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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 2024
OR

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

For the transition period from to
Commission file number 814-00704
_________________________
GLADSTONE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)

Delaware | 83-0423116
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
1521 WESTBRANCH DRIVE, SUITE 100 | 22102
MCLEAN, VA | (Zip Code)
(Address of principal executive offices) |

(703) 287-5800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class |  | Trading Symbol(s) |  | Name of Each Exchange on Which Registered
Common Stock, $0.001 par value per share |  | GAIN |  | The Nasdaq Stock Market LLC
5.00% Notes due 2026 |  | GAINN |  | The Nasdaq Stock Market LLC
4.875% Notes due 2028 |  | GAINZ |  | The Nasdaq Stock Market LLC
8.00% Notes due 2028 |  | GAINL |  | The Nasdaq Stock Market LLC

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 o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o 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 o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | o | Accelerated filer | o
Non-accelerated filer | x | Smaller reporting company | o
Emerging growth company | o |  |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES NO
The aggregate market value of the voting stock held by non-affiliates of the Registrant on September 30, 2023, based on the closing price on that date of $12.74 on the Nasdaq Global Select Market, was $420,365,931. For the purposes of calculating this amount only, all directors and executive officers of the Registrant have been treated as affiliates. There were 36,688,667 shares of the Registrant’s Common Stock, $0.001 par value, outstanding as of May 7, 2024.
Documents Incorporated by Reference. Portions of the Registrant’s definitive proxy statement relating to the Registrant’s 2024 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, 2024.

Table of Contents
GLADSTONE INVESTMENT CORPORATION
FORM 10-K FOR THE FISCAL YEAR ENDED
MARCH 31, 2024
TABLE OF CONTENTS

PART I | ITEM 1 | Business | 3
| ITEM 1A | Risk Factors | 22
| ITEM 1B | Unresolved Staff Comments | 42
| I TEM 1C | C ybersecurity | 43
| ITEM 2 | Properties | 44
| ITEM 3 | Legal Proceedings | 44
| ITEM 4 | Mine Safety Disclosures | 44
PART II | ITEM 5 | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 45
| ITEM 6 | Reserved | 51
| ITEM 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 52
| ITEM 7A | Quantitative and Qualitative Disclosures About Market Risk | 69
| ITEM 8 | Financial Statements and Supplementary Data | 71
| ITEM 9 | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 120
| ITEM 9A | Controls and Procedures | 120
| ITEM 9B | Other Information | 120
| ITEM 9C | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 120
PART III | ITEM 10 | Directors, Executive Officers and Corporate Governance | 121
| ITEM 11 | Executive Compensation | 121
| ITEM 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 121
| ITEM 13 | Certain Relationships and Related Transactions, and Director Independence | 121
| ITEM 14 | Principal Accountant Fees and Services | 121
PART IV | ITEM 15 | Exhibits and Financial Statement Schedules | 122
| ITEM 16 | Form 10-K Summary | 125
SIGNATURES |  | 126

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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 (the “Adviser”), our investment adviser, and its affiliates, the use of borrowed money to finance our investments, the adequacy of our financing sources and working capital, and our ability to co-invest. 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: (1) changes in the economy and the capital markets, including stock price volatility, inflation, elevated interest rates and risks of recession; (2) risks associated with negotiation and consummation of pending and future transactions; (3) the loss of one or more of our executive officers, in particular David Gladstone, David Dullum, or Terry Lee Brubaker; (4) changes in our investment objectives and strategy; (5) availability, terms (including the possibility of interest rate volatility) and deployment of capital; (6) changes in our industry, interest rates, exchange rates, or the general economy, including inflation; (7) our business prospects and the prospects of our portfolio companies; (8) the degree and nature of our competition; (9) changes in governmental regulation, tax rates and similar matters; (10) our ability to exit investments in a timely manner; (11) our ability to maintain our qualification as a regulated investment company (“RIC”) and as a business development company (“BDC”); and (12) those factors described in Item 1A. “Risk Factors” of this Annual Report on Form 10-K (this “Annual Report”). We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Actual results could differ materially from those anticipated in our forward-looking statements and future results could differ materially from our historical performance. 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 U.S. Securities and Exchange Commission (the “SEC”), including subsequent annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements contained in this Annual Report on Form 10-K are excluded from the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended (the "Securities Act").
In this Annual Report, the terms the “Company,” “we,” “us,” and “our” refer to Gladstone Investment Corporation and its wholly-owned subsidiaries unless the context otherwise indicates. Dollar amounts, except per share amounts, are in thousands unless otherwise indicated.
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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.
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 BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). For U.S. federal income tax purposes, we have elected to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). To continue to qualify as a RIC for U.S. federal income tax purposes and obtain favorable RIC tax treatment, we must meet certain requirements, including certain minimum distribution requirements.
As of March 31, 2024, shares of our common stock, our 5.00% Notes due 2026 (“5.00% 2026 Notes”), our 4.875% Notes due 2028 (“4.875% 2028 Notes”) and our 8.00% Notes due 2028 ("8.00% 2028 Notes") are traded on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbols “GAIN,” “GAINN,” “GAINZ,” and "GAINL," respectively.
Investment Adviser and Administrator
We are externally managed by the Adviser, an affiliate of ours and an SEC-registered investment adviser, pursuant to an investment advisory and management agreement, as amended from time to time, (the “Advisory Agreement”). We have also entered into an administration agreement (the “Administration Agreement”) with Gladstone Administration, LLC (the “Administrator”), an affiliate of ours and the Adviser. Each of the Adviser and the Administrator are privately-held companies that are indirectly owned and controlled by David Gladstone, our chairman and chief executive officer. David Dullum, our president, also serves as the executive vice president of private equity (buyouts) of the Adviser. Michael LiCalsi, our general counsel and secretary, also serves as the Administrator’s president, general counsel, and secretary, as well as the executive vice president of administration of the Adviser. Mr. Gladstone and Terry Lee Brubaker, our chief operating officer, also serve on the board of directors of the Adviser, the board of managers of the Administrator, and as executive officers of the Adviser and the Administrator. The Administrator employs, among others, our chief financial officer and treasurer, chief valuation officer, chief compliance officer, general counsel and secretary (who also serves as the president of the Administrator) and their respective staffs. The Adviser and Administrator have extensive experience in our lines of business and also provide investment advisory and administrative services, respectively, to our affiliates, including: Gladstone Commercial Corporation (“Gladstone Commercial”), a publicly-traded real estate investment trust; Gladstone Capital Corporation (“Gladstone Capital”), a publicly-traded BDC and RIC; and Gladstone Land Corporation, a publicly-traded real estate investment trust (“Gladstone Land”) (together with “Gladstone Commercial” and “Gladstone Capital,” collectively the “Affiliated Public Funds”). In the future, the Adviser and Administrator may provide investment advisory and administrative services, respectively, to other funds and companies, both public and private.
The Adviser was organized as a corporation under the laws of the State of Delaware on July 2, 2002, and is a SEC-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 Adviser also has offices in several other states.
Investment Objectives and Strategy
We were established for the purpose of investing in debt and equity securities of established private businesses operating in the U.S. Our investment objectives are to: (i) achieve and grow current income by investing in debt securities of established businesses that we believe will provide stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions to stockholders that grow over time; and (ii) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of established businesses, generally in combination with the aforementioned debt securities, that we believe can grow over time to permit us to sell our equity investments for capital gains. To achieve our investment objectives, our investment strategy is to invest
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in several categories of debt and equity securities, with individual investments in a particular portfolio company generally totaling up to $75 million, although investment size may vary, depending upon our total assets or available capital at the time of investment. 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, 2024, our investment portfolio was comprised of 77.0% in debt securities and 23.0% in equity securities, at cost.
We focus on investing in lower middle market private businesses (which we generally define as private companies with annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $4 million to $15 million) (“Lower Middle Market”) in the U.S. that meet certain criteria, including: the sustainability of the business’ free cash flow and its ability to grow it over time, adequate assets for loan collateral, experienced management teams with a significant ownership interest in the portfolio company, reasonable capitalization of the portfolio company, including an ample equity contribution or cushion based on prevailing enterprise valuation multiples, and the potential to realize appreciation and gain liquidity in our equity position, if any. We anticipate that liquidity in our equity position will be achieved through a merger, acquisition, or recapitalization of the portfolio company, a public offering of the portfolio company’s stock or, to a lesser extent, by exercising our right to require the portfolio company to repurchase our warrants, as applicable, though there can be no assurance that we will always have these rights. We invest in portfolio companies that seek funds for management buyouts and/or growth capital to finance acquisitions, recapitalize or, to a lesser extent, refinance their existing debt facilities. We seek to avoid investing in high-risk, early-stage enterprises.
We invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity. In July 2012, the SEC granted us an exemptive order (the “Co-Investment Order”) that expanded our ability to co-invest, under certain circumstances, with certain of our affiliates, including Gladstone Capital and any future BDC or registered closed-end management investment company that is advised (or sub-advised if it controls the fund) by the Adviser, or any combination of the foregoing, subject to the conditions in the Co-Investment Order. We believe the Co-Investment Order has enhanced and will continue to enhance our ability to further our investment objectives and strategies. If we are participating in an investment with one or more co-investors, whether or not an affiliate of ours, our investment is likely to be smaller than if we were investing alone.
In general, our investments in debt securities have a term of five years, accrue interest at variable rates based on the 30 day Secured Overnight Financing Rate ("SOFR") and, to a lesser extent, at fixed rates. As of March 31, 2024, our loan portfolio consisted of 100.0% variable rate loans with floors, based on the total principal balance of all outstanding debt investments.
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, to a lesser extent, 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 portfolio company. Some debt securities may 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. As of March 31, 2024, we did not have any securities with a PIK feature.
Typically, our investments in equity securities take the form of common stock, preferred stock, limited liability company interests, warrants or options to purchase any of the foregoing. Often, these equity investments occur in connection with our original investment, buyouts and recapitalizations of a business, or refinancing existing debt. From our initial public offering in 2005 through March 31, 2024, we invested in 58 companies, excluding investments in syndicated loans.
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We expect that our investment portfolio will continue to primarily include the following three categories of investments in private companies in the U.S.:
•Secured First Lien Debt Securities: We seek to invest a portion of our assets in secured first lien 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 secured first lien debt to cover a substantial portion of the funding needs of the business. These debt securities usually take the form of first priority liens on all, or substantially all, of the assets of the business.
•Secured Second Lien Debt Securities: We seek to invest a portion of our assets in secured second lien debt securities, which may also be referred to as subordinated loans, subordinated notes and mezzanine loans. These secured second lien debt securities rank junior to the borrower’s secured first lien debt securities and may be secured by second priority liens on all or a portion of the assets of the business. 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 secured second lien 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, limited liability company interests, 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 of the businesses in which we invest.
We expect that most, if not all, of the debt securities we acquire will not be rated by a rating agency. Investors should assume that these loans would be rated below what is 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 Policies
We seek to achieve a high level of current income and capital gains through investments in secured debt securities and preferred and common stock that we generally acquire in connection with buyouts and other recapitalizations. The following investment policies, along with the investment objectives, may not be changed without the approval 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:
•We will at all times conduct our business so as to retain our status as a BDC. See “—Regulation as a BDC — Qualifying Assets.”
•We will at all times endeavor to conduct our business so as to retain our status as a RIC under the Code. See "—Material U.S. Federal Income Tax Considerations."
With the exception of our policy to conduct our business as a BDC, these investment policies are not fundamental and may be changed without stockholder approval.
Investment Concentrations
As of March 31, 2024, our investment portfolio consisted of investments in 24 portfolio companies located in 18 states across 16 different industries with an aggregate fair value of $920.5 million. Our investments in SFEG Holdings, Inc. ("SFEG"), Nocturne Luxury Villas, Inc. ("Nocturne"), Nth Degree Investment Group, LLC ("Nth Degree"), Old World Christmas, Inc. (“Old World”), and Brunswick Bowling Products, Inc. ("Brunswick") represented our five largest portfolio investments at fair value and collectively comprised $393.5 million, or 42.7%, of our total investment portfolio at fair value as of March 31, 2024.
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The following table summarizes our investments by security type as of March 31, 2024 and 2023:

| March 31, 2024 |  | March 31, 2023
| Cost |  | Fair Value |  | Cost |  | Fair Value
Secured first lien debt | $ | 513,425 |  |  | 60.1 | % |  | $ | 474,856 |  |  | 51.6 | % |  | $ | 471,439 |  |  | 65.4 | % |  | $ | 437,517 |  |  | 58.1 | %
Secured second lien debt | 144,958 |  |  | 16.9 | % |  | 138,703 |  |  | 15.0 | % |  | 84,158 |  |  | 11.7 | % |  | 75,734 |  |  | 10.1 | %
Total debt | 658,383 |  |  | 77.0 | % |  | 613,559 |  |  | 66.6 | % |  | 555,597 |  |  | 77.1 | % |  | 513,251 |  |  | 68.2 | %
Preferred equity | 145,070 |  |  | 17.0 | % |  | 213,480 |  |  | 23.2 | % |  | 149,099 |  |  | 20.7 | % |  | 222,585 |  |  | 29.5 | %
Common equity/equivalents | 50,837 |  |  | 6.0 | % |  | 93,465 |  |  | 10.2 | % |  | 15,934 |  |  | 2.2 | % |  | 17,707 |  |  | 2.3 | %
Total equity/equivalents | 195,907 |  |  | 23.0 | % |  | 306,945 |  |  | 33.4 | % |  | 165,033 |  |  | 22.9 | % |  | 240,292 |  |  | 31.8 | %
Total investments | $ | 854,290 |  |  | 100.0 | % |  | $ | 920,504 |  |  | 100.0 | % |  | $ | 720,630 |  |  | 100.0 | % |  | $ | 753,543 |  |  | 100.0 | %

Our investments at fair value consisted of the following industry classifications as of March 31, 2024 and 2023:

| March 31, 2024 |  | March 31, 2023
| Fair Value |  | Percentage of Total Investments |  | Fair Value |  | Percentage of Total Investments
Diversified/Conglomerate Services | $ | 264,535 |  |  | 28.7 | % |  | $ | 268,954 |  |  | 35.7 | %
Home and Office Furnishings, Housewares, and Durable Consumer Products | 160,038 |  |  | 17.3 | % |  | 143,685 |  |  | 19.1 | %
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) | 92,781 |  |  | 10.1 | % |  | 20,088 |  |  | 2.7 | %
Hotels, Motels, Inns, and Gaming | 77,366 |  |  | 8.4 | % |  | 58,713 |  |  | 7.8 | %
Buildings and Real Estate | 60,431 |  |  | 6.6 | % |  | 60,571 |  |  | 8.0 | %
Oil and Gas | 51,171 |  |  | 5.6 | % |  | — |  |  | — | %
Healthcare, Education, and Childcare | 49,638 |  |  | 5.4 | % |  | 37,445 |  |  | 5.0 | %
Leisure, Amusement, Motion Pictures, and Entertainment | 39,350 |  |  | 4.3 | % |  | 47,616 |  |  | 6.3 | %
Mining, Steel, Iron and Non-Precious Metals | 30,537 |  |  | 3.3 | % |  | 25,998 |  |  | 3.5 | %
Aerospace and Defense | 29,064 |  |  | 3.2 | % |  | 22,215 |  |  | 2.8 | %
Chemicals, Plastics, and Rubber | 20,363 |  |  | 2.2 | % |  | 24,891 |  |  | 3.3 | %
Printing and Publishing | 14,238 |  |  | 1.5 | % |  | — |  |  | — | %
Cargo Transport | 13,500 |  |  | 1.5 | % |  | 14,707 |  |  | 2.0 | %
Telecommunications | 9,002 |  |  | 1.0 | % |  | 18,987 |  |  | 2.5 | %
Other < 2.0% | 8,490 |  |  | 0.9 | % |  | 9,673 |  |  | 1.3 | %
Total investments | $ | 920,504 |  |  | 100.0 | % |  | $ | 753,543 |  |  | 100.0 | %

Our investments at fair value were included in the following U.S. geographic regions as of March 31, 2024 and 2023:

|  | March 31, 2024 |  | March 31, 2023
Location |  | Fair Value |  | Percentage of Total Investments |  | Fair Value |  | Percentage of Total Investments
South |  | $ | 346,838 |  |  | 37.7 | % |  | $ | 171,056 |  |  | 22.7 | %
West |  | 223,871 |  |  | 24.3 | % |  | 197,989 |  |  | 26.3 | %
Northeast |  | 207,870 |  |  | 22.6 | % |  | 266,612 |  |  | 35.4 | %
Midwest |  | 141,925 |  |  | 15.4 | % |  | 117,886 |  |  | 15.6 | %
Total investments |  | $ | 920,504 |  |  | 100.0 | % |  | $ | 753,543 |  |  | 100.0 | %

The geographic region indicates the location of the headquarters for our portfolio companies. A portfolio company may have additional business locations in other geographic regions.
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Investment 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 currently is composed of Messrs. Gladstone, Brubaker, and Dullum, as well as Jonathan Sateri and Laura Gladstone. If this LOI is issued, then the Adviser and Gladstone Securities, LLC (“Gladstone Securities”) (collectively, 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.
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 companies in which we invest have experienced management teams or a hiring plan in place to install an experienced management team. We also require the companies to have in place proper incentives to induce management to succeed and act in concert with our interests as an investor, 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 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 companies 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 companies 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 companies that demonstrate significant competitive advantages versus their competitors, which we believe will help to protect their market positions and profitability.
•Enterprise Collateral Value: The projected enterprise valuation of the business,, based on market based comparable cash flow multiples, is an important factor in our investment analysis in determining the collateral coverage of 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 typically begins with a review of publicly available information followed by in-depth business analysis, including some or all of the following:
•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;
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•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. Prior to the closing of an investment, additional due diligence may be conducted on our behalf by attorneys, independent accountants, and other outside advisers, as appropriate.
We also rely on the long-term relationships that the Adviser’s investment professionals have with 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 Lower Middle Market companies and providing debt and equity capital to Lower Middle Market companies plays a significant role in our investment evaluation and assessment of risk.
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 first lien secured debt, second lien secured debt, and preferred and common equity or equivalents. 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, while also 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 we may sell our investments (including our equity investments) earlier if a liquidity event takes place, such as a recapitalization of a portfolio company, an initial public offering, or a sale to a third party, including strategic buyers, private equity funds, or existing investors in the portfolio company, and which may be privately negotiated transactions.
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Competitive Advantages
A large number of entities compete with us and make the types of investments that we seek to make in Lower Middle Market companies. Such competitors include private equity funds, leveraged buyout funds, other BDCs, 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 Lower Middle Market companies.
Management Expertise
Our Adviser has a separate investment committee for the Company and each of the Affiliated Public Funds. The Adviser's investment committee for the Company is comprised of Messrs. Gladstone, Brubaker, Dullum and Sateri and Ms. Gladstone, each of whom have a wealth of experience in our area of operation. Ms. Gladstone and Messrs. Gladstone, Brubaker, and Sateri also serve on the Adviser’s investment committee for the other Affiliated Public Funds. Ms. Gladstone has over 20 years of experience in investing in middle market companies and is a managing director of the Adviser. Each of Messrs. Gladstone, Dullum and Sateri (also a managing director of the Adviser) have over 30 years of experience in investing in middle market companies and with operating in the BDC marketplace in general. Messrs. Gladstone and Brubaker also have principal management responsibility for the Adviser as its executive officers, and have worked together at the Gladstone Companies for more than 20 years. Mr. Brubaker has over 30 years of experience in acquisitions and operations of companies. These five individuals dedicate a significant portion of their time to managing our investment portfolio. Our senior management has extensive experience providing capital to Lower Middle Market companies. 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 their reputation, experience, and focus on investing in Lower Middle Market 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 contacts 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 investment philosophy that its professionals use in the management of the other Affiliated Public Funds 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 companies 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.
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Longer Investment Horizon
Unlike private equity and other funds that are typically organized as finite-life partnerships (generally seven to ten years), we are not subject to standard periodic capital return requirements. These structures often force private equity and other 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 an exchange-traded corporation of perpetual duration. 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 the Adviser’s and our management team’s broad expertise and years of combined experience enable 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 and the risk of refinancing during periods of market yield compression. We believe that this approach enables the Adviser to craft 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.
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 portfolio 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;
•frequent 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, 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;
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•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, as defined in the 1940 Act, to our portfolio companies and provide other services (other than such managerial assistance) 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 may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance. Such services may include: (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) a primary role in interviewing, vetting and negotiating employment contracts with candidates in connection with adding and retaining key portfolio company management team members. The Adviser non-contractually, unconditionally, and irrevocably credits 100% of any fees received for such services against the base management fee that we would otherwise be required to pay to the Adviser, as discussed below in “—Transactions with Related Parties – Investment Advisory and Management Agreement – Base Management Fee;” however, pursuant to the terms of the Advisory Agreement, a small percentage of certain of such fees is retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser, primarily related to the valuation of portfolio companies.
Gladstone Securities also provides other services (such as investment banking and due diligence services) to certain of our portfolio companies and receives fees for the provision of such services, see “—Transactions with Related Parties – Other Transactions” below.
Valuation Process
Our Board of Directors has approved investment valuation policies and procedures pursuant to Rule 2a-5 (the “Policy”) and, in July 2022, designated the Adviser to serve as the Board of Directors’ valuation designee (“Valuation Designee”) under the 1940 Act.
The following is a general description of the Policy that the professionals of the Adviser and Administrator, with oversight and direction from our chief valuation officer, an employee of the Administrator that reports directly to our 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 the good faith fair value determination of our investments for which market quotations are not readily available based on our Policy and for overseeing the Valuation Designee. 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 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 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.
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•Preliminary valuation conclusions are then discussed amongst the Valuation Team and with our management and documented for review by our Board of Directors. Fair value determinations and supporting material are sent to the Board of Directors in advance of its quarterly meetings.
•The Valuation Committee of the Board of Directors (comprised entirely of independent directors) meets to review the valuation determinations and supporting materials, discusses the information provided by the Valuation Team, determines whether the Valuation Team has followed the Policy and reviews other facts and circumstances, including current valuation risks, conflicts of interest, material valuation matters, appropriateness of valuation methodologies, back-testing results, price challenges/overides, and ongoing monitoring and oversight of pricing services. After the Valuation Committee concludes its meeting, it and the chief valuation officer, representing the Valuation Designee, present the Valuation Committee’s findings on the Valuations Designee's determinations to the entire Board of Directors so that the full Board of Directors may review the Valuation Designee's determined fair values of such investments in accordance with the Policy.
Fair value measurements of our investments may involve subjective judgment and estimates. Due to the uncertainty inherent in valuing these securities, the determinations of fair value may fluctuate from period to period and may differ materially from the values that could be obtained if a ready market for these securities existed. Our net asset value (“NAV”) could be materially affected if the determinations regarding the fair value of our investments are materially different from the values that we ultimately realize upon our disposal of such securities. Our valuation policies, procedures and processes are more fully described in Note 2 — Summary of Significant Accounting Policies in our accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report.
Transactions with Related Parties
Investment Advisory and Management Agreement
Pursuant to our Advisory Agreement, we pay the Adviser certain fees as compensation for its services, consisting of a base management fee and an incentive fee, each as described below. On July 11, 2023, our Board of Directors, including a majority of the directors who are not parties to the Advisory Agreement or interested persons of either party, unanimously approved the renewal of the Advisory Agreement through August 31, 2024. 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 Affiliated Public Funds 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, (6) indirect profits to the Adviser created through the Company and (7) in light of the foregoing considerations, the overall fairness of the advisory fees paid under the Advisory Agreement.
On January 4, 2024, we approved a new investment advisory agreement between us and the Adviser (the "New Advisory Agreement"). The New Advisory Agreement is the result of an anticipated change in control of the Adviser. From inception, the Adviser has been 100% indirectly owned and controlled by David Gladstone. David Gladstone owns 100% of the voting and economic interests of The Gladstone Companies, Ltd., which in turn owns 100% of the voting and economic interests of The Gladstone Companies, Inc., which in turn owned 100% of the voting and economic interests of the Adviser. Immediately after approval by the stockholders of Gladstone Capital Corporation of a similar advisory agreement, which occurred on January 24, 2024, the Adviser entered into a voting trust agreement (the “Voting Trust Agreement”), among David Gladstone, Lorna Gladstone, Laura Gladstone, Kent Gladstone and Jessica Martin, each as a trustee and collectively, as the board of trustees of the voting trust (the “Voting Trust Board”), the Adviser and certain stockholders of the Adviser, pursuant to which David Gladstone deposited all of his indirect interests in the Adviser, which represented 100% of the voting and economic interests thereof, with the voting trust.
Pursuant to the Voting Trust Agreement, prior to its Effective Date (as defined below) David Gladstone has, in his sole discretion, the full, exclusive and unqualified right and power to vote in person or by proxy all of the shares of common stock of the Adviser deposited with the voting trust at all meetings of the stockholders of the Adviser in respect of any and all matters on which the stockholders of the Adviser are entitled to vote under the Adviser’s certificate of incorporation or applicable law, to give consents in lieu of voting such shares of common stock of the Adviser at a meeting of the stockholders of the Adviser in respect of any and all matters on which stockholders of the Adviser are entitled to vote under its certificate of incorporation or applicable law, to enter into voting agreements, waive notice of any meeting of
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stockholders of the Adviser in respect of such shares of common stock of the Adviser and to grant proxies with respect to all such shares of common stock of the Adviser with respect to any lawful corporate action (collectively, the “Voting Powers”).
Commencing on the Effective Date, the Voting Trust Board shall have the full, exclusive and unqualified right and power to exercise the Voting Powers. Each member of the Voting Trust Board shall hold 20% of the voting power of the Voting Trust Board as of the Effective Date. The “Effective Date” shall occur on the earliest of (i) the death of David Gladstone, (ii) David Gladstone’s election (in his sole discretion) and (iii) one year from the date the Voting Trust Agreement is entered into. Following entry into the Voting Trust Agreement, the current members of senior management of the Adviser will continue to manage the day-to-day aspects of the Adviser.
There are no changes to the terms of the Advisory Agreement currently in effect (the "Original Advisory Agreement") in the New Advisory Agreement, including the fee structure and services to be provided, other than the date and term of the New Advisory Agreement as compared to the Original Advisory Agreement. In addition to there being no changes to the fee structure, no other fees or expenses currently paid by us will change as a result of entry into the New Advisory Agreement. There will be no changes to our principal investment objective, investment strategies, fundamental investment restrictions or principal risks as a result of entry into the Voting Trust Agreement or New Advisory Agreement.
Base Management Fee
The base management fee is payable quarterly to the Adviser pursuant to our Advisory Agreement and is assessed at an annual rate of 2.0%, computed on the basis of the value of our average gross assets at the end of the two most recently completed quarters (inclusive of the current quarter), which are total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective period, and adjusted appropriately for any share issuances or repurchases during the period.
Additionally, as stated above, pursuant to the requirements of the 1940 Act, the Adviser makes available significant managerial assistance to our portfolio companies. The Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance. Such services may include: (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) a primary role in interviewing, vetting and negotiating employment contracts with candidates in connection with adding and retaining key portfolio company management team members. The Adviser non-contractually, unconditionally, and irrevocably credits 100% of any fees received for such services 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 in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser, primarily related to the valuation of portfolio companies. Loan servicing fees that are payable to the Adviser pursuant to our Fifth Amended and Restated Credit Agreement, as amended (the “Credit Facility”), are also 100% credited against the base management fee as discussed below “—Loan Servicing Fee Pursuant to Credit Facility.”
Incentive Fee
The incentive fee payable to the Adviser under our Advisory Agreement consists of two parts: an income-based incentive fee and a capital gains-based incentive fee.
The income-based incentive fee rewards the Adviser if our quarterly net investment income (before giving effect to any incentive fee) exceeds 1.75% of our net assets, which we define as total assets less indebtedness and before taking into account any incentive fees payable or contractually due but not payable during the period, at the end of the immediately preceding calendar quarter, adjusted appropriately for any share issuances or repurchases during the period (the “Hurdle Rate”). The income-based incentive fee with respect to our pre-incentive fee net investment income is payable quarterly to the Adviser and is computed as follows:
•No incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the Hurdle Rate;
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•100.0% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the Hurdle Rate but is less than 2.1875% of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter; and
•20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter.
Quarterly Incentive Fee Based on Net Investment Income
Pre-incentive fee net investment income
(expressed as a percentage of the value of net assets)
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, less (iii) the entire portfolio’s aggregate unrealized capital depreciation, if any, as of the date of the calculation. If this number is positive at the applicable calculation date, then the capital gains-based incentive fee for such year equals 20.0% of such amount, less the aggregate amount of any capital gains-based incentive fees paid in respect of our portfolio in all prior years. For calculation purposes, cumulative aggregate realized capital gains, if any, equals the sum of the excess between the net sales price of each investment, when sold, and the original cost of such investment since our inception. Cumulative aggregate realized capital losses equals the sum of the deficit between the net sales price of each investment, when sold, and the original cost of such investment since our inception. The entire portfolio’s aggregate unrealized capital depreciation, if any, equals the sum of the deficit between the fair value of each investment security as of the applicable calculation date and the original cost of such investment security. As of and for the years ended March 31, 2024 and 2022, capital gains-based incentive fees of $1.1 million and $5.3 million, respectively, were contractually due and paid to the Adviser. For the year ended March 31, 2023, no capital gains-based incentive fees were contractually due and paid to the Adviser.
In accordance with GAAP, accrual of the capital gains-based incentive fee is determined as if our investments had been liquidated at their fair values as of the end of the reporting period. Therefore, GAAP requires that the capital gains-based incentive fee accrual consider the aggregate unrealized capital appreciation in the calculation, as a capital gains-based incentive fee would be payable if such unrealized capital appreciation were realized. There can be no assurance that any such unrealized capital appreciation will be realized in the future. Accordingly, a GAAP accrual is calculated at the end of the reporting period based on (i) cumulative aggregate realized capital gains since our inception, plus (ii) the entire portfolio’s aggregate unrealized capital appreciation, if any, less (iii) cumulative aggregate realized capital losses since our inception, less (iv) the entire portfolio’s aggregate unrealized capital depreciation, if any. If such amount is positive at the end of a reporting period, a capital gains-based incentive fee equal to 20.0% of such amount, less the aggregate amount of capital gains-based incentive fees accrued in all prior years, is recorded, regardless of whether such amount is contractually due under the terms of the Advisory Agreement. If such amount is negative, then there is no accrual for such period and prior period accruals are reversed, as appropriate. For the three years ended March 31, 2024, 2023 and 2022, we recorded/(reversed) capital gains-based incentive fees of $12.7 million, $(0.3) million and $18.3 million, respectively.
Loan Servicing Fee Pursuant to Credit Facility
The Adviser also services the loans held by our wholly-owned subsidiary, Gladstone Business Investment, LLC (“Business Investment”) (the borrower under the Credit Facility), in return for which the Adviser receives a 2.0% annual fee based on the monthly aggregate outstanding balance of loans pledged under the Credit Facility. Since Business Investment is a consolidated subsidiary of ours, coupled with the fact that the total base management fee paid to the Adviser pursuant to the Advisory Agreement cannot exceed 2.0% of total assets (less any uninvested cash or cash equivalents resulting from
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borrowings) during any given calendar year, we treat the payment of the loan servicing fee pursuant to the Credit Facility as a pre-payment of the base management fee under the Advisory Agreement. Accordingly, these loan servicing fees are 100% non-contractually, unconditionally, and irrevocably credited back to us by the Adviser.
Administration Agreement
We reimburse the Administrator pursuant to the Administration Agreement for our allocable portion of the Administrator’s expenses incurred while performing services to us, which are primarily rent and salaries and benefits expenses of the Administrator’s employees, including our chief financial officer and treasurer, chief valuation officer, chief compliance officer, general counsel and secretary (who also serves as the Administrator’s president, general counsel, and secretary), and their respective staffs.
Our allocable portion of the Administrator’s expenses is generally derived by multiplying the Administrator’s total expenses by the approximate percentage of time during the current quarter that the Administrator’s employees performed services for us in relation to their time spent performing services for all companies serviced by the Administrator. On July 11, 2023, our Board of Directors, including a majority of the directors who are not parties to the Administration Agreement or interested persons of either party, approved the annual renewal of the Administration Agreement through August 31, 2024.
Other Transactions
Mr. Gladstone also serves on the board of managers of our affiliate Gladstone Securities, a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation. Gladstone Securities is 100% indirectly owned and controlled by Mr. Gladstone and has provided other services, such as investment banking and due diligence services, to certain of our portfolio companies, for which Gladstone Securities receives a fee. Any such fees paid by portfolio companies to Gladstone Securities do not impact the fees we pay to the Adviser or the non-contractual, unconditional, and irrevocable credits against the base management fee. For additional information, refer to Note 4 — Related Party Transactions in the accompanying Notes to Consolidated Financial Statements.
Material U.S. Federal Income Tax Considerations
This is a general summary of certain material U.S. federal income tax considerations applicable to us, to our qualification and taxation as a RIC for U.S. federal income tax purposes under Subchapter M of the Code and to the ownership and disposition of our shares. This summary does not purport to be a complete description of all of the tax considerations relating thereto. In particular, we have not described certain considerations that may be relevant to certain types of stockholders subject to special treatment under U.S. federal income tax laws. This summary does not discuss any aspect of state, local or foreign tax laws, or the U.S. estate or gift tax. Stockholders are urged to consult their tax advisors regarding their particular situations and the possible applicability of federal, state, local, non-U.S. or other tax laws, and any proposed tax law changes.
For purposes of this summary, a “U.S. stockholder” is a beneficial owner of stock that is for U.S. federal income tax purposes:
•an individual who is a citizen or resident of the United States;
•a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof of the District of Columbia;
•a trust, if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons (as defined in the Code) have the authority to control all of its substantial decisions, or if the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes; or
•an estate, the income of which is subject to U.S. federal income taxation regardless of its source.
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RIC Status
To qualify for treatment as a RIC under Subchapter M of the Code, we must generally distribute to our stockholders, for each taxable year, at least 90% of our taxable ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses (“Investment Company Taxable Income”). 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 (including certain deemed inclusions) 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 (other than U.S. government securities or the securities of other regulated investment companies) of (i) one issuer, (ii) two or more issuers that are controlled by us and are engaged in the same or similar or related trades or businesses, and (iii) one or more qualified publicly-traded partnerships.
Our qualification and taxation as a RIC depends upon our ability to satisfy on a continuing basis, through actual, annual operating results, distribution, income and asset, and other requirements imposed under the Code. However, no assurance can be given that we will be able to meet the complex and varied tests required to qualify as a RIC or to avoid corporate level tax. In addition, because the relevant laws may change, compliance with one or more of the RIC requirements may be impossible or impracticable.
Failure to Qualify as a RIC
If we were to fail to meet the income, diversification, or distribution tests described above, we could in some cases cure such failure, including by paying a fund-level tax, paying interest, making additional distributions, or disposing of certain assets. If we were ineligible to or otherwise did not cure such failure, or were otherwise unable to qualify for treatment as a RIC, we would be subject to U.S. federal income tax on all of our taxable income at the regular corporate income tax rate and would be subject to any applicable state and local taxes, even if we distributed all of our Investment Company Taxable Income to our stockholders. We would not be able to deduct distributions to our stockholders, nor would we be required to make such distributions. Distributions would be taxable to our stockholders as ordinary dividend income to the extent of our current or accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributees would be eligible for the dividends received deduction, if applicable. 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 capital gain. 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 U.S. federal income tax on any unrealized appreciation with respect to our assets unless we make a special election to pay corporate-level U.S. federal income tax on any such unrealized appreciation during the succeeding five-year period.
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Qualification as a RIC
If we qualify as a RIC and meet the annual distribution requirement, we will not be subject to U.S. federal income tax on the portion of our Investment Company Taxable Income and net capital gain (realized net long-term capital gain in excess of realized net short-term capital loss) that we timely distribute (or are deemed to distribute) to our 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 (i) 98% of our ordinary income for the calendar year, (ii) 98.2% of our net capital gains for the one-year period ending on October 31 of the calendar year (or November 30 or December 31 of that year if we are permitted to elect and so elect) and (iii) any income realized, but not distributed, in the preceding period (to the extent that income tax was not imposed on such amounts), less certain reductions, as applicable. For the calendar years ended December 31, 2023, 2022 and 2021, we incurred $1.2 million, $1.3 million and $0.7 million, respectively, in excise taxes. As of March 31, 2024, there was no capital loss carryforward.
Taxation of Our U.S. Stockholders
The following summary generally describes certain U.S federal income tax consequences of an investment in our shares beneficially owned by U.S. stockholders. If you are not a U.S. sotckholder this section does not apply to you. Whether an investment is appropriate for a U.S. stockholder will depend upon that person's particular circumstances. An investment by a U.S. stockholder may have adverse tax consequences. U.S. stockholders are urged to consult their tax advisors about the U.S. tax consequences of investing in the fund.
Distributions
For any period during which we qualify as a RIC for U.S. federal income tax purposes, distributions to our stockholders attributable to our Investment Company Taxable Income generally will be taxable as ordinary income to our stockholders to the extent of our current or accumulated earnings and profits. 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 capital gain. Distributions of our long-term capital gains, reported by us as such, will be taxable to our stockholders as long-term capital gains regardless of the stockholder’s holding period of the stock and whether the distributions are paid in cash or invested in additional stock. Corporate U.S. stockholders generally are eligible for the 50% dividends received deduction with respect to dividends received from us, but only to the extent such amount is attributable to dividends received by us from taxable domestic corporations.
Any distribution declared by us in October, November or December of any calendar year, payable to our 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 our 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 extended due date for filing our return for that taxable year or the 15 th 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. For the fiscal year ended March 31, 2024, Investment Company Taxable Income exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $18.7 million of the first distributions paid to common stockholders in the fiscal year ending March 31, 2025 as having been paid in the fiscal year ended March 31, 2024. In addition, for the fiscal year ended March 31, 2024, net capital gains exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $1.4 million of the first distributions paid to common stockholders in the fiscal year ending March 31, 2025 as having been paid in the fiscal year ended March 31, 2024.
If a common stockholder participates in our “opt in” dividend reinvestment plan, then the common stockholder will have their cash dividends and distributions automatically reinvested in additional shares of our common stock, rather than receiving cash dividends and distributions. 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 dollar amount that would have been received if the U.S. stockholder had received the dividend or distribution in cash. 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.
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We may distribute our net long-term capital gains, if any, in cash or elect to retain some or all of such gains, pay taxes at the U.S. federal corporate-level income tax rate on the amount retained, and designate the retained amount as a “deemed distribution.” If we elect to retain net long-term capital gains and deem them distributed, each U.S. common stockholder will be treated as if they received a distribution of their pro-rata share of the retained net long-term capital gain and the U.S. federal income tax paid. As a result, each U.S. common stockholder will (i) be required to report their pro-rata share of the retained gain on their tax return as long-term capital gain, (ii) receive a refundable tax credit for their pro-rata share of federal income tax paid by us on the retained gain, and (iii) increase the tax basis of their shares of common stock by an amount equal to the deemed distribution less the tax credit. To use the deemed distribution approach, we must provide written notice to our common stockholders prior to the expiration of 60 days after the close of the relevant taxable year. For the years ended March 31, 2024, 2023 and 2022, we did not elect to retain long-term capital gains and to treat them as deemed distributions to common 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 the 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 the 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. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed under the Code’s “wash sale” rule if other substantially identical shares are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss. 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. 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 also 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 and Other Required Withholding
We may be required to withhold U.S. federal income tax, or backup withholding, from all taxable distributions to any non-corporate U.S. stockholder (i) who fails to furnish us with a correct taxpayer identification number or a certificate that such stockholder is exempt from backup withholding, or (ii) 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.
Sections 1471-1474 of the Code and the U.S. Treasury and IRS guidance issued thereunder or, collectively, FATCA, generally require that we obtain information sufficient to identify the status of each shareholder under FATCA or under an applicable intergovernmental agreement, or IGA, between the United States and a foreign government. If a shareholder fails to provide the requested information or otherwise fails to comply with FATCA or an IGA, we may be required to withhold under FATCA at a rate of 30% with respect to that shareholder on ordinary dividends it pays. The IRS and the Department of Treasury have issued proposed regulations providing that these withholding rules will not apply to the gross proceeds of share redemptions or capital gain dividends we pay. If a payment is subject to FATCA withholding, we are required to withhold even if such payment would otherwise be exempt from withholding under the rules applicable to foreign shareholders described above (e.g., interest-related dividends). In addition, subject to certain exceptions, this legislation also imposes a 30% withholding on payments to foreign entities that are not financial institutions unless the foreign entity certifies that it does not have a greater than 10% U.S. owner or provides the withholding agent with identifying information on each greater than 10% U.S. owner. Depending on the status of a non-U.S. stockholder and the status of the intermediaries through which they hold their shares, non-U.S. stockholders could be subject to this 30% withholding tax with respect to distributions on their shares and proceeds from the sale of their shares. Under certain circumstances, a non-U.S. stockholder might be eligible for refunds or credits of such taxes.
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Information Reporting
We will send to each of our U.S. stockholders, after the end of each calendar year, a notice providing the amounts includible in the U.S. stockholder’s taxable income for such year as ordinary income and as long-term capital gain for cash distributions received. In addition, the U.S. federal tax status of each year’s distributions will generally be reported to the IRS (including the amount of dividends, if any, eligible for the preferential rates applicable to long-term capital gains).
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 "vote of a majority of outstanding voting securities,” as defined in the 1940 Act.
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 total assets, exclusive of Operating Assets. The types of qualifying assets in which we may invest under the 1940 Act include 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, 2024, 99.8% of our assets were qualifying assets.
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Asset Coverage
Pursuant to Section 61(a)(3) 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 150%. As of March 31, 2024, our asset coverage on our senior securities representing indebtedness was 219.0%.
In addition, our ability to pay dividends or distributions (other than dividends payable in our common 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 150% (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 150% (measured at the time of declaration of such distribution and accounting for such distribution). When the value of our assets declines, we might be unable to satisfy these asset coverage requirements. To satisfy the 150% 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 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 costs will not be available for distributions to our stockholders. If we are unable to regain the requisite asset coverage through these methods, we may be forced to suspend the payment of such dividends or distributions.
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 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.
Summary Risk Factors
Below is a summary of the principal risk factors associated with an investment in our securities. In addition to the below, you should carefully consider the information included in “Risk Factors”, beginning on page 20 of this Annual Report, together with all of the other information included in this Annual Report and the other reports and documents filed or furnishe d by us with the SEC for a more detailed discussion of the principal risks, as well as certain other risks that you should carefully consider before deciding to invest in our securities.
•Market conditions could negatively impact our business, results of operations, cash flows and financial condition.
•Volatility in the capital markets may make it more difficult to raise capital and may adversely affect the valuations of our investments.
•We may experience fluctuations in our quarterly and annual results based on the impact of inflation in the U.S.
•Changes in interest rates may negatively impact our investments and have an adverse effect on our business, financial condition, results of operations, and cash flows.
•The lack of liquidity of our privately held investments may adversely affect our business.
•Our investments in lower middle market companies are extremely risky and could cause you to lose all or a part of your investment.
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•Our investments are typically long-term and will require several years to realize liquidation events.
•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 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.
•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 new investments or maintain distributions to our stockholders.
•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.
•There are significant potential conflicts of interest, including with the Adviser, which could impact our investment returns.
•Our success depends on the Adviser’s ability to attract and retain qualified personnel in a competitive environment.
•Our incentive fee may induce the Adviser to make certain investments, including speculative investments.
•We may be obligated to pay the Adviser incentive compensation even if we incur a loss.
•The Adviser is not obligated to provide a credit of the base management fee or incentive fee, which could negatively impact our earnings and our ability to maintain our current level of distributions to our stockholders.
•There is a risk that you may not receive distributions or that distributions may not grow over time.
•Investing in our securities may involve an above average degree of risk.
•Common shares of closed-end investment companies frequently trade at a discount to the NAV per share.
•The indentures under which our unsecured notes were issued contain limited protection for holders of such notes.
•Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, or the operations of businesses in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.
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 personnel of such companies that complies with the guidelines set forth in Item 406 of Regulation S-K of 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 the Investors section of our website under “Governance – Governance Documents” at www.GladstoneInvestment.com. Appendix A to the code of ethics and business conduct is our insider trading policy. 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 companies.
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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 dedicates all of his or her time to us. However, we expect that 20 to 25 full-time employees of the Adviser and the Administrator will spend substantial time on our matters during the remainder of calendar year 2024 and all of calendar year 2025.
As of March 31, 2024, the Adviser and Administrator collectively had 70 full-time employees. A breakdown of these employees is summarized by functional area in the table below:

