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 September 30, 2018 OR  ☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from
 to Commission file number: 814-00704   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 100MCLEAN, 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

☐

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 November 2, 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 September 30, 2018 and March 
31, 2018


2Consolidated Statements of Operations for the three and six months ended September 
30, 2018 and 2017


3Consolidated Statements of Changes in Net Assets for the six months ended September 
30, 2018 and 2017


5Consolidated Statements of Cash Flows for the six months ended September 
30, 2018 and 2017


6Consolidated Schedules of Investments as of September 30, 2018 and March 31,
2018


8Notes to Consolidated Financial Statements


20Item 2.

Managements Discussion and Analysis of Financial Condition and Results of OperationsOverview


46Results of Operations


52Liquidity and Capital Resources


62Item 3.

Quantitative and Qualitative Disclosures About Market Risk


69Item 4.

Controls and Procedures


69PART II.

OTHER INFORMATION:Item 1.

Legal Proceedings


70Item 1A.

Risk Factors


70Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


71Item 3.

Defaults Upon Senior Securities


71Item 4.

Mine Safety Disclosures


71Item 5.

Other Information


71Item 6.

Exhibits


72SIGNATURES


73




---

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)  September 30,


March 31,2018


2018ASSETSInvestments at fair valueNon-Control/Non-Affiliate
investments (Cost of $234,695 and $220,087, respectively)

$
277,968


$
247,297Affiliate investments (Cost of $338,047 and $343,247, respectively)


370,415



339,393Control investments (Cost of $21,512 and $21,512 respectively)


16,734



12,457Cash and cash equivalents


2,168



3,639Restricted cash and cash equivalents


1,133



328Interest receivable


2,088



3,532Due from administrative agent


1,915



2,324Deferred financing costs, net


2,137



976Other assets, net


840



953TOTAL ASSETS

$
675,398


$
610,899LIABILITIESBorrowings:Line of credit at fair value (Cost of $115,700 and $107,000, respectively)

$
115,700


$
107,500Secured borrowing


5,096



5,096Total borrowings


120,796



112,596Mandatorily redeemable preferred stock, $0.001 par value, $25 liquidation preference; 9,856,000and 6,356,000 shares authorized; 5,290,000and 5,566,000 shares issued and outstanding, respectively, net


128,144



135,615Accounts payable and accrued expenses


1,619



916Fees due to Adviser(A)


19,517



6,671Fee due to Administrator(A)


337



317Other liabilities


1,411



584TOTAL LIABILITIES

$
271,824


$
256,699Commitments and contingencies(B)NET ASSETS

$
403,574


$
354,200ANALYSIS OF NET ASSETSCommon stock, $0.001 par value per share, 100,000,000shares authorized, 32,822,459and 32,653,635 shares issued and outstanding, respectively

$
33


$
33Capital in excess of par value


329,782



330,661Cumulative net unrealized appreciation of investments


70,863



14,301Cumulative net unrealized appreciation of other






(500
)(Overdistributed) underdistributed net investment income


(12,263
)


3,660Accumulated net realized gain in excess of distributions


15,159



6,045Total distributable earnings


73,759



23,506TOTAL NET ASSETS

$
403,574


$
354,200NET ASSET VALUE PER SHARE AT END OF PERIOD

$
12.30


$
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 Ended September 30,


Six Months Ended September 30,2018


2017


2018


2017INVESTMENT INCOMEInterest incomeNon-Control/Non-Affiliate
investments

$
5,622


$
4,587


$
11,888


$
9,053Affiliate investments


6,051



6,408



12,880



12,480Control investments


212



210



421



416Cash and cash equivalents


10



8



20



10Total interest income


11,895



11,213



25,209



21,959Dividend incomeNon-Control/Non-Affiliate
investments


1,196



1,770



1,262



1,770Affiliate investments














865Total dividend income


1,196



1,770



1,262



2,635Success fee incomeNon-Control/Non-Affiliate
investments






149



124



2,158Control investments










2,000



Total success fee income






149



2,124



2,158Total investment income


13,091



13,132



28,595



26,752EXPENSESBase management fee(A)


3,275



2,554



6,386



5,070Loan servicing fee(A)


1,674



1,485



3,414



3,049Incentive fee(A)


7,125



1,295



14,711



2,467Administration fee(A)


344



201



629



508Interest expense on borrowings


1,526



754



3,268



1,483Dividends on mandatorily redeemable preferred stock


2,317



2,251



4,568



4,502Amortization of deferred financing costs and discounts


497



367



864



734Professional fees


247



260



658



579Other general and administrative expenses


2,319



626



2,972



1,698Expenses before credits from Adviser


19,324



9,793



37,470



20,090Credits to base management fee  loan servicing fee(A)


(1,674
)


(1,485
)


(3,414
)


(3,049
)Credits to fees from
Adviserother(A)


(565
)


(926
)


(1,525
)


(1,474
)Total expenses, net of credits to fees


17,085



7,382



32,531



15,567NET INVESTMENT (LOSS) INCOME


(3,994
)


5,750



(3,936
)


11,185REALIZED AND UNREALIZED GAIN (LOSS)Net realized gain (loss):Non-Control/Non-Affiliate
investments


745



37



14,531



978Affiliate investments


(3,601
)


(80
)


(3,279
)


144Other


(1,687
)






(1,687
)


Total net realized gain (loss)


(4,543
)


(43
)


9,565



1,122Net unrealized appreciation (depreciation):Non-Control/Non-Affiliate
investments


19,805



14,293



16,064



16,124Affiliate investments


17,650



(4,945
)


36,221



(2,610
)Control investments


1,039



(1,499
)


4,277



(4,124
)Other


407







500



Total net unrealized appreciation


38,901



7,849



57,062



9,390Net realized and unrealized gain


34,358



7,806



66,627



10,512NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

$
30,364


$
13,556


$
62,691


$
21,697  (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)  Three Months Ended September 30,


Six Months Ended September 30,2018


2017


2018


2017BASIC AND DILUTED PER COMMON SHARE:Net investment (loss) income

$
(0.12
)

$
0.18


$
(0.12
)

$
0.35Net increase in net assets resulting from operations

$
0.93


$
0.42


$
1.91


$
0.68WEIGHTED-AVERAGE SHARES OF COMMON STOCKOUTSTANDING:Basic and diluted


32,822,459



32,526,223



32,792,816



32,003,128 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)   Six Months Ended September 30,2018


2017OPERATIONSNet investment (loss) income

$
(3,936
)

$
11,185Net realized gain on investments


11,252



1,122Net realized loss on other


(1,687
)


Net unrealized appreciation of investments


56,562



9,390Net unrealized depreciation of other


500



Net increase in net assets from operations


62,691



21,697DISTRIBUTIONSDistributions to common stockholders from net investment income


(13,512
)


(12,336
)Distributions to common stockholders from realized gains


(1,641
)


(1,951
)Net decrease in net assets from distributions


(15,153
)


(14,287
)CAPITAL ACTIVITYIssuance of common stock


1,873



21,154Discounts, commissions, and offering costs for issuance of common stock


(37
)


(1,098
)Net increase in net assets from capital activity


1,836



20,056TOTAL INCREASE IN NET ASSETS


49,374



27,466NET ASSETS, BEGINNING OF PERIOD


354,200



301,082NET ASSETS, END OF PERIOD

$
403,574


$
328,548 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  5




---

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)    Six Months Ended September 30,2018


2017CASH FLOWS FROM OPERATING ACTIVITIESNet increase in net assets resulting from operations

$
62,691


$
21,697Adjustments to reconcile net increase in net assets resulting from operations to net cash provided
by operating activities:Purchase of investments


(30,952
)


(31,648
)Principal repayments of investments


14,514



17,610Net proceeds from the sale of investments


18,291



5,796Net realized gain on investments


(11,252
)


(1,214
)Net realized loss on other


1,670



Net unrealized appreciation of investments


(56,562
)


(9,390
)Net unrealized depreciation of other


(500
)


Amortization of premiums, discounts, and acquisition costs, net


(9
)


(6
)Amortization of deferred financing costs and discounts


864



734Bad debt expense, net of recoveries


1,374



575Changes in assets and liabilities:Decrease (increase) in interest receivable


434



(524
)Decrease in due from administrative agent


409



195(Increase) decrease in other assets, net


(142
)


2,469Increase in accounts payable and accrued expenses


602



378Increase in fees due to
Adviser(A)


12,846



115Increase (decrease) in fee due to
Administrator(A)


20



(95
)Increase (decrease) in other liabilities


827



(638
)Net cash provided by operating activities


15,125



6,054CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock


1,873



21,154Discounts, commissions, and offering costs for issuance of common stock


(28
)


(1,090
)Proceeds from line of credit


129,200



49,600Repayments on line of credit


(120,500
)


(62,600
)Proceeds from issuance of mandatorily redeemable preferred stock


74,750



Redemption of mandatorily redeemable preferred stock


(81,650
)


Deferred financing and offering costs


(4,283
)


(75
)Distributions paid to common stockholders


(15,153
)


(14,287
)Net cash used in financing activities


(15,791
)


(7,298
)NET DECREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH
EQUIVALENTS


(666
)


(1,244
)CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS AT BEGINNING OF
PERIOD


3,967



4,099CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS AT END OF
PERIOD

$
3,301


$
2,855CASH PAID FOR INTEREST

$
3,114


$
1,135NON-CASH ACTIVITIES(B)

$



$
9,379  (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: 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)  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 SEPTEMBER 30, 2018 (DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)  Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValueNON-CONTROL/NON-AFFILIATE
INVESTMENTS(N)  68.9%Secured First Lien Debt  34.6%Containers, Packaging, and Glass  2.4%Frontier Packaging, Inc.  Term Debt (L+10.0%, 12.3% Cash, Due 3/2021)(L)

$
9,500


$
9,500


$
9,500Diversified/Conglomerate Services  14.8%Bassett Creek Restoration, Inc.  Term Debt (L+10.0%, 12.3% Cash, Due 4/2023)(L)


23,000



23,000



23,000Counsel Press, Inc.  Term Debt (L+11.8%, 14.0% Cash, Due 3/2020)(L)


18,000



18,000



18,000Counsel Press, Inc.  Term Debt (L+13.0%, 15.3% Cash, Due 3/2020)(L)


5,500



5,500



5,500Nth Degree, Inc.  Term Debt (L+11.5%, 13.8% Cash, Due 3/2023)(L)


13,290



13,290



13,29059,790



59,790Farming and Agriculture  4.1%Jackrabbit, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 9/2019)(L)


11,000



11,000



11,000Star Seed, Inc.  Term Debt (L+10.0%, 12.5% Cash, Due 5/2020)(Q)


5,000



5,000



5,49016,000



16,490Leisure, Amusement, Motion Pictures, and Entertainment  6.8%Schylling, Inc.  Term Debt (L+11.0%, 13.3%, Due 11/2018)(L)


13,081



13,081



13,081Schylling, Inc.  Term Debt (L+11.0%, 13.3%, Due 11/2018)(L)


8,500



8,500



8,500Schylling, Inc.  Term Debt (L+11.0%, 13.3%, Due 11/2018)(L)


6,000



6,000



6,00027,581



27,581Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  4.9%SBS Industries, LLC  Term Debt (L+12.0%, 14.3% Cash, Due 6/2020)(L)


19,957



19,957



19,957Oil 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



3,216Personal, Food, and Miscellaneous Services  0.8%B-Dry, LLC  Line of Credit, $50 available (L+0.3%,
2.5% Cash (0.8% Unused Fee), Due 12/2018)(G)(L)


4,600



4,600



3,080B-Dry, LLC  Term Debt (L+0.3%, 2.5% Cash, Due
12/2019)(G)(L)


6,443



6,443



B-Dry, LLC  Term Debt (L+0.3%, 2.5% Cash, Due
12/2019)(G)(L)


840



840



11,883



3,080Total Secured First Lien Debt





$
147,927


$
139,614Secured Second Lien Debt  7.5%Automobile  1.0%Country Club Enterprises, LLC  Term Debt (L+11.0%, 18.7% Cash, Due 5/2019)(L)(V)

$
4,000


$
4,000


$
4,000Cargo Transport  3.2%Diligent Delivery Systems  Term Debt (L+9.0%, 11.3% Cash, Due 11/2022)(K)


13,000



12,925



13,130Home and Office Furnishings, Housewares, and Durable Consumer Products 3.3%Ginsey Home Solutions, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 1/2021)(H)(L)


13,300



13,300



13,300Total Secured Second Lien Debt





$
30,225


$
30,430Preferred Equity  22.0%Automobile  0.2%Country Club Enterprises, LLC  Preferred
Stock(C)(L)(V)


7,304,792


$
7,725


$
998Country Club Enterprises, LLC  Guaranty ($2,000)(U)(V)










7,725



998 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 8




---

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) SEPTEMBER 30, 2018 (DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)  Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValueContainers, Packaging, and Glass  0.3%Frontier Packaging, Inc.  Preferred
Stock(C)(L)


1,373


$
1,373


$
1,373Diversified/Conglomerate Services  13.2%Bassett Creek Restoration, Inc.  Preferred Stock(C)(L)


4,900



4,900



4,900Counsel Press, Inc.  Preferred
Stock(C)(L)


6,995



6,995



8,415Nth Degree, Inc.  Preferred
Stock(C)(L)


5,660



5,660



40,02917,555



53,344Farming and Agriculture  1.9%Jackrabbit, Inc.  Preferred
Stock(C)(L)


3,556



3,556



4,844Star Seed, Inc.  Preferred
Stock(C)(Q)


1,499



1,499



2,4935,055



7,337Home and Office Furnishings, Housewares, and Durable Consumer Products  3.5%Ginsey Home Solutions, Inc.  Preferred
Stock(C)(L)


19,280



9,583



14,102Leisure, Amusement, Motion Pictures, and Entertainment  0.6%Schylling, Inc.  Preferred
Stock(C)(L)


4,000



4,000



2,317Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  1.1%SBS Industries, LLC  Preferred
Stock(C)(L)


27,705



2,771



4,291Oil and Gas  1.2%Tread Corporation  Preferred
Stock(C)(L)


12,998,639



3,768



4,826Personal, Food, and Miscellaneous Services  0.0%B-Dry, LLC  Preferred Stock(C)(L)


2,500



2,516



Total Preferred Equity





$
54,346


$
88,588Common Equity  4.8%Cargo Transport  0.5%Diligent Delivery Systems  Common Stock Warrants(C)(L)


8
%

$
500


$
2,063Containers, Packaging, and Glass  2.6%Frontier Packaging, Inc.  Common
Stock(C)(L)


152



152



10,680Farming and Agriculture  1.4%Jackrabbit, Inc.  Common
Stock(C)(L)


548



94



Star Seed, Inc.  Common
Stock(C)(Q)


600



1



5,38195



5,381Home 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)  0.1%SBS Industries, LLC  Common
Stock(C)(L)


