##### Table of Contents





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, 2017

OR



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

For the transition period from
 to

Commission file number: 814-00704

GLADSTONE INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 83-0423116                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)



|                                                  |  |           
|------------------------------------------------- |  | ----------
|1521 WESTBRANCH DRIVE, SUITE 100
MCLEAN, VIRGINIA |  | 22102     
|(Address of principal executive offices)          |  | (Zip Code)

(703) 287-5800

(Registrants telephone number, including area code)

Not Applicable

(Former
name, former address and former fiscal year, if changed since last report)

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

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

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



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

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

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

The number of shares of the issuers Common Stock,
$0.001 par value per share, outstanding as of October 31, 2017, was 32,526,223.









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##### Table of Contents

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, 2017 and March 31, 2017         |    |  | 2  | 
|           |  | Consolidated Statements of Operations for the three and six months ended September 30,
 2017 and 2016  |    |  | 3  | 
|           |  | Consolidated Statements of Changes in Net Assets for the six months ended September 30,
 2017 and 2016 |    |  | 4  | 
|           |  | Consolidated Statements of Cash Flows for the six months ended September 30,
 2017 and 2016            |    |  | 5  | 
|           |  | Consolidated Schedules of Investments as of September 
30, 2017 and March 31, 2017                     |    |  | 6  | 
|           |  | Notes to Consolidated Financial Statements                                                             |    |  | 18 | 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                  |    |  |    | 
|           |  | Overview                                                                                               |    |  | 43 | 
|           |  | Results of Operations                                                                                  |    |  | 48 | 
|           |  | Liquidity and Capital Resources                                                                        |    |  | 58 | 
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                             |    |  | 65 | 
|Item 4.    |  | Controls and Procedures                                                                                |    |  | 65 | 
|PART II.   |  | OTHER INFORMATION:                                                                                     |    |  |    | 
|Item 1.    |  | Legal Proceedings                                                                                      |    |  | 66 | 
|Item 1A.   |  | Risk Factors                                                                                           |    |  | 66 | 
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                            |    |  | 66 | 
|Item 3.    |  | Defaults Upon Senior Securities                                                                        |    |  | 66 | 
|Item 4.    |  | Mine Safety Disclosures                                                                                |    |  | 66 | 
|Item 5.    |  | Other Information                                                                                      |    |  | 66 | 
|Item 6.    |  | Exhibits                                                                                               |    |  | 67 | 
|SIGNATURES |  |                                                                                                        | 68 | 



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)



|                                                                                                                                                               |  |               |         |   |           |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | --------- | - | ------- | -
|                                                                                                                                                               |  | September 30, |         |   | March 31, |  
|                                                                                                                                                               |  | 2017          |         |   | 2017      |  
|ASSETS                                                                                                                                                         |  |               |         |   |           |   |         |  
|Investments at fair value                                                                                                                                      |  |               |         |   |           |   |         |  
|Non-Control/Non-Affiliate
investments (Cost of $206,952 and $225,046, respectively)                                                                            |  | $             | 221,482 |   |           | $ | 223,451 |  
|Affiliate investments (Cost of $305,908 and $278,811, respectively)                                                                                            |  |               | 286,574 |   |           |   | 262,086 |  
|Control investments (Cost of $21,512 and $21,312 respectively)                                                                                                 |  |               | 12,118  |   |           |   | 16,042  |  
|Cash and cash equivalents                                                                                                                                      |  |               | 2,433   |   |           |   | 2,868   |  
|Restricted cash and cash equivalents                                                                                                                           |  |               | 422     |   |           |   | 1,231   |  
|Interest receivable                                                                                                                                            |  |               | 2,375   |   |           |   | 2,305   |  
|Due from custodian                                                                                                                                             |  |               | 2,043   |   |           |   | 2,238   |  
|Deferred financing costs, net                                                                                                                                  |  |               | 1,319   |   |           |   | 1,588   |  
|Other assets, net                                                                                                                                              |  |               | 952     |   |           |   | 3,386   |  
|                                                                                                                                                               |  |               |         |   |           |   |         |  
|TOTAL ASSETS                                                                                                                                                   |  | $             | 529,718 |   |           | $ | 515,195 |  
|                                                                                                                                                               |  |               |         |   |           |   |         |  
|LIABILITIES                                                                                                                                                    |  |               |         |   |           |   |         |  
|Borrowings:                                                                                                                                                    |  |               |         |   |           |   |         |  
|Line of credit at fair value (Cost of $56,700 and $69,700, respectively)                                                                                       |  | $             | 56,700  |   |           | $ | 69,700  |  
|Secured borrowing                                                                                                                                              |  |               | 5,096   |   |           |   | 5,096   |  
|                                                                                                                                                               |  |               |         |   |           |   |         |  
|Total borrowings                                                                                                                                               |  |               | 61,796  |   |           |   | 74,796  |  
|Mandatorily redeemable preferred stock, $0.001 par value, $25 liquidation preference;
6,356,000shares authorized; 5,566,000 shares issued and outstanding, net |  |               | 135,225 |   |           |   | 134,835 |  
|Accounts payable and accrued expenses                                                                                                                          |  |               | 956     |   |           |   | 578     |  
|Fees due to Adviser(A)                                                                                                                                         |  |               | 1,786   |   |           |   | 1,671   |  
|Fee due to Administrator(A)                                                                                                                                    |  |               | 201     |   |           |   | 296     |  
|Other liabilities                                                                                                                                              |  |               | 1,206   |   |           |   | 1,937   |  
|                                                                                                                                                               |  |               |         |   |           |   |         |  
|TOTAL LIABILITIES                                                                                                                                              |  | $             | 201,170 |   |           | $ | 214,113 |  
|                                                                                                                                                               |  |               |         |   |           |   |         |  
|Commitments and contingencies(B)                                                                                                                               |  |               |         |   |           |   |         |  
|NET ASSETS                                                                                                                                                     |  | $             | 328,548 |   |           | $ | 301,082 |  
|                                                                                                                                                               |  |               |         |   |           |   |         |  
|ANALYSIS OF NET ASSETS                                                                                                                                         |  |               |         |   |           |   |         |  
|Common stock, $0.001 par value per share, 100,000,000 shares authorized,
32,526,223 and 30,270,958 shares issued and outstanding, respectively                 |  | $             | 33      |   |           | $ | 30      |  
|Capital in excess of par value                                                                                                                                 |  |               | 329,731 |   |           |   | 310,332 |  
|Cumulative net unrealized depreciation of investments                                                                                                          |  |               | (14,198 | ) |           |   | (23,590 | )
|Net investment income in excess of distributions                                                                                                               |  |               | 6,784   |   |           |   | 7,283   |  
|Accumulated net realized gain                                                                                                                                  |  |               | 6,198   |   |           |   | 7,027   |  
|                                                                                                                                                               |  |               |         |   |           |   |         |  
|TOTAL NET ASSETS                                                                                                                                               |  | $             | 328,548 |   |           | $ | 301,082 |  
|                                                                                                                                                               |  |               |         |   |           |   |         |  
|NET ASSET VALUE PER SHARE AT END OF PERIOD                                                                                                                     |  | $             | 10.10   |   |           | $ | 9.95    |  
|                                                                                                                                                               |  |               |         |   |           |   |         |  



|(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



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)



|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ----------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                |  | Three Months EndedSeptember 30, |            |   | Six Months EndedSeptember 30, |  
|                                                                |  | 2017                            |            |   | 2016                          |   |            | 2017 |  |   | 2016       |  
|INVESTMENT INCOME                                               |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Interest income                                                 |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Non-Control/Non-Affiliate
investments                           |  | $                               | 4,587      |   |                               | $ | 4,357      |      |  | $ | 9,053      |   |  | $ | 8,862      |  
|Affiliate investments                                           |  |                                 | 6,408      |   |                               |   | 7,168      |      |  |   | 12,480     |   |  |   | 14,082     |  
|Control investments                                             |  |                                 | 210        |   |                               |   | 204        |      |  |   | 416        |   |  |   | 413        |  
|Cash and cash equivalents                                       |  |                                 | 8          |   |                               |   | 1          |      |  |   | 10         |   |  |   | 1          |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Total interest income                                           |  |                                 | 11,213     |   |                               |   | 11,730     |      |  |   | 21,959     |   |  |   | 23,358     |  
|Dividend income                                                 |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Non-Control/Non-Affiliate
investments                           |  |                                 | 1,770      |   |                               |   | 12         |      |  |   | 1,770      |   |  |   | 16         |  
|Affiliate investments                                           |  |                                 |           |   |                               |   |           |      |  |   | 865        |   |  |   | 2,750      |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Total dividend income                                           |  |                                 | 1,770      |   |                               |   | 12         |      |  |   | 2,635      |   |  |   | 2,766      |  
|Success fee income                                              |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Non-Control/Non-Affiliate
investments                           |  |                                 | 149        |   |                               |   |           |      |  |   | 2,158      |   |  |   |           |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Total success fee income                                        |  |                                 | 149        |   |                               |   |           |      |  |   | 2,158      |   |  |   |           |  
|Other income                                                    |  |                                 |           |   |                               |   | 2          |      |  |   |           |   |  |   | 13         |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Total investment income                                         |  |                                 | 13,132     |   |                               |   | 11,744     |      |  |   | 26,752     |   |  |   | 26,137     |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|EXPENSES                                                        |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Base management fee(A)                                          |  |                                 | 2,554      |   |                               |   | 2,489      |      |  |   | 5,070      |   |  |   | 4,998      |  
|Loan servicing fee(A)                                           |  |                                 | 1,485      |   |                               |   | 1,722      |      |  |   | 3,049      |   |  |   | 3,403      |  
|Incentive fee(A)                                                |  |                                 | 1,295      |   |                               |   | 549        |      |  |   | 2,467      |   |  |   | 2,249      |  
|Administration fee(A)                                           |  |                                 | 201        |   |                               |   | 275        |      |  |   | 508        |   |  |   | 574        |  
|Interest expense on borrowings                                  |  |                                 | 754        |   |                               |   | 953        |      |  |   | 1,483      |   |  |   | 1,924      |  
|Dividends on mandatorily redeemable preferred stock             |  |                                 | 2,251      |   |                               |   | 2,115      |      |  |   | 4,502      |   |  |   | 4,180      |  
|Amortization of deferred financing costs and discounts          |  |                                 | 367        |   |                               |   | 481        |      |  |   | 734        |   |  |   | 962        |  
|Professional fees                                               |  |                                 | 260        |   |                               |   | 194        |      |  |   | 579        |   |  |   | 386        |  
|Other general and administrative expenses                       |  |                                 | 626        |   |                               |   | 690        |      |  |   | 1,698      |   |  |   | 891        |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Expenses before credits from Adviser                            |  |                                 | 9,793      |   |                               |   | 9,468      |      |  |   | 20,090     |   |  |   | 19,567     |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Credits to base management fee  loan servicing fee(A)          |  |                                 | (1,485     | ) |                               |   | (1,722     | )    |  |   | (3,049     | ) |  |   | (3,403     | )
|Credits to fees from Adviser 
other(A)                         |  |                                 | (926       | ) |                               |   | (1,114     | )    |  |   | (1,474     | ) |  |   | (1,951     | )
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Total expenses, net of credits to fees                          |  |                                 | 7,382      |   |                               |   | 6,632      |      |  |   | 15,567     |   |  |   | 14,213     |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|NET INVESTMENT INCOME                                           |  |                                 | 5,750      |   |                               |   | 5,112      |      |  |   | 11,185     |   |  |   | 11,924     |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|REALIZED AND UNREALIZED GAIN (LOSS)                             |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net realized gain (loss):                                       |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Non-Control/Non-Affiliate
investments                           |  |                                 | 37         |   |                               |   | (12        | )    |  |   | 978        |   |  |   | (165       | )
|Affiliate investments                                           |  |                                 | (80        | ) |                               |   | 3          |      |  |   | 144        |   |  |   | 18,792     |  
|Control investments                                             |  |                                 |           |   |                               |   | (2         | )    |  |   |           |   |  |   | (3         | )
|Other                                                           |  |                                 |           |   |                               |   | (182       | )    |  |   |           |   |  |   | (257       | )
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Total net realized gain (loss)                                  |  |                                 | (43        | ) |                               |   | (193       | )    |  |   | 1,122      |   |  |   | 18,367     |  
|Net unrealized appreciation (depreciation):                     |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Non-Control/Non-Affiliate
investments                           |  |                                 | 14,293     |   |                               |   | (8,136     | )    |  |   | 16,124     |   |  |   | (919       | )
|Affiliate investments                                           |  |                                 | (4,945     | ) |                               |   | 1,977      |      |  |   | (2,610     | ) |  |   | (13,972    | )
|Control investments                                             |  |                                 | (1,499     | ) |                               |   | 1,138      |      |  |   | (4,124     | ) |  |   | 8,957      |  
|Other                                                           |  |                                 |           |   |                               |   |           |      |  |   |           |   |  |   | 75         |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Total net unrealized appreciation (depreciation)                |  |                                 | 7,849      |   |                               |   | (5,021     | )    |  |   | 9,390      |   |  |   | (5,859     | )
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net realized and unrealized gain (loss)                         |  |                                 | 7,806      |   |                               |   | (5,214     | )    |  |   | 10,512     |   |  |   | 12,508     |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |  | $                               | 13,556     |   |                               | $ | (102       | )    |  | $ | 21,697     |   |  | $ | 24,432     |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|BASIC AND DILUTED PER COMMON SHARE:                             |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net investment income                                           |  | $                               | 0.18       |   |                               | $ | 0.17       |      |  | $ | 0.35       |   |  | $ | 0.39       |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net increase (decrease) in net assets resulting from operations |  |                                 | 0.42       |   |                               |   |           |      |  |   | 0.68       |   |  |   | 0.81       |  
|                                                                |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Distributions                                                   |  |                                 | 0.19       |   |                               |   | 0.19       |      |  |   | 0.44       |   |  |   | 0.38       |  
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:            |  |                                 |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted                                               |  |                                 | 32,526,223 |   |                               |   | 30,270,958 |      |  |   | 32,003,128 |   |  |   | 30,270,958 |  



|(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.



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(IN THOUSANDS)

(UNAUDITED)



|                                                                        |  |                               |         |   |      |   |         |  
|----------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                                                        |  | Six Months EndedSeptember 30, |        
|                                                                        |  | 2017                          |         |   | 2016 |  
|OPERATIONS                                                              |  |                               |         |   |      |   |         |  
|Net investment income                                                   |  | $                             | 11,185  |   |      | $ | 11,924  |  
|Net realized gain on investments                                        |  |                               | 1,122   |   |      |   | 18,624  |  
|Net realized loss on other                                              |  |                               |        |   |      |   | (257    | )
|Net unrealized appreciation (depreciation) of investments               |  |                               | 9,390   |   |      |   | (5,934  | )
|Net unrealized appreciation of other                                    |  |                               |        |   |      |   | 75      |  
|                                                                        |  |                               |         |   |      |   |         |  
|Net increase in net assets from operations                              |  |                               | 21,697  |   |      |   | 24,432  |  
|                                                                        |  |                               |         |   |      |   |         |  
|DISTRIBUTIONS                                                           |  |                               |         |   |      |   |         |  
|Distributions to common stockholders from net investment income         |  |                               | (12,336 | ) |      |   | (11,352 | )
|Distributions to common stockholders from realized gains                |  |                               | (1,951  | ) |      |   |        |  
|                                                                        |  |                               |         |   |      |   |         |  
|Net decrease in net assets from distributions                           |  |                               | (14,287 | ) |      |   | (11,352 | )
|                                                                        |  |                               |         |   |      |   |         |  
|CAPITAL ACTIVITY                                                        |  |                               |         |   |      |   |         |  
|Issuance of common stock                                                |  |                               | 21,154  |   |      |   |        |  
|Discounts, commissions, and offering costs for issuance of common stock |  |                               | (1,098  | ) |      |   |        |  
|                                                                        |  |                               |         |   |      |   |         |  
|Net increase in net assets from capital activity                        |  |                               | 20,056  |   |      |   |        |  
|                                                                        |  |                               |         |   |      |   |         |  
|TOTAL INCREASE IN NET ASSETS                                            |  |                               | 27,466  |   |      |   | 13,080  |  
|NET ASSETS, BEGINNING OF PERIOD                                         |  |                               | 301,082 |   |      |   | 279,022 |  
|                                                                        |  |                               |         |   |      |   |         |  
|NET ASSETS, END OF PERIOD                                               |  | $                             | 328,548 |   |      | $ | 292,102 |  
|                                                                        |  |                               |         |   |      |   |         |  

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



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)



|                                                                                                                            |  |                               |         |   |      |   |         |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                            |  | Six Months EndedSeptember 30, |        
|                                                                                                                            |  | 2017                          |         |   | 2016 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                        |  |                               |         |   |      |   |         |  
|Net increase in net assets resulting from operations                                                                        |  | $                             | 21,697  |   |      | $ | 24,432  |  
|Adjustments to reconcile net increase in net assets resulting from operations to net cash provided
by operating activities: |  |                               |         |   |      |   |         |  
|Purchase of investments                                                                                                     |  |                               | (31,648 | ) |      |   | (31,186 | )
|Principal repayments of investments                                                                                         |  |                               | 17,610  |   |      |   | 16,661  |  
|Net proceeds from the sale of investments                                                                                   |  |                               | 5,796   |   |      |   | 28,479  |  
|Net realized gain on investments                                                                                            |  |                               | (1,214  | ) |      |   | (18,662 | )
|Net realized loss on other                                                                                                  |  |                               |        |   |      |   | 257     |  
|Net unrealized (appreciation) depreciation of investments                                                                   |  |                               | (9,390  | ) |      |   | 5,934   |  
|Net unrealized appreciation of other                                                                                        |  |                               |        |   |      |   | (75     | )
|Amortization of premiums, discounts, and acquisition costs, net                                                             |  |                               | (6      | ) |      |   |        |  
|Amortization of deferred financing costs and discounts                                                                      |  |                               | 734     |   |      |   | 962     |  
|Bad debt expense, net of recoveries                                                                                         |  |                               | 575     |   |      |   | (186    | )
|Changes in assets and liabilities:                                                                                          |  |                               |         |   |      |   |         |  
|Decrease in restricted cash and cash equivalents                                                                            |  |                               | 808     |   |      |   | 464     |  
|(Increase) decrease in interest receivable                                                                                  |  |                               | (524    | ) |      |   | 818     |  
|Decrease (increase) in due from custodian                                                                                   |  |                               | 195     |   |      |   | (1,051  | )
|Decrease in other assets, net                                                                                               |  |                               | 2,469   |   |      |   | 2,885   |  
|Increase (decrease) in accounts payable and accrued expenses                                                                |  |                               | 378     |   |      |   | (71     | )
|Increase (decrease) in fees due to
Adviser(A)                                                                               |  |                               | 115     |   |      |   | (1,290  | )
|Decrease in fee due to
Administrator(A)                                                                                     |  |                               | (95     | ) |      |   | (36     | )
|Decrease in other liabilities                                                                                               |  |                               | (637    | ) |      |   | (481    | )
|                                                                                                                            |  |                               |         |   |      |   |         |  
|Net cash provided by operating activities                                                                                   |  |                               | 6,863   |   |      |   | 27,854  |  
|                                                                                                                            |  |                               |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                        |  |                               |         |   |      |   |         |  
|Proceeds from issuance of common stock                                                                                      |  |                               | 21,154  |   |      |   |        |  
|Discounts, commissions, and offering costs for issuance of common stock                                                     |  |                               | (1,090  | ) |      |   |        |  
|Proceeds from line of credit                                                                                                |  |                               | 49,600  |   |      |   | 37,200  |  
|Repayments on line of credit                                                                                                |  |                               | (62,600 | ) |      |   | (68,700 | )
|Proceeds from issuance of mandatorily redeemable preferred stock                                                            |  |                               |        |   |      |   | 57,500  |  
|Redemption of mandatorily redeemable preferred stock                                                                        |  |                               |        |   |      |   | (40,000 | )
|Deferred financing and offering costs                                                                                       |  |                               | (75     | ) |      |   | (1,886  | )
|Distributions paid to common stockholders                                                                                   |  |                               | (14,287 | ) |      |   | (11,352 | )
|                                                                                                                            |  |                               |         |   |      |   |         |  
|Net cash used in financing activities                                                                                       |  |                               | (7,298  | ) |      |   | (27,238 | )
|                                                                                                                            |  |                               |         |   |      |   |         |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                                        |  |                               | (435    | ) |      |   | 616     |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                                              |  |                               | 2,868   |   |      |   | 4,481   |  
|                                                                                                                            |  |                               |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                                                    |  | $                             | 2,433   |   |      | $ | 5,097   |  
|                                                                                                                            |  |                               |         |   |      |   |         |  
|CASH PAID FOR INTEREST                                                                                                      |  | $                             | 1,135   |   |      | $ | 1,730   |  
|                                                                                                                            |  |                               |         |   |      |   |         |  
|NON-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:
|--- | ---------------------------------------------------------------------------------------------------

In June 2017, one of our portfolio companies, Mathey Investments, Inc. (Mathey) was 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.



5



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|----------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                              |  | Principal/Shares/Units(F)(J) |           |  | Cost |   |         | Fair Value | 
|                                                                                                |  |                              |          
|NON-CONTROL/NON-AFFILIATE
INVESTMENTS(N)  67.4%                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  34.3%                                                                 |  |                              |           |  |      |   |         |            |  |   |         | 
|Chemicals, Plastics, and Rubber  3.0%                                                          |  |                              |           |  |      |   |         |            |  |   |         | 
|Drew Foam Companies, Inc.  Term Debt (13.5%, Due 12/2017)(Q)                                   |  | $                            | 9,913     |  |      | $ | 9,913   |            |  | $ | 9,989   | 
|                                                                                                |  |                              |          
|Containers, Packaging, and Glass  2.9%                                                         |  |                              |           |  |      |   |         |            |  |   |         | 
|Frontier Packaging, Inc.  Term Debt (12.0%, Due 12/2019)(L)                                    |  |                              | 9,500     |  |      |   | 9,500   |            |  |   | 9,500   | 
|                                                                                                |  |                              |          
|Diversified/Conglomerate Services  11.2%                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|Counsel Press, Inc.  Line of Credit, $500 available (13.0% (1.0% Unused Fee), Due 3/2018)(L)   |  |                              |          |  |      |   |        |            |  |   |        | 
|Counsel Press, Inc.  Term Debt (13.0%, Due 3/2020)(L)                                          |  |                              | 18,000    |  |      |   | 18,000  |            |  |   | 18,000  | 
|Counsel Press, Inc.  Term Debt (14.2%, Due 3/2020)(L)                                          |  |                              | 5,500     |  |      |   | 5,500   |            |  |   | 5,500   | 
|Nth Degree, Inc.  Term Debt (12.7%, Due
12/2020)(L)                                            |  |                              | 13,290    |  |      |   | 13,290  |            |  |   | 13,290  | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                |  |                              |           |  |      |   | 36,790  |            |  |   | 36,790  | 
|                                                                                                |  |                              |          
|Farming and Agriculture  4.9%                                                                  |  |                              |           |  |      |   |         |            |  |   |         | 
|Jackrabbit, Inc.  Term Debt (13.5%, Due
4/2018)(L)                                             |  |                              | 11,000    |  |      |   | 11,000  |            |  |   | 11,000  | 
|Star Seed, Inc.  Term Debt (12.5%, Due
5/2018)(L)                                              |  |                              | 5,000     |  |      |   | 5,000   |            |  |   | 5,000   | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                |  |                              |           |  |      |   | 16,000  |            |  |   | 16,000  | 
|                                                                                                |  |                              |          
|Leisure, Amusement, Motion Pictures, and Entertainment  4.0%                                   |  |                              |           |  |      |   |         |            |  |   |         | 
|Schylling, Inc.  Term Debt (13.0%, Due
8/2018)(L)                                              |  |                              | 13,081    |  |      |   | 13,081  |            |  |   | 13,081  | 
|                                                                                                |  |                              |          
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  6.1%                        |  |                              |           |  |      |   |         |            |  |   |         | 
|SBS Industries, LLC  Line of Credit, $1,500 available (10.0% (1.0% Unused Fee), Due 6/2018)(L) |  |                              |          |  |      |   |        |            |  |   |        | 
|SBS Industries, LLC  Term Debt (14.0%, Due 6/2020)(L)                                          |  |                              | 19,957    |  |      |   | 19,957  |            |  |   | 19,957  | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                |  |                              |           |  |      |   | 19,957  |            |  |   | 19,957  | 
|                                                                                                |  |                              |          
|Oil and Gas  1.0%                                                                              |  |                              |           |  |      |   |         |            |  |   |         | 
|Tread Corporation  Line of Credit, $634 available (12.5%, Due 2/2018)(G)(L)                    |  |                              | 3,216     |  |      |   | 3,216   |            |  |   | 3,216   | 
|                                                                                                |  |                              |          
|Personal, Food, and Miscellaneous Services  1.2%                                               |  |                              |           |  |      |   |         |            |  |   |         | 
|B-Dry, LLC  Line of Credit, $100 available (1.5%
(0.8% Unused Fee), Due 12/2018)(L)            |  |                              | 4,550     |  |      |   | 4,550   |            |  |   | 3,980   | 
|B-Dry, LLC  Term Debt (1.5%, Due 12/2019)(L)                                                   |  |                              | 6,443     |  |      |   | 6,443   |            |  |   |        | 
|B-Dry, LLC  Term Debt (1.5%, Due 12/2019)(L)                                                   |  |                              | 840       |  |      |   | 840     |            |  |   |        | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                |  |                              |           |  |      |   | 11,833  |            |  |   | 3,980   | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Secured First Lien Debt                                                                   |  |                              |           |  |      | $ | 120,290 |            |  | $ | 112,513 | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                |  |                              |          
|Secured Second Lien Debt  9.2%                                                                 |  |                              |           |  |      |   |         |            |  |   |         | 
|Automobile  1.2%                                                                               |  |                              |           |  |      |   |         |            |  |   |         | 
|Country Club Enterprises, LLC  Term Debt (18.7%, Due 5/2018)(L)                                |  | $                            | 4,000     |  |      | $ | 4,000   |            |  | $ | 4,000   | 
|                                                                                                |  |                              |          
|Cargo Transport  4.0%                                                                          |  |                              |           |  |      |   |         |            |  |   |         | 
|Diligent Delivery Systems  Term Debt (10.0%, Due 11/2022)(Q)                                   |  |                              | 13,000    |  |      |   | 12,905  |            |  |   | 13,000  | 
|                                                                                                |  |                              |          
|Home and Office Furnishings, Housewares, and Durable Consumer Products  4.0%                   |  |                              |           |  |      |   |         |            |  |   |         | 
|Ginsey Home Solutions, Inc.  Term Debt (13.5%, Due 1/2021)(H)(L)                               |  |                              | 13,300    |  |      |   | 13,300  |            |  |   | 13,300  | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Secured Second Lien Debt                                                                  |  |                              |           |  |      | $ | 30,205  |            |  | $ | 30,300  | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                |  |                              |          
|Preferred Equity  14.3%                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Automobile  0.7%                                                                               |  |                              |           |  |      |   |         |            |  |   |         | 
|Country Club Enterprises, LLC  Preferred
Stock(C)(L)                                           |  |                              | 7,304,792 |  |      | $ | 7,725   |            |  | $ | 2,169   | 
|Country Club Enterprises, LLC  Guaranty
($2,000)(V)                                            |  |                              |          |  |      |   |        |            |  |   |        | 
|                                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                |  |                              |           |  |      | $ | 7,725   |            |  | $ | 2,169   | 
|                                                                                                |  |                              |          
|Chemicals, Plastics, and Rubber  1.1%                                                          |  |                              |           |  |      |   |         |            |  |   |         | 
|Drew Foam Companies, Inc.  Preferred
Stock(C)(Q)                                               |  |                              | 34,045    |  |      | $ | 3,375   |            |  | $ | 3,456   | 