Number of Individuals |  | Functional Area
13 |  | Executive management
21 |  | Accounting, administration, compliance, human resources, legal, and treasury
36 |  | Investment management, portfolio management, and due diligence

The Adviser and the Administrator aim to attract and retain capable advisory and administrative personnel, respectively, by offering competitive base salaries and bonus structure, and by providing employees with appropriate opportunities for professional growth.
Available Information
We file with or furnish to the SEC copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information meeting the information requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and make such reports and any amendments thereto available free of charge through the “Investors – SEC Filings” section of our website at www.GladstoneInvestment.com as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. Information contained on our website is not incorporated by reference into this Annual Report. 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.
ITEM 1A. RISK FACTORS
You should carefully consider these risk factors, together with all of the other information included in this Annual Report 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. If that happens, the trading price of our securities and the NAV of our common stock 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 the Economy
Market conditions could negatively impact our business, results of operations, financial condition, and cash flows.
The market in which we operate is affected by a number of factors that are largely beyond our control but can nonetheless have a potentially significant, negative impact on us. These factors include, among other things:
•changes in interest rates and credit spreads and the effects of inflation on us and our portfolio companies;
•the availability of credit, including the price, terms and conditions under which it can be obtained;
•the quality, pricing, and availability of suitable investments and credit losses with respect to our investments;
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•the ability to obtain accurate market-based valuations;
•investment values relative to the value of the underlying assets;
•default rates on the loans underlying our investments and the amount of related losses;
•prepayment rates, delinquency rates and the timing and amount of service advances;
•competition;
•the actual and perceived state of the economy and capital markets generally;
•amendments or repeals of legislation, or changes in regulations or regulatory interpretations thereof, and transitions of government, including uncertainty regarding any of the foregoing;
•the national and global political environment, including war, armed conflicts, foreign relations and trading policies;
•the impact of potential changes to the Code; and
•the attractiveness of other types of investments relative to investments in Lower Middle Market companies generally.
Changes in these factors are difficult to predict, and a change in one factor could affect other factors, which could result in adverse effects to our business, results of operations, financial condition, and cash flows.
Volatility in the capital markets could make it more difficult to raise capital and may adversely affect the valuations of our investments.
Given the volatility and dislocation that the capital markets have experienced from time to time, many BDCs have faced, and may in the future face, a challenging environment in which to raise capital. We could in the future have difficulty accessing debt and equity capital, and a severe disruption in U.S. or global financial markets or deterioration in credit and financing conditions, including as a result of rising inflation, could have a material adverse effect on our business, financial condition, results of operations, and cash flows. In addition, significant changes in the capital markets have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. Additionally, volatility in the U.S. repo market may affect other financial markets worldwide. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition, results of operations, or cash flows.
We may experience fluctuations in our quarterly and annual results based on the impact of inflation in the U.S.
Certain of our portfolio companies are in industries that have been and, in the future, may be impacted by inflation, such as consumer goods and services and manufacturing. Our portfolio companies may not be able to pass on to customers increases in their costs of operations 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 unrealized losses and therefore reduce our net assets resulting from operations.
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Public health threats may adversely impact the businesses in which we invest and affect our business, operating results, and financial condition.
Public health threats, such as pandemics, may disrupt the operations of the businesses in which we invest. Such threats can create economic and political uncertainties and can contribute to global economic instability. In the event of a future public health threat, our portfolio companies may face limitations on their business activities for an unknown period of time, including shutdowns that may be requested or mandated by governmental authorities, may experience disruptions in their supply chains or decreased consumer demand, or may experience increases in health and safety expenses, payroll costs and other operating expenses. These adverse economic impacts may decrease the value of the collateral securing our loans in such portfolio companies, as well as the value of our equity investments. In addition, these adverse impacts could cause certain of our portfolio companies to have difficulty meeting their debt service requirements, which in turn could lead to an increase in defaults, and/or could diminish the ability of certain of our portfolio companies to engage in liquidity events. These negative impacts on our portfolio companies and their performance may increase realized and unrealized losses related to our investments, which may, in turn, adversely impact our business, financial condition or results of operations.
Risks Related to Interest Rates
Market interest rates may have an effect on the value of our securities.
One of the factors that influences the price of our securities is the distribution yield on our securities (as a percentage of the price of our securities) relative to market interest rates. An increase in market interest rates, which have risen recently, may lead prospective purchasers of our securities to expect a higher distribution yield. In addition, higher interest rates have increased our borrowing costs. As a result, higher market interest rates tend to cause the value of our securities to decrease.
Changes in interest rates may negatively impact our investments and have an adverse effect on our business, financial condition, results of operations, and cash flows.
Generally, interest rate fluctuations and changes in credit spreads on floating rate loans may have a negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our rate of return on invested capital, our net investment income, our NAV and the market price of our securities. As interest rates increase, generally, the cost of borrowing under our Credit Facility increases, which may affect our ability to make new investments on favorable terms or at all. A substantial portion of our debt investments have variable interest rates that reset periodically and are generally based on SOFR. As interest rates have increased, the operating performance of certain of our portfolio companies has been affected by increasing debt service obligations and, therefore, may affect our results of operations. In addition, to the extent that further increases in interest rates make it difficult or impossible to make payments on outstanding indebtedness to us or other financial sponsors or refinance debt that is maturing in the near term, some of our portfolio companies may be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection. Elevated interest rates could also cause borrowers to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. Additionally, as interest rates increase and the corresponding risk of a default by borrowers increases, the liquidity of higher interest rate loans may decrease as fewer investors may be willing to purchase such loans in the secondary market in light of the increased risk of a default by the borrower and the heightened risk of a loss of an investment in such loans. Decreases in credit spreads on debt that pays a floating rate of return would have an impact on the income generation of our floating rate assets. Trading prices for debt that pays a fixed rate of return tend to fall as interest rates rise. Trading prices tend to fluctuate more for fixed rate securities that have longer maturities. There can be no guarantee the Federal Reserve Board will raise rates at a gradual pace, or at all, nor can there be any assurance that markets will not adversely react to rate increases. Recent and future increases in interest rates could have a negative effect on our investments, which could negatively impact our operating results, financial condition, and cash flows.
Conversely, reduced interest rates will result in a decrease in our total investment income unless offset by interest rate floors or an increase in the spread of our debt investments with variable interest rates. In addition, our net investment income could decrease if there is no reduction or credit to the base management or incentive fees that we pay to the Adviser or if we are unable to refinance our fixed rate debt obligations or issue new fixed rate debt at lower rates. In addition, when interest rates decline, borrowers may refinance their loans at lower interest rates, which could shorten the average life of the loans and reduce the associated returns on the investment, as well as require the Adviser and its investment professionals to incur management time and expense to re-deploy such proceeds, including on terms that may not be as favorable as our existing loans.
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A change in interest rates may adversely affect our profitability and any 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, interest rate hedging arrangements may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio.
Ultimately, we expect approximately 90% of the loans in our portfolio to be at variable rates determined on the basis of the SOFR and approximately up to 10% to be at fixed rates. As of March 31, 2024, based on the total principal balance of debt investments outstanding, our portfolio consisted of 100.0% of loans at variable rates with floors.
As of March 31, 2024, we did not have any hedging arrangements, such as interest rate hedges, in place. While hedging arrangements 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, results of operations, and cash flows. Our ability to receive payments pursuant to a hedging arrangement is linked to the ability of the counter-party to that hedging arrangement to make the required payments. To the extent that the counter-party to the hedging arrangement is unable to pay pursuant to the terms of the agreement, we may lose the hedging protection of the arrangement.
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 any hedging arrangements then in effect 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, results of operations, and cash flows. Refer to “Quantitative and Qualitative Disclosures About Market Risk” for additional information on interest rate fluctuations.
Risks Related to Our Investments
We operate in a highly competitive market for investment opportunities.
There is competitive pressure in the BDC and investment company marketplace for first and second lien secured debt, which can result in reduced yields on investment. A large number of entities compete with us to make the types of investments we seek to make in Lower Middle Market 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, mutual funds, and private equity. 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 objectives. 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.
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Our investments in Lower Middle Market portfolio companies are extremely risky and could cause you to lose all or a part of your investment.
Investments in Lower Middle Market portfolio companies are subject to a number of significant risks including the following:
•Lower Middle Market 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. When the economy contracts, the financial results of Lower Middle Market businesses, like those in which we invest, could experience deterioration or limited growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements and an increase in defaults. Consequently, for any portfolio company that is adversely impacted by an economic downturn or recession, its ability to repay our loan(s) or engage in a liquidity event, such as a sale, recapitalization or initial public offering would be diminished.
•Lower Middle Market 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(s) 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 31, 2024, loans to two portfolio companies were on non-accrual status with an aggregate debt cost basis of $59.1 million, or 9.0% of the cost basis of all debt investments in our portfolio. We cannot assure you that our efforts to improve profitability and cash flows of these companies will prove successful. In some of our loans we expect to be subordinated to a senior lender and our security interest in any collateral would, accordingly, likely be second lien and subordinate to another lender’s security interest.
•Lower Middle Market businesses typically have narrower product lines and smaller market shares than large businesses. Our target portfolio companies tend to be more vulnerable to 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 to make a well-informed investment decision.
•Lower Middle Market 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(s) would be jeopardized.
•Lower Middle Market businesses are more likely to be dependent on one or two persons. Typically, the success of a Lower Middle Market 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 portfolio company and, in turn, on us.
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•Lower Middle Market businesses may have limited operating histories. While we intend to continue to target stable companies with proven track records, we may invest in 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 Lower Middle Market companies typically are not rated by a credit rating agency. Typically, a Lower Middle Market 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 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.
•Lower Middle Market companies may be highly leveraged. Some of our portfolio companies are highly leveraged, which could have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage could impair these companies’ ability to finance their future operations and capital needs. As a result, these companies’ flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.
•Lower Middle Market companies may operate in regulated industries or provide services to governments. Some of our portfolio companies may operate in regulated industries and/or provide services to federal, state or local governments, or operate in industries that provide services to regulated industries or federal, state or local governments, any of which could lead to delayed payments for services or subject the company to changing payment and reimbursement rates or other terms.
Because the majority of the loans we make and equity securities we invest in are not publicly traded, there is uncertainty regarding the value of our privately-held securities.
Substantially all of 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. In valuing our investment portfolio, several techniques are used, including, a total enterprise value approach, a yield analysis, and market quotes. A third-party valuation firm provides estimates of fair value on generally all of our debt investments that are not valued using total enterprise value (“TEV”) and we use another independent valuation firm to provide valuation inputs for our significant equity investments, which are generally valued using TEV, 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: the nature and realizable value of the collateral, including external parties’ guaranties; any relevant offers or letters of intent to acquire the portfolio company; timing of expected loan repayments; and the markets in which the portfolio company operates.
Fair value measurements of our investments may involve subjective judgments and estimates and, due to the uncertainty inherent in valuing these securities, the determination 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. 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.
Our NAV would be adversely affected if the fair value of our investments are higher than the values that we ultimately realize upon the disposal of such securities.
The valuation process for certain of our portfolio holdings creates a conflict of interest.
A substantial portion of our portfolio investments are securities for which market quotations are not readily available. In connection with the determination of the fair value of these securities, our Valuation Team prepares portfolio company valuations based upon the most recent portfolio company financial statements available and projected financial results of each portfolio company. The participation of our Adviser’s investment professionals in our valuation process and Mr. Gladstone’s pecuniary interest in our Adviser may result in a conflict of interest, as the management fees that we pay our
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Adviser are based on our average gross assets, less uninvested cash or cash equivalents from borrowings, and adjusted appropriately for any share issuances or repurchases during the period.
The lack of liquidity of our privately-held investments may adversely affect our business.
We 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, the Administrator, or our respective officers, 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. Additional discussion regarding risks associated with determinations made by the Adviser is found in the risk factor “The valuation process for certain of our portfolio holdings creates a conflict of interest.”
Our financial results could be negatively affected if a significant portfolio investment fails to perform as expected.
Our total investment in one or more 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 42.7% and 42.8% of the fair value of our total portfolio as of March 31, 2024 and 2023, respectively. Any disposition of a significant investment in one or more portfolio companies may negatively impact our net investment income and limit our ability to pay distributions.
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, financial condition, and cash flows.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies and/or we could be subject to lender liability claims.
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. Additionally, depending on the facts and circumstances, including the extent to which we provide managerial assistance to any portfolio company subject to bankruptcy, a bankruptcy court might re-characterize our debt investments and subordinate all or a portion of our claims to that of other creditors. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying 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 as a result of actions taken
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in rendering any managerial assistance. Furthermore, 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.
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, 2024, we had investments in 24 portfolio companies, the five largest of which included SFEG, Nocturne, Nth Degree, Old World, and Brunswick and comprised $393.5 million, or 42.7%, 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 investments or a substantial write-down of any one investment, including due to the current inflation and interest rate environment. Beyond our regulatory and income tax diversification requirements, as well as 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, 2024, our largest industry concentration was in Diversified/Conglomerate Services, representing 28.7% of our total investments, at fair value.
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.
Our portfolio includes companies related to the oil and gas industry with the fair value of these investments representing approximately $51.2 million, or 5.6% of our total portfolio at fair value as of March 31, 2024. These businesses provide services to oil and gas companies and are indirectly impacted by the prices of, and demand for, oil and natural gas, which have from time to time experienced volatility, including rapid and significant changes in prices, and such volatility could continue or increase in the future. A substantial decline in oil and natural gas demand or prices may adversely affect the business, financial condition, cash flows, liquidity or results of operations of these portfolio companies and might impair their ability to meet capital expenditure obligations and financial commitments. Any decline in oil prices, especially for a prolonged period, could therefore have a material adverse effect on our business, financial condition and results of operations.
Our investments are typically long-term and will require several years to realize liquidation events.
Since we generally make five year term loans and hold our loans and equity positions until the loans mature and/or we exit the investment, investors should not expect realization events, if any, to occur over the near term. In addition, we expect that any equity investments may require several years to appreciate in value and we cannot give any assurance that such appreciation will occur or ultimately be realized.
The disposition of our investments may result in contingent liabilities.
Currently, all but one 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 may ultimately yield funding obligations that must be satisfied through our return of certain distributions previously made to us.
Portfolio company litigation or other litigation or claims against us or our personnel could result in additional costs 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 or otherwise, 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
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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.
While we believe we would have valid defenses to potential claims brought due to our investment in any portfolio company, and will defend any such claims vigorously, we may nevertheless expend significant amounts of money in defense costs and expenses. Further, if we enter into settlements or suffer an adverse outcome in any litigation, we could be required to pay significant amounts. In addition, if any of our portfolio companies become subject to direct or indirect claims or other obligations, such as defense costs or damages in litigation or settlement, our investment in such companies could diminish in value and we could suffer indirect losses. Further, these matters could cause us to expend significant management time and effort in connection with assessment and defense of any claims.
Any unrealized depreciation we experience on our investment portfolio may be an indication of future realized losses, which could reduce any gains 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. 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 any gains available for distribution to stockholders in future periods.
Risks Related to Our External Financing
In addition to regulatory limitations on our ability to raise capital, the Credit Facility 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, cash flows, and ability to pay distributions.
We will have a continuing need for capital to finance our investments. As of March 31, 2024, we, through our wholly-owned subsidiary, Business Investment, had $67.0 million of borrowings outstanding under the Credit Facility, which provides for maximum borrowings of $200.0 million, with a revolving period end date of October 30, 2026 (the “Revolving Period End Date”). The 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. Among other things, the Credit Facility contains covenants that require Business Investment to maintain its status as a separate legal entity, prohibit certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions) and restrict certain material changes to our credit and collection policy without the lenders’ consent. The Credit Facility also generally seeks to restrict distributions to stockholders to the sum of (i) our net investment income, (ii) net capital gains, and (iii) amounts deemed by the Company to be considered as having been paid during the prior fiscal year in accordance with Section 855(a) of the Code. Loans eligible to be pledged as collateral are subject to certain limitations, including, among other things, restrictions on geographic concentrations, industry concentrations, loan size, payment frequency and status, average life, portfolio company leverage, and lien property. The Credit Facility also requires Business Investment to comply with other financial and operational covenants, which obligate Business Investment to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of obligors in the borrowing base. Additionally, the Credit Facility contains a performance guarantee that requires the Company to maintain (i) a minimum net worth of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any equity or subordinated debt redeemed or retired after November 16, 2016, which equated to $348.7 million as of March 31, 2024; (ii) asset coverage with respect to senior securities representing indebtedness of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act); and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of March 31, 2024, and as defined in the performance guaranty of the Credit Facility, we had a net worth of $822.4 million, asset coverage on our senior securities representing indebtedness of 219.0%, calculated in accordance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and RIC. As of March 31, 2024, we were in compliance with all covenants under the Credit Facility; however, our continued compliance depends on many factors, some of which are beyond our control.
Any 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 the 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, cash flows, and ability to pay distributions to our stockholders.
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Any inability to renew, extend or replace the Credit Facility on terms favorable to us, or at all, could adversely impact our liquidity and ability to fund new investments or maintain distributions to our stockholders.
If the Credit Facility is not renewed or extended by the Revolving Period End Date, all principal and interest will be due and payable on October 30, 2028 (two years after the Revolving Period End Date). Subject to certain terms and conditions, the Credit Facility may be expanded to a total of $300.0 million through additional commitments of existing or new lenders. However, if such lenders are unwilling to provide additional commitments under the terms of the Credit Facility, we will be unable to expand the Credit Facility and thus will continue to have limited availability to finance new investments under the Credit Facility. There can be no guaranty that we will be able to renew, extend or replace the Credit Facility upon its Revolving Period End Date on terms that are favorable to us, if at all. Our ability to expand the 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 the Credit Facility, or to renew, extend or refinance the 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. In addition to selling assets, or as an alternative, we may issue common equity to repay amounts outstanding under the Credit Facility. Depending upon the trading prices of our common stock (and with the approval of our independent directors and stockholders), such an equity offering may have a 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 the 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 stockholders.
Because we expect to distribute substantially all of our Investment Company Taxable 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.
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 the Credit Facility, our 5.00% 2026 Notes, our 4.875% 2028 Notes and our 8.00% 2028 Notes) and "senior securities that are 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, in amounts such that our asset coverage, as defined in Section 18(h) of the 1940 Act, is at least 150% on each such senior security immediately after each issuance of each such senior security. As a result of issuing senior securities (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 150%. If the aggregate fair value of our assets declines, we might be unable to satisfy that 150% requirement. To satisfy the 150% 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, pay dividends on our preferred stock or for offering costs will not be available for distributions to common stockholders. Pursuant to Section 61(a)(3) 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 are stock".
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•Common and Convertible Preferred Stock: Because we are constrained in our ability to issue debt or senior securities for the reasons given above, we may at times be 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 stockholders 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, such sales would result in an immediate dilution to the NAV per common share. 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".
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 use of leverage, including through the issuance of senior securities that are debt or stock, magnifies the potential for gain or loss on amounts invested and, if we incur additional leverage, this potential will be further magnified. We have incurred leverage in the past and currently incur leverage through the Credit Facility, the 5.00% 2026 Notes, the 4.875% 2028 Notes and the 8.00% 2028 Notes and, from time to time, may incur additional leverage to the extent permitted under the 1940 Act. The use of leverage is generally considered a speculative investment technique and increases the risks associated with investing in our securities. In the future, we may borrow from, and issue senior securities to, banks and other lenders. Holders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such holders to seek recovery against our assets in the event of a default.
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(A) | (24.07)% | (14.55)% | (5.03)% | 4.49% | 14.01%

(A)The hypothetical return to common stockholders is calculated by multiplying our total assets as of March 31, 2024 by the assumed rates of return and subtracting all interest on our debt expected to be paid during the twelve months following March 31, 2024, and then dividing the resulting difference by our total net assets attributable to common stock as of March 31, 2024. Based on $938.1 million in total assets, $67.0 million of borrowings outstanding on the Credit Facility, $127.9 million of 5.00% 2026 Notes, at cost, $134.6 million of 4.875% 2028 Notes, at cost, $74.8 million of 8.00% 2028 Notes, at cost, and $492.7 million in net assets as of March 31, 2024.
Based on an aggregate outstanding indebtedness of $404.2 million, at cost, as of March 31, 2024, the effective annual cash interest rate of 6.1% as of that date, our investment portfolio at fair value would have to produce an annual return of at least 2.7% to cover annual interest payments on the outstanding debt.
Risks Related to Our Regulation and Structure
We will be subject to corporate-level tax if we are unable to satisfy the Code requirements for RIC qualification.
To maintain our qualification as a RIC, we must maintain our status as a BDC and meet annual distribution, income source, 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 may receive with respect to debt investments generally
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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, is recognized as ordinary income. Both OID and PIK interest will increase the amounts we are required to distribute to maintain our 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. As of March 31, 2024, we did not have investments with OID or a PIK feature. 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 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 U.S. federal 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.
Some of our debt investments may include success fees that would generally generate payments to us upon a change of control. 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 to maintain our 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, exclusive of Operating 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 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. Refer to “Business — Regulation as a BDC — Qualifying Assets” for additional information regarding qualifying assets.
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.
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We may not be permitted to declare a dividend or make any distribution to stockholders or repurchase shares until such time as we satisfy the asset coverage tests under the provisions of the 1940 Act that apply to BDCs.
Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth. As a result of the annual distribution requirement to qualify as a RIC, we may need to periodically access the capital markets to raise cash to fund new investments. We may issue senior securities representing indebtedness, including borrowing money from banks or other financial institutions, or senior securities that are stock, only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after each such incurrence or issuance. Further, we may not be permitted to declare a dividend or make any distribution to our outstanding stockholders or repurchase shares until such time as we satisfy this test. Our ability to issue different types of securities is also limited. Compliance with these requirements may unfavorably limit our investment opportunities and reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend. As a BDC, therefore, we may issue equity at a rate more frequent than our privately owned competitors, which may lead to greater stockholder dilution. We have incurred leverage to generate capital to make additional investments. If the value of our assets declines, we may be unable to satisfy the asset coverage test under the 1940 Act, which could prohibit us from paying distributions and could prevent us from qualifying as a RIC. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales and repayments may be disadvantageous. Such events, if they were to occur, could have a significant adverse effect on our business, financial condition, results of operations, and cash flows.
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, David Dullum and Terry Lee Brubaker, 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, 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, David Dullum and Terry Lee Brubaker 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, 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.
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.
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
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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 objectives may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.
The Adviser’s liability is limited under the Advisory Agreement, and we are required to indemnify our investment adviser against certain liabilities, which may lead the Adviser to act in a riskier manner on our behalf than it would when acting for its own account.
The Adviser has not assumed any responsibility to us other than to render the services described in the Advisory Agreement, and it will not be responsible for any action of our Board of Directors in declining to follow the Adviser’s advice or recommendations. Pursuant to the Advisory Agreement, the Adviser and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with the Adviser will not be liable to us for their acts under the Advisory Agreement, absent willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their duties and obligations under the Advisory Agreement. We have agreed to indemnify, defend and protect the Adviser and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with the Adviser with respect to all damages, liabilities, costs and expenses arising out of or otherwise based upon the performance of any of the Adviser’s duties or obligations under the Advisory Agreement or otherwise as an investment adviser for us, and not arising out of willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their duties and obligations under the Advisory Agreement. These protections may lead the Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account.
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, 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 net decrease in net assets.
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 the incentive fee) above a threshold return of 1.75% of our net assets, as adjusted, for that quarter. When calculating our incentive fee, our pre-incentive fee net investment income excludes realized losses and unrealized depreciation that we may incur in the fiscal quarter, even if such losses or depreciation result in a net decrease in net assets 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.
The part of the incentive fee payable by us that relates to our net investment income is computed and paid on income that may include income 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.
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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 Adviser’s senior management team has substantial responsibilities under the Advisory Agreement. 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, 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 our or our stockholders’ best interests. 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, and the Affiliated Public Funds. In addition, Mr. Brubaker, our chief operating officer, is also the vice chairman and chief operating officer of the Adviser and Administrator, and chief operating officer of the Affiliated Public Funds. Mr. Dullum, our president, is also an executive vice president of the Adviser. While portfolio managers and the officers and other employees of the Adviser devote as much time to the management of us as appropriate to enable the Adviser to perform its duties in accordance with the Advisory Agreement, the portfolio managers and other of the Adviser's officers may have conflicts in allocating their time and services among us, on the one hand, and other investment vehicles managed by the Adviser, on the other hand. These activities could be viewed as creating a conflict of interest insofar as the time and effort of the portfolio managers and the officers and employees of the Adviser will not be devoted exclusively to our business but will instead be allocated between our business and the management of these other investment vehicles. 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 Company or the Affiliated Public Fund 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 it manages. 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.
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, 2024, our Board of Directors has approved the following types of transactions:
•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.
•Pursuant to the Co-Investment Order, we may co-invest, under certain circumstances, with certain of our affiliates, including Gladstone Capital and any future BDC or closed-end management investment company that is advised (or sub-advised if it controls the fund) by the Adviser, or any combination of the foregoing subject to the conditions in the Co-Investment Order.
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 for 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.
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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 receive 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.
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 non-contractual, 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 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.
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
There is a risk that you may not receive distributions or that distributions may not grow over time.
Our current intention is to distribute up to 100% of our Investment Company Taxable Income to our stockholders by paying monthly distributions. We may retain some or all of our net realized long-term capital gains, if any, and designate them as deemed distributions to supplement our equity capital and support the growth of our portfolio, although our Board of Directors may determine to distribute these net realized long-term capital gains to our stockholders in cash. In addition, the Credit Facility restricts the amount of distributions we are permitted to make annually. We cannot assure investors 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 objectives 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 securities may not be suitable for someone with lower risk tolerance.
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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 estimates of Investment Company Taxable Income and capital gains 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 and capital gains that may differ from actual results, future common distributions payable to our common stockholders may include a return of capital. To the extent that we distribute amounts that exceed our accumulated earnings and profits, these distributions constitute a return of capital to the extent of the common stockholder’s adjusted tax basis in its shares of our common stock. A return of capital represents a return of a common stockholder’s original investment in shares of our common 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 in its shares of our 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.
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.
Absent stockholder approval, we are not able to access the capital markets in an offering of our securities at prices below the then-current NAV per share, due to restrictions applicable to BDCs under the 1940 Act. Should we decide to issue shares of common stock at a price below NAV per share in the future, we will seek the requisite approval of our stockholders at such time.
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.
Risks Related to the 5.00% 2026 Notes, 4.875% 2028 Notes and 8.00% 2028 Notes (collectively, the "Notes")
The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we may incur in the future and will rank pari passu with, or equal to, all outstanding and future unsecured indebtedness issued by us and our general liabilities (total liabilities, less debt).
The Notes are not secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated to any secured indebtedness we may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. In addition, the Notes will rank pari passu with, or equal to, all outstanding and future unsecured indebtedness issued by us and our general liabilities (total liabilities, less debt).
The Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
The Notes are obligations exclusively of the Company and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes are structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries and any
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subsidiaries that we may in the future acquire or establish. Our wholly-owned subsidiary, Business Investment, is the obligor under our Credit Facility, which is structurally senior to the Notes. In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.
The indenture under which the Notes were issued contains limited protection for holders of the Notes.
The indenture under which the Notes were issued offers limited protection to holders of the Notes. The terms of the indenture and the Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on your investment in the Notes. In particular, the terms of the indenture and the Notes do not place any restrictions on our or our subsidiaries’ ability to:
•issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(2) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, which generally prohibit us incurring additional debt or issuing additional debt or preferred securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such incurrence or issuance;
•pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, including preferred stock and any subordinated indebtedness, in each case other than dividends, purchases, redemptions or payments that would cause our asset coverage to fall below the threshold specified in Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act or any successor provisions thereto, whether or not we are subject to such provisions of the 1940 Act, giving effect to any no-action relief granted by the SEC to another BDC and upon which we may reasonably rely (or to us if we determine to seek such similar SEC no-action or other relief) permitting the BDC to declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act to maintain the BDC’s status as a RIC under Subchapter M of the Code;
•sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);
•enter into transactions with affiliates;
•create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;
•make investments; or
•create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
In addition, the indenture and the Notes do not require us to make an offer to purchase the Notes in connection with a change of control or any other event.
Furthermore, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, if any, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity.
Our ability to recapitalize, incur additional debt (including additional debt that matures prior to the maturity of the Notes) and take a number of other actions that are not limited by the terms of the Notes may have important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.
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Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for, trading levels, and prices of the Notes.
An active trading market for the Notes may not exist, which could limit your ability to sell the Notes or affect the market price of the Notes.
An active trading market for the Notes may not exist in the future and holders may not be able to sell their Notes. Even if an active trading market does exist, the Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. To the extent an active trading market does not exist, the liquidity and trading price for the Notes may be harmed. Accordingly, holders of the Notes may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.
If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
Any default under the agreements governing our indebtedness, including a default under the Credit Facility or other indebtedness to which we may be a party, that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness, including the Notes. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Credit Facility or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to refinance or restructure our debt, including the Notes, sell assets, reduce or delay capital investments, seek to raise additional capital or seek to obtain waivers from the required lenders under the Credit Facility or other debt that we may incur in the future to avoid being in default. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the Notes or our other debt. If we breach our covenants under the Credit Facility or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default under the Credit Facility or other debt, the lenders or holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under the Credit Facility, could proceed against the collateral securing the debt. Because the Credit Facility has, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness under the Notes or the Credit Facility or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.
We may choose to redeem the Notes when prevailing interest rates are relatively low.
At any time with respect to the 5.00% 2026 Notes and the 4.875% 2028 Notes and on or after August 1, 2025, with respect to the 8.00% 2028 Notes, we may choose to redeem the Notes from time to time, especially if prevailing interest rates are lower than the rate borne by the Notes. If prevailing rates are lower at the time of redemption, and we redeem the Notes, you likely would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the Notes being redeemed. Our redemption right also may adversely impact your ability to sell the Notes as the optional redemption date or period approaches.
A downgrade, suspension or withdrawal of any credit rating assigned by a rating agency to us or the Notes could cause the liquidity or market value of the Notes to decline significantly.
Any credit rating is an assessment by the assigning rating agency of our ability to pay our debts when due. Consequently, real or anticipated changes in any credit ratings will generally affect the market value of the Notes. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the Notes. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. There can be no assurance that any credit ratings will remain for any given period of time or that such credit ratings will not be lowered or withdrawn entirely by the rating agencies if in their judgment future circumstances relating to the basis of the credit ratings, such as adverse changes in our Company, so warrant.
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General Risk Factors
Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, or the operations of businesses in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.
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, security measures, our technology platform may be vulnerable to intrusion, computer viruses or similar disruptive problems caused by cyber-attacks, including those employing artificial intelligence. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources or those of our portfolio companies. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems or those of our portfolio companies for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships or those of our portfolio companies. As our and our portfolio companies’ reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided to us by third-party service providers, and the information systems of our portfolio companies. We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that a cyber incident will not occur and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident. In addition, any such incident, disruption or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations, and damage our and our Adviser’s reputations, resulting in a loss of confidence in our services and our Adviser’s services, which could adversely affect our business.
We are subject to risks associated with artificial intelligence and machine learning technology.
Recent technological advances in artificial intelligence and machine learning technology pose risks to our Company and our portfolio companies. Our Company and our portfolio companies could be exposed to the risks of artificial intelligence and machine learning technology if third-party service providers or any counterparties, whether or not known to our Company, also use artificial intelligence and machine learning technology in their business activities. We and our portfolio companies may not be in a position to control the use of artificial intelligence and machine learning technology in third-party products or services.
Use of artificial intelligence and machine learning technology could include the input of confidential information in contravention of applicable policies, contractual or other obligations or restrictions, resulting in such confidential information becoming partly accessible by other third-party artificial intelligence and machine learning technology applications and users.
Independent of its context of use, artificial intelligence and machine learning technology is generally highly reliant on the collection and analysis of large amounts of data, and it is not possible or practicable to incorporate all relevant data into the model that artificial intelligence and machine learning technology utilizes to operate. Certain data in such models will inevitably contain a degree of inaccuracy and error—potentially materially so—and could otherwise be inadequate or flawed, which would be likely to degrade the effectiveness of artificial intelligence and machine learning technology. To the extent that we or our portfolio companies are exposed to the risks of artificial intelligence and machine learning technology use, any such inaccuracies or errors could have adverse impacts on our Company or our investments.
Artificial intelligence and machine learning technology and its applications, including in the private investment and financial sectors, continue to develop rapidly, and it is impossible to predict the future risks that may arise from such developments.
We are subject to risks related to corporate social responsibility.
Our business (including that of our portfolio companies) faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities, which are increasingly considered to contribute to the long-term sustainability of a company’s performance. A variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized. Adverse incidents with respect to ESG activities could impact the value of our brand, our relationship with future portfolio companies, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations.
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Additionally, new regulatory initiatives related to ESG that are applicable to us and our portfolio companies could adversely affect our business. The SEC has adopted rules that require additional disclosures about ESG investment practices by investment advisers and certain funds, including BDCs. The SEC has also adopted rules that, among other matters, establish a framework for reporting of climate-related risks. Compliance with these rules may be onerous and expensive. Further, compliance with any new laws, regulations or disclosure obligations increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we or our portfolio companies conduct our businesses and adversely affect our profitability.
We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividends.
Our business is dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:
•sudden electrical or telecommunications outages;
•natural disasters such as earthquakes, tornadoes and hurricanes;
•disease pandemics;
•events arising from local or larger scale political or social matters, including terrorist acts; and
•cyber-attacks.
These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay dividends to our stockholders.
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.”
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 level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, rapidly changing valuation of our portfolio companies, 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, and general economic conditions, including the impacts of inflation and rising interest rates. 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 service and repay our loans. In addition, any potential 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. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM 1C. CYBERSECURITY
Risk Management and Strategy
Our Adviser and our Administrator have implemented ongoing processes that are designed to continually identify, assess, manage, monitor and mitigate the dynamic and evolving material risks to us from cybersecurity threats. Our Adviser’s and Administrator’s resource management and compliance departments work in conjunction with an independent third-party information technology service provider (“ISP”) engaged by our Adviser to manage our information technology strategy. The ISP regularly performs cyber assessments and assists in maintaining our cyber and information security programs. The ISP proposes recommendations for improvements to our Adviser’s resource management and compliance departments, which then are considered by other officers and employees of our Adviser and Administrator before implementation.
In addition, regular ongoing cybersecurity threat risk assessments, which also cover third-party business applications, are performed throughout the year and reported to our officers and Board of Directors by our Chief Compliance Officer (“CCO”) no less than quarterly. Cybersecurity risks are assessed in general as part of the overall enterprise risk management for us, but also specifically between the ISP and our Adviser and Administrator in monitoring and determining not only the risks but also in assessing corresponding processes and procedures to mitigate those risks appropriately.
Our ISP constantly monitors information technology risk and cybersecurity threats globally. When risks are detected, we, through our Adviser and Administrator, consults with the ISP to assess if the risk is a cybersecurity threat to our information technology systems or data. If a risk to our information systems or data is identified, we, through our Adviser and Administrator, work in conjunction with the ISP to implement recommended processes, improvements, or safeguards to our systems or processes to address the risks as needed. Relevant examples of such efforts include but are not limited to:
•implementation of industry leading Cloud solutions and business applications which possess integrated cybersecurity safeguards;
•anti-malware, antivirus and threat detection software;
•ransomware containment and isolation software;
•enhanced password requirements and multifactor authentication requirements;
•endpoint encryption;
•intrusion detection and response system conduct file integrity monitoring;
•email archiving, firewalls, and quarantine capabilities;
•mobile device management of business applications;
•frequent systems backups with recovery capabilities; and
•regular vulnerability scans and penetration testing.
Contractually, we require the ISP to annually provide a third-party report on its systems and on the suitability of the design and operating effectiveness of its controls relevant to information and cyber security. In addition to the ongoing dialogue and technology interaction between our Adviser and Administrator and the ISP, any significant findings in these reports are shared with us, including our Board of Directors and other officers, to enhance ongoing monitoring and assessment of our information technology and cybersecurity risk management.
Our Adviser and Administrator also regularly trains employees working on our behalf on the evolving threats and educates them on cybersecurity risks to provide an additional protection barrier through end-user knowledge.
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Notwithstanding our risk management and strategy described above, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. We are not currently aware of any known cybersecurity risks that may materially impact our operations and we may not be able to determine the likelihood of such risks. See “Risk Factors - Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, or the operations of businesses in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.” for a discussion of risks related to cybersecurity and cyber incidents.
Governance
Our Board of Directors is actively engaged in overseeing our cybersecurity and information security program. Our Board of Directors receives regular reports during board meetings from our CCO on our and our Adviser’s and Administrator’s efforts concerning information security and addressing information technology and cybersecurity risks, no less than quarterly, and regularly receives updates from third parties on various business risks, which include cybersecurity matters. The reports are distributed to our Board of Directors, and our CCO engages in detailed discussions with the independent board members during the independent members’ session. The reports cover potentially material cybersecurity threats facing us, as well as key risks and mitigation efforts undertaken by us and our Adviser and Administrator. As significant threats or events are identified by management or the ISP between regular reporting periods, our CCO will inform our Board of Directors immediately and keep it informed as to the developments of assessing the risks, mitigating efforts, and potential disclosure. Appropriate members of management and third party providers will be involved as deemed necessary based on the potential impact.
Our Head of Resources Management, who is also a member of our Board of Directors, and our CCO lead our cybersecurity program. Our Head of Resources Management has more than 30 years of overall experience and more than 20 years directly assessing and managing our cyber information technology and human resources systems, and the associated security concerns. Our CCO has more than 30 years of overall experience as a CPA, with more than 15 years managing information technology systems and databases, and more than 15 years supporting our Adviser’s and Administrator’s resource management department. This includes identifying, assessing, mitigating, and monitoring cyber information security risks. These managers, as well as other management personnel, attend various professional continuing education programs, which include cybersecurity matters. Certain members of our Board of Directors have, or previously held, positions with other companies, including other public companies, that involved managing risks associated with their cyber and information technology systems.
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.
ITEM 3. LEGAL PROCEEDINGS
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us.
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 under the symbol “GAIN.” The following table reflects, by quarter, the high and low intraday sales prices per share of our common stock on Nasdaq, the intraday sales prices as a percentage of NAV per share and quarterly distributions declared per common share for each fiscal quarter during the last two completed fiscal years and the current fiscal year through May 7, 2024.