221,500



222



540Oil 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)


39,483



167



672 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.  9




---

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) SEPTEMBER 30, 2018 (DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)   Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValuePersonal, Food, and Miscellaneous Services  0.0%B-Dry, LLC  Common Stock(C)(L)


2,500


$
300


$
Total Common Equity





$
2,197


$
19,336Total
Non-Control/Non-Affiliate Investments





$
234,695


$
277,968AFFILIATE INVESTMENTS(O) 
91.8%Secured First Lien Debt  42.4%Automobile  1.8%Meridian Rack & Pinion, Inc.(M)
 Term Debt (L+11.5%, 13.8% Cash, Due 6/2019)(K)

$
9,660


$
9,660


$
7,245Beverage, Food, and Tobacco  2.2%Head Country, Inc.  Term Debt (L+10.5%, 12.8% Cash, Due 2/2019)(L)


9,050



9,050



9,050Diversified/Conglomerate Manufacturing  4.7%D.P.M.S., Inc.  Term Debt (10.0% Cash, Due 10/2021)(I)(L)


8,795



8,795



7,414Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+10.5%, 12.8% Cash, Due 2/2019)(K)


9,300



9,300



9,091Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+11.8%, 14.0% Cash, Due 2/2019)(K)


2,400



2,400



2,35820,495



18,863Diversified/Conglomerate Services  10.7%ImageWorks Display and Marketing Group, Inc.  Term Debt (L+11.0%, 13.3% Cash, Due 11/2022)(L)


22,000



22,000



22,000J.R. Hobbs Co.  Atlanta, LLC  Term Debt (L+11.5%, 13.8% Cash, Due 2/2022)(L)


21,000



21,000



21,00043,000



43,000Home and Office Furnishings, Housewares, and Durable Consumer Products  8.3%Brunswick Bowling Products, Inc.  Term Debt (L+10.0%, 12.3% Cash, Due 1/2023)(L)


17,700



17,700



17,700Old World Christmas, Inc.  Term Debt (L+11.3%, 13.5% Cash, Due 10/2019)(L)


15,770



15,770



15,77033,470



33,470Leisure, Amusement, Motion Pictures, and Entertainment  3.7%SOG Specialty Knives & Tools, LLC  Term Debt (L+7.3%, 9.5% Cash, Due 8/2020)(G)(L)


6,200



6,200



6,200SOG Specialty Knives & Tools, LLC  Term Debt (L+8.3%, 10.5% Cash, Due 8/2020)(G)(L)


12,200



12,200



8,617SOG Specialty Knives & Tools, LLC  Term Debt (Due 8/2020)(L)(R)


538



538



43318,938



15,250Personal and Non-Durable Consumer Products
(Manufacturing Only)  5.2%Pioneer Square Brands, Inc.  Term Debt (L+12.0%, 14.3% Cash, Due 8/2022)(L)


21,000



21,000



21,000Telecommunications  3.5%B+T Group Acquisition, Inc.(M)  Term
Debt (L+11.0%, 13.3% Cash, Due 12/2019)(L)


14,000



14,000



14,000Textiles and Leather  2.3%Logo Sportswear, Inc.  Term Debt (L+10.5%, 12.8% Cash, Due 3/2020)(Q)(V)


9,200



9,200



9,374Total Secured First Lien Debt





$
178,813


$
171,252 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.   10




---

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) SEPTEMBER 30, 2018 (DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)  Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValueSecured Second Lien Debt  14.8%Chemicals, Plastics, and Rubber  6.1%PSI Molded Plastics, Inc.  Term Debt (L+12.0%, 14.3% Cash, Due 1/2024)(G)(L)

$
24,618


$
24,618


$
24,618Diversified/Conglomerate Manufacturing  3.1%Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.3% Cash, Due 4/2021)(K)


12,215



12,215



11,512Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.3% Cash, Due 4/2021)(K)


175



175



165Alloy Die Casting Co.(M)  Term Debt
(L+4.0%, 6.3% Cash, Due 4/2021)(K)


910



910



85813,300



12,535Home and Office Furnishings, Housewares, and Durable Consumer Products  4.0%Cambridge Sound Management, Inc.  Term Debt (L+11.0%, 13.3% Cash, Due 8/2021)(L)


16,000



16,000



16,000Personal and Non-Durable Consumer Products
(Manufacturing Only)  1.6%The Mountain Corporation  Term Debt (L+4.0%, 7.0% Cash, Due 8/2021)(G)(L)


18,600



18,600



3,355The Mountain Corporation  Term Debt (Due 8/2021)(L)(R)


1,000



1,000



1,000The Mountain Corporation  Term Debt (Due 8/2021)(L)(R)


1,500



1,500



1,500The Mountain Corporation  Delayed Draw Term Debt, $400 available (Due 8/2021)(L)(R)


600



600



60021,700



6,455Total Secured Second Lien Debt





$
75,618


$
59,608Preferred Equity  34.6%Automobile  0.0%Meridian Rack & Pinion, Inc.(M)
 Preferred Stock(C)(L)


3,381


$
3,381


$
Beverage, Food, and Tobacco  0.6%Head Country, Inc.  Preferred
Stock(C)(L)


4,000



4,000



2,246Chemicals, Plastics, and Rubber  0.0%PSI Molded Plastics, Inc.  Preferred
Stock(C)(L)


58,598



9,730



Diversified/Conglomerate Manufacturing  1.2%Alloy Die Casting Co.(M)  Preferred
Stock(C)(L)


5,114



5,114



1,243Channel Technologies Group, LLC  Preferred Stock(C)(L)


2,279



1,841



Edge Adhesives Holdings, Inc.(M) 
Preferred Stock(C)(L)


3,774



3,774



3,57010,729



4,813Diversified/Conglomerate Services  5.9%ImageWorks Display and Marketing Group, Inc.  Preferred Stock(C)(L)


67,490



6,750



12,189J.R. Hobbs Co.  Atlanta, LLC  Preferred Stock(C)(L)


5,920



5,920



11,72712,670



23,916Home and Office Furnishings, Housewares, and Durable Consumer Products 
21.2%Brunswick Bowling Products, Inc.  Preferred Stock(C)(L)


4,943



4,943



22,248Cambridge Sound Management, Inc.  Preferred Stock(C)(L)


4,500



4,500



51,711Old World Christmas, Inc.  Preferred
Stock(C)(L)


6,180



6,180



11,83215,623



85,791Leisure, 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



9,96212,399



9,962Telecommunications  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) SEPTEMBER 30, 2018 (DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)  Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValueTextiles and Leather  3.2%Logo Sportswear, Inc.  Preferred
Stock(C)(Q)(V)


1,550


$
1,096


$
12,827Total Preferred Equity





$
83,573


$
139,555Common Equity  0.0%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





$
338,047


$
370,415CONTROL INVESTMENTS(P) 
4.1%:Secured First Lien Debt  1.2%Aerospace and Defense  1.2%Galaxy Tool Holding Corporation  Line of Credit, $0 available (L+4.5%, 6.8% Cash (1.0%
Unused Fee), Due 8/2019)(L)

$
5,000


$
5,000


$
5,000Secured Second Lien Debt  1.2%Aerospace and Defense  1.2%Galaxy Tool Holding Corporation  Term Debt (L+6.0%, 10.0% Cash, Due 8/2019)(L)

$
5,000


$
5,000


$
5,000Preferred Equity  1.7%Aerospace and Defense  1.7%Galaxy Tool Holding Corporation  Preferred Stock(C)(L)


5,517,444


$
11,464


$
6,734Common Equity  0.0%Aerospace and Defense  0.0%Galaxy Tool Holding Corporation  Common
Stock(C)(L)


88,843


$
48


$
Total Control Investments





$
21,512


$
16,734TOTAL INVESTMENTS  164.8%





$
594,254


$
665,117 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.   12




---

GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) SEPTEMBER 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 $569.1 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 September 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 2.3% as of September 30, 2018. If applicable,
paid-in-kind (PIK) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash
interest rate is the greater of the floor or 30-day 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 September 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Investmentsin the
accompanyingNotes to Consolidated Financial Statementsforadditional 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 Liabilities as of September 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 accompanying Notes 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 Statementsfor additional information. (T)
Reserved (U)
Refer to Note 11  Commitments and Contingencies in the accompanying Notes to Consolidated
Financial Statements for additional information regarding this guaranty. (V)
Investment was exited and/or amended subsequent to September 30, 2018. Refer to Note 13 
Subsequent Events in the accompanying Notes to Consolidated Financial Statementsfor 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)  Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValueNON-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


$
9,987Containers, Packaging, and Glass  2.7%Frontier Packaging, Inc.  Term Debt (L+10.0%, 12.0% Cash, Due 12/2019)(L)


9,500



9,500



9,500Diversified/Conglomerate Services  10.4%Counsel Press, Inc.  Term Debt (L+11.8%, 13.6% Cash, Due 3/2020)(L)


18,000



18,000



18,000Counsel Press, Inc.  Term Debt (L+13.0%, 14.9% Cash, Due 3/2020)(L)


5,500



5,500



5,500Nth Degree, Inc.  Term Debt (L+11.5%, 13.4% Cash, Due 12/2020)(L)


13,290



13,290



13,29036,790



36,790Farming and Agriculture  4.5%Jackrabbit, Inc.  Term Debt (L+10.0%, 13.5% Cash, Due 4/2018)(L)


11,000



11,000



11,000Star Seed, Inc.  Term Debt (L+10.0%, 12.5% Cash, Due 5/2020)(L)


5,000



5,000



5,00016,000



16,000Leisure, Amusement, Motion Pictures, and Entertainment  7.8%Schylling, Inc.  Term Debt (L+11.0%, 13.0%, Due 11/2018)(L)


13,081



13,081



13,081Schylling, Inc.  Term Debt (L+11.0%, 13.0%, Due 11/2018)(T)


8,500



8,500



8,500Schylling, Inc.  Term Debt (L+11.0%, 13.0%, Due 11/2018)(T)


6,000



6,000



6,00027,581



27,581Machinery (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



19,95719,957



19,957Oil 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



3,216Personal, 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



3,882B-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



3,882Total Secured First Lien Debt





$
134,790


$
126,913Secured 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


$
4,000Cargo Transport  3.7%Diligent Delivery Systems  Term Debt (L+8.0%, 10.0% Cash, Due 11/2022)(Q)


13,000



12,916



13,000Home 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



13,300Total Secured Second Lien Debt





$
30,216


$
30,300Preferred Equity  17.3%Automobile  0.3%Country Club Enterprises, LLC  Preferred
Stock(C)(L)


7,304,792


$
7,725


$
1,010Country 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)  Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValueChemicals, Plastics, and Rubber  1.0%Drew Foam Companies, Inc.  Preferred
Stock(C)(Q)


34,045


$
3,375


$
3,375Containers, Packaging, and Glass  0.4%Frontier Packaging, Inc.  Preferred
Stock(C)(L)


1,373



1,373



1,428Diversified/Conglomerate Services  9.2%Counsel Press, Inc.  Preferred
Stock(C)(L)


6,995



6,995



6,303Nth Degree, Inc.  Preferred
Stock(C)(L)


5,660



5,660



26,42412,655



32,727Farming and Agriculture  1.4%Jackrabbit, Inc.  Preferred
Stock(C)(L)


3,556



3,556



2,518Star Seed, Inc.  Preferred
Stock(C)(L)


1,499



1,499



2,3765,055



4,894Home and Office Furnishings, Housewares, and Durable Consumer Products  3.5%Ginsey Home Solutions, Inc.  Preferred
Stock(C)(L)


19,280



9,583



12,555Leisure, 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



1,958Oil and Gas  0.9%Tread Corporation  Preferred
Stock(C)(L)


12,998,639



3,768



3,335Personal, Food, and Miscellaneous Services  0.0%B-Dry, LLC  Preferred Stock(C)(L)


2,500



2,516



Total Preferred Equity





$
52,821


$
61,282Common Equity  8.1%Cargo Transport  0.7%Diligent Delivery Systems  Common Stock Warrants(C)(Q)


8
%

$
500


$
2,816Chemicals, Plastics, and Rubber  4.1%Drew Foam Companies, Inc.  Common
Stock(C)(Q)


5,372



63



14,744Containers, Packaging, and Glass  3.0%Frontier Packaging, Inc.  Common
Stock(C)(L)


152



152



10,459Farming and Agriculture  0.2%Jackrabbit, Inc.  Common
Stock(C)(L)


548



94



Star Seed, Inc.  Common
Stock(C)(L)


600



1



58995



589Home 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)  Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValuePersonal, Food, and Miscellaneous Services  0.0%B-Dry, LLC  Common Stock(C)(L)


2,500


$
300


$
Total Common Equity





$
2,260


$
28,802Total
Non-Control/Non-Affiliate Investments





$
220,087


$
247,297AFFILIATE 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


$
8,018Beverage, Food, and Tobacco  2.6%Head Country, Inc.  Term Debt (L+10.5%, 12.5% Cash, Due 2/2019)(L)


9,050



9,050



9,050Diversified/Conglomerate Manufacturing  5.0%D.P.M.S., Inc.  Term Debt (10.0% Cash, Due 10/2021)(I)(L)


8,795



8,795



7,028Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+10.5%, 12.5% Cash, Due 2/2019)(K)


9,300



9,300



8,742Edge Adhesives Holdings, Inc.(M)  Term
Debt (L+11.8%, 13.8% Cash, Due 2/2019)(K)


2,400



2,400



2,26820,495



18,038Diversified/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



300ImageWorks Display and Marketing Group, Inc.  Term Debt (L+11.0%, 13.0% Cash, Due 11/2022)(L)


22,000



22,000



22,000J.R. Hobbs Co.  Atlanta, LLC  Term Debt (L+11.5%, 13.4% Cash, Due 2/2022)(L)


21,000



21,000



21,00043,300



43,300Home 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



17,700Old World Christmas, Inc.  Term Debt (L+11.3%, 13.3% Cash, Due 10/2019)(L)


15,770



15,770



15,77033,470



33,470Leisure, 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



6,200SOG Specialty Knives & Tools, LLC  Term Debt (L+8.3%, 10.3% Cash, Due 8/2020)(L)


12,200



12,200



8,827SOG Specialty Knives & Tools, LLC  Term Debt (Due 8/2020)(L)(R)


538



538



44018,938



15,467Personal 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



2,400Pioneer Square Brands, Inc.  Term Debt (L+12.0%, 13.9% Cash, Due 8/2022)(L)


21,000



21,000



21,00023,400



23,400Telecommunications  4.0%B+T Group Acquisition, Inc.(M)  Term
Debt (L+11.0%, 13.0% Cash, Due 12/2019)(L)


14,000



14,000



14,000Textiles and Leather  2.6%Logo Sportswear, Inc.  Term Debt (L+10.5%, 12.5% Cash, Due 3/2020)(L)


