##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 FOR THE QUARTER ENDED SEPTEMBER 30, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 COMMISSION FILE NUMBER: 000-51233
 GLADSTONE INVESTMENT CORPORATION
  DELAWARE
(State or other jurisdiction of incorporation or organization)
    
    83-0423116
(I.R.S. Employer Identification No.)
 1521 WESTBRANCH DRIVE, SUITE 200
MCLEAN, VIRGINIA 22102
 (703) 287-5800
 o þ
 o þ
 o þ




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GLADSTONE INVESTMENT CORPORATION
TABLE OF CONTENTS
 PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Statement of Assets and Liabilities as of September 30, 2005Schedule of Investments as of September 30, 2005Statement of Operations for the three months ended September 30, 2005 and the period
June 22, 2005* to September 30, 2005Statement of Changes in Net Assets for the period June 22, 2005* to September 30, 2005Statement of Cash Flows for the period June 22, 2005* to September 30, 2005Financial Highlights for the period June 22, 2005* to September 30, 2005Notes to Financial Statements* denotes the date operations commencedItem 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsOverviewResults of OperationsLiquidity and Capital ResourcesItem 3.
    
    Quantitative and Qualitative Disclosure About Market RiskItem 4.
    
    Controls and ProceduresPART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal ProceedingsItem 2.
    
    Unregistered Sales of Equity Securities and Use of ProceedsItem 3.
    
    Defaults Upon Senior SecuritiesItem 4.
    
    Submission of Matters to a Vote of Security HoldersItem 5.
    
    Other InformationItem 6.
    
    ExhibitsSIGNATURES




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GLADSTONE INVESTMENT CORPORATION
 STATEMENTS OF ASSETS AND LIABILITIES
(Unaudited)
 September 30,
    
    
    March 31,2005
    
    
    2005ASSETSCash
    
    $
    6,132,099
    
    
    $
    3,636Investments at fair value (Cost 9/30/2005: $40,507,884)
    
    
    40,571,710
    
    
    
    Cash equivalents
    
    
    183,841,923
    
    
    
    Interest receivable
    
    
    106,434
    
    
    
    Prepaid insurance
    
    
    211,450
    
    
    
    Prepaid directors fees
    
    
    84,000
    
    
    
    Deferred offering costs
    
    
    
    
    
    
    47,864Other assets
    
    
    13,606
    
    
    
    TOTAL ASSETS
    
    $
    230,961,222
    
    
    $
    51,500LIABILITIESAccounts payable
    
    $
    32,071
    
    
    $
    Administration fee payable to Gladstone Administration
    
    
    77,962
    
    
    
    Base management fee payable to Gladstone Management
    
    
    67,434
    
    
    
    Loan payable to affiliate
    
    
    
    
    
    
    50,000Accrued expenses
    
    
    30,343
    
    
    
    Total Liabilities
    
    
    207,810
    
    
    
    50,000NET ASSETS
    
    $
    230,753,412
    
    
    $
    1,500ANALYSIS OF NET ASSETS:Common stock, $0.001 par value, 100,000,000 shares authorized and16,560,100 and 100 shares issued and outstanding, respectively
    
    $
    16,560
    
    
    $
    Capital in excess of par value
    
    
    230,233,926
    
    
    
    1,500Net unrealized appreciation of investment portfolio
    
    
    63,826
    
    
    
    Undistributed net investment income
    
    
    439,100
    
    
    
    Total Net Assets
    
    $
    230,753,412
    
    
    $
    1,500Net assets per share
    
    $
    13.93
    
    
    $
    15.00
 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART TO THESE FINANCIAL STATEMENTS.
 2




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##### 



GLADSTONE INVESTMENT CORPORATION
 SCHEDULE OF INVESTMENTS
(Unaudited)
 Company (1)
    
    Industry
    
    Investment (2)
    
    Cost
    
    
    Fair ValueGraham Packaging Holdings Co.
    
    Manufacturing-custom blow molded
    
    Senior Term Debt (3)
    
    $
    10,132,131
    
    
    $
    10,099,560Graham Packaging Company, L.P.
    
    plastic containers
    
    (6.3%, Due 10/2011)GPC Capital Corp. ILatham Manufacturing Corp.
    
