ours, was established
on August 11, 2006 for the sole purpose of owning our portfolio of investments in connection with our line of credit. The financial statements of Business Investment are consolidated with those of Gladstone Investment. We also have significant
subsidiaries (as defined under Rule 1-02(w) of the U.S. Securities and Exchange Commissions (SEC) Regulation S-X) whose financial statements are not
consolidated with ours. Refer to Note 12Unconsolidated Significant Subsidiaries for additional information regarding our unconsolidated significant subsidiaries.

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Statements and Basis of Presentation

We prepare our interim financial statements in accordance with accounting principles generally accepted in the U.S. (GAAP) for interim financial
information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 and 10 of SEC Regulation S-X under the Securities Exchange Act of 1934,
as amended. Accordingly, we have not included in this quarterly report all of the information and notes required by GAAP for annual financial statements. The accompanying Consolidated Financial Statements include our accounts and those of our
wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. In accordance with Article 6 of Regulation S-X, under the Securities Act of 1933, we do not
consolidate portfolio company investments. Under the investment company rules and regulations pursuant to the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies, codified in ASC
946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to the investment company
or its consolidated subsidiaries. In our opinion, all adjustments, consisting solely of normal recurring accruals, necessary for the fair statement of financial statements for the interim periods have been included. The results of operations for the
three months ended June 30, 2018 are not necessarily indicative of results that ultimately may be achieved for the fiscal year ending March 31, 2019 or any future interim period. The interim financial statements and notes thereto should be
read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended March 31, 2018, as filed with the SEC on May 15, 2018.



20



---

Use of Estimates

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

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation in the Consolidated Financial Statements and the
accompanying Notes to Consolidated Financial Statements. Reclassifications did not impact net increase in net assets resulting from operations, total assets, total liabilities, or total net assets, or Statement of Changes in Net Assets and
Statement of Cash Flows classifications.

Investment Valuation Policy

Accounting Recognition

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

Board Responsibility

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

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

Use of Third Party Valuation Firms

The Valuation Team
engages third party valuation firms to provide independent assessments of fair value of certain of our investments.

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

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



21



---

Valuation Techniques

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



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

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



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



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



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

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



22



---

Fair value measurements of our investments may involve subjective judgments and estimates and, due to the
uncertainty inherent in valuing these securities, the determinations of fair value may fluctuate from period to period and may differ materially from the values that could be obtained if a ready market for these securities existed. Our NAV could be
materially affected if the determinations regarding the fair value of our investments are materially different from the values that we ultimately realize upon our disposal of such securities. Additionally, changes in the market environment and other
events that may occur over the life of the investment may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned. Further, such investments are generally subject to legal and other
restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which it is recorded.

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

Revenue Recognition

Interest Income Recognition

Interest income, adjusted for amortization of premiums, amendment fees and acquisition costs and the accretion of 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 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, the interest income is deemed to be collectible. As of June 30, 2018, certain of our loans to B-Dry, LLC, The Mountain Corporation, and PSI Molded Plastics, Inc. were on non-accrual status, with an aggregate debt cost basis of $55.1 million, or 12.4% of the cost basis of all debt investments in our portfolio, and an aggregate fair value of $33.8 million, or 8.2% of the
fair value of all debt investments in our portfolio. As of March 31, 2018, certain of our loans to Alloy Die Casting Co. and Tread Corporation were on non-accrual status, with an aggregate debt cost basis
of $15.6 million, or 3.6% of the cost basis of all debt investments in our portfolio, and an aggregate fair value of $12.5 million, or 3.1% of the fair value of all debt investments in our portfolio.

Paid-in-kind (PIK) interest, computed at the contractual rate
specified in the loan agreement, is added to the principal balance of the loan and recorded as interest income. As of June 30, 2018 and March 31, 2018, we did not have any loans with a PIK interest component.

Success Fee Income Recognition

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

Dividend Income Recognition

We accrue dividend income on
preferred and common equity securities to the extent that such amounts are expected to be collected and if we have the option to collect such amounts in cash or other consideration.

Restricted Cash and Cash Equivalents

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

Deferred
Financing and Offering Costs

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



23



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Related Party Fees

We are party to the Advisory Agreement with the Adviser, which is owned and controlled by our chairman and chief executive officer. In accordance with the
Advisory Agreement, we pay the Adviser fees as compensation for its services, consisting of a base management fee and an incentive fee. Additionally, we pay the Adviser a loan servicing fee as compensation for its services as servicer under the
terms of the Fifth Amended and Restated Credit Agreement dated April 30, 2013, as amended (the Credit Facility).

We are also party to
the Administration Agreement with the Administrator, which is owned and controlled by our chairman and chief executive officer, whereby we pay separately for administrative services.

Refer to Note 4  Related Party Transactionsfor additional information regarding these related party fees and agreements.

Recent Accounting Pronouncements

In November 2016, the
FASB issued Accounting Standards Update 2016-18, Restricted Cash (a consensus of the Emerging Issues Task Force) (ASU 2016-18), which
requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU
2016-18 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted, and we adopted ASU 2016-18 effective April 1, 2018. The adoption of ASU 2016-18 did not have a material impact on our financial position, results of operations, or cash flows.

In August 2016, the FASB issued Accounting Standards Update 2016-15, Classification of Certain Cash Receipts
and Cash Payments (a consensus of the Emerging Issues Task Force) (ASU 2016-15), which is intended to reduce diversity in practice in how certain transactions are classified in the
statement of cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted,
and we adopted ASU 2016-15 effective April 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our financial position, results of
operations, or cash flows.

In January 2016, the FASB issued Accounting Standards Update 2016-01,
Financial InstrumentsOverall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which changes how entities measure certain equity
investments and how entities present changes in the fair value of financial liabilities measured under the fair value option that are attributable to instrument-specific credit risk. ASU 2016-01 is effective
for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted for certain aspects of ASU 2016-01 relating to the
recognition of changes in fair value of financial liabilities when the fair value option is elected, and we adopted ASU 2016-01 effective April 1, 2018. The adoption of ASU
2016-01 did not have a material impact on our financial position, results of operations, or cash flows.

In May
2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which was amended in March
2016 by FASB Accounting Standards Update 2016-08, Principal versus Agent Considerations (ASU 2016-08), in April 2016 by FASB Accounting
Standards Update 2016-10, Identifying Performance Obligations and Licensing(ASU 2016-10), in May 2016 by FASB Accounting Standards Update
2016-12, Narrow-Scope Improvements and Practical Expedients(ASU 2016-12), and in December 2016 by FASB Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606(ASU 2016-20). ASU 2014-09, as amended,
supersedes or replaces nearly all GAAP revenue recognition guidance. The new guidance establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, and will
expand disclosures about revenue. In July 2015, the FASB issued Accounting Standards Update 2015-14, Deferral of the Effective Date, which deferred the effective date of ASU 2014-09. ASU 2014-09, as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20, is now effective for annual reporting periods beginning after December 15, 2017 and interim
periods within those years, with early adoption permitted for annual reporting periods beginning after December 15, 2016 and interim periods within those years. We adopted ASU 2014-09, as amended,
effective April 1, 2018. The adoption of ASU 2014-09, as amended, did not result in a material change in the timing of revenue recognition or a material impact on our financial position, results of
operations, or cash flows from adopting this standard.



24



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NOTE 3. INVESTMENTS

Fair Value

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



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



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



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

When a determination is made to classify our investments within Level 3 of the valuation hierarchy, such determination is based upon the significance of
the unobservable factors to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable, or Level 3, inputs, observable inputs (or, components that are actively quoted and
can be validated to external sources). The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.

As of June 30, 2018 and March 31, 2018, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy, except
for our investment in Funko Acquisition Holdings, LLC (Funko), which was valued using Level 2 inputs.

We transfer investments in and out
of Level 1, 2 and 3 of the valuation hierarchy as of the beginning balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. There were no transfers in or out of
Level 1, 2 and 3 during the three months ended June 30, 2018. During the three months ended June 30, 2017, we transferred our investment in AquaVenture Holdings Limited, f/k/a Quench Holdings Corp., (AquaVenture) from
Level 2 to Level 1 as a result of the expiration of the lock-up period from the initial public offering in October 2016 and subsequently sold our investment.



25



---

As of June 30, 2018 and March 31, 2018, our investments, by security type, at fair value were
categorized as follows within the ASC 820 fair value hierarchy:



|                                   |  |            |         |  |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 
|---------------------------------- |  | ---------- | ------- |  | ---------------------------------------------------------- | - | - | ----------------------------------------- |  | - | -------------------------------------- | --- |  | - | ------- | 
|                                   |  |            |         |  | Fair Value Measurements                                    |  
|                                   |  | Fair Value |         |  | Quoted Prices inActive Marketsfor IdenticalAssets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level 3) |    
|As of June 30, 2018:               |  |            |         |  |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 
|Secured first lien debt            |  | $          | 316,325 |  |                                                            | $ |  |                                           |  | $ |                                       |     |  | $ | 316,325 | 
|Secured second lien debt           |  |            | 97,026  |  |                                                            |   |  |                                           |  |   |                                       |     |  |   | 97,026  | 
|Preferred equity                   |  |            | 200,252 |  |                                                            |   |  |                                           |  |   |                                       |     |  |   | 200,252 | 
|Common equity/equivalents          |  |            | 15,715  |  |                                                            |   |  |                                           |  |   | 712                                    | (A) |  |   | 15,003  | 
|                                   |  |            |         |  |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 
|Total Investments at June 30, 2018 |  | $          | 629,318 |  |                                                            | $ |  |                                           |  | $ | 712                                    |     |  | $ | 628,606 | 
|                                   |  |            |         |  |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 



|                                    |  |            |         |  |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 
|----------------------------------- |  | ---------- | ------- |  | ---------------------------------------------------------- | - | - | ----------------------------------------- |  | - | -------------------------------------- | --- |  | - | ------- | 
|                                    |  |            |         |  | Fair Value Measurements                                    |  
|                                    |  | Fair Value |         |  | Quoted Prices inActive Marketsfor IdenticalAssets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level 3) |    
|As of March 31, 2018:               |  |            |         |  |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 
|Secured first lien debt             |  | $          | 305,856 |  |                                                            | $ |  |                                           |  | $ |                                       |     |  | $ | 305,856 | 
|Secured second lien debt            |  |            | 97,339  |  |                                                            |   |  |                                           |  |   |                                       |     |  |   | 97,339  | 
|Preferred equity                    |  |            | 167,150 |  |                                                            |   |  |                                           |  |   |                                       |     |  |   | 167,150 | 
|Common equity/equivalents           |  |            | 28,802  |  |                                                            |   |  |                                           |  |   | 194                                    | (B) |  |   | 28,608  | 
|                                    |  |            |         |  |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 
|Total Investments at March 31, 2018 |  | $          | 599,147 |  |                                                            | $ |  |                                           |  | $ | 194                                    |     |  | $ | 598,953 | 
|                                    |  |            |         |  |                                                            |   |   |                                           |  |   |                                        |     |  |   |         | 



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

| | (B) | Fair value was determined based on the closing market price of shares of Funko, Inc. (our units in Funko can be converted into shares of Funko, Inc.) at the reporting
date less a discount for lack of marketability, as our investment was subject to a 180-day lock-up period, which expired in May 2018, and other restrictions.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



26



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The following table presents our investments, valued using Level 3 inputs within the ASC 820 fair value
hierarchy, and carried at fair value as of June 30, 2018 and March 31, 2018, by caption on our accompanying Consolidated Statements of Assets and Liabilities, and by security type:



|                                                     |  |                                         |         |  |                |   |         | 
|---------------------------------------------------- |  | --------------------------------------- | ------- |  | -------------- | - | ------- | 
|                                                     |  | Total Recurring Fair Value Measurements |        
|                                                     |  | Reported inConsolidated Statements      |        
|                                                     |  | of Assets and Liabilities               |        
|                                                     |  | Valued Using Level 3 Inputs             |        
|                                                     |  | June 30, 2018                           |         |  | March 31, 2018 |  
|Non-Control/Non-Affiliate
Investments                |  |                                         |         |  |                |   |         | 
|Secured first lien debt                              |  | $                                       | 139,089 |  |                | $ | 126,913 | 
|Secured second lien debt                             |  |                                         | 30,300  |  |                |   | 30,300  | 
|Preferred equity                                     |  |                                         | 73,005  |  |                |   | 61,282  | 
|Common equity/equivalents(A)                         |  |                                         | 15,003  |  |                |   | 28,608  | 
|                                                     |  |                                         |         |  |                |   |         | 
|Total
Non-Control/Non-Affiliate Investments          |  |                                         | 257,397 |  |                |   | 247,103 | 
|Affiliate Investments                                |  |                                         |         |  |                |   |         | 
|Secured first lien debt                              |  |                                         | 172,236 |  |                |   | 173,943 | 
|Secured second lien debt                             |  |                                         | 61,726  |  |                |   | 62,039  | 
|Preferred equity                                     |  |                                         | 121,552 |  |                |   | 103,411 | 
|Common equity/equivalents                            |  |                                         |        |  |                |   |        | 
|                                                     |  |                                         |         |  |                |   |         | 
|Total Affiliate Investments                          |  |                                         | 355,514 |  |                |   | 339,393 | 
|Control Investments                                  |  |                                         |         |  |                |   |         | 
|Secured first lien debt                              |  |                                         | 5,000   |  |                |   | 5,000   | 
|Secured second lien debt                             |  |                                         | 5,000   |  |                |   | 5,000   | 
|Preferred equity                                     |  |                                         | 5,695   |  |                |   | 2,457   | 
|Common equity/equivalents                            |  |                                         |        |  |                |   |        | 
|                                                     |  |                                         |         |  |                |   |         | 
|Total Control Investments                            |  |                                         | 15,695  |  |                |   | 12,457  | 
|                                                     |  |                                         |         |  |                |   |         | 
|Total investments at fair value using Level 3 inputs |  | $                                       | 628,606 |  |                | $ | 598,953 | 
|                                                     |  |                                         |         |  |                |   |         | 



|(A) | Excludes our investment in Funko with a fair value of $0.7 million and $0.2 million as of June 30, 2018 and March 31, 2018, respectively, which
was valued using Level 2 inputs.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



27



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In accordance with ASC 820, the following table provides quantitative information about our investments valued
using Level 3 fair value measurements as of June 30, 2018 and March 31, 2018. 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
|                                |  | Fair Valueas ofJune 30,2018                                    |          |     | Fair Valueas ofMarch 31,2018 |  |          | ValuationTechnique/Methodology |  | UnobservableInput |  | Range / Weighted- Averageas ofJune 30, 2018 |  | Range / Weighted- Averageas ofMarch 31, 2018
|Secured first lien debt         |  |                                                                | $297,177 | (A) |                              |  | $286,828 | (A)                            |  | TEV               |  | EBITDAmultiple                              |  | 4.9x  8.0x / 6.2x                           |  | 4.7x 8.3x / 6.1x         
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | EBITDA                                      |  | $1,439  $16,767 /$5,965                     |  | $1,298 $14,085 /$5,575   
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | Revenuemultiple                             |  | 0.2x  0.7x / 0.5x                           |  | 0.3x  0.7x / 0.6x        
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | Revenue                                     |  | $15,223  $30,502 /$24,626                   |  | $15,528  $30,561 /$24,780
|                                |  |                                                                | 19,148   |     |                              |  | 19,028   |                                |  | Yield Analysis    |  | Discount Rate                               |  | 16.7%  23.7% / 19.9%                        |  | 19.8%  21.3% / 20.6%     
|Secured second lien debt        |  |                                                                | 85,051   | (B) |                              |  | 87,360   | (B)                            |  | TEV               |  | EBITDAmultiple                              |  | 3.4x  8.0x / 6.7x                           |  | 3.3x  6.8x / 6.2x        
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | EBITDA                                      |  | $2,434  $9,597 /$6,580                      |  | $2,683  $8,795 /$6,827   
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | Revenuemultiple                             |  | 0.9x  0.9x / 0.9x                           |  | 0.9x  0.9x / 0.9x        
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | Revenue                                     |  | $19,765  $19,765 /$19,765                   |  | $21,439  $21,439 /$21,439
|                                |  |                                                                | 11,975   |     |                              |  | 9,979    |                                |  | Yield Analysis    |  | Discount Rate                               |  | 11.3% 11.3% / 11.3%                         |  | 19.4%  20.9% / 19.5%     
|Preferred equity(C)             |  |                                                                | 200,252  |     |                              |  | 167,150  |                                |  | TEV               |  | EBITDAmultiple                              |  | 3.4x  8.0x / 6.2x                           |  | 3.3x  8.3x / 6.0x        
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | EBITDA                                      |  | $1,439  $16,767 /$5,674                     |  | $1,298  $14,085 /$5,344  
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | Revenuemultiple                             |  | 0.2x  0.9x / 0.7x                           |  | 0.3x  0.9x / 0.7x        
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | Revenue                                     |  | $15,223  $30,502 /$24,631                   |  | $15,528  $30,561 /$25,303
|Common equity/equivalents(D)(E) |  |                                                                | 15,003   |     |                              |  | 28,608   |                                |  | TEV               |  | EBITDAmultiple                              |  | 5.1x  6.4x / 5.8x                           |  | 4.9x  6.2x / 5.6x        
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | EBITDA                                      |  | $1,439  $5,705 /$2,613                      |  | $1,298  $5,842 /$2,491   
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | Revenuemultiple                             |  | 0.2x  0.9x / 0.2x                           |  | 0.3x  0.9x / 0.3x        
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  | Revenue                                     |  | $15,223  $ 19,765 /$15,234                  |  | $15,528  $21,439 /$15,543
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  |                                             |  |                                              |  |                           
|Total                           |  |                                                                | $628,606 |     |                              |  | $598,953 |                                |  |                  
|                                |  |                                                                |          |     |                              |  |          |                                |  |                   |  |                                             |  |                                              |  |                           



|(A) | Fair value as of June 30, 2018 includes one new proprietary debt investment of $23.0 million, which was valued at cost using the transaction price as the
unobservable input. Fair value as of March 31, 2018 includes two new proprietary debt investments for a combined $14.5 million, which were valued at cost using the transaction price as the unobservable input, and one proprietary debt
investment of $10.0 million, which was valued at the expected payoff amount as the unobservable input.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Fair value as of both June 30, 2018 and March 31, 2018 includes one proprietary debt investment of $13.0 million, which was valued at the expected
payoff amount as the unobservable input.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Fair value as of June 30, 2018 includes one new proprietary equity investment of $4.9 million, which was valued at cost using the transaction price as the
unobservable input. Fair value as of March 31, 2018 includes one proprietary equity investment of $3.4 million, which was valued at the expected payoff amount as the unobservable input.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Fair value as of June 30, 2018 includes one proprietary equity investment of $2.4 million, which was valued at the expected payoff amount as the
unobservable input. Fair value as of March 31, 2018 includes two proprietary equity investments for a combined $17.6 million, which were valued at the expected payoff amount as the unobservable input.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | Fair value as of both June 30, 2018 and March 31, 2018 excludes our investment in Funko with a fair value of $0.7 million and $0.2 million,
respectively, which was valued using Level 2 inputs.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