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



6



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|----------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ------ | ---------- |  | - | ------ | 
|Company and Investment(A)(B)(D)(E)                                            |  | Principal/Shares/Units(F)(J) |            |   | Cost |   |        | Fair Value | 
|                                                                              |  |                              |           
|Containers, Packaging, and Glass  0.4%                                       |  |                              |            |   |      |   |        |            |  |   |        | 
|Frontier Packaging, Inc.  Preferred
Stock(C)(L)                              |  |                              | 1,373      |   |      | $ | 1,373  |            |  | $ | 1,373  | 
|                                                                              |  |                              |           
|Diversified/Conglomerate Services  7.6%                                      |  |                              |            |   |      |   |        |            |  |   |        | 
|Counsel Press, Inc.  Preferred
Stock(C)(L)                                   |  |                              | 6,995      |   |      |   | 6,995  |            |  |   | 5,446  | 
|Nth Degree, Inc.  Preferred
Stock(C)(L)                                      |  |                              | 5,660      |   |      |   | 5,660  |            |  |   | 19,424 | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   | 12,655 |            |  |   | 24,870 | 
|                                                                              |  |                              |           
|Farming and Agriculture  1.0%                                                |  |                              |            |   |      |   |        |            |  |   |        | 
|Jackrabbit, Inc.  Preferred
Stock(C)(L)                                      |  |                              | 3,556      |   |      |   | 3,556  |            |  |   | 2,271  | 
|Star Seed, Inc.  Preferred
Stock(C)(L)                                       |  |                              | 1,499      |   |      |   | 1,499  |            |  |   | 978    | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   | 5,055  |            |  |   | 3,249  | 
|                                                                              |  |                              |           
|Home and Office Furnishings, Housewares, and Durable Consumer Products  2.5% |  |                              |            |   |      |   |        |            |  |   |        | 
|Ginsey Home Solutions, Inc.  Preferred
Stock(C)(L)                           |  |                              | 19,280     |   |      |   | 9,583  |            |  |   | 8,359  | 
|                                                                              |  |                              |           
|Leisure, Amusement, Motion Pictures, and Entertainment  0.0%                 |  |                              |            |   |      |   |        |            |  |   |        | 
|Schylling, Inc.  Preferred
Stock(C)(L)                                       |  |                              | 4,000      |   |      |   | 4,000  |            |  |   |       | 
|                                                                              |  |                              |           
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  0.5%      |  |                              |            |   |      |   |        |            |  |   |        | 
|SBS Industries, LLC  Preferred
Stock(C)(L)                                   |  |                              | 27,705     |   |      |   | 2,772  |            |  |   | 1,724  | 
|                                                                              |  |                              |           
|Oil and Gas  0.5%                                                            |  |                              |            |   |      |   |        |            |  |   |        | 
|Tread Corporation  Preferred
Stock(C)(L)                                     |  |                              | 12,998,639 |   |      |   | 3,768  |            |  |   | 1,732  | 
|                                                                              |  |                              |           
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.0%        |  |                              |            |   |      |   |        |            |  |   |        | 
|Funko Acquisition Holdings, LLC(M) 
Preferred Stock(C)(L)                    |  |                              | 260        |   |      |   | 167    |            |  |   | 159    | 
|                                                                              |  |                              |           
|Personal, Food, and Miscellaneous Services  0.0%                             |  |                              |            |   |      |   |        |            |  |   |        | 
|B-Dry, LLC  Preferred Stock(C)(L)                                            |  |                              | 2,500      |   |      |   | 2,516  |            |  |   |       | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|Total Preferred Equity                                                        |  |                              |            |   |      | $ | 52,989 |            |  | $ | 47,091 | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |           
|Common Equity  9.6%                                                          |  |                              |            |   |      |   |        |            |  |   |        | 
|Cargo Transport  0.9%                                                        |  |                              |            |   |      |   |        |            |  |   |        | 
|Diligent Delivery Systems  Common Stock
Warrants(C)(Q)                       |  |                              | 8          | % |      | $ | 500    |            |  | $ | 2,832  | 
|                                                                              |  |                              |           
|Chemicals, Plastics, and Rubber  5.3%                                        |  |                              |            |   |      |   |        |            |  |   |        | 
|Drew Foam Companies, Inc.  Common
Stock(C)(Q)                                |  |                              | 5,372      |   |      |   | 63     |            |  |   | 17,477 | 
|                                                                              |  |                              |           
|Containers, Packaging, and Glass  3.1%                                       |  |                              |            |   |      |   |        |            |  |   |        | 
|Frontier Packaging, Inc.  Common
Stock(C)(L)                                 |  |                              | 152        |   |      |   | 152    |            |  |   | 10,142 | 
|                                                                              |  |                              |           
|Farming and Agriculture  0.0%                                                |  |                              |            |   |      |   |        |            |  |   |        | 
|Jackrabbit, Inc.  Common
Stock(C)(L)                                         |  |                              | 548        |   |      |   | 94     |            |  |   |       | 
|Star Seed, Inc.  Common
Stock(C)(L)                                          |  |                              | 600        |   |      |   | 1      |            |  |   |       | 
|                                                                              |  |                              |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                              |            |   |      |   | 95     |            |  |   |       | 
|                                                                              |  |                              |           
|Home and Office Furnishings, Housewares, and Durable Consumer Products  0.0% |  |                              |            |   |      |   |        |            |  |   |        | 
|Ginsey Home Solutions, Inc.  Common
Stock(C)(L)                              |  |                              | 63,747     |   |      |   | 8      |            |  |   |       | 
|                                                                              |  |                              |           
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  0.0%      |  |                              |            |   |      |   |        |            |  |   |        | 
|SBS Industries, LLC  Common
Stock(C)(L)                                      |  |                              | 221,500    |   |      |   | 222    |            |  |   |       | 
|                                                                              |  |                              |           
|Oil and Gas  0.0%                                                            |  |                              |            |   |      |   |        |            |  |   |        | 
|Tread Corporation  Common
Stock(C)(L)                                        |  |                              | 10,089,048 |   |      |   | 753    |            |  |   |       | 
|                                                                              |  |                              |           
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.0%        |  |                              |            |   |      |   |        |            |  |   |        | 
|Funko Acquisition Holdings, LLC(M) 
Common Stock(C)(L)                       |  |                              | 975        |   |      |   |       |            |  |   |       | 

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



7



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                                      |  | Principal/Shares/  Units(F)(J) |        |  | Cost |   |         | Fair Value | 
|                                                                                                        |  |                                |       
|Personal, Food, and Miscellaneous Services  0.0%                                                       |  |                                |        |  |      |   |         |            |  |   |         | 
|B-Dry, LLC  Common Stock(C)(L)                                                                         |  |                                | 2,500  |  |      | $ | 300     |            |  | $ |        | 
|                                                                                                        |  |                                |       
|Utilities  0.3%                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|AquaVenture Holdings Limited  Common
Stock(C)(S)(U)                                                    |  |                                | 83,453 |  |      |   | 1,375   |            |  |   | 1,127   | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                                     |  |                                |        |  |      | $ | 3,468   |            |  | $ | 31,578  | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|Total
Non-Control/Non-Affiliate Investments                                                             |  |                                |        |  |      | $ | 206,952 |            |  | $ | 221,482 | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |       
|AFFILIATE INVESTMENTS(O) 
87.2%                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  52.1%                                                                         |  |                                |        |  |      |   |         |            |  |   |         | 
|Automobile  2.6%                                                                                       |  |                                |        |  |      |   |         |            |  |   |         | 
|Meridian Rack & Pinion, Inc.(M)
 Term Debt (13.5%, Due 12/2018)(K)                                     |  | $                              | 9,660  |  |      | $ | 9,660   |            |  | $ | 8,501   | 
|                                                                                                        |  |                                |       
|Beverage, Food, and Tobacco  2.8%                                                                      |  |                                |        |  |      |   |         |            |  |   |         | 
|Head Country, Inc.  Term Debt (12.5%, Due
2/2019)(L)                                                   |  |                                | 9,050  |  |      |   | 9,050   |            |  |   | 9,050   | 
|                                                                                                        |  |                                |       
|Chemicals, Plastics, and Rubber  4.6%                                                                  |  |                                |        |  |      |   |         |            |  |   |         | 
|GI Plastek, Inc.  Term Debt (13.3%, Due
7/2020)(L)                                                     |  |                                | 15,000 |  |      |   | 15,000  |            |  |   | 15,000  | 
|                                                                                                        |  |                                |       
|Diversified/Conglomerate Manufacturing  7.7%                                                           |  |                                |        |  |      |   |         |            |  |   |         | 
|Alloy Die Casting Co.(M)  Term Debt
(13.5%, Due 10/2018)(G)(K)                                         |  |                                | 12,215 |  |      |   | 12,215  |            |  |   | 7,634   | 
|Alloy Die Casting Co.(M)  Term Debt
(13.5%, Due 10/2018)(G)(K)                                         |  |                                | 175    |  |      |   | 175     |            |  |   | 109     | 
|Alloy Die Casting Co.(M)  Term Debt (Due
10/2018)(K)(R)                                                |  |                                | 910    |  |      |   | 910     |            |  |   | 574     | 
|D.P.M.S., Inc.  Term Debt (10.0%, Due
10/2021)(I)(L)                                                   |  |                                | 8,795  |  |      |   | 8,795   |            |  |   | 6,354   | 
|Edge Adhesives Holdings, Inc.(M)  Term
Debt (12.5%, Due 2/2019)(K)                                     |  |                                | 9,300  |  |      |   | 9,300   |            |  |   | 8,556   | 
|Edge Adhesives Holdings, Inc.(M)  Term
Debt (13.8%, Due 2/2019)(K)                                     |  |                                | 2,400  |  |      |   | 2,400   |            |  |   | 2,220   | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |        |  |      |   | 33,795  |            |  |   | 25,447  | 
|                                                                                                        |  |                                |       
|Diversified/Conglomerate Services  6.4%                                                                |  |                                |        |  |      |   |         |            |  |   |         | 
|JR Hobbs Co.  Atlanta, LLC  Term Debt (13.0%, Due 2/2022)(L)                                          |  |                                | 21,000 |  |      |   | 21,000  |            |  |   | 21,000  | 
|                                                                                                        |  |                                |       
|Home and Office Furnishings, Housewares, and Durable Consumer Products  8.2%                           |  |                                |        |  |      |   |         |            |  |   |         | 
|Brunswick Bowling Products, Inc.  Term Debt (16.3%, Due 5/2020)(L)                                     |  |                                | 11,307 |  |      |   | 11,307  |            |  |   | 11,307  | 
|Old World Christmas, Inc.  Term Debt (13.3%, Due 10/2019)(L)                                           |  |                                | 15,770 |  |      |   | 15,770  |            |  |   | 15,770  | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |        |  |      |   | 27,077  |            |  |   | 27,077  | 
|                                                                                                        |  |                                |       
|Leisure, Amusement, Motion Pictures, and Entertainment  5.8%                                           |  |                                |        |  |      |   |         |            |  |   |         | 
|SOG Specialty Knives & Tools, LLC  Term Debt (13.3%, Due 8/2020)(L)                                    |  |                                | 6,200  |  |      |   | 6,200   |            |  |   | 6,200   | 
|SOG Specialty Knives & Tools, LLC  Term Debt (14.8%, Due 8/2020)(L)                                    |  |                                | 12,200 |  |      |   | 12,200  |            |  |   | 12,200  | 
|SOG Specialty Knives & Tools, LLC  Term Debt (Due 8/2020)(L)(R)                                        |  |                                | 538    |  |      |   | 538     |            |  |   | 538     | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |        |  |      |   | 18,938  |            |  |   | 18,938  | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  6.9%                                  |  |                                |        |  |      |   |         |            |  |   |         | 
|Pioneer Square Brands, Inc.  Line of Credit, $1,200 available (10.2% (1.0% Unused Fee), Due
2/2018)(T) |  |                                | 1,800  |  |      |   | 1,800   |            |  |   | 1,800   | 
|Pioneer Square Brands, Inc.  Term Debt (13.2%, Due 8/2022)(T)                                          |  |                                | 21,000 |  |      |   | 21,000  |            |  |   | 21,000  | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |        |  |      |   | 22,800  |            |  |   | 22,800  | 
|                                                                                                        |  |                                |       
|Telecommunications  4.3%                                                                               |  |                                |        |  |      |   |         |            |  |   |         | 
|B+T Group Acquisition, Inc.(M)  Term
Debt (13.0%, Due 12/2019)(L)                                      |  |                                | 14,000 |  |      |   | 14,000  |            |  |   | 14,000  | 
|                                                                                                        |  |                                |       
|Textiles and Leather  2.8%                                                                             |  |                                |        |  |      |   |         |            |  |   |         | 
|Logo Sportswear, Inc.  Term Debt (12.5%, Due 3/2020)(L)                                                |  |                                | 9,200  |  |      |   | 9,200   |            |  |   | 9,200   | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|Total Secured First Lien Debt                                                                           |  |                                |        |  |      | $ | 180,520 |            |  | $ | 171,013 | 
|                                                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                |       
|Secured Second Lien Debt  11.8%                                                                        |  |                                |        |  |      |   |         |            |  |   |         | 
|Diversified/Conglomerate Manufacturing  2.9%                                                           |  |                                |        |  |      |   |         |            |  |   |         | 
|Precision Southeast, Inc.  Term Debt (14.0%, Due 9/2020)(G)(L)                                         |  | $                              | 9,618  |  |      | $ | 9,618   |            |  | $ | 9,618   | 

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



8



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|------------------------------------------------------------------------------ |  | ---------------------------- | ------ |  | ---- | - | ------ | ---------- |  | - | ------ | 
|Company and Investment(A)(B)(D)(E)                                             |  | Principal/Shares/Units(F)(J) |        |  | Cost |   |        | Fair Value | 
|                                                                               |  |                              |       
|Home and Office Furnishings, Housewares, and Durable Consumer Products  4.9%  |  |                              |        |  |      |   |        |            |  |   |        | 
|Cambridge Sound Management, Inc.  Term Debt (13.0%, Due 8/2021)(L)            |  | $                            | 16,000 |  |      | $ | 16,000 |            |  | $ | 16,000 | 
|                                                                               |  |                              |       
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  4.0%         |  |                              |        |  |      |   |        |            |  |   |        | 
|The Mountain Corporation  Term Debt (13.7%, Due 8/2021)(L)                    |  |                              | 18,600 |  |      |   | 18,600 |            |  |   | 13,257 | 
|The Mountain Corporation  Term Debt (Due
8/2021)(L)(R)                        |  |                              | 1,000  |  |      |   | 1,000  |            |  |   |       | 
|                                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                               |  |                              |        |  |      |   | 19,600 |            |  |   | 13,527 | 
|                                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|Total Secured Second Lien Debt                                                 |  |                              |        |  |      | $ | 45,218 |            |  | $ | 38,875 | 
|                                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                               |  |                              |       
|Preferred Equity  23.3%                                                       |  |                              |        |  |      |   |        |            |  |   |        | 
|Automobile  0.1%                                                              |  |                              |        |  |      |   |        |            |  |   |        | 
|Meridian Rack & Pinion, Inc.(M)
 Preferred Stock(C)(L)                        |  |                              | 3,381  |  |      | $ | 3,381  |            |  | $ | 311    | 
|                                                                               |  |                              |       
|Beverage, Food, and Tobacco  1.6%                                             |  |                              |        |  |      |   |        |            |  |   |        | 
|Head Country, Inc.  Preferred
Stock(C)(L)                                     |  |                              | 4,000  |  |      |   | 4,000  |            |  |   | 5,117  | 
|                                                                               |  |                              |       
|Cargo Transport  0.0%                                                         |  |                              |        |  |      |   |        |            |  |   |        | 
|NDLI, Inc.  Preferred
Stock(C)(L)                                             |  |                              | 3,600  |  |      |   | 3,600  |            |  |   |       | 
|                                                                               |  |                              |       
|Chemicals, Plastics, and Rubber  1.2%                                         |  |                              |        |  |      |   |        |            |  |   |        | 
|GI Plastek, Inc.  Preferred
Stock(C)(L)                                       |  |                              | 5,150  |  |      |   | 5,150  |            |  |   | 3,898  | 
|                                                                               |  |                              |       
|Diversified/Conglomerate Manufacturing  0.8%                                  |  |                              |        |  |      |   |        |            |  |   |        | 
|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  |            |  |   |       | 
|Precision Southeast, Inc.  Preferred
Stock(C)(L)                              |  |                              | 37,391 |  |      |   | 3,739  |            |  |   | 2,776  | 
|                                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                               |  |                              |        |  |      |   | 14,468 |            |  |   | 2,776  | 
|                                                                               |  |                              |       
|Diversified/Conglomerate Services  2.4%                                       |  |                              |        |  |      |   |        |            |  |   |        | 
|JR Hobbs Co.  Atlanta, LLC  Preferred
Stock(C)(L)                            |  |                              | 5,920  |  |      |   | 5,920  |            |  |   | 7,901  | 
|                                                                               |  |                              |       
|Home and Office Furnishings, Housewares, and Durable Consumer Products  12.1% |  |                              |        |  |      |   |        |            |  |   |        | 
|Brunswick Bowling Products, Inc.  Preferred
Stock(C)(L)                       |  |                              | 4,943  |  |      |   | 4,943  |            |  |   | 9,887  | 
|Cambridge Sound Management, Inc.  Preferred
Stock(C)(L)                       |  |                              | 4,500  |  |      |   | 4,500  |            |  |   | 19,381 | 
|Old World Christmas, Inc.  Preferred
Stock(C)(L)                              |  |                              | 6,180  |  |      |   | 6,180  |            |  |   | 10,667 | 
|                                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                               |  |                              |        |  |      |   | 15,623 |            |  |   | 39,935 | 
|                                                                               |  |                              |       
|Leisure, Amusement, Motion Pictures, and Entertainment  0.0%                  |  |                              |        |  |      |   |        |            |  |   |        | 
|SOG Specialty Knives & Tools, LLC  Preferred Stock(C)(L)                      |  |                              | 9,749  |  |      |   | 9,749  |            |  |   |       | 
|                                                                               |  |                              |       
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  1.7%         |  |                              |        |  |      |   |        |            |  |   |        | 
|The Mountain Corporation  Preferred
Stock(C)(L)                               |  |                              | 6,899  |  |      |   | 6,899  |            |  |   |       | 
|Pioneer Square Brands, Inc.  Preferred
Stock(C)(T)                            |  |                              | 5,502  |  |      |   | 5,500  |            |  |   | 5,500  | 
|                                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                               |  |                              |        |  |      |   | 12,399 |            |  |   | 5,500  | 
|                                                                               |  |                              |       
|Telecommunications  0.1%                                                      |  |                              |        |  |      |   |        |            |  |   |        | 
|B+T Group Acquisition, Inc.(M) 
Preferred Stock(C)(L)                         |  |                              | 12,841 |  |      |   | 4,196  |            |  |   | 327    | 
|                                                                               |  |                              |       
|Textiles and Leather  3.3%                                                    |  |                              |        |  |      |   |        |            |  |   |        | 
|Logo Sportswear, Inc.  Preferred
Stock(C)(L)                                  |  |                              | 1,550  |  |      |   | 1,550  |            |  |   | 10,921 | 
|                                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|Total Preferred Equity                                                         |  |                              |        |  |      | $ | 80,036 |            |  | $ | 76,686 | 
|                                                                               |  |                              |        |  |      |   |        |            |  |   |        | 
|                                                                               |  |                              |       
|Common Equity  0.0%                                                           |  |                              |        |  |      |   |        |            |  |   |        | 
|Cargo Transport  0.0%                                                         |  |                              |        |  |      |   |        |            |  |   |        | 
|NDLI, Inc.  Common Stock(C)(L)                                                |  |                              | 545    |  |      | $ |       |            |  | $ |       | 

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



9



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2017

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)



|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------------------------------ |  | ---------------------------- | --------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                                     |  | Principal/Shares/Units(F)(J) |           |  | Cost |   |         | Fair Value | 
|                                                                                                       |  |                              |          
|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       |            |  |   |        | 
|Precision Southeast, Inc.  Common
Stock(C)(L)                                                         |  |                              | 90,909    |  |      |   | 91      |            |  |   |        | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                       |  |                              |           |  |      |   | 133     |            |  |   |        | 
|                                                                                                       |  |                              |          
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.0%                                 |  |                              |           |  |      |   |         |            |  |   |         | 
|The Mountain Corporation  Common
Stock(C)(L)                                                          |  |                              | 751       |  |      |   | 1       |            |  |   |        | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                                    |  |                              |           |  |      | $ | 134     |            |  | $ |        | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Affiliate Investments                                                                            |  |                              |           |  |      | $ | 305,908 |            |  | $ | 286,574 | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|CONTROL INVESTMENTS(P) 
3.7%:                                                                         |  |                              |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  1.5%                                                                         |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  1.5%                                                                           |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Line of Credit, $0 available (6.5% (1.0% Unused Fee), Due
8/2019)(L) |  | $                            | 5,000     |  |      | $ | 5,000   |            |  | $ | 5,000   | 
|                                                                                                       |  |                              |          
|Secured Second Lien Debt  1.5%                                                                        |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  1.5%                                                                           |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Term Debt (10.0%, Due 8/2019)(L)                                     |  | $                            | 5,000     |  |      | $ | 5,000   |            |  | $ | 5,000   | 
|                                                                                                       |  |                              |          
|Preferred Equity  0.7%                                                                                |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  0.7%                                                                           |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Preferred
Stock(C)(L)                                                |  |                              | 5,517,444 |  |      | $ | 11,464  |            |  | $ | 2,118   | 
|                                                                                                       |  |                              |          
|Common Equity  0.0%                                                                                   |  |                              |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  0.0%                                                                           |  |                              |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Common
Stock(C)(L)                                                   |  |                              | 88,843    |  |      | $ | 48      |            |  | $ |        | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|Total Control Investments                                                                              |  |                              |           |  |      | $ | 21,512  |            |  | $ | 12,118  | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 
|TOTAL INVESTMENTS  158.3%                                                                             |  |                              |           |  |      | $ | 534,372 |            |  | $ | 520,174 | 
|                                                                                                       |  |                              |           |  |      |   |         |            |  |   |         | 











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



10



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2017

(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 $451.8 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, 2017,
our investment in AquaVenture Holdings Limited (AquaVenture) is considered a non-qualifying asset under Section 55 of the 1940 Act and represents 0.2% of total investments, at fair value.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Interest rate percentages represent the cash interest rates in effect at September 30, 2017, and due date represents the contractual maturity date. Unless indicated otherwise, all cash interest rates are indexed to
30-day London Interbank Offered Rate, which was 1.2% as of September 30, 2017. If applicable, paid-in-kind interest rates
are noted separately from the cash interest rates.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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, 2017.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

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

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

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

|(H) | $5.1 million of the debt security was participated to a third party, but is accounted for as collateral for a secured borrowing under accounting principles generally accepted in the U.S. and presented as Secured
borrowing on our accompanying Consolidated Statements of Assets and Liabilitiesas of September 30, 2017.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 Standard & Poors Securities Evaluations, Inc. Refer to Note 3Investments in the accompanying Notes
to Consolidated Financial Statements for additional information.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(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) | Fair value was based on the closing market price of our shares as of the reporting date. AquaVenture is traded on the New York Stock Exchange under the trading symbol WAAS.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(U) | As of September 30, 2017, our investment in AquaVenture was valued using Level 1 inputs within the ASC 820 fair value hierarchy. Refer to Note 3Investments in the accompanying Notes to
Consolidated Financial Statements for additional information.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(V) | Refer to Note 10Commitments and Contingencies in the accompanyingNotes to Consolidated Financial Statements for additional information regarding this guaranty.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



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



11



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

MARCH 31, 2017

(DOLLAR AMOUNTS IN THOUSANDS)



|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|--------------------------------------------------------------------------------------------- |  | ------------------------------ | --------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                            |  | Principal/Shares/  Units(F)(J) |           |  | Cost |   |         | Fair Value | 
|                                                                                              |  |                                |          
|NON-CONTROL/NON-AFFILIATE
INVESTMENTS(N)  74.2%                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  36.1%                                                               |  |                                |           |  |      |   |         |            |  |   |         | 
|Chemicals, Plastics, and Rubber  3.3%                                                        |  |                                |           |  |      |   |         |            |  |   |         | 
|Drew Foam Companies, Inc.  Term Debt (13.5%, Due 8/2017)(L)                                  |  | $                              | 9,913     |  |      | $ | 9,913   |            |  | $ | 9,913   | 
|                                                                                              |  |                                |          
|Containers, Packaging, and Glass  3.2%                                                       |  |                                |           |  |      |   |         |            |  |   |         | 
|Frontier Packaging, Inc.  Term Debt (12.0%, Due 12/2019)(L)                                  |  |                                | 9,500     |  |      |   | 9,500   |            |  |   | 9,500   | 
|                                                                                              |  |                                |          
|Diversified/Conglomerate Services  12.2%                                                     |  |                                |           |  |      |   |         |            |  |   |         | 
|Counsel Press, Inc.  Line of Credit, $500 available (12.8% (1.0% Unused Fee), Due 3/2018)(L) |  |                                |          |  |      |   |        |            |  |   |        | 
|Counsel Press, Inc.  Term Debt (12.8%, Due 3/2020)(L)                                        |  |                                | 18,000    |  |      |   | 18,000  |            |  |   | 18,000  | 
|Counsel Press, Inc.  Term Debt (14.0%, Due 3/2020)(L)                                        |  |                                | 5,500     |  |      |   | 5,500   |            |  |   | 5,500   | 
|Nth Degree, Inc.  Term Debt (12.5%, Due
12/2020)(L)                                          |  |                                | 13,290    |  |      |   | 13,290  |            |  |   | 13,290  | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|                                                                                              |  |                                |           |  |      |   | 36,790  |            |  |   | 36,790  | 
|                                                                                              |  |                                |          
|Farming and Agriculture  5.2%                                                                |  |                                |           |  |      |   |         |            |  |   |         | 
|Jackrabbit, Inc.  Term Debt (13.5%, Due
4/2018)(L)                                           |  |                                | 11,000    |  |      |   | 11,000  |            |  |   | 11,000  | 
|Star Seed, Inc.  Term Debt (12.5%, Due
5/2018)(K)                                            |  |                                | 5,000     |  |      |   | 5,000   |            |  |   | 4,675   | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|                                                                                              |  |                                |           |  |      |   | 16,000  |            |  |   | 15,675  | 
|                                                                                              |  |                                |          
|Leisure, Amusement, Motion Pictures, and Entertainment  4.3%                                 |  |                                |           |  |      |   |         |            |  |   |         | 
|Schylling, Inc.  Term Debt (13.0%, Due
8/2018)(L)                                            |  |                                | 13,081    |  |      |   | 13,081  |            |  |   | 13,081  | 
|                                                                                              |  |                                |          
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  5.7%                      |  |                                |           |  |      |   |         |            |  |   |         | 
|Mathey Investments, Inc.  Term Debt (10.0%, Due 3/2018)(L)                                   |  |                                | 1,375     |  |      |   | 1,375   |            |  |   | 1,375   | 
|Mathey Investments, Inc.  Term Debt (12.0%, Due 3/2018)(L)                                   |  |                                | 3,727     |  |      |   | 3,727   |            |  |   | 3,727   | 
|Mathey Investments, Inc.  Term Debt (12.5%, Due 3/2018)(I)(L)                                |  |                                | 3,500     |  |      |   | 3,500   |            |  |   | 1,619   | 
|SBS Industries, LLC  Term Debt (14.0%, Due 8/2019)(L)                                        |  |                                | 11,355    |  |      |   | 11,355  |            |  |   | 10,561  | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|                                                                                              |  |                                |           |  |      |   | 19,957  |            |  |   | 17,282  | 
|                                                                                              |  |                                |          
|Oil and Gas  0.7%                                                                            |  |                                |           |  |      |   |         |            |  |   |         | 
|Tread Corporation  Line of Credit, $634 available (12.5%, Due 2/2018)(G)(L)                  |  |                                | 3,216     |  |      |   | 3,216   |            |  |   | 2,017   | 
|                                                                                              |  |                                |          
|Personal, Food, and Miscellaneous Services  1.5%                                             |  |                                |           |  |      |   |         |            |  |   |         | 
|B-Dry, LLC  Line of Credit, $500 available (7.3%
(0.8% Unused Fee), Due 12/2018)(L)          |  |                                | 4,150     |  |      |   | 4,150   |            |  |   | 4,150   | 
|B-Dry, LLC  Term Debt (1.5%, Due 12/2019)(L)                                                 |  |                                | 6,443     |  |      |   | 6,443   |            |  |   | 205     | 
|B-Dry, LLC  Term Debt (1.5%, Due 12/2019)(L)                                                 |  |                                | 840       |  |      |   | 840     |            |  |   |        | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|                                                                                              |  |                                |           |  |      |   | 11,433  |            |  |   | 4,355   | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|Total Secured First Lien Debt                                                                 |  |                                |           |  |      | $ | 119,890 |            |  | $ | 108,613 | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|                                                                                              |  |                                |          
|Secured Second Lien Debt  15.2%                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|Automobile  1.3%                                                                             |  |                                |           |  |      |   |         |            |  |   |         | 
|Country Club Enterprises, LLC  Term Debt (18.7%, Due 5/2017)(L)                              |  | $                              | 4,000     |  |      | $ | 4,000   |            |  | $ | 4,000   | 
|                                                                                              |  |                                |          
|Cargo Transport  4.4%                                                                        |  |                                |           |  |      |   |         |            |  |   |         | 
|Diligent Delivery Systems  Term Debt (10.0%, Due 8/2020)(K)                                  |  |                                | 13,000    |  |      |   | 13,000  |            |  |   | 13,292  | 
|                                                                                              |  |                                |          
|Chemicals, Plastics, and Rubber  5.1%                                                        |  |                                |           |  |      |   |         |            |  |   |         | 
|Mitchell Rubber Products, Inc.  Term Debt (13.0%, Due 3/2018)(I)(Q)                          |  |                                | 13,560    |  |      |   | 13,560  |            |  |   | 15,230  | 
|                                                                                              |  |                                |          
|Home and Office Furnishings, Housewares, and Durable Consumer Products  4.4%                 |  |                                |           |  |      |   |         |            |  |   |         | 
|Ginsey Home Solutions, Inc.  Term Debt (13.0%, Due 3/2018)(H)(L)                             |  |                                | 13,300    |  |      |   | 13,300  |            |  |   | 13,300  | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|Total Secured Second Lien Debt                                                                |  |                                |           |  |      | $ | 43,860  |            |  | $ | 45,822  | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|                                                                                              |  |                                |          
|Preferred Equity  14.7%                                                                      |  |                                |           |  |      |   |         |            |  |   |         | 
|Automobile  1.7%                                                                             |  |                                |           |  |      |   |         |            |  |   |         | 
|Country Club Enterprises, LLC  Preferred
Stock(C)(L)                                         |  |                                | 7,245,681 |  |      | $ | 7,725   |            |  | $ | 5,256   | 
|Country Club Enterprises, LLC  Guaranty
($2,000)(V)                                          |  |                                |          |  |      |   |        |            |  |   |        | 
|                                                                                              |  |                                |           |  |      |   |         |            |  |   |         | 
|                                                                                              |  |                                |           |  |      |   | 7,725   |            |  |   | 5,256   | 