9,200



9,200



9,200Total 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)  Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValueSecured 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


$
24,618Diversified/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



9,161Alloy Die Casting Co.(M)  Term Debt
(L+11.5%, 13.5% Cash, Due 4/2021)(G)(K)


175



175



131Alloy Die Casting Co.(M)  Term Debt
(Due 4/2021)(K)(R)


910



910



68713,300



9,979Home 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



16,000Personal 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



8,692The Mountain Corporation  Term Debt (Due 8/2021)(L)(R)


1,000



1,000



1,000The Mountain Corporation  Term Debt (Due 8/2021)(L)(R)


1,500



1,500



1,500The Mountain Corporation  Delayed Draw Term Debt, $750 available (Due 8/2021)(L)(R)


250



250



25021,350



11,442Total Secured Second Lien Debt





$
75,268


$
62,039Preferred Equity  29.2%Automobile  0.2%Meridian Rack & Pinion, Inc.(M)
 Preferred Stock(C)(L)


3,381


$
3,381


$
802Beverage, Food, and Tobacco  0.7%Head Country, Inc.  Preferred
Stock(C)(L)


4,000



4,000



2,555Cargo 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



3,016Diversified/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



1,92510,729



1,925Diversified/Conglomerate Services  6.8%ImageWorks Display and Marketing Group, Inc.  Preferred Stock(C)(L)


67,490



6,750



9,422J.R. Hobbs Co.  Atlanta, LLC  Preferred Stock(C)(L)


5,920



5,920



14,48012,670



23,902Home and Office Furnishings, Housewares, and Durable Consumer Products 
15.0%Brunswick Bowling Products, Inc.  Preferred Stock(C)(L)


4,943



4,943



16,615Cambridge Sound Management, Inc.  Preferred Stock(C)(L)


4,500



4,500



26,178Old World Christmas, Inc.  Preferred
Stock(C)(L)


6,180



6,180



10,41115,623



53,204Leisure, 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



7,80012,399



7,800Telecommunications  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




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GLADSTONE INVESTMENT CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) MARCH 31, 2018 (DOLLAR AMOUNTS IN THOUSANDS)  Principal/Shares/Company and
Investment(A)(B)(D)(E)

Units(F)(J)


Cost


Fair ValueTextiles and Leather  2.9%Logo Sportswear, Inc.  Preferred
Stock(C)(L)


1,550


$
1,096


$
10,207Total Preferred Equity





$
86,423


$
103,411Common 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


$
339,393CONTROL 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


$
5,000Secured 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


$
5,000Preferred Equity  0.7%Aerospace and Defense  0.7%Galaxy Tool Holding Corporation  Preferred Stock(C)(L)


5,517,444


$
11,464


$
2,457Common Equity  0.0%Aerospace and Defense  0.0%Galaxy Tool Holding Corporation  Common
Stock(C)(L)


88,843


$
48


$
Total Control Investments





$
21,512


$
12,457TOTAL 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Investmentsin the
accompanyingNotes to Consolidated Financial Statementsforadditional 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 Liabilities as 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 accompanying Notes 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 accompanying Notes 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 SEPTEMBER 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
and six months ended September 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




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Use of Estimates Preparing financial statements requires management to make estimates and assumptions that affect the amounts reported in our accompanying Consolidated
Financial Statements and accompanying Notes to Consolidated Financial Statements. 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 Statementsand the accompanyingNotes to Consolidated Financial Statements. Reclassifications did not impact net increase in netassets resulting from operations, total assets, total liabilities, or total net assets, or Consolidated Statements of Changes in Net Assets and Consolidated Statements 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




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

Total Enterprise ValueIn determining the fair value using a TEV, the Valuation Team first
calculates the TEV ofthe 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 nothave 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 readilyavailable 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 ValuationTeam 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




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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 September 30, 2018, certain of our loans to B-Dry, LLC, The Mountain Corporation, PSI Molded Plastics, Inc., and SOG Specialty
Knives & Tools, LLC were on non-accrual status, with an aggregate debt cost basis of $73.5 million, or 16.6% of the cost basis of all debt investments in our portfolio, and an aggregate fair
value of $45.9 million, or 11.2% 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 September 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  Borrowings and Note 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 Transactions for additional information regarding these related party fees and agreements. Recent Accounting Pronouncements In August 2018, the SEC
adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative,
overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders equity for interim financial statements. Under the amendments, an analysis of changes in each caption of
stockholders equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of
comprehensive income is required to be filed. This final rule is effective on November 5, 2018. We are in the process of evaluating the impact of the final rule, but do not anticipate a material impact on our consolidated financial statements. In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820):
Disclosure FrameworkChanges to the Disclosure Requirements for Fair Value (ASU 2018-13), whichmodifies the disclosure requirementsin ASC 820. We are currently
assessing the impact of ASU 2018-13 and do not anticipate a material impact on our disclosures. ASU 2018-13 is effective for annual reporting periods beginning after
December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. In November 2016, the FASB issued Accounting
Standards Update 2016-18, Restricted Cash (a consensus of the Emerging Issues Task Force) (ASU 2016-18), which requires that the
statement of cash flows explain the change during the period in the total ofcash, 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 inhow 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 equityinvestments 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  24




---

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 GAAPrevenue 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 2014-9. 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. 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 inactive markets;  

Level2inputs to the valuation methodology include quoted prices for
similar financial instruments in active orinactive 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 September 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 six months ended September 30, 2018. During the six months ended September 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 September 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 MeasurementsQuoted Prices in


SignificantActive Markets


Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


InputsFair Value


(Level 1)


(Level 2)


(Level 3)As of September 30, 2018:Secured first lien debt

$
315,866


$



$



$
315,866Secured second lien debt


95,038











95,038Preferred equity


234,877











234,877Common equity/equivalents


19,336







672
(A)


18,664Total Investments at September 30, 2018

$
665,117


$



$
672


$
664,445Fair Value MeasurementsQuoted Prices in


SignificantActive Markets


Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


InputsFair Value


(Level 1)


(Level 2)


(Level 3)As of March 31, 2018:Secured first lien debt

$
305,856


$



$



$
305,856Secured second lien debt


97,339











97,339Preferred equity


167,150











167,150Common equity/equivalents


28,802







194
(B)


28,608Total 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




---

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 September 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 MeasurementsReported inConsolidated Statementsof Assets and LiabilitiesValued Using Level 3 InputsSeptember 30, 2018


March 31, 2018Non-Control/Non-Affiliate
InvestmentsSecured first lien debt

$
139,614


$
126,913Secured second lien debt


30,430



30,300Preferred equity


88,588



61,282Common equity/equivalents(A)


18,664



28,608Total
Non-Control/Non-Affiliate Investments


277,296



247,103Affiliate InvestmentsSecured first lien debt


171,252



173,943Secured second lien debt


59,608



62,039Preferred equity


139,555



103,411Common equity/equivalents






Total Affiliate Investments


370,415



339,393Control InvestmentsSecured first lien debt


5,000



5,000Secured second lien debt


5,000



5,000Preferred equity


6,734



2,457Common equity/equivalents






Total Control Investments


16,734



12,457Total investments at fair value using Level 3 inputs

$
664,445


$
598,953  (A)
Excludes our investment in Funko with a fair value of $0.7 million and $0.2 million as of
September 30, 2018 and March 31, 2018, respectively, which was valued using Level 2 inputs.   27




---

In accordance with ASC 820, the following table provides quantitative information about our investments
valued using Level 3 fair value measurements as of September 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 MeasurementsFair Value


FairValueas of


as of


Valuation




Range / Weighted-

Range / Weighted-September 30,


March 31,


Technique/

Unobservable


Average as of

Average as of2018


2018


Methodology

Input


September 30, 2018

March 31, 2018Secured first lien debt

$
297,172
(A)

$
286,828
(A)

TEV


EBITDAmultiple


4.9x  8.1x / 6.2x

4.7x  8.3x /
6.1xEBITDA


$1,377  $18,882 /$6,205

$1,298  $14,085 / $5,575Revenuemultiple


0.2x  0.7x / 0.5x

0.3x  0.7x / 0.6xRevenue


$15,399  $29,903 /$24,311

$15,528  $30,561 / $24,78018,694



19,028


Yield Analysis


Discount Rate


13.6%  24.3% /18.5%

19.8%  21.3% / 20.6%Secured second lien debt


69,373



87,360
(B)

TEV


EBITDAmultiple


3.0x  10.0x /7.2x

3.3x  6.8x / 6.2xEBITDA


$2,647  $9,823 /$6,466

$2,683  $8,795 / $6,827Revenuemultiple


0.8x  0.8x / 0.8x

0.9x  0.9x / 0.9xRevenue


$18,950  $18,950 /$18,950

$21,439  $21,439 / $21,43925,665



9,979


Yield Analysis


Discount Rate


11.0%  13.3% /12.1%

19.4%  20.9% / 19.5%Preferred equity(C)


234,877



167,150


TEV


EBITDAmultiple


3.0x 10.0x / 6.3x

3.3x  8.3x / 6.0xEBITDA


$1,459  $18,882 /$5,848

$1,298  $14,085 / $5,344Revenuemultiple


0.2x  0.8x / 0.7x

0.3x  0.9x / 0.7xRevenue


$15,399  $29,903 /$24,055

$15,528  $30,561 / $25,303Common equity/equivalents(D)(E)


18,664



28,608


TEV


EBITDAmultiple


5.4x  8.0x / 6.4x

4.9x  6.2x / 5.6xEBITDA


$1,377  $16,089 /$6,449

$1,298  $5,842 / $2,491Revenuemultiple


0.2x  0.8x / 0.2x

0.3x  0.9x / 0.3xRevenue


$15,399  $18,950 /

$15,528  $21,439 /$15,408

$15,543Total


$664,445



$598,953  (A)
Fair value as of September 30, 2018 includes two proprietary debt investments for a combined
$14.9 million, which were valued using the expected payoff amounts as the unobservable inputs. 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 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 September 30, 2018 includes two proprietary equity investments for a combined
$15.3 million, which were valued using the expected payoff amounts as the unobservable inputs. Fair value as of March 31, 2018 includes one proprietary equity investment of $3.4 million, which was valued using the expected payoff
amount as the unobservable input. (D)
Fair value as of September 30, 2018 includes one proprietary equity investment of $5.4 million, which
was valued using 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 using the expected payoff amounts as the
unobservable inputs. (E)
Fair value as of both September 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.




---

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 and six months ended September 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)  Secured


Secured





CommonFirst Lien


Second Lien


Preferred


Equity/Debt


Debt


Equity


Equivalents


TotalThree months ended September 30, 2018:Fair value as of June 30, 2018

$
316,325


$
97,026


$
200,252


$
15,003


$
628,606Total gain (loss):Net realized (loss)(A)










(3,600
)






(3,600
)Net unrealized appreciation
(depreciation)(B)


(509
)


(2,093
)


33,875



3,661



34,934Reversal of previously recorded depreciation upon realization(B)










3,600







3,600New investments, repayments and
settlements(C):Issuances / originations


50



105



750







905Settlements / repayments


















Sales


















Transfers


















Fair value as of September 30, 2018

$
315,866


$
95,038


$
234,877


$
18,664


$
664,445Secured


Secured





CommonFirst Lien


Second Lien


Preferred


Equity/Debt


Debt


Equity


Equivalents


TotalSix months ended September 30, 2018:Fair value as of March 31, 2018

$
305,856


$
97,339


$
167,150


$
28,608


$
598,953Total gain (loss):Net realized gain (loss)(A)










(3,600
)


13,786



10,186Net unrealized appreciation
(depreciation)(B)


(354
)


(2,661
)


65,453



4,801



67,239Reversal of previously recorded (appreciation) depreciation upon realization(B)


(74
)






3,600



(14,681
)


(11,155
)New investments, repayments and
settlements(C):Issuances / originations


24,952



360



5,650







30,962Settlements / repayments


(14,514
)














(14,514
)Sales










(3,376
)


(13,850
)


(17,226
)Transfers


















Fair value as of September 30, 2018

$
315,866


$
95,038


$
234,877


$
18,664


$
664,445   29




---

Secured


Secured





CommonFirst Lien


Second Lien


Preferred


Equity/Debt


Debt


Equity


Equivalents


TotalThree months ended September 30, 2017:Fair value as of June 30, 2017

$
271,331


$
79,924


$
111,726


$
22,518


$
485,499Total gain (loss):Net realized gain (loss)(A)


















Net unrealized appreciation
(depreciation)(B)


(1,855
)


(6,753
)


8,669



7,933



7,994Reversal of previously recorded (appreciation) depreciation upon realization(B)


















New investments, repayments and
settlements(C):Issuances / originations


23,000



1,004



5,500







29,504Settlements / repayments


(3,950
)














(3,950
)Sales


















Transfers


















Fair value as of September 30, 2017

$
288,526


$
74,175


$
125,895


$
30,451


$
519,047Secured


Secured





CommonFirst Lien


Second Lien


Preferred


Equity/Debt


Debt


Equity


Equivalents


TotalSix months ended September 30, 2017:Fair value as of March 31, 2017

$
268,150


$
95,040


$
113,515


$
21,441


$
498,146Total gain (loss):Net realized gain (loss)(A)










957







957Net unrealized appreciation
(depreciation)(B)


(2,493
)


(6,541
)


9,797



9,038



9,801Reversal of previously recorded (appreciation) depreciation upon realization(B)


1,881



(1,670
)


(1,113
)


777



(125
)New investments, repayments and
settlements(C):Issuances / originations


33,540



1,006



6,487







41,033Settlements / repayments


(12,552
)


(13,660
)










(26,212
)Sales










(3,748
)


(805
)


(4,553
)Transfers


















Fair value as of September 30, 2017

$
288,526


$
74,175


$
125,895


$
30,451


$
519,047  (A)
Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of
Operations for the respective periods ended September 30, 2018 and 2017. (B)
Included in net unrealized appreciation (depreciation) of investments on our accompanying Consolidated
Statements of Operations for the periods ended September 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. Investment Activity During the six months ended September 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.  