28



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

Changes in
Level 3 Fair Value Measurements of Investments

The following tables provide our portfolios changes in fair value, broken out by security
type, during the three months ended June 30, 2018 and 2017 for all investments for which the Adviser determines fair value using unobservable (Level 3) inputs.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)



|                                                                 |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|---------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------------- | - | ------ | --------------- |  | - | ------------------------ | - |  | ----- | ------- | - |  | - | ------- | -
|                                                                 |  | SecuredFirst LienDebt |         |   | SecuredSecond LienDebt |   |        | PreferredEquity |  |   | CommonEquity/Equivalents |   |  | Total |        
|Three months ended June 30, 2018:                                |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|Fair value as of March 31, 2018                                  |  | $                     | 305,856 |   |                        | $ | 97,339 |                 |  | $ | 167,150                  |   |  | $     | 28,608  |   |  | $ | 598,953 |  
|Total gain (loss):                                               |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|Net realized gain(A)                                             |  |                       |        |   |                        |   |       |                 |  |   |                         |   |  |       | 13,786  |   |  |   | 13,786  |  
|Net unrealized appreciation
(depreciation)(B)                    |  |                       | 155     |   |                        |   | (568   | )               |  |   | 31,578                   |   |  |       | 1,140   |   |  |   | 32,305  |  
|Reversal of previously recorded appreciation upon realization(B) |  |                       | (74     | ) |                        |   |       |                 |  |   |                         |   |  |       | (14,681 | ) |  |   | (14,755 | )
|New investments, repayments and
settlements(C):                  |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|Issuances / originations                                         |  |                       | 24,902  |   |                        |   | 255    |                 |  |   | 4,900                    |   |  |       |        |   |  |   | 30,057  |  
|Settlements / repayments                                         |  |                       | (14,514 | ) |                        |   |       |                 |  |   |                         |   |  |       |        |   |  |   | (14,514 | )
|Sales                                                            |  |                       |        |   |                        |   |       |                 |  |   | (3,376                   | ) |  |       | (13,850 | ) |  |   | (17,226 | )
|Transfers                                                        |  |                       |        |   |                        |   |       |                 |  |   |                         |   |  |       |        |   |  |   |        |  
|                                                                 |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|Fair value as of June 30, 2018                                   |  | $                     | 316,325 |   |                        | $ | 97,026 |                 |  | $ | 200,252                  |   |  | $     | 15,003  |   |  | $ | 628,606 |  
|                                                                 |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |         |   |  |   |         |  



|                                                                                |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------------- | - | ------- | --------------- |  | - | ------------------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                                                                |  | SecuredFirst LienDebt |         |   | SecuredSecondLien Debt |   |         | PreferredEquity |  |   | CommonEquity/Equivalents |   |  | Total |       
|Three months ended June 30, 2017:                                               |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair value as of March 31, 2017                                                 |  | $                     | 268,150 |   |                        | $ | 95,040  |                 |  | $ | 113,515                  |   |  | $     | 21,441 |   |  | $ | 498,146 |  
|Total gain (loss):                                                              |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Net realized gain(A)                                                            |  |                       |        |   |                        |   |        |                 |  |   | 957                      |   |  |       |       |   |  |   | 957     |  
|Net unrealized appreciation
(depreciation)(B)                                   |  |                       | (638    | ) |                        |   | 212     |                 |  |   | 1,128                    |   |  |       | 1,105  |   |  |   | 1,807   |  
|Reversal of previously recorded (appreciation) depreciation upon realization(B) |  |                       | 1,881   |   |                        |   | (1,670  | )               |  |   | (1,113                   | ) |  |       | 777    |   |  |   | (125    | )
|New investments, repayments and
settlements(C):                                 |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Issuances / originations                                                        |  |                       | 10,540  |   |                        |   | 2       |                 |  |   | 987                      |   |  |       |       |   |  |   | 11,529  |  
|Settlements / repayments                                                        |  |                       | (8,602  | ) |                        |   | (13,660 | )               |  |   |                         |   |  |       |       |   |  |   | (22,262 | )
|Sales                                                                           |  |                       |        |   |                        |   |        |                 |  |   | (3,748                   | ) |  |       | (805   | ) |  |   | (4,553  | )
|Transfers                                                                       |  |                       |        |   |                        |   |        |                 |  |   |                         |   |  |       |       |   |  |   |        |  
|                                                                                |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair value as of June 30, 2017                                                  |  | $                     | 271,331 |   |                        | $ | 79,924  |                 |  | $ | 111,726                  |   |  | $     | 22,518 |   |  | $ | 485,499 |  
|                                                                                |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  



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

|(B) | Included in net unrealized appreciation (depreciation) of investments on our accompanying Consolidated Statements of Operations for the periods ended
June 30, 2018 and 2017.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



29



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Investment Activity

During the three months ended June 30, 2018, the following significant transactions occurred:



| |  |  | In April 2018, we invested $29.2 million in Bassett Creek Restoration, Inc. (d/b/a J.R. Johnson, LLC) (Bassett Creek) through a combination of secured first lien debt and preferred equity. Bassett
Creek, headquartered in Portland, Oregon, is a leading provider of commercial restoration and renovation services to the Oregon and Southwest Washington region.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In June 2018, we sold our investment in Drew Foam Companies, Inc., which resulted in dividend and success fee income of $0.2 million and a realized gain of $13.8 million. In connection with the sale, we
received net cash proceeds of $27.3 million, including the repayment of our debt investment of $9.9 million at par.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investment
Concentrations

As of June 30, 2018, our investment portfolio consisted of investments in 33 portfolio companies located in 16 states across 17
different industries with an aggregate fair value of $629.3 million. Our investments in Cambridge Sound Management, Inc., Nth Degree, Inc., Brunswick Bowling Products, Inc., J.R. Hobbs Co.  Atlanta, LLC, and ImageWorks Display and
Marketing Group, Inc. represented our five largest portfolio investments at fair value, and collectively comprised $204.7 million, or 32.5%, of our total investment portfolio at fair value.

The following table summarizes our investments by security type as of June 30, 2018 and March 31, 2018:



|                          |  |               |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|------------------------- |  | ------------- | ------- |  | -------------- |  | ----- | ---- |  | - | ---------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                          |  | June 30, 2018 |         |  | March 31, 2018 | 
|                          |  | Cost          |         |  | Fair Value     |  |       | Cost |  |   | Fair Value | 
|Secured first lien debt   |  | $             | 331,690 |  |                |  | 55.6  | %    |  | $ | 316,325    |  |  |  | 50.3  | % |  | $ | 321,303 |  |  |  | 54.9  | % |  | $ | 305,856 |  |  |  | 51.0  | %
|Secured second lien debt  |  |               | 110,738 |  |                |  | 18.6  |      |  |   | 97,026     |  |  |  | 15.4  |   |  |   | 110,484 |  |  |  | 18.9  |   |  |   | 97,339  |  |  |  | 16.2  |  
|                          |  |               |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total debt                |  |               | 442,428 |  |                |  | 74.2  |      |  |   | 413,351    |  |  |  | 65.7  |   |  |   | 431,787 |  |  |  | 73.8  |   |  |   | 403,195 |  |  |  | 67.2  |  
|Preferred equity          |  |               | 152,233 |  |                |  | 25.4  |      |  |   | 200,252    |  |  |  | 31.8  |   |  |   | 150,708 |  |  |  | 25.8  |   |  |   | 167,150 |  |  |  | 28.0  |  
|Common equity/equivalents |  |               | 2,288   |  |                |  | 0.4   |      |  |   | 15,715     |  |  |  | 2.5   |   |  |   | 2,351   |  |  |  | 0.4   |   |  |   | 28,802  |  |  |  | 4.8   |  
|                          |  |               |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total equity/equivalents  |  |               | 154,521 |  |                |  | 25.8  |      |  |   | 215,967    |  |  |  | 34.3  |   |  |   | 153,059 |  |  |  | 26.2  |   |  |   | 195,952 |  |  |  | 32.8  |  
|                          |  |               |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total investments         |  | $             | 596,949 |  |                |  | 100.0 | %    |  | $ | 629,318    |  |  |  | 100.0 | % |  | $ | 584,846 |  |  |  | 100.0 | % |  | $ | 599,147 |  |  |  | 100.0 | %
|                          |  |               |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  

Investments at fair value consisted of the following industry classifications as of June 30, 2018 and March 31,
2018:



|                                                                       |  |               |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|---------------------------------------------------------------------- |  | ------------- | ------- |  | ------------------------------ |  | ----- | ---------- |  | - | ------------------------------ |  |  |  | ----- | -
|                                                                       |  | June 30, 2018 |         |  | March 31, 2018                 | 
|                                                                       |  | Fair Value    |         |  | Percentage ofTotal Investments |  |       | Fair Value |  |   | Percentage ofTotal Investments | 
|Diversified/Conglomerate Services                                      |  | $             | 170,846 |  |                                |  | 27.1  | %          |  | $ | 136,719                        |  |  |  | 22.8  | %
|Home and Office Furnishings, Housewares, and Durable Consumer Products |  |               | 145,873 |  |                                |  | 23.2  |            |  |   | 128,529                        |  |  |  | 21.5  |  
|Leisure, Amusement, Motion Pictures, and Entertainment                 |  |               | 45,185  |  |                                |  | 7.2   |            |  |   | 43,048                         |  |  |  | 7.2   |  
|Personal and Non-Durable Consumer Products
(Manufacturing Only)        |  |               | 40,454  |  |                                |  | 6.4   |            |  |   | 42,836                         |  |  |  | 7.1   |  
|Diversified/Conglomerate Manufacturing                                 |  |               | 35,081  |  |                                |  | 5.6   |            |  |   | 29,942                         |  |  |  | 5.0   |  
|Chemicals, Plastics, and Rubber                                        |  |               | 24,618  |  |                                |  | 3.9   |            |  |   | 55,740                         |  |  |  | 9.3   |  
|Farming and Agriculture                                                |  |               | 24,019  |  |                                |  | 3.8   |            |  |   | 21,483                         |  |  |  | 3.6   |  
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)      |  |               | 21,795  |  |                                |  | 3.5   |            |  |   | 21,915                         |  |  |  | 3.7   |  
|Containers, Packaging, and Glass                                       |  |               | 21,391  |  |                                |  | 3.4   |            |  |   | 21,387                         |  |  |  | 3.6   |  
|Textiles and Leather                                                   |  |               | 20,103  |  |                                |  | 3.2   |            |  |   | 19,407                         |  |  |  | 3.2   |  
|Aerospace and Defense                                                  |  |               | 15,695  |  |                                |  | 2.5   |            |  |   | 12,457                         |  |  |  | 2.1   |  
|Cargo Transport                                                        |  |               | 15,384  |  |                                |  | 2.4   |            |  |   | 15,816                         |  |  |  | 2.6   |  
|Telecommunications                                                     |  |               | 14,000  |  |                                |  | 2.2   |            |  |   | 14,000                         |  |  |  | 2.3   |  
|Automobile                                                             |  |               | 12,514  |  |                                |  | 2.0   |            |  |   | 13,830                         |  |  |  | 2.3   |  
|Beverage, Food, and Tobacco                                            |  |               | 11,549  |  |                                |  | 1.8   |            |  |   | 11,605                         |  |  |  | 1.9   |  
|Other < 2.0%                                                           |  |               | 10,811  |  |                                |  | 1.8   |            |  |   | 10,433                         |  |  |  | 1.8   |  
|                                                                       |  |               |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|Total investments                                                      |  | $             | 629,318 |  |                                |  | 100.0 | %          |  | $ | 599,147                        |  |  |  | 100.0 | %
|                                                                       |  |               |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  



30



---

Investments at fair value were included in the following geographic regions of the U.S. as of June 30, 2018
and March 31, 2018:



|                  |  |               |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|----------------- |  | ------------- | ------- |  | ------------------------------ |  | ----- | ---------- |  | - | ------------------------------ |  |  |  | ----- | -
|                  |  | June 30, 2018 |         |  | March 31, 2018                 | 
|                  |  | Fair Value    |         |  | Percentage ofTotal Investments |  |       | Fair Value |  |   | Percentage ofTotal Investments | 
|South             |  | $             | 200,546 |  |                                |  | 31.9  | %          |  | $ | 221,725                        |  |  |  | 37.0  | %
|Northeast         |  |               | 200,378 |  |                                |  | 31.8  |            |  |   | 188,911                        |  |  |  | 31.5  |  
|West              |  |               | 164,834 |  |                                |  | 26.2  |            |  |   | 133,774                        |  |  |  | 22.3  |  
|Midwest           |  |               | 63,560  |  |                                |  | 10.1  |            |  |   | 54,737                         |  |  |  | 9.2   |  
|                  |  |               |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|Total investments |  | $             | 629,318 |  |                                |  | 100.0 | %          |  | $ | 599,147                        |  |  |  | 100.0 | %
|                  |  |               |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  

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

Investment Principal Repayments

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



|                                               |  |                                                           |  |        |         |  
|---------------------------------------------- |  | --------------------------------------------------------- |  | ------ | ------- | -
|                                               |  |                                                           |  | Amount |        
|For the remaining nine months ending March 31: |  | 2019                                                      |  | $      | 63,881  |  
|For the fiscal years ending March 31:          |  | 2020                                                      |  |        | 102,913 |  
|                                               |  | 2021                                                      |  | 60,410 |        
|                                               |  | 2022                                                      |  | 80,696 |        
|                                               |  | 2023                                                      |  | 86,990 |        
|                                               |  | Thereafter                                                |  |        | 47,618  |  
|                                               |  |                                                           |  |        |         |  
|                                               |  | Total contractual repayments                              |  | $      | 442,508 |  
|                                               |  | Adjustments to cost basis of debt investments             |  |        | (80     | )
|                                               |  | Investments in equity securities                          |  |        | 154,521 |  
|                                               |  |                                                           |  |        |         |  
|                                               |  | Total cost basis of investments held as of June 30, 2018: |  | $      | 596,949 |  
|                                               |  |                                                           |  |        |         |  

Receivables from Portfolio Companies

Receivables from portfolio companies represent non-recurring costs that we incurred on behalf of portfolio companies.
Such receivables, net of any allowance for uncollectible receivables, are included in Other assets, 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. We
write-off accounts receivable when we have exhausted collection efforts and have deemed the receivables uncollectible. As of both June 30, 2018 and March 31, 2018, we had gross receivables from
portfolio companies of $0.7 million. The allowance for uncollectible receivables was $0.4 million and $0.2 million as of June 30, 2018 and March 31, 2018, respectively.

NOTE 4. RELATED PARTY TRANSACTIONS

Transactions
with the Adviser

We pay the Adviser certain fees as compensation for its services, such fees consisting of a base management fee and an incentive fee,
as provided for in the Advisory Agreement, and a loan servicing fee for the Advisers role as servicer pursuant to the Credit Facility, each as described below. On July 10, 2018, our Board of Directors, including a majority of the
directors who are not parties to the Advisory Agreement or interested persons of either party, approved the annual renewal of the Advisory Agreement through August 31, 2019.

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



31



---

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



|                                                          |  |                             |         |   |      |   |         |  
|--------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                          |  | Three Months Ended June 30, |        
|                                                          |  | 2018                        |         |   | 2017 |  
|Average total assets subject to base management
fee(A)    |  | $                           | 622,200 |   |      | $ | 503,200 |  
|Multiplied by prorated annual base management fee of 2.0% |  |                             | 0.5     | % |      |   | 0.5     | %
|                                                          |  |                             |         |   |      |   |         |  
|Base management fee(B)                                    |  |                             | 3,111   |   |      |   | 2,516   |  
|Credits to fees from
Adviserother(B)                     |  |                             | (960    | ) |      |   | (548    | )
|                                                          |  |                             |         |   |      |   |         |  
|Net base management fee                                   |  | $                           | 2,151   |   |      | $ | 1,968   |  
|                                                          |  |                             |         |   |      |   |         |  
|Loan servicing fee(B)                                     |  | $                           | 1,740   |   |      | $ | 1,564   |  
|Credits to base management feeloan servicing
fee(B)      |  |                             | (1,740  | ) |      |   | (1,564  | )
|                                                          |  |                             |         |   |      |   |         |  
|Net loan servicing fee                                    |  | $                           |        |   |      | $ |        |  
|                                                          |  |                             |         |   |      |   |         |  
|Incentive fee  income-based                              |  | $                           | 1,078   |   |      | $ | 1,172   |  
|Incentive fee  capital
gains-based(C)                    |  |                             | 6,508   |   |      |   |        |  
|                                                          |  |                             |         |   |      |   |         |  
|Total incentive fee(B)                                    |  |                             | 7,586   |   |      |   | 1,172   |  
|Credits to fees from
Adviserother(B)                     |  |                             |        |   |      |   |        |  
|                                                          |  |                             |         |   |      |   |         |  
|Net total incentive fee                                   |  | $                           | 7,586   |   |      | $ | 1,172   |  
|                                                          |  |                             |         |   |      |   |         |  



|(A) | Average total assets subject to the base management fee is defined in the Advisory Agreement 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 as a line item on our accompanying Consolidated Statement of Operations.
|--- | ----------------------------------------------------------------------------------

|(C) | The capital gains-based incentive fee is not yet contractually due under the terms of the Advisory Agreement.
|--- | -------------------------------------------------------------------------------------------------------------

Base Management Fee

The base management fee is payable
quarterly to the Adviser pursuant to our Advisory Agreement and is assessed at an annual rate of 2.0%, 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.

Additionally, pursuant to the requirements of the 1940 Act, the Adviser makes available significant managerial assistance to our portfolio companies. The
Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance. Such services may include, but are not limited to: (i) assistance obtaining,
sourcing or structuring credit facilities, long term loans or additional equity from unaffiliated third parties; (ii) negotiating important contractual financial relationships; (iii) consulting services regarding restructuring of the
portfolio company and financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties; and (iv) primary role in interviewing, vetting and negotiating employment contracts with candidates in
connection with adding and retaining key portfolio company management team members. The Adviser non-contractually, unconditionally, and irrevocably credits 100% of these fees against the base management fee
that we would otherwise be required to pay to the Adviser; however, pursuant to the terms of the Advisory Agreement, a small percentage of certain of such fees, totaling $71 and $56 for the three month periods ended June 30, 2018 and 2017,
respectively, was retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser, primarily related to the valuation of portfolio companies.

Loan Servicing Fee

The Adviser also services the loans
held by our wholly-owned subsidiary, Business Investment (the borrower under the Credit Facility), in return for which the Adviser receives a 2.0% annual fee based on the monthly aggregate outstanding balance of loans pledged under the Credit
Facility. Since Business Investment is a consolidated subsidiary of ours, coupled with the fact that the total base management fee paid to the Adviser pursuant to the Advisory Agreement cannot exceed 2.0% 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 the Credit Facility as a pre-payment of the base management fee under the Advisory
Agreement. Accordingly, these loan servicing fees are 100% non-contractually, unconditionally, and irrevocably credited back to us by the Adviser.