    Manufacturing-swimming pool
    
    Senior Term Debt (3)
    
    
    4,479,258
    
    
    
    4,478,204components accessories
    
    (7.7%, Due 12/2010)Madison River Capital LLC
    
    Service-communications and
    
    Senior Term Debt (3)
    
    
    3,000,000
    
    
    
    3,048,750information
    
    (6.2%, Due 7/2012)Maidenform, Inc.
    
    Intimate apparel
    
    Senior Term Debt (3)
    
    
    3,266,667
    
    
    
    3,299,333(5.8%, Due 5/2010)MedAssets, Inc.
    
    Pharmaceuticals and healthcare GPO
    
    Senior Term Debt (3)
    
    
    1,950,000
    
    
    
    1,959,750(6.4%, Due 7/2010)Ozburn-Hessey Holding Co. LLC
    
    Third party logistics provider
    
    Senior Term Debt (3)
    
    
    2,014,204
    
    
    
    2,032,500(6.1%, Due 8/2012)SunGard Data Systems, Inc.
    
    Integrated software and processing
    
    Senior Term Debt (3)
    
    
    10,112,963
    
    
    
    10,112,500Solar Capital Corp.
    
    solutions
    
    (6.3%, Due 2/2013)SunGard Holdco LLCWastequip, Inc.
    
    Manufacturing-waste removal
    
    Senior Term Debt (3)
    
    
    5,552,661
    
    
    
    5,541,113WQP Acquisition, Inc.
    
    equipment
    
    (6.2%, Due 7/2011)Total investments:
    
    
    
    
    
    $
    40,507,884
    
    
    $
    40,571,710Cash equivalents
    
    Government
    
    US Treasury Bill
    
    
    15,226,987
    
    
    
    15,226,987(3.15%, 10/27/2005)Government
    
    US Treasury Bill
    
    
    22,182,809
    
    
    
    22,182,809(3.30%, 11/03/2005)Government
    
    US Treasury Bill
    
    
    12,952,420
    
    
    
    12,952,420(3.35%, 11/10/2005)Government
    
    US Treasury Bill
    
    
    24,967,991
    
    
    
    24,967,991(3.31%, 11/17/2005)Government
    
    US Treasury Bill
    
    
    44,767,800
    
    
    
    44,767,800(3.36%, 11/25/2005)Government
    
    US Treasury Bill
    
    
    34,499,386
    
    
    
    34,499,386(3.35%, 12/22/2005)Government
    
    US Treasury Bill
    
    
    29,244,530
    
    
    
    29,244,530(3.34%, 12/29/2005)Total cash equivalents;
    
    
    
    
    
    $
    183,841,923
    
    
    $
    183,841,923Total investments and cash equivalents:
    
    
    
    
    
    $
    224,349,807
    
    
    $
    224,413,633
 
 (1)
    
    We do not Control, and are not an Affiliate of, any of our portfolio companies, each
as defined in the Investment Company Act of 1940, as amended (the 1940 Act). In general, under
the 1940 Act, we would Control a portfolio company if we owned 25% or more of its voting
securities and would be an Affiliate of a portfolio company if we owned 5% or more of its voting
securities.(2)
    
    Percentage represents interest rates in effect at September 30, 2005 and due date represents
the contractual maturity date.(3)
    
    Marketable securities are valued based on the bid price, as of September 30, 2005, from the
respective originating syndication agents trading desk. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART TO THESE FINANCIAL STATEMENTS.
 3




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##### 



GLADSTONE INVESTMENT CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
 For the periodJune 22, 2005For the three
    
    
    (Commencement ofmonths ended
    
    
    Operations) toSeptember 30, 2005
    
    
    September 30, 2005INVESTMENT INCOMEInterest
income  investments
    
    $
    193,578
    
    
    $
    193,578Interest
income  cash and cash equivalents
    
    
    1,613,012
    
    
    
    1,661,210Total investment income
    
    
    1,806,590
    
    
    
    1,854,788EXPENSESAdministration fee to Gladstone Administration
    
    
    77,962
    
    
    
    105,045Base management fee to Gladstone Management
    
    
    92,108
    
    
    
    92,108Directors fees
    
    
    52,000
    
    
    