Quarter Ended/Ending |  | NAV(A) |  | Sales Prices |  | Premium / (Discount) of High to NAV(B) |  | Premium (Discount) of Low to NAV(B) |  | Declared Common Stock Distributions |
|  | High |  | Low |  |  |
Fiscal Year ended March 31, 2023: |  |  |  |  |  |  |  |  |  |  |  |  |
6/30/2022 |  | $ | 13.44 |  |  | $ | 16.85 |  |  | $ | 12.27 |  |  | 25 | % |  | (9) | % |  | $ | 0.3450 |  | (C)
9/30/2022 |  | $ | 13.31 |  |  | $ | 15.86 |  |  | $ | 11.77 |  |  | 19 | % |  | (12) | % |  | $ | 0.2250 |  |
12/31/2022 |  | $ | 13.43 |  |  | $ | 14.64 |  |  | $ | 11.40 |  |  | 9 | % |  | (15) | % |  | $ | 0.3600 |  | (C)
3/31/2023 |  | $ | 13.09 |  |  | $ | 14.55 |  |  | $ | 12.11 |  |  | 11 | % |  | (7) | % |  | $ | 0.4800 |  | (C)
Fiscal Year ended March 31, 2024: |  |  |  |  |  |  |  |  |  |  |  |  |
6/30/2023 |  | $ | 12.99 |  |  | $ | 13.91 |  |  | $ | 12.53 |  |  | 7 | % |  | (4) | % |  | $ | 0.3600 |  | (D)
9/30/2023 |  | $ | 14.03 |  |  | $ | 13.88 |  |  | $ | 12.44 |  |  | (1) | % |  | (11) | % |  | $ | 0.3600 |  | (D)
12/31/2023 |  | $ | 13.01 |  |  | $ | 14.92 |  |  | $ | 12.14 |  |  | 15 | % |  | (7) | % |  | $ | 1.2400 |  | (D)
3/31/2024 |  | $ | 13.43 |  |  | $ | 14.96 |  |  | $ | 13.30 |  |  | 11 | % |  | (1) | % |  | $ | 0.2400 |  |
Fiscal Year ending March 31, 2025: |  |  |  |  |  |  |  |  |  |  |  |  |
6/30/2024 (through May 7, 2024) |  | * |  | $ | 14.39 |  |  | $ | 13.75 |  |  | * |  | * |  | $ | 0.2400 |  |

(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 per share shown are based on outstanding shares at the end of each period.
(B)The premiums (discounts) set forth in these columns represent the high or low, as applicable, intraday 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 (discount) to NAV per share on the date of the high and low intraday sales prices.
(C)Includes $0.12, $0.12 and $0.24 per common share supplemental distributions paid in June 2022, December 2022 and March 2023, respectively.
(D)Includes $0.12, $0.12, $0.12 and $0.88 per common share supplemental distributions paid in June 2023, September 2023, November 2023 and December 2023, respectively.
* Not yet available, as the NAV per share as of the end of this quarter has not yet been finalized.
As of May 7, 2024, there were 20 record owners of our common stock. This number does not include stockholders for whom shares are held in “street name.”
Distributions
We generally intend to distribute, in the form of cash distributions, up to 100% of our Investment Company Taxable Income, if any, to our stockholders in the form of monthly distributions. We may retain some or all of our net realized long-term capital gains, if any, and designate them as a deemed distribution to supplement our equity capital and support the growth of our portfolio, but we may also distribute all or a portion of such gains to stockholders in cash. For the years ended March 31, 2024 and 2023, we did not elect to retain long-term capital gains and to treat them as deemed distributions to common stockholders. The Credit Facility also generally restricts distributions on our common stock to the sum of certain amounts, including, 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
We did not sell any unregistered securities during the fiscal year ended March 31, 2024.
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Purchases of Equity Securities
We did not repurchase any shares of our stock during the fourth quarter ended March 31, 2024.
Stock Performance Graph
The following graph shows the total stockholder return on an investment of $100 in cash on March 31, 2019 for (i) our common stock, (ii) the Nasdaq’s 100 Total Return index (“Nasdaq 100 TR”), (iii) the Russell 1000 Total Return index (“Russell 1000 TR”) and (iv) the Standard and Poor’s BDC index (“S&P BDC”). The graph and other information furnished under the heading “Stock Performance Graph” shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference and shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act.
The returns on each investment assume reinvestment of dividends. This stock performance graph and the related textual information are not necessarily indicative of future performance.

| GAIN |  | Nasdaq 100 TR |  | Russell 1000 TR |  | S&P BDC
3/31/2019 | $ | 100.00 |  |  | $ | 100.00 |  |  | $ | 100.00 |  |  | $ | 100.00 |
3/31/2020 | 73.77 |  |  | 107.03 |  |  | 92.39 |  |  | 61.45 |
3/31/2021 | 125.88 |  |  | 180.75 |  |  | 148.69 |  |  | 119.64 |
3/31/2022 | 179.26 |  |  | 206.30 |  |  | 168.43 |  |  | 144.45 |
3/31/2023 | 150.74 |  |  | 184.95 |  |  | 154.29 |  |  | 133.06 |
3/31/2024 | 204.99 |  |  | 254.78 |  |  | 200.37 |  |  | 170.99 |

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F ees and Expenses
The following table is intended to assist stockholders in understanding the costs and expenses that common stockholders will bear directly or indirectly. The percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this Annual Report contains a reference to fees or expenses paid by “us” or the “Company,” or that “we” will pay fees or expenses, common stockholders will indirectly bear such fees or expenses as investors in the Company. The following annualized percentages were calculated based on actual expenses, except with respect to capital gains-based incentive fees as discussed below, incurred in the quarter ended March 31, 2024 and average net assets for the quarter ended March 31, 2024. The table and examples below include all fees and expenses of our consolidated subsidiaries.

Stockholder Transaction Expenses: |
Sales load or other commission (as a percentage of offering price) (1) | — | %
Offering expenses (as a percentage of offering price) (1) | — | %
Dividend reinvestment plan expenses (per sales transaction fee) (2) | Up to $25 Transaction fee
Total stockholder transaction expenses (as a percentage of offering price) (1) | —%
Annual expenses (as a percentage of net assets attributable to common stock) (3): |
Base management fee (4) | 3.85 | %
Loan servicing fee (5) | 1.91 | %
Incentive fees (6) | 4.70 | %
Interest payments on borrowed funds (7) | 5.93 | %
Other expenses (8) | 1.18 | %
Total annual expenses (9) | 17.57 | %

(1)The amounts set forth in the table above do not reflect the impact of any sales load or other commission or offering expenses borne by the Company and its common stockholders. If applicable, the prospectus or prospectus supplement relating to an offering of our common stock will disclose the offering price and the estimated offering expenses and total stockholder transaction expenses borne by the Company and its common stockholders as a percentage of the offering price. In the event that shares of our common stock are sold to or through underwriters, the applicable prospectus or prospectus supplement will also disclose the applicable sales load or other commission.
(2)The expenses of the dividend reinvestment plan, if any, are included in stock record expenses, a component of “Other expenses.” If a participant elects by written notice to the plan agent prior to termination of his or her account to have the plan agent sell part or all of the shares held by the plan agent in the participant’s account and remit the proceeds to the participant, the plan agent is authorized to deduct a transaction fee, plus per share brokerage commissions, from the proceeds. The participants in the dividend reinvestment plan will also bear a transaction fee, plus per share brokerage commissions incurred with respect to open market purchases, if any. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Distributions and Dividends to Stockholders—Dividend Reinvestment Plan” for information on the dividend reinvestment plan.
(3)The percentages presented in this table are gross of credits to any fees.
(4)The base management fee is payable quarterly to the Adviser pursuant to our Advisory Agreement and is assessed at an annual rate of 2% 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, valued at the end of the applicable quarters within the respective period and adjusted appropriately for any share issuances or repurchases during the period. In accordance with the requirements of the SEC, the table above shows our base management fee as a percentage of average net assets attributable to common stockholders. For purposes of the table, the annualized base management fee has been converted to 3.85% of the average net assets for the quarter ended March 31, 2024 by dividing the total annualized amount of the base management fee by our average net assets for the quarter ended March 31, 2024. The base management fee for the quarter ended March 31, 2024 before application of any credits was $4.6 million.
Pursuant to the requirements of the 1940 Act, the Adviser makes available significant managerial assistance to our portfolio companies. The Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance. Such services may include: (i) assistance obtaining,
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sourcing or structuring credit facilities, long term loans or additional equity from unaffiliated third parties; (ii) negotiating important contractual financial relationships; (iii) consulting services regarding restructuring of the portfolio company and financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties; and (iv) primary role in interviewing, vetting, and negotiating employment contracts with candidates in connection with adding and retaining key portfolio company management team members. The Adviser non-contractually, unconditionally, and irrevocably credits 100% of any fees received for such services 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 in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser and primarily related to the valuation of portfolio companies. For the quarter ended March 31, 2024, $0.5 million of these fees were non-contractually, unconditionally and irrevocably credited against the base management fee. See “Item 1. Business — Transactions with Related Parties — Investment Advisory and Management Agreement” for additional information.
(5)The Adviser services the loans held by Business Investment in return for which the Adviser receives a 2.0% annual loan servicing fee based on the monthly aggregate balance of loans pledged under the Credit Facility. Since Business Investment is a consolidated subsidiary of ours, coupled with the fact that the total base management fee paid to the Adviser pursuant to the Advisory Agreement cannot exceed 2.0% of total assets (less any uninvested cash or cash equivalents resulting from borrowings) during any given calendar year, we treat payment of the loan servicing fee pursuant to the Credit Facility as a pre-payment of the base management fee under the Advisory Agreement. Accordingly, these loan servicing fees are 100% non-contractually, unconditionally and irrevocably credited back to us by the Adviser. The loan servicing fee for the three months ended March 31, 2024 was $2.3 million. See “Item 1. Business—Transactions with Related Parties—Loan Servicing Fee Pursuant to Credit Facility” and footnote 4 above for additional information.
(6)The incentive fee payable to the Adviser under the Advisory Agreement consists of two parts: an income-based fee and a capital gains-based fee. The income-based incentive fee is payable quarterly in arrears, and equals 20% of the excess, if any, of our pre-incentive fee net investment income that exceeds a 1.75% quarterly hurdle rate of our net assets, which we define as total assets less indebtedness and before taking into account any incentive fees payable or contractually due but not payable during the period, at the end of the immediately preceding calendar quarter, adjusted appropriately for any share issuances or repurchases during the period, subject to a “catch-up” provision measured as of the end of each calendar quarter. The “catch-up” provision requires us to pay 100% of our pre-incentive fee net investment income with respect to that portion of such income, if any, that exceeds the hurdle rate but is less than 125% of the quarterly hurdle rate (or 2.1875%) in any calendar quarter. The catch-up provision is meant to provide our Adviser with 20% of our pre-incentive fee net investment income as if a hurdle rate did not apply when our pre-incentive fee net investment income exceeds 125% of the quarterly hurdle rate in any calendar quarter. For the three months ended March 31, 2024, the income-based incentive fee was $2.2 million.
The capital gains-based incentive fee equals 20% of our net realized capital gains in excess of unrealized depreciation since our inception, if any, computed as all realized capital gains net of all realized capital losses and unrealized depreciation since our inception, less any prior payments, measured at the end of each calendar year and payable at the end of each fiscal year. During the three months ended March 31, 2024, we recorded capital gains-based incentive fees of $3.5 million in accordance with GAAP, which were not contractually due under the terms of the Advisory Agreement.
No credits were applied to incentive fees for the three months ended March 31, 2024; however, the Adviser may credit such fees in the future.
Examples of how the incentive fee would be calculated are as follows:
•Assuming pre-incentive fee net investment income of 0.55%, there would be no income-based incentive fee because such income would not exceed the hurdle rate of 1.75%.
•Assuming pre-incentive fee net investment income of 2.00%, the income-based incentive fee would be as follows:
= 100.0% × (2.00% - 1.75%)
= 0.25%
•Assuming pre-incentive fee net investment income of 2.30%, the income-based incentive fee would be as follows:
= (100.0% × (“catch-up”: 2.1875% - 1.75%)) + (20.0% × (2.30% - 2.1875%))
= (100.0% × 0.4375%) + (20.0% × 0.1125%)
= 0.4375% + 0.0225%
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= 0.46%
•Assuming net realized capital gains of 6% and realized capital losses and unrealized capital depreciation of 1%, the capital gains-based incentive fee would be as follows:
= 20.0% × (6.0% - 1.0%)
= 20.0% × 5.0%
= 1.0%
For a more detailed discussion of the calculation of the two-part incentive fee, including the capital gains-based incentive fee calculation under GAAP, see “Item 1. Business — Transactions with Related Parties — Investment Advisory and Management Agreement.”
(7)Includes amortization of deferred financing costs. As of March 31, 2024, we had $67.0 million of borrowings outstanding under our Credit Facility, $127.9 million of 5.00% 2026 Notes, at cost, $134.6 million of 4.875% 2028 Notes, at cost, and $74.8 million of 8.00% 2028 Notes, at cost. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Revolving Line of Credit” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Notes Payable” for additional information regarding the Credit Facility, the 5.00% 2026 Notes, the 4.875% 2028 Notes and the 8.00% 2028 Notes.
(8)Includes our overhead expenses, including payments under the Administration Agreement based on our projected allocable portion of overhead and other expenses estimated to be incurred by our Administrator for the current fiscal year. See “Item 1. Business—Transactions with Related Parties—Administration Agreement” for additional information.
(9)Total annualized gross expenses, based on actual amounts incurred for the three months ended March 31, 2024 (except as set forth in footnote 9), would be $84.4 million. After all non-contractual, unconditional, and irrevocable credits described in footnote 4, footnote 5, and footnote 6 above are applied to the base management fee and the loan servicing fee, total annualized expenses after fee credits, based on actual amounts incurred for the three months ended March 31, 2024, would be $73.3 million or 15.26% as a percentage of average net assets.
Example
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above. The example below and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. While the example assumes, as required by the SEC, a 5.0% annual return, our performance will vary and may result in a return greater or less than 5.0%. Dollar amounts in the table below are not in thousands.

| 1 Year |  | 3 Years |  | 5 Years |  | 10 Years
Common stockholders would pay the following expenses on a $1,000 investment: |  |  |  |  |  |  |
assuming a 5% annual return consisting entirely of ordinary income(1)(2) | $ | 135 |  | $ | 372 |  | $ | 570 |  | $ | 935
assuming a 5% annual return consisting entirely of capital gains(2)(3) | $ | 144 |  | $ | 392 |  | $ | 596 |  | $ | 960

(1)For purposes of this example, we have assumed that the entire amount of the assumed 5.0% annual return would constitute ordinary income. Because the assumed 5.0% annual return is significantly below the hurdle rate of 7.0% (annualized) that we must achieve under the Advisory Agreement to trigger the payment of an income-based incentive fee, we have assumed, for purposes of this example, that no income-based incentive fee would be payable if we realized a 5.0% annual return.
(2)While the example assumes reinvestment of all distributions at NAV per share, participants in the dividend reinvestment plan will receive a number of shares of our common stock determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the distribution, and this price per share may differ from NAV per share. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital
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Resources—Distributions and Dividends to Stockholders—Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.
(3)For purposes of this example, we have assumed that the entire amount of the assumed 5.0% annual return would constitute capital gains and that no accumulated capital losses or unrealized depreciation would have to be overcome first before a capital gains-based incentive fee is payable.
Senior Securities
Information about our senior securities is shown in the following table as of the end of each of our last ten fiscal years. The annual information has been derived from our audited financial statements for each respective period, which have been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm. The report of our independent registered public accounting firm, PricewaterhouseCoopers LLP, on the senior securities table as of March 31, 2024 is included elsewhere in this Annual Report.

Class and Year | Total Amount Outstanding Exclusive of Treasury Securities (1) |  | Asset Coverage Per Unit (2) |  | Involuntary Liquidating Preference Per Unit (3) |  | Average Market Value Per Unit (4)
7.125% Series A Cumulative Term Preferred Stock (5) |  |  |  |  |  |  |
March 31, 2016 | $ | 40,000,000 |  |  | $ | 2,214 |  |  | $ | 25.00 |  |  | $ | 25.60 |
March 31, 2015 | $ | 40,000,000 |  |  | $ | 2,301 |  |  | $ | 25.00 |  |  | $ | 25.78 |
6.75% Series B Cumulative Term Preferred Stock (6) |  |  |  |  |  |  |
March 31, 2018 | $ | 41,400,000 |  |  | $ | 2,373 |  |  | $ | 25.00 |  |  | $ | 25.20 |
March 31, 2017 | $ | 41,400,000 |  |  | $ | 2,356 |  |  | $ | 25.00 |  |  | $ | 26.00 |
March 31, 2016 | $ | 41,400,000 |  |  | $ | 2,214 |  |  | $ | 25.00 |  |  | $ | 24.43 |
March 31, 2015 | $ | 41,400,000 |  |  | $ | 2,301 |  |  | $ | 25.00 |  |  | $ | 25.38 |
6.50% Series C Cumulative Term Preferred Stock due 2022 (7) |  |  |  |  |  |
March 31, 2018 | $ | 40,250,000 |  |  | $ | 2,373 |  |  | $ | 25.00 |  |  | $ | 25.33 |
March 31, 2017 | $ | 40,250,000 |  |  | $ | 2,356 |  |  | $ | 25.00 |  |  | $ | 25.64 |
March 31, 2016 | $ | 40,250,000 |  |  | $ | 2,214 |  |  | $ | 25.00 |  |  | $ | 23.92 |
6.25% Series D Cumulative Term Preferred Stock due 2023 (8) |  |  |  |  |  |
March 31, 2020 | $ | 57,500,000 |  |  | $ | 2,938 |  |  | $ | 25.00 |  |  | $ | 20.46 |
March 31, 2019 | $ | 57,500,000 |  |  | $ | 3,091 |  |  | $ | 25.00 |  |  | $ | 25.38 |
March 31, 2018 | $ | 57,500,000 |  |  | $ | 2,373 |  |  | $ | 25.00 |  |  | $ | 25.22 |
March 31, 2017 | $ | 57,500,000 |  |  | $ | 2,356 |  |  | $ | 25.00 |  |  | $ | 25.43 |
6.375% Series E Cumulative Term Preferred Stock due 2025 (9) |  |  |  |  |  |
March 31, 2021 | $ | 94,371,325 |  |  | $ | 2,486 |  |  | $ | 25.00 |  |  | $ | 25.44 |
March 31, 2020 | $ | 74,750,000 |  |  | $ | 2,938 |  |  | $ | 25.00 |  |  | $ | 19.52 |
March 31, 2019 | $ | 74,750,000 |  |  | $ | 3,091 |  |  | $ | 25.00 |  |  | $ | 25.55 |
Revolving credit facilities |  |  |  |  |  |  |
March 31, 2024 | $ | 67,000,000 |  |  | $ | 2,190 |  |  | — |  |  | N/A
March 31, 2023 | $ | 35,200,000 |  |  | $ | 2,447 |  |  | — |  |  | N/A
March 31, 2022 | $ | — |  |  | $ | 2,529 |  |  | — |  |  | N/A
March 31, 2021 | $ | 22,400,000 |  |  | $ | 3,980 |  |  | — |  |  | N/A
March 31, 2020 | $ | 49,200,000 |  |  | $ | 9,935 |  |  | — |  |  | N/A
March 31, 2019 | $ | 53,000,000 |  |  | $ | 9,976 |  |  | — |  |  | N/A
March 31, 2018 | $ | 107,000,000 |  |  | $ | 5,257 |  |  | — |  |  | N/A
March 31, 2017 | $ | 69,700,000 |  |  | $ | 6,613 |  |  | — |  |  | N/A
March 31, 2016 | $ | 95,000,000 |  |  | $ | 4,838 |  |  | — |  |  | N/A
March 31, 2015 | $ | 118,800,000 |  |  | $ | 2,301 |  |  | — |  |  | N/A
5.00% 2026 Notes (10) |  |  |  |  |  |  |
March 31, 2024 | $ | 127,937,500 |  |  | $ | 2,190 |  |  | $ | 25.00 |  |  | $ | 24.16 |
March 31, 2023 | $ | 127,937,500 |  |  | $ | 2,447 |  |  | $ | 25.00 |  |  | $ | 23.47 |
March 31, 2022 | $ | 127,937,500 |  |  | $ | 2,529 |  |  | $ | 25.00 |  |  | $ | 25.13 |
March 31, 2021 | $ | 127,937,500 |  |  | $ | 3,980 |  |  | $ | 25.00 |  |  | $ | 25.85 |

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Class and Year | Total Amount Outstanding Exclusive of Treasury Securities (1) |  | Asset Coverage Per Unit (2) |  | Involuntary Liquidating Preference Per Unit (3) |  | Average Market Value Per Unit (4)
4.875% 2028 Notes (11) |  |  |  |  |  |  |
March 31, 2024 | $ | 134,550,000 |  |  | $ | 2,190 |  |  | $ | 25.00 |  |  | $ | 22.95 |
March 31, 2023 | $ | 134,550,000 |  |  | $ | 2,447 |  |  | $ | 25.00 |  |  | $ | 23.00 |
March 31, 2022 | $ | 134,550,000 |  |  | $ | 2,529 |  |  | $ | 25.00 |  |  | $ | 25.07 |
8.00% 2028 Notes (12) |  |  |  |  |  |  |
March 31, 2024 | $ | 74,750,000 |  |  | $ | 2,190 |  |  | $ | 25.00 |  |  | $ | 25.86 |
Secured borrowings (13) |  |  |  |  |  |  |
March 31, 2022 | $ | 5,095,785 |  |  | $ | 2,529 |  |  | — |  |  | N/A
March 31, 2021 | $ | 5,095,785 |  |  | $ | 3,980 |  |  | — |  |  | N/A
March 31, 2020 | $ | 5,095,785 |  |  | $ | 9,935 |  |  | — |  |  | N/A
March 31, 2019 | $ | 5,095,785 |  |  | $ | 9,976 |  |  | — |  |  | N/A
March 31, 2018 | $ | 5,095,785 |  |  | $ | 5,257 |  |  | — |  |  | N/A
March 31, 2017 | $ | 5,095,785 |  |  | $ | 6,613 |  |  | — |  |  | N/A
March 31, 2016 | $ | 5,095,785 |  |  | $ | 4,838 |  |  | — |  |  | N/A
March 31, 2015 | $ | 5,095,785 |  |  | $ | 2,301 |  |  | — |  |  | N/A

(1)Total amount of each class of senior securities outstanding as of the dates presented.
(2)Asset coverage is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness (including interest payable and guaranties). Asset coverage per unit is the asset coverage ratio expressed in terms of dollar amounts per one thousand dollars of indebtedness.
(3)The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.
(4)Only applicable to our Term Preferred Stock, 5.00% 2026 Notes, 4.875% 2028 Notes, and 8.00% 2028 Notes because the other senior securities are not registered for public trading. Average market value per unit is the average of the closing price of the shares on Nasdaq during the last 10 trading days of the period.
(5)Our Series A Term Preferred Stock was issued in March 2012 and redeemed in September 2016.
(6)Our Series B Term Preferred Stock was issued in November 2014 and redeemed in August 2018.
(7)Our Series C Term Preferred Stock was issued in May 2015 and redeemed in August 2018.
(8)Our Series D Term Preferred Stock was issued in September 2016 and redeemed in March 2021.
(9)Our Series E Term Preferred Stock was issued in August 2018 and redeemed in August 2021.
(10)Our 5.00% 2026 Notes were issued in March 2021.
(11)Our 4.875% 2028 Notes were issued in August 2021.
(12)Our 8.00% 2028 Notes were issued in May 2023.
(13)In August 2012, we entered into a participation agreement with a third-party related to $5.0 million of our secured second lien term debt investment in Ginsey Home Solutions, Inc. (“Ginsey”). In May 2014, we amended the agreement with the third-party to include an additional $0.1 million. Accounting Standards Codification Topic 860, “Transfers and Servicing” requires us to treat the participation as a financing-type transaction. Specifically, the third-party has a senior claim to our remaining investment in the event of default by Ginsey which, in part, resulted in the loan participation bearing a rate of interest lower than the contractual rate established at origination. In conjunction with the August 2022 refinancing at Ginsey, the $5.1 million secured borrowing liability was extinguished.
ITEM 6. RESERVED
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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 accompanying Consolidated Financial Statements and the notes thereto contained elsewhere in this Annual Report. Historical financial condition and results of operations and percentage relationships among any amounts in the financial statements are not necessarily indicative of financial condition, results of operations or percentage relationships for any future periods. Except per share amounts, dollar amounts included herein are in thousands unless otherwise indicated.
OVERVIEW
General
We were incorporated under the General Corporation Law 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 BDC under the 1940 Act. For U.S. federal income tax purposes, we have elected to be treated as a RIC under Subchapter M of the Code. To continue to qualify as a RIC for U.S. 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 U.S. Our investment objectives are to: (i) achieve and grow current income by investing in debt securities of established businesses that we believe will provide stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness, and make distributions to our stockholders that grow over time; and (ii) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of established businesses, generally, in combination with the aforementioned debt securities, that we believe can grow over time to permit us to sell our equity investments for capital gains. To achieve our objectives, our investment strategy is to invest in several categories of debt and equity securities, with individual investments generally totaling up to $75 million, although investment size may vary, depending upon our total assets or available capital at the time of investment. We expect that our investment portfolio over time will consist of approximately 75% in debt investments and 25% in equity investments, at cost. As of March 31, 2024, our investment portfolio was comprised of 77.0% in debt investments and 23.0% in equity investments, at cost.
We focus on investing in Lower Middle Market businesses in the U.S. that meet certain criteria, including: the sustainability of the business’ free cash flow and its ability to grow it over time, adequate assets for loan collateral, experienced management teams with a significant ownership interest in the portfolio company, reasonable capitalization of the portfolio company, including an ample equity contribution or cushion based on prevailing enterprise valuation multiples, and the potential to realize appreciation and gain liquidity in our equity position, if any. We anticipate that liquidity in our equity position will be achieved through a merger or acquisition of the portfolio company, a public offering of the portfolio company’s stock or, to a lesser extent, by exercising our right to require the portfolio company to repurchase our warrants, though there can be no assurance that we will always have these rights. We invest in portfolio companies that seek funds for management buyouts and/or growth capital to finance acquisitions, recapitalize or, to a lesser extent, refinance their existing debt facilities. We seek to avoid investing in high-risk, early-stage enterprises. Our targeted portfolio companies are generally considered too small for the larger capital marketplace.
We invest by ourselves or jointly with other funds and/or management of the portfolio company, depending on the opportunity, and have opportunistically made several co-investments with Gladstone Capital pursuant to the Co-Investment Order. We believe the Co-Investment Order has enhanced and will continue to enhance our ability to further our investment objectives and strategies. If we are participating in an investment with one or more co-investors, whether or not an affiliate of ours, our investment is likely to be smaller than if we were investing alone.
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Business
Portfolio and Investment Activity
While the business environment remains competitive, we continue to see new investment opportunities consistent with our investment strategy of providing a combination of debt and equity in support of management and independent sponsor-led buyouts of Lower Middle Market companies in the U.S. During the year ended March 31, 2024, we invested in two new portfolio companies and exited three portfolio companies. From our initial public offering in June 2005 through March 31, 2024, we have invested in 58 companies, excluding investments in syndicated loans, for a total of approximately $1.7 billion, before giving effect to principal repayments and divestitures.
The majority of the debt securities in our portfolio have a success fee component, which enhances the yield on our debt investments. Unlike PIK income, we generally do not recognize success fees as income until payment has been received. Due to the contingent nature of success fees, there are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such collections. As a result, as of March 31, 2024, we had unrecognized, contractual success fees of $44.9 million, or $1.23 per common share. Consistent with GAAP, we generally have not recognized success fee receivables and related income in our accompanying Consolidated Financial Statements until earned.
From inception through March 31, 2024, we exited our investments in 31 portfolio companies that we acquired under our buyout strategy (which excludes investments in syndicated loans). In the aggregate, these sales have generated $290.2 million in net realized gains and $41.8 million in other income upon exit, for a total increase to our net assets of $332.0 million. We believe, in aggregate, these transactions were equity-oriented investment successes and exemplify our investment strategy of striving to achieve returns through current income on the debt portion of our investments and capital gains from the equity portion. The 31 liquidity events have offset any realized losses since inception, which were primarily incurred during the 2008-2009 recession in connection with the sale of performing syndicated loans at a realized loss to pay off a former lender. The successful exits, in part, enabled us to increase the monthly distribution by 100.0% from March 2011 through March 31, 2024 and allowed us to declare and pay 22 supplemental distributions to common stockholders through March 31, 2024.
Capital Raising
We have been able to meet our capital needs through extensions of and increases to the Credit Facility and by accessing the capital markets in the form of public offerings of unsecured notes, as well as common and preferred stock. We have successfully extended the Credit Facility’s revolving period multiple times, most recently to October 2026, and currently have a total commitment amount of $200.0 million (with a potential total commitment of $300.0 million through additional commitments from new or existing lenders). During the year ended March 31, 2024, we issued the 8.00% 2028 Notes for gross proceeds of $74.8 million and sold 3,097,162 shares of our common stock under our "at-the-market" program (the "Common Stock ATM Program") for gross proceeds of approximately $44.5 million. During the year ended March 31, 2023, we sold 386,482 shares of our common stock under our Common Stock ATM Program for gross proceeds of approximately $5.5 million. Refer to “Liquidity and Capital Resources.”
Although we have been able to access the capital markets historically, market conditions may continue to affect the trading price of our common stock and thus our ability to finance new investments through the issuance of common equity. On March 31, 2024, the closing market price of our common stock was $14.23 per share, representing a 6.0% premium to our NAV of $13.43 per share as of March 31, 2024. When our common stock trades below NAV, our ability to issue additional equity is constrained by provisions of the 1940 Act, which generally prohibits the issuance and sale of our common stock at an issuance price below the then current NAV per share without stockholder approval, other than through sales to our then existing stockholders pursuant to a rights offering.
Regulatory Compliance
Our ability to seek external debt financing, to the extent that it is available under current market conditions, is further subject to the asset coverage limitations of the 1940 Act, which require us to have asset coverage (as defined in Sections 18 and 61 of the 1940 Act) of at least 150% on each of our senior securities representing indebtedness and our senior securities that are stock.
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On April 10, 2018, our Board of Directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) thereof, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, our asset coverage requirements for senior securities changed from 200% to 150%, effective as of April 10, 2019, one year after the date of the Board of Directors’ approval.
As of March 31, 2024, our asset coverage ratio on our senior securities representing indebtedness was 219.0%.
Investment Highlights
Investment Activity
During the fiscal year ended March 31, 2024, the following significant transactions occurred:
•In May 2023, we invested $15.3 million in a new portfolio company, Home Concepts Acquisition, Inc. ("Home Concepts"), in the form of $12.0 million of secured first lien debt and $3.3 million of preferred equity. Home Concepts, headquartered in Santa Barbara, California, is a leading home improvement advertising publication focusing on connecting homeowners to high-quality residential repair and remodeling businesses.
•In June 2023, we recapitalized our existing investment in Old World and invested an additional $2.5 million in the form of secured first lien debt. In connection with this investment, we received proceeds of $2.2 million, of which $1.9 million was recognized as dividend income and $0.3 million was recognized as a realized gain.
•In June 2023, we invested an additional $30.0 million in the form of $25.0 million of secured second lien debt and $5.0 million of common equity in Nth Degree Investment Group, LLC to fund an add-on acquisition.
•In June 2023, we received a $1.5 million escrow settlement in connection with our December 2021 exit of SOG Specialty Knives & Tools, LLC, of which $0.6 million was recognized as a return of cost basis and $0.9 million as a realized gain. As a result of the escrow release, there are no remaining assets held by Gladstone SOG Investments, Inc.
•In August 2023, we invested an additional $18.7 million in the form of secured first lien debt in Nocturne to fund an add-on acquisition.
•In September 2023, we invested $46.0 million in a new portfolio company, The E3 Company, LLC ("E3"), in the form of $34.8 million of secured first lien debt and $11.2 million of preferred equity. E3, headquartered in Kilgore, Texas, is a market leader in advanced pressure management solutions for oil and gas well completions.
•In October 2023, we invested an additional $64.7 million in the form of $39.0 million of secured second lien debt and $25.7 million of common equity in SFEG to fund an add-on acquisition. In connection with the investment, our existing preferred equity, with a cost basis of $4.8 million, was converted to common equity.
•In October 2023, we exited our investment in Counsel Press, Inc. ("Counsel Press"), which resulted in success fee income of $1.4 million, a realized gain of $43.5 million and the repayment of our debt investment of $27.5 million at par.
•In March 2024, we recognized a $14.7 million realized loss on our preferred and common equity investments and the related first and second lien debt investments in The Mountain Corporation (“The Mountain”) upon the liquidation and dissolution of The Mountain.
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Recent Developments
Distributions and Dividends
In April 2024, our Board of Directors declared the following monthly cash distributions to common stockholders:

Record Date |  | Payment Date |  | Distribution per Common Share |
April 19, 2024 |  | April 30, 2024 |  | $ | 0.080 |  |
May 17, 2024 |  | May 31, 2024 |  | 0.080 |  |
June 19, 2024 |  | June 28, 2024 |  | 0.080 |  |
|  | Total for the Quarter: |  | $ | 0.240 |  |