32



---

Incentive Fee

The incentive fee payable to the Adviser under our Advisory Agreement 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, adjusted appropriately for any share issuances or repurchases during the period (the Hurdle Rate). The income-based incentive fee with respect to our pre-incentive fee net
investment income is payable quarterly to the Adviser and is computed as follows:



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



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



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

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, less any realized capital losses and unrealized
depreciation, calculated as of the end of the preceding calendar year. The capital gains-based incentive fee payable to the Adviser is calculated based on (i) cumulative aggregate realized capital gains since our inception, less
(ii) cumulative aggregate realized capital losses since our inception, less (iii) the entire portfolios aggregate unrealized capital depreciation, if any, as of the date of the calculation. If this number is positive at the
applicable calculation date, then the capital gains-based incentive fee for such year equals 20.0% of such amount, less the aggregate amount of any capital gains-based incentive fees paid in respect of our portfolio in all prior years. For
calculation purposes, cumulative aggregate realized capital gains, if any, equals the sum of the excess 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 deficit between the net sales price of each investment, when sold, and the original cost of such investment since our inception. The entire portfolios aggregate unrealized capital depreciation, if
any, equals the sum of the deficit between the fair value of each investment security as of the applicable calculation date and the original cost of such investment security. We have not incurred capital gains-based incentive fees from inception
through June 30, 2018, as aggregate unrealized capital depreciation has exceeded cumulative realized capital gains net of cumulative realized capital losses.

In accordance with GAAP, accrual of the capital gains-based incentive fee is determined as if our investments had been liquidated at their fair values as of
the end of the reporting period. Therefore, GAAP requires that the capital gains-based incentive fee accrual consider the 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. Accordingly, a GAAP accrual is calculated at the end of the reporting period based on
(i) cumulative aggregate realized capital gains since our inception, plus (ii) the entire portfolios aggregate unrealized capital appreciation, if any, less (iii) cumulative aggregate realized capital losses since our inception,
less (iv) the entire portfolios aggregate unrealized capital depreciation, if any. If such amount is positive at the end of a reporting period, 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, is recorded, regardless of whether such amount is contractually due under the terms of the Advisory Agreement. If such amount is negative, then there is no accrual for such
period. During the three months ended June 30, 2018, we recorded a capital gains-based incentive fee of $6.5 million, which is not contractually due under the terms of the Advisory Agreement. We did not record a capital gains-based
incentive fee during the three months ended June 30, 2017.

Transactions with the Administrator

We pay the Administrator pursuant to the Administration Agreement for our allocable portion of the Administrators expenses incurred while performing
services to us, which are primarily rent and salaries and benefits expenses of the Administrators employees, including, but not limited to, our chief financial officer and treasurer, chief valuation officer, chief compliance officer, and
general counsel and secretary (who also serves as the Administrators president, general counsel, and secretary), and their respective staffs.



33



---

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

Other Transactions

Gladstone Securities, LLC (Gladstone Securities), which is 100% indirectly owned and controlled by Mr. Gladstone, our chairman and chief
executive officer, is a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation and, from time to time, provides other services, such as investment
banking and due diligence services, to certain of our portfolio companies, for which Gladstone Securities receives a fee. Any such fees paid by portfolio companies to Gladstone Securities do not impact the fees we pay to the Adviser or the non-contractual, unconditional, and irrevocable credits against the base management fee. The fees received by Gladstone Securities from portfolio companies totaled $0.3 million during the three months ended
June 30, 2018. Gladstone Securities did not receive any fees from portfolio companies during the three months ended June 30, 2017.

Related
Party Fees Due

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



|                                                                      |  |                |        |  |                |   |       | 
|--------------------------------------------------------------------- |  | -------------- | ------ |  | -------------- | - | ----- | 
|                                                                      |  | As of June 30, |        |  | As of March 31 |  
|                                                                      |  | 2018           |        |  | 2018           |  
|Base management and loan servicing fee due to Adviser, net of credits |  | $              | 800    |  |                | $ | 540   | 
|Incentive fee due to Adviser(A)                                       |  |                | 11,986 |  |                |   | 6,122 | 
|Other due to Adviser                                                  |  |                |       |  |                |   | 9     | 
|                                                                      |  |                |        |  |                |   |       | 
|Total fees due to Adviser                                             |  | $              | 12,786 |  |                | $ | 6,671 | 
|Fee due to Administrator                                              |  | $              | 285    |  |                | $ | 317   | 
|                                                                      |  |                |        |  |                |   |       | 
|Total related party fees due                                          |  | $              | 13,071 |  |                | $ | 6,988 | 
|                                                                      |  |                |        |  |                |   |       | 



|(A) | Includes a capital gains-based incentive fee of $10.9 million and $4.4 million as of June 30, 2018 and March 31, 2018, respectively, recorded in
accordance with GAAP requirements and which is not contractually due under the terms of the Advisory Agreement. Refer to Note 4  Related Party Transactions Transactions with the Adviser Incentive Fee for
additional information.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net expenses receivable from Gladstone Capital Corporation, one of our affiliated funds, for reimbursement
purposes, which includes certain co-investment expenses, totaled $15 and $16 as of June 30, 2018 and March 31, 2018, respectively. These amounts are generally settled in the quarter subsequent to
being incurred and have been included in Other Assets, net on the accompanying Consolidated Statements of Assets and Liabilitiesas of June 30, 2018 and March 31, 2018.

NOTE 5. BORROWINGS

Revolving Line of Credit

On November 16, 2016, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 2 to the Fifth Amended and
Restated Credit Agreement, originally entered into on April 30, 2013 and as previously amended on June 26, 2014, with KeyBank National Association (KeyBank), as administrative agent, lead arranger, managing agent and lender,
the Adviser, as servicer, and certain other lenders party thereto. The revolving period was extended to November 15, 2019, and if not renewed or extended by such date, all principal and interest will be due and payable on or before
November 15, 2021 (two years after the revolving period end date). The amended Credit Facility provides a one-year extension option that may be exercised on or before the second anniversary of the
November 16, 2016 amendment date, subject to approval by all lenders. Additionally, the Credit Facility commitment amount was changed from $185.0 million to $165.0 million and, subject to certain terms and conditions, can be expanded
to a total facility amount of $250.0 million through additional commitments of existing or new lenders. Advances under the Credit Facility generally bear interest at 30-day London Interbank Offered Rate
(LIBOR) plus 3.15% per annum until November 15, 2019, with the margin then increasing to 3.40% for the period from November 15, 2019 to November 15, 2020, and increasing further to 3.65% thereafter. The Credit Facility has
an unused commitment fee of 0.50% per annum on the portion of the total unused commitment amount that is less than or equal to 45.0% of the total commitment amount and 0.80% per annum on the total unused commitment amount that is greater than 45.0%.



34



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On January 20, 2017, we entered into Amendment No. 3 to the Credit Facility, which clarified a
definition in the Companys performance guaranty under the Credit Facility.

The following tables summarize noteworthy information related to the
Credit Facility:



|                               |  |                |         |  |                 |   |         | 
|------------------------------ |  | -------------- | ------- |  | --------------- | - | ------- | 
|                               |  | As of June 30, |         |  | As of March 31, |  
|                               |  | 2018           |         |  | 2018            |  
|Commitment amount              |  | $              | 165,000 |  |                 | $ | 165,000 | 
|Borrowings outstanding at cost |  |                | 102,500 |  |                 |   | 107,000 | 
|Availability(A)                |  |                | 62,500  |  |                 |   | 58,000  | 



|                                        |  |                                    |         |   |      |   |        |  
|--------------------------------------- |  | ---------------------------------- | ------- | - | ---- | - | ------ | -
|                                        |  | For the Three MonthsEnded June 30, |        
|                                        |  | 2018                               |         |   | 2017 |  
|Weighted-average borrowings outstanding |  | $                                  | 123,275 |   |      | $ | 42,148 |  
|Effective interest rate(B)              |  |                                    | 5.4     | % |      |   | 6.1    | %
|Commitment (unused) fees incurred       |  | $                                  | 53      |   |      | $ | 191    |  



| | (A) | Availability is subject to various constraints, characteristics and applicable advance rates based oncollateral quality under the Credit Facility, which equated to an
adjusted availability of $59.5 millionand $53.8 million as of June 30, 2018 and March 31, 2018, respectively.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (B) | Excludes the impact of deferred financing costs and includes unused commitment fees.
| | --- | ------------------------------------------------------------------------------------

Among other things, the Credit Facility contains a performance guaranty that requires us to maintain (i) a minimum net worth (defined in the Credit
Facility to include our mandatory redeemable term preferred stock) of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any equity or subordinated debt redeemed or retired
after November 16, 2016, which equated to $222.2 million as of June 30, 2018, (ii) asset coverage with respect to senior securities representing indebtedness of at least 200% (or such higher percentage as may be set forth in
Section 61 of the 1940 Act); and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of June 30, 2018, and as defined in the performance guaranty of the Credit Facility, we had a net worth of
$514.7 million, asset coverage on our senior securities representing indebtedness of 566.8%, calculated in compliance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and RIC. As of June 30, 2018,
we were in compliance with all covenants under the Credit Facility.

Secured Borrowing

In August 2012, we entered into a participation agreement with a third-party related to $5.0 million of our secured second lien term debt investment in
Ginsey Home Solutions, Inc. (Ginsey). In May 2014, we amended the agreement with the third-party to include an additional $0.1 million. ASC Topic 860, Transfers and Servicing requires us to treat the participation
as a financing-type transaction. Specifically, the third-party has a senior claim to our remaining investment in the event of default by Ginsey which, in part, resulted in the loan participation bearing a rate of interest lower than the contractual
rate established at origination. Therefore, our accompanying Consolidated Statements of Assets and Liabilities reflects the entire secured second lien term debt investment in Ginsey and a corresponding $5.1 million secured borrowing
liability. The secured borrowing has a stated fixed interest rate of 7.0% and a maturity date of January 3, 2021.

Fair Value

We elected to apply the fair value option of ASC Topic 825, Financial Instruments, to the Credit Facility, which was consistent with our
application of ASC 820 to our investments. Generally, the fair value of the Credit Facility is determined using a yield analysis, which includes a DCF calculation and also takes into account the assumptions the Valuation Team believes market
participants would use, including, but not limited to, the estimated remaining life, counterparty credit risk, current market yield and interest rate spreads of similar securities as of the measurement date. At both June 30, 2018 and
March 31, 2018, the discount rate used to determine the fair value of the Credit Facility was 30-day LIBOR, plus 2.85% per annum, plus an unused fee of 0.5%. Generally, an increase or decrease in the
discount rate used in the DCF calculation may result in a corresponding decrease or increase, respectively, in the fair value of the Credit Facility. At each of June 30, 2018 and March 31, 2018, the Credit Facility was valued using
Level 3 inputs and any changes in its fair value are recorded in Net unrealized depreciation of other on our accompanying Consolidated Statements of Operations.



35



---

The following tables provide relevant information and disclosures about the Credit Facility as of June 30,
2018 and March 31, 2018, and for the three months ended June 30, 2018 and 2017, as required by ASC 820:



|                |  |                                                                                    |         |  |                |   |         | 
|--------------- |  | ---------------------------------------------------------------------------------- | ------- |  | -------------- | - | ------- | 
|                |  | Level 3  Borrowings                                                               |        
|                |  | Recurring Fair Value Measurements                                                  |        
|                |  | Reported inConsolidated                                                            |        
|                |  | Statements of Assets and LiabilitiesUsing SignificantUnobservable Inputs (Level
3) |        
|                |  | June 30, 2018                                                                      |         |  | March 31, 2018 |  
|Credit Facility |  | $                                                                                  | 102,907 |  |                | $ | 107,500 | 
|                |  |                                                                                    |         |  |                |   |         | 



|                                                        |  |                |         |  
|------------------------------------------------------- |  | -------------- | ------- | -
|Fair Value Measurements of Borrowings Using Significant | 
|Unobservable Inputs (Level 3) Reported in               | 
|Consolidated Statements of Assets and
Liabilities       | 
|                                                        |  | CreditFacility |        
|Three months ended June 30, 2018:                       |  |                |         |  
|Fair value at March 31, 2018                            |  | $              | 107,500 |  
|Borrowings                                              |  |                | 37,900  |  
|Repayments                                              |  |                | (42,400 | )
|Unrealized depreciation                                 |  |                | (93     | )
|                                                        |  |                |         |  
|Fair value at June 30, 2018                             |  | $              | 102,907 |  
|                                                        |  |                |         |  
|Three months ended June 30, 2017:                       |  |                |         |  
|Fair value at March 31, 2017                            |  | $              | 69,700  |  
|Borrowings                                              |  |                | 9,400   |  
|Repayments                                              |  |                | (45,100 | )
|                                                        |  |                |         |  
|Fair value at June 30, 2017                             |  | $              | 34,000  |  
|                                                        |  |                |         |  

The fair value of the collateral under the Credit Facility was $533.0 million and $504.0 million as of June 30,
2018 and March 31, 2018, respectively.

NOTE 6. MANDATORILY REDEEMABLE PREFERRED STOCK

The following tables summarize our 6.75% Series B Cumulative Term Preferred Stock (our Series B Term Preferred Stock or Series B), our
6.50% Series C Cumulative Term Preferred Stock (our Series C Term Preferred Stock or Series C), and our 6.25% Series D Cumulative Term Preferred Stock (our Series D Term Preferred Stock or Series D)
outstanding as of June 30, 2018 and March 31, 2018:

As of June30, 2018:



|                               |  |              |       |           |             |                    |                             |                    |              |  |      |                   |   |  |                                |  |  |                            |       |  |  |   |        | 
|------------------------------ |  | ------------ | ----- | --------- | ----------- | ------------------ | --------------------------- | ------------------ | ------------ |  | ---- | ----------------- | - |  | ------------------------------ |  |  | -------------------------- | ----- |  |  | - | ------ | 
|Class of
Term Preferred Stock  |  | TickerSymbol |       |           | Date Issued |                    | MandatoryRedemption Date(A) |                    | InterestRate |  |      | SharesOutstanding |   |  | LiquidationPreferenceper Share |  |  | TotalLiquidationPreference |      
|Series B                       |  |              | GAINO |           |             | November 13, 2014  |                             | December 31, 2021  |              |  | 6.75 | %                 |   |  | 1,656,000                      |  |  | $                          | 25.00 |  |  | $ | 41,400 | 
|Series C                       |  |              | GAINN |           |             | May 12, 2015       |                             | May 31, 2022       |              |  | 6.50 | %                 |   |  | 1,610,000                      |  |  |                            | 25.00 |  |  |   | 40,250 | 
|Series D                       |  |              | GAINM |           |             | September 26, 2016 |                             | September 30, 2023 |              |  | 6.25 | %                 |   |  | 2,300,000                      |  |  |                            | 25.00 |  |  |   | 57,500 | 
|                               |  |              |       |           |             |                    |                             |                    |              |  |      |                   |   |  |                                |  |  |                            |       |  |  |   |        | 
|Term preferred stock,
gross(B) |  |              |       | 5,566,000 |             |                    | $                           | 25.00              |              |  | $    | 139,150           |  
|Less: Discounts                |  |              |       |           |             |                    |                             |                    |              |  |      | (3,339            | )
|                               |  |              |       |           |             |                    |                             |                    |              |  |      |                   |   |  |                                |  |  |                            |       |  |  |   |        | 
|Term preferred stock,
net(C)   |  |              |       |           |             |                    |                             |                    |              |  | $    | 135,811           |  
|                               |  |              |       |           |             |                    |                             |                    |              |  |      |                   |   |  |                                |  |  |                            |       |  |  |   |        | 



36



---

As of March 31, 2018:



|                               |  |              |       |           |             |                    |                             |                    |              |  |      |                   |   |  |                                |  |  |                            |       |  |  |   |        | 
|------------------------------ |  | ------------ | ----- | --------- | ----------- | ------------------ | --------------------------- | ------------------ | ------------ |  | ---- | ----------------- | - |  | ------------------------------ |  |  | -------------------------- | ----- |  |  | - | ------ | 
|Class of
Term Preferred Stock  |  | TickerSymbol |       |           | Date Issued |                    | MandatoryRedemption Date(A) |                    | InterestRate |  |      | SharesOutstanding |   |  | LiquidationPreferenceper Share |  |  | TotalLiquidationPreference |      
|Series B                       |  |              | GAINO |           |             | November 13, 2014  |                             | December 31, 2021  |              |  | 6.75 | %                 |   |  | 1,656,000                      |  |  | $                          | 25.00 |  |  | $ | 41,400 | 
|Series C                       |  |              | GAINN |           |             | May 12, 2015       |                             | May 31, 2022       |              |  | 6.50 | %                 |   |  | 1,610,000                      |  |  |                            | 25.00 |  |  |   | 40,250 | 
|Series D                       |  |              | GAINM |           |             | September 26, 2016 |                             | September 30, 2023 |              |  | 6.25 | %                 |   |  | 2,300,000                      |  |  |                            | 25.00 |  |  |   | 57,500 | 
|                               |  |              |       |           |             |                    |                             |                    |              |  |      |                   |   |  |                                |  |  |                            |       |  |  |   |        | 
|Term preferred stock,
gross(B) |  |              |       | 5,566,000 |             |                    | $                           | 25.00              |              |  | $    | 139,150           |  
|Less: Discounts                |  |              |       |           |             |                    |                             |                    |              |  |      | (3,535            | )
|                               |  |              |       |           |             |                    |                             |                    |              |  |      |                   |   |  |                                |  |  |                            |       |  |  |   |        | 
|Term preferred stock,
net(C)   |  |              |       |           |             |                    |                             |                    |              |  | $    | 135,615           |  
|                               |  |              |       |           |             |                    |                             |                    |              |  |      |                   |   |  |                                |  |  |                            |       |  |  |   |        | 



|(A) | The optional redemption dates for each of our series of mandatorily redeemable preferred stock are: any time on or after December 31, 2017 for our Series B Term Preferred Stock, any time on or after
May 31, 2018 for our Series C Term Preferred Stock, and any time on or after September 30, 2018 for our Series D Term Preferred Stock.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | As of June 30, 2018 and March 31, 2018, asset coverage on our senior securities that are stock calculated pursuant to Sections 18 and 61 of the 1940 Act was 250.2% and 237.3%, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Reflected as a line item on our accompanying Consolidated Statement of Assets and Liabilitiespursuant to the adoption of Accounting Standard Update 2015-03,
Simplifying the Presentation of Debt Issuance Costs.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following tables summarize dividends declared by our Board of
Directors and paid by us on our Series B Term Preferred Stock, Series C Term Preferred Stock, and Series D Term Preferred Stock during the three months ended June 30, 2018 and 2017:

For the Three Months Ended June 30, 2018:



Declaration Date

Record Date


Payment Date


Dividend perShare ofSeries B TermPreferredStock


Dividend perShare ofSeries C TermPreferredStock


Dividend perShare ofSeries D TermPreferredStockApril 10, 2018


April 20, 2018



April 30, 2018


$
0.140625


$
0.135417


$
0.13020833April 10, 2018


May 22, 2018



May 31, 2018



0.140625



0.135417



0.13020833April 10, 2018


June 20, 2018



June 29, 2018



0.140625



0.135417



0.13020833Total


$
0.421875


$
0.406251


$
0.39062499


For the Three Months Ended June30, 2017:



Declaration Date

Record Date


Payment Date


Dividend perShare ofSeries B TermPreferredStock


Dividend perShare ofSeries C TermPreferredStock


Dividend perShare ofSeries D TermPreferredStockApril 11, 2017


April 21, 2017



April 28, 2017


$
0.140625


$
0.135417


$
0.13020833April 11, 2017


May 19, 2017



May 31, 2016



0.140625



0.135417



0.13020833April 11, 2017


June 21, 2017



June 30, 2017



0.140625



0.135417



0.13020833Total


$
0.421875


$
0.406251


$
0.39062499


The federal income tax characteristics of dividends paid to our preferred stockholders generally constitute ordinary
income or capital gains to the extent of our current and accumulated earnings and profits and is reported after the end of the calendar year based on tax information for the full fiscal year. Estimates of tax characterization made on a quarterly
basis may not be representative of the actual tax characterization of dividends for the full year. Estimates made on a quarterly basis are updated as of each interim reporting date. If we determined the tax characterization of dividends paid to
preferred stockholders in the current calendar year as of June 30, 2018, 89.0% would be from ordinary income and 11.0% would be from capital gains.