    52,000Insurance
    
    
    42,478
    
    
    
    42,478Organizational costs
    
    
    7,002
    
    
    
    7,002Professional fees
    
    
    66,302
    
    
    
    66,302Stockholder related costs
    
    
    42,903
    
    
    
    43,538Interest
    
    
    
    
    
    
    378General and administrative
    
    
    12,929
    
    
    
    13,231Total expenses
    
    
    393,684
    
    
    
    422,082NET INVESTMENT INCOME
    
    
    1,412,906
    
    
    
    1,432,706Net unrealized appreciation of investment portfolio
    
    
    63,826
    
    
    
    63,826NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS (Refer to Note 5)
    
    $
    1,476,732
    
    
    $
    1,496,532NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE:Basic and Diluted
    
    $
    0.09
    
    
    $
    0.09SHARES OF COMMON STOCK OUTSTANDING:Basic and diluted weighted average shares
    
    
    16,231,404
    
    
    
    16,084,900
 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART TO THESE FINANCIAL STATEMENTS.
 4




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GLADSTONE INVESTMENT CORPORATION
STATEMENT OF CHANGES IN NET ASSETS
For the Period June 22, 2005 (Commencement of Operations) to September 30, 2005
(UNAUDITED)
 Operations:Investment income-net
    
    $
    1,432,706Net unrealized appreciation of portfolio
    
    
    63,826Increase in net assets from operations
    
    
    1,496,532Capital transactions:Issuance of common stock
    
    
    230,248,986Distributions to stockholders
    
    
    (993,606
    )Total increase
    
    
    230,751,912Net AssetsCommencement of operations
    
    
    1,500End of period
    
    $
    230,753,412
 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART TO THESE FINANCIAL STATEMENTS.
 5




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GLADSTONE INVESTMENT CORPORATION
STATEMENT OF CASH FLOWS
For the Period June 22, 2005 (Commencement of Operations) to September 30, 2005
 (UNAUDITED)
 CASH FLOWS FROM OPERATING ACTIVITIESNet increase in net assets resulting from operations
    
    $
    1,496,532Adjustments to reconcile net increase in stockholders equity
resulting from operations to net cash provided by operating activities:Net unrealized appreciation of investment portfolio
    
    
    (63,826
    )Net amortization of premiums
    
    
    3,134Increase in interest receivable
    
    
    (106,434
    )Increase in prepaid assets
    
    
    (295,450
    )Increase in other assets
    
    
    (13,606
    )Increase in accounts payable
    
    
    32,071Increase in administration fee payable to Gladstone Administration
    
    
    77,962Increase in base management fee payable to Gladstone Management
    
    
    67,434Increase in accrued expenses
    
    
    30,343Net cash provided by operating activities
    
    
    1,228,160CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of investments
    
    
    (40,844,381
    )Principal repayments of investments
    
    
    333,363Net cash used in investing activities
    
    
    (40,511,018
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net proceeds from the issuance of common stock
    
    
    230,296,850Distributions paid
    
    
    (993,606
    )Decrease in loan payable to affiliate
    
    
    (50,000
    )Net cash provided by financing activities
    
    
    229,253,244NET INCREASE IN CASH AND CASH EQUIVALENTS (1)
    
    
    189,970,386CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    3,636CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    189,974,022CASH PAID DURING PERIOD FOR INTEREST TO AFFILIATE
    
    $
    378
 
 (1)
    
    Cash and cash equivalents consist of demand deposits and highly liquid investments with
original maturities of three months or less when purchased. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART TO THESE FINANCIAL STATEMENTS.
 6




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GLADSTONE INVESTMENT CORPORATION
FINANCIAL HIGHLIGHTS
(UNAUDITED)
 For the periodJune 22, 2005For the three
    
    
    (Commencement ofmonths ended
    
    
    Operations) toSeptember 30, 2005
    
    
    September 30, 2005Per Share
Data (1)Net proceeds
from initial public offering
(2)
    
    $
    13.90
    
    
    $
    13.95Offering costs
    
    
    
    
    
    
    (0.05
    )Income from investment operations:Net investment income
    
    
    0.09
    
    
    
