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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-K





(Mark One)

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

For the fiscal year ended March 31, 2015

OR



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

For the transition period
from to

Commission file number 001-34007





GLADSTONE
INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)







|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                      |  | 83-0423116                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              | 
|1521 Westbranch Drive, Suite 100McLean, Virginia              |  | 22102                              
|(Address of principal executive offices)                      |  | (Zip Code)                         

(703) 287-5800

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



|                                                                            |  |                                            
|--------------------------------------------------------------------------- |  | -------------------------------------------
|(Title of Each Class)                                                       |  | (Name of Each Exchange on Which Registered)
|Common Stock, $0.001 par value per share                                    |  | NASDAQ Global Select Market                
|7.125% Series A Cumulative Term Preferred Stock, $0.001 par value per share |  | NASDAQ Global Select Market                
|6.750% Series B Cumulative Term Preferred Stock, $0.001 par value per share |  | NASDAQ Global Select Market                
|6.500% Series C Cumulative Term Preferred Stock, $0.001 par value per share |  | NASDAQ Global Select Market                

Securities registered pursuant to Section 12(g) of the Act: None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    YES   ̈    NO  x

Indicate by check if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    YES   ̈    NO  x

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

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

Indicate by check mark
if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

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



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

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

The aggregate market value of the voting stock held by non-affiliates of the Registrant on September 30, 2014, based on the closing price on that date of
$7.11 on the NASDAQ Global Select Market, was $183,806,933. For the purposes of calculating this amount only, all directors and executive officers of the Registrant have been treated as affiliates. There were 30,270,958 shares of the
Registrants Common Stock, $0.001 par value, outstanding as of May 19, 2015.

Documents Incorporated by Reference.Portions of the
Registrants definitive proxy statement relating to the Registrants 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A are incorporated by reference into Part III of
this Annual Report on Form 10-K as indicated herein. Such proxy statement will be filed with the Securities and Exchange Commission no later than 120 days following the end of the Registrants fiscal year ended March 31, 2015.









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GLADSTONE INVESTMENT CORPORATION

FORM 10-K FOR THE FISCAL YEAR ENDED

MARCH 31, 2015

TABLE OF CONTENTS



|           |  |         |     |                                                                                                              |  |  |     | 
|---------- |  | ------- | --- | ------------------------------------------------------------------------------------------------------------ |  |  | --- | 
|PART I     |  | ITEM 1  |     | Business                                                                                                     |  |  | 2   | 
|           |  | ITEM 1A |     | Risk Factors                                                                                                 |  |  | 18  | 
|           |  | ITEM 1B |     | Unresolved Staff Comments                                                                                    |  |  | 34  | 
|           |  | ITEM 2  |     | Properties                                                                                                   |  |  | 34  | 
|           |  | ITEM 3  |     | Legal Proceedings                                                                                            |  |  | 34  | 
|           |  | ITEM 4  |     | Mine Safety Disclosures                                                                                      |  |  | 34  | 
|PART II    |  | ITEM 5  |     | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  |  | 35  | 
|           |  | ITEM 6  |     | Selected Financial Data                                                                                      |  |  | 36  | 
|           |  | ITEM 7  |     | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  |  | 37  | 
|           |  | ITEM 7A |     | Quantitative and Qualitative Disclosures About Market Risk                                                   |  |  | 63  | 
|           |  | ITEM 8  |     | Financial Statements and Supplementary Data                                                                  |  |  | 65  | 
|           |  | ITEM 9  |     | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  |  | 103 | 
|           |  | ITEM 9A |     | Controls and Procedures                                                                                      |  |  | 103 | 
|           |  | ITEM 9B |     | Other Information                                                                                            |  |  | 103 | 
|PART III   |  | ITEM 10 |     | Directors, Executive Officers and Corporate Governance                                                       |  |  | 104 | 
|           |  | ITEM 11 |     | Executive Compensation                                                                                       |  |  | 104 | 
|           |  | ITEM 12 |     | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  |  | 104 | 
|           |  | ITEM 13 |     | Certain Relationships and Related Transactions, and Director Independence                                    |  |  | 104 | 
|           |  | ITEM 14 |     | Principal Accountant Fees and Services                                                                       |  |  | 104 | 
|PART IV    |  | ITEM 15 |     | Exhibits and Financial Statement Schedule                                                                    |  |  | 105 | 
|SIGNATURES |  |         | 107 |                                                                                                             



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FORWARD-LOOKING STATEMENTS

All statements contained herein, other than historical facts, may constitute forward-looking statements. These statements may relate to, among
other things, our future operating results, our business prospects and the prospects of our portfolio companies, actual and potential conflicts of interest with Gladstone Management Corporation and its affiliates, the use of borrowed money to
finance our investments, the adequacy of our financing sources and working capital, and our ability to co-invest, among other factors. In some cases, you can identify forward-looking statements by terminology such as estimate,
may, might, believe, will, provided, anticipate, future, could, growth, plan, 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 theRisk Factorssection of
this Annual Report on Form 10-K. We caution readers not to place undue reliance on any such forward-looking statements. Actual results could differ materially from those anticipated in our forward-looking statements and future results could
differ materially from historical performance. We have based forward-looking statements on information available to us on the date of this Annual Report on Form 10-K. Except as required by the federal securities laws, we undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Annual Report on Form 10-K. Although we undertake no obligation to revise or update any
forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file
with the Securities and Exchange Commission, including subsequent annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

In this Annual Report on Form 10-K, or Annual Report, the Company, we, us, and our refer to Gladstone
Investment Corporation and its wholly-owned subsidiaries unless the context otherwise indicates. Dollar amounts are in thousands unless otherwise indicated.

PART I

The information
contained in this section should be read in conjunction with our accompanying Consolidated Financial Statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K.



|ITEM 1. | BUSINESS
|------- | --------

Overview

Organization

We were incorporated under the
General Corporation Law 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). In order to continue to qualify as a RIC for federal income tax purposes and obtain favorable RIC tax
treatment, we must meet certain requirements, including certain minimum distribution requirements.

Our shares of common stock, 7.125% Series A Cumulative
Term Preferred Stock (Series A Term Preferred Stock), 6.75% Series B Cumulative Term Preferred Stock (Series B Term Preferred Stock) and 6.50% Series C Cumulative Term Preferred Stock (Series C Term Preferred
Stock) are traded on the NASDAQ Global Select Market (NASDAQ) under the trading symbols GAIN, GAINP, GAINO, and GAINN, respectively.

Investment Objectives and Strategy

We were
established for the purpose of investing in debt and equity securities of established private businesses operating in the United States (U.S.). Our investment objectives are to: (1) achieve and grow current income by investing in
debt securities of established



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businesses that we believe will provide stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions to stockholders
that grow over time; and (2) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities, 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 each investment generally
ranging from $5 million to $30 million, although investment size may vary, depending upon our total assets or available capital at the time of investment. We seek to avoid investments in high-risk, early stage enterprises. We expect that our
investment portfolio over time will consist of approximately 75% in debt securities and 25% in equity securities, at cost. As of March 31, 2015, our investment portfolio was made up of 73% in debt securities and 27% in equity securities, at
cost.

We invest by ourselves or jointly with other funds or management of the portfolio company, depending on the opportunity. If we are participating in
an investment with one or more co-investors, our investment is likely to be smaller than if we were investing alone.

In July 2012, the Securities and
Exchange Commission (SEC) granted us an exemptive order that expanded our ability to co-invest with certain of our affiliates under certain circumstances and any future business development company or closed-end management investment
company that is advised (or sub-advised if it controls the fund) by our external investment adviser, or any combination of the foregoing, subject to the conditions in the SECs order. We believe this ability to co-invest will continue to
enhance our ability to further our investment objectives and strategies.

In general, our investments in debt securities have a term of no more than seven
years, accrue interest at variable rates (based on the one-month London Interbank Offered Rate (LIBOR)) and, to a lesser extent, at fixed rates. In addition, many of the debt securities we hold typically do not amortize prior to
maturity. We seek debt instruments that pay interest monthly or, at a minimum, quarterly, and which may include a yield enhancement such as a success fee or deferred interest provision and are primarily interest only, with all principal and any
accrued but unpaid interest due at maturity. Generally, success fees accrue at a set rate and are contractually due upon a change of control of the business. Some debt securities have deferred interest whereby some portion of the interest payment is
added to the principal balance so that the interest is paid, together with the principal, at maturity. This form of deferred interest is often called paid-in-kind (PIK) interest.

Typically, our investments in equity securities take the form of common stock, preferred stock, limited liability company interests, or warrants or options to
purchase the foregoing. Often, these equity investments occur in connection with our original investment, buyouts and recapitalizations of a business, or refinancing existing debt.

As of March 31, 2015, our portfolio consisted of investments in 34 companies located in 16 states in 18 different industries with an aggregate fair value
of $466.1 million. Since our initial public offering in 2005 and through March 31, 2015, we have invested in over 113 different companies, while making 118 consecutive monthly distributions to common stockholders.

We expect that our investment portfolio will primarily include the following four categories of investments in private companies in the United States
(U.S.):



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



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



| |  |  | Junior Subordinated Debt Securities: We seek to invest a portion of our assets in junior subordinated debt securities, also known as subordinated loans, subordinated notes and mezzanine loans. These junior
subordinated debts may be secured by certain assets of the borrower or may be unsecured loans. Additionally, we may receive other yield enhancements in addition to or in lieu of success fees, such as warrants to buy common and preferred stock or
limited liability interests in connection with these junior subordinated debt securities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Preferred and Common Equity/Equivalents: We seek to invest a portion of our assets in equity securities, which consist of preferred and common equity, or limited liability company interests, or warrants or
options to acquire such securities, and are generally in combination with our debt investment in a business. Additionally, we may receive equity investments derived from restructurings on some of our existing debt investments. In many cases, we will
own a significant portion of the equity which may include having voting control of the businesses in which we invest.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Additionally, pursuant to the 1940 Act, we must maintain at least 70% of our total assets in qualifying assets,
which generally include each of the investment types listed above. Therefore, the 1940 Act permits us to invest up to 30% of our assets in other non-qualifying assets. See Regulation as a BDC  Qualifying Assets for a
discussion of the types of qualifying assets in which we are permitted to invest pursuant to Section 55(a) of the 1940 Act.

Because the majority of
the loans in our portfolio consist of term debt in private companies that typically cannot or will not expend the resources to have their debt securities rated by a credit rating agency, we expect that most, if not all, of the debt securities we
acquire will be unrated. Investors should assume that these loans would be rated below what is today considered investment grade quality. Investments rated below investment grade are often referred to as high yield securities or junk
bonds and may be considered higher risk, as compared to investment-grade debt instruments.

Investment Concentrations

Year over year, our investment concentration as a percentage of fair value and of cost has remained relatively unchanged. As of March 31, 2015, our
investment portfolio consisted of investments in 34 portfolio companies located in 16 states across 18 different industries with an aggregate fair value of $466.1 million, of which our investments in Counsel Press, Inc. (Counsel Press),
SOG Specialty Knives & Tools, LLC (SOG), Funko, LLC (Funko), Acme Cryogenics, Inc. (Acme), and Old World Christmas, Inc. (Old World) our five largest portfolio investments at fair value,
collectively comprised $134.3 million, or 28.8%, of our total investment portfolio at fair value. The following table summarizes our investments by security type as of March 31, 2015 and 2014:



|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|-------------------------------- |  | -------------- | ------- |  | -------------- |  | ----- | ---- |  | - | ---------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                                 |  | March 31, 2015 |         |  | March 31, 2014 | 
|                                 |  | Cost           |         |  | Fair Value     |  |       | Cost |  |   | Fair Value | 
|Senior secured debt              |  | $              | 284,509 |  |                |  | 56.3  | %    |  | $ | 263,141    |  |  |  | 56.5  | % |  | $ | 196,293 |  |  |  | 51.2  | % |  | $ | 169,870 |  |  |  | 54.0  | %
|Senior subordinated secured debt |  |                | 85,937  |  |                |  | 17.0  |      |  |   | 70,378     |  |  |  | 15.1  |   |  |   | 82,348  |  |  |  | 21.5  |   |  |   | 70,827  |  |  |  | 22.5  |  
|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total debt                       |  |                | 370,446 |  |                |  | 73.3  |      |  |   | 333,519    |  |  |  | 71.6  |   |  |   | 278,641 |  |  |  | 72.7  |   |  |   | 240,697 |  |  |  | 76.5  |  
|Preferred equity                 |  |                | 127,762 |  |                |  | 25.3  |      |  |   | 111,090    |  |  |  | 23.8  |   |  |   | 98,099  |  |  |  | 25.6  |   |  |   | 62,901  |  |  |  | 20.0  |  
|Common equity/equivalents        |  |                | 7,050   |  |                |  | 1.4   |      |  |   | 21,444     |  |  |  | 4.6   |   |  |   | 6,797   |  |  |  | 1.7   |   |  |   | 10,795  |  |  |  | 3.5   |  
|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total equity/equivalents         |  |                | 134,812 |  |                |  | 26.7  |      |  |   | 132,534    |  |  |  | 28.4  |   |  |   | 104,896 |  |  |  | 27.3  |   |  |   | 73,696  |  |  |  | 23.5  |  
|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total Investments                |  | $              | 505,258 |  |                |  | 100.0 | %    |  | $ | 466,053    |  |  |  | 100.0 | % |  | $ | 383,537 |  |  |  | 100.0 | % |  | $ | 314,393 |  |  |  | 100.0 | %
|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  

Our investments at fair value consisted of the following industry classifications as of March 31, 2015 and 2014:



|                                                                       |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|---------------------------------------------------------------------- |  | -------------- | ------- |  | ------------------------------ |  | ----- | ---------- |  | - | ------------------------------ |  |  |  | ----- | -
|                                                                       |  | March 31, 2015 |         |  | March 31, 2014                 | 
|                                                                       |  | Fair Value     |         |  | Percentage ofTotal Investments |  |       | Fair Value |  |   | Percentage ofTotal Investments | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products |  | $              | 70,533  |  |                                |  | 15.1  | %          |  | $ | 21,188                         |  |  |  | 6.7   | %
|Diversified/Conglomerate Manufacturing                                 |  |                | 62,996  |  |                                |  | 13.5  |            |  |   | 54,845                         |  |  |  | 17.4  |  
|Chemicals, Plastics, and Rubber                                        |  |                | 49,312  |  |                                |  | 10.6  |            |  |   | 52,753                         |  |  |  | 16.8  |  
|Leisure, Amusement, Motion Pictures, Entertainment                     |  |                | 44,931  |  |                                |  | 9.6   |            |  |   | 39,867                         |  |  |  | 12.7  |  
|Diversified/Conglomerate Services                                      |  |                | 31,995  |  |                                |  | 6.9   |            |  |   |                               |  |  |  |      |  
|Machinery (Non-agriculture, Non-construction, Non-electronic           |  |                | 30,397  |  |                                |  | 6.5   |            |  |   | 25,917                         |  |  |  | 8.2   |  
|Personal and Non-Durable Consumer Products
(Manufacturing Only)        |  |                | 25,008  |  |                                |  | 5.4   |            |  |   | 10,005                         |  |  |  | 3.2   |  
|Automobile                                                             |  |                | 24,530  |  |                                |  | 5.3   |            |  |   | 25,735                         |  |  |  | 8.2   |  
|Farming and Agriculture                                                |  |                | 22,438  |  |                                |  | 4.8   |            |  |   | 20,557                         |  |  |  | 6.5   |  
|Containers, Packaging, and Glass                                       |  |                | 19,447  |  |                                |  | 4.2   |            |  |   | 17,889                         |  |  |  | 5.7   |  
|Telecommunications                                                     |  |                | 19,241  |  |                                |  | 4.1   |            |  |   |                               |  |  |  |      |  
|Aerospace and Defense                                                  |  |                | 18,770  |  |                                |  | 4.0   |            |  |   | 18,512                         |  |  |  | 5.9   |  
|Cargo Transport                                                        |  |                | 13,972  |  |                                |  | 3.0   |            |  |   | 6,500                          |  |  |  | 2.1   |  
|Beverage, Food and Tobacco                                             |  |                | 12,982  |  |                                |  | 2.8   |            |  |   | 13,050                         |  |  |  | 4.2   |  
|Textiles and Leather                                                   |  |                | 10,750  |  |                                |  | 2.3   |            |  |   |                               |  |  |  |      |  
|Buildings and Real Estate                                              |  |                | 1,860   |  |                                |  | 0.4   |            |  |   | 7,575                          |  |  |  | 2.4   |  
|Other < 2.0%                                                           |  |                | 6,891   |  |                                |  | 1.5   |            |  |   |                               |  |  |  |      |  
|                                                                       |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|Total Investments                                                      |  | $              | 466,053 |  |                                |  | 100.0 | %          |  | $ | 314,393                        |  |  |  | 100.0 | %
|                                                                       |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  



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Our investments at fair value were included in the following U.S. geographic regions as of March 31, 2015
and 2014:



|                  |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|----------------- |  | -------------- | ------- |  | ------------------------------ |  | ----- | ---------- |  | - | ------------------------------ |  |  |  | ----- | -
|                  |  | March 31, 2015 |         |  | March 31, 2014                 | 
|                  |  | Fair Value     |         |  | Percentage ofTotal Investments |  |       | Fair Value |  |   | Percentage ofTotal Investments | 
|West              |  | $              | 161,444 |  |                                |  | 34.6  | %          |  | $ | 117,781                        |  |  |  | 37.5  | %
|Northeast         |  |                | 133,814 |  |                                |  | 28.7  |            |  |   | 67,862                         |  |  |  | 21.6  |  
|South             |  |                | 133,703 |  |                                |  | 28.7  |            |  |   | 89,915                         |  |  |  | 28.6  |  
|Midwest           |  |                | 37,092  |  |                                |  | 8.0   |            |  |   | 38,835                         |  |  |  | 12.3  |  
|                  |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|Total Investments |  | $              | 466,053 |  |                                |  | 100.0 | %          |  | $ | 314,393                        |  |  |  | 100.0 | %
|                  |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  

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

Investment Adviser and Administrator

Gladstone Management Corporation (the Adviser) is our affiliate, investment adviser, and a privately-held company led by a management team that has
extensive experience in our lines of business. Another of our and the Advisers affiliates, a privately-held company, Gladstone Administration, LLC (the Administrator), employs, among others, our chief financial officer and
treasurer, chief accounting officer, chief valuation officer, chief compliance officer, general counsel and secretary (who also serves as the president of the Administrator) and their respective staffs. All but one of our executive officers serve as
directors, executive officers, officers, or a combination of the foregoing, of the following of our affiliates: Gladstone Commercial Corporation (Gladstone Commercial), a publicly-traded real estate investment trust; Gladstone Capital
Corporation (Gladstone Capital), a publicly-traded BDC and RIC; Gladstone Land Corporation (Gladstone Land), a publicly-traded real estate investment trust; the Adviser; and the Administrator. Our chief financial officer and
treasurer is also the chief financial officer and treasurer of Gladstone Capital. David Gladstone, our chairman and chief executive officer, also serves on the board of managers of our affiliate, Gladstone Securities, LLC (Gladstone
Securities), a privately-held broker-dealer registered with the Financial Industry Regulatory Authority (FINRA) and insured by the Securities Investor Protection Corporation.

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

We have been externally managed by the Adviser pursuant to an investment advisory and management agreement and the Administrator has provided administration
services to us under an administration agreement since June 22, 2005. The Adviser was organized as a corporation under the laws of the State of Delaware on July 2, 2002, and is a registered investment adviser under the Investment Advisers
Act of 1940, as amended. The Administrator was organized as a limited liability company under the laws of the State of Delaware on March 18, 2005. The Adviser and Administrator are headquartered in McLean, Virginia, a suburb of Washington, D.C.
The Advisor also has offices in several other states.

Investment Process

Overview of Investment and Approval Process

To
originate investments, the Advisers investment professionals use an extensive referral network comprised primarily of private equity sponsors, venture capitalists, leveraged buyout funds, investment bankers, attorneys, accountants, commercial
bankers and business brokers. The Advisers investment professionals review information received from these and other sources in search of potential financing opportunities. If a potential opportunity matches our investment objectives, the
investment professionals will seek an initial screening of the opportunity with our president, David Dullum, to authorize the submission of an indication of interest (IOI) to the prospective portfolio company. If the prospective
portfolio company passes this initial screening and the IOI is accepted by the prospective company, the investment professionals will seek approval to issue a letter of intent (LOI) from the Advisers investment committee, which is
composed of Mr. Gladstone (our chairman and chief executive officer), Terry Lee Brubaker (our vice chairman and chief operating officer), and Mr. Dullum, to the prospective company. If this LOI is issued, then the Adviser and Gladstone
Securities (the Due Diligence Team) will conduct a due diligence investigation and create a detailed profile summarizing the prospective portfolio companys historical financial statements, industry, competitive position and
management team and analyzing its conformity to our general investment criteria. The investment professionals then present this profile to the Advisers investment committee, which must approve each investment. Further, each investment is
available for review by the members of our board of directors (our Board of Directors), a majority of whom are not interested persons as defined in Section 2(a)(19) of the 1940 Act.



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Prospective Portfolio Company Characteristics

We have identified certain characteristics that we believe are important in identifying and investing in prospective portfolio companies. The criteria listed
below provide general guidelines for our investment decisions, although not all of these criteria may be met by each portfolio company.



| |  |  | Experienced Management. We typically require that the businesses in which we invest have experienced management teams or a hiring plan in place to install an experienced management team. We also require the
businesses to have in place proper incentives to induce management to succeed and act in concert with our interests as investors, including having significant equity or other interests in the financial performance of their companies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Value-and-Income Orientation and Positive Cash Flow. Our investment philosophy places a premium on fundamental analysis from an investors perspective and has a distinct value-and-income orientation. In
seeking value, we focus on established companies in which we can invest at relatively low multiples of earnings before interest, taxes, depreciation and amortization (EBITDA), and that have positive operating cash flow at the time of
investment. In seeking income, we typically invest in companies that generate relatively stable to growing sales, cash flows, and EBITDA to fixed charges coverage, which provides some assurance that the borrowers will be able to service their debt.
We do not expect to invest in start-up companies or companies with what we believe to be speculative business plans.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Strong Competitive Position in an Industry. We seek to invest in businesses that have developed strong market positions and significant relative market share within their respective markets and that we believe
are well-positioned to capitalize on growth opportunities. We seek businesses that demonstrate significant competitive advantages versus their competitors, which we believe will help to protect their market positions and profitability.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Liquidation Value of Assets. The projected liquidation value of the assets, if any, is an important factor in our investment analysis in collateralizing our debt securities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Extensive Due Diligence

The Due Diligence Team
conducts what we believe are extensive due diligence investigations of our prospective portfolio companies and investment opportunities. The due diligence investigation may begin with a review of publicly available information followed by in depth
business analysis, including, but not limited to, some or all of the following:



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



| |  |  | visits to the prospective portfolio companys business site(s) and evaluation of potential environmental issues;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | interviews with the prospective portfolio companys management, employees, customers and vendors;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | review of loan documents and material contracts;
| | - |  | ------------------------------------------------



| |  |  | background checks and a management capabilities assessment on the prospective portfolio companys management team; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | research, including market analyses, on the prospective portfolio companys products, services or particular industry and its competitive position therein.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

Upon completion of a due diligence investigation and a decision to proceed with an investment, the Advisers investment professionals who have primary
responsibility for the investment present the investment opportunity to the Advisers investment committee. The investment committee then determines whether to pursue the potential investment. Additional due diligence of a potential investment
may be conducted on our behalf by attorneys and independent accountants, as well as other outside advisers, prior to the closing of the investment, as appropriate.

We also rely on the long-term relationships that the Advisers investment professionals have with venture capitalists, leveraged buyout funds, investment
bankers, commercial bankers, private equity sponsors, attorneys, accountants, and business brokers. In addition, the extensive direct experiences of our executive officers and managing directors in the operations of and providing debt and equity
capital to small and medium-sized private businesses plays a significant role in our investment evaluation and assessment of risk.



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Investment Structure

Once the Adviser has determined that an investment meets our standards and investment criteria, the Adviser works with the management of that company and other
capital providers to structure the transaction in a way that we believe will provide us with the greatest opportunity to maximize our return on the investment, while providing appropriate incentives to management of the company. As discussed above,
the capital classes through which we typically structure a deal include senior secured debt, senior subordinated secured debt, junior subordinated secured debt, and preferred and common equity or equivalents, the majority of which is secured first
and second lien debt investments. Through its risk management process, the Adviser seeks to limit the downside risk of our investments by:



| |  |  | making investments with an expected total return (including interest, yield enhancements and potential equity appreciation) that it believes compensates us for the credit risk of the investment;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | seeking collateral or superior positions in the portfolio companys capital structure where possible;
| | - |  | -----------------------------------------------------------------------------------------------------



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



| |  |  | negotiating covenants in connection with our investments that afford our portfolio companies as much flexibility as possible in managing their businesses, consistent with preserving our capital; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

We expect to hold most of
our debt investments until maturity or repayment, but may sell our investments (including our equity investments) earlier if a liquidity event takes place, such as the sale or recapitalization of a portfolio company or, in the case of an equity
investment in a company, its initial public offering. Occasionally, we may sell some or all of our investment interests in a portfolio company to a third party, such as an existing investor in the portfolio company, in a privately negotiated
transaction.

Competitive Advantages

A large number
of entities compete with us and make the types of investments that we seek to make in small and medium-sized privately-owned businesses. Such competitors include private equity funds, leveraged buyout funds, other BDCs, venture capital funds,
investment banks and other equity and non-equity based investment funds, and other financing sources, including traditional financial services companies such as commercial banks. Many of our competitors are substantially larger than we are and have
considerably greater funding sources or are able to access capital more cost effectively. In addition, certain of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of
investments, and establish a larger portfolio of investments. Furthermore, many of these competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. However, we believe that we have the following competitive
advantages over many other providers of financing to small and medium-sized businesses.

Management Expertise

Mr. Gladstone, our chairman and chief executive officer, is also the chairman and chief executive officer of the Adviser and its affiliated companies,
other than Gladstone Securities, (the Gladstone Companies) and has been involved in all aspects of the Gladstone Companies investment activities, including serving as a member of the Advisers investment committees for each of
the Company, Gladstone Capital, Gladstone Commercial, and Gladstone Land. Mr. Gladstone and Mr. Dullum, our president and a director, have extensive experience in investing in middle market companies and with operating in the BDC
marketplace in general. Mr. Brubaker, our vice chairman and chief operating officer, has substantial experience in acquisitions and operations of companies. Messrs. Gladstone and Brubaker also have principal management responsibility for
the Adviser as its executive officers. These three individuals dedicate a significant portion of their time to managing our investment portfolio. Our senior management has extensive experience providing capital to small and medium-sized companies
and has worked together at the Gladstone Companies for more than ten years. In addition, we have access to the resources and expertise of the Advisers investment professionals and support staff who possess a broad range of transactional,
financial, managerial, and investment skills.

Increased Access to Investment Opportunities Developed Through Extensive Research Capability and
Network of Contacts

The Adviser seeks to identify potential investments through active origination and due diligence and through its dialogue with
numerous management teams, members of the financial community and potential corporate partners with whom the Advisers investment professionals have long-term relationships. We believe that the Advisers investment professionals have
developed a broad network of contacts within the investment, commercial banking, private equity and investment management communities, and that



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their reputation, experience, and focus on investing in small and medium-sized companies enables us to source and identify well-positioned prospective portfolio companies, which provide
attractive investment opportunities. Additionally, the Adviser expects to generate information from its professionals network of accountants, consultants, lawyers and management teams of portfolio companies and other companies to support the
Advisers investment activities.

Disciplined, Value and Income-Oriented Investment Philosophy with a Focus on Preservation of Capital

In making its investment decisions, the Adviser focuses on the risk and reward profile of each prospective portfolio company, seeking to minimize
the risk of capital loss without foregoing the potential for capital appreciation. We expect the Adviser to use the same value and income-oriented investment philosophy that its professionals use in the management of the other Gladstone Companies
and to commit resources to manage downside exposure. The Advisers approach seeks to reduce our risk in investments by using some or all of the following approaches:



| |  |  | focusing on companies with attractive and sustainable market positions and cash flow;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | investing in businesses with experienced and established management teams;
| | - |  | --------------------------------------------------------------------------



| |  |  | engaging in extensive due diligence from the perspective of a long-term investor;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | investing at low price-to-cash flow multiples; and
| | - |  | --------------------------------------------------



| |  |  | adopting flexible transaction structures by drawing on the experience of the investment professionals of the Adviser and its affiliates.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

Longer Investment Horizon

Unlike private equity
and venture capital funds that are typically organized as finite-life partnerships, we are not subject to standard periodic capital return requirements. The partnership agreements of most private equity and venture capital funds typically provide
that these funds may only invest investors capital once and must return all capital and realized gains to investors within a finite time period, often seven to ten years. These provisions often force private equity and venture capital funds to
seek returns on their investments by causing their portfolio companies to pursue mergers, public equity offerings, or other liquidity events more quickly than might otherwise be optimal or desirable, potentially resulting in a lower overall return
to investors and/or an adverse impact on their portfolio companies. In contrast, we are a corporation of perpetual duration and are exchange-traded. We believe that our flexibility to make investments with a long-term view and without the capital
return requirements of traditional private investment vehicles provides us with the opportunity to achieve greater long-term returns on invested capital.

Flexible Transaction Structuring

We believe our
management teams broad expertise and its ability to draw upon many years of combined experience enables the Adviser to identify, assess, and structure investments successfully across all levels of a companys capital structure and manage
potential risk and return at all stages of the economic cycle. We are not subject to many of the regulatory limitations that govern traditional lending institutions, such as banks. As a result, we are flexible in selecting and structuring
investments, adjusting investment criteria and transaction structures and, in some cases, the types of securities in which we invest, thereby affording us a competitive advantage of providing both, equity and debt financing, which may limit
uncertainty related to the close of the transaction. We believe that this approach enables the Adviser to develop a financing structure which best fits the investment and growth profile of the underlying business and yields attractive investment
opportunities that will continue to generate current income and capital gain potential throughout the economic cycle, including during turbulent periods in the capital markets.

Leverage

For the purpose of making investments
and taking advantage of favorable interest rates, we may issue senior securities up to the maximum amount permitted by the 1940 Act. The 1940 Act currently permits us to issue senior securities representing indebtedness and senior securities that
are stock (collectively our Senior Securities) in amounts such that we maintain an asset coverage ratio, as defined in Section 18(h) of the 1940 Act, of at least 200% on our Senior Securities immediately after each issuance of such
Senior Securities. We may also incur such indebtedness to repurchase our common stock. We may also be exposed to the risks of leverage as a result of incurring indebtedness, generally through our revolving line of credit or issuing Senior Securities
representing indebtedness, such as our Series A, Series B, and Series C Term Preferred Stock. Although borrowing money for investments increases the potential for gain, it also increases the risk of a loss. A decrease in the value of our investments
will have a greater



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impact on the value of our common stock to the extent that we have borrowed money to make investments. There is a possibility that the costs of borrowing could exceed the income we receive on the
investments we make with such borrowed funds. Our Board of Directors is authorized to provide for the issuance of Senior Securities with such preferences, powers, rights and privileges as it deems appropriate, subject to the requirements of the 1940
Act. See Regulation as a BDCAsset Coverage for a discussion of our leveraging constraints and Risk FactorsRisks Related to Our External Financing for further discussion of certain leveraging
risks.

Ongoing Management of Investments and Portfolio Company Relationships

The Advisers investment professionals actively oversee each investment by continuously evaluating the portfolio companys performance and typically
working collaboratively with the portfolio companys management to identify and incorporate best resources and practices that help us achieve our projected investment performance.

Monitoring

The Advisers investment
professionals monitor the financial performance, trends, and changing risks of each portfolio company on an ongoing basis to determine if each company is performing within expectations and to guide the portfolio companys management in taking
the appropriate courses of action. The Adviser employs various methods of evaluating and monitoring the performance of our investments in portfolio companies, which can include the following:



| |  |  | monthly analysis of financial and operating performance;
| | - |  | --------------------------------------------------------



| |  |  | assessment of the portfolio companys performance against its business plan and our investment expectations;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | attendance at and/or participation in the portfolio companys board of directors or management meetings;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | assessment of portfolio company management, sponsor, governance and strategic direction;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | assessment of the portfolio companys industry and competitive environment; and
| | - |  | -------------------------------------------------------------------------------



| |  |  | review and assessment of the portfolio companys operating outlook and financial projections.
| | - |  | ---------------------------------------------------------------------------------------------

Relationship Management

The Advisers
investment professionals interact with various parties involved with a portfolio company, or investment, by actively engaging with internal and external constituents, including:



| |  |  | management;
| | - |  | -----------



| |  |  | boards of directors;
| | - |  | --------------------



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



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



| |  |  | auditors; and
| | - |  | -------------



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

Managerial Assistance and Services

As a BDC, we make available significant managerial assistance to our portfolio companies and provide other services to such portfolio companies. Neither we,
nor the Adviser, currently receive fees in connection with the managerial assistance we make available. At times, the Adviser provides other services to certain of our portfolio companies and it receives fees for these other services. Such services
may include, but are not limited to: (i) assistance obtaining, sourcing or structuring credit facilities, long term loans or additional equity from unaffiliated third parties; (ii) negotiating important contractual financial relationships;
(iii) consulting services regarding restructuring of the portfolio company and financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties; and (iv) primary role in interviewing, vetting
and negotiating employment contracts with candidates in connection with adding and retaining key portfolio company management team members. At the end of each quarter, we credit 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 agreement with the Adviser, a small percentage of certain of such fees, primarily for the valuation of portfolio companies, is retained by the Adviser in the form of
reimbursement, at cost, for tasks completed by personnel of the Adviser.



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In February 2011, Gladstone Securities started providing other services (such as investment banking and due
diligence services) to certain of our portfolio companies. Any such fees paid by portfolio companies to Gladstone Securities upon origination do not impact the overall fees we pay to the Adviser or the overall fees credited against the base
management fee.

Valuation Process

The
following is a general description of the Companys investment valuation policy (the Policy) (which has been approved by our Board of Directors) that the professionals of the Adviser and Administrator, with oversight and direction
from the chief valuation officer, an employee of the Administrator that reports directly to the Companys Board of Directors, (collectively, the Valuation Team) use each quarter to determine the fair value of our investment
portfolio. In accordance with the 1940 Act, our Board of Directors has the ultimate responsibility for reviewing and approving, in good faith, the fair value of our investments based on the Policy. The Adviser values our investments in accordance
with the requirements of the 1940 Act and accounting principles generally accepted in the U.S. (GAAP). There is no single standard for determining fair value (especially for privately-held businesses), as fair value depends upon the
specific facts and circumstances of each individual investment. Each quarter, our Board of Directors reviews the Policy to determine if changes thereto are advisable and assesses whether the Valuation Team has applied the Policy consistently. With
respect to the valuation of our investment portfolio, the Valuation Team performs the following steps each quarter:



| |  |  | Each portfolio company or investment is initially assessed by the Valuation Team using the Policy, which may include:
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | obtaining fair value quotes or utilizing valuation inputs from third party valuation firms; and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | using techniques, such as total enterprise value, yield analysis, market quotes and other factors, including but not limited to: the nature and realizable value of the collateral, including external parties
guaranties; any relevant offers or letters of intent to acquire the portfolio company; and the markets in which the portfolio company operates.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Preliminary valuation conclusions are then discussed amongst the Valuation Team and with our management and documented for review by our Board of Directors.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Next, our Board of Directors reviews this documentation and discusses the information provided by our Valuation Team, and determines whether the Valuation Team has followed the Policy, whether the Valuation Teams
recommended fair value is reasonable in light of the Policy and reviews other facts and circumstances. Then our Board of Directors votes to accept or reject the Valuation Teams recommended valuation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fair value measurements of our investments may involve subjective judgment and estimates. 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. Our valuation policies, procedures and processes are more fully
described under Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical Accounting Policies  Investment Valuation.

Investment Advisory and Management Agreement

We entered into an investment advisory and management agreement with the Adviser (the Advisory Agreement). In accordance with the Advisory
Agreement, we pay the Adviser fees as compensation for its services, consisting of a base management fee and an incentive fee. On July 15, 2014, our Board of Directors approved the annual renewal of the Advisory Agreement with the Adviser
through August 31, 2015. Our Board of Directors considered the following factors as the basis for its decision to renew the Advisory Agreement: (1) the nature, extent and quality of services provided by the Adviser to our stockholders;
(2) the investment performance of the Company and the Adviser, (3) the costs of the services to be provided and profits to be realized by the Adviser and its affiliates from the relationship with the Company, (4) the extent to which
economies of scale will be realized as the Company and the Companys affiliates that are managed by the same Adviser (Gladstone Commercial, Gladstone Capital and Gladstone Land) grow and whether the fee level under the Advisory Agreement
reflects the economies of scale for the Companys investors, (5) the fee structure of the advisory and administrative agreements of comparable funds, and (6) indirect profits to the Adviser created through the Company and (7) in
light of the foregoing considerations, the overall fairness of the advisory fee paid under the Advisory Agreement.



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Base Management Fee

The base management fee is computed and generally payable quarterly to the Adviser 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 other agreements and may receive fees for services other than managerial assistance, as discussed above. We generally credit 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, primarily for the valuation of portfolio companies, is retained
by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser.

Loan Servicing Fee

The Adviser also services the loans held by our wholly-owned subsidiary, Gladstone Business Investment, LLC (Business Investment), in return for
which the Adviser receives a 2.0% annual fee based on the monthly aggregate outstanding balance of loans pledged under our revolving line of credit. The entire loan servicing fee paid monthly to the Adviser by Business Investment is voluntarily and
irrevocably credited against the base management fee otherwise payable to the Adviser since Business Investment is a consolidated subsidiary of the Company, and overall, the base management fee, inclusive of the loan servicing fee, cannot exceed
2.0% of total assets (as reduced by cash and cash equivalents pledged to creditors) during any given calendar year pursuant to the Advisory Agreement.

Incentive Fee

The incentive fee consists of two
parts: an income-based incentive fee and a capital gains-based incentive fee. The income-based incentive fee rewards the Adviser if our quarterly net investment income (before giving effect to any incentive fee) exceeds 1.75% of our net assets (the
hurdle rate). The income-based incentive fee with respect to our pre-incentive fee net investment income is generally payable quarterly to the Adviser and is computed as follows:



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



| |  |  | 100.0% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% of our net assets 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 in any calendar quarter (8.75% annualized).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

Quarterly Incentive Fee Based on Net Investment Income

Pre-incentive fee net investment income

(expressed as a percentage of the value of net assets)



LOGO

Percentage of pre-incentive fee net investment income

allocated to income-related portion of incentive fee

The second part of the incentive fee is a capital gains-based incentive fee that is determined and payable in arrears as of the end of each fiscal year (or
upon termination of the Advisory Agreement, as of the termination date), and equals 20.0% of our realized capital gains, 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, if any, 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



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of each investment, when sold, and the original cost of such investment since our inception. The entire portfolios aggregate unrealized capital depreciation, if any, equals the sum of the
deficit between the fair value of each investment security as of the applicable calculation date and the original cost of such investment security. We have not incurred capital gains-based incentive fees from inception through March 31, 2015,
as cumulative net unrealized capital depreciation has exceeded cumulative realized capital gains net of cumulative realized capital losses.

Additionally,
in accordance with GAAP, a capital gains-based incentive fee accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the capital
gains-based incentive fee plus the aggregate cumulative unrealized capital appreciation. If such amount is positive at the end of a 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 reporting period. GAAP requires that the capital gains-based incentive fee accrual consider
the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains-based incentive fee would be payable if such unrealized capital appreciation were realized. There can be no assurance that any such unrealized capital
appreciation will be realized in the future. There has been no GAAP accrual recorded for a capital gains-based incentive fee since our inception through March 31, 2015.

Our Board of Directors accepted an unconditional and irrevocable voluntary credit from the Adviser to reduce the income-based incentive fee to the extent net
investment income did not cover 100% of the distributions to common stockholders for the year ended March 31, 2013, which credit totaled $0.2 million. For the years ended March 31, 2015 and 2014, there were no such incentive fee credits
from the Adviser.

Administration Agreement

We have entered into an administration agreement with the Administrator (the Administration Agreement), whereby we pay separately for
administrative services. The Administration Agreement provides for payments equal to our allocable portion of the Administrators expenses incurred while performing services to us, which are primarily rent and salaries and benefits expenses of
the Administrators employees, including our chief financial officer and treasurer, chief accounting officer, chief valuation officer, chief compliance officer and general counsel and secretary (who also serves as the Administrators
president) and their respective staff. Prior to July 1, 2014, our allocable portion of the expenses were generally derived by multiplying that portion of the Administrators expenses allocable to all funds managed by the Adviser by the
percentage of our total assets at the beginning of each quarter in comparison to the total assets at the beginning of each quarter of all funds managed by the Adviser.

Effective July 1, 2014, our allocable portion of the Administrators expenses are 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 generally paid the following quarter. On July 15, 2014, our Board of Directors approved the annual renewal of the Administration Agreement through
August 31, 2015.

Material U.S. Federal Income Tax Considerations

RIC Status

To qualify for treatment as a RIC under
Subchapter M of the Code, we must distribute to our stockholders, for each taxable year, at least 90% of our investment company taxable income, which is generally our ordinary income plus the excess of our net short-term capital gains
over net long-term capital losses. We refer to this as the annual distribution requirement. We must also meet several additional requirements, including:



| |  |  | Business Development Company status.At all times during the taxable year, we must maintain our status as a BDC.
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | Income source requirements. At least 90% of our gross income for each taxable year must be from dividends, interest, payments with respect to securities loans, gains from sales or other dispositions of securities
or other income derived with respect to our business of investing in securities, and net income derived from an interest in a qualified, publicly-traded partnership.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Asset diversification requirements. As of the close of each quarter of our taxable year: (1) at least 50% of the value of our assets must consist of cash, cash items, U.S. government securities, the
securities of other regulated investment companies and other securities to the extent that (a) we do not hold more than 10% of the outstanding voting securities of an issuer of such other securities and (b) such other securities of any one
issuer do not represent more than 5% of our total assets (the 50% threshold), and (2) no more than 25% of the value of our total assets may be invested in the securities of one issuer (other than U.S. government securities or the
securities of other regulated investment companies), or of two or more issuers that are controlled by us and are engaged in the same or similar or related trades or businesses or in the securities of one or more qualified, publicly-traded
partnerships.
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Failure to Qualify as a RIC

If we are unable to qualify for treatment as a RIC, we would be subject to tax on all of our taxable income at regular corporate rates. We would not be able to
deduct distributions to stockholders, nor would we be required to make such distributions. Distributions would be taxable to our stockholders as dividend income to the extent of our current and accumulated earnings and profits. Subject to certain
limitations under the Code, corporate distributees would be eligible for the dividends received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the
stockholders adjusted tax basis, and then as a gain realized from the sale or exchange of property. If we fail to meet the RIC requirements for more than two consecutive years and then seek to requalify as a RIC, we generally would be subject
to corporate-level federal income tax on any unrealized appreciation with respect to our assets to the extent that any such unrealized appreciation is recognized during a specified period up to ten years.

Qualification as a RIC

If we qualify as a RIC and
distribute to stockholders each year in a timely manner at least 90% of our investment company taxable income, we will not be subject to federal income tax on the portion of our taxable income and gains we distribute to stockholders. We would,
however, be subject to a 4% nondeductible federal excise tax if we do not distribute, actually or on a deemed basis, an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital
gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years.
For the years ended December 31, 2014, 2013 and 2012, we incurred $0.1 million, $0.3 million and $31, respectively, in excise taxes. As of March 31, 2015, our capital loss carryforward totaled $0.3 million.

The 4% federal excise tax applies only to the amount by which the required distributions exceed the amount of income we distribute, actually or on a deemed
basis, to stockholders. We will be subject to regular corporate income tax, currently at rates up to 35%, on any income that is not distributed or deemed to be distributed, including both ordinary income and capital gains. We may retain some or all
of our capital gains, but we generally intend to treat the retained amount as a deemed distribution. In that case, among other consequences, we will pay tax on the retained amount, each stockholder will be required to include its share of the deemed
distribution in income as if it had been actually distributed to the stockholder and the stockholder will be entitled to claim a credit or refund equal to its allocable share of the tax we pay on the retained capital gain. The amount of the deemed
distribution, net of such tax, will be added to the stockholders cost basis for its stock. Since we expect to pay tax on any retained capital gains at our regular corporate capital gain tax rate, and since that rate is in excess of the maximum
rate currently payable by individuals on long-term capital gains, the amount of tax that individual stockholders will be treated as having paid will exceed the tax they owe on the capital gain dividend and such excess may be claimed as a credit or
refund against the stockholders other tax obligations. A stockholder that is not subject to U.S. federal income tax or tax on long-term capital gains would be required to file a U.S. federal income tax return on the appropriate form in
order to claim a refund for the taxes we paid. In order to utilize the deemed distribution approach, we must provide written notice to the stockholders after the close of the relevant tax year. We will also be subject to alternative minimum tax, but
any tax preference items would be apportioned between us and our stockholders in the same proportion that distributions, other than capital gain dividends, paid to each stockholder bear to our taxable income determined without regard to the
dividends paid deduction. As of March 31, 2015, we have never distributed investment company taxable income as a deemed distribution.

Taxation
of Our U.S. Stockholders

Distributions

For any period during which we qualify as a RIC for federal income tax purposes, distributions to our stockholders attributable to our investment company
taxable income generally will be taxable as ordinary income to stockholders to the extent of our current or accumulated earnings and profits. We first allocate our earnings and profits to distributions to our preferred stockholders and then to
distributions to our common stockholders based on priority in our capital structure. Any distributions in excess of our earnings and profits will first be treated as a return of capital to the extent of the stockholders adjusted basis in his
or her shares of stock and thereafter as gain from the sale of shares of our stock. Distributions of our long-term capital gains, reported by us as such, will be taxable to stockholders as long-term capital gains regardless of the stockholders
holding period for its stock and whether the distributions are paid in cash or invested in additional stock. Corporate stockholders are generally eligible for the 70% dividends received deduction with respect to dividends received from us, other
than capital gains dividends, but only to the extent such amount is attributable to dividends received by us from taxable domestic corporations.



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Any distribution declared by us in October, November or December of any calendar year, payable to
stockholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it were paid by us and received by the stockholders on December 31 of the previous year. In addition,
we may elect (in accordance with Section 855(a) of the Code) to relate a distribution back to the prior taxable year if we (1) declare such distribution prior to the later of the due date for filing our return for that taxable year or the
15th day of the ninth month following the close of the taxable year, (2) make the election in that return, and (3) distribute the amount in the 12-month period following the close of the
taxable year but not later than the first regular distribution payment of the same type following the declaration. Any such election will not alter the general rule that a stockholder will be treated as receiving a distribution in the taxable year
in which the distribution is made, subject to the October, November, December rule described above. As of March 31, 2015, our Section 855(a) distributions were $4.0 million.

If a common stockholder participates in our opt in dividend reinvestment plan, any distributions reinvested under the plan will be taxable to the
common stockholder to the same extent, and with the same character, as if the common stockholder had received the distribution in cash. The common stockholder will have an adjusted basis in the additional common shares purchased through the plan
equal to the amount of the reinvested distribution. The additional common shares will have a new holding period commencing on the day following the day on which the shares are credited to the common stockholders account. The plan agent
purchases shares in the open market in connection with the obligations under the plan. We do not have a dividend reinvestment plan for our preferred stockholders.

Sale of Our Shares

A U.S. stockholder
generally will recognize taxable gain or loss if the U.S. stockholder sells or otherwise disposes of his, her or its shares of our common or preferred stock. Any gain arising from such sale or disposition generally will be treated as long-term
capital gain or loss if the U.S. stockholder has held his, her or its shares for more than one year. Otherwise, it will be classified as short-term capital gain or loss. However, any capital loss arising from the sale or disposition of shares
of our stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to such shares. Under the tax laws in
effect as of the date of this filing, individual U.S. stockholders are subject to a maximum federal income tax rate of 20% on their net capital gain (i.e. the excess of realized net long-term capital gain over realized net short-term capital
loss for a taxable year) including any long-term capital gain derived from an investment in our shares. Such rate is lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. stockholders currently are
subject to federal income tax on net capital gain at the same rates applied to their ordinary income (currently up to a maximum of 35%). Capital losses are subject to limitations on use for both corporate and non-corporate stockholders. Certain U.S.
stockholders who are individuals, estates or trusts generally are subject to a 3.8% Medicare tax on, among other things, dividends on, and capital gain from the sale or other disposition of, shares of our stock.

Backup Withholding

We may be required to withhold
federal income tax, or backup withholding, currently at a rate of 28%, from all taxable distributions to any non-corporate U.S. stockholder (1) who fails to furnish us with a correct taxpayer identification number or a certificate that
such stockholder is exempt from backup withholding, or (2) with respect to whom the Internal Revenue Service (IRS) notifies us that such stockholder has failed to properly report certain interest and dividend income to the IRS and
to respond to notices to that effect. An individuals taxpayer identification number is generally his or her social security number. Any amount withheld under backup withholding is allowed as a credit against the U.S. stockholders
federal income tax liability, provided that proper information is provided to the IRS.

The Foreign Account Tax Compliance Act (FATCA) imposes
a federal withholding tax on certain types of payments made to foreign financial institutions and certain other non-U.S. entities unless certain due diligence, reporting, withholding, and certification obligation requirements are
satisfied. Under delayed effective dates provided for in the Treasury Regulations and other IRS guidance, such required withholding will not begin until January 1, 2017 with respect to gross proceeds from a sale or other disposition of our
stock.

Regulation as a BDC

We are a
closed-end, non-diversified management investment company that has elected to be regulated as a BDC under Section 54 of the 1940 Act. As such, we are subject to regulation under the 1940 Act. The 1940 Act contains prohibitions and restrictions
relating to transactions between BDCs and their affiliates, principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors be persons other than interested persons, as defined in
the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities, as defined
in the 1940 Act.

We intend to conduct our business so as to retain our status as a BDC. A BDC may use capital provided by public stockholders and from
other sources to invest in long-term private investments in businesses. A BDC provides stockholders the ability to retain the liquidity of a publicly-traded stock while sharing in the possible benefits, if any, of investing in primarily privately
owned companies.



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In general, a BDC must have been organized and have its principal place of business in the U.S. and must be
operated for the purpose of making investments in qualifying assets, as described in Sections 55(a)(1)  (through (a)(3) of the 1940 Act.

Qualifying Assets

Under the 1940 Act, a BDC may
not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets, other than certain interests in furniture,
equipment, real estate, or leasehold improvements (Operating Assets) represent at least 70% of our total assets, exclusive of Operating Assets. The types of qualifying assets in which we may invest under the 1940 Act include, but are not
limited to, the following:



| | (1) | Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer is an eligible portfolio company. An eligible portfolio company is generally defined in the 1940
Act as any issuer which:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) | is organized under the laws of, and has its principal place of business in, any State or States in the U.S.;
| | --- | ------------------------------------------------------------------------------------------------------------



| | (b) | is not an investment company (other than a small business investment company wholly owned by the BDC or otherwise excluded from the definition of investment company); and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | satisfies one of the following:
| | --- | -------------------------------



| | (i) | it does not have any class of securities with respect to which a broker or dealer may extend margin credit;
| | --- | -----------------------------------------------------------------------------------------------------------



| | (ii) | it is controlled by the BDC and for which an affiliate of the BDC serves as a director;
| | ---- | ---------------------------------------------------------------------------------------



| | (iii) | it has total assets of not more than $4 million and capital and surplus of not less than $2 million;
| | ----- | ----------------------------------------------------------------------------------------------------



| | (iv) | it does not have any class of securities listed on a national securities exchange; or
| | ---- | -------------------------------------------------------------------------------------



| | (v) | it has a class of securities listed on a national securities exchange, with an aggregate market value of outstanding voting and non-voting equity of less than $250 million.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Securities received in exchange for or distributed on or with respect to securities described in (1) above, or pursuant to the exercise of options, warrants or rights relating to such securities.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Cash, cash items, government securities or high quality debt securities maturing in one year or less from the time of investment.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2015, 98.8% of our assets were qualifying assets.

Asset Coverage

Pursuant to Section 61(a)(2)
of the 1940 Act, we are permitted, under specified conditions, to issue multiple classes of Senior Securities representing indebtedness. However, pursuant to Section 18(c) of the 1940 Act, we are permitted to issue only one class of Senior
Securities that is stock. In either case, we may only issue such Senior Securities if such class of Senior Securities, after such issuance, has an asset coverage, as defined in Section 18(h) of the 1940 Act, of at least 200%.