In accordance with ASC Topic 480, Distinguishing Liabilities from Equity, mandatorily redeemable financial instruments should be classified
as liabilities on the balance sheet and we have recorded our mandatorily redeemable preferred stock at cost, which equals the liquidation preference, less discounts, as of June 30, 2018 and March 31, 2018. The related dividend payments to
preferred stockholders are treated as dividend expense on our accompanyingConsolidated Statements of Operations on the ex-dividend date.



37



---

The following table summarizes the fair value of each of our series of mandatorily redeemable preferred stock
based on the last reported closing sale price as of June 30, 2018 and March 31, 2018, each of which we consider to be a Level 1 input within the fair value hierarchy:



|                              |  |                  |         |  |                |   |         | 
|----------------------------- |  | ---------------- | ------- |  | -------------- | - | ------- | 
|                              |  | Fair Value as of |        
|                              |  | June 30, 2018    |         |  | March 31, 2018 |  
|Series B Term Preferred Stock |  | $                | 42,062  |  |                | $ | 41,814  | 
|Series C Term Preferred Stock |  |                  | 41,313  |  |                |   | 40,862  | 
|Series D Term Preferred Stock |  |                  | 58,466  |  |                |   | 58,282  | 
|                              |  |                  |         |  |                |   |         | 
|Total                         |  | $                | 141,841 |  |                | $ | 140,958 | 
|                              |  |                  |         |  |                |   |         | 

NOTE 7. REGISTRATION STATEMENT AND COMMON EQUITY OFFERINGS

Registration Statement

On June 5, 2018, we filed a
registration statement on Form N-2 (File No. 333-225447), which the SEC declared effective on July 13, 2018. The registration statement permits us to issue,
through one or more transactions, up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities,
including through concurrent, separate offerings of such securities.As of July 31, 2018, we had the ability to issue up to $300.0 million in securities under the registration statement.

Common Equity Offering

In February 2018, we entered into
equity distribution agreements (commonly referred to as at-the-market (ATM) programs) with Cantor Fitzgerald & Co. (Cantor),
Ladenburg Thalmann & Co., Inc., and Wedbush Securities, Inc. (each a Sales Agent), under which we have the ability to issue and sell shares of our common stock, from time to time, through the Sales Agents, up to an aggregate
offering price of $35.0 million. Pursuant to our prior registration statement on Form N-2 (File No. 333-204996), during the three months ended June 30,
2018, we sold 168,824 shares of our common stock under the ATM program with Cantor at a weighted-average gross price of $11.09 per share and raised approximately $1.9 million of gross proceeds. The weighted-average net price per share, after
deducting commissions and offering costs borne by us, was $10.87 and resulted in total net proceeds of approximately $1.8 million. Certain of these sales were below our then-current estimated NAV per share during the sales period, with a
discount of $0.002 per share, when comparing the sales price per share, after deducting commissions, to the then-current estimated NAV per share; however, the net dilutive effect (after commissions and offering costs borne by us) of these sales was
$0.00 per common share as a result of the small number of shares sold at a slight discount to NAV per share and resulting rounding. In aggregate, the sales during the three months ended June 30, 2018 were above our then-current estimated NAV
per share. As of June 30, 2018, we had remaining capacity to sell up to $31.8 million of common stock under the ATM program.

Pursuant to our
prior registration statement on Form N-2 (File No. 333-204996), in March 2018, we sold 127,412 shares of our common stock under the ATM program with Cantor at a
weighted-average gross price of $10.45 per share and raised approximately $1.3 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $10.24 and resulted in
total net proceeds of approximately $1.3 million. These sales were below our then-current estimated NAV per share during the sales period, with such discounts ranging from $0.01 per share to $0.07 per share, when comparing the sales price per
share, after deducting commissions, to the then-current estimated NAV per share; however, the net dilutive effect (after commissions and offering costs borne by us) of these sales was $0.00 per common share as a result of the small number of shares
sold at a slight discount to NAV per share and resulting rounding.

Also pursuant to our prior registration statement on Form N-2 (File No. 333-204996), in May 2017, we completed a public offering of 2.1 million shares of our common stock at a public offering price of $9.38 per share, which
was below our then-current NAV of $9.95 per share. Gross proceeds totaled $19.7 million and net proceeds, after deducting underwriting discounts and commissions and offering costs borne by us, were $18.7 million, which were used to repay
borrowings under the Credit Facility and for other general corporate purposes. In June 2017, the underwriters partially exercised their over-allotment option and purchased an additional 155,265 shares at the public offering price of $9.38 per share
and on the same terms and conditions solely to cover over-allotments, which resulted in gross proceeds of $1.5 million and net proceeds, after deducting underwriting discounts and commissions and offering costs borne by us, of
$1.4 million.



38



---

NOTE 8. NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER
WEIGHTED-AVERAGE 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 three months ended June 30, 2018 and 2017:



|                                                                                                         |  |                             |            |  |      |   |            | 
|-------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- |  | ---- | - | ---------- | 
|                                                                                                         |  | Three Months Ended June 30, |           
|                                                                                                         |  | 2018                        |            |  | 2017 |  
|Numerator: net increase in net assets resulting from operations                                          |  | $                           | 32,327     |  |      | $ | 8,141      | 
|Denominator: basic and diluted weighted-average common shares                                            |  |                             | 32,762,848 |  |      |   | 31,474,284 | 
|                                                                                                         |  |                             |            |  |      |   |            | 
|Basic and diluted net increase in net assets resulting from operations per weighted-average
common share |  | $                           | 0.99       |  |      | $ | 0.26       | 
|                                                                                                         |  |                             |            |  |      |   |            | 

NOTE 9. DISTRIBUTIONS TO COMMON STOCKHOLDERS

To qualify to be taxed as a RIC under Subchapter M of the Code, we must generally distribute to our stockholders, for each taxable year, at least 90% of our
taxable ordinary income plus the excess of our net short-term capital gains over net long-term capital losses (Investment Company Taxable Income). The amount to be paid out as distributions to our common stockholders is determined by our
Board of Directors quarterly and is based upon managements estimate of Investment Company Taxable Income and net long-term capital gains. Based on that estimate, our Board of Directors declares monthly distributions, and supplemental
distributions, as appropriate, to common stockholders each quarter.

The federal income tax characteristics of distributions paid to our common
stockholders is generally reported to stockholders on Internal Revenue Service Form 1099 after the end of each calendar year. Estimates of tax characterization made on a quarterly basis may not be representative of the actual tax characterization of
distributions for the full year. Estimates made on a quarterly basis are updated as of each interim reporting date. If we determined the tax characterization of distributions paid to common stockholders in the current calendar year as of
June 30, 2018, 89.0% would be from ordinary income and 11.0% would be from capital gains.

We paid the following monthly distributions to our common
stockholders for the three months ended June 30, 2018 and 2017:



|            |  |                  |  |                                   |  |                |       |                              |       |    
|----------- |  | ---------------- |  | --------------------------------- |  | -------------- | ----- | ---------------------------- | ----- | ---
|Fiscal Year |  | Declaration Date |  | Record Date                       |  | Payment Date   |       | Distributionper Common Share |      
|2019        |  | April 10, 2018   |  | April 20, 2018                    |  | April 30, 2018 |       | $                            | 0.067 |    
|            |  | April 10, 2018   |  | May 22, 2018                      |  | May 31, 2018   |       |                              | 0.067 |    
|            |  | April 10, 2018   |  | June 6, 2018                      |  | June 15, 2018  |       |                              | 0.060 | (A)
|            |  | April 10, 2018   |  | June 20, 2018                     |  | June 29, 2018  |       |                              | 0.067 |    
|            |  |                  |  |                                   |  |                |       |                              |       |    
|            |  |                  |  | Three months ended June 30, 2018: |  | $              | 0.261 |                             
|            |  |                  |  |                                   |  |                |       |                             



|            |  |                  |  |                                   |  |                |       |                              |       |    
|----------- |  | ---------------- |  | --------------------------------- |  | -------------- | ----- | ---------------------------- | ----- | ---
|Fiscal Year |  | Declaration Date |  | Record Date                       |  | Payment Date   |       | Distributionper Common Share |      
|2018        |  | April 11, 2017   |  | April 21, 2017                    |  | April 28, 2017 |       | $                            | 0.064 |    
|            |  | April 11, 2017   |  | May 19, 2017                      |  | May 31, 2017   |       |                              | 0.064 |    
|            |  | April 11, 2017   |  | June 5, 2017                      |  | June 15, 2017  |       |                              | 0.060 | (A)
|            |  | April 11, 2017   |  | June 21, 2017                     |  | June 30, 2017  |       |                              | 0.064 |    
|            |  |                  |  |                                   |  |                |       |                              |       |    
|            |  |                  |  | Three months ended June 30, 2017: |  | $              | 0.252 |                             
|            |  |                  |  |                                   |  |                |       |                             



|(A) | Represents a supplemental distribution of $0.06 per share of common stock.
|--- | --------------------------------------------------------------------------

Aggregate distributions to our common stockholders declared quarterly and paid were $8.6 million and $8.0 million for the three months ended
June 30, 2018 and 2017, respectively, and were declared based on estimates of Investment Company Taxable Income and net long-term capital gains for the respective periods.

For the three months ended June 30, 2018, we recorded $0.7 million of net estimated adjustments for permanent
book-tax differences to reflect tax character, which decreased Capital in excess of par value and Accumulated net realized gain in excess of distributions and increased Overdistributed net investment income on
our accompanying Consolidated Statements of Assets and Liabilities. For the fiscal year ended March 31, 2018, Investment Company Taxable Income exceeded distributions declared and paid and, in accordance with Section 855(a) of the
Code, we elected to treat $8.4 million of the first distributions paid to common stockholders in fiscal year 2019, as having been paid in the prior year.



39



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NOTE 10. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are party to certain legal
proceedings incidental to the normal course of our business. We are required to establish reserves for litigation matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both
probable and estimable, we do not establish reserves. Based on current knowledge, we do not believe that loss contingencies, if any, arising from pending investigations, litigation or regulatory matters will have a material adverse effect on our
financial condition, results of 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 June 30, 2018 and March 31, 2018, we had
no established reserves for such loss contingencies.

Escrow Holdbacks

From time to time, we enter into arrangements relating to exits of certain investments whereby specific amounts of the proceeds are held in escrow to be used
to satisfy potential obligations, as stipulated in the sales agreements. We record escrow amounts in Restricted cash and cash equivalents, if received in cash but subject to potential obligations or other contractual restrictions, or as escrow
receivables in Other assets, net, if not yet received in cash, on our accompanying Consolidated Statements of Assets and Liabilities. We establish reserves and holdbacks against escrow amounts if we determine that it is probable and estimable
that a portion of the escrow amounts will not ultimately be released or received at the end of the escrow period. Reserves and holdbacks against escrow amounts were $0.8 million and $0.3 million as of June 30, 2018 and March 31,
2018, respectively.

Financial Commitments and Obligations

We may have line of credit and delayed draw term loan commitments to certain of our portfolio companies that have not been fully drawn. Since these line of
credit and delayed draw term loan commitments have expiration dates and we expect many will never be fully drawn, the total line of credit and delayed draw term loan commitment amounts do not necessarily represent future cash requirements. We
estimate the fair value of the combined unused line of credit and delayed draw term loan commitments as of June 30, 2018 and March 31, 2018 to be immaterial.

We have also extended a guaranty on behalf of one of our portfolio companies. As of June 30, 2018, we have not been required to make any payments on this
guaranty, or any guaranties that existed in previous periods, and we consider the credit risk to be remote and the fair value of the guaranty as of June 30, 2018 and March 31, 2018 to be immaterial.

As of June 30, 2018, the following guaranty was outstanding:



| |  |  | In February 2010, we executed a guaranty of a wholesale financing facility agreement (the Floor Plan Facility) between Agricredit Acceptance, LLC (Agricredit) and Country Club Enterprises, LLC
(CCE). The Floor Plan Facility provides CCE with financing of up to $2.0 million to bridge the time and cash flow gap between the order and delivery of golf carts to customers. The guaranty was renewed in February of each subsequent
year and expires in February 2019, unless it is renewed again by us, CCE and Agricredit.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the principal
balances of unused line of credit and delayed draw term loan commitments and guaranties as of June 30, 2018 and March 31, 2018, which are not reflected as liabilities in the accompanying Consolidated Statements of Assets and
Liabilities:



|                                                             |  |               |       |  |                |   |       | 
|------------------------------------------------------------ |  | ------------- | ----- |  | -------------- | - | ----- | 
|                                                             |  | June 30, 2018 |       |  | March 31, 2018 |  
|Unused line of credit and delayed draw term loan commitments |  | $             | 4,234 |  |                | $ | 6,284 | 
|Guaranties                                                   |  |               | 2,000 |  |                |   | 2,000 | 
|                                                             |  |               |       |  |                |   |       | 
|Total                                                        |  | $             | 6,234 |  |                | $ | 8,284 | 
|                                                             |  |               |       |  |                |   |       | 



40



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NOTE 11. FINANCIAL HIGHLIGHTS



|                                                                        |  |                             |            |   |      |   |            |  
|----------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                        |  | Three Months Ended June 30, |           
|                                                                        |  | 2018                        |            |   | 2017 |  
|Per Common Share Data:                                                  |  |                             |            |   |      |   |            |  
|Net asset value at beginning of
period(A)                               |  | $                           | 10.85      |   |      | $ | 9.95       |  
|Income from investment
operations(B)                                    |  |                             |            |   |      |   |            |  
|Net investment income                                                   |  |                             |           |   |      |   | 0.17       |  
|Net realized gain on investments                                        |  |                             | 0.43       |   |      |   | 0.04       |  
|Net unrealized appreciation of investments and other                    |  |                             | 0.56       |   |      |   | 0.05       |  
|                                                                        |  |                             |            |   |      |   |            |  
|Total from investment operations                                        |  |                             | 0.99       |   |      |   | 0.26       |  
|Effect of equity capital
activity(B)                                    |  |                             |            |   |      |   |            |  
|Cash distributions to common stockholders from net investment income(C) |  |                             | (0.21      | ) |      |   | (0.19      | )
|Cash distributions to common stockholders from realized gains(C)        |  |                             | (0.05      | ) |      |   | (0.06      | )
|Discounts, commissions, and offering costs                              |  |                             |           |   |      |   | (0.03      | )
|Net dilutive effect of equity
offering(D)                               |  |                             |           |   |      |   | (0.04      | )
|                                                                        |  |                             |            |   |      |   |            |  
|Total from equity capital activity                                      |  |                             | (0.26      | ) |      |   | (0.32      | )
|Other, net(B)(E)                                                        |  |                             | (0.01      | ) |      |   | (0.01      | )
|                                                                        |  |                             |            |   |      |   |            |  
|Net asset value at end of
period(A)                                     |  | $                           | 11.57      |   |      | $ | 9.88       |  
|                                                                        |  |                             |            |   |      |   |            |  
|Per common share market value at beginning of period                    |  | $                           | 10.10      |   |      | $ | 9.07       |  
|Per common share market value at end of period                          |  |                             | 11.77      |   |      |   | 9.40       |  
|Total investment return(F)                                              |  |                             | 19.19      | % |      |   | 6.44       | %
|Common stock outstanding at end of
period(A)                            |  |                             | 32,822,459 |   |      |   | 32,526,223 |  
|Statement of Assets and Liabilities Data:                               |  |                             |            |   |      |   |            |  
|Net assets at end of period                                             |  | $                           | 379,808    |   |      | $ | 321,235    |  
|Average net assets(G)                                                   |  |                             | 364,228    |   |      |   | 313,668    |  
|Senior Securities Data:                                                 |  |                             |            |   |      |   |            |  
|Total borrowings, at cost                                               |  | $                           | 107,596    |   |      | $ | 39,096     |  
|Mandatorily redeemable preferred
stock(H)                               |  |                             | 139,150    |   |      |   | 139,150    |  
|Ratios/Supplemental Data:                                               |  |                             |            |   |      |   |            |  
|Ratio of net expenses to average net assets annualized(I)              |  |                             | 16.96      | % |      |   | 10.44      | %
|Ratio of net investment income to average net assetsannualized(J)      |  |                             | 0.06       |   |      |   | 6.93       |  



|(A) | Based on actual shares of common stock outstanding at the beginning or end of the corresponding period, as appropriate.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(B) | Based on weighted-average basic common share data for the corresponding period.
|--- | -------------------------------------------------------------------------------

|(C) | The tax character of distributions is determined based on taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP. For further information on the
estimated character of our distributions to common stockholders, including changes in estimates, as applicable, refer to Note 9  Distributions to Common Stockholders.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | During the three months ended June 30, 2017, the dilution is the result of issuing common shares at a price below the then-current NAV per share.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | Represents the impact of the different share amounts (weighted-average basic common shares outstanding for the corresponding period and actual common shares outstanding at the end of the period) in the Per Common Share
Data calculations and rounding impacts.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | Total return equals the change in the market value of our common stock from the beginning of the period, taking into account dividends 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, including changes in estimates, as applicable, refer to
Note 9  Distributions to Common Stockholders.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(G) | Calculated using the average balance of net assets at the end of each month of the reporting period.
|--- | ----------------------------------------------------------------------------------------------------

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

|(I) | Ratio of net expenses to average net assets is computed using total expenses, net of any non-contractual, unconditional, and irrevocable credits of fees from the Adviser. Had we
not received any non-contractual, unconditional, and irrevocable credits of fees due to the Adviser, the ratio of expenses to average net assetsannualized would have been 19.93% and 13.13% for the three
months ended June 30, 2018 and 2017, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(J) | Had we not received any non-contractual, unconditional, and irrevocable credits of fees from the Adviser, the ratio of net investment (loss) income to average net
assetsannualized would have been (2.90)% and 4.24% for the three months ended June 30, 2018 and 2017, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



41



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NOTE 12. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES

In accordance with the SECs Regulation S-X, we do not consolidate portfolio company investments. Further, in
accordance with ASC 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to
the investment company or its consolidated subsidiaries.