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



12



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2017

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                                                              |  |                                |            |   |      |   |        |            |  |   |        | 
|----------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ---- | - | ------ | ---------- |  | - | ------ | 
|Company and Investment(A)(B)(D)(E)                                            |  | Principal/Shares/  Units(F)(J) |            |   | Cost |   |        | Fair Value | 
|                                                                              |  |                                |           
|Chemicals, Plastics, and Rubber  2.6%                                        |  |                                |            |   |      |   |        |            |  |   |        | 
|Drew Foam Companies, Inc.  Preferred
Stock(C)(L)                             |  |                                | 34,045     |   |      | $ | 3,375  |            |  | $ | 3,878  | 
|Mitchell Rubber Products, Inc.  Preferred
Stock(C)(Q)                        |  |                                | 27,900     |   |      |   | 2,790  |            |  |   | 3,903  | 
|                                                                              |  |                                |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                                |            |   |      |   | 6,165  |            |  |   | 7,781  | 
|                                                                              |  |                                |           
|Containers, Packaging, and Glass  0.5%                                       |  |                                |            |   |      |   |        |            |  |   |        | 
|Frontier Packaging, Inc.  Preferred
Stock(C)(L)                              |  |                                | 1,373      |   |      |   | 1,373  |            |  |   | 1,401  | 
|                                                                              |  |                                |           
|Diversified/Conglomerate Services  6.2%                                      |  |                                |            |   |      |   |        |            |  |   |        | 
|Counsel Press, Inc.  Preferred
Stock(C)(L)                                   |  |                                | 6,995      |   |      |   | 6,995  |            |  |   | 6,117  | 
|Nth Degree, Inc.  Preferred
Stock(C)(L)                                      |  |                                | 5,660      |   |      |   | 5,660  |            |  |   | 12,471 | 
|                                                                              |  |                                |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                                |            |   |      |   | 12,655 |            |  |   | 18,588 | 
|                                                                              |  |                                |           
|Farming and Agriculture  1.1%                                                |  |                                |            |   |      |   |        |            |  |   |        | 
|Jackrabbit, Inc.  Preferred
Stock(C)(L)                                      |  |                                | 3,556      |   |      |   | 3,556  |            |  |   | 3,421  | 
|Star Seed, Inc.  Preferred
Stock(C)(L)                                       |  |                                | 1,499      |   |      |   | 1,499  |            |  |   |       | 
|                                                                              |  |                                |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                                |            |   |      |   | 5,055  |            |  |   | 3,421  | 
|                                                                              |  |                                |           
|Home and Office Furnishings, Housewares, and Durable Consumer Products  2.4% |  |                                |            |   |      |   |        |            |  |   |        | 
|Ginsey Home Solutions, Inc.  Preferred
Stock(C)(L)                           |  |                                | 19,280     |   |      |   | 9,583  |            |  |   | 7,176  | 
|                                                                              |  |                                |           
|Leisure, Amusement, Motion Pictures, and Entertainment  0.1%                 |  |                                |            |   |      |   |        |            |  |   |        | 
|Schylling, Inc.  Preferred
Stock(C)(L)                                       |  |                                | 4,000      |   |      |   | 4,000  |            |  |   | 262    | 
|                                                                              |  |                                |           
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  0.0%      |  |                                |            |   |      |   |        |            |  |   |        | 
|SBS Industries, LLC  Preferred
Stock(C)(L)                                   |  |                                | 19,935     |   |      |   | 1,994  |            |  |   |       | 
|                                                                              |  |                                |           
|Oil and Gas  0.0%                                                            |  |                                |            |   |      |   |        |            |  |   |        | 
|Tread Corporation  Preferred
Stock(C)(L)                                     |  |                                | 12,998,639 |   |      |   | 3,768  |            |  |   |       | 
|                                                                              |  |                                |           
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.1%        |  |                                |            |   |      |   |        |            |  |   |        | 
|Funko Acquisition Holdings, LLC(M) 
Preferred Stock(C)(L)                    |  |                                | 260        |   |      |   | 167    |            |  |   | 257    | 
|                                                                              |  |                                |           
|Personal, Food, and Miscellaneous Services  0.0%                             |  |                                |            |   |      |   |        |            |  |   |        | 
|B-Dry, LLC  Preferred Stock(C)(L)                                            |  |                                | 2,500      |   |      |   | 2,516  |            |  |   |       | 
|                                                                              |  |                                |            |   |      |   |        |            |  |   |        | 
|Total Preferred Equity                                                        |  |                                |            |   |      | $ | 55,001 |            |  | $ | 44,142 | 
|                                                                              |  |                                |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                                |           
|Common Equity  8.2%                                                          |  |                                |            |   |      |   |        |            |  |   |        | 
|Cargo Transport  0.9%                                                        |  |                                |            |   |      |   |        |            |  |   |        | 
|Diligent Delivery Systems  Common Stock
Warrants(C)(L)                       |  |                                | 8          | % |      | $ | 500    |            |  | $ | 2,598  | 
|                                                                              |  |                                |           
|Chemicals, Plastics, and Rubber  3.8%                                        |  |                                |            |   |      |   |        |            |  |   |        | 
|Drew Foam Companies, Inc.  Common
Stock(C)(L)                                |  |                                | 5,372      |   |      |   | 63     |            |  |   | 11,451 | 
|Mitchell Rubber Products, Inc.  Common
Stock(C)(Q)                           |  |                                | 27,900     |   |      |   | 28     |            |  |   | 28     | 
|                                                                              |  |                                |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                                |            |   |      |   | 91     |            |  |   | 11,479 | 
|                                                                              |  |                                |           
|Containers, Packaging, and Glass  2.4%                                       |  |                                |            |   |      |   |        |            |  |   |        | 
|Frontier Packaging, Inc.  Common
Stock(C)(L)                                 |  |                                | 152        |   |      |   | 152    |            |  |   | 7,364  | 
|                                                                              |  |                                |           
|Farming and Agriculture  0.0%                                                |  |                                |            |   |      |   |        |            |  |   |        | 
|Jackrabbit, Inc.  Common
Stock(C)(L)                                         |  |                                | 548        |   |      |   | 94     |            |  |   |       | 
|Star Seed, Inc.  Common
Stock(C)(L)                                          |  |                                | 600        |   |      |   | 1      |            |  |   |       | 
|                                                                              |  |                                |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                                |            |   |      |   | 95     |            |  |   |       | 
|                                                                              |  |                                |           
|Home and Office Furnishings, Housewares, and Durable Consumer Products  0.0% |  |                                |            |   |      |   |        |            |  |   |        | 
|Ginsey Home Solutions, Inc.  Common
Stock(C)(L)                              |  |                                | 63,747     |   |      |   | 8      |            |  |   |       | 
|                                                                              |  |                                |           
|Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)  0.0%      |  |                                |            |   |      |   |        |            |  |   |        | 
|Mathey Investments, Inc.  Common
Stock(C)(L)                                 |  |                                | 29,102     |   |      |   | 777    |            |  |   |       | 
|SBS Industries, LLC  Common
Stock(C)(L)                                      |  |                                | 221,500    |   |      |   | 222    |            |  |   |       | 
|                                                                              |  |                                |            |   |      |   |        |            |  |   |        | 
|                                                                              |  |                                |            |   |      |   | 999    |            |  |   |       | 

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



13



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2017

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                                      |  | Principal/Shares/    Units(F)(J) |            |  | Cost |   |         | Fair Value | 
|                                                                                                        |  |                                  |           
|Oil and Gas  0.0%                                                                                      |  |                                  |            |  |      |   |         |            |  |   |         | 
|Tread Corporation  Common
Stock(C)(L)                                                                  |  |                                  | 10,089,048 |  |      | $ | 753     |            |  | $ |        | 
|                                                                                                        |  |                                  |           
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.0%                                  |  |                                  |            |  |      |   |         |            |  |   |         | 
|Funko Acquisition Holdings, LLC(M) 
Common Stock(C)(L)                                                 |  |                                  | 975        |  |      |   |        |            |  |   |        | 
|                                                                                                        |  |                                  |           
|Personal, Food, and Miscellaneous Services  0.0%                                                       |  |                                  |            |  |      |   |         |            |  |   |         | 
|B-Dry, LLC  Common Stock(C)(L)                                                                         |  |                                  | 2,500      |  |      |   | 300     |            |  |   |        | 
|                                                                                                        |  |                                  |           
|Utilities  1.1%                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|AquaVenture Holdings Limited  Common
Stock(C)(S)(U)                                                    |  |                                  | 201,586    |  |      |   | 3,397   |            |  |   | 3,433   | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                                     |  |                                  |            |  |      | $ | 6,295   |            |  | $ | 24,874  | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|Total
Non-Control/Non-Affiliate Investments                                                             |  |                                  |            |  |      | $ | 225,046 |            |  | $ | 223,451 | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                  |           
|AFFILIATE INVESTMENTS(O) 
87.1%                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  51.4%                                                                         |  |                                  |            |  |      |   |         |            |  |   |         | 
|Automobile  2.9%                                                                                       |  |                                  |            |  |      |   |         |            |  |   |         | 
|Meridian Rack & Pinion, Inc.(M)
 Term Debt (13.5%, Due 12/2018)(K)                                     |  | $                                | 9,660      |  |      | $ | 9,660   |            |  | $ | 8,646   | 
|                                                                                                        |  |                                  |           
|Beverage, Food, and Tobacco  3.0%                                                                      |  |                                  |            |  |      |   |         |            |  |   |         | 
|Head Country, Inc.  Term Debt (12.5%, Due
2/2019)(L)                                                   |  |                                  | 9,050      |  |      |   | 9,050   |            |  |   | 9,050   | 
|                                                                                                        |  |                                  |           
|Chemicals, Plastics, and Rubber  5.0%                                                                  |  |                                  |            |  |      |   |         |            |  |   |         | 
|GI Plastek, Inc.  Term Debt (13.3%, Due
7/2020)(L)                                                     |  |                                  | 15,000     |  |      |   | 15,000  |            |  |   | 15,000  | 
|                                                                                                        |  |                                  |           
|Diversified/Conglomerate Manufacturing  9.7%                                                           |  |                                  |            |  |      |   |         |            |  |   |         | 
|Alloy Die Casting Co.(M)  Term Debt
(13.5%, Due 10/2018)(G)(K)                                         |  |                                  | 12,215     |  |      |   | 12,215  |            |  |   | 9,772   | 
|Alloy Die Casting Co.(M)  Term Debt
(13.5%, Due 10/2018)(G)(K)                                         |  |                                  | 175        |  |      |   | 175     |            |  |   | 140     | 
|Alloy Die Casting Co.(M)  Term Debt (Due
10/2018)(K)(R)                                                |  |                                  | 910        |  |      |   | 910     |            |  |   | 732     | 
|D.P.M.S., Inc.  Term Debt (10.0%, Due
10/2021)(I)(L)                                                   |  |                                  | 8,796      |  |      |   | 8,796   |            |  |   | 7,175   | 
|Edge Adhesives Holdings, Inc.(M)  Term
Debt (12.5%, Due 2/2019)(K)                                     |  |                                  | 9,300      |  |      |   | 9,300   |            |  |   | 9,207   | 
|Edge Adhesives Holdings, Inc.(M)  Term
Debt (13.8%, Due 2/2019)(K)                                     |  |                                  | 2,400      |  |      |   | 2,400   |            |  |   | 2,388   | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                  |            |  |      |   | 33,796  |            |  |   | 29,414  | 
|                                                                                                        |  |                                  |           
|Diversified/Conglomerate Services  8.0%                                                                |  |                                  |            |  |      |   |         |            |  |   |         | 
|JR Hobbs Co.  Atlanta, LLC  Line of Credit, $1,050 available (10.0% (1.0% Unused Fee),
Due 2/2018)(T) |  |                                  | 2,950      |  |      |   | 2,950   |            |  |   | 2,950   | 
|JR Hobbs Co.  Atlanta, LLC  Term Debt (13.0%, Due 2/2022)(T)                                          |  |                                  | 21,000     |  |      |   | 21,000  |            |  |   | 21,000  | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                  |            |  |      |   | 23,950  |            |  |   | 23,950  | 
|                                                                                                        |  |                                  |           
|Home and Office Furnishings, Housewares, and Durable Consumer Products  9.0%                           |  |                                  |            |  |      |   |         |            |  |   |         | 
|Brunswick Bowling Products, Inc.  Term Debt (16.3%, Due 5/2020)(L)                                     |  |                                  | 11,307     |  |      |   | 11,307  |            |  |   | 11,307  | 
|Old World Christmas, Inc.  Term Debt (13.3%, Due 10/2019)(L)                                           |  |                                  | 15,770     |  |      |   | 15,770  |            |  |   | 15,770  | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                  |            |  |      |   | 27,077  |            |  |   | 27,077  | 
|                                                                                                        |  |                                  |           
|Leisure, Amusement, Motion Pictures, and Entertainment  6.1%                                           |  |                                  |            |  |      |   |         |            |  |   |         | 
|SOG Specialty Knives & Tools, LLC  Term Debt (13.3%, Due 10/2017)(L)                                   |  |                                  | 6,200      |  |      |   | 6,200   |            |  |   | 6,200   | 
|SOG Specialty Knives & Tools, LLC  Term Debt (14.8%, Due 10/2017)(L)                                   |  |                                  | 12,200     |  |      |   | 12,200  |            |  |   | 12,200  | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|                                                                                                        |  |                                  |            |  |      |   | 18,400  |            |  |   | 18,400  | 
|                                                                                                        |  |                                  |           
|Telecommunications  4.6%                                                                               |  |                                  |            |  |      |   |         |            |  |   |         | 
|B+T Group Acquisition, Inc.(M)  Term
Debt (13.0%, Due 12/2019)(L)                                      |  |                                  | 14,000     |  |      |   | 14,000  |            |  |   | 14,000  | 
|                                                                                                        |  |                                  |           
|Textiles and Leather  3.1%                                                                             |  |                                  |            |  |      |   |         |            |  |   |         | 
|Logo Sportswear, Inc.  Term Debt (12.5%, Due 3/2020)(L)                                                |  |                                  | 9,200      |  |      |   | 9,200   |            |  |   | 9,200   | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 
|Total Secured First Lien Debt                                                                           |  |                                  |            |  |      | $ | 160,133 |            |  | $ | 154,737 | 
|                                                                                                        |  |                                  |            |  |      |   |         |            |  |   |         | 

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



14



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2017

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|----------------------------------------------------------------------------- |  | -------------------------------- | ------ |  | ---- | - | ------ | ---------- |  | - | ------ | 
|Company and Investment(A)(B)(D)(E)                                            |  | Principal/Shares/    Units(F)(J) |        |  | Cost |   |        | Fair Value | 
|                                                                              |  |                                  |       
|Secured Second Lien Debt  14.7%                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|Diversified/Conglomerate Manufacturing  3.2%                                 |  |                                  |        |  |      |   |        |            |  |   |        | 
|Precision Southeast, Inc.  Term Debt (14.0%, Due 9/2020)(L)                  |  | $                                | 9,618  |  |      | $ | 9,618  |            |  | $ | 9,618  | 
|                                                                              |  |                                  |       
|Home and Office Furnishings, Housewares, and Durable Consumer Products  5.3% |  |                                  |        |  |      |   |        |            |  |   |        | 
|Cambridge Sound Management, Inc.  Term Debt (13.0%, Due 8/2021)(L)           |  |                                  | 16,000 |  |      |   | 16,000 |            |  |   | 16,000 | 
|                                                                              |  |                                  |       
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  6.2%        |  |                                  |        |  |      |   |        |            |  |   |        | 
|The Mountain Corporation  Term Debt (13.5%, Due 8/2021)(L)                   |  |                                  | 18,600 |  |      |   | 18,600 |            |  |   | 18,600 | 
|                                                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|                                                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|Total Secured Second Lien Debt                                                |  |                                  |        |  |      | $ | 44,218 |            |  | $ | 44,218 | 
|                                                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|Preferred Equity 
21.0%                                                      |  |                                  |        |  |      |   |        |            |  |   |        | 
|Automobile  1.0%                                                             |  |                                  |        |  |      |   |        |            |  |   |        | 
|Meridian Rack & Pinion, Inc.(M)
 Preferred Stock(C)(L)                       |  |                                  | 3,381  |  |      | $ | 3,381  |            |  | $ | 2,890  | 
|                                                                              |  |                                  |       
|Beverage, Food, and Tobacco  1.9%                                            |  |                                  |        |  |      |   |        |            |  |   |        | 
|Head Country, Inc.  Preferred
Stock(C)(L)                                    |  |                                  | 4,000  |  |      |   | 4,000  |            |  |   | 5,752  | 
|                                                                              |  |                                  |       
|Cargo Transport  0.0%                                                        |  |                                  |        |  |      |   |        |            |  |   |        | 
|NDLI, Inc.  Preferred
Stock(C)(L)                                            |  |                                  | 3,600  |  |      |   | 3,600  |            |  |   |       | 
|                                                                              |  |                                  |       
|Chemicals, Plastics, and Rubber  1.9%                                        |  |                                  |        |  |      |   |        |            |  |   |        | 
|GI Plastek, Inc.  Preferred
Stock(C)(L)                                      |  |                                  | 5,150  |  |      |   | 5,150  |            |  |   | 5,754  | 
|                                                                              |  |                                  |       
|Diversified/Conglomerate Manufacturing  0.4%                                 |  |                                  |        |  |      |   |        |            |  |   |        | 
|Alloy Die Casting Co.(M)  Preferred
Stock(C)(L)                              |  |                                  | 4,904  |  |      |   | 4,904  |            |  |   |       | 
|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  |            |  |   | 1,271  | 
|Precision Southeast, Inc.  Preferred
Stock(C)(L)                             |  |                                  | 37,391 |  |      |   | 3,739  |            |  |   |       | 
|                                                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|                                                                              |  |                                  |        |  |      |   | 14,258 |            |  |   | 1,271  | 
|                                                                              |  |                                  |       
|Diversified/Conglomerate Services  2.0%                                      |  |                                  |        |  |      |   |        |            |  |   |        | 
|JR Hobbs Co.  Atlanta, LLC  Preferred
Stock(C)(T)                           |  |                                  | 5,920  |  |      |   | 5,920  |            |  |   | 5,920  | 
|                                                                              |  |                                  |       
|Home and Office Furnishings, Housewares, and Durable Consumer Products  9.8% |  |                                  |        |  |      |   |        |            |  |   |        | 
|Brunswick Bowling Products, Inc.  Preferred
Stock(C)(L)                      |  |                                  | 4,943  |  |      |   | 4,943  |            |  |   | 11,329 | 
|Cambridge Sound Management, Inc.  Preferred
Stock(C)(L)                      |  |                                  | 4,500  |  |      |   | 4,500  |            |  |   | 11,046 | 
|Old World Christmas, Inc.  Preferred
Stock(C)(L)                             |  |                                  | 6,180  |  |      |   | 6,180  |            |  |   | 7,135  | 
|                                                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|                                                                              |  |                                  |        |  |      |   | 15,623 |            |  |   | 29,510 | 
|                                                                              |  |                                  |       
|Leisure, Amusement, Motion Pictures, and Entertainment  0.2%                 |  |                                  |        |  |      |   |        |            |  |   |        | 
|SOG Specialty Knives & Tools, LLC  Preferred Stock(C)(L)                     |  |                                  | 9,749  |  |      |   | 9,749  |            |  |   | 711    | 
|                                                                              |  |                                  |       
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.1%        |  |                                  |        |  |      |   |        |            |  |   |        | 
|The Mountain Corporation  Preferred
Stock(C)(L)                              |  |                                  | 6,899  |  |      |   | 6,899  |            |  |   | 153    | 
|                                                                              |  |                                  |       
|Telecommunications  0.0%                                                     |  |                                  |        |  |      |   |        |            |  |   |        | 
|B+T Group Acquisition, Inc.(M) 
Preferred Stock(C)(L)                        |  |                                  | 12,841 |  |      |   | 4,196  |            |  |   |       | 
|                                                                              |  |                                  |       
|Textiles and Leather  3.7%                                                   |  |                                  |        |  |      |   |        |            |  |   |        | 
|Logo Sportswear, Inc.  Preferred
Stock(C)(L)                                 |  |                                  | 1,550  |  |      |   | 1,550  |            |  |   | 11,170 | 
|                                                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|                                                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|Total Preferred Equity                                                        |  |                                  |        |  |      | $ | 74,326 |            |  | $ | 63,131 | 
|                                                                              |  |                                  |        |  |      |   |        |            |  |   |        | 
|                                                                              |  |                                  |       
|Common Equity  0.0%                                                          |  |                                  |        |  |      |   |        |            |  |   |        | 
|Cargo Transport  0.0%                                                        |  |                                  |        |  |      |   |        |            |  |   |        | 
|NDLI, Inc.  Common Stock(C)(L)                                               |  |                                  | 545    |  |      | $ |       |            |  | $ |       | 

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



15



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2017

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|-------------------------------------------------------------------------------------------------------- |  | --------------------------------- | --------- |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company and Investment(A)(B)(D)(E)                                                                       |  | Principal/Shares/     Units(F)(J) |           |  | Cost |   |         | Fair Value | 
|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       |            |  |   |        | 
|Precision Southeast, Inc.  Common
Stock(C)(L)                                                           |  |                                   | 90,909    |  |      |   | 91      |            |  |   |        | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|                                                                                                         |  |                                   |           |  |      |   | 133     |            |  |   |        | 
|Personal and Non-Durable Consumer Products
(Manufacturing Only)  0.0%                                   |  |                                   |           |  |      |   |         |            |  |   |         | 
|The Mountain Corporation  Common
Stock(C)(L)                                                            |  |                                   | 751       |  |      |   | 1       |            |  |   |        | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|Total Common Equity                                                                                      |  |                                   |           |  |      | $ | 134     |            |  | $ |        | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|Total Affiliate Investments                                                                              |  |                                   |           |  |      | $ | 278,811 |            |  | $ | 262,086 | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|                                                                                                         |  |                                   |          
|CONTROL INVESTMENTS(P) 
5.3%:                                                                           |  |                                   |           |  |      |   |         |            |  |   |         | 
|Secured First Lien Debt  1.6%                                                                           |  |                                   |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  1.6%                                                                             |  |                                   |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Line of Credit, $200 available (6.5% (1.0% Unused Fee), Due
8/2019)(L) |  | $                                 | 4,800     |  |      | $ | 4,800   |            |  | $ | 4,800   | 
|                                                                                                         |  |                                   |          
|Secured Second Lien Debt  1.7%                                                                          |  |                                   |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  1.7%                                                                             |  |                                   |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Term Debt (10.0%, Due 8/2019)(L)                                       |  | $                                 | 5,000     |  |      | $ | 5,000   |            |  | $ | 5,000   | 
|                                                                                                         |  |                                   |          
|Preferred Equity  2.0%                                                                                  |  |                                   |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  2.0%                                                                             |  |                                   |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Preferred
Stock(C)(L)                                                  |  |                                   | 5,517,444 |  |      | $ | 11,464  |            |  | $ | 6,242   | 
|                                                                                                         |  |                                   |          
|Common Equity  0.0%                                                                                     |  |                                   |           |  |      |   |         |            |  |   |         | 
|Aerospace and Defense  0.0%                                                                             |  |                                   |           |  |      |   |         |            |  |   |         | 
|Galaxy Tool Holding Corporation  Common
Stock(C)(L)                                                     |  |                                   | 88,843    |  |      | $ | 48      |            |  | $ |        | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|Total Control Investments                                                                                |  |                                   |           |  |      | $ | 21,312  |            |  | $ | 16,042  | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 
|TOTAL INVESTMENTS(W) 
166.6%                                                                            |  |                                   |           |  |      | $ | 525,169 |            |  | $ | 501,579 | 
|                                                                                                         |  |                                   |           |  |      |   |         |            |  |   |         | 







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



16



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2017

(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 $448.0 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, 2017, our
investment in AquaVenture Holdings Limited (AquaVenture) is considered a non-qualifying asset under Section 55 of the 1940 Act and represents 0.7% of total investments, at fair value.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Interest rate percentages represent the cash interest rates in effect at March 31, 2017, and due date represents the contractual maturity date. Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate, which was 1.0% as of March 31, 2017. If applicable, paid-in-kind interest rates are noted
separately from the cash interest rates.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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, 2017.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

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

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

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

|(H) | $5.1 million of the debt security was participated to a third party, but is accounted for as collateral for a secured borrowing under accounting principles generally accepted in the U.S. and presented as Secured
borrowing on our accompanying Consolidated Statements of Assets and Liabilitiesas of March 31, 2017.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 Standard & 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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) | Fair value was based on the closing market price of our shares as of the reporting date less a discount for lack of marketability.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(T) | New portfolio investment valued at cost, as it was determined that the price paid during the three months ended March 31, 2017 best represents fair value as of March 31, 2017.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(U) | As of March 31, 2017, our investment in AquaVenture was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Refer to Note 3Investments in the accompanying Notes to
Consolidated Financial Statements for additional information.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(W) | Cumulative gross unrealized depreciation for federal income tax purposes is $77.9 million; cumulative gross unrealized appreciation for federal income tax purposes is $58.3 million. Cumulative net unrealized
depreciation is $19.5 million, based on a tax cost of $521.1 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



17



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

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

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, 2017 are not necessarily indicative of results that ultimately may be achieved for the fiscal year ending March 31, 2018 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, 2017, as filed with the SEC on
May 15, 2017.



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Use of Estimates

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

Reclassifications

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

Investment Valuation Policy

Accounting Recognition

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

Board
Responsibility

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

Standard & Poors Securities Evaluation, Inc. (SPSE), a valuation specialist, generally provides estimates of fair value on our
debt investments. The Valuation Team generally assigns SPSEs estimates of fair value to our debt investments where we do not have the ability to effectuate a sale of the applicable portfolio company. The Valuation Team corroborates SPSEs
estimates of fair value using one or more of the valuation techniques discussed below. The Valuation Teams estimate of value on a specific debt investment may significantly differ from SPSEs. When this occurs, 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 our valuation
of our significant equity investments, which includes providing the information noted above. The Valuation Team evaluates such information for incorporation into our TEV, including review of all inputs provided by the independent valuation
firm. The Valuation Team then makes a recommendation to our Valuation Committee and Board of Directors as to the fair value. Our Board of Directors reviews the recommended fair value and whether it is reasonable in light of the Policy and
other relevant facts and circumstances and then votes to accept or reject the Valuation Teams recommended fair value.



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Valuation Techniques

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



| |  |  | Total Enterprise Value  In determining the fair value using a TEV, the Valuation Team first calculates the TEV of the portfolio company by incorporating some or all of the following factors: the portfolio
companys ability to make payments and other specific portfolio company attributes; the earnings of the portfolio company (the trailing or projected twelve month revenue or earnings before interest, taxes, depreciation and amortization
(EBITDA)); EBITDA or revenue multiples obtained from our indexing methodology whereby the original transaction EBITDA or revenue multiple at the time of our closing is indexed to a general subset of comparable disclosed transactions and
EBITDA or revenue multiples from recent sales to third parties of similar securities in similar industries; a comparison to publicly traded securities in similar industries, 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 or revenue multiples; however, TEV may also be calculated using a discounted cash flow (DCF) analysis whereby future expected cash flows of the portfolio company are discounted to determine a net
present value using estimated risk-adjusted discount rates, which incorporate adjustments for nonperformance and liquidity risks. Generally, the Valuation Team uses the DCF to calculate TEV to corroborate estimates of value for our equity
investments where we do not have the ability to effectuate a sale of a portfolio company or for debt of credit impaired portfolio companies.



| |  |  | Yield Analysis  The Valuation Team generally determines the fair value of our debt investments (where we do not have the ability to effectuate a sale of a portfolio company) using the yield analysis, which
includes a DCF calculation and the 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 SPSE and market quotes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

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



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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 Advisers 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 Advisers determinations regarding the fair value of our investments are materially different from the values that we ultimately realize upon our disposal of such securities. 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,
2017, certain of our loans to Alloy Die Cast Co. (Alloy Die Casting), Precision Southeast, Inc., and Tread Corporation (Tread) were on non-accrual status, with an aggregate debt cost
basis of $25.2 million, or 6.5% of the cost basis of all debt investments in our portfolio, and an aggregate fair value of $20.6 million, or 5.7% of the fair value of all debt investments in our portfolio. As of March 31, 2017,
certain of our loans to Alloy Die Casting and Tread were on non-accrual status, with an aggregate debt cost basis of $15.6 million, or 4.1% of the cost basis of all debt investments in our portfolio, and
an aggregate fair value of $11.9 million, or 3.3% 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, 2017 and March 31, 2017, we did not have any loans with a PIK interest component. During the three and six months ended September 30, 2017 and 2016, we did not record any PIK income, nor did we collect any PIK interest
in cash.

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.

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. See Note 5  BorrowingsandNote 6  Mandatorily Redeemable Preferred
Stock for further discussion.

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).



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We are also party to the Administration Agreement with the Administrator, which is also owned and controlled by
our chairman and chief executive officer, whereby we pay separately for administrative services. These fees are accrued when the services are performed and generally paid one month in arrears.

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

Recent Accounting Pronouncements

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

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

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

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

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

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from
Contracts with Customers (ASU 2014-09), which was amended in March 2016 by FASB Accounting Standards Update 2016-08, Principal versus
Agent Considerations (ASU 2016-08), in April 2016 by FASB Accounting Standards Update 2016-10, Identifying Performance Obligations and
Licensing(ASU 2016-10), in May 2016 by FASB Accounting Standards Update 2016-12, Narrow-Scope Improvements and Practical Expedients(ASU 2016-12), and in December 2016 by FASB Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606(ASU 2016-20). ASU 2014-09, as amended, supersedes or replaces nearly all GAAP revenue recognition guidance. The new guidance establishes a new
control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time and will expand disclosures about revenue. In July 2015, the FASB issued Accounting Standards Update 2015-14, Deferral of the Effective Date, which deferred the effective date of ASU 2014-09.



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ASU 2014-09, as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20, is now effective for annual reporting periods beginning after December 15, 2017 and interim
periods within those years, with early adoption permitted for annual reporting periods beginning after December 15, 2016 and interim periods within those years. We continue to assess the impact of ASU
2014-09, as amended, and expect to identify similar performance obligations as compared to existing guidance. As a result, we do not anticipate a material change in the timing of revenue recognition or a
material impact on our financial position, results of operations, or cash flows from adopting this standard.

NOTE 3. INVESTMENTS

Fair Value

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



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



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



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

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

As of September 30, 2017 and March 31, 2017, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy,
except for our investment in AquaVenture Holdings Limited, f/k/a Quench Holdings Corp., (AquaVenture), which was valued using Level 1 inputs as of September 30, 2017 and Level 2 inputs as of March 31, 2017.