Impact of Inflation
We believe the effects of inflation on our historical results of operations and financial condition have not been significant. During the year ended March 31, 2024, general inflationary pressures and certain commodity price volatility have impacted certain of our portfolio companies to varying degrees; however, the broad based impact of these pricing changes have largely been mitigated by price adjustments without adverse sales implications, and thus, have not materially impacted our portfolio companies’ ability to service their indebtedness, including our loans. Notwithstanding the results to date, we expect that the cumulative effect of these inflationary pressures may impact the profit margins or sales of certain portfolio companies and their ability to service their debts. We continue to monitor the current inflationary environment to anticipate any impact on our portfolio companies, including their ability to pay interest on our loans. We cannot assure you that our results of operations and financial condition or that of our portfolio companies will not be materially impacted by inflation in the future. Refer to “Risk Factors — Risks Related to the Economy — We may experience fluctuations in our quarterly and annual results based on the impact of inflation in the U.S.”
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RESULTS OF OPERATIONS
Comparison of the Fiscal Year Ended March 31, 2024 to the Fiscal Year Ended March 31, 2023

| For the Fiscal Years Ended March 31, |  |  |  |
| 2024 |  | 2023 |  | $ Change |  | % Change
INVESTMENT INCOME |  |  |  |  |  |  |
Interest income | $ | 81,794 |  |  | $ | 60,276 |  |  | $ | 21,518 |  |  | 35.7 | %
Dividend and success fee income | 5,512 |  |  | 21,267 |  |  | (15,755) |  |  | (74.1) | %
Total investment income | 87,306 |  |  | 81,543 |  |  | 5,763 |  |  | 7.1 | %
EXPENSES |  |  |  |  |  |  |
Base management fee | 17,500 |  |  | 14,798 |  |  | 2,702 |  |  | 18.3 | %
Loan servicing fee | 9,118 |  |  | 7,880 |  |  | 1,238 |  |  | 15.7 | %
Incentive fee | 21,047 |  |  | 8,880 |  |  | 12,167 |  |  | 137.0 | %
Administration fee | 1,789 |  |  | 1,811 |  |  | (22) |  |  | (1.2) | %
Interest expense | 24,121 |  |  | 15,877 |  |  | 8,244 |  |  | 51.9 | %
Amortization of deferred financing costs and discounts | 2,305 |  |  | 1,802 |  |  | 503 |  |  | 27.9 | %
Other | 4,363 |  |  | 5,186 |  |  | (823) |  |  | (15.9) | %
Expenses before credits from Adviser | 80,243 |  |  | 56,234 |  |  | 24,009 |  |  | 42.7 | %
Credits to fees from Adviser | (14,714) |  |  | (11,691) |  |  | (3,023) |  |  | 25.9 | %
Total expenses, net of credits to fees | 65,529 |  |  | 44,543 |  |  | 20,986 |  |  | 47.1 | %
NET INVESTMENT INCOME | 21,777 |  |  | 37,000 |  |  | (15,223) |  |  | (41.1) | %
REALIZED AND UNREALIZED GAIN (LOSS), NET OF TAXES |  |  |  |  |  |  |
Net realized gain on investments | 30,256 |  |  | 10,753 |  |  | 19,503 |  |  | 181.4 | %
Net unrealized appreciation (depreciation) of investments | 33,301 |  |  | (12,235) |  |  | 45,536 |  |  | NM
Net unrealized (appreciation) depreciation of other | (29) |  |  | 29 |  |  | (58) |  |  | NM
Net realized and unrealized gain (loss), net of taxes on deemed distribution of long-term capital gains | 63,528 |  |  | (1,453) |  |  | 64,981 |  |  | NM
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 85,305 |  |  | $ | 35,547 |  |  | $ | 49,758 |  |  | 140.0 | %
WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING |  |  |  |  |  |  |
Basic and diluted | 34,466,724 |  |  | 33,311,785 |  |  | 1,154,939 |  |  | 3.5 | %
BASIC AND DILUTED PER COMMON SHARE: |  |  |  |  |  |  |
Net investment income | $ | 0.63 |  |  | $ | 1.11 |  |  | $ | (0.48) |  |  | (43.2) | %
Net increase in net assets resulting from operations | $ | 2.47 |  |  | $ | 1.07 |  |  | $ | 1.40 |  |  | 130.8 | %

NM = Not Meaningful
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Investment Income
Total investment income increased $5.8 million, or 7.1%, for the year ended March 31, 2024, as compared to the prior year. This increase was primarily due to an increase in interest income, partially offset by a decrease in dividend and success fee income.
Interest income from our investments in debt securities increased $21.5 million, or 35.7%, for the year ended March 31, 2024, as compared to the prior year. Generally, the level of interest income from investments is directly related to the weighted-average 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, 2024 was $560.8 million, compared to $464.4 million during the prior year. This increase was primarily due to $158.8 million of follow-on debt investments to existing portfolio companies, the origination of $85.8 million of new debt investments, and $14.9 million of loans placed back on accrual status, partially offset by the pay-off, restructuring, or write-off of $37.4 million of debt investments and $9.2 million of existing loans placed on non-accrual status after March 31, 2022, and their respective impact on the weighted-average principal balance when considering the timing of new investments, pay-offs, restructurings, write-offs, and accrual status changes, as applicable.
The weighted-average yield on our interest-bearing investments, excluding cash and cash equivalents and receipts recorded as other income, was 14.4% and 13.0% for the years ended March 31, 2024 and 2023, respectively. The weighted-average yield may vary from period to period, based on the current stated interest rate on interest-bearing investments, coupled with any collection of past due interest during the period. During the years ended March 31, 2024 and 2023, we had no collections of past due interest.
As of March 31, 2024, our loans to Edge Adhesives Holdings, Inc. ("Edge") and J.R. Hobbs Co. - Atlanta, LLC ("J.R. Hobbs") were on non-accrual status, with an aggregate debt cost basis of $59.1 million. As of March 31, 2023, our loans to Edge, J.R. Hobbs, and The Mountain were on non-accrual status, with an aggregate debt cost basis of $66.9 million.
Dividend and success fee income for the year ended March 31, 2024 decreased $15.8 million, or 74.1%, as compared to the prior year. During the year ended March 31, 2024, dividend and success fee income consisted of $3.6 million of success fee income and $1.9 million of dividend income. During the year ended March 31, 2023, dividend and success fee income consisted of $10.9 million of dividend income and $10.4 million of success fee income.
As of March 31, 2024, SFEG represented 10.1% of the total investment portfolio at fair value. As of March 31, 2023, no single investment represented greater than 10% of our total investment portfolio at fair value.
Expenses
Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased $21.0 million, or 47.1%, for the year ended March 31, 2024, as compared to the prior year, primarily due to increases in the capital gains-based incentive fee, interest expense and base management fee, partially offset by an increase in credits to fees from Adviser, and a decrease in income-based incentive fee.
In accordance with GAAP, we recorded a capital gains-based incentive fee of $12.7 million during the year ended March 31, 2024, compared to reversal of capital gains-based incentive fee of $0.3 million during the year ended March 31, 2023. The capital gains-based incentive fee is a result of the net impact of net realized gains (losses) and net unrealized appreciation (depreciation) on investments during the respective periods. The income-based incentive fee for the year ended March 31, 2024 decreased $0.8 million, or 9.2%, as compared to the prior year, due to the increase in net assets, which increases the pre-incentive fee net investment income required to meet the hurdle rate, and the decrease in pre-incentive fee net investment income.
Base management fee for the year ended March 31, 2024 increased $2.7 million, or 18.3%, as compared to the prior year, primarily due to the increase in the average total assets subject to the base management fee as a result of a net increase in additional investments at cost and an increase in the fair value of investments.
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The base management fee, loan servicing fee, incentive fee, and their related non-contractual, unconditional, and irrevocable credits are computed quarterly, as described under “Transactions with the Adviser” in Note 4 – Related Party Transactions in the accompanying Notes to Consolidated Financial Statements and are summarized in the following table:

| Year Ended March 31,
| 2024 |  | 2023
Average total assets subject to base management fee(A) | $ | 875,000 |  |  | $ | 739,900 |
Multiplied by annual base management fee of 2.0% | 2.0 | % |  | 2.0 | %
Base management fee(B) | 17,500 |  |  | 14,798 |
Credits to fees from Adviser - other(B) | (5,596) |  |  | (3,811) |
Net base management fee | $ | 11,904 |  |  | $ | 10,987 |
Loan servicing fee(B) | $ | 9,118 |  |  | $ | 7,880 |
Credits to base management fee - loan servicing fee(B) | (9,118) |  |  | (7,880) |
Net loan servicing fee | $ | — |  |  | $ | — |
Incentive fee – income-based | $ | 8,336 |  |  | $ | 9,176 |
Incentive fee – capital gains-based(C) | 12,711 |  |  | (296) |
Total incentive fee(B) | 21,047 |  |  | 8,880 |
Credits to fees from Adviser - other(B) | — |  |  | — |
Net total incentive fee | $ | 21,047 |  |  | $ | 8,880 |

(A)Average total assets subject to the base management fee is defined in the Advisory Agreement as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective periods and adjusted appropriately for any share issuances or repurchases during the periods.
(B)Reflected as a line item on our accompanying Consolidated Statement of Operations.
(C)The capital gains-based incentive fees are recorded in accordance with GAAP and do not necessarily reflect amounts contractually due under the terms of the Advisory Agreement.
Interest expense increased $8.2 million, or 51.9%, during the year ended March 31, 2024, as compared to the prior year, primarily due to the issuance of the 8.00% 2028 Notes in May 2023 and increased borrowings on the Credit Facility, partially offset by a decrease in the effective interest rate. The weighted-average balance outstanding on the Credit Facility during the year ended March 31, 2024 was $61.0 million, as compared to $16.2 million in the prior year. The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the year ended March 31, 2024 was 10.1%, as compared to 17.3% in the prior year. This decrease in the effective interest rate on the Credit Facility was primarily a result of a decrease in unused commitment fees, partially offset by an increase in interest rates on the drawn portion of the Credit Facility.
Other expenses decreased $0.8 million, or 15.9%, during the year ended March 31, 2024, as compared to the prior year, primarily due to a decrease in professional expenses and bad debt expense.
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Realized and Unrealized Gain (Loss)
The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the years ended March 31, 2024 and 2023 were as follows:

|  | Year Ended March 31, 2024
Portfolio Company |  | Realized Gain (Loss) on Investments |  | Unrealized Appreciation (Depreciation) |  | Reversal of Unrealized (Appreciation) Depreciation |  | Net Gain (Loss)
Nth Degree Investment Group, LLC |  | $ | — |  |  | $ | 31,199 |  |  | $ | — |  |  | $ | 31,199 |
Counsel Press, Inc. |  | 43,459 |  |  | 22,676 |  |  | (43,566) |  |  | 22,569 |
Brunswick Bowling Products, Inc. |  | — |  |  | 14,789 |  |  | — |  |  | 14,789 |
Educators Resource, Inc. |  | — |  |  | 12,193 |  |  | — |  |  | 12,193 |
Mason West, LLC |  | — |  |  | 8,819 |  |  | — |  |  | 8,819 |
SFEG Holdings, Inc. |  | — |  |  | 7,812 |  |  | — |  |  | 7,812 |
Galaxy Technologies Holdings, Inc. |  | — |  |  | 6,849 |  |  | — |  |  | 6,849 |
The E3 Company, LLC |  | — |  |  | 5,189 |  |  | — |  |  | 5,189 |
Utah Pacific Bridge & Steel, Ltd. |  | — |  |  | 4,539 |  |  | — |  |  | 4,539 |
Ginsey Home Solutions, Inc. |  | — |  |  | 2,415 |  |  | — |  |  | 2,415 |
The Maids International, LLC |  | — |  |  | 2,226 |  |  | — |  |  | 2,226 |
Gladstone SOG Investments, Inc. |  | 882 |  |  | — |  |  | (93) |  |  | 789 |
The Mountain Corporation |  | (14,650) |  |  | — |  |  | 14,650 |  |  | — |
Diligent Delivery Systems |  | — |  |  | (1,207) |  |  | — |  |  | (1,207) |
Edge Adhesives Holdings, Inc. |  | — |  |  | (1,350) |  |  | — |  |  | (1,350) |
Home Concepts Acquisition, Inc. |  | — |  |  | (2,037) |  |  | — |  |  | (2,037) |
Old World Christmas, Inc. |  | 273 |  |  | (3,352) |  |  | — |  |  | (3,079) |
Nocturne Luxury Villas, Inc. |  | — |  |  | (3,998) |  |  | — |  |  | (3,998) |
PSI Molded Plastics, Inc. |  | — |  |  | (4,529) |  |  | — |  |  | (4,529) |
Schylling, Inc. |  | — |  |  | (7,553) |  |  | — |  |  | (7,553) |
ImageWorks Display and Marketing Group, Inc. |  | — |  |  | (8,319) |  |  | — |  |  | (8,319) |
B+T Group Acquisition, Inc. |  | — |  |  | (10,921) |  |  | — |  |  | (10,921) |
Horizon Facilities Services, Inc. |  | — |  |  | (12,344) |  |  | — |  |  | (12,344) |
Other, net (<$1.0 million, net ) |  | 292 |  |  | (786) |  |  | — |  |  | (494) |
Total |  | $ | 30,256 |  |  | $ | 62,310 |  |  | $ | (29,009) |  |  | $ | 63,557 |

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|  | Year Ended March 31, 2023
Portfolio Company |  | Realized Gain (Loss) on Investments |  | Unrealized Appreciation (Depreciation) |  | Reversal of Unrealized (Appreciation) Depreciation |  | Net Gain (Loss)
Nth Degree Investment Group, LLC |  | $ | — |  |  | $ | 14,732 |  |  | $ | — |  |  | $ | 14,732 |
Brunswick Bowling Products, Inc. |  | — |  |  | 12,484 |  |  | — |  |  | 12,484 |
Old World Christmas, Inc. |  | 13,371 |  |  | (3,852) |  |  | — |  |  | 9,519 |
Horizon Facilities Services, Inc. |  | 2,218 |  |  | 4,618 |  |  | — |  |  | 6,836 |
Nocturne Luxury Villas, Inc. |  | — |  |  | 6,040 |  |  | — |  |  | 6,040 |
SFEG Holdings, Inc. |  | — |  |  | 5,485 |  |  | — |  |  | 5,485 |
Mason West, LLC |  | — |  |  | 3,387 |  |  | — |  |  | 3,387 |
Counsel Press, Inc. |  | — |  |  | 2,511 |  |  | — |  |  | 2,511 |
Utah Pacific Bridge & Steel, Ltd. |  | — |  |  | 1,748 |  |  | — |  |  | 1,748 |
Dema/Mai Holdings, Inc. |  | — |  |  | 1,321 |  |  | — |  |  | 1,321 |
Schylling, Inc. |  | — |  |  | 1,102 |  |  | — |  |  | 1,102 |
PSI Molded Plastics, Inc. |  | — |  |  | (1,726) |  |  | — |  |  | (1,726) |
Educators Resource, Inc. |  | — |  |  | (1,807) |  |  | — |  |  | (1,807) |
Galaxy Technologies Holdings, Inc. |  | — |  |  | (3,481) |  |  | — |  |  | (3,481) |
Ginsey Home Solutions, Inc. |  | — |  |  | (4,787) |  |  | — |  |  | (4,787) |
Edge Adhesives Holdings, Inc. |  | — |  |  | (4,817) |  |  | — |  |  | (4,817) |
ImageWorks Display and Marketing Group, Inc. |  | — |  |  | (5,479) |  |  | — |  |  | (5,479) |
The Mountain Corporation |  | (10,000) |  |  | (5,590) |  |  | 10,000 |  |  | (5,590) |
Bassett Creek Services, Inc. |  | 5,188 |  |  | — |  |  | (12,250) |  |  | (7,062) |
B+T Group Acquisition, Inc. |  | — |  |  | (13,480) |  |  | — |  |  | (13,480) |
J.R. Hobbs Co. - Atlanta, LLC |  | — |  |  | (18,510) |  |  | — |  |  | (18,510) |
Other, net (<$1.0 million, net ) |  | (24) |  |  | 130 |  |  | (14) |  |  | 92 |
Total |  | $ | 10,753 |  |  | $ | (9,971) |  |  | $ | (2,264) |  |  | $ | (1,482) |

Net Realized Gain (Loss) on Investments
During the year ended March 31, 2024, we recorded net realized gains on investments of $30.3 million, primarily due to a $43.5 million realized gain from the exit of Counsel Press, $1.2 million of realized gains related to certain prior period exits and $0.3 million of realized gain from the recapitalization of Old World. These amounts were partially offset by the $14.7 million realized loss recognized from the dissolution and liquidation of The Mountain.
During the year ended March 31, 2023, we recorded net realized gains on investments of $10.8 million, primarily due to a $13.4 million realized gain from the recapitalization of Old World, $5.2 million of realized gains from the exit of Bassett Creek Services, Inc., and a $2.2 million realized gain from the recapitalization of Horizon Facilities Services, Inc. These amounts were partially offset by the $10.0 million realized loss recognized in conjunction with the replacement of our existing investment in The Mountain.
Net Unrealized Appreciation (Depreciation) of Investments
Net unrealized appreciation of investments of $33.3 million for the year ended March 31, 2024 was primarily due to the net unrealized appreciation across our portfolio, as well as the reversal of unrealized depreciation of our investment in The Mountain upon its exit. These amounts were partially offset by the reversal of unrealized appreciation of our investment in Counsel Press upon its exit. The net appreciation was driven primarily by increased performance of certain of our portfolio companies, partially offset by decreased comparable transaction multiples used to estimate the fair value of certain of our portfolio companies.
Net unrealized appreciation of investments of $12.2 million for the year ended March 31, 2023 was primarily due to the net unrealized depreciation across our portfolio, as well as the reversal of unrealized appreciation of our investment in Bassett Creek upon its exit, partially offset by the reversal of unrealized depreciation of our investment in The Mountain upon the replacement of our existing investment. The net depreciation was driven primarily by decreased performance of certain of our other portfolio companies and decreased comparable transaction multiples used to estimate the fair value of certain of our portfolio companies. These decreases were partially offset by increased performance of certain of our portfolio
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companies, driven partially by the reversal of the impact of COVID-19 on certain of our portfolio companies and the markets in which they operate.
Across our entire investment portfolio, we recorded $35.8 million of net unrealized appreciation on our equity investments and $2.5 million of net unrealized depreciation on our debt investments for the year ended March 31, 2024. As of March 31, 2024, the fair value of our investment portfolio was more than our cost basis by $66.2 million, compared to March 31, 2023, when the fair value of our investment portfolio was more than our cost basis by $32.9 million. This resulted in net unrealized appreciation of $33.3 million for the year ended March 31, 2024. Our entire portfolio was fair valued at 107.8% of cost as of March 31, 2024.
The comparison of the fiscal year ended March 31, 2023 to the fiscal year ended March 31, 2022 can be found in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 located within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Cash inflows from operating activities are primarily generated from cash collections of interest and other income from our portfolio companies, as well as from cash proceeds received from repayments of debt investments and from sales of equity investments. These cash collections are principally used to fund new investments, pay distributions to our common stockholders, make interest payments on our Credit Facility, 5.00% 2026 Notes, 4.875% 2028 Notes and 8.00% 2028 Notes, pay management and incentive fees to the Adviser and other operating expenses. We may also use cash inflows from operating activities to repay outstanding borrowings under the Credit Facility.
Net cash used in operating activities for the year ended March 31, 2024 was $69.9 million, as compared to net cash used in operating activities of $4.5 million for the year ended March 31, 2023. This change was primarily due to an increase in purchases of investments, partially offset by a decrease in the aggregate net proceeds from the sale and recapitalization of investments and principal repayments of investments.
Purchases of investments totaled $183.9 million during the year ended March 31, 2024, compared to $133.8 million during the year ended March 31, 2023. Net proceeds from the sale and recapitalization of investments and principal repayments of investments totaled $80.2 million during the year ended March 31, 2024, compared to $87.8 million during the year ended March 31, 2023.
Net cash used in operating activities for the year ended March 31, 2023 was $4.5 million, as compared to net cash provided by operating activities of $36.6 million for the year ended March 31, 2022. This change was primarily due to an increase in purchases of investments, partially offset by a decrease in the aggregate net proceeds from the sale and recapitalization of investments and principal repayments of investments.
Purchases of investments totaled $133.8 million during the year ended March 31, 2023, compared to $92.7 million during the year ended March 31, 2022. Net proceeds from the sale and recapitalization of investments and principal repayments totaled $87.8 million during the year ended March 31, 2023, compared to $101.4 million during the year ended March 31, 2022.
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As of March 31, 2024, we had equity investments in and/or loans to 24 companies with an aggregate cost basis of $854.3 million. As of March 31, 2023, we had equity investments in and/or loans to 25 companies with an aggregate cost basis of $720.6 million. The following table summarizes our total portfolio investment activity for the years ended March 31, 2024 and 2023:

| Years Ended March 31,
| 2024 |  | 2023
Beginning investment portfolio, at fair value | $ | 753,543 |  |  | $ | 714,396 |
New investments | 61,258 |  |  | 60,050 |
Disbursements to existing portfolio companies | 122,666 |  |  | 73,706 |
Unscheduled principal repayments (A) | (28,000) |  |  | (57,398) |
Net proceeds from sales of investments | (52,228) |  |  | (35,533) |
Net realized gain on investments | 29,964 |  |  | 10,545 |
Net unrealized appreciation (depreciation) of investments | 62,310 |  |  | (9,971) |
Reversal of net unrealized appreciation of investments | (29,009) |  |  | (2,264) |
Amortization of premiums, discounts, and acquisition costs, net | — |  |  | 12 |
Ending investment portfolio, at fair value | $ | 920,504 |  |  | $ | 753,543 |

(A)The year ended March 31, 2023 includes $5.1 million of non-cash principal repayments related to the August 2022 refinancing at Ginsey.
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, 2024:

|  |  | Amount
For the fiscal years ending March 31: |  |
| 2025 |  | $ | 72,770 |
| 2026 |  | 236,193 |
| 2027 |  | 185,776 |
| 2028 |  | 38,250 |
| 2029 |  | 100,394 |
| Thereafter |  | 25,000 |
| Total contractual repayments |  | $ | 658,383 |
| Investments in equity securities |  | 195,907 |
| Total cost basis of investments held as of March 31, 2024: |  | $ | 854,290 |

Financing Activities
Net cash provided by financing activities for the year ended March 31, 2024 was $69.9 million, which consisted primarily of $74.8 million of gross proceeds from the issuance of the 8.00% 2028 Notes, $43.9 million of proceeds from the issuance of common stock under the Common Stock ATM Program, net of expenses and shelf offering registration costs, and $31.8 million of net borrowings on our Credit Facility, partially offset by $76.1 million in distributions to common stockholders and $4.5 million of deferred financing and offering costs.
Net cash used in financing activities for the year ended March 31, 2023 was $6.7 million, which consisted primarily of $47.1 million in distributions to common stockholders and $0.3 million of deferred financing and offering costs, partially offset by $35.2 million of net borrowings on our Credit Facility and $5.4 million of proceeds from the issuance of common stock under the Common Stock ATM Program, net expenses and shelf registration offering costs.
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Distributions and Dividends to Stockholders
Common Stock Distributions
To qualify to be taxed as a RIC and thus avoid corporate level federal income tax on the income we distribute to our stockholders, we are required, among other requirements, to distribute to our stockholders on an annual basis at least 90% of our Investment Company Taxable Income, determined without regard to the dividends paid deduction. Additionally, the Credit Facility generally restricts the amount of distributions to stockholders that we can pay out to be no greater than the sum of certain amounts, including 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 $0.08 per common share for each of the twelve months from April 2023 through March 2024, and supplemental distributions of $0.12 per common share in June, September, and November 2023 and $0.88 per common share in December 2023. See also “Recent Developments - Distributions and Dividends” for a discussion of cash distributions to common stockholders declared by our Board of Directors in April 2024.
For each of the fiscal years ended March 31, 2024 and 2023, Investment Company Taxable Income exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $18.7 million and $21.4 million, respectively, of the first distributions paid subsequent to fiscal year-end as having been paid in the prior year. In addition, for each of the fiscal years ended March 31, 2024 and 2023, net capital gains exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $1.4 million and $10.6 million, respectively, of the first distributions paid subsequent to fiscal year-end as having been paid in the prior year. For the year ended March 31, 2024, we recorded $0.8 million of net adjustments for estimated permanent book-tax differences to reflect tax character, which increased Overdistributed net investment income and decreased Accumulated net realized gain in excess of distributions and Capital in excess of par value. For the year ended March 31, 2023, we recorded $1.6 million of net adjustments for estimated permanent book-tax differences to reflect tax character, which decreased Capital in excess of par value and increased Overdistributed net investment income and Accumulated net realized gain in excess of distributions.
Preferred Stock Dividends
Our Board of Directors declared and we paid monthly cash dividends of $0.1328125 per share to holders of our Series E Term Preferred Stock per month from April 2021 through July 2021 and $0.07968750 per share of our Series E Term Preferred Stock for the period from August 1, 2021 up to, but excluding, the redemption date of August 19, 2021. In accordance with GAAP, we treated these monthly dividends as an operating expense.
Dividend Reinvestment Plan
Our common stockholders who hold their shares through our transfer agent, Computershare, Inc. (“Computershare”), have the option to participate in a dividend reinvestment plan offered by Computershare, as the plan agent. This is an “opt in” dividend reinvestment plan, meaning that common stockholders may elect to have their cash distributions automatically reinvested in additional shares of our common stock. Common stockholders who do not make such election will receive their distributions in cash. Any distributions reinvested under the plan will be taxable to a 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 generally will have an adjusted basis in the additional common shares purchased through the plan equal to the dollar amount that would have been received if the U.S. stockholder had received the dividend or distribution in cash. The additional common shares will have a new holding period commencing on the day following the date on which the shares are credited to the common stockholder’s account. Computershare purchases shares in the open market in connection with the obligations under the plan.
Registration Statement
On February 28, 2024, we filed a registration statement on Form N-2 (File No. 333-277452), which the SEC declared effective on April 18, 2024. The registration statement permits us to issue, through one or more transactions, up to an aggregate of $450.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities, including through concurrent, separate offerings of such securities. As of the date of this report, we have the ability to issue up to $450.0 million of securities under the registration statement.
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On September 3, 2021, we filed a registration statement on Form N-2 (File No. 333-259302), which the SEC declared effective on October 15, 2021. The registration statement permited us to issue, through one or more transactions, up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities, including through concurrent, separate offerings of such securities. As of March 31, 2024, we had the ability to issue up to $175.3 million of the securities registered under the registration statement. This registration statement was terminated on April 18, 2024.
Equity
Common Stock
In August 2022, we entered into equity distribution agreements with Oppenheimer & Co. and Virtu Americas LLC (each a “Sales Agent”), under which we have the ability to issue and sell shares of our common stock, from time to time, through the Sales Agents, up to an aggregate offering price of $50.0 million in our Common Stock ATM Program. In August 2023, we entered into an equity distribution agreement with B. Riley Securities, Inc. and entered into amendments to the agreements with Oppenheimer & Co. Inc. and Virtu Americas LLC in order to add B. Riley Securities, Inc. as a Sales Agent for the Common Stock ATM Program. As of March 31, 2024, we had no remaining capacity under the Common Stock ATM Program.
During the year ended March 31, 2024, we sold 3,097,162 shares of our common stock under the Common Stock ATM Program at a weighted-average gross price of $14.37 per share and raised approximately $44.5 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $14.12 and resulted in total net proceeds of approximately $43.7 million. These sales were above our then current NAV per share.
During the year ended March 31, 2023, we sold 386,482 shares of our common stock under the Common Stock ATM Program at a weighted-average gross price of $14.21 per share and raised approximately $5.5 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $14.01 and resulted in total net proceeds of approximately $5.4 million. These sales were above our then current NAV per share.
We anticipate issuing equity securities to obtain additional capital in the future. However, we cannot determine the timing or terms of any future equity issuances or whether we will be able to issue equity on terms favorable to us, or at all. When our common stock is trading at a price below NAV per share, the 1940 Act places regulatory constraints on our ability to obtain additional capital by issuing common stock. Generally, the 1940 Act provides that we may not issue and sell our common stock at a price below our NAV per common share, other than to our then existing common stockholders pursuant to a rights offering, without first obtaining approval from our stockholders and our independent directors and meeting other stated requirements. On March 31, 2024, the closing market price of our common stock was $14.23 per share, representing a 6.0% premium to our NAV of $13.43 per share as of March 31, 2024.
Revolving Line of Credit
On February 5, 2024, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 9 to the Credit Facility with KeyBank National Association ("KeyBank"), as administrative agent, joint lead arranger and lender, Fifth Third Bank as managing agent, joint lead arranger and lender, the Adviser, as servicer, and certain other lenders party thereto. The Credit Facility was amended to increase the size from $135.0 million to $200.0 million and update certain existing terms. The Credit Facility continues to include customary terms, covenants, events of default and constraints on borrowing availability based on collateral tests for a credit facility of its size and nature.
Previously, on October 30, 2023, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 8 to the Credit Facility with KeyBank, as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and certain other lenders party thereto. Among other things, the revolving period was extended to October 30, 2026, and if not renewed or extended by such date, all principal and interest will be due and payable by October 30, 2028 (two years after the revolving period end date). Advances under the Credit Facility generally bear interest at 30-day Term SOFR, subject to a floor of 0.35%, plus 3.15% per annum until October 30, 2026, with the margin then increasing to 3.40% for the period from October 30, 2026 to October 30, 2027, and increasing further to 3.65% thereafter with a SOFR credit spread adjustment of 10 basis points. The Credit Facility has an unused commitment fee on the daily unused commitment amount of 0.50% per annum if the daily unused commitment amount is less than or equal to 50% of the total commitment amount, 0.75% per annum if the daily unused commitment amount is greater than 50% but less than or equal to 65% of the
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total commitment amount, and 1.00% per annum if the daily unused commitment amount is greater than 65% of the total commitment amount. The size of the Credit Facility was reduced from $180.0 million to $135.0 million.
Previously, on April 10, 2023, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 7 to the Credit Facility with KeyBank as administrative agent, lead arranger, managing agent and lender, the Adviser, as servicer, and certain other lenders party thereto. The reference rate was updated from LIBOR to Term SOFR plus an 11 basis point credit spread adjustment.
At March 31, 2024, we had $67.0 million of borrowings outstanding on the Credit Facility and as of the date of this report, we had $65.1 million outstanding under the Credit Facility.
Interest is payable monthly during the term of the Credit Facility. Available borrowings are subject to various constraints and applicable advance rates, which are generally based on the size, characteristics, and quality of the collateral pledged by Business Investment. The Credit Facility also requires that any interest and principal payments on pledged loans be remitted directly by the borrower into a lockbox account with KeyBank. KeyBank is also the trustee of the account and generally remits the collected funds to us once a month.
Among other things, the Credit Facility contains covenants that require Business Investment to maintain its status as a separate legal entity, prohibit certain significant corporate transactions (such as mergers, consolidations, liquidations or dissolutions) and restrict certain material changes to our credit and collection policies without the lenders’ consent. The Credit Facility also generally seeks to restrict distributions to stockholders to the sum of (i) our net investment income, (ii) net capital gains, and (iii) amounts deemed by the Company to be considered as having been paid during the prior fiscal year in accordance with Section 855(a) of the Code. Loans eligible to be pledged as collateral are subject to certain limitations, including, among other things, restrictions on geographic concentrations, industry concentrations, loan size, payment frequency and status, average life, portfolio company leverage, and lien property. The Credit Facility also requires Business Investment to comply with other financial and operational covenants, which obligate Business Investment to, among other things, maintain certain financial ratios, including asset and interest coverage and a minimum number of obligors required in the borrowing base. Additionally, the Credit Facility contains a performance guaranty that requires the Company to maintain (i) a minimum net worth (defined in our Credit Facility to include any outstanding mandatorily redeemable preferred stock) of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any equity or subordinated debt redeemed or retired after November 16, 2016, which equated to $348.7 million as of March 31, 2024, (ii) asset coverage with respect to senior securities representing indebtedness of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act); and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of March 31, 2024, and as defined in the performance guaranty of the Credit Facility, we had a net worth of $822.4 million, asset coverage on our senior securities representing indebtedness of 219.0%, calculated in compliance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and RIC. As of March 31, 2024, we had availability, after adjustments for various constraints based on collateral quality, of $133.0 million under the Credit Facility and were in compliance with all covenants under the Credit Facility.
Notes Payable
5.00% Notes due 2026
In March 2021, we completed a public offering of the 5.00% 2026 Notes with an aggregate principal amount of $127.9 million, which resulted in net proceeds of approximately $123.8 million after deducting underwriting discounts, commissions and offering costs borne by us. The 5.00% 2026 Notes are traded under the ticker symbol “GAINN” on Nasdaq. The 5.00% 2026 Notes will mature on May 1, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option. The 5.00% 2026 Notes bear interest at a rate of 5.00% per year (which equates to $6.4 million per year), payable quarterly in arrears.
The indenture relating to the 5.00% 2026 Notes contains certain covenants, including (i) an inability to incur additional debt or issue additional debt or preferred securities unless the Company’s asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our stock) on a class of our capital stock or to purchase shares of our capital stock unless the Company’s asset coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and (iii) if, at any time, we are not subject to the reporting requirements of the Exchange Act, we will provide the holders of the 5.00% 2026
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Notes, as applicable, and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.
The 5.00% 2026 Notes are recorded at the aggregate principal amount, less underwriting discounts, commissions, and offering costs, on our accompanying Consolidated Statements of Assets and Liabilities. Total underwriting discounts, commissions, and offering costs related to this offering were $4.1 million, which have been recorded as discounts to the aggregate principal amount on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending May 1, 2026, the maturity date.
4.875% Notes due 2028
In August 2021, we completed a public offering of the 4.875% 2028 Notes with an aggregate principal amount of $134.6 million, which resulted in net proceeds of approximately $131.3 million after deducting underwriting discounts, commissions and offering costs borne by us. The 4.875% 2028 Notes are traded under the ticker symbol “GAINZ” on Nasdaq. The 4.875% 2028 Notes will mature on November 1, 2028 and may be redeemed in whole or in part at any time or from time to time at the Company’s option. The 4.875% 2028 Notes bear interest at a rate of 4.875% per year (which equates to $6.6 million per year), payable quarterly in arrears.
The indenture relating to the 4.875% 2028 Notes contains certain covenants, including (i) an inability to incur additional debt or issue additional debt or preferred securities unless the Company’s asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our stock) on a class of our capital stock or to purchase shares of our capital stock unless the Company’s asset coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and (iii) if, at any time, we are not subject to the reporting requirements of the Exchange Act, we will provide the holders of the 4.875% 2028 Notes, as applicable, and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.
The 4.875% 2028 Notes are recorded at the aggregate principal amount, less underwriting discounts, commissions, and offering costs, on our accompanying Consolidated Statements of Assets and Liabilities. Total underwriting discounts, commissions, and offering costs related to this offering were $3.3 million, which have been recorded as discounts to the aggregate principal amount on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending November 1, 2028, the maturity date.
8.00% Notes due 2028
In May 2023, we completed a public offering of the 8.00% 2028 Notes with an aggregate principal amount of $74.8 million, which resulted in net proceeds of approximately $72.3 million after deducting underwriting discounts, commissions and offering costs borne by us. The 8.00% 2028 Notes are traded under the ticker symbol “GAINL” on Nasdaq. The 8.00% 2028 Notes will mature on August 1, 2028 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after August 1, 2025. The 8.00% 2028 Notes bear interest at a rate of 8.00% per year (which equates to $6.0 million per year), payable quarterly in arrears.
The indenture relating to the 8.00% 2028 Notes contains certain covenants, including (i) an inability to incur additional debt or issue additional debt or preferred securities unless the Company’s asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our stock) on a class of our capital stock or to purchase shares of our capital stock unless the Company’s asset coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and (iii) if, at any time, we are not subject to the reporting requirements of the Exchange Act, we will provide the holders of the 8.00% 2028 Notes and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.
The 8.00% 2028 Notes are recorded at the aggregate principal amount, less underwriting discounts, commissions, and offering costs, on our accompanying Consolidated Statements of Assets and Liabilities. Total underwriting discounts, commissions, and offering costs related to this offering were $2.5 million, which have been recorded as discounts to the aggregate principal amount on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending August 1, 2028, the maturity date.
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OFF-BALANCE SHEET ARRANGEMENTS
Unlike PIK income, we generally do not recognize success fees as income until payment has been received. Due to the contingent nature of success fees, there are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such collections. As a result, as of March 31, 2024 and 2023, we had unrecognized, contractual off-balance sheet success fee receivables of $44.9 million and $53.6 million (or approximately $1.23 and $1.60 per common share), respectively, on our debt investments. Consistent with GAAP, we have not recognized success fee receivables and related income in our accompanying Consolidated Financial Statements until earned.
CONTRACTUAL OBLIGATIONS
We have line of credit commitments to certain of our portfolio companies that have not been fully drawn. Since these line of credit commitments have expiration dates and we expect many will never be fully drawn, the total line of credit commitment amounts do not necessarily represent future cash requirements. We estimate the fair value of the combined unused line of credit commitments as of March 31, 2024 to be insignificant.
The following table shows our contractual obligations as of March 31, 2024, at cost:

|  | Payments Due by Period
Contractual Obligations(A) |  | Total |  | Less than 1 Year |  | 1-3 Years |  | 3-5 Years |  | More than 5 Years
Credit Facility(B) |  | $ | 67,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 67,000 |  |  | $ | — |
Notes payable |  | 337,238 |  |  | — |  |  | 127,938 |  |  | 209,300 |  |  | — |
Interest payments on obligations(C) |  | 102,725 |  |  | 26,112 |  |  | 46,431 |  |  | 30,182 |  |  | — |
Total |  | $ | 506,963 |  |  | $ | 26,112 |  |  | $ | 174,369 |  |  | $ | 306,482 |  |  | $ | — |