We had one unconsolidated subsidiary, Galaxy Tool Holding Corporation (Galaxy),
which met at least one of the significance conditions under Rule 1-02(w) of the SECs Regulation S-X as of or during at least one of the three month periods ended
June 30, 2018 and 2017. Accordingly, summarized, comparative financial information, pursuant to Rule 10-01(b) is presented below for Galaxy, which is a designer and manufacturer of precision tools for the
business jet industry and of injection and blow molds for the plastics industry.



|                  |  |                                     |        |   |      |   |       | 
|----------------- |  | ----------------------------------- | ------ | - | ---- | - | ----- | 
|                  |  | For the Three Months Ended June 30, |       
|Income Statement  |  | 2018                                |        |   | 2017 |  
|Net sales         |  | $                                   | 6,212  |   |      | $ | 5,803 | 
|Gross profit      |  |                                     | 1,427  |   |      |   | 1,028 | 
|Net (loss) profit |  |                                     | (1,480 | ) |      |   | 134   | 

NOTE 13. SUBSEQUENT EVENTS

Distributions and Dividends

In July 2018, our Board of
Directors declared the following monthly distributions to common stockholders and monthly dividends to holders of our Series B Term Preferred Stock, Series C Term Preferred Stock and Series D Term Preferred Stock:



|                   |  |                        |  |                              |       |  |                                                  |   |          |                                                  |  |   |                                                  |  |  |   |            | 
|------------------ |  | ---------------------- |  | ---------------------------- | ----- |  | ------------------------------------------------ | - | -------- | ------------------------------------------------ |  | - | ------------------------------------------------ |  |  | - | ---------- | 
|Record Date        |  | Payment Date           |  | Distribution perCommon Share |       |  | Dividend perShare ofSeries B TermPreferred Stock |   |          | Dividend perShare ofSeries C TermPreferred Stock |  |   | Dividend perShare ofSeries D TermPreferred Stock | 
|July 20, 2018      |  | July 31, 2018          |  | $                            | 0.067 |  |                                                  | $ | 0.140625 |                                                  |  | $ | 0.135417                                         |  |  | $ | 0.13020833 | 
|August 21, 2018    |  | August 31, 2018        |  |                              | 0.067 |  |                                                  |   | 0.140625 |                                                  |  |   | 0.135417                                         |  |  |   | 0.13020833 | 
|September 19, 2018 |  | September 28, 2018     |  |                              | 0.067 |  |                                                  |   | 0.140625 |                                                  |  |   | 0.135417                                         |  |  |   | 0.13020833 | 
|                   |  |                        |  |                              |       |  |                                                  |   |          |                                                  |  |   |                                                  |  |  |   |            | 
|                   |  | Total for the Quarter: |  | $                            | 0.201 |  |                                                  | $ | 0.421875 |                                                  |  | $ | 0.406251                                         |  |  | $ | 0.39062499 | 
|                   |  |                        |  |                              |       |  |                                                  |   |          |                                                  |  |   |                                                  |  |  |   |            | 

Investment Activity

In
July 2018, we exited our investment in NDLI, Inc. and recorded a realized loss of $3.6 million.



42



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

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 (the
Adviser) and its affiliates, the use of borrowed money to finance our investments, the adequacy of our financing sources and working capital, and our ability to co-invest, among other factors. In
some cases, you can identify forward-looking statements by terminology such as estimate, may, might, believe, will, provided, anticipate, future,
could, growth, plan, project, intend, expect, should, would, if, seek, possible, potential,
likely or the negative or variations 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, David Dullum, or Terry Lee Brubaker; (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, regulation or the general economy; (7) the degree and nature of our competition; (8) our ability to maintain our qualification as a regulated investment company and as a business development
company; and (9) those factors described in Item 1A.Risk Factorsherein and the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended March 31, 2018, filed with the U.S. Securities and Exchange Commission (SEC) on May 15, 2018 (the Annual Report). 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q. Although we undertake no
obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have
filed or in the future may file with the SEC, including subsequent annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

In this Quarterly Report on Form 10-Q (the Quarterly
Report), the Company, we, us, and our refer to Gladstone Investment Corporation and its wholly-owned subsidiaries unless the context otherwise indicates. Dollar amounts, except per share amounts,
are in thousands unless otherwise indicated.

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 Quarterly Report and in our Annual Report. Historical financial condition and results of operations and
percentage relationships among any amounts in the financial statements are not necessarily indicative of financial condition or results of operations for any future periods.

OVERVIEW

General

We were incorporated under the General Corporation Laws of the State of Delaware on February 18, 2005. On June 22, 2005, we completed
our initial public offering and commenced operations. 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 Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). To continue to qualify as a RIC for federal income tax purposes and obtain favorable RIC tax treatment, we must meet certain requirements,
including certain minimum distribution requirements. From our initial public offering in 2005 through June 30, 2018, we have made 156 consecutive monthly distributions to common stockholders.

We are externally managed by Gladstone Management Corporation, an affiliate of ours and an SEC registered investment adviser, pursuant to an investment
advisory and management agreement (the Advisory Agreement). We have also entered into an administration agreement (the Administration Agreement) with Gladstone Administration, LLC (the Administrator), an affiliate
of ours and the Adviser. Each of the Adviser and the Administrator are privately-held companies that are indirectly owned and controlled by David Gladstone, our chairman and chief executive officer.



43



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Additionally, Gladstone Securities, LLC (Gladstone Securities), a privately-held broker-dealer
registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation, which is indirectly owned and controlled by Mr. Gladstone, our chairman and chief executive officer, has provided other
services, such as investment banking and due diligence services, to certain of our portfolio companies, for which Gladstone Securities receives a fee. Any such fees paid by portfolio companies to Gladstone Securities do not impact the fees we pay to
the Adviser or the non-contractual, unconditional, and irrevocable credits against the base management fee. For additional information refer to Note 4  Related Party Transactions in the
accompanying Notes to Consolidated Financial Statements.

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: (i) 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 our stockholders that grow over time; and (ii) provide our stockholders with long-term capital
appreciation in the value of our assets by investing in equity securities, generally in combination with the aforementioned debt 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 individual investments generally totaling up to $30 million, although investment size may vary depending
upon our total assets or available capital at the time of investment. We intend that our investment portfolio over time will consist of approximately 75% in debt securities and 25% in equity securities, at cost. As of June 30, 2018, our
investment portfolio was made up of 74.2% in debt securities and 25.8% in equity securities, at cost.

We focus on investing in lower middle market
private businesses (which we generally define as companies with annual earnings before interest, taxes, depreciation and amortization (EBITDA) of $3 million to $20 million) (Lower Middle Market) 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 portfolio company, reasonable capitalization of the portfolio company, including an ample equity contribution or cushion based on prevailing enterprise valuation multiples, and the potential to realize appreciation and gain
liquidity in our equity position, if any. We anticipate that liquidity in our equity position will be achieved through a merger or acquisition of the portfolio company, a public offering of the portfolio companys stock, or, to a lesser extent,
by exercising our right to require the portfolio company to repurchase our warrants, though there can be no assurance that we will always have these rights. We invest in portfolio companies that need funds for growth capital or to finance
acquisitions or recapitalize or, to a lesser extent, refinance their existing debt facilities. We seek to avoid investing in high-risk, early-stage enterprises.

We invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity. In July 2012, the SEC granted us
an exemptive order (the Co-Investment Order) that expanded our ability to co-invest, under certain circumstances, with certain of our affiliates, including
Gladstone Capital Corporation (Gladstone Capital) and any future business development company or closed-end management investment company that is advised (or
sub-advised if it controls the fund) by the Adviser, or any combination of the foregoing, subject to the conditions in the Co-Investment Order. Since 2012, we have
opportunistically made several co-investments with Gladstone Capital pursuant to the Co-Investment Order. We believe the
Co-Investment Order has enhanced and will continue to enhance our ability to further our investment objectives and strategies. If we are participating in an investment with one or more co-investors, whether or not an affiliate of ours, our investment is likely to be smaller than if we were investing alone.

Our shares of common stock, 6.75% Series B Cumulative Term Preferred Stock (Series B Term Preferred Stock), 6.50% Series C Cumulative Term
Preferred Stock (Series C Term Preferred Stock), and 6.25% Series D Cumulative Term Preferred Stock (Series D Term Preferred Stock) are traded on the Nasdaq Global Select Market (NASDAQ) under the trading symbols
GAIN, GAINO, GAINN, and GAINM, respectively.

Business

Portfolio Activity

While the business environment
remains competitive, we continue to see new investment opportunities consistent with our investment strategy of providing a combination of debt and equity in support of management and independent sponsor-led
buyouts of Lower Middle Market companies in the U.S. During the three months ended June 30, 2018, we exited one portfolio company with a fair value prior to its sale of $28.1 million and invested $29.2 million in one new portfolio
company, resulting in no net change in the number of companies in our portfolio, which was comprised of 33 companies as of June 30, 2018. From our initial public offering in June 2005 through June 30, 2018, we have made investments in 48
companies, excluding investments in syndicated loans, for a total of approximately $1 billion, before giving effect to principal repayments and divestitures.



44



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The majority of the debt securities in our portfolio have a success fee component, which enhances the yield on
our debt investments. Unlike paid-in-kind (PIK) income, we generally do not recognize success fees as income until payment has been received. Due to the
contingent nature of success fees, there are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such collections. As a result, as of June 30, 2018, we had unrecognized, contractual success
fees of $29.3 million, or $0.89 per common share. Consistent with accounting principles generally accepted in the U.S. (GAAP), we generally have not recognized success fee receivables and related income in our Consolidated
Financial Statements until earned.

From inception through June 30, 2018, we have completed 13 sales of portfolio companies that we acquired
under our buyout strategy (which excludes investments in syndicated loans). In the aggregate, these sales have generated $99.8 million in net realized gains and $22.1 million in other income upon exit, for a total increase to our net
assets of $121.9 million. We believe each of these transactions was an equity-oriented investment success and exemplifies our investment strategy of striving to achieve returns through current income on the debt portion of our investments and
capital gains from the equity portion. The 13 liquidity events have offset any realized losses since inception, which were primarily incurred during the recession in connection with the sale of performing syndicated loans at a realized loss to pay
off a former lender. These successful exits, in part, enabled us to increase the monthly distribution by 67.5% from March 2011 through June 30, 2018, and allowed us to declare and pay a $0.03 per common share supplemental distribution in fiscal
year 2012, a $0.05 per common share supplemental distribution in November 2013, a $0.05 per common share supplemental distribution in December 2014, and a $0.06 per common share supplemental distribution in each of June 2017, December 2017, and June
2018.

Capital Raising Efforts

We have been
able to meet our capital needs through extensions of and increases to the Fifth Amended and Restated Credit Agreement dated April 30, 2013, as amended (the Credit Facility), and by accessing the capital markets in the form of public
offerings of common and preferred stock. We have successfully extended the Credit Facilitys revolving period multiple times, most recently to November 2019, and currently have a total commitment amount of $165.0 million (with a potential
total commitment of $250.0 million through additional commitments of new or existing lenders). During the three months ended June 30, 2018, we sold 168,824 shares of our common stock under our at-the-market program for gross proceeds of approximately $1.9 million. During the year ended March 31, 2018, we sold 127,412 shares of our common stock under our at-the-market program for gross proceeds of approximately $1.3 million. Additionally, we issued approximately 2.3 million shares of common stock for gross proceeds of $21.2 million in May 2017,
inclusive of the June 2017 over-allotment. Refer to Liquidity and Capital Resources  Revolving Line of Credit for further discussion of the Credit Facility, Liquidity and Capital Resources  Equity 
Common Stock and Liquidity and Capital Resources  Equity  Term Preferred Stock for further discussion of our common stock and mandatorily redeemable preferred stock.

Although we have been able to access the capital markets historically, market conditions may continue to affect the trading price of our common stock and thus
our ability to finance new investments through the issuance of common equity. On July 31, 2018, the closing market price of our common stock was $11.30 per share, representing a 2.3% discount to our net asset value (NAV) of $11.57
per share as of June 30, 2018. When our common stock trades below NAV, our ability to issue additional equity is constrained by provisions of the 1940 Act, which generally prohibits the issuance and sale of our common stock at an issuance price
below the then-current NAV per share without stockholder approval, other than through sales to our then-existing stockholders pursuant to a rights offering.

At our 2017 Annual Meeting of Stockholders held on August 24, 2017, our stockholders approved a proposal authorizing us to issue and sell shares of our
common stock at a price below our then-current NAV per share, subject to certain limitations, including 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, provided that our board of directors (Board of Directors) makes certain determinations prior to any such sale. This August 2017 stockholder authorization is in effect for one year from the date of
stockholder approval. At our 2018 Annual Meeting of Stockholders, scheduled to take place on August 2, 2018, our stockholders will vote on a similar proposal, which would be in effect for another year. We sought and obtained stockholder
approval concerning similar proposals at each Annual Meeting of Stockholders since 2008, and with our Board of Directors subsequent approval, we issued shares of our common stock in three offerings at a price below the then-current NAV per
share, once in May 2017, once in March 2015, and once in October 2012. Certain sales under the at-the-market program in March and April 2018 were also below the
then-current estimated NAV per share. The resulting proceeds, in part, have allowed us to (i) grow our portfolio by making new investments, (ii) generate additional income through these new investments, (iii) ensure continued
compliance with regulatory tests and (iv) increase our debt capital while still complying with our applicable debt-to-equity ratios. Refer to Liquidity and
Capital Resources  Equity  Common Stock for further discussion of our common stock.



45



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Regulatory Compliance

Our ability to seek external debt financing, to the extent that it is available under current market conditions, is further subject to the asset coverage
limitations of the 1940 Act, which require us to have asset coverage (as defined in Sections 18 and 61 of the 1940 Act, as amended), of at least 200% (currently) or 150.0% (effective April 10, 2019) on each of our senior securities representing
indebtedness and our senior securities that are stock (such as our three series of term preferred stock).

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

As of June 30, 2018,
our asset coverage ratio on our senior securities representing indebtedness was 566.8% and our asset coverage on our senior securities that are stock was 250.2%.

Investment Highlights

During the three months
ended June 30, 2018, and inclusive of non-cash transactions, we invested $29.2 million in one new portfolio company, received $32.1 million in proceeds from repayments and sales, and extended
$0.9 million of follow-on investments to existing portfolio companies through revolver draws and term loans.

Investment Activity

During the three months ended
June 30, 2018, the following significant transactions occurred:



| |  |  | In April 2018, we invested $29.2 million in Bassett Creek Restoration, Inc. (d/b/a J.R. Johnson, LLC) (Bassett Creek) through a combination of secured first lien debt and preferred equity. Bassett
Creek, headquartered in Portland, Oregon, is a leading provider of commercial restoration and renovation services to the Oregon and Southwest Washington region.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In June 2018, we sold our investment in Drew Foam Companies, Inc. (Drew Foam), which resulted in dividend and success fee income of $0.2 million and a realized gain of $13.8 million. In connection
with the sale, we received net cash proceeds of $27.3 million, including the repayment of our debt investment of $9.9 million at par.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following significant investment activity occurred subsequent to June 30, 2018. Also refer to Note 13  Subsequent Events in the
accompanying Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report.



| |  |  | In July 2018, we exited our investment in NDLI, Inc. and recorded a realized loss of $3.6 million.
| | - |  | --------------------------------------------------------------------------------------------------

Recent Developments

Registration Statement

On June 5, 2018, we filed a registration statement on Form N-2 (File
No. 333-225447), which the SEC declared effective on July 13, 2018. The registration statement permits us to issue, through one or more transactions, up to an aggregate of $300.0 million in
securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities, including through concurrent, separate offerings of such securities.As
of July 31, 2018, we had the ability to issue up to $300.0 million in securities under the registration statement.

At-the-Market Program

In February 2018, we entered into equity
distribution agreements (commonly referred to as at-the-market (ATM) programs) with Cantor Fitzgerald & Co. (Cantor),
Ladenburg Thalmann & Co., Inc., and Wedbush Securities, Inc. (each a Sales Agent), under



46



---

which we have the ability to issue and sell shares of our common stock, from time to time, through the Sales Agents, up to an aggregate offering price of $35.0 million. Pursuant to our prior
registration statement on Form N-2 (File No. 333-204996), during the three months ended June 30, 2018, we sold 168,824 shares of our common stock under the ATM
program with Cantor at a weighted-average gross price of $11.09 per share and raised approximately $1.9 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $10.87
and resulted in total net proceeds of approximately $1.8 million. Certain of these sales were below our then-current estimated NAV per share during the sales period, with a discount of $0.002 per share, when comparing the sales price per share,
after deducting commissions, to the then-current estimated NAV per share; however, the net dilutive effect (after commissions and offering costs borne by us) of these sales was $0.00 per common share as a result of the small number of shares sold at
a slight discount to NAV per share and resulting rounding. In aggregate, the sales during the three months ended June 30, 2018 were above our then-current estimated NAV per share. As of June 30, 2018, we had remaining capacity to sell up
to $31.8 million of common stock under the ATM program.