In July 2018, we exited our investment in NDLI, Inc., which resulted in a realized loss of $3.6 million. Investment Concentrations As of
September 30, 2018, our investment portfolio consisted of investments in 32 portfolio companies located in 16 states across 17 different industries with an aggregate fair value of $665.1 million. Our investments in Cambridge Sound
Management, Inc., Nth Degree, Inc., Brunswick Bowling Products, Inc., ImageWorks Display and Marketing Group, Inc., and J.R. Hobbs Co.  Atlanta, LLC (J.R. Hobbs) represented our five largest portfolio investments at fair value, and
collectively comprised $227.9 million, or 34.2%, of our total investment portfolio at fair value.  30




---

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


March 31, 2018Cost


Fair Value


Cost


Fair ValueSecured first lien debt

$
331,740



55.8
%

$
315,866



47.5
%

$
321,303



54.9
%

$
305,856



51.0
%Secured second lien debt


110,843



18.7



95,038



14.3



110,484



18.9



97,339



16.2Total debt


442,583



74.5



410,904



61.8



431,787



73.8



403,195



67.2Preferred equity


149,383



25.1



234,877



35.3



150,708



25.8



167,150



28.0Common equity/equivalents


2,288



0.4



19,336



2.9



2,351



0.4



28,802



4.8Total equity/equivalents


151,671



25.5



254,213



38.2



153,059



26.2



195,952



32.8Total investments

$
594,254



100.0
%

$
665,117



100.0
%

$
584,846



100.0
%

$
599,147



100.0
% Investments at fair value consisted of the following industry classifications as of September 30, 2018 and March 31,
2018:  September 30, 2018


March 31, 2018Percentage of





Percentage ofFair Value


Total Investments


Fair Value


Total InvestmentsDiversified/Conglomerate Services

$
180,050



27.1
%

$
136,719



22.8
%Home and Office Furnishings, Housewares, and Durable Consumer Products


162,663



24.5



128,529



21.5Leisure, Amusement, Motion Pictures, and Entertainment


45,148



6.8



43,048



7.2Personal and Non-Durable Consumer Products (Manufacturing
Only)


38,089



5.7



42,836



7.1Diversified/Conglomerate Manufacturing


36,211



5.4



29,942



5.0Farming and Agriculture


29,208



4.4



21,483



3.6Machinery (Non-Agriculture,
Non-Construction, and Non-Electronic)


24,788



3.7



21,915



3.7Chemicals, Plastics, and Rubber


24,618



3.7



55,740



9.3Textiles and Leather


22,201



3.3



19,407



3.2Containers, Packaging, and Glass


21,553



3.2



21,387



3.6Aerospace and Defense


16,734



2.5



12,457



2.1Cargo Transport


15,193



2.3



15,816



2.6Telecommunications


14,000



2.1



14,000



2.3Automobile


12,243



1.8



13,830



2.3Beverage, Food, and Tobacco


11,296



1.7



11,605



1.9Other < 2.0%


11,122



1.8



10,433



1.8Total investments

$
665,117



100.0
%

$
599,147



100.0
% Investments at fair value were included in the following geographic regions of the U.S. as of September 30, 2018 and
March 31, 2018:  September 30, 2018


March 31, 2018Percentage of





Percentage ofFair Value


Total Investments


Fair Value


Total InvestmentsNortheast

$
215,199



32.4
%

$
188,911



31.5
%South


211,652



31.8



221,725



37.0West


168,219



25.3



133,774



22.3Midwest


70,047



10.5



54,737



9.2Total investments

$
665,117



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.  31




---

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 September 30, 2018:  Amount(A)For the remaining six months ending March 31:

2019

$
52,931For the fiscal years ending March 31:

2020


104,4132021


69,9102022


80,7962023


86,990Thereafter


47,618Total contractual repayments

$
442,658Adjustments to cost basis of debt investments


(75
)Investments in equity securities


151,671Total cost basis of investments held as of September 30, 2018:

$
594,254  (A)
Subsequent to September 30, 2018, one debt investment with a principal balance of $9.2 million
maturing during the fiscal year ended March 31, 2020 was repaid at par and debt investments in three portfolio companies with combined principal balances of $11.7 million, $4.0 million, and $21.0 million, respectively, which
previously had maturity dates during the fiscal years ending March 31, 2019, March 31, 2020, and March 31, 2022, respectively, were extended to mature during the fiscal years ending March 31, 2022, March 31, 2022, and
March 31, 2024, respectively. 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 whenthe receivable balance becomes 90 days or more past due or if it is determined, based upon managements judgment, that the portfolio company is unable to pay its obligations. We write-off accounts receivable when we have exhausted collection efforts and have deemed the receivables uncollectible. As of September 30, 2018 and March 31, 2018, we had gross receivables from portfolio
companies of $0.9 million and $0.7 million, respectively. The allowance for uncollectible receivables was $0.5 million and $0.2 million as of September 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.  32




---

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 September 30,


Six Months Ended September 30,2018


2017


2018


2017Average total assets subject to base management fee(A)

$
655,000


$
510,800


$
638,600


$
507,000Multiplied by prorated annual base management fee of 2.0%


0.5
%


0.5
%


1.0
%


1.0
%Base management fee(B)


3,275



2,554



6,386



5,070Credits to fees from Adviser  other(B)


(565
)


(926
)


(1,525
)


(1,474
)Net base management fee

$
2,710


$
1,628


$
4,861


$
3,596Loan servicing fee(B)


1,674



1,485



3,414



3,049Credits to base management fee  loan servicing fee(B)


(1,674
)


(1,485
)


(3,414
)


(3,049
)Net loan servicing fee

$



$



$



$
Incentive fee  income-based

$



$
1,295


$
1,078


$
2,467Incentive fee  capital
gains-based(C)


7,125







13,633



Total incentive fee(B)

$
7,125


$
1,295


$
14,711


$
2,467Credits to fees from Adviser  other(B)














Net incentive fee

$
7,125


$
1,295


$
14,711


$
2,467  (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 $47 and $57 for the three month periods ended
September 30, 2018 and 2017, respectively, and $118 and $113 for the six month periods ended September 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.  33




---

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, which we define as total assets less indebtedness and before taking into account any incentive fees payable or contractually due but not payable during the period, at the end of the immediately preceding calendar quarter, adjusted
appropriately for any share issuances or repurchases during the period (the Hurdle Rate). The income-based incentive fee with respect to our pre-incentive fee net investment income is 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 September 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 and six months ended September 30, 2018, we recorded capital gains-based incentive fees of $7.1 million and
$13.6 million, respectively, which are not contractually due under the terms of the Advisory Agreement. We did not record any capital gains-based incentive fees during the three and six months ended September 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.  34




---

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. From time to time, Gladstone Securities provides other services, such as
investment banking and due diligence services, to certain of our portfolio companies, for which it receives fees. 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 and $0.3 million during each of the three
months ended September 30, 2018 and 2017, respectively, and $0.3 million during both of the six months ended September 30, 2018 and 2017. Related Party Fees Due Amounts due to related parties on
our accompanying Consolidated Statements of Assets and Liabilities were as follows:  As of September 30,


As of March 312018


2018Base management and loan servicing fee due to Adviser, net of credits

$
1,416


$
540Incentive fee due to Adviser(A)


18,032



6,122Other due to Adviser


69



9Total fees due to Adviser

$
19,517


$
6,671Fee due to Administrator

$
337


$
317Total related party fees due

$
19,854


$
6,988  (A)
Includes a capital gains-based incentive fee of $18.0 million and $4.4 million as of
September 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 Feefor additional information. Net expenses receivable from
Gladstone Capital Corporation, one of our affiliated funds, for reimbursement purposes, which includes certain co-investment expenses, totaled $0 and $16 as of September 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 September 30, 2018 and
March 31, 2018. NOTE 5. BORROWINGS Revolving Line of Credit On August 22, 2018, we,
through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 4 to the Fifth Amended and Restated Credit Agreement, originally entered into on April 30, 2013 and as previously amended, 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 August 22, 2021, and if not renewed or
extended by such date, all principal and interest will be due and payable on or before August 22, 2023 (two years after the revolving period end date). The amended Credit Facility provides two one-year
extension options that may be exercised on or before the first and second anniversary of the August 22, 2018 amendment date, subject to approval by all lenders. Additionally, the Credit Facility commitment amount was increased from
$165.0 million to $200.0 million and, subject to certain terms and conditions, can be expanded to a total facility amount of $300.0 million through additional commitments from existing or new lenders. The amendment also reduced the Companys minimum asset coverage with respect to senior securities representing indebtedness from 200% to 150% (or such
percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act).  35




---

Advances under the Credit Facility generally bear interest at 30-day
London Interbank Offered Rate (LIBOR) plus 2.85% per annum until August 21, 2021, with the margin then increasing to 3.10% for the period from August 22, 2021 to August 21, 2022, and increasing further to 3.35% thereafter.
The Credit Facility has an unused commitment fee on the daily unused commitment amount of 0.50% per annum if the average unused commitment amount for the period is less than or equal to 50% of the total commitment amount, 0.75% per annum if the
average unused commitment amount for the period is greater than 50% but less than or equal to 65% of the total commitment amount, and 1.00% per annum if the average unused commitment amount for the period is greater than 65% of the total commitment
amount. The following tables summarize noteworthy information related to the Credit Facility:  As of September 30,


As of March 31,2018


2018Commitment amount

$
200,000


$
165,000Borrowings outstanding at cost


115,700



107,000Availability(A)


84,300



58,000  For the Three Months Ended


For the Six Months EndedSeptember 30,


September 30,2018


2017


2018


2017Weighted-average borrowings outstanding

$
100,960


$
42,037


$
112,056


$
42,092Effective interest rate(B)


5.7
%


6.3
%


5.5
%


6.2
%Commitment (unused) fees incurred

$
116


$
195$



170


$
386  (A)
Availability is subject to various constraints, characteristics and applicable advance rates based on
collateral quality under the Credit Facility, which equated to an adjusted availability of $80.2 million and $53.8 million as of September 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 $218.7 million as of September 30, 2018, (ii) asset coverage with respect to senior securities representing indebtedness of at least 150% (or such percentage as may be set forth in
Section 18 of the 1940 Act, as modified by 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 September 30, 2018, and as defined in the performance guaranty of the
Credit Facility, we had a net worth of $529.6 million, asset coverage on our senior securities representing indebtedness of 528.4%, 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 September 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 September 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 September 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.  36




---

The following tables provide relevant information and disclosures about the Credit Facility as of
September 30, 2018 and March 31, 2018, and for the three and six months ended September 30, 2018 and 2017, as required by ASC 820:  Level 3  BorrowingsRecurring Fair Value MeasurementsReported inConsolidatedStatements of Assets and LiabilitiesUsing SignificantUnobservable Inputs (Level 3)September 30, 2018


March 31, 2018Credit Facility

$
115,700


$
107,500 Fair Value Measurements of Borrowings Using Significant Unobservable Inputs (Level 3) Reported in Consolidated Statements of Assets and Liabilities  CreditFacilityThree months ended September 30, 2018:Fair value at June 30, 2018

$
102,907Borrowings


91,300Repayments


(78,100
)Unrealized depreciation


(407
)Fair value at September 30, 2018

$
115,700Six months ended September 30, 2018:Fair value at March 31, 2018

$
107,500Borrowings


129,200Repayments


(120,500
)Unrealized depreciation


(500
)Fair value at September 30, 2018

$
115,700 Fair Value Measurements of Borrowings Using Significant Unobservable Inputs (Level 3) Reported in Consolidated Statements of Assets and Liabilities  CreditFacilityThree months ended September 30, 2017:Fair value at June 30, 2017

$
34,000Borrowings


40,200Repayments


(17,500
)Fair value at September 30, 2017

$
56,700Six months ended September 30, 2017:Fair value at March 31, 2017

$
69,700Borrowings


49,600Repayments


(62,600
)Fair value at September 30, 2017

$
56,700 The fair value of the collateral under the Credit Facility was $569.1 million and $504.0 million as of
September 30, 2018 and March 31, 2018, respectively.  37




---

NOTE 6. MANDATORILY REDEEMABLE PREFERRED STOCK In August 2018, we completed a public offering of 2,990,000 shares of 6.375% Series E Cumulative Term Preferred Stock (our Series E Term Preferred
Stock or Series E) at a public offering price of $25.00 per share. Gross proceeds totaled $74.8 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were $72.1 million. Total
underwriting discounts and offering costs related to this offering were $2.7 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 August 31, 2025, the mandatory redemption date. The shares of Series E Term Preferred Stock are traded under the
ticker symbol GAINL on the Nasdaq Global Select Market. Our Series E Term Preferred Stock is not convertible into our common stock or any other security and provides for a fixed dividend equal to 6.375% per year, payable monthly. We are required to
redeem all shares of our outstanding Series E Term Preferred Stock on August 31, 2025, 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 E
Term Preferred Stock, and (2) if we fail to maintain asset coverage as required by Sections 18 and 61 of the 1940 Act (which, for the Company, is currently 200% and will be 150% effective April 10, 2019, unless earlier approved by the
Companys stockholders) and are unable to correct such failure within a specific amount of time, we are required to redeem a portion of our outstanding Series E Term Preferred Stock or otherwise cure the asset coverage redemption trigger (we
may also redeem additional securities to cause asset coverage to be up to 250% currently and 200% effective April 10, 2019). We may also voluntarily redeem all or a portion of our Series E Term Preferred Stock at our sole option at the
redemption price at any time on or after August 31, 2020. In August 2018, we used the proceeds from the issuance of our Series E Term Preferred
Stock, along with borrowings under the Credit Facility, to voluntarily redeem all outstanding shares of our 6.750% Series B Cumulative Term Preferred Stock (our Series B Term Preferred Stock or Series B) and 6.500% Series C
Cumulative Term Preferred Stock (our Series C Term Preferred Stock or Series C), each of which had a liquidation preference of $25.00 per share. In connection with the voluntary redemption of our Series B Term Preferred Stock
and Series C Term Preferred Stock, we incurred a loss on extinguishment of debt of $1.7 million, which was recorded in Realized loss on other in our accompanying Consolidated Statements of Operations and which was primarily comprised of
unamortized deferred issuance costs at the time of redemption. The following tables summarize our Series B Term Preferred Stock, our Series C Term
Preferred Stock, our 6.250% Series D Cumulative Term Preferred Stock (our Series D Term Preferred Stock or Series D), and our Series E Term Preferred Stock outstanding as of September 30, 2018 and March 31, 2018: As of September 30, 2018:  Class of Term







Mandatory








Liquidation


TotalPreferred

Ticker





Redemption


Interest


Shares


Preference


LiquidationStock

Symbol


Date Issued


Date(A)


Rate


Outstanding


per Share


PreferenceSeries D


GAINM



September 26,2016



September 30,2023



6.250
%


2,300,000



25.00



57,500Series E


GAINL



August 22,2018



August 31,2025



6.375
%


2,990,000



25.00



74,750Term preferred stock,
gross(B)















5,290,000


$
25.00


$
132,250Less: Discounts























(4,106
)Term preferred stock,
net(C)






















$
128,144  38




---

As of March 31, 2018:  Class of Term







Mandatory








Liquidation


TotalPreferred

Ticker





Redemption


Interest


Shares


Preference


LiquidationStock

Symbol


Date Issued


Date(A)


Rate


Outstanding


per Share


PreferenceSeries B


GAINO



November 13,2014



December 31,2021



6.750
%


1,656,000


$
25.00


$
41,400Series C


GAINN



May 12, 2015



May 31, 2022



6.500
%


1,610,000



25.00



40,250Series D


GAINM



September 26,2016



September 30,2023



6.250
%


2,300,000



25.00



57,500Term preferred stock,
gross(B)