(A)Excludes unused line of credit commitments to our portfolio companies in the aggregate principal amount of $2.4 million.
(B)Principal balance of borrowings outstanding under the Credit Facility, based on the maturity date following the current contractual revolving period end date.
(C)Includes interest payments due on the Credit Facility, 5.00% 2026 Notes, 4.875% 2028 Notes, and 8.00% 2028 Notes, as applicable. The amount of interest payments calculated for purposes of this table was based upon rates and outstanding balances as of March 31, 2024.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported consolidated amounts of assets and liabilities, including disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ materially from those estimates under different assumptions or conditions. We have identified our investment valuation policy (which has been approved by our Board of Directors) as our most critical accounting policy, which is described in Note 2— Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report. Additionally, refer to Note 3 — Investments in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report for additional information regarding fair value measurements and our application of Financial Accounting Standards Board Accounting Standards Codification Topic 820, “Fair Value Measurements and Disclosures.” We have also identified our revenue recognition policy as a critical accounting policy, which is described in Note 2— Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report.
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Investment Valuation
Credit Monitoring and Risk Rating
The Adviser monitors a wide variety of key credit statistics that provide information regarding our portfolio companies to help us assess credit quality and portfolio performance and, in some instances, are used as inputs in our valuation techniques. Generally, we, through the Adviser, participate in periodic board meetings of our portfolio companies in which we hold board seats and also require them to provide annual audited and monthly unaudited financial statements. Using these statements or comparable information and board discussions, the Adviser calculates and evaluates certain credit statistics.
The Adviser risk rates all of our investments in debt securities. The Adviser does not risk rate equity securities. For loans that have been rated by a SEC-registered Nationally Recognized Statistical Rating Organization (“NRSRO”), the Adviser generally uses the average of two corporate level NRSRO’s risk ratings for such security. For all other debt securities, the Adviser uses a proprietary risk rating system. While the Adviser seeks to mirror the NRSRO systems, we cannot provide any assurance that the Adviser’s risk rating system will provide the same risk rating as an NRSRO for these securities. The Adviser’s risk rating system is used to estimate the probability of default on debt securities and the expected loss, if there is a default. The Adviser’s risk rating system uses a scale of 0 to >10, with >10 being the lowest probability of default. It is the Adviser’s understanding that most debt securities of Lower Middle Market companies do not exceed the grade of BBB on an NRSRO scale, so there would be no debt securities in the Lower Middle Market that would meet the definition of AAA, AA or A. Therefore, the Adviser’s scale begins with the designation >10 as the best risk rating which may be equivalent to a BBB from an NRSRO; however, no assurance can be given that a >10 on the Adviser’s scale is equal to a BBB or Baa2 on an NRSRO scale. The Adviser’s risk rating system covers both qualitative and quantitative aspects of the business and the securities we hold.
The following table reflects risk ratings for all loans in our portfolio as of March 31, 2024 and 2023:

|  | As of March 31,
Rating |  | 2024 |  | 2023
Highest |  | 9.0 |  | 9.0
Average |  | 6.6 |  | 6.4
Weighted-average |  | 6.9 |  | 7.3
Lowest |  | 3.0 |  | 1.0

Tax Status
We intend to continue to maintain our qualification as a RIC under Subchapter M of the Code for U.S. federal income tax purposes. As a RIC, we generally are not subject to U.S. federal income tax on the portion of our taxable income and gains distributed to our stockholders. To maintain our qualification as a RIC, we must maintain our status as a BDC and meet certain source-of-income and asset diversification requirements. In addition, to qualify to be taxed as a RIC, we must distribute to stockholders at least 90% of our Investment Company Taxable Income, determined without regard to the dividends paid deduction. Our policy generally is to make distributions to our stockholders in an amount up to 100% of Investment Company Taxable Income. We may retain some or all of our net long-term capital gains, if any, and designate them as deemed distributions, or distribute such gains to stockholders in cash. See “Business — Material U.S. Federal Income Tax Considerations” and “— Liquidity and Capital Resources — Distributions and Dividends to Stockholders.”
In an effort to limit federal excise taxes, we have to distribute to stockholders, during each calendar year, an amount close to the sum of: (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our net capital gains (both long-term and short-term), if any, for the one-year period ending on October 31 of the calendar year, and (3) any income realized, but not distributed, in the preceding period (to the extent that income tax was not imposed on such amounts), less certain reductions, as applicable. Under the RIC Modernization Act, we are permitted to carryforward any capital losses that we may incur for an unlimited period, and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. Our capital loss carryforward balance was $0 as of March 31, 2024 and 2023.
Recent Accounting Pronouncements
Refer to Note 2 — Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report for a description of recent accounting pronouncements.
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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 income is dependent upon the difference between the rates at which we borrow funds, such as under the Credit Facility (which is variable), the 5.00% 2026 Notes, 4.875% 2028 Notes and 8.00% 2028 Notes (which are fixed), and the rates at which we invest those funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We use a combination of debt and equity capital to finance our investing activities. We may use interest rate risk management techniques to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.
We target to have approximately 90% of the loans in our portfolio at variable rates or variable rates with a floor mechanism, and approximately up to 10% at fixed rates. As of March 31, 2024 and 2023, all of our variable-rate loans had rates associated with the current 30-day Term SOFR rate and 30-day LIBOR rate, respectively, and our total debt investment portfolio consisted of the following breakdown based on the principal balance:

|  | As of March 31,
Rates: |  | 2024 |  | 2023
Variable rates with a floor |  | 100.0 | % |  | 100.0 | %
Fixed rates |  | — | % |  | — | %
Total |  | 100.0 | % |  | 100.0 | %

We had $67.0 million of outstanding borrowings under the Credit Facility as of March 31, 2024 and $35.2 million borrowings as of March 31, 2023. As of March 31, 2024, the 5.00% 2026 Notes, 4.875% 2028 Notes and 8.00% 2028 Notes had an outstanding principal balance of $127.9 million, $134.6 million and $74.8 million, respectively. As of March 31, 2023, the 5.00% 2026 Notes and 4.875% 2028 Notes had an outstanding principal balance of $127.9 million and $134.6 million, respectively.
Advances under the Credit Facility generally bear interest at 30-day Term SOFR, subject to a floor of 0.35%, plus 3.15% per annum until October 30, 2026, with the margin then increasing to 3.40% for the period from October 30, 2026 to October 30, 2027, and increasing further to 3.65% thereafter with a SOFR credit spread adjustment of 10 basis points. The Credit Facility has an unused commitment fee on the daily unused commitment amount of 0.50% per annum if the daily unused commitment amount is less than or equal to 50% of the total commitment amount, 0.75% per annum if the daily unused commitment amount is greater than 50% but less than or equal to 65% of the total commitment amount, and 1.00% per annum if the daily unused commitment amount is greater than 65% of the total commitment amount.
To illustrate the potential impact of changes in interest rates, we have performed the following hypothetical analysis, which assumes that our balance sheet and interest rates remain constant as of March 31, 2024 and no further actions are taken to alter our existing interest rate sensitivity.

Basis Point Change |  | Increase (Decrease) in Interest Income |  | Increase (Decrease) in Interest Expense |  | Net Increase (Decrease) in Net Assets Resulting from Operations
Up 300 basis points |  | $ | 15,821 |  |  | $ | 2,039 |  |  | $ | 13,782 |
Up 200 basis points |  | $ | 10,614 |  |  | $ | 1,360 |  |  | $ | 9,254 |
Up 100 basis points |  | $ | 5,365 |  |  | $ | 680 |  |  | $ | 4,685 |
Down 100 basis points |  | $ | (4,554) |  |  | $ | (680) |  |  | $ | (3,874) |
Down 200 basis points |  | $ | (8,980) |  |  | $ | (1,360) |  |  | $ | (7,620) |
Down 300 basis points |  | $ | (13,109) |  |  | $ | (2,039) |  |  | $ | (11,070) |

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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, including portfolio company defaults, 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.
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

Management’s Annual Report on Internal Controls Over Financial Reporting | 72
Report of Independent Registered Public Accounting Firm (PCAOB ID 238) | 73
Consolidated Statements of Assets and Liabilities as of March 31, 2024 and 2023 | 75
Consolidated Statements of Operations for the years ended March 31, 2024, 2023 and 2022 | 76
Consolidated Statements of Changes in Net Assets for the years ended March 31, 2024, 2023 and 2022 | 77
Consolidated Statements of Cash Flows for the years ended March 31, 2024, 2023 and 2022 | 78
Consolidated Schedules of Investments as of March 31, 2024 and 2023 | 80
Notes to Consolidated Financial Statements | 90

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Management’s Annual Report on Internal Control over Financial Reporting
To the Board of Directors and Stockholders 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, we assessed the effectiveness of our internal control over financial reporting as of March 31, 2024, 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, 2024.
May 8, 2024
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Gladstone Investment Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of Gladstone Investment Corporation and its subsidiaries (the “Company”) as of March 31, 2024 and 2023, and the related consolidated statements of operations, of changes in net assets and of cash flows for each of the three years in the period ended March 31, 2024, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations, changes in its net assets and its cash flows for each of the three years in the period ended March 31, 2024 in conformity with accounting principles generally accepted in the United States of America.
We have also previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of assets and liabilities, including the consolidated schedules of investments, of the Company as of March 31, 2022, 2021, 2020, 2019, 2018, 2017, 2016, and 2015, and the related consolidated statements of operations, changes in net assets and cash flows for the years ended March 31, 2021, 2020, 2019, 2018, 2017, 2016, and 2015 (none of which are presented herein), and we expressed unqualified opinions on those consolidated financial statements. In our opinion, the information set forth in the Senior Securities table of the Company for each of the ten years in the period ended March 31, 2024, appearing on pages 50-51 under Item 5 of this Form 10-K, is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of March 31, 2024 and 2023 by correspondence with the custodian, portfolio company investees, and an escrow agent; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Valuation of Level 3 Investments
As described in Notes 2 and 3 to the consolidated financial statements, the Company held $920.5 million of total level 3 investments at fair value as of March 31, 2024. Management uses significant unobservable inputs in estimating the fair value of its level 3 investments, including (i) with respect to investments valued using a total enterprise value, portfolio company earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA multiples, revenue and revenue multiples, or a discounted cash flow analysis using estimated risk-adjusted discount rates; (ii) with respect to investments valued using a yield analysis, a modified discount rate; and (iii) with respect to investments valued using market quotations for which a limited market exists, the lower indicative bid price in the bid-to-ask price range.
The principal considerations for our determination that performing procedures relating to the valuation of level 3 investments is a critical audit matter are (i) the significant judgment by management to determine the fair value of these level 3 investments using a total enterprise value or yield analysis due to the use of significant unobservable inputs, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the EBITDA and EBITDA multiples and revenue and revenue multiples used in a total enterprise value and the modified discount rate used in a yield analysis, and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, either (i) testing management’s process for determining the fair value estimate, including testing the completeness and accuracy of data provided by management, evaluating the appropriateness of management’s valuation methods, and evaluating the reasonableness of the EBITDA and EBITDA multiples and revenue and revenue multiples used in a total enterprise value and the modified discount rate used in a yield analysis by considering current and past performance of the investment, consistency of the unobservable inputs with external market data and evidence obtained in other areas of the audit, and management’s historical forecasting accuracy, or (ii) the involvement of professionals with specialized skill and knowledge to assist in developing an independent fair value estimate for certain level 3 investments and comparison of management’s estimate to the independently developed estimate. Developing an independent fair value estimate involved testing the completeness and accuracy of data provided by management and independently developing significant unobservable inputs related to the EBITDA and EBITDA multiples or revenue and revenue multiples for those investments valued using a total enterprise value.
/s/ PricewaterhouseCoopers LLP
Washington, District Of Columbia
May 8, 2024
We have served as the Company’s auditor since 2005.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

| March 31,
| 2024 |  | 2023
ASSETS |  |  |
Investments at fair value |  |  |
Non-Control/Non-Affiliate investments (Cost of $544,799 and $429,305, respectively) | $ | 622,233 |  |  | $ | 496,875 |
Affiliate investments (Cost of $292,082 and $276,055, respectively) | 295,366 |  |  | 255,955 |
Control investments (Cost of $17,409 and $15,270, respectively) | 2,905 |  |  | 713 |
Cash and cash equivalents | 2,460 |  |  | 2,683 |
Restricted cash and cash equivalents | 760 |  |  | 565 |
Interest receivable | 7,627 |  |  | 3,038 |
Due from administrative agent | 3,427 |  |  | 3,899 |
Deferred financing costs, net | 1,643 |  |  | 431 |
Other assets, net | 1,662 |  |  | 1,485 |
TOTAL ASSETS | $ | 938,083 |  |  | $ | 765,644 |
LIABILITIES |  |  |
Borrowings: |  |  |
Line of credit at fair value (Cost of $67,000 and $35,200, respectively) | $ | 67,000 |  |  | $ | 35,171 |
Notes payable, net | 331,345 |  |  | 257,436 |
Total borrowings | 398,345 |  |  | 292,607 |
Accounts payable and accrued expenses | 732 |  |  | 786 |
Interest payable | 3,465 |  |  | 2,309 |
Fees due to Adviser(A) | 41,344 |  |  | 28,919 |
Fee due to Administrator(A) | 727 |  |  | 716 |
Other liabilities | 759 |  |  | 565 |
TOTAL LIABILITIES | 445,372 |  |  | 325,902 |
Commitments and contingencies(B) |  |  |
NET ASSETS | $ | 492,711 |  |  | $ | 439,742 |
ANALYSIS OF NET ASSETS |  |  |
Common stock, $0.001 par value per share, 100,000,000 shares authorized; 36,688,667 and 33,591,505 shares issued and outstanding, respectively | $ | 37 |  |  | $ | 34 |
Capital in excess of par value | 444,706 |  |  | 401,798 |
Cumulative net unrealized appreciation of investments | 66,214 |  |  | 32,913 |
Cumulative net unrealized depreciation of other | — |  |  | 29 |
Overdistributed net investment income | (19,562) |  |  | (5,527) |
Accumulated net realized gain in excess of distributions | 1,316 |  |  | 10,495 |
Total distributable earnings | 47,968 |  |  | 37,910 |
TOTAL NET ASSETS | $ | 492,711 |  |  | $ | 439,742 |
NET ASSET VALUE PER SHARE | $ | 13.43 |  |  | $ | 13.09 |

(A)Refer to Note 4 — Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.
(B)Refer to Note 11 — Commitments and Contingencies in the accompanying Notes to Consolidated Financial Statements for additional information.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

| Year Ended March 31,
| 2024 |  | 2023 |  | 2022
INVESTMENT INCOME |  |  |  |  |
Interest income: |  |  |  |  |
Non-Control/Non-Affiliate investments | $ | 56,424 |  |  | $ | 41,872 |  |  | $ | 34,531 |
Affiliate investments | 24,578 |  |  | 18,323 |  |  | 24,617 |
Control investments | — |  |  | — |  |  | 500 |
Cash and cash equivalents | 792 |  |  | 81 |  |  | 1 |
Total interest income | 81,794 |  |  | 60,276 |  |  | 59,649 |
Dividend income: |  |  |  |  |
Non-Control/Non-Affiliate investments | — |  |  | 4,847 |  |  | 6 |
Affiliate investments | 1,907 |  |  | 6,018 |  |  | 2,589 |
Total dividend income | 1,907 |  |  | 10,865 |  |  | 2,595 |
Success fee income: |  |  |  |  |
Non-Control/Non-Affiliate investments | 2,285 |  |  | 9,801 |  |  | 2,647 |
Affiliate investments | 1,320 |  |  | 601 |  |  | 7,661 |
Total success fee income | 3,605 |  |  | 10,402 |  |  | 10,308 |
Total investment income | 87,306 |  |  | 81,543 |  |  | 72,552 |
EXPENSES |  |  |  |  |
Base management fee(A) | 17,500 |  |  | 14,798 |  |  | 14,113 |
Loan servicing fee(A) | 9,118 |  |  | 7,880 |  |  | 7,178 |
Incentive fee(A) | 21,047 |  |  | 8,880 |  |  | 26,360 |
Administration fee(A) | 1,789 |  |  | 1,811 |  |  | 1,806 |
Interest expense on borrowings | 24,121 |  |  | 15,877 |  |  | 13,078 |
Dividends on mandatorily redeemable preferred stock | — |  |  | — |  |  | 2,306 |
Amortization of deferred financing costs and discounts | 2,305 |  |  | 1,802 |  |  | 1,803 |
Professional fees | 1,382 |  |  | 1,916 |  |  | 1,431 |
Other general and administrative expenses | 2,981 |  |  | 3,270 |  |  | 3,162 |
Expenses before credits from Adviser | 80,243 |  |  | 56,234 |  |  | 71,237 |
Credits to base management fee – loan servicing fee(A) | (9,118) |  |  | (7,880) |  |  | (7,178) |
Credits to fees from Adviser - other(A) | (5,596) |  |  | (3,811) |  |  | (6,497) |
Total expenses, net of credits to fees | 65,529 |  |  | 44,543 |  |  | 57,562 |
NET INVESTMENT INCOME | $ | 21,777 |  |  | $ | 37,000 |  |  | $ | 14,990 |
REALIZED AND UNREALIZED GAIN (LOSS) |  |  |  |  |
Net realized gain (loss): |  |  |  |  |
Non-Control/Non-Affiliate investments | $ | 43,749 |  |  | $ | 7,561 |  |  | $ | 256 |
Affiliate investments | 275 |  |  | 3,469 |  |  | 14,186 |
Control investments | (13,768) |  |  | (277) |  |  | — |
Other | — |  |  | — |  |  | (1,998) |
Total net realized gain | 30,256 |  |  | 10,753 |  |  | 12,444 |
Net unrealized appreciation (depreciation): |  |  |  |  |
Non-Control/Non-Affiliate investments | 9,864 |  |  | 14,218 |  |  | 52,529 |
Affiliate investments | 10,317 |  |  | (23,792) |  |  | 25,378 |
Control investments | 13,120 |  |  | (2,661) |  |  | (3,025) |
Other | (29) |  |  | 29 |  |  | — |
Total net unrealized appreciation (depreciation) | 33,272 |  |  | (12,206) |  |  | 74,882 |
Net realized and unrealized gain (loss) | 63,528 |  |  | (1,453) |  |  | 87,326 |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 85,305 |  |  | $ | 35,547 |  |  | $ | 102,316 |
BASIC AND DILUTED PER COMMON SHARE: |  |  |  |  |
Net investment income | $ | 0.63 |  |  | $ | 1.11 |  |  | $ | 0.45 |
Net increase in net assets resulting from operations | $ | 2.47 |  |  | $ | 1.07 |  |  | $ | 3.08 |
WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING: |  |  |  |  |
Basic and diluted | 34,466,724 |  |  | 33,311,785 |  |  | 33,205,023 |

(A)Refer to Note 4 — Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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G LADSTONE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)

| Year Ended March 31,
| 2024 |  | 2023 |  | 2022
NET ASSETS, BEGINNING OF YEAR | $ | 439,742 |  |  | $ | 445,830 |  |  | $ | 382,364 |
OPERATIONS |  |  |  |  |
Net investment income | $ | 21,777 |  |  | $ | 37,000 |  |  | $ | 14,990 |
Net realized gain on investments | 30,256 |  |  | 10,753 |  |  | 14,442 |
Net realized loss on other | — |  |  | — |  |  | (1,998) |
Net unrealized appreciation (depreciation) of investments | 33,301 |  |  | (12,235) |  |  | 74,882 |
Net unrealized (appreciation) depreciation of other | (29) |  |  | 29 |  |  | — |
Net increase in net assets from operations | 85,305 |  |  | 35,547 |  |  | 102,316 |
DISTRIBUTIONS(A) |  |  |  |  |
Distributions to common stockholders from net investment income ($1.08, $0.92, and $0.91 per share, respectively) | (37,509) |  |  | (30,833) |  |  | (30,244) |
Distributions to common stockholders from cumulative realized gains ($1.12, $0.49, and $0.26 per share, respectively) | (38,552) |  |  | (16,217) |  |  | (8,606) |
Net decrease in net assets from distributions | (76,061) |  |  | (47,050) |  |  | (38,850) |
CAPITAL ACTIVITY |  |  |  |  |
Issuance of common stock | 44,508 |  |  | 5,492 |  |  | — |
Discounts, commissions, and offering costs for issuance of common stock | (783) |  |  | (77) |  |  | — |
Net increase in net assets from capital activity | 43,725 |  |  | 5,415 |  |  | — |
TOTAL INCREASE (DECREASE) IN NET ASSETS | 52,969 |  |  | (6,088) |  |  | 63,466 |
NET ASSETS, END OF YEAR(A) | $ | 492,711 |  |  | $ | 439,742 |  |  | $ | 445,830 |

(A)Refer to Note 9 — Distributions to Common Stockholders in the accompanying Notes to Consolidated Financial Statements for additional information.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

| Year Ended March 31,
| 2024 |  | 2023 |  | 2022
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |
Net increase in net assets resulting from operations | $ | 85,305 |  |  | $ | 35,547 |  |  | $ | 102,316 |
Adjustments to reconcile net increase in net assets resulting from operations to net cash (used in) provided by operating activities: |  |  |  |  |
Purchase of investments | (183,924) |  |  | (133,756) |  |  | (92,738) |
Principal repayments of investments | 28,000 |  |  | 52,300 |  |  | 51,398 |
Net proceeds from the sale and recapitalization of investments | 52,228 |  |  | 35,533 |  |  | 50,018 |
Net realized gain on investments | (30,256) |  |  | (10,753) |  |  | (14,442) |
Net realized loss on other | — |  |  | — |  |  | 1,998 |
Net unrealized (appreciation) depreciation of investments | (33,301) |  |  | 12,235 |  |  | (74,882) |
Net unrealized appreciation (depreciation) of other | 29 |  |  | (29) |  |  | — |
Amortization of premiums, discounts, and acquisition costs, net | — |  |  | (12) |  |  | (18) |
Amortization of deferred financing costs and discounts | 2,305 |  |  | 1,802 |  |  | 1,803 |
Bad debt expense, net of recoveries | 1 |  |  | 362 |  |  | 792 |
Changes in assets and liabilities: |  |  |  |  |
(Increase) decrease in interest receivable | (4,589) |  |  | 4 |  |  | (131) |
Decrease (increase) in due from administrative agent | 472 |  |  | 2,507 |  |  | (5,242) |
(Increase) decrease in other assets, net | (181) |  |  | (446) |  |  | 209 |
(Decrease) increase in accounts payable and accrued expenses | (54) |  |  | (13) |  |  | 236 |
Increase in interest payable | 1,156 |  |  | 119 |  |  | 1,599 |
Increase (decrease) in fees due to Adviser(A) | 12,375 |  |  | (435) |  |  | 13,588 |
Increase in fee due to Administrator(A) | 11 |  |  | 89 |  |  | 50 |
Increase in other liabilities | 485 |  |  | 442 |  |  | 45 |
Net cash (used in) provided by operating activities | (69,938) |  |  | (4,504) |  |  | 36,599 |
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |
Proceeds from issuance of common stock | 44,508 |  |  | 5,492 |  |  | — |
Discounts, commissions, and offering costs for issuance of common stock | (609) |  |  | (77) |  |  | — |
Proceeds from line of credit | 242,300 |  |  | 102,500 |  |  | 111,700 |
Repayments on line of credit | (210,500) |  |  | (67,300) |  |  | (134,100) |
Proceeds from issuance of notes payable | 74,750 |  |  | — |  |  | 134,550 |
Redemption of mandatorily redeemable preferred stock | — |  |  | — |  |  | (94,371) |
Deferred financing and offering costs | (4,478) |  |  | (308) |  |  | (3,431) |
Distributions paid to common stockholders | (76,061) |  |  | (47,050) |  |  | (38,850) |
Net cash provided by (used in) by financing activities | 69,910 |  |  | (6,743) |  |  | (24,502) |
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS | (28) |  |  | (11,247) |  |  | 12,097 |
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF YEAR | 3,248 |  |  | 14,495 |  |  | 2,398 |
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, END OF YEAR | $ | 3,220 |  |  | $ | 3,248 |  |  | $ | 14,495 |
CASH PAID FOR INTEREST | $ | 21,978 |  |  | $ | 14,103 |  |  | $ | 9,837 |

(A)Refer to Note 4 — Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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Supplemental disclosures of non-cash operating activities:
For the year ended March 31, 2024:
•In March 2024, we recognized a $14.7 million realized loss on our preferred and common equity investments and related first and second lien debt investments in The Mountain Corporation ("The Mountain") upon its liquidation and dissolution.
For the year ended March 31, 2023:
•In August 2022, in conjunction with a refinancing at Ginsey Home Solutions, Inc. ("Ginsey"), there was a $5.1 million payment made by Ginsey to extinguish our secured borrowing liability. Refer to Note 3 - Investments and Note 5 - Borrowings for further discussion.
•In December 2022, we replaced our previously outstanding secured second lien term loan and second lien delayed draw term loan to The Mountain with a total aggregate cost basis of $13.2 million with a new $3.2 million secured second lien term loan, which resulted in a realized loss of $10.0 million.
For the year ended March 31, 2022:
•In March 2022, we replaced our previously outstanding first lien term loan to J.R. Hobbs Co. - Atlanta, LLC ("J.R. Hobbs") with a total cost basis of $36.0 million with a new $26.0 million first lien term loan, which resulted in a realized loss of $10.0 million.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2024
(DOLLAR AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(D)(E) |  | Principal/Shares/ Units(F)(H) |  | Cost |  | Fair Value
NON-CONTROL/NON-AFFILIATE INVESTMENTS(L) –126.3% |  |  |  |  |  |
Secured First Lien Debt – 65.9% |  |  |  |  |  |
Buildings and Real Estate Total – 7.8% |  |  |  |  |  |
Dema/Mai Holdings, Inc. – Term Debt (SOFR+11.0%, 16.3% Cash, Due 7/2027)(J) |  | $ | 38,250 |  |  | $ | 38,250 |  |  | $ | 38,250 |
Diversified/Conglomerate Manufacturing – 1.1% |  |  |  |  |  |
Phoenix Door Systems, Inc. – Line of Credit, $0 available (SOFR+7.0%, 12.3% Cash (0.3% Unused Fee), Due 9/2026)(J) |  | 2,750 |  |  | 2,750 |  |  | 2,750 |
Phoenix Door Systems, Inc. – Term Debt (SOFR+11.0%, 16.3% Cash, Due 9/2026)(J) |  | 3,200 |  |  | 3,200 |  |  | 2,817 |
|  |  |  | 5,950 |  |  | 5,567 |
Diversified/Conglomerate Services – 16.8% |  |  |  |  |  |
Horizon Facilities Services, Inc. – Term Debt (SOFR+7.5%, 12.8% Cash, Due 6/2026)(J) |  | 57,700 |  |  | 57,700 |  |  | 57,700 |
Mason West, LLC – Term Debt (SOFR+10.0%, 15.3% Cash, Due 7/2025)(J) |  | 25,250 |  |  | 25,250 |  |  | 25,250 |
|  |  |  | 82,950 |  |  | 82,950 |
Healthcare, Education, and Childcare – 4.1% |  |  |  |  |  |
Educators Resource, Inc. – Term Debt (SOFR+10.5%, 15.8% Cash, Due 3/2025) (J) |  | 20,000 |  |  | 20,000 |  |  | 20,000 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 7.5% |  |  |  |  |  |
Brunswick Bowling Products, Inc. – Term Debt (SOFR+10.0%, 15.3% Cash, Due 1/2026)(J) |  | 17,700 |  |  | 17,700 |  |  | 17,700 |
Brunswick Bowling Products, Inc. – Term Debt (SOFR+10.0%, 15.3% Cash, Due 1/2026)(J) |  | 6,850 |  |  | 6,850 |  |  | 6,850 |
Ginsey Home Solutions, Inc. – Term Debt (SOFR+10.0%, 15.3% Cash, Due 11/2025)(J) |  | 12,200 |  |  | 12,200 |  |  | 12,200 |
|  |  |  | 36,750 |  |  | 36,750 |
Hotels, Motels, Inns, and Gaming Total – 13.2% |  |  |  |  |  |
Nocturne Luxury Villas, Inc. – Line of Credit, $0 available (SOFR+8.0%, 13.3% Cash, Due 6/2025)(J) |  | 4,000 |  |  | 4,000 |  |  | 4,000 |
Nocturne Luxury Villas, Inc. – Term Debt (SOFR+10.5%, 14.5% Cash, Due 6/2026)(J)(P) |  | 61,100 |  |  | 61,100 |  |  | 61,100 |
|  |  |  | 65,100 |  |  | 65,100 |
Leisure, Amusement, Motion Pictures, and Entertainment – 5.7% |  |  |  |  |  |
Schylling, Inc. – Term Debt (SOFR+11.0%, 16.3% Cash, Due 5/2025)(J) |  | 27,981 |  |  | 27,981 |  |  | 27,981 |
Oil and Gas – 7.1% |  |  |  |  |  |
The E3 Company, LLC – Line of Credit, $1,000 available (SOFR+5.5%, 10.8% Cash, Due 2/2025)(J) |  | 1,000 |  |  | 1,000 |  |  | 1,000 |
The E3 Company, LLC – Term Debt (SOFR+9.0%, 14.3%Cash, Due 9/2028)(J) |  | 33,750 |  |  | 33,750 |  |  | 33,750 |
|  |  |  | 34,750 |  |  | 34,750 |
Printing and Publishing – 2.6% |  |  |  |  |  |
Home Concepts Acquisition, Inc. – Line of Credit, $1,000 available (SOFR+6.0%, 11.3% Cash, Due 11/2024)(J) |  | 1,000 |  |  | 1,000 |  |  | 1,000 |
Home Concepts Acquisition, Inc. – Term Debt (SOFR+9.0%, 14.3% Cash, Due 5/2028)(J) |  | 12,000 |  |  | 12,000 |  |  | 12,000 |
|  |  |  | 13,000 |  |  | 13,000 |
Total Secured First Lien Debt |  |  |  | $ | 324,731 |  |  | $ | 324,348 |
Secured Second Lien Debt – 18.9% |  |  |  |  |  |
Aerospace and Defense – 5.2% |  |  |  |  |  |
Galaxy Technologies Holdings, Inc. – Term Debt (SOFR+4.1%, 9.4% Cash, Due 10/2026)(J) |  | $ | 6,900 |  |  | $ | 6,900 |  |  | $ | 6,900 |
Galaxy Technologies Holdings, Inc. – Term Debt (SOFR+7.0%, 12.3% Cash, Due 10/2026)(J) |  | 18,796 |  |  | 18,796 |  |  | 18,796 |
|  |  |  | 25,696 |  |  | 25,696 |
Cargo Transport – 2.6% |  |  |  |  |  |
Diligent Delivery Systems – Term Debt (SOFR+9.0%, 14.3% Cash, Due 9/2024)(Q) |  | 13,000 |  |  | 13,000 |  |  | 13,000 |
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) – 11.1% |  |  |  |  |  |
SFEG Holdings, Inc. – Term Debt (SOFR+7.0%, 12.5% Cash, Due 10/2028)(J) |  | 54,644 |  |  | 54,644 |  |  | 54,644 |
Total Secured Second Lien Debt |  |  |  | $ | 93,340 |  |  | $ | 93,340 |

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2024
(DOLLAR AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(D)(E) |  | Principal/Shares/ Units(F)(H) |  | Cost |  | Fair Value
Preferred Equity – 33.0% |  |  |  |  |  |
Buildings and Real Estate – 4.5% |  |  |  |  |  |
Dema/Mai Holdings, Inc. – Preferred Equity(C)(J) |  | 21,000 |  |  | $ | 21,000 |  |  | $ | 22,181 |
Diversified/Conglomerate Services – 4.0% |  |  |  |  |  |
Horizon Facilities Services, Inc. – Preferred Stock(C)(J) |  | 10,080 |  |  | — |  |  | — |
Mason West, LLC – Preferred Stock(C)(J) |  | 11,206 |  |  | 11,206 |  |  | 19,759 |
|  |  |  | 11,206 |  |  | 19,759 |
Healthcare, Education, and Childcare – 6.0% |  |  |  |  |  |
Educators Resource, Inc. – Preferred Stock(C)(J) |  | 8,560 |  |  | 8,560 |  |  | 29,638 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 10.1% |  |  |  |  |  |
Brunswick Bowling Products, Inc. – Preferred Stock(C)(J) |  | 6,653 |  |  | 6,653 |  |  | 48,759 |
Ginsey Home Solutions, Inc. – Preferred Stock(C)(J) |  | 19,280 |  |  | 9,583 |  |  | 891 |
|  |  |  | 16,236 |  |  | 49,650 |
Hotels, Motels, Inns, and Gaming – 2.5% |  |  |  |  |  |
Nocturne Luxury Villas, Inc. – Preferred Stock (C)(J) |  | 6,600 |  |  | 6,600 |  |  | 12,266 |
Leisure, Amusement, Motion Pictures, and Entertainment – 2.3% |  |  |  |  |  |
Schylling, Inc. – Preferred Stock(C)(J) |  | 4,000 |  |  | 4,000 |  |  | 11,369 |
Oil and Gas – 3.3% |  |  |  |  |  |
The E3 Company, LLC – Preferred Stock(C)(J) |  | 11,233 |  |  | 11,233 |  |  | 16,421 |
Printing and Publishing - 0.3% |  |  |  |  |  |
Home Concepts Acquisition, Inc. – Preferred Stock(C)(J) |  | 3,275 |  |  | 3,275 |  |  | 1,238 |
Total Preferred Equity |  |  |  | $ | 82,110 |  |  | $ | 162,522 |
Common Equity/Equivalents – 8.5% |  |  |  |  |  |
Aerospace and Defense – 0.7% |  |  |  |  |  |
Galaxy Technologies Holdings, Inc. – Common Stock(C)(J) |  | 16,957 |  |  | $ | 11,513 |  |  | $ | 3,368 |
Cargo Transport – 0.1% |  |  |  |  |  |
Diligent Delivery Systems – Common Stock Warrants(C)(Q) |  | 8 | % |  | 500 |  |  | 500 |
Diversified/Conglomerate Manufacturing – 0.0% |  |  |  |  |  |
Phoenix Door Systems, Inc. – Common Stock(C)(J) |  | 4,221 |  |  | 1,830 |  |  | — |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 0.0% |  |  |  |  |  |
Ginsey Home Solutions, Inc. – Common Stock(C)(J) |  | 63,747 |  |  | 8 |  |  | — |
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) – 7.7% |  |  |  |  |  |
SFEG Holdings, Inc. – Common Stock(C)(J) |  | 18,721 |  |  | 30,746 |  |  | 38,137 |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |
Funko Acquisition Holdings, LLC(K) – Common Units(C)(O) |  | 4,239 |  |  | 21 |  |  | 18 |
Total Common Equity/Equivalents |  |  |  | $ | 44,618 |  |  | $ | 42,023 |
Total Non-Control/Non-Affiliate Investments |  |  |  | $ | 544,799 |  |  | $ | 622,233 |

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2024
(DOLLAR AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(D)(E) |  | Principal/Shares/ Units(F)(H) |  | Cost |  | Fair Value
AFFILIATE INVESTMENTS(M) – 59.9% |  |  |  |  |  |
Secured First Lien Debt – 30.0% |  |  |  |  |  |
Diversified/Conglomerate Services – 15.7% |  |  |  |  |  |
ImageWorks Display and Marketing Group, Inc. – Term Debt (SOFR+11.0%, 16.3% Cash, Due 11/2025)(J) |  | $ | 22,000 |  |  | $ | 22,000 |  |  | $ | 22,000 |
J.R. Hobbs Co. - Atlanta, LLC – Line of Credit, $0 available (SOFR+6.0%, 11.3%, Cash, Due 6/2025)(G)(J) |  | 5,000 |  |  | 5,000 |  |  | 2,682 |
J.R. Hobbs Co. - Atlanta, LLC - Term Debt (SOFR+6.0%, 11.3% Cash, Due 6/2025) (G)(J) |  | 16,500 |  |  | 16,500 |  |  | 8,852 |
J.R. Hobbs Co. - Atlanta, LLC – Term Debt (SOFR+10.3%, 15.6% Cash, Due 6/2025) (G)(J) |  | 26,000 |  |  | 26,000 |  |  | 13,949 |
J.R. Hobbs Co. - Atlanta, LLC – Term Debt (SOFR+6.0%, 11.3% Cash, Due 6/2025) (G)(J) |  | 2,438 |  |  | 2,438 |  |  | 1,308 |
The Maids International, LLC – Term Debt (SOFR+10.5%, 15.8% Cash, Due 3/2025)(J) |  | 28,560 |  |  | 28,560 |  |  | 28,560 |
|  |  |  | 100,498 |  |  | 77,351 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 8.7% |  |  |  |  |  |
Old World Christmas, Inc. – Term Debt (SOFR+9.5%, 14.8% Cash, Due 12/2025)(J) |  | 43,000 |  |  | 43,000 |  |  | 43,000 |
Mining, Steel, Iron and Non-Precious Metals Total – 3.7% |  |  |  |  |  |
Utah Pacific Bridge & Steel, Ltd. – Term Debt (SOFR+10.0%, 15.3% Cash, Due 7/2026)(J) |  | 18,250 |  |  | 18,250 |  |  | 18,250 |
Telecommunications – 1.9% |  |  |  |  |  |
B+T Group Acquisition, Inc.(K) – Line of Credit, $0 available (SOFR+2.0%, 7.3% Cash, Due 12/2026)(J) |  | 3,080 |  |  | 3,080 |  |  | 3,080 |
B+T Group Acquisition, Inc.(K) – Line of Credit, $394 available (SOFR+2.0%, 7.3% Cash, Due 6/2025)(J) |  | 656 |  |  | 656 |  |  | 656 |
B+T Group Acquisition, Inc.(K) – Term Debt (SOFR+2.0%, 7.3% Cash, Due 12/2026)(J) |  | 14,000 |  |  | 14,000 |  |  | 5,266 |
|  |  |  | 17,736 |  |  | 9,002 |
Total Secured First Lien Debt |  |  |  | $ | 179,484 |  |  | $ | 147,603 |
Secured Second Lien Debt – 9.2% |  |  |  |  |  |
Chemicals, Plastics, and Rubber – 4.1% |  |  |  |  |  |
PSI Molded Plastics, Inc. – Term Debt (SOFR+5.5%, 10.8% Cash, Due 1/2026)(J) |  | $ | 26,618 |  |  | $ | 26,618 |  |  | $ | 20,363 |
Diversified/Conglomerate Services – 5.1% |  |  |  |  |  |
Nth Degree, Inc. – Term Debt (SOFR+8.5%, 13.8% Cash, Due 6/2029)(I) |  | 25,000 |  |  | 25,000 |  |  | 25,000 |
Total Secured Second Lien Debt |  |  |  | $ | 51,618 |  |  | $ | 45,363 |
Preferred Equity – 10.3% |  |  |  |  |  |
Chemicals, Plastics, and Rubber – 0.0% |  |  |  |  |  |
PSI Molded Plastics, Inc. – Preferred Stock(C)(J) |  | 158,598 |  |  | $ | 19,730 |  |  | $ | — |
Diversified/Conglomerate Services – 1.6% |  |  |  |  |  |
ImageWorks Display and Marketing Group, Inc. – Preferred Stock(C)(J) |  | 67,490 |  |  | 6,749 |  |  | 2,607 |
J.R. Hobbs Co. – Atlanta, LLC – Preferred Stock(C)(J) |  | 10,920 |  |  | 10,920 |  |  | — |
The Maids International, LLC – Preferred Stock(C)(J) |  | 6,640 |  |  | 6,640 |  |  | 5,426 |
|  |  |  | 24,309 |  |  | 8,033 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 6.2% |  |  |  |  |  |
Old World Christmas, Inc. – Preferred Stock(C)(J) |  | 6,180 |  |  | — |  |  | 30,638 |
Mining, Steel, Iron and Non-Precious Metals – 2.5% |  |  |  |  |  |
Utah Pacific Bridge & Steel, Ltd. – Preferred Stock(C)(J) |  | 6,000 |  |  | 6,000 |  |  | 12,287 |
Telecommunications – 0.0% |  |  |  |  |  |
B+T Group Acquisition, Inc.(K) – Preferred Stock(C)(J) |  | 14,304 |  |  | 4,722 |  |  | — |
Total Preferred Equity |  |  |  | $ | 54,761 |  |  | $ | 50,958 |