Distributions and Dividends

In July 2018, our Board of Directors declared the following monthly distributions to common stockholders and monthly dividends to holders of our Series B Term
Preferred Stock, Series C Term Preferred Stock and Series D Term Preferred Stock:



|                   |  |                        |  |                              |       |  |                                                  |   |          |                                                  |  |   |                                                  |  |  |   |            | 
|------------------ |  | ---------------------- |  | ---------------------------- | ----- |  | ------------------------------------------------ | - | -------- | ------------------------------------------------ |  | - | ------------------------------------------------ |  |  | - | ---------- | 
|Record Date        |  | Payment Date           |  | Distribution perCommon Share |       |  | Dividend perShare ofSeries B TermPreferred Stock |   |          | Dividend perShare ofSeries C TermPreferred Stock |  |   | Dividend perShare ofSeries D TermPreferred Stock | 
|July 20, 2018      |  | July 31, 2018          |  | $                            | 0.067 |  |                                                  | $ | 0.140625 |                                                  |  | $ | 0.135417                                         |  |  | $ | 0.13020833 | 
|August 21, 2018    |  | August 31, 2018        |  |                              | 0.067 |  |                                                  |   | 0.140625 |                                                  |  |   | 0.135417                                         |  |  |   | 0.13020833 | 
|September 19, 2018 |  | September 28, 2018     |  |                              | 0.067 |  |                                                  |   | 0.140625 |                                                  |  |   | 0.135417                                         |  |  |   | 0.13020833 | 
|                   |  |                        |  |                              |       |  |                                                  |   |          |                                                  |  |   |                                                  |  |  |   |            | 
|                   |  | Total for the Quarter: |  | $                            | 0.201 |  |                                                  | $ | 0.421875 |                                                  |  | $ | 0.406251                                         |  |  | $ | 0.39062499 | 
|                   |  |                        |  |                              |       |  |                                                  |   |          |                                                  |  |   |                                                  |  |  |   |            | 



47



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RESULTS OF OPERATIONS

Comparison of the Three Months Ended June 30, 2018 to the Three Months Ended June 30, 2017



|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|------------------------------------------------------ |  | ----------------------------------- | ------ | - | ---- | - | ------ | -------- |  | - | -------- | - |  |  | ------- | --
|                                                       |  | For the Three Months Ended June 30, |       
|                                                       |  | 2018                                |        |   | 2017 |   |        | $ Change |  |   | % Change |  
|INVESTMENT INCOME                                      |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|Interest income                                        |  | $                                   | 13,314 |   |      | $ | 10,746 |          |  | $ | 2,568    |   |  |  | 23.9    | % 
|Dividend, success fee, and other income                |  |                                     | 2,190  |   |      |   | 2,874  |          |  |   | (684     | ) |  |  | (23.8   | ) 
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|Total investment income                                |  |                                     | 15,504 |   |      |   | 13,620 |          |  |   | 1,884    |   |  |  | 13.8    |   
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|EXPENSES                                               |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|Base management fee                                    |  |                                     | 3,111  |   |      |   | 2,516  |          |  |   | 595      |   |  |  | 23.6    |   
|Loan servicing fee                                     |  |                                     | 1,740  |   |      |   | 1,564  |          |  |   | 176      |   |  |  | 11.3    |   
|Incentive fee                                          |  |                                     | 7,586  |   |      |   | 1,172  |          |  |   | 6,414    |   |  |  | 547.3   |   
|Administration fee                                     |  |                                     | 285    |   |      |   | 307    |          |  |   | (22      | ) |  |  | (7.2    | ) 
|Interest and dividend expense                          |  |                                     | 3,993  |   |      |   | 2,980  |          |  |   | 1,013    |   |  |  | 34.0    |   
|Amortization of deferred financing costs and discounts |  |                                     | 367    |   |      |   | 367    |          |  |   |         |   |  |  |        |   
|Other                                                  |  |                                     | 1,064  |   |      |   | 1,391  |          |  |   | (327     | ) |  |  | (23.5   | ) 
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|Expenses before credits from Adviser                   |  |                                     | 18,146 |   |      |   | 10,297 |          |  |   | 7,849    |   |  |  | 76.2    |   
|Credits to fees from Adviser                           |  |                                     | (2,700 | ) |      |   | (2,112 | )        |  |   | (588     | ) |  |  | 27.8    |   
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|Total expenses, net of credits to fees                 |  |                                     | 15,446 |   |      |   | 8,185  |          |  |   | 7,261    |   |  |  | 88.7    |   
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|NET INVESTMENT INCOME                                  |  |                                     | 58     |   |      |   | 5,435  |          |  |   | (5,377   | ) |  |  | (98.9   | ) 
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|REALIZED AND UNREALIZED GAIN (LOSS)                    |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|Net realized gain on investments                       |  |                                     | 14,108 |   |      |   | 1,165  |          |  |   | 12,943   |   |  |  | 1,111.0 |   
|Net unrealized appreciation of investments             |  |                                     | 18,068 |   |      |   | 1,541  |          |  |   | 16,527   |   |  |  | 1,072.5 |   
|Net unrealized depreciation of other                   |  |                                     | 93     |   |      |   |       |          |  |   | 93       |   |  |  | NM      |   
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|Net realized and unrealized gain                       |  |                                     | 32,269 |   |      |   | 2,706  |          |  |   | 29,563   |   |  |  | 1,092.5 |   
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS   |  | $                                   | 32,327 |   |      | $ | 8,141  |          |  | $ | 24,186   |   |  |  | 297.1   |   
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|BASIC AND DILUTED PER COMMON SHARE:                    |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|Net investment income                                  |  | $                                   |       |   |      | $ | 0.17   |          |  | $ | (0.17    | ) |  |  | (100.0  | )%
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   
|Net increase in net assets resulting from operations   |  | $                                   | 0.99   |   |      | $ | 0.26   |          |  | $ | 0.73     |   |  |  | 280.8   |   
|                                                       |  |                                     |        |   |      |   |        |          |  |   |          |   |  |  |         |   



|NM | = Not Meaningful
|-- | ----------------

Investment Income

Total investment income increased by 13.8% for the three months ended June 30, 2018, as compared to the prior year period. This increase was primarily due
to an increase in interest income, partially offset by a decline in dividend, success fee, and other income, for the three months ended June 30, 2018, as compared to the prior year period.

Interest income from our investments in debt securities increased 23.9% for the three months ended June 30, 2018, as compared to the prior year period.
Generally, the level of interest income from investments is directly related to the principal balance of our interest-bearing investment portfolio outstanding during the period multiplied by the weighted-average yield. The weighted-average principal
balance of our interest-bearing investment portfolio during the three months ended June 30, 2018 was $409.9 million, compared to $340.5 million for the prior year period. This increase was primarily due to $71.4 million in new
debt investments and $59.4 million in follow-on debt investments to existing portfolio companies originated after June 30, 2017 and $25.2 million of loans placed back on accrual status,
partially offset by the pay-off or restructure of $57.7 million of debt investments and $55.1 million of loans placed on non-accrual status, and their
respective impact on the weighted-average principal balance when considering timing of new investments, pay-offs, restructures, and non-accruals, as applicable. The
weighted-average yield on our interest-bearing investments, excluding cash and cash equivalents and receipts recorded as dividend, success fee, and other income, was 13.0% for the three months ended June 30, 2018, compared to 12.6% for the
prior year period. The weighted-average yield may vary from period to period, based on the current stated interest rate on interest-bearing investments.

At June 30, 2018, certain of our loans to three portfolio companies, B-Dry, LLC, The Mountain Corporation, and
PSI Molded Plastics, Inc., were on non-accrual status, with an aggregate debt cost basis of $55.1 million. At June 30, 2017, certain of our loans to three portfolio companies, Alloy Die Casting Co.,
Precision Southeast, Inc., and Tread Corporation, were on non-accrual status, with an aggregate debt cost basis of $25.2 million.



48



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Dividend, success fee, and other income for the three months ended June 30, 2018 decreased 23.8% from the
prior year period. During the three months ended June 30, 2018, dividend, success fee, and other income primarily consisted of $2.1 million of success fee income and $0.1 million of dividend income. During the three months ended
June 30, 2017, dividend, success fee, and other income primarily consisted of $2.0 million of success fee income and $0.9 million of dividend income.

The following table lists the investment income for our five largest portfolio company investments, at fair value, during the respective periods:



|                                             |  |                     |         |  |                                  |  |       |                  |  |   |                             |  |  |  |       |  
|-------------------------------------------- |  | ------------------- | ------- |  | -------------------------------- |  | ----- | ---------------- |  | - | --------------------------- |  |  |  | ----- | -
|                                             |  | As of June 30, 2018 |         |  | Three months ended June 30, 2018 | 
|Portfolio Company                            |  | Fair Value          |         |  | % of Portfolio                   |  |       | InvestmentIncome |  |   | % of TotalInvestment Income | 
|Cambridge Sound Management, Inc.             |  | $                   | 54,732  |  |                                  |  | 8.7   | %                |  | $ | 526                         |  |  |  | 3.4   | %
|Nth Degree, Inc.                             |  |                     | 44,306  |  |                                  |  | 7.0   |                  |  |   | 451                         |  |  |  | 2.9   |  
|Brunswick Bowling Products, Inc.             |  |                     | 38,250  |  |                                  |  | 6.1   |                  |  |   | 537                         |  |  |  | 3.5   |  
|J.R. Hobbs Co.Atlanta, LLC                  |  |                     | 36,031  |  |                                  |  | 5.7   |                  |  |   | 713                         |  |  |  | 4.6   |  
|ImageWorks Display and Marketing Group, Inc. |  |                     | 31,410  |  |                                  |  | 5.0   |                  |  |   | 723                         |  |  |  | 4.6   |  
|                                             |  |                     |         |  |                                  |  |       |                  |  |   |                             |  |  |  |       |  
|Subtotalfive largest investments            |  |                     | 204,729 |  |                                  |  | 32.5  |                  |  |   | 2,950                       |  |  |  | 19.0  |  
|Other portfolio companies                    |  |                     | 424,589 |  |                                  |  | 67.5  |                  |  |   | 12,544                      |  |  |  | 81.0  |  
|                                             |  |                     |         |  |                                  |  |       |                  |  |   |                             |  |  |  |       |  
|Total investment portfolio                   |  | $                   | 629,318 |  |                                  |  | 100.0 | %                |  | $ | 15,494                      |  |  |  | 100.0 | %
|                                             |  |                     |         |  |                                  |  |       |                  |  |   |                             |  |  |  |       |  



|                                  |  |                     |         |  |                                  |  |       |                  |  |   |                             |  |  |  |       |  
|--------------------------------- |  | ------------------- | ------- |  | -------------------------------- |  | ----- | ---------------- |  | - | --------------------------- |  |  |  | ----- | -
|                                  |  | As of June 30, 2017 |         |  | Three months ended June 30, 2017 | 
|Portfolio Company                 |  | Fair Value          |         |  | % of Portfolio                   |  |       | InvestmentIncome |  |   | % of TotalInvestment Income | 
|Cambridge Sound Management, Inc.  |  | $                   | 33,233  |  |                                  |  | 6.8   | %                |  | $ | 526                         |  |  |  | 3.9   | %
|J.R. Hobbs Co.Atlanta, LLC       |  |                     | 31,305  |  |                                  |  | 6.4   |                  |  |   | 787                         |  |  |  | 5.8   |  
|Nth Degree, Inc.                  |  |                     | 29,560  |  |                                  |  | 6.1   |                  |  |   | 421                         |  |  |  | 3.1   |  
|Counsel Press, Inc.               |  |                     | 28,434  |  |                                  |  | 5.8   |                  |  |   | 778                         |  |  |  | 5.7   |  
|Old World Christmas, Inc.         |  |                     | 26,830  |  |                                  |  | 5.5   |                  |  |   | 528                         |  |  |  | 3.9   |  
|                                  |  |                     |         |  |                                  |  |       |                  |  |   |                             |  |  |  |       |  
|Subtotalfive largest investments |  |                     | 149,362 |  |                                  |  | 30.6  |                  |  |   | 3,040                       |  |  |  | 22.4  |  
|Other portfolio companies         |  |                     | 337,408 |  |                                  |  | 69.4  |                  |  |   | 10,578                      |  |  |  | 77.6  |  
|                                  |  |                     |         |  |                                  |  |       |                  |  |   |                             |  |  |  |       |  
|Total investment portfolio        |  | $                   | 486,770 |  |                                  |  | 100.0 | %                |  | $ | 13,618                      |  |  |  | 100.0 | %
|                                  |  |                     |         |  |                                  |  |       |                  |  |   |                             |  |  |  |       |  

Expenses

Total expenses,
net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased 88.7% during the three months ended June 30, 2018, as compared to the prior year period, primarily as a
result of an increase in the capital gains-based incentive fee, interest expense, and the base management fee, partially offset by an increase in non-contractual, unconditional, and irrevocable credits from
the Adviser.

In accordance with GAAP, we recorded a capital gains-based incentive fee of $6.5 million during the three months ended June 30,
2018, which is not yet contractually due. There was no capital gains-based incentive fee during the prior year period.

The base management fee increased
for the three months ended June 30, 2018, as compared to the prior year period, as average total assets increased over the respective periods as a result of an increase in investments.



49



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



|                                                          |  |                             |         |   |      |   |         |  
|--------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                          |  | Three Months Ended June 30, |        
|                                                          |  | 2018                        |         |   | 2017 |  
|Average total assets subject to base management
fee(A)    |  | $                           | 622,200 |   |      | $ | 503,200 |  
|Multiplied by prorated annual base management fee of 2.0% |  |                             | 0.5     | % |      |   | 0.5     | %
|                                                          |  |                             |         |   |      |   |         |  
|Base management fee(B)                                    |  |                             | 3,111   |   |      |   | 2,516   |  
|Credits to fees from
Adviserother(B)                     |  |                             | (960    | ) |      |   | (548    | )
|                                                          |  |                             |         |   |      |   |         |  
|Net base management fee                                   |  | $                           | 2,151   |   |      | $ | 1,968   |  
|                                                          |  |                             |         |   |      |   |         |  
|Loan servicing fee(B)                                     |  | $                           | 1,740   |   |      | $ | 1,564   |  
|Credits to base management feeloan servicing fee(B)      |  |                             | (1,740  | ) |      |   | (1,564  | )
|                                                          |  |                             |         |   |      |   |         |  
|Net loan servicing fee                                    |  | $                           |        |   |      | $ |        |  
|                                                          |  |                             |         |   |      |   |         |  
|Incentive feeincome-based                                |  | $                           | 1,078   |   |      | $ | 1,172   |  
|Incentive feecapital
gains-based(C)                      |  |                             | 6,508   |   |      |   |        |  
|                                                          |  |                             |         |   |      |   |         |  
|Total incentive fee(B)                                    |  |                             | 7,586   |   |      |   | 1,172   |  
|Credits to fees from
Adviserother(B)                     |  |                             |        |   |      |   |        |  
|                                                          |  |                             |         |   |      |   |         |  
|Net total incentive fee                                   |  | $                           | 7,586   |   |      | $ | 1,172   |  
|                                                          |  |                             |         |   |      |   |         |  



|(A) | Average total assets subject to the base management fee is defined in the Advisory Agreement 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 as a line item on our accompanying Consolidated Statement of Operations.
|--- | ----------------------------------------------------------------------------------

|(C) | The capital gains-based incentive fee is not yet contractually due under the terms of the Advisory Agreement.
|--- | -------------------------------------------------------------------------------------------------------------

Interest and dividend expense increased 34.0% during the three months ended June 30, 2018, as compared to the prior year period, due to a higher
weighted-average balance outstanding on the Credit Facility, partially offset by a lower effective interest rate. The weighted-average balance outstanding on the Credit Facility during the three months ended June 30, 2018 was
$123.3 million, as compared to $42.1 million in the prior year period. The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the three months ended June 30, 2018 was 5.4%, as
compared to 6.1% in the prior year period.

Realized and Unrealized Gain (Loss)

Net Realized Gain on Investments

During the three months
ended June 30, 2018, we recorded net realized gains on investments of $14.1 million, primarily related to a $13.8 million realized gain from the exit of Drew Foam, as compared to net realized gains on investments of $1.2 million
during the prior year period, primarily related to a $1.0 million realized gain from the exit of Mitchell Rubber Products, Inc.



50



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Net Unrealized Appreciation (Depreciation) of Investments

During the three months ended June 30, 2018, we recorded net unrealized appreciation of investments of $18.1 million. The realized gains (losses) and
unrealized appreciation (depreciation) across our investments for the three months ended June 30, 2018, were as follows:



|                                 |  |                                  |        |  |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|-------------------------------- |  | -------------------------------- | ------ |  | ------------------------------------ | - | ------ | ----------------------------------------------- |  | - | -------------- | - |  | - | ------ | -
|                                 |  | Three Months Ended June 30, 2018 |       
|Portfolio Company                |  | RealizedGain(Loss)               |        |  | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) |  
|Cambridge Sound Management, Inc. |  | $                                |       |  |                                      | $ | 12,554 |                                                 |  | $ |               |   |  | $ | 12,554 |  
|Nth Degree, Inc.                 |  |                                  |       |  |                                      |   | 4,592  |                                                 |  |   |               |   |  |   | 4,592  |  
|Brunswick Bowling Products, Inc. |  |                                  |       |  |                                      |   | 3,935  |                                                 |  |   |               |   |  |   | 3,935  |  
|Galaxy Tool Holding Corporation  |  |                                  |       |  |                                      |   | 3,238  |                                                 |  |   |               |   |  |   | 3,238  |  
|Edge Adhesives Holdings, Inc.    |  |                                  |       |  |                                      |   | 2,327  |                                                 |  |   |               |   |  |   | 2,327  |  
|Schylling, Inc.                  |  |                                  |       |  |                                      |   | 2,080  |                                                 |  |   |               |   |  |   | 2,080  |  
|Alloy Die Casting Co.            |  |                                  |       |  |                                      |   | 1,995  |                                                 |  |   |               |   |  |   | 1,995  |  
|Pioneer Square Brands, Inc.      |  |                                  |       |  |                                      |   | 1,809  |                                                 |  |   |               |   |  |   | 1,809  |  
|Star Seed, Inc.                  |  |                                  |       |  |                                      |   | 1,650  |                                                 |  |   |               |   |  |   | 1,650  |  
|Counsel Press, Inc.              |  |                                  |       |  |                                      |   | 1,396  |                                                 |  |   |               |   |  |   | 1,396  |  
|Tread Corporation                |  |                                  |       |  |                                      |   | 1,215  |                                                 |  |   |               |   |  |   | 1,215  |  
|Jackrabbit, Inc.                 |  |                                  |       |  |                                      |   | 886    |                                                 |  |   |               |   |  |   | 886    |  
|D.P.M.S., Inc.                   |  |                                  |       |  |                                      |   | 816    |                                                 |  |   |               |   |  |   | 816    |  
|Logo Sportswear, Inc.            |  |                                  |       |  |                                      |   | 697    |                                                 |  |   |               |   |  |   | 697    |  
|Old World Christmas, Inc.        |  |                                  |       |  |                                      |   | 565    |                                                 |  |   |               |   |  |   | 565    |  
|J.R. Hobbs Co.Atlanta, LLC      |  |                                  |       |  |                                      |   | 551    |                                                 |  |   |               |   |  |   | 551    |  
|Funko Acquisition Holdings, LLC  |  |                                  |       |  |                                      |   | 518    |                                                 |  |   |               |   |  |   | 518    |  
|Behrens Manufacturing, LLC       |  |                                  | 322    |  |                                      |   |       |                                                 |  |   |               |   |  |   | 322    |  
|Ginsey Home Solutions, Inc.      |  |                                  |       |  |                                      |   | 289    |                                                 |  |   |               |   |  |   | 289    |  
|Country Club Enterprises, LLC    |  |                                  |       |  |                                      |   | (223   | )                                               |  |   |               |   |  |   | (223   | )
|Diligent Delivery Systems        |  |                                  |       |  |                                      |   | (437   | )                                               |  |   |               |   |  |   | (437   | )
|B-Dry, LLC                       |  |                                  |       |  |                                      |   | (837   | )                                               |  |   |               |   |  |   | (837   | )
|Drew Foam Companies, Inc.        |  |                                  | 13,786 |  |                                      |   |       |                                                 |  |   | (14,755        | ) |  |   | (969   | )
|Meridian Rack & Pinion, Inc.     |  |                                  |       |  |                                      |   | (1,092 | )                                               |  |   |               |   |  |   | (1,092 | )
|The Mountain Corporation         |  |                                  |       |  |                                      |   | (2,559 | )                                               |  |   |               |   |  |   | (2,559 | )
|PSI Molded Plastics, Inc.        |  |                                  |       |  |                                      |   | (3,016 | )                                               |  |   |               |   |  |   | (3,016 | )
|Other, net (<$250 Net)           |  |                                  |       |  |                                      |   | (126   | )                                               |  |   |               |   |  |   | (126   | )
|                                 |  |                                  |        |  |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|Total                            |  | $                                | 14,108 |  |                                      | $ | 32,823 |                                                 |  | $ | (14,755        | ) |  | $ | 32,176 |  
|                                 |  |                                  |        |  |                                      |   |        |                                                 |  |   |                |   |  |   |        |  

The primary drivers of net unrealized appreciation of $18.1 million for the three months ended June 30, 2018, were
increased performance of certain of our portfolio companies and an increase in comparable multiples used to estimate the fair value of certain of our portfolio companies, which were partially offset by the reversal of previously recorded unrealized
appreciation upon the exit of our investment in Drew Foam and a decline in performance of certain of our other portfolio companies.