We transfer investments in and out of Level 1, 2 and 3 securities 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. In April 2017, we transferred our investment in AquaVenture from Level 2 to Level 1 as a result of the expiration of the lock-up
period in connection with AquaVentures initial public offering in October 2016. There were no transfers in or out of Level 1, 2 and 3 during the three and six months ended September 30, 2016.



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As of September 30, 2017 and March 31, 2017, our investments, by security type, at fair value were
categorized as follows within the ASC 820 fair value hierarchy:



|                                        |  |            |         |  |                                                             |   |       |                                            |  |   |                                        |  |  |   |         | 
|--------------------------------------- |  | ---------- | ------- |  | ----------------------------------------------------------- | - | ----- | ------------------------------------------ |  | - | -------------------------------------- |  |  | - | ------- | 
|                                        |  |            |         |  | Fair Value Measurements                                     |  
|                                        |  | Fair Value |         |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |       | Significant OtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level 3) | 
|As of September 30, 2017:               |  |            |         |  |                                                             |   |       |                                            |  |   |                                        |  |  |   |         | 
|Secured first lien debt                 |  | $          | 288,526 |  |                                                             | $ |      |                                            |  | $ |                                       |  |  | $ | 288,526 | 
|Secured second lien debt                |  |            | 74,175  |  |                                                             |   |      |                                            |  |   |                                       |  |  |   | 74,175  | 
|Preferred equity                        |  |            | 125,895 |  |                                                             |   |      |                                            |  |   |                                       |  |  |   | 125,895 | 
|Common equity/equivalents               |  |            | 31,578  |  |                                                             |   | 1,127 | (A)                                        |  |   |                                       |  |  |   | 30,451  | 
|                                        |  |            |         |  |                                                             |   |       |                                            |  |   |                                        |  |  |   |         | 
|Total Investments at September 30, 2017 |  | $          | 520,174 |  |                                                             | $ | 1,127 |                                            |  | $ |                                       |  |  | $ | 519,047 | 
|                                        |  |            |         |  |                                                             |   |       |                                            |  |   |                                        |  |  |   |         | 



|                                    |  |            |         |  |                                                             |   |   |                                            |  |   |                                        |     |  |   |         | 
|----------------------------------- |  | ---------- | ------- |  | ----------------------------------------------------------- | - | - | ------------------------------------------ |  | - | -------------------------------------- | --- |  | - | ------- | 
|                                    |  |            |         |  | Fair Value Measurements                                     |  
|                                    |  | Fair Value |         |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | Significant OtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level 3) |    
|As of March 31, 2017:               |  |            |         |  |                                                             |   |   |                                            |  |   |                                        |     |  |   |         | 
|Secured first lien debt             |  | $          | 268,150 |  |                                                             | $ |  |                                            |  | $ |                                       |     |  | $ | 268,150 | 
|Secured second lien debt            |  |            | 95,040  |  |                                                             |   |  |                                            |  |   |                                       |     |  |   | 95,040  | 
|Preferred equity                    |  |            | 113,515 |  |                                                             |   |  |                                            |  |   |                                       |     |  |   | 113,515 | 
|Common equity/equivalents           |  |            | 24,874  |  |                                                             |   |  |                                            |  |   | 3,433                                  | (B) |  |   | 21,441  | 
|                                    |  |            |         |  |                                                             |   |   |                                            |  |   |                                        |     |  |   |         | 
|Total Investments at March 31, 2017 |  | $          | 501,579 |  |                                                             | $ |  |                                            |  | $ | 3,433                                  |     |  | $ | 498,146 | 
|                                    |  |            |         |  |                                                             |   |   |                                            |  |   |                                        |     |  |   |         | 



|(A) | Fair value was determined based on the closing market price of our shares at the reporting date.
|--- | ------------------------------------------------------------------------------------------------

|(B) | Fair value was determined based on the closing market price of our shares 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 April 2017.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table presents our portfolio investments, valued using Level 3 inputs within the ASC 820 fair
value hierarchy, and carried at fair value as of September 30, 2017 and March 31, 2017, by caption on our accompanying Consolidated Statements of Assets and Liabilities, and by security type:



|                                                     |  |                                                                                       |         |     |                |   |         |    
|---------------------------------------------------- |  | ------------------------------------------------------------------------------------- | ------- | --- | -------------- | - | ------- | ---
|                                                     |  | Total Recurring Fair
Value Measurements                                               |        
|                                                     |  | Reported inConsolidatedStatements of Assetsand LiabilitiesValued Using Level 3
Inputs |        
|                                                     |  | September 30, 2017                                                                    |         |     | March 31, 2017 |  
|Non-Control/Non-Affiliate
Investments                |  |                                                                                       |         |     |                |   |         |    
|Secured first lien debt                              |  | $                                                                                     | 112,513 |     |                | $ | 108,613 |    
|Secured second lien debt                             |  |                                                                                       | 30,300  |     |                |   | 45,822  |    
|Preferred equity                                     |  |                                                                                       | 47,091  |     |                |   | 44,142  |    
|Common equity/equivalents                            |  |                                                                                       | 30,451  | (A) |                |   | 21,441  | (A)
|                                                     |  |                                                                                       |         |     |                |   |         |    
|Total
Non-Control/Non-Affiliate Investments          |  |                                                                                       | 220,355 |     |                |   | 220,018 |    
|Affiliate Investments                                |  |                                                                                       |         |     |                |   |         |    
|Secured first lien debt                              |  |                                                                                       | 171,013 |     |                |   | 154,737 |    
|Secured second lien debt                             |  |                                                                                       | 38,875  |     |                |   | 44,218  |    
|Preferred equity                                     |  |                                                                                       | 76,686  |     |                |   | 63,131  |    
|Common equity/equivalents                            |  |                                                                                       |        |     |                |   |        |    
|                                                     |  |                                                                                       |         |     |                |   |         |    
|Total Affiliate Investments                          |  |                                                                                       | 286,574 |     |                |   | 262,086 |    
|Control Investments                                  |  |                                                                                       |         |     |                |   |         |    
|Secured first lien debt                              |  |                                                                                       | 5,000   |     |                |   | 4,800   |    
|Secured second lien debt                             |  |                                                                                       | 5,000   |     |                |   | 5,000   |    
|Preferred equity                                     |  |                                                                                       | 2,118   |     |                |   | 6,242   |    
|Common equity/equivalents                            |  |                                                                                       |        |     |                |   |        |    
|                                                     |  |                                                                                       |         |     |                |   |         |    
|Total Control Investments                            |  |                                                                                       | 12,118  |     |                |   | 16,042  |    
|                                                     |  |                                                                                       |         |     |                |   |         |    
|Total investments at fair value using Level 3 inputs |  | $                                                                                     | 519,047 |     |                | $ | 498,146 |    
|                                                     |  |                                                                                       |         |     |                |   |         |    



|(A) | Excludes our investment in AquaVenture with a fair value of $1.1 million and $3.4 million as of September 30, 2017 and March 31, 2017,
respectively, which was valued using Level 1 inputs and Level 2 inputs, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



25



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##### Table of Contents

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, 2017 and March 31, 2017. The table below is not intended to be all-inclusive, but rather provides information on the significant
Level 3 inputs as they relate to our fair value measurements. The weighted average calculations in the table below are based on the principal balances for all debt-related calculations and on the cost basis for all equity-related calculations
for the particular input.



|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  |                                                 |  |                                             |  |                           
|------------------------------- |  | -------------------------------------------------------------- | ------- | --- | ----------------------------- | - | ------- | ------------------------------ |  | ----------------- |  | ----------------------------------------------- |  | ------------------------------------------- |  | --------------------------
|                                |  | Quantitative Information about Level 3 Fair Value Measurements
|                                |  | Fair Value as ofSeptember 30, 2017                             |         |     | Fair Value asof March 31,2017 |   |         | ValuationTechnique/Methodology |  | UnobservableInput |  | Range / WeightedAverage as ofSeptember 30, 2017 |  | Range / WeightedAverage as ofMarch 31, 2017
|Secured first lien debt         |  | $                                                              | 260,932 | (A) |                               | $ | 232,590 | (A)                            |  | TEV               |  | EBITDAmultiple                                  |  | 4.3x  7.9x / 6.3x                          |  | 4.3x  7.9x /6.2x         
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | EBITDA                                          |  | $1,105  $13,423 /$4,622                    |  | $897  $10,887 /$4,093    
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | Revenuemultiple                                 |  | 0.3x  0.3x / 0.3x                          |  |                          
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | Revenue                                         |  | $15,919  $15,919 /$15,919                  |  |                          
|                                |  |                                                                | 27,594  |     |                               |   | 35,560  |                                |  | Yield Analysis    |  | Discount Rate                                   |  | 19.1%  25.0% /22.9%                        |  | 13.1%  30.3% /19.7%      
|Secured second lien debt        |  |                                                                | 74,175  | (B) |                               |   | 81,747  | (B)                            |  | TEV               |  | EBITDAmultiple                                  |  | 5.0x  7.4x / 6.4x                          |  | 5.3x  7.4x / 6.4x        
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | EBITDA                                          |  | $2,005  $7,211 /$4,711                     |  | $2,357  $5,824 /$4,588   
|                                |  |                                                                |        |     |                               |   | 13,293  |                                |  | Yield Analysis    |  | Discount Rate                                   |  |                                            |  | 9.2%  9.2% /9.2%         
|Preferred equity(C)             |  |                                                                | 125,895 |     |                               |   | 113,515 |                                |  | TEV               |  | EBITDAmultiple                                  |  | 5.0x  7.9x / 6.1x                          |  | 4.8x  7.9x / 6.3x        
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | EBITDA                                          |  | $1,105  $84,828 /$4,345                    |  | $897  $97,366 /$4,415    
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | Revenuemultiple                                 |  | 0.3x  0.5x / 0.4x                          |  | 0.5x  0.5x / 0.5x        
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | Revenue                                         |  | $15,919  $19,900 /$18,587                  |  | $21,662  $21,662 /$21,662
|Common
equity/equivalents(D)(E) |  |                                                                | 30,451  |     |                               |   | 21,441  |                                |  | TEV               |  | EBITDAmultiple                                  |  | 4.3x  7.4x / 5.6x                          |  | 4.3x  9.8x / 6.0x        
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | EBITDA                                          |  | $1,105  $5,420 /$2,495                     |  | $897  $13,378 /$3,687    
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | Revenuemultiple                                 |  | 0.3x  0.5x / 0.3x                          |  | 0.5x  0.5x / 0.5x        
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  | Revenue                                         |  | $15,919  $19,900 /$16,398                  |  | $21,662  $21,662 /$21,662
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  |                                                 |  |                                             |  |                           
|Total                           |  | $                                                              | 519,047 |     |                               | $ | 498,146 |                                |  |                  
|                                |  |                                                                |         |     |                               |   |         |                                |  |                   |  |                                                 |  |                                             |  |                           



|(A) | Fair value as of September 30, 2017 includes two new proprietary debt investments for a combined $22.8 million, which were valued at cost using the
transaction price as the unobservable input, and one proprietary debt investment for $10.0 million, which was valued at the expected payoff amount as the unobservable input. Fair value as of March 31, 2017 includes two new proprietary debt
investments for a combined $24.0 million, which were valued at cost using the transaction price as the unobservable input.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Fair value as of September 30, 2017 includes one proprietary debt investment for $13.0 million, which was valued at the expected payoff amount as the
unobservable input. Fair value as of March 31, 2017 includes one proprietary debt investment for $15.2 million, which was valued at the expected payoff amount as the unobservable input.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Fair value as of September 30, 2017 includes one new proprietary equity investment for $5.5 million, which was valued at cost using the transaction price as
the unobservable input, and one proprietary equity investment for $3.5 million, which was valued at the expected payoff amount as the unobservable input. Fair value as of March 31, 2017 includes one new proprietary equity investment for
$5.9 million, which was valued at cost using the transaction price as the unobservable input, and one proprietary equity investment for $3.9 million, which was valued at the expected payoff amount as the unobservable input.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Fair value as of September 30, 2017 includes two proprietary equity investments for a combined $20.3 million, which were valued at the expected payoff
amount as the unobservable input. Fair value as of March 31, 2017 includes one proprietary equity investment for $28, which was valued at the expected payoff amount as the unobservable input.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(E) | Fair value as of September 30, 2017 and March 31, 2017 excludes our investment in AquaVenture with a fair value of $1.1 million and $3.4 million,
respectively, which was valued using Level 1 inputs and Level 2 inputs, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.



26



---

##### Table of Contents

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 and six months ended September 30,
2017 and 2016 for all investments for which the Adviser determines fair value using unobservable (Level 3) inputs.

Fair Value
Measurements Using Significant Unobservable Inputs (Level 3)



|                                                                                |  |                       |         |   |                        |   |        |                 |  |   |                          |  |  |       |        |  |  |   |         |  
|------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------------- | - | ------ | --------------- |  | - | ------------------------ |  |  | ----- | ------ |  |  | - | ------- | -
|                                                                                |  | SecuredFirst LienDebt |         |   | SecuredSecondLien Debt |   |        | PreferredEquity |  |   | CommonEquity/Equivalents |  |  | Total |       
|Three months ended September 30, 2017:                                          |  |                       |         |   |                        |   |        |                 |  |   |                          |  |  |       |        |  |  |   |         |  
|Fair value as of June 30, 2017                                                  |  | $                     | 271,331 |   |                        | $ | 79,924 |                 |  | $ | 111,726                  |  |  | $     | 22,518 |  |  | $ | 485,499 |  
|Total gain (loss):                                                              |  |                       |         |   |                        |   |        |                 |  |   |                          |  |  |       |        |  |  |   |         |  
|Net realized gain (loss)(A)                                                     |  |                       |        |   |                        |   |       |                 |  |   |                         |  |  |       |       |  |  |   |        |  
|Net unrealized appreciation
(depreciation)(B)                                   |  |                       | (1,855  | ) |                        |   | (6,753 | )               |  |   | 8,669                    |  |  |       | 7,933  |  |  |   | 7,994   |  
|Reversal of previously recorded (appreciation) depreciation upon realization(B) |  |                       |        |   |                        |   |       |                 |  |   |                         |  |  |       |       |  |  |   |        |  
|New investments, repayments and
settlements(C):                                 |  |                       |         |   |                        |   |        |                 |  |   |                          |  |  |       |        |  |  |   |         |  
|Issuances / originations                                                        |  |                       | 23,000  |   |                        |   | 1,004  |                 |  |   | 5,500                    |  |  |       |       |  |  |   | 29,504  |  
|Settlements / repayments                                                        |  |                       | (3,950  | ) |                        |   |       |                 |  |   |                         |  |  |       |       |  |  |   | (3,950  | )
|Sales                                                                           |  |                       |        |   |                        |   |       |                 |  |   |                         |  |  |       |       |  |  |   |        |  
|Transfers                                                                       |  |                       |        |   |                        |   |       |                 |  |   |                         |  |  |       |       |  |  |   |        |  
|                                                                                |  |                       |         |   |                        |   |        |                 |  |   |                          |  |  |       |        |  |  |   |         |  
|Fair value as of September 30, 2017                                             |  | $                     | 288,526 |   |                        | $ | 74,175 |                 |  | $ | 125,895                  |  |  | $     | 30,451 |  |  | $ | 519,047 |  
|                                                                                |  |                       |         |   |                        |   |        |                 |  |   |                          |  |  |       |        |  |  |   |         |  



|                                                                                |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------------- | - | ------- | --------------- |  | - | ------------------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                                                                |  | SecuredFirst LienDebt |         |   | SecuredSecondLien Debt |   |         | PreferredEquity |  |   | CommonEquity/Equivalents |   |  | Total |       
|Six months ended September 30, 2017:                                            |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair value as of March 31, 2017                                                 |  | $                     | 268,150 |   |                        | $ | 95,040  |                 |  | $ | 113,515                  |   |  | $     | 21,441 |   |  | $ | 498,146 |  
|Total gain (loss):                                                              |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Net realized gain (loss)(A)                                                     |  |                       |        |   |                        |   |        |                 |  |   | 957                      |   |  |       |       |   |  |   | 957     |  
|Net unrealized appreciation
(depreciation)(B)                                   |  |                       | (2,493  | ) |                        |   | (6,541  | )               |  |   | 9,797                    |   |  |       | 9,038  |   |  |   | 9,801   |  
|Reversal of previously recorded (appreciation) depreciation upon realization(B) |  |                       | 1,881   |   |                        |   | (1,670  | )               |  |   | (1,113                   | ) |  |       | 777    |   |  |   | (125    | )
|New investments, repayments and
settlements(C):                                 |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Issuances / originations                                                        |  |                       | 33,540  |   |                        |   | 1,006   |                 |  |   | 6,487                    |   |  |       |       |   |  |   | 41,033  |  
|Settlements / 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 |  
|                                                                                |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  



|                                                                                |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------------- | - | ------ | --------------- |  | - | ------------------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                                                                |  | SecuredFirst LienDebt |         |   | SecuredSecondLien Debt |   |        | PreferredEquity |  |   | CommonEquity/Equivalents |   |  | Total |       
|Three months ended September 30, 2016:                                          |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair value as of June 30, 2016                                                  |  | $                     | 280,388 |   |                        | $ | 69,990 |                 |  | $ | 113,566                  |   |  | $     | 27,037 |   |  | $ | 490,981 |  
|Total gain (loss):                                                              |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Net realized gain (loss)(A)                                                     |  |                       |        |   |                        |   |       |                 |  |   |                         |   |  |       | 20     |   |  |   | 20      |  
|Net unrealized appreciation
(depreciation)(B)                                   |  |                       | (3,240  | ) |                        |   | 4,506  |                 |  |   | (1,509                   | ) |  |       | (4,778 | ) |  |   | (5,021  | )
|Reversal of previously recorded (appreciation) depreciation upon realization(B) |  |                       |        |   |                        |   |       |                 |  |   |                         |   |  |       |       |   |  |   |        |  
|New investments, repayments and
settlements(C):                                 |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Issuances / originations                                                        |  |                       | 1,210   |   |                        |   | 1,000  |                 |  |   |                         |   |  |       |       |   |  |   | 2,210   |  
|Settlements / repayments                                                        |  |                       | (1,250  | ) |                        |   |       |                 |  |   |                         |   |  |       |       |   |  |   | (1,250  | )
|Sales                                                                           |  |                       |        |   |                        |   |       |                 |  |   | (948                     | ) |  |       | (20    | ) |  |   | (968    | )
|Transfers(D)                                                                    |  |                       | (15,000 | ) |                        |   | 15,000 |                 |  |   |                         |   |  |       |       |   |  |   |        |  
|                                                                                |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair value as of September 30, 2016                                             |  | $                     | 262,108 |   |                        | $ | 90,496 |                 |  | $ | 111,109                  |   |  | $     | 22,259 |   |  | $ | 485,972 |  
|                                                                                |  |                       |         |   |                        |   |        |                 |  |   |                          |   |  |       |        |   |  |   |         |  



27



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##### Table of Contents

|                                                                                |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------------- | - | ------- | --------------- |  | - | ------------------------ | - |  | ----- | ------- | - |  | - | ------- | -
|                                                                                |  | SecuredFirst LienDebt |         |   | SecuredSecondLien Debt |   |         | PreferredEquity |  |   | CommonEquity/Equivalents |   |  | Total |        
|Six months ended September 30, 2016:                                            |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|Fair value as of March 31, 2016                                                 |  | $                     | 280,037 |   |                        | $ | 64,484  |                 |  | $ | 113,550                  |   |  | $     | 29,585  |   |  | $ | 487,656 |  
|Total gain (loss):                                                              |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|Net realized gain (loss)(A)                                                     |  |                       |        |   |                        |   |        |                 |  |   |                         |   |  |       | 18,826  |   |  |   | 18,826  |  
|Net unrealized appreciation
(depreciation)(B)                                   |  |                       | (4,954  | ) |                        |   | 5,912   |                 |  |   | 14,095                   |   |  |       | 229     |   |  |   | 15,282  |  
|Reversal of previously recorded (appreciation) depreciation upon realization(B) |  |                       |        |   |                        |   |        |                 |  |   | (14,381                  | ) |  |       | (6,835  | ) |  |   | (21,216 | )
|New investments, repayments and
settlements(C):                                 |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|Issuances / originations                                                        |  |                       | 4,186   |   |                        |   | 19,600  |                 |  |   | 6,899                    |   |  |       | 501     |   |  |   | 31,186  |  
|Settlements / repayments                                                        |  |                       | (2,161  | ) |                        |   | (14,500 | )               |  |   |                         |   |  |       |        |   |  |   | (16,661 | )
|Sales                                                                           |  |                       |        |   |                        |   |        |                 |  |   | (9,054                   | ) |  |       | (20,047 | ) |  |   | (29,101 | )
|Transfers(D)                                                                    |  |                       | (15,000 | ) |                        |   | 15,000  |                 |  |   |                         |   |  |       |        |   |  |   |        |  
|                                                                                |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |         |   |  |   |         |  
|Fair value as of September 30, 2016                                             |  | $                     | 262,108 |   |                        | $ | 90,496  |                 |  | $ | 111,109                  |   |  | $     | 22,259  |   |  | $ | 485,972 |  
|                                                                                |  |                       |         |   |                        |   |         |                 |  |   |                          |   |  |       |         |   |  |   |         |  



|(A) | Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of Operations for the respective periods ended
September 30, 2017 and 2016.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Included in net unrealized appreciation (depreciation) of investments on our accompanying Consolidated Statements of Operations for the periods ended
September 30, 2017 and 2016.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(D) | Transfers represent $15.0 million of secured first lien debt of Cambridge Sound Management, Inc. (Cambridge), which was converted into secured second
lien debt in August 2016.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investment Activity

During the six months ended September 30, 2017, the following significant transactions occurred:



| |  |  | In April 2017, we sold our investment in Mitchell Rubber Products, Inc. (Mitchell), which resulted in success fee income of $1.7 million and a realized gain of $1.0 million. In connection with the
sale, we received net cash proceeds of $19.0 million, including the repayment of our debt investment of $13.6 million at par.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In May and June 2017, we sold a portion of our common stock investment in AquaVenture resulting in net cash proceeds of $2.0 million, which represented a return of capital.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In June 2017, one of our portfolio companies, Mathey Investments, Inc. (Mathey) was merged with and into another one of our portfolio companies, SBS Industries, LLC (SBS). As a result of this
transaction, we received success fee income of $0.3 million from Mathey. 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. In connection with the merger, we also extended a secured first lien revolving line of credit to SBS with a total facility amount of $1.5 million, which was undrawn at the time of the transaction.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In August 2017, we invested $28.3 million in Pioneer Square Brands, Inc. (Pioneer) through a combination of secured first lien debt and preferred equity. Pioneer, headquartered in Seattle, Washington,
is a designer, manufacturer, and marketer of premium mobile technology bags and cases serving a diverse customer base, primarily in the education and corporate sectors.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



28



---

##### Table of Contents

Investment Concentrations

As of September 30, 2017, our investment portfolio consisted of investments in 34 portfolio companies located in 17 states across 18 different industries
with an aggregate fair value of $520.2 million. Our investments in Cambridge, Nth Degree, Inc., Drew Foam Companies, Inc., Counsel Press, Inc., and JR Hobbs Co.  Atlanta, LLC represented our five largest portfolio investments at fair
value as of September 30, 2017, and collectively comprised $156.9 million, or 30.2%, of our total investment portfolio at fair value.

The
following table summarizes our investments by security type as of September 30, 2017 and March 31, 2017:



|                          |  |                    |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|------------------------- |  | ------------------ | ------- |  | -------------- |  | ----- | ---- |  | - | ---------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                          |  | September 30, 2017 |         |  | March 31, 2017 | 
|                          |  | Cost               |         |  | Fair Value     |  |       | Cost |  |   | Fair Value | 
|Secured first lien debt   |  | $                  | 305,810 |  |                |  | 57.2  | %    |  | $ | 288,526    |  |  |  | 55.5  | % |  | $ | 284,823 |  |  |  | 54.3  | % |  | $ | 268,150 |  |  |  | 53.5  | %
|Secured second lien debt  |  |                    | 80,424  |  |                |  | 15.1  |      |  |   | 74,175     |  |  |  | 14.3  |   |  |   | 93,078  |  |  |  | 17.7  |   |  |   | 95,040  |  |  |  | 18.9  |  
|                          |  |                    |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total debt                |  |                    | 386,234 |  |                |  | 72.3  |      |  |   | 362,701    |  |  |  | 69.8  |   |  |   | 377,901 |  |  |  | 72.0  |   |  |   | 363,190 |  |  |  | 72.4  |  
|Preferred equity          |  |                    | 144,488 |  |                |  | 27.0  |      |  |   | 125,895    |  |  |  | 24.2  |   |  |   | 140,791 |  |  |  | 26.8  |   |  |   | 113,515 |  |  |  | 22.6  |  
|Common equity/equivalents |  |                    | 3,650   |  |                |  | 0.7   |      |  |   | 31,578     |  |  |  | 6.0   |   |  |   | 6,477   |  |  |  | 1.2   |   |  |   | 24,874  |  |  |  | 5.0   |  
|                          |  |                    |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total equity/equivalents  |  |                    | 148,138 |  |                |  | 27.7  |      |  |   | 157,473    |  |  |  | 30.2  |   |  |   | 147,268 |  |  |  | 28.0  |   |  |   | 138,389 |  |  |  | 27.6  |  
|                          |  |                    |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total investments         |  | $                  | 534,372 |  |                |  | 100.0 | %    |  | $ | 520,174    |  |  |  | 100.0 | % |  | $ | 525,169 |  |  |  | 100.0 | % |  | $ | 501,579 |  |  |  | 100.0 | %
|                          |  |                    |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  

Investments at fair value consisted of the following industry classifications as of September 30, 2017 and March 31,
2017:



|                                                                       |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|---------------------------------------------------------------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                                                                       |  | September 30, 2017 |         |  | March 31, 2017                | 
|                                                                       |  | Fair Value         |         |  | Percentageof TotalInvestments |  |       | Fair Value |  |   | Percentageof TotalInvestments | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products |  | $                  | 104,671 |  |                               |  | 20.1  | %          |  | $ | 93,062                        |  |  |  | 18.6  | %
|Diversified/Conglomerate Services                                      |  |                    | 90,561  |  |                               |  | 17.4  |            |  |   | 85,248                        |  |  |  | 17.0  |  
|Chemicals, Plastics, and Rubber                                        |  |                    | 49,820  |  |                               |  | 9.6   |            |  |   | 65,156                        |  |  |  | 13.0  |  
|Personal and Non-Durable Consumer Products
(Manufacturing Only)        |  |                    | 41,716  |  |                               |  | 8.0   |            |  |   | 19,011                        |  |  |  | 3.8   |  
|Diversified/Conglomerate Manufacturing                                 |  |                    | 37,841  |  |                               |  | 7.3   |            |  |   | 40,303                        |  |  |  | 8.0   |  
|Leisure, Amusement, Motion Pictures, Entertainment                     |  |                    | 32,019  |  |                               |  | 6.2   |            |  |   | 32,453                        |  |  |  | 6.5   |  
|Machinery (Non-agriculture, Non-construction, Non-electronic)          |  |                    | 21,681  |  |                               |  | 4.2   |            |  |   | 17,283                        |  |  |  | 3.4   |  
|Containers, Packaging, and Glass                                       |  |                    | 21,015  |  |                               |  | 4.0   |            |  |   | 18,266                        |  |  |  | 3.6   |  
|Textiles and Leather                                                   |  |                    | 20,121  |  |                               |  | 3.9   |            |  |   | 20,369                        |  |  |  | 4.1   |  
|Farming and Agriculture                                                |  |                    | 19,249  |  |                               |  | 3.7   |            |  |   | 19,096                        |  |  |  | 3.8   |  
|Cargo Transport                                                        |  |                    | 15,832  |  |                               |  | 3.0   |            |  |   | 15,891                        |  |  |  | 3.2   |  
|Automobile                                                             |  |                    | 14,981  |  |                               |  | 2.9   |            |  |   | 20,792                        |  |  |  | 4.1   |  
|Telecommunications                                                     |  |                    | 14,327  |  |                               |  | 2.8   |            |  |   | 14,000                        |  |  |  | 2.8   |  
|Beverage, Food, and Tobacco                                            |  |                    | 14,167  |  |                               |  | 2.7   |            |  |   | 14,802                        |  |  |  | 3.0   |  
|Aerospace and Defense                                                  |  |                    | 12,118  |  |                               |  | 2.3   |            |  |   | 16,042                        |  |  |  | 3.2   |  
|Other < 2.0%                                                           |  |                    | 10,055  |  |                               |  | 1.9   |            |  |   | 9,805                         |  |  |  | 1.9   |  
|                                                                       |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total investments                                                      |  | $                  | 520,174 |  |                               |  | 100.0 | %          |  | $ | 501,579                       |  |  |  | 100.0 | %
|                                                                       |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  

Investments at fair value were included in the following geographic regions of the U.S. as of September 30, 2017 and
March 31, 2017:



|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|----------------- |  | ------------------ | ------- |  | ----------------------------- |  | ----- | ---------- |  | - | ----------------------------- |  |  |  | ----- | -
|                  |  | September 30, 2017 |         |  | March 31, 2017                | 
|                  |  | Fair Value         |         |  | Percentageof TotalInvestments |  |       | Fair Value |  |   | Percentageof TotalInvestments | 
|South             |  | $                  | 191,769 |  |                               |  | 36.9  | %          |  | $ | 175,136                       |  |  |  | 34.9  | %
|Northeast         |  |                    | 157,514 |  |                               |  | 30.3  |            |  |   | 159,614                       |  |  |  | 31.8  |  
|West              |  |                    | 131,601 |  |                               |  | 25.3  |            |  |   | 123,475                       |  |  |  | 24.6  |  
|Midwest           |  |                    | 39,290  |  |                               |  | 7.5   |            |  |   | 43,354                        |  |  |  | 8.7   |  
|                  |  |                    |         |  |                               |  |       |            |  |   |                               |  |  |  |       |  
|Total investments |  | $                  | 520,174 |  |                               |  | 100.0 | %          |  | $ | 501,579                       |  |  |  | 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.