    0.09Total from investment operations
    
    
    0.09
    
    
    
    0.09Distributions
    
    
    (0.06
    )
    
    
    (0.06
    )Net asset value at end of period
    
    $
    13.93
    
    
    $
    13.93Per share market value at beginning of period
    
    $
    15.05
    
    
    $
    15.00Per share market value at end of period
    
    
    14.68
    
    
    
    14.68Total Return
(3) (4)
    
    
    -2.07
    %
    
    
    -1.74
    %Shares outstanding at end of period
    
    
    16,560,100
    
    
    
    16,560,100Ratios/Supplemental DataNet assets at end of period
    
    $
    230,753,412
    
    
    $
    230,753,412Average net
assets (5)
    
    $
    230,242,643
    
    
    $
    222,716,478Ratio of expenses to average net assets-annualized
    
    
    0.68
    %
    
    
    0.57
    %Ratio of net investment income to average net assets-annualized
    
    
    2.45
    %
    
    
    1.93
    %
 
 (1)
    
    Based on actual shares outstanding.(2)
    
    Net of initial underwriting discount of $1.05 per share.(3)
    
    Total return equals the increase of the ending market value over the beginning market value
divided by the market value at the beginning of each month.(4)
    
    Amounts are not annualized.(5)
    
    Average net assets calculated from June 22, 2005 (commencement of operations) to September
30, 2005 for the period June 22, 2005 (commencement of operations) to September 30, 2005. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART TO THESE FINANCIAL STATEMENTS.
 7




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GLADSTONE INVESTMENT CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 September 30, 2005
 (UNAUDITED)
        Interim
Financial Statements
 Use of
Estimates
 Cash
and Cash Equivalents
 Organizational
Costs
 8




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Income
Taxes
  Loan Payable to Affiliate
  Administration Agreement
   License Agreement
  Investment Advisory and Management Agreement
   9




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
    
    no incentive fee in any calendar quarter in which pre-incentive fee net investment
income does not exceed the 1.75% hurdle rate (7% annualized);
    
    100% of 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 125% of the hurdle rate (2.1875%) in any calendar quarter (8.75% annualized). This
portion of the income-based incentive fee is referred to as the catch-up. The catch-up
provision is intended to provide Gladstone Management with an incentive fee of 20% on all
of pre-incentive fee investment income up to 125% of the quarterly hurdle rate once the
hurdle rate has been surpassed; and
    
    20% of the amount of pre-incentive fee net investment income, if any, that exceeds 125%
of the quarterly hurdle rate (2.1875%) in any calendar quarter (8.75% annualized).
   10




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Common StockShares
    
    
    AmountBeginning balance, March 31, 2005
    
    
    100
    
    
    $
    1,500Issuance of common shares in public
offering (net of offering costs of
$763,014)
    
    
    16,560,000
    
    
    
    230,248,986Ending balance, September 30, 2005
    
    
    16,560,100
    
    
    $
    230,250,486
   For the periodJune 22, 2005For the three
    
    
    (Commencement ofmonths ended
    
    
    Operations) toSeptember 30, 2005
    
    
    September 30, 2005Numerator for basic and diluted net increase in
net assets resulting from operations per share
    
    $
    1,476,732
    
    
    $
    1,496,532Denominator for basic and diluted shares
    
    
    16,231,404
    
    
    
    16,084,900Basic and diluted net increase in net assets
per share resulting from operations
    
    $
    0.09
    
    
    $
    0.09
 11




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Declaration Date
    
    Record Date
    
    Payment Date
    
    Dividend per ShareJuly 7, 2005
    
    Sept. 22, 2005
    
    Sept. 30, 2005
    
    $
    0.02July 7, 2005
    
    Aug. 23, 2005
    
    Aug. 31, 2005
    
    $
    0.02July 7, 2005
    
    July 21, 2005
    
    July 29, 2005
    
    $
    0.02
   Payment Due by PeriodMore thanContractual Obligations
    
    Total
    
    
    Less than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsInvestments
    
    
    3,000,000
    
    
    