5,566,000


$
25.00


$
139,150Less: 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 (and we redeemed all outstanding shares on August 31, 2018), any time on or after May 31, 2018 for our Series C Term Preferred Stock (and we redeemed all
outstanding shares on August 31, 2018), any time on or after September 30, 2018 for our Series D Term Preferred Stock, and any time after August 31, 2020 for our Series E Term Preferred Stock. (B)
As of September 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 254.8% and 237.3%, respectively. (C)
Reflected as a line item on our accompanying Consolidated Statement of Assets and Liabilities
pursuant 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, Series D Term Preferred Stock, and Series E Term Preferred Stock during the six months ended September 30, 2018 and 2017: For the Six
Months Ended September30, 2018:  Dividend per


Dividend per


Dividend per


Dividend perShare of


Share of


Share of


Share ofSeries B Term


Series C Term


Series D Term


Series E TermDeclaration

Record

Payment

Preferred


Preferred


Preferred


PreferredDate

Date

Date

Stock(A)


Stock(A)


Stock


Stock(B)April 10, 2018

April 20, 2018

April 30, 2018

$
0.140625


$
0.135417


$
0.13020833


$
April 10, 2018

May 22, 2018

May 31, 2018


0.140625



0.135417



0.13020833



April 10, 2018

June 20, 2018

June 29, 2018


0.140625



0.135417



0.13020833



July 10, 2018

July 20, 2018

July 31, 2018


0.140625



0.135417



0.13020833



July 10, 2018

August 21, 2018

August 31, 2018


0.140625



0.135417



0.13020833



July 10, 2018

September 19, 2018

September 28, 2018










0.13020833



September 6, 2018

September 19, 2018

September 28, 2018














0.17265625
(C)Total

$
0.703125


$
0.677085


$
0.78124998


$
0.17265625   39




---

For the Six Months Ended September30, 2017:  Dividend per


Dividend per


Dividend perShare of


Share of


Share ofSeries B Term


Series C Term


Series D TermPreferred


Preferred


PreferredDeclaration Date

Record Date

Payment Date

Stock


Stock


StockApril 11, 2017

April 21, 2017

April 28, 2017

$
0.140625


$
0.135417


$
0.13020833April 11, 2017

May 19, 2017

May 31, 2017


0.140625



0.135417



0.13020833April 11, 2017

June 21, 2017

June 30, 2017


0.140625



0.135417



0.13020833July 11, 2017

July 21, 2017

July 31, 2017


0.140625



0.135417



0.13020833July 11, 2017

August 21, 2017

August 31, 2017


0.140625



0.135417



0.13020833July 11, 2017

September 20, 2017

September 29, 2017


0.140625



0.135417



0.13020833Total

$
0.843750


$
0.812502


$
0.78124998  (A)
We voluntarily redeemed all outstanding shares of our Series B Term Preferred Stock and Series C Term
Preferred Stock on August 31, 2018. (B)
We issued our Series E Term Preferred Stock on August 22, 2018. (C)
Represents a combined dividend for the prorated month of August 2018, based upon the issuance date of
our Series E Term Preferred Stock, combined with the full month of September 2018. 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 September 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 September 30, 2018 and March 31, 2018. The related dividend
payments to preferred stockholders are treated as dividend expense on our accompanying Consolidated Statements of Operations on the ex-dividend date. 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 September 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 ofSeptember 30, 2018


March 31, 2018Series B Term Preferred Stock(A)

$



$
41,814Series C Term Preferred Stock(A)






40,862Series D Term Preferred Stock


58,121



58,282Series E Term Preferred Stock(B)


75,856



Total

$
133,977


$
140,958  (A)
We voluntarily redeemed all outstanding shares of our Series B Term Preferred Stock and Series C Term
Preferred Stock on August 31, 2018. (B)
We issued our Series E Term Preferred Stock on August 22, 2018. 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 September 30, 2018, we had the ability to issue up to $225.3 million in securities under the registration statement.   40




---

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. As of
September 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), 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. 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. 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 and six months ended September 30, 2018 and 2017:  Three Months Ended September 30,


Six Months Ended September 30,2018


2017


2018


2017Numerator: net increase in net assets resulting from operations

$
30,364


$
13,556


$
62,691


$
21,697Denominator: basic and diluted weighted-average common shares


32,822,459



32,526,223



32,792,816



32,003,128Basic and diluted net increase in net assets resulting from operations per weighted-average
common share

$
0.93


$
0.42


$
1.91


$
0.68 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.  41




---

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 September 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 six
months ended September 30, 2018 and 2017:  DistributionFiscal Year

Declaration Date


Record Date

Payment Date

per Common Share2019


April 10, 2018


April 20, 2018

April 30, 2018

$
0.067April 10, 2018


May 22, 2018

May 31, 2018


0.067April 10, 2018


June 6, 2018

June 15, 2018


0.060
(A)April 10, 2018


June 20, 2018

June 29, 2018


0.067July 10, 2018


July 20, 2018

July 31, 2018


0.067July 10, 2018


August 21, 2018

August 31, 2018


0.067July 10, 2018


September 19, 2018

September 28, 2018


0.067Six months ended September 30, 2018:

$
0.462DistributionFiscal Year

Declaration Date


Record Date

Payment Date

per Common Share2018


April 11, 2017


April 21, 2017

April 28, 2017

$
0.064April 11, 2017


May 19, 2017

May 31, 2017


0.064April 11, 2017


June 5, 2017

June 15, 2017


0.060
(A)April 11, 2017


June 21, 2017

June 30, 2017


0.064July 11, 2017


July 21, 2017

July 31, 2017


0.064July 11, 2017


August 21, 2017

August 31, 2017


0.064July 11, 2017


September 20, 2017

September 29, 2017


0.064Six months ended September 30, 2017:

$
0.444  (A)
Represents a supplemental distribution of $0.06 per share of common stock. Aggregate distributions to our common stockholders declared quarterly and paid were $15.2 million and $14.3 million for the six months ended
September 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 six months ended September 30, 2018, we recorded $2.7 million of net estimated adjustments for permanent
book-tax differences to reflect tax character, which decreased Capital in excess of par value and increased Overdistributed net investment income and Accumulated net realized gain in excess of distributions 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 paidand, 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. 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 September 30, 2018 and March 31, 2018, we had no established reserves for such loss contingencies.  42




---

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 aportion 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 September 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 September 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 September 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 September 30, 2018 and March 31, 2018 to be immaterial. As of September 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 DLL Finance LLC (DLL f/k/a Agricredit Acceptance, LLC) 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 DLL. In October 2018, we reduced the
guaranty from $2.0 million to $1.0 million. Refer to Note 13  Subsequent Events for additional information. The
following table summarizes the principal balances of unused line of credit and delayed draw term loan commitments and guaranties as of September 30, 2018 and March 31, 2018, which are not reflected as liabilities in the accompanying
Consolidated Statements of Assets and Liabilities:  September 30, 2018


March 31, 2018Unused line of credit and delayed draw term loan commitments

$
1,084


$
6,284Guaranties


2,000



2,000Total

$
3,084


$
8,284  43




---

NOTE 11. FINANCIAL HIGHLIGHTS  Three Months Ended September 30,


Six Months Ended September 30,2018


2017


2018


2017Per Common Share Data:Net asset value at beginning of
period(A)

$
11.57


$
9.88


$
10.85


$
9.95Income from investment
operations(B)Net investment (loss) income


(0.12
)


0.18



(0.12
)


0.35Net realized gain (loss) on investments and other


(0.14
)






0.29



0.04Net unrealized appreciation of investments and other


1.19



0.24



1.74



0.29Total from investment operations


0.93



0.42



1.91



0.68Effect of equity capital
activity(B)Cash distributions to common stockholders from net investment income(C)


(0.20
)


(0.19
)


(0.41
)


(0.38
)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


(0.20
)


(0.19
)


(0.46
)


(0.51
)Other, net(B)(E)






(0.01
)






(0.02
)Net asset value at end of
period(A)

$
12.30


$
10.10


$
12.30


$
10.10Per common share market value at beginning of period $


11.77


$
9.40


$
10.10


$
9.07Per common share market value at end of period


11.43



9.49



11.43



9.49Total investment return(F)


(0.61
)%


3.02
%


17.77
%


9.66
%Common stock outstanding at end of
period(A)


32,822,459



32,526,223



32,822,459



32,526,223Statement of Assets and Liabilities Data:Net assets at end of period

$
403,574


$
328,548


$
403,574


$
328,548Average net assets(G)


386,747



323,834



375,487



318,751Senior Securities Data:Total borrowings, at cost

$
120,796


$
61,796


$
120,796


$
61,796Mandatorily redeemable preferred stock
(H)


132,250



139,150



132,250



139,150Ratios/Supplemental Data:Ratio of net expenses to average net assets  annualized(I)


17.67
%


9.12
%


17.33
%


9.77
%Ratio of net investment income to average net assets  annualized(J)


(4.13
)


7.10



(2.10
)


7.02  (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 six months ended September 30, 2017, the dilution was 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 19.99% and 12.10% for the three months ended September 30, 2018 and 2017, respectively, and 19.96% and 12.61% for the six months ended
September 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 (6.45)% and 4.12% for the three months ended September 30, 2018 and 2017, respectively, and (4.73)% and 4.18% for
the six months ended September 30, 2018 and 2017, respectively.  44




---

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 did not have any unconsolidated subsidiaries which met any of the significance conditions under Rule 1-02(w) of the SECs Regulation S-X as of or during either of the six month periods ended September 30, 2018 and 2017. NOTE 13. SUBSEQUENT
EVENTS Distributions and Dividends In October
2018, our Board of Directors declared the following monthly and supplemental distributions to common stockholders and monthly dividends to holders of our Series D Term Preferred Stock and Series E Term Preferred Stock:  Dividend per


Dividend perShare of


Share ofDistribution per


Series D Term


Series E TermRecord Date

Payment Date

Common Share


Preferred Stock


Preferred StockOctober 19, 2018

October 31, 2018

$
0.068


$
0.13020833


$
0.13281250November 20, 2018

November 30, 2018


0.068



0.13020833



0.13281250December 6, 2018

December 14, 2018


0.060
(A)






December 20, 2018

December 31, 2018


0.068



0.13020833



0.13281250Total for the Quarter:

$
0.264


$
0.39062499


$
0.39843750  (A)
Denotes supplemental distribution to common stockholders. Investment Activity In October 2018, we invested an
additional $15.0 million of secured first lien debt into J.R. Hobbs, which together with our existing $21.0 million secured first lien term loan resulted in a new $36.0 million secured first lien term loan due in October 2023. In October 2018, we exited our equity investment in CCE, which resulted in a realized loss of $7.7 million. As part of this transaction, we received
success fee income of $1.0 million, reduced our existing guaranty to $1.0 million, and amended our existing $4.0 million secured second lien term loan to have a stated interest rate of LIBOR + 8.0% and mature in February 2022. In November 2018, we sold our investment in Logo Sportswear, Inc., which had a cost basis and fair value of $10.3 million and $22. 2 million,
respectively, as of September 30, 2018. In connection with the sale, we received net cash proceeds of $22.7 million, including the repayment of our debt investment of $9.2 million at par. Certificates of Elimination As a result of the
Companys redemption of all outstanding share of Series B Term Preferred Stock and Series C Term Preferred Stock, on October 18, 2018, the Company executed and filed a Certificate of Elimination of 6.75% Series B Cumulative Term Preferred
Stock and a Certificate of Elimination of 6.50% Series C Cumulative Term Preferred Stock, thereby removing the Certificate of Designation of the Series B Term Preferred Stock and the Certificate of Designation of the Series C Term Preferred Stock
from the Companys Amended and Restated Certificate of Incorporation.   45




---

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 September 30, 2018, we have made 159 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.  46




---

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 September 30, 2018, our
investment portfolio was made up of 74.5% in debt securities and 25.5% 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, 6.25% Series D Cumulative Term Preferred Stock (Series D Term Preferred Stock), and 6.375% Series E Cumulative Term
Preferred Stock (Series E Term Preferred Stock) are traded on the Nasdaq Global Select Market under the trading symbols GAIN, GAINM, and GAINL, 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 six months ended September 30, 2018, we exited two
portfolio companies with fair values prior to their exits of $28.1 million and $0, respectively, and invested $29.2 million in one new portfolio company, resulting in a net reduction of one company in our portfolio, which was comprised of
32 companies as of September 30, 2018. From our initial public offering in June 2005 through September 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.  47




---

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 September 30, 2018, we had unrecognized, contractual
success fees of $32.4 million, or $0.99 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 September 30, 2018, we have completed sales of 13 portfolio companies
that we acquired under our buyout strategy (which excludes investments in syndicated loans). In the aggregate, these sales have generated $100.6 million in net realized gains and $22.1 million in other income upon exit, for a total
increase to our net assets of $122.7 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 September 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 August 2021, and currently have a total commitment amount of $200.0 million (with a potential total commitment of $300.0 million through additional commitments from new or existing lenders). During the six months ended
September 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, and approximately 3.0 million shares of our Series E Term Preferred Stock
for gross proceeds of $74.8 million in August 2018. 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 November 2, 2018, the closing market price of our common stock was $10.44 per share, representing a 15.1% discount to our net asset value
(NAV) of $12.30 per share as of September 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 2018 Annual Meeting of Stockholders held on August 9, 2018, 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 2018 stockholder authorization is in effect for one year from the date of
stockholder approval. 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.   48




---

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 for the Company) or 150.0% (effective April 10, 2019 for the Company) on each of
our senior securities representing indebtedness and our senior securities that are stock (such as our two 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 our Series D Term Preferred Stock. As of September 30, 2018, our
asset coverage ratio on our senior securities representing indebtedness was 528.4% and our asset coverage on our senior securities that are stock was 254.8%. Investment Highlights During the six months ended
September 30, 2018, and inclusive of non-cash transactions, we invested $29.2 million in one new portfolio company, received $32.8 million in proceeds from repayments and sales, and extended
$1.8 million of follow-on investments to existing portfolio companies through revolver draws, term loans, and preferred equity. Investment Activity During the six months ended
September 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.  

In July 2018, we exited our investment in NDLI, Inc. and recorded a realized loss of $3.6 million. The following significant investment activity occurred subsequent to September 30, 2018. Also refer to Note 13 
Subsequent Events in the accompanying Notes to Consolidated Financial Statements.  

In October 2018, we invested an additional $15.0 million of secured first lien debt into J.R. Hobbs Co.
 Atlanta, LLC, which together with our existing $21.0 million secured first lien term loan resulted in a new $36.0 million secured first lien term loan due in October 2023.  

In October 2018, we exited our equity investment in CCE, which resulted in a realized loss of $7.7 million.
As part of this transaction, we received success fee income of $1.0 million, reduced our existing guaranty to $1.0 million, and amended our existing $4.0 million secured second lien term loan to have a stated interest rate of LIBOR +
8.0% and mature in February 2022.  