51



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During the three months ended June 30, 2017, we recorded net unrealized appreciation of investments of
$1.5 million. The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the three months ended June 30, 2017, were as follows:



|                                  |  |                                  |       |  |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|--------------------------------- |  | -------------------------------- | ----- |  | ------------------------------------ | - | ------ | ----------------------------------------------- |  | - | -------------- | - |  | - | ------ | -
|                                  |  | Three Months Ended June 30, 2017 |      
|Portfolio Company                 |  | RealizedGain(Loss)               |       |  | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) |  
|Cambridge Sound Management, Inc.  |  | $                                |      |  |                                      | $ | 6,187  |                                                 |  | $ |               |   |  | $ | 6,187  |  
|Old World Christmas, Inc.         |  |                                  |      |  |                                      |   | 3,926  |                                                 |  |   |               |   |  |   | 3,926  |  
|Nth Degree, Inc.                  |  |                                  |      |  |                                      |   | 3,799  |                                                 |  |   |               |   |  |   | 3,799  |  
|B+T Group Acquisition, Inc.       |  |                                  |      |  |                                      |   | 3,205  |                                                 |  |   |               |   |  |   | 3,205  |  
|Mathey Investments, Inc.          |  |                                  |      |  |                                      |   |       |                                                 |  |   | 2,658          |   |  |   | 2,658  |  
|Precision Southeast, Inc.         |  |                                  |      |  |                                      |   | 1,627  |                                                 |  |   |               |   |  |   | 1,627  |  
|SBS Industries, LLC               |  |                                  |      |  |                                      |   | 1,466  |                                                 |  |   |               |   |  |   | 1,466  |  
|Tread Corporation                 |  |                                  |      |  |                                      |   | 1,199  |                                                 |  |   |               |   |  |   | 1,199  |  
|Logo Sportswear, Inc.             |  |                                  |      |  |                                      |   | 867    |                                                 |  |   |               |   |  |   | 867    |  
|Star Seed, Inc.                   |  |                                  |      |  |                                      |   | 764    |                                                 |  |   |               |   |  |   | 764    |  
|Frontier Packaging, Inc.          |  |                                  |      |  |                                      |   | 738    |                                                 |  |   |               |   |  |   | 738    |  
|J.R. Hobbs Co.Atlanta, LLC       |  |                                  |      |  |                                      |   | 435    |                                                 |  |   |               |   |  |   | 435    |  
|Drew Foam Company, Inc.           |  |                                  |      |  |                                      |   | 370    |                                                 |  |   |               |   |  |   | 370    |  
|Diligent Delivery Systems         |  |                                  |      |  |                                      |   | 314    |                                                 |  |   |               |   |  |   | 314    |  
|Ginsey Home Solutions, Inc.       |  |                                  |      |  |                                      |   | (185   | )                                               |  |   |               |   |  |   | (185   | )
|Schylling, Inc.                   |  |                                  |      |  |                                      |   | (262   | )                                               |  |   |               |   |  |   | (262   | )
|D.P.M.S., Inc.                    |  |                                  |      |  |                                      |   | (304   | )                                               |  |   |               |   |  |   | (304   | )
|B-Dry, LLC                        |  |                                  |      |  |                                      |   | (434   | )                                               |  |   |               |   |  |   | (434   | )
|SOG Specialty Knives & Tools, LLC |  |                                  |      |  |                                      |   | (711   | )                                               |  |   |               |   |  |   | (711   | )
|Counsel Press, Inc.               |  |                                  |      |  |                                      |   | (1,183 | )                                               |  |   |               |   |  |   | (1,183 | )
|Jackrabbit, Inc.                  |  |                                  |      |  |                                      |   | (1,258 | )                                               |  |   |               |   |  |   | (1,258 | )
|Head Country, Inc.                |  |                                  |      |  |                                      |   | (1,498 | )                                               |  |   |               |   |  |   | (1,498 | )
|Alloy Die Casting Co.             |  |                                  |      |  |                                      |   | (1,540 | )                                               |  |   |               |   |  |   | (1,540 | )
|Mitchell Rubber Products, Inc.    |  |                                  | 957   |  |                                      |   |       |                                                 |  |   | (2,783         | ) |  |   | (1,826 | )
|GI Plastek, Inc.                  |  |                                  |      |  |                                      |   | (1,851 | )                                               |  |   |               |   |  |   | (1,851 | )
|Meridian Rack & Pinion, Inc.      |  |                                  |      |  |                                      |   | (1,902 | )                                               |  |   |               |   |  |   | (1,902 | )
|Edge Adhesives Holdings, Inc.     |  |                                  |      |  |                                      |   | (2,207 | )                                               |  |   |               |   |  |   | (2,207 | )
|Galaxy Tool Holding Corporation   |  |                                  |      |  |                                      |   | (2,625 | )                                               |  |   |               |   |  |   | (2,625 | )
|Country Club Enterprises, LLC     |  |                                  |      |  |                                      |   | (3,219 | )                                               |  |   |               |   |  |   | (3,219 | )
|Brunswick Bowling Products, Inc.  |  |                                  |      |  |                                      |   | (3,747 | )                                               |  |   |               |   |  |   | (3,747 | )
|Other, net (<$250 Net)            |  |                                  | 208   |  |                                      |   | (284   | )                                               |  |   | (21            | ) |  |   | (97    | )
|                                  |  |                                  |       |  |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|Total                             |  | $                                | 1,165 |  |                                      | $ | 1,687  |                                                 |  | $ | (146           | ) |  | $ | 2,706  |  
|                                  |  |                                  |       |  |                                      |   |        |                                                 |  |   |                |   |  |   |        |  

The primary drivers of net unrealized appreciation of $1.5 million for the three months ended June 30, 2017, were
increased performance of certain of our portfolio companies and an increase in comparable multiples used to estimate the fair value of certain of our portfolio companies, which were partially offset by a decline in performance of certain of our
other portfolio companies.

Across our entire investment portfolio, we recorded $0.5 million of net unrealized depreciation on our debt positions and
$18.6 million of net unrealized appreciation on our equity positions for the three months ended June 30, 2018. At June 30, 2018, the fair value of our investment portfolio was greater than our cost basis by $32.4 million, as
compared to $14.3 million at March 31, 2018, representing net unrealized appreciation of $18.1 million for the three months ended June 30, 2018. Our entire portfolio had a fair value of 105.4% of cost as of June 30, 2018.

Net Unrealized Depreciation on Other

During the
three months ended June 30, 2018, we recorded net unrealized depreciation of other of $0.1 million related to the Credit Facility recorded at fair value. There was no unrealized appreciation or depreciation on other during the three months
ended June 30, 2017.



52



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LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Net cash provided by
operating activities for the three months ended June 30, 2018 was $10.7 million, as compared to $26.3 million for the three months ended June 30, 2017. This change was primarily due to an increase in the purchase of investments,
partially offset by higher repayments and net proceeds from the sale of investments period over period.

Purchases of investments were $30.1 million
during the three months ended June 30, 2018, compared to $2.1 million during the three months ended June 30, 2017. Repayments and net proceeds from the sale of investments totaled $32.1 million during the three months ended
June 30, 2018, compared to $19.5 million during the three months ended June 30, 2017.

As of June 30, 2018, we had equity investments
in or loans to 33 portfolio companies with an aggregate cost basis of $596.9 million. As of June 30, 2017, we had equity investments in or loans to 33 portfolio companies with an aggregate cost basis of $508.8 million. The following
table summarizes our total portfolio investment activity during the three months ended June 30, 2018 and 2017:



|                                                                |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                |  | Three Months Ended June 30, |        
|                                                                |  | 2018                        |         |   | 2017 |  
|Beginning investment portfolio, at fair value                   |  | $                           | 599,147 |   |      | $ | 501,579 |  
|New investments                                                 |  |                             | 29,202  |   |      |   |        |  
|Disbursements to existing portfolio companies                   |  |                             | 850     |   |      |   | 2,148   |  
|Unscheduled principal repayments                                |  |                             | (14,514 | ) |      |   | (13,660 | )
|Net proceeds from sales of investments                          |  |                             | (17,226 | ) |      |   | (5,797  | )
|Net realized gain on investments                                |  |                             | 13,786  |   |      |   | 957     |  
|Net unrealized appreciation of investments                      |  |                             | 32,823  |   |      |   | 1,687   |  
|Reversal of net unrealized appreciation of investments          |  |                             | (14,755 | ) |      |   | (146    | )
|Amortization of premiums, discounts, and acquisition costs, net |  |                             | 5       |   |      |   | 2       |  
|                                                                |  |                             |         |   |      |   |         |  
|Ending investment portfolio, at fair value                      |  | $                           | 629,318 |   |      | $ | 486,770 |  
|                                                                |  |                             |         |   |      |   |         |  

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



|                                               |  |                                                           |  |        |         |  
|---------------------------------------------- |  | --------------------------------------------------------- |  | ------ | ------- | -
|                                               |  |                                                           |  | Amount |        
|For the remaining nine months ending March 31: |  | 2019                                                      |  | $      | 63,881  |  
|For the fiscal years ending March 31:          |  | 2020                                                      |  |        | 102,913 |  
|                                               |  | 2021                                                      |  |        | 60,410  |  
|                                               |  | 2022                                                      |  |        | 80,696  |  
|                                               |  | 2023                                                      |  |        | 86,990  |  
|                                               |  | Thereafter                                                |  |        | 47,618  |  
|                                               |  |                                                           |  |        |         |  
|                                               |  | Total contractual repayments                              |  | $      | 442,508 |  
|                                               |  | Adjustments to cost basis of debt investments             |  |        | (80     | )
|                                               |  | Investments in equity securities                          |  |        | 154,521 |  
|                                               |  |                                                           |  |        |         |  
|                                               |  | Total cost basis of investments held as of June 30, 2018: |  | $      | 596,949 |  
|                                               |  |                                                           |  |        |         |  

Financing Activities

Net cash used in financing activities for the three months ended June 30, 2018 was $11.3 million, which consisted primarily of $4.5 million of
net repayments on the Credit Facility and $8.6 million in distributions to common stockholders, partially offset by $1.8 million of net proceeds from the issuance of common stock under the ATM program.

Net cash used in financing activities for the three months ended June 30, 2017 was $23.7 million, which consisted primarily of $35.7 million of
net repayments on the Credit Facility and $8.0 million in distributions to common stockholders, partially offset by $20.1 million of net proceeds from the issuance of common stock in May 2017, including the partial exercise of the
underwriters over-allotment option in June 2017.



53



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Distributions and Dividends 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% of our taxable ordinary income plus the excess of our net
short-term capital gains over net long-term capital losses (Investment Company Taxable Income). Additionally, the Credit Facility generally restricts the amount of distributions to stockholders that we can pay out to be no greater than
the sum of certain amounts, including, but not limited to, our net investment income, plus net capital gains, plus amounts elected by the Company to be considered as having been paid during the prior fiscal year in accordance with
Section 855(a) of the Code. In accordance with these requirements, our Board of Directors declared, and we paid, monthly cash distributions of $0.067 per common share for each of the three months from April through June 2018 and a supplemental
distribution of $0.06 per common share for June 2018.

The federal income tax characteristics of distributions paid to our common stockholders is
generally reported to stockholders on Internal Revenue Service Form 1099 after the end of the calendar year based on tax information for the full fiscal year. Any characterization made on an interim, quarterly basis may not be representative of the
actual tax characterization for the full year.

For the year ended March 31, 2018, distributions to common stockholders totaled $28.9 million
and were less than our taxable income for the same year, after also taking into account spillover amounts under Section 855(a) of the Code with respect to the prior year. At March 31, 2018, we elected to treat $8.4 million of the
first distributions paid after fiscal year-end as having been paid in the prior fiscal year, in accordance with Section 855(a) of the Code. In addition, for the year ended March 31, 2018, we recorded
$1.6 million of net estimated adjustments for permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and Accumulated net realized gain in excess of
distributions and increased Net investment income in excess of distributions on our accompanying Consolidated Statements of Assets and Liabilities. For the three months ended June 30, 2018, we recorded $0.7 million of net estimated
adjustments for permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and Accumulated net realized gain in excess of distributions and increased
Overdistributed net investment income on our accompanying Consolidated Statements of Assets and Liabilities.

Preferred Stock Dividends

Our Board of Directors declared and we paid monthly cash dividends of (i) $0.140625 per share to holders of our Series B Term Preferred Stock,
(ii) $0.135417 per share to holders of our Series C Term Preferred Stock, and (iii) $0.13020833 per share to holders of our Series D Term Preferred Stock for each of the three months from April through June 2018. In accordance with GAAP, we treat
these monthly dividends as an operating expense. The federal income tax characteristics of dividends paid to our preferred stockholders generally constitute ordinary income or capital gains to the extent of our current and accumulated earnings and
profits and is reported after the end of the calendar year based on tax information for the full fiscal year. Such a characterization made on an interim, quarterly basis may not be representative of the actual tax characterization for the full year.

Dividend Reinvestment Plan

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

Equity

Registration Statement

On June 5, 2018, we filed a registration statement on Form N-2 (File
No. 333-225447), which the SEC declared effective on July 13, 2018. The registration statement permits us to issue, through one or more transactions, up to an aggregate of $300.0 million in
securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities, including through concurrent, separate offerings of such securities.As
of July 31, 2018, we had the ability to issue up to $300.0 million in securities under the registration statement.



54



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Common Stock

In February 2018, we entered into equity distribution agreements with Sales Agents, under which we have the ability to issue and sell shares of our common
stock, from time to time, through the Sales Agents, up to an aggregate offering price of $35.0 million. Pursuant to our prior registration statement on Form N-2 (File
No. 333-204996), during the three months ended June 30, 2018, we sold 168,824 shares of our common stock under the ATM program with Cantor at a weighted-average gross price of $11.09 per share and
raised approximately $1.9 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $10.87 and resulted in total net proceeds of approximately $1.8 million. Certain
of these sales were below our then-current estimated NAV per share during the sales period, with a discount of $0.002 per share, when comparing the sales price per share, after deducting commissions, to the then-current estimated NAV per share;
however, the net dilutive effect (after commissions and offering costs borne by us) of these sales was $0.00 per common share as a result of the small number of shares sold at a slight discount to NAV per share and resulting rounding. In aggregate,
the sales during the three months ended June 30, 2018 were above our then-current estimated NAV per share. As of July 31, 2018, we had remaining capacity to sell up to $31.8 million of common stock under the ATM program.

Pursuant to our prior registration statement on Form N-2 (File
No. 333-204996), in March 2018, we sold 127,412 shares of our common stock under the ATM program with Cantor at a weighted-average gross price of $10.45 per share and raised approximately
$1.3 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $10.24 and resulted in total net proceeds of approximately $1.3 million. These sales were below
our then-current estimated NAV per share during the sales period, with such discounts ranging from $0.01 per share to $0.07 per share, when comparing the sales price per share, after deducting commissions, to the then-current estimated NAV per
share; however, the net dilutive effect (after commissions and offering costs borne by us) of these sales was $0.00 per common share as a result of the small number of shares sold at a slight discount to NAV per share and resulting rounding.

Also pursuant to our prior registration statement on Form N-2 (File
No. 333-204996), in May 2017, we completed a public offering of 2.1 million shares of our common stock at a public offering price of $9.38 per share, which was below our then-current NAV of $9.95 per
share. Gross proceeds totaled $19.7 million and net proceeds, after deducting underwriting discounts and commissions and offering costs borne by us, were $18.7 million, which were used to repay borrowings under the Credit Facility and for
other general corporate purposes. In June 2017, the underwriters partially exercised their over-allotment option and purchased an additional 155,265 shares at the public offering price of $9.38 per share and on the same terms and conditions solely
to cover over-allotments, which resulted in gross proceeds of $1.5 million and net proceeds, after deducting underwriting discounts and commissions and offering costs borne by us, of $1.4 million.

We anticipate issuing equity securities to obtain additional capital in the future. However, we cannot determine the timing or terms of any future equity
issuances or whether we will be able to issue equity on terms favorable to us, or at all. When our common stock is trading at a price below NAV per share, the 1940 Act places regulatory constraints on our ability to obtain additional capital by
issuing common stock. Generally, the 1940 Act provides that we may not issue and sell our common stock at a price below our NAV per common share, other than to our then-existing common stockholders pursuant to a rights offering, without first
obtaining approval from our stockholders and our independent directors and meeting other stated requirements. On July 31, 2018, the closing market price of our common stock was $11.30 per share, representing a 2.3% discount to our NAV per share
of $11.57 as of June 30, 2018. At our 2017 Annual Meeting of Stockholders held on August 24, 2017, our stockholders approved a proposal authorizing us to issue and sell shares of our common stock at a price below our then-current NAV per
common share for a period of one year from the date of such approval, provided that our Board of Directors makes certain determinations prior to any such sale. At our 2018 Annual Meeting of Stockholders, scheduled to take place on August 2,
2018, our stockholders will vote on a similar proposal, which would be in effect for another year.

Term Preferred Stock

Pursuant to an earlier registration statement on Form N-2 (Registration
No. 333-181879), in November 2014, we completed a public offering of 1,656,000 shares of our Series B Term Preferred Stock at a public offering price of $25.00 per share. Gross proceeds totaled
$41.4 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were $39.7 million. Total underwriting discounts and offering costs related to this offering were $1.7 million, which have been
recorded as discounts to the liquidation value on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending December 31, 2021, the mandatory redemption date.



55



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Our Series B Term Preferred Stock is not convertible into our common stock or any other security. Our Series B
Term Preferred Stock provides for a fixed dividend equal to 6.75% per year, payable monthly (which equates to $2.8 million per year). We are required to redeem all shares of our outstanding Series B Term Preferred Stock on December 31,
2021, for cash at a redemption price equal to $25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but excluding, the date of redemption. In addition, two other potential mandatory redemption triggers are as
follows: (1) upon the occurrence of certain events that would constitute a change in control of us, we would be required to redeem all of our outstanding Series B Term Preferred Stock, and (2) if we fail to maintain asset coverage of at
least 200%, we are required to redeem a portion of our outstanding Series B Term Preferred Stock or otherwise cure the asset coverage redemption trigger (and we may also redeem additional securities to cause the asset coverage to be 215%). We may
also voluntarily redeem all or a portion of our Series B Term Preferred Stock at our sole option at the redemption price at any time.