    3,000,000Total
    
    $
    3,000,000
    
    
    $
    3,000,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
   
 Declaration Date
    
    Record Date
    
    Payment Date
    
    Dividend per ShareOctober 11, 2005
    
    Dec. 21, 2005
    
    Dec. 30, 2005
    
    $
    0.04October 11, 2005
    
    Nov. 21, 2005
    
    Nov. 30, 2005
    
    $
    0.04October 11, 2005
    
    Oct. 21, 2005
    
    Oct. 31, 2005
    
    $
    0.04
 12




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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 within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements may relate to,
among other things, future events or our future performance or financial condition. In some cases,
you can identify forward-looking statements by terminology such as may, might, believe,
will, provided, anticipate, future, could, growth, plan, intend, expect,
should, would, if, seek, possible, potential, likely or the negative of such terms or
comparable terminology. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of activity, performance
or achievements expressed or implied by such forward-looking statements. Such factors include,
among others: (1) our future operating results as we are a company with a limited operating
history; (2) the impact of the investments that we make and the ability of these investments to
achieve their objectives; (3) our contractual relationships with third parties; (4) the adequacy of
our cash resources and working capital; (5) our ability to obtain future financing, if at all; and
(6) those factors listed under the caption Risk Factors of the Companys prospectus dated June
22, 2005, as filed with the Securities and Exchange Commission on June 23, 2005. We caution readers
not to place undue reliance on any such forward-looking statements, which are made pursuant to the
Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. 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 Form 10-Q
 The following analysis of our financial condition and results of operations should be read in
conjunction with our financial statements and the notes thereto contained elsewhere in this report.
 OVERVIEW
     13




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
    
    determines the composition of our portfolio, the nature and
timing of the changes to our portfolio, and the manner of
implementing such changes;
    
    identifies, evaluates, and negotiates the structure of the
investments we make (including performing due diligence on
our prospective portfolio companies);
    
    closes and monitors the investments we make; and
    
    makes available on our behalf, and provides if requested,
managerial assistance to our portfolio companies.
  Managerial Assistance
  Administration Agreement
   License Agreement
  14




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Investment Advisory and Management Agreement
    
    
    no incentive fee in any calendar quarter in which pre-incentive fee net investment
income does not exceed the hurdle rate (1.75%) (7% annualized);
    
    100% of 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 125% of the hurdle rate (2.1875%) in any calendar quarter (8.75% annualized). This
portion of the income-based incentive fee is referred to as the catch-up. The catch-up
provision is intended to provide Gladstone Management with an incentive fee of 20% on all
of pre-incentive fee investment income up to 125% of the quarterly hurdle rate once the
hurdle rate has been surpassed; and
    
    20% of the amount of pre-incentive fee net investment income, if any, that exceeds 125%
of the quarterly hurdle rate (2.1875%) in any calendar quarter (8.75% annualized).
   15




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##### 



Critical Accounting Policies
  Investment Valuation
  General Valuation Policy
  16




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##### 



Credit Information:
 Loan Grading and Risk Rating:
  Companys
    
    First
    
    SecondSystem
    
    NRSRO
    
    NRSRO
    
    Gladstone Capitals Description(a)>10
    
    Baa2
    
    BBB
    
    Probability of Default (PD during the next ten years is 4% and the
Expected Loss (EL) is 1% or less10
    
    Baa3
    
    BBB-
    
    PD is 5% and the EL is 1% to 2%9
    
    Ba1
    
    BB+
    
    PD is 10% and the EL is 2% to 3%8
    
    Ba2
    
    BB
    
    PD is 16% and the EL is 3% to 4%7
    
    Ba3
    
    BB-
    
    PD is 17.8% and the EL is 4% to 5%6
    
    B1
    
    B+
    
    PD is 22.0% and the EL is 5% to 6.5%5
    
    B2
    
    B
    
    PD is 25% and the EL is 6.5% to 8%4
    
    B3
    
    B-
    
    PD is 27% and the EL is 8% to 10%3
    
    Caa1
    
    CCC+
    
    PD is 30% and the EL is 10.0% to 13.3%2
    
    Caa2
    
    CCC
    
    PD is 35% and the EL is 13.3% to 16.7%1
    
    Caa3
    
    CC
    
    PD is 65% and the EL is 16.7% to 20%0
    
    N/a
    
    D
    
    PD is 85% or there is a Payment Default: and the EL is greater than 20%
 
 (a)
    
    the default rates set forth herein are for a ten year term debt, if a debt securitys term is
less than ten years then the probability of default is adjusted to a lower percentage for the
shorter period which may move the security higher on our risk rating scale. 17