In addition, our ability to pay dividends or distributions (other than dividends payable in our stock) to holders of any class of our capital stock would be
restricted if our Senior Securities representing indebtedness fail to have an asset coverage of at least 200% (measured at the time of declaration of such distribution and accounting for such distribution). The 1940 Act does not apply this
limitation to privately arranged debt that is not intended to be publicly distributed, unless this limitation is specifically negotiated by the lender. In addition, our ability to pay dividends or distributions (other than dividends payable in our
common stock) to our common stockholders would be restricted if our Senior Securities that are stock fail to have an asset coverage of at least 200% (measured at the time of declaration of such distribution and accounting for such distribution). If
the value of our assets declines, we might be unable to satisfy these asset coverage requirements. To satisfy the 200% asset coverage requirement in the event that we are seeking to pay a distribution, we might either have to (i) liquidate a
portion of our loan portfolio to repay a portion of our indebtedness or (ii) issue common stock. This may occur at a time when a sale of a portfolio asset may be disadvantageous, or when we have limited access to capital markets on agreeable
terms. In addition, any amounts that we use to service our indebtedness or for offering expenses will not be available for distributions to our stockholders. If we are unable to regain asset coverage through these methods, we may be forced to
suspend the payment of such dividends or distributions. As of March 31, 2015, our asset coverage ratio was 230%

Significant Managerial
Assistance

A BDC generally must make available significant managerial assistance to issuers of certain of its portfolio securities that the BDC
counts as a qualifying asset for the 70% test described above. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if
accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio



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company. Significant managerial assistance also includes the exercise of a controlling influence over the management and policies of the portfolio company. However, with respect to certain, but
not all such securities, where the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance, or the BDC may exercise such control
jointly.

Investment Policies

We seek to
achieve a high level of current income and capital gains through investments in debt securities and preferred and common stock that we acquire in connection with buyout and other recapitalizations. The following investment policies, along with these
investment objectives, may not be changed without the approval of our Board of Directors:



| |  |  | We will at all times conduct our business so as to retain our status as a BDC. In order to retain that status, we must be operated for the purpose of investing in certain categories of qualifying assets. In addition, we
may not acquire any assets (other than non-investment assets necessary and appropriate to our operations as a BDC or qualifying assets) if, after giving effect to such acquisition, the value of our qualifying assets is less than 70% of
the value of our total assets. We anticipate that the securities we seek to acquire will generally be qualifying assets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We will at all times endeavor to conduct our business so as to retain our status as a RIC under the Code. To do so, we must meet income source, asset diversification and annual distribution requirements. We may issue
Senior Securities, such as debt or preferred stock, to the extent permitted by the 1940 Act for the purpose of making investments, to fund share repurchases, or for temporary emergency or other purposes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

With the exception of our policy to conduct our business as a BDC, these policies are not fundamental and may be changed without stockholder approval.

Code of Ethics

We and all of the Gladstone family
of companies, have adopted a code of ethics and business conduct applicable to all of the officers, directors and employees of such companies that complies with the guidelines set forth in Item 406 of Regulation S-K of the Securities Act of
1933 (the Securities Act) and Rule 17j-1 of the 1940 Act. As required by the 1940 Act, this code establishes procedures for personal investments, restricts certain transactions by such personnel and requires the reporting of certain
transactions and holdings by such personnel. This code of ethics and business conduct is publicly available on our website under Corporate Governance at www.GladstoneInvestment.com. We intend to provide any required disclosure of any
amendments to or waivers of the provisions of this code by posting information regarding any such amendment or waiver to our website or in a Current Report on Form 8-K.

Compliance Policies and Procedures

We and the
Adviser have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws, and our Board of Directors is required to review these compliance policies and procedures annually to
assess their adequacy and the effectiveness of their implementation. We have designated a chief compliance officer, John Dellafiora, Jr., who also serves as chief compliance officer for all of the Gladstone family of companies.

Staffing

We do not currently have any employees
and do not expect to have any employees in the foreseeable future. Currently, services necessary for our business are provided by individuals who are employees of the Adviser and the Administrator pursuant to the terms of the Advisory Agreement and
the Administration Agreement, respectively. No employee of the Adviser or the Administrator will dedicate all of his or her time to us. However, we expect that 25 to 30 full time employees of the Adviser and the Administrator will spend substantial
time on our matters during the remainder of calendar year 2015 and all of calendar year 2016. To the extent we acquire more investments, we anticipate that the number of employees of the Adviser and the Administrator who devote time to our matters
will increase.

As of May 5, 2015, the Adviser and Administrator collectively had 63 full-time employees. A breakdown of these employees is
summarized by functional area in the table below:



|                      |  |                                                                            
|--------------------- |  | ---------------------------------------------------------------------------
|Number of Individuals |  | Functional Area                                                            
|10                    |  | Executive management                                                       
|16                    |  | Accounting, administration, compliance, human resources, legal and treasury
|37                    |  | Investment management, portfolio management and due diligence              



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Available Information

Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments, if any, to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act) are available free of charge through our website at www.GladstoneInvestment.com as soon as
reasonably practicable after such materials are electronically filed with or furnished to the SEC. A request for any of these reports may also be submitted to us by sending a written request addressed to Investor Relations, Gladstone Investment
Corporation, 1521 Westbranch Drive, Suite 100, McLean, VA 22102, or by calling our toll-free investor relations line at 1-866-366-5745. The public may read and copy materials that we file with the SEC at the SECs Public Reference
Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.



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ITEM 1A. RISK FACTORS

You should carefully consider these risk factors, together with all of the other information included in this Annual Report on Form 10-K and the other
reports and documents filed by us with the SEC. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us, or not presently deemed material by us, may also impair our operations and
performance. If any of the following events occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected. In such case, our net asset value and the trading price of our securities could
decline, and you may lose all or part of your investment. The risk factors described below are the principal risk factors associated with an investment in our securities as well as those factors generally associated with an investment company with
investment objectives, investment policies, capital structure or trading markets similar to ours.

Risks Related to Our Investments

We operate in a highly competitive market for investment opportunities.

There has been increased competitive pressure in the BDC and investment company marketplace for senior and senior subordinated secured debt, resulting in lower
yields for increasingly riskier investments. A large number of entities compete with us and make the types of investments that we seek to make in small and medium-sized companies. We compete with public and private buyout funds, commercial and
investment banks, commercial financing companies, and, to the extent that they provide an alternative form of financing, hedge funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing
resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which
would allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. The competitive
pressures we face could have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to
time and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective. We do not seek to compete based on the interest rates we offer, and we believe that some of our competitors
may make loans with interest rates that will be comparable to or lower than the rates we offer. We may lose investment opportunities if we do not match our competitors pricing, terms, and structure. However, if we match our competitors
pricing, terms, and structure, we may experience decreased net interest income and increased risk of credit loss.

Our investments in small and
medium-sized portfolio companies are extremely risky and could cause you to lose all or a part of your investment.

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



| |  |  | Small and medium-sized businesses are likely to have greater exposure to economic downturns than larger businesses. Our portfolio companies may have fewer resources than larger businesses, and any economic
downturns or recessions, are more likely to have a material adverse effect on them. If one of our portfolio companies is adversely impacted by a recession, its ability to repay our loan or engage in a liquidity event, such as a sale,
recapitalization or initial public offering would be diminished.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Small and medium-sized businesses may have limited financial resources and may not be able to repay the loans we make to them. Our strategy includes providing financing to portfolio companies that typically
do not have readily available access to financing. While we believe that this provides an attractive opportunity for us to generate profits, this may make it difficult for the portfolio companies to repay their loans to us upon maturity. A
borrowers ability to repay its loan may be adversely affected by numerous factors, including the failure to meet its business plan, a downturn in its industry or negative economic conditions. Deterioration in a borrowers financial
condition and prospects usually will be accompanied by deterioration in the value of any collateral and a reduction in the likelihood of realizing on any guaranties we may have obtained from the borrowers management. As of March 15, 2015,
one portfolio company was on non-accrual status with an aggregate debt cost basis of approximately $11.7 million, or 3.1% of the cost basis of all debt investments in our portfolio. While we are working with the portfolio company to improve its
profitability and cash flows, there can be no assurance that our efforts will prove successful. Although we will generally seek to be the senior secured lender to a borrower, in some of our loans we expect to be subordinated to a senior lender, and
our interest in any collateral would, accordingly, likely be subordinate to another lenders security interest.
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| |  |  | Small and medium-sized businesses typically have narrower product lines and smaller market shares than large businesses. Because
our target portfolio companies are smaller businesses, they will tend to be more vulnerable to
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| | competitors actions and market conditions, as well as general economic downturns. In addition, our portfolio companies may face intense competition, including competition from companies
with greater financial resources, more extensive development, manufacturing, marketing and other capabilities and a larger number of qualified managerial and technical personnel.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | There is generally little or no publicly available information about these businesses. Because we seek to invest in privately owned businesses, there is generally little or no publicly available operating
and financial information about our potential portfolio companies. As a result, we rely on our officers, the Adviser and its employees, Gladstone Securities and consultants to perform due diligence investigations of these portfolio companies, their
operations, and their prospects. We may not learn all of the material information we need to know regarding these businesses through our investigations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Small and medium-sized businesses generally have less predictable operating results. We expect that our portfolio companies may have significant variations in their operating results, may from time to time
be exposed to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, may require substantial additional capital to support their operations, to finance expansion or to maintain their
competitive position, may otherwise have a weak financial position or may be adversely affected by changes in the business cycle. Our portfolio companies may not meet net income, cash flow and other coverage tests typically imposed by their senior
lenders. A borrowers failure to satisfy financial or operating covenants imposed by senior lenders could lead to defaults and, potentially, foreclosure on its senior credit facility, which could additionally trigger cross-defaults in other
agreements. If this were to occur, it is possible that the borrowers ability to repay our loan would be jeopardized.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Small and medium-sized businesses are more likely to be dependent on one or two persons. Typically, the success of a small or medium-sized business also depends on the management talents and efforts of one
or two persons or a small group of persons. The death, disability or resignation of one or more of these persons could have a material adverse impact on our borrower and, in turn, on us.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Small and medium-sized businesses may have limited operating histories. While we intend to target stable companies with proven track records, we may make loans to new companies that meet our other investment
criteria. Portfolio companies with limited operating histories will be exposed to all of the operating risks that new businesses face and may be particularly susceptible to, among other risks, market downturns, competitive pressures and the
departure of key executive officers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Debt securities of small and medium-sized private companies typically are not rated by a credit rating agency. Typically a small or medium-sized private business cannot or will not expend the resources to have
their debt securities rated by a credit rating agency. We expect that most, if not all, of the debt securities we acquire will be unrated. Investors should assume that these loans would be at rates below what is today considered investment
grade quality. Investments rated below investment grade are often referred to as high yield securities or junk bonds and may be considered high risk as compared to investment-grade debt instruments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because the loans we make and equity securities we receive when we make loans are not publicly traded, there is uncertainty regarding the value of our
privately held securities that could adversely affect our determination of our net asset value (NAV).

Our portfolio investments
are, and we expect will continue to be, in the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable. Our Board of Directors has ultimate
responsibility for reviewing and approving, in good faith, the fair value of our investments, based on the Policy. Our Board of Directors reviews valuation recommendations that are provided by the Valuation Team. In valuing our investment portfolio,
several techniques are used, including, a total enterprise value approach, a yield analysis, market quotes, and independent third party assessments. Currently, Standard & Poors Securities Evaluation, Inc. provides estimates of fair
value on generally all of our debt investments and we use another independent valuation firm to provide valuation inputs for our significant equity investments, including earnings multiple ranges, as well as other information. In addition to these
techniques, inputs and information, other factors are considered when determining fair value of our investments, including but limited to: the nature and realizable value of the collateral, including external parties guaranties; any relevant
offers or letters of intent to acquire the portfolio company; and the markets in which the portfolio company operates. All new and follow-on debt and equity investments made during the current three month reporting period ended March 31, 2015
were valued at original cost basis. For additional information on our valuation policies, procedures and processes, see Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical Accounting Policy
 Investment Valuation.

Fair value measurements of our investments may involve subjective judgments and estimates and due to the inherent
uncertainty of determining these fair values, the fair value of our investments may fluctuate from period to period. 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



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on these investments to be different than the valuations currently assigned. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid
than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which it is recorded.

Our NAV would be adversely affected if the fair value of our investments that are approved by our Board of Directors are higher than the values that we
ultimately realize upon the disposal of such securities.

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

We will generally make investments in private companies whose securities are not traded in any public market. Substantially all of the investments we
presently hold and the investments we expect to acquire in the future are, and will be, subject to legal and other restrictions on resale and will otherwise be less liquid than publicly-traded securities. The illiquidity of our investments may make
it difficult for us to quickly obtain cash equal to the value at which we record our investments if the need arises. This could cause us to miss important investment opportunities. In addition, if we are required to liquidate all or a portion of our
portfolio quickly, we may record substantial realized losses upon liquidation. We may also face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we, the Adviser, or our respective officers,
employees or affiliates have material non-public information regarding such portfolio company.

Due to the uncertainty inherent in valuing these
securities, the Advisers determinations of fair value may differ materially from the values that could be obtained if a ready market for these securities existed. Our NAV could be materially affected if the Advisers determinations
regarding the fair value of our investments are materially different from the values that we ultimately realize upon our disposal of such securities.

Our financial results could be negatively affected if a significant portfolio investment fails to perform as expected.

Our total investment in companies may be significant individually or in the aggregate. As a result, if a significant investment in one or more companies fails
to perform as expected, our financial results could be more negatively affected and the magnitude of the loss could be more significant than if we had made smaller investments in more companies. Our five largest investments represented 28.8% of the
fair value of our total portfolio as of March 31, 2015, compared to 32.8% as of March 31, 2014. Any disposition of a significant investment in one or more companies may negatively impact our net investment income and limit our ability to
pay distributions.

We generally will not control our portfolio companies.

We do not, and do not expect to, control most of our portfolio companies, even though we may have board representation or board observation rights, and our
debt agreements may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives
of the holders of their common stock, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests
in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

We typically invest in transactions involving acquisitions, buyouts and recapitalizations of companies, which will subject us to the risks associated with
change in control transactions.

Our strategy, in part, includes making debt and equity investments in companies in connection with acquisitions,
buyouts and recapitalizations, which subjects us to the risks associated with change in control transactions. Change in control transactions often present a number of uncertainties. Companies undergoing change in control transactions often face
challenges retaining key employees and maintaining relationships with customers and suppliers. While we hope to avoid many of these difficulties by participating in transactions where the management team is retained and by conducting thorough due
diligence in advance of our decision to invest, if our portfolio companies experience one or more of these problems, we may not realize the value that we expect in connection with our investments, which would likely harm our operating results and
financial condition.

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

We primarily invest in secured first and second lien debt securities issued by our portfolio companies. In some cases portfolio companies will be permitted to
have other debt that ranks equally with, or senior to, the debt securities in which we invest. By their terms, such debt securities may provide that the holders thereof are entitled to receive payment of interest and principal on or before the dates
on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization, or bankruptcy of a portfolio company, holders of debt instruments ranking
senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such senior creditors, such portfolio company may not have any
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repaying its obligation to us. In the case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditors holding
such debt in the event of an insolvency, liquidation, dissolution, reorganization, or bankruptcy of a portfolio company.

Prepayments of our
investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.

In addition to risks
associated with delays in investing our capital, we are also subject to the risk that investments we make in our portfolio companies may be repaid prior to maturity. During the fiscal year 2015, we experienced prepayments of debt investments from
Cambridge Sound Management, Inc. (CSM), Frontier Packaging, Inc. (Frontier), Funko, Old World, and Star Seed, Inc. (Star Seed). We will first use any proceeds from prepayments to repay any borrowings outstanding
on our credit facility. In the event that funds remain after repayment of our outstanding borrowings, then we will generally reinvest these proceeds in government securities, pending their future investment in new debt and/or equity securities.
These government securities will typically have substantially lower yields than the debt securities being prepaid and we could experience significant delays in reinvesting these amounts. As a result, our results of operations could be materially
adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our common stock.

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

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

Our portfolio is concentrated in a limited number of companies and industries, which subjects us to an increased risk of significant loss if any one of
these companies does not repay us or if the industries experience downturns.

As of March 31, 2015, we had investments in 34 portfolio companies,
of which there were five investments, Counsel Press, SOG, Funko, Acme, and Old World that comprised $134.3 million, or 28.8%, of our total investment portfolio, at fair value. A consequence of a limited number of investments is that the aggregate
returns we realize may be substantially adversely affected by the unfavorable performance of a small number of such loans or a substantial write-down of any one investment. Beyond our regulatory and income tax diversification requirements, as well
as our credit facility requirements, we do not have fixed guidelines for industry concentration and our investments could potentially be concentrated in relatively few industries. In addition, while we do not intend to invest 25% or more of our
total assets in a particular industry or group of industries at the time of investment, it is possible that as the values of our portfolio companies change, one industry or a group of industries may comprise in excess of 25% of the value of our
total assets. A downturn in a particular industry in which we have invested a significant portion of our total assets could have a materially adverse effect on us. As of March 31, 2015, our largest industry concentration was in Home and Office
Furnishings, Housewares, and Durable Consumer Products, representing 15.1% of our total investments, at fair value.

Our investments are typically long
term and will require several years to realize liquidation events.

Since we generally make five to seven year term loans and hold our loans and
related warrants or other equity positions until the loans mature, you should not expect realization events, if any, to occur over the near term. In addition, we expect that any warrants or other equity positions that we receive when we make loans
may require several years to appreciate in value and we cannot give any assurance that such appreciation will occur.

The disposition of our
investments may result in contingent liabilities.

Currently, all of our investments involve private securities. In connection with the disposition of
an investment in private securities, we may be required to make representations about the business and financial affairs of the underlying portfolio company typical of those made in connection with the sale of a business. We may also be required to
indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to certain potential liabilities. These arrangements may result in contingent liabilities that ultimately yield funding
obligations that must be satisfied through our return of certain distributions previously made to us.

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

Even though we have structured most
of our investments as secured first and second lien loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio
company, a bankruptcy court might re-characterize our debt investments and subordinate all, or a portion, of our claims to that of other creditors. Holders of debt instruments ranking senior to our investments typically would be entitled to receive
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before we receive any distributions. After repaying such senior creditors, such portfolio company may not have any remaining assets to use to repay its obligation to us. We may also be subject to
lender liability claims for actions taken by us with respect to a borrowers business or in instances in which we exercised control over the borrower. It is possible that we could become subject to a lenders liability claim, including as
a result of actions taken in rendering significant managerial assistance.

Portfolio company-related litigation could result in costs,
including defense costs or damages, and the diversion of management time and resources.

In the course of investing in and often providing significant
managerial assistance to certain of our portfolio companies, certain persons employed by the Adviser sometimes serve as directors on the boards of such companies. To the extent that litigation arises out of our investments in these companies, even
if meritless, we or such employees may be named as defendants in such litigation, which could result in additional costs, including defense costs, and the diversion of management time and resources. We may be unable to accurately estimate our
exposure to litigation risk if we record balance sheet reserves for probable loss contingencies. As a result, any reserves we establish to cover any settlements or judgments may not be sufficient to cover our actual financial exposure, which may
have a material impact on our results of operations, financial condition, or cash flows.

In view of the inherent difficulty of predicting the outcome of
legal actions and regulatory matters, we cannot provide assurance as to the outcome of any threatened or pending matter or, if resolved adversely, the costs associated with any such matter, particularly where the claimant seeks very large or
indeterminate damages or where the matter presents novel legal theories, involves a large number of parties or is at a preliminary stage. The resolution of any such matters may be time consuming, expensive, and may distract management from the
conduct of our business. The resolution of certain threatened or pending legal actions or regulatory matters, if unfavorable, whether in settlement or a judgment, could have a material adverse effect on our financial condition, results of
operations, or cash flows for the quarter in which such actions or matters are resolved or a reserve is established.

For example, a former portfolio
company, Noble Logistics, Inc. (Noble) is a defendant in employment law wage and hour and independent contractor misclassification claims in a purported class action seeking monetary damages, Maximo v. Aspen Contracting California LLC
d/b/a/ Noble Logistics, et al., or Maximo. Noble is a debtor in a bankruptcy case under Chapter 11 of the federal bankruptcy code, pending in federal bankruptcy court in Delaware. The claims against Noble asserted in the Maximo case have been stayed
by the filing of Nobles bankruptcy case. A lawsuit brought by plaintiffs Clarence and Sheila Walder against a customer of Noble is also pending in California based on similar facts relating to Noble and claims under California law. The Maximo
and Walder plaintiffs have attempted to bring claims against the Company and other former investors in Noble based primarily on allegations that the Company and other investors controlled Noble and were responsible for the misclassification of
Nobles workforce. To date, claims against the Company have been struck by a court or voluntarily dismissed by the plaintiffs in connection with the automatic stay arising in connection with the Noble bankruptcy. While neither the Company nor
any of its portfolio companies (other than Noble) are currently defendants in these cases, they may in the future be subject to claims by these plaintiffs or other persons alleging similar claims, or may expend funds on behalf of Noble to defend
claims.

While the Company believes it would have valid defenses to potential claims, based on the current claims and facts alleged, and intends to defend
any claims vigorously, it may nevertheless expend significant amounts of money in defense costs and expenses. Further, if the Company enters into settlements or suffers an adverse outcome in any litigation, the Company could be required to pay
significant amounts. In addition, if any of the Companys portfolio companies become subject to direct or indirect claims or other obligations, such as defense costs or damages in litigation or settlement, the Companys investment in such
companies could diminish in value and the Company could suffer indirect losses. Further, these matters could cause the Company to expend significant management time and effort in connection with assessment and defense of any claims. No range of
potential expenses, costs or damages in connection with these matters can be estimated at this time.

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

When we make a loan, we may receive warrants to purchase stock issued by the borrower or other yield
enhancements, such as success fees. Our goal is to ultimately dispose of these equity interests and realize gains upon our disposition of such interests. We expect that, over time, the gains we realize on these warrants and other yield enhancements
will offset any losses we may experience on loan defaults. However, any warrants we receive may not appreciate in value and, in fact, may decline in value and any other yield enhancements, such as success fees, may not be realized. Accordingly, we
may not be able to realize gains from our equity interests or other yield enhancements and any gains we do recognize may not be sufficient to offset losses we experience on our loan portfolio.

During the fiscal year ended March 31, 2015, we recorded a net realized loss of $0.1 million related to reversal of escrows from previous investment
exits. During the fiscal year ended March 31, 2014, we recorded a net realized gain of $8.2 million primarily consisting of a $24.8 million gain on the sale of Venyu Solutions, Inc. (Venyu), partially offset by realized losses of
$11.4 million and $1.8 million related to the equity sales of Auto Safety House, LLC (ASH) and Packerland Whey Products, Inc. (Packerland), respectively, and a realized loss of $3.4 million related to the restructuring of
Noble. During the fiscal year ended March 31, 2013, we



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recorded a realized gain of $0.8 million relating to post-closing adjustments on our previous investment exit of A. Stucki Holding Corp. (A. Stucki). There can be no guarantees that
such realized gains can be achieved in future periods and the impact of such sales on our results of operations in prior periods should not be relied upon as being indicative of performance in future periods. For the years ended March 31, 2015,
2014 and 2013, success fees totaled $1.4 million, $4.2 million and $0.8 million, respectively.

Any cumulative unrealized depreciation we experience on
our investment portfolio may be an indication of future realized losses, which could reduce our income available for distribution.

As a BDC we are
required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of our Board of Directors. We will record decreases in the market values or fair values of
our investments as unrealized depreciation. Since our inception, we have, at times, incurred a cumulative net unrealized depreciation of our portfolio. Any unrealized depreciation in our investment portfolio could result in realized losses in the
future and ultimately in reductions of our income available for distribution to stockholders in future periods.

The recent volatility of oil and
natural gas prices could impair certain of our portfolio companies operations and ability to satisfy obligations to their respective lenders and investors, including us, which could negatively impact our financial condition.

Many of our portfolio companies businesses are heavily dependent upon the prices of, and demand for, oil and natural gas, which have recently declined
significantly and such volatility could continue or increase in the future. A substantial or extended decline in oil and natural gas demand or prices may adversely affect the business, financial condition, cash flow, liquidity or results of
operations of these portfolio companies and might impair their ability to meet capital expenditure obligations and financial commitments. A prolonged or continued decline in oil prices could therefore have a material adverse effect on our business,
financial condition and results of operations.

Risks Related to Our External Financing

In addition to regulatory limitations on our ability to raise capital, our revolving line of credit contains various covenants which, if not complied with,
could accelerate our repayment obligations under the facility, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.

We will have a continuing need for capital to finance our investments. As of March 31, 2015, we had $118.8 million in borrowings outstanding under our
fifth amended and restated credit agreement, which provides for maximum borrowings of $185.0 million (our Credit Facility), with a revolving period end date of June 26, 2017 (the Revolving Period End Date). Our Credit
Facility permits us to fund additional loans and investments as long as we are within the conditions and covenants set forth in the credit agreement. Our Credit Facility contains covenants that require our wholly-owned subsidiary, 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 material changes to our credit and collection policies
without lenders consent. Our Credit Facility also generally seeks to restrict distributions on our common stock to 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. We are also subject to certain limitations on the type of loan investments we can make, including
restrictions on geographic concentrations, sector concentrations, loan size, payment frequency and status, average life and lien property. Our Credit Facility also requires us to comply with other financial and operational covenants, which obligate
us to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of obligors required in the borrowing base of the credit agreement. Additionally, we are subject to a performance guaranty that
requires us to maintain (i) a minimum net worth of $170 million plus 50% of all equity and subordinated debt raised minus any equity or subordinated debt redeemed or retired after June 26, 2014, which equates to $202.9 million as of
March 31, 2015, (ii) asset coverage with respect to senior securities representing indebtedness of at least 200%, in accordance with Section 18, as modified by Section 61, of the 1940 Act and
(iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of March 31, 2015 and as of the date of this filing, we were in compliance with the covenants under our Credit Facility; however, our continued compliance depends
on many factors, some of which are beyond our control.

Given the continued uncertainty in the capital markets, the cumulative net unrealized depreciation
in our portfolio may increase in future periods and threaten our ability to comply with the minimum net worth covenant and other covenants under our Credit Facility. Our failure to satisfy these covenants could result in foreclosure by our lenders,
which would accelerate our repayment obligations under the facility and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.

Any inability to renew, extend or replace our Credit Facility on terms favorable to us, or at all, could adversely impact our liquidity and ability to fund
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If our Credit Facility is not renewed or extended by the Revolving Period End Date, all principal and interest
will be due and payable on or before June 26, 2017. Subject to certain terms and conditions, our Credit Facility may be expanded to a total of $250 million through the addition of other lenders to the facility. However, if additional lenders
are unwilling to join the facility on its terms, we will be unable to expand the facility and thus will continue to have limited availability to finance new investments under our Credit Facility. There can be no guarantee that we will be able to
renew, extend or replace our Credit Facility upon its Revolving Period End Date on terms that are favorable to us, if at all. Our ability to expand our Credit Facility, and to obtain replacement financing at or before the time of its Revolving
Period End Date, will be constrained by then-current economic conditions affecting the credit markets. In the event that we are not able to expand our Credit Facility, or to renew, extend or refinance our Credit Facility by the Revolving Period
End Date, this could have a material adverse effect on our liquidity and ability to fund new investments, our ability to make distributions to our stockholders and our ability to qualify as a RIC under the Code.

If we are unable to secure replacement financing, we may be forced to sell certain assets on disadvantageous terms, which may result in realized losses, and
such realized losses could materially exceed the amount of any unrealized depreciation on these assets as of our most recent balance sheet date, which would have a material adverse effect on our results of operations. Such circumstances would also
increase the likelihood that we would be required to redeem some or all of our outstanding mandatorily redeemable preferred stock, which could potentially require us to sell more assets. In addition to selling assets, or as an alternative, we may
issue common equity in order to repay amounts outstanding under our Credit Facility. Based on the recent trading prices of our common stock, such an equity offering may have a substantial dilutive impact on our existing stockholders interest
in our earnings, assets and voting interest in us. If we are able to renew, extend or refinance our Credit Facility prior to maturity, renewal, extension or refinancing, it could potentially result in significantly higher interest rates and related
charges and may impose significant restrictions on the use of borrowed funds to fund investments or maintain distributions to common and preferred stockholders.

Because we expect to distribute substantially all of our net investment income, at least 90%, on an annual basis, our business plan is dependent upon
external financing, which is constrained by the limitations of the 1940 Act.

We completed recent equity offerings of our Series C and Series B Term
Preferred Stock in May 2015 and November 2014, respectively; our Series A Term Preferred Stock in March 2012; and our common offerings in March 2015 and in October 2012, and there can be no assurance that we will be able to raise capital through
issuing equity in the near future. Our business requires a substantial amount of cash to operate and grow. We may acquire such additional capital from the following sources:



| |  |  | Senior Securities.We may issue senior securities representing indebtedness (including borrowings under our Credit Facility) and senior securities that are stock, such as our Series A, B, and C Term Preferred
Stock, up to the maximum amount permitted by the 1940 Act. The 1940 Act currently permits us, as a BDC, to issue senior securities representing indebtedness and senior securities which are stock (such as our mandatorily redeemable preferred stock)
(collectively, our Senior Securities), in amounts such that our asset coverage, as defined in Section 18(h) of the 1940 Act, is at least 200% immediately after each issuance of such Senior Security. As a result of incurring
indebtedness (in whatever form), we will be exposed to the risks associated with leverage. Although borrowing money for investments increases the potential for gain, it also increases the risk of a loss. A decrease in the value of our investments
will have a greater impact on the value of our common stock to the extent that we have borrowed money to make investments. There is a possibility that the costs of borrowing could exceed the income we receive on the investments we make with such
borrowed funds. In addition, our ability to pay distributions, issue Senior Securities or repurchase shares of our common stock would be restricted if the asset coverage on each of our Senior Securities is not at least 200%. If the aggregate value
of our assets declines, we might be unable to satisfy that 200% requirement. To satisfy the 200% asset coverage requirement in the event that we are seeking to pay a distribution, we might either have to (i) liquidate a portion of our loan
portfolio to repay a portion of our indebtedness or (ii) issue common stock. This may occur at a time when a sale of a portfolio asset may be disadvantageous, or when we have limited access to capital markets on agreeable terms. In addition,
any amounts that we use to service our indebtedness or for offering expenses will not be available for distributions to stockholders. Furthermore, if we have to issue common stock below NAV per common share, any non-participating stockholders will
be subject to dilution, as described below. Pursuant to Section 61(a)(2) of the 1940 Act, we are permitted, under specified conditions, to issue multiple classes of senior securities representing indebtedness. However, pursuant to
Section 18(c) of the 1940 Act, we are permitted to issue only one class of Senior Securities that is stock.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Common and Convertible Preferred Stock.Because we are constrained in our ability to issue debt or Senior Securities for the reasons given
above, we are dependent on the issuance of equity as a financing source. If we raise additional funds by issuing more common stock, the percentage ownership of our common stockholders at the time of the issuance would decrease and our existing
common stockholder may experience dilution. In addition, under the 1940 Act, we will generally not be able to issue additional shares of our common stock at a price below NAV per common share to purchasers, other than to our existing common
stockholders through a rights offering, without first obtaining the approval of our stockholders and our independent directors. If we were to sell shares of our common stock below our then current NAV per common share, as we did in March 2015 and
October 2012, such sales would result in an immediate dilution to the NAV per common share.
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| | This dilution would occur as a result of the sale of common shares at a price below the then current NAV per share of our common stock and a proportionately greater decrease in a common
stockholders interest in our earnings and assets and voting percentage than the increase in our assets resulting from such issuance. For example, if we issue and sell an additional 10% of our common stock at a 5% discount from NAV, a common
stockholder who does not participate in that offering for its proportionate interest will suffer NAV dilution of up to 0.5% or $5 per $1,000 of NAV. This imposes constraints on our ability to raise capital when our common stock is trading below NAV
per common share, as it generally has for the last several years. As noted above, the 1940 Act prohibits the issuance of multiple classes of senior securities that are stock. As a result, we would be prohibited from issuing convertible preferred
stock to the extent that such a security was deemed to be a separate class of stock from our outstanding mandatorily redeemable preferred stock.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We financed certain of our investments with borrowed money and capital from the issuance of Senior Securities, which will magnify the potential for gain or
loss on amounts invested and may increase the risk of investing in us.

The following table illustrates the effect of leverage on returns from an
investment in our common stock assuming various annual returns on our portfolio, net of expenses. The calculations in the table below are hypothetical, and actual returns may be higher or lower than those appearing in the table below.



|                                              |  |                                                  |       |    |  |  |       |    |  |  |      |    |  |  |     |   |  |  |      |  
|--------------------------------------------- |  | ------------------------------------------------ | ----- | -- |  |  | ----- | -- |  |  | ---- | -- |  |  | --- | - |  |  | ---- | -
|                                              |  | Assumed Return on Our Portfolio(Net of Expenses) |      
|                                              |  |                                                  | (10   | )% |  |  | (5    | )% |  |  | 0    | %  |  |  | 5   | % |  |  | 10   | %
|                                              |  |                                                  |       |    |  |  |       |    |  |  |      |    |  |  |     |   |  |  |      |  
|Corresponding return to common stockholder(1) |  |                                                  | (21.6 | )% |  |  | (12.8 | )% |  |  | (3.9 | )% |  |  | 4.9 | % |  |  | 13.8 | %



|(1) | The hypothetical return to common stockholders is calculated by multiplying our total assets as of March 31, 2015, by the assumed rates of return and subtracting
all interest on our debt and dividends on our mandatorily redeemable preferred stock expected to be paid or declared during the twelve months following March 31, 2015; and then dividing the resulting difference by our total net assets
attributable to Common Stock as of March 31, 2015. Based on $483.5 million in total assets, $118.8 million in debt outstanding at cost, $5.1 million in a secured borrowing, $40.0 million in aggregate liquidation preference of Series A Term
Preferred Stock, $41.4 million in aggregate liquidation preference of Series B Term Preferred Stock and $273.4 million in net assets as of March 31, 2015.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based on an aggregate outstanding indebtedness of $123.9 million at cost as of March 31, 2015, the effective annual interest rate of 4.0% as of that
date, and aggregate liquidation preference of our mandatorily redeemable preferred stock of $81.4 million, our investment portfolio at fair value would have had to produce an annual return of at least 2.3% to cover annual interest payments on the
outstanding debt and dividends on our mandatorily redeemable preferred stock.

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

We anticipate using a combination of equity and long-term and short-term borrowings to
finance our investment activities. As a result, a portion of our income will depend upon the spread between the rate at which we borrow funds and the rate at which we loan these funds. An increase or decrease in interest rates could reduce the
spread between the rate at which we invest and the rate at which we borrow, and thus, adversely affect our profitability, if we have not appropriately hedged against such event. Alternatively, our interest rate hedging activities may limit our
ability to participate in the benefits of lower interest rates with respect to the hedged portfolio.

Ultimately, we expect approximately 90.0% of the
loans in our portfolio to be at variable rates determined on the basis of the LIBOR and approximately 10.0% to be at fixed rates. As of March 31, 2015, based on the total principal balance of debt investments outstanding, our portfolio
consisted of 79.9% of loans at variable rates with floors and 20.1% at fixed rates.

We currently hold one interest rate cap agreement for a notional
amount of $45.0 million. While hedging activities may insulate us against adverse fluctuations in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse
developments resulting from changes in interest rates or any future hedging transactions could have a material adverse effect on our business, financial condition and results of operations. Our ability to receive payments pursuant to an interest
rate cap agreement is linked to the ability of the counter-party to that agreement to make the required payments. To the extent that the counter-party to the agreement is unable to pay pursuant to the terms of the agreement, we may lose the hedging
protection of the interest rate cap agreement.

Also, the fair value of certain of our debt investments is based in part on the current market yields or
interest rates of similar securities. A change in interest rates could have a significant impact on our determination of the fair value of these debt investments. In addition, a change in interest rates could also have an impact on the fair value of
our interest rate cap agreements that could result in the recording of unrealized appreciation or depreciation in future periods. Therefore, adverse developments resulting from changes in interest rates could have a material adverse effect on our
business, financial condition and results of operations. For additional information on interest rate fluctuations, see Managements Discussion and Analysis of Financial Condition and Results of OperationsQuantitative and Qualitative
Disclosures About Market RiskandFinancial Statements and Supplementary Datafor additional information on interest rate cap agreements.



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Risks Related to Our Regulation and Structure

We will be subject to corporate-level tax if we are unable to satisfy Code requirements for RIC qualification.

To maintain our qualification as a RIC, we must meet income source, annual distribution and asset diversification requirements. The annual distribution
requirement is satisfied if we distribute at least 90% of our investment company taxable income to our stockholders on an annual basis. Because we use leverage, we are subject to certain asset coverage ratio requirements under the 1940 Act and
could, under certain circumstances, be restricted from making distributions necessary to qualify as a RIC. Warrants we receive with respect to debt investments will create original issue discount (OID), which we must
recognize as ordinary income over the term of the debt investment. Similarly, PIK interest which is accrued generally over the term of the debt investment but not paid in cash. Both OID and PIK interest will increase the amounts we are required to
distribute to maintain RIC status. Because such OIDs and PIK interest will not produce distributable cash for us at the same time as we are required to make distributions, we will need to use cash from other sources to satisfy such distribution
requirements. Additionally, we must meet asset diversification and income source requirements at the end of each calendar quarter. If we fail to meet these tests, we may need to quickly dispose of certain investments to prevent the loss of RIC
status. Since most of our investments will be illiquid, such dispositions, if even possible, may not be made at prices advantageous to us and, in fact, may result in substantial losses. If we fail to qualify as a RIC as of a calendar quarter or
annually for any reason and become fully subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution, and the actual amount distributed. Such a failure
would have a material adverse effect on us and our common stock. For additional information regarding asset coverage ratio and RIC requirements, see BusinessMaterial U.S. Federal Income Tax ConsiderationsRIC Status.

From time to time, some of our debt investments may include success fees that would generate payments to us if the business is ultimately sold. Because
the satisfaction of these success fees, and the ultimate payment of these fees, is uncertain and highly contingent, we generally only recognize them as income when the payment is received. Success fee amounts are characterized as ordinary income for
tax purposes and, as a result, we are required to distribute such amounts to our stockholders in order to maintain RIC status.

If we do not invest a
sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC under the 1940 Act or be precluded from investing according to our current business strategy.

As a BDC, we may not acquire any assets other than qualifying assets unless, at the time of and after giving effect to such acquisition, at least
70% of our total assets are qualifying assets, as defined in Section 55(a) of the 1940 Act.

We believe that most of the investments that we may
acquire in the future will constitute qualifying assets. However, we may be precluded from investing in what we believe to be attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a
sufficient portion of our assets in qualifying assets, we could violate the 1940 Act provisions applicable to BDCs. As a result of such violation, specific rules under the 1940 Act could prevent us, for example, from making follow-on investments in
existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to come into compliance with the 1940 Act. If we need to dispose of such investments
quickly, it could be difficult to dispose of such investments on favorable terms. We may not be able to find a buyer for such investments and, even if we do find a buyer, we may have to sell the investments at a substantial loss. Any such outcomes
would have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we do not maintain our status as a
BDC, we would be subject to regulation as a registered closed-end investment company under the 1940 Act. As a registered closed-end investment company, we would be subject to substantially more regulatory restrictions under the 1940 Act, which would
significantly decrease our operating flexibility. For additional information regarding qualifying assets, see BusinessRegulation as a BDC  Qualifying Assets.

Changes in laws or regulations governing our operations, or changes in the interpretation thereof, and any failure by us to comply with laws or regulations
governing our operations may adversely affect our business.

We, and our portfolio companies, are subject to regulation by laws at the local, state
and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Accordingly, any change in these laws or regulations, or their interpretation, or any failure by us or our portfolio companies to
comply with these laws or regulations may adversely affect our business. For additional information regarding the regulations to which we are subject, see BusinessMaterial U.S. Federal Income Tax Considerations RIC StatusandBusinessRegulation as a BDC.



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Provisions of the Delaware General Corporation Law and of our certificate of incorporation and bylaws could
restrict a change in control and have an adverse impact on the price of our common stock.

We are subject to provisions of the Delaware General
Corporation Law that, in general, prohibit any business combination with a beneficial owner of 15% or more of our common stock for three years unless the holders acquisition of our stock was either approved in advance by our Board of Directors
or ratified by our Board of Directors and stockholders owning two-thirds of our outstanding stock not owned by the acquiring holder. Although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring
potential acquirers to negotiate with our Board of Directors, they would apply even if the offer may be considered beneficial by some stockholders.

We
have also adopted other measures that may make it difficult for a third party to obtain control of us, including provisions of our certificate of incorporation classifying our Board of Directors in three classes serving staggered three-year terms,
and provisions of our certificate of incorporation authorizing our Board of Directors to induce the issuance of additional shares of our stock. These provisions, as well as other provisions of our certificate of incorporation and bylaws, may delay,
defer, or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.

Risks Related to Our
External Management

We are dependent upon our key management personnel and the key management personnel of the Adviser, particularly David
Gladstone, Terry Lee Brubaker and David Dullum, and on the continued operations of the Adviser, for our future success.

We have no employees. Our
chief executive officer, chief operating officer, chief financial officer and treasurer, chief valuation officer, chief accounting officer, and the employees of the Adviser, do not spend all of their time managing our activities and our investment
portfolio. We are particularly dependent upon David Gladstone, Terry Lee Brubaker and David Dullum for their experience, skills, and networks. Our executive officers and the employees of the Adviser allocate some, and in some cases a material
portion, of their time to businesses and activities that are not related to our business. We have no separate facilities and are completely reliant on the Adviser, which has significant discretion as to the implementation and execution of our
business strategies and risk management practices. We are subject to the risk of discontinuation of the Advisers operations or termination of the Advisory Agreement and the risk that, upon such event, no suitable replacement will be found. We
believe that our success depends to a significant extent upon the Adviser and that discontinuation of its operations or the loss of its key management personnel could have a material adverse effect on our ability to achieve our investment
objectives.

Our success depends on the Advisers ability to attract and retain qualified personnel in a competitive environment.

The Adviser experiences competition in attracting and retaining qualified personnel, particularly investment professionals and senior executives, and we may
be unable to maintain or grow our business if we cannot attract and retain such personnel. The Advisers ability to attract and retain personnel with the requisite credentials, experience and skills depends on several factors including, but not
limited to, its ability to offer competitive wages, benefits and professional growth opportunities. The Adviser competes with investment funds (such as private equity funds and mezzanine funds) and traditional financial services companies for
qualified personnel, many of which have greater resources than us. Searches for qualified personnel may divert managements time from the operation of our business. Strain on the existing personnel resources of the Adviser, in the event
that it is unable to attract experienced investment professionals and senior executives, could have a material adverse effect on our business.

We are
dependent upon the contacts and relationships of the Adviser to provide us with potential investment opportunities.

We depend upon the Adviser to
maintain its relationships with private equity sponsors, placement agents, investment banks, management groups and other financial institutions, and we expect to rely to a significant extent upon these relationships to provide us with potential
investment opportunities. If the Adviser or members of our investment team fail to maintain such relationships, or to develop new relationships with other sources of investment opportunities, we will not be able to grow our investment portfolio. In
addition, individuals with whom the Adviser has relationships are not obligated to provide us with investment opportunities, and we can offer no assurance that these relationships will generate investment opportunities for us in the future. Failure
of the Adviser to maintain such relationships or enter into new relationships that would generate additional investment opportunities, could have a material adverse effect on our business.

The Adviser can resign on 60 days notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our
operations that could adversely affect our financial condition, business and results of operations.



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The Adviser has the right to resign under the Advisory Agreement at any time upon not less than 60 days
written notice, whether we have found a replacement or not. If the Adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on
acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely
to be adversely affected and the market price of our common stock may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single
institution or group of executives having the expertise possessed by the Adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity
with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.

Our incentive fee may induce the Adviser to make certain investments, including speculative investments.

The management compensation structure that has been implemented under the Advisory Agreement may cause the Adviser to invest in high-risk investments or take
other investment risks. In addition to its management fee, the Adviser is entitled under the Advisory Agreement to receive incentive compensation based in part upon our achievement of specified levels of income. In evaluating investments and other
management strategies, the opportunity to earn incentive compensation based on net investment income may lead the Adviser to place undue emphasis on the maximization of net investment income at the expense of other criteria, such as preservation of
capital, maintaining sufficient liquidity, or management of credit risk or market risk, in order to achieve higher incentive compensation. Investments with higher yield potential are generally riskier or more speculative. This could result in
increased risk to the value of our investment portfolio.

We may be obligated to pay the Adviser incentive compensation even if we incur a loss.

The Advisory Agreement entitles the Adviser to incentive compensation for each fiscal quarter in an amount equal to a percentage of the excess of our
net investment income for that quarter (before deducting incentive fee, net operating losses and certain other items) above a threshold return of 1.75% for that quarter. When calculating our incentive fee, our pre-incentive fee net investment income
excludes realized and unrealized losses or depreciation that we may incur in the fiscal quarter, even if such losses or depreciation result in a net loss on our statement of operations for that quarter. Thus, we may be required to pay the Adviser
incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or we incur a net realized or unrealized loss for that quarter. For additional information on incentive compensation under the Advisory Agreement
with the Adviser, see Business  Investment Advisory and Management Agreement.

We may be required to pay the Adviser incentive
compensation on income accrued, but not yet received in cash.

That part of the incentive fee payable by us that relates to our net investment income
is computed and paid on income that may include interest that has been accrued but not yet received in cash, such as debt instruments with PIK interest. If a portfolio company defaults on a loan, it is possible that such accrued interest previously
used in the calculation of the incentive fee will become uncollectible. Consequently, we may make incentive fee payments on income accruals that we may not collect in the future and with respect to which we do not have a clawback right against the
Adviser. During the years ended March 31, 2015, 2014 and 2013, PIK income and any other non-cash income represents less than 1% of total income for the year.

The Advisers failure to identify and invest in securities that meet our investment criteria or perform its responsibilities under the Advisory
Agreement would likely adversely affect our ability for future growth.

Our ability to achieve our investment objectives will depend on our ability to
grow, which in turn will depend on the Advisers ability to identify and invest in securities that meet our investment criteria. Accomplishing this result on a cost-effective basis will be largely a function of the Advisers structuring of
the investment process, its ability to provide competent and efficient services to us, and our access to financing on acceptable terms. The senior management team of the Adviser has substantial responsibilities under the Advisory Agreement. In order
to grow, the Adviser will need to hire, train, supervise, and manage new employees successfully. Any failure to manage our future growth effectively would likely have a material adverse effect on our business, financial condition, and results of
operations and cash flows.

There are significant potential conflicts of interest, including with the Adviser, which could impact our investment
returns.

Our executive officers and directors, and the officers and directors of the Adviser, serve or may serve as officers, directors, or
principals of entities that operate in the same or a related line of business as we do or of investment funds managed by our affiliates. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in
the best interests of us or our stockholders. For example, Mr. Gladstone, our chairman and chief executive officer, is the chairman of the board and chief executive officer of the Adviser and Administrator, Gladstone Investment, Gladstone
Commercial and Gladstone Land. In addition,



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Mr. Brubaker, our vice chairman and chief operating officer, is the vice chairman and chief operating officer of the Adviser and Administrator, Gladstone Capital, Gladstone Commercial and
Gladstone Land. Mr. Dullum, our president and a director, is an executive managing director of the Adviser. Moreover, the Adviser may establish or sponsor other investment vehicles which from time to time may have potentially overlapping
investment objectives with ours and accordingly may invest in, whether principally or secondarily, asset classes we target. While the Adviser generally has broad authority to make investments on behalf of the investment vehicles that it advises, the
Adviser has adopted investment allocation procedures to address these potential conflicts and intends to direct investment opportunities to the Gladstone affiliate with the investment strategy that most closely fits the investment opportunity.
Nevertheless, the management of the Adviser may face conflicts in the allocation of investment opportunities to other entities managed by the Adviser. As a result, it is possible that we may not be given the opportunity to participate in certain
investments made by other funds managed by the Adviser. Our Board of Directors approved a revision of our investment objectives and strategies that became effective on January 1, 2013, which may enhance the potential for conflicts in the
allocation of investment opportunities to us and other entities managed by the Adviser.

In certain circumstances, we may make investments in a portfolio
company in which one of our affiliates has or will have an investment, subject to satisfaction of any regulatory restrictions and, where required, the prior approval of our Board of Directors. As of March 31, 2015, our Board of Directors has
approved the following types of co-investment transactions not under the July 2012 co-invest exemption order we received from the SEC:



| |  |  | Our affiliate, Gladstone Commercial, may, under certain circumstances, lease property to portfolio companies that we do not control. We may pursue such transactions only if (i) the portfolio company is not
controlled by us or any of our affiliates, (ii) the portfolio company satisfies the tenant underwriting criteria of Gladstone Commercial, and (iii) the transaction is approved by a majority of our independent directors and a majority of
the independent directors of Gladstone Commercial. We expect that any such negotiations between Gladstone Commercial and our portfolio companies would result in lease terms consistent with the terms that the portfolio companies would be likely to
receive were they not portfolio companies of ours.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may invest simultaneously with our affiliate Gladstone Capital in senior loans in the broadly syndicated market whereby neither we nor any affiliate has the ability to dictate the terms of the loans.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Additionally, pursuant to an exemptive order granted by the SEC in July 2012, under certain circumstances, we may co-invest with Gladstone Capital and any future BDC or closed-end management investment company that is
advised by the Adviser (or sub-advised by the Adviser if it controls the fund) or any combination of the foregoing subject to the conditions included therein.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Certain of our officers, who are also officers of the Adviser, may from time to time serve as directors of certain of our portfolio companies. If an officer
serves in such capacity with one of our portfolio companies, such officer will owe fiduciary duties to stockholders of the portfolio company, which duties may from time to time conflict with the interests of our stockholders.

In the course of our investing activities, we will pay management and incentive fees to the Adviser and will reimburse the Administrator for certain expenses
it incurs. As a result, investors in our common stock will invest on a gross basis and receive distributions on a net basis after expenses, resulting in, among other things, a lower rate of return than one might achieve
through our investors themselves making direct investments. As a result of this arrangement, there may be times when the management team of the Adviser has interests that differ from those of our stockholders, giving rise to a conflict. In addition,
as a BDC, we make available significant managerial assistance to our portfolio companies and provide other services to such portfolio companies. While neither we nor the Adviser currently receives fees in connection with managerial assistance, the
Adviser and Gladstone Securities have, at various times, provided other services to certain of our portfolio companies and received fees for these other services.

Our business model is dependent upon developing and sustaining strong referral relationships with investment bankers, business brokers and other
intermediaries and any change in our referral relationships may impact our business plan.

We are dependent upon informal relationships with
investment bankers, business brokers and traditional lending institutions to provide us with deal flow. If we fail to maintain our relationship with such funds or institutions, or if we fail to establish strong referral relationships with other
funds, we will not be able to grow our portfolio of investments and fully execute our business plan.



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The Adviser is not obligated to provide credits of the base management fee or incentive fees, which could
negatively impact our earnings and our ability to maintain our current level of distributions to our stockholders.

The Advisory Agreement provides
for a base management fee, based on our gross assets, and an incentive fee, that is based on our income and capital gains. Our Board of Directors has accepted in the past and may accept in the future voluntary, unconditional and irrevocable credits
to reduce the annual 2.0% base management fee or the incentive fee, on a quarterly or annual basis. Any fees credited may not be recouped by the Adviser in the future. However, the Adviser is not required to issue these or other credits of fees
under the Advisory Agreement. If the Adviser does not issue these credits in the future, it could negatively impact our earnings and may compromise our ability to maintain our current level of distributions to our stockholders, which could have a
material adverse impact on our common stock price.

Our base management fee may induce the Adviser to incur leverage.

The fact that our base management fee is payable based upon our gross assets, which would include any investments made with proceeds of borrowings, may
encourage the Adviser to use leverage to make additional investments. Under certain circumstances, the use of increased leverage may increase the likelihood of default, which would disfavor holders of our securities. Given the subjective nature of
the investment decisions made by the Adviser on our behalf, we will not be able to monitor this potential conflict of interest.

Risks Related to an
Investment in Our Securities

We may experience fluctuations in our quarterly and annual operating results.

We may experience fluctuations in our quarterly and annual operating results due to a number of factors, including, among others, variations in our investment
income, the interest rates payable on the debt securities we acquire, the default rates on such securities, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, placing and removing
investments on non-accrual status, the degree to which we encounter competition in our markets, the ability to sell investments at attractive terms, the ability to fund and close suitable investments, the level of our expenses, the degree to which
we encounter competition in our markets, and general economic conditions, including the impacts of inflation. The majority of our portfolio companies are in industries that are directly impacted by inflation, such as manufacturing and consumer goods
and services. Our portfolio companies may not be able to pass on to customers increases in their costs of production which could greatly affect their operating results, impacting their ability to repay our loans. In addition, any projected future
decreases in our portfolio companies operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized and unrealized losses and
therefore reduce our net assets resulting from operations. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

There is a risk that you may not receive distributions or that distributions may not grow over time.

Our current intention is to distribute at least 90% of our investment company taxable income to our common stockholders on a quarterly basis by paying monthly
common distributions. We expect to retain some or all net realized long-term capital gains by first offsetting them with realized capital losses, and, secondly, through a deemed distribution to supplement our equity capital and support
the growth of our portfolio, although our Board of Directors may determine in certain cases to distribute these gains to our common stockholders. In addition, our Credit Facility restricts the amount of distributions we are permitted to make
annually. We cannot assure you that we will achieve investment results or maintain a tax status that will allow or require any specified level of cash distributions.