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2024
(DOLLAR AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(D)(E) |  | Principal/Shares/ Units(F)(H) |  | Cost |  | Fair Value
Common Equity/Equivalents – 10.4% |  |  |  |  |  |
Diversified/Conglomerate Services – 10.4% |  |  |  |  |  |
Nth Degree Investment Group, LLC – Common Stock(C)(J) |  | 17,216,976 |  |  | $ | 6,219 |  |  | $ | 51,442 |
Telecommunications – 0.0% |  |  |  |  |  |
B+T Group Acquisition, Inc.(K) – Common Stock Warrants(C)(J) |  | 3.5 | % |  | — |  |  | — |
Total Common Equity/Equivalents |  |  |  | $ | 6,219 |  |  | $ | 51,442 |
Total Affiliate Investments |  |  |  | $ | 292,082 |  |  | $ | 295,366 |
CONTROL INVESTMENTS(N) – 0.6% |  |  |  |  |  |
Secured First Lien Debt – 0.6% |  |  |  |  |  |
Diversified/Conglomerate Manufacturing – 0.6% |  |  |  |  |  |
Edge Adhesives Holdings, Inc.(K) – Term Debt (SOFR+5.5%, 10.8% Cash, Due 8/2024)(G)(J) |  | $ | 9,210 |  |  | $ | 9,210 |  |  | $ | 2,905 |
Total Secured First Lien Debt |  |  |  | $ | 9,210 |  |  | $ | 2,905 |
Preferred Equity – 0.0% |  |  |  |  |  |
Diversified/Conglomerate Manufacturing – 0.0% |  |  |  |  |  |
Edge Adhesives Holdings, Inc.(K) – Preferred Stock(C)(J) |  | 8,199 |  |  | $ | 8,199 |  |  | $ | — |
Total Preferred Equity |  |  |  | $ | 8,199 |  |  | $ | — |
Total Control Investments |  |  |  | $ | 17,409 |  |  | $ | 2,905 |
TOTAL INVESTMENTS – 186.8%(R) |  |  |  | $ | 854,290 |  |  | $ | 920,504 |

(A)Certain of the securities listed are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $717.3 million at fair value, are pledged as collateral to our revolving line of credit, as described further in Note 5—Borrowings in the accompanying Notes to Consolidated Financial Statements. Additionally, under Section 55 of the Investment Company Act of 1940, as amended (the "1940 Act"), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of March 31, 2024, our investment in Funko Acquisition Holdings, LLC ("Funko") was considered a non-qualifying asset under Section 55 of the 1940 Act and represented less than 0.1% of total investments, at fair value.
(B)Unless indicated otherwise, all cash interest rates are indexed to 30-day Secured Overnight Financing Rate ("SOFR"), which was 5.3% as of March 31, 2024. If applicable, paid-in-kind interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or reference rate plus a spread. Due dates represent the contractual maturity date.
(C)Security is non-income producing.
(D)Category percentages represent the fair value of each category and subcategory as a percentage of net assets as of March 31, 2024.
(E)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 820, "Fair Value Measurements and Disclosures" ("ASC 820") fair value hierarchy. Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(F)Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase.
(G)Debt security is on non-accrual status.
(H)Represents the principal balance, presented in thousands, for debt investments and the number of shares/units held for equity investments. Warrants are represented as a percentage of ownership, as applicable.
(I)Fair value was based on internal yield analysis or on estimates of value submitted by a third-party valuation firm. Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(J)Fair value was based on the total enterprise value of the portfolio company, which is generally allocated to the portfolio company’s securities in order of their relative priority in the capital structure. Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(K)One of our affiliated funds, Gladstone Capital Corporation, co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(L)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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2024
(DOLLAR AMOUNTS IN THOUSANDS)
(M)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.
(N)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.
(O)Our investment in Funko was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Our common units in Funko are convertible into class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Global Select Market under the trading symbol “FNKO.” Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(P)Debt security is subject to an interest rate ceiling.
(Q)Fair value was based on the expected exit or payoff amount, where such event has occurred or is expected to occur imminently.
(R)Cumulative gross unrealized appreciation for federal income tax purposes is $180.5 million; cumulative gross unrealized depreciation for federal income tax purposes is $115.8 million. Cumulative net unrealized appreciation is $64.7 million, based on a tax cost of $855.8 million.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS
MARCH 31, 2023
(DOLLAR AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(D)(E) |  | Principal/Shares/ Units(F)(H) |  | Cost |  | Fair Value
NON-CONTROL/NON-AFFILIATE INVESTMENTS(L) – 113.0% |  |  |  |  |  |
Secured First Lien Debt – 63.6% |  |  |  |  |  |
Buildings and Real Estate –8.7% |  |  |  |  |  |
Dema/Mai Holdings, Inc. – Term Debt (L+11.0%, 15.9% Cash, Due 7/2027)(J) |  | $ | 38,250 |  |  | $ | 38,250 |  |  | $ | 38,250 |
Diversified/Conglomerate Manufacturing – 1.2% |  |  |  |  |  |
Phoenix Door Systems, Inc – Line of Credit, $0 available (L+7.0%, 11.9% Cash (0.3% Unused Fee), Due 3/2024)(I) |  | 2,550 |  |  | 2,550 |  |  | 2,391 |
Phoenix Door Systems, Inc. – Term Debt (L+11.0%, 15.9% Cash, Due 9/2024)(I) |  | 3,200 |  |  | 3,200 |  |  | 3,000 |
|  |  |  | 5,750 |  |  | 5,391 |
Diversified/Conglomerate Services – 25.1% |  |  |  |  |  |
Counsel Press, Inc. – Term Debt (L+11.8%, 16.6% Cash, Due 3/2024)(J) |  | 21,100 |  |  | 21,100 |  |  | 21,100 |
Counsel Press, Inc. – Term Debt (L+13.0%, 17.9% Cash, Due 3/2024)(J) |  | 6,400 |  |  | 6,400 |  |  | 6,400 |
Horizon Facilities Services, Inc. – Term Debt (L+7.5%, 12.4% Cash, Due 6/2026)(J) |  | 57,700 |  |  | 57,700 |  |  | 57,700 |
Mason West, LLC – Term Debt (L+10.0%, 14.9% Cash, Due 7/2025)(J) |  | 25,250 |  |  | 25,250 |  |  | 25,250 |
|  |  |  | 110,450 |  |  | 110,450 |
Healthcare, Education, and Childcare – 4.5% |  |  |  |  |  |
Educators Resource, Inc. – Term Debt (L+10.5%, 15.4% Cash, Due 11/2023) (J) |  | 20,000 |  |  | 20,000 |  |  | 20,000 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 8.0% |  |  |  |  |  |
Brunswick Bowling Products, Inc. – Term Debt (L+10.0%, 14.9% Cash, Due 1/2026) (J) |  | 17,700 |  |  | 17,700 |  |  | 17,700 |
Brunswick Bowling Products, Inc. – Term Debt (L+10.0%, 14.9% Cash, Due 1/2026) (J) |  | 6,850 |  |  | 6,850 |  |  | 6,850 |
Ginsey Home Solutions, Inc. – Term Debt (L+10.0%, 14.9% Cash, Due 11/2025)(J) |  | 12,200 |  |  | 12,200 |  |  | 10,676 |
|  |  |  | 36,750 |  |  | 35,226 |
Hotels, Motels, Inns, and Gaming Total – 9.7% |  |  |  |  |  |
Nocturne Luxury Villas, Inc. – Line of Credit, $2,000 available (L+8.0%, 12.9% Cash, Due 6/2024)(J) |  | — |  |  | — |  |  | — |
Nocturne Luxury Villas, Inc. – Term Debt (L+10.5%, 15.4% Cash, Due 6/2026)(J) |  | 42,450 |  |  | 42,450 |  |  | 42,450 |
|  |  |  | 42,450 |  |  | 42,450 |
Leisure, Amusement, Motion Pictures, and Entertainment – 6.4% |  |  |  |  |  |
Schylling, Inc. – Term Debt (L+11.0%, 15.9% Cash, Due 5/2025)(J) |  | 27,981 |  |  | 27,981 |  |  | 27,981 |
Total Secured First Lien Debt |  |  |  | $ | 281,631 |  |  | $ | 279,748 |
Secured Second Lien Debt – 11.6% |  |  |  |  |  |
Aerospace and Defense – 5.0% |  |  |  |  |  |
Galaxy Technologies Holdings, Inc. – Term Debt (L+4.1%, 9.0% Cash, Due 10/2026)(J) |  | $ | 6,900 |  |  | $ | 6,900 |  |  | $ | 5,965 |
Galaxy Technologies Holdings, Inc. – Term Debt (L+7.0%, 11.9% Cash, Due 10/2026)(J) |  | 18,796 |  |  | 18,796 |  |  | 16,250 |
|  |  |  | 25,696 |  |  | 22,215 |
Cargo Transport – 3.0% |  |  |  |  |  |
Diligent Delivery Systems – Term Debt (L+9.0%, 13.9% Cash, Due 5/2024)(I) |  | 13,000 |  |  | 13,000 |  |  | 12,983 |
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) – 3.6% |  |  |  |  |  |
SFEG Holdings, Inc. – Term Debt (L+7.0%, 11.9% Cash, Due 11/2024)(J) |  | 3,128 |  |  | 3,128 |  |  | 3,128 |
SFEG Holdings, Inc. – Term Debt (L+7.0%, 11.9% Cash, Due 11/2024)(J) |  | 12,516 |  |  | $ | 12,516 |  |  | $ | 12,516 |
|  |  |  | 15,644 |  |  | 15,644 |
Total Secured Second Lien Debt |  |  |  | $ | 54,340 |  |  | $ | 50,842 |
Preferred Equity – 37.4% |  |  |  |  |  |
Buildings and Real Estate – 5.1% |  |  |  |  |  |
Dema/Mai Holdings, Inc. – Preferred Equity(C)(J) |  | 21,000 |  |  | 21,000 |  |  | 22,321 |

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
MARCH 31, 2023
(DOLLAR AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(D)(E) |  | Principal/Shares/ Units(F)(H) |  | Cost |  | Fair Value
Diversified/Conglomerate Services – 11.6% |  |  |  |  |  |
Counsel Press, Inc. – Preferred Stock(C)(J) |  | 6,995 |  |  | 6,995 |  |  | 27,885 |
Horizon Facilities Services, Inc. – Preferred Stock(C)(J) |  | 10,080 |  |  | — |  |  | 12,345 |
Mason West, LLC – Preferred Stock(C)(J) |  | 11,206 |  |  | 11,206 |  |  | 10,940 |
|  |  |  | 18,201 |  |  | 51,170 |
Healthcare, Education, and Childcare – 4.0% |  |  |  |  |  |
Educators Resource, Inc. – Preferred Stock(C)(J) |  | 8,560 |  |  | 8,560 |  |  | 17,445 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 7.7% |  |  |  |  |  |
Brunswick Bowling Products, Inc. – Preferred Stock(C)(J) |  | 6,653 |  |  | 6,653 |  |  | 33,969 |
Ginsey Home Solutions, Inc. – Preferred Stock(C)(J) |  | 19,280 |  |  | 9,583 |  |  | — |
|  |  |  | 16,236 |  |  | 33,969 |
Hotels, Motels, Inns, and Gaming – 3.7% |  |  |  |  |  |
Nocturne Luxury Villas, Inc. – Preferred Stock (C)(J) |  | 6,600 |  |  | 6,600 |  |  | 16,263 |
Leisure, Amusement, Motion Pictures, and Entertainment – 4.3% |  |  |  |  |  |
Schylling, Inc. – Preferred Stock(C)(J) |  | 4,000 |  |  | 4,000 |  |  | 18,922 |
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) – 1.0% |  |  |  |  |  |
SFEG Holdings, Inc. – Preferred Stock(C)(J) |  | 29,577 |  |  | 4,643 |  |  | 4,444 |
Total Preferred Equity |  |  |  | $ | 79,240 |  |  | $ | 164,534 |
Common Equity/Equivalents – 0.4% |  |  |  |  |  |
Aerospace and Defense – 0.0% |  |  |  |  |  |
Galaxy Technologies Holdings, Inc. – Common Stock(C)(J) |  | 16,957 |  |  | $ | 11,513 |  |  | $ | — |
Cargo Transport – 0.4% |  |  |  |  |  |
Diligent Delivery Systems – Common Stock Warrants(C)(J) |  | 8 | % |  | 500 |  |  | 1,724 |
Diversified/Conglomerate Manufacturing– 0.0% |  |  |  |  |  |
Phoenix Door Systems, Inc. – Common Stock(C)(J) |  | 4,221 |  |  | 1,830 |  |  | — |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 0.0% |  |  |  |  |  |
Ginsey Home Solutions, Inc. – Common Stock(C)(J) |  | 63,747 |  |  | 8 |  |  | — |
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) – 0.0% |  |  |  |  |  |
SFEG Holdings, Inc. – Common Stock(C)(J) |  | 221,500 |  |  | 222 |  |  | — |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |
Funko Acquisition Holdings, LLC(L) – Common Units(C)(O) |  | 4,239 |  |  | 21 |  |  | 27 |
Total Common Equity/Equivalents |  |  |  | $ | 14,094 |  |  | $ | 1,751 |
Total Non-Control/Non-Affiliate Investments |  |  |  | $ | 429,305 |  |  | $ | 496,875 |

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
MARCH 31, 2023
(DOLLAR AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(D)(E) |  | Principal/Shares/ Units(F)(H) |  | Cost |  | Fair Value
AFFILIATE INVESTMENTS(M) – 58.2% |  |  |  |  |  |
Secured First Lien Debt – 35.8% |  |  |  |  |  |
Diversified/Conglomerate Manufacturing – 1.0% |  |  |  |  |  |
Edge Adhesives Holdings, Inc.(L) – Term Debt (L+5.5%, 10.4% Cash, Due 8/2024)(G)(J) |  | $ | 9,210 |  |  | $ | 9,210 |  |  | $ | 4,255 |
Diversified/Conglomerate Services – 17.7% |  |  |  |  |  |
ImageWorks Display and Marketing Group, Inc. – Term Debt (L+11.0%, 15.9% Cash, Due 11/2025)(J) |  | 22,000 |  |  | 22,000 |  |  | 22,000 |
J.R. Hobbs Co. - Atlanta, LLC – Line of Credit, $0 available (L+6.0%, 10.9% Cash, Due 6/2025)(G)(J) |  | 5,000 |  |  | 5,000 |  |  | 2,744 |
J.R. Hobbs Co. - Atlanta, LLC – Term Debt (L+6.0%, 10.9% Cash, Due 6/2025) (G)(J) |  | 16,500 |  |  | 16,500 |  |  | 9,054 |
J.R. Hobbs Co. - Atlanta, LLC – Term Debt (L+10.3%, 15.1% Cash, Due 6/2025) (G)(J) |  | 26,000 |  |  | 26,000 |  |  | 14,268 |
J.R. Hobbs Co. - Atlanta, LLC – Term Debt (L+6.0%, 10.9% Cash, Due 6/2025) (G)(J) |  | 2,438 |  |  | 2,438 |  |  | 1,338 |
The Maids International, LLC – Term Debt (L+10.5%, 15.4% Cash, Due 3/2025)(J) |  | 28,560 |  |  | 28,560 |  |  | 28,560 |
|  |  |  | 100,498 |  |  | 77,964 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 9.2% |  |  |  |  |  |
Old World Christmas, Inc. – Term Debt (L+9.5%, 14.4% Cash, Due 12/2025)(J) |  | 40,500 |  |  | 40,500 |  |  | 40,500 |
Mining, Steel, Iron and Non-Precious Metals Total – 4.1% |  |  |  |  |  |
Utah Pacific Bridge & Steel, Ltd. – Term Debt (L+10.0%, 14.9% Cash, Due 7/2026)(J) |  | 18,250 |  |  | 18,250 |  |  | 18,250 |
Telecommunications – 3.8% |  |  |  |  |  |
B+T Group Acquisition, Inc.(K) – Line of Credit, $0 available (L+11.0%, 15.9% Cash, Due 12/2024)(J) |  | 2,800 |  |  | 2,800 |  |  | 2,800 |
B+T Group Acquisition, Inc.(K) – Term Debt (L+11.0%, 15.9% Cash, Due 12/2024)(J) |  | 14,000 |  |  | 14,000 |  |  | 14,000 |
|  |  |  | 16,800 |  |  | 16,800 |
Total Secured First Lien Debt |  |  |  | $ | 185,258 |  |  | $ | 157,769 |
Secured Second Lien Debt – 5.7% |  |  |  |  |  |
Chemicals, Plastics, and Rubber – 5.7% |  |  |  |  |  |
PSI Molded Plastics, Inc. – Term Debt (L+5.5%, 10.4% Cash, Due 1/2024)(J) |  | $ | 26,618 |  |  | $ | 26,618 |  |  | $ | 24,892 |
Total Secured Second Lien Debt |  |  |  | $ | 26,618 |  |  | $ | 24,892 |
Preferred Equity – 13.2% |  |  |  |  |  |
Chemicals, Plastics, and Rubber – 0.0% |  |  |  |  |  |
PSI Molded Plastics, Inc. – Preferred Stock(C)(K) |  | 158,598 |  |  | $ | 19,730 |  |  | $ | — |
Diversified/Conglomerate Manufacturing – 0.0% |  |  |  |  |  |
Edge Adhesives Holdings, Inc.(K) – Preferred Stock(C)(J) |  | 8,199 |  |  | 8,199 |  |  | — |
Diversified/Conglomerate Services – 3.2% |  |  |  |  |  |
ImageWorks Display and Marketing Group, Inc. – Preferred Stock(C)(J) |  | 67,490 |  |  | 6,749 |  |  | 10,926 |
J.R. Hobbs Co. – Atlanta, LLC – Preferred Stock(C)(J) |  | 10,920 |  |  | 10,920 |  |  | — |
The Maids International, LLC – Preferred Stock(C)(J) |  | 6,640 |  |  | 6,640 |  |  | 3,200 |
|  |  |  | 24,309 |  |  | 14,126 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 7.7% |  |  |  |  |  |
Old World Christmas, Inc. – Preferred Stock(C)(J) |  | 6,180 |  |  | — |  |  | 33,990 |
Mining, Steel, Iron and Non-Precious Metals –1.8% |  |  |  |  |  |
Utah Pacific Bridge & Steel, Ltd. – Preferred Stock(C)(J) |  | 6,000 |  |  | 6,000 |  |  | 7,748 |

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
MARCH 31, 2023
(DOLLAR AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(D)(E) |  | Principal/Shares/ Units(F)(H) |  | Cost |  | Fair Value
Telecommunications – 0.5% |  |  |  |  |  |
B+T Group Acquisition, Inc.(K) – Preferred Stock(C)(J) |  | 14,304 |  |  | 4,722 |  |  | 2,187 |
Total Preferred Equity |  |  |  | $ | 62,960 |  |  | $ | 58,051 |
Common Equity/Equivalents – 3.5% |  |  |  |  |  |
Diversified/Conglomerate Services – 3.5% |  |  |  |  |  |
Nth Degree Investment Group, LLC – Common Stock(C)(J) |  | 14,360,000 |  |  | $ | 1,219 |  |  | $ | 15,243 |
Telecommunications – 0.0% |  |  |  |  |  |
B+T Group Acquisition, Inc.(K) – Common Stock Warrants(C)(J) |  | 3.5 | % |  | — |  |  | — |
Total Common Equity/Equivalents |  |  |  | $ | 1,219 |  |  | $ | 15,243 |
Total Affiliate Investments |  |  |  | $ | 276,055 |  |  | $ | 255,955 |
CONTROL INVESTMENTS(N) – 0.2%: |  |  |  |  |  |
Secured First Lien Debt – 0.0% |  |  |  |  |  |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |
The Mountain Corporation – Line of Credit, $150 available (L+5.0%, 9.9% Cash, Due 5/2023)(G)(J) |  | $ | 4,550 |  |  | $ | 4,550 |  |  | $ | — |
Total Secured First Lien Debt |  |  |  | $ | 4,550 |  |  | $ | — |
Secured Second Lien Debt –0% |  |  |  |  |  |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |
The Mountain Corporation – Term Debt (L+4.0%, 8.9% Cash, Due 4/2024)(G)(J) |  | $ | 3,200 |  |  | $ | 3,200 |  |  | $ | — |
Total Secured Second Lien Debt |  |  |  | $ | 3,200 |  |  | $ | — |
Preferred Equity –0.0% |  |  |  |  |  |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |
The Mountain Corporation – Preferred Stock(C)(J) |  | 6,899 |  |  | $ | 6,899 |  |  | $ | — |
Total Preferred Equity |  |  |  | $ | 6,899 |  |  | $ | — |
Common Equity/Equivalents – 0.2% |  |  |  |  |  |
Leisure, Amusement, Motion Pictures, and Entertainment – 0.2% |  |  |  |  |  |
Gladstone SOG Investments, Inc. - Common Stock(C)(J) |  | 100 |  |  | 620 |  |  | 713 |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |
The Mountain Corporation – Common Stock(C)(J) |  | 751 |  |  | 1 |  |  | — |
Total Common Equity/Equivalents |  |  |  | $ | 621 |  |  | $ | 713 |
Total Control Investments |  |  |  | $ | 15,270 |  |  | $ | 713 |
TOTAL INVESTMENTS – 171.4%(P) |  |  |  | $ | 720,630 |  |  | $ | 753,543 |

(A)Certain of the securities listed are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $639.5 million at fair value, are pledged as collateral to our revolving line of credit, as described further in Note 5—Borrowings in the accompanying Notes to Consolidated Financial Statements. Additionally, under Section 55 of the 1940 Act, we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of March 31, 2023, our investment in Funko was considered a non-qualifying asset under Section 55 of the 1940 Act and represented less than 0.1% of total investments, at fair value.
(B)Unless indicated otherwise, all cash interest rates are indexed to 30-day LIBOR, which was 4.9% as of March 31, 2023. If applicable, paid-in-kind interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or 30-day LIBOR plus a spread. Due dates represent the contractual maturity date.
(C)Security is non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
MARCH 31, 2023
(DOLLAR AMOUNTS IN THOUSANDS)
(D)Category percentages represent the fair value of each category and subcategory as a percentage of net assets as of March 31, 2023.
(E)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB ASC 820 fair value hierarchy. Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(F)Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase.
(G)Debt security is on non-accrual status.
(H)Represents the principal balance, presented in thousands, for debt investments and the number of shares/units held for equity investments. Warrants are represented as a percentage of ownership, as applicable.
(I)Fair value was based on internal yield analysis or on estimates of value submitted by a third-party valuation firm. Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(J)Fair value was based on the total enterprise value of the portfolio company, which is generally allocated to the portfolio company’s securities in order of their relative priority in the capital structure. Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(K)One of our affiliated funds, Gladstone Capital Corporation, co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(L)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.
(M)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.
(N)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.
(O)Our investment in Funko was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Our common units in Funko are convertible into class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Global Select Market under the trading symbol “FNKO.” Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(P)Cumulative gross unrealized appreciation for federal income tax purposes is $150.4 million; cumulative gross unrealized depreciation for federal income tax purposes is $119.3 million. Cumulative net unrealized appreciation is $31.1 million, based on a tax cost of $722.4 million.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
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GLADSTONE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(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 are applying the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services-Investment Companies” (“ASC 946”). In addition, we have elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”). We were established for the purpose of investing in debt and equity securities of established private businesses in the United States (“U.S.”). Debt investments primarily take the form of two types of loans: secured first lien loans and secured second lien loans. Equity investments primarily take the form of preferred or common equity (or warrants or options to acquire the foregoing), often in connection with buyouts and other recapitalizations. Our investment objectives are to: (i) achieve and grow current income by investing in debt securities of established businesses that we believe will provide stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions to stockholders that grow over time, and (ii) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of established businesses, generally in combination with the aforementioned debt securities, that we believe can grow over time to permit us to sell our equity investments for capital gains. We intend that our investment portfolio over time will consist of approximately 75.0% in debt investments and 25.0% in equity investments, at cost. As of March 31, 2024, our investment portfolio was comprised of 77.0% in debt investments and 23.0% in equity investments, at cost.
Gladstone Business Investment, LLC (“Business Investment”), a wholly-owned subsidiary of ours, was established on August 11, 2006 for the sole purpose of holding certain investments pledged as collateral under our line of credit. The financial statements of Business Investment are consolidated with those of Gladstone Investment.
We are externally managed by Gladstone Management Corporation (the “Adviser”), an affiliate of ours and a U.S. Securities and Exchange Commission (“SEC”) registered investment adviser, pursuant to an investment advisory and management agreement (the “Advisory Agreement”). Administrative services are provided by Gladstone Administration, LLC (the “Administrator”), an affiliate of ours and the Adviser, pursuant to an administration agreement (the “Administration Agreement”). Refer to Note 4 — Related Party Transactions for more information regarding these arrangements.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Consolidated Financial Statements and these accompanying notes are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and conform to the applicable requirements of Regulation S-X. 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
In accordance with Article 6 of Regulation S-X, we do not consolidate portfolio company investments. Under the investment company rules and regulations pursuant to the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, codified in ASC 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries.
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Use of Estimates
Preparing financial statements requires management to make estimates and assumptions that affect the amounts reported in our accompanying Consolidated Financial Statements and these Notes to Consolidated Financial Statements. Actual results may differ from those estimates.
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 and cash equivalents are 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 and cash equivalents are generally cash and cash equivalents held in escrow received as part of an investment exit. Restricted cash and cash equivalents are carried at cost, which approximates fair value.
Classification of Investments
In accordance with the provisions of the 1940 Act applicable to BDCs, 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 FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) and the 1940 Act. Investment transactions are recorded on the trade date. Realized gains or losses are generally measured by the difference between the net proceeds from the repayment or sale and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the period, net of recoveries. Unrealized appreciation or depreciation primarily reflects the change in investment fair values, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
Board Responsibility
Our board of directors (the “Board of Directors”) has approved investment valuation policies and procedures pursuant to Rule 2a-5 under the 1940 Act (the “Policy”) and, in July 2022, designated the Adviser to serve as the Board of Directors’ valuation designee (“Valuation Designee”) under the 1940 Act.
In accordance with the 1940 Act, our Board of Directors has the ultimate responsibility for reviewing the good faith fair value determination of our investments for which market quotations are not readily available based on our Policy and for overseeing the Valuation Designee. Such review and oversight includes receiving written fair value determinations and
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supporting materials provided by the Valuation Designee, in coordination with the Administrator and with the oversight by the Company's chief valuation officer (collectively, the “Valuation Team”). The Valuation Committee of our Board of Directors (comprised entirely of independent directors) meets to review the valuation determinations and supporting materials, discusses the information provided by the Valuation Team, determines whether the Valuation Team has followed the Policy, and reviews other facts and circumstances, including current valuation risks, conflicts of interest, material valuation matters, appropriateness of valuation methodologies, back-testing results, price challenges/overrides, and ongoing monitoring and oversight of pricing services. After the Valuation Committee concludes its meeting, it and the chief valuation officer, representing the Valuation Designee, present the Valuation Committee’s findings on the Valuation Designee's determinations to the entire Board of Directors so that the full Board of Directors may review the Valuation Designee's determined fair values of such investments in accordance with the Policy.
There is no single standard for determining fair value (especially for privately-held businesses), as fair value depends upon the specific facts and circumstances of each individual investment. In determining the fair value of our investments, the Valuation Team, led by the chief valuation officer, uses the Policy, and each quarter the Valuation Committee and Board of Directors review the Policy to determine if changes thereto are advisable and 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.
A third-party valuation firm generally provides estimates of fair value on our debt investments. The Valuation Team generally assigns the third-party valuation firm’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 the third-party valuation firm’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 the third-party valuation firm’s. When this occurs, our Valuation Committee and Board of Directors review whether the Valuation Team has followed the Policy and the Valuation Committee reviews whether the Valuation Designee’s determined fair value is reasonable in light of the Policy and other relevant facts and circumstances.
We may engage other independent valuation firms to provide earnings multiple ranges, as well as other information, and evaluate such information for incorporation into the total enterprise value (“TEV”) of certain of our investments. Generally, at least once per year, we engage an independent valuation firm to value or review the valuation of each of our significant equity investments, which includes providing the information noted above. The Valuation Team evaluates such information for incorporation into our TEV, including review of all inputs provided by the independent valuation firm. The Valuation Team then presents a determination to our Valuation Committee as to the fair value. Our Valuation Committee reviews the determined fair value and whether it is reasonable in light of the Policy and other relevant facts and circumstances.
Valuation Techniques
In accordance with ASC 820, the Valuation Team uses the following techniques when valuing our investment portfolio:
•Total Enterprise Value — In determining the fair value using a TEV, the Valuation Team first calculates the TEV of the portfolio company by incorporating some or all of the following factors: the portfolio company’s ability to make payments and other specific portfolio company attributes; the earnings of the portfolio company (the trailing or projected twelve month revenue or earnings before interest, taxes, depreciation and amortization (“EBITDA”)); EBITDA multiples obtained from our indexing methodology whereby the original transaction EBITDA multiple at the time of our closing is indexed to a general subset of comparable disclosed transactions and EBITDA multiples from recent sales to third parties of similar securities in similar industries; a comparison to publicly traded securities in similar industries; and other pertinent factors. The Valuation Team generally reviews industry statistics and may use outside experts when gathering this information. Once the TEV is determined for a portfolio company, the Valuation Team generally allocates the TEV to the portfolio company’s securities based on the facts and circumstances of the securities, which typically results in the allocation of fair value to securities based on the order of their relative priority in the capital structure. Generally, the Valuation Team uses TEV to value our equity investments and, in the circumstances where we have the ability to effectuate a sale of a portfolio company, our debt investments.
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TEV is primarily calculated using EBITDA and EBITDA multiples; however, TEV may also be calculated using revenue and revenue multiples or a discounted cash flow (“DCF”) analysis whereby future expected cash flows of the portfolio company are discounted to determine a net present value using estimated risk-adjusted discount rates, which incorporate adjustments for nonperformance and liquidity risks.
•Yield Analysis — The Valuation Team generally determines the fair value of our debt investments for which we do not have the ability to effectuate a sale of the applicable portfolio company using the yield analysis, which includes a DCF calculation and assumptions that the Valuation Team believes market participants would use, including: 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 a third-party valuation firm and market quotes.
•Market Quotes — For our investments for which a limited market exists, we generally base fair value on readily available and reliable market quotations, which are corroborated by the Valuation Team (generally by using the yield analysis described 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 in the bid-to-ask price range obtained from the respective originating syndication agent’s trading desk on or near the valuation date. The Valuation Team may take further steps to consider additional information to validate that price in accordance with the Policy. For securities that are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date. For restricted securities that are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date less a discount for the restriction, which includes consideration of the nature and term to expiration of the restriction and the lack of marketability of the security.
•Investments in Funds — For equity investments in other funds for which we cannot effectuate a sale of the fund, the Valuation Team generally determines the fair value of our invested capital at the net asset value (“NAV”) provided by the fund. Any invested capital that is not yet reflected in the NAV provided by the fund is valued at par value. The Valuation Team may also determine fair value of our investments in other investment funds based on the capital accounts of the underlying entity.
In addition to the valuation techniques listed above, the Valuation Team may also consider other factors when determining the fair value of our investments, including: the nature and realizable value of the collateral, including external parties’ guaranties, any relevant offers or letters of intent to acquire the portfolio company, timing of expected loan repayments, and the markets in which the portfolio company operates.
Fair value measurements of our investments may involve subjective judgments and estimates and, due to the uncertainty inherent in valuing these securities, the determinations of fair value may fluctuate from period to period and may differ materially from the values that could be obtained if a ready market for these securities existed. Our NAV could be materially affected if the determinations regarding the fair value of our investments are materially different from the values that we ultimately realize upon our disposal of such securities. Additionally, changes in the market environment and other events that may occur over the life of the investment may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which it is recorded.
Refer to Note 3 — Investments for additional information regarding fair value measurements and our application of ASC 820.
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 on the trade date, typically when an investment is disposed of, and is computed as the difference between the cost basis of the investment on the disposition date and the net proceeds received from such disposition. Unrealized appreciation or depreciation reflects the difference between the fair value of the investment and the cost basis of such
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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 accompanying Consolidated Statement of Operations.
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, 2024, our loans to Edge Adhesives Holdings, Inc. ("Edge") and J.R. Hobbs were on non-accrual status, with an aggregate debt cost basis of $59.1 million, or 9.0% of the cost basis of all debt investments in our portfolio, and an aggregate fair value of $29.7 million, or 4.8% of the fair value of all debt investments in our portfolio. As of March 31, 2023, our loans to Edge, J.R. Hobbs and The Mountain were on non-accrual status, with an aggregate debt cost basis of $66.9 million, or 12.0% of the cost basis of all debt investments in our portfolio, and an aggregate fair value of $31.7 million, or 6.2% of the fair value of all debt investments in our portfolio.
Paid-in-kind (“PIK”) interest, computed at the contractual rate specified in the loan agreement, is added to the principal balance of the loan and recorded as interest income. Thus, the actual collection of PIK income may be deferred until the time of debt principal repayment. As of March 31, 2024 and 2023, we did not have any loans with a PIK interest component.
Success Fee Income Recognition
We record success fees as income when earned, which often occurs upon receipt of cash. Success fees are generally contractually due upon a change of control in a portfolio company, typically resulting from an exit or sale, and are non-recurring.
Dividend Income Recognition
We accrue dividend income on preferred and common equity securities to the extent that such amounts are expected to be collected and if we have the option to collect such amounts in cash or other consideration.
Deferred Financing and Offering Costs
Deferred financing and offering costs consist of costs incurred to obtain financing, including lender fees, underwriting discounts and commissions, and legal fees. Certain costs associated with our revolving line of credit are deferred and amortized using the straight-line method, which approximates the effective interest method, over the term of the revolving line of credit. Costs associated with the issuance of our notes payable and mandatorily redeemable preferred stock are presented as discounts to the liquidation value of the notes payable and mandatorily redeemable preferred stock and are amortized using the straight-line method, which approximates the effective interest method, over the term of the notes payable and respective series of preferred stock. Refer to Note 5 — Borrowings and Note 6 — Mandatorily Redeemable Preferred Stock for further discussion.
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Related Party Fees
We are party to the Advisory Agreement with the Adviser, which is indirectly owned and controlled by our chairman and chief executive officer. In accordance with the Advisory Agreement, we pay the Adviser fees as compensation for its services, consisting of a base management fee and an incentive fee. Additionally, we pay the Adviser a loan servicing fee as compensation for its services as servicer under the terms of the Fifth Amended and Restated Credit Agreement dated April 30, 2013, as amended from time to time (the "Credit Facility").
We are also party to the Administration Agreement with the Administrator, which is indirectly owned and controlled by our chairman and chief executive officer, whereby we pay separately for administrative services.
Refer to Note 4 — Related Party Transactions for additional information regarding these related party fees and agreements.
Federal Income Taxes
We intend to continue to maintain our qualification as a RIC under subchapter M of the Code for federal income tax purposes. As a RIC, we generally are not subject to federal income tax on the portion of our taxable income and gains distributed to our stockholders. To maintain our qualification as a RIC, we must maintain our status as a BDC and meet certain source-of-income and asset diversification requirements. In addition, to qualify to be taxed as a RIC, we must generally distribute to stockholders, for each taxable year, at least 90% of our taxable ordinary income plus the excess of our net short-term capital gains over net long-term capital losses (“Investment Company Taxable Income”). Our policy generally is to make distributions to our stockholders in an amount up to 100% of our Investment Company Taxable Income. We intend to continue to make sufficient distributions to qualify as a RIC and to generally limit taxable income, although we may retain some or all of our net long-term capital gains and pay income taxes on such gains. Refer to Note 10 — Federal and State Income Taxes for additional information regarding our RIC requirements.
FASB ASC 740, Income Taxes (“ASC 740”), 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 income tax returns for fiscal years 2023, 2022 and 2021 remain subject to examination by the Internal Revenue Service (“IRS”). We are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized benefits will change materially in the next twelve months.
Distributions
Distributions to stockholders are recorded on the ex-dividend date. We are required to distribute at least 90% of our Investment Company Taxable Income for each taxable year as a distribution to our stockholders to maintain our ability to be taxed as a RIC under Subchapter M of the Code. It is our policy to generally pay out as a distribution up to 100% of those amounts. The amount to be paid is determined by our Board of Directors and is based upon management’s estimate of Investment Company Taxable Income, net long-term capital gains, as well as amounts to be distributed in accordance with Section 855(a) of the Code. Based on that estimate, our Board of Directors declares monthly distributions, and supplemental distributions, as applicable, each quarter. At fiscal year-end, we may elect to treat a portion of the first distributions paid after year-end as having been paid in the prior year in accordance with Section 855(a) of the Code. We may retain some or all of our net long-term capital gains, if any, and designate them as deemed distributions, or distribute these capital gains to stockholders in cash. If we elect to retain net long-term capital gains and deem them distributed, each U.S. common stockholder will be treated as if they received a distribution of their pro-rata share of the retained net long-term capital gain and the U.S. federal income tax paid. As a result, each common stockholder will (i) be required to report their pro-rata share of the retained gain on their tax return as long-term capital gain, (ii) receive a refundable tax credit for their pro-rata share of federal income tax paid by us on the retained gain, and (iii) increase the tax basis of their shares of common stock by an amount equal to the deemed distribution less the tax credit. Refer to Note 9 — Distributions to Common Stockholders for further information.
Our common stockholders who hold their shares through our transfer agent, Computershare, Inc. (“Computershare”), have the option to participate in a dividend reinvestment plan offered by Computershare, as the plan agent. This is an “opt in” dividend reinvestment plan, meaning that common stockholders may elect to have their cash distributions automatically reinvested in additional shares of our common stock. Common stockholders who do not so elect will receive their
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distributions in cash. Any distributions reinvested under the plan will be taxable to a 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 dollar amount that would have been received if the U.S. stockholder had received the dividend or distribution in cash. The additional common shares will have a new holding period commencing on the day following the date on which the shares are credited to the common stockholder’s account. Computershare purchases shares in the open market in connection with the obligations under the plan.
Recent Accounting Pronouncements
In June 2022, the FASB issued Accounting Standards Update 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”), which clarifies the measurement and presentation of fair value for equity securities subject to contractual restrictions that prohibit the sale of the equity security. ASU 2022-03 is effective for annual reporting periods beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. Our early adoption of ASU 2022-03 did not have a material impact on our financial position, results of operations or cash flows.
NOTE 3. INVESTMENTS
Fair Value
In accordance with ASC 820, the fair value of our investments 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 those in 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, 2024 and 2023, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy, except for our investment in Funko Acquisition Holdings, LLC (“Funko”), which was valued using Level 2 inputs.
We transfer investments in and out of Level 1, 2 and 3 of the valuation hierarchy as of the beginning balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. There were no transfers in or out of Level 1, 2 and 3 during the years ended March 31, 2024 and 2023, respectively.
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As of March 31, 2024 and 2023, our investments, by security type, at fair value were categorized as follows within the ASC 820 fair value hierarchy:

|  |  | Fair Value Measurements
| Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3)
As of March 31, 2024: |  |  |  |  |  |  |  |
Secured first lien debt | $ | 474,856 |  |  | $ | — |  |  | $ | — |  |  |  | $ | 474,856 |
Secured second lien debt | 138,703 |  |  | — |  |  | — |  |  |  | 138,703 |
Preferred equity | 213,480 |  |  | — |  |  | — |  |  |  | 213,480 |
Common equity/equivalents | 93,465 |  |  | — |  |  | 18 |  | (A) |  | 93,447 |
Total Investments at March 31, 2024 | $ | 920,504 |  |  | $ | — |  |  | $ | 18 |  |  |  | $ | 920,486 |

|  |  | Fair Value Measurements
| Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3)
As of March 31, 2023: |  |  |  |  |  |  |  |
Secured first lien debt | $ | 437,517 |  |  | $ | — |  |  | $ | — |  |  |  | $ | 437,517 |
Secured second lien debt | 75,734 |  |  | — |  |  | — |  |  |  | 75,734 |
Preferred equity | 222,585 |  |  | — |  |  | — |  |  |  | 222,585 |
Common equity/equivalents | 17,707 |  |  | — |  |  | 27 |  | (A) |  | 17,680 |
Total Investments at March 31, 2023 | $ | 753,543 |  |  | $ | — |  |  | $ | 27 |  |  |  | $ | 753,516 |