In November 2018, we sold our investment in Logo Sportswear, Inc., which had a cost basis and fair value of
$10.3 million and $22.2 million, respectively, as of September 30, 2018. In connection with the sale, we received net cash proceeds of $22.7 million, including the repayment of our debt investment of $9.2 million at par.  49




---

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 November 2, 2018, we had the ability to issue up to $225.3 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 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. As of
November 2, 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), 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. Mandatorily Redeemable Preferred Stock Offering and Redemption In August 2018, we completed a public offering of 2,990,000 shares of our Series E Term Preferred Stock at a public offering price of $25.00 per share. Gross
proceeds totaled $74.8 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were $72.1 million. Total underwriting discounts and offering costs related to this offering were $2.7 million.
Refer to Liquidity and Capital Resources  Equity  Term Preferred Stockfor further discussion of our recently issued mandatorilyredeemable preferred stock. In August 2018, we used the proceeds from the issuance of our Series E Term Preferred Stock, along with borrowings under the Credit Facility, to voluntarily
redeem all outstanding shares of our 6.750% Series B Cumulative Term Preferred Stock (our Series B Term Preferred Stock or Series B) and 6.500% Series C Cumulative Term Preferred Stock (our Series C Term Preferred
Stock or Series C), each of which had a liquidation preference of $25.00 per share. In connection with the voluntary redemption of our Series B Term Preferred Stock and Series C Term Preferred Stock, we incurred a loss on
extinguishment of debt of $1.7 million, which was recorded in Realized loss on other in our accompanying Consolidated Statements of Operations and which was primarily comprised of unamortized deferred issuance costs at the time of
redemption. Refer to Liquidity and Capital Resources  Equity  Term Preferred Stockfor further discussion of our recently redeemed mandatorily redeemable preferred stock. As a result of the Companys redemption of all outstanding share of Series B Term Preferred Stock and Series C Term Preferred Stock, on October 18,
2018, the Company executed and filed a Certificate of Elimination of 6.75% Series B Cumulative Term Preferred Stock and a Certificate of Elimination of 6.50% Series C Cumulative Term Preferred Stock, thereby removing the Certificate of Designation
of the Series B Term Preferred Stock and the Certificate of Designation of the Series C Term Preferred Stock from the Companys Amended and Restated Certificate of Incorporation.   50




---

Credit Facility Amendment On August 22, 2018, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 4 to the Fifth Amended and Restated
Credit Agreement, originally entered into on April 30, 2013 and as previously amended, with KeyBank National Association (KeyBank), as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and
certain other lenders party thereto. Among other things, we increased the facility size, reduced pricing, and extended the revolving period and maturity date. Refer to Liquidity and Capital Resources    Revolving Line of
Credit for further discussion of the Credit Facility. Distributions and Dividends In October 2018, our Board of Directors declared the following monthly and supplemental distributions to common stockholders and monthly dividends to holders
of our Series D Term Preferred Stock and Series E Term Preferred Stock:  Dividend per


Dividend perShare of


Share ofDistribution per


Series D Term


Series E TermRecord Date

Payment Date


Common Share


Preferred Stock


Preferred StockOctober 19, 2018


October 31, 2018


$
0.068


$
0.13020833


$
0.13281250November 20, 2018


November 30, 2018



0.068



0.13020833



0.13281250December 6, 2018


December 14, 2018



0.060
(A)






December 20, 2018


December 31, 2018



0.068



0.13020833



0.13281250Total for the Quarter:


$
0.264


$
0.39062499


$
0.39843750  (A)
Denotes supplemental distribution to common stockholders.  51




---

RESULTS OF OPERATIONS Comparison of the Three Months Ended September 30, 2018 to the Three Months Ended September 30, 2017  For the Three Months Ended September 30,2018


2017


$ Change


% ChangeINVESTMENT INCOMEInterest income

$
11,895


$
11,213


$
682



6.1
%Dividend, success fee, and other income


1,196



1,919



(723
)


(37.7
)Total investment income


13,091



13,132



(41
)


(0.3
)EXPENSESBase management fee


3,275



2,554



721



28.2Loan servicing fee


1,674



1,485



189



12.7Incentive fee


7,125



1,295



5,830



450.2Administration fee


344



201



143



71.1Interest and dividend expense


3,843



3,005



838



27.9Amortization of deferred financing costs and discounts


497



367



130



35.4Other


2,566



886



1,680



189.6Expenses before credits from Adviser


19,324



9,793



9,531



97.3Credits to fees from Adviser


(2,239
)


(2,411
)


172



(7.1
)Total expenses, net of credits to fees


17,085



7,382



9,703



131.4NET INVESTMENT (LOSS) INCOME


(3,994
)


5,750



(9,744
)


NMREALIZED AND UNREALIZED GAIN (LOSS)Net realized loss on investments


(2,856
)


(43
)


(2,813
)


NMNet realized loss on other


(1,687
)






(1,687
)


NMNet unrealized appreciation of investments


38,494



7,849



30,645



390.4Net unrealized depreciation of other


407







407



NMNet realized and unrealized gain


34,358



7,806



26,552



340.1NET INCREASE IN NET ASSETS RESULTING FROMOPERATIONS

$
30,364


$
13,556


$
16,808



124.0BASIC AND DILUTED PER COMMON SHARE:Net investment (loss) income

$
(0.12
)

$
0.18


$
(0.30
)


NMNet increase in net assets resulting from operations

$
0.93


$
0.42


$
0.51



121.4 NM = Not Meaningful Investment Income Total investment income remained
relatively flat for the three months ended September 30, 2018, as compared to the prior year period. The slight decrease was primarily due to a decline in dividend, success fee, and other income, partially offset by an increase in interest
income, for the three months ended September 30, 2018, as compared to the prior year period. Interest income from our investments in debt securities
increased 6.1% for the three months ended September 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 September 30, 2018 was $365.5 million,
compared to $351.7 million for the prior year period. This increase was primarily due to $48.7 million in new debt investments and $59.3 million in follow-on debt investments to existing
portfolio companies originated after September 30, 2017 and $15.6 million of loans placed back on accrual status, partially offset by the pay-off or restructure of $53.7 million of debt
investments and $63.9 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 12.9% for the three months ended September 30, 2018, compared to 12.8% 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.  52




---

At September 30, 2018, certain of our loans to four portfolio companies,
B-Dry, LLC (B-Dry), The Mountain Corporation (Mountain), PSI Molded Plastics, Inc. (PSI Molded), and SOG Specialty Knives &
Tools, LLC (SOG), were on non-accrual status, with an aggregate debt cost basis of $73.5 million. At September 30, 2017, certain of our loans to three portfolio companies, Alloy Die
Casting Co. (ADC), Precision Southeast, Inc. (Precision), and Tread Corporation (Tread), were on non-accrual status, with an aggregate debt cost basis of $25.2 million. Dividend, success fee, and other income for the three months ended September 30, 2018 decreased 37.7% from the prior year period. During the three
months ended September 30, 2018, dividend, success fee, and other income consisted of $1.2 million of dividend income. During the three months ended September 30, 2017, other income consisted of $1.8 million of dividend income
and $0.1 million of success fee income. The following table lists the investment income for our five largest portfolio company investments, at fair
value, during the respective periods:  As of September 30, 2018


Three months ended September 30, 2018Investment


% of TotalPortfolio Company

Fair Value


% of Portfolio


Income


Investment IncomeCambridge Sound Management, Inc.

$
67,711



10.2
%

$
536



4.1
%Nth Degree, Inc.


53,319



8.0



462



3.5Brunswick Bowling Products, Inc.


39,948



6.0



547



4.2ImageWorks Display and Marketing Group, Inc.


34,189



5.1



736



5.6J.R. Hobbs Co.Atlanta, LLC


32,727



4.9



730



5.6Subtotalfive largest investments


227,894



34.2



3,011



23.0Other portfolio companies


437,223



65.8



10,070



77.0Total investment portfolio

$
665,117



100.0
%

$
13,081



100.0
%As of September 30, 2017


Three months ended September 30, 2017Investment


% of TotalPortfolio Company

Fair Value


% of Portfolio


Income


Investment IncomeCambridge Sound Management, Inc.

$
35,381



6.8
%

$
532



4.1
%Nth Degree, Inc.


32,714



6.3



432



3.3Drew Foam Companies, Inc.(A)


30,922



5.9



1,068



8.1Counsel Press, Inc.


28,946



5.6



798



6.1J.R. Hobbs Co.  Atlanta, LLC


28,901



5.6



749



5.7Subtotalfive largest investments


156,864



30.2



3,579



27.3Other portfolio companies


363,310



69.8



9,545



72.7Total investment portfolio

$
520,174



100.0
%

$
13,124



100.0
%  (A)
Investment exited subsequent to September 30, 2017. Expenses Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased 131.4% during the three months ended September 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, the base management fee, and other expenses, partially offset by a decrease in the income-based incentive fee. In accordance with GAAP, we recorded a capital gains-based incentive fee of $7.1 million during the three months ended September 30, 2018, which is
not yet contractually due. The capital gains-based incentive fee was a result of the net impact of net realized losses and net unrealized appreciation on investments during the period. There was no capital gains-based incentive fee during the prior
year period. The income-based incentive fee decreased for the three months ended September 30, 2018 as compared to the prior year period, as pre-incentive fee net investment income decreased and net
assets, which drives the hurdle rate, increased over the respective periods. The base management fee increased for the three months ended
September 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.  53




---

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 September 30,2018


2017Average total assets subject to base management fee(A)

$
655,000


$
510,800Multiplied by prorated annual base management fee of 2.0%


0.5
%


0.5
%Base management fee(B)


3,275



2,554Credits to fees from
Adviserother(B)


(565
)


(926
)Net base management fee

$
2,710


$
1,628Loan servicing fee(B)


1,674



1,485Credits to base management feeloan servicing fee(B)


(1,674
)


(1,485
)Net loan servicing fee

$



$
Incentive fee  income-based

$



$
1,295Incentive fee  capital
gains-based(C)


7,125



Total incentive fee(B)

$
7,125


$
1,295Credits to fees from
Adviserother(B)






Net incentive fee

$
7,125


$
1,295  (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 27.9% during the three months ended September 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
September 30, 2018 was $101.0 million, as compared to $42.0 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
September 30, 2018 was 5.7%, as compared to 6.3% in the prior year period. This decrease in the effective interest rate on the Credit Facility was primarily due to the reduced interest rate margin as part of the amendment to the Credit Facility
in August 2018. Refer to Liquidity and Capital Resources  Revolving Line of Credit for further discussion of the Credit Facility. Other expenses increased 189.6% during the three months ended September 30, 2018, as compared to the prior year period, primarily as a result of
increased bad debt expense and tax expense. Realized and Unrealized Gain (Loss) Net Realized Loss on Investments During the three months
ended September 30, 2018, we recorded net realized losses on investments of $2.9 million, primarily related to a $3.6 million realized loss from the exit of NDLI, partially offset by $0.7 million of realized gains from the sale
of a portion of our investment in Funko Acquisition Holdings, LLC (Funko). There were no significant realized gains or losses on investments during the three months ended September 30, 2017. Net Realized Loss on Other During the three months ended
September 30, 2018, we recorded a net realized loss on other of $1.7 million which primarily related to unamortized deferred issuance costs written off upon the redemption of our Series B Term Preferred Stock and Series C Term Preferred
Stock in August 2018. There were no realized gains or losses on other during the three months ended September 30, 2017.  54




---

Net Unrealized Appreciation (Depreciation) of Investments During the three months ended September 30, 2018, we recorded net unrealized appreciation of investments of $38.5 million. The realized gains
(losses) and unrealized appreciation (depreciation) across our investments for the three months ended September 30, 2018, were as follows:  Three Months Ended September 30, 2018Reversal ofRealized


Unrealized


UnrealizedGain


Appreciation


(Appreciation)


Net GainPortfolio Company

(Loss)


(Depreciation)


Depreciation


(Loss)Cambridge Sound Management, Inc.

$



$
12,979


$



$
12,979Nth Degree, Inc.






9,012







9,012Star Seed, Inc.






3,750







3,750SBS Industries, LLC






2,995







2,995ImageWorks Display and Marketing Group, Inc.






2,779







2,779Logo Sportswear, Inc.






2,099







2,099Alloy Die Casting Co.






1,804







1,804Brunswick Bowling Products, Inc.






1,698







1,698Jackrabbit, Inc.






1,441







1,441Ginsey Home Solutions, Inc.






1,258







1,258Galaxy Tool Holding Corporation






1,038







1,038Old World Christmas, Inc.






855







855Counsel Press, Inc.






716







716Funko Acquisition Holdings, LLC


745



316



(356
)


705Pioneer Square Brands, Inc.






353







353Tread Corporation






276







276NDLI, Inc.


(3,601
)






3,600



(1
)Head Country, Inc.






(253
)






(253
)SOG Specialty Knives & Tools, LLC






(273
)






(273
)D.P.M.S., Inc.






(432
)






(432
)Meridian Rack & Pinion, Inc.






(483
)






(483
)PSI Molded Plastics, Inc.






(750
)






(750
)The Mountain Corporation






(2,779
)






(2,779
)J.R. Hobbs Co.Atlanta, LLC






(3,304
)






(3,304
)Other, net (<$250 Net)






155







155Total

$
(2,856
)

$
35,250


$
3,244


$
35,638 The primary drivers of net unrealized appreciation of $38.5 million for the three months ended September 30, 2018,
were increased performance of certain of our portfolio companies, an increase in comparable multiples used to estimate the fair value of certain of our portfolio companies, and the reversal of previously recorded unrealized depreciation upon the
exit of our investment in NDLI, which were partially offset by a decline in performance of certain of our other portfolio companies.  55




---

During the three months ended September 30, 2017, we recorded net unrealized appreciation of
investments of $7.8 million. The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the three months ended September 30, 2017, were as follows:  Three Months Ended September 30, 2017Reversal ofRealized


Unrealized


UnrealizedGain


Appreciation


(Appreciation)


Net GainPortfolio Company

(Loss)


(Depreciation)


Depreciation


(Loss)Drew Foam Companies, Inc.

$



$
5,312


$



$
5,312Nth Degree, Inc.






3,154







3,154Brunswick Bowling Products, Inc.






2,305







2,305Cambridge Sound Management, Inc.






2,148







2,148Frontier Packaging, Inc.






2,010







2,010Tread Corporation






1,732







1,732J.R. Hobbs Co.  Atlanta, LLC






1,547







1,547Ginsey Home Solutions, Inc.






1,368







1,368Precision Southeast, Inc.






1,149







1,149Head Country, Inc.






862







862Star Seed, Inc.






539







539Counsel Press, Inc.






512







512SBS Industries, LLC






275







275Diligent Delivery Systems






(278
)






(278
)B-Dry, LLC






(341
)






(341
)Old World Christmas, Inc.