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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, 2017:



|                                              |  |                                                                |  |           |         |  
|--------------------------------------------- |  | -------------------------------------------------------------- |  | --------- | ------- | -
|                                              |  |                                                                |  | Amount(A) |        
|For the remaining six months ending March 31: |  | 2018                                                           |  | $         | 14,929  |  
|For the fiscal years ending March 31:         |  | 2019                                                           |  |           | 81,341  |  
|                                              |  | 2020                                                           |  |           | 89,253  |  
|                                              |  | 2021                                                           |  |           | 101,410 |  
|                                              |  | 2022                                                           |  |           | 65,396  |  
|                                              |  | Thereafter                                                     |  |           | 34,000  |  
|                                              |  |                                                                |  |           |         |  
|                                              |  | Total contractual repayments                                   |  | $         | 386,329 |  
|                                              |  | Adjustments to cost basis of debt investments                  |  |           | (95     | )
|                                              |  | Investments in equity securities                               |  |           | 148,138 |  
|                                              |  |                                                                |  |           |         |  
|                                              |  | Total cost basis of investments held as of
September 30, 2017: |  | $         | 534,372 |  
|                                              |  |                                                                |  |           |         |  



|(A) | Subsequent to September 30, 2017, debt investments in one portfolio company with a combined principal balance of $13.3 million, which previously had maturity dates during the fiscal year ending March 31,
2019, were extended to mature during the fiscal year ending March 31, 2022.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Receivables from Portfolio Companies

Receivables from portfolio companies represent non-recurring costs that we incurred on behalf of portfolio companies.
Such receivables, net of any allowance for uncollectible receivables, are included in Other assets, net on our accompanying Consolidated Statements of Assets and Liabilities. We generally maintain an allowance for uncollectible receivables
from portfolio companies when the receivable balance becomes 90 days or more past due or if it is determined, based upon managements judgment, that the portfolio company is unable to pay its obligations. We
write-off accounts receivable when we have exhausted collection efforts and have deemed the receivables uncollectible. As of September 30, 2017 and March 31, 2017, we had gross receivables from
portfolio companies of $0.9 million and $1.2 million, respectively. The allowance for uncollectible receivables was $0.4 million and $0.3 million as of September 30, 2017 and March 31, 2017, 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 11, 2017, our Board of Directors, including a majority of the
directors who are not parties to the Advisory Agreement or interested persons of such party, approved the annual renewal of the Advisory Agreement through August 31, 2018.

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



30



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##### Table of Contents

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, |  
|                                                          |  | 2017                             |         |   | 2016                           |   |         | 2017 |  |   | 2016    |  
|Average total assets subject to base management
fee(A)    |  | $                                | 510,800 |   |                                | $ | 497,800 |      |  | $ | 507,000 |   |  | $ | 499,800 |  
|Multiplied by prorated annual base management fee of 2.0% |  |                                  | 0.5     | % |                                |   | 0.5     | %    |  |   | 1.0     | % |  |   | 1.0     | %
|                                                          |  |                                  |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Base management fee(B)                                    |  |                                  | 2,554   |   |                                |   | 2,489   |      |  |   | 5,070   |   |  |   | 4,998   |  
|Credits to fees from Adviser -
other(B)                   |  |                                  | (926    | ) |                                |   | (1,114  | )    |  |   | (1,474  | ) |  |   | (1,951  | )
|                                                          |  |                                  |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net base management fee                                   |  | $                                | 1,628   |   |                                | $ | 1,375   |      |  | $ | 3,596   |   |  | $ | 3,047   |  
|                                                          |  |                                  |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Loan servicing fee(B)                                     |  |                                  | 1,485   |   |                                |   | 1,722   |      |  |   | 3,049   |   |  |   | 3,403   |  
|Credits to base management fee - loan servicing
fee(B)    |  |                                  | (1,485  | ) |                                |   | (1,722  | )    |  |   | (3,049  | ) |  |   | (3,403  | )
|                                                          |  |                                  |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loan servicing fee                                    |  | $                                |        |   |                                | $ |        |      |  | $ |        |   |  | $ |        |  
|                                                          |  |                                  |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Incentive fee(B)                                          |  | $                                | 1,295   |   |                                | $ | 549     |      |  | $ | 2,467   |   |  | $ | 2,249   |  
|Credits to fees from Adviser -
other(B)                   |  |                                  |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|                                                          |  |                                  |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net incentive fee                                         |  | $                                | 1,295   |   |                                | $ | 549     |      |  | $ | 2,467   |   |  | $ | 2,249   |  
|                                                          |  |                                  |         |   |                                |   |         |      |  |   |         |   |  |   |         |  



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

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 $57 and $75 for the three month periods ended September 30, 2017 and 2016,
respectively, and $113 and $132 for the six month periods ended September 30, 2017 and 2016, respectively, was retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser and primarily for 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.

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.



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The income-based incentive fee rewards the Adviser if our quarterly net investment income (before giving effect
to any incentive fee) exceeds 1.75% of our net assets, adjusted appropriately for any share issuances or repurchases during the period (the Hurdle Rate). The income-based incentive fee with respect to our
pre-incentive fee net investment income is payable quarterly to the Adviser and is computed as follows:



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



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



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

The second part of the incentive fee is a capital gains-based incentive fee
that is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Advisory Agreement, as of the termination date), and equals 20.0% of our realized capital gains, less any realized capital losses and unrealized
depreciation, calculated as of the end of the preceding calendar year. The capital gains-based incentive fee payable to the Adviser is calculated based on (i) cumulative aggregate realized capital gains since our inception, less
(ii) cumulative aggregate realized capital losses since our inception, less (iii) the entire portfolios aggregate unrealized capital depreciation, if any, as of the date of the calculation. If this number is positive at the
applicable calculation date, then the capital gains-based incentive fee for such year equals 20.0% of such amount, less the aggregate amount of any capital gains-based incentive fees paid in respect of our portfolio in all prior years. For
calculation purposes, cumulative aggregate realized capital gains, if any, equals the sum of the excess between the net sales price of each investment, when sold, and the original cost of such investment since our inception. Cumulative aggregate
realized capital losses equals the sum of the deficit between the net sales price of each investment, when sold, and the original cost of such investment since our inception. The entire portfolios aggregate unrealized capital depreciation, if
any, equals the sum of 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, 2017, as aggregate unrealized capital depreciation has exceeded cumulative realized capital gains net of cumulative realized capital losses.

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

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. These administrative fees are
accrued at the end of the quarter when the services are performed and recorded on our accompanying Consolidated Statements of Operations and generally paid the following quarter. On July 11, 2017, our Board of Directors, including a
majority of the directors who are not parties to the Administration Agreement or interested persons of such party, approved the annual renewal of the Administration Agreement through August 31, 2018.



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Other Transactions

Gladstone Securities, LLC (Gladstone Securities), a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and
insured by the Securities Investor Protection Corporation, which is 100% indirectly owned and controlled by Mr. Gladstone, our chairman and chief executive officer, has provided other services, such as investment banking and due diligence
services, to certain of our portfolio companies, for which Gladstone Securities receives a fee. Any such fees paid by portfolio companies to Gladstone Securities do not impact the fees we pay to the Adviser or the
non-contractual, unconditional, and irrevocable credits against the base management fee. The fees received by Gladstone Securities from portfolio companies totaled $0.3 million and $0 during the three
month periods ended September 30, 2017 and 2016, respectively, and $0.3 million during each of the six month periods ended September 30, 2017 and 2016.

Related Party Fees Due

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



|                                                                      |  |                     |       |  |                 |   |       | 
|--------------------------------------------------------------------- |  | ------------------- | ----- |  | --------------- | - | ----- | 
|                                                                      |  | As of September 30, |       |  | As of March 31, |  
|                                                                      |  | 2017                |       |  | 2017            |  
|Base management and loan servicing fee due to Adviser, net of credits |  | $                   | 473   |  |                 | $ | 346   | 
|Incentive fee due to Adviser                                          |  |                     | 1,303 |  |                 |   | 1,324 | 
|Other due to Adviser                                                  |  |                     | 10    |  |                 |   | 1     | 
|                                                                      |  |                     |       |  |                 |   |       | 
|Total fees due to Adviser                                             |  | $                   | 1,786 |  |                 | $ | 1,671 | 
|Fee due to Administrator                                              |  | $                   | 201   |  |                 | $ | 296   | 
|                                                                      |  |                     |       |  |                 |   |       | 
|Total related party fees due                                          |  | $                   | 1,987 |  |                 | $ | 1,967 | 
|                                                                      |  |                     |       |  |                 |   |       | 

Net co-investment expenses receivable from Gladstone Capital Corporation, one of our
affiliated funds, for reimbursement purposes, totaled $54 and $27 as of September 30, 2017 and March 31, 2017, 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, 2017 and March 31, 2017.

NOTE 5. BORROWINGS

Revolving Line of Credit

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

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



33



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##### Table of Contents

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



|                               |  |                     |         |  |                 |   |         | 
|------------------------------ |  | ------------------- | ------- |  | --------------- | - | ------- | 
|                               |  | As of September 30, |         |  | As of March 31, |  
|                               |  | 2017                |         |  | 2017            |  
|Commitment amount              |  | $                   | 165,000 |  |                 | $ | 165,000 | 
|Borrowings outstanding at cost |  |                     | 56,700  |  |                 |   | 69,700  | 
|Availability(A)                |  |                     | 108,300 |  |                 |   | 95,300  | 



|                                        |  |                                          |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------- |  | ---------------------------------------- | ------ | - | -------------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                        |  | For the Three Months Ended September 30, |        |   | For the Six Months Ended September 30, |  
|                                        |  | 2017                                     |        |   | 2016                                   |   |        | 2017 |  |   | 2016   |  
|Weighted average borrowings outstanding |  | $                                        | 42,037 |   |                                        | $ | 75,248 |      |  | $ | 42,092 |   |  | $ | 77,549 |  
|Effective interest rate(B)              |  |                                          | 6.3    | % |                                        |   | 4.6    | %    |  |   | 6.2    | % |  |   | 4.5    | %
|Commitment (unused) fees incurred       |  | $                                        | 195    |   |                                        | $ | 140    |      |  | $ | 386    |   |  | $ | 273    |  



|(A) | Availability is subject to various constraints, characteristics, and applicable advance rates based on collateral quality under our Credit Facility, which equated to
an adjusted availability of $105.1 million and $93.4 million as of September 30, 2017 and March 31, 2017, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Excludes the impact of deferred financing costs and includes weighted average 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 (a) $210.0 million or (b) $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 $220.6 million as of September 30, 2017, (ii) asset coverage with respect to senior securities representing indebtedness of at least 200%, in accordance with Sections 18 and 61 of
the 1940 Act and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of September 30, 2017, and as defined in the performance guaranty of the Credit Facility, we had a net worth of $462.5 million, asset
coverage on our senior securities representing indebtedness of 819.6%, 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, 2017, we were in compliance
with all covenants under the Credit Facility.

In July 2013, pursuant to the terms of the then effective revolving line of credit, we entered into an
interest rate cap agreement with KeyBank effective October 2013 for a notional amount of $45.0 million. The interest rate cap agreement expired in April 2016. Prior to its expiration in April 2016, the agreement effectively limited the interest
rate on a portion of our borrowings under the then effective revolving line of credit. We incurred a premium fee of $75 in conjunction with this agreement, which was recorded in Net realized loss on other on our accompanying Consolidated
Statements of Operationsduring the six months ended September 30, 2016.

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 September 30, 2017 and
March 31, 2017, the discount rate used to determine the fair value of the Credit Facility was 30-day LIBOR, plus 3.15% per annum, plus an unused fee of 0.6%. 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, 2017 and March 31, 2017, the Credit Facility was valued using
Level 3 inputs and any changes in its fair value are recorded in Net unrealized depreciation (appreciation) of other on our accompanying Consolidated Statements of Operations.



34



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##### Table of Contents

The following tables present the Credit Facility, carried at fair value as of September 30, 2017 and
March 31, 2017, by caption on our accompanying Consolidated Statements of Assets and Liabilities for Level 3 of the hierarchy established by ASC 820 and a roll-forward of the changes in fair value during the three and six months
ended September 30, 2017 and 2016:



|                |  |                                                                                    |        |  |                |   |        | 
|--------------- |  | ---------------------------------------------------------------------------------- | ------ |  | -------------- | - | ------ | 
|                |  | Level 3  Borrowings                                                               |       
|                |  | Recurring Fair Value Measurements                                                  |       
|                |  | Reported inConsolidated                                                            |       
|                |  | Statements of Assets and LiabilitiesUsing SignificantUnobservable Inputs (Level
3) |       
|                |  | September 30, 2017                                                                 |        |  | March 31, 2017 |  
|Credit Facility |  | $                                                                                  | 56,700 |  |                | $ | 69,700 | 
|                |  |                                                                                    |        |  |                |   |        | 



|                                                                                                  |  |                 |         |  
|------------------------------------------------------------------------------------------------- |  | --------------- | ------- | -
|Fair Value Measurements of Borrowings Using Significant Unobservable
Inputs (Level 3) Reported in | 
|Consolidated Statements of Assets
and Liabilities                                                 | 
|                                                                                                  |  | Credit Facility |        
|Three months ended September 30, 2017:                                                            |  |                 |         |  
|Fair value at June 30, 2017                                                                       |  | $               | 34,000  |  
|Borrowings                                                                                        |  |                 | 40,200  |  
|Repayments                                                                                        |  |                 | (17,500 | )
|                                                                                                  |  |                 |         |  
|Fair value at September 30, 2017                                                                  |  | $               | 56,700  |  
|                                                                                                  |  |                 |         |  
|                                                                                                  | 
|Six months ended September 30, 2017:                                                              |  |                 |         |  
|Fair value at March 31, 2017                                                                      |  | $               | 69,700  |  
|Borrowings                                                                                        |  |                 | 49,600  |  
|Repayments                                                                                        |  |                 | (62,600 | )
|                                                                                                  |  |                 |         |  
|Fair value at September 30, 2017                                                                  |  | $               | 56,700  |  
|                                                                                                  |  |                 |         |  



|                                                                                                  |  |                 |         |  
|------------------------------------------------------------------------------------------------- |  | --------------- | ------- | -
|Fair Value Measurements of Borrowings Using Significant Unobservable
Inputs (Level 3) Reported in | 
|Consolidated Statements of Assets
and Liabilities                                                 | 
|                                                                                                  |  | Credit Facility |        
|Three months ended September 30, 2016:                                                            |  |                 |         |  
|Fair value at June 30, 2016                                                                       |  | $               | 79,600  |  
|Borrowings                                                                                        |  |                 | 6,100   |  
|Repayments                                                                                        |  |                 | (22,200 | )
|                                                                                                  |  |                 |         |  
|Fair value at September 30, 2016                                                                  |  | $               | 63,500  |  
|                                                                                                  |  |                 |         |  
|                                                                                                  | 
|Six months ended September 30, 2016:                                                              |  |                 |         |  
|Fair value at March 31, 2016                                                                      |  | $               | 95,000  |  
|Borrowings                                                                                        |  |                 | 37,200  |  
|Repayments                                                                                        |  |                 | (68,700 | )
|                                                                                                  |  |                 |         |  
|Fair value at September 30, 2016                                                                  |  | $               | 63,500  |  
|                                                                                                  |  |                 |         |  

The fair value of the collateral under the Credit Facility was $451.8 million and $448.0 million as of
September 30, 2017 and March 31, 2017, respectively.



35



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##### Table of Contents

NOTE 6. MANDATORILY REDEEMABLE PREFERRED STOCK

The following tables summarize our 6.75% Series B Cumulative Term Preferred Stock (our Series B Term Preferred Stock or Series B), our
6.50% Series C Cumulative Term Preferred Stock (our Series C Term Preferred Stock or Series C), and our 6.25% Series D Cumulative Term Preferred Stock (our Series D Term Preferred Stock or Series D)
outstanding as of September 30, 2017 and March 31, 2017:

As of September 30, 2017:



|                               |  |              |           |                   |  |                            |       |              |  |                   |           |   |                                |   |       |                            |  |   |        | 
|------------------------------ |  | ------------ | --------- | ----------------- |  | -------------------------- | ----- | ------------ |  | ----------------- | --------- | - | ------------------------------ | - | ----- | -------------------------- |  | - | ------ | 
|Class ofTermPreferredStock     |  | TickerSymbol |           | Date
Issued       |  | MandatoryRedemptionDate(A) |       | InterestRate |  | SharesOutstanding |           |   | LiquidationPreferenceper
Share |   |       | TotalLiquidationPreference | 
|Series B                       |  | GAINO        |           | November 13,2014  |  | December 31,2021           |       | 6.75%        |  |                   | 1,656,000 |   |                                | $ | 25.00 |                            |  | $ | 41,400 | 
|Series C                       |  | GAINN        |           | May 12,2015       |  | May 31,2022                |       | 6.50%        |  |                   | 1,610,000 |   |                                |   | 25.00 |                            |  |   | 40,250 | 
|Series D                       |  | GAINM        |           | September 26,2016 |  | September 30,2023          |       | 6.25%        |  |                   | 2,300,000 |   |                                |   | 25.00 |                            |  |   | 57,500 | 
|                               |  |              |           |                   |  |                            |       |              |  |                   |           |   |                                |   |       |                            |  |   |        | 
|Term preferred stock,
gross(B) |  |              | 5,566,000 |                   |  | $                          | 25.00 |              |  | $                 | 139,150   |  
|Less: Discounts                |  |              |           |                   |  |                            |       |              |  |                   | (3,925    | )
|                               |  |              |           |                   |  |                            |       |              |  |                   |           |  
|Term preferred stock,
net(C)   |  |              |           |                   |  |                            |       |              |  | $                 | 135,225   |  
|                               |  |              |           |                   |  |                            |       |              |  |                   |           |  

As of March 31, 2017:



|                               |  |              |           |                   |  |                            |       |              |  |                   |           |   |                                |   |       |                            |  |   |        | 
|------------------------------ |  | ------------ | --------- | ----------------- |  | -------------------------- | ----- | ------------ |  | ----------------- | --------- | - | ------------------------------ | - | ----- | -------------------------- |  | - | ------ | 
|Class ofTermPreferredStock     |  | TickerSymbol |           | Date
Issued       |  | MandatoryRedemptionDate(A) |       | InterestRate |  | SharesOutstanding |           |   | LiquidationPreferenceper
Share |   |       | TotalLiquidationPreference | 
|Series B                       |  | GAINO        |           | November 13,2014  |  | December 31,2021           |       | 6.75%        |  |                   | 1,656,000 |   |                                | $ | 25.00 |                            |  | $ | 41,400 | 
|Series C                       |  | GAINN        |           | May 12,2015       |  | May 31,2022                |       | 6.50%        |  |                   | 1,610,000 |   |                                |   | 25.00 |                            |  |   | 40,250 | 
|Series D                       |  | GAINM        |           | September 26,2016 |  | September 30,2023          |       | 6.25%        |  |                   | 2,300,000 |   |                                |   | 25.00 |                            |  |   | 57,500 | 
|                               |  |              |           |                   |  |                            |       |              |  |                   |           |   |                                |   |       |                            |  |   |        | 
|Term preferred stock,
gross(B) |  |              | 5,566,000 |                   |  | $                          | 25.00 |              |  | $                 | 139,150   |  
|Less: Discounts                |  |              |           |                   |  |                            |       |              |  |                   | (4,315    | )
|                               |  |              |           |                   |  |                            |       |              |  |                   |           |  
|Term preferred stock,
net(C)   |  |              |           |                   |  |                            |       |              |  | $                 | 134,835   |  
|                               |  |              |           |                   |  |                            |       |              |  |                   |           |  



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

|(B) | As of September 30, 2017 and March 31, 2017, the asset coverage on our senior securities that are stock calculated pursuant to Sections 18 and 61 of
the 1940 Act was 258.2% and 235.6%, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Reflected as a line item on our accompanying Consolidated Statement of Assets and Liabilitiespursuant to the adoption of Accounting Standard Update 2015-03,
Simplifying the Presentation of Debt Issuance Costs during the six months ended September 30, 2016.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

The following tables summarize dividends declared by our Board of Directors and paid by us on our 7.125% Series A
Cumulative Term Preferred Stock (our Series A Term Preferred Stock), Series B Term Preferred Stock, Series C Term Preferred Stock, and Series D Term Preferred Stock during the six months ended September 30, 2017 and 2016:

For the Six Months Ended September 30, 2017:



|                 |  |                    |  |                    |  |                                                |          |  |                                                |   |          |                                                   |  |   |            | 
|---------------- |  | ------------------ |  | ------------------ |  | ---------------------------------------------- | -------- |  | ---------------------------------------------- | - | -------- | ------------------------------------------------- |  | - | ---------- | 
|Declaration Date |  | Record Date        |  | Payment Date       |  | Dividendper Share ofSeries BTermPreferredStock |          |  | Dividendper Share ofSeries CTermPreferredStock |   |          | Dividendper Share ofSeries DTermPreferredStock(A) | 
|April 11, 2017   |  | April 21, 2017     |  | April 28, 2017     |  | $                                              | 0.140625 |  |                                                | $ | 0.135417 |                                                   |  | $ | 0.13020833 | 
|April 11, 2017   |  | May 19, 2017       |  | May 31, 2017       |  |                                                | 0.140625 |  |                                                |   | 0.135417 |                                                   |  |   | 0.13020833 | 
|April 11, 2017   |  | June 21, 2017      |  | June 30, 2017      |  |                                                | 0.140625 |  |                                                |   | 0.135417 |                                                   |  |   | 0.13020833 | 
|July 11, 2017    |  | July 21, 2017      |  | July 31, 2017      |  |                                                | 0.140625 |  |                                                |   | 0.135417 |                                                   |  |   | 0.13020833 | 
|July 11, 2017    |  | August 21, 2017    |  | August 31, 2017    |  |                                                | 0.140625 |  |                                                |   | 0.135417 |                                                   |  |   | 0.13020833 | 
|July 11, 2017    |  | September 20, 2017 |  | September 29, 2017 |  |                                                | 0.140625 |  |                                                |   | 0.135417 |                                                   |  |   | 0.13020833 | 
|                 |  |                    |  |                    |  |                                                |          |  |                                                |   |          |                                                   |  |   |            | 
|                 |  |                    |  | Total              |  | $                                              | 0.843750 |  |                                                | $ | 0.812502 |                                                   |  | $ | 0.78124998 | 
|                 |  |                    |  |                    |  |                                                |          |  |                                                |   |          |                                                   |  |   |            | 

For the Six Months Ended September 30, 2016:



|                 |  |                    |  |                    |  |                                                   |           |  |                                                |   |          |                                                |  |   |          | 
|---------------- |  | ------------------ |  | ------------------ |  | ------------------------------------------------- | --------- |  | ---------------------------------------------- | - | -------- | ---------------------------------------------- |  | - | -------- | 
|Declaration Date |  | Record Date        |  | Payment Date       |  | Dividendper Share ofSeries ATermPreferredStock(B) |           |  | Dividendper Share ofSeries BTermPreferredStock |   |          | Dividendper Share ofSeries CTermPreferredStock | 
|April 12, 2016   |  | April 22, 2016     |  | May 2, 2016        |  | $                                                 | 0.1484375 |  |                                                | $ | 0.140625 |                                                |  | $ | 0.135417 | 
|April 12, 2016   |  | May 19, 2016       |  | May 31, 2016       |  |                                                   | 0.1484375 |  |                                                |   | 0.140625 |                                                |  |   | 0.135417 | 
|April 12, 2016   |  | June 17, 2016      |  | June 30, 2016      |  |                                                   | 0.1484375 |  |                                                |   | 0.140625 |                                                |  |   | 0.135417 | 
|July 12, 2016    |  | July 22, 2016      |  | August 2, 2016     |  |                                                   | 0.1484375 |  |                                                |   | 0.140625 |                                                |  |   | 0.135417 | 
|July 12, 2016    |  | August 22, 2016    |  | August 31, 2016    |  |                                                   | 0.1484375 |  |                                                |   | 0.140625 |                                                |  |   | 0.135417 | 
|July 12, 2016    |  | September 21, 2016 |  | September 30, 2016 |  |                                                   | 0.1484375 |  |                                                |   | 0.140625 |                                                |  |   | 0.135417 | 
|                 |  |                    |  |                    |  |                                                   |           |  |                                                |   |          |                                                |  |   |          | 
|                 |  |                    |  | Total              |  | $                                                 | 0.8906250 |  |                                                | $ | 0.843750 |                                                |  | $ | 0.812502 | 
|                 |  |                    |  |                    |  |                                                   |           |  |                                                |   |          |                                                |  |   |          | 



|(A) | We issued our Series D Term Preferred Stock on September 26, 2016.
|--- | ------------------------------------------------------------------

|(B) | We voluntarily redeemed all outstanding shares of our Series A Term Preferred Stock on September 30, 2016.
|--- | ----------------------------------------------------------------------------------------------------------

The tax character of dividends paid by us to our preferred stockholders generally constitute ordinary income to the extent of our current and accumulated
earnings and profits.

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, 2017 and March 31,
2017. The related dividend payments to preferred stockholders are treated as dividend expense on our accompanyingConsolidated 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, 2017 and March 31, 2017, each of which we consider to be a Level 1 input within the fair value hierarchy:



|                              |  |                    |         |  |                |   |         | 
|----------------------------- |  | ------------------ | ------- |  | -------------- | - | ------- | 
|                              |  | Fair Value as of   |        
|                              |  | September 30, 2017 |         |  | March 31, 2017 |  
|Series B Term Preferred Stock |  | $                  | 41,797  |  |                | $ | 42,973  | 
|Series C Term Preferred Stock |  |                    | 41,280  |  |                |   | 41,216  | 
|Series D Term Preferred Stock |  |                    | 58,581  |  |                |   | 58,719  | 
|                              |  |                    |         |  |                |   |         | 
|Total                         |  | $                  | 141,658 |  |                | $ | 142,908 | 
|                              |  |                    |         |  |                |   |         | 



37



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##### Table of Contents

NOTE 7. REGISTRATION STATEMENT AND COMMON EQUITY OFFERINGS

Registration Statement

On June 16, 2015, we filed a
registration statement on Form N-2 (File No. 333-204996) with the SEC and subsequently filed a Pre-Effective Amendment
No. 1 thereto on July 28, 2015, which the SEC declared effective on July 29, 2015. On June 8, 2016, we filed Post-Effective Amendment No. 1 to the registration statement, which the SEC declared effective on July 28,
2016. On July 28, 2017, we filed Post-Effective Amendment No. 5 to the registration statement, which the SEC declared effective on July 31, 2017. 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, 2017, we have the ability to issue up to $221.3 million in securities under the registration statement.

Common Equity Offering

Pursuant to our current
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 (decrease) in net assets resulting from operations per
weighted average common share for the three and six months ended September 30, 2017 and 2016:



|                                                                                                                    |  |                                  |            |  |                                |   |            |      |  |   |            |  |  |   |            | 
|------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- |  | ------------------------------ | - | ---------- | ---- |  | - | ---------- |  |  | - | ---------- | 
|                                                                                                                    |  | Three Months Ended September 30, |            |  | Six Months Ended September 30, |  
|                                                                                                                    |  | 2017                             |            |  | 2016                           |   |            | 2017 |  |   | 2016       | 
|Numerator: net increase (decrease) in net assets resulting from operations                                          |  | $                                | 13,556     |  |                                | $ | (102       | )    |  | $ | 21,697     |  |  | $ | 24,432     | 
|Denominator: basic and diluted weighted average common shares                                                       |  |                                  | 32,526,223 |  |                                |   | 30,270,958 |      |  |   | 32,003,128 |  |  |   | 30,270,958 | 
|                                                                                                                    |  |                                  |            |  |                                |   |            |      |  |   |            |  |  |   |            | 
|Basic and diluted net increase (decrease) in net assets resulting from operations per weighted
average common share |  | $                                | 0.42       |  |                                | $ |           |      |  | $ | 0.68       |  |  | $ | 0.81       | 
|                                                                                                                    |  |                                  |            |  |                                |   |            |      |  |   |            |  |  |   |            | 

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. Based on that estimate, our Board of Directors declares three monthly distributions to common stockholders each quarter.

The federal income tax characteristics of all distributions (including preferred stock dividends) will generally be reported to stockholders on Internal
Revenue Service Form 1099 after the end of each calendar year.