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Rating
    
    Sept. 30, 2005Average
    
    
    7.9Weighted Average
    
    
    7.5Highest
    
    
    9.0Lowest
    
    
    7.0
  Valuation Methods:
  
    
    financial standing of the issuer of the security;
    
    comparison of the business and financial plan of the issuer with actual results;
    
    the cost of the security;
    
    the size of the security held as it relates to the liquidity of the market for such securities;
    
    contractual restrictions on the disposition of the security;
    
    pending public offering of the issuer of the security;
    
    pending reorganization activity affecting the issuer such as mergers or debt restructuring;
    
    reported prices of similar securities of the issuer or comparable issuers;
    
    ability of the issuer to obtain needed financing;
    
    changes in the economy affecting the issuer;
    
    recent purchases or sale of a security of the issuer;
    
    pricing by other buyers or sellers of similar securities;
    
    financial statements of the borrower;
    
    reports from portfolio company senior management and ownership;
    
    the type of security;
    
    cost at date of purchase;
    
    size of holding;
    
    discount from market value of unrestricted securities of the same class at the time of purchase;
    
    special reports prepared by analysts;
    
    information as to any transactions or offers with respect to the security;
    
    existence of merger proposals or tender offers affecting the securities;
    
    the collateral;
    
    the issuers ability to make payments;
    
    the current and forecasted earnings of the issuer;
    
    sales to third parties of similar securities;
    
    statistical ratios compared to lending standards;
    
    statistical ratios compared to other similar securities; and
    
    other pertinent factors.
  18




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Tax Status
 Federal Income Taxes
  Revenue Recognition
 Interest Income Recognition
  RESULTS OF OPERATIONS
 For the three months ended September 30, 2005
 Investment Income
   Operating Expenses
      19




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Unrealized Appreciation on Investments
  Net Increase in Net Assets from Operations
  For the period June 22, 2005 (commencement of operations) to September 30, 2005
 Investment Income
   Operating Expenses
        20




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Unrealized Appreciation on Investments
  Net Increase in Net Assets from Operations
    21




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LIQUIDITY AND CAPITAL RESOURCES
   Investment
    
    DisbursementGraham Packaging Holdings Co.
    
    $
    10,157,257Latham Manufacturing Corp.
    
    
    4,491,138Madison River Capital LLC
    
    
    3,000,000Maidenform, Inc.
    
    
    3,500,000Medassets, Inc.
    
    
    2,000,000Ozburn-Hessey Holding Co. LLC
    
    
    2,014,375SunGard Data Systems, Inc.
    
    
    10,114,250Wastequip, Inc.
    
    
    5,567,361$
    40,844,381
  Fiscal Year Ended March 31,
    
    Amount2006
    
    $
    285,0592007
    
    
    595,1182008
    
    
    720,1182009
    
    
    745,1182010
    
    
    2,336,784Thereafter
    
    
    35,825,687$
    40,507,884
    22




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
      ITEM 4. CONTROLS AND PROCEDURES.
   23




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PART
IIOTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS.
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
     ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  ITEM 5. OTHER INFORMATION.
  ITEM 6. EXHIBITS
  24




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SIGNATURE
  GLADSTONE INVESTMENT CORPORATIONBy:
    
    /s/ HARRY BRILLHarry BrillChief Financial Officer and TreasurerDate: November 9, 2005
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EXHIBIT INDEX
 Exhibit
    
    Description3.1
    
    Articles of Amendment and Restatement of the Articles of Incorporation, incorporated by reference
to Exhibit a.2 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File
No. 333-123699), filed March 31, 2005.3.2
    
    By-laws, incorporated by reference to Exhibit b to the Registration Statement on Form N-2 (File
No. 333-123699), filed March 31, 2005.11
    
    Computation of Per Share Earnings (included in the notes to the unaudited financial statements
contained in this report).31.1
    
    Certification of Chief Executive Officer pursuant to section 302 of The Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to section 302 of The Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.
  26