Also, pursuant to
an earlier registration statement on Form N-2 (Registration No. 333-181879), in May 2015, we completed a public offering of 1,610,000 shares of our Series C Term
Preferred Stock at a public offering price of $25.00 per share. Gross proceeds totaled $40.3 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were $38.6 million. Total underwriting discounts
and offering costs related to this offering were $1.6 million, which have been recorded as discounts to the liquidation value on our accompanyingConsolidated Statements of Assets and Liabilities and are being amortized over the period
ending May 31, 2022, the mandatory redemption date.

Our Series C Term Preferred Stock is not convertible into our common stock or any other
security. Our Series C Term Preferred Stock provides for a fixed dividend equal to 6.50% per year, payable monthly (which equates to $2.6 million per year). We are required to redeem all shares of our outstanding Series C Term Preferred Stock
on May 31, 2022, for cash at a redemption price equal to $25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but excluding, the date of redemption. In addition, two other potential mandatory redemption
triggers are as follows: (1) upon the occurrence of certain events that would constitute a change in control of us, we would be required to redeem all of our outstanding Series C Term Preferred Stock, and (2) if we fail to maintain asset
coverage of at least 200%, we are required to redeem a portion of our outstanding Series C Term Preferred Stock or otherwise cure the asset coverage redemption trigger (and we may also redeem additional securities to cause the asset coverage to be
215%). We may also voluntarily redeem all or a portion of our Series C Term Preferred Stock at our sole option at the redemption price at any time.

Pursuant to our prior registration statement on Form N-2 (Registration
No. 333-204996), in September 2016, we completed a public offering of 2,300,000 shares of our Series D Term Preferred Stock at a public offering price of $25.00 per share. Gross proceeds totaled
$57.5 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were $55.4 million. Total underwriting discounts and offering costs related to this offering were $2.1 million, which have been
recorded as discounts to the liquidation value on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending September 30, 2023, the mandatory redemption date.

Our Series D Term Preferred Stock is not convertible into our common stock or any other security. Our Series D Term Preferred Stock provides for a fixed
dividend equal to 6.25% per year, payable monthly (which equates to $3.6 million per year). We are required to redeem all shares of our outstanding Series D Term Preferred Stock on September 30, 2023, for cash at a redemption price equal
to $25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but excluding, the date of redemption. In addition, two other potential mandatory redemption triggers are as follows: (1) upon the occurrence of certain
events that would constitute a change in control of us, we would be required to redeem all of our outstanding Series D Term Preferred Stock, and (2) if we fail to maintain asset coverage of at least 200% and are unable to correct such failure
within a specific amount of time, we are required to redeem a portion of our outstanding Series D Term Preferred Stock or otherwise cure the asset coverage redemption trigger (and we may also redeem additional securities to cause the asset coverage
to be 240%). We may also voluntarily redeem all or a portion of our Series D Term Preferred Stock at our sole option at the redemption price at any time on or after September 30, 2018.

Each series of our mandatorily redeemable preferred stock has a preference over our common stock with respect to dividends, whereby no distributions are
payable on our common stock unless the stated dividends, including any accrued and unpaid dividends, on the mandatorily redeemable preferred stock have been paid in full. The Series B Term Preferred Stock, Series C Term Preferred Stock, and Series D
Term Preferred Stock are considered liabilities in accordance with GAAP and, as such, affect our asset coverage, exposing us to additional leverage risks. The asset coverage on our senior securities that are stock (our Series B Term Preferred Stock,
Series C Term Preferred Stock, and Series D Term Preferred Stock) as of June 30, 2018 was 250.2%, calculated pursuant to Sections 18 and 61 of the 1940 Act.



56



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Revolving Line of Credit

On November 16, 2016, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 2 to the Fifth Amended and Restated
Credit Agreement, originally entered into on April 30, 2013 and as previously amended on June 26, 2014, with KeyBank National Association (KeyBank), as administrative agent, lead arranger, managing agent and lender, the
Adviser, as servicer, and certain other lenders party thereto. The revolving period was extended to November 15, 2019, and if not renewed or extended by such date, all principal and interest will be due and payable on or before
November 15, 2021 (two years after the revolving period end date). The amended Credit Facility provides a one-year extension option that may be exercised on or before the second anniversary of the
November 16, 2016 amendment date, subject to approval by all lenders. Additionally, the Credit Facility commitment amount was changed from $185.0 million to $165.0 million and, subject to certain terms and conditions, can be expanded
to a total facility amount of $250.0 million through additional commitments of existing or new lenders. Advances under the Credit Facility generally bear interest at 30-day LIBOR plus 3.15% per annum
until November 15, 2019, with the margin then increasing to 3.40% for the period from November 15, 2019 to November 15, 2020, and increasing further to 3.65% thereafter. The Credit Facility has an unused commitment fee of 0.50% per
annum on the portion of the total unused commitment amount that is less than or equal to 45.0% of the total commitment amount and 0.80% per annum on the total unused commitment amount that is greater than 45.0%. We incurred fees of approximately
$1.4 million in connection with this amendment.

On January 20, 2017, we entered into Amendment No. 3 to the Credit Facility, which
clarified a definition in the Companys performance guaranty under the Credit Facility.

Interest is payable monthly during the term of the Credit
Facility. Available borrowings are subject to various constraints and applicable advance rates, which are generally based on the size, characteristics, and quality of the collateral pledged by Business Investment. The Credit Facility also requires
that any interest and principal payments on pledged loans be remitted directly by the borrower into a lockbox account with KeyBank. KeyBank is also the trustee of the account and generally remits the collected funds to us once a month.

Among other things, the Credit Facility contains covenants that require Business Investment to maintain its status as a separate legal entity, prohibit
certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions) and restrict certain material changes to our credit and collection policies without the lenders consent. The Credit Facility also
generally seeks to restrict distributions to stockholders to the sum of (i) our net investment income, (ii) net capital gains, and (iii) amounts deemed by the Company to be considered as having been paid during the prior fiscal year
in accordance with Section 855(a) of the Code. Loans eligible to be pledged as collateral are subject to certain limitations, including, among other things, restrictions on geographic concentrations, industry concentrations, loan size, payment
frequency and status, average life, portfolio company leverage, and lien property. The Credit Facility also requires Business Investment to comply with other financial and operational covenants, which obligate Business Investment to, among other
things, maintain certain financial ratios, including asset and interest coverage and a minimum number of obligors required in the borrowing base. Additionally, the Credit Facility contains a performance guaranty that requires the Company to maintain
(i) a minimum net worth (defined in the Credit Facility to include our mandatory redeemable term preferred stock) of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any
equity or subordinated debt redeemed or retired after November 16, 2016, which equated to $222.2 million as of June 30, 2018, (ii) asset coverage with respect to senior securities representing indebtedness of at least 200% (or such
higher percentage as may be set forth in Section 61 of the 1940 Act), and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of June 30, 2018, and as defined in the performance guaranty of the Credit
Facility, we had a net worth of $514.7 million, asset coverage on our senior securities representing indebtedness of 566.8%, calculated in compliance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and
RIC. As of June 30, 2018, we had availability, after adjustments for various constraints based on collateral quality, of $59.5 million under the Credit Facility and were in compliance with all covenants under the Credit Facility. As of
July 31, 2018, we had availability, before adjustments for various constraints based on collateral quality, of $62.0 million under the Credit Facility.

OFF-BALANCE SHEET ARRANGEMENTS

Unlike PIK income, we generally do not recognize success fees as income until payment has been received. Due to the contingent nature of success fees, there
are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such collections. As a result, as of June 30, 2018 and March 31, 2018, we had unrecognized, contractual off-balance sheet success fee receivables of $29.3 million and $28.3 million (or approximately $0.89 and $0.87 per common share), respectively, on our debt investments. Consistent with GAAP, we generally
have not recognized success fee receivables and related income in our Consolidated Financial Statements until earned.



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CONTRACTUAL OBLIGATIONS

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

We have also extended
a guaranty on behalf of one of our portfolio companies, whereby we have guaranteed $2.0 million of obligations of Country Club Enterprises, LLC. The guaranty expires in February 2019, unless renewed. As of June 30, 2018, we have not been
required to make payments on this or any previous guaranties, and we consider the credit risks to be remote and the fair value of this guaranty to be immaterial.

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



|                                       |  |                        |         |  |                 |   |        |           |  |   |           |  |  |                  |         |  |  |   |        | 
|-------------------------------------- |  | ---------------------- | ------- |  | --------------- | - | ------ | --------- |  | - | --------- |  |  | ---------------- | ------- |  |  | - | ------ | 
|                                       |  | Payments Due by Period |        
|Contractual Obligations(A)             |  | Total                  |         |  | Less than1 Year |   |        | 1-3 Years |  |   | 3-5 Years |  |  | More than5 Years |        
|Credit Facility(B)                     |  | $                      | 102,500 |  |                 | $ |       |           |  | $ |          |  |  | $                | 102,500 |  |  | $ |       | 
|Mandatorily redeemable preferred stock |  |                        | 139,150 |  |                 |   |       |           |  |   |          |  |  |                  | 81,650  |  |  |   | 57,500 | 
|Secured borrowing                      |  |                        | 5,096   |  |                 |   |       |           |  |   | 5,096     |  |  |                  |        |  |  |   |       | 
|Interest payments on obligations(C)    |  |                        | 59,287  |  |                 |   | 15,129 |           |  |   | 30,098    |  |  |                  | 13,162  |  |  |   | 898    | 
|                                       |  |                        |         |  |                 |   |        |           |  |   |           |  |  |                  |         |  |  |   |        | 
|Total                                  |  | $                      | 306,033 |  |                 | $ | 15,129 |           |  | $ | 35,194    |  |  | $                | 197,312 |  |  | $ | 58,398 | 
|                                       |  |                        |         |  |                 |   |        |           |  |   |           |  |  |                  |         |  |  |   |        | 



|(A) | Excludes unused line of credit and delayed draw term loan commitments and guaranties to our portfolio companies in the aggregate principal amount of
$6.2 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Principal balance of borrowings outstanding under the Credit Facility, based on the maturity date following the current contractual revolving period end date.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Includes interest payments due on the Credit Facility and secured borrowing and dividend obligations on each series of our mandatorily redeemable preferred stock. The
amount of interest expense calculated for purposes of this table was based upon rates and outstanding balances as of June 30, 2018. Dividend obligations on our mandatorily redeemable preferred stock assume quarterly declarations and monthly
dividend payments through the respective mandatory redemption dates of each series.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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) as our most critical accounting policy, which is described in Note 2 Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report. Additionally, refer to Note 3  Investments in the accompanying Notes to
Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information regarding fair value measurements and our application of Financial Accounting Standards Board Accounting Standards Codification Topic 820,
Fair Value Measurements and Disclosures. We have also identified our revenue recognition policy as a critical accounting policy, which is described in Note 2 Summary of Significant Accounting Policies in the
accompanying Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report.

Investment Valuation

Credit Monitoring and Risk Rating

The Adviser monitors a
wide variety of key credit statistics that provide information regarding our portfolio companies to help us assess credit quality and portfolio performance and, in some instances, are 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 equity securities. For loans that have been rated by an SEC-registered Nationally Recognized Statistical Rating Organization (NRSRO), the Adviser
generally uses the average of two corporate level NRSROs risk ratings for such security. For all other debt securities, the Adviser uses a proprietary risk



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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 Lower Middle Market companies do not exceed the grade of BBB on an NRSRO scale, so there would be no debt securities in the Lower Middle
Market that would meet the definition of AAA, AA or A. Therefore, the Advisers scale begins with the designation >10 as the best risk rating which may be equivalent to a BBB from an NRSRO; however, no assurance can be given that a >10 on
the Advisers scale is equal to a BBB or Baa2 on an NRSRO scale. The Advisers risk rating system covers both qualitative and quantitative aspects of the business and the securities we hold.

The following table reflects risk ratings for all loans in our portfolio as of June 30, 2018 and March 31, 2018:



|                 |  |               |     |  |                |  |      | 
|---------------- |  | ------------- | --- |  | -------------- |  | ---- | 
|Rating           |  | June 30, 2018 |     |  | March 31, 2018 | 
|Highest          |  |               | 9.0 |  |                |  | 10.0 | 
|Average          |  |               | 6.9 |  |                |  | 6.4  | 
|Weighted-Average |  |               | 7.2 |  |                |  | 6.5  | 
|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. As a RIC, we generally are not subject to federal income tax on the portion of our taxable income and gains distributed to our
stockholders. To maintain our qualification as a RIC, we must maintain our status as a BDC and meet certain source-of-income and asset diversification requirements. In
addition, in order to qualify to be taxed as a RIC, we must distribute to stockholders at least 90% of our Investment Company Taxable Income. Our policy generally is to make distributions to our stockholders in an amount up to 100% of our Investment
Company Taxable Income. We may retain some or all of our net long-term capital gains, if any, retain and designate them as deemed distributions, or distribute such gains to stockholders in cash.

In an effort to limit federal excise taxes imposed on RICs, a RIC has to distribute to stockholders, during each calendar year, an amount close to the sum of:
(1) 98% 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 from preceding years that were not distributed during such years. Under the RIC Modernization Act, we are permitted to carryforward any capital losses that we may incur for
an unlimited period, and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. Our capital loss carryforward balance was $0 as of both June 30, 2018 and March 31, 2018.

Recent Accounting Pronouncements

Refer to Note 2
 Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report for a description of recent accounting pronouncements.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 rates at which we borrow funds, such as under the Credit Facility (which is variable) and
our mandatorily redeemable preferred stock (which are fixed), and the rates 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 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% of the loans in our portfolio at fixed
rates, with approximately 90% at variable rates or variables rates with a floor mechanism. As of June 30, 2018, all of our variable-rate loans have rates associated with the current 30-day LIBOR rate and
our total debt investment portfolio consisted of the following breakdown based on the principal balance:



| |       |   |  |                            
| | ----- | - |  | ---------------------------
| | 97.2  | % |  | Variable rates with a floor
| | 2.8   |   |  | Fixed rates                
| |       |   |  |                            
| | 100.0 | % |  | Total                      
| |       |   |  |                            

There have been no material changes in the quantitative and qualitative market risk disclosures during the three months ended
June 30, 2018 from that disclosed in our Annual Report for the fiscal year ended March 31, 2018.

ITEM 4.
CONTROLS AND PROCEDURES.

a) Evaluation of Disclosure Controls and Procedures

As of June 30, 2018 (the end of the period covered by this report), we, including our chief executive officer and chief financial officer, evaluated the
effectiveness, 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 at a reasonable assurance level 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 evaluation of
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) Changes in Internal Control
over Financial Reporting

There were no changes in internal controls for the three months ended June 30, 2018 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.



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PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business.
Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While we do not expect that the resolution of these matters, if they arise, would materially affect our business,
financial condition, results of operations or cash flows, resolution will be subject to various uncertainties and could result in the expenditure of significant financial and managerial resources. Further, we are not named as a party to any
proceeding that involves a claim for damages that exceeds 10% of our consolidated current assets.

ITEM 1A. RISK
FACTORS.

Our business is subject to certain risks and events that, if they occur, could adversely affect our financial condition and results of
operations and the trading price of our securities. For a discussion of these risks, please refer to the risk factor below as well as the section captioned Item 1A. Risk Factors in Part I of our Annual Report on Form 10-K for the fiscal year ended March 31, 2018, as filed with the SEC on May 15, 2018. The risks described herein and in our Annual Report are not the only risks we face. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

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

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

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

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.



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ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER
INFORMATION.

Not applicable.

ITEM 6. EXHIBITS

See the
exhibit index.

EXHIBIT INDEX



|        |  |                                                                                                                                                                                                                                         
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                             
|        | 
|3.1     |  | Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 
A.2 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 
333-123699), filed May 13, 2005.                     
|        | 
|3.1.a   |  | Certificate of Designation of 6.75% Series B Cumulative Term Preferred Stock, incorporated by reference to Exhibit 3.3 to the Registration Statement
 on Form 8-A (File No. 001-34007), filed November 7, 2014.                         
|        | 
|3.1.b   |  | Certificate of Designation of 6.50% Series C Cumulative Term Preferred Stock, incorporated by reference to Exhibit 3.4 to the Registration Statement
 on Form 8-A (File No. 001-34007), filed May 11, 2015.                             
|        | 
|3.1.c   |  | Certificate of Amendment to the Certificate of Designation of 6.75% Series B Cumulative Term Preferred Stock, incorporated by reference to Exhibit
 3.6 to the Quarterly Report on Form 10-Q (File No. 814-00704), filed August 4, 2015.
|        | 
|3.1.d   |  | Certificate of Designation of 6.25% Series D Cumulative Term Preferred Stock, incorporated by reference to Exhibit 3.5 to the Registration Statement
 on Form 8-A (File No. 001-34007), filed September 22, 2016.                       
|        | 
|3.2     |  | Amended and Restated Bylaws, incorporated by reference to Exhibit 
b.2 to the Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 
333-123699), filed June 21, 2005.                                      
|        | 
|3.3     |  | First Amendment to Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 
99.1 to the Current Report on Form 8-K (File No. 814-00704) filed July 10, 2007.                                                
|        | 
|4.1     |  | Specimen Stock Certificate, incorporated by reference to Exhibit 
d to Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-123699), filed June 
21, 2005.                                             
|        | 
|4.2     |  | Specimen 6.75% Series B Cumulative Term Preferred Stock Certificate, incorporated by reference to Exhibit 4.3 to the Registration Statement on
Form 8-A (File No. 001-34007), filed November 7, 2014.                                   
|        | 
|4.3     |  | Specimen 6.50% Series C Cumulative Term Preferred Stock Certificate, incorporated by reference to Exhibit 4.4 to the Registration Statement on
Form 8-A (File No. 001-34007), filed May 11, 2015.                                       
|        | 
|4.4     |  | Specimen 6.25% Series D Cumulative Term Preferred Stock Certificate, incorporated by reference to Exhibit 4.5 to the Registration Statement on
Form 8-A (File No. 001-34007), filed September 22, 2016.                                 
|        | 
|11      |  | Computation of Per Share Earnings (included in the notes to the financial statements contained in this report).                                                                                                                         
|        | 
|31.1*   |  | Certification of Chief Executive Officer pursuant to section 302 of The Sarbanes-Oxley Act of 2002.                                                                                                                                     
|        | 
|31.2*   |  | Certification of Chief Financial Officer pursuant to section 302 of The Sarbanes-Oxley Act of 2002.                                                                                                                                     
|        | 
|32.1   |  | Certification of Chief Executive Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.                                                                                                                                     
|        | 
|32.2   |  | Certification of Chief Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.                                                                                                                                     



|* | Filed herewith
|- | --------------

|+ | Furnished herewith
|- | ------------------

All other exhibits for which provision is made in the applicable regulations of the
Securities and Exchange Commission are not required under the related instruction or are inapplicable and therefore have been omitted.



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SIGNATURE

Pursuant to the requirements 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 INVESTMENT CORPORATIONBy:

/s/ Julia RyanJulia RyanChief Financial Officer and Treasurer


Date: August 1, 2018



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