38



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##### Table of Contents

We paid the following monthly distributions to our common stockholders for the six months ended
September 30, 2017 and 2016:



|            |  |                  |                |  |             |                                      |              |                    |                            |   |        |    
|----------- |  | ---------------- | -------------- |  | ----------- | ------------------------------------ | ------------ | ------------------ | -------------------------- | - | ------ | ---
|Fiscal
Year |  | Declaration Date |                |  | Record Date |                                      | Payment Date |                    | DistributionperCommonShare |  
|2018        |  |                  | April 11, 2017 |  |             | April 21, 2017                       |              | April 28, 2017     |                            | $ | 0.064  |    
|            |  |                  | April 11, 2017 |  |             | May 19, 2017                         |              | May 31, 2017       |                            |   | 0.064  |    
|            |  |                  | April 11, 2017 |  |             | June 5, 2017                         |              | June 15, 2017      |                            |   | 0.060  | (A)
|            |  |                  | April 11, 2017 |  |             | June 21, 2017                        |              | June 30, 2017      |                            |   | 0.064  |    
|            |  |                  | July 11, 2017  |  |             | July 21, 2017                        |              | July 31, 2017      |                            |   | 0.064  |    
|            |  |                  | July 11, 2017  |  |             | August 21, 2017                      |              | August 31, 2017    |                            |   | 0.064  |    
|            |  |                  | July 11, 2017  |  |             | September 20, 2017                   |              | September 29, 2017 |                            |   | 0.064  |    
|            |  |                  |                |  |             |                                      |              |                    |                            |   |        |    
|            |  |                  |                |  |             | Six months ended September 30, 2017: |              | $                  | 0.444                      |  
|            |  |                  |                |  |             |                                      |              |                    |                            |  
|            |  |                  |                | 
|Fiscal
Year |  | Declaration Date |                |  | Record Date |                                      | Payment Date |                    | DistributionperCommonShare |  
|2017        |  |                  | April 12, 2016 |  |             | April 22, 2016                       |              | May 2, 2016        |                            | $ | 0.0625 |    
|            |  |                  | April 12, 2016 |  |             | May 19, 2016                         |              | May 31, 2016       |                            |   | 0.0625 |    
|            |  |                  | April 12, 2016 |  |             | June 17, 2016                        |              | June 30, 2016      |                            |   | 0.0625 |    
|            |  |                  | July 12, 2016  |  |             | July 22, 2016                        |              | August 2, 2016     |                            |   | 0.0625 |    
|            |  |                  | July 12, 2016  |  |             | August 22, 2016                      |              | August 31, 2016    |                            |   | 0.0625 |    
|            |  |                  | July 12, 2016  |  |             | September 21, 2016                   |              | September 30, 2016 |                            |   | 0.0625 |    
|            |  |                  |                |  |             |                                      |              |                    |                            |   |        |    
|            |  |                  |                |  |             | Six months ended September 30, 2016: |              | $                  | 0.3750                     |  
|            |  |                  |                |  |             |                                      |              |                    |                            |  



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

Aggregate distributions to our
common stockholders declared quarterly and paid were $14.3 million and $11.4 million for the six months ended September 30, 2017 and 2016, respectively. We determine the tax characterization of distributions to our common stockholders
as of the end of our fiscal year, based upon our taxable income for the full year and distributions paid during the full year. Therefore, a determination of tax characterization made on a quarterly basis may not be representative of the actual tax
characterization of distributions for the full year. If we determined the tax characterization of our distributions as of September 30, 2017, 86.5% would be from ordinary income and 13.5% would be from capital gains. For the six months ended
September 30, 2017, we recorded $0.7 million of net estimated adjustments for permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and increased Net
investment income in excess of distributions on our accompanying Consolidated Statements of Assets and Liabilities. For the fiscal year ended March 31, 2017, Investment Company Taxable Income exceeded distributions declared and paid and,
in accordance with Section 855(a) of the Code, we elected to treat $8.2 million of the first distributions paid to common stockholders in fiscal year 2018, 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, 2017 and March 31, 2017, we had no established reserves for such loss contingencies.

Escrow Holdbacks

From time to time, we will enter into
arrangements relating to exits of certain investments whereby specific amounts of the proceeds are held in escrow to be used to satisfy potential obligations, as stipulated in the sales agreements. We record escrow amounts in Restricted cash and
cash equivalents, if received in cash but subject to potential obligations or other contractual restrictions, or as escrow receivables in Other assets, net, if not yet received in cash, on our accompanying Consolidated Statements of Assets and
Liabilities. We establish reserves and holdbacks against escrow amounts if we determine that it is probable and estimable that a portion of the escrow amounts will not ultimately be released or received at the end of the escrow period. Reserves
and holdbacks against escrow amounts were $0.3 million and $0.5 million as of September 30, 2017 and March 31, 2017, respectively.



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Financial Commitments and Obligations

We have lines of credit and other uncalled capital commitments to certain of our portfolio companies that have not been fully drawn. Since these lines of
credit and other uncalled capital commitments have expiration dates and we expect many will never be fully drawn, the total line of credit and other uncalled capital commitment amounts do not necessarily represent future cash requirements. In
February 2015, we executed a capital call commitment with Tread and its senior credit facility lender, which expires in February 2018. Under the terms of the agreement, we may be required to fund additional capital up to $10.0 million in Tread,
with such commitment limited at all times to the actual amount outstanding under Treads senior credit facility. The actual amount outstanding under Treads senior credit facility was $0.7 million and $0 as of September 30, 2017
and March 31, 2017, respectively. We estimate the fair value of the combined unused line of credit and other uncalled capital commitments as of September 30, 2017 and March 31, 2017 to be immaterial.

In addition to the lines of credit and other uncalled capital commitments to our portfolio companies, we have also extended a guaranty on behalf of one of our
portfolio companies. As of September 30, 2017, 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 risks to be remote and the fair value of the guaranty
as of September 30, 2017 and March 31, 2017 to be immaterial.

As of September 30, 2017, the following guaranty was outstanding:



| |  |  | In February 2010, we executed a guaranty of a wholesale financing facility agreement (the Floor Plan Facility) between Agricredit Acceptance, LLC (Agricredit) and Country Club Enterprises, LLC
(CCE). The Floor Plan Facility provides CCE with financing of up to $2.0 million to bridge the time and cash flow gap between the order and delivery of golf carts to customers. The guaranty was renewed in February of each subsequent
year and expires in February 2018, unless it is renewed again by us, CCE and Agricredit.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the principal
balances of unused line of credit and other uncalled capital commitments and guaranties as of September 30, 2017 and March 31, 2017, which are not reflected as liabilities in the accompanying Consolidated Statements of Assets and
Liabilities:



|                                                             |  |                    |       |  |                |   |       | 
|------------------------------------------------------------ |  | ------------------ | ----- |  | -------------- | - | ----- | 
|                                                             |  | September 30, 2017 |       |  | March 31, 2017 |  
|Unused line of credit and other uncalled capital commitments |  | $                  | 4,636 |  |                | $ | 2,884 | 
|Guaranties                                                   |  |                    | 2,000 |  |                |   | 2,000 | 
|                                                             |  |                    |       |  |                |   |       | 
|Total                                                        |  | $                  | 6,636 |  |                | $ | 4,884 | 
|                                                             |  |                    |       |  |                |   |       | 



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NOTE 11. FINANCIAL HIGHLIGHTS



|                                                                        |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|----------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------ | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                        |  | Three Months Ended September 30, |            |   | Six Months Ended September 30, |  
|                                                                        |  | 2017                             |            |   | 2016                           |   |            | 2017 |  |   | 2016       |  
|Per Common Share Data:                                                  |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net asset value, at beginning of
period(A)                              |  | $                                | 9.88       |   |                                | $ | 9.84       |      |  | $ | 9.95       |   |  | $ | 9.22       |  
|Income from investment
operations(B)                                    |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net investment income                                                   |  |                                  | 0.18       |   |                                |   | 0.17       |      |  |   | 0.35       |   |  |   | 0.39       |  
|Net realized gain (loss) on sale of investments and other               |  |                                  |           |   |                                |   | (0.01      | )    |  |   | 0.04       |   |  |   | 0.61       |  
|Net unrealized appreciation (depreciation) of investments and other     |  |                                  | 0.24       |   |                                |   | (0.16      | )    |  |   | 0.29       |   |  |   | (0.19      | )
|                                                                        |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total from investment operations                                        |  |                                  | 0.42       |   |                                |   |           |      |  |   | 0.68       |   |  |   | 0.81       |  
|Effect of equity capital
activity(B)                                    |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Cash distributions to common stockholders from net investment income(C) |  |                                  | (0.19      | ) |                                |   | (0.19      | )    |  |   | (0.38      | ) |  |   | (0.38      | )
|Cash distributions to common stockholders from realized gains(C)        |  |                                  |           |   |                                |   |           |      |  |   | (0.06      | ) |  |   |           |  
|Discounts, commissions, and offering costs                              |  |                                  |           |   |                                |   |           |      |  |   | (0.03      | ) |  |   |           |  
|Net dilutive effect of equity
offering(D)                               |  |                                  |           |   |                                |   |           |      |  |   | (0.04      | ) |  |   |           |  
|                                                                        |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total from equity capital activity                                      |  |                                  | (0.19      | ) |                                |   | (0.19      | )    |  |   | (0.51      | ) |  |   | (0.38      | )
|Other, net(B)(E)                                                        |  |                                  | (0.01      | ) |                                |   |           |      |  |   | (0.02      | ) |  |   |           |  
|                                                                        |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net asset value, at end of
period(A)                                    |  | $                                | 10.10      |   |                                | $ | 9.65       |      |  | $ | 10.10      |   |  | $ | 9.65       |  
|                                                                        |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Per common share market value at beginning of period                    |  | $                                | 9.40       |   |                                | $ | 7.16       |      |  | $ | 9.07       |   |  | $ | 7.02       |  
|Per common share market value at end of period                          |  |                                  | 9.49       |   |                                |   | 8.89       |      |  |   | 9.49       |   |  |   | 8.89       |  
|Total investment return(F)                                              |  |                                  | 3.02       | % |                                |   | 26.89      | %    |  |   | 9.66       | % |  |   | 32.92      | %
|Common stock outstanding at end of
period(A)                            |  |                                  | 32,526,223 |   |                                |   | 30,270,958 |      |  |   | 32,526,223 |   |  |   | 30,270,958 |  
|                                                                        |  |                                  |            |  
|Statement of Assets and Liabilities Data:                               |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net assets at end of period                                             |  | $                                | 328,548    |   |                                | $ | 292,102    |      |  | $ | 328,548    |   |  | $ | 292,102    |  
|Average net assets(G)                                                   |  |                                  | 323,834    |   |                                |   | 296,105    |      |  |   | 318,751    |   |  |   | 290,825    |  
|                                                                        |  |                                  |            |  
|Senior Securities Data:                                                 |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total borrowings, at cost                                               |  | $                                | 61,796     |   |                                | $ | 68,596     |      |  | $ | 61,796     |   |  | $ | 68,596     |  
|Mandatorily redeemable preferred stock(H)                               |  |                                  | 139,150    |   |                                |   | 139,150    |      |  |   | 139,150    |   |  |   | 139,150    |  
|                                                                        |  |                                  |            |  
|Ratios/Supplemental Data:                                               |  |                                  |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Ratio of net expenses to average net assets  annualized(I)             |  |                                  | 9.12       | % |                                |   | 8.96       | %    |  |   | 9.77       | % |  |   | 9.77       | %
|Ratio of net investment income to average net assets  annualized(J)    |  |                                  | 7.10       |   |                                |   | 6.91       |      |  |   | 7.02       |   |  |   | 8.20       |  



|(A) | Based on actual common shares outstanding at the end of the corresponding period.
|--- | ---------------------------------------------------------------------------------

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

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

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

|(F) | Total return equals the change in the market value of our common stock from the beginning of the period, taking into account dividends reinvested in accordance with the terms of our dividend reinvestment plan. Total
return does not take into account distributions that may be characterized as a return of capital. For further information on the estimated character of our distributions to common stockholders, 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 12.10% and 12.79% for the
three months ended September 30, 2017 and 2016, respectively, and 12.61% and 13.46% for the six months ended September 30, 2017 and 2016, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(J) | Had we not received any non-contractual, unconditional, and irrevocable credits of fees from the Adviser, the ratio of net investment income to average net assetsannualized
would have been 4.12% and 3.07% for the three months ended September 30, 2017 and 2016, respectively, and 4.18% and 4.52% for the six months ended September 30, 2017 and 2016, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTE 12. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES

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

We had one unconsolidated subsidiary, Galaxy Tool Holding Corporation (Galaxy),
which met at least one of the significance conditions under Rule 1-02(w) of the SECs Regulation S-X as of or during at least one of the six month periods ended
September 30, 2017 and 2016. Accordingly, summarized, comparative financial information, pursuant to Rule 10-01(b) is presented below for Galaxy, which is a designer and manufacturer of precision tools
for the business jet industry and of injection and blow molds for the plastics industry.



|                 |  |                                        |        |  |      |   |        | 
|---------------- |  | -------------------------------------- | ------ |  | ---- | - | ------ | 
|                 |  | For the Six Months Ended September 30, |       
|Income Statement |  | 2017                                   |        |  | 2016 |  
|Net sales        |  | $                                      | 12,361 |  |      | $ | 12,480 | 
|Gross profit     |  |                                        | 1,931  |  |      |   | 2,743  | 
|Net profit       |  |                                        | 442    |  |      |   | 764    | 

NOTE 13. SUBSEQUENT EVENTS

Distributions

In October 2017, our Board of Directors
declared the following monthly and supplemental distributions to common stockholders and monthly dividends to holders of our Series B Term Preferred Stock, Series C Term Preferred Stock and Series D Term Preferred Stock:



|                  |  |                        |  |                              |       |     |                                                  |   |          |                                                  |  |   |                                                  |  |  |   |            | 
|----------------- |  | ---------------------- |  | ---------------------------- | ----- | --- | ------------------------------------------------ | - | -------- | ------------------------------------------------ |  | - | ------------------------------------------------ |  |  | - | ---------- | 
|Record Date       |  | Payment Date           |  | Distribution perCommon Share |       |     | Dividend perShare ofSeries B TermPreferred Stock |   |          | Dividend perShare ofSeries C TermPreferred Stock |  |   | Dividend perShare ofSeries D TermPreferred Stock | 
|October 20, 2017  |  | October 31, 2017       |  | $                            | 0.065 |     |                                                  | $ | 0.140625 |                                                  |  | $ | 0.135417                                         |  |  | $ | 0.13020833 | 
|November 20, 2017 |  | November 30, 2017      |  |                              | 0.065 |     |                                                  |   | 0.140625 |                                                  |  |   | 0.135417                                         |  |  |   | 0.13020833 | 
|December 5, 2017  |  | December 15, 2017      |  |                              | 0.060 | (A) |                                                  |   |         |                                                  |  |   |                                                 |  |  |   |           | 
|December 19, 2017 |  | December 29, 2017      |  |                              | 0.065 |     |                                                  |   | 0.140625 |                                                  |  |   | 0.135417                                         |  |  |   | 0.13020833 | 
|                  |  |                        |  |                              |       |     |                                                  |   |          |                                                  |  |   |                                                  |  |  |   |            | 
|                  |  | Total for the Quarter: |  | $                            | 0.255 |     |                                                  | $ | 0.421875 |                                                  |  | $ | 0.406251                                         |  |  | $ | 0.39062499 | 
|                  |  |                        |  |                              |       |     |                                                  |   |          |                                                  |  |   |                                                  |  |  |   |            | 



|                                                                  
|------------------------------------------------------------------
|(A)      Denotes supplemental
distribution to common stockholders.



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

All statements contained herein, other than historical facts, may constitute forward-looking statements. These
statements may relate to, among other things, our future operating results, our business prospects and the prospects of our portfolio companies, actual and potential conflicts of interest with Gladstone Management Corporation (the
Adviser) and its affiliates, the use of borrowed money to finance our investments, the adequacy of our financing sources and working capital, and our ability to co-invest, among other factors. In
some cases, you can identify forward-looking statements by terminology such as estimate, may, might, believe, will, provided, anticipate, future,
could, growth, plan, project, intend, expect, should, would, if, seek, possible, potential,
likely or the negative or variations of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: (1) the
recurrence of adverse events in the economy and the capital markets; (2) risks associated with negotiation and consummation of pending and future transactions; (3) the loss of one or more of our executive officers, in particular David
Gladstone, Terry Lee Brubaker or David Dullum; (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, 2017, filed with the U.S. Securities and Exchange Commission (SEC) on May 15, 2017 (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, 2017, we have made 147 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). The Adviser manages our investment activities. We have also entered into an administration agreement (the Administration Agreement) with Gladstone Administration,
LLC (the Administrator), an affiliate of ours and the Adviser, whereby we pay separately for administrative services. The Adviser

and
Administrator are privately-held companies that are indirectly owned and controlled by David Gladstone, our chairman and chief executive officer.



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

We were established for the purpose of investing in debt and equity securities of
established private businesses operating in the United States (U.S.). Our investment objectives are to: (i) achieve and grow current income by investing in debt securities of established businesses that we believe will provide
stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness, and make distributions to our stockholders that grow over time; and (ii) provide our stockholders with long-term capital
appreciation in the value of our assets by investing in equity securities, generally in combination with the aforementioned debt securities, of established businesses that we believe can grow over time to permit us to sell our equity investments for
capital gains. To achieve our objectives, our investment strategy is to invest in several categories of debt and equity securities, with individual investments generally totaling up to $30 million, although investment size may vary depending
upon our total assets or available capital at the time of investment. We intend that our investment portfolio over time will consist of approximately 75% in debt securities and 25% in equity securities, at cost. As of September 30, 2017, our
investment portfolio was made up of 72.3% in debt securities and 27.7% 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 SECs order. Since 2012, we have opportunistically made several co-investments with Gladstone Capital pursuant to the Co-Investment Order. We
believe the Co-Investment Order has enhanced and will continue to enhance our ability to further our investment objectives and strategies. If we are participating in an investment with one or more co-investors, whether or not an affiliate of ours, our investment is likely to be smaller than if we were investing alone.

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

Business

Portfolio Activity

While the business environment
remains competitive, we continue to see new investment opportunities consistent with our investment strategy of providing a combination of debt and equity in support of management and independent sponsor-led
buyouts of Lower Middle Market companies in the U.S. During the six months ended September 30, 2017, we exited one portfolio company with a fair value prior to its sale of $19.2 million, invested $28.3 million in one new portfolio
company, and one of our existing portfolio companies merged with and into another one of our portfolio companies, resulting in a net reduction of one company from our



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portfolio, which was comprised of 34 companies as of September 30, 2017. From our initial public offering in June 2005 through September 30, 2017, we have made investments in 46
companies, excluding investments in syndicated loans, for a total of approximately $955 million, before giving effect to principal repayments and divestitures.

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, 2017, we had unrecognized, contractual success fees of $26.0 million, or
$0.80 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, 2017, we have completed eleven buyout liquidity events, which, in the aggregate, have generated
$85.5 million in net realized gains and $22.0 million in other income upon exit, for a total increase to our net assets of $107.5 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 eleven 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 60.0% from March
2011 through September 30, 2017, and allowed us to 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 June 2017.

Capital Raising Efforts

We have been able to meet our capital needs through extensions of and increases to the Fifth Amended and Restated Credit Agreement dated April 30, 2013,
as amended (the Credit Facility), and by accessing the capital markets in the form of public offerings of common and preferred stock. We have successfully extended the Credit Facilitys revolving period multiple times, most recently
to November 2019, and currently have a total commitment amount of $165.0 million (with a potential total commitment of $250.0 million through additional commitments of new or existing lenders). Most recently, 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 2.3 million shares of our Series D Term Preferred Stock for gross proceeds of $57.5 million in
September 2016. 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 were able to access the capital markets historically, we believe market conditions 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 October 31, 2017, the closing market price of our common stock was $10.09 per share, which represented a 0.1% discount to our net asset value
(NAV) of $10.10 per share as of September 30, 2017. When our common stock trades below NAV, our ability to issue additional equity is constrained by provisions of the 1940 Act, which generally prohibits the issuance and sale of our
common stock at an issuance price below the then current NAV per share without stockholder approval, other than through sales to our then-existing stockholders pursuant to a rights offering.

At our 2017 Annual Meeting of Stockholders held on August 24, 2017, our stockholders approved a proposal authorizing us to issue and sell shares of our
common stock at a price below our then current NAV per share, subject to certain limitations, including that the number of common shares issued and sold pursuant to such authority does not exceed 25.0% of our then outstanding common stock
immediately prior to each such sale, provided that our board of directors (Board of Directors) makes certain determinations prior to any such sale. This August 2017 stockholder authorization is in effect for one year from the date of
stockholder approval. 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 (including offerings of additional shares of common stock to cover over-allotments) at a price below the then current NAV per share, once in May and June 2017, once in March and April 2015, and once in October and November 2012. The
resulting proceeds, in part, have allowed us to (i) grow our portfolio by making new investments, (ii) generate additional income through these new investments, (iii) ensure continued compliance with regulatory tests and
(iv) increase our debt capital while still complying with our applicable debt-to-equity ratios. Refer to Liquidity and Capital Resources  Equity
 Common Stock for further discussion of our common stock.



45



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Regulatory Compliance

Our ability to seek external debt financing, to the extent that it is available under current market conditions, is further subject to the asset coverage
limitations of the 1940 Act, which require us to have asset coverage (as defined in Sections 18 and 61 of the 1940 Act), of at least 200.0% on each of our senior securities representing indebtedness and our senior securities that are stock (such as
our three series of term preferred stock). As of September 30, 2017, our asset coverage on our senior securities representing indebtedness was 819.6% and our asset coverage on our senior securities that are stock was 258.2%.

Investment Highlights

During the six months ended
September 30, 2017, we invested $28.3 million in one new portfolio company, received $30.8 million in proceeds from repayments and sales, and extended $12.7 million of follow-on investments
to existing portfolio companies through revolver draws, term loans, and additions to equity, as applicable.

Investment Activity

During the six months ended September 30, 2017, the following significant transactions occurred:



| |  |  | In April 2017, we sold our investment in Mitchell Rubber Products, Inc. (Mitchell), which resulted in success fee income of $1.7 million and a realized gain of $1.0 million. In connection with the
sale, we received net cash proceeds of $19.0 million, including the repayment of our debt investment of $13.6 million at par.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In May and June 2017, we sold a portion of our common stock investment in AquaVenture resulting in net cash proceeds of $2.0 million, which represented a return of capital.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In June 2017, one of our portfolio companies, Mathey Investments, Inc. (Mathey) was merged with and into another one of our portfolio companies, SBS Industries, LLC (SBS). As a result of this
transaction, we received success fee income of $0.3 million from Mathey. 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. In connection with the merger, we also extended a secured first lien revolving line of credit to SBS with a total facility amount of $1.5 million, which was undrawn at the time of the transaction.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In August 2017, we invested $28.3 million in Pioneer Square Brands, Inc. (Pioneer) through a combination of secured first lien debt and preferred equity. Pioneer, headquartered in Seattle, Washington,
is a designer, manufacturer, and marketer of premium mobile technology bags and cases serving a diverse customer base, primarily in the education and corporate sectors.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent Developments

Registration Statement

On June 16, 2015, we filed a registration statement on Form N-2 (File
No. 333-204996) with the SEC and subsequently filed a Pre-Effective Amendment No. 1 to the registration statement on July 28, 2015, which the SEC declared
effective on July 29, 2015. On June 8, 2016, we filed Post-Effective Amendment No. 1 to the registration statement, which the SEC declared effective on July 28, 2016. On July 28, 2017, we filed Post-Effective Amendment
No. 5 to the registration statement, which the SEC declared effective on July 31, 2017. 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,
2017, we have the ability to issue up to $221.3 million in securities under the registration statement.



46



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##### Table of Contents

Common Stock Offering

Pursuant to our current 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.

Executive Officers

In October 2017, our Board of
Directors announced that Julia Ryan, the Companys Chief Financial Officer and Treasurer, had taken a temporary family medical leave of absence and that Nicole Schaltenbrand, the Chief Financial Officer and Treasurer of the Companys
affiliated fund, Gladstone Capital Corporation, will serve as the Companys Acting Principal Financial Officer during Ms. Ryans absence. Ms. Ryan will return to her position as Chief Financial Officer and Treasurer of the
Company in January 2018.

Distributions and Dividends

In October 2017, our Board of Directors declared the following monthly and supplemental distributions to common stockholders and monthly dividends to holders
of our Series B Term Preferred Stock, Series C Term Preferred Stock and Series D Term Preferred Stock:



|                       |  |                   |       |                              |       |     |                                                  |   |          |                                                  |          |   |                                                  |   |            |   |            | 
|---------------------- |  | ----------------- | ----- | ---------------------------- | ----- | --- | ------------------------------------------------ | - | -------- | ------------------------------------------------ | -------- | - | ------------------------------------------------ | - | ---------- | - | ---------- | 
|Record Date            |  | Payment Date      |       | Distribution perCommon Share |       |     | Dividend perShare ofSeries B TermPreferred Stock |   |          | Dividend perShare ofSeries C TermPreferred Stock |          |   | Dividend perShare ofSeries D TermPreferred Stock |  
|October 20, 2017       |  | October 31, 2017  |       | $                            | 0.065 |     |                                                  | $ | 0.140625 |                                                  |          | $ | 0.135417                                         |   |            | $ | 0.13020833 | 
|November 20, 2017      |  | November 30, 2017 |       |                              | 0.065 |     |                                                  |   | 0.140625 |                                                  |          |   | 0.135417                                         |   |            |   | 0.13020833 | 
|December 5, 2017       |  | December 15, 2017 |       |                              | 0.060 | (A) |                                                  |   |         |                                                  |          |   |                                                 |   |            |   |           | 
|December 19, 2017      |  | December 29, 2017 |       |                              | 0.065 |     |                                                  |   | 0.140625 |                                                  |          |   | 0.135417                                         |   |            |   | 0.13020833 | 
|                       |  |                   |       |                              |       |     |                                                  |   |          |                                                  |          |   |                                                  |   |            |   |            | 
|Total for the Quarter: |  | $                 | 0.255 |                              |       | $   | 0.421875                                         |   |          | $                                                | 0.406251 |   |                                                  | $ | 0.39062499 |  
|                       |  |                   |       |                              |       |     |                                                  |   |          |                                                  |          |   |                                                  |   |            |   |            | 



|(A) | Denotes supplemental distribution to common stockholders.
|--- | ---------------------------------------------------------



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RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2017 to the Three Months Ended September 30, 2016



|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|--------------------------------------------------------------- |  | ---------------------------------------- | ------ | - | ---- | - | ------ | -------- |  | - | -------- | - |  |  | ------ | --
|                                                                |  | For the Three Months Ended September 30, |       
|                                                                |  | 2017                                     |        |   | 2016 |   |        | $ Change |  |   | % Change |  
|INVESTMENT INCOME                                               |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Interest income                                                 |  | $                                        | 11,213 |   |      | $ | 11,730 |          |  | $ | (517     | ) |  |  | (4.4   | )%
|Dividend, success fee, and other income                         |  |                                          | 1,919  |   |      |   | 14     |          |  |   | 1,905    |   |  |  | NM     |   
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Total investment income                                         |  |                                          | 13,132 |   |      |   | 11,744 |          |  |   | 1,388    |   |  |  | 11.8   |   
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|EXPENSES                                                        |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Base management fee                                             |  |                                          | 2,554  |   |      |   | 2,489  |          |  |   | 65       |   |  |  | 2.6    |   
|Loan servicing fee                                              |  |                                          | 1,485  |   |      |   | 1,722  |          |  |   | (237     | ) |  |  | (13.8  | ) 
|Incentive fee                                                   |  |                                          | 1,295  |   |      |   | 549    |          |  |   | 746      |   |  |  | 135.9  |   
|Administration fee                                              |  |                                          | 201    |   |      |   | 275    |          |  |   | (74      | ) |  |  | (26.9  | ) 
|Interest and dividend expense                                   |  |                                          | 3,005  |   |      |   | 3,068  |          |  |   | (63      | ) |  |  | (2.1   | ) 
|Amortization of deferred financing costs and discounts          |  |                                          | 367    |   |      |   | 481    |          |  |   | (114     | ) |  |  | (23.7  | ) 
|Other                                                           |  |                                          | 886    |   |      |   | 884    |          |  |   | 2        |   |  |  | 0.2    |   
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Expenses before credits from Adviser                            |  |                                          | 9,793  |   |      |   | 9,468  |          |  |   | 325      |   |  |  | 3.4    |   
|Credits to fees from Adviser                                    |  |                                          | (2,411 | ) |      |   | (2,836 | )        |  |   | 425      |   |  |  | (15.0  | ) 
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Total expenses, net of credits to fees                          |  |                                          | 7,382  |   |      |   | 6,632  |          |  |   | 750      |   |  |  | 11.3   |   
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|NET INVESTMENT INCOME                                           |  |                                          | 5,750  |   |      |   | 5,112  |          |  |   | 638      |   |  |  | 12.5   |   
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|REALIZED AND UNREALIZED GAIN (LOSS)                             |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Net realized loss on investments                                |  |                                          | (43    | ) |      |   | (11    | )        |  |   | (32      | ) |  |  | 290.9  |   
|Net realized loss on other                                      |  |                                          |       |   |      |   | (182   | )        |  |   | 182      |   |  |  | (100.0 | ) 
|Net unrealized appreciation (depreciation) of investments       |  |                                          | 7,849  |   |      |   | (5,021 | )        |  |   | 12,870   |   |  |  | NM     |   
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Net realized and unrealized gain (loss)                         |  |                                          | 7,806  |   |      |   | (5,214 | )        |  |   | 13,020   |   |  |  | NM     |   
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |  | $                                        | 13,556 |   |      | $ | (102   | )        |  | $ | 13,658   |   |  |  | NM     |   
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|BASIC AND DILUTED PER COMMON SHARE:                             |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Net investment income                                           |  | $                                        | 0.18   |   |      | $ | 0.17   |          |  | $ | 0.01     |   |  |  | 5.9    | % 
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Net increase (decrease) in net assets resulting from operations |  | $                                        | 0.42   |   |      | $ |       |          |  | $ | 0.42     |   |  |  | NM     |   
|                                                                |  |                                          |        |   |      |   |        |          |  |   |          |   |  |  |        |   

NM = Not Meaningful

Investment Income

Total investment income increased by
11.8% for the three months ended September 30, 2017, as compared to the prior year period. This increase was primarily due to an increase in other income, partially offset by a decrease in interest income, which resulted from a decrease in the
size of our interest-bearing portfolio for the three months ended September 30, 2017 as compared to the prior year period.

Interest income from our
investments in debt securities decreased 4.4% for the three months ended September 30, 2017, 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 three months ended September 30, 2017
was $351.7 million, compared to $375.9 million for the prior year period. This decrease was primarily due to the pay-off or restructure of $57.9 million of debt investments principally related
to the exit or restructure of portfolio companies and $22.0 million of loans placed on non-accrual, partially offset by $45.8 million in new debt investments and $22.1 million in follow-on debt investments to existing portfolio companies originated after September 30, 2016, 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 12.8% for the three months ended September 30, 2017, compared to 12.5% 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.