(394
)






(394
)D.P.M.S., Inc.






(517
)






(517
)Meridian Rack & Pinion, Inc.






(823
)






(823
)Alloy Die Casting Co.






(998
)






(998
)Logo Sportswear, Inc.






(1,116
)






(1,116
)Galaxy Tool Holding Corporation






(1,499
)






(1,499
)B+T Group Acquisition, Inc.






(2,878
)






(2,878
)The Mountain, Inc.






(6,342
)






(6,342
)Other, net (<$250 Net)


(43
)


122







79Total

$
(43
)

$
7,849


$



$
7,806 The primary drivers of net unrealized appreciation of $7.8 million for the three months ended September 30, 2017,
were an increase in the fair value of our investment in Drew Foam, increased performance of certain of our other 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
$2.6 million of net unrealized depreciation on our debt positions and $41.1 million of net unrealized appreciation on our equity positions for the three months ended September 30, 2018. At September 30, 2018, the fair value of
our investment portfolio was greater than our cost basis by $70.9 million, as compared to $32.4 million at June 30, 2018, representing net unrealized appreciation of $38.5 million for the three months ended September 30,
2018. Our entire portfolio had a fair value of 111.9% of cost as of September 30, 2018. Net Unrealized Depreciation on Other During the three months ended September 30, 2018, we recorded net unrealized depreciation of other of $0.4 million related to the Credit Facility
recorded at fair value. There was no unrealized appreciation or depreciation on other during the three months ended September 30, 2017.  56




---

Comparison of the Six Months Ended September 30, 2018 to the Six Months Ended September 30,
2017  For the Six Months Ended September 30,2018


2017


$ Change


% ChangeINVESTMENT INCOMEInterest income

$
25,209


$
21,959


$
3,250



14.8
%Dividend, success fee, and other income


3,386



4,793



(1,407
)


(29.4
)Total investment income


28,595



26,752



1,843



6.9EXPENSESBase management fee


6,386



5,070



1,316



26.0Loan servicing fee


3,414



3,049



365



12.0Incentive fee


14,711



2,467



12,244



496.3Administration fee


629



508



121



23.8Interest and dividend expense


7,836



5,985



1,851



30.9Amortization of deferred financing costs and discounts


864



734



130



17.7Other


3,630



2,277



1,353



59.4Expenses before credits from Adviser


37,470



20,090



17,380



86.5Credits to fees from Adviser


(4,939
)


(4,523
)


(416
)


9.2Total expenses, net of credits to fees


32,531



15,567



16,964



109.0NET INVESTMENT (LOSS) INCOME


(3,936
)


11,185



(15,121
)


NMREALIZED AND UNREALIZED GAIN (LOSS)Net realized gain on investments


11,252



1,122



10,130



902.9Net realized loss on other


(1,687
)






(1,687
)


NMNet unrealized appreciation of investments


56,562



9,390



47,172



502.4Net unrealized depreciation (appreciation) of other


500







500



NMNet realized and unrealized gain


66,627



10,512



56,115



533.8NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

$
62,691


$
21,697


$
40,994



188.9BASIC AND DILUTED PER COMMON SHARE:Net investment (loss) income

$
(0.12
)

$
0.35


$
(0.47
)


NMNet increase in net assets resulting from operations

$
1.91


$
0.68


$
1.23



180.9 NM = Not Meaningful Investment Income Total investment income increased by
6.9% for the six months ended September 30, 2018, as compared to the prior year period. This increase was primarily due to an increase in interest income, partially offset by a decrease in dividend, success fee, and other income, for the six
months ended September 30, 2018 as compared to the prior year period. Interest income from our investments in debt securities increased 14.8% for
the six months ended September 30, 2018, as compared to the prior year period. 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 six months ended September 30, 2018 was $385.9 million, compared to $346.1 million for the prior
year period. This increase was primarily due to $48.7 million in new debt investments and $59.3 million in follow-on debt investments to existing portfolio companies originated after
September 30, 2017 and $15.6 million of loans placed back on accrual status, partially offset by the pay-off or restructure of $53.7 million of debt investments and $63.9 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 other income, was 13.0% for the six months ended
September 30, 2018, compared to 12.7% 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 September 30, 2018, certain of our loans to B-Dry, Mountain, PSI Molded, and SOG were on non-accrual status, with an aggregate debt cost basis of $73.5 million. At September 30, 2017, certain of our loans to three portfolio companies, ADC, Precision, and Tread, were on non-accrual status, with an aggregate debt cost basis of $25.2 million.  57




---

Other income for the six months ended September 30, 2018 decreased 29.4% from the prior year period.
During the six months ended September 30, 2018, other income primarily consisted of $1.3 million of dividend income and $2.1 million of success fee income. During the six months ended September 30, 2017, other income primarily
consisted of $2.6 million of dividend income and $2.2 million of success fee income. The following table lists the investment income for our
five largest portfolio company investments, at fair value, during the respective periods:  As of September 30, 2018


Six months ended September 30, 2018Investment


% of TotalPortfolio Company

Fair Value


% of Portfolio


Income


Investment IncomeCambridge Sound Management, Inc.

$
67,711



10.2
%

$
1,061



3.7
%Nth Degree, Inc.


53,319



8.0



913



3.2Brunswick Bowling Products, Inc.


39,948



6.0



1,084



3.8ImageWorks Display and Marketing Group, Inc.


34,189



5.1



1,460



5.1J.R. Hobbs Co.  Atlanta, LLC


32,727



4.9



1,443



5.1Subtotal   five largest investments


227,894



34.2



5,961



20.9Other portfolio companies


437,223



65.8



22,614



79.1Total investment portfolio

$
665,117



100.0
%

$
28,575



100.0
%As of September 30, 2017


Six months ended September 30, 2017Investment


% of TotalPortfolio Company

Fair Value


% of Portfolio


Income


Investment IncomeCambridge Sound Management, Inc.

$
35,381



6.8
%

$
1,057



3.9
%Nth Degree, Inc.


32,714



6.3



853



3.2Drew Foam Companies, Inc.(A)


30,922



5.9



1,407



5.3Counsel Press, Inc.


28,946



5.6



1,576



5.9J.R. Hobbs Co.  Atlanta, LLC


28,901



5.6



1,537



5.7Subtotal   five largest investments


156,864



30.2



6,430



24.0Other portfolio companies


363,310



69.8



20,312



76.0Total investment portfolio

$
520,174



100.0
%

$
26,742



100.0
%  (A)
Investment exited subsequent to September 30, 2017. Expenses Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased 109.0% during the six months ended September 30, 2018, as compared to the prior year period, primarily as a result of an
increase in the capital gain-based incentive fee, interest expense, the base management fee, and other expenses, partially offset by a decrease in the income-based incentive fee. In accordance with GAAP, we recorded a capital gains-based incentive fee of $13.6 million during the six months ended September 30, 2018, which is
not yet contractually due. The capital gains-based incentive fee was a result of the net impact of net realized gains and net unrealized appreciation on investments during the period. There was no capital gains-based incentive fee during the prior
year period. The income-based incentive fee decreased for the six months ended September 30, 2018 as compared to the prior year period, as pre-incentive fee net investment income decreased and net assets,
which drives the hurdle rate, increased over the respective periods. The base management fee increased for the six months ended September 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.  58




---

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:  Six Months Ended September 30,2018


2017Average total assets subject to base management fee(A)

$
638,600


$
507,000Multiplied by prorated annual base management fee of 2.0%


1.0
%


1.0
%Base management fee(B)


6,386



5,070Credits to fees from Adviser
other(B)


(1,525
)


(1,474
)Net base management fee

$
4,861


$
3,596Loan servicing fee(B)


3,414



3,049Credits to base management fee loan servicing fee(B)


(3,414
)


(3,049
)Net loan servicing fee

$



$
Incentive fee  income-based

$
1,078


$
2,467Incentive fee  capital
gains-based(C)


13,633



Total incentive fee(B)

$
14,711


$
2,467Credits to fees from Adviser
other(B)






Net incentive fee

$
14,711


$
2,467  (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 30.9% during the six months ended September 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 our Credit Facility during the six months ended September 30,
2018 was $112.1 million as compared to $42.1 million in the prior year period. The effective interest rate on our Credit Facility, excluding the impact of deferred financing costs, during the six months ended September 30, 2018 was
5.5% as compared to 6.2% in the prior year period. This decrease in the effective interest rate on the Credit Facility was primarily due to the reduced interest rate margin as part of the amendment to the Credit Facility in August 2018. Refer to
Liquidity and Capital Resources  Revolving Line of Credit for further discussion of the Credit Facility. Other expenses
increased 59.4% for the six months ended September 30, 2018, as compared to the prior year period, primarily as a result of increased bad debt expense and tax expense. Realized and Unrealized Gain (Loss) Net Realized Gain
on Investments During the six months ended September 30, 2018, we recorded net realized gains on investments of $11.3 million, primarily
related to a $13.8 million realized gain from the exit of Drew Foam and $0.7 million of realized gains from the sale of a portion of our investment in Funko, partially offset by a $3.6 million loss from the exit of NDLI, compared to
net realized gains on investments of $1.1 million during the prior year period, primarily related to a $1.0 million realized gain from the exit of Mitchell Rubber Products, Inc. Net Realized Loss on Other During the six months ended
September 30, 2018, we recorded a net realized loss on other of $1.7 million which primarily related to unamortized deferred issuance costs written off upon the redemption of our Series B Term Preferred Stock and Series C Term Preferred
Stock in August 2018. There were no realized gains or losses on other during the six months ended September 30, 2017.  59




---

Net Unrealized Appreciation (Depreciation) of Investments During the six months ended September 30, 2018, we recorded net unrealized appreciation of investments of $56.6 million. The realized gains (losses)
and unrealized appreciation (depreciation) across our investments for the six months ended September 30, 2018, were as follows:  Six Months Ended September 30, 2018Reversal ofRealized


Unrealized


UnrealizedGain


Appreciation


(Appreciation)


Net GainPortfolio Company

(Loss)


(Depreciation)


Depreciation


(Loss)Cambridge Sound Management, Inc.

$



$
25,533


$



$
25,533Nth Degree, Inc.






13,604







13,604Brunswick Bowling Products, Inc.






5,633







5,633Star Seed, Inc.






5,400







5,400Galaxy Tool Holding Corporation






4,277







4,277Alloy Die Casting Co.






3,799







3,799SBS Industries, LLC






2,874







2,874Logo Sportswear, Inc.






2,796







2,796ImageWorks Display and Marketing Group, Inc.






2,768







2,768Jackrabbit, Inc.






2,327







2,327Schylling, Inc.






2,317







2,317Pioneer Square Brands, Inc.






2,162







2,162Counsel Press, Inc.






2,112







2,112Edge Adhesives Holdings, Inc.






2,084







2,084Ginsey Home Solutions, Inc.






1,547







1,547Tread Corporation






1,491







1,491Old World Christmas, Inc.






1,420







1,420Funko Acquisition Holdings, LLC


745



834



(356
)


1,223D.P.M.S., Inc.






384







384Behrens Manufacturing, LLC


322











322NDLI, Inc.


(3,601
)






3,600



(1
)Head Country, Inc.






(309
)






(309
)Diligent Delivery Systems






(633
)






(633
)B-Dry, LLC






(852
)






(852
)Drew Foam Companies, Inc.


13,786







(14,755
)


(969
)Meridian Rack & Pinion, Inc.






(1,575
)






(1,575
)J.R. Hobbs Co.   Atlanta, LLC






(2,753
)






(2,753
)PSI Molded Plastic, Inc.






(3,766
)






(3,766
)The Mountain, Inc.






(5,338
)






(5,338
)Other, net (<$250 Net)






(63
)






(63
)Total

$
11,252


$
68,073


$
(11,511
)

$
67,814 The primary drivers of net unrealized appreciation of $56.6 million for the six months ended September 30, 2018,
were increased performance of certain of our portfolio companies, an increase in comparable multiples used to estimate the fair value of certain of our portfolio companies, and the reversal of previously recorded unrealized depreciation upon the
exit of our investment in NDLI, 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.  60




---

During the six months ended September 30, 2017, we recorded net unrealized depreciation of investments
of $9.4 million. The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the six months ended September 30, 2017, were as follows:  Six Months Ended September 30, 2017Reversal ofRealized


Unrealized


UnrealizedGain


Appreciation


(Appreciation)


Net GainPortfolio Company

(Loss)


(Depreciation)


Depreciation


(Loss)Cambridge Sound Management, Inc.

$



$
8,335


$



$
8,335Nth Degree, Inc.






6,953







6,953Drew Foam Companies, Inc.






5,682







5,682Old World Christmas, Inc.






3,532







3,532Tread Corporation






2,931







2,931Precision Southeast, Inc.






2,776







2,776Frontier Packaging, Inc.






2,748







2,748Mathey Investments, Inc.










2,658



2,658J.R. Hobbs Co. Atlanta, LLC






1,981







1,981SBS Industries, LLC






1,741







1,741Star Seed, Inc.






1,303







1,303Ginsey Home Solutions, Inc.






1,184







1,184B+T Group Acquisition, Inc.






327







327Schylling, Inc.






(262
)






(262
)AquaVenture Holdings Limited






(265
)


(21
)


(286
)Head Country, Inc.






(635
)






(635
)Counsel Press, Inc.






(671
)






(671
)SOG Specialty Knives & Tools, LLC






(711
)






(711
)B-Dry, LLC






(775
)






(775
)D.P.M.S., Inc.






(821
)






(821
)Jackrabbit, Inc.






(1,150
)






(1,150
)Brunswick Bowling Products, Inc.






(1,442
)






(1,442
)Mitchell Rubber Products, Inc.


957







(2,783
)


(1,826
)GI Plastek, Inc.






(1,856
)






(1,856
)Edge Adhesives Holdings, Inc.






(2,090
)






(2,090
)Alloy Die Casting Co.






(2,538
)






(2,538
)Meridian Rack & Pinion, Inc.






(2,724
)






(2,724
)Country Club Enterprises, LLC






(3,087
)






(3,087
)Galaxy Tool Holding Corporation






(4,124
)






(4,124
)The Mountain, Inc.