Investing in our securities may involve an above average degree of risk.

The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and a higher
risk of volatility or loss of principal. Our investments in portfolio companies may be highly speculative, and therefore, an investment in our common stock may not be suitable for someone with lower risk tolerance.

Distributions to our common stockholders have included and may in the future include a return of capital.

Our Board of Directors declares monthly common distributions each quarter based on the respective quarters estimates of investment company taxable
income for each fiscal year, which may differ, and in the past have differed, from actual results. Because our common distributions are based on estimates of investment company taxable income that may differ from actual results, future common
distributions payable to our common stockholders may also include a return of capital. Moreover, to the extent that we distribute amounts that exceed our accumulated earnings and profits, these distributions constitute a return of capital. A return
of capital represents a return of a common stockholders original investment in common shares of our stock and should not be confused with a distribution from earnings and profits. Although return of capital distributions may not be taxable,
such distributions may increase an investors tax liability for capital gains upon the sale of our common stock by reducing the investors tax basis for such common stock. Such returns of capital reduce our asset base and also adversely
impact our ability to raise debt capital as a result of the leverage restrictions under the 1940 Act, which could have a material adverse impact on our ability to make new investments.



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The market price of our shares may fluctuate significantly.

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

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



| |  |  | general economic trends and other external factors, such as inflation, oil and gas prices, GDP growth;
| | - |  | ------------------------------------------------------------------------------------------------------



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



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



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



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



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



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



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



| |  |  | changes and perceived projected changes in prevailing interest rates;
| | - |  | ---------------------------------------------------------------------



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



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



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



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



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



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



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

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

Common shares of closed-end investment companies frequently trade at a discount from NAV.

Shares of closed-end investment companies frequently trade at a discount from NAV per common share. Since our inception, our common stock has at times traded
above NAV, and at times below NAV. During the past year, our common stock has often, and at times significantly, traded below NAV. Subsequent to March 31, 2015, our common stock has traded at discounts of up to 19.9% of our NAV per share, which
was $9.18 as of March 31, 2015. This characteristic of shares of closed-end investment companies is separate and distinct from the risk that our NAV per share will decline. As with any stock, the price of our common shares will fluctuate with
market conditions and other factors. If common shares are sold, the price received may be more or less than the original investment. Whether investors will realize gains or losses upon the sale of our shares will not depend directly upon our NAV,
but will depend upon the market price of the shares at the time of sale. Since the market price of our common shares will be affected by such factors as the relative demand for and supply of the shares in the market, general market and economic
conditions and other factors



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beyond our control, we cannot predict whether the common shares will trade at, below or above our NAV. Under the 1940 Act, we are generally not able to issue additional shares of our common stock
at a price below NAV per share to purchasers other than our existing common stockholders through a rights offering without first obtaining the approval of our stockholders and our independent directors. Additionally, at times when our common stock
is trading below its NAV per share, our dividend yield may exceed the weighted average returns that we would expect to realize on new investments that would be made with the proceeds from the sale of such stock, making it unlikely that we would
determine to issue additional common shares in such circumstances. Thus, for as long as our common stock may trade below NAV we will be subject to significant constraints on our ability to raise capital through the issuance of common stock.
Additionally, an extended period of time in which we are unable to raise capital may restrict our ability to grow and adversely impact our ability to increase or maintain our distributions.

Common stockholders may incur dilution if we sell shares of our common stock in one or more offerings at prices below the then current NAV per share.

At our most recent annual meeting of stockholders on August 7, 2014, our stockholders approved a proposal designed to allow us to sell shares of
our common stock below the then current NAV per share in one or more offerings for a period of one year from the date of such approval, subject to certain conditions (including, but not limited to, that the number of common shares issued and sold
pursuant to such authority does not exceed 25% of our then outstanding common stock immediately prior to each such sale).

We exercised this right with
Board of Director approval in March 2015, when we completed a public offering of 3.3 million shares of our common stock at a public offering price of $7.40 per share, which was below our then current NAV of $8.55 per share. Gross proceeds
totaled approximately $24.4 million and net proceeds, after deducting underwriting discounts and offering expenses borne by us, were approximately $23.0 million. The net dilutive effect of the issuance of common stock, net of expenses, below NAV was
$0.22 per share of common stock.

We previously exercised this right with our Board of Directors approval in October 2012, when we completed a
public offering of 4.4 million shares of our common stock at a public offering price of $7.50 per share, which was below our then current NAV of $8.65 per share. Gross proceeds totaled approximately $33.0 million and net proceeds, after
deducting underwriting discounts and offering expenses borne by us, were approximately $31.0 million. The net dilutive effect of the issuance of common stock, net of expenses, below NAV was $0.31 per share of common stock.

At the upcoming annual stockholders meeting scheduled for August 6, 2015, we expect that our stockholders will again be asked to vote in favor of
renewing this proposal for another year. During the past year, our common stock has traded consistently, and at times significantly, below NAV. Any decision to sell shares of our common stock below the then current NAV per share of our common stock
would be subject to the determination by our Board of Directors that such issuance is in our and our stockholders best interests.

If we were to
sell shares of our common stock below NAV per share, such sales would result in an immediate dilution to the NAV per share. This dilution would occur as a result of the sale of shares at a price below the then current NAV per share of our common
stock and a proportionately greater decrease in a common stockholders interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. The greater the difference between the sale price
and the NAV per share at the time of the offering, the more significant the dilutive impact would be. Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive
effect, if any, cannot be currently predicted. However, if, for example, we sold an additional 10% of our common stock at a 5% discount from NAV, an existing common stockholder who did not participate in that offering for its proportionate interest
would suffer NAV dilution of up to 0.5% or $5 per $1,000 of NAV.

If we fail to pay dividends on our mandatorily redeemable preferred stock for two
years, the holders of our preferred stock will be entitled to elect a majority of our directors.

The terms of our three series of mandatorily
redeemable preferred stock provide for annual dividends of $1.78125, $1.68750, and $1.62500 per outstanding share of our Series A Term Preferred Stock, Series B Term Preferred Stock and Series C Term Preferred Stock, respectively. In accordance with
the terms of each of our three series of mandatorily redeemable term preferred stock, if dividends thereon are unpaid in an amount equal to at least two years of dividends, the holders of such series of stock will be entitled to elect a majority of
our Board of Directors.

Other Risks

Market volatility and the condition of the debt and equity capital markets could negatively impact our financial condition and stock price.



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Beginning in the third quarter of 2007, global credit and other financial markets began to suffer substantial
stress, volatility, illiquidity and disruption. These forces reached extraordinary levels in late 2008, resulting in the bankruptcy of, the acquisition of, or government intervention in the affairs of several major domestic and international
financial institutions. In particular, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest.
We believe that such value declines were exacerbated by widespread forced liquidations as leveraged holders of financial assets, faced with declining prices, were compelled to sell to meet margin requirements and maintain compliance with applicable
capital standards. Such forced liquidations also impaired or eliminated many investors and investment vehicles, leading to a decline in the supply of capital for investment and depressed pricing levels for many assets. These events significantly
diminished overall confidence in the debt and equity markets, engendered unprecedented declines in the values of certain assets, and caused extreme economic uncertainty. If market conditions similar to these were to recur, our assets could
experience a similar decline in value, among other negative impacts we could suffer.

Since March 2009, the global credit and other financial market
conditions have improved as stability has increased throughout the international financial system and, specifically, in the U.S. economy in which we operate, and many public market indices have experienced positive total returns. However, the
macroeconomic environment and recovery from the downturn has been challenging and inconsistent. Instability in the credit markets, the impact of periodic uncertainty regarding the U.S. federal budget, tapering of bond purchases by the U.S. Federal
Reserve and debt ceiling, the instability in the geopolitical environment in many parts of the world, sovereign debt conditions in Europe and other disruptions may continue to put pressure on economic conditions in the U.S. and abroad, all of which
can have an adverse effect on our business.

Economic recessions or downturns could impair our portfolio companies and harm our operating results.

Many of our portfolio companies may be susceptible to economic downturns or recessions and may be unable to repay our loans during these periods.
Therefore, during these periods our non-performing assets may increase and the value of these assets may decrease. Adverse economic conditions may also decrease the value of collateral securing some of our loans and the value of our equity
investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in investment income, net investment income and assets. Unfavorable economic conditions also could increase our funding costs, limit our
access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results. We experienced to some extent such effects as a result of the
economic downturn that occurred from 2008 through 2009 and may experience such effects again in any future downturn or recession.

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

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

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

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



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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We do not own any real estate or other physical properties material to our operations. The Adviser is the current leaseholder of all properties in
which we operate. We occupy these premises pursuant to our Advisory and Administration Agreements with the Adviser and Administrator, respectively. The Adviser and Administrator are both headquartered in McLean, Virginia, a suburb of Washington,
D.C., and the Adviser also has offices in several other states.

ITEM 3. LEGAL PROCEEDINGS

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. See Risk FactorsPortfolio company-related litigation could result in costs, including defense costs or
damages, and the diversion of management time and resources. 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.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.



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PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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



|        |  |              |            |  |  |      |      |              |     |   |                                      |  |  |                          |      |  |                                   |  |      |   |  |  |      |   |  |   |      | 
|------- |  | ------------ | ---------- |  |  | ---- | ---- | ------------ | --- | - | ------------------------------------ |  |  | ------------------------ | ---- |  | --------------------------------- |  | ---- | - |  |  | ---- | - |  | - | ---- | 
|        |  | QuarterEnded |            |  |  |      |      | Sales Prices |     |   | Discount /(Premium) ofHigh to NAV(B) |  |  | Discount ofLow to NAV(B) |      |  | DeclaredCommon StockDistributions | 
|        |  |              | NAV(A)     |  |  | High |      |              | Low |   |                                      |  | 
|FY 2015 |  |              | 6/30/2014  |  |  | $    | 8.57 |              |     | $ | 8.39                                 |  |  | $                        | 7.23 |  |                                   |  | 2.1  | % |  |  | 15.6 | % |  | $ | 0.18 | 
|        |  |              | 9/30/2014  |  |  |      | 8.49 |              |     |   | 7.77                                 |  |  |                          | 7.08 |  |                                   |  | 8.5  |   |  |  | 16.6 |   |  |   | 0.18 | 
|        |  |              | 12/31/2014 |  |  |      | 8.55 |              |     |   | 7.50                                 |  |  |                          | 6.72 |  |                                   |  | 12.3 |   |  |  | 21.4 |   |  |   | 0.23 | 
|        |  |              | 3/31/2015  |  |  |      | 9.18 |              |     |   | 8.04                                 |  |  |                          | 6.98 |  |                                   |  | 12.4 |   |  |  | 24.0 |   |  |   | 0.18 | 
|FY 2014 |  |              | 6/30/2013  |  |  | $    | 8.70 |              |     | $ | 7.52                                 |  |  | $                        | 7.02 |  |                                   |  | 13.6 | % |  |  | 19.3 | % |  | $ | 0.15 | 
|        |  |              | 9/30/2013  |  |  |      | 9.12 |              |     |   | 7.57                                 |  |  |                          | 6.80 |  |                                   |  | 17.0 |   |  |  | 25.4 |   |  |   | 0.15 | 
|        |  |              | 12/31/2013 |  |  |      | 8.49 |              |     |   | 8.06                                 |  |  |                          | 6.80 |  |                                   |  | 5.1  |   |  |  | 19.9 |   |  |   | 0.23 | 
|        |  |              | 3/31/2014  |  |  |      | 8.34 |              |     |   | 8.50                                 |  |  |                          | 7.35 |  |                                   |  | (1.9 | ) |  |  | 11.9 |   |  |   | 0.18 | 



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



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

As of May 19, 2015, there
were 22 record owners of our common stock. This number does not include stockholders for whom shares are held in street name.

Distributions

We currently intend to distribute in the
form of cash distributions a minimum of 90% of our investment company taxable income, if any, on a quarterly basis to our stockholders in the form of monthly distributions. We intend to retain some or all of our long-term capital gains, if any, but
to designate the retained amount as a deemed distribution, after giving effect to any prior year realized losses that are carried forward, to supplement our equity capital and support the growth of our portfolio. However, in certain cases our
Board of Directors may choose to distribute our net realized long-term capital gains by paying a one-time, special common distribution.

Our Credit
Facility also generally seeks to restrict distributions on our common stock to 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.

Recent Sales of Unregistered Securities and
Purchases of Equity Securities

We did not sell any unregistered shares of stock, nor repurchase any of our shares of stock during the fiscal year
ended March 31, 2015.



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ITEM 6. SELECTED FINANCIAL DATA

The following consolidated selected financial data as of and for the fiscal years ended March 31, 2015, 2014, 2013, 2012, and 2011, are derived from our
audited accompanying Consolidated Financial Statements. The other data included in the second table below is unaudited. The data should be read in conjunction with our audited accompanying Consolidated Financial Statements and notes
thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report.

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SELECTED FINANCIAL AND OTHER DATA

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)



|                                                                                                      |  |                      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|----------------------------------------------------------------------------------------------------- |  | -------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                                                      |  | Year Ended March 31, |           
|                                                                                                      |  | 2015                 |            |   | 2014 |   |            | 2013 |  |   | 2012       |   |  | 2011 |           
|Statement of Operations Data:                                                                         |  |                      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total investment income                                                                               |  | $                    | 41,643     |   |      | $ | 36,264     |      |  | $ | 30,538     |   |  | $    | 21,242     |   |  | $ | 26,064     |  
|Total expenses net of credits from Adviser                                                            |  |                      | 21,746     |   |      |   | 16,957     |      |  |   | 14,050     |   |  |      | 7,499      |   |  |   | 9,893      |  
|                                                                                                      |  |                      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net investment income                                                                                 |  |                      | 19,897     |   |      |   | 19,307     |      |  |   | 16,488     |   |  |      | 13,743     |   |  |   | 16,171     |  
|                                                                                                      |  |                      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net gain (loss) on investments                                                                        |  |                      | 30,317     |   |      |   | (20,636    | )    |  |   | 791        |   |  |      | 8,223      |   |  |   | 268        |  
|                                                                                                      |  |                      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net increase (decrease) in net assets resulting from operations                                       |  | $                    | 50,214     |   |      | $ | (1,329     | )    |  | $ | 17,279     |   |  | $    | 21,966     |   |  | $ | 16,439     |  
|                                                                                                      |  |                      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Per Common Share Data:                                                                                |  |                      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net increase (decrease) in net assets resulting from operations per common sharebasic and diluted(A) |  | $                    | 1.88       |   |      | $ | (0.05      | )    |  | $ | 0.71       |   |  | $    | 0.99       |   |  | $ | 0.74       |  
|Net investment income before net gain (loss) on investments per common sharebasic and diluted(A)     |  |                      | 0.75       |   |      |   | 0.73       |      |  |   | 0.68       |   |  |      | 0.62       |   |  |   | 0.73       |  
|Cash distributions declared per common share                                                          |  |                      | 0.77       |   |      |   | 0.71       |      |  |   | 0.60       |   |  |      | 0.61       |   |  |   | 0.48       |  
|Statement of Assets and Liabilities Data:                                                             |  |                      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total assets                                                                                          |  | $                    | 483,521    |   |      | $ | 330,694    |      |  | $ | 379,803    |   |  | $    | 325,297    |   |  | $ | 241,109    |  
|Net assets                                                                                            |  |                      | 273,429    |   |      |   | 220,837    |      |  |   | 240,963    |   |  |      | 198,829    |   |  |   | 198,829    |  
|Net asset value per common share                                                                      |  |                      | 9.18       |   |      |   | 8.34       |      |  |   | 9.10       |   |  |      | 9.00       |   |  |   | 9.00       |  
|Common shares outstanding                                                                             |  |                      | 29,775,958 |   |      |   | 26,475,958 |      |  |   | 26,475,958 |   |  |      | 22,080,133 |   |  |   | 22,080,133 |  
|Weighted common shares outstandingbasic and diluted                                                  |  |                      | 26,665,821 |   |      |   | 26,475,958 |      |  |   | 24,189,148 |   |  |      | 22,080,133 |   |  |   | 22,080,133 |  
|Senior Securities Data(B):                                                                            |  |                      |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total borrowings, at cost(C)                                                                          |  | $                    | 123,896    |   |      | $ | 66,250     |      |  | $ | 94,016     |   |  | $    | 76,005     |   |  | $ | 40,000     |  
|Mandatorily redeemable preferred stock                                                                |  |                      | 81,400     |   |      |   | 40,000     |      |  |   | 40,000     |   |  |      | 40,000     |   |  |   |           |  
|Asset coverage ratio(B)                                                                               |  |                      | 230        | % |      |   | 298        | %    |  |   | 272        | % |  |      | 268        | % |  |   | 534        | %
|Asset coverage per unit(D)                                                                            |  | $                    | 2,301      |   |      | $ | 2,978      |      |  | $ | 2,725      |   |  | $    | 2,676      |   |  | $ | 5,344      |  



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

|(B) | As a BDC, we are generally required to maintain an asset coverage ratio (as defined in Section 18(h) of the 1940 Act) of at least 200% on our Senior Securities. Our mandatorily redeemable preferred stock is a
Senior Security that is stock.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Includes borrowings under our Credit Facility, other secured borrowings, and short-term loans, as applicable.
|--- | -------------------------------------------------------------------------------------------------------------

|(D) | Asset coverage per unit is the asset coverage ratio expressed in terms of dollar amounts per one thousand dollars of indebtedness.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



|                                                     |  |                      |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|---------------------------------------------------- |  | -------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                     |  | Year Ended March 31, |        
|                                                     |  | 2015                 |         |   | 2014 |   |         | 2013 |  |   | 2012   |   |  | 2011 |       
|Other Unaudited Data:                                |  |                      |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Number of portfolio companies                        |  |                      | 34      |   |      |   | 29      |      |  |   | 21     |   |  |      | 17     |   |  |   | 17     |  
|Average size of portfolio company investment at cost |  | $                    | 14,861  |   |      | $ | 13,225  |      |  | $ | 15,544 |   |  | $    | 15,670 |   |  | $ | 11,600 |  
|Principal amount of new investments                  |  |                      | 108,197 |   |      |   | 132,291 |      |  |   | 87,607 |   |  |      | 91,298 |   |  |   | 43,634 |  
|Proceeds from loan repayments and investments sold   |  |                      | 11,259  |   |      |   | 83,415  |      |  |   | 28,424 |   |  |      | 27,185 |   |  |   | 97,491 |  
|Weighted average yield on investments(A)             |  |                      | 12.60   | % |      |   | 12.61   | %    |  |   | 12.51  | % |  |      | 12.32  | % |  |   | 11.36  | %
|Total return(B)                                      |  |                      | 11.96   |   |      |   | 24.26   |      |  |   | 4.73   |   |  |      | 5.58   |   |  |   | 38.56  |  



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

|(B) | Total return equals the change in the ending market value of our common stock from the beginning of the fiscal year, taking into account common dividends reinvested in accordance with the terms of our dividend
reinvestment plan. Total return does not take into account common distributions that may be characterized as a return of capital. For further information on the estimated character of our distributions to common stockholders, please refer to Note
9Distributions to Common Stockholders elsewhere in this Annual Report on Form 10-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following analysis of our financial condition and results of operations should be read in conjunction with our
accompanyingConsolidated Financial Statementsand the notes thereto contained elsewhere in this Annual Report on Form 10-K. Historical financial condition and results of operations and percentage relationships among any
amounts in the financial statements are not necessarily indicative of financial condition, results of operations or percentage relationships for any future periods. Except per share amounts, dollar amounts in the tables included herein are in
thousands unless otherwise indicated.

OVERVIEW

General

We were incorporated under the General
Corporation Laws of the State of Delaware on February 18, 2005. 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). In order to continue to qualify as a RIC for federal income tax purposes and obtain favorable RIC tax treatment, we must meet certain requirements, including certain minimum distribution requirements.

We were established for the purpose of investing in debt and equity securities of established private businesses operating in the United States
(U.S.). Our investment objectives are to: (1) achieve and grow current income by investing in debt securities of established businesses that we believe will provide stable earnings and cash flow to pay expenses, make principal and
interest payments on our outstanding indebtedness and make distributions to stockholders that grow over time; and (2) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of
established businesses that we believe can grow over time to permit us to sell our equity investments for capital gains. To achieve our objectives, our investment strategy is to invest in several categories of debt and equity securities, with each
investment generally ranging from $5 million to $30 million, although investment size may vary, depending upon our total assets or available capital at the time of investment. We seek to avoid investments in high-risk, early stage enterprises. We
expect that our investment portfolio over time will consist of approximately 75% in debt securities and 25% in equity securities, at cost. As of March 31, 2015, our investment portfolio was made up of 73% in debt securities and 27% in equity
securities, at cost.

We focus on investing in small and medium-sized private businesses in the United States (U.S.) that meet certain
criteria, including, but not limited to, the following: the sustainability of the business free cash flow and its ability to grow it over time, adequate assets for loan collateral, experienced management teams with a significant ownership
interest in the borrower, reasonable capitalization of the borrower, including an ample equity contribution or cushion based on prevailing enterprise valuation multiples, and 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 borrower, a public offering of the borrowers stock or by exercising our right to require the borrower to repurchase
our warrants, though there can be no assurance that we will always have these rights. We lend to borrowers that need funds for growth capital or to finance acquisitions or recapitalize or refinance their existing debt facilities. We seek to avoid
investing in high-risk, early-stage enterprises. We invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity. If we are participating in an investment with one or more co-investors, our
investment is likely to be smaller than if we were investing alone.

In July 2012, the Securities and Exchange Commission (SEC) granted us an
exemptive order that expanded our ability to co-invest with certain of our affiliates under certain circumstances and any future business development company or closed-end management investment company that is advised (or sub-advised if it controls
the fund) by our external investment adviser, or any combination of the foregoing, subject to the conditions in the SECs order. We believe this ability to co-invest has enhanced and will continue to enhance our ability to further our
investment objectives and strategies.

In general, our investments in debt securities have a term of no more than seven years, accrue interest at variable
rates (based on the one-month London Interbank Offered Rate (LIBOR)) and, to a lesser extent, at fixed rates. We seek debt instruments that pay interest monthly or, at a minimum, quarterly, and which may include a yield enhancement such
as a success fee or deferred interest provision and are primarily interest only with all principal and any accrued but unpaid interest due at maturity. Generally, success fees accrue at a set rate and are contractually due upon a change of control
of the business. Some debt securities have deferred interest whereby some portion of the interest payment is added to the principal balance so that the interest is paid, together with the principal, at maturity. This form of deferred interest is
often called PIK interest.



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Typically, our investments in equity securities take the form of common stock, preferred stock, limited liability
company interests, or warrants or options to purchase the foregoing. Often, these equity investments occur in connection with our original investment, buyouts and recapitalizations of a business, or refinancing existing debt.

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

Our shares of common stock,
7.125% Series A Cumulative Term Preferred Stock (Series A Term Preferred Stock), 6.75% Series B Cumulative Term Preferred Stock (Series B Term Preferred Stock), and 6.50% Series C Cumulative Term Preferred Stock (Series
C Term Preferred Stock) are traded on the NASDAQ Global Select Market (NASDAQ) under the trading symbols GAIN, GAINP, GAINO, and GAINN, respectively.

Business

Portfolio Activity

While conditions remain challenging, we are seeing many new investment opportunities consistent with our investment strategy of providing a combination of debt
and equity in support of management and sponsor-led buyouts of small and medium-sized companies in the U.S. For the fiscal year ended March 31, 2015, we invested a total of $108.2 million in six new deals, resulting in a net expansion in our
overall portfolio to 34 portfolio companies and an increase year over year of 28.2% in our portfolio at cost. These new investments, along with our capital raising efforts discussed below, have allowed us to invest $419.0 million in 25 new debt and
equity deals since October 2010. For the fiscal year ended March 31, 2015, our new investments consisted of approximately 78.3% senior and subordinated secured term loans and 21.7% equity investments, based on the originating principal
balances, respectively.

Generally, the majority of our debt securities in our portfolio, have a success fee component, which enhances the yield on our
debt investments. Unlike PIK income, we generally do not recognize success fees as income until they are received in cash. Due to their contingent nature, there are no guarantees that we will be able to collect any or all of these success fees or
know the timing of such collections. As a result, as of March 31, 2015, we had unrecognized success fees of $24.3 million, or $0.82 per common share. Consistent with accounting principles generally accepted in the U.S. (GAAP), we
generally have not recognized our success fee receivable and related income in our accompanying Consolidated Financial Statements.

The improved
investing environment has presented us with an opportunity to realize gains and other income from four management-supported buyout liquidity events since June 2010, and in the aggregate, these four liquidity events have generated $54.4 million in
realized gains and $13.1 million in other income, for a total increase to our net assets of $67.5 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. With the four liquidity events that resulted in realized gains since June 2010, we have nearly overcome our cumulative realized losses
since inception that were primarily incurred during the recession and in connection with the sale of performing loans at a realized loss to pay off a former lender. These successful exits, in part, enabled us to increase the monthly distribution
50.0% since March 2011 and allowed us to declare and pay a special distribution of $0.03 per common share in fiscal year 2012, $0.05 per common share in November 2013, and $0.05 per common share in December 2014.



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Capital Raising Efforts

Despite the challenges that have existed in the economy for the past several years, we have been able to meet our capital needs through extensions and
increases to our revolving line of credit and by accessing the capital markets in the form of public offerings of stock. We have successfully extended our Credit Facilitys revolving period multiple times, most recently to June 2017, and
increased the commitment from $60.0 million to $185.0 million (with a total commitment of $250.0 million through additional commitments of new or existing lenders). Additionally, we issued approximately 1.7 million shares of our Series B Term
Preferred Stock for gross proceeds of $41.4 million in November 2014, approximately 3.8 million shares of common stock for gross proceeds of $28.1 million in March and April 2015, and approximately 1.6 million shares of our Series C Term
Preferred Stock for gross proceeds of $40.3 million in May 2015. Refer to 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 term preferred stock and Liquidity and Capital Resources  Revolving Credit Facility for further discussion of our Credit Facility.

Although we were able to access the capital markets during 2014 and 2015, 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 equity. On May 19, 2015, the closing market price of our common stock was $7.54, which represented a 17.9% discount to our March 31, 2015 net asset value
(NAV) per share of $9.18. When our common stock trades below NAV, our ability to issue equity is constrained by provisions of the 1940 Act, which generally prohibit 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
2014 Annual Meeting of Stockholders held on August 7, 2014, 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 (our Board of
Directors) makes certain determinations prior to any such sale. This August 2014 stockholder authorization is in effect for one year from the date of stockholder approval. With our Board of Directors subsequent approval, we issued shares
of our common stock in March and April 2015 at a price per share below the then current NAV per share. We sought and obtained stockholder approval concerning a similar proposal at the Annual Meeting of Stockholders held in August 2012, and with our
Board of Directors subsequent approval, we issued shares of our common stock in October and November 2012 at a price per share below the then current NAV per share. The resulting proceeds, in part, have allowed us to grow the portfolio by
making new investments, generate additional income through these new investments, provide us additional equity capital to help ensure continued compliance with regulatory tests and 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.

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 an asset coverage ratio (as defined in Section 18(h) of
the 1940 Act), of at least 200% on our senior securities representing indebtedness and our senior securities that are stock (collectively the Senior Securities). As of March 31, 2015, our asset coverage ratio was 229.9%.

Investment Highlights

For the fiscal year ended
March 31, 2015, we disbursed $108.2 million in new debt and equity investments and extended $24.7 million of investments to existing portfolio companies through revolver draws or additions to term notes. From our initial public offering in
June 2005 through March 31, 2015, we have made 237 investments in 113 companies for a total of approximately $1.1 billion, before giving effect to principal repayments on investments and divestitures.

Investment Activity

During the fiscal year ended
March 31, 2015, the following significant transactions occurred:



| |  |  | In May 2014, NDLI, Inc. (NDLI), one of our portfolio companies, completed the purchase of certain of Noble Logistics, Inc.s assets, one of our other portfolio companies, out of bankruptcy.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | In August 2014, we made a $1.8 million equity investment in Roanoke Industries Corp. (Roanoke), formerly known as Tread Real Estate Corp., which purchased the building owned by another one of our portfolio
companies, Tread Corporation (Tread). This building has subsequently been leased back to Tread.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In September 2014, we invested $20.2 million in Cambridge Sound Management, Inc. (Cambridge) through a combination of secured debt and equity. Cambridge, based in Waltham, Massachusetts, is the developer of
sound systems and solutions.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2014, we invested $24.4 million in Old World through a combination of secured debt and equity. Old World, headquartered in Spokane, Washington, is a designer and distributor of an extensive collection of
blown glass Christmas ornaments, table top figurines, vintage-style light covers and nostalgic greeting cards into the independent gift channel.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2014, we invested $19.6 million in B+T Group Acquisition Inc. (B+T) through a combination of secured debt and equity. B+T, headquartered in Tulsa, Oklahoma, is a full-service provider of
structural engineering, construction, and technical services to the wireless tower industry for tower upgrades and modifications. Gladstone Capital also participated as a co-investor by providing $8.4 million of debt and equity financing at the same
price and terms as our investment.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2014, B-Dry, LLC (B-Dry) was restructured, resulting in $2.0 million of secured debt being converted into preferred equity.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March 2015, we invested $10.8 million in Logo Sportswear, Inc. (Logo) through a combination of secured debt and equity. Logo, headquartered in Cheshire, Connecticut, is an online provider of
user-customized uniforms and apparel for teams, leagues, schools, businesses and organizations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March 2015, we invested $32.0 million in Counsel Press, Inc. (Counsel Press) through a combination of secured debt and equity. Counsel Press, headquartered in New York, New York, provides expert
assistance in preparing, filing, and serving appeals in state and federal appellate courts nationwide and several international tribunals.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent Developments

Registration Statement

On June 3, 2014, we filed Post-Effective Amendment No. 3 to the registration statement on Form N-2 (File No. 333-181879), and
subsequently filed a Post-Effective Amendment No. 4 to the registration statement on September 2, 2014, which the SEC declared effective on September 4, 2014. 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 or preferred stock, including through a combined offering of two or
more of such securities. We currently have the ability to issue up to $117.3 million in securities under the registration statement.

Credit
Facility Extension and Expansion

In June 2014, we, through our wholly-owned subsidiary, Gladstone Business Investment (Business
Investment), entered into Amendment No. 1 to the Fifth Amended and Restated Credit Agreement originally entered into on April 30, 2013, with Key Equipment Finance, a division of KeyBank National Association (KeyBank) as
administrative agent, lead arranger and lender; other lenders; and the Adviser, as servicer, to extend the revolving period and reduce the interest rate of our revolving line of credit. The revolving period was extended 14 months to June 26,
2017. We incurred fees of $0.4 million in connection with this amendment, which are being amortized through our Credit Facilitys revolver period end date of June 26, 2017.

In September 2014, we further increased our borrowing capacity under our Credit Facility from $105.0 million to $185.0 million (with a total commitment up to
$250.0 million through additional commitments of new or existing lenders) by entering into Joinder Agreements pursuant to our Credit Facility, by and among Business Investment, KeyBank, the Adviser and other lenders. We incurred fees of $1.3 million
in connection with this expansion, which are being amortized through our Credit Facilitys revolver period end date of June 26, 2017. Refer to Liquidity and Capital Resources  Revolving Credit Facility for further
discussion of our Credit Facility

Term Preferred Stock Offerings

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 expenses borne by us, were approximately $39.7 million.



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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 expenses borne by us, were approximately $38.6 million. Refer to Liquidity and Capital Resources
 Equity  Term Preferred Stock for further discussion of our recently issued mandatorily redeemable preferred stock.

Executive
Officers

On January 9, 2015, David Watson resigned as the Companys chief financial officer and treasurer. On January, 13, 2015, our
Board of Directors accepted Mr. Watsons resignation and appointed Melissa Morrison, Gladstone Capitals chief financial officer and treasurer, as the Companys chief financial officer and treasurer. On April 14, 2015, our
Board of Directors appointed Julia Ryan as the Companys chief accounting officer.

Common Stock Offering

In March 2015, we completed a public offering of 3.3 million shares of our common stock. Gross proceeds totaled $24.4 million and net proceeds, after
deducting underwriting discounts and offering expenses borne by us, were approximately $23.0 million. In April 2015, the underwriters fully exercised their overallotment option to purchase approximately 0.5 million additional shares of our common
stock, resulting in net proceeds, after deducting underwriting discounts and offering expenses borne by us, of approximately $3.5 million. Refer to Liquidity and Capital Resources  Equity  Common Stock for further
discussion of our common stock.



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RESULTS OF OPERATIONS

Comparison of the Fiscal Year Ended March 31, 2015, to the Fiscal Year Ended March 31, 2014



|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|---------------------------------------------------------------- |  | ------------------------------------ | ------ | - | ---- | - | ------- | -------- |  | - | -------- | - |  |  | ------ | -
|                                                                 |  | For the Fiscal Years Ended March 31, |       
|                                                                 |  | 2015                                 |        |   | 2014 |   |         | $ Change |  |   | % Change |  
|INVESTMENT INCOME                                                |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|Interest income                                                  |  | $                                    | 36,685 |   |      | $ | 30,460  |          |  | $ | 6,225    |   |  |  | 20.4   | %
|Other income                                                     |  |                                      | 4,958  |   |      |   | 5,804   |          |  |   | (846     | ) |  |  | (14.6  | )
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|Total investment income                                          |  |                                      | 41,643 |   |      |   | 36,264  |          |  |   | 5,379    |   |  |  | 14.8   |  
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|EXPENSES                                                         |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|Base management fee                                              |  |                                      | 7,569  |   |      |   | 6,207   |          |  |   | 1,362    |   |  |  | 21.9   |  
|Loan servicing fee                                               |  |                                      | 4,994  |   |      |   | 4,326   |          |  |   | 668      |   |  |  | 15.4   |  
|Incentive fee                                                    |  |                                      | 4,975  |   |      |   | 3,983   |          |  |   | 992      |   |  |  | 24.9   |  
|Administration fee                                               |  |                                      | 932    |   |      |   | 863     |          |  |   | 69       |   |  |  | 8.0    |  
|Interest and dividend expense                                    |  |                                      | 7,460  |   |      |   | 4,925   |          |  |   | 2,535    |   |  |  | 51.5   |  
|Amortization of deferred financing costs                         |  |                                      | 1,329  |   |      |   | 1,024   |          |  |   | 305      |   |  |  | 29.8   |  
|Other                                                            |  |                                      | 2,329  |   |      |   | 2,264   |          |  |   | 65       |   |  |  | 2.9    |  
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|Total expenses before credits from Adviser                       |  |                                      | 29,588 |   |      |   | 23,592  |          |  |   | 5,996    |   |  |  | 25.4   |  
|Credits to fees from Adviser                                     |  |                                      | (7,842 | ) |      |   | (6,635  | )        |  |   | (1,207   | ) |  |  | (18.2  | )
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|Total expenses, net of credits to fees                           |  |                                      | 21,746 |   |      |   | 16,957  |          |  |   | 4,789    |   |  |  | 28.2   |  
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|NET INVESTMENT INCOME                                            |  |                                      | 19,897 |   |      |   | 19,307  |          |  |   | 590      |   |  |  | 3.1    |  
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|REALIZED AND UNREALIZED GAIN (LOSS)                              |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|Net realized (loss) gain on investments                          |  |                                      | (73    | ) |      |   | 8,241   |          |  |   | (8,314   | ) |  |  | (100.9 | )
|Net realized loss on other                                       |  |                                      |       |   |      |   | (29     | )        |  |   | 29       |   |  |  | 100.0  |  
|Net unrealized appreciation (depreciation) of investments        |  |                                      | 29,940 |   |      |   | (29,206 | )        |  |   | 59,146   |   |  |  | NM     |  
|Net unrealized depreciation of other                             |  |                                      | 450    |   |      |   | 358     |          |  |   | 92       |   |  |  | 25.7   |  
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|Net realized and unrealized gain (loss) on investments and other |  |                                      | 30,317 |   |      |   | (20,636 | )        |  |   | 50,953   |   |  |  | NM     |  
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  |  | $                                    | 50,214 |   |      | $ | (1,329  | )        |  | $ | 51,543   |   |  |  | NM     |  
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|BASIC AND DILUTED PER COMMON SHARE:                              |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|Net investment income                                            |  | $                                    | 0.75   |   |      | $ | 0.73    |          |  | $ | 0.02     |   |  |  | 2.7    | %
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  
|Net increase (decrease) in net assets resulting from operations  |  | $                                    | 1.88   |   |      | $ | (0.05   | )        |  | $ | 1.93     |   |  |  | NM     |  
|                                                                 |  |                                      |        |   |      |   |         |          |  |   |          |   |  |  |        |  

NM = Not Meaningful

Investment Income

Total investment income increased by
14.8% for the year ended March 31, 2015, as compared to the prior year. This increase was due to an increase in interest income, which resulted primarily from an increase in the size of our portfolio during the year ended March 31, 2015,
partially offset by a decline in other income for the same period. This decline in other income was primarily a result of success fees and dividend income related to the exit of Venyu, which were recorded during the year ended March 31, 2014,
but did not recur in the year ended March 31, 2015.

Interest income from our investments in debt securities increased 20.4% for the year ended
March 31, 2015, as compared to the prior year. 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 year ended March 31, 2015, was approximately $292.2 million, compared to approximately $241.5 million for the prior year. This
increase was primarily due to approximately $84.7 million in new debt investments originated after March 31, 2014, including Roanoke, Cambridge, Old World, B+T, Logo, and Counsel Press.



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At March 31, 2015, the loans of one portfolio company, Tread, were on non-accrual status, with an aggregate
weighted average principal balance of $11.6 million during the year ended March 31, 2015. These loans had an aggregate weighted average principal balance of $11.9 million during the year ended March 31, 2014. The weighted average yield on
our interest-bearing investments, excluding cash and cash equivalents and receipts recorded as other income, was 12.6% for both years ended March 31, 2015 and 2014. The weighted average yield may vary from period to period, based on the current
stated interest rate on interest-bearing investments.

Other income for the year ended March 31, 2015 decreased 14.6% from the prior year. During the year
ended March 31, 2015, other income primarily consisted of $2.6 million and $0.6 million of dividend income received from Mathey Investments, Inc. (Mathey) and Drew Foam Company, Inc. (Drew Foam), respectively, and $0.5
million resulting from prepaid success fees received from SOG Specialty Knives and Tools, LLC (SOG). During the year ended March 31, 2014, other income primarily consisted of a combined $3.3 million in success fee and dividend
income received in connection with the exit of Venyu, $0.8 million and $0.2 million in success and prepayment fees resulting from payoffs from Channel Technologies Group, LLC (Channel) and Cavert II Holding Corp. (Cavert),
respectively, and SOGs and Frontier Packaging, Inc.s (Frontiers) elections to prepay success fees of $0.5 million and $0.2 million, respectively.

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



|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|----------------------------------- |  | -------------------- | ------- |  | ------------------------- |  | ----- | ---------------- |  | - | -------------------------- |  |  |  | ----- | -
|                                    |  | As of March 31, 2015 |         |  | Year Ended March 31, 2015 | 
|Company                             |  | Fair Value           |         |  | % of Portfolio            |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|Counsel Press, Inc. (A)             |  | $                    | 31,995  |  |                           |  | 6.9   | %                |  | $ | 9                          |  |  |  | 0.0   | %
|SOG Specialty Knives & Tools, LLC   |  |                      | 31,851  |  |                           |  | 6.8   |                  |  |   | 2,657                      |  |  |  | 6.4   |  
|Funko, LLC                          |  |                      | 25,008  |  |                           |  | 5.4   |                  |  |   | 991                        |  |  |  | 2.4   |  
|Acme Cryogenics, Inc.               |  |                      | 23,019  |  |                           |  | 4.9   |                  |  |   | 1,691                      |  |  |  | 4.1   |  
|Old World Christmas, Inc.(A)        |  |                      | 22,427  |  |                           |  | 4.8   |                  |  |   | 1,060                      |  |  |  | 2.5   |  
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments   |  |                      | 134,300 |  |                           |  | 28.8  |                  |  |   | 6,408                      |  |  |  | 15.4  |  
|Other portfolio companies           |  |                      | 331,753 |  |                           |  | 71.2  |                  |  |   | 35,235                     |  |  |  | 84.6  |  
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|Total investment portfolio          |  | $                    | 466,053 |  |                           |  | 100.0 | %                |  | $ | 41,643                     |  |  |  | 100.0 | %
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|                                    |  |                     
|                                    |  | As of March 31, 2014 |         |  | Year Ended March 31, 2014 | 
|Company                             |  | Fair Value           |         |  | % of Portfolio            |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|SOG Specialty Knives and Tools, LLC |  | $                    | 26,639  |  |                           |  | 8.5   | %                |  | $ | 3,157                      |  |  |  | 8.7   | %
|Acme Cryogenics, Inc.               |  |                      | 25,776  |  |                           |  | 8.2   |                  |  |   | 1,691                      |  |  |  | 4.7   |  
|Galaxy Tool Holding, Inc.           |  |                      | 18,512  |  |                           |  | 5.9   |                  |  |   | 2,124                      |  |  |  | 5.9   |  
|Ginsey Home Solutions, Inc.         |  |                      | 16,132  |  |                           |  | 5.1   |                  |  |   | 1,786                      |  |  |  | 4.9   |  
|Edge Adhesives Holdings, Inc.(A)    |  |                      | 15,969  |  |                           |  | 5.1   |                  |  |   | 142                        |  |  |  | 0.4   |  
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments   |  |                      | 103,028 |  |                           |  | 32.8  |                  |  |   | 8,900                      |  |  |  | 24.6  |  
|Other portfolio companies           |  |                      | 211,365 |  |                           |  | 67.2  |                  |  |   | 27,364                     |  |  |  | 75.4  |  
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|Total investment portfolio          |  | $                    | 314,393 |  |                           |  | 100.0 | %                |  | $ | 36,264                     |  |  |  | 100.0 | %
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  



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

Expenses

Total expenses, net of any voluntary,
irrevocable and non-contractual credits from the Adviser, increased 28.2% for the year ended March 31, 2015, as compared to the prior year period, primarily due to an increase in the net base management fee, incentive fee and interest and
dividend expense, as compared to the prior year.

The net base management fee increased for the fiscal year ended March 31, 2015, as compared to the
prior year period, as a result of the increased size of our portfolio over the respective periods. An incentive fee of $5.0 million was earned by the Adviser during the fiscal year ended March 31, 2015, compared to an incentive fee of $4.0
million for the prior year.



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The base management fee, loan servicing fee, incentive fee, and their related unconditional and irrevocable
voluntary credits are computed quarterly, as described under Investment Advisory and Management Agreement in Note 4  Related Party Transactions of the notes to our accompanying Consolidated Financial Statements and
are summarized in the following table:



|                                                       |  |                      |         |   |      |   |         |  
|------------------------------------------------------ |  | -------------------- | ------- | - | ---- | - | ------- | -
|                                                       |  | Year Ended March 31, |        
|                                                       |  | 2015                 |         |   | 2014 |  
|Average total assets subject to base management fee(A) |  | $                    | 378,450 |   |      | $ | 310,350 |  
|Multiplied by annual base management fee of 2%         |  |                      | 2.0     | % |      |   | 2.0     | %
|Base management fee(B)                                 |  |                      | 7,569   |   |      |   | 6,207   |  
|Credits to fees from Adviserother(B)                  |  |                      | (2,848  | ) |      |   | (2,309  | )
|                                                       |  |                      |         |   |      |   |         |  
|Net base management fee                                |  | $                    | 4,721   |   |      | $ | 3,898   |  
|                                                       |  |                      |         |   |      |   |         |  
|Loan servicing fee(B)                                  |  |                      | 4,994   |   |      |   | 4,326   |  
|Credits to base management fee  loan servicing fee(B) |  |                      | (4,994  | ) |      |   | (4,326  | )
|                                                       |  |                      |         |   |      |   |         |  
|Net loan servicing fee                                 |  | $                    |        |   |      | $ |        |  
|                                                       |  |                      |         |   |      |   |         |  
|Incentive fee(B)                                       |  |                      | 4,975   |   |      |   | 3,983   |  
|Credits to fees from Adviser  other(B)                |  |                      |        |   |      |   |        |  
|                                                       |  |                      |         |   |      |   |         |  
|Net incentive fee                                      |  | $                    | 4,975   |   |      | $ | 3,983   |  
|                                                       |  |                      |         |   |      |   |         |  



|(A) | Average total assets subject to the base management fee is defined as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings,
valued at the end of the applicable quarters within the respective periods and adjusted appropriately for any share issuances or repurchases during the periods.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Reflected as a line item on our accompanying Consolidated Statement of Operations.
|--- | ----------------------------------------------------------------------------------

Interest and
dividend expense increased 51.5% for the year ended March 31, 2015, as compared to the prior year, primarily due to increased average borrowings under our Credit Facility. The weighted average balance outstanding on our Credit Facility
during the fiscal year ended March 31, 2015, was $79.2 million, as compared to $34.6 million in the prior year. The increase in average borrowings under our Credit Facility was partially offset by a decrease in the interest rate due to an
amendment of our Credit Facility that occurred in June 2014. Dividends on mandatorily redeemable preferred stock increased as a result of the issuance of $41.4 million of our Series B Term Preferred Stock in November 2014.

Realized and Unrealized Gain (Loss)

Realized Gain
(Loss) on Investments

During the year ended March 31, 2015, we recorded minimal realized activity. During the year ended March 31, 2014, we
recorded a net realized gain of $8.2 million consisting of a $24.8 million gain on the Venyu sale, partially offset by realized losses of $11.4 million and $1.8 million related to the equity sales of ASH and Packerland, respectively, and realized
losses of $3.4 million related to the restructuring of Noble.

Net Unrealized Appreciation (Depreciation) of Investments

During the year ended March 31, 2015, we recorded net unrealized appreciation of investments in the aggregate amount of $29.9 million.



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The realized loss and unrealized appreciation (depreciation) across our investments for the year ended
March 31, 2015, were as follows:



|                                  |  |                                    |     |   |                                      |   |        |                                                 |  |   |                |  |  |   |        |  
|--------------------------------- |  | ---------------------------------- | --- | - | ------------------------------------ | - | ------ | ----------------------------------------------- |  | - | -------------- |  |  | - | ------ | -
|                                  |  | Twelve Months Ended March 31, 2015 |    
|Portfolio Company                 |  | RealizedLoss                       |     |   | UnrealizedAppreciation(Depreciation) |   |        | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) | 
|Funko, LLC                        |  | $                                  |    |   |                                      | $ | 13,090 |                                                 |  | $ |               |  |  | $ | 13,090 |  
|SOG Specialty Knives & Tools, LLC |  |                                    |    |   |                                      |   | 5,211  |                                                 |  |   |               |  |  |   | 5,211  |  
|Drew Foam Company, Inc.           |  |                                    |    |   |                                      |   | 4,994  |                                                 |  |   |               |  |  |   | 4,994  |  
|Jackrabbit, Inc.                  |  |                                    |    |   |                                      |   | 4,575  |                                                 |  |   |               |  |  |   | 4,575  |  
|NDLI Inc.                         |  |                                    |    |   |                                      |   | 4,397  |                                                 |  |   |               |  |  |   | 4,397  |  
|Ginsey Home Solutions, Inc.       |  |                                    |    |   |                                      |   | 3,904  |                                                 |  |   |               |  |  |   | 3,904  |  
|Mathey Investments, Inc.          |  |                                    |    |   |                                      |   | 2,735  |                                                 |  |   |               |  |  |   | 2,735  |  
|Cambridge Sound Management, LLC   |  |                                    |    |   |                                      |   | 2,698  |                                                 |  |   |               |  |  |   | 2,698  |  
|Alloy Die Casting Corp.           |  |                                    |    |   |                                      |   | 2,068  |                                                 |  |   |               |  |  |   | 2,068  |  
|Tread Corp.                       |  |                                    |    |   |                                      |   | 1,896  |                                                 |  |   |               |  |  |   | 1,896  |  
|Frontier Packaging, Inc.          |  |                                    |    |   |                                      |   | 1,816  |                                                 |  |   |               |  |  |   | 1,816  |  
|SBS, Industries, LLC              |  |                                    |    |   |                                      |   | 1,746  |                                                 |  |   |               |  |  |   | 1,746  |  
|Behrens Manufacturing, LLC        |  |                                    |    |   |                                      |   | 692    |                                                 |  |   |               |  |  |   | 692    |  
|Old World Christmas, Inc.         |  |                                    |    |   |                                      |   | 477    |                                                 |  |   |               |  |  |   | 477    |  
|Quench Holdings Corp.             |  |                                    |    |   |                                      |   | 375    |                                                 |  |   |               |  |  |   | 375    |  
|B+T Group Acquisition Inc.        |  |                                    |    |   |                                      |   | 344    |                                                 |  |   |               |  |  |   | 344    |  
|Edge Adhesives Holdings, Inc.     |  |                                    |    |   |                                      |   | (274   | )                                               |  |   |               |  |  |   | (274   | )
|Meridian Rack & Pinion, Inc.      |  |                                    |    |   |                                      |   | (411   | )                                               |  |   |               |  |  |   | (411   | )
|D.P.M.S., Inc.                    |  |                                    |    |   |                                      |   | (605   | )                                               |  |   |               |  |  |   | (605   | )
|Country Club Enterprises, LLC     |  |                                    |    |   |                                      |   | (806   | )                                               |  |   |               |  |  |   | (806   | )
|Channel Technologies Group, LLC   |  |                                    |    |   |                                      |   | (807   | )                                               |  |   |               |  |  |   | (807   | )
|Galaxy Tool Holding Corp.         |  |                                    |    |   |                                      |   | (2,992 | )                                               |  |   |               |  |  |   | (2,992 | )
|Acme Cryogenics, Inc.             |  |                                    |    |   |                                      |   | (3,881 | )                                               |  |   |               |  |  |   | (3,881 | )
|B-Dry, LLC                        |  |                                    |    |   |                                      |   | (4,081 | )                                               |  |   |               |  |  |   | (4,081 | )
|Mitchell Rubber Products, Inc.    |  |                                    |    |   |                                      |   | (7,178 | )                                               |  |   |               |  |  |   | (7,178 | )
|Other, net (<$250 Net)            |  |                                    | (73 | ) |                                      |   | (43    | )                                               |  |   |               |  |  |   | (116   | )
|                                  |  |                                    |     |   |                                      |   |        |                                                 |  |   |                |  |  |   |        |  
|Total                             |  | $                                  | (73 | ) |                                      | $ | 29,940 |                                                 |  | $ |               |  |  | $ | 29,867 |  
|                                  |  |                                    |     |   |                                      |   |        |                                                 |  |   |                |  |  |   |        |  

The primary reason for the change in our net unrealized appreciation of $29.9 million for the year ended March 31, 2015,
was an increase in the equity valuations of Funko, SOG, Drew Foam, Jackrabbit, Inc. (Jackrabbit), and NDLI, due to an increase in the portfolio companies performance and an increase in certain comparable multiples used to estimate
the fair value of our investments. This was partially offset by decreased performance in several of our portfolio companies.

During the year ended
March 31, 2014, we recorded net unrealized depreciation on investments in the aggregate amount of $29.2 million, which included the reversal of $0.8 million in aggregate unrealized appreciation, primarily related to the sale of Venyu, partially
offset by the sale of ASH and Packerland, and the restructure of Noble. Excluding reversals, we had $28.4 million in net unrealized depreciation for the year ended March 31, 2014.