(A)Fair value was determined based on the closing market price of shares of Funko, Inc. (our units in Funko can be converted into common shares of Funko, Inc.) at the reporting date less a discount for lack of marketability, as our investment was subject to certain restrictions.
The following table presents our investments, valued using Level 3 inputs within the ASC 820 fair value hierarchy, and carried at fair value as of March 31, 2024 and 2023, by caption on our accompanying Consolidated Statements of Assets and Liabilities, and by security type:
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| Total Recurring Fair Value Measurements Reported in Consolidated Statements of Assets and Liabilities Valued Using Level 3 Inputs
| March 31,
| 2024 |  | 2023
Non-Control/Non-Affiliate Investments |  |  |
Secured first lien debt | $ | 324,348 |  |  | $ | 279,748 |
Secured second lien debt | 93,340 |  |  | 50,842 |
Preferred equity | 162,522 |  |  | 164,534 |
Common equity/equivalents(A) | 42,005 |  |  | 1,724 |
Total Non-Control/Non-Affiliate Investments | 622,215 |  |  | 496,848 |
Affiliate Investments |  |  |
Secured first lien debt | 147,603 |  |  | 157,769 |
Secured second lien debt | 45,363 |  |  | 24,892 |
Preferred equity | 50,958 |  |  | 58,051 |
Common equity/equivalents | 51,442 |  |  | 15,243 |
Total Affiliate Investments | 295,366 |  |  | 255,955 |
Control Investments |  |  |
Secured first lien debt | 2,905 |  |  | — |
Secured second lien debt | — |  |  | — |
Preferred equity | — |  |  | — |
Common equity/equivalents | — |  |  | 713 |
Total Control Investments | 2,905 |  |  | 713 |
Total investments at fair value using Level 3 inputs | $ | 920,486 |  |  | $ | 753,516 |

(A)Excludes our investment in Funko with a fair value of $18 thousand and $27 thousand as of March 31, 2024 and 2023, respectively, which was valued using Level 2 inputs.
In accordance with ASC 820, the following table provides quantitative information about our investments valued using Level 3 fair value measurements as of March 31, 2024 and 2023. 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.
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| Quantitative Information about Level 3 Fair Value Measurements
| Fair Value as of |  | Valuation Technique/ Methodology |  | Unobservable Input |  | Range / Weighted-Average as of
| March 31, 2024 |  | March 31, 2023 |  |  |  | March 31, 2024 |  | March 31, 2023
Secured first lien debt | $ | 474,856 |  |  | $ | 432,126 |  |  | TEV |  | EBITDA multiple |  | 4.2x – 8.8x / 6.4x |  | 4.4x – 7.7x / 6.4x
|  |  |  |  |  |  | EBITDA |  | $1,091 – $23,547 / $10,509 |  | $4,251 – $19,083 / $10,764
|  |  |  |  |  |  | Revenue multiple |  | 0.3x – 0.6x / 0.4x |  | 0.3x – 0.6x / 0.3x
|  |  |  |  |  |  | Revenue |  | $31,586 – $93,916 / $77,580 |  | $15,483 – $109,615 / $94,957
| — |  |  | 5,391 |  |  | Yield Analysis |  | Discount Rate |  | N/A |  | 19.4% – 19.9% / 19.7%
Secured second lien debt | 113,703 |  |  | 62,750 |  |  | TEV |  | EBITDA multiple |  | 5.1x – 15.0x / 7.0x |  | 5.4x – 6.6x / 6.2x
|  |  |  |  |  |  | EBITDA |  | $5,648 – $23,003 / $14,192 |  | $4,112 – $6,379 / $5,501
| 25,000 |  |  | 12,984 |  |  | Yield Analysis |  | Discount Rate |  | 13.8% – 13.8% / 13.8% |  | 14.0% – 14.0% / 14.0%
Preferred equity | 213,480 |  |  | 222,585 |  |  | TEV |  | EBITDA multiple |  | 4.2x – 8.8x / 6.1x |  | 4.4x – 7.7x / 5.9x
|  |  |  |  |  |  | EBITDA |  | $1,091 – $23,547 / $9,502 |  | $4,251 – $19,083 / $9,486
|  |  |  |  |  |  | Revenue multiple |  | 0.3x – 0.6x / 0.4x |  | 0.3x – 0.6x / 0.4x
|  |  |  |  |  |  | Revenue |  | $31,586 – $93,916 / $75,099 |  | $15,483 – $109,615 / $69,247
Common equity/equivalents(A) | 93,447 |  |  | 17,680 |  |  | TEV |  | EBITDA multiple |  | 5.0x – 15.0x / 6.4x |  | 4.7x – 7.2x / 6.4x
|  |  |  |  |  |  | EBITDA |  | $1,154 – $63,269 / $23,615 |  | $1,105 – $30,833 / $6,273
Total | $ | 920,486 |  |  | $ | 753,516 |  |  |  |  |  |  |  |  |

(A)Fair value as of both March 31, 2024 and 2023 excludes our investment in Funko with a fair value of $18 thousand and $27 thousand, respectively, which was valued using Level 2 inputs.
Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in discount rates, EBITDA, or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of our investments. Generally, an increase/(decrease) in discount rates or a (decrease)/increase in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a (decrease)/increase in the fair value of certain of our investments.
Changes in Level 3 Fair Value Measurements of Investments
The following tables provide our portfolio’s changes in fair value, broken out by security type, during the years ended March 31, 2024 and 2023 for all investments for which the Adviser determines fair value using unobservable (Level 3) inputs.
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

| Secured First Lien Debt |  | Secured Second Lien Debt |  | Preferred Equity |  | Common Equity/ Equivalents |  | Total
Year ended March 31, 2024: |  |  |  |  |  |  |  |  |
Fair value as of March 31, 2023 | $ | 437,517 |  |  | $ | 75,734 |  |  | $ | 222,585 |  |  | $ | 17,680 |  |  | $ | 753,516 |
Total gain (loss): |  |  |  |  |  |  |  |  |
Net realized gain (loss)(A) | (4,550) |  |  | (3,200) |  |  | 36,833 |  |  | 881 |  |  | 29,964 |
Net unrealized appreciation (depreciation)(B) | (7,859) |  |  | (1,031) |  |  | 34,050 |  |  | 37,159 |  |  | 62,319 |
Reversal of previously recorded (appreciation) depreciation upon realization(B) | 3,212 |  |  | 3,200 |  |  | (35,329) |  |  | (92) |  |  | (29,009) |
New investments, repayments and settlements(C): |  |  |  |  |  |  |  |  |
Issuances / originations | 74,536 |  |  | 64,000 |  |  | 14,688 |  |  | 30,700 |  |  | 183,924 |
Settlements / repayments | (28,000) |  |  | — |  |  | — |  |  | — |  |  | (28,000) |
Sales(D) | — |  |  | — |  |  | (50,726) |  |  | (1,502) |  |  | (52,228) |
Transfers(E) | — |  |  | — |  |  | (8,621) |  |  | 8,621 |  |  | — |
Fair value as of March 31, 2024 | $ | 474,856 |  |  | $ | 138,703 |  |  | $ | 213,480 |  |  | $ | 93,447 |  |  | $ | 920,486 |

| Secured First Lien Debt |  | Secured Second Lien Debt |  | Preferred Equity |  | Common Equity/ Equivalents |  | Total
Year ended March 31, 2023: |  |  |  |  |  |  |  |  |
Fair value as of March 31, 2022 | $ | 425,087 |  |  | $ | 67,958 |  |  | $ | 217,599 |  |  | $ | 3,678 |  |  | $ | 714,322 |
Total gain (loss): |  |  |  |  |  |  |  |  |
Net realized gain (loss)(A) | — |  |  | (10,000) |  |  | 20,778 |  |  | — |  |  | 10,778 |
Net unrealized appreciation (depreciation)(B) | (29,552) |  |  | (5,235) |  |  | 11,216 |  |  | 13,622 |  |  | (9,949) |
Reversal of previously recorded (appreciation) depreciation upon realization(B) | — |  |  | 10,001 |  |  | (12,250) |  |  | — |  |  | (2,249) |
New investments, repayments and settlements(C): |  |  |  |  |  |  |  |  |
Issuances / originations | 107,200 |  |  | 5,188 |  |  | 21,000 |  |  | 380 |  |  | 133,768 |
Settlements / repayments | (50,800) |  |  | (6,596) |  |  | — |  |  | — |  |  | (57,396) |
Sales(D) | — |  |  | — |  |  | (35,758) |  |  | — |  |  | (35,758) |
Transfers(E) | (14,418) |  |  | 14,418 |  |  | — |  |  | — |  |  | — |
Fair value as of March 31, 2023 | $ | 437,517 |  |  | $ | 75,734 |  |  | $ | 222,585 |  |  | $ | 17,680 |  |  | $ | 753,516 |

(A)Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of Operations for the respective years ended March 31, 2024 and 2023.
(B)Included in net unrealized appreciation (depreciation) of investments on our accompanying Consolidated Statements of Operations for the respective years ended March 31, 2024 and 2023.
(C)Includes increases in the cost basis of investments resulting from new portfolio investments, the amortization of discounts, 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)2024: Includes $0.3 million of proceeds from the recapitalization of Old World Christmas, Inc. ("Old World")
2023: Includes $13.4 million of proceeds from the recapitalization of Old World and $12.3 million of proceeds from the recapitalization of Horizon Facilities Services, Inc ("Horizon").
(E)2024: Transfers represent preferred equity of SFEG Holdings, Inc. ("SFEG") with a total cost basis and fair value of $4.8 million and $8.6 million, respectively, which was converted to common equity in October 2023.
2023: Transfers include (1) secured second lien debt of Ginsey with a total cost basis and fair value of $12.2 million, which was converted into secured first lien debt in August 2022 and (2) secured first lien debt of PSI Molded Plastics, Inc. with a total cost basis and fair value of $26.6 million, which was converted into secured second lien debt in September 2022.
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Investment Activity
During the fiscal year ended March 31, 2024, the following significant transactions occurred:
•In May 2023, we invested $15.3 million in a new portfolio company, Home Concepts Acquisition, Inc. ("Home Concepts"), in the form of $12.0 million of secured first lien debt and $3.3 million of preferred equity. Home Concepts, headquartered in Santa Barbara, California, is a leading home improvement advertising publication focusing on connecting homeowners to high-quality residential repair and remodeling businesses.
•In June 2023, we recapitalized our existing investment in Old World and invested an additional $2.5 million in the form of secured first lien debt. In connection with this investment, we received proceeds of $2.2 million, of which $1.9 million was recognized as dividend income and $0.3 million was recognized as a realized gain.
•In June 2023, we invested an additional $30.0 million in the form of $25.0 million of secured second lien debt and $5.0 million of common equity in Nth Degree Investment Group, LLC ("Nth Degree") to fund an add-on acquisition.
•In June 2023, we received a $1.5 million escrow settlement in connection with our December 2021 exit of SOG Specialty Knives & Tools, LLC, of which $0.6 million was recognized as a return of cost basis and $0.9 million as a realized gain. As a result of the escrow release, there are no remaining assets held by Gladstone SOG Investments, Inc.
•In August 2023, we invested an additional $18.7 million in the form of secured first lien debt in Nocturne Luxury Villas, Inc. ("Nocturne") to fund an add-on acquisition.
•In September 2023, we invested $46.0 million in a new portfolio company, The E3 Company, LLC ("E3"), in the form of $34.8 million of secured first lien debt and $11.2 million of preferred equity. E3, headquartered in Kilgore, Texas, is a market leader in advanced pressure management solutions for oil and gas well completions.
•In October 2023, we invested an additional $64.7 million in the form of $39.0 million of secured second lien debt and $25.7 million of common equity in SFEG to fund an add-on acquisition. In connection with the investment, our existing preferred equity, with a cost basis of $4.8 million, was converted to common equity.
•In October 2023, we exited our investment in Counsel Press, Inc., which resulted in success fee income of $1.4 million, a realized gain of $43.5 million and the repayment of our debt investment of $27.5 million at par.
•In March 2024, we recognized a $14.7 million realized loss on our preferred and common equity investments and related first and second lien debt investments in The Mountain upon its liquidation and dissolution.
Investment Concentrations
As of March 31, 2024, our investment portfolio consisted of investments in 24 portfolio companies located in 18 states across 16 different industries with an aggregate fair value of $920.5 million. Our investments in SFEG, Nocturne, Nth Degree, Old World and Brunswick Bowling Products, Inc. represent our five largest portfolio investments at fair value, and collectively comprised $393.5 million, or 42.7%, of our total investment portfolio at fair value as of March 31, 2024.
The following table summarizes our investments by security type as of March 31, 2024 and 2023:

| March 31, 2024 |  | March 31, 2023
| Cost |  | Fair Value |  | Cost |  | Fair Value
Secured first lien debt | $ | 513,425 |  |  | 60.1 | % |  | $ | 474,856 |  |  | 51.6 | % |  | $ | 471,439 |  |  | 65.4 | % |  | $ | 437,517 |  |  | 58.1 | %
Secured second lien debt | 144,958 |  |  | 16.9 | % |  | 138,703 |  |  | 15.0 | % |  | 84,158 |  |  | 11.7 | % |  | 75,734 |  |  | 10.1 | %
Total debt | 658,383 |  |  | 77.0 | % |  | 613,559 |  |  | 66.6 | % |  | 555,597 |  |  | 77.1 | % |  | 513,251 |  |  | 68.2 | %
Preferred equity | 145,070 |  |  | 17.0 | % |  | 213,480 |  |  | 23.2 | % |  | 149,099 |  |  | 20.7 | % |  | 222,585 |  |  | 29.5 | %
Common equity/equivalents | 50,837 |  |  | 6.0 | % |  | 93,465 |  |  | 10.2 | % |  | 15,934 |  |  | 2.2 | % |  | 17,707 |  |  | 2.3 | %
Total equity/equivalents | 195,907 |  |  | 23.0 | % |  | 306,945 |  |  | 33.4 | % |  | 165,033 |  |  | 22.9 | % |  | 240,292 |  |  | 31.8 | %
Total investments | $ | 854,290 |  |  | 100.0 | % |  | $ | 920,504 |  |  | 100.0 | % |  | $ | 720,630 |  |  | 100.0 | % |  | $ | 753,543 |  |  | 100.0 | %

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Investments at fair value consisted of the following industry classifications as of March 31, 2024 and 2023:

| March 31, 2024 |  | March 31, 2023
| Fair Value |  | Percentage of Total Investments |  | Fair Value |  | Percentage of Total Investments
Diversified/Conglomerate Services | $ | 264,535 |  |  | 28.7 | % |  | $ | 268,954 |  |  | 35.7 | %
Home and Office Furnishings, Housewares, and Durable Consumer Products | 160,038 |  |  | 17.3 | % |  | 143,685 |  |  | 19.1 | %
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) | 92,781 |  |  | 10.1 | % |  | 20,088 |  |  | 2.7 | %
Hotels, Motels, Inns, and Gaming | 77,366 |  |  | 8.4 | % |  | 58,713 |  |  | 7.8 | %
Buildings and Real Estate | 60,431 |  |  | 6.6 | % |  | 60,571 |  |  | 8.0 | %
Oil and Gas | 51,171 |  |  | 5.6 | % |  | — |  |  | — | %
Healthcare, Education, and Childcare | 49,638 |  |  | 5.4 | % |  | 37,445 |  |  | 5.0 | %
Leisure, Amusement, Motion Pictures, and Entertainment | 39,350 |  |  | 4.3 | % |  | 47,616 |  |  | 6.3 | %
Mining, Steel, Iron and Non-Precious Metals | 30,537 |  |  | 3.3 | % |  | 25,998 |  |  | 3.5 | %
Aerospace and Defense | 29,064 |  |  | 3.2 | % |  | 22,215 |  |  | 2.8 | %
Chemicals, Plastics, and Rubber | 20,363 |  |  | 2.2 | % |  | 24,891 |  |  | 3.3 | %
Printing and Publishing | 14,238 |  |  | 1.5 | % |  | — |  |  | — | %
Cargo Transport | 13,500 |  |  | 1.5 | % |  | 14,707 |  |  | 2.0 | %
Telecommunications | 9,002 |  |  | 1.0 | % |  | 18,987 |  |  | 2.5 | %
Other < 2.0% | 8,490 |  |  | 0.9 | % |  | 9,673 |  |  | 1.3 | %
Total investments | $ | 920,504 |  |  | 100.0 | % |  | $ | 753,543 |  |  | 100.0 | %

Investments at fair value were included in the following geographic regions of the U.S. as of March 31, 2024 and 2023:

|  | March 31, 2024 |  | March 31, 2023
Location |  | Fair Value |  | Percentage of Total Investments |  | Fair Value |  | Percentage of Total Investments
South |  | $ | 346,838 |  |  | 37.7 | % |  | $ | 171,056 |  |  | 22.7 | %
West |  | 223,871 |  |  | 24.3 | % |  | 197,989 |  |  | 26.3 | %
Northeast |  | 207,870 |  |  | 22.6 | % |  | 266,612 |  |  | 35.4 | %
Midwest |  | 141,925 |  |  | 15.4 | % |  | 117,886 |  |  | 15.6 | %
Total investments |  | $ | 920,504 |  |  | 100.0 | % |  | $ | 753,543 |  |  | 100 | %

The geographic region indicates the location of the headquarters for our portfolio companies. A portfolio company may have additional business locations in other geographic regions.
Investment Principal Repayments
The following table summarizes the contractual principal repayment and maturity of our investment portfolio for the next five fiscal years and thereafter, assuming no voluntary prepayments, as of March 31, 2024:

|  |  |  | Amount
For the fiscal years ending March 31: |  | 2025 |  | $ | 72,770 |
|  | 2026 |  | 236,193 |
|  | 2027 |  | 185,776 |
|  | 2028 |  | 38,250 |
|  | 2029 |  | 100,394 |
|  | Thereafter |  | 25,000 |
|  | Total contractual repayments |  | $ | 658,383 |
|  | Investments in equity securities |  | 195,907 |
|  | Total cost basis of investments held as of March 31, 2024: |  | $ | 854,290 |

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Receivables from Portfolio Companies
Receivables from portfolio companies represent non-recurring costs that we incurred on behalf of portfolio companies. Such receivables, net of any allowance for uncollectible receivables, are included in Other assets, net on our accompanying Consolidated Statements of Assets and Liabilities. We generally maintain an allowance for uncollectible receivables from portfolio companies when the receivable balance becomes 90 days or more past due or if it is determined, based upon management’s judgment, that the portfolio company is unable to pay its obligations. We write-off accounts receivable when we have exhausted collection efforts and have deemed the receivables uncollectible. As of March 31, 2024 and 2023, we had gross receivables from portfolio companies of $2.2 million. As of March 31, 2024 and 2023, the allowance for uncollectible receivables was $1.4 million and $1.6 million, respectively.
NOTE 4. RELATED PARTY TRANSACTIONS
Transactions with the Adviser
We pay the Adviser certain fees as compensation for its services under the Advisory Agreement, consisting of a base management fee and an incentive fee and a loan servicing fee for the Adviser’s role as servicer pursuant to the Credit Facility, all as described below. On July 11, 2023, our Board of Directors, including a majority of the directors who are not parties to the Advisory Agreement or interested persons of either party, approved the annual renewal of the Advisory Agreement through August 31, 2024.
Two of our executive officers, David Gladstone (our chairman and chief executive officer) and Terry Lee Brubaker (our chief operating officer) serve as directors and executive officers of the Adviser, which is 100% indirectly owned and controlled by Mr. Gladstone. David Dullum (our president) is also the executive vice president of private equity (buyouts) of the Adviser. Michael LiCalsi, our general counsel and secretary (who also serves as the Administrator’s president, general counsel and secretary), is also the executive vice president of administration, general counsel, and secretary of our Adviser.
The following table summarizes the base management fees, loan servicing fees, incentive fees, and associated non-contractual, unconditional, and irrevocable credits reflected in our accompanying Consolidated Statements of Operations:

| Year Ended March 31,
| 2024 |  | 2023 |  | 2022
Average total assets subject to base management fee(A) | $ | 875,000 |  |  | $ | 739,900 |  |  | $ | 705,650 |
Multiplied by annual base management fee of 2.0% | 2.0 | % |  | 2.0 | % |  | 2.0 | %
Base management fee(B) | 17,500 |  |  | 14,798 |  |  | 14,113 |
Credits to fees from Adviser - other(B) | (5,596) |  |  | (3,811) |  |  | (6,497) |
Net base management fee | $ | 11,904 |  |  | $ | 10,987 |  |  | $ | 7,616 |
Loan servicing fee(B) | $ | 9,118 |  |  | $ | 7,880 |  |  | $ | 7,178 |
Credits to base management fee - loan servicing fee(B) | (9,118) |  |  | (7,880) |  |  | (7,178) |
Net loan servicing fee | $ | — |  |  | $ | — |  |  | $ | — |
Incentive fee – income-based | $ | 8,336 |  |  | $ | 9,176 |  |  | $ | 8,074 |
Incentive fee – capital gains-based(C) | 12,711 |  |  | (296) |  |  | 18,286 |
Total incentive fee(B) | 21,047 |  |  | 8,880 |  |  | 26,360 |
Credits to fees from Adviser - other(B) | — |  |  | — |  |  | — |
Net total incentive fee | $ | 21,047 |  |  | $ | 8,880 |  |  | $ | 26,360 |

(A)Average total assets subject to the base management fee is defined in the Advisory Agreement as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective periods and adjusted appropriately for any share issuances or repurchases during the periods.
(B)Reflected as a line item on our accompanying Consolidated Statements of Operations.
(C)The capital gains-based incentive fees are recorded in accordance with GAAP and do not necessarily reflect amounts contractually due under the terms of the Advisory Agreement.
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Base Management Fee
The base management fee is payable quarterly to the Adviser pursuant to our Advisory Agreement and is assessed at an annual rate of 2.0%, computed on the basis of the value of our average gross assets at the end of the two most recently completed quarters (inclusive of the current quarter), which are total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective period and adjusted appropriately for any share issuances or repurchases during the period.
Additionally, pursuant to the requirements of the 1940 Act, the Adviser makes available significant managerial assistance to our portfolio companies. The Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance. Such services may include: (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) taking a primary role in interviewing, vetting, and negotiating employment contracts with candidates in connection with adding and retaining key portfolio company management team members. The Adviser non-contractually, unconditionally, and irrevocably credits 100% of any fees received for such services 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, was retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser, primarily related to the valuation of portfolio companies. For the years ended March 31, 2024, 2023, and 2022, these credits totaled $0.3 million, $0.2 million, and $0.3 million, respectively.
Loan Servicing Fee
The Adviser also services the loans held by our wholly-owned subsidiary, Business Investment (the borrower under the Credit Facility), in return for which the Adviser receives a 2.0% annual fee based on the monthly aggregate outstanding balance of loans pledged under the Credit Facility. Since Business Investment is a consolidated subsidiary of ours, coupled with the fact that the total base management fee paid to the Adviser pursuant to the Advisory Agreement cannot exceed 2.0% of total assets (less any uninvested cash or cash equivalents resulting from borrowings) during any given calendar year, we treat payment of the loan servicing fee pursuant to the Credit Facility as a pre-payment of the base management fee under the Advisory Agreement. Accordingly, these loan servicing fees are 100% non-contractually, unconditionally, and irrevocably credited back to us by the Adviser.
Incentive Fee
The incentive fee payable to the Adviser under our Advisory Agreement consists of two parts: an income-based incentive fee and a capital gains-based incentive fee.
The income-based incentive fee rewards the Adviser if our quarterly net investment income (before giving effect to any incentive fee) exceeds 1.75% of our net assets, which we define as total assets less indebtedness and before taking into account any incentive fees payable or contractually due but not payable during the period, at the end of the immediately preceding calendar quarter, adjusted appropriately for any share issuances or repurchases during the period (the “Hurdle Rate”). The income-based incentive fee with respect to our pre-incentive fee net investment income is payable quarterly to the Adviser and is computed as follows:
•No incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the Hurdle Rate;
•100.0% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the Hurdle Rate but is less than 2.1875% of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter; and
•20.0% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter.
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
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preceding calendar year. The capital gains-based incentive fee payable to the Adviser is calculated based on (i) cumulative aggregate realized capital gains since our inception, less (ii) cumulative aggregate realized capital losses since our inception, less (iii) the entire portfolio’s aggregate unrealized capital depreciation, if any, as of the date of the calculation. If this number is positive at the applicable calculation date, then the capital gains-based incentive fee for such year equals 20.0% of such amount, less the aggregate amount of any capital gains-based incentive fees paid in respect of our portfolio in all prior years. For calculation purposes, cumulative aggregate realized capital gains, if any, equals the sum of the excess between the net sales price of each investment, when sold, and the original cost of such investment since our inception. Cumulative aggregate realized capital losses equals the sum of the deficit between the net sales price of each investment, when sold, and the original cost of such investment since our inception. The entire portfolio’s aggregate unrealized capital depreciation, if any, equals the sum of the deficit between the fair value of each investment security as of the applicable calculation date and the original cost of such investment security. As of and for the years ended March 31, 2024 and 2022, capital gains-based incentive fees of $1.1 million and $5.3 million, respectively, were contractually due and paid to the Adviser. For the year ended March 31, 2023, no capital gains-based incentive fees were contractually due and paid to the Adviser.
In accordance with GAAP, accrual of the capital gains-based incentive fee is determined as if our investments had been liquidated at their fair values as of the end of the reporting period. Therefore, GAAP requires that the capital gains-based incentive fee accrual consider the aggregate unrealized capital appreciation in the calculation, as a capital gains-based incentive fee would be payable if such unrealized capital appreciation were realized. There can be no assurance that any such unrealized capital appreciation will be realized in the future. Accordingly, a GAAP accrual is calculated at the end of the reporting period based on (i) cumulative aggregate realized capital gains since our inception, plus (ii) the entire portfolio’s aggregate unrealized capital appreciation, if any, less (iii) cumulative aggregate realized capital losses since our inception, less (iv) the entire portfolio’s aggregate unrealized capital depreciation, if any. If such amount is positive at the end of a reporting period, a capital gains-based incentive fee equal to 20.0% of such amount, less the aggregate amount of capital gains-based incentive fees accrued in all prior years, is recorded, regardless of whether such amount is contractually due under the terms of the Advisory Agreement. If such amount is negative, then there is no accrual for such period and prior period accruals are reversed, as appropriate. During the years ended March 31, 2024, 2023 and 2022, we recorded/(reversed) capital gains-based incentive fees of $12.7 million, $(0.3) million and $18.3 million, respectively.
Transactions with the Administrator
We reimburse the Administrator pursuant to the Administration Agreement for our allocable portion of the Administrator’s expenses incurred while performing services to us, which are primarily rent and salaries and benefits expenses of the Administrator’s employees, including, our chief financial officer and treasurer, chief valuation officer, chief compliance officer, and general counsel and secretary, and their respective staffs. Two of our executive officers, David Gladstone (our chairman and chief executive officer) and Terry Lee Brubaker (our chief operating officer) serve as members of the board of managers and executive officers of the Administrator, which is 100% indirectly owned and controlled by Mr. Gladstone. Another of our officers, Mr. LiCalsi (our general counsel and secretary), serves as the Administrator’s president as well as the executive vice president of administration, general counsel, and secretary for the Adviser.
Our allocable portion of the Administrator’s expenses is generally derived by multiplying the Administrator’s total expenses by the approximate percentage of time during the current quarter the Administrator’s employees performed services for us in relation to their time spent performing services for all companies serviced by the Administrator. On July 11, 2023, our Board of Directors, including a majority of the directors who are not parties to the Administration Agreement or interested persons of either party, approved the annual renewal of the Administration Agreement through August 31, 2024. Administration fees for each of the years ended March 31, 2024, 2023, and 2022 were $1.8 million.
Transactions with Gladstone Securities, LLC
Gladstone Securities, LLC (“Gladstone Securities”) is a privately held broker dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation. Gladstone Securities is an affiliate of ours, as its parent company is 100% indirectly owned and controlled by David Gladstone, our chairman and chief executive officer. Mr. Gladstone also serves on the board of managers of Gladstone Securities.
Other Transactions
From time to time, Gladstone Securities provides services, such as investment banking and due diligence services, to certain of our portfolio companies, for which it receives a fee. Any such fees paid by portfolio companies to Gladstone
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Securities do not impact the fees we pay to the Adviser or the non-contractual, unconditional, and irrevocable credits against the base management fee. During the years ended March 31, 2024, 2023, and 2022, the fees received by Gladstone Securities from portfolio companies totaled $0.3 million, $1.6 million, and $3.2 million, respectively.
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,
| 2024 |  | 2023
Base management and loan servicing fee due to Adviser, net of credits | $ | 2,386 |  |  | $ | 1,574 |
Incentive fee due to Adviser(A) | 38,936 |  |  | 27,259 |
Other due to Adviser | 22 |  |  | 86 |
Total fees due to Adviser | $ | 41,344 |  |  | $ | 28,919 |
Fee due to Administrator | 727 |  |  | 716 |
Total related party fees due | $ | 42,071 |  |  | $ | 29,635 |

(A)Includes a capital gains-based incentive fee of $36.7 million and $25.1 million as of March 31, 2024 and 2023, respectively, recorded in accordance with GAAP requirements and which was not contractually due under the terms of the Advisory Agreement. Refer to Note 4 — Related Party Transactions—Transactions with the Adviser—Incentive Fee for additional information, including capital gains-based incentive fee payments made.
Net expenses receivable from Gladstone Capital Corporation, one of our affiliated funds, for reimbursement of certain co-investment expenses, there were $0.1 million of co-investment expenses as of March 31, 2024. There were no co-investment expenses as of March 31, 2023. These amounts are generally settled in the quarter subsequent to being incurred and have been included in Other assets, net on the accompanying Consolidated Statements of Assets and Liabilities as of March 31, 2024 and 2023, respectively.
NOTE 5. BORROWINGS
Revolving Line of Credit
On February 5, 2024, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 9 to the Credit Facility with KeyBank National Association (“KeyBank”), as administrative agent, joint lead arranger and lender, Fifth Third Bank as managing agent, joint lead arranger and lender, the Adviser, as servicer, and certain other lenders party thereto. The Credit Facility was amended to increase the size from $135.0 million to $200.0 million and update certain existing terms. The Credit Facility continues to include customary terms, covenants, events of default and constraints on borrowing availability based on collateral tests for a credit facility of its size and nature.
On October 30, 2023, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 8 to the Credit Facility. The revolving period was extended to October 30, 2026, and if not renewed or extended by such date, all principal and interest will be due and payable on October 30, 2028 (two years after the revolving period end date). The size of the Credit Facility was reduced from $180.0 million to $135.0 million.
On April 10, 2023, we, through our wholly-owned subsidiary, Business Investment, entered into Amendment No. 7 to the Credit Facility. The reference rate was updated from LIBOR to Term SOFR plus an 11 basis point credit spread adjustment.
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Advances under the Credit Facility generally bear interest at 30-day Term SOFR, subject to a floor of 0.35%, plus 3.15% per annum until October 30, 2026, with the margin then increasing to 3.40% for the period from October 30, 2026 to October 30, 2027, and increasing further to 3.65% thereafter with a SOFR credit spread adjustment of 10 basis points. The Credit Facility has an unused commitment fee on the daily unused commitment amount of 0.50% per annum if the daily unused commitment amount is less than or equal to 50% of the total commitment amount, 0.75% per annum if the daily unused commitment amount is greater than 50% but less than or equal to 65% of the total commitment amount, and 1.00% per annum if the daily unused commitment amount is greater than 65% of the total commitment amount.
The following tables summarize noteworthy information related to the Credit Facility:

| As of March 31,
| 2024 |  | 2023
Commitment amount | $ | 200,000 |  |  | $ | 180,000 |
Borrowings outstanding at cost | $ | 67,000 |  |  | $ | 35,200 |
Availability(A) | $ | 133,000 |  |  | $ | 144,800 |

| For the Years Ended March 31
| 2024 |  | 2023 |  | 2022
Weighted-average borrowings outstanding | $ | 60,980 |  |  | $ | 16,186 |  |  | $ | 18,051 |
Effective interest rate(B) | 10.1 | % |  | 17.3 | % |  | 12.5 | %
Commitment (unused) fees incurred | $ | 986 |  |  | $ | 1,655 |  |  | $ | 1,641 |

(A)Availability is subject to various constraints, characteristics, and applicable advance rates based on collateral quality under the Credit Facility, which equated to an adjusted availability of $133.0 million and $144.8 million as of March 31, 2024 and 2023, respectively.
(B)Excludes the impact of deferred financing costs and includes unused commitment fees.
Interest is payable monthly during the term of the Credit Facility. Available borrowings are subject to various constraints and applicable advance rates, which are generally based on the size, characteristics, and quality of the collateral pledged by Business Investment. The Credit Facility also requires that any interest and principal payments on pledged loans be remitted directly by the borrower into a lockbox account with KeyBank. KeyBank is also the trustee of the account and generally remits the collected funds to us once a month. Amounts collected in the lockbox account with KeyBank are presented as Due from administrative agent on the accompanying Consolidated Statements of Assets and Liabilities.
Among other things, the Credit Facility contains a performance guaranty that requires us to maintain (i) a minimum net worth of the greater of $210.0 million or $210.0 million plus 50% of all equity and subordinated debt raised minus 50% of any equity or subordinated debt redeemed or retired after November 16, 2016, which equated to $348.7 million as of March 31, 2024, (ii) asset coverage with respect to senior securities representing indebtedness of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act); and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code. As of March 31, 2024, and as defined in the performance guaranty of the Credit Facility, we had a net worth of $822.4 million, asset coverage on our senior securities representing indebtedness of 219.0%, calculated in compliance with the requirements of Sections 18 and 61 of the 1940 Act, and an active status as a BDC and RIC. As of March 31, 2024, we were in compliance with all covenants under the Credit Facility.
Fair Value
We elected to apply the fair value option of ASC Topic 825, “Financial Instruments,” to the Credit Facility, which was consistent with our application of ASC 820 to our investments. Generally, the fair value of the Credit Facility is determined using a yield analysis, which includes a DCF calculation and also takes into account the assumptions the Valuation Team believes market participants would use, including the estimated remaining life, counterparty credit risk, current market yield and interest rate spreads of similar securities as of the measurement date. At March 31, 2024, the discount rate used to determine the fair value of the Credit Facility was 30-day Term SOFR, with a 0.35% floor, plus 3.25% per annum, plus an unused commitment fee of 1.0%. At March 31, 2023, the discount rate used to determine the fair value of the Credit Facility was 30-day LIBOR, with a 0.50% floor, plus 2.94% per annum, plus an unused commitment fee of 1.0%. Generally, an increase or decrease in the discount rate used in the DCF calculation may result in a corresponding decrease or increase, respectively, in the fair value of the Credit Facility. At each of March 31, 2024 and 2023, the Credit Facility
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was valued using Level 3 inputs and any changes in its fair value are recorded in Net unrealized appreciation (depreciation) of other on our accompanying Consolidated Statements of Operations.
The following tables provide relevant information and disclosures about the Credit Facility as of and for the years ended March 31, 2024 and 2023, as required by ASC 820:

| Level 3 – Borrowings
| Recurring Fair Value Measurements Reported in Consolidated Statements of Assets and Liabilities Using Significant Unobservable Inputs (Level 3) As of March 31,
| 2024 |  | 2023
Credit Facility | $ | 67,000 |  |  | $ | 35,171 |

Fair Value Measurements of Borrowings Using Significant Unobservable Inputs (Level 3) Reported in Consolidated Statements of Assets and Liabilities
| Credit Facility
Year ended March 31, 2024: |
Fair value at March 31, 2023 | $ | 35,171 |
Borrowings | 242,300 |
Repayments | (210,500) |
Unrealized appreciation | 29 |
Fair value at March 31, 2024 | $ | 67,000 |
Year ended March 31, 2023: |
Fair value at March 31, 2022 | $ | — |
Borrowings | 102,500 |
Repayments | (67,300) |
Unrealized depreciation | (29) |
Fair value at March 31, 2023 | $ | 35,171 |