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##### Table of Contents

At September 30, 2017, certain of our loans to three portfolio companies, Alloy Die Casting Co. (Alloy
Die Casting), Precision Southeast, Inc. (Precision), and Tread Corporation (Tread), were on non-accrual status, with an aggregate debt cost basis of $25.2 million. At
September 30, 2016, our loan to Tread was on non-accrual status, with a debt cost basis of $3.2 million.

Other income for the three months ended September 30, 2017 increased by $1.9 million as compared to the prior year period. During the three months
ended September 30, 2017, other income primarily consisted of $1.8 million of dividend income and $0.1 million of success fee income. During the three months ended September 30, 2016, other income primarily consisted of dividend
income of $12.

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, 2017 |         |  | Three months ended September 30, 2017 | 
|Portfolio Company                 |  | Fair Value               |         |  | % ofPortfolio                         |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|Cambridge Sound Management, Inc.  |  | $                        | 35,381  |  |                                       |  | 6.8   | %                |  | $ | 532                        |  |  |  | 4.1   | %
|Nth Degree, Inc.                  |  |                          | 32,714  |  |                                       |  | 6.3   |                  |  |   | 432                        |  |  |  | 3.3   |  
|Drew Foam Companies, Inc.         |  |                          | 30,922  |  |                                       |  | 5.9   |                  |  |   | 1,068                      |  |  |  | 8.1   |  
|Counsel Press, Inc.               |  |                          | 28,946  |  |                                       |  | 5.6   |                  |  |   | 798                        |  |  |  | 6.1   |  
|J.R. Hobbs Co.  Atlanta, LLC     |  |                          | 28,901  |  |                                       |  | 5.6   |                  |  |   | 749                        |  |  |  | 5.7   |  
|                                  |  |                          |         |  |                                       |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments |  |                          | 156,864 |  |                                       |  | 30.2  |                  |  |   | 3,579                      |  |  |  | 27.3  |  
|Other portfolio companies         |  |                          | 363,310 |  |                                       |  | 69.8  |                  |  |   | 9,545                      |  |  |  | 72.7  |  
|                                  |  |                          |         |  |                                       |  |       |                  |  |   |                            |  |  |  |       |  
|Total investment portfolio        |  | $                        | 520,174 |  |                                       |  | 100.0 | %                |  | $ | 13,124                     |  |  |  | 100.0 | %
|                                  |  |                          |         |  |                                       |  |       |                  |  |   |                            |  |  |  |       |  
|                                  |  |                         
|                                  |  | As of September 30, 2016 |         |  | Three months ended September 30, 2016 | 
|Portfolio Company                 |  | Fair Value               |         |  | % ofPortfolio                         |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|Counsel Press, Inc.               |  | $                        | 31,937  |  |                                       |  | 6.6   | %                |  | $ | 786                        |  |  |  | 6.7   | %
|Cambridge Sound Management, Inc.  |  |                          | 26,061  |  |                                       |  | 5.4   |                  |  |   | 520                        |  |  |  | 4.4   |  
|The Mountain Corporation          |  |                          | 23,628  |  |                                       |  | 4.9   |                  |  |   | 642                        |  |  |  | 5.5   |  
|Old World Christmas, Inc.         |  |                          | 22,143  |  |                                       |  | 4.6   |                  |  |   | 534                        |  |  |  | 4.5   |  
|GI Plastek Inc.                   |  |                          | 21,291  |  |                                       |  | 4.4   |                  |  |   | 508                        |  |  |  | 4.3   |  
|                                  |  |                          |         |  |                                       |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments |  |                          | 125,060 |  |                                       |  | 25.9  |                  |  |   | 2,990                      |  |  |  | 25.4  |  
|Other portfolio companies         |  |                          | 360,912 |  |                                       |  | 74.1  |                  |  |   | 8,754                      |  |  |  | 74.6  |  
|                                  |  |                          |         |  |                                       |  |       |                  |  |   |                            |  |  |  |       |  
|Total investment portfolio        |  | $                        | 485,972 |  |                                       |  | 100.0 | %                |  | $ | 11,744                     |  |  |  | 100.0 | %
|                                  |  |                          |         |  |                                       |  |       |                  |  |   |                            |  |  |  |       |  

Expenses

Total expenses,
net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased 11.3% during the three months ended September 30, 2017, as compared to the prior year period, primarily as a
result of an increase in the incentive fee and a decrease in non-contractual, unconditional, and irrevocable credits from the Adviser, partially offset by a decrease in amortization of deferred financing costs
and discounts.

The incentive fee increased for the three months ended September 30, 2017 as compared to the prior year period, as pre-incentive fee net investment income increased over the respective periods.



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



|                                                          |  |                                  |         |   |      |   |         |  
|--------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | -
|                                                          |  | Three Months Ended September 30, |        
|                                                          |  | 2017                             |         |   | 2016 |  
|Average total assets subject to base management
fee(A)    |  | $                                | 510,800 |   |      | $ | 497,800 |  
|Multiplied by prorated annual base management fee of 2.0% |  |                                  | 0.5     | % |      |   | 0.5     | %
|                                                          |  |                                  |         |   |      |   |         |  
|Base management fee(B)                                    |  |                                  | 2,554   |   |      |   | 2,489   |  
|Credits to fees from Adviser -
other(B)                   |  |                                  | (926    | ) |      |   | (1,114  | )
|                                                          |  |                                  |         |   |      |   |         |  
|Net base management fee                                   |  | $                                | 1,628   |   |      | $ | 1,375   |  
|                                                          |  |                                  |         |   |      |   |         |  
|Loan servicing fee(B)                                     |  | $                                | 1,485   |   |      | $ | 1,722   |  
|Credits to base management fee - loan servicing
fee(B)    |  |                                  | (1,485  | ) |      |   | (1,722  | )
|                                                          |  |                                  |         |   |      |   |         |  
|Net loan servicing fee                                    |  | $                                |        |   |      | $ |        |  
|                                                          |  |                                  |         |   |      |   |         |  
|Incentive fee(B)                                          |  | $                                | 1,295   |   |      | $ | 549     |  
|Credits to fees from Adviser -
other(B)                   |  |                                  |        |   |      |   |        |  
|                                                          |  |                                  |         |   |      |   |         |  
|Net incentive fee                                         |  | $                                | 1,295   |   |      | $ | 549     |  
|                                                          |  |                                  |         |   |      |   |         |  



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

Amortization of
deferred financing costs and discounts decreased 23.7% for the three months ended September 30, 2017, as compared to the prior year period, primarily as a result of the write-off of previously deferred
costs related to the 7.125% Series A Cumulative Term Preferred Stock (our Series A Term Preferred Stock) upon its redemption in September 2016, as well as the write-off of previously deferred costs
related to our Credit Facility due to the amendment in November 2016, partially offset by the amortization of deferred costs incurred related to the issuance of the Series D Term Preferred Stock in September 2016 and the amendment to the Credit
Facility in November 2016.

Realized and Unrealized Gain (Loss)

Net Realized Gain (Loss) on Investments

There was no
significant realized gain (loss) activity during each of the three months ended September 30, 2017 and 2016.

Net Realized Loss on Other

During the three months ended September 30, 2016, we recorded a net realized loss on other of $0.2 million related to the redemption of our Series A
Term Preferred Stock in September 2016. There were no realized gains or losses on other during the three months ended September 30, 2017.



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Net Unrealized Appreciation (Depreciation) of Investments

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, 2017 |    
|Portfolio Company                |  | RealizedGain(Loss)                    |     |   | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) | 
|Drew Foam Companies, Inc.        |  | $                                     |    |   |                                      | $ | 5,312  |                                                 |  | $ |               |  |  | $ | 5,312  |  
|Nth Degree, Inc.                 |  |                                       |    |   |                                      |   | 3,154  |                                                 |  |   |               |  |  |   | 3,154  |  
|Brunswick Bowling Products, Inc. |  |                                       |    |   |                                      |   | 2,305  |                                                 |  |   |               |  |  |   | 2,305  |  
|Cambridge Sound Management, Inc. |  |                                       |    |   |                                      |   | 2,148  |                                                 |  |   |               |  |  |   | 2,148  |  
|Frontier Packaging, Inc.         |  |                                       |    |   |                                      |   | 2,010  |                                                 |  |   |               |  |  |   | 2,010  |  
|Tread Corporation                |  |                                       |    |   |                                      |   | 1,732  |                                                 |  |   |               |  |  |   | 1,732  |  
|J.R. Hobbs Co. - Atlanta, LLC    |  |                                       |    |   |                                      |   | 1,547  |                                                 |  |   |               |  |  |   | 1,547  |  
|Ginsey Home Solutions, Inc.      |  |                                       |    |   |                                      |   | 1,368  |                                                 |  |   |               |  |  |   | 1,368  |  
|Precision Southeast, Inc.        |  |                                       |    |   |                                      |   | 1,149  |                                                 |  |   |               |  |  |   | 1,149  |  
|Head Country, Inc.               |  |                                       |    |   |                                      |   | 862    |                                                 |  |   |               |  |  |   | 862    |  
|Star Seed, Inc.                  |  |                                       |    |   |                                      |   | 539    |                                                 |  |   |               |  |  |   | 539    |  
|Counsel Press, Inc.              |  |                                       |    |   |                                      |   | 512    |                                                 |  |   |               |  |  |   | 512    |  
|SBS Industries, LLC              |  |                                       |    |   |                                      |   | 275    |                                                 |  |   |               |  |  |   | 275    |  
|Diligent 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    |                                                 |  |   |               |  |  |   | 79     |  
|                                 |  |                                       |     |   |                                      |   |        |                                                 |  |   |                |  |  |   |        |  
|Total                            |  | $                                     | (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 Companies, Inc. (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.



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During the three months ended September 30, 2016, we recorded net unrealized depreciation of investments of
$5.0 million. The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the three months ended September 30, 2016, were as follows:



|                                  |  |                                       |     |   |                                      |   |        |                                                 |  |   |                |  |  |   |        |  
|--------------------------------- |  | ------------------------------------- | --- | - | ------------------------------------ | - | ------ | ----------------------------------------------- |  | - | -------------- |  |  | - | ------ | -
|                                  |  | Three Months Ended September 30, 2016 |    
|Portfolio Company                 |  | RealizedGain(Loss)                    |     |   | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) | 
|Mitchell Rubber Products, Inc.    |  | $                                     |    |   |                                      | $ | 4,440  |                                                 |  | $ |               |  |  | $ | 4,440  |  
|Old World Christmas, Inc.         |  |                                       |    |   |                                      |   | 3,824  |                                                 |  |   |               |  |  |   | 3,824  |  
|Brunswick Bowling Products, Inc.  |  |                                       |    |   |                                      |   | 2,341  |                                                 |  |   |               |  |  |   | 2,341  |  
|Counsel Press, Inc.               |  |                                       |    |   |                                      |   | 1,739  |                                                 |  |   |               |  |  |   | 1,739  |  
|Galaxy Tool Holding Corporation   |  |                                       |    |   |                                      |   | 1,138  |                                                 |  |   |               |  |  |   | 1,138  |  
|Logo Sportswear, Inc.             |  |                                       |    |   |                                      |   | 1,005  |                                                 |  |   |               |  |  |   | 1,005  |  
|B+T Group Acquisition, Inc.       |  |                                       |    |   |                                      |   | 770    |                                                 |  |   |               |  |  |   | 770    |  
|Behrens Manufacturing, LLC        |  |                                       |    |   |                                      |   | 523    |                                                 |  |   |               |  |  |   | 523    |  
|Tread Corporation                 |  |                                       |    |   |                                      |   | 372    |                                                 |  |   |               |  |  |   | 372    |  
|GI Plastek, Inc.                  |  |                                       |    |   |                                      |   | 372    |                                                 |  |   |               |  |  |   | 372    |  
|Channel Technologies Group, LLC   |  |                                       |    |   |                                      |   | 366    |                                                 |  |   |               |  |  |   | 366    |  
|Edge Adhesives Holdings, Inc.     |  |                                       |    |   |                                      |   | 182    |                                                 |  |   |               |  |  |   | 182    |  
|Meridian Rack & Pinion, Inc.      |  |                                       |    |   |                                      |   | 137    |                                                 |  |   |               |  |  |   | 137    |  
|Alloy Die Casting Co.             |  |                                       |    |   |                                      |   | (568   | )                                               |  |   |               |  |  |   | (568   | )
|Head Country, Inc.                |  |                                       |    |   |                                      |   | (843   | )                                               |  |   |               |  |  |   | (843   | )
|B-Dry, LLC                        |  |                                       |    |   |                                      |   | (876   | )                                               |  |   |               |  |  |   | (876   | )
|Schylling, Inc.                   |  |                                       |    |   |                                      |   | (967   | )                                               |  |   |               |  |  |   | (967   | )
|Country Club Enterprises, LLC     |  |                                       |    |   |                                      |   | (979   | )                                               |  |   |               |  |  |   | (979   | )
|Drew Foam Companies, Inc.         |  |                                       |    |   |                                      |   | (1,035 | )                                               |  |   |               |  |  |   | (1,035 | )
|D.P.M.S., Inc.                    |  |                                       |    |   |                                      |   | (1,074 | )                                               |  |   |               |  |  |   | (1,074 | )
|Mathey Investments, Inc.          |  |                                       |    |   |                                      |   | (1,352 | )                                               |  |   |               |  |  |   | (1,352 | )
|SOG Specialty Knives & Tools, LLC |  |                                       |    |   |                                      |   | (1,497 | )                                               |  |   |               |  |  |   | (1,497 | )
|Jackrabbit, Inc.                  |  |                                       |    |   |                                      |   | (1,562 | )                                               |  |   |               |  |  |   | (1,562 | )
|Precision Southeast, Inc.         |  |                                       |    |   |                                      |   | (1,682 | )                                               |  |   |               |  |  |   | (1,682 | )
|Cambridge Sound Management, Inc.  |  |                                       |    |   |                                      |   | (1,745 | )                                               |  |   |               |  |  |   | (1,745 | )
|The Mountain Corporation          |  |                                       |    |   |                                      |   | (1,872 | )                                               |  |   |               |  |  |   | (1,872 | )
|Frontier Packaging, Inc.          |  |                                       |    |   |                                      |   | (1,987 | )                                               |  |   |               |  |  |   | (1,987 | )
|Nth Degree, Inc.                  |  |                                       |    |   |                                      |   | (2,090 | )                                               |  |   |               |  |  |   | (2,090 | )
|SBS Industries, LLC               |  |                                       |    |   |                                      |   | (2,342 | )                                               |  |   |               |  |  |   | (2,342 | )
|Other, net (<$250 Net)            |  |                                       | (11 | ) |                                      |   | 241    |                                                 |  |   |               |  |  |   | 230    |  
|                                  |  |                                       |     |   |                                      |   |        |                                                 |  |   |                |  |  |   |        |  
|Total                             |  | $                                     | (11 | ) |                                      | $ | (5,021 | )                                               |  | $ |               |  |  | $ | (5,032 | )
|                                  |  |                                       |     |   |                                      |   |        |                                                 |  |   |                |  |  |   |        |  

The primary driver of net unrealized depreciation of $5.0 million for the three months ended September 30, 2016 was
decreased performance of certain of our portfolio companies, which was partially offset by increased performance of certain of our portfolio companies.

Across our entire investment portfolio, we recorded $8.6 million of net unrealized depreciation on our debt positions and $16.4 million of net
unrealized appreciation on our equity positions for the three months ended September 30, 2017. At September 30, 2017, the fair value of our investment portfolio was less than our cost basis by $14.2 million, as compared to
$22.0 million at June 30, 2017, representing net unrealized appreciation of $7.8 million for the three months ended September 30, 2017. Our entire portfolio had a fair value of 97.3% of cost as of September 30, 2017.



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Comparison of the Six Months Ended September 30, 2017 to the Six Months Ended September 30, 2016



|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|--------------------------------------------------------- |  | -------------------------------------- | ------ | - | ---- | - | ------ | -------- |  | - | -------- | - |  |  | ------ | --
|                                                          |  | For the Six Months Ended September 30, |       
|                                                          |  | 2017                                   |        |   | 2016 |   |        | $ Change |  |   | % Change |  
|INVESTMENT INCOME                                         |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Interest income                                           |  | $                                      | 21,959 |   |      | $ | 23,358 |          |  | $ | (1,399   | ) |  |  | (6.0   | )%
|Dividend, success fee, and other income                   |  |                                        | 4,793  |   |      |   | 2,779  |          |  |   | 2,014    |   |  |  | 72.5   |   
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Total investment income                                   |  |                                        | 26,752 |   |      |   | 26,137 |          |  |   | 615      |   |  |  | 2.4    |   
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|EXPENSES                                                  |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Base management fee                                       |  |                                        | 5,070  |   |      |   | 4,998  |          |  |   | 72       |   |  |  | 1.4    |   
|Loan servicing fee                                        |  |                                        | 3,049  |   |      |   | 3,403  |          |  |   | (354     | ) |  |  | (10.4  | ) 
|Incentive fee                                             |  |                                        | 2,467  |   |      |   | 2,249  |          |  |   | 218      |   |  |  | 9.7    |   
|Administration fee                                        |  |                                        | 508    |   |      |   | 574    |          |  |   | (66      | ) |  |  | (11.5  | ) 
|Interest and dividend expense                             |  |                                        | 5,985  |   |      |   | 6,104  |          |  |   | (119     | ) |  |  | (1.9   | ) 
|Amortization of deferred financing costs and discounts    |  |                                        | 734    |   |      |   | 962    |          |  |   | (228     | ) |  |  | (23.7  | ) 
|Other                                                     |  |                                        | 2,277  |   |      |   | 1,277  |          |  |   | 1,000    |   |  |  | 78.3   |   
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Expenses before credits from Adviser                      |  |                                        | 20,090 |   |      |   | 19,567 |          |  |   | 523      |   |  |  | 2.7    |   
|Credits to fees from Adviser                              |  |                                        | (4,523 | ) |      |   | (5,354 | )        |  |   | 831      |   |  |  | (15.5  | ) 
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Total expenses, net of credits to fees                    |  |                                        | 15,567 |   |      |   | 14,213 |          |  |   | 1,354    |   |  |  | 9.5    |   
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|NET INVESTMENT INCOME                                     |  |                                        | 11,185 |   |      |   | 11,924 |          |  |   | (739     | ) |  |  | (6.2   | ) 
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|REALIZED AND UNREALIZED GAIN (LOSS)                       |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Net realized gain on investments                          |  |                                        | 1,122  |   |      |   | 18,624 |          |  |   | (17,502  | ) |  |  | (94.0  | ) 
|Net realized loss on other                                |  |                                        |       |   |      |   | (257   | )        |  |   | 257      |   |  |  | (100.0 | ) 
|Net unrealized appreciation (depreciation) of investments |  |                                        | 9,390  |   |      |   | (5,934 | )        |  |   | 15,324   |   |  |  | NM     |   
|Net unrealized appreciation of other                      |  |                                        |       |   |      |   | 75     |          |  |   | (75      | ) |  |  | (100.0 | ) 
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Net realized and unrealized gain                          |  |                                        | 10,512 |   |      |   | 12,508 |          |  |   | (1,996   | ) |  |  | (16.0  | ) 
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS      |  | $                                      | 21,697 |   |      | $ | 24,432 |          |  | $ | (2,735   | ) |  |  | (11.2  | ) 
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|BASIC AND DILUTED PER COMMON SHARE:                       |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Net investment income                                     |  | $                                      | 0.35   |   |      | $ | 0.39   |          |  | $ | (0.04    | ) |  |  | (10.3  | )%
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   
|Net increase in net assets resulting from operations      |  | $                                      | 0.68   |   |      | $ | 0.81   |          |  | $ | (0.13    | ) |  |  | (16.0  | ) 
|                                                          |  |                                        |        |   |      |   |        |          |  |   |          |   |  |  |        |   

NM = Not Meaningful

Investment Income

Total investment income increased by
2.4% for the six months ended September 30, 2017, as compared to the prior year period. This increase was primarily due to an increase in other income, partially offset by a decrease in interest income, which resulted from a decrease in the
size of our interest-bearing portfolio for the six months ended September 30, 2017 as compared to the prior year period.

Interest income from our
investments in debt securities decreased 6.0% for the six months ended September 30, 2017, 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, 2017 was
$346.1 million, compared to $371.5 million for the prior year period. This decrease was primarily due to the pay-off or restructure of $57.9 million of debt investments principally related to
the exit or restructure of portfolio companies and $22.0 million of loans placed on non-accrual, partially offset by $45.8 million in new debt investments and $22.1 million in follow-on debt investments to existing portfolio companies originated after September 30, 2016, 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 12.7% for the six months ended September 30, 2017, compared to 12.6% for the prior year period. The weighted average yield may vary from period to period, based on the current stated interest rate on
interest-bearing investments.

At September 30, 2017, certain of our loans to three portfolio companies, Alloy Die Casting, Precision, and Tread,
were on non-accrual status, with an aggregate debt cost basis of $25.2 million. At September 30, 2016, our loan to Tread was on non-accrual status, with a debt
cost basis of $3.2 million.



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Other income for the six months ended September 30, 2017 increased 72.5% from the prior year period. 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. During the six months ended September 30, 2016, other income primarily consisted
of $2.8 million of dividend income.

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



|                                  |  |                          |         |  |                                     |  |       |                  |  |   |                            |  |  |  |       |  
|--------------------------------- |  | ------------------------ | ------- |  | ----------------------------------- |  | ----- | ---------------- |  | - | -------------------------- |  |  |  | ----- | -
|                                  |  | As of September 30, 2017 |         |  | Six months ended September 30, 2017 | 
|Portfolio Company                 |  | Fair Value               |         |  | % ofPortfolio                       |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|Cambridge Sound Management, Inc.  |  | $                        | 35,381  |  |                                     |  | 6.8   | %                |  | $ | 1,057                      |  |  |  | 3.9   | %
|Nth Degree, Inc.                  |  |                          | 32,714  |  |                                     |  | 6.3   |                  |  |   | 853                        |  |  |  | 3.2   |  
|Drew Foam Companies, Inc.         |  |                          | 30,922  |  |                                     |  | 5.9   |                  |  |   | 1,407                      |  |  |  | 5.3   |  
|Counsel Press, Inc.               |  |                          | 28,946  |  |                                     |  | 5.6   |                  |  |   | 1,576                      |  |  |  | 5.9   |  
|J.R. Hobbs Co.  Atlanta, LLC     |  |                          | 28,901  |  |                                     |  | 5.6   |                  |  |   | 1,537                      |  |  |  | 5.7   |  
|                                  |  |                          |         |  |                                     |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments |  |                          | 156,864 |  |                                     |  | 30.2  |                  |  |   | 6,430                      |  |  |  | 24.0  |  
|Other portfolio companies         |  |                          | 363,310 |  |                                     |  | 69.8  |                  |  |   | 20,312                     |  |  |  | 76.0  |  
|                                  |  |                          |         |  |                                     |  |       |                  |  |   |                            |  |  |  |       |  
|Total investment portfolio        |  | $                        | 520,174 |  |                                     |  | 100.0 | %                |  | $ | 26,742                     |  |  |  | 100.0 | %
|                                  |  |                          |         |  |                                     |  |       |                  |  |   |                            |  |  |  |       |  



|                                  |  |                          |         |  |                                     |  |       |                  |  |   |                            |  |  |  |       |  
|--------------------------------- |  | ------------------------ | ------- |  | ----------------------------------- |  | ----- | ---------------- |  | - | -------------------------- |  |  |  | ----- | -
|                                  |  | As of September 30, 2016 |         |  | Six months ended September 30, 2016 | 
|Portfolio Company                 |  | Fair Value               |         |  | % ofPortfolio                       |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|Counsel Press, Inc.               |  | $                        | 31,937  |  |                                     |  | 6.6   | %                |  | $ | 1,563                      |  |  |  | 6.0   | %
|Cambridge Sound Management, Inc.  |  |                          | 26,061  |  |                                     |  | 5.4   |                  |  |   | 1,013                      |  |  |  | 3.9   |  
|The Mountain Corporation(A)       |  |                          | 23,628  |  |                                     |  | 4.9   |                  |  |   | 1,011                      |  |  |  | 3.9   |  
|Old World Christmas, Inc.         |  |                          | 22,143  |  |                                     |  | 4.6   |                  |  |   | 1,062                      |  |  |  | 4.1   |  
|GI Plastek, Inc.                  |  |                          | 21,291  |  |                                     |  | 4.4   |                  |  |   | 1,010                      |  |  |  | 3.9   |  
|                                  |  |                          |         |  |                                     |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments |  |                          | 125,060 |  |                                     |  | 25.9  |                  |  |   | 5,659                      |  |  |  | 21.8  |  
|Other portfolio companies         |  |                          | 360,912 |  |                                     |  | 74.1  |                  |  |   | 20,478                     |  |  |  | 78.2  |  
|                                  |  |                          |         |  |                                     |  |       |                  |  |   |                            |  |  |  |       |  
|Total investment portfolio        |  | $                        | 485,972 |  |                                     |  | 100.0 | %                |  | $ | 26,137                     |  |  |  | 100.0 | %
|                                  |  |                          |         |  |                                     |  |       |                  |  |   |                            |  |  |  |       |  



|(A) | New investment during the applicable period.
|--- | --------------------------------------------

Expenses

Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased
9.5% during the six months ended September 30, 2017, as compared to the prior year period, primarily as a result of an increase in other expenses and the incentive fee and a decrease in non-contractual,
unconditional, and irrevocable credits from the Adviser, partially offset by a decrease in amortization of deferred financing fees and discounts and interest and dividend expense.

The incentive fee increased for the six months ended September 30, 2017 as compared to the prior year period, as
pre-incentive fee net investment income increased over the respective periods.



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



|                                                          |  |                                |         |   |      |   |         |  
|--------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                          |  | Six Months Ended September 30, |        
|                                                          |  | 2017                           |         |   | 2016 |  
|Average total assets subject to base management
fee(A)    |  | $                              | 507,000 |   |      | $ | 499,800 |  
|Multiplied by prorated annual base management fee of 2.0% |  |                                | 1.0     | % |      |   | 1.0     | %
|                                                          |  |                                |         |   |      |   |         |  
|Base management fee(B)                                    |  |                                | 5,070   |   |      |   | 4,998   |  
|Credits to fees from Adviser -
other(B)                   |  |                                | (1,474  | ) |      |   | (1,951  | )
|                                                          |  |                                |         |   |      |   |         |  
|Net base management fee                                   |  | $                              | 3,596   |   |      | $ | 3,047   |  
|                                                          |  |                                |         |   |      |   |         |  
|Loan servicing fee(B)                                     |  | $                              | 3,049   |   |      | $ | 3,403   |  
|Credits to base management fee - loan servicing
fee(B)    |  |                                | (3,049  | ) |      |   | (3,403  | )
|                                                          |  |                                |         |   |      |   |         |  
|Net loan servicing fee                                    |  | $                              |        |   |      | $ |        |  
|                                                          |  |                                |         |   |      |   |         |  
|Incentive fee(B)                                          |  | $                              | 2,467   |   |      | $ | 2,249   |  
|Credits to fees from Adviser -
other(B)                   |  |                                |        |   |      |   |        |  
|                                                          |  |                                |         |   |      |   |         |  
|Net incentive fee                                         |  | $                              | 2,467   |   |      | $ | 2,249   |  
|                                                          |  |                                |         |   |      |   |         |  



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

Interest and dividend expense decreased 1.9% during the six months ended September 30, 2017, as compared to the prior year period, primarily due to lower
costs of borrowings on our Credit Facility, as the increase in the effective interest rate was more than offset by the decrease in average borrowings outstanding. Interest expense decreased $0.4 million from the prior year period, as the
weighted average balance outstanding on our Credit Facility during the six months ended September 30, 2017 was $42.1 million as compared to $77.5 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, 2017 was 6.2% as compared to 4.5% in the prior year period. Dividends on mandatorily redeemable preferred stock increased $0.3 million from the
prior year period, during which the Series D Term Preferred Stock was newly issued and only outstanding for a portion of the period and the Series A Term Preferred Stock was outstanding until September 2016.

Amortization of deferred financing costs and discounts decreased 23.7% for the six months ended September 30, 2017 as compared to the prior year period,
primarily as a result of the write-off of previously deferred costs related to the Series A Term Preferred Stock upon its redemption in September 2016, as well as the
write-off of previously deferred costs related to our Credit Facility due to the amendment in November 2016, partially offset by the amortization of deferred costs incurred related to the issuance of the
Series D Term Preferred Stock in September 2016 and the amendment to the Credit Facility in November 2016.

Other expenses increased 78.3% for the six
months ended September 30, 2017 as compared to the prior year period, primarily as a result of higher bad debt expense, professional fees, and tax expense.

Realized and Unrealized Gain (Loss)

Net Realized Gain
on Investments

During the six months ended September 30, 2017, we recorded net realized gains on investments of $1.1 million, primarily
related to a $1.0 million realized gain from the exit of Mitchell, compared to net realized gains on investments of $18.6 million during the prior year period, primarily related to an $18.8 million realized gain from the exit of Acme
Cryogenics, Inc. (Acme).

Net Realized Loss on Other

During the six months ended September 30, 2016, we recorded a net realized loss on other of $0.3 million, of which $0.2 million related to the
redemption of our Series A Term Preferred Stock in September 2016 and $0.1 million related to the expiration of our interest rate cap agreement in April 2016. There were no realized gains or losses on other during the six months ended
September 30, 2017.