45



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Realized gains (losses) and unrealized appreciation (depreciation) across our investments for the year ended
March 31, 2014,

were as follows:



|                                  |  |                           |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|--------------------------------- |  | ------------------------- | ------- | - | ------------------------------------ | - | ------- | ----------------------------------------------- |  | - | -------------- | - |  | - | ------- | -
|                                  |  | Year Ended March 31, 2014 |        
|Portfolio Company                 |  | RealizedGain (Loss)       |         |   | Unrealized(Depreciation)Appreciation |   |         | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) |  
|Venyu Solutions, Inc.(A)          |  | $                         | 24,798  |   |                                      | $ | (1,596  | )                                               |  | $ | (17,374        | ) |  | $ | 5,828   |  
|Auto Safety House, LLC(B)         |  |                           | (11,402 | ) |                                      |   | 4,925   |                                                 |  |   | 11,410         |   |  |   | 4,933   |  
|Quench Holdings Corp.             |  |                           |        |   |                                      |   | 3,377   |                                                 |  |   |               |   |  |   | 3,377   |  
|Frontier Packaging, Inc.          |  |                           |        |   |                                      |   | 1,712   |                                                 |  |   |               |   |  |   | 1,712   |  
|Channel Technologies Group, LLC   |  |                           |        |   |                                      |   | 2,187   |                                                 |  |   | (583           | ) |  |   | 1,604   |  
|B-Dry, LLC                        |  |                           |        |   |                                      |   | 1,555   |                                                 |  |   |               |   |  |   | 1,555   |  
|Funko, LLC                        |  |                           |        |   |                                      |   | 1,113   |                                                 |  |   |               |   |  |   | 1,113   |  
|Packerland Whey Products, Inc.(C) |  |                           | (1,764  | ) |                                      |   | (369    | )                                               |  |   | 2,500          |   |  |   | 367     |  
|Tread Corp.                       |  |                           |        |   |                                      |   | (735    | )                                               |  |   |               |   |  |   | (735    | )
|Mathey Investments, Inc.          |  |                           |        |   |                                      |   | (922    | )                                               |  |   |               |   |  |   | (922    | )
|D.P.M.S., Inc.                    |  |                           |        |   |                                      |   | (1,229  | )                                               |  |   |               |   |  |   | (1,229  | )
|Star Seed, Inc.                   |  |                           |        |   |                                      |   | (1,406  | )                                               |  |   |               |   |  |   | (1,406  | )
|Acme Cryogenics, Inc.             |  |                           |        |   |                                      |   | (1,564  | )                                               |  |   |               |   |  |   | (1,564  | )
|Jackrabbit, Inc.                  |  |                           |        |   |                                      |   | (1,687  | )                                               |  |   |               |   |  |   | (1,687  | )
|Mitchell Rubber Products, Inc.    |  |                           |        |   |                                      |   | (2,016  | )                                               |  |   |               |   |  |   | (2,016  | )
|Alloy Die Casting Corp.           |  |                           |        |   |                                      |   | (2,111  | )                                               |  |   |               |   |  |   | (2,111  | )
|Galaxy Tool Holding Corp.         |  |                           |        |   |                                      |   | (2,364  | )                                               |  |   |               |   |  |   | (2,364  | )
|Drew Foam Company, Inc.           |  |                           |        |   |                                      |   | (2,837  | )                                               |  |   |               |   |  |   | (2,837  | )
|Noble Logistics, Inc.(D)          |  |                           | (3,432  | ) |                                      |   | (2,989  | )                                               |  |   | 3,432          |   |  |   | (2,989  | )
|SOG Specialty Knives & Tools, LLC |  |                           |        |   |                                      |   | (3,183  | )                                               |  |   |               |   |  |   | (3,183  | )
|Precision Southeast, Inc.         |  |                           |        |   |                                      |   | (3,227  | )                                               |  |   |               |   |  |   | (3,227  | )
|Schylling, Inc.                   |  |                           |        |   |                                      |   | (3,853  | )                                               |  |   |               |   |  |   | (3,853  | )
|Ginsey Home Solutions, Inc.       |  |                           |        |   |                                      |   | (5,702  | )                                               |  |   |               |   |  |   | (5,702  | )
|SBS, Industries, LLC              |  |                           |        |   |                                      |   | (5,823  | )                                               |  |   |               |   |  |   | (5,823  | )
|Other, net (<$250 Net)            |  |                           | 41      |   |                                      |   | 328     |                                                 |  |   | (175           | ) |  |   | 194     |  
|                                  |  |                           |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|Total                             |  | $                         | 8,241   |   |                                      | $ | (28,416 | )                                               |  | $ | (790           | ) |  | $ | (20,965 | )
|                                  |  |                           |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  



|(A) | Venu was sold in August 2013.
|--- | -----------------------------

|(B) | ASH equity investment was sold in October 2013.
|--- | -----------------------------------------------

|(C) | Packerland equity investment was sold in November 2013.
|--- | -------------------------------------------------------

|(D) | Noble was restructured in February 2014.
|--- | ----------------------------------------

The primary
changes in our net unrealized depreciation for the year ended March 31, 2014, were due to decreased equity valuations in several of our portfolio companies, primarily due to decreased portfolio company performance and decreases in certain
comparable multiples used to estimate the fair value of our investments.

Over our entire investment portfolio, we recorded approximately $1.0 million of
net unrealized appreciation on our debt positions and $28.9 million of net unrealized appreciation on our equity holdings for the year ended March 31, 2015. At March 31, 2015, the fair value of our investment portfolio was less than our
cost basis by approximately $39.2 million, as compared to $69.1 million at March 31, 2014, representing net unrealized appreciation of $29.9 million for the year ended March 31, 2015. We believe that our aggregate investment portfolio is
valued at a depreciated value due to the lingering effects of the recent recession on the performance of certain of our portfolio companies. Our entire portfolio was fair valued at 92.2% of cost as of March 31, 2015. The unrealized depreciation
of our investments does not have an impact on our current ability to pay distributions to stockholders; however, it may be an indication of future realized losses, which could ultimately reduce our income available for distribution.

Net Realized Loss on Other

For the year ended
March 31, 2014, we recorded a net realized loss of $29, due to the expiration of interest rate cap agreements. For the year ended March 31, 2015, no such amounts were incurred.

Net Unrealized Depreciation on Other

For the years ended
March 31, 2015 and 2014, we recorded $0.5 million and $0.4 million, respectively, of net unrealized depreciation on our Credit Facility recorded at fair value.



46



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Comparison of the Fiscal Year Ended March 31, 2014, to the Fiscal Year Ended
March 31, 2013



|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|---------------------------------------------------------------- |  | ------------------------------------ | ------- | - | ---- | - | ------ | -------- |  | - | -------- | - |  |  | ----- | -
|                                                                 |  | For the Fiscal Years Ended March 31, |        
|                                                                 |  | 2014                                 |         |   | 2013 |   |        | $ Change |  |   | % Change |  
|INVESTMENT INCOME                                                |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|Interest income                                                  |  | $                                    | 30,460  |   |      | $ | 24,798 |          |  | $ | 5,662    |   |  |  | 22.8  | %
|Other income                                                     |  |                                      | 5,804   |   |      |   | 5,740  |          |  |   | 64       |   |  |  | 1.1   |  
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|Total investment income                                          |  |                                      | 36,264  |   |      |   | 30,538 |          |  |   | 5,726    |   |  |  | 18.8  |  
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|EXPENSES                                                         |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|Base management fee                                              |  |                                      | 6,207   |   |      |   | 5,412  |          |  |   | 795      |   |  |  | 14.7  |  
|Loan servicing fee                                               |  |                                      | 4,326   |   |      |   | 3,725  |          |  |   | 601      |   |  |  | 16.1  |  
|Incentive fee                                                    |  |                                      | 3,983   |   |      |   | 2,585  |          |  |   | 1,398    |   |  |  | 54.1  |  
|Administration fee                                               |  |                                      | 863     |   |      |   | 785    |          |  |   | 78       |   |  |  | 9.9   |  
|Interest and dividend expense                                    |  |                                      | 4,925   |   |      |   | 3,977  |          |  |   | 948      |   |  |  | 23.8  |  
|Amortization of deferred financing costs                         |  |                                      | 1,024   |   |      |   | 791    |          |  |   | 233      |   |  |  | 29.5  |  
|Other                                                            |  |                                      | 2,264   |   |      |   | 1,828  |          |  |   | 436      |   |  |  | 23.9  |  
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|Total expenses before credits from Adviser                       |  |                                      | 23,592  |   |      |   | 19,103 |          |  |   | 4,489    |   |  |  | 23.5  |  
|Credits to fees from Adviser                                     |  |                                      | (6,635  | ) |      |   | (5,053 | )        |  |   | (1,582   | ) |  |  | (31.3 | )
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|Total expenses, net of credits to fees                           |  |                                      | 16,957  |   |      |   | 14,050 |          |  |   | 2,907    |   |  |  | 20.7  |  
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|NET INVESTMENT INCOME                                            |  |                                      | 19,307  |   |      |   | 16,488 |          |  |   | 2,819    |   |  |  | 17.1  |  
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|REALIZED AND UNREALIZED (LOSS) GAIN                              |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|Net realized gain on investments                                 |  |                                      | 8,241   |   |      |   | 843    |          |  |   | 7,398    |   |  |  | 877.6 |  
|Net realized loss on other                                       |  |                                      | (29     | ) |      |   | (41    | )        |  |   | 12       |   |  |  | 29.3  |  
|Net unrealized (depreciation) appreciation of investments        |  |                                      | (29,206 | ) |      |   | 804    |          |  |   | (30,010  | ) |  |  | NM    |  
|Net unrealized depreciation (appreciation) of other              |  |                                      | 358     |   |      |   | (815   | )        |  |   | 1,173    |   |  |  | NM    |  
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|Net realized and unrealized (loss) gain on investments and other |  |                                      | (20,636 | ) |      |   | 791    |          |  |   | (21,427  | ) |  |  | NM    |  
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS  |  | $                                    | (1,329  | ) |      | $ | 17,279 |          |  | $ | (18,608  | ) |  |  | NM    |  
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|BASIC AND DILUTED PER COMMON SHARE:                              |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|Net investment income                                            |  | $                                    | 0.73    |   |      | $ | 0.68   |          |  | $ | 0.05     |   |  |  | 7.4   | %
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  
|Net (decrease) increase in net assets resulting from operations  |  |                                      | (0.05   | ) |      |   | 0.71   |          |  |   | (0.76    | ) |  |  | NM    |  
|                                                                 |  |                                      |         |   |      |   |        |          |  |   |          |   |  |  |       |  

NM = Not Meaningful

Investment Income

Total investment income increased by
18.8% for the year ended March 31, 2014, as compared to the prior year. This increase was primarily due an increase in interest income in the year ended March 31, 2014, as a result of an increase in the size of our loan portfolio and
holding higher-yielding debt investments.

Interest income from our investments in debt securities increased 22.8% for the year ended March 31, 2014,
as compared to the prior year. 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 year ended March 31, 2014, was approximately $241.5 million, compared to approximately $198.1 million for the prior year. This increase was primarily due
to $125.6 million in new investments originated after March 31, 2013, including Jackrabbit, Funko, Star Seed, Schylling, Inc. (Schylling), Alloy Die Casting Corp. (ADC), Behrens Manufacturing, LLC (Behrens),
Meridian Rack & Pinion, Inc. (Meridian), Head Country Food Products, Inc. (Head Country) and Edge Adhesives Holdings Inc. (Edge), partially offset by the exit of Venyu and the repayment of debt
investments of Cavert and Channel.

As of March 31, 2014, our loans to Tread were on non-accrual. ASH, which was on non-accrual as of
September 30, 2013, was sold to certain members of its existing management team in October 2013. As a result of the sale, we retained a $5.0 million accruing revolving credit facility in ASH, which is no longer on non-accrual. The non-accrual
aggregate weighted average principal balance was $19.9 million during the year ended March 31, 2014. As of March 31, 2013, loans to two portfolio companies, ASH and Tread, were on non-accrual, with an aggregate weighted average principal
balance of $20.5 million during the year ended March 31, 2013. Tread was put on non-accrual and Country Club Enterprises, LLC (CCE) was taken off non-accrual during the three months ended December 31, 2012. The weighted average
yield on our interest-bearing investments, excluding cash and cash equivalents and excluding receipts recorded as other income, for the year ended March 31, 2014, was 12.6%, compared to 12.5% for the prior year.



47



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##### Table of Contents

Other income for the year ended March 31, 2014 remained relatively unchanged from the prior year. During the year
ended March 31, 2014, other income primarily consisted of a combined $3.3 million in success fee and dividend income received in connection with the exit of Venyu, $0.8 million and $0.2 million in success and prepayment fees resulting from
payoffs from Channel and Cavert, respectively, and SOGs and Frontiers elections to prepay success fees of $0.5 million and $0.2 million, respectively. During the year ended March 31, 2013, other income primarily consisted of $4.1
million of dividend income from the Galaxy Tool Holding Corp. (Galaxy) recapitalization, $0.7 million in dividend income received on preferred shares of Acme, and Matheys and Caverts elections to each prepay $0.4 million of
success fees.

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



|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|----------------------------------- |  | -------------------- | ------- |  | ------------------------- |  | ----- | ---------------- |  | - | -------------------------- |  |  |  | ----- | -
|                                    |  | As of March 31, 2014 |         |  | Year Ended March 31, 2014 | 
|Company                             |  | Fair Value           |         |  | % of Portfolio            |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|SOG Specialty Knives and Tools, LLC |  | $                    | 26,639  |  |                           |  | 8.5   | %                |  | $ | 3,157                      |  |  |  | 8.7   | %
|Acme Cryogenics, Inc.               |  |                      | 25,776  |  |                           |  | 8.2   |                  |  |   | 1,691                      |  |  |  | 4.7   |  
|Galaxy Tool Holding, Inc.           |  |                      | 18,512  |  |                           |  | 5.9   |                  |  |   | 2,124                      |  |  |  | 5.9   |  
|Ginsey Home Solutions, Inc.         |  |                      | 16,132  |  |                           |  | 5.1   |                  |  |   | 1,786                      |  |  |  | 4.9   |  
|Edge Adhesives Holdings, Inc.(A)    |  |                      | 15,969  |  |                           |  | 5.1   |                  |  |   | 142                        |  |  |  | 0.4   |  
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments   |  |                      | 103,028 |  |                           |  | 32.8  |                  |  |   | 8,900                      |  |  |  | 24.6  |  
|Other portfolio companies           |  |                      | 211,365 |  |                           |  | 67.2  |                  |  |   | 27,364                     |  |  |  | 75.4  |  
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|Total investment portfolio          |  | $                    | 314,393 |  |                           |  | 100.0 | %                |  | $ | 36,264                     |  |  |  | 100.0 | %
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|                                    |  |                     
|                                    |  | As of March 31, 2013 |         |  | Year Ended March 31, 2013 | 
|Company                             |  | Fair Value           |         |  | % of Portfolio            |  |       | InvestmentIncome |  |   | % of TotalInvestmentIncome | 
|Venyu Solutions, Inc.(B)            |  | $                    | 43,970  |  |                           |  | 15.4  | %                |  | $ | 2,502                      |  |  |  | 8.2   | %
|SOG Specialty Knives and Tools, LLC |  |                      | 29,822  |  |                           |  | 10.4  |                  |  |   | 2,657                      |  |  |  | 8.7   |  
|Acme Cryogenics, Inc.               |  |                      | 27,340  |  |                           |  | 9.5   |                  |  |   | 2,368                      |  |  |  | 7.8   |  
|Ginsey Home Solutions, Inc.(A)      |  |                      | 21,833  |  |                           |  | 7.6   |                  |  |   | 1,331                      |  |  |  | 4.4   |  
|Galaxy Tool Holding, Inc.(C)        |  |                      | 20,876  |  |                           |  | 7.3   |                  |  |   | 4,711                      |  |  |  | 15.4  |  
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|Subtotalfive largest investments   |  |                      | 143,841 |  |                           |  | 50.2  |                  |  |   | 13,569                     |  |  |  | 44.5  |  
|Other portfolio companies           |  |                      | 142,641 |  |                           |  | 49.8  |                  |  |   | 16,969                     |  |  |  | 55.5  |  
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  
|Total investment portfolio          |  | $                    | 286,482 |  |                           |  | 100.0 | %                |  | $ | 30,538                     |  |  |  | 100.0 | %
|                                    |  |                      |         |  |                           |  |       |                  |  |   |                            |  |  |  |       |  

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

|(B) | Venyu was sold in August 2013.
|--- | ------------------------------

|(C) | Investment income includes $4.1 million non-cash dividend recognized from recapitalization.
|--- | -------------------------------------------------------------------------------------------

Expenses

Total expenses, excluding any voluntary, irrevocable and non-contractual credits from the Adviser, increased 23.4% for the year ended March 31,
2014, as compared to the prior year, primarily due to an increase in the base management fee, incentive fee, and interest expense, as compared to the prior year.

The base management fee increased for the year ended March 31, 2014, as compared to the prior year, as a result of the increased size of our portfolio.
Additionally, a net incentive fee of $3.9 million was earned by the Adviser during the fiscal year ended March 31, 2014, compared to $2.4 million for the prior year. The base management fee, loan servicing fee, and incentive fee, and their
related unconditional and irrevocable voluntary credits, are computed quarterly, as described under



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Investment Advisory and Management Agreement in Note 4 of the notes to our accompanying Consolidated Financial Statements and are summarized in the following table:



|                                                       |  |                      |         |   |      |   |         |  
|------------------------------------------------------ |  | -------------------- | ------- | - | ---- | - | ------- | -
|                                                       |  | Year Ended March 31, |        
|                                                       |  | 2014                 |         |   | 2013 |  
|Average total assets subject to base management fee(A) |  | $                    | 310,350 |   |      | $ | 270,600 |  
|Multiplied by annual base management fee of 2%         |  |                      | 2.0     | % |      |   | 2.0     | %
|                                                       |  |                      |         |   |      |   |         |  
|Base management fee(B)                                 |  |                      | 6,207   |   |      |   | 5,412   |  
|Credits to fees from Adviser-other(B)                  |  |                      | (2,309  | ) |      |   | (1,107  | )
|                                                       |  |                      |         |   |      |   |         |  
|Net base management fee                                |  | $                    | 3,898   |   |      | $ | 4,305   |  
|                                                       |  |                      |         |   |      |   |         |  
|Loan servicing fee(B)                                  |  |                      | 4,326   |   |      |   | 3,725   |  
|Credits to base management fee-loan servicing fee(B)   |  |                      | (4,326  | ) |      |   | (3,725  | )
|                                                       |  |                      |         |   |      |   |         |  
|Net loan servicing fee                                 |  | $                    |        |   |      | $ |        |  
|                                                       |  |                      |         |   |      |   |         |  
|Incentive fee(B)                                       |  |                      | 3,983   |   |      |   | 2,585   |  
|Credits to fees from Adviser-other(B)                  |  |                      |        |   |      |   | (221    | )
|                                                       |  |                      |         |   |      |   |         |  
|Net Incentive fee                                      |  | $                    | 3,983   |   |      | $ | 2,364   |  
|                                                       |  |                      |         |   |      |   |         |  



|(A) | Average total assets subject to the base management fee is defined as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued
at the end of the applicable quarters within the respective periods and adjusted appropriately for any share issuances or repurchases during the periods.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Reflected as a line item on our accompanying Consolidated Statement of Operations. For the year ended March 31, 2013, the credits to incentive fee and the credits to base management fee are combined into one
line item, Credits to fees from Adviser-other, on the accompanying Consolidated Statement of Operations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest and dividend
expense increased 23.8% for the fiscal year ended March 31, 2014, as compared to the prior year, primarily due to increased commitment (unused) fees related to the expansion of our Credit Facility from $60 million to $105 million and
increased average borrowings under our Credit Facility. The average balance outstanding on our Credit Facility during the fiscal year ended March 31, 2014, was $34.6 million, as compared to $15.5 million in the prior year.

Realized and Unrealized Gain (Loss)

Net Realized Gain
on Investments

During the fiscal year ended March 31, 2014, we recorded a net realized gain of $8.2 million consisting of a $24.8 million gain on
the Venyu sale, partially offset by the realized losses of $11.4 million and $1.8 million related to the equity sales of ASH and Packerland, respectively, and the realized loss of $3.4 million related to the restructuring of Noble. During the year
ended March 31, 2013, we recorded a realized gain of $0.8 million relating to post-closing adjustments on the previous investment exit of A. Stucki.

Net Unrealized Appreciation (Depreciation) of Investments

During the year ended March 31, 2014, we recorded net unrealized depreciation on investments in the aggregate amount of $29.2 million, which included the
reversal of $0.8 million in aggregate unrealized appreciation, primarily related to the sale of Venyu, partially offset by the sale of ASH and Packerland, and the restructure of Noble. Excluding reversals, we had $28.4 million in net unrealized
depreciation for the year ended March 31, 2014.



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The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the year ended
March 31, 2014, were as follows:



|                                  |  |                           |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|--------------------------------- |  | ------------------------- | ------- | - | ------------------------------------ | - | ------- | ----------------------------------------------- |  | - | -------------- | - |  | - | ------- | -
|                                  |  | Year Ended March 31, 2014 |        
|Portfolio Company                 |  | RealizedGain (Loss)       |         |   | UnrealizedAppreciation(Depreciation) |   |         | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) |  
|Venyu Solutions, Inc.(A)          |  | $                         | 24,798  |   |                                      | $ | (1,596  | )                                               |  | $ | (17,374        | ) |  | $ | 5,828   |  
|Auto Safety House, LLC(B)         |  |                           | (11,402 | ) |                                      |   | 4,925   |                                                 |  |   | 11,410         |   |  |   | 4,933   |  
|Quench Holdings Corp.             |  |                           |        |   |                                      |   | 3,377   |                                                 |  |   |               |   |  |   | 3,377   |  
|Frontier Packaging, Inc.          |  |                           |        |   |                                      |   | 1,712   |                                                 |  |   |               |   |  |   | 1,712   |  
|Channel Technologies Group, LLC   |  |                           |        |   |                                      |   | 2,187   |                                                 |  |   | (583           | ) |  |   | 1,604   |  
|B-Dry, LLC                        |  |                           |        |   |                                      |   | 1,555   |                                                 |  |   |               |   |  |   | 1,555   |  
|Funko, LLC                        |  |                           |        |   |                                      |   | 1,113   |                                                 |  |   |               |   |  |   | 1,113   |  
|Packerland Whey Products, Inc.(C) |  |                           | (1,764  | ) |                                      |   | (369    | )                                               |  |   | 2,500          |   |  |   | 367     |  
|Tread Corp.                       |  |                           |        |   |                                      |   | (735    | )                                               |  |   |               |   |  |   | (735    | )
|Mathey Investments, Inc.          |  |                           |        |   |                                      |   | (922    | )                                               |  |   |               |   |  |   | (922    | )
|D.P.M.S., Inc.                    |  |                           |        |   |                                      |   | (1,229  | )                                               |  |   |               |   |  |   | (1,229  | )
|Star Seed, Inc.                   |  |                           |        |   |                                      |   | (1,406  | )                                               |  |   |               |   |  |   | (1,406  | )
|Acme Cryogenics, Inc.             |  |                           |        |   |                                      |   | (1,564  | )                                               |  |   |               |   |  |   | (1,564  | )
|Jackrabbit, Inc.                  |  |                           |        |   |                                      |   | (1,687  | )                                               |  |   |               |   |  |   | (1,687  | )
|Mitchell Rubber Products, Inc.    |  |                           |        |   |                                      |   | (2,016  | )                                               |  |   |               |   |  |   | (2,016  | )
|Alloy Die Casting Corp.           |  |                           |        |   |                                      |   | (2,111  | )                                               |  |   |               |   |  |   | (2,111  | )
|Galaxy Tool Holding Corp.         |  |                           |        |   |                                      |   | (2,364  | )                                               |  |   |               |   |  |   | (2,364  | )
|Drew Foam Company, Inc.           |  |                           |        |   |                                      |   | (2,837  | )                                               |  |   |               |   |  |   | (2,837  | )
|Noble Logistics, Inc.(D)          |  |                           | (3,432  | ) |                                      |   | (2,989  | )                                               |  |   | 3,432          |   |  |   | (2,989  | )
|SOG Specialty Knives & Tools, LLC |  |                           |        |   |                                      |   | (3,183  | )                                               |  |   |               |   |  |   | (3,183  | )
|Precision Southeast, Inc.         |  |                           |        |   |                                      |   | (3,227  | )                                               |  |   |               |   |  |   | (3,227  | )
|Schylling, Inc.                   |  |                           |        |   |                                      |   | (3,853  | )                                               |  |   |               |   |  |   | (3,853  | )
|Ginsey Home Solutions, Inc.       |  |                           |        |   |                                      |   | (5,702  | )                                               |  |   |               |   |  |   | (5,702  | )
|SBS, Industries, LLC              |  |                           |        |   |                                      |   | (5,823  | )                                               |  |   |               |   |  |   | (5,823  | )
|Other, net (<$250 Net)            |  |                           | 41      |   |                                      |   | 328     |                                                 |  |   | (175           | ) |  |   | 194     |  
|                                  |  |                           |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  
|Total                             |  | $                         | 8,241   |   |                                      | $ | (28,416 | )                                               |  | $ | (790           | ) |  | $ | (20,965 | )
|                                  |  |                           |         |   |                                      |   |         |                                                 |  |   |                |   |  |   |         |  



|(A) | Venyu was sold in August 2013.
|--- | ------------------------------

|(B) | ASH equity investment was sold in October 2013.
|--- | -----------------------------------------------

|(C) | Packerland equity investment was sold in November 2013.
|--- | -------------------------------------------------------

|(D) | Noble was restructured in February 2014.
|--- | ----------------------------------------

The primary changes in our net unrealized depreciation for the year
ended March 31, 2014, were due to decreased equity valuations in several of our portfolio companies, primarily due to decreased portfolio company performance and decreases in certain comparable multiples used to estimate the fair value of our
investments.



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During the year ended March 31, 2013, we recorded net unrealized depreciation on investments in the
aggregate amount of $0.8 million. The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the year ended March 31, 2013, were as follows:



|                                  |  |                           |     |   |                                      |   |         |                                                 |  |   |                |  |  |   |         |  
|--------------------------------- |  | ------------------------- | --- | - | ------------------------------------ | - | ------- | ----------------------------------------------- |  | - | -------------- |  |  | - | ------- | -
|                                  |  | Year Ended March 31, 2013 |    
|Portfolio Company                 |  | RealizedGain (Loss)       |     |   | UnrealizedAppreciation(Depreciation) |   |         | Reversal ofUnrealized(Appreciation)Depreciation |  |   | Net Gain(Loss) | 
|Venyu Solutions, Inc.             |  | $                         |    |   |                                      | $ | 20,640  |                                                 |  | $ |               |  |  | $ | 20,640  |  
|Galaxy Tool Holdings, Inc.        |  |                           |    |   |                                      |   | 12,057  |                                                 |  |   |                |  |  |   | 12,057  |  
|Country Club Enterprises, LLC     |  |                           |    |   |                                      |   | 7,467   |                                                 |  |   |               |  |  |   | 7,467   |  
|Mathey Investments, Inc.          |  |                           |    |   |                                      |   | 1,653   |                                                 |  |   |               |  |  |   | 1,653   |  
|Precision Southeast, Inc.         |  |                           |    |   |                                      |   | 1,594   |                                                 |  |   |               |  |  |   | 1,594   |  
|SBS, Industries, LLC              |  |                           |    |   |                                      |   | 1,238   |                                                 |  |   |               |  |  |   | 1,238   |  
|A. Stucki Holding Corp.           |  |                           | 861 |   |                                      |   |        |                                                 |  |   |               |  |  |   | 861     |  
|Drew Foam Company, Inc.           |  |                           |    |   |                                      |   | 750     |                                                 |  |   |               |  |  |   | 750     |  
|SOG Specialty Knives & Tools, LLC |  |                           |    |   |                                      |   | (273    | )                                               |  |   |               |  |  |   | (273    | )
|Ginsey Home Solutions, Inc.       |  |                           |    |   |                                      |   | (618    | )                                               |  |   |               |  |  |   | (618    | )
|Frontier Packaging, Inc.          |  |                           |    |   |                                      |   | (872    | )                                               |  |   |               |  |  |   | (872    | )
|Quench Holdings Corp.             |  |                           |    |   |                                      |   | (944    | )                                               |  |   |               |  |  |   | (944    | )
|Acme Cryogenics, Inc.             |  |                           |    |   |                                      |   | (962    | )                                               |  |   |               |  |  |   | (962    | )
|Channel Technologies Group, LLC   |  |                           |    |   |                                      |   | (1,288  | )                                               |  |   |               |  |  |   | (1,288  | )
|Auto Safety House, LLC            |  |                           |    |   |                                      |   | (1,458  | )                                               |  |   |               |  |  |   | (1,458  | )
|Mitchell Rubber Products, Inc.    |  |                           |    |   |                                      |   | (1,762  | )                                               |  |   |               |  |  |   | (1,762  | )
|Packerland Whey Products, Inc.    |  |                           |    |   |                                      |   | (2,131  | )                                               |  |   |               |  |  |   | (2,131  | )
|B-Dry, LLC                        |  |                           |    |   |                                      |   | (3,953  | )                                               |  |   |               |  |  |   | (3,953  | )
|Noble Logistics, Inc.             |  |                           |    |   |                                      |   | (6,420  | )                                               |  |   |               |  |  |   | (6,420  | )
|D.P.M.S., Inc.                    |  |                           |    |   |                                      |   | (8,225  | )                                               |  |   |               |  |  |   | (8,225  | )
|Tread Corp.                       |  |                           |    |   |                                      |   | (15,930 | )                                               |  |   |               |  |  |   | (15,930 | )
|Other, net (<$250 Net)            |  |                           | (18 | ) |                                      |   | 241     |                                                 |  |   |               |  |  |   | 223     |  
|                                  |  |                           |     |   |                                      |   |         |                                                 |  |   |                |  |  |   |         |  
|Total                             |  | $                         | 843 |   |                                      | $ | 804     |                                                 |  | $ |               |  |  | $ | 1,647   |  
|                                  |  |                           |     |   |                                      |   |         |                                                 |  |   |                |  |  |   |         |  

The primary changes in our net unrealized appreciation for the fiscal year ended March 31, 2013, were due to notable
unrealized appreciation of our equity investment in Venyu, primarily due to increased portfolio company performance and an increase in certain comparable multiples used to estimate the fair value. We also experienced notable appreciation in our
investments in Galaxy and CCE, primarily due to increased portfolio company performance. This unrealized appreciation was partially offset by notable depreciation of our debt investments in D.P.M.S., Inc. (d/b/a Danco Acquisition Corp.)
(Danco) and in our debt and equity investments in Tread, Noble and B-Dry, LLC (B-Dry), primarily due to decreased portfolio company performance and, to a lesser extent, a decrease in certain comparable multiples used to
estimate the fair value of our investments.

Over our entire investment portfolio, we recorded, in the aggregate, $10.7 million of net unrealized
appreciation and $39.9 million of net unrealized depreciation on our debt positions and equity holdings, respectively, for the year ended March 31, 2014. As of March 31, 2014, the fair value of our investment portfolio was less than our
cost basis by $69.1 million, as compared to $39.9 million as of March 31, 2013, representing net unrealized depreciation of $29.2 million for fiscal year 2014. We believe that our aggregate investment portfolio was valued at a depreciated value
due to the lingering effects of the recent recession on the performance of certain of our portfolio companies. Our entire investment portfolio was fair valued at 82.0% of cost as of March 31, 2014. The unrealized depreciation of our investments
does not have an impact on our current ability to pay distributions to stockholders; however, it may be an indication of future realized losses, which could ultimately reduce our income available for distribution.

Realized Loss on Other

For the years ended
March 31, 2014 and 2013, we recorded a net realized loss of $29 and $41, respectively, due to the expiration of interest rate cap agreements in each year.



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Net Unrealized Depreciation (Appreciation) on Other

For the years ended March 31, 2014 and 2013, we recorded $0.4 million of net unrealized depreciation and $0.9 million of net unrealized appreciation,
respectively, on our Credit Facility recorded at fair value.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Our cash flows from operating
activities are primarily generated from cash collections of interest and dividend payments from our portfolio companies, as well as cash proceeds received through repayments of debt investments and sales of equity investments. These cash collections
are primarily used to pay distributions to our stockholders, interest payments on our Credit Facility, dividend payments on our three series of mandatorily redeemable preferred stock, management fees to the Adviser, and for other operating expenses.
Net cash used in operating activities for the year ended March 31, 2015, was approximately $97.6 million, as compared to $33.6 million for the year ended March 31, 2014. This increase in cash used in operating activities was primarily due
to a decrease in principal repayments and proceeds from the sale of investments year over year. Repayments and proceeds from the sale of investments totaled $11.3 million during the year ended March 31, 2015, compared to $83.4 million during
the year ended March 31, 2014, largely due to our exit of Venyu in August 2013, which resulted in sale proceeds of $30.8 million and principal repayments of $19.0 million.

Net cash used in operating activities for the year ended March 31, 2014, was $33.6 million, as compared to $39.7 million during the year ended
March 31, 2013. This decrease in cash used in operating activities was primarily due to an increase in principal repayments and sales proceeds of $55 million over the prior year, largely due to our exit of Venyu in August 2013, partially offset
by increased investment originations of $48.7 million over the prior year.

As of March 31, 2015, we had equity investments in or loans to 34 private
companies with an aggregate cost basis of approximately $505.3 million. As of March 31, 2014, we had equity investments in or loans to 29 private companies with an aggregate cost basis of approximately $383.5 million. The following table
summarizes our total portfolio investment activity for the years ended March 31, 2015 and 2014:



|                                              |  |                       |         |   |      |   |         |  
|--------------------------------------------- |  | --------------------- | ------- | - | ---- | - | ------- | -
|                                              |  | Years Ended March 31, |        
|                                              |  | 2015                  |         |   | 2014 |  
|Beginning investment portfolio, at fair value |  | $                     | 314,393 |   |      | $ | 286,482 |  
|New investments                               |  |                       | 108,197 |   |      |   | 125,567 |  
|Disbursements to existing portfolio companies |  |                       | 24,705  |   |      |   | 6,636   |  
|Increase in investment balance due to PIK     |  |                       | 78      |   |      |   | 88      |  
|Scheduled principal repayments                |  |                       | (878    | ) |      |   | (110    | )
|Unscheduled principal repayments              |  |                       | (10,382 | ) |      |   | (51,718 | )
|Proceeds from sales                           |  |                       |        |   |      |   | (31,587 | )
|Net realized gain                             |  |                       |        |   |      |   | 8,241   |  
|Net unrealized appreciation (depreciation)    |  |                       | 29,940  |   |      |   | (28,416 | )
|Reversal of net unrealized appreciation       |  |                       |        |   |      |   | (790    | )
|                                              |  |                       |         |   |      |   |         |  
|Ending Investment Portfolio, at Fair Value    |  | $                     | 466,053 |   |      | $ | 314,393 |  
|                                              |  |                       |         |   |      |   |         |  

The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year,
assuming no voluntary prepayments, as of March 31, 2015:



|                                      |  |                                                            |  |        |         | 
|------------------------------------- |  | ---------------------------------------------------------- |  | ------ | ------- | 
|                                      |  |                                                            |  | Amount |        
|For the fiscal years ending March 31: |  | 2016                                                       |  | $      | 19,567  | 
|                                      |  | 2017                                                       |  |        | 43,861  | 
|                                      |  | 2018                                                       |  |        | 100,316 | 
|                                      |  | 2019                                                       |  |        | 81,681  | 
|                                      |  | 2020                                                       |  |        | 115,403 | 
|                                      |  | Thereafter                                                 |  |        | 9,618   | 
|                                      |  |                                                            |  |        |         | 
|                                      |  | Total contractual repayments                               |  | $      | 370,446 | 
|                                      |  | Investments in equity securities                           |  |        | 134,812 | 
|                                      |  |                                                            |  |        |         | 
|                                      |  | Total Cost Basis of Investments Held as of March 31, 2015: |  | $      | 505,258 | 
|                                      |  |                                                            |  |        |         | 



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Financing Activities

Net cash provided by financing activities for the year ended March 31, 2015, was approximately $97.9 million, which consisted primarily of $41.4 million
of proceeds from the issuance of our Series B Term Preferred Stock, $23.0 million of net proceeds from the issuance of additional shares of our common stock, and $57.5 million of net borrowings on our Credit Facility, partially offset by $20.6
million in distributions to common stockholders. Net cash used in financing activities for the year ended March 31, 2014, was $47.7 million and consisted primarily of net repayments of our short-term borrowings of $58.0 million and
distributions to common stockholders of $18.8 million, partially offset by $30.3 million in net borrowings from our Credit Facility.

Distributions
to Stockholders

Common Stock Distributions

To qualify to be taxed as a RIC and thus avoid corporate level federal income tax on the income we distribute to our stockholders, we are required to
distribute to our stockholders on an annual basis at least 90% of our investment company taxable income. Additionally, our 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 $0.06 per common share for each month during the year ended March 31, 2015, as well as a special distribution of $0.05 in
December 2014. In April 2015, our Board of Directors also declared a monthly distribution of $0.0625 per common share for each of April, May, and June 2015, which is a 4.2% run rate increase on a monthly basis. Our Board of Directors declared these
distributions based on estimates of taxable income for the fiscal year ending March 31, 2016.

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, 2016 will be determined after the 2016 fiscal year end based upon our taxable income for the full year and distributions paid during the full year. Such a characterization made on a quarterly
basis may not be representative of the actual full year characterization.

For the year ended March 31, 2015, distributions to common stockholders
totaled of $20.6 million and were less than our taxable income for the same year, when also considering prior year spillover amounts under Section 855(a) of the Code. In addition, we recorded a $0.6 million adjustment for estimated book-tax
differences, which decreased capital in excess of par value and increased net investment income in excess of distributions. At March 31, 2015, we elected to treat $4.0 million of the first distribution paid after fiscal year-end as having been
paid in the prior fiscal year, in accordance with Section 855(a) of the Code. For the year ended March 31, 2014, distributions to common stockholders totaled $18.8 million and were less than our taxable income for the same year, when also
considering prior year spillover amounts under Section 855(a) of the Code. At March 31, 2014, we elected to treat $3.9 million of the first distribution paid after fiscal year-end as having been paid in the prior fiscal year, in accordance
with Section 855(a) of the Code.

Preferred Stock Dividends

Our Board of Directors declared and we paid monthly cash dividends of $0.1484375 per share to holders of our Series A Term Preferred Stock for each month
during the year ended March 31, 2015. For the year ended March 31, 2015, our Board of Directors declared and we paid dividends for the pro-rated month of November 2014 and for each full month from December 2014 through March 31, 2015
in aggregate of $0.703125 per share to our holders of Series B Term Preferred Stock. In April 2015, our Board of Directors also declared a monthly dividend of $0.1484375 and $0.140625 per preferred share for each of April, May, and June 2015 to the
holders of our Series A Term Preferred Stock and Series B Term Preferred Stock, respectively. In May 2015, our Board of Directors declared a combined prorated dividend for May 2015 and a full month dividend for June 2015, which totaled $0.221181 per
share, to the holders of our Series C Term Preferred Stock. 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

We offer a dividend reinvestment plan for our common stockholders who hold their shares through our transfer agent, Computershare, Inc. This is an opt
in dividend reinvestment plan, meaning that common stockholders may elect to have their cash distributions automatically reinvested in additional shares of our common stock. Common stockholders who do not so elect will receive their
distributions in cash. Common stockholders who receive distributions in the form of stock will be subject to the same federal, state



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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. Our plan agent
purchases shares in the open market in connection with the obligations under the plan. We do not have a dividend reinvestment plan for our preferred stock stockholders.

Equity

Registration Statement

We filed a registration statement on Form N-2 (File No. 333-181879) with the SEC on June 4, 2012, and subsequently filed a Pre-Effective
Amendment No. 1 to the registration statement on July 17, 2012, which the SEC declared effective on July 26, 2012. On June 7, 2013, we filed Post-Effective Amendment No. 2 to the registration statement, which the SEC
declared effective on July 26, 2013. On June 3, 2014, we filed Post-Effective Amendment No. 3 to the registration statement, and subsequently filed a Post-Effective Amendment No. 4 to the registration statement on
September 2, 2014, which the SEC declared effective on September 4, 2014. 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 or preferred stock, including through a combined offering of two or more of such securities. We generated $33.0 million and $28.1 million of gross proceeds through
the issuance of common stock under the registration statement in October and November 2012 and March 2015 and April 2015, respectively. Additionally, we issued $41.4 million of our Series B Term Preferred Stock and $40.3 million of our Series C Term
Preferred Stock under the registration statement in November 2014 and May 2015, respectively. No other securities have been issued to date under the registration statement. Currently, we have the ability to issue up to $117.3 million in securities
under the registration statement.

Common Stock

Pursuant to our registration statement on Form N-2 (Registration No. 333-181879), on October 5, 2012, we completed a public offering of
4.0 million shares of our common stock at a public offering price of $7.50 per share, which was below then current NAV of $8.65 per share. Gross proceeds totaled $30.0 million and net proceeds, after deducting underwriting discounts and
offering expenses borne by us, were approximately $28.3 million, which was used to repay borrowings under our Credit Facility. In connection with the offering, in November 2012, the underwriters exercised their option to purchase an additional
395,825 shares at the public offering price to cover over-allotments, which resulted in gross proceeds of $3.0 million and net proceeds, after deducting underwriting discounts, of approximately $2.8 million.

Also pursuant to our registration statement on Form N-2 (Registration No. 333-181879), on March 13, 2015, we completed a public offering of
3.3 million shares of our common stock at a public offering price of $7.40 per share, which was below then current NAV of $8.55 per share. Gross proceeds totaled $24.4 million and net proceeds, after deducting underwriting discounts and
offering expenses borne by us, were approximately $23.0 million, which were primarily used to repay borrowings under our Credit Facility. In connection with the offering, on April 2, 2015, the underwriters exercised their option to purchase an
additional 495,000 shares at the public offering price to cover over-allotments, which resulted in gross proceeds of $3.7 million and net proceeds, after deducting underwriting discounts, of approximately $3.5 million.

We anticipate issuing equity securities to obtain additional capital in the future. However, we cannot determine the terms of any future equity issuances or
whether we will be able to issue equity on terms favorable to us, or at all. When our common stock is trading at a price below NAV per share, as it has consistently 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. On May 19, 2015, the closing market price of our common stock was $7.54 per share, representing a 17.9% discount to our NAV of $9.18 as of
March 31, 2015. To the extent that our common stock continues to trade 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 2014 Annual Meeting of Stockholders held on August 7, 2014, our stockholders approved a proposal authorizing us to issue and sell shares of
our common stock at a price below our then current NAV per common share for a period of one year from the date of such approval, provided that our Board of Directors makes certain determinations prior to any such sale. At our 2015 Annual Meeting of
Stockholders, scheduled to take place in August 2015, we will again ask our stockholders to vote in favor of a similar proposal so that it may be in effect for another year.



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Term Preferred Stock

Pursuant to our prior 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 expenses borne by us, were approximately $38.0 million, a
portion of which was used to repay borrowings under our Credit Facility, with the remaining proceeds being held to make additional investments and for general corporate purposes. We incurred $2.0 million in total offering costs related to the
offering, which have been recorded as deferred financing costs on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending February 28, 2017, the mandatory redemption date.

Our Series A Term Preferred Stock provides for a fixed dividend equal to 7.125% per year, payable monthly (which equates to $2.9 million per year). We
are 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 is not convertible into our common stock or any other security. In addition, three other potential 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 the outstanding Series A Term Preferred Stock; (2) if we fail to maintain an asset coverage ratio of at least 200%, we are required to redeem a portion of the outstanding Series A
Term Preferred Stock or otherwise cure the ratio redemption trigger and (3) at our sole option, at any time on or after February 28, 2016, we may redeem some or all of our Series A Term Preferred Stock.

Pursuant to our 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 expenses borne by us, were $39.7 million. We incurred $1.7
million in total offering costs related to this offering, which have been recorded as deferred financing costs on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending
December 31, 2021, the mandatory redemption date.

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, (2) if we fail to maintain an asset
coverage ratio of at least 200%, we are required to redeem a portion of our outstanding Series B Term Preferred Stock or otherwise cure the ratio redemption trigger. We may also voluntarily redeem all or a portion of our Series B Term Preferred
Stock at our sole option at the redemption price in order to have an asset coverage ratio of up to and including 215.0% and at any time on or after December 31, 2017.

Also pursuant to our 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 expenses borne by us, were approximately $38.6 million. We
incurred $1.6 million in total offering costs related to this offering, which will be recorded as deferred financing costs on future Consolidated 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, (2) if we fail to maintain an asset coverage ratio of at least 200%, we are
required to redeem a portion of our outstanding Series C Term Preferred Stock or otherwise cure the ratio redemption trigger. We may also voluntarily redeem all or a portion of our Series C Term Preferred Stock at our sole option at the redemption
price in order to have an asset coverage ratio of up to and including 215.0% and at any time on or after May 31, 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 A, B, and C Term Preferred Stock are considered liabilities in accordance with GAAP and, as such, affect our asset coverage, exposing us to additional leverage risks.



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Revolving Credit Facility

On June 26, 2014, we, through Business Investment, entered into Amendment No. 1 to our Credit Facility, with KeyBank, administrative agent, lead
arranger and a lender; other lenders; and the Adviser, as servicer, to extend the revolving period and reduce the interest rate of our revolving line of credit. The revolving period was extended 14 months to June 26, 2017, and if not renewed or
extended by June 26, 2017, all principal and interest will be due and payable on or before June 26, 2019 (two years after the revolving period end date). In addition, we have retained the two one-year extension options, to be agreed upon
by all parties, which may be exercised on or before June 26, 2015 and 2016, respectively, and upon exercise, the options would extend the revolving period to June 26, 2018 and 2019 and the maturity date to June 26, 2020 and 2021,
respectively. Subject to certain terms and conditions, our Credit Facility can be expanded by up to $145.0 million, to a total facility amount of $250 million, through additional commitments of existing or new committed lenders. Advances under our
Credit Facility generally bear interest at 30-day LIBOR, plus 3.25% per annum, down from 3.75% prior to the amendment, and our Credit Facility includes an unused fee of 0.50% on undrawn amounts. Once the revolving period ends, the interest rate
margin increases to 3.75% for the period from June 26, 2017 to June 26, 2018, and further increases to 4.25% through maturity. We incurred fees of $0.4 million in connection with this amendment, which are being amortized through our Credit
Facilitys revolver period end date of June 26, 2017.

On September 19, 2014, we further increased our borrowing capacity under our Credit
Facility from $105.0 million to $185.0 million by entering into Joinder Agreements pursuant to our Credit Facility, by and among Business Investment, KeyBank, the Adviser and other lenders. We incurred fees of $1.3 million in connection with this
expansion, which are being amortized through our Credit Facilitys revolver period end date of June 26, 2017.

Our 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 material changes to our
credit and collection policies without lenders consent. The Credit Facility generally also limits distributions 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, for each of the twelve month periods ending March 31, 2016 and 2017. We are also subject
to certain limitations on the type of loan investments we can make, including restrictions on geographic concentrations, sector concentrations, loan size, payment frequency and status, average life and lien property. Our Credit Facility also
requires us to comply with other financial and operational covenants, which obligate us to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of obligors required in the borrowing base
of the credit agreement. Additionally, we are subject to a performance guaranty that requires us to maintain (i) a minimum net worth of $170.0 million plus 50.0% of all equity and subordinated debt raised minus any equity or subordinated debt
redeemed or retired after June 26, 2014, which equates to $202.9 million as of March 31, 2015, (ii) asset coverage with respect to senior securities representing indebtedness of at least 200%, in accordance
with Section 18 of the 1940 Act and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of March 31, 2015, and as defined in the performance guaranty of our Credit Facility, we had a net worth of $354.8
million, an asset coverage of 229.9% and an active status as a BDC and RIC. As of March 31, 2015, we were in compliance with all covenants under our Credit Facility.

Our Credit Facility also requires that any interest or principal payments on pledged loans be remitted directly by the borrower into a lockbox account with
KeyBank and with The Bank of New York Mellon Trust Company, N.A. as custodian. KeyBank is also the trustee of the account and generally remits the collected funds to us once a month.

Pursuant to the terms of our Credit Facility, in July 2013, we entered into a forward interest rate cap agreement, effective October 2013 and expiring April
2016, for a notional amount of $45.0 million. We incurred a premium fee of $75 in conjunction with this agreement. The interest rate cap agreement effectively limits the interest rate on a portion of the borrowings pursuant to the terms of our
Credit Facility.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

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 March 31, 2015 to be minimal.

In addition to the lines
of credit and other uncalled capital commitments to our portfolio companies, we have also extended certain guarantees on behalf of some our portfolio companies, whereby we have guaranteed an aggregate of $2.6 million of obligations of CCE. As of
March 31, 2015, we have not been required to make any payments on any of the guarantees, and we consider the credit risks to be remote and the fair value of the guaranties to be minimal.



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The following table shows our contractual obligations as of March 31, 2015, at cost:



|                                          |  |                        |         |  |                 |   |        |           |  |   |           |  |  |                  |       |  |  |   |        | 
|----------------------------------------- |  | ---------------------- | ------- |  | --------------- | - | ------ | --------- |  | - | --------- |  |  | ---------------- | ----- |  |  | - | ------ | 
|                                          |  | Payments Due by Period |        
|Contractual Obligations(A)                |  | Total                  |         |  | Less than1 Year |   |        | 1-3 Years |  |   | 3-5 Years |  |  | More than5 Years |      
|Credit Facility(B)                        |  | $                      | 118,800 |  |                 | $ |       |           |  | $ | 118,800   |  |  | $                |      |  |  | $ |       | 
|Mandatorily redeemable preferred stock(C) |  |                        | 81,400  |  |                 |   |       |           |  |   | 40,000    |  |  |                  |      |  |  |   | 41,400 | 
|Secured borrowing                         |  |                        | 5,096   |  |                 |   |       |           |  |   | 5,096     |  |  |                  |      |  |  |   |       | 
|Interest payments on obligations(D)       |  |                        | 35,681  |  |                 |   | 10,571 |           |  |   | 17,301    |  |  |                  | 5,674 |  |  |   | 2,135  | 
|                                          |  |                        |         |  |                 |   |        |           |  |   |           |  |  |                  |       |  |  |   |        | 
|Total                                     |  | $                      | 240,977 |  |                 | $ | 10,571 |           |  | $ | 181,197   |  |  | $                | 5,674 |  |  | $ | 43,535 | 
|                                          |  |                        |         |  |                 |   |        |           |  |   |           |  |  |                  |       |  |  |   |        | 



|(A) | Excludes our unused line of credit commitments and uncalled capital commitments and guaranties to our portfolio companies in the aggregate amount of $12.6 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Principal balance of borrowings outstanding under our Credit Facility, based on the current contractual revolver period end date due to the revolving nature of the facility.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Excludes $40.3 million of our Series C Term Preferred Stock issued in May 2015 with a mandatory redemption date in May 2022.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(D) | Includes interest payments due on our Credit Facility and dividend obligations on each series of our mandatorily redeemable preferred stock. Dividend payments on our mandatorily redeemable term preferred stock assume
quarterly declarations and monthly distributions through the date of mandatory redemption of each series.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Of our interest bearing debt
investments as of March 31, 2015, 83.0% had a success fee component, which enhances the yield on our debt investments. Unlike PIK income, we generally recognize success fees as income only when the payment has been received. As a result, as of
March 31, 2015 and 2014, we had aggregate off-balance sheet success fee receivables of $24.3 million and $17.7 million (or approximately $0.82 and $0.69 per common share), respectively, on our accruing debt investments that would be owed to us
based on our current portfolio if fully paid off. Consistent with GAAP, we have not recognized our success fee receivable on our balance sheet or income statement. Due to our success fees contingent nature, there are no guarantees that we will
be able to collect all of these success fees or know the timing of such collections.

Litigation

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.

Critical Accounting Policies

The preparation of
financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported consolidated amounts of assets and liabilities, including disclosure of contingent assets and
liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ materially from those estimates under different assumptions or conditions. We have identified our investment
valuation policy (which has been approved by our Board of Directors) (the Policy) as our most critical accounting policy.

Investment
Valuation

The most significant estimate inherent in the preparation of our consolidated financial statements is the valuation of our
investments and the related amounts of unrealized appreciation and depreciation of investments recorded in our accompanying Consolidated Financial Statements.

Accounting Recognition

We record our investments at fair
value in accordance with the Financial Accounting Standards Board (the FASB) Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC 820) and the 1940 Act. Investment
transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and amortized cost basis of the investment, without regard to unrealized 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.



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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.



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



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



| |  |  | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are those inputs that reflect assumptions that market participants would use
when pricing the financial instrument and can include the Valuation Teams (as defined below) 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 March 31, 2015 and 2014,
all of our investments were valued using Level 3 inputs and during the years ended March 31, 2015 and 2014, there were no investments transferred into or out of Level 1, 2 or 3.

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 the Policy. Our Board of Directors reviews valuation recommendations that are provided by professionals of
the Adviser and Administrator with oversight and direction from the chief valuation officer, (the Valuation Team). 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 our Board of Directors reviews the
Policy to determine if changes thereto are advisable and also reviews whether the Valuation Team has applied the Policy consistently.

Use of Third
Party Valuation Firms

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

Standard & Poors Securities Evaluation, Inc. (SPSE) provides estimates of fair value on our debt investments. The
Valuation Team 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 Board of Directors reviews 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 of certain of our investments. Generally, at least once per year, we engage an independent valuation firm to value or review the Companys valuation of our significant equity investments,
which includes providing the information noted above. The Valuation Team evaluates such information for incorporation into our total enterprise value, including review of all inputs provided by the independent valuation firm. The Valuation Team
then makes a recommendation to our 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 total enterprise value (TEV), the Valuation Team first calculates the TEV of the portfolio company by incorporating some or all of
the following factors: the portfolio companys ability to make payments and other specific portfolio company attributes; the earnings of the portfolio company (the trailing or projected twelve month revenue or earnings before interest, taxes,
depreciation and amortization (EBITDA)); EBITDA or revenue multiples obtained from our indexing methodology whereby the original transaction EBITDA or revenue multiple at the time of our closing is indexed to a general subset of
comparable disclosed transactions and EBITDA or revenue multiples from recent sales to third parties of similar securities in similar industries; a comparison to publicly traded securities in similar industries, and other pertinent factors. The
Valuation Team generally references industry statistics and may use outside experts when gathering this information. Once the TEV is determined for a portfolio company, the Valuation Team then generally allocates the TEV to the portfolio
companys securities in order of their relative priority in the capital structure. Generally, the Valuation Team uses TEV to value our equity investments and, in the circumstances where we have the ability to effectuate a sale of a portfolio
company, our debt investments.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 using the yield analysis, which includes a DCF calculation and the Valuation Teams own assumptions,
including, but not limited to, estimated remaining life, current market yield, current leverage, and interest rate spreads. This technique develops a modified discount rate that incorporates risk premiums including, among other things, increased
probability of default, increased loss upon default and increased liquidity risk. Generally, the Valuation Team uses the yield analysis to corroborate both estimates of value provided by SPSE and market quotes.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

In addition to the above valuation techniques, the Valuation Team may also consider other factors when determining fair values of our investments, including
but not limited to: the nature and realizable value of the collateral, including external parties guaranties; any relevant offers or letters of intent to acquire the portfolio company; and the markets in which the portfolio company operates.
If applicable, new and follow-on debt and equity investments made during the current reporting quarter (the three months ended March 31, 2015) are generally valued at original cost basis.

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.



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Refer to Note 3Investments in the accompanying notes to our accompanying Consolidated Financial
Statements included elsewhere in this report for additional information regarding fair value measurements and our application of ASC 820.

Credit
Monitoring and Risk Rating

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

The Adviser risk rates all of our investments in debt securities. The Adviser does not risk rate our equity securities. For loans that have been rated by a
Nationally Recognized Statistical Rating Organization (NRSRO) (as defined in Rule 2a-7 under the 1940 Act), the Adviser generally uses the average of two corporate level NRSROs risk ratings for such security. For all other debt
securities, the Adviser uses a proprietary risk rating system. While the Adviser seeks to mirror the NRSRO systems, we cannot provide any assurance that the Advisers risk rating system will provide the same risk rating as an NRSRO for these
securities. The Advisers risk rating system is used to estimate the probability of default on debt securities and the expected loss if there is a default. The Advisers risk rating system uses a scale of 0 to >10, with >10 being the
lowest probability of default. It is the Advisers understanding that most debt securities of medium-sized companies do not exceed the grade of BBB on an NRSRO scale, so there would be no debt securities in the middle market that would meet the
definition of AAA, AA or A. Therefore, the Advisers scale begins with the designation >10 as the best risk rating which may be equivalent to a BBB from an NRSRO; however, no assurance can be given that a >10 on the Advisers scale
is equal to a BBB or Baa2 on an NRSRO scale. The Advisers risk rating system covers both qualitative and quantitative aspects of the business and the securities we hold. During the three months ended June 30, 2014, we modified our risk
rating model to incorporate additional factors in our qualitative and quantitative analysis. While the overall process did not change, we believe the additional factors enhance the quality of the risk ratings of our investments. No adjustments were
made to prior periods as a result of this modification.

The following table reflects risk ratings for all loans in our portfolio as of March 31,
2015 and 2014:



|                 |  |                 |      |  |      |  |     | 
|---------------- |  | --------------- | ---- |  | ---- |  | --- | 
|                 |  | As of March 31, |     
|Rating           |  | 2015            |      |  | 2014 | 
|Highest          |  |                 | 10.0 |  |      |  | 9.1 | 
|Average          |  |                 | 5.9  |  |      |  | 5.7 | 
|Weighted Average |  |                 | 6.4  |  |      |  | 5.2 | 
|Lowest           |  |                 | 3.0  |  |      |  | 2.6 | 

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 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 meet certain source-of-income and asset diversification requirements. In addition, in order to qualify to be taxed as a RIC, we must also meet certain annual stockholder distribution
requirements. To satisfy the RIC annual distribution requirement, we must distribute to stockholders at least 90.0% of our investment company taxable income. Our policy generally is to make distributions to our stockholders in an amount up to 100.0%
of our investment company taxable income.

In an effort to limit certain federal excise taxes imposed on RICs, we currently intend to distribute to our
stockholders, during each calendar year, an amount at least equal to the sum of: (1) 98.0% of our ordinary income for the calendar year, (2) 98.2% of our capital gain net income for the one-year period ending on October 31 of the
calendar year, and (3) any ordinary income and capital gain net income from preceding years that were not distributed during such years. Under the RIC Modernization Act (the RIC Act), we are permitted to carryforward capital losses
incurred in taxable years beginning after September 30, 2011, for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years,
which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term
or long-term capital losses rather than being considered all short-term as permitted under the Treasury regulations applicable to pre-enactment capital loss carryforwards. Our total capital loss carry forward balance was $0.3 million as of
March 31, 2015.



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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 March 31, 2015, our loans to Tread were on non-accrual status, with an aggregate debt cost basis of $11.7 million, or 3.1% of the cost basis of all debt investments in our portfolio, and an aggregate fair value of $1.8
million, or 0.5% of the fair value of all debt investments in our portfolio. As of March 31, 2014, our loans to Tread were on non-accrual status, with an aggregate debt cost basis of $11.7 million, or 4.2% of the cost basis of all debt
investments in our portfolio, and an aggregate fair value of $0.

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. To maintain our status as a RIC, this non-cash source of income must be included in our calculation of distributable income for purposes of complying with our distribution
requirements, even though we have not yet collected the cash. During the years ended March 31, 2015 and 2014, we recorded PIK income of $0.1 million. We did not hold any loans in our portfolio that contained a PIK provision during the year
ended March 31, 2013.

Other Income Recognition

We generally record success fees upon receipt of cash. Success fees are contractually due upon a change of control in a portfolio company, typically from an
exit or sale. We recorded an aggregate of $1.4 million of success fees during the year ended March 31, 2015 related to prepaid success fees from SOG, ASH, Drew Foam, Frontier, and Mathey. We recorded an aggregate of $4.2 million of success fees
during the year ended March 31, 2014 related to debt exits or prepayments from Venyu, Channel, Cavert, SOG, Mathey and Frontier. During the year ended March 31, 2013, we recorded an aggregate of $0.8 million of success fees, representing
prepayments received from Mathey and Cavert.

Dividend income on equity investments is accrued to the extent that such amounts are expected to be
collected and if we have the option to collect such amounts in cash. During the year ended March 31, 2015, we recorded an aggregate of $3.5 million of dividend income from Funko, SOG, Drew Foam, Frontier, and Mathey. For the year ended
March 31, 2014, we recorded $1.4 million in dividend income related to the exit of Venyu. During the year ended March 31, 2013, we recorded an aggregate of $4.8 million in dividend income, which resulted from payments from Galaxy and Acme,
respectively.

Both dividend income and success fees are recorded in other income in our accompanying Consolidated Statements of Operations.

Recent Accounting Pronouncements

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

In February 2015, the FASB issued 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 new standard changes the way a reporting entity evaluates whether a) limited partnerships and
similar entities should be consolidated, b) fees paid to decision makers or service provides are variable interests in a variable interest entity (VIE), and c) variable interests in a VIE held by related parties require the reporting
entity to consolidate the VIE. ASU 2015-02 also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. We do not anticipate ASU 2015-02 to 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, with early adoption permitted.



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

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with
Customers (ASU 2014-09), which supersedes or replaces nearly all GAAP revenue recognition guidance. The new guidance establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is
recognized over time or at a point in time and will expand disclosures about revenue. We are currently assessing the impact of ASU 2014-09 and anticipate no impact on our financial position, results of operations or cash flows from adopting this
standard. ASU 2014-09 is effective for annual reporting periods that begin after December 15, 2016 and interim periods within those years, with early adoption not permitted.

In June 2013, the FASB issued Accounting Standards Update 2013-08, Financial Services  Investment Companies (Topic 946): Amendments to the
Scope, Measurement, and Disclosure Requirements (ASU 2013-08), which amends the criteria that define an investment company and clarifies the measurement guidance and requires new disclosures for investment companies. Under ASU
2013-08, an entity already regulated under the 1940 Act is automatically an investment company under the new GAAP definition, so there was no impact from adopting this standard on our financial position or results of operations. We adopted ASU
2013-08 beginning with our quarter ended June 30, 2014, and have increased our disclosure requirements as necessary.



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ITEM 7A. 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 is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, there can
be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We use a combination of debt and equity capital to finance our investing activities. We 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 March 31, 2015, our portfolio consisted of the following breakdown based on total principal balance of all outstanding debt
investments:



| |       |   |  |                            
| | ----- | - |  | ---------------------------
| | 79.9  | % |  | Variable rates with a floor
| | 20.1  |   |  | Fixed rates                
| |       |   |  |                            
| | 100.0 | % |  | Total                      
| |       |   |  |                            

On June 26, 2014, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 1 to the
Fifth Amended and Restated Credit Agreement originally entered into on April 30, 2013, with KeyBank, as administrative agent, lead arranger and a lender; other lenders; and the Adviser, as servicer, to extend the revolving period and reduce the
interest rate of our revolving line of credit. The revolving period was extended 14 months to June 26, 2017, and if not renewed or extended by June 26, 2017, all principal and interest will be due and payable on or before June 26,
2019 (two years after the revolving period end date). In addition, we have retained the two one-year extension options, to be agreed upon by all parties, which may be exercised on or before June 26, 2015 and 2016, respectively, and upon
exercise, the options would extend the revolving period to June 26, 2018 and 2019 and the maturity date to June 26, 2020 and 2021, respectively. Subject to certain terms and conditions, our Credit Facility can be expanded by up to $145.0
million, to a total facility amount of $250.0 million, through additional commitments of existing or new committed lenders. On September 19, 2014, we further increased our borrowing capacity under our Credit Facility from $105.0 million to
$185.0 million by entering into Joinder Agreements pursuant to our Credit Facility. Advances under our Credit Facility generally bear interest at 30-day LIBOR, plus 3.25% per annum, down from 3.75% prior to the amendment, and our Credit
Facility includes a fee of 0.50% on undrawn amounts. Once the revolving period ends, the interest rate margin increases to 3.75% for the period from June 26, 2017 to June 26, 2018, and further increases to 4.25% through maturity.

In connection with original closing date of our Credit Facility in July 2013, we entered into a forward interest rate cap agreement, effective October 2013
and expiring in April 2016. As of March 31, 2015, the interest rate cap agreement had a minimal fair value.

The current interest rate cap agreement
entitles us to receive payments, if any, equal to the amount by which interest payments on the current notional amount at the 30-day LIBOR exceed the payments on the current notional amount at 6.0%. This agreement effectively caps our interest
payments on our line of credit borrowings, up to the notional amount of the interest rate cap over the remaining term of the agreement. This mitigates our exposure to increases in interest rates on our borrowings on our line of credit, which are at
variable rates.

To illustrate the potential impact of changes in interest rates on our net increase (decrease) in net assets resulting from operations,
we have performed the following hypothetical analysis, which assumes that our balance sheet and interest rates remain constant as of March 31, 2015 and no further actions are taken to alter our existing interest rate sensitivity.



|                       |  |                            |       |  |                                        |   |       |                                                               |  |   |        |  
|---------------------- |  | -------------------------- | ----- |  | -------------------------------------- | - | ----- | ------------------------------------------------------------- |  | - | ------ | -
|Basis Point Change (a) |  | Increase inInterest Income |       |  | Increase (Decrease) inInterest Expense |   |       | Net (Decrease) Increase inNet Assets Resulting fromOperations | 
|Up 300 basis points    |  | $                          | 2,902 |  |                                        | $ | 3,564 |                                                               |  | $ | (662   | )
|Up 200 basis points    |  |                            | 766   |  |                                        |   | 2,376 |                                                               |  |   | (1,610 | )
|Up 100 basis points    |  |                            | 80    |  |                                        |   | 1,188 |                                                               |  |   | (1,108 | )
|Down 17 basis points   |  |                            |      |  |                                        |   | (204  | )                                                             |  |   | 204    |  



|(a) | As of March 31, 2015, our effective average LIBOR was 0.17%, therefore the largest decrease in basis points that could occur was 17 basis points.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

Although management believes that this analysis is indicative of our existing interest rate sensitivity, it does not adjust for potential changes in credit
quality, size and composition of our loan portfolio on the balance sheet and other business developments that could affect net increase (decrease) in net assets resulting from operations. Accordingly, actual results could differ significantly from
those in the hypothetical analysis in the table above.



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We may also experience risk associated with investing in securities of companies with foreign operations. Some of
our portfolio companies have operations located outside the U.S. These risks include, but are not limited to, fluctuations in foreign currency exchange rates, imposition of foreign taxes, changes in exportation regulations and political and social
instability.



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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements



|                                                                                                   |  |  |    | 
|-------------------------------------------------------------------------------------------------- |  |  | -- | 
|Report of Management on Internal Controls and Financial Reporting                                  |  |  | 66 | 
|Report of Independent Registered Public Accounting Firm                                            |  |  | 67 | 
|Consolidated Statements of Assets and Liabilities as of March 31, 2015 and March 31, 2014          |  |  | 68 | 
|Consolidated Statements of Operations for the years ended March 31, 2015, 2014 and 2013            |  |  | 69 | 
|Consolidated Statements of Changes in Net Assets for the years ended March 31, 2015, 2014 and
2013 |  |  | 70 | 
|Consolidated Statements of Cash Flows for the years ended March 31, 2015, 2014 and 2013            |  |  | 71 | 
|Consolidated Schedules of Investments as of March 31, 2015 and March 31, 2014                      |  |  | 72 | 
|Notes to Consolidated Financial Statements                                                         |  |  | 79 | 



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Managements Annual Report on Internal Control over Financial
Reporting

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

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and include those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of
our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are
being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our
financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer and treasurer, we
assessed the effectiveness of our internal control over financial reporting as of March 31, 2015, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated
Framework (2013). Based on its assessment, management has concluded that our internal control over financial reporting was effective as of March 31, 2015.

The effectiveness of our internal control over financial reporting as of March 31, 2015 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which is included herein.

May 20, 2015



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Report of Independent Registered Public Accounting Firm

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

In our opinion, the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, and the related
consolidated statements of operations, of changes in net assets and of cash flows present fairly, in all material respects, the financial position of Gladstone Investment Corporation and its subsidiaries (the Company) as of
March 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2015, based on criteria established in Internal
ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for these financial statements and financial statement schedule,
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Companys internal control over financial reporting based on our integrated audits. We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits, which included confirmation of securities as of March 31, 2015 by correspondence with the custodian, provide
a reasonable basis for our opinions.

A companys internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

McLean, VA

May 20, 2015



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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)



|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                                                                                 |  | March 31, |        
|                                                                                                                                                                                                                 |  | 2015      |         |   | 2014 |  
|ASSETS                                                                                                                                                                                                           |  |           |         |   |      |   |         |  
|Investments at fair value                                                                                                                                                                                        |  |           |         |   |      |   |         |  
|Non-Control/Non-Affiliate investments (Cost of $162,598 and $233,895, respectively)                                                                                                                              |  | $         | 174,373 |   |      | $ | 205,440 |  
|Affiliate investments (Cost of $310,628 and $120,010, respectively)                                                                                                                                              |  |           | 271,050 |   |      |   | 87,849  |  
|Control investments (Cost of $32,032 and $29,632 respectively)                                                                                                                                                   |  |           | 20,630  |   |      |   | 21,104  |  
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|Total investments at fair value (Cost of $505,258 and $383,537, respectively)                                                                                                                                    |  |           | 466,053 |   |      |   | 314,393 |  
|Cash and cash equivalents                                                                                                                                                                                        |  |           | 4,921   |   |      |   | 4,553   |  
|Restricted cash and cash equivalents                                                                                                                                                                             |  |           | 260     |   |      |   | 5,314   |  
|Interest receivable                                                                                                                                                                                              |  |           | 1,867   |   |      |   | 1,289   |  
|Due from custodian                                                                                                                                                                                               |  |           | 4,512   |   |      |   | 1,704   |  
|Deferred financing costs, net                                                                                                                                                                                    |  |           | 4,529   |   |      |   | 2,355   |  
|Other assets                                                                                                                                                                                                     |  |           | 1,379   |   |      |   | 1,086   |  
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|TOTAL ASSETS                                                                                                                                                                                                     |  | $         | 483,521 |   |      | $ | 330,694 |  
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|LIABILITIES                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|Borrowings:                                                                                                                                                                                                      |  |           |         |   |      |   |         |  
|Line of credit at fair value (Cost of $118,800 and $61,250, respectively)                                                                                                                                        |  | $         | 118,800 |   |      | $ | 61,701  |  
|Other secured borrowings                                                                                                                                                                                         |  |           | 5,096   |   |      |   | 5,000   |  
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|Total borrowings                                                                                                                                                                                                 |  |           | 123,896 |   |      |   | 66,701  |  
|Mandatorily redeemable preferred stock, $0.001 par value, $25 liquidation preference;3,610,000and 1,610,000 shares authorized,
respectively; 3,256,000 and 1,600,000 shares issued and outstanding, respectively |  |           | 81,400  |   |      |   | 40,000  |  
|Accounts payable and accrued expenses                                                                                                                                                                            |  |           | 1,271   |   |      |   | 665     |  
|Fees due to Adviser(A)                                                                                                                                                                                           |  |           | 1,502   |   |      |   | 1,225   |  
|Fee due to Administrator(A)                                                                                                                                                                                      |  |           | 262     |   |      |   | 224     |  
|Other liabilities                                                                                                                                                                                                |  |           | 1,761   |   |      |   | 1,042   |  
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|TOTAL LIABILITIES                                                                                                                                                                                                |  |           | 210,092 |   |      |   | 109,857 |  
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|Commitments and contingencies(B)                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|NET ASSETS                                                                                                                                                                                                       |  | $         | 273,429 |   |      | $ | 220,837 |  
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|ANALYSIS OF NET ASSETS                                                                                                                                                                                           |  |           |         |   |      |   |         |  
|Common stock, $0.001 par value per share, 100,000,000 shares authorized; 29,775,958 and 26,475,958 shares issued and
outstanding, respectively                                                                   |  | $         | 30      |   |      | $ | 26      |  
|Capital in excess of par value                                                                                                                                                                                   |  |           | 309,438 |   |      |   | 287,062 |  
|Cumulative net unrealized depreciation of investments                                                                                                                                                            |  |           | (39,204 | ) |      |   | (69,144 | )
|Cumulative net unrealized (depreciation) (appreciation) of other                                                                                                                                                 |  |           | (75     | ) |      |   | (525    | )
|Net investment income in excess of distributions                                                                                                                                                                 |  |           | 3,511   |   |      |   | 3,616   |  
|Accumulated net realized loss                                                                                                                                                                                    |  |           | (271    | ) |      |   | (198    | )
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|TOTAL NET ASSETS                                                                                                                                                                                                 |  | $         | 273,429 |   |      | $ | 220,837 |  
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  
|NET ASSET VALUE PER COMMON SHARE AT END OF YEAR                                                                                                                                                                  |  | $         | 9.18    |   |      | $ | 8.34    |  
|                                                                                                                                                                                                                 |  |           |         |   |      |   |         |  



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

|(B) | Refer to Note 11Commitments and Contingencies for additional information.
|--- | --------------------------------------------------------------------------

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



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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)



|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|--------------------------------------------------------------- |  | -------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                |  | Year Ended March 31, |           
|                                                                |  | 2015                 |            |   | 2014 |   |            | 2013 | 
|INVESTMENT INCOME                                               |  |                      |            |   |      |   |            |      |  |   |            |  
|Interest income:                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate investments                           |  | $                    | 17,541     |   |      | $ | 21,190     |      |  | $ | 15,292     |  
|Affiliate investments                                           |  |                      | 16,844     |   |      |   | 3,625      |      |  |   | 3,114      |  
|Control investments                                             |  |                      | 2,296      |   |      |   | 5,642      |      |  |   | 6,388      |  
|Cash and cash equivalents                                       |  |                      | 4          |   |      |   | 3          |      |  |   | 4          |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Total interest income                                           |  |                      | 36,685     |   |      |   | 30,460     |      |  |   | 24,798     |  
|Other income:                                                   |  |                      |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate investments                           |  |                      | 4,424      |   |      |   | 1,210      |      |  |   | 1,634      |  
|Affiliate investments                                           |  |                      | 534        |   |      |   | 1,299      |      |  |   |           |  
|Control investments                                             |  |                      |           |   |      |   | 3,295      |      |  |   | 4,106      |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Total other income                                              |  |                      | 4,958      |   |      |   | 5,804      |      |  |   | 5,740      |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Total investment income                                         |  |                      | 41,643     |   |      |   | 36,264     |      |  |   | 30,538     |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|EXPENSES                                                        |  |                      |            |   |      |   |            |      |  |   |            |  
|Base management fee(A)                                          |  |                      | 7,569      |   |      |   | 6,207      |      |  |   | 5,412      |  
|Loan servicing fee(A)                                           |  |                      | 4,994      |   |      |   | 4,326      |      |  |   | 3,725      |  
|Incentive fee(A)                                                |  |                      | 4,975      |   |      |   | 3,983      |      |  |   | 2,585      |  
|Administration fee(A)                                           |  |                      | 932        |   |      |   | 863        |      |  |   | 785        |  
|Interest expense on borrowings                                  |  |                      | 3,539      |   |      |   | 2,075      |      |  |   | 1,127      |  
|Dividends on mandatorily redeemable preferred stock             |  |                      | 3,921      |   |      |   | 2,850      |      |  |   | 2,850      |  
|Amortization of deferred financing costs                        |  |                      | 1,329      |   |      |   | 1,024      |      |  |   | 791        |  
|Professional fees                                               |  |                      | 908        |   |      |   | 805        |      |  |   | 541        |  
|Other general and administrative expenses                       |  |                      | 1,421      |   |      |   | 1,459      |      |  |   | 1,287      |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Expenses before credits from Adviser                            |  |                      | 29,588     |   |      |   | 23,592     |      |  |   | 19,103     |  
|Credits to base management fee  loan servicing fee(A)          |  |                      | (4,994     | ) |      |   | (4,326     | )    |  |   | (3,725     | )
|Credits to fees from Adviserother(A)                           |  |                      | (2,848     | ) |      |   | (2,309     | )    |  |   | (1,328     | )
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Total expenses, net of credits to fees                          |  |                      | 21,746     |   |      |   | 16,957     |      |  |   | 14,050     |  
|NET INVESTMENT INCOME                                           |  | $                    | 19,897     |   |      | $ | 19,307     |      |  | $ | 16,488     |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|REALIZED AND UNREALIZED GAIN (LOSS)                             |  |                      |            |   |      |   |            |      |  |   |            |  
|Net realized (loss) gain:                                       |  |                      |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate investments                           |  |                      |           |   |      |   | (14,834    | )    |  |   | 849        |  
|Affiliate investments                                           |  |                      |           |   |      |   | (1,763     | )    |  |   |           |  
|Control investments                                             |  |                      | (73        | ) |      |   | 24,838     |      |  |   | (6         | )
|Other                                                           |  |                      |           |   |      |   | (29        | )    |  |   | (41        | )
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Total net realized (loss) gain                                  |  |                      | (73        | ) |      |   | 8,212      |      |  |   | 802        |  
|Net unrealized appreciation (depreciation):                     |  |                      |            |   |      |   |            |      |  |   |            |  
|Non-Control/Non-Affiliate investments                           |  |                      | 37,047     |   |      |   | (6,382     | )    |  |   | (7,722     | )
|Affiliate investments                                           |  |                      | (4,233     | ) |      |   | (1,481     | )    |  |   | (19,214    | )
|Control investments                                             |  |                      | (2,874     | ) |      |   | (21,343    | )    |  |   | 27,740     |  
|Other                                                           |  |                      | 450        |   |      |   | 358        |      |  |   | (815       | )
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Total net unrealized appreciation (depreciation)                |  |                      | 30,390     |   |      |   | (28,848    | )    |  |   | (11        | )
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Net realized and unrealized gain (loss)                         |  |                      | 30,317     |   |      |   | (20,636    | )    |  |   | 791        |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |  | $                    | 50,214     |   |      | $ | (1,329     | )    |  | $ | 17,279     |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|BASIC AND DILUTED PER COMMON SHARE:                             |  |                      |            |   |      |   |            |      |  |   |            |  
|Net investment income                                           |  | $                    | 0.75       |   |      | $ | 0.73       |      |  | $ | 0.68       |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|Net increase (decrease) in net assets resulting from operations |  | $                    | 1.88       |   |      | $ | (0.05      | )    |  | $ | 0.71       |  
|                                                                |  |                      |            |   |      |   |            |      |  |   |            |  
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:            |  |                      |            |   |      |   |            |      |  |   |            |  
|Basic and diluted                                               |  |                      | 26,665,821 |   |      |   | 26,475,958 |      |  |   | 24,189,148 |  



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

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



69



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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(IN THOUSANDS)



|                                                                   |  |                      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------ |  | -------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                   |  | Year Ended March 31, |        
|                                                                   |  | 2015                 |         |   | 2014 |   |         | 2013 | 
|OPERATIONS                                                         |  |                      |         |   |      |   |         |      |  |   |         |  
|Net investment income                                              |  | $                    | 19,897  |   |      | $ | 19,307  |      |  | $ | 16,488  |  
|Net realized (loss) gain on investments                            |  |                      | (73     | ) |      |   | 8,241   |      |  |   | 843     |  
|Net realized loss on other                                         |  |                      |        |   |      |   | (29     | )    |  |   | (41     | )
|Net unrealized appreciation (depreciation) of investments          |  |                      | 29,940  |   |      |   | (29,206 | )    |  |   | 804     |  
|Net unrealized depreciation (appreciation) of other                |  |                      | 450     |   |      |   | 358     |      |  |   | (815    | )
|                                                                   |  |                      |         |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in net assets from operations              |  |                      | 50,214  |   |      |   | (1,329  | )    |  |   | 17,279  |  
|                                                                   |  |                      |         |   |      |   |         |      |  |   |         |  
|EQUITY CAPITAL ACTIVITY                                            |  |                      |         |   |      |   |         |      |  |   |         |  
|Issuance of common stock                                           |  |                      | 24,420  |   |      |   |        |      |  |   | 32,969  |  
|Offering costs for issuance of common stock                        |  |                      | (1,458  | ) |      |   |        |      |  |   | (1,954  | )
|Distributions to common stockholders                               |  |                      | (20,584 | ) |      |   | (18,797 | )    |  |   | (14,547 | )
|                                                                   |  |                      |         |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in net assets from equity capital activity |  |                      | 2,378   |   |      |   | (18,797 | )    |  |   | 16,468  |  
|                                                                   |  |                      |         |   |      |   |         |      |  |   |         |  
|TOTAL INCREASE (DECREASE) IN NET ASSETS                            |  |                      | 52,592  |   |      |   | (20,126 | )    |  |   | 33,747  |  
|NET ASSETS AT BEGINNING OF YEAR                                    |  |                      | 220,837 |   |      |   | 240,963 |      |  |   | 207,216 |  
|                                                                   |  |                      |         |   |      |   |         |      |  |   |         |  
|NET ASSETS AT END OF YEAR                                          |  | $                    | 273,429 |   |      | $ | 220,837 |      |  | $ | 240,963 |  
|                                                                   |  |                      |         |   |      |   |         |      |  |   |         |  

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



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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)



|                                                                                                                                   |  |                      |          |   |      |   |          |      |  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                                                   |  | Year Ended March 31, |         
|                                                                                                                                   |  | 2015                 |          |   | 2014 |   |          | 2013 | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                               |  |                      |          |   |      |   |          |      |  |   |          |  
|Net increase (decrease) in net assets resulting from operations                                                                    |  | $                    | 50,214   |   |      | $ | (1,329   | )    |  | $ | 17,279   |  
|Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating
activities: |  |                      |          |   |      |   |          |      |  |   |          |  
|Purchase of investments                                                                                                            |  |                      | (132,902 | ) |      |   | (132,203 | )    |  |   | (87,607  | )
|Principal repayments of investments                                                                                                |  |                      | 11,260   |   |      |   | 51,828   |      |  |   | 25,243   |  
|Proceeds from the sale of investments                                                                                              |  |                      |         |   |      |   | 31,587   |      |  |   | 3,181    |  
|Increase in investment balance due to paid in kind interest                                                                        |  |                      | (78      | ) |      |   | (88      | )    |  |   |         |  
|Net realized loss (gain) on investments                                                                                            |  |                      | 73       |   |      |   | (8,241   | )    |  |   | (843     | )
|Net realized loss on other                                                                                                         |  |                      |         |   |      |   | 29       |      |  |   | 41       |  
|Net unrealized (appreciation) depreciation of investments                                                                          |  |                      | (29,940  | ) |      |   | 29,206   |      |  |   | (804     | )
|Net unrealized (appreciation) depreciation of other                                                                                |  |                      | (450     | ) |      |   | (358     | )    |  |   | 815      |  
|Amortization of deferred financing costs                                                                                           |  |                      | 1,329    |   |      |   | 1,024    |      |  |   | 791      |  
|Decrease (increase) in restricted cash and cash equivalents                                                                        |  |                      | 4,981    |   |      |   | (4,688   | )    |  |   | 1,302    |  
|(Increase) decrease in interest receivable                                                                                         |  |                      | (578     | ) |      |   | 20       |      |  |   | (59      | )
|Increase in due from custodian                                                                                                     |  |                      | (2,808   | ) |      |   | (27      | )    |  |   | (150     | )
|(Increase) decrease in other assets                                                                                                |  |                      | (293     | ) |      |   | 383      |      |  |   | (867     | )
|Increase (decrease) in accounts payable and accrued expenses                                                                       |  |                      | 606      |   |      |   | (345     | )    |  |   | 613      |  
|Increase (decrease) in fees due to Adviser(A)                                                                                      |  |                      | 277      |   |      |   | (842     | )    |  |   | 1,571    |  
|Increase in administration fee payable to Administrator(A)                                                                         |  |                      | 38       |   |      |   | 3        |      |  |   | 3        |  
|Increase (decrease) in other liabilities                                                                                           |  |                      | 719      |   |      |   | 429      |      |  |   | (243     | )
|                                                                                                                                   |  |                      |          |   |      |   |          |      |  |   |          |  
|Net cash used in operating activities                                                                                              |  |                      | (97,552  | ) |      |   | (33,612  | )    |  |   | (39,734  | )
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                               |  |                      |          |   |      |   |          |      |  |   |          |  
|Proceeds from issuance of common stock                                                                                             |  |                      | 24,420   |   |      |   |         |      |  |   | 32,969   |  
|Offering costs for issuance of common stock                                                                                        |  |                      | (1,458   | ) |      |   |         |      |  |   | (1,954   | )
|Proceeds from short-term loans                                                                                                     |  |                      |         |   |      |   | 56,514   |      |  |   | 250,063  |  
|Repayments on short-term loans                                                                                                     |  |                      |         |   |      |   | (114,530 | )    |  |   | (268,052 | )
|Proceeds from line of credit                                                                                                       |  |                      | 144,549  |   |      |   | 145,350  |      |  |   | 144,000  |  
|Repayments on line of credit                                                                                                       |  |                      | (87,000  | ) |      |   | (115,100 | )    |  |   | (113,000 | )
|Proceeds from other secured borrowings                                                                                             |  |                      | 96       |   |      |   |         |      |  |   | 5,000    |  
|Proceeds from issuance of mandatorily redeemable preferred stock                                                                   |  |                      | 41,400   |   |      |   |         |      |  |   |         |  
|Purchase of derivatives                                                                                                            |  |                      |         |   |      |   | (75      | )    |  |   |         |  
|Payment of deferred financing costs                                                                                                |  |                      | (3,503   | ) |      |   | (1,101   | )    |  |   | (387     | )
|Distributions paid to common stockholders                                                                                          |  |                      | (20,584  | ) |      |   | (18,797  | )    |  |   | (14,547  | )
|                                                                                                                                   |  |                      |          |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) financing activities                                                                                |  |                      | 97,920   |   |      |   | (47,739  | )    |  |   | 34,092   |  
|                                                                                                                                   |  |                      |          |   |      |   |          |      |  |   |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                               |  |                      | 368      |   |      |   | (81,351  | )    |  |   | (5,642   | )
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                                                       |  |                      | 4,553    |   |      |   | 85,904   |      |  |   | 91,546   |  
|                                                                                                                                   |  |                      |          |   |      |   |          |      |  |   |          |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                                                                                             |  | $                    | 4,921    |   |      | $ | 4,553    |      |  | $ | 85,904   |  
|                                                                                                                                   |  |                      |          |   |      |   |          |      |  |   |          |  
|CASH PAID DURING YEAR FOR INTEREST                                                                                                 |  | $                    | 3,310    |   |      | $ | 1,952    |      |  | $ | 1,079    |  
|                                                                                                                                   |  |                      |          |   |      |   |          |      |  |   |          |  
|NON-CASH ACTIVITIES(B)                                                                                                             |  | $                    |         |   |      | $ |         |      |  | $ | 4,106    |  
|                                                                                                                                   |  |                      |          |   |      |   |          |      |  |   |          |  



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

|(B) | In February 2013, we recapitalized our investment in Galaxy Tool Holdings Corp. (Galaxy), converting $8.2 million of Galaxy preferred stock and its related $4.1 million in accrued dividends into a new
$12.3 million senior debt investment in a non-cash transaction. We recognized $4.1 million in dividend income on our Consolidated Statements of Operations during the year ended March 31, 2013 related to this recapitalization.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



71



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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

MARCH 31, 2015

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|----------------------------------------- |  | ---------------------------------------------------------------------- |  | ------------------------------------------------------------------ |  | --------- | ------ |  | ---- | - | ------ | ---------- |  | - | ------ | 
|Company(A)                                |  | Industry                                                               |  | Investment(B)                                                      |  | Principal |        |  | Cost |   |        | Fair Value | 
|NON-CONTROL/NON-AFFILIATE INVESTMENTS(N): |  |                                                                        |  |                                                                    |  |           |        | 
|Auto Safety House, LLC                    |  | Automobile                                                             |  | Secured Line of Credit, $1,000 available (7.0%, Due 10/2019)(I)(K) |  | $         |       |  |      | $ |       |            |  | $ |       | 
|                                          |  |                                                                        |  | Senior Secured Term Debt (7.0%, Due 10/2019)(I)(K)                 |  |           | 5,000  |  |      |   | 5,000  |            |  |   | 4,938  | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 5,000  |            |  |   | 4,938  | 
|Cavert II Holding Corp.                   |  | Containers, Packaging, and Glass                                       |  | Preferred Stock (18,446 shares)(C)(F)(L)                           |  |           |        |  |      |   | 1,845  |            |  |   | 3,265  | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 1,845  |            |  |   | 3,265  | 
|Country Club Enterprises, LLC             |  | Automobile                                                             |  | Senior Subordinated Secured Term Debt (18.7%, Due 5/2017)(L)       |  |           | 4,000  |  |      |   | 4,000  |            |  |   | 4,000  | 
|                                          |  |                                                                        |  | Preferred Stock (7,079,792 shares)(C)(F)(L)                        |  |           |        |  |      |   | 7,725  |            |  |   | 2,863  | 
|                                          |  |                                                                        |  | Guaranty ($2,000)(D)                                               |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  | Guaranty ($593)(D)                                                 |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 11,725 |            |  |   | 6,863  | 
|Drew Foam Company, Inc.                   |  | Chemicals, Plastics, and Rubber                                        |  | Senior Secured Term Debt (13.5%, Due 8/2017)(L)                    |  |           | 10,913 |  |      |   | 10,913 |            |  |   | 10,913 | 
|                                          |  |                                                                        |  | Preferred Stock (34,045 shares)(C)(F)(L)                           |  |           |        |  |      |   | 3,375  |            |  |   | 3,532  | 
|                                          |  |                                                                        |  | Common Stock (5,372 shares)(C)(F)(L)                               |  |           |        |  |      |   | 63     |            |  |   | 2,813  | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 14,351 |            |  |   | 17,258 | 
|Frontier Packaging, Inc.                  |  | Containers, Packaging, and Glass                                       |  | Senior Secured Term Debt (12.0%, Due 12/2017)(L)                   |  |           | 12,000 |  |      |   | 12,000 |            |  |   | 12,000 | 
|                                          |  |                                                                        |  | Preferred Stock (1,373 shares)(C)(F)(L)                            |  |           |        |  |      |   | 1,373  |            |  |   | 1,404  | 
|                                          |  |                                                                        |  | Common Stock (152 shares)(C)(F)(L)                                 |  |           |        |  |      |   | 152    |            |  |   | 2,777  | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 13,525 |            |  |   | 16,181 | 
|Funko, LLC(M)                             |  | Personal and Non-Durable Consumer Products (Manufacturing Only)        |  | Senior Subordinated Secured Term Debt (9.3%, Due 5/2019)(I)(K)     |  |           | 7,500  |  |      |   | 7,500  |            |  |   | 7,734  | 
|                                          |  |                                                                        |  | Senior Subordinated Secured Term Debt (9.3%, Due 5/2019)(I)(K)     |  |           | 2,000  |  |      |   | 2,000  |            |  |   | 2,063  | 
|                                          |  |                                                                        |  | Preferred Stock (1,305 shares)(C)(F)(L)                            |  |           |        |  |      |   | 1,305  |            |  |   | 15,211 | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 10,805 |            |  |   | 25,008 | 
|Ginsey Home Solutions, Inc.               |  | Home and Office Furnishings, Housewares, and Durable                   |  | Senior Subordinate Secured Term Debt (13.5%, Due 1/2018)(H)(L)     |  |           | 13,300 |  |      |   | 13,300 |            |  |   | 13,300 | 
|                                          |  | Consumer Products                                                      |  | Preferred Stock (18,898 shares)(C)(F)(L)                           |  |           |        |  |      |   | 9,583  |            |  |   | 7,176  | 
|                                          |  |                                                                        |  | Common Stock (63,747 shares)(C)(F)(L)                              |  |           |        |  |      |   | 8      |            |  |   |       | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 22,891 |            |  |   | 20,476 | 
|Jackrabbit, Inc.                          |  | Farming and Agriculture                                                |  | Senior Secured Term Debt (13.5%, Due 4/2018)(L)                    |  |           | 11,000 |  |      |   | 11,000 |            |  |   | 11,000 | 
|                                          |  |                                                                        |  | Preferred Stock (3,556 shares)(C)(F)(L)                            |  |           |        |  |      |   | 3,556  |            |  |   | 4,139  | 
|                                          |  |                                                                        |  | Common Stock (548 shares)(C)(F)(L)                                 |  |           |        |  |      |   | 94     |            |  |   | 2,399  | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 14,650 |            |  |   | 17,538 | 
|Mathey Investments, Inc.                  |  | Machinery (Nonagriculture,                                             |  | Senior Secured Term Debt (10.0%, Due 3/2016)(L)                    |  |           | 1,375  |  |      |   | 1,375  |            |  |   | 1,375  | 
|                                          |  | Nonconstruction, Nonelectronic)                                        |  | Senior Secured Term Debt (12.0%, Due 3/2016)(L)                    |  |           | 3,727  |  |      |   | 3,727  |            |  |   | 3,727  | 
|                                          |  |                                                                        |  | Senior Secured Term Debt (12.5%, Due 3/2016)(E)(I)(L)              |  |           | 3,500  |  |      |   | 3,500  |            |  |   | 3,500  | 
|                                          |  |                                                                        |  | Common Stock (29,102 shares)(C)(F)(L)                              |  |           |        |  |      |   | 777    |            |  |   | 7,630  | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 9,379  |            |  |   | 16,232 | 
|Mitchell Rubber Products, Inc.            |  | Chemicals, Plastics, and Rubber                                        |  | Subordinated Secured Term Debt (13.0%, Due 10/2016)(I)(K)          |  |           | 13,560 |  |      |   | 13,560 |            |  |   | 8,136  | 
|                                          |  |                                                                        |  | Subordinated Secured Term Debt (13.0%, Due 12/2015)(I)(K)          |  |           | 1,500  |  |      |   | 1,500  |            |  |   | 900    | 
|                                          |  |                                                                        |  | Preferred Stock (27,900 shares)(C)(F)(L)                           |  |           |        |  |      |   | 2,790  |            |  |   |       | 
|                                          |  |                                                                        |  | Common Stock (27,900 shares)(C)(F)(L)                              |  |           |        |  |      |   | 28     |            |  |   |       | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 17,878 |            |  |   | 9,036  | 
|Quench Holdings Corp.                     |  | Home and Office Furnishings, Housewares, and Durable Consumer Products |  | Common Stock (4,770,391 shares)(C)(F)(L)                           |  |           |        |  |      |   | 3,397  |            |  |   | 5,432  | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 3,397  |            |  |   | 5,432  | 
|SBS, Industries, LLC                      |  | Machinery (Nonagriculture,                                             |  | Senior Secured Term Debt (14.0%, Due 8/2016)(L)                    |  |           | 11,355 |  |      |   | 11,355 |            |  |   | 11,355 | 
|                                          |  | Nonconstruction, Nonelectronic)                                        |  | Preferred Stock (19,935 shares)(C)(F)(L)                           |  |           |        |  |      |   | 1,994  |            |  |   | 2,627  | 
|                                          |  |                                                                        |  | Common Stock (221,500 shares)(C)(F)(L)                             |  |           |        |  |      |   | 222    |            |  |   | 183    | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                        |  |                                                                    |  |           |        |  |      |   | 13,571 |            |  |   | 14,165 | 



72



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2015

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|------------------------------------------------------------------------------------------------- |  | ----------------------------------------- | - | --------------------------------------------------------------- |  | --------- | ------ | ------- | ---- | - | ------ | ---------- |  | - | ------ | 
|Company(A)                                                                                        |  | Industry                                  |   | Investment(B)                                                   |  | Principal |        |         | Cost |   |        | Fair Value | 
|Schylling, Inc.                                                                                   |  | Leisure, Amusement, Motion                |   | Senior Secured Term Debt (13.0%, Due 8/2018)(L)                 |  | $         | 13,081 |         |      | $ | 13,081 |            |  | $ | 13,081 | 
|                                                                                                  |  | Pictures, Entertainment                   |   | Preferred Stock (4,000 shares)(C)(F)(L)                         |  |           |        |         |      |   | 4,000  |            |  |   |       | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 17,081 |            |  |   | 13,081 | 
|Star Seed, Inc.                                                                                   |  | Farming and Agriculture                   |   | Senior Secured Term Debt (12.5%, Due 5/2018)(E)(K)              |  |           | 5,000  |         |      |   | 5,000  |            |  |   | 4,900  | 
|                                                                                                  |  |                                           |   | Preferred Stock (1,499 shares)(C)(F)(L)                         |  |           |        |         |      |   | 1,499  |            |  |   |       | 
|                                                                                                  |  |                                           |   | Common Stock (600 shares)(C)(F)(L)                              |  |           |        |         |      |   | 1      |            |  |   |       | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 6,500  |            |  |   | 4,900  | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|Total Non-Control/Non-Affiliate Investments (represents 37.4% of total investments at fair value) |  |                                           | $ | 162,598                                                         |  |           | $      | 174,373 |     
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|AFFILIATE INVESTMENTS(O):                                                                         |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |  
|Acme Cryogenics, Inc.                                                                             |  | Chemicals, Plastics, and Rubber           |   | Senior Subordinated Secured Term Debt (11.5%, Due 3/2020)(I)(L) |  | $         | 14,500 |         |      | $ | 14,500 |            |  | $ | 14,500 | 
|                                                                                                  |  |                                           |   | Preferred Stock (965,982 shares)(C)(F)(L)                       |  |           |        |         |      |   | 7,956  |            |  |   | 8,519  | 
|                                                                                                  |  |                                           |   | Common Stock (549,908 shares)(C)(F)(L)                          |  |           |        |         |      |   | 1,197  |            |  |   |       | 
|                                                                                                  |  |                                           |   | Common Stock Warrants (465,639 shares)(C)(F)(L)                 |  |           |        |         |      |   | 25     |            |  |   |       | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 23,678 |            |  |   | 23,019 | 
|Alloy Die Casting Corp.(M)                                                                        |  | Diversified/Conglomerate                  |   | Senior Secured Term Debt (13.5%, Due 10/2018)(K)                |  |           | 12,215 |         |      |   | 12,215 |            |  |   | 12,154 | 
|                                                                                                  |  | Manufacturing                             |   | Preferred Stock (4,064 shares)(C)(F)(L)                         |  |           |        |         |      |   | 4,064  |            |  |   | 4,122  | 
|                                                                                                  |  |                                           |   | Common Stock (630 shares)(C)(F)(L)                              |  |           |        |         |      |   | 41     |            |  |   |       | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 16,320 |            |  |   | 16,276 | 
|Behrens Manufacturing, LLC(M)                                                                     |  | Diversified/Conglomerate                  |   | Senior Secured Term Debt (13.0%, Due 12/2018)(L)                |  |           | 9,975  |         |      |   | 9,975  |            |  |   | 9,975  | 
|                                                                                                  |  | Manufacturing                             |   | Preferred Stock (2,923 shares)(C)(F)(L)                         |  |           |        |         |      |   | 2,922  |            |  |   | 3,447  | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 12,897 |            |  |   | 13,422 | 
|B-Dry, LLC                                                                                        |  | Personal, Food and Miscellaneous Services |   | Secured Line of Credit, $175 available (6.5%, Due 12/2016)(L)   |  |           | 2,075  |         |      |   | 2,075  |            |  |   | 1,124  | 
|                                                                                                  |  |                                           |   | Senior Secured Term Debt (13.5%, Due 12/2019)(L)                |  |           | 6,433  |         |      |   | 6,443  |            |  |   | 3,490  | 
|                                                                                                  |  |                                           |   | Senior Secured Term Debt (13.5%, Due 12/2019)(L)                |  |           | 840    |         |      |   | 840    |            |  |   | 455    | 
|                                                                                                  |  |                                           |   | Preferred Stock (2,250 shares)(C)(F)(L)                         |  |           |        |         |      |   | 2,250  |            |  |   |       | 
|                                                                                                  |  |                                           |   | Common Stock (2,250 shares)(C)(F)(L)                            |  |           |        |         |      |   | 300    |            |  |   |       | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 11,908 |            |  |   | 5,069  | 
|B+T Group Acquisition Inc.(M)                                                                     |  | Telecommunications                        |   | Secured Line of Credit, $700 available (10.0%, Due 6/2015)(L)   |  |           | 700    |         |      |   | 700    |            |  |   | 700    | 
|                                                                                                  |  |                                           |   | Senior Secured Term Debt (13.0%, Due 12/2019)(L)                |  |           | 14,000 |         |      |   | 14,000 |            |  |   | 14,000 | 
|                                                                                                  |  |                                           |   | Preferred Stock (12,841 shares)(C)(F)(L)                        |  |           |        |         |      |   | 4,196  |            |  |   | 4,541  | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 18,896 |            |  |   | 19,241 | 
|Cambridge Sound Management, Inc.                                                                  |  | Home and Office Furnishing,               |   | Senior Secured Term Debt (13.0%, Due 9/2019)(L)                 |  |           | 15,000 |         |      |   | 15,000 |            |  |   | 15,000 | 
|                                                                                                  |  | Housewares and Durable                    |   | Preferred Stock (4,500 shares)(C)(F)(L)                         |  |           |        |         |      |   | 4,500  |            |  |   | 7,198  | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  | Consumer Products                         |   |                                                                 |  |           |        |         |      |   | 19,500 |            |  |   | 22,198 | 
|Channel Technologies Group, LLC                                                                   |  | Diversified/Conglomerate                  |   | Preferred Stock (2,279 shares)(C)(F)(L)                         |  |           |        |         |      |   | 2,864  |            |  |   | 2,315  | 
|                                                                                                  |  | Manufacturing                             |   | Common Stock (2,279,020 shares)(C)(F)(L)                        |  |           |        |         |      |   |       |            |  |   |       | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 2,864  |            |  |   | 2,315  | 
|Counsel Press, Inc.                                                                               |  | Diversified/Conglomerate Services         |   | Secured Line of Credit, $500 available (12.8%, Due 3/2017)(J)   |  |           | 1,500  |         |      |   | 1,500  |            |  |   | 1,500  | 
|                                                                                                  |  |                                           |   | Senior Secured Term Debt (12.8%, Due 3/2020)(J)                 |  |           | 18,000 |         |      |   | 18,000 |            |  |   | 18,000 | 
|                                                                                                  |  |                                           |   | Senior Secured Term Debt (14.0%, Due 3/2020)(J)                 |  |           | 5,500  |         |      |   | 5,500  |            |  |   | 5,500  | 
|                                                                                                  |  |                                           |   | Preferred Stock (6,995 shares)(C)(F)(J)                         |  |           |        |         |      |   | 6,995  |            |  |   | 6,995  | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 31,995 |            |  |   | 31,995 | 
|D.P.M.S., Inc.                                                                                    |  | Diversified/Conglomerate Manufacturing    |   | Secured Line of Credit, $550 available (4.0%, Due 8/2016)(I)(L) |  |           | 4,000  |         |      |   | 4,000  |            |  |   | 762    | 
|                                                                                                  |  |                                           |   | Senior Secured Term Debt (4.0%, Due 8/2016)(I)(L)               |  |           | 2,575  |         |      |   | 2,575  |            |  |   | 490    | 
|                                                                                                  |  |                                           |   | Senior Secured Term Debt (4.0%, Due 8/2016)(I)(L)               |  |           | 8,795  |         |      |   | 8,795  |            |  |   | 1,674  | 
|                                                                                                  |  |                                           |   | Senior Secured Term Debt (5.0%, Due 8/2016)(E)(L)               |  |           | 1,150  |         |      |   | 1,150  |            |  |   | 219    | 
|                                                                                                  |  |                                           |   | Preferred Stock (25 shares)(C)(F)(L)                            |  |           |        |         |      |   | 2,500  |            |  |   |       | 
|                                                                                                  |  |                                           |   | Common Stock Warrants (1,241 shares)(C)(F)(L)                   |  |           |        |         |      |   | 3      |            |  |   |       | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                                  |  |                                           |   |                                                                 |  |           |        |         |      |   | 19,023 |            |  |   | 3,145  | 



73



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2015

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|--------------------------------------------------------------------------------- |  | -------------------------------------------------- | - | --------------------------------------------------------------------- |  | --------- | ------ | ------- | ---- | - | ------ | ---------- |  | - | ------ | 
|Company(A)                                                                        |  | Industry                                           |   | Investment(B)                                                         |  | Principal |        |         | Cost |   |        | Fair Value | 
|Edge Adhesives Holdings, Inc.(M)                                                  |  | Diversified/Conglomerate Manufacturing             |   | Secured Line of Credit, $10 available (12.5%, Due 8/2015)(K)          |  | $         | 1,490  |         |      | $ | 1,490  |            |  | $ | 1,488  | 
|                                                                                  |  |                                                    |   | Senior Secured Term Debt (12.5%, Due 2/2019)(K)                       |  |           | 9,300  |         |      |   | 9,300  |            |  |   | 9,300  | 
|                                                                                  |  |                                                    |   | Senior Subordinated Secured Term Debt (13.8%, Due 2/2019)(K)          |  |           | 2,400  |         |      |   | 2,400  |            |  |   | 2,403  | 
|                                                                                  |  |                                                    |   | Preferred Stock (3,474 shares)(C)(F)(L)                               |  |           |        |         |      |   | 3,474  |            |  |   | 3,199  | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   | 16,664 |            |  |   | 16,390 | 
|Head Country Food Products, Inc.                                                  |  | Beverage, Food and Tobacco                         |   | Senior Secured Term Debt (12.5%, Due 2/2019)(L)                       |  |           | 9,050  |         |      |   | 9,050  |            |  |   | 9,050  | 
|                                                                                  |  |                                                    |   | Preferred Stock (4,000 shares)(C)(F)(L)                               |  |           |        |         |      |   | 4,000  |            |  |   | 3,931  | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   | 13,050 |            |  |   | 12,981 | 
|Logo Sportswear, Inc.                                                             |  | Textiles and Leather                               |   | Secured Line of Credit, $500 available (10.0%, Due 9/2015)(J)         |  |           |       |         |      |   |       |            |  |   |       | 
|                                                                                  |  |                                                    |   | Senior Secured Term Debt (12.5%, Due 3/2020)(J)                       |  |           | 9,200  |         |      |   | 9,200  |            |  |   | 9,200  | 
|                                                                                  |  |                                                    |   | Preferred Stock (1,550 shares)(C)(F)(J)                               |  |           |        |         |      |   | 1,550  |            |  |   | 1,550  | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   | 10,750 |            |  |   | 10,750 | 
|Meridian Rack & Pinion, Inc.(M)                                                   |  | Automobile                                         |   | Senior Secured Term Debt (13.5%, Due 12/2018)(K)                      |  |           | 9,660  |         |      |   | 9,660  |            |  |   | 9,612  | 
|                                                                                  |  |                                                    |   | Preferred Stock (3,381 shares)(C)(F)(L)                               |  |           |        |         |      |   | 3,381  |            |  |   | 3,117  | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   | 13,041 |            |  |   | 12,729 | 
|NDLI Acquisition, LLC                                                             |  | Cargo Transport                                    |   | Secured Line of Credit, $50 available (10.5%, Due 1/2016)(L)          |  |           | 2,875  |         |      |   | 2,875  |            |  |   | 2,308  | 
|                                                                                  |  |                                                    |   | Senior Secured Term Debt (11.0%, Due 1/2018)(L)                       |  |           | 7,227  |         |      |   | 7,227  |            |  |   | 5,803  | 
|                                                                                  |  |                                                    |   | Senior Secured Term Debt (10.5%, Due 1/2018)(L)                       |  |           | 3,650  |         |      |   | 3,650  |            |  |   | 2,931  | 
|                                                                                  |  |                                                    |   | Senior Secured Term Debt (10.5%, Due 1/2018)(E)(L)                    |  |           | 3,650  |         |      |   | 3,650  |            |  |   | 2,930  | 
|                                                                                  |  |                                                    |   | Preferred Stock (3,600 shares)(C)(F)(L)                               |  |           |        |         |      |   | 3,600  |            |  |   |       | 
|                                                                                  |  |                                                    |   | Common Stock (545 shares)(C)(F)(L)                                    |  |           |        |         |      |   |       |            |  |   |       | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   | 21,002 |            |  |   | 13,972 | 
|Old World Christmas, Inc.                                                         |  | Home and Office Furnishings,                       |   | Senior Secured Term Debt (13.3%, Due 10/2019)(L)                      |  |           | 15,770 |         |      |   | 15,770 |            |  |   | 15,770 | 
|                                                                                  |  | Housewares, and Durable                            |   | Preferred Stock (6,180 shares)(C)(F)(L)                               |  |           |        |         |      |   | 6,180  |            |  |   | 6,657  | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                  |  | Consumer Products                                  |   |                                                                       |  |           |        |         |      |   | 21,950 |            |  |   | 22,427 | 
|Precision Southeast, Inc.                                                         |  | Diversified/Conglomerate                           |   | Senior Secured Term Debt (14.0%, Due 9/2020)(L)                       |  |           | 9,617  |         |      |   | 9,617  |            |  |   | 9,617  | 
|                                                                                  |  | Manufacturing                                      |   | Preferred Stock (37,391 shares)(C)(F)(J)                              |  |           |        |         |      |   | 3,739  |            |  |   | 1,830  | 
|                                                                                  |  |                                                    |   | Common Stock (90,909 shares)(C)(F)(L)                                 |  |           |        |         |      |   | 91     |            |  |   |       | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   | 13,447 |            |  |   | 11,447 | 
|SOG Specialty Knives & Tools, LLC                                                 |  | Leisure, Amusement, Motion Pictures, Entertainment |   | Senior Secured Term Debt (13.3%, Due 10/2017)(L)                      |  |           | 6,200  |         |      |   | 6,200  |            |  |   | 6,200  | 
|                                                                                  |  |                                                    |   | Senior Secured Term Debt (14.8%, Due 10/2017)(L)                      |  |           | 12,200 |         |      |   | 12,200 |            |  |   | 12,200 | 
|                                                                                  |  |                                                    |   | Preferred Stock (9,749 shares)(C)(F)(L)                               |  |           |        |         |      |   | 9,749  |            |  |   | 13,451 | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   | 28,149 |            |  |   | 31,851 | 
|Tread Corporation                                                                 |  | Oil and Gas                                        |   | Secured Line of Credit, $853 available (12.5%, Due 2/2018)(G)(L)      |  |           | 2,397  |         |      |   | 2,397  |            |  |   | 375    | 
|                                                                                  |  |                                                    |   | Senior Subordinated Secured Term Debt (12.5%, Due 2/2018)(G)(I)(L)    |  |           | 5,000  |         |      |   | 5,000  |            |  |   | 782    | 
|                                                                                  |  |                                                    |   | Senior Subordinated Secured Term Debt (12.5%, Due 2/2018)(G)(I)(L)    |  |           | 2,750  |         |      |   | 2,750  |            |  |   | 430    | 
|                                                                                  |  |                                                    |   | Senior Subordinated Secured Term Debt (12.5%, Due 2/2018)(G)(I)(L)    |  |           | 1,000  |         |      |   | 1,000  |            |  |   | 156    | 
|                                                                                  |  |                                                    |   | Senior Subordinated Secured Term Debt (12.5%, Due on Demand)(G)(I)(L) |  |           | 510    |         |      |   | 510    |            |  |   | 80     | 
|                                                                                  |  |                                                    |   | Preferred Stock (3,332,765 shares)(C)(F)(L)                           |  |           |        |         |      |   | 3,333  |            |  |   |       | 
|                                                                                  |  |                                                    |   | Common Stock (7,716,320 shares)(C)(F)(L)                              |  |           |        |         |      |   | 501    |            |  |   |       | 
|                                                                                  |  |                                                    |   | Common Stock Warrants (2,372,727 shares)(C)(F)(L)                     |  |           |        |         |      |   | 3      |            |  |   |       | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   | 15,494 |            |  |   | 1,823  | 
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 
|Total Affiliate Investments (represents 58.2% of total investments at fair value) |  |                                                    | $ | 310,628                                                               |  |           | $      | 271,050 |     
|                                                                                  |  |                                                    |   |                                                                       |  |           |        |         |      |   |        |            |  |   |        | 



74



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2015

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                                                               |  |                           |  |                                                                 |  |           |        |  |      |   |         |            |  |   |         | 
|------------------------------------------------------------------------------ |  | ------------------------- |  | --------------------------------------------------------------- |  | --------- | ------ |  | ---- | - | ------- | ---------- |  | - | ------- | 
|Company(A)                                                                     |  | Industry                  |  | Investment(B)                                                   |  | Principal |        |  | Cost |   |         | Fair Value | 
|CONTROL INVESTMENTS(P):                                                        |  |                           |  |                                                                 |  |           |        |  |      |   |         |            |  |  
|Galaxy Tool Holding Corporation                                                |  | Aerospace and Defense     |  | Secured Line of Credit, $1,250 available (10.0%, Due 9/2015)(L) |  | $         | 3,250  |  |      | $ | 3,250   |            |  | $ | 3,250   | 
|                                                                               |  |                           |  | Senior Subordinated Secured Term Debt (13.5%, Due 8/2017)(L)    |  |           | 15,520 |  |      |   | 15,520  |            |  |   | 15,520  | 
|                                                                               |  |                           |  | Preferred Stock (6,039,387 shares)(C)(F)(L)                     |  |           |        |  |      |   | 11,464  |            |  |   |        | 
|                                                                               |  |                           |  | Common Stock (88,843 shares)(C)(F)(L)                           |  |           |        |  |      |   | 48      |            |  |   |        | 
|                                                                               |  |                           |  |                                                                 |  |           |        |  |      |   |         |            |  |   |         | 
|                                                                               |  |                           |  |                                                                 |  |           |        |  |      |   | 30,282  |            |  |   | 18,770  | 
|Roanoke Industries Corp.                                                       |  | Buildings and Real Estate |  | Senior Secured Term Debt (10.0%, Due 11/2019)(I)(L)             |  |           | 1,650  |  |      |   | 1,650   |            |  |   | 1,650   | 
|                                                                               |  |                           |  | Common Stock (57 shares)(C)(F)(L)                               |  |           |        |  |      |   | 100     |            |  |   | 210     | 
|                                                                               |  |                           |  |                                                                 |  |           |        |  |      |   |         |            |  |   |         | 
|                                                                               |  |                           |  |                                                                 |  |           |        |  |      |   | 1,750   |            |  |   | 1,860   | 
|                                                                               |  |                           |  |                                                                 |  |           |        |  |      |   |         |            |  |   |         | 
|Total Control Investments (represents 4.4% of total investments at fair value) |  |                           |  |                                                                 |  | $         | 32,032 |  |      | $ | 20,630  |           
|                                                                               |  |                           |  |                                                                 |  |           |        |  |      |   |         |            |  |   |         | 
|TOTAL INVESTMENTS(Q)                                                           |  |                           |  |                                                                 |  |           |        |  |      | $ | 505,258 |            |  | $ | 466,053 | 
|                                                                               |  |                           |  |                                                                 |  |           |        |  |      |   |         |            |  |   |         | 



|(A) | Certain of the securities listed are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $435.9 million at fair value, are pledged as collateral to our credit
facility as described further in Note 5Borrowings. Additionally, all of our investments are considered qualifying assets under Section 55 of the Investment Company Act of 1940, as amended, (the 1940 Act) as of
March 31, 2015.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Percentages represent the weighted average cash interest rates in effect at March 31, 2015, and due date represents the contractual maturity date. Unless indicated otherwise, all cash interest rates are indexed to
30-day London Interbank Offered Rate (LIBOR). If applicable, paid-in-kind (PIK) interest rates are noted separately from the cash interest rates.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(D) | Refer to Note 11Commitments and Contingencies for additional information regarding these guaranties.
|--- | -----------------------------------------------------------------------------------------------------

|(E) | Last Out Tranche (LOT) of senior secured debt, meaning if the portfolio company is liquidated, the holder of the LOT is paid after the other senior debt but before the senior subordinated debt.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | Where applicable, aggregates all shares of such class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to
purchase shares of such 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 participated to a third party but accounted for as collateral for a secured borrowing for accounting principles generally accepted in the U.S. (GAAP) purposes as of
March 31, 2015.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(J) | New portfolio investment valued at cost, as it was determined that the price paid during the three months ended March 31, 2015 best represents fair value as of March 31, 2015.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

|(N) | Non-Control/Non-Affiliate investments, as defined by the 1940 Act, are those that are neither Control nor Affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(P) | Control investments, as defined by the 1940 Act, are those where we have the power to exercise a controlling influence over the management or policies of the portfolio company, which may include owning, with the power
to vote, more than 25.0% of the issued and outstanding voting securities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Q) | Cumulative gross unrealized depreciation for federal income tax purposes is $80.6 million; cumulative gross unrealized appreciation for federal income tax purposes is $41.4 million. Cumulative net unrealized
depreciation is $39.2 million, based on a tax cost of $505.6 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



75



---

##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

MARCH 31, 2014

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|----------------------------------------- |  | --------------------------------------------------------------- |  | ------------------------------------------------------------------------- |  | --------- | ------ |  | ---- | - | ------ | ---------- |  | - | ------ | 
|Company(A)                                |  | Industry                                                        |  | Investment(B)                                                             |  | Principal |        |  | Cost |   |        | Fair Value | 
|NON-CONTROL/NON-AFFILIATE INVESTMENTS(N): |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |           
|Acme Cryogenics, Inc.                     |  | Chemicals, Plastics, and Rubber                                 |  | Senior Subordinated Secured Term Debt (11.5%, Due 3/2015)(I)(L)           |  | $         | 14,500 |  |      | $ | 14,500 |            |  | $ | 14,500 | 
|                                          |  |                                                                 |  | Preferred Stock (898,814 shares(C)(F)(L)                                  |  |           |        |  |      |   | 6,984  |            |  |   | 11,276 | 
|                                          |  |                                                                 |  | Common Stock (418,072
shares)(C)(F)(L)                                    |  |           |        |  |      |   | 1,045  |            |  |   |       | 
|                                          |  |                                                                 |  | Common Stock Warrants (465,639 shares)(C)(F)(L)                           |  |           |        |  |      |   | 25     |            |  |   |       | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 22,554 |            |  |   | 25,776 | 
|Alloy Die Casting Corp.(M)                |  | Diversified/Conglomerate                                        |  | Senior Secured Term Debt (13.5%, Due 10/2018)(K)                          |  |           | 12,215 |  |      |   | 12,215 |            |  |   | 12,261 | 
|                                          |  | Manufacturing                                                   |  | Preferred Stock (4,064
shares)(C)(F)(L)                                   |  |           |        |  |      |   | 4,064  |            |  |   | 1,948  | 
|                                          |  |                                                                 |  | Common Stock (630
shares)(C)(F)(L)                                        |  |           |        |  |      |   | 41     |            |  |   |       | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 16,320 |            |  |   | 14,209 | 
|Auto Safety House, LLC(M)                 |  | Automobile                                                      |  | Secured Line of Credit, $1,000 available (7.0%, Due 10/2018)(I)(K)        |  |           | 5,000  |  |      |   | 5,000  |            |  |   | 4,925  | 
|                                          |  |                                                                 |  | Guaranty ($500)(D)                                                        |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  | Guaranty ($250)(D)                                                        |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 5,000  |            |  |   | 4,925  | 
|B-Dry, LLC                                |  | Buildings and Real Estate                                       |  | Secured Line of Credit, $0 available (6.5%, Due 5/2014)(K)                |  |           | 750    |  |      |   | 750    |            |  |   | 566    | 
|                                          |  |                                                                 |  | Senior Secured Term Debt (13.5%, Due 5/2014)(K)                           |  |           | 6,433  |  |      |   | 6,443  |            |  |   | 4,865  | 
|                                          |  |                                                                 |  | Senior Secured Term Debt (13.5%, Due 5/2014)(K)                           |  |           | 2,840  |  |      |   | 2,840  |            |  |   | 2,144  | 
|                                          |  |                                                                 |  | Common Stock Warrants (85 shares)(C)(F)(L)                                |  |           |        |  |      |   | 300    |            |  |   |       | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 10,333 |            |  |   | 7,575  | 
|Cavert II Holding Corp.                   |  | Containers, Packaging, and Glass                                |  | Preferred Stock (18,446 shares)(C)(F)(L)                                  |  |           |        |  |      |   | 1,845  |            |  |   | 3,023  | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 1,845  |            |  |   | 3,023  | 
|Country Club Enterprises, LLC             |  | Automobile                                                      |  | Senior Subordinated Secured Term Debt (18.6%, Due 11/2014)(L)             |  |           | 4,000  |  |      |   | 4,000  |            |  |   | 4,000  | 
|                                          |  |                                                                 |  | Preferred Stock (7,079,792 shares)(C)(F)(L)                               |  |           |        |  |      |   | 7,725  |            |  |   | 3,670  | 
|                                          |  |                                                                 |  | Guaranty ($2,000)(D)                                                      |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  | Guaranty ($878)(D)                                                        |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 11,725 |            |  |   | 7,670  | 
|Drew Foam Company, Inc.                   |  | Chemicals, Plastics, and Rubber                                 |  | Senior Secured Term Debt (13.5%, Due 8/2017)(L)                           |  |           | 10,913 |  |      |   | 10,913 |            |  |   | 10,913 | 
|                                          |  |                                                                 |  | Preferred Stock (34,045 shares)(C)(F)(L)                                  |  |           |        |  |      |   | 3,375  |            |  |   | 1,351  | 
|                                          |  |                                                                 |  | Common Stock (5,372
shares)(C)(F)(L)                                      |  |           |        |  |      |   | 63     |            |  |   |       | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 14,351 |            |  |   | 12,264 | 
|Frontier Packaging, Inc.                  |  | Containers, Packaging, and Glass                                |  | Senior Secured Term Debt (12.0%, Due 12/2017)(L)                          |  |           | 12,500 |  |      |   | 12,500 |            |  |   | 12,500 | 
|                                          |  |                                                                 |  | Preferred Stock (1,373
shares)(C)(F)(L)                                   |  |           |        |  |      |   | 1,373  |            |  |   | 1,522  | 
|                                          |  |                                                                 |  | Common Stock (152
shares)(C)(F)(L)                                        |  |           |        |  |      |   | 152    |            |  |   | 843    | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 14,025 |            |  |   | 14,865 | 
|Funko, LLC(M)                             |  | Personal and Non-Durable Consumer Products (Manufacturing Only) |  | Senior Subordinated Secured Term Debt (12.0% and 1.5% PIK, Due
5/2019)(K) |  |           | 7,587  |  |      |   | 7,587  |            |  |   | 7,729  | 
|                                          |  |                                                                 |  | Preferred Stock (1,305
shares)(C)(F)(L)                                   |  |           |        |  |      |   | 1,305  |            |  |   | 2,276  | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 8,892  |            |  |   | 10,005 | 
|Ginsey Home Solutions, Inc.               |  | Home and Office Furnishings,                                    |  | Senior Subordinate Secured Term Debt (13.5%, Due 1/2018)(H)(L)            |  |           | 13,050 |  |      |   | 13,050 |            |  |   | 13,050 | 
|                                          |  | Housewares, and Durable                                         |  | Preferred Stock (18,898
shares(C)(F)(L)                                   |  |           |        |  |      |   | 9,393  |            |  |   | 3,082  | 
|                                          |  | Consumer Products                                               |  | Common Stock (63,747
shares)(C)(F)(L)                                     |  |           |        |  |      |   | 8      |            |  |   |       | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 22,451 |            |  |   | 16,132 | 
|Jackrabbit, Inc.                          |  | Farming and Agriculture                                         |  | Secured Line of Credit, $3,000 available (13.5%, Due 4/2014)(L)           |  |           |       |  |      |   |       |            |  |   |       | 
|                                          |  |                                                                 |  | Senior Secured Term Debt (13.5%, Due 4/2018)(L)                           |  |           | 11,000 |  |      |   | 11,000 |            |  |   | 11,000 | 
|                                          |  |                                                                 |  | Preferred Stock (3,556
shares)(C)(F)(L)                                   |  |           |        |  |      |   | 3,556  |            |  |   | 1,963  | 
|                                          |  |                                                                 |  | Common Stock (548
shares)(C)(F)(L)                                        |  |           |        |  |      |   | 94     |            |  |   |       | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 14,650 |            |  |   | 12,963 | 
|Mathey Investments, Inc.                  |  | Machinery (Nonagriculture,                                      |  | Senior Secured Term Debt (10.0%, Due 3/2016)(L)                           |  |           | 1,375  |  |      |   | 1,375  |            |  |   | 1,375  | 
|                                          |  | Nonconstruction, Nonelectronic)                                 |  | Senior Secured Term Debt (12.0%, Due 3/2016)(L)                           |  |           | 3,727  |  |      |   | 3,727  |            |  |   | 3,727  | 
|                                          |  |                                                                 |  | Senior Secured Term Debt (12.5%,Due 3/2016)(E)(I)(L)                      |  |           | 3,500  |  |      |   | 3,500  |            |  |   | 3,500  | 
|                                          |  |                                                                 |  | Common Stock (29,102
shares)(C)(F)(L)                                     |  |           |        |  |      |   | 777    |            |  |   | 4,895  | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   |        |            |  |   |        | 
|                                          |  |                                                                 |  |                                                                           |  |           |        |  |      |   | 9,379  |            |  |   | 13,497 | 



76



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##### Table of Contents

GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2014

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------- |  | --------------------------------------------------------------- |  | --------- | ------- |  | ---- | - | ------- | ---------- |  | - | ------ | 
|Company(A)                                                                                        |  | Industry                                                               |  | Investment(B)                                                   |  | Principal |         |  | Cost |   |         | Fair Value | 
|Mitchell Rubber Products, Inc.                                                                    |  | Chemicals, Plastics and Rubber                                         |  | Subordinated Secured Term Debt (13.0%, Due 10/2016)(I)(K)       |  | $         | 13,560  |  |      | $ | 13,560  |            |  | $ | 13,628 | 
|                                                                                                  |  |                                                                        |  | Preferred Stock (27,900 shares)(C)(F)(L)                        |  |           |         |  |      |   | 2,790   |            |  |   | 1,086  | 
|                                                                                                  |  |                                                                        |  | Common Stock (27,900
shares)(C)(F)(L)                           |  |           |         |  |      |   | 28      |            |  |   |       | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 16,378  |            |  |   | 14,714 | 
|Noble Logistics, Inc.                                                                             |  | Cargo Transport                                                        |  | Secured Line of Credit, $0 available (10.5%, Due 1/2015)(K)     |  |           | 800     |  |      |   | 800     |            |  |   | 204    | 
|                                                                                                  |  |                                                                        |  | Senior Secured Term Debt (11.0%, Due 1/2015)(K)                 |  |           | 7,227   |  |      |   | 7,227   |            |  |   | 1,842  | 
|                                                                                                  |  |                                                                        |  | Senior Secured Term Debt (10.5%, Due 1/2015)(K)                 |  |           | 3,650   |  |      |   | 3,650   |            |  |   | 931    | 
|                                                                                                  |  |                                                                        |  | Senior Secured Term Debt (10.5%, Due 1/2015)(E)(K)              |  |           | 3,650   |  |      |   | 3,650   |            |  |   | 931    | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 15,327  |            |  |   | 3,908  | 
|Precision Southeast, Inc.                                                                         |  | Diversified/Conglomerate                                               |  | Senior Secured Term Debt (14.0%, Due 12/2015)(L)                |  |           | 5,617   |  |      |   | 5,617   |            |  |   | 5,617  | 
|                                                                                                  |  | Manufacturing                                                          |  | Preferred Stock(19,091
shares)(C)(F)(L)                         |  |           |         |  |      |   | 1,909   |            |  |   |       | 
|                                                                                                  |  |                                                                        |  | Common Stock (90,909
shares)(C)(F)(L)                           |  |           |         |  |      |   | 91      |            |  |   |       | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 7,617   |            |  |   | 5,617  | 
|Quench Holdings Corp.                                                                             |  | Home and Office Furnishings, Housewares, and Durable Consumer Products |  | Common Stock (4,770,391 shares)(C)(F)(L)                        |  |           |         |  |      |   | 3,397   |            |  |   | 5,056  | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 3,397   |            |  |   | 5,056  | 
|SBS, Industries, LLC                                                                              |  | Machinery (Nonagriculture,                                             |  | Senior Secured Term Debt (14.0%, Due 8/2016)(L)                 |  |           | 11,355  |  |      |   | 11,355  |            |  |   | 11,355 | 
|                                                                                                  |  | Nonconstruction, Nonelectronic)                                        |  | Preferred Stock (19,935 shares)(C)(F)(L)                        |  |           |         |  |      |   | 1,994   |            |  |   | 1,064  | 
|                                                                                                  |  |                                                                        |  | Common Stock (221,500
shares)(C)(F)(L)                          |  |           |         |  |      |   | 221     |            |  |   |       | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 13,570  |            |  |   | 12,419 | 
|Schylling, Inc.                                                                                   |  | Leisure, Amusement, Motion                                             |  | Senior Secured Term Debt (13.0%, Due 8/2017)(K)                 |  |           | 13,081  |  |      |   | 13,081  |            |  |   | 13,228 | 
|                                                                                                  |  | Pictures, Entertainment                                                |  | Preferred Stock (4,000
shares)(C)(F)(L)                         |  |           |         |  |      |   | 4,000   |            |  |   |       | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 17,081  |            |  |   | 13,228 | 
|Star Seed, Inc.                                                                                   |  | Farming and Agriculture                                                |  | Senior Secured Term Debt (12.5%, Due 4/2018)(K)                 |  |           | 7,500   |  |      |   | 7,500   |            |  |   | 7,594  | 
|                                                                                                  |  |                                                                        |  | Preferred Stock (1,499
shares)(C)(F)(L)                         |  |           |         |  |      |   | 1,499   |            |  |   |       | 
|                                                                                                  |  |                                                                        |  | Common Stock (600
shares)(C)(F)(L)                              |  |           |         |  |      |   | 1       |            |  |   |       | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 9,000   |            |  |   | 7,594  | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|Total Non-Control/Non-Affiliate Investments (represents 65.4% of total investments at fair value) |  |                                                                        |  |                                                                 |  | $         | 233,895 |  |      | $ | 205,440 |           
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|AFFILIATE
INVESTMENTS(O):                                                                         |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |           
|Behrens Manufacturing, LLC(M)                                                                     |  | Diversified/Conglomerate                                               |  | Senior Secured Term Debt (13.0%, Due 12/2018)(L)                |  | $         | 9,975   |  |      | $ | 9,975   |            |  | $ | 9,975  | 
|                                                                                                  |  | Manufacturing                                                          |  | Preferred Stock (2,923 shares)(C)(F)(L)                         |  |           |         |  |      |   | 2,922   |            |  |   | 2,754  | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 12,897  |            |  |   | 12,729 | 
|Channel Technologies Group, LLC                                                                   |  | Diversified/Conglomerate                                               |  | Preferred Stock (2,279
shares)(C)(F)(L)                         |  |           |         |  |      |   | 2,864   |            |  |   | 3,122  | 
|                                                                                                  |  | Manufacturing                                                          |  | Common Stock (2,279,020 shares)(C)(F)(L)                        |  |           |         |  |      |   |        |            |  |   |       | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 2,864   |            |  |   | 3,122  | 
|D.P.M.S., Inc.                                                                                    |  | Diversified/Conglomerate                                               |  | Secured Line of Credit, $700 available (4.0%, Due 8/2015)(I)(K) |  |           | 3,450   |  |      |   | 3,450   |            |  |   | 690    | 
|                                                                                                  |  | Manufacturing                                                          |  | Senior Secured Term Debt (4.0%, Due 8/2015)(I)(K)               |  |           | 2,575   |  |      |   | 2,575   |            |  |   | 515    | 
|                                                                                                  |  |                                                                        |  | Senior Secured Term Debt (4.0%, Due 8/2015)(I)(K)               |  |           | 8,795   |  |      |   | 8,795   |            |  |   | 1,759  | 
|                                                                                                  |  |                                                                        |  | Senior Secured Term Debt (5.0%, Due 8/2015)(E)(K)               |  |           | 1,150   |  |      |   | 1,150   |            |  |   | 236    | 
|                                                                                                  |  |                                                                        |  | Preferred Stock (25
shares)(C)(F)(L)                            |  |           |         |  |      |   | 2,500   |            |  |   |       | 
|                                                                                                  |  |                                                                        |  | Common Stock (1,241
shares)(C)(F)(L)                            |  |           |         |  |      |   | 3       |            |  |   |       | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 18,473  |            |  |   | 3,200  | 
|Edge Adhesives Holdings, Inc.(M)                                                                  |  | Diversified/Conglomerate                                               |  | Secured Line of Credit, $705 available (10.5%, Due 8/2014)(J)   |  |           | 795     |  |      |   | 795     |            |  |   | 795    | 
|                                                                                                  |  | Manufacturing                                                          |  | Senior Secured Term Debt (12.5%, Due 2/2019)(J)                 |  |           | 9,300   |  |      |   | 9,300   |            |  |   | 9,300  | 
|                                                                                                  |  |                                                                        |  | Senior Subordinated Secured Term Debt (13.5%, Due 2/2019)(J)    |  |           | 2,400   |  |      |   | 2,400   |            |  |   | 2,400  | 
|                                                                                                  |  |                                                                        |  | Preferred Stock (3,474 shares)(C)(F)(J)                         |  |           |         |  |      |   | 3,474   |            |  |   | 3,474  | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 15,969  |            |  |   | 15,969 | 
|Head Country Food Products, Inc.                                                                  |  | Beverage, Food and Tobacco                                             |  | Secured Line of Credit, $500 available (10.0%, Due 8/2014)(J)   |  |           |        |  |      |   |        |            |  |   |       | 
|                                                                                                  |  |                                                                        |  | Senior Secured Term Debt (12.5%, Due 2/2019)(J)                 |  |           | 9,050   |  |      |   | 9,050   |            |  |   | 9,050  | 
|                                                                                                  |  |                                                                        |  | Preferred Stock (4,000 shares)(C)(F)(J)                         |  |           |         |  |      |   | 4,000   |            |  |   | 4,000  | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   |         |            |  |   |        | 
|                                                                                                  |  |                                                                        |  |                                                                 |  |           |         |  |      |   | 13,050  |            |  |   | 13,050 | 



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GLADSTONE INVESTMENT CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

MARCH 31, 2014

(DOLLAR
AMOUNTS IN THOUSANDS)



|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|--------------------------------------------------------------------------------- |  | -------------------------- |  | -------------------------------------------------------------------- |  | --------- | ------- | - | ------- | - | ------ | ---------- | ------- | - | ------ | 
|Company(A)                                                                        |  | Industry                   |  | Investment(B)                                                        |  | Principal |         |   | Cost    |   |        | Fair Value |        
|Meridian Rack & Pinion, Inc.(M)                                                   |  | Automobile                 |  | Senior Secured Term Debt (13.5%, Due 12/2018)(K)                     |  | $         | 9,660   |   |         | $ | 9,660  |            |         | $ | 9,672  | 
|                                                                                  |  |                            |  | Preferred Stock (3,381
shares)(C)(F)(L)                              |  |           |         |   |         |   | 3,381  |            |         |   | 3,468  | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   | 13,041 |            |         |   | 13,140 | 
|SOG Specialty Knives & Tools, LLC.                                                |  | Leisure, Amusement, Motion |  | Senior Secured Term Debt (13.3%, Due 8/2016)(L)                      |  |           | 6,200   |   |         |   | 6,200  |            |         |   | 6,200  | 
|                                                                                  |  | Pictures, Entertainment    |  | Senior Secured Term Debt (14.8%, Due 8/2016)(L)                      |  |           | 12,199  |   |         |   | 12,199 |            |         |   | 12,199 | 
|                                                                                  |  |                            |  | Preferred Stock (9,749
shares)(C)(F)(L)                              |  |           |         |   |         |   | 9,749  |            |         |   | 8,240  | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   | 28,148 |            |         |   | 26,639 | 
|Tread Corporation                                                                 |  | Oil and Gas                |  | Secured Line of Credit, $779 available (12.5%,Due 6/2014)(G)(L)      |  |           | 2,471   |   |         |   | 2,471  |            |         |   |       | 
|                                                                                  |  |                            |  | Senior Subordinated Secured Term Debt (12.5%,Due 2/2015)(G)(I)(L)    |  |           | 5,000   |   |         |   | 5,000  |            |         |   |       | 
|                                                                                  |  |                            |  | Senior Subordinated Secured Term Debt (12.5%,Due 2/2015)(G)(I)(L)    |  |           | 2,750   |   |         |   | 2,750  |            |         |   |       | 
|                                                                                  |  |                            |  | Senior Subordinated Secured Term Debt (12.5%,Due 2/2015)(G)(I)(L)    |  |           | 1,000   |   |         |   | 1,000  |            |         |   |       | 
|                                                                                  |  |                            |  | Senior Subordinated Secured Term Debt (12.5%,Due on Demand)(G)(I)(L) |  |           | 510     |   |         |   | 510    |            |         |   |       | 
|                                                                                  |  |                            |  | Preferred Stock (3,332,765 shares)(C)(F)(L)                          |  |           |         |   |         |   | 3,333  |            |         |   |       | 
|                                                                                  |  |                            |  | Common Stock (7,716,320 shares)(C)(F)(L)                             |  |           |         |   |         |   | 501    |            |         |   |       | 
|                                                                                  |  |                            |  | Common Stock Warrants (2,372,727 shares)(C)(F)(L)                    |  |           |         |   |         |   | 3      |            |         |   |       | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   | 15,568 |            |         |   |       | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|Total Affiliate Investments (represents 27.9% of total investments at fair value) |  |                            |  |                                                                      |  | $         | 120,010 |   |         | $ | 87,849 |           
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|CONTROL INVESTMENTS(P):                                                           |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |  
|Galaxy Tool Holding Corp.                                                         |  | Aerospace and Defense      |  | Senior Subordinated Secured Term Debt (13.5%,Due 8/2017)(L)          |  | $         | 15,520  |   |         | $ | 15,520 |            |         | $ | 15,520 | 
|                                                                                  |  |                            |  | Preferred Stock (6,039,387 shares)(C)(F)(L)                          |  |           |         |   |         |   | 11,464 |            |         |   | 2,992  | 
|                                                                                  |  |                            |  | Common Stock (88,843
shares)(C)(F)(L)                                |  |           |         |   |         |   | 48     |            |         |   |       | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   | 27,032 |            |         |   | 18,512 | 
|NDLI Acquisition, LLC                                                             |  | Cargo Transport            |  | Preferred Stock (2,600
shares)(C)(F)(L)                              |  |           |         |   |         |   | 2,600  |            |         |   | 2,592  | 
|                                                                                  |  |                            |  | Common Stock (545
shares)(C)(F)(L)                                   |  |           |         |   |         |   |       |            |         |   |       | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   | 2,600  |            |         |   | 2,592  | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|Total Control Investments (represents 6.7% of total investments at fair value)    |  |                            |  |                                                                      |  | $         | 29,632  |   |         | $ | 21,104 |           
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|TOTAL INVESTMENTS(Q)                                                              |  |                            |  |                                                                      |  |           |         | $ | 383,537 |   |        | $          | 314,393 |  
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 
|                                                                                  |  |                            |  |                                                                      |  |           |         |   |         |   |        |            |         |   |        | 



|(A) | Certain of the securities listed are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $288.6 million at fair value, are pledged as collateral to our credit
facility as described further in Note 5Borrowings. Additionally, all of our investments are considered qualifying assets under Section 55 of the 1940 Act as of March 31, 2014.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Percentages represent the weighted average cash interest rates in effect at March 31, 2014, and due date represents the contractual maturity date. Unless indicated otherwise, all cash interest rates are indexed to
30-day LIBOR. If applicable, PIK interest rates are noted separately from the cash interest rates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(D) | Refer to Note 11Commitments and Contingencies for additional information regarding these guaranties.
|--- | -----------------------------------------------------------------------------------------------------

|(E) | LOT of senior secured debt, meaning if the portfolio company is liquidated, the holder of the LOT is paid after the other senior debt but before the senior subordinated debt.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | Where applicable, aggregates all shares of such class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to
purchase shares of such 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) | $5.0 million of the debt security participated to a third party but accounted for as collateral for a secured borrowing for GAAP purposes as of March 31, 2014.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(J) | New portfolio investment valued at cost, as it was determined that the price paid during the three months ended March 31, 2014 best represents fair value as of March 31, 2014.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(M) | One of our affiliated funds, Gladstone Capital, co-invested with us in this portfolio company pursuant to an exemptive order granted by the SEC.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

|(N) | Non-Control/Non-Affiliate investments, as defined by the 1940 Act, are those that are neither Control nor Affiliate investments and in which we own less than 5.0% of the issued and outstanding voting securities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(P) | Control investments, as defined by the 1940 Act, are those where we have the power to exercise a controlling influence over the management or policies of the portfolio company, which may include owning, with the power
to vote, more than 25.0% of the issued and outstanding voting securities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(Q) | Cumulative gross unrealized depreciation for federal income tax purposes is $83.2 million; cumulative gross unrealized appreciation for federal income tax purposes is $13.9 million. Cumulative net unrealized
depreciation is $69.3 million, based on a tax cost of $383.7 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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GLADSTONE INVESTMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(DOLLAR
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND 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 FASB ASC Topic 946 Financial Services-Investment Companies. In addition, we have elected to be treated for tax purposes as a regulated investment company (RIC) under the Internal Revenue Code of 1986,
as amended (the Code). We were established for the purpose of investing in debt and equity securities of established private businesses in the United States (U.S.). Debt investments primarily come in the form of three types
of loans: senior secured term loans, senior subordinated secured loans and junior subordinated secured debt. 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: (a) to 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 (b) to provide our stockholders with long-term capital appreciation in the value of our assets by
investing in equity securities of established businesses that we believe can grow over time to permit us to sell our equity investments for capital gains. We aim to maintain a portfolio allocation of approximately 75.0% debt investments and 25.0%
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 14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 a SEC registered investment adviser, pursuant to an investment advisory agreement and management agreement. Administrative services are provided by Gladstone Administration, LLC (the
Administrator), an affiliate of ours and the Adviser, pursuant to an administration agreement.

NOTE 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

Basis of Presentation

These
Consolidated Financial Statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) and conform to Regulation S-X under the Securities Exchange Act of 1934, as
amended. Management believes it has made all necessary adjustments so that our accompanying Consolidated Financial Statements are presented fairly and that all such adjustments are of a normal recurring nature. Our accompanying
Consolidated Financial Statements include our accounts and the accounts of our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Consolidation

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

Use of
Estimates

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



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Revisions

Certain amounts in our prior fiscal years financial statements have been revised to correct the net presentation of certain fees in our results of
operations. The Adviser services, administers and collects on the loans held by Business Investment, in return for which the Adviser receives a 2.0% annual fee from Business Investment. This entire loan servicing fee paid to the Adviser by Business
Investment is voluntarily and irrevocably credited against the base management fee otherwise payable to the Adviser, since Business Investment is a consolidated subsidiary of the Company, and overall, the base management fee (including any loan
servicing fee) cannot exceed 2.0% of total assets (as reduced by cash and cash equivalents pledged to creditors) during any given calendar year pursuant to the Advisory Agreement. Previously, we incorrectly presented the loan servicing fee on a net
basis, which is zero because it is 100.0% credited back to us. We have revised our fee presentation related to these loan servicing fees to reflect the gross fee and related gross credit amounts. Management evaluated this error in presentation and
concluded it was not material to the previously issued consolidated financial statements for the years ended March 31, 2014 and 2013. The impact of the revisions are shown in the table below:



|                                                  |  |                           |        |   |                           |   |        |                       |  |   |            |   |  |   |        |  
|------------------------------------------------- |  | ------------------------- | ------ | - | ------------------------- | - | ------ | --------------------- |  | - | ---------- | - |  | - | ------ | -
|                                                  |  | Year Ended March 31, 2014 |        |   | Year Ended March 31, 2013 |  
|                                                  |  | As PreviouslyReported     |        |   | As Revised                |   |        | As PreviouslyReported |  |   | As Revised |  
|Expenses                                          |  |                           |        |   |                           |   |        |                       |  |   |            |   |  |   |        |  
|Aggregate expenses (not revised)                  |  | $                         | 19,266 |   |                           | $ | 19,266 |                       |  | $ | 15,378     |   |  | $ | 15,378 |  
|Loan servicing fee                                |  |                           |       |   |                           |   | 4,326  |                       |  |   |           |   |  |   | 3,725  |  
|                                                  |  |                           |        |   |                           |   |        |                       |  |   |            |   |  |   |        |  
|Expenses before credits from Adviser              |  |                           | 19,266 |   |                           |   | 23,592 |                       |  |   | 15,378     |   |  |   | 19,103 |  
|Credits to base management feeloan servicing fee |  |                           |       |   |                           |   | (4,326 | )                     |  |   |           |   |  |   | (3,725 | )
|Credits to fees from Adviserother                |  |                           | (2,309 | ) |                           |   | (2,309 | )                     |  |   | (1,328     | ) |  |   | (1,328 | )
|                                                  |  |                           |        |   |                           |   |        |                       |  |   |            |   |  |   |        |  
|Total Expenses, Net of Credits to Fees            |  | $                         | 16,957 |   |                           | $ | 16,957 |                       |  | $ | 14,050     |   |  | $ | 14,050 |  
|                                                  |  |                           |        |   |                           |   |        |                       |  |   |            |   |  |   |        |  

Classification of Investments

In accordance with the BDC regulations in the 1940 Act, we classify portfolio investments on our accompanying Consolidated Statements of Assets and
Liabilities, Consolidated Statements of Operations and Consolidated Schedules of Investments into the following categories:



| |  |  | Non-Control/Non-Affiliate InvestmentsNon-Control/Non-Affiliate investments are those that are neither control nor affiliate investments and in which we typically own less than 5.0% of the issued and
outstanding voting securities;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Affiliate InvestmentsAffiliate investments 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; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Control InvestmentsControl investments are those where we have the power to exercise a controlling influence over the management or policies of the portfolio company, which may include owning, with the
power to vote, more than 25.0% of the issued and outstanding voting securities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investment Valuation Policy

Accounting Recognition

We record our investments at fair
value in accordance with the Financial Accounting Standards Board (the FASB) Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC 820) and the 1940 Act. Investment
transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and amortized cost basis of the investment, without regard to unrealized 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 the Companys investment valuation policy (which has been approved by our Board of Directors) (the Policy). Our Board of Directors reviews valuation recommendations that are provided by professionals of the
Adviser and Administrator with oversight and direction from the chief valuation officer, (the Valuation



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##### Table of Contents

Team). 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 our Board of Directors reviews the Policy to determine if changes thereto are advisable and also
reviews whether the Valuation Team has applied the Policy consistently.

Use of Third Party Valuation Firms

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

Standard & Poors Securities Evaluation, Inc. (SPSE) provides estimates of fair value on our debt investments. The Valuation Team
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 Board of Directors reviews 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 of certain of our investments. Generally, at least once per year, we engage an independent valuation firm to value or review the Companys valuation of our significant equity investments, which
includes providing the information noted above. The Valuation Team evaluates such information for incorporation into our total enterprise value, including review of all inputs provided by the independent valuation firm. The Valuation Team then
makes a recommendation to our 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.

Valuation Techniques

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



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

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 using the yield analysis, which includes a DCF calculation and the Valuation Teams own assumptions,
including, but not limited to, estimated remaining life, current market yield, current leverage, and interest rate spreads. This technique develops a modified discount rate that incorporates risk premiums including, among other things, increased
probability of default, increased loss upon default and increased liquidity risk. Generally, the Valuation Team uses the yield analysis to corroborate both estimates of value provided by SPSE and market quotes.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

In addition to the above valuation techniques, the Valuation Team may also consider other factors when determining fair values of our investments, including
but not limited to: the nature and realizable value of the collateral, including external parties guaranties; any relevant offers or letters of intent to acquire the portfolio company; and the markets in which the portfolio company operates.
If applicable, new and follow-on debt and equity investments made during the current reporting quarter (the three months ended March 31, 2015) are generally valued at our original cost basis.

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.

Realized Gain or Loss and Unrealized Appreciation or Depreciation of Portfolio Investments

Gains or losses on the sale of investments are calculated by using the specific identification method. A realized gain or loss is recognized at the trade date,
typically when an investment is disposed of, and is computed as the difference between our cost basis in the investment at the disposition date and the net proceeds received from such disposition. Unrealized appreciation or depreciation displays the
difference between the fair value of the investment and the cost basis of such investment. We determine the fair value of each individual investment each reporting period and record changes in fair value as unrealized appreciation or depreciation in
our Consolidated Statement of Operations.

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 March 31, 2015 and 2014, our loans to Tread Corporation (Tread) were on non-accrual status,
with an aggregate debt cost basis at both period ends of $11.7 million, or 3.1% and 4.2% of the cost basis of all debt investments in our portfolio, and an aggregate fair value of $1.8 million and $0, or 0.5% and 0.0% of the fair value of all debt
investments in our portfolio, respectively.

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 over the life of the obligation. As of March 31, 2015, we did not have any loans with a PIK interest component and as of March 31, 2014, we had one loan with a PIK interest component.
During the years ended March 31, 2015 and 2014, we recorded PIK income of $0.1 million. We did not hold any loans in our portfolio that contained a PIK provision during the year ended March 31, 2013. We collected $0.2 million PIK interest
in cash during the year ended March 31, 2015 and no PIK interest in cash during the years ended March 31, 2014 and 2013.



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Other Income Recognition

We generally record success fees upon receipt of cash. Typically, success fees are contractually due upon a change of control in a portfolio company. We
recorded an aggregate of $1.4 million of success fees during the year ended March 31, 2015, which resulted from prepayments from Auto Safety House LLC (ASH), Drew Foam Company, Inc. (Drew Foam), Frontier Packaging, Inc.
(Frontier), Mathey Investments, Inc. (Mathey), SOG Specialty Knives and Tools, LLC (SOG), and Star Seed, Inc. (Star Seed). We recorded an aggregate of $4.2 million of success fees during the year ended
March 31, 2014, which resulted from debt exits or prepayments from Cavert II Holding Group (Cavert), Channel Technologies Group LLC (Channel), Frontier, Mathey, SOG, and Venyu Solutions, Inc. (Venyu). We
recorded an aggregate of $0.8 million of success fees during the year ended March 31, 2013, which resulted from prepayments received from Cavert and Mathey.

We accrue dividend income on preferred 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. For the year ended March 31, 2015, we recorded an aggregate of $3.5 million in dividend income, which resulted from payments from Drew Foam, Frontier, Funko, LLC (Funko), Mathey, and SOG. For
the year ended March 31, 2014, we recorded $1.4 million in dividend income, which resulted from the exit of Venyu. We recorded an aggregate of $4.8 million in dividend income during the year ended March 31, 2013, which resulted from
payments from Acme Cryogenics, Inc. (Acme) and Galaxy Tool Holding Corporation (Galaxy).

Both dividend and success fee income are
recorded in other income in our accompanying Consolidated Statements of Operations.

Cash and Cash Equivalents

We consider all short-term, highly liquid investments that are both readily convertible to cash and have a maturity of three months or less at the time of
purchase to be cash equivalents. Cash is carried at cost, which approximates fair value. We place our cash with financial institutions, and at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit.
We seek to mitigate this concentration of credit risk by depositing funds with major financial institutions.

Restricted Cash and Cash Equivalents

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

Deferred Financing Costs

Deferred financing costs consist of costs incurred to obtain financing, including legal fees, origination fees and administration fees. Costs associated with
our line of credit and the issuance of our mandatorily redeemable preferred stock, are deferred and amortized using the straight-line method, which approximates the effective interest method, over the terms of the respective financings. See Note
5Borrowingsand Note 6Mandatorily Redeemable Preferred Stock for further discussion.

Related Party Fees

We have entered into an investment advisory and management agreement (the Advisory Agreement) with the Adviser, which is 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, loan servicing fee, and an incentive fee.

We have entered into an administration agreement (the Administration Agreement) with the Administrator 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 costs and
agreements.

Federal Income Taxes

We intend to
continue to qualify for treatment as a RIC under subchapter M of the Code, which generally allows us to avoid paying corporate income taxes on any income or gains that we distribute to our stockholders. We intend to continue to distribute sufficient
dividends to eliminate taxable income. Refer to Note 10Federal and State Income Taxes for additional information regarding our RIC requirements.

We have certain wholly-owned taxable subsidiaries (the Taxable Subsidiaries), each of which holds one or more of our portfolio investments that
are listed on our accompanying Consolidated Schedules of Investments. The purpose of the Taxable Subsidiaries is to permit us to hold certain portfolio companies that are organized as limited liability companies (LLCs) (or other
forms of pass-through entities) while satisfying the RIC tax requirement that at least 90% of the RICs gross revenue for income tax purposes must



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consist of qualifying investment income. When LLCs (or other pass-through entities) are owned by the Taxable Subsidiaries, their income is taxed to the Taxable Subsidiaries and does not flow
through to the RIC, thereby helping us preserve our RIC status. The Taxable Subsidiaries are not consolidated for income tax purposes and may generate income tax expense as a result of their ownership of the portfolio companies. This income tax
expense is considered immaterial and, therefore, it is not recorded on our accompanying Consolidated Statements of Operations.

ASC 740,
Income Taxes requires the evaluation of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are more-likely-than-not of being sustained by the
applicable tax authorities. Tax positions not deemed to satisfy the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current fiscal year. We have evaluated the implications of ASC 740, for all open tax
years and in all major tax jurisdictions, and determined that there is no material impact on our accompanying Consolidated Financial Statements. Our federal tax returns for fiscal years 2014, 2013, and 2012 remain subject to examination by
the Internal Revenue Service (IRS).

Distributions

Distributions to stockholders are recorded on the ex-dividend date. We are required to pay out at least 90% of our investment company taxable
income, which is generally our net ordinary income plus the excess of our net short-term capital gains over net long-term capital losses for each taxable year as a distribution to our stockholders in order to maintain our ability to be taxed
as a RIC under Subchapter M of the Code. It is our policy to pay out as a distribution up to 100% of those amounts. The amount to be paid is determined by our Board of Directors each quarter and is based on the annual earnings estimated by our
management. Based on that estimate, a distribution is declared each quarter and is paid out monthly over the course of the respective quarter. At fiscal year-end, we elected to treat a portion of the first distribution paid after year-end as having
been paid in the prior year, in accordance with Section 855(a) of the Code. Additionally, we may pay a special distribution in addition to the monthly distributions to ensure that we have paid out at least 90% of our investment company taxable
income for the year. We typically retain long-term capital gains, if any, and do not pay them out as distributions. If we decide to retain long-term capital gains, the portion of the retained capital gains, net of any capital loss carryforward, if
applicable, will be subject to a 35.0% tax.

Refer to Note 9Distributions to Common Stockholders for further information. We have a dividend
reinvestment plan for our common stockholders. This is an opt in dividend reinvestment plan, meaning that common stockholders may elect to have their cash dividends automatically reinvested in additional shares of our common stock.
Common stockholders who do not so elect will receive their dividends 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 plan agent purchases shares in the open market in connection with the obligations under the plan. We do not have a dividend reinvestment plan for our preferred stock stockholders.

Recent Accounting Pronouncements

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

In February 2015, the FASB issued 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 new standard changes the way a reporting entity evaluates whether a) limited partnerships and
similar entities should be consolidated, b) fees paid to decision makers or service provides are variable interests in a variable interest entity (VIE), and c) variable interests in a VIE held by related parties require the reporting
entity to consolidate the VIE. ASU 2015-02 also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. We do not anticipate ASU 2015-02 to 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, with early adoption permitted.

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



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In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with
Customers (ASU 2014-09), which supersedes or replaces nearly all GAAP revenue recognition guidance. The new guidance establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is
recognized over time or at a point in time and will expand disclosures about revenue. We are currently assessing the impact of ASU 2014-09 and anticipate no impact on our financial position, results of operations or cash flows from adopting this
standard. ASU 2014-09 is effective for annual reporting periods that begin after December 15, 2016 and interim periods within those years, with early adoption not permitted.

In June 2013, the FASB issued Accounting Standards Update 2013-08, Financial Services  Investment Companies (Topic 946): Amendments to the
Scope, Measurement, and Disclosure Requirements (ASU 2013-08), which amends the criteria that define an investment company and clarifies the measurement guidance and requires new disclosures for investment companies. Under ASU
2013-08, an entity already regulated under the 1940 Act is automatically an investment company under the new GAAP definition, so there was no impact from adopting this standard on our financial position or results of operations. We adopted ASU
2013-08 beginning with our quarter ended June 30, 2014, and have increased our disclosure requirements as necessary.

NOTE 3. INVESTMENTS

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.



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



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



| |  |  | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are those inputs that reflect assumptions that market participants would use
when pricing the financial instrument and can include the Valuation Teams assumptions based upon the best available information.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

As of March 31, 2015 and
2014, all of our investments were valued using Level 3 inputs. 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. During the years ended March 31, 2015 and 2014, there were no transfers in or out of Level 1, 2 and 3.



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The following table presents the financial assets carried at fair value as of March 31, 2015 and 2014, by
caption on our accompanying Consolidated Statements of Assets and Liabilities and by security type for each of the three applicable levels of hierarchy established by ASC 820 that we used to value our financial assets:



|                                            |  |                                                                                                                                                                 |         |  |      |   |         | 
|------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- |  | ---- | - | ------- | 
|                                            |  | Total Recurring Fair Value MeasurementsReported
inConsolidated Statements of Assets andLiabilitiesUsing Significant UnobservableInputs (Level 3)As of March 31, |        
|                                            |  | 2015                                                                                                                                                            |         |  | 2014 |  
|Non-Control/Non-Affiliate Investments       |  |                                                                                                                                                                 |         |  |      |   |         | 
|Senior secured debt                         |  | $                                                                                                                                                               | 76,789  |  |      | $ | 109,479 | 
|Senior subordinated secured debt            |  |                                                                                                                                                                 | 36,133  |  |      |   | 52,907  | 
|Preferred equity                            |  |                                                                                                                                                                 | 40,217  |  |      |   | 32,259  | 
|Common equity/equivalents                   |  |                                                                                                                                                                 | 21,234  |  |      |   | 10,795  | 
|                                            |  |                                                                                                                                                                 |         |  |      |   |         | 
|Total Non-Control/Non-Affiliate Investments |  |                                                                                                                                                                 | 174,373 |  |      |   | 205,440 | 
|Affiliate Investments                       |  |                                                                                                                                                                 |         |  |      |   |         | 
|Senior secured debt                         |  |                                                                                                                                                                 | 181,452 |  |      |   | 60,391  | 
|Senior subordinated secured debt            |  |                                                                                                                                                                 | 18,725  |  |      |   | 2,400   | 
|Preferred equity                            |  |                                                                                                                                                                 | 70,873  |  |      |   | 25,058  | 
|                                            |  |                                                                                                                                                                 |         |  |      |   |         | 
|Total Affiliate Investments                 |  |                                                                                                                                                                 | 271,050 |  |      |   | 87,849  | 
|Control Investments                         |  |                                                                                                                                                                 |         |  |      |   |         | 
|Senior secured debt                         |  |                                                                                                                                                                 | 4,900   |  |      |   |        | 
|Senior subordinated secured debt            |  |                                                                                                                                                                 | 15,520  |  |      |   | 15,520  | 
|Preferred equity                            |  |                                                                                                                                                                 |        |  |      |   | 5,584   | 
|Common equity/equivalents                   |  |                                                                                                                                                                 | 210     |  |      |   |        | 
|                                            |  |                                                                                                                                                                 |         |  |      |   |         | 
|Control Investments                         |  |                                                                                                                                                                 | 20,630  |  |      |   | 21,104  | 
|                                            |  |                                                                                                                                                                 |         |  |      |   |         | 
|Total Investments and Cash Equivalents      |  | $                                                                                                                                                               | 466,053 |  |      | $ | 314,393 | 
|                                            |  |                                                                                                                                                                 |         |  |      |   |         | 

In accordance with ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and International Reporting Standards (IFRS), (ASU 2011-04), the following table provides quantitative information about our Level 3 fair value measurements of our
investments as of March 31, 2015 and 2014. The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to our fair value measurements. The weighted average calculations
in the table below are based on the principal balances for all debt-related calculations and on the cost basis for all equity-related calculations for the particular input.



|                                     |  |                                                                |         |  |                               |   |         |                                |  |                   |  |                                             |  |                                             |  |                        
|------------------------------------ |  | -------------------------------------------------------------- | ------- |  | ----------------------------- | - | ------- | ------------------------------ |  | ----------------- |  | ------------------------------------------- |  | ------------------------------------------- |  | -----------------------
|                                     |  | Quantitative Information about Level 3 Fair Value Measurements
|                                     |  | Fair Value asof March 31,2015                                  |         |  | Fair Value asof March 31,2014 |   |         | ValuationTechnique/Methodology |  | UnobservableInput |  | Range / WeightedAverage as ofMarch 31, 2015 |  | Range / WeightedAverage as ofMarch 31, 2014
|Senior secured debt (A)              |  | $                                                              | 220,750 |  |                               | $ | 115,081 |                                |  | TEV               |  | EBITDAmultiples                             |  | 4.4x 18.2x / 6.9x                          |  | 4.6x  7.3x / 5.6x     
|                                     |  |                                                                |         |  |                               |   |         |                                |  |                   |  | EBITDA                                      |  | $712  $5,871 /$3,302                       |  | $1,558  $6,230 /$3,609
|                                     |  |                                                                | 42,391  |  |                               |   | 54,789  |                                |  | Yield Analysis    |  | Discount Rate                               |  | 7.4% -13.7% /12.6%                          |  | 7.6%  30.0% /19.2%    
|Senior subordinated secured debt (B) |  |                                                                | 49,142  |  |                               |   | 49,470  |                                |  | TEV               |  | EBITDAmultiples                             |  | 4.2x  7.0x / 5.8x                          |  | 4.1x  7.3x / 5.0x     
|                                     |  |                                                                |         |  |                               |   |         |                                |  |                   |  | EBITDA                                      |  | $1,135  $5,462 /$2,834                     |  | $36  $6,156 /$4,159   
|                                     |  |                                                                | 21,236  |  |                               |   | 21,357  |                                |  | Yield Analysis    |  | Discount Rate                               |  | 5.0%  20.5% /14.4%                         |  | 12.8%  12.8% /12.8%   
|Preferred equity(C)                  |  |                                                                | 111,090 |  |                               |   | 62,901  |                                |  | TEV               |  | EBITDAmultiples                             |  | 3.6x  18.2x / 6.6x                         |  | 3.5x  8.5x / 5.1x     
|                                     |  |                                                                |         |  |                               |   |         |                                |  |                   |  | EBITDA                                      |  | $712  $29,235 /$3,749                      |  | $36  $10,621 /$4,266  
|Common equity/equivalents            |  |                                                                | 21,444  |  |                               |   | 10,795  |                                |  | TEV               |  | EBITDAmultiples                             |  | 3.6x  18.2x / 9.4x                         |  | 3.4x  16.0x /10.5x    
|                                     |  |                                                                |         |  |                               |   |         |                                |  |                   |  | EBITDA                                      |  | $712  $15,240 /$9,149                      |  | $36  $10,621 /$6,008  
|                                     |  |                                                                |         |  |                               |   |         |                                |  |                   |  |                                             |  |                                             |  |                        
|Total                                |  | $                                                              | 466,053 |  |                               | $ | 314,393 |                                |  |                  
|                                     |  |                                                                |         |  |                               |   |         |                                |  |                   |  |                                             |  |                                             |  |                        



|(A) | March 31, 2015 includes two new proprietary debt investments for a combined $34.2 million, which were valued at cost. March 31, 2014 includes two new proprietary debt investments for a combined $19.1 million, which
were valued at cost.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | March 31, 2014 includes one new proprietary debt investment for $2.4 million, which was valued at cost.
|--- | -------------------------------------------------------------------------------------------------------

|(C) | March 31, 2015 includes two new proprietary equity investments for a combined $8.5 million, which were valued at cost. March 31, 2014 includes two new proprietary equity investments for a combined $7.4 million,
which were valued at cost.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

Changes in Level 3 Fair Value Measurements of Investments

The following tables provide the changes in fair value of our portfolio, broken out by security type, during the years ended March 31, 2015 and 2014 for
all investments for which the Adviser determines fair value using unobservable (Level 3) factors.

Fair Value Measurements Using
Significant Unobservable Inputs (Level 3)



|                                                                                |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------------------------------ | - | ------- | --------------- |  | - | ------------------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                                                                |  | SeniorSecured Debt |         |   | SeniorSubordinatedSecured Debt |   |         | PreferredEquity |  |   | CommonEquity/Equivalents |   |  | Total |       
|Year ended March 31, 2015:                                                      |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair value as of March 31, 2014                                                 |  | $                  | 169,870 |   |                                | $ | 70,827  |                 |  | $ | 62,901                   |   |  | $     | 10,795 |   |  | $ | 314,393 |  
|Total gain (loss):                                                              |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Net realized (loss) gain(A)                                                     |  |                    |        |   |                                |   |        |                 |  |   |                         |   |  |       |       |   |  |   |        |  
|Net unrealized appreciation (depreciation)(B)                                   |  |                    | 5,056   |   |                                |   | (4,038  | )               |  |   | 18,525                   |   |  |       | 10,397 |   |  |   | 29,940  |  
|Reversal of previously-recorded depreciation (appreciation) upon
realization(B) |  |                    |        |   |                                |   |        |                 |  |   |                         |   |  |       |       |   |  |   |        |  
|New investments, repayments and settlements(C):                                 |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Issuances / originations                                                        |  |                    | 96,693  |   |                                |   | 6,661   |                 |  |   | 27,724                   |   |  |       | 1,902  |   |  |   | 132,980 |  
|Settlements / repayments                                                        |  |                    | (8,128  | ) |                                |   | (3,072  | )               |  |   | (60                      | ) |  |       |       |   |  |   | (11,260 | )
|Sales                                                                           |  |                    |        |   |                                |   |        |                 |  |   |                         |   |  |       |       |   |  |   |        |  
|Transfers(D)                                                                    |  |                    | (350    | ) |                                |   |        |                 |  |   | 2,000                    |   |  |       | (1,650 | ) |  |   |        |  
|                                                                                |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair Value as of March 31, 2015                                                 |  | $                  | 263,141 |   |                                | $ | 70,378  |                 |  | $ | 111,090                  |   |  | $     | 21,444 |   |  | $ | 466,053 |  
|                                                                                |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|                                                                                |  |                    |         |   |                               
|                                                                                |  | SeniorSecured Debt |         |   | SeniorSubordinatedSecured Debt |   |         | PreferredEquity |  |   | CommonEquity/Equivalents |   |  | Total |       
|Year ended March 31, 2014:                                                      |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair value as of March 31, 2013                                                 |  | $                  | 103,882 |   |                                | $ | 86,811  |                 |  | $ | 82,157                   |   |  | $     | 13,632 |   |  | $ | 286,482 |  
|Total (loss) gain:                                                              |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Net realized (loss) gain(A)                                                     |  |                    | (2,856  | ) |                                |   | (6,050  | )               |  |   | 18,806                   |   |  |       | (1,659 | ) |  |   | 8,241   |  
|Net unrealized appreciation (depreciation)(B)                                   |  |                    | 3,165   |   |                                |   | (660    | )               |  |   | (25,000                  | ) |  |       | (5,921 | ) |  |   | (28,416 | )
|Reversal of previously-recorded depreciation (appreciation) upon
realization(B) |  |                    | 2,274   |   |                                |   | 5,874   |                 |  |   | (10,644                  | ) |  |       | 1,706  |   |  |   | (790    | )
|New investments, repayments and settlements(C):                                 |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Issuances / originations                                                        |  |                    | 88,267  |   |                                |   | 11,818  |                 |  |   | 32,067                   |   |  |       | 139    |   |  |   | 132,291 |  
|Settlements / repayments                                                        |  |                    | (24,862 | ) |                                |   | (26,966 | )               |  |   |                         |   |  |       |       |   |  |   | (51,828 | )
|Sales                                                                           |  |                    |        |   |                                |   |        |                 |  |   | (31,535                  | ) |  |       | (52    | ) |  |   | (31,587 | )
|Transfers(D)                                                                    |  |                    |        |   |                                |   |        |                 |  |   | (2,950                   | ) |  |       | 2,950  |   |  |   |        |  
|                                                                                |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  
|Fair Value as of March 31, 2014                                                 |  | $                  | 169,870 |   |                                | $ | 70,827  |                 |  | $ | 62,901                   |   |  | $     | 10,795 |   |  | $ | 314,393 |  
|                                                                                |  |                    |         |   |                                |   |         |                 |  |   |                          |   |  |       |        |   |  |   |         |  



|(A) | Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of Operations for the years ended March 31, 2015 and 2014.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Included in net unrealized appreciation (depreciation) of investments on our accompanying Consolidated Statements of Operations for the years ended March 31, 2015 and 2014.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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) | 2015: Transfers represent $2.0 million of senior secured debt of B-Dry, LLC (B-Dry), which was converted into preferred equity, and $1.7 million of common equity of Roanoke Industries Corp., which was
converted to senior secured term debt.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2014: Transfers represent $3.0 million of preferred equity of Quench Holding Corp.
(Quench), which was converted into common equity during the quarter ended December 31, 2013.



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Investment Activity

During the year ended March 31, 2015, the following significant transactions occurred:



| |  |  | In May 2014, NDLI Acquisition, Inc. (NDLI), one of our portfolio companies, completed the purchase of certain of Noble Logistics, Inc.s (Noble) assets, one of our other portfolio companies,
out of bankruptcy.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In August 2014, we made a $1.8 million equity investment in Roanoke Industries Corp. (Roanoke), formerly known as Tread Real Estate Corp., which purchased the building owned by another one of our portfolio
companies, Tread Corporation (Tread). This building has subsequently been leased back to Tread
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In September 2014, we invested $20.2 million in Cambridge Sound Management, Inc. (Cambridge) through a combination of secured debt and equity. Cambridge, based in Waltham, Massachusetts, is the developer of
sound systems and solutions.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2014, we invested $24.4 million in Old World Christmas, Inc. (Old World) through a combination of secured debt and equity. Old World, headquartered in Spokane, Washington, is a designer and
distributor of an extensive collection of blown glass Christmas ornaments, table top figurines, vintage-style light covers and nostalgic greeting cards into the independent gift channel.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2014, we invested $19.6 million in B+T Group Acquisition Inc. (B+T) through a combination of secured debt and equity. B+T, headquartered in Tulsa, Oklahoma, is a full-service provider of
structural engineering, construction, and technical services to the wireless tower industry for tower upgrades and modifications. Gladstone Capital Corporation (Gladstone Capital), an affiliated fund of ours, also participated as a
co-investor by providing $8.4 million of debt and equity financing at the same price and terms as our investment.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2014, B-Dry, LLC (B-Dry) was restructured, resulting in $2.0 million of secured debt being converted into preferred equity.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March 2015, we invested $10.8 million in Logo Sportswear, Inc. (Logo) through a combination of secured debt and equity. Logo, headquartered in Cheshire, Connecticut, is an online provider of
user-customized uniforms and apparel for teams, leagues, schools, businesses and organizations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March 2015, we invested $32.0 million in Counsel Press, Inc. (Counsel Press) through a combination of secured debt and equity. Counsel Press, headquartered in New York, New York, provides expert
assistance in preparing, filing, and serving appeals in state and federal appellate courts nationwide and several international tribunals.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investment Concentrations

As of March 31, 2015, our
investment portfolio consisted of investments in 34 portfolio companies located in 16 states across 18 different industries with an aggregate fair value of $466.1 million, of which our investments in Counsel Press, SOG, Funko, Acme and Old World,
our five largest portfolio investments at fair value, collectively comprised $134.3 million, or 28.8%, of our total investment portfolio at fair value.

The following table summarizes our investments by security type as of March 31, 2015 and 2014:



|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|-------------------------------- |  | -------------- | ------- |  | -------------- |  | ----- | ---- |  | - | ---------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                                 |  | March 31, 2015 |         |  | March 31, 2014 | 
|                                 |  | Cost           |         |  | Fair Value     |  |       | Cost |  |   | Fair Value | 
|Senior secured debt              |  | $              | 284,509 |  |                |  | 56.3  | %    |  | $ | 263,141    |  |  |  | 56.5  | % |  | $ | 196,293 |  |  |  | 51.2  | % |  | $ | 169,870 |  |  |  | 54.0  | %
|Senior subordinated secured debt |  |                | 85,937  |  |                |  | 17.0  |      |  |   | 70,378     |  |  |  | 15.1  |   |  |   | 82,348  |  |  |  | 21.5  |   |  |   | 70,827  |  |  |  | 22.5  |  
|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total debt                       |  |                | 370,446 |  |                |  | 73.3  |      |  |   | 333,519    |  |  |  | 71.6  |   |  |   | 278,641 |  |  |  | 72.7  |   |  |   | 240,697 |  |  |  | 76.5  |  
|Preferred equity                 |  |                | 127,762 |  |                |  | 25.3  |      |  |   | 111,090    |  |  |  | 23.8  |   |  |   | 98,099  |  |  |  | 25.6  |   |  |   | 62,901  |  |  |  | 20.0  |  
|Common equity/equivalents        |  |                | 7,050   |  |                |  | 1.4   |      |  |   | 21,444     |  |  |  | 4.6   |   |  |   | 6,797   |  |  |  | 1.7   |   |  |   | 10,795  |  |  |  | 3.5   |  
|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total equity/equivalents         |  |                | 134,812 |  |                |  | 26.7  |      |  |   | 132,534    |  |  |  | 28.4  |   |  |   | 104,896 |  |  |  | 27.3  |   |  |   | 73,696  |  |  |  | 23.5  |  
|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  
|Total Investments                |  | $              | 505,258 |  |                |  | 100.0 | %    |  | $ | 466,053    |  |  |  | 100.0 | % |  | $ | 383,537 |  |  |  | 100.0 | % |  | $ | 314,393 |  |  |  | 100.0 | %
|                                 |  |                |         |  |                |  |       |      |  |   |            |  |  |  |       |   |  |   |         |  |  |  |       |   |  |   |         |  |  |  |       |  



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Investments at fair value consisted of the following industry classifications as of March 31, 2015 and 2014:



|                                                                       |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|---------------------------------------------------------------------- |  | -------------- | ------- |  | ------------------------------ |  | ----- | ---------- |  | - | ------------------------------ |  |  |  | ----- | -
|                                                                       |  | March 31, 2015 |         |  | March 31, 2014                 | 
|                                                                       |  | Fair Value     |         |  | Percentage ofTotal Investments |  |       | Fair Value |  |   | Percentage ofTotal Investments | 
|Home and Office Furnishings, Housewares, and Durable Consumer Products |  | $              | 70,533  |  |                                |  | 15.1  | %          |  | $ | 21,188                         |  |  |  | 6.7   | %
|Diversified/Conglomerate Manufacturing                                 |  |                | 62,996  |  |                                |  | 13.5  |            |  |   | 54,845                         |  |  |  | 17.4  |  
|Chemicals, Plastics, and Rubber                                        |  |                | 49,312  |  |                                |  | 10.6  |            |  |   | 52,753                         |  |  |  | 16.8  |  
|Leisure, Amusement, Motion Pictures, Entertainment                     |  |                | 44,931  |  |                                |  | 9.6   |            |  |   | 39,867                         |  |  |  | 12.7  |  
|Diversified/Conglomerate Service                                       |  |                | 31,995  |  |                                |  | 6.9   |            |  |   |                               |  |  |  |      |  
|Machinery (Non-agriculture, Non-construction, Non-electronic)          |  |                | 30,397  |  |                                |  | 6.5   |            |  |   | 25,917                         |  |  |  | 8.2   |  
|Personal and Non-Durable Consumer Products (Manufacturing Only)        |  |                | 25,008  |  |                                |  | 5.4   |            |  |   | 10,005                         |  |  |  | 3.2   |  
|Automobile                                                             |  |                | 24,530  |  |                                |  | 5.3   |            |  |   | 25,735                         |  |  |  | 8.2   |  
|Farming and Agriculture                                                |  |                | 22,438  |  |                                |  | 4.8   |            |  |   | 20,557                         |  |  |  | 6.5   |  
|Containers, Packaging, and Glass                                       |  |                | 19,447  |  |                                |  | 4.2   |            |  |   | 17,889                         |  |  |  | 5.7   |  
|Telecommunications                                                     |  |                | 19,241  |  |                                |  | 4.1   |            |  |   |                               |  |  |  |      |  
|Aerospace and Defense                                                  |  |                | 18,770  |  |                                |  | 4.0   |            |  |   | 18,512                         |  |  |  | 5.9   |  
|Cargo Transport                                                        |  |                | 13,972  |  |                                |  | 3.0   |            |  |   | 6,500                          |  |  |  | 2.1   |  
|Beverage Food and Tobacco                                              |  |                | 12,982  |  |                                |  | 2.8   |            |  |   | 13,050                         |  |  |  | 4.2   |  
|Textiles and Leather                                                   |  |                | 10,750  |  |                                |  | 2.3   |            |  |   |                               |  |  |  |      |  
|Buildings and Real Estate                                              |  |                | 1,860   |  |                                |  | 0.4   |            |  |   | 7,575                          |  |  |  | 2.4   |  
|Other < 2.0%                                                           |  |                | 6,891   |  |                                |  | 1.5   |            |  |   |                               |  |  |  |      |  
|                                                                       |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|Total Investments                                                      |  | $              | 466,053 |  |                                |  | 100.0 | %          |  | $ | 314,393                        |  |  |  | 100.0 | %
|                                                                       |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  

Investments at fair value were included in the following geographic regions of the U.S. as of March 31, 2015 and 2014:



|                  |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|----------------- |  | -------------- | ------- |  | ------------------------------ |  | ----- | ---------- |  | - | ------------------------------ |  |  |  | ----- | -
|                  |  | March 31, 2015 |         |  | March 31, 2014                 | 
|                  |  | Fair Value     |         |  | Percentage ofTotal Investments |  |       | Fair Value |  |   | Percentage ofTotal Investments | 
|West              |  | $              | 161,444 |  |                                |  | 34.6  | %          |  | $ | 117,781                        |  |  |  | 37.5  | %
|Northeast         |  |                | 133,814 |  |                                |  | 28.7  |            |  |   | 67,862                         |  |  |  | 21.6  |  
|South             |  |                | 133,703 |  |                                |  | 28.7  |            |  |   | 89,915                         |  |  |  | 28.6  |  
|Midwest           |  |                | 37,092  |  |                                |  | 8.0   |            |  |   | 38,835                         |  |  |  | 12.3  |  
|                  |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  
|Total Investments |  | $              | 466,053 |  |                                |  | 100.0 | %          |  | $ | 314,393                        |  |  |  | 100.0 | %
|                  |  |                |         |  |                                |  |       |            |  |   |                                |  |  |  |       |  

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

Investment Principal Repayments

The following table summarizes the contractual principal repayments and maturity of our investment portfolio for the next five fiscal years and thereafter,
assuming no voluntary prepayments, as of March 31, 2015:



|                                      |  |                                                            |  |        |         | 
|------------------------------------- |  | ---------------------------------------------------------- |  | ------ | ------- | 
|                                      |  |                                                            |  | Amount |        
|For the fiscal years ending March 31: |  | 2016                                                       |  | $      | 19,567  | 
|                                      |  | 2017                                                       |  |        | 43,861  | 
|                                      |  | 2018                                                       |  |        | 100,316 | 
|                                      |  | 2019                                                       |  |        | 81,681  | 
|                                      |  | 2020                                                       |  |        | 115,403 | 
|                                      |  | Thereafter                                                 |  |        | 9,618   | 
|                                      |  |                                                            |  |        |         | 
|                                      |  | Total contractual repayments                               |  | $      | 370,446 | 
|                                      |  | Investments in equity securities                           |  |        | 134,812 | 
|                                      |  |                                                            |  |        |         | 
|                                      |  | Total Cost Basis of Investments Held as of March 31, 2015: |  | $      | 505,258 | 
|                                      |  |                                                            |  |        |         | 

Receivables from Portfolio Companies

Receivables from portfolio companies represent non-recurring costs that we incurred on behalf of portfolio companies and are included in other assets 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



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determined, based upon managements judgment, that the portfolio company is unable to pay its obligations. We charge the accounts receivable to the established allowance when collection
efforts have been exhausted and the receivables are deemed uncollectible. As of March 31, 2015 and 2014, we had gross receivables from portfolio companies of $1.5 million and $1.2 million, respectively. The allowance for uncollectible
receivables was $349 and $44 as of March 31, 2015 and 2014, respectively.

NOTE 4. RELATED PARTY TRANSACTIONS

Investment Advisory and Management Agreement

In
accordance with the Advisory Agreement, we pay the Adviser certain fees as compensation for its services, such fees consisting of a base management fee, loan servicing fee and an incentive fee, each as described below. On July 15, 2014, 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, 2015.

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



|                                                       |  |                      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------ |  | -------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                       |  | Year Ended March 31, |        
|                                                       |  | 2015                 |         |   | 2014 |   |         | 2013 | 
|Average total assets subject to base management fee(A) |  | $                    | 378,450 |   |      | $ | 310,350 |      |  | $ | 270,600 |  
|Multiplied by annual base management fee of 2%         |  |                      | 2.0     | % |      |   | 2.0     | %    |  |   | 2.0     | %
|                                                       |  |                      |         |   |      |   |         |      |  |   |         |  
|Base management fee(B)                                 |  |                      | 7,569   |   |      |   | 6,207   |      |  |   | 5,412   |  
|Credits to fees from Adviserother(B)(C)               |  |                      | (2,848  | ) |      |   | (2,309  | )    |  |   | (1,107  | )
|                                                       |  |                      |         |   |      |   |         |      |  |   |         |  
|Net base management fee                                |  | $                    | 4,721   |   |      | $ | 3,898   |      |  | $ | 4,305   |  
|                                                       |  |                      |         |   |      |   |         |      |  |   |         |  
|Loan servicing fee(B)                                  |  |                      | 4,994   |   |      |   | 4,326   |      |  |   | 3,725   |  
|Credits to base management feeloan servicing fee(B)   |  |                      | (4,994  | ) |      |   | (4,326  | )    |  |   | (3,725  | )
|                                                       |  |                      |         |   |      |   |         |      |  |   |         |  
|Net loan servicing fee                                 |  | $                    |        |   |      | $ |        |      |  | $ |        |  
|                                                       |  |                      |         |   |      |   |         |      |  |   |         |  
|Incentive fee(B)                                       |  |                      | 4,975   |   |      |   | 3,983   |      |  |   | 2,585   |  
|Credits to fees from Adviserother(B)(D)               |  |                      |        |   |      |   |        |      |  |   | (221    | )
|                                                       |  |                      |         |   |      |   |         |      |  |   |         |  
|Net incentive fee                                      |  | $                    | 4,975   |   |      | $ | 3,983   |      |  | $ | 2,364   |  
|                                                       |  |                      |         |   |      |   |         |      |  |   |         |  



|(A) | Average total assets subject to the base management fee is defined as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings,
valued at the end of the applicable quarters within the respective periods and adjusted appropriately for any share issuances or repurchases during the periods.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | Reflected as a line item on our accompanying Consolidated Statement of Operations. For the year ended March 31, 2013, the credits to incentive fee and the credits to base management fee are combined into
one line item, Credits to fees from Adviser  other, on the accompanying Consolidated Statement of Operations.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | 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
other agreements and may receive fees for services other than managerial assistance. The Adviser generally credits 100.0% 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 is retained by the Adviser.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Our Board of Directors accepted an unconditional and irrevocable voluntary credit from the Adviser to reduce the income-based incentive fee to the extent net investment income did not 100.0% cover distributions
to common stockholders for the year ended March 31, 2013.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Base Management Fee

The base management fee is computed and generally payable quarterly to the Adviser 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 other 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 generally voluntarily 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, primarily for the
valuation of portfolio companies, is retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser.



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Loan Servicing Fee

The Adviser also services the loans held by our wholly-owned subsidiary, Business Investment, in return for which the Adviser receives a 2.0% annual fee based
on the monthly aggregate outstanding balance of loans pledged under our revolving line of credit. These loan servicing fees are 100% credited back to us by the Adviser. Overall, the base management fee, inclusive of the loan servicing fee, due to
the Adviser cannot exceed 2.0% of total assets (as reduced by cash and cash equivalents pledged to creditors) during any given calendar year.

Incentive Fee

The incentive fee consists of two parts:
an income-based incentive fee and a capital gains-based incentive fee. The income-based incentive fee rewards the Adviser if our quarterly net investment income (before giving effect to any incentive fee) exceeds 1.75% of our net assets (the
hurdle rate). The income-based incentive fee with respect to our pre-incentive fee net investment income is generally payable quarterly to the Adviser and is computed as follows:



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



| |  |  | 100.0% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% of our net assets 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 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 March 31, 2015, as cumulative net unrealized capital depreciation has exceeded
cumulative realized capital gains net of cumulative realized capital losses.

Additionally, in accordance with GAAP, a capital gains-based incentive fee
accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the capital gains-based incentive fee plus the aggregate cumulative
unrealized capital appreciation. If such amount is positive at the end of a 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 year. GAAP requires that the capital gains-based incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the
calculation, as a capital gains-based incentive fee would be payable if such unrealized capital appreciation were realized. There can be no assurance that any such unrealized capital appreciation will be realized in the future. There has been no
GAAP accrual recorded for a capital gains-based incentive fee since our inception through March 31, 2015.

Our Board of Directors accepted an
unconditional and irrevocable voluntary credit from the Adviser to reduce the income-based incentive fee to the extent net investment income did not cover 100% of the distributions to common stockholders for the year ended March 31, 2013, which
credit totaled $0.2 million. There have been no incentive fee credits from the Adviser for the years ended March 31, 2015 and 2014

Administration
Agreement

The Administration Agreement provides for payments equal to our allocable portion of the Administrators expenses incurred while
performing services to us, which are primarily rent and salaries and benefits expenses of the Administrators employees, including our



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chief financial officer and treasurer, chief accounting officer, chief compliance officer and general counsel and secretary (who also serves as the Administrators president) and their
respective staff. Prior to July 1, 2014, our allocable portion of the expenses were generally derived by multiplying that portion of the Administrators expenses allocable to all funds managed by the Adviser by the percentage of our total
assets at the beginning of each quarter in comparison to the total assets at the beginning of each quarter of all funds managed by the Adviser.

Effective
July 1, 2014, our allocable portion of the Administrators expenses are 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 15, 2014, our Board of Directors approved the annual renewal of the Administration Agreement through August 31, 2015.

Related Party Fees Due

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



|                                   |  |                 |       |  |      |   |       | 
|---------------------------------- |  | --------------- | ----- |  | ---- | - | ----- | 
|                                   |  | As of March 31, |      
|                                   |  | 2015            |       |  | 2014 |  
|Base management fee due to Adviser |  | $               | 191   |  |      | $ | 63    | 
|Incentive fee due to Adviser       |  |                 | 1,249 |  |      |   | 1,161 | 
|Other due to Adviser               |  |                 | 62    |  |      |   | 1     | 
|                                   |  |                 |       |  |      |   |       | 
|Total fees due to Adviser          |  |                 | 1,502 |  |      |   | 1,225 | 
|Fee due to Administrator           |  |                 | 262   |  |      |   | 224   | 
|                                   |  |                 |       |  |      |   |       | 
|Total Related Party Fees Due       |  | $               | 1,764 |  |      | $ | 1,449 | 
|                                   |  |                 |       |  |      |   |       | 

Net co-investment expenses payable to Gladstone Capital (for reimbursement purposes) and payables to other affiliates
totaled $305 and $41 as of March 31, 2015 and 2014, respectively. These expenses were paid in full subsequent to fiscal year end and have been included in other liabilities on the accompanying Consolidated Statements of Assets and
Liabilitiesas of March 31, 2015 and 2014.

NOTE 5. BORROWINGS

Line of Credit

On June 26, 2014, we, through our
wholly-owned subsidiary, Business Investment, entered into Amendment No. 1 to the Fifth Amended and Restated Credit Agreement originally entered into on April 30, 2013, with Key Equipment Finance, a division of KeyBank National Association
(KeyBank), as administrative agent, lead arranger and lender; other lenders; and the Adviser, as servicer, to extend the revolving period and reduce the interest rate of our revolving line of credit (our Credit Facility). The
revolving period was extended 14 months to June 26, 2017, and if not renewed or extended by June 26, 2017, all principal and interest will be due and payable on or before June 26, 2019 (two years after the revolving period end date).
In addition, we have retained the two one-year extension options, to be agreed upon by all parties, which may be exercised on or before June 26, 2015 and 2016, respectively, and upon exercise, the options would extend the revolving period to
June 26, 2018 and 2019 and the maturity date to June 26, 2020 and 2021, respectively. Subject to certain terms and conditions, our Credit Facility can be expanded by up to $145.0 million, to a total facility amount of $250.0 million,
through additional commitments of existing or new committed lenders. Advances under our Credit Facility generally bear interest at 30-day LIBOR, plus 3.25% per annum, down from 3.75% prior to the amendment, and our Credit Facility includes a
fee of 0.50% on undrawn amounts. Once the revolving period ends, the interest rate margin increases to 3.75% for the period from June 26, 2017 to June 26, 2018, and further increases to 4.25% through maturity. We incurred fees of $0.4
million in connection with this amendment, which are being amortized through our Credit Facilitys revolver period end date of June 26, 2017.

On September 19, 2014, we further increased our borrowing capacity under our Credit Facility from $105.0 million to $185.0 million by entering into
Joinder Agreements pursuant to our Credit Facility, by and among Business Investment, KeyBank, the Adviser and other lenders. We incurred fees of $1.3 million in connection with this expansion, which are being amortized through our Credit
Facilitys revolver period end date of June 26, 2017.



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



|                               |  |                 |         |  |      |   |         | 
|------------------------------ |  | --------------- | ------- |  | ---- | - | ------- | 
|                               |  | As of March 31, |        
|                               |  | 2015            |         |  | 2014 |  
|Commitment amount              |  | $               | 185,000 |  |      | $ | 105,000 | 
|Borrowings outstanding at cost |  |                 | 118,800 |  |      |   | 61,250  | 
|Availability                   |  |                 | 66,200  |  |      |   | 43,750  | 



|                                        |  |                               |        |   |      |   |        |      |  |   |        |  
|--------------------------------------- |  | ----------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                        |  | For the Years Ended March 31, |       
|                                        |  | 2015                          |        |   | 2014 |   |        | 2013 | 
|Weighted average borrowings outstanding |  | $                             | 79,158 |   |      | $ | 34,632 |      |  | $ | 15,533 |  
|Effective interest rate(A)              |  |                               | 3.98   | % |      |   | 4.90   | %    |  |   | 5.49   | %
|Commitment (unused) fees incurred       |  | $                             | 347    |   |      | $ | 318    |      |  | $ | 225    |  



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

Interest
is payable monthly during the term of our Credit Facility. Available borrowings are subject to various constraints imposed under our Credit Facility, based on the aggregate loan balance pledged by Business Investment, which varies as loans are added
and repaid, regardless of whether such repayments are prepayments or made as contractually required.

Our Credit Facility also requires that any interest
or principal payments on pledged loans be remitted directly by the borrower into a lockbox account with KeyBank and with The Bank of New York Mellon Trust Company, N.A as custodian. KeyBank is also the trustee of the account and generally remits the
collected funds to us once a month.

Among other things, our 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. Our Credit Facility also generally seeks to restrict distributions on our common stock to 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. Business Investment is also subject to certain limitations on the type of loan investments it can apply toward available credit in the
borrowing base, including restrictions on geographic concentrations, sector concentrations, loan size, payment frequency and status, average life and lien property. Our Credit Facility further 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 of the credit
agreement. Additionally, we are subject to a performance guaranty that requires us to maintain (i) a minimum net worth (defined in our Credit Facility to include our mandatory redeemable term preferred stock) of $170 million plus 50% of all
equity and subordinated debt raised minus any equity or subordinated debt redeemed or retired after June 26, 2014, which equates to $202.9 million as of March 31, 2015, (ii) asset coverage with respect to senior
securities representing indebtedness of at least 200%, in accordance with Section 18 of the 1940 Act and (iii) its status as a BDC under the 1940 Act and as a RIC under the Code. As of March 31, 2015, and as defined in the
performance guaranty of our Credit Facility, we had a net worth of $354.8 million, an asset coverage of 229.9% and an active status as a BDC and RIC. Our Credit Facility requires a minimum of 12 obligors in the borrowing base and, as of
March 31, 2015, Business Investment had 27 obligors. As of March 31, 2015, we were in compliance with all covenants under our Credit Facility.

Pursuant to the terms of our Credit Facility, in July 2013, we entered into an interest rate cap agreement with KeyBank that effectively limit the interest
rate on a portion of our borrowings under the line of credit pursuant to the terms of our Credit Facility. The agreement, which expires April 2016, provides that the interest rate on $45.0 million of our borrowings is capped at 6.0%, plus
3.25% per annum, when 30-day LIBOR is in excess of 6.0%. We incurred a premium fee of $75 in conjunction with this agreement, which is recorded in other assets on our accompanying Consolidated Statements of Assets and Liabilities. At
each of March 31, 2015 and 2014, the fair value of our interest rate cap agreement was $0.

Secured Borrowing

In August 2012, we entered into a participation agreement with a third-party related to $5.0 million of our senior subordinated 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. Accounting Standards Codification Topic 860, Transfers and Servicing (ASC
860) 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 senior subordinated secured term debt investment in
Ginsey and a corresponding $5.1 million secured borrowing liability. The secured borrowing has a stated interest rate of 7.0% and a maturity date of January 3, 2018.



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Fair Value

We elected to apply the fair value option of ASC 825, Financial Instruments, specifically for our Credit Facility, which was consistent with
our application of ASC 820 to our investments. Generally, the fair value of our Credit Facility is determined using a yield analysis which includes a DCF calculation and also takes into account the Valuation Teams own assumptions, including,
but not limited to, the estimated remaining life, counterparty credit risk, current market yield and interest rate spreads of similar securities as of the measurement date. At each of March 31, 2015 and 2014, the discount rate used to determine
the fair value of our Credit Facility was 3.7% and 4.2%, respectively. Generally, an increase or decrease in the discount rate used in the DCF calculation may result in a corresponding increase or decrease, respectively, in the fair value of our
Credit Facility. At each of March 31, 2015 and 2014, our Credit Facility was valued using Level 3 inputs and any changes in its fair value are recorded in net unrealized depreciation (appreciation) of other on our accompanying Consolidated
Statements of Operations.

The following tables present our Credit Facility carried at fair value as of March 31, 2015 and 2014, 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 years ended March 31, 2015 and 2014:



|                |  |                                                                |         |  |      |   |        | 
|--------------- |  | -------------------------------------------------------------- | ------- |  | ---- | - | ------ | 
|                |  | Total Recurring Fair Value Measurement Reported in             |        
|                |  | Consolidated Statements of Assets and Liabilities              |        
|                |  | Using Significant Unobservable Inputs (Level 3)As of March 31, |        
|                |  | 2015                                                           |         |  | 2014 |  
|Credit Facility |  | $                                                              | 118,800 |  |      | $ | 61,701 | 
|                |  |                                                                |         |  |      |   |        | 

Fair Value Measurements of Borrowings Using Significant Unobservable Inputs (Level 3)



|                                |  |                |          |   |                |   |          |                                                                               |  |   |          |  
|------------------------------- |  | -------------- | -------- | - | -------------- | - | -------- | ----------------------------------------------------------------------------- |  | - | -------- | -
|                                |  |                |          |   |                |   |          | Total Fair Value
Reported in
Consolidated Statementsof Assets and Liabilities | 
|                                |  |                |          |   |                |   |         
|                                |  | Short-TermLoan |          |   | CreditFacility |   |         
|Year ended March 31, 2015:      |  |                |          |   |                |   |          |                                                                               |  |   |          |  
|Fair value as of March 31, 2014 |  | $              |         |   |                | $ | 61,701   |                                                                               |  | $ | 61,701   |  
|Borrowings                      |  |                |         |   |                |   | 144,549  |                                                                               |  |   | 144,549  |  
|Repayments                      |  |                |         |   |                |   | (87,000  | )                                                                             |  |   | (87,000  | )
|Net unrealized depreciation(A)  |  |                |         |   |                |   | (450     | )                                                                             |  |   | (450     | )
|                                |  |                |          |   |                |   |          |                                                                               |  |   |          |  
|Fair value as of March 31, 2015 |  | $              |         |   |                | $ | 118,800  |                                                                               |  | $ | 118,800  |  
|                                |  |                |          |   |                |   |          |                                                                               |  |   |          |  
|Year ended March 31, 2014:      |  |                |          |   |                |   |          |                                                                               |  |   |          |  
|Fair value as of March 31, 2013 |  | $              | 58,016   |   |                | $ | 31,854   |                                                                               |  | $ | 89,870   |  
|Borrowings                      |  |                | 56,514   |   |                |   | 145,350  |                                                                               |  |   | 201,864  |  
|Repayments                      |  |                | (114,530 | ) |                |   | (115,100 | )                                                                             |  |   | (229,630 | )
|Net unrealized depreciation(A)  |  |                |         |   |                |   | (403     | )                                                                             |  |   | (403     | )
|                                |  |                |          |   |                |   |          |                                                                               |  |   |          |  
|Fair value as of March 31, 2014 |  | $              |         |   |                | $ | 61,701   |                                                                               |  | $ | 61,701   |  
|                                |  |                |          |   |                |   |          |                                                                               |  |   |          |  



|(A) | Included in net unrealized (depreciation) appreciation on our accompanying Consolidated Statement of Operations for the years ended March 31, 2015 and 2014.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of the collateral under our Credit Facility was $435.9 million and $288.6 million as of March 31, 2015 and 2014, respectively.

NOTE 6. MANDATORILY REDEEMABLE PREFERRED STOCK

In
November 2014, we completed a public offering of 1,656,000 shares of 6.75% Series B Cumulative Term Preferred Stock (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 expenses borne by us, were $39.7 million. We incurred $1.7 million in total offering costs related to these transactions, which have been recorded as deferred financing costs 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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The shares of Series B Term Preferred Stock are traded under the ticker symbol GAINO on the NASDAQ Global Select
Market (NASDAQ). 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. 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, (2) if we fail to maintain an asset coverage ratio of at least 200%, we are required to redeem a portion of our outstanding Series B Term Preferred Stock or otherwise cure the ratio redemption trigger.
We may also voluntarily redeem all or a portion of our Series B Term Preferred Stock at our sole option at the redemption price in order to have an asset coverage ratio of up to and including 215.0% and at any time on or after December 31,
2017.

In March 2012, we completed a public offering of 1,600,000 shares of 7.125% Series A Cumulative Term Preferred Stock (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 expenses borne by us, were $38.0 million. We incurred $2.0 million in total
offering costs related to these transactions, which have been recorded as deferred financing costs on our accompanying Consolidated Statements of Assets and Liabilities and will be amortized over the redemption period ending February 28,
2017, the mandatory redemption date.

The Series A Term Preferred Stock has a redemption date of February 28, 2017, and is traded under the ticker
symbol GAINP on the NASDAQ Global Select Market. The Series A Term Preferred Stock is not convertible into our common stock or any other security. The Series A Term Preferred Stock provides for a fixed dividend equal to 7.125% per year, payable
monthly. We are required to redeem all of the outstanding shares of our 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, but excluding, the date of redemption. In addition, three other potential 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 the outstanding Series A Term Preferred Stock, (2) if we fail to maintain an asset coverage ratio of at least 200%, we are required to redeem a portion of the outstanding Series A Term Preferred Stock or otherwise cure the ratio redemption
trigger and (3) at our sole option, at any time on or after February 28, 2016, we may redeem some or all of the Series A Term Preferred Stock.

For the years ended March 31, 2015, 2014, and 2013 our Board of Directors declared and we paid a monthly dividend of $0.1484375 per share, or $1.78125
per share in aggregate, to holders of our Series A Term Preferred Stock. For the year ended March 31, 2015, our Board of Directors declared and we paid dividends for the pro-rated month of November 2014 (based on the number of days between the
issuance date and November 30, 2014) and all full months from December 2014 through March 2015, that totaled $0.703125 per share to holders of our Series B Term Preferred Stock. The tax character of dividends paid by us to preferred
stockholders generally constitute ordinary income to the extent of our current and accumulated earnings and profits.

In accordance with ASC 480,
Distinguishing Liabilities from Equity, mandatorily redeemable financial instruments should be classified as liabilities in the balance sheet and we have recorded our mandatorily redeemable term preferred stock at cost as of
March 31, 2015 and 2014. The related distribution payments to preferred stockholders are treated as dividend expense on our statement of operations as of the ex-dividend date. For disclosure purposes, the fair value of our Series A Term
Preferred Stock, which we consider to be a Level 1 liability within the fair value hierarchy, based on the last reported closing sale price as of March 31, 2015 and 2014, was $41.5 million and $42.4 million, respectively. The fair value of our
Series B Term Preferred Stock, which we consider to be a Level 1 liability within the fair value hierarchy, based on the last reported closing sale price as of March 31, 2015, was $42.2 million.

Refer to Note 15  Subsequent Events for information regarding the recent offering of our newly designated and issued 6.50% Series C Cumulative
Term Preferred Stock (Series C Term Preferred Stock) subsequent to March 31, 2015.

NOTE 7. COMMON STOCK

Registration Statement

We filed a registration statement
on Form N-2 (File No. 333-181879) with the SEC on June 4, 2012, and subsequently filed a Pre-Effective Amendment No. 1 to the registration statement on July 17, 2012, which the SEC declared effective on July 26, 2012.
On June 7, 2013, we filed Post-Effective Amendment No. 2 to the registration statement, which the SEC declared effective on July 26, 2013. On June 3, 2014, we filed Post-Effective Amendment No. 3 to the registration
statement, and subsequently filed a Post-Effective Amendment No. 4 to the registration statement on September 2, 2014, which the SEC declared effective on September 4, 2014. 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 or preferred stock, including through a combined offering of
two or more of such securities. We currently have the ability to issue up to $117.3 million in securities under the registration statement.



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On March 13, 2015, we completed a public offering of 3.3 million shares of our common stock at a public
offering price of $7.40 per share, which was below our then current NAV per share. Gross proceeds totaled $24.4 million and net proceeds, after deducting underwriting discounts and offering expenses borne by us, were approximately $23.0 million,
which was used to repay borrowings under our Credit Facility. Refer to Note 15  Subsequent Events for additional information regarding shares issued pursuant to the underwriters overallotment option occurring subsequent to
March 31, 2015.

On October 5, 2012, we completed a public offering of 4.0 million shares of our common stock at a public offering price of
$7.50 per share, which was below our then current NAV per share. Gross proceeds totaled $30.0 million and net proceeds, after deducting underwriting discounts and offering expenses borne by us, were approximately $28.3 million, which was used to
repay borrowings under our Credit Facility. In connection with the offering, the underwriters exercised their option to purchase an additional 395,825 shares at the public offering price to cover over-allotments, which resulted in gross proceeds of
$3.0 million and net proceeds, after deducting underwriting discounts, of approximately $2.8 million.

NOTE 8. NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE

The following table sets forth the computation of basic and diluted net increase (decrease) in net
assets resulting from operations per common share for the years ended March 31, 2015, 2014, and 2013:



|                                                                                                                 |  |                      |            |  |      |   |            |      |  |   |            | 
|---------------------------------------------------------------------------------------------------------------- |  | -------------------- | ---------- |  | ---- | - | ---------- | ---- |  | - | ---------- | 
|                                                                                                                 |  | Year Ended March 31, |           
|                                                                                                                 |  | 2015                 |            |  | 2014 |   |            | 2013 | 
|Numerator for basic and diluted-net increase (decrease) in net assets resulting from operations per common share |  | $                    | 50,214     |  |      | $ | (1,329     | )    |  | $ | 17,279     | 
|Denominator for basic and diluted-weighted average common shares                                                 |  |                      | 26,665,821 |  |      |   | 26,475,958 |      |  |   | 24,189,148 | 
|                                                                                                                 |  |                      |            |  |      |   |            |      |  |   |            | 
|Basic and diluted net increase (decrease) in net assets resulting from operations per common share               |  | $                    | 1.88       |  |      | $ | (0.05      | )    |  | $ | 0.71       | 
|                                                                                                                 |  |                      |            |  |      |   |            |      |  |   |            | 

NOTE 9. DISTRIBUTIONS TO COMMON STOCKHOLDERS

To qualify to be taxed as a RIC, we are required to distribute to our common stockholders 90% of our investment company taxable income. The amount to be paid
out as distributions to our stockholders is determined by our Board of Directors quarterly and is based on managements estimate of the investment company taxable income. Based on that estimate, our Board of Directors declares three monthly
common distributions each quarter.

The federal income tax characteristics of all distributions (including preferred stock dividends) will be reported to
stockholders on the Internal Revenue Service Form 1099 at the end of each calendar year. For calendar years ended December 31, 2014, 2013 and 2012, 100% of our common distributions during these periods were deemed to be paid from ordinary
income for 1099 stockholder reporting purposes.

We paid the following monthly distributions to common stockholders for the years ended March 31,
2015 and 2014:



|            |  |                    |  |                            |  |                    |       |                              |       |    
|----------- |  | ------------------ |  | -------------------------- |  | ------------------ | ----- | ---------------------------- | ----- | ---
|Fiscal Year |  | Declaration Date   |  | Record Date                |  | Payment Date       |       | Distributionper Common Share |      
|2015        |  | April 16, 2014     |  | April 21, 2014             |  | April 30, 2014     |       | $                            | 0.060 |    
|            |  | May 16, 2014       |  | May 20, 2014               |  | May 30, 2014       |       |                              | 0.060 |    
|            |  | June 17, 2014      |  | June 19, 2014              |  | June 30, 2014      |       |                              | 0.060 |    
|            |  | July 23, 2014      |  | July 25, 2014              |  | August 5, 2014     |       |                              | 0.060 |    
|            |  | August 18, 2014    |  | August 20, 2014            |  | August 29, 2014    |       |                              | 0.060 |    
|            |  | September 17, 2014 |  | September 19, 2014         |  | September 30, 2014 |       |                              | 0.060 |    
|            |  | October 20, 2014   |  | October 22, 2014           |  | October 31, 2014   |       |                              | 0.060 |    
|            |  | November 13, 2014  |  | November 17, 2014          |  | November 26, 2014  |       |                              | 0.060 |    
|            |  | December 17, 2014  |  | December 19, 2014          |  | December 31, 2014  |       |                              | 0.050 | (A)
|            |  | December 17, 2014  |  | December 19, 2014          |  | December 31, 2014  |       |                              | 0.060 |    
|            |  | January 21, 2015   |  | January 23, 2015           |  | February 3, 2015   |       |                              | 0.060 |    
|            |  | February 13, 2015  |  | February 18, 2015          |  | February 27, 2015  |       |                              | 0.060 |    
|            |  | March 18, 2015     |  | March 20, 2015             |  | March 31, 2015     |       |                              | 0.060 |    
|            |  |                    |  |                            |  |                    |       |                              |       |    
|            |  |                    |  | Year Ended March 31, 2015: |  | $                  | 0.770 |                             
|            |  |                    |  |                            |  |                    |       |                              |       |    



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|     |  |                 |  |                            |  |                    |       |   |       |    
|---- |  | --------------- |  | -------------------------- |  | ------------------ | ----- | - | ----- | ---
|2014 |  | April 9, 2013   |  | April 22, 2013             |  | April 30, 2013     |       | $ | 0.050 |    
|     |  | April 9, 2013   |  | May 20, 2013               |  | May 31, 2013       |       |   | 0.050 |    
|     |  | April 9, 2013   |  | June 19, 2013              |  | June 28, 2013      |       |   | 0.050 |    
|     |  | July 9, 2013    |  | July 17, 2013              |  | July 31, 2013      |       |   | 0.050 |    
|     |  | July 9, 2013    |  | August 19, 2013            |  | August 30, 2013    |       |   | 0.050 |    
|     |  | July 9, 2013    |  | September 16, 2013         |  | September 30, 2013 |       |   | 0.050 |    
|     |  | October 8, 2013 |  | October 22, 2013           |  | October 31, 2013   |       |   | 0.060 |    
|     |  | October 8, 2013 |  | November 14, 2013          |  | November 29, 2013  |       |   | 0.060 |    
|     |  | October 8, 2013 |  | November 18, 2013          |  | November 29, 2013  |       |   | 0.050 | (A)
|     |  | October 8, 2013 |  | December 16, 2013          |  | December 31, 2013  |       |   | 0.060 |    
|     |  | January 7, 2014 |  | January 22, 2014           |  | January 31, 2014   |       |   | 0.060 |    
|     |  | January 7, 2014 |  | February 19. 2014          |  | February 28, 2014  |       |   | 0.060 |    
|     |  | January 7, 2014 |  | March 17, 2014             |  | March 31, 2014     |       |   | 0.060 |    
|     |  |                 |  |                            |  |                    |       |   |       |    
|     |  |                 |  | Year Ended March 31, 2014: |  | $                  | 0.710 |  
|     |  |                 |  |                            |  |                    |       |   |       |    



|(A) | A special distribution on our common stock of $0.05 per share was declared by our Board of Directors.
|--- | -----------------------------------------------------------------------------------------------------

Aggregate distributions declared and paid to our common stockholders for the years ended March 31, 2015 and 2014 were $20.6 million and $18.8 million,
respectively, and were declared based on estimates of net investment income for the respective fiscal years. For each of the years ended March 31, 2015 and 2014, taxable income available for common distributions exceeded distributions declared
and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $4.0 million and $3.9 million, respectively, of the first common distributions paid in fiscal year 2016 and 2015, respectively, as having been paid in the
respective prior year.

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



|                                                             |  |                      |         |   |      |   |         |  
|------------------------------------------------------------ |  | -------------------- | ------- | - | ---- | - | ------- | -
|                                                             |  | Year Ended March 31, |        
|                                                             |  | 2015                 |         |   | 2014 |  
|Common stock                                                 |  | $                    | 30      |   |      | $ | 26      |  
|Capital in excess of par value                               |  |                      | 309,438 |   |      |   | 287,062 |  
|Cumulative unrealized depreciation of investments            |  |                      | (39,204 | ) |      |   | (69,283 | )
|Cumulative unrealized (depreciation) (appreciation) of other |  |                      | (75     | ) |      |   | (525    | )
|Undistributed ordinary income                                |  |                      | 4,002   |   |      |   | 3,918   |  
|Capital loss carryforward                                    |  |                      | (288    | ) |      |   | (216    | )
|Other temporary differences                                  |  |                      | (490    | ) |      |   | (163    | )
|Other                                                        |  |                      | 16      |   |      |   | 18      |  
|                                                             |  |                      |         |   |      |   |         |  
|Net Assets                                                   |  | $                    | 273,429 |   |      | $ | 220,837 |  
|                                                             |  |                      |         |   |      |   |         |  

We generally intend to retain some or all of our realized gains first to the extent we have available capital loss
carryforwards and second, through a deemed distribution. As of March 31, 2015, we had $0.3 million of capital loss carryforwards that expire in 2018. We had no deemed distributions during the years ended March 31, 2015, 2014, and 2013.

For the years ended March 31, 2015 and 2014, we recorded the following adjustments for permanent book-tax differences to reflect tax character.
Results of operations, net assets, and cash flows were not affected by these adjustments.



|                                    |  |                          |      |   |      |   |      |  
|----------------------------------- |  | ------------------------ | ---- | - | ---- | - | ---- | -
|                                    |  | Tax Year Ended March 31, |     
|                                    |  | 2015                     |      |   | 2014 |  
|Undistributed net investment income |  | $                        | 584  |   |      | $ | 416  |  
|Accumulated net realized gain       |  |                          |     |   |      |   | 235  |  
|Paid-in-capital                     |  |                          | (584 | ) |      |   | (651 | )

The tax character of distributions paid by us to common stockholders for the years ended March 31, 2015, 2014 and 2013
were 100.0% from ordinary income.

NOTE 10. FEDERAL AND STATE INCOME TAXES

We intend to continue to maintain our qualifications as a RIC for federal income tax purposes. As a RIC, we are not subject to federal income tax on the
portion of our taxable income and gains that we distribute to stockholders. To maintain our qualification as a RIC, we must meet certain source-of-income and asset diversification requirements. In addition, in order to qualify to be taxed as a RIC,
we must also meet certain annual stockholder distribution requirements. To satisfy the RIC annual distribution requirement, we must



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distribute to stockholders at least 90% of our investment company taxable income. Our policy generally is to make distributions to our stockholders in amount up to 100% of our investment company
taxable income. Because we have distributed more than 90% of our investment company taxable income, no income tax provisions have been recorded for the years ended March 31, 2015, 2014, and 2013.

In an effort to limit certain federal excise taxes imposed on RICs, we generally distribute during each calendar year, an amount at least equal to the sum of
(1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and capital gains in
excess of capital losses for preceding years that were not distributed during such years. We incurred an excise tax of $0.1 million, $0.3 million, and $31 for the calendar years ended December 31, 2014, 2013 and 2012, respectively.

Under the RIC Modernization Act (the RIC Act), we are permitted to carry forward capital losses incurred in taxable years beginning after
September 30, 2011, for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result
of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than
being considered all short-term as permitted under the Treasury regulations applicable to pre-enactment capital losses. Our capital loss carryforward balance as of March 31, 2015 and 2014 was $0.3 million and $0.2 million, respectively.

NOTE 11. COMMITMENTS AND CONTINGENCIES

Legal
Proceedings

We are party to certain legal proceedings incidental to the normal course of our business, including the enforcement of our rights under
contracts with our portfolio companies. We are required to establish reserves for litigation matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we
do not establish reserves. Based on current knowledge, we do not believe that loss contingencies, if any, arising from pending investigations, litigation or regulatory matters will have a material adverse effect on our financial condition, results
of operation or cash flows. Additionally, based on our current knowledge, we do not believe such loss contingencies are both probable and estimable and therefore, as of as of March 31, 2015, we have not established reserves for such loss
contingencies.

Escrow Holdbacks

From time to time,
we will enter into arrangements as it relates to exits of certain investments whereby specific amounts of the proceeds are held in escrow in order to be used to satisfy potential obligations as stipulated in the sales agreements. We record escrow
amounts in restricted cash and cash equivalents on our accompanying Consolidated Statements of Assets and Liabilities. We establish a contingent liability against the escrow amounts if we determine that it is probable and estimable that a
portion of the escrow amounts will not be ultimately received at the end of the escrow period. The aggregate contingent liability recorded against the escrow amounts was $0 and $35 as of March 31, 2015 and 2014, respectively.

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, but in all cases limited to the actual amount outstanding under Treads senior credit facility. The actual
amount outstanding under Treads senior credit facility as of March 31, 2015 was $4.4 million. We estimate the fair value of the combined unused line of credit and other uncalled capital commitments as of March 31, 2015 and 2014 to be
minimal.

In addition to the lines of credit and other uncalled capital commitments to our portfolio companies, we have also extended certain guaranties
on behalf of some our portfolio companies. During the years ended March 31, 2015, 2014 and 2013, we have not been required to make any payments on any of the guaranties, and we consider the credit risks to be remote and the fair value of the
guaranties to be minimal.

As of March 31, 2015, the following guaranties were outstanding:



| |  |  | In February 2010, we executed a guarantee 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 guarantee was renewed in February 2012, 2013, 2014, and
2015 and will expire in February 2016, unless it is renewed again by us, CCE and Agricredit.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | In April 2010, we executed a guarantee of vendor recourse for up to $0.6 million in individual customer transactions (the Recourse Facility) between Wells Fargo Financial Leasing, Inc. and CCE. The Recourse
Facility provides CCE with the ability to provide vendor recourse up to a limit of $0.6 million on transactions with long-time customers who lack the financial history to qualify for third-party financing. The terms to maturity of these individual
transactions range from October 2015 to October 2016.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2014, the following guaranties were outstanding:



| |  |  | In October 2008, we executed a guarantee of a vehicle finance facility agreement (the Ford Finance Facility) between Ford Motor Credit Company (Ford) and ASH. The Ford Finance Facility provides
ASH with a line of credit of up to $0.5 million for component Ford parts used by ASH to build truck bodies under a separate contract. Ford retains title and ownership of the parts. The guarantee of the Ford Finance Facility will expire upon
termination of the separate parts supply contract with Ford or upon replacement of us as guarantor.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In February 2010, we executed the Floor Plan Facility between Agricredit and 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 guarantee was renewed in February 2012, 2013 and 2014.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In April 2010, we executed the Recourse Facility for up to $2.0 million in individual customer transactions between Wells Fargo Financial Leasing, Inc. and CCE. The Recourse Facility provides CCE with the ability to
provide vendor recourse up to a limit of $2.0 million on transactions with long-time customers who lack the financial history to qualify for third-party financing. The terms to maturity of these individual transactions ranged from October 2014 to
October 2016.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2013, we executed a guarantee of a vehicle finance facility agreement (the Compass Finance Facility) between Compass Bank and ASH. The Compass Finance Facility provides ASH with a line of credit
of up to $0.3 million for component Ram parts used by ASH to build truck bodies under a separate contract. The guarantee expired upon maturity of the Compass Finance Facility on October 16, 2014.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the dollar balance of unused line of credit and other uncalled capital commitments and guaranties as of March 31, 2015 and
2014:



|                                                             |  |                 |        |  |      |   |        | 
|------------------------------------------------------------ |  | --------------- | ------ |  | ---- | - | ------ | 
|                                                             |  | As of March 31, |       
|                                                             |  | 2015            |        |  | 2014 |  
|Unused line of credit and other uncalled capital commitments |  | $               | 10,031 |  |      | $ | 6,684  | 
|Guaranties                                                   |  |                 | 2,593  |  |      |   | 3,628  | 
|                                                             |  |                 |        |  |      |   |        | 
|Total                                                        |  | $               | 12,624 |  |      | $ | 10,312 | 
|                                                             |  |                 |        |  |      |   |        | 



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NOTE 12. FINANCIAL HIGHLIGHTS



|                                                                    |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|------------------------------------------------------------------- |  | -------------------------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                    |  | As of and for the Year Ended March 31, |           
|                                                                    |  | 2015                                   |            |   | 2014 |   |            | 2013 |  |   | 2012       |   |  | 2011 |           
|Per Common Share Data:                                              |  |                                        |            |   |      |   |            |      |  |   |            |   | 
|Net asset value, beginning of year(A)                               |  | $                                      | 8.34       |   |      | $ | 9.10       |      |  | $ | 9.38       |   |  | $    | 9.00       |   |  | $ | 8.74       |  
|Income from investment operations(B)                                |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net investment income                                               |  |                                        | 0.75       |   |      |   | 0.73       |      |  |   | 0.68       |   |  |      | 0.62       |   |  |   | 0.73       |  
|Net realized gain on investments and other                          |  |                                        |           |   |      |   | 0.31       |      |  |   | 0.03       |   |  |      | 0.23       |   |  |   | 1.06       |  
|Net unrealized appreciation (depreciation) on investments and other |  |                                        | 1.13       |   |      |   | (1.09      | )    |  |   |           |   |  |      | 0.14       |   |  |   | (1.05      | )
|                                                                    |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total from investment operations                                    |  |                                        | 1.88       |   |      |   | (0.05      | )    |  |   | 0.71       |   |  |      | 0.99       |   |  |   | 0.74       |  
|                                                                    |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Effect of equity capital activity(B)                                |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Cash distributions to common stockholders(C)                        |  |                                        | (0.77      | ) |      |   | (0.71      | )    |  |   | (0.60      | ) |  |      | (0.61      | ) |  |   | (0.48      | )
|Shelf registration offering costs                                   |  |                                        | (0.03      | ) |      |   |           |      |  |   | (0.08      | ) |  |      |           |   |  |   |           |  
|Net dilutive effect of equity offering(D)                           |  |                                        | (0.22      | ) |      |   |           |      |  |   | (0.31      | ) |  |      |           |   |  |   |           |  
|                                                                    |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total from equity capital activity                                  |  |                                        | (1.02      | ) |      |   | (0.71      | )    |  |   | (0.99      | ) |  |      | (0.61      | ) |  |   | (0.48      | )
|                                                                    |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Other, net(B)(E)                                                    |  |                                        | (0.02      | ) |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|                                                                    |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net asset value at end of year(A)                                   |  | $                                      | 9.18       |   |      | $ | 8.34       |      |  | $ | 9.10       |   |  | $    | 9.38       |   |  | $ | 9.00       |  
|                                                                    |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Per common share market value at beginning of year                  |  | $                                      | 8.27       |   |      | $ | 7.31       |      |  | $ | 7.57       |   |  | $    | 7.79       |   |  | $ | 6.01       |  
|Per common share market value at end of year                        |  |                                        | 7.40       |   |      |   | 8.27       |      |  |   | 7.31       |   |  |      | 7.57       |   |  |   | 7.76       |  
|Total return(F)                                                     |  |                                        | 11.96      | % |      |   | 24.26      | %    |  |   | 4.73       | % |  |      | 5.58       | % |  |   | 38.56      | %
|Common stock outstanding at end of year(A)                          |  |                                        | 29,775,958 |   |      |   | 26,475,958 |      |  |   | 26,475,958 |   |  |      | 22,080,133 |   |  |   | 22,080,133 |  
|Statement of Assets and Liabilities Data:                           |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net assets at end of year                                           |  | $                                      | 273,429    |   |      | $ | 220,837    |      |  | $ | 240,963    |   |  | $    | 207,216    |   |  | $ | 198,829    |  
|Average net assets(G)                                               |  |                                        | 229,350    |   |      |   | 231,356    |      |  |   | 216,751    |   |  |      | 204,595    |   |  |   | 192,893    |  
|Senior Securities Data:                                             |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total borrowings, at cost                                           |  | $                                      | 123,896    |   |      | $ | 66,250     |      |  | $ | 94,016     |   |  | $    | 76,005     |   |  | $ | 40,000     |  
|Mandatorily redeemable preferred stock                              |  |                                        | 81,400     |   |      |   | 40,000     |      |  |   | 40,000     |   |  |      | 40,000     |   |  |   |           |  
|Asset coverage ratio(H)                                             |  |                                        | 230        | % |      |   | 298        | %    |  |   | 272        | % |  |      | 268        | % |  |   | 534        | %
|Average coverage per unit(I)                                        |  | $                                      | 2,301      |   |      | $ | 2,978      |      |  | $ | 2,725      |   |  | $    | 2,676      |   |  | $ | 5,344      |  
|Ratios/Supplemental Data:                                           |  |                                        |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Ratio of expenses to average net assets(J)                          |  |                                        | 12.90      | % |      |   | 10.20      | %    |  |   | 8.81       | % |  |      | 5.71       | % |  |   | 6.90       | %
|Ratio of net expenses to average net assets(K)(L)                   |  |                                        | 9.48       |   |      |   | 7.33       |      |  |   | 6.48       |   |  |      | 3.67       |   |  |   | 5.13       |  
|Ratio of net investment income to average net assets(M)             |  |                                        | 8.68       |   |      |   | 8.35       |      |  |   | 7.61       |   |  |      | 6.72       |   |  |   | 8.38       |  



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

|(B) | Based on weighted average per basic common share data.
|--- | ------------------------------------------------------

|(C) | Distributions are determined based on taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | In fiscal years ended March 31, 2015 and 2013, the dilution is the result of issuing common shares at a price below then current NAV.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(E) | Represents the impact of the different share amounts (weighted average shares outstanding during the fiscal year and shares outstanding at the end of the fiscal year) in the per share data calculations and rounding
impacts.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(F) | Total return equals the change in the market value of our common stock from the beginning of the year, 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, please 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 year.
|--- | --------------------------------------------------------------------------------------------------

|(H) | As a BDC, we are generally required to maintain an asset coverage ratio (as defined in Section 18(h) of the 1940 Act) of at least 200% on our senior securities representing indebtedness and our senior securities
that are stock. Our mandatorily redeemable preferred stock is a senior security that is stock.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(I) | Asset coverage per unit is the asset coverage ratio expressed in terms of dollar amounts per one thousand dollars of indebtedness.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(J) | Ratio of expenses to average net assets is computed using expenses before credits from the Adviser. The ratio of expenses to average net assets for the twelve months ended March 31, 2014, 2013, 2012, and 2011 were
revised from the previously reported ratios, which were 8.33%, 7.09%, 4.23%, and 5.48%, respectively. Refer to Note 2  Summary of Significant Accounting Policiesfor additional information on the revision.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(K) | Ratio of net expenses to average net assets is computed using total expenses, net of credits to the base management fee for the loan servicing fee and other credits from the Adviser.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(L) | Had we not received any voluntary credits of fees due to the Adviser, the ratio of net expenses to average net assets would have been 12.90%, 10.20 %, 8.81%, 6.14%, and 7.75% for the fiscal years ended
March 31, 2015, 2014, 2013, 2012, and 2011, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(M) | Had we not received any voluntary credits of fees due to the Adviser, the ratio of net investment income to average net assets would have been 5.26%, 5.48%, 5.28%, 4.25%, and 5.76% for the fiscal years ended
March 31, 2015, 2014, 2013, 2012, and 2011, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTE 13. SELECTED QUARTERLY DATA (UNAUDITED)



|                                                                                                         |  |               |        |  |                    |   |       |                   |  |   |                |  |  |   |        | 
|-------------------------------------------------------------------------------------------------------- |  | ------------- | ------ |  | ------------------ | - | ----- | ----------------- |  | - | -------------- |  |  | - | ------ | 
|                                                                                                         |  | Quarter Ended |       
|Year ended March 31, 2015                                                                                |  | June 30, 2014 |        |  | September 30, 2014 |   |       | December 31, 2014 |  |   | March 31, 2015 | 
|Total investment income                                                                                  |  | $             | 9,837  |  |                    | $ | 9,071 |                   |  | $ | 11,562         |  |  | $ | 11,173 | 
|Net investment income                                                                                    |  |               | 4,859  |  |                    |   | 4,204 |                   |  |   | 5,839          |  |  |   | 4,995  | 
|Net increase in net assets resulting from operations                                                     |  |               | 10,770 |  |                    |   | 2,697 |                   |  |   | 7,589          |  |  |   | 29,158 | 
|Net increase in net assets resulting from operations per weighted average common share  basic & diluted |  | $             | 0.41   |  |                    | $ | 0.10  |                   |  | $ | 0.29           |  |  | $ | 1.08   | 



|                                                                                                                    |  |               |        |   |                    |   |        |                   |  |   |                |   |  |   |       | 
|------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | - | ------------------ | - | ------ | ----------------- |  | - | -------------- | - |  | - | ----- | 
|                                                                                                                    |  | Quarter Ended |       
|Year ended March 31, 2014                                                                                           |  | June 30, 2013 |        |   | September 30, 2013 |   |        | December 31, 2013 |  |   | March 31, 2014 |  
|Total investment income                                                                                             |  | $             | 7,398  |   |                    | $ | 11,359 |                   |  | $ | 8,696          |   |  | $ | 8,811 | 
|Net investment income                                                                                               |  |               | 4,033  |   |                    |   | 6,228  |                   |  |   | 4,402          |   |  |   | 4,644 | 
|Net (decrease) increase in net assets resulting from operations                                                     |  |               | (6,519 | ) |                    |   | 14,939 |                   |  |   | (10,686        | ) |  |   | 937   | 
|Net (decrease) increase in net assets resulting from operations per weighted average common share  basic &
diluted |  | $             | (0.25  | ) |                    | $ | 0.57   |                   |  | $ | (0.40          | ) |  | $ | 0.03  | 

NOTE 14. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES

In accordance with the SECs Regulation S-X and GAAP, we are not permitted to consolidate any subsidiary or other entity that is not an investment
company, including those in which we have a controlling interest. We had three unconsolidated subsidiaries, D.P.M.S., Inc. (d/b/a Danco Acquisition Corporation), Galaxy, and SOG, which met at least one of the significance conditions under Rule
1-02(w) of the SECs Regulation S-X during at least one of the years ended March 31, 2015, 2014 and 2013. Accordingly, audited and unaudited financial statements, as applicable, for these subsidiaries have been included as exhibits to this
Form 10-K. In addition, we had one unconsolidated subsidiary, Venyu, which met at least one of the significance conditions under Rule 1-02(w) of the SECs Regulation S-X for the years ended March 31, 2014 and 2013. Accordingly, summarized,
comparative financial information is presented below for Venyu, which is a leader in commercial-grade, customizable solutions for data protection, data hosting, and disaster recovery.



|                 |  |                                             |        |   |                                  |   |        |  
|---------------- |  | ------------------------------------------- | ------ | - | -------------------------------- | - | ------ | -
|Income Statement |  | For the Five Months EndedAugust 30, 2013(A) |        |   | For the Year EndedMarch 31, 2013 |  
|Net sales        |  | $                                           | 10,120 |   |                                  | $ | 23,905 |  
|Gross profit     |  |                                             | 5,254  |   |                                  |   | 12,861 |  
|Net loss         |  |                                             | (294   | ) |                                  |   | (329   | )



|(A) | Venyu was exited in August 2013 and is no longer in our portfolio as of March 31, 2015 or 2014. Rule 4-08(g) information is being provided herein in lieu of Rule 3-09 separate financial statements pursuant to
relief provided by the Staff of the SECs Office of Chief Accountant in the Division of Investment Management.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 15. SUBSEQUENT
EVENTS

Common stock offering

In connection with
the March 13, 2015 common stock offering, the underwriters exercised their option in April 2015 to purchase an additional 495,000 shares at the public offering price of $7.40 per share to cover over-allotments, which resulted in gross proceeds
of $3.7 million and net proceeds, after deducting underwriting discounts, of approximately $3.5 million.

Term preferred stock offering

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 expenses borne by us, were approximately $38.6 million.

Distributions and dividends

In April 2015, our Board of
Directors declared the following monthly distributions to common stockholders and dividends to holders of our Series A and B Term Preferred Stock:



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|                       |  |              |                |        |                              |   |        |                                          |  |   |                                          |          |  |   |          | 
|---------------------- |  | ------------ | -------------- | ------ | ---------------------------- | - | ------ | ---------------------------------------- |  | - | ---------------------------------------- | -------- |  | - | -------- | 
|Record Date            |  | Payment Date |                |        | Distribution perCommon Share |   |        | Dividend perSeries A TermPreferred Share |  |   | Dividend perSeries B TermPreferred Share |         
|April 24, 2015         |  |              | April 30, 2014 |        |                              | $ | 0.0625 |                                          |  | $ | 0.1484375                                |          |  | $ | 0.140625 | 
|May 19, 2015           |  |              | May 29, 2015   |        |                              |   | 0.0625 |                                          |  |   | 0.1484375                                |          |  |   | 0.140625 | 
|June 19, 2015          |  |              | June 30, 2015  |        |                              |   | 0.0625 |                                          |  |   | 0.1484375                                |          |  |   | 0.140625 | 
|                       |  |              |                |        |                              |   |        |                                          |  |   |                                          |          |  |   |          | 
|Total for the Quarter: |  |              | $              | 0.1875 |                              |   | $      | 0.4453125                                |  |   | $                                        | 0.421875 | 
|                       |  |              |                |        |                              |   |        |                                          |  |   |                                          |          |  |   |          | 

In May 2015, our Board of Directors declared the following combined cash dividend (for a prorated month of May 2015, based
upon the issuance date, and a full month of June 2015) to holders of our Series C Term Preferred Stock:



|                       |  |              |               |  |                                          |   |          | 
|---------------------- |  | ------------ | ------------- |  | ---------------------------------------- | - | -------- | 
|Record Date            |  | Payment Date |               |  | Dividend perSeries C TermPreferred Share |  
|June 19, 2015          |  |              | June 30, 2015 |  |                                          | $ | 0.221181 | 
|                       |  |              |               |  |                                          |   |          | 
|Total for the Quarter: |  |              |               |  |                                          | $ | 0.221181 | 
|                       |  |              |               |  |                                          |   |          | 



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

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of March 31, 2015 (the end of the period covered by this report), we, including our chief executive officer and chief financial officer and treasurer,
evaluated the effectiveness and design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the chief executive officer and chief financial officer and treasurer, concluded that our disclosure
controls and procedures were effective in timely alerting management, including the chief executive officer and chief financial officer and treasurer, 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.

Managements
Annual Report on Internal Control over Financial Reporting

Refer to Managements Annual Report on Internal Control over Financial
Reporting located in Item 8 of this Form 10-K.

Attestation Report of the Independent Registered Public Accounting Firm

Refer to the Report of Independent Registered Public Accounting Firm located in Item 8 of this Form 10-K.

Change in Internal Control over Financial Reporting

There were no changes in internal controls for the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION.
|-------- | ------------------

Not applicable.



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PART III

We will file a definitive Proxy Statement for our 2015 Annual Meeting of Stockholders (the 2015 Proxy Statement) with the SEC, pursuant to
Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of the
2015 Proxy Statement that specifically address the items set forth herein are incorporated by reference.

ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is hereby incorporated by reference from our 2015
Proxy Statement under the captions Election of Directors and Section 16(a) Beneficial Ownership Reporting Compliance.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is hereby incorporated by reference from our 2015 Proxy Statement under the captions Compensation Discussion and
AnalysisExecutive Compensation and Director Compensation.

ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is hereby incorporated by reference
from our 2015 Proxy Statement under the caption Security Ownership of Certain Beneficial Owners and Management.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 is hereby incorporated by reference from our 2015 Proxy Statement under the captions Certain Transactions
and Information Regarding the Board of Directors and Corporate Governance.

ITEM 14. PRINCIPAL ACCOUNTANT
FEES AND SERVICES

The information required by Item 14 is hereby incorporated by reference from our 2015 Proxy Statement under the caption
Independent Registered Public Accounting Firm Fees.



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------



|   |  |                                                       
|-- |  | ------------------------------------------------------
|   | 
|a. |  | DOCUMENTS FILED AS PART OF THIS REPORT                
|   | 
|1. |  | The following financial statements are filed herewith:



|   |  |                                                                                                    |  |  |    | 
|-- |  | -------------------------------------------------------------------------------------------------- |  |  | -- | 
|   |  | Report of Independent Registered Public Accounting Firm                                            |  |  | 67 | 
|   |  | Consolidated Statements of Assets and Liabilities as of March 31, 2015 and 2014                    |  |  | 68 | 
|   |  | Consolidated Statements of Operations for the years ended March 31, 2015, 2014 and 2013            |  |  | 69 | 
|   |  | Consolidated Statements of Changes in Net Assets for the years ended March 31, 2015, 2014 and
2013 |  |  | 70 | 
|   |  | Consolidated Statements of Cash Flows for the years ended March 31, 2015, 2014 and 2013            |  |  | 71 | 
|   |  | Consolidated Schedules of Investments as of March 31, 2015 and 2014                                |  |  | 72 | 
|   |  | Notes to Consolidated Financial Statements                                                         |  |  | 79 | 
|   |  |                                                                                                   
|2. |  | The following financial statement schedule is filed herewith:                                      |  |  |    | 



| |  |                                                          |  |  |     | 
| |  | -------------------------------------------------------- |  |  | --- | 
| |  | Schedule 12-14 Investments in and Advances to Affiliates |  |  | 108 | 

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                 
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|      |  | No other financial statement schedules are filed herewith because (1) such schedules are not required or (2) the information has been presented in
the aforementioned financial statements.                                                                                                                                                                                                     
|      | 
|3.    |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                        
|      | 
|      |  | The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:                                                                                                                                                                                                                                                          
|      | 
|3.1   |  | Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit A.2 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-123699), filed May 13,
2005.                                                                                                                                                                               
|      | 
|3.1.a |  | Certificate of Designation of 7.125% Series A Cumulative Term Preferred Stock, incorporated by reference to Exhibit 2.A.2 to Post-Effective Amendment No. 5 to the Registration Statement on Form N-2 (File No. 333-160720), filed
February 29, 2012.                                                                                                                                           
|      | 
|3.1.b |  | Certificate of Designation of 6.75% Series B Cumulative Term Preferred Stock, incorporated by reference to Exhibit 3.3 to the Registration Statement on Form 8-A (File No. 001-34007), filed November 7, 2014.                                                                                                                                                                                  
|      | 
|3.1.c |  | 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.                                                                                                                                                                                      
|      | 
|3.2   |  | Amended and Restated Bylaws, incorporated by reference to Exhibit B.2 to the Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-123699), filed June 21, 2005.                                                                                                                                                                                                
|      | 
|3.3   |  | First Amendment to Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No. 814-00704) filed July 10, 2007.                                                                                                                                                                                                         
|      | 
|4.1   |  | Specimen Stock Certificate, incorporated by reference to Exhibit 99.D to Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-123699), filed June 21, 2005.                                                                                                                                                                                                    
|      | 
|4.2   |  | Specimen 7.125% Series A Cumulative Term Preferred Stock Certificate, incorporated by reference to Exhibit 2.D.4 to Post-Effective Amendment No. 5 to the Registration Statement on Form N-2 (File No. 333-160720), filed February 29,
2012.                                                                                                                                                    
|      | 
|4.3   |  | 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.                                                                                                                                                                                            
|      | 
|4.4   |  | 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.                                                                                                                                                                                                
|      | 
|10.1  |  | Investment Advisory and Management Agreement between the Registrant and Gladstone Management Corporation, dated June 22, 2005, incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K (File No.
814-00704) filed June 14, 2006.                                                                                                                                            
|      | 
|10.2  |  | Administration Agreement between the Registrant and Gladstone Administration, LLC, dated June 22, 2005, incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K (File No. 814-00704) filed
June 14, 2006.                                                                                                                                                                   
|      | 
|10.3  |  | Stock Transfer Agency Agreement between the Registrant and The Bank of New York, incorporated by reference to Exhibit K.1 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File
No. 333-123699), filed May 13, 2005.                                                                                                                                                 
|      | 
|10.4  |  | Custody Agreement between the Registrant and The Bank of New York, incorporated by reference to Exhibit 99.J to Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-123699), filed
June 21, 2005.                                                                                                                                                             
|      | 
|10.5  |  | Custodial Agreement by and among Gladstone Business Investment, LLC, the Registrant, Gladstone Management Corporation, The Bank of New York Trust Company, N.A. and Deutsche Bank AG, New York Branch, dated October 10, 2006,
incorporated by reference to Exhibit 2.j.2 to Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-181879), filed June 7, 2013.



105



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.6  |  | Amendment No. 1 to Custodial Agreement by and among Gladstone Business Investment, LLC, the Registrant, Gladstone Management Corporation, The Bank of New York Trust Company, N.A. and Deutsche Bank AG, New York Branch, dated
April 14, 2009, incorporated by reference to Exhibit 2.j.3 to Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-181879), filed June 7, 2013.                                                                                          
|      | 
|10.7  |  | Fifth Amended and Restated Credit Agreement, dated as of April 30, 2013, by and among Gladstone Business Investment, LLC, as Borrower, Gladstone Management Corporation, as Servicer, the Financial Institutions as party thereto, as
Lenders and Managing Agents, and Key Equipment Finance, Inc., as Administrative Agent and Lead Arranger, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 814-00704), filed May 2, 2013.                                        
|      | 
|10.8  |  | Joinder Agreement, dated as of June 12, 2013, by and among the Gladstone Business Investment, LLC, Gladstone Management Corporation, Key Equipment Finance Inc. and Everbank Commercial Finance, Inc., incorporated by reference to
Exhibit 10.1 of the Current Report on Form 8-K (File No. 814-00704), filed June 17, 2013.                                                                                                                                                                              
|      | 
|10.9  |  | Joinder Agreement, dated as of June 12, 2013, by and among the Gladstone Business Investment, LLC, Gladstone Management Corporation, Key Equipment Finance Inc. and Alostar Bank of Commerce, incorporated by reference to Exhibit 10.2
of the Current Report on Form 8-K (File No. 814-00704), filed June 17, 2013.                                                                                                                                                                                       
|      | 
|10.10 |  | Amendment No. 1 to Fifth Amended and Restated Credit Agreement, dated as of June 26, 2014, by and among Gladstone Business Investment, LLC, as Borrower, Gladstone Management Corporation, as Servicer, the Financial Institutions as
party thereto, as Lenders and Managing Agents, and Key Equipment Finance, a division of KeyBank National Association, as Administrative Agent, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 814-00704), filed
June 30, 2014.
|      | 
|10.11 |  | Joinder Agreement, dated as of September 19, 2014, by and among the Gladstone Business Investment, LLC, Gladstone Management Corporation, Key Equipment Finance, a division of KeyBank National Association, and East West Bank,
incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 814-00704), filed September 22, 2014.                                                                                                                                               
|      | 
|10.12 |  | Joinder Agreement, dated as of September 19, 2014, by and among the Gladstone Business Investment, LLC, Gladstone Management Corporation, Key Equipment Finance, a division of KeyBank National Association, and Manufacturers and
Traders Trust, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K (File No. 814-00704), filed September 22, 2014.                                                                                                                              
|      | 
|10.13 |  | Joinder Agreement, dated as of September 19, 2014, by and among the Gladstone Business Investment, LLC, Gladstone Management Corporation, Key Equipment Finance, a division of KeyBank National Association, and Customers Bank,
incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K (File No. 814-00704), filed September 22, 2014.                                                                                                                                               
|      | 
|10.14 |  | Joinder Agreement, dated as of September 19, 2014, by and among the Gladstone Business Investment, LLC, Gladstone Management Corporation, Key Equipment Finance, a division of KeyBank National Association, and Talmer Bank and Trust,
incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K (File No. 814-00704), filed September 22, 2014.                                                                                                                                        
|      | 
|11    |  | Computation of Per Share Earnings (included in the notes to the audited financial statements contained in this report).                                                                                                                                                                                                                                                                                                                                                                                    
|      | 
|12*   |  | Statements re: Computation of Ratios                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      | 
|14    |  | Code of Ethics and Business Conduct, dated January 28, 2013, incorporated by reference to Exhibit 2.r to the Post-effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-181979), filed June 7,
2013.                                                                                                                                                                                                                                                                           
|      | 
|21*   |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      | 
|31.1* |  | Certification of Chief Executive Officer filed pursuant to section 302 of The Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                  
|      | 
|31.2* |  | Certification of Chief Financial Officer filed pursuant to section 302 of The Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                  
|      | 
|32.1 |  | Certification of Chief Executive Officer furnished pursuant to section 906 of The Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                              
|      | 
|32.2 |  | Certification of Chief Financial Officer furnished pursuant to section 906 of The Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                              
|      | 
|99.1* |  | Financial Statements of Danco Acquisition Corporation as of and for the years ended December 31, 2014 and 2013 (unaudited).                                                                                                                                                                                                                                                                                                                                                                                
|      | 
|99.2* |  | Financial Statements of Danco Acquisition Corporation as of and for the years ended December 31, 2012 and 2011.                                                                                                                                                                                                                                                                                                                                                                                            
|      | 
|99.3* |  | Financial Statements of Galaxy Tool Holding Corporation and Subsidiary as of and for the years ended December 31, 2014 and 2013 (unaudited).                                                                                                                                                                                                                                                                                                                                                               
|      | 
|99.4* |  | Financial Statements of Galaxy Tool Holding Corporation and Subsidiary as of and for the years ended December 31, 2012 and 2011.                                                                                                                                                                                                                                                                                                                                                                           
|      | 
|99.5* |  | Financial Statements of SOG Specialty Knives and Tools, LLC as of and for the years ended December 31, 2014 and 2013 (unaudited).                                                                                                                                                                                                                                                                                                                                                                          
|      | 
|99.6* |  | Financial Statements of SOG Specialty Knives and Tools, LLC as of and for the years ended December 31, 2013 and 2012.                                                                                                                                                                                                                                                                                                                                                                                      

* Filed herewith


Furnished herewith



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                   |  |  |  |                                  |  |                                      
|------------------ |  |  |  | -------------------------------- |  | -------------------------------------
|                   |  |  |  | GLADSTONE INVESTMENT CORPORATION
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By:                              |  | /s/ MELISSA MORRISON                 
|                   |  |  |  |                                  |  | Melissa Morrison                     
|                   |  |  |  |                                  |  | Chief Financial Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                   |  |  |  |     |  |                                                                                             
|------------------ |  |  |  | --- |  | --------------------------------------------------------------------------------------------
|Date: May 20, 2015 |  |  |  | By: |  | /s/ DAVID GLADSTONE                                                                         
|                   |  |  |  |     |  | David Gladstone                                                                             
|                   |  |  |  |     |  | Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By: |  | /s/ TERRY LEE BRUBAKER                                                                      
|                   |  |  |  |     |  | Terry Lee Brubaker                                                                          
|                   |  |  |  |     |  | Vice Chairman and Chief Operating Officer                                                   
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By: |  | /s/ DAVID A. R. DULLUM                                                                      
|                   |  |  |  |     |  | David A. R. Dullum                                                                          
|                   |  |  |  |     |  | President and Director                                                                      
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By: |  | /s/ MELISSA MORRISON                                                                        
|                   |  |  |  |     |  | Melissa Morrison                                                                            
|                   |  |  |  |     |  | Chief Financial Officer and Treasurer (principal financial and accounting officer)          
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By: |  | /s/ ANTHONY W. PARKER                                                                       
|                   |  |  |  |     |  | Anthony W. Parker                                                                           
|                   |  |  |  |     |  | Director                                                                                    
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By: |  | /s/ MICHELA A. ENGLISH                                                                      
|                   |  |  |  |     |  | Michela A. English                                                                          
|                   |  |  |  |     |  | Director                                                                                    
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By: |  | /s/ PAUL ADELGREN                                                                           
|                   |  |  |  |     |  | Paul Adelgren                                                                               
|                   |  |  |  |     |  | Director                                                                                    
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By: |  | /s/ JOHN H. OUTLAND                                                                         
|                   |  |  |  |     |  | John H. Outland                                                                             
|                   |  |  |  |     |  | Director                                                                                    
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By: |  | /s/ CAREN D. MERRICK                                                                        
|                   |  |  |  |     |  | Caren D. Merrick                                                                            
|                   |  |  |  |     |  | Director                                                                                    
|                   |  |  | 
|Date: May 20, 2015 |  |  |  | By: |  | /s/ WALTER H. WILKINSON, JR.                                                                
|                   |  |  |  |     |  | Walter H. Wilkinson, Jr.                                                                    
|                   |  |  |  |     |  | Director                                                                                    



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SCHEDULE 12-14

GLADSTONE INVESTMENT CORPORATION

INVESTMENTS IN AND ADVANCES TO AFFILIATES

(AMOUNTS IN THOUSANDS)



|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|-------------------------------- |  | ------------------------------------------ | ----- | ---------------------------- | ----- | - | ------------------------ | - | ------ | ----------------- | ----- | - | ------------------- | - | ------ | ------------------------ | ------ | - | ------ | - | ------ | 
|Name of Issuer(A)                |  | Title of Issue orNature of Indebtedness(B) |       | Amount ofInvestmentIncome(C) |       |   | Value as ofMarch 31,2014 |   |        | GrossAdditions(D) |       |   | Gross Reductions(E) |   |        | Value as ofMarch 31,2015 |       
|CONTROL INVESTMENTS              |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |  
|Galaxy Tool Holding Corporation  |  | Secured Line of Credit                     |       | $                            | 103   |   |                          | $ |       |                   |       | $ | 3,250               |   |        | $                        |       |   |        | $ | 3,250  | 
|                                 |  | Senior Subordinated Secured Term Debt      |       |                              | 2,124 |   |                          |   | 15,520 |                   |       |   |                    |   |        |                          |       |   |        |   | 15,520 | 
|                                 |  | Preferred Stock                            |       |                              |      |   |                          |   | 2,992  |                   |       |   |                    |   |        |                          | (2,992 | ) |        |   |       | 
|                                 |  | Common Stock                               |       |                              |      |   |                          |   |       |                   |       |   |                    |   |        |                          |       |   |        |   |       | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              | 2,227 |   |                          |   | 18,512 |                   |       |   | 3,250               |   |        |                          | (2,992 | ) |        |   | 18,770 | 
|Roanoke Industries Corp.         |  | Senior Secured Term Debt                   |       |                              | 69    |   |                          |   |       |                   |       |   | 1,650               |   |        |                          |       |   |        |   | 1,650  | 
|                                 |  | Common Stock                               |       |                              |      |   |                          |   |       |                   |       |   | 1,860               |   |        |                          | (1,650 | ) |        |   | 210    | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              | 69    |   |                          |   |       |                   |       |   | 3,510               |   |        |                          | (1,650 | ) |        |   | 1,860  | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|TOTAL CONTROL INVESTMENTS        |  | $                                          | 2,296 |                              |       | $ | 18,512                   |   |        | $                 | 6,760 |   |                     | $ | (4,642 | )                        |        | $ | 20,630 |  
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|AFFILIATE INVESTMENTS            |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |  
|Acme Cryogenics, Inc.            |  | Senior Subordinated Secured Term Debt      |       | $                            | 1,269 |   |                          | $ | 14,500 |                   |       | $ |                    |   |        | $                        |       |   |        | $ | 14,500 | 
|                                 |  | Preferred Stock                            |       |                              |      |   |                          |   | 11,276 |                   |       |   | 972                 |   |        |                          | (3,729 | ) |        |   | 8,519  | 
|                                 |  | Common Stock                               |       |                              |      |   |                          |   |       |                   |       |   |                    |   |        |                          |       |   |        |   |       | 
|                                 |  | Common Stock Warrants                      |       |                              |      |   |                          |   |       |                   |       |   |                    |   |        |                          |       |   |        |   |       | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              | 1,269 |   |                          |   | 25,776 |                   |       |   | 972                 |   |        |                          | (3,729 | ) |        |   | 23,019 | 
|Alloy Die Casting Corp.          |  | Senior Secured Term Debt                   |       |                              | 1,255 |   |                          |   | 12,261 |                   |       |   |                    |   |        |                          | (107   | ) |        |   | 12,154 | 
|                                 |  | Preferred Stock                            |       |                              |      |   |                          |   | 1,948  |                   |       |   | 2,174               |   |        |                          |       |   |        |   | 4,122  | 
|                                 |  | Common Stock                               |       |                              |      |   |                          |   |       |                   |       |   |                    |   |        |                          |       |   |        |   |       | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              | 1,255 |   |                          |   | 14,209 |                   |       |   | 2,174               |   |        |                          | (107   | ) |        |   | 16,276 | 
|Behrens Manufacturing, LLC       |  | Senior Secured Term Debt                   |       |                              | 1,315 |   |                          |   | 9,975  |                   |       |   |                    |   |        |                          |       |   |        |   | 9,975  | 
|                                 |  | Preferred Stock                            |       |                              |      |   |                          |   | 2,754  |                   |       |   | 693                 |   |        |                          |       |   |        |   | 3,447  | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              | 1,315 |   |                          |   | 12,729 |                   |       |   | 693                 |   |        |                          |       |   |        |   | 13,422 | 
|B-Dry, LLC                       |  | Secured Line of Credit                     |       |                              | 39    |   |                          |   | 566    |                   |       |   | 1,325               |   |        |                          | (767   | ) |        |   | 1,124  | 
|                                 |  | Senior Secured Term Debt                   |       |                              | 440   |   |                          |   | 4,865  |                   |       |   |                    |   |        |                          | (1,375 | ) |        |   | 3,490  | 
|                                 |  | Senior Secured Term Debt                   |       |                              | 122   |   |                          |   | 2,144  |                   |       |   |                    |   |        |                          | (1,689 | ) |        |   | 455    | 
|                                 |  | Common Stock                               |       |                              |      |   |                          |   |       |                   |       |   |                    |   |        |                          |       |   |        |   |       | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              | 601   |   |                          |   | 7,575  |                   |       |   | 1,325               |   |        |                          | (3,831 | ) |        |   | 5,069  | 
|B+T Group Acquisition, Inc.      |  | Secured Line of Credit                     |       |                              | 22    |   |                          |   |       |                   |       |   | 700                 |   |        |                          |       |   |        |   | 700    | 
|                                 |  | Senior Secured Term Debt                   |       |                              | 521   |   |                          |   |       |                   |       |   | 14,000              |   |        |                          |       |   |        |   | 14,000 | 
|                                 |  | Preferred Stock                            |       |                              |      |   |                          |   |       |                   |       |   | 4,541               |   |        |                          |       |   |        |   | 4,541  | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              | 543   |   |                          |   |       |                   |       |   | 19,241              |   |        |                          |       |   |        |   | 19,241 | 
|Cambridge Sound Management, Inc. |  | Secured Line of Credit                     |       |                              | 14    |   |                          |   |       |                   |       |   | 675                 |   |        |                          | (675   | ) |        |   |       | 
|                                 |  | Senior Secured Term Debt                   |       |                              | 991   |   |                          |   |       |                   |       |   | 15,000              |   |        |                          |       |   |        |   | 15,000 | 
|                                 |  | Preferred Equity                           |       |                              |      |   |                          |   |       |                   |       |   | 4,500               |   |        |                          | 2,698  |   |        |   | 7,198  | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              | 1,005 |   |                          |   |       |                   |       |   | 20,175              |   |        |                          | 2,023  |   |        |   | 22,198 | 
|Channel Technologies Group, LLC  |  | Preferred Stock                            |       |                              |      |   |                          |   | 3,122  |                   |       |   |                    |   |        |                          | (807   | ) |        |   | 2,315  | 
|                                 |  | Common Stock                               |       |                              |      |   |                          |   |       |                   |       |   |                    |   |        |                          |       |   |        |   |       | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              |      |   |                          |   | 3,122  |                   |       |   |                    |   |        |                          | (807   | ) |        |   | 2,315  | 
|Counsel Press, Inc.              |  | Secured Line of Credit                     |       |                              | 1     |   |                          |   |       |                   |       |   | 1,500               |   |        |                          |       |   |        |   | 1,500  | 
|                                 |  | Senior Secured Term Debt                   |       |                              | 6     |   |                          |   |       |                   |       |   | 18,000              |   |        |                          |       |   |        |   | 18,000 | 
|                                 |  | Senior Secured Term Debt                   |       |                              | 2     |   |                          |   |       |                   |       |   | 5,500               |   |        |                          |       |   |        |   | 5,500  | 
|                                 |  | Preferred Equity                           |       |                              |      |   |                          |   |       |                   |       |   | 6,995               |   |        |                          |       |   |        |   | 6,995  | 
|                                 |  |                                            |       |                              |       |   |                          |   |        |                   |       |   |                     |   |        |                          |        |   |        |   |        | 
|                                 |  |                                            |       |                              | 9     |   |                          |   |       |                   |       |   | 31,995              |   |        |                          |       |   |        |   | 31,995 | 



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GLADSTONE INVESTMENT CORPORATION

INVESTMENTS IN AND ADVANCES TO AFFILIATES (Continued)

(AMOUNTS IN THOUSANDS)



|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|--------------------------------- |  | ------------------------------------------ |  | ---------------------------- | ----- |  | ------------------------ | - | ------ | ----------------- |  | - | ------------------- |  |  | ------------------------ | ------ | - |  | - | ------ | 
|Name of Issuer(A)                 |  | Title of Issue orNature of Indebtedness(B) |  | Amount ofInvestmentIncome(C) |       |  | Value as ofMarch 31,2014 |   |        | GrossAdditions(D) |  |   | Gross Reductions(E) |  |  | Value as ofMarch 31,2015 |       
|D.P.M.S., Inc.                    |  | Secured Line of Credit                     |  | $                            | 161   |  |                          | $ | 690    |                   |  | $ | 550                 |  |  | $                        | (478   | ) |  | $ | 762    | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 104   |  |                          |   | 515    |                   |  |   |                    |  |  |                          | (25    | ) |  |   | 490    | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 357   |  |                          |   | 1,759  |                   |  |   |                    |  |  |                          | (85    | ) |  |   | 1,674  | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 58    |  |                          |   | 236    |                   |  |   |                    |  |  |                          | (17    | ) |  |   | 219    | 
|                                  |  | Preferred Stock                            |  |                              |      |  |                          |   |       |                   |  |   |                    |  |  |                          |       |   |  |   |       | 
|                                  |  | Common Stock Warrants                      |  |                              |      |  |                          |   |       |                   |  |   |                    |  |  |                          |       |   |  |   |       | 
|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|                                  |  |                                            |  |                              | 680   |  |                          |   | 3,200  |                   |  |   | 550                 |  |  |                          | (605   | ) |  |   | 3,145  | 
|Edge Adhesives Holdings, Inc.     |  | Secured Line of Credit                     |  |                              | 130   |  |                          |   | 795    |                   |  |   | 1,590               |  |  |                          | (897   | ) |  |   | 1,488  | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 1,179 |  |                          |   | 9,300  |                   |  |   |                    |  |  |                          |       |   |  |   | 9,300  | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 39    |  |                          |   |       |                   |  |   | 877                 |  |  |                          | (877   | ) |  |   |       | 
|                                  |  | Senior Subordinated Term Debt              |  |                              | 335   |  |                          |   | 2,400  |                   |  |   | 3                   |  |  |                          |       |   |  |   | 2,403  | 
|                                  |  | Preferred Stock                            |  |                              |      |  |                          |   | 3,474  |                   |  |   |                    |  |  |                          | (275   | ) |  |   | 3,199  | 
|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|                                  |  |                                            |  |                              | 1,683 |  |                          |   | 15,969 |                   |  |   | 2,470               |  |  |                          | (2,049 | ) |  |   | 16,390 | 
|Head Country Food Products, Inc.  |  | Secured Line of Credit                     |  |                              | 2     |  |                          |   |       |                   |  |   |                    |  |  |                          |       |   |  |   |       | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 1,147 |  |                          |   | 9,050  |                   |  |   |                    |  |  |                          |       |   |  |   | 9,050  | 
|                                  |  | Preferred Stock                            |  |                              |      |  |                          |   | 4,000  |                   |  |   |                    |  |  |                          | (69    | ) |  |   | 3,931  | 
|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|                                  |  |                                            |  |                              | 1,149 |  |                          |   | 13,050 |                   |  |   |                    |  |  |                          | (69    | ) |  |   | 12,981 | 
|Logo Sportswear, Inc.             |  | Secured Line of Credit                     |  |                              | 1     |  |                          |   |       |                   |  |   | 250                 |  |  |                          | (250   | ) |  |   |       | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 83    |  |                          |   |       |                   |  |   | 9,200               |  |  |                          |       |   |  |   | 9,200  | 
|                                  |  | Preferred Stock                            |  |                              |      |  |                          |   |       |                   |  |   | 1,550               |  |  |                          |       |   |  |   | 1,550  | 
|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|                                  |  |                                            |  |                              | 84    |  |                          |   |       |                   |  |   | 11,000              |  |  |                          | (250   | ) |  |   | 10,750 | 
|Meridian Rack & Pinion, Inc.      |  | Senior Secured Term Debt                   |  |                              | 1,322 |  |                          |   | 9,672  |                   |  |   |                    |  |  |                          | (60    | ) |  |   | 9,612  | 
|                                  |  | Preferred Stock                            |  |                              |      |  |                          |   | 3,468  |                   |  |   |                    |  |  |                          | (351   | ) |  |   | 3,117  | 
|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|                                  |  |                                            |  |                              | 1,322 |  |                          |   | 13,140 |                   |  |   |                    |  |  |                          | (411   | ) |  |   | 12,729 | 
|NDLI Acquisition, LLC             |  | Secured Line of Credit                     |  |                              | 163   |  |                          |   |       |                   |  |   | 2,875               |  |  |                          | (567   | ) |  |   | 2,308  | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 840   |  |                          |   |       |                   |  |   | 7,227               |  |  |                          | (1,424 | ) |  |   | 5,803  | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 405   |  |                          |   |       |                   |  |   | 3,650               |  |  |                          | (719   | ) |  |   | 2,931  | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 405   |  |                          |   |       |                   |  |   | 3,650               |  |  |                          | (720   | ) |  |   | 2,930  | 
|                                  |  | Preferred Stock                            |  |                              |      |  |                          |   | 2,592  |                   |  |   | 1,000               |  |  |                          | (3,592 | ) |  |   |       | 
|                                  |  | Common Stock                               |  |                              |      |  |                          |   |       |                   |  |   |                    |  |  |                          |       |   |  |   |       | 
|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|                                  |  |                                            |  |                              | 1,813 |  |                          |   | 2,592  |                   |  |   | 18,402              |  |  |                          | (7,022 | ) |  |   | 13,972 | 
|Old World Christmas, Inc.         |  | Secured Line of Credit                     |  |                              | 79    |  |                          |   |       |                   |  |   | 2,430               |  |  |                          | (2,430 | ) |  |   |       | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 981   |  |                          |   |       |                   |  |   | 15,770              |  |  |                          |       |   |  |   | 15,770 | 
|                                  |  | Preferred Stock                            |  |                              |      |  |                          |   |       |                   |  |   | 6,657               |  |  |                          |       |   |  |   | 6,657  | 
|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|                                  |  |                                            |  |                              | 1,060 |  |                          |   |       |                   |  |   | 24,857              |  |  |                          | (2,430 | ) |  |   | 22,427 | 
|Precision Southeast, Inc.         |  | Senior Secured Term Debt                   |  |                              | 399   |  |                          |   | 5,617  |                   |  |   | 4,000               |  |  |                          |       |   |  |   | 9,617  | 
|                                  |  | Preferred Stock                            |  |                              |      |  |                          |   |       |                   |  |   | 1,830               |  |  |                          |       |   |  |   | 1,830  | 
|                                  |  | Common Stock                               |  |                              |      |  |                          |   |       |                   |  |   |                    |  |  |                          |       |   |  |   |       | 
|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|                                  |  |                                            |  |                              | 399   |  |                          |   | 5,617  |                   |  |   | 5,830               |  |  |                          |       |   |  |   | 11,447 | 
|SOG Specialty Knives & Tools, LLC |  | Senior Secured Term Debt                   |  |                              | 833   |  |                          |   | 6,200  |                   |  |   |                    |  |  |                          |       |   |  |   | 6,200  | 
|                                  |  | Senior Secured Term Debt                   |  |                              | 1,824 |  |                          |   | 12,199 |                   |  |   | 1                   |  |  |                          |       |   |  |   | 12,200 | 
|                                  |  | Preferred Stock                            |  |                              | 534   |  |                          |   | 8,240  |                   |  |   | 5,211               |  |  |                          |       |   |  |   | 13,451 | 
|                                  |  |                                            |  |                              |       |  |                          |   |        |                   |  |   |                     |  |  |                          |        |   |  |   |        | 
|                                  |  |                                            |  |                              | 3,191 |  |                          |   | 26,639 |                   |  |   | 5,212               |  |  |                          |       |   |  |   | 31,851 | 



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GLADSTONE INVESTMENT CORPORATION

INVESTMENTS IN AND ADVANCES TO AFFILIATES (Continued)

(AMOUNTS IN THOUSANDS)



|                            |  |                                            |        |                              |   |   |                          |   |   |                   |         |   |                     |   |         |                          |        |   |         |   |       | 
|--------------------------- |  | ------------------------------------------ | ------ | ---------------------------- | - | - | ------------------------ | - | - | ----------------- | ------- | - | ------------------- | - | ------- | ------------------------ | ------ | - | ------- | - | ----- | 
|Name of Issuer(A)           |  | Title of Issue orNature of Indebtedness(B) |        | Amount ofInvestmentIncome(C) |   |   | Value as ofMarch 31,2014 |   |   | GrossAdditions(D) |         |   | Gross Reductions(E) |   |         | Value as ofMarch 31,2015 |       
|Tread Corporation           |  | Secured Line of Credit(F)                  |        | $                            |  |   |                          | $ |  |                   |         | $ | 3,282               |   |         | $                        | (2,907 | ) |         | $ | 375   | 
|                            |  | Senior Subordinated Secured Term Debt (F)  |        |                              |  |   |                          |   |  |                   |         |   | 782                 |   |         |                          |       |   |         |   | 782   | 
|                            |  | Senior Subordinated Secured Term Debt (F)  |        |                              |  |   |                          |   |  |                   |         |   | 430                 |   |         |                          |       |   |         |   | 430   | 
|                            |  | Senior Subordinated Secured Term Debt (F)  |        |                              |  |   |                          |   |  |                   |         |   | 156                 |   |         |                          |       |   |         |   | 156   | 
|                            |  | Senior Subordinated Secured Term Debt (F)  |        |                              |  |   |                          |   |  |                   |         |   | 80                  |   |         |                          |       |   |         |   | 80    | 
|                            |  | Preferred Stock                            |        |                              |  |   |                          |   |  |                   |         |   |                    |   |         |                          |       |   |         |   |      | 
|                            |  | Common Stock                               |        |                              |  |   |                          |   |  |                   |         |   |                    |   |         |                          |       |   |         |   |      | 
|                            |  | Common Stock Warrants                      |        |                              |  |   |                          |   |  |                   |         |   |                    |   |         |                          |       |   |         |   |      | 
|                            |  |                                            |        |                              |   |   |                          |   |   |                   |         |   |                     |   |         |                          |        |   |         |   |       | 
|                            |  |                                            |        |                              |  |   |                          |   |  |                   |         |   | 4,730               |   |         |                          | (2,907 | ) |         |   | 1,823 | 
|                            |  |                                            |        |                              |   |   |                          |   |   |                   |         |   |                     |   |         |                          |        |   |         |   |       | 
|TOTAL AFFILIATE INVESTMENTS |  | $                                          | 17,378 |                              |   | $ | 143,618                  |   |   | $                 | 149,626 |   |                     | $ | (22,194 | )                        |        | $ | 271,050 |  
|                            |  |                                            |        |                              |   |   |                          |   |   |                   |         |   |                     |   |         |                          |        |   |         |   |       | 



|(A) | Certain of the listed securities are issued by affiliate(s) of the indicated portfolio company.
|--- | -----------------------------------------------------------------------------------------------

|(B) | Common stock, warrants, options and, in some cases, preferred stock are generally non-income-producing and restricted. The principal amount of debt and the number of shares of common stock and preferred stock are
shown in the accompanying Consolidated Schedule of Investments as of March 31, 2015.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(C) | Represents the total amount of interest or other investment income credited to income for the portion of the year an investment was a control investment or affiliate investment, as appropriate.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(D) | Gross additions include increases in investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and fees and the exchange of one or more existing securities
for one or more new securities. Gross additions also include net increases in unrealized appreciation or decreases in unrealized depreciation.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(F) | Debt security is on non-accrual status and, therefore, is considered non-income producing
|--- | -----------------------------------------------------------------------------------------

|** | Information related to the amount of equity in the net profit and loss for the period for the investments listed has not been included in this schedule. This information is not considered to be meaningful due to the
complex capital structures of the portfolio companies, with different classes of equity securities outstanding with different preferences in liquidation. These investments are not consolidated, nor are they accounted for under the equity method of
accounting.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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