The fair value of the collateral under the Credit Facility was $717.3 million and $639.5 million as of March 31, 2024 and 2023, respectively.
Notes Payable
5.00% Notes due 2026
In March 2021, we completed a public offering of 5.00% Notes due 2026 with an aggregate principal amount of $127.9 million (the “5.00% 2026 Notes”), which resulted in net proceeds of approximately $123.8 million after deducting underwriting discounts, commissions and offering costs borne by us. The 5.00% 2026 Notes are traded under the ticker symbol “GAINN” on the Nasdaq Global Select Market (“Nasdaq”). The 5.00% 2026 Notes will mature on May 1, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company's option. The 5.00% 2026 Notes bear interest at a rate of 5.00% per year, which is payable quarterly in arrears.
The indenture relating to the 5.00% 2026 Notes contains certain covenants, including (i) an inability to incur additional debt or issue additional debt or preferred securities unless the Company’s asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our stock) on a class of our capital stock or to purchase shares of our capital stock unless the Company’s asset coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and (iii) if, at any time, we are not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we will provide the holders of the 5.00% 2026 Notes, and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.
The 5.00% 2026 Notes are recorded at the aggregate principal amount, less underwriting discounts, commissions, and offering costs, on our accompanying Consolidated Statements of Assets and Liabilities. Total underwriting discounts,
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commissions, and offering costs related to this offering were $4.1 million, which have been recorded as discounts to the aggregate principal amount on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending May 1, 2026, the maturity date.
4.875% Notes due 2028
In August 2021, we completed a public offering of 4.875% Notes due 2028 with an aggregate principal amount of $134.6 million (the “4.875% 2028 Notes”), which resulted in net proceeds of approximately $131.3 million after deducting underwriting discounts, commissions and offering costs borne by us. The 4.875% 2028 Notes are traded under the ticker symbol “GAINZ” on Nasdaq. The 4.875% 2028 Notes will mature on November 1, 2028 and may be redeemed in whole or in part at any time or from time to time at the Company's option. The 4.875% 2028 Notes bear interest at a rate of 4.875% per year, which is payable quarterly in arrears.
The indenture relating to the 4.875% 2028 Notes contains certain covenants, including (i) an inability to incur additional debt or issue additional debt or preferred securities unless the Company’s asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our stock) on a class of our capital stock or to purchase shares of our capital stock unless the Company’s asset coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and (iii) if, at any time, we are not subject to the reporting requirements of the Exchange Act, we will provide the holders of the 4.875% 2028 Notes, and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.
The 4.875% 2028 Notes are recorded at the aggregate principal amount, less underwriting discounts, commissions, and offering costs, on our accompanying Consolidated Statements of Assets and Liabilities. Total underwriting discounts, commissions, and offering costs related to this offering were $3.3 million, which have been recorded as discounts to the aggregate principal amount on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending November 1, 2028, the maturity date.
8.00% Notes due 2028
In May 2023, we completed a public offering of 8.00% Notes due 2028 with an aggregate principal amount of $74.8 million (the “8.00% 2028 Notes”), which resulted in net proceeds of approximately $72.3 million after deducting underwriting discounts, commissions and offering costs borne by us. The 8.00% 2028 Notes are traded under the ticker symbol “GAINL” on Nasdaq. The 8.00% 2028 Notes will mature on August 1, 2028 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after August 1, 2025. The 8.00% 2028 Notes bear interest at a rate of 8.00% per year, which is payable quarterly in arrears.
The indenture relating to the 8.00% 2028 Notes contains certain covenants, including (i) an inability to incur additional debt or issue additional debt or preferred securities unless the Company’s asset coverage meets the threshold specified in the 1940 Act after such borrowing, (ii) an inability to declare any dividend or distribution (except a dividend payable in our stock) on a class of our capital stock or to purchase shares of our capital stock unless the Company’s asset coverage meets the threshold specified in the 1940 Act at the time of (and giving effect to) such declaration or purchase, and (iii) if, at any time, we are not subject to the reporting requirements of the Exchange Act, we will provide the holders of the 8.00% 2028 Notes and the trustee with audited annual consolidated financial statements and unaudited interim consolidated financial statements.
The 8.00% 2028 Notes are recorded at the aggregate principal amount, less underwriting discounts, commissions, and offering costs, on our accompanying Consolidated Statements of Assets and Liabilities. Total underwriting discounts, commissions, and offering costs related to this offering were $2.5 million, which have been recorded as discounts to the aggregate principal amount on our accompanying Consolidated Statements of Assets and Liabilities and are being amortized over the period ending August 1, 2028, the maturity date.
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The following tables summarizes the 5.00% 2026 Notes, 4.875% 2028 Notes and 8.00% 2028 Notes as of March 31, 2024 and 2023:

As of March 31, 2024: |  |  |  |  |  |  |  |  |  |  |  |
Description |  | Ticker Symbol |  | Date Issued |  | Maturity Date(A) |  | Interest Rate |  | Notes Outstanding |  | Principal Amount per Note |  | Aggregate Principal Amount
5.00% 2026 Notes |  | GAINN |  | March 2, 2021 |  | May 1, 2026 |  | 5.00% |  | 5,117,500 |  | $ | 25.00 |  |  | $ | 127,938 |
4.875% 2028 Notes |  | GAINZ |  | August 18, 2021 |  | November 1, 2028 |  | 4.875% |  | 5,382,000 |  | $ | 25.00 |  |  | 134,550 |
8.00% 2028 Notes |  | GAINL |  | May 31, 2023 |  | August 1, 2028 |  | 8.00% |  | 2,990,000 |  | $ | 25.00 |  |  | 74,750 |
Notes payable, gross(B) |  | 13,489,500 |  |  |  | 337,238 |
Less: Unamortized Discounts |  |  |  |  |  | (5,893) |
Notes payable, net(C) |  |  |  |  |  | $ | 331,345 |

As of March 31, 2023: |  |  |  |  |  |  |  |  |  |  |  |
Description |  | Ticker Symbol |  | Date Issued |  | Maturity Date(A) |  | Interest Rate |  | Notes Outstanding |  | Principal Amount per Note |  | Aggregate Principal Amount
5.00% 2026 Notes |  | GAINN |  | March 2, 2021 |  | May 1, 2026 |  | 5.00% |  | 5,117,500 |  | $ | 25.00 |  |  | $ | 127,938 |
4.875% 2028 Notes |  | GAINZ |  | August 18, 2021 |  | November 1, 2028 |  | 4.875% |  | 5,382,000 |  | $ | 25.00 |  |  | 134,550 |
Notes payable, gross(B) |  | 10,499,500 |  |  |  | 262,488 |
Less: Unamortized Discounts |  |  |  |  |  | (5,052) |
Notes payable, net(C) |  |  |  |  |  | $ | 257,436 |

(A)The 5.00% 2026 Notes and the 4.875% 2028 Notes can be redeemed at our option at any time. The 8.00% 2028 Notes can be redeemed at our option at any time on or after August 1, 2025.
(B)As of March 31, 2024 and 2023, asset coverage on our senior securities representing indebtedness, calculated pursuant to Sections 18 and 61 of the 1940 Act, was 219.0% and 244.7%, respectively.
(C)Reflected as a line item on our accompanying Consolidated Statements of Assets and Liabilities.
The fair value based on the last reported closing prices of the 5.00% 2026 Notes, 4.875% 2028 Notes, and 8.00% 2028 Notes as of March 31, 2024 was $123.9 million, $123.7 million, and $77.3 million, respectively. The fair value based on the last reported closing prices of the 5.00% 2026 Notes and 4.875% 2028 Notes as of March 31, 2023 was $121.5 million and $127.4 million, respectively. We consider the closing prices of the 5.00% 2026 Notes, 4.875% 2028 Notes and 8.00% 2028 Notes to be a Level 1 inputs within the ASC 820 hierarchy.
Secured Borrowing
In August 2012, we entered into a participation agreement with a third-party related to $5.0 million of our secured second lien term debt investment in Ginsey and in May 2014, we amended the agreement with the third-party to include an additional $0.1 million. ASC Topic 860, “Transfers and Servicing” required us to treat the participation as a financing-type transaction. Specifically, the third-party had 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 as of March 31, 2022 reflect the entire secured second lien term debt investment in Ginsey and a corresponding $5.1 million secured borrowing liability. In conjunction with the August 2022 refinancing at Ginsey, the $5.1 million secured borrowing liability was extinguished.
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NOTE 6. MANDATORILY REDEEMABLE PREFERRED STOCK
In August 2021, we used a portion of the proceeds from the issuance of the 4.875% 2028 Notes to voluntarily redeem all outstanding shares of the 6.375% Series E Cumulative Term Preferred Stock (“Series E Term Preferred Stock” or “Series E”), which had a liquidation preference of $25.00 per share. In connection with the voluntary redemption of the Series E Term Preferred Stock, we incurred a loss on extinguishment of debt of $2.0 million, which was recorded in Realized loss on other in our accompanying Consolidated Statements of Operations and which was primarily comprised of unamortized deferred issuance costs at the time of redemption.
The following tables summarize dividends declared by our Board of Directors and paid by us on each of the Series E Term Preferred Stock during the year ended March 31, 2022:
For the Year Ended March 31, 2022:

Declaration Date |  | Record Date |  | Payment Date |  | Dividend per Share of Series E Term Preferred Stock(A) |
April 13, 2021 |  | April 23, 2021 |  | April 30, 2021 |  | $ | 0.13281250 |  |
April 13, 2021 |  | May 19, 2021 |  | May 28, 2021 |  | 0.13281250 |  |
April 13, 2021 |  | June 18, 2021 |  | June 30, 2021 |  | 0.13281250 |  |
July 13, 2021 |  | July 23, 2021 |  | July 30, 2021 |  | 0.13281250 |  |
July 13, 2021 |  | August 23, 2021 |  | August 31, 2021 |  | 0.07968750 |  | (B)
|  |  |  | Total |  | $ | 0.61093750 |  |

(A)We voluntarily redeemed all outstanding shares of the Series E Term Preferred Stock on August 19, 2021
(B)Represents accrued and unpaid dividends up to, but excluding, the redemption date of August 19, 2021.
The federal income tax characteristics of dividends paid to our preferred stockholders generally constitute ordinary income or capital gains to the extent of our current and accumulated earnings and profits and are reported after the end of the calendar year based on tax information for the full fiscal year. The tax characterization of dividends paid to our preferred stockholders during the calendar year ended December 31, 2021 was 71.3% from ordinary income and 28.7% from capital gains.
NOTE 7. REGISTRATION STATEMENT AND COMMON EQUITY OFFERINGS
Registration Statement
On February 28, 2024, we filed a registration statement on Form N-2 (File No. 333-277452), which the SEC declared effective on April 18, 2024. The registration statement permits us to issue, through one or more transactions, up to an aggregate of $450.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities, including through concurrent, separate offerings of such securities. As of the date of this report, we have the ability to issue up to $450.0 million of the securities registered under the registration statement.
On September 3, 2021, we filed a registration statement on Form N-2 (File No. 333-259302), which the SEC declared effective on October 15, 2021. The registration statement permitted us to issue, through one or more transactions, up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, subscription rights, debt securities, and warrants to purchase common stock, preferred stock, or debt securities, including through concurrent, separate offerings of such securities. As of March 31, 2024, we had the ability to issue up to $175.3 million of the securities registered under the registration statement. This registration statement was terminated on April 18, 2024.
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Common Equity Offerings
In August 2022, we entered into equity distribution agreements with Oppenheimer & Co. and Virtu Americas LLC (each a “Sales Agent”), under which we have the ability to issue and sell shares of our common stock, from time to time, through the Sales Agents, up to an aggregate offering price of $50.0 million in what is commonly referred to as an “at-the-market” program (“Common Stock ATM Program”). In August 2023, we entered into an equity distribution agreement with B. Riley Securities, Inc. and entered into amendments to the agreements with Oppenheimer & Co. Inc. and Virtu Americas LLC in order to add B. Riley Securities, Inc. as a Sales Agent for the Common Stock ATM Program. As of March 31, 2024, we had no remaining capacity under the Common Stock ATM program.
During the year ended March 31, 2024, we sold 3,097,162 shares of our common stock under the Common Stock ATM Program at a weighted-average gross price of $14.37 per share and raised approximately $44.5 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $14.12 and resulted in total net proceeds of approximately $43.7 million. These sales were above our then current NAV per share.
During the year ended March 31, 2023, we sold 386,482 shares of our common stock under the Common Stock ATM Program at a weighted-average gross price of $14.21 per share and raised approximately $5.5 million of gross proceeds. The weighted-average net price per share, after deducting commissions and offering costs borne by us, was $14.01 and resulted in total net proceeds of approximately $5.4 million. These sales were above our then current NAV per share.
In December 2019, we entered into equity distribution agreements with Wedbush Securities, Inc., Cantor Fitzgerald & Co., and Ladenburg Thalmann & Co., Inc. (each a “2019 Sales Agent”), under which we had the ability to issue and sell shares of our common stock, from time to time, through the 2019 Sales Agents, up to an aggregate offering price of $35.0 million in an at-the-market program (the “2019 Common Stock ATM Program”). On August 11, 2021, we terminated the equity distribution agreements with each of the 2019 Sales Agents.
We did not sell any shares of our common stock under the 2019 Common Stock ATM Program during the year ended March 31, 2022.
NOTE 8. NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER WEIGHTED-AVERAGE COMMON SHARE
The following table sets forth the computation of basic and diluted Net increase in net assets resulting from operations per weighted-average common share for the years ended March 31, 2024, 2023, and 2022:

| Year Ended March 31,
| 2024 |  | 2023 |  | 2022
Numerator: net increase (decrease) in net assets resulting from operations | $ | 85,305 |  |  | $ | 35,547 |  |  | $ | 102,316 |
Denominator: basic and diluted weighted-average common shares | 34,466,724 |  |  | 33,311,785 |  |  | 33,205,023 |
Basic and diluted net increase (decrease) in net assets resulting from operations per weighted-average common share | $ | 2.47 |  |  | $ | 1.07 |  |  | $ | 3.08 |

NOTE 9. DISTRIBUTIONS TO COMMON STOCKHOLDERS
To qualify to be taxed as a RIC under Subchapter M of the Code, we must generally distribute to our stockholders, for each taxable year, at least 90% of our Investment Company Taxable Income. The amount to be paid out as distributions to our stockholders is determined by our Board of Directors and is based upon management’s estimate of Investment Company Taxable Income and net long-term capital gains, as well as amounts to be distributed in accordance with Section 855(a) of the Code. Based on that estimate, our Board of Directors declares monthly distributions, and supplemental distributions, as appropriate, to stockholders each quarter and deemed distributions of long-term capital gains annually as of the end of the fiscal year, as applicable.
The U.S. federal income tax characteristics of cash distributions paid to our common stockholders generally are reported to stockholders on IRS Form 1099 after the end of each calendar year. Estimates of tax characterization made on a quarterly basis may not be representative of the actual tax characterization of cash distributions for the full year. Estimates made on a quarterly basis are updated as of each interim reporting date. The tax characterization of cash distributions paid to our common stockholders during the calendar year ended December 31, 2023 was 53.2% from ordinary income and 46.8%
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from capital gains. The tax characterization of cash distributions paid to our common stockholders during the calendar year ended December 31, 2022 was 61.2% from ordinary income and 38.8% from capital gains.
We paid the following cash distributions to our common stockholders for the years ended March 31, 2024, 2023 and 2022.
For the Year Ended March 31, 2024:

Declaration Date |  | Record Date |  | Payment Date |  | Distribution per Common Share |
April 11, 2023 |  | April 21, 2023 |  | April 28, 2023 |  | $ | 0.080 |  |
April 11, 2023 |  | May 23, 2023 |  | May 31, 2023 |  | 0.080 |  |
April 11, 2023 |  | June 5, 2023 |  | June 15, 2023 |  | 0.120 |  | (A)
April 11, 2023 |  | June 21, 2023 |  | June 30, 2023 |  | 0.080 |  |
July 11, 2023 |  | July 21, 2023 |  | July 31, 2023 |  | 0.080 |  |
July 11, 2023 |  | August 23, 2023 |  | August 31, 2023 |  | 0.080 |  |
July 11, 2023 |  | September 7, 2023 |  | September 15, 2023 |  | 0.120 |  | (A)
July 11, 2023 |  | September 21, 2023 |  | September 29, 2023 |  | 0.080 |  |
October 10, 2023 |  | October 20, 2023 |  | October 31, 2023 |  | 0.080 |  |
October 10, 2023 |  | November 7, 2023 |  | November 17, 2023 |  | 0.120 |  | (A)
October 10, 2023 |  | November 20, 2023 |  | November 30, 2023 |  | 0.080 |  |
October 24, 2023 |  | December 5, 2023 |  | December 15, 2023 |  | 0.880 |  | (A)
October 10, 2023 |  | December 18, 2023 |  | December 29, 2023 |  | 0.080 |  |
January 9, 2024 |  | January 23, 2024 |  | January 31, 2024 |  | 0.080 |  |
January 9, 2024 |  | February 21, 2024 |  | February 29, 2024 |  | 0.080 |  |
January 9, 2024 |  | March 21, 2024 |  | March 29, 2024 |  | 0.080 |  |
|  |  |  | Year ended March 31, 2024 |  | $ | 2.200 |  |

For the Year Ended March 31, 2023:

Declaration Date |  | Record Date |  | Payment Date |  | Distribution per Common Share |
April 12, 2022 |  | April 22, 2022 |  | April 29, 2022 |  | $ | 0.075 |  |
April 12, 2022 |  | May 20, 2022 |  | May 31, 2022 |  | 0.075 |  |
April 12, 2022 |  | June 6, 2022 |  | June 15, 2022 |  | 0.120 |  | (A)
April 12, 2022 |  | June 22, 2022 |  | June 30, 2022 |  | 0.075 |  |
July 12, 2022 |  | July 22, 2022 |  | July 29, 2022 |  | 0.075 |  |
July 12, 2022 |  | August 23, 2022 |  | August 31, 2022 |  | 0.075 |  |
July 12, 2022 |  | September 22, 2022 |  | September 30, 2022 |  | 0.075 |  |
October 11, 2022 |  | October 21, 2022 |  | October 31, 2022 |  | 0.080 |  |
October 11, 2022 |  | November 18, 2022 |  | November 30, 2022 |  | 0.080 |  |
October 11, 2022 |  | December 6, 2022 |  | December 15, 2022 |  | 0.120 |  | (A)
October 11, 2022 |  | December 20, 2022 |  | December 30, 2022 |  | 0.080 |  |
January 10, 2023 |  | January 20, 2023 |  | January 31, 2023 |  | 0.080 |  |
January 10, 2023 |  | February 17, 2023 |  | February 28, 2023 |  | 0.080 |  |
January 10, 2023 |  | March 3, 2023 |  | March 15, 2023 |  | 0.240 |  | (A)
January 10, 2023 |  | March 17, 2023 |  | March 31, 2023 |  | 0.080 |  |
|  |  |  | Year ended March 31, 2023: |  | $ | 1.410 |  |

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For the Year Ended March 31, 2022:

Declaration Date |  | Record Date |  | Payment Date |  | Distribution per Common Share |
April 13, 2021 |  | April 23, 2021 |  | April 30, 2021 |  | $ | 0.070 |  |
April 13, 2021 |  | May 19, 2021 |  | May 28, 2021 |  | 0.070 |  |
April 13, 2021 |  | June 8, 2021 |  | June 17, 2021 |  | 0.060 |  | (A)
April 13, 2021 |  | June 18, 2021 |  | June 30, 2021 |  | 0.070 |  |
July 13, 2021 |  | July 23, 2021 |  | July 30, 2021 |  | 0.070 |  |
July 13, 2021 |  | August 23, 2021 |  | August 31, 2021 |  | 0.070 |  |
July 13, 2021 |  | September 3, 2021 |  | September 15, 2021 |  | 0.030 |  | (A)
July 13, 2021 |  | September 22, 2021 |  | September 30, 2021 |  | 0.070 |  |
October 12, 2021 |  | October 22, 2021 |  | October 29, 2021 |  | 0.075 |  |
October 12, 2021 |  | November 19, 2021 |  | November 30, 2021 |  | 0.075 |  |
October 12, 2021 |  | December 7, 2021 |  | December 15, 2021 |  | 0.090 |  | (A)
October 12, 2021 |  | December 23, 2021 |  | December 31, 2021 |  | 0.075 |  |
January 11, 2022 |  | January 21, 2022 |  | January 31, 2022 |  | 0.075 |  |
January 11, 2022 |  | February 4, 2022 |  | February 14, 2022 |  | 0.120 |  | (A)
January 11, 2022 |  | February 18, 2022 |  | February 28, 2022 |  | 0.075 |  |
January 11, 2022 |  | March 23, 2022 |  | March 31, 2022 |  | 0.075 |  |
|  |  |  | Year ended March 31, 2022: |  | $ | 1.170 |  |

(A)Represents a supplemental distribution to common stockholders.
Aggregate cash distributions to our common stockholders declared and paid for the years ended March 31, 2024, 2023 and 2022 were $76.1 million, $47.0 million, and $38.9 million, respectively.
For the fiscal years ended March 31, 2024, 2023, and 2022, Investment Company Taxable Income exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $18.7 million, $21.4 million, and $13.9 million, respectively, of the first distributions paid subsequent to fiscal year-end, as having been paid in the prior year. In addition, for the fiscal years ended March 31, 2024, 2023, and 2022, net capital gains exceeded distributions declared and paid, and, in accordance with Section 855(a) of the Code, we elected to treat $1.4 million, $10.6 million, and $15.7 million, respectively, of the first distributions paid subsequent to fiscal year-end as having been paid in the prior year.
We may distribute our net long-term capital gains, if any, in cash or elect to retain some or all of such gains, pay taxes at the U.S. federal corporate-level income tax rate on the amount retained, and designate the retained amount as a “deemed distribution.” If we elect to retain net long-term capital gains and deem them distributed, each U.S. common stockholder will be treated as if they received a distribution of their pro-rata share of the retained net long-term capital gain and the U.S. federal income tax paid. As a result, each U.S. common stockholder will (i) be required to report their pro-rata share of the retained gain on their tax return as long-term capital gain, (ii) receive a refundable tax credit for their pro-rata share of federal income tax paid by us on the retained gain, and (iii) increase the tax basis of their shares of common stock by an amount equal to the deemed distribution less the tax credit. To use the deemed distribution approach, we must provide written notice to our common stockholders prior to the expiration of 60 days after the close of the relevant taxable year. For the years ended March 31, 2024, 2023, and 2022 we did not elect to retain long-term capital gains and to treat them as deemed distributions to common stockholders.
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The components of our net assets on a tax basis were as follows:

| Year Ended March 31,
| 2024 |  | 2023
Common stock | $ | 37 |  |  | $ | 34 |
Capital in excess of par value | 444,706 |  |  | 401,798 |
Cumulative unrealized appreciation of investments | 64,737 |  |  | 31,129 |
Cumulative unrealized depreciation of other | — |  |  | 29 |
Undistributed ordinary income | 18,708 |  |  | 21,380 |
Undistributed capital gain | 1,373 |  |  | 10,552 |
Other temporary differences | (36,850) |  |  | (25,180) |
Net Assets | $ | 492,711 |  |  | $ | 439,742 |

For the years ended March 31, 2024 and 2023, we recorded the following adjustments for estimated permanent book-tax differences to reflect tax character. Results of operations, total net assets, and cash flows were not affected by these adjustments.

| Tax Year Ended March 31,
| 2024 |  | 2023
Underdistributed (overdistributed) net investment income | $ | 1,695 |  |  | $ | 1,301 |
Accumulated net realized gain in excess of distributions | $ | (881) |  |  | $ | 263 |
Capital in excess of par value | $ | (814) |  |  | $ | (1,564) |

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 generally 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 maintain our status as a BDC and meet certain source-of-income and asset diversification requirements. In addition, to qualify to be taxed as a RIC, we must distribute to stockholders at least 90% of our Investment Company Taxable Income. Our policy generally is to make distributions to our stockholders in an amount up to 100% of our Investment Company Taxable Income. We may retain some or all of our net long-term capital gains, if any, and designate them as deemed distributions, or distribute such gains to stockholders in cash. Because we have distributed or intend to distribute 100% of our Investment Company Taxable Income and net long-term capital gains, no income tax provisions have been recorded for the years ended March 31, 2024, 2023, and 2022.
In an effort to limit federal excise taxes, we have to distribute to stockholders, during each calendar year, an amount close to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our net capital gains (both long-term and short-term), if any, for the one-year period ending on October 31 of the calendar year and (3) any income realized, but not distributed, in the preceding period (to the extent that income tax was not imposed on such amounts), less certain reductions, as applicable. We incurred an excise tax of $1.2 million, $1.3 million, and $0.7 million for the calendar years ended December 31, 2023, 2022 and 2021, respectively, which are included in Other general and administrative expenses on the accompanying Consolidated Statement of Operations.
Under the RIC Modernization Act, we are permitted to carryforward any capital losses that we may incur for an unlimited period, and such capital loss carryforwards will retain their character as either short-term or long-term capital losses. Our capital loss carryforward balance was $0 as of both March 31, 2024 and 2023.
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NOTE 11. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are party to certain legal proceedings incidental to the normal course of our business. We are required to establish reserves for litigation matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves. Based on current knowledge, we do not believe that loss contingencies, if any, arising from pending investigations, litigation, or regulatory matters will have a material adverse effect on our financial condition, results of operation, or cash flows. Additionally, based on our current knowledge, we do not believe such loss contingencies are both probable and estimable and, therefore, as of March 31, 2024 and 2023, we had no established reserves for such loss contingencies.
Escrow Holdbacks
From time to time, we enter into arrangements relating to exits of certain investments whereby specific amounts of the proceeds are held in escrow to be used to satisfy potential obligations, as stipulated in the sales agreements. We record escrow amounts in Restricted cash and cash equivalents and Other liabilities, if received in cash but subject to potential obligations or other contractual restrictions, or as escrow receivables in Other assets, net, if not yet received in cash, on our accompanying Consolidated Statements of Assets and Liabilities. We establish reserves and holdbacks against escrow amounts if we determine that it is probable and estimable that a portion of the escrow amounts will not ultimately be released or received at the end of the escrow period. Reserves and holdbacks against escrow amounts were $1.0 million and $0.1 million as of March 31, 2024 and 2023, respectively.
Financial Commitments and Obligations
We may have line of credit commitments to certain of our portfolio companies that have not been fully drawn. Since these line of credit commitments have expiration dates, and we expect many will never be fully drawn, the total line of credit commitment amounts do not necessarily represent future cash requirements. We estimate the fair value of the combined unused line of credit commitments as of March 31, 2024 and 2023 to be insignificant.
We may also extend guaranties on behalf of our portfolio companies. As of March 31, 2024 and 2023, there were no guaranties outstanding.
The following table summarizes the principal balances of unused line of credit and delayed draw term debt commitments and guaranties as of March 31, 2024 and 2023, which are not reflected as liabilities in the accompanying Consolidated Statements of Assets and Liabilities:

| As of March 31,
| 2024 |  | 2023
Unused line of credit commitments | $ | 2,394 |  |  | $ | 2,150 |
Total | $ | 2,394 |  |  | $ | 2,150 |

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NOTE 12. FINANCIAL HIGHLIGHTS

| As of and for the Year Ended March 31,
| 2024 |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | 2017 |  | 2016 |  | 2015
Per Common Share Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net asset value at beginning of year (A) | $ | 13.09 |  |  | $ | 13.43 |  |  | $ | 11.52 |  |  | $ | 11.17 |  |  | $ | 12.40 |  |  | $ | 10.85 |  |  | $ | 9.95 |  |  | $ | 9.22 |  |  | 9.18 |  |  | 8.34 |
Income from investment operations(B) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment income | 0.63 |  |  | 1.11 |  |  | 0.45 |  |  | 0.54 |  |  | 1.11 |  |  | 0.23 |  |  | 0.68 |  |  | 0.74 |  |  | 0.68 |  |  | 0.75 |
Net realized gain (loss) on investments and other | 0.88 |  |  | 0.32 |  |  | 0.37 |  |  | 0.32 |  |  | 1.36 |  |  | 2.04 |  |  | 0.04 |  |  | 0.51 |  |  | (0.15) |  |  | — |
Taxes on deemed distributions of long-term capital gains | — |  |  | — |  |  | — |  |  | — |  |  | (0.31) |  |  | (0.41) |  |  | — |  |  | — |  |  | — |  |  | — |
Net unrealized appreciation (depreciation) of investments and other | 0.96 |  |  | (0.36) |  |  | 2.26 |  |  | 0.42 |  |  | (2.38) |  |  | 0.63 |  |  | 1.16 |  |  | 0.23 |  |  | 0.29 |  |  | 1.13 |
Total from investment operations | 2.47 |  |  | 1.07 |  |  | 3.08 |  |  | 1.28 |  |  | (0.22) |  |  | 2.49 |  |  | 1.88 |  |  | 1.48 |  |  | 0.82 |  |  | 1.88 |
Effect of equity capital activity(B) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash distributions to common stockholders from net investment income(C) | (1.08) |  |  | (0.92) |  |  | (0.91) |  |  | (0.83) |  |  | (0.75) |  |  | (0.69) |  |  | (0.84) |  |  | (0.75) |  |  | (0.64) |  |  | (0.77) |
Cash distributions to common stockholders from realized gains(C) | (1.12) |  |  | (0.49) |  |  | (0.26) |  |  | (0.10) |  |  | (0.28) |  |  | (0.24) |  |  | (0.05) |  |  | — |  |  | (0.11) |  |  | — |
Discounts, commissions, and offering costs | (0.02) |  |  | (0.01) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (0.03) |  |  | — |  |  | (0.01) |  |  | (0.03) |
Net accretive (dilutive) effect of equity offering(D) | 0.10 |  |  | 0.01 |  |  | — |  |  | — |  |  | 0.01 |  |  | — |  |  | (0.04) |  |  | — |  |  | (0.03) |  |  | (0.22) |
Total from equity capital activity | (2.12) |  |  | (1.41) |  |  | (1.17) |  |  | (0.93) |  |  | (1.02) |  |  | (0.93) |  |  | (0.96) |  |  | (0.75) |  |  | (0.79) |  |  | (1.02) |
Other, net(E) | (0.01) |  |  | — |  |  | — |  |  | — |  |  | 0.01 |  |  | (0.01) |  |  | (0.02) |  |  | — |  |  | 0.01 |  |  | (0.02) |
Net asset value at end of year(A) | $ | 13.43 |  |  | $ | 13.09 |  |  | $ | 13.43 |  |  | $ | 11.52 |  |  | $ | 11.17 |  |  | 12.40 |  |  | 10.85 |  |  | 9.95 |  |  | 9.22 |  |  | 9.18 |
Per common share market value at beginning of year | $ | 13.25 |  |  | $ | 16.13 |  |  | $ | 12.23 |  |  | $ | 7.85 |  |  | $ | 11.60 |  |  | 10.10 |  |  | $ | 9.07 |  |  | 7.02 |  |  | 7.40 |  |  | 8.27 |
Per common share market value at end of year | $ | 14.23 |  |  | $ | 13.25 |  |  | $ | 16.13 |  |  | $ | 12.23 |  |  | $ | 7.85 |  |  | $ | 11.60 |  |  | $ | 10.10 |  |  | $ | 9.07 |  |  | $ | 7.02 |  |  | $ | 7.40 |
Total investment return(F) | 25.52 | % |  | (8.90 | %) |  | 42.40 | % |  | 70.65 | % |  | (26.23 | %) |  | 24.95 | % |  | 21.82 | % |  | 41.58 | % |  | 4.82 | % |  | 11.96 | %
Common stock outstanding at end of year(A) | 36,688,667 |  |  | 33,591,505 |  |  | 33,205,023 |  |  | 33,205,023 |  |  | 33,049,463 |  |  | 32,822,459 |  |  | 32,653,635 |  |  | 30,270,958 |  |  | 30,270,958 |  |  | 29,775,958 |
Consolidated Statement of Assets and Liabilities Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net assets at end of year | $ | 492,711 |  |  | $ | 439,742 |  |  | $ | 445,830 |  |  | $ | 382,364 |  |  | $ | 369,031 |  |  | $ | 407,110 |  |  | $ | 354,200 |  |  | $ | 301,082 |  |  | $ | 279,022 |  |  | $ | 273,429 |
Average net assets(G) | $ | 461,819 |  |  | $ | 446,899 |  |  | $ | 425,985 |  |  | $ | 365,568 |  |  | $ | 404,336 |  |  | $ | 391,786 |  |  | $ | 328,533 |  |  | $ | 294,030 |  |  | $ | 276,293 |  |  | $ | 229,350 |
Senior Securities Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total borrowings, at cost | $ | 404,238 |  |  | $ | 297,688 |  |  | $ | 267,584 |  |  | $ | 155,434 |  |  | $ | 54,296 |  |  | $ | 58,096 |  |  | $ | 112,096 |  |  | $ | 74,796 |  |  | $ | 100,096 |  |  | $ | 123,896 |
Mandatorily redeemable preferred stock(H) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 94,371 |  |  | $ | 132,250 |  |  | $ | 132,250 |  |  | $ | 139,150 |  |  | $ | 139,150 |  |  | $ | 121,650 |  |  | $ | 81,400 |
Ratios/Supplemental Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ratio of net expenses to average net assets(I) | 14.19 | % |  | 9.97 | % |  | 13.51 | % |  | 10.58 | % |  | 6.32 | % |  | 13.30 | % |  | 11.08 | % |  | 10.02 | % |  | 10.94 | % |  | 9.48 | %
Ratio of net investment income to average net assets(J) | 4.72 | % |  | 8.28 | % |  | 3.52 | % |  | 4.91 | % |  | 8.99 | % |  | 1.92 | % |  | 6.68 | % |  | 7.63 | % |  | 7.50 | % |  | 8.68 | %

(A)Based on actual shares of common stock outstanding at the beginning or end of the corresponding year, as appropriate.
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(B)Based on weighted-average basic common share data for the corresponding year.
(C)The tax character of distributions is determined based on taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP. For further information on the estimated character of our distributions to common stockholders, including changes in estimates, as applicable, refer to Note 9 — Distributions to Common Stockholders.
(D)During the years ended March 31, 2024, 2023, and 2020, the accretive effect is the result of issuing common shares at a price above the then current NAV per share. During the year ended March 31, 2018, 2016, and 2015, the net dilutive effect is the result of issuing common shares at a price below the then current NAV per share.
(E)Represents the impact of the different share amounts (weighted-average basic common shares outstanding for the corresponding year and actual common shares outstanding at the end of the year) in the Per Common Share Data calculations and rounding impacts.
(F)Total investment 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, including changes in estimates, as applicable, refer to Note 9 — Distributions to Common Stockholders.
(G)Calculated using the average balance of net assets at the end of each month of the reporting year.
(H)Represents the aggregate liquidation preference of our mandatorily redeemable preferred stock.
(I)Ratio of net expenses to average net assets is computed using total expenses, net of any non-contractual, unconditional, and irrevocable credits of fees from the Adviser. Had we not received any non-contractual, unconditional, and irrevocable credits of fees from the Adviser, the ratio of expenses to average net assets would have been 17.38%, 12.58%, 16.72%, 13.33%, 9.12%, 16.45%, 14.11%, 13.46%, 14.50%, and 12.90% for the fiscal years ended March 31, 2024, 2023, 2022, 2021, 2018, 2017, 2016, and 2015, respectively.
Had we included Virginia state taxes incurred on the deemed distributions of retained capital gains for the fiscal year ended March 31, 2020 and 2019, the ratio of net expenses to average net assets would have been 6.89% and 14.07%, respectively.
(J)Had we not received any non-contractual, unconditional, and irrevocable credits of fees from the Adviser, the ratio of net investment income (loss) to average net assets would have been 1.53%, 5.66%, 0.31%, 2.16%, 6.20%, (1.22%), 3.66%, 4.19%, 3.94%, and 5.26% for the fiscal years ended March 31, 2024, 2023, 2022, 2021, 2020, 2019, 2018, 2017, 2016, and 2015, respectively.
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NOTE 13. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES
In accordance with the SEC’s Regulation S-X, we do not consolidate portfolio company investments. Further, in accordance with ASC 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries.
We did not have any unconsolidated subsidiaries that met any of the significance conditions under Rule 1-02(w)(2) of the SEC’s Regulation S-X as of or during the years ended March 31, 2024, 2023 and 2022.
NOTE 14. SUBSEQUENT EVENTS
Distributions and Dividends
In April 2024, our Board of Directors declared the following monthly cash distributions to common stockholders:

Record Date |  | Payment Date |  | Distribution per Common Share |
April 19, 2024 |  | April 30, 2024 |  | $ | 0.08 |  |
May 17, 2024 |  | May 31, 2024 |  | 0.08 |  |
June 19, 2024 |  | June 28, 2024 |  | 0.08 |  |
|  | Total for the Quarter: |  | $ | 0.24 |  |

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
a)Disclosure Controls and Procedures
As of March 31, 2024 (the end of the period covered by this report), we, including our chief executive officer and chief financial officer, 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, concluded that our disclosure controls and procedures were effective at a reasonable assurance level in timely alerting management, including the chief executive officer and chief financial officer, of material information about us required to be included in periodic SEC filings. However, in evaluation of the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
b)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.
c)Attestation Report of the Independent Registered Public Accounting Firm
Not Applicable.
d)Change in Internal Control over Financial Reporting
There were no changes in internal controls for the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
During the three months ended March 31, 2024, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement”.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
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PART III
We will file a definitive Proxy Statement for our 2024 Annual Meeting of Stockholders (the “2024 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 2024 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 2024 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is hereby incorporated by reference from our 2024 Proxy Statement.
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 2024 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is hereby incorporated by reference from our 2024 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is hereby incorporated by reference from our 2024 Proxy Statement.
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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 | 73
| Consolidated Statements of Assets and Liabilities as of March 31, 202 4 and 2023 | 75
| Consolidated Statements of Operations for the years ended March 31, 202 4, 202 3, and 2022 | 76
| Consolidated Statements of Changes in Net Assets for the years ended March 31, 202 4, 202 3, and 2022 | 77
| Consolidated Statements of Cash Flows for the years ended March 31, 202 4, 202 3, and 2022 | 78
| Consolidated Schedules of Investments as of March 31, 202 4 and 2023 | 85
| Notes to Consolidated Financial Statements | 90
2. | The following financial statement schedule is filed herewith: |
| Schedule 12-14 Investments in and Advances to Affiliates | 127
| 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.
3.2 | Second Amended and Restated Bylaws, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 814-00704), filed May 15, 2020.
4.1 | Specimen Stock Certificate, incorporated by reference to Exhibit d to Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-123699), filed June 21, 2005.
4.2 | Indenture, dated as of May 22, 2020, between Gladstone Investment Corporation and UMB Bank, National Association, as trustee incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 814-00704), filed May 22, 2020.
4.3 | Second Supplemental Indenture between Gladstone Investment Corporation and UMB Bank, National Association, dated as of March 2, 2021, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 814-00704), filed March 2, 2021.
4.4 | Third Supplemental Indenture between Gladstone Investment Corporation and UMB Bank, National Association, dated as of August 18, 2021, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 814-00704), filed August 18, 2021.
4.5 | Fourth Supplemental Indenture between Gladstone Investment Corporation and UMB Bank, National Association, dated as of May 31, 2023, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 814-00704), filed May 31, 2023.