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Net Unrealized Appreciation (Depreciation) of Investments

During the six months ended September 30, 2017, we recorded net unrealized appreciation 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, 2017 |      
|Portfolio Company                 |  | RealizedGain(Loss)                  |       |  | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) |  
|Cambridge Sound Management, Inc.  |  | $                                   |      |  |                                      | $ | 8,335  |                                                 |  | $ |               |   |  | $ | 8,335  |  
|Nth Degree, Inc.                  |  |                                     |      |  |                                      |   | 6,953  |                                                 |  |   |               |   |  |   | 6,953  |  
|Drew Foam Companies, Inc.         |  |                                     |      |  |                                      |   | 5,682  |                                                 |  |   |               |   |  |   | 5,682  |  
|Old World Christmas, Inc.         |  |                                     |      |  |                                      |   | 3,532  |                                                 |  |   |               |   |  |   | 3,532  |  
|Tread Corporation                 |  |                                     |      |  |                                      |   | 2,931  |                                                 |  |   |               |   |  |   | 2,931  |  
|Precision Southeast, Inc.         |  |                                     |      |  |                                      |   | 2,776  |                                                 |  |   |               |   |  |   | 2,776  |  
|Frontier Packaging, Inc.          |  |                                     |      |  |                                      |   | 2,748  |                                                 |  |   |               |   |  |   | 2,748  |  
|Mathey Investments, Inc.          |  |                                     |      |  |                                      |   |       |                                                 |  |   | 2,658          |   |  |   | 2,658  |  
|J.R. Hobbs Co. - Atlanta, LLC     |  |                                     |      |  |                                      |   | 1,981  |                                                 |  |   |               |   |  |   | 1,981  |  
|SBS Industries, LLC               |  |                                     |      |  |                                      |   | 1,741  |                                                 |  |   |               |   |  |   | 1,741  |  
|Star Seed, Inc.                   |  |                                     |      |  |                                      |   | 1,303  |                                                 |  |   |               |   |  |   | 1,303  |  
|Ginsey Home Solutions, Inc.       |  |                                     |      |  |                                      |   | 1,184  |                                                 |  |   |               |   |  |   | 1,184  |  
|B+T Group Acquisition, Inc.       |  |                                     |      |  |                                      |   | 327    |                                                 |  |   |               |   |  |   | 327    |  
|Schylling, 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.



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During the six months ended September 30, 2016, we recorded net unrealized depreciation of investments of
$5.9 million. The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the six months ended September 30, 2016, were as follows:



|                                  |  |                                     |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|--------------------------------- |  | ----------------------------------- | ------ | - | ------------------------------------ | - | ------ | ----------------------------------------------- |  | - | -------------- | - |  | - | ------ | -
|                                  |  | Six Months Ended September 30, 2016 |       
|Portfolio Company                 |  | RealizedGain(Loss)                  |        |   | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) |  
|Galaxy Tool Holding Corporation   |  | $                                   |       |   |                                      | $ | 8,957  |                                                 |  | $ |               |   |  | $ | 8,957  |  
|Mitchell Rubber Products, Inc.    |  |                                     |       |   |                                      |   | 5,766  |                                                 |  |   |               |   |  |   | 5,766  |  
|Brunswick Bowling Products, Inc.  |  |                                     |       |   |                                      |   | 4,619  |                                                 |  |   |               |   |  |   | 4,619  |  
|Head Country, Inc.                |  |                                     |       |   |                                      |   | 4,240  |                                                 |  |   |               |   |  |   | 4,240  |  
|Counsel Press, Inc.               |  |                                     |       |   |                                      |   | 3,037  |                                                 |  |   |               |   |  |   | 3,037  |  
|Logo Sportswear, Inc.             |  |                                     |       |   |                                      |   | 2,914  |                                                 |  |   |               |   |  |   | 2,914  |  
|Old World Christmas, Inc.         |  |                                     |       |   |                                      |   | 2,214  |                                                 |  |   |               |   |  |   | 2,214  |  
|Behrens Manufacturing, LLC        |  |                                     |       |   |                                      |   | 1,820  |                                                 |  |   |               |   |  |   | 1,820  |  
|Jackrabbit, Inc.                  |  |                                     |       |   |                                      |   | 1,329  |                                                 |  |   |               |   |  |   | 1,329  |  
|Ginsey Home Solutions, Inc.       |  |                                     |       |   |                                      |   | 1,070  |                                                 |  |   |               |   |  |   | 1,070  |  
|GI Plastek, Inc.                  |  |                                     |       |   |                                      |   | 619    |                                                 |  |   |               |   |  |   | 619    |  
|Country Club Enterprises, LLC     |  |                                     |       |   |                                      |   | 427    |                                                 |  |   |               |   |  |   | 427    |  
|B-Dry, LLC                        |  |                                     |       |   |                                      |   | 310    |                                                 |  |   |               |   |  |   | 310    |  
|Edge Adhesives Holdings, Inc.     |  |                                     |       |   |                                      |   | 240    |                                                 |  |   |               |   |  |   | 240    |  
|Drew Foam Companies, Inc.         |  |                                     |       |   |                                      |   | 204    |                                                 |  |   |               |   |  |   | 204    |  
|Schylling, Inc.                   |  |                                     |       |   |                                      |   | 203    |                                                 |  |   |               |   |  |   | 203    |  
|Diligent Delivery Systems         |  |                                     |       |   |                                      |   | 146    |                                                 |  |   |               |   |  |   | 146    |  
|Meridian Rack & Pinion, Inc.      |  |                                     |       |   |                                      |   | (393   | )                                               |  |   |               |   |  |   | (393   | )
|Alloy Die Casting Co.             |  |                                     |       |   |                                      |   | (448   | )                                               |  |   |               |   |  |   | (448   | )
|Nth Degree, Inc.                  |  |                                     |       |   |                                      |   | (687   | )                                               |  |   |               |   |  |   | (687   | )
|Frontier Packaging, Inc.          |  |                                     |       |   |                                      |   | (869   | )                                               |  |   |               |   |  |   | (869   | )
|Tread Corporation                 |  |                                     |       |   |                                      |   | (1,336 | )                                               |  |   |               |   |  |   | (1,336 | )
|Mathey Investments, Inc.          |  |                                     |       |   |                                      |   | (1,405 | )                                               |  |   |               |   |  |   | (1,405 | )
|The Mountain Corporation          |  |                                     |       |   |                                      |   | (1,872 | )                                               |  |   |               |   |  |   | (1,872 | )
|D.P.M.S., Inc.                    |  |                                     |       |   |                                      |   | (2,228 | )                                               |  |   |               |   |  |   | (2,228 | )
|SBS Industries, LLC               |  |                                     |       |   |                                      |   | (2,342 | )                                               |  |   |               |   |  |   | (2,342 | )
|Acme Cryogenics, Inc.             |  |                                     | 18,826 |   |                                      |   |       |                                                 |  |   | (21,216        | ) |  |   | (2,390 | )
|Cambridge Sound Management, Inc.  |  |                                     |       |   |                                      |   | (2,774 | )                                               |  |   |               |   |  |   | (2,774 | )
|Precision Southeast, Inc.         |  |                                     |       |   |                                      |   | (3,922 | )                                               |  |   |               |   |  |   | (3,922 | )
|SOG Specialty Knives & Tools, LLC |  |                                     |       |   |                                      |   | (4,913 | )                                               |  |   |               |   |  |   | (4,913 | )
|Other, net (<$250 Net)            |  |                                     | (202   | ) |                                      |   | 356    |                                                 |  |   |               |   |  |   | 154    |  
|                                  |  |                                     |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  
|Total                             |  | $                                   | 18,624 |   |                                      | $ | 15,282 |                                                 |  | $ | (21,216        | ) |  | $ | 12,690 |  
|                                  |  |                                     |        |   |                                      |   |        |                                                 |  |   |                |   |  |   |        |  

The primary driver of net unrealized depreciation of $5.9 million for the six months ended September 30, 2016, was
the reversal of $21.2 million of previously recorded unrealized appreciation on our investment in Acme upon exit, which was partially offset by increased performance of certain of our portfolio companies.

Across our entire investment portfolio, we recorded $8.8 million of net unrealized depreciation on our debt positions and $18.2 million of net
unrealized appreciation on our equity positions for the six months ended September 30, 2017. At September 30, 2017, the fair value of our investment portfolio was less than our cost basis by $14.2 million, as compared to
$23.6 million at March 31, 2017, representing net unrealized appreciation of $9.4 million for the six months ended September 30, 2017. Our entire portfolio had a fair value of 97.3% of cost as of September 30, 2017.

Net Unrealized Appreciation on Other

During the six
months ended September 30, 2016, we recorded net unrealized appreciation on other of $75 due to the reversal of previously recorded depreciation upon the expiration of our interest rate cap agreement in April 2016. There was no unrealized
appreciation or depreciation on other during the six months ended September 30, 2017.



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LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Net cash provided by
operating activities for the six months ended September 30, 2017 was $6.9 million, as compared to $27.9 million for the six months ended September 30, 2016. This change was primarily due to lower net proceeds from the sale of
investments. Net proceeds from the sale of investments totaled $5.8 million during the six months ended September 30, 2017, compared to $28.5 million during the six months ended September 30, 2016.

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. As of
September 30, 2016, we had equity investments in or loans to 36 portfolio companies with an aggregate cost basis of $522.4 million. The following table summarizes our total portfolio investment activity during the six months ended
September 30, 2017 and 2016:



|                                                                |  |                                |         |   |      |   |         |  
|--------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                |  | Six Months Ended September 30, |        
|                                                                |  | 2017                           |         |   | 2016 |  
|Beginning investment portfolio, at fair value                   |  | $                              | 501,579 |   |      | $ | 487,656 |  
|New investments                                                 |  |                                | 28,300  |   |      |   | 25,500  |  
|Disbursements to existing portfolio companies                   |  |                                | 3,348   |   |      |   | 5,686   |  
|Unscheduled principal repayments                                |  |                                | (17,610 | ) |      |   | (16,661 | )
|Net proceeds from sales of investments                          |  |                                | (5,796  | ) |      |   | (28,479 | )
|Net realized gain on investments                                |  |                                | 957     |   |      |   | 18,204  |  
|Net unrealized appreciation of investments                      |  |                                | 9,536   |   |      |   | 15,282  |  
|Reversal of net unrealized appreciation of investments          |  |                                | (146    | ) |      |   | (21,216 | )
|Amortization of premiums, discounts, and acquisition costs, net |  |                                | 6       |   |      |   |        |  
|                                                                |  |                                |         |   |      |   |         |  
|Ending investment portfolio, at fair value                      |  | $                              | 520,174 |   |      | $ | 485,972 |  
|                                                                |  |                                |         |   |      |   |         |  

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, 2017:



|                                              |  |                                                                |  |           |         |  
|--------------------------------------------- |  | -------------------------------------------------------------- |  | --------- | ------- | -
|                                              |  |                                                                |  | Amount(A) |        
|For the remaining six months ending March 31: |  | 2018                                                           |  | $         | 14,929  |  
|For the fiscal years ending March 31:         |  | 2019                                                           |  |           | 81,341  |  
|                                              |  | 2020                                                           |  |           | 89,253  |  
|                                              |  | 2021                                                           |  |           | 101,410 |  
|                                              |  | 2022                                                           |  |           | 64,396  |  
|                                              |  | Thereafter                                                     |  |           | 34,000  |  
|                                              |  |                                                                |  |           |         |  
|                                              |  | Total contractual repayments                                   |  | $         | 386,329 |  
|                                              |  | Adjustments to cost basis of debt investments                  |  |           | (95     | )
|                                              |  | Investments in equity securities                               |  |           | 148,138 |  
|                                              |  |                                                                |  |           |         |  
|                                              |  | Total cost basis of investments held as of
September 30, 2017: |  | $         | 534,372 |  
|                                              |  |                                                                |  |           |         |  



|(A) | Subsequent to September 30, 2017, debt investments in one portfolio company with a combined principal balance of $13.3 million, which previously had
maturity dates during the fiscal year ending March 31, 2019, were extended to mature during the fiscal year ending March 31, 2022.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financing Activities

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. Net cash used in financing activities for the six months ended
September 30, 2016 was $27.2 million, which consisted primarily of $31.5 million of net repayments on our Credit Facility, $11.4 million in distributions to common stockholders, and the redemption of our Series A Term Preferred
Stock of $40.0 million in September 2016, partially offset by net proceeds from the issuance of our Series D Term Preferred Stock of $55.4 million in September 2016.



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Distributions and Dividends to Stockholders

Common Stock Distributions

To qualify to be taxed
as a RIC and thus avoid corporate level federal income tax on the income we distribute to our stockholders, we are required to distribute to our stockholders on an annual basis at least 90% of our taxable ordinary income plus the excess of our net
short-term capital gains over net long-term capital losses (Investment Company Taxable Income). Additionally, the Credit Facility generally restricts the amount of distributions to stockholders that we can pay out to be no greater than
the sum of certain amounts, including, but not limited to, our net investment income, plus net capital gains, plus amounts elected by the Company to be considered as having been paid during the prior fiscal year in accordance with
Section 855(a) of the Code. In accordance with these requirements, our Board of Directors declared, and we paid, monthly cash distributions of $0.064 per common share for each of the six months from April 2017 through September 2017, and a
supplemental distribution of $0.06 per common share for June 2017. In October 2017, our Board of Directors declared a monthly distribution of $0.065 per common share for each of October, November, and December 2017 and a supplemental distribution of
$0.06 per common share for December 2017. Our Board of Directors declared these distributions based on estimates of taxable income for the fiscal year ending March 31, 2018.

For federal income tax purposes, we determine the tax characterization of our common distributions as of the end of our fiscal year based upon our taxable
income for the full fiscal year and distributions paid during the full fiscal year. The characterization of the common stockholder distributions declared and paid for the year ending March 31, 2018 will be determined after the 2018 fiscal year-end based upon our taxable income for the full year and distributions paid during the full year. Such a characterization made on an interim, quarterly basis may not be representative of the actual full year
characterization.

For the year ended March 31, 2017, distributions to common stockholders totaled $22.7 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, 2017, we elected to treat $8.2 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, we recorded a $1.3 million adjustment for estimated book-tax differences, which decreased Capital in excess of par value and increased Accumulated net realized gain (loss) and Net investment income in excess of distributions. As of September 30, 2017, we
recorded a $0.7 million adjustment for estimated book-tax differences, which decreased Capital in excess of par value and increased Net investment income in excess of distributions.

Preferred Stock Dividends

Our Board of Directors
declared and we paid monthly cash dividends of (i) $0.140625 per share to holders of our Series B Term Preferred Stock, (ii) $0.135417 per share to holders of our Series C Term Preferred Stock, and (iii) $0.13020833 per share to holders of our
Series D Term Preferred Stock for each of the six months from April 2017 through September 2017. In accordance with GAAP, we treat these monthly dividends as an operating expense. For federal income tax purposes, the dividends paid by us to
preferred stockholders generally constitute ordinary income to the extent of our current and accumulated earnings and profits.

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

Equity

Registration Statement

On
June 16, 2015, we filed a registration statement on Form N-2 (File No. 333-204996) with the SEC and subsequently filed a
Pre-Effective Amendment No. 1 thereto on July 28, 2015, which the SEC declared effective on July 29, 2015. On June 8, 2016, we filed Post-Effective Amendment No. 1 to the registration
statement, which the SEC declared effective on July 28, 2016. On July 28, 2017, we filed Post-Effective Amendment No. 5 to the registration statement, which the SEC declared effective on July 31, 2017. The



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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.We currently have the ability to issue up to $221.3 million in
securities under the registration statement.

Common Stock

Pursuant to our current 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, as it has predominantly since September 30, 2008, 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 October 31, 2017, the closing market price of our common stock was $10.09
per share, which represented a 0.1% discount to our NAV per share of $10.10 as of September 30, 2017. To the extent that our common stock trades at a market price below our NAV per common share, we will generally be precluded from raising
equity capital through public offerings of our common stock, other than pursuant to stockholder approval or through a rights offering to existing common stockholders. At our 2017 Annual Meeting of Stockholders held on August 24, 2017, our
stockholders approved a proposal authorizing us to issue and sell shares of our common stock at a price below our then current NAV per common share for a period of one year from the date of such approval, provided that our Board of Directors makes
certain determinations prior to any such sale.

Term Preferred Stock

Pursuant to an earlier registration statement on Form N-2 (File
No. 333-160720), in March 2012, we completed an offering of 1,600,000 shares of our Series A Term Preferred Stock at a public offering price of $25.00 per share. Gross proceeds totaled $40.0 million,
and net proceeds, after deducting underwriting discounts and offering costs borne by us, were $38.0 million, a portion of which was used to repay borrowings under the Credit Facility, with the remaining proceeds being held to make additional
investments and for general corporate purposes. Total underwriting discounts and offering costs related to this offering were $2.0 million, which have been recorded as discounts to the liquidation value on our accompanyingConsolidated
Statements of Assets and Liabilities and which, prior to the redemption in September 2016, were amortized over the period ended February 28, 2017, the mandatory redemption date.

In September 2016, we used a portion of the proceeds from the issuance of our Series D Term Preferred Stock, discussed below, to voluntarily redeem all
1.6 million outstanding shares of our Series A Term Preferred Stock, which had a liquidation preference of $25.00 per share. In connection with this voluntary redemption, we incurred a loss on extinguishment of debt of $0.2 million, which
has been 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 September 2016, our Series A Term Preferred Stock provided for a fixed dividend equal to 7.125% per year, payable monthly (which
equated to $2.9 million per year). We were required to redeem all of the outstanding Series A Term Preferred Stock on February 28, 2017, for cash at a redemption price equal to $25.00 per share plus an amount equal to accumulated but
unpaid dividends, if any, to the date of redemption. Our Series A 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. 333-181879), in November 2014, we completed a public offering of 1,656,000 shares of our Series B Term Preferred Stock at a public offering price of $25.00 per share. Gross proceeds totaled
$41.4 million and net proceeds, after deducting underwriting discounts and offering costs borne by us, were $39.7 million. Total underwriting discounts and offering costs related to this offering were $1.7 million, which have been
recorded as discounts to the liquidation value on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending December 31, 2021, the mandatory redemption date.



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Our Series B Term Preferred Stock is not convertible into our common stock or any other security. Our Series B
Term Preferred Stock provides for a fixed dividend equal to 6.75% per year, payable monthly (which equates to $2.8 million per year). We are required to redeem all shares of our outstanding Series B Term Preferred Stock on December 31,
2021, for cash at a redemption price equal to $25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but excluding, the date of redemption. In addition, two other potential mandatory redemption triggers are as
follows: (1) upon the occurrence of certain events that would constitute a change in control of us, we would be required to redeem all of our outstanding Series B Term Preferred Stock, and (2) if we fail to maintain asset coverage of at
least 200%, we are required to redeem a portion of our outstanding Series B Term Preferred Stock or otherwise cure the asset coverage redemption trigger (and we may also redeem additional securities to cause the asset coverage to be 215%). We may
also voluntarily redeem all or a portion of our Series B Term Preferred Stock at our sole option at the redemption price at any time on or after December 31, 2017.

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

Our Series C Term Preferred Stock is not convertible into our common stock or any other security. Our Series C Term Preferred Stock provides for a fixed
dividend equal to 6.50% per year, payable monthly (which equates to $2.6 million per year). We are required to redeem all shares of our outstanding Series C Term Preferred Stock on May 31, 2022, for cash at a redemption price equal to
$25.00 per share, plus an amount equal to accumulated but unpaid dividends, if any, to, but excluding, the date of redemption. In addition, two other potential mandatory redemption triggers are as follows: (1) upon the occurrence of certain
events that would constitute a change in control of us, we would be required to redeem all of our outstanding Series C Term Preferred Stock, and (2) if we fail to maintain asset coverage of at least 200%, we are required to redeem a portion of
our outstanding Series C Term Preferred Stock or otherwise cure the asset coverage redemption trigger (and we may also redeem additional securities to cause the asset coverage to be 215%). We may also voluntarily redeem all or a portion of our
Series C Term Preferred Stock at our sole option at the redemption price at any time on or after May 31, 2018.

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

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

Each series of our mandatorily redeemable preferred stock has a preference over our common stock with respect to dividends, whereby no
distributions are payable on our common stock unless the stated dividends, including any accrued and unpaid dividends, on the mandatorily redeemable preferred stock have been paid in full. The Series B Term Preferred Stock, Series C Term Preferred
Stock, and Series D Term Preferred Stock are considered liabilities in accordance with GAAP and, as such, affect our asset coverage, exposing us to additional leverage risks. The asset coverage on our senior securities that are stock (our Series B
Term Preferred Stock, Series C Term Preferred Stock, and Series D Term Preferred Stock) as of September 30, 2017 was 258.2%, calculated pursuant to Sections 18 and 61 of the 1940 Act.

Revolving Line of Credit

On November 16,
2016, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 2 to the Fifth Amended and Restated Credit Agreement, originally entered into on April 30, 2013 and as previously amended on June 26, 2014,
with



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KeyBank National Association (KeyBank), as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and certain other lenders party thereto. The
revolving period was extended to November 15, 2019, and if not renewed or extended by such date, all principal and interest will be due and payable on or before November 15, 2021 (two years after the revolving period end date). The amended
Credit Facility provides two one-year extension options that may be exercised on or before the first and second anniversary of the November 16, 2016 amendment date, subject to approval by all lenders.
Additionally, the Credit Facility commitment amount was changed from $185.0 million to $165.0 million and, subject to certain terms and conditions, can be expanded to a total facility amount of $250.0 million through additional
commitments of existing or new lenders. Advances under the Credit Facility generally bear interest at 30-day LIBOR plus 3.15% per annum until November 15, 2019, with the margin then increasing to 3.40%
for the period from November 15, 2019 to November 15, 2020, and increasing further to 3.65% thereafter. The Credit Facility has an unused commitment fee of 0.50% per annum on the portion of the total unused commitment amount that is less
than or equal to 45.0% of the total commitment amount and 0.80% per annum on the total unused commitment amount that is greater than 45.0%. We incurred fees of approximately $1.4 million in connection with this amendment.

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

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

Among other things, the Credit Facility contains covenants that require Business Investment to maintain its status as a separate legal entity, prohibit
certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions) and restrict certain material changes to our credit and collection policies without the lenders consent. The Credit Facility also
generally seeks to restrict distributions to shareholders to the sum of (i) our net investment income, (ii) net capital gains, and (iii) 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. 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 (a) $210.0 million or (b) $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 $220.6 million as of September 30, 2017, (ii) asset coverage with respect to senior securities representing indebtedness of at least
200%, in accordance with Sections 18 and 61 of the 1940 Act and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of September 30, 2017, and as defined in the performance guaranty of the Credit Facility, we
had a net worth of $462.5 million, asset coverage on our senior securities representing indebtedness of 819.6%, 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, 2017, we had availability, after adjustments for various constraints based on collateral quality, of approximately $105.1 million under the Credit Facility and were in compliance with all covenants under the Credit Facility.
As of October 31, 2017, we had availability, before adjustments for various constraints based on collateral quality, of $107.1 million under the Credit Facility.

In July 2013, pursuant to the terms of the then effective revolving line of credit, we entered into an interest rate cap agreement with KeyBank effective
October 2013 for a notional amount of $45.0 million. The interest rate cap agreement expired in April 2016. Prior to its expiration in April 2016, the agreement effectively limited the interest rate on a portion of our borrowings under the then
effective revolving line of credit. We incurred a premium fee of $75 in conjunction with this agreement, which was recorded in Net realized loss on other on our accompanying Consolidated Statements of Operationsduring the six months ended
September 30, 2016.

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, 2017 and March 31, 2017, we had unrecognized, contractual off-balance sheet success fee receivables of $26.0 million and $24.2 million (or approximately $0.80 per common share for each period), respectively, on our debt investments. Consistent with GAAP, we
generally have not recognized success fee receivables and related income in our Consolidated Financial Statements until earned.



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CONTRACTUAL OBLIGATIONS

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

In addition to
the lines of credit and other uncalled capital commitments to our portfolio companies, 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 2018, unless renewed. As of September 30, 2017, we have not been required to make payments on this or any previous guaranties, and we consider the credit risks to be remote and the fair value
of this guaranty to be immaterial.

The following table shows our contractual obligations as of September 30, 2017, at cost:



|                                       |  |                        |         |  |                |   |        |          |  |   |           |  |  |                 |         |  |  |   |        | 
|-------------------------------------- |  | ---------------------- | ------- |  | -------------- | - | ------ | -------- |  | - | --------- |  |  | --------------- | ------- |  |  | - | ------ | 
|                                       |  | Payments Due by Period |        
|Contractual
Obligations(A)             |  | Total                  |         |  | Lessthan1 Year |   |        | 1-3Years |  |   | 3-5 Years |  |  | Morethan5 Years |        
|Credit Facility(B)                     |  | $                      | 56,700  |  |                | $ |       |          |  | $ |          |  |  | $               | 56,700  |  |  | $ |       | 
|Mandatorily redeemable preferred stock |  |                        | 139,150 |  |                |   |       |          |  |   |          |  |  |                 | 81,650  |  |  |   | 57,500 | 
|Secured borrowing                      |  |                        | 5,096   |  |                |   |       |          |  |   |          |  |  |                 | 5,096   |  |  |   |       | 
|Interest payments on obligations(C)    |  |                        | 59,925  |  |                |   | 12,538 |          |  |   | 25,086    |  |  |                 | 18,707  |  |  |   | 3,594  | 
|                                       |  |                        |         |  |                |   |        |          |  |   |           |  |  |                 |         |  |  |   |        | 
|Total                                  |  | $                      | 260,871 |  |                | $ | 12,538 |          |  | $ | 25,086    |  |  | $               | 162,153 |  |  | $ | 61,094 | 
|                                       |  |                        |         |  |                |   |        |          |  |   |           |  |  |                 |         |  |  |   |        | 



|(A) | Excludes unused line of credit commitments, uncalled capital commitments and guaranties to our portfolio companies in the aggregate principal amount of
$6.6 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, 2017. Dividend obligations on our mandatorily redeemable preferred stock assume quarterly declarations and
monthly dividend payments through the date of mandatory redemption of each series.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Critical Accounting Policies

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

Investment Valuation

Credit Monitoring and Risk Rating

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



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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, 2017 and March 31, 2017:



|                 |  |                    |      |  |                |  |      | 
|---------------- |  | ------------------ | ---- |  | -------------- |  | ---- | 
|Rating           |  | September 30, 2017 |      |  | March 31, 2017 | 
|Highest          |  |                    | 10.0 |  |                |  | 10.0 | 
|Average          |  |                    | 6.2  |  |                |  | 6.1  | 
|Weighted Average |  |                    | 6.6  |  |                |  | 6.5  | 
|Lowest           |  |                    | 3.0  |  |                |  | 3.0  | 

Tax Status

We
intend to continue to maintain our qualification as a RIC under Subchapter M of the Code for federal income tax purposes. 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.

In an effort to limit certain federal excise taxes imposed on RICs, we generally intend to distribute to our 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, 2017 and March 31, 2017.

Recent Accounting Pronouncements

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



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

We target to have approximately 10% of the loans in our portfolio at fixed
rates, with approximately 90% at variable rates or variables rates with a floor mechanism. Currently, all of our variable-rate loans have rates associated with the current 30-day LIBOR rate. As of
September 30, 2017, our portfolio consisted of the following breakdown based on the total principal balance of all outstanding debt investments:



| |        |  |  |                            
| | ------ |  |  | ---------------------------
| | 97.1%  |  |  | Variable rates with a floor
| | 2.9    |  |  | Fixed rates                
| |        |  |  |                            
| | 100.0% |  |  | Total                      
| |        |  |  |                            

There have been no material changes in the quantitative and qualitative market risk disclosures during the three months ended
September 30, 2017 from that disclosed in our Annual Report for the fiscal year ended March 31, 2017.

ITEM 4.
CONTROLS AND PROCEDURES.

a) Evaluation of Disclosure Controls and Procedures

As of September 30, 2017 (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, 2017 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

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

ITEM 1A. RISK
FACTORS.

Our business is subject to certain risks and events that, if they occur, could adversely affect our financial condition and results of
operations and the trading price of our securities. For a discussion of these risks, please refer to the section captioned Item 1A. Risk Factors in Part I of our Annual Report on Form 10-K for the
fiscal year ended March 31, 2017, as filed with the SEC on May 15, 2017. The risks described 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.

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

Not applicable.

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

Not applicable.



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ITEM 6. EXHIBITS



|        |  |                                                                                                                                                                                                                                        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                            
|        | 
|3.1     |  | Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit A.2 to Pre-Effective Amendment No. 1 to the Registration Statement on FormN-2 (File No.333-123699), filed May 13, 2005.                        
|        | 
|3.2     |  | 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.                         
|        | 
|3.3     |  | 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.                             
|        | 
|3.4     |  | 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.
|        | 
|3.5     |  | 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.                       
|        | 
|3.6     |  | Amended and Restated Bylaws, incorporated by reference to Exhibit 
b.2 to the Pre-Effective Amendment No. 3 to the Registration Statement on FormN-2 (File No.333-123699), filed June 21, 2005.                                        
|        | 
|3.7     |  | First Amendment to Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 
99.1 to the Current Report on Form8-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 FormN-2 (File No.333-123699), filed June 21, 2005.                                               
|        | 
|4.2     |  | Specimen 6.75% Series B Cumulative Term Preferred Stock Certificate, incorporated by reference to Exhibit 4.3 to the Registration Statement on
Form 8-A (File No.001-34007), filed November 7, 2014.                                   
|        | 
|4.3     |  | Specimen 6.50% Series C Cumulative Term Preferred Stock Certificate, incorporated by reference to Exhibit 4.4 to the Registration Statement on
Form 8-A (File No.001-34007), filed May 11, 2015.                                       
|        | 
|4.4     |  | Specimen 6.25% Series D Cumulative Term Preferred Stock Certificate, incorporated by reference to Exhibit 4.5 to the Registration Statement on
Form 8-A (File No.001-34007), filed September 22, 2016.                                 
|        | 
|11      |  | Computation of Per Share Earnings (included in the notes to the financial statements contained in this report).                                                                                                                        
|        | 
|31.1*   |  | Certification of Chief Executive Officer pursuant to section 302 of The Sarbanes-Oxley Act of 2002.                                                                                                                                    
|        | 
|31.2*   |  | Certification of Acting Principal 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 Acting Principal Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.                                                                                                                         



|                          
|--------------------------
|*       Filed herewith    
|+       Furnished herewith

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



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##### Table of Contents

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/ Nicole SchaltenbrandNicole SchaltenbrandActing Principal Financial Officer


Date: November 1, 2017



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