(6,496
)






(6,496
)Other, net (<$250 Net)


165



(310
)






(145
)Total

$
1,122


$
9,536


$
(146
)

$
10,512 The primary drivers of net unrealized appreciation of $9.4 million for the six months ended September 30, 2017, were
an increase in the fair value of our investment in Drew Foam, increased performance of certain of our other 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
$3.1 million of net unrealized depreciation on our debt positions and $59.7 million of net unrealized appreciation on our equity positions for the six months ended September 30, 2018. At September 30, 2018, the fair value of our
investment portfolio was greater than our cost basis by $70.9 million, as compared to $14.3 million at March 31, 2018, representing net unrealized appreciation of $56.6 million for the six months ended September 30, 2018.
Our entire portfolio had a fair value of 111.9% of cost as of September 30, 2018. Net Unrealized Depreciation on Other During the six months ended September 30, 2018, we recorded net unrealized depreciation of other of $0.5 million related to the Credit Facility
recorded at fair value. There was no unrealized appreciation or depreciation on other during the six months ended September 30, 2017.  61




---

LIQUIDITY AND CAPITAL RESOURCES Operating Activities Net cash provided by
operating activities for the six months ended September 30, 2018 was $15.1 million, as compared to $6.1 million for the six months ended September 30, 2017. This change was primarily due to higher net proceeds from the sale of
investments period over period. Repayments and net proceeds from the sale of investments totaled $32.8 million during the six months ended
September 30, 2018, compared to $23.4 million during the six months ended September 30, 2017. Purchases of investments were $31.0 million during the six months ended September 30, 2018, compared to $31.6 million during
the six months ended September 30, 2017. As of September 30, 2018, we had equity investments in or loans to 32 portfolio companies with an
aggregate cost basis of $594.3 million. As of September 30, 2017, we had equity investments in or loans to 34 portfolio companies with an aggregate cost basis of $534.4 million. The following table summarizes our total portfolio
investment activity during the six months ended September 30, 2018 and 2017:  Six Months Ended September 30,2018


2017Beginning investment portfolio, at fair value

$
599,147


$
501,579New investments


29,202



28,300Disbursements to existing portfolio companies


1,750



3,348Unscheduled principal repayments


(14,514
)


(17,610
)Net proceeds from sales of investments


(17,969
)


(5,796
)Net realized gain on investments


10,930



957Net unrealized appreciation of investments


68,073



9,536Reversal of net unrealized appreciation of investments


(11,511
)


(146
)Amortization of premiums, discounts, and acquisition costs, net


9



6Ending investment portfolio, at fair value

$
665,117


$
520,174 The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year,
assuming no voluntary prepayments, as of September 30, 2018:    Amount(A)For the remaining six months ending March 31:

2019

$
52,931For the fiscal years ending March 31:

2020


104,4132021


69,9102022


80,7962023


86,990Thereafter


47,618Total contractual repayments

$
442,658Adjustments to cost basis of debt investments


(75
)Investments in equity securities


151,671Total cost basis of investments held as of September 30, 2018:

$
$594,254  (B)
Subsequent to September 30, 2018, one debt investment with a principal balance of $9.2 million
maturing during the fiscal year ended March 31, 2020 was repaid at par and debt investments in three portfolio companies with combined principal balances of $11.7 million, $4.0 million, and $21.0 million, respectively, which
previously had maturity dates during the fiscal years ending March 31, 2019, March 31, 2020, and March 31, 2022, respectively, were extended to mature during the fiscal years ending March 31, 2022, March 31, 2022, and
March 31, 2024, respectively. Financing Activities Net cash used in financing activities for the six months ended September 30, 2018 was $15.8 million, which was primarily a result of the redemption
of our Series B Term Preferred Stock and Series C Term Preferred Stock of $81.7 million and $15.2 million in distributions to common stockholders, partially offset by $72.1 million of net proceeds from the issuance of our Series E
Term Preferred Stock, $8.7 million of net borrowings on the Credit Facility, and $1.8 million of net proceeds from the issuance of common stock under the ATM program. Net cash used in financing activities for the six months ended September 30, 2017 was $7.3 million, which consisted primarily of $13.0 million
of net repayments on the Credit Facility and $14.3 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.  62




---

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 six months from April through September 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 six months ended September 30, 2018, we recorded
$2.7 million of net estimated adjustments for permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and increased Overdistributed net investment income
and Accumulated net realized gain in excess of distributions 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 for each of the five months from April through August 2018 (prior to redemption); (ii) $0.135417 per share to holders of our
Series C Term Preferred Stock for each of the five months from April through August 2018 (prior to redemption); and (iii) $0.13020833 per share to holders of our Series D Term Preferred Stock for each of the six months from April through September
2018. Our Board of Directors also declared and we paid a combined dividend for the pro-rated period from and including the issuance date, August 22, 2018, to and including August 31, 2018 and the
full month of September 2018, which totaled $0.17265625 per share, to the holders of our Series E Term Preferred Stock. 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.  63




---

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 November 2, 2018, we had the ability to issue up to $225.3 million in securities under the registration statement. Common Stock In February 2018, we entered into
equity distribution agreements with the 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. As of
November 2, 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), 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. 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 November 2, 2018, the closing market price of our common stock was $10.44 per share, representing a 15.1% discount to our NAV per
share of $12.30 as of September 30, 2018. At our 2018 Annual Meeting of Stockholders held on August 9, 2018, 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.  64




---

Term Preferred Stock Pursuant to our current registration statement on Form N-2 (File
No. 333-225447), in August 2018, we completed a public offering of 2,990,000 shares of our Series E Term Preferred Stock at a public offering price of $25.00 per share. Gross proceeds totaled $74.8
million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were $72.1 million. Total underwriting discounts and offering costs related to this offering were $2.7 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 August 31, 2025, the mandatory redemption date. Our Series E Term Preferred Stock is not convertible into our common stock or any other security and provides for a fixed dividend equal to 6.375% per year,
payable monthly (which equates to $4.8 million per year). We are required to redeem all shares of our outstanding Series E Term Preferred Stock on August 31, 2025, 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 E Term Preferred Stock, and (2) if we fail to maintain asset coverage as required by Sections 18 and 61 of the 1940 Act (which is currently 200% for the
Company and will be 150% effective April 10, 2019 for the Company, unless earlier approved by the Companys stockholders) and are unable to correct such failure within a specific amount of time, we are required to redeem a portion of our
outstanding Series E Term Preferred Stock or otherwise cure the asset coverage redemption trigger (we may also redeem additional securities to cause asset coverage to be up to 250% currently and 200% effective April 10, 2019). We may also
voluntarily redeem all or a portion of our Series E Term Preferred Stock at our sole option at the redemption price at any time on or after August 31, 2020. In August 2018, we used the proceeds from the issuance of our Series E Term Preferred Stock, along with borrowings under the Credit Facility, to voluntarily
redeem all outstanding shares of our Series B Term Preferred Stock and Series C Term Preferred Stock, each of which had a liquidation preference of $25.00 per share. In connection with the voluntary redemption of our Series B Term Preferred Stock
and Series C Term Preferred Stock, we incurred a loss on extinguishment of debt of $1.7 million, which was recorded in Realized loss on other in our accompanying Consolidated Statements of Operations and which was primarily comprised of
unamortized deferred issuance costs at the time of redemption. Prior to its redemption in August 2018, our Series B Term Preferred Stock provided for a
fixed dividend equal to 6.75% per year, payable monthly (which equated to $2.8 million per year). We were 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. Our Series B Term Preferred Stock was not convertible into our common stock or any other security. Prior to its redemption in August 2018, our Series C Term Preferred Stock provided for a fixed dividend equal to 6.50% per year, payable monthly (which
equated to $2.6 million per year). We were 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. Our Series C Term Preferred Stock was not convertible into our common stock or any other security. 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 D Term Preferred Stock and Series E 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 D Term Preferred Stock and Series E Term
Preferred Stock) as of September 30, 2018 was 254.8%, calculated pursuant to Sections 18 and 61 of the 1940 Act.  65




---

Revolving Line of Credit On August 22, 2018, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 4 to the Fifth Amended and Restated
Credit Agreement, originally entered into on April 30, 2013 and as previously, with 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 August 22, 2021, and if not renewed or extended by such date, all principal and interest will be due and payable on or before August 22, 2023 (two years after the revolving period end date). The amended Credit
Facility provides two one-year extension options that may be exercised on or before the first and second anniversary of the August 22, 2018 amendment date, subject to approval by all lenders.
Additionally, the Credit Facility commitment amount was increased from $165.0 million to $200.0 million and, subject to certain terms and conditions, can be expanded to a total facility amount of $300.0 million through additional
commitments from existing or new lenders. Advances under the Credit Facility generally bear interest at 30-day
LIBOR plus 2.85% per annum until August 21, 2021, with the margin then increasing to 3.10% for the period from August 22, 2021 to August 21, 2022, and increasing further to 3.35% thereafter. The Credit Facility has an unused
commitment fee on the daily unused commitment amount of 0.50% per annum if the average unused commitment amount for the period is less than or equal to 50% of the total commitment amount, 0.75% per annum if the average unused commitment amount for
the period is greater than 50% but less than or equal to 65% of the total commitment amount, and 1.00% per annum if the average unused commitment amount for the period is greater than 65% of the total commitment amount. We incurred fees of
approximately $1.6 million in connection with this amendment. 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 $218.7 million as of September 30, 2018, (ii) asset coverage with respect to senior securities representing indebtedness of at least 150% (or
such percentage as may be set forth in Section 18 of the 1940 Act, as modified by 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 September 30, 2018, and as defined
in the performance guaranty of the Credit Facility, we had a net worth of $529.6 million, asset coverage on our senior securities representing indebtedness of 528.4%, 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 September 30, 2018, we had availability, after adjustments for various constraints based on collateral quality, of $80.2 million under the Credit Facility and were in compliance with
all covenants under the Credit Facility. As of November 2, 2018, we had availability, before adjustments for various constraints based on collateral quality, of $91.9 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 September 30, 2018 and March 31, 2018, we had unrecognized, contractual off-balance sheet success fee receivables of $32.4 million and $28.3 million (or approximately $0.99 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 Statementsuntil earned.  66




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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 September 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 September 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. In October 2018, we reduced the guaranty from $2.0 million to
$1.0 million. Refer to Note 13  Subsequent Events in the accompanying Notes to Consolidated Financial Statements for additional information. The following table shows our contractual obligations as of September 30, 2018, at cost:  Payments Due by PeriodLess than








More thanContractual
Obligations(A)

Total


1 Year


1-3 Years


3-5 Years


5 YearsCredit Facility(B)

$
115,700


$



$



$
115,700


$
Mandatorily redeemable preferred stock


132,250











57,500



74,750Secured borrowing


5,096







5,096







Interest payments on obligations(C)


83,191



15,143



30,037



28,877



9,134Total

$
336,237


$
15,143


$
35,133


$
202,077


$
83,884  (A)
Excludes unused line of credit and delayed draw term loan commitments and guaranties to our portfolio companies
in the aggregate principal amount of $3.1 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 September 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 Policiesin the accompanyingNotes to Consolidated
Financial Statementsincluded elsewhere in this QuarterlyReport. 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 Policiesin the accompanyingNotes to Consolidated Financial Statementsincluded elsewhere in
this Quarterly Report.  67




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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 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
September 30, 2018 and March 31, 2018:  Rating

September 30, 2018


March 31, 2018Highest


9.0



10.0Average


6.8



6.4Weighted-Average


7.2



6.5Lowest


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 September 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.  68




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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 September 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 floor2.8


Fixed rates100.0
%

Total There have been no material changes in the quantitative and qualitative market risk disclosures during the six months ended
September 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 September 30, 2018 (the end of the period covered by this report), we, including our chief executive officer and chief financial officer, evaluated
the effectiveness, 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 September 30, 2018 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.  69




---

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 our Series D Term Preferred Stock. If we drop below the 200% minimum asset coverage requirement, we
may under certain circumstances be required to redeem our Series D Term Preferred Stock. In addition, in the event we fall below the 200% minimum asset coverage requirement, we may need to 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.  70




---

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. Sales of Unregistered Securities Not applicable. Issuer Purchases of Equity Securities The following
table provides information with respect to the purchases made by or on behalf of the Company of our 6.75% Series B Cumulative Term Preferred Stock, par value $0.001 per share (the Series B Term Preferred Stock) and our 6.50% Series C
Cumulative Term Preferred Stock, par value $0.001 per share (the Series C Term Preferred Stock), during the second quarter of our fiscal year 2019. The Company elected to voluntarily redeem the entirety of the then issued and outstanding
Series B Term Preferred Stock and Series C Term Preferred Stock, pursuant to their respective terms, on August 31, 2018. On October 18, 2018, the Company executed and filed a Certificate of Elimination of 6.75% Series B Cumulative Term
Preferred Stock and a Certificate of Elimination of 6.50% Series C Cumulative Term Preferred Stock, thereby removing the Certificate of Designation of the Series B Term Preferred Stock and the Certificate of Designation of the Series C Term
Preferred Stock from the Companys Amended and Restated Certificate of Incorporation. The Company does not have any existing publicly announced repurchase plans or programs.  (a)





(c)


(d)Total Number





Total Number of


Maximum Numberof Shares of


(b)


Shares of Series B


of Shares of SeriesSeries B


Average Price


Term Preferred


B Term PreferredTerm


Paid per Share


Stock Purchased


Stock that May YetPreferred


of Series B


as Part of Publicly


Be PurchasedStock


Term Preferred


Announced Plans


Under the Plans orPeriod

Purchased


Stock


or Programs


ProgramsJuly 1 through 31, 2018














August 1 through 31, 2018


1,656,000


$
25.00







September 1 through 30, 2018














Total


1,656,000


$
25.00







(a)





(c)


(d)Total Number





Total Number of


Maximum Numberof Shares of


(b)


Shares of Series C


of Shares of SeriesSeries C


Average Price


Term Preferred


C Term PreferredTerm


Paid per Share


Stock Purchased


Stock that May YetPreferred


of Series C


as Part of Publicly


Be PurchasedStock


Term Preferred


Announced Plans


Under the Plans orPeriod

Purchased


Stock


or Programs


ProgramsJuly 1 through 31, 2018














August 1 through 31, 2018


1,610,000


$
25.00







September 1 through 30, 2018














Total


1,610,000


$
25.00







  ITEM 3.
DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. MINE
SAFETY DISCLOSURES. Not applicable. ITEM 5. OTHER INFORMATION. Not applicable.   71




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ITEM 6. EXHIBITS See the exhibit index. EXHIBIT INDEX  Exhibit

Description3.1

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, 2016.3.1.e

Certificate of Designation of 6.375% Series E Cumulative Term Preferred Stock Due 2025 of Gladstone Investment Corporation, incorporated by reference
to Exhibit 3.1 to the Current Report on Form 8-K (File No. 814-00704), filed August 16, 2018.3.2

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, 2016.4.5

Specimen 6.375% Series E Cumulative Term Preferred Stock Certificate incorporated by reference to Exhibit 4.1 to the Current Report on Form
8-K (File No. 814-00704), filed August 16, 2018.10.1

Amendment No. 4 to Fifth Amended and Restated Credit Agreement, dated as of August 
22, 2018 by and among Gladstone Business Investment, LLC, as Borrower, Gladstone Management Corporation, as Servicer, Keybank National Association, as administrative agent, swingline lender, managing agent and lead arranger and certain other lenders party
 thereto, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 814-00704), filed August 23, 2018.31.1*

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.  72




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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: November 5, 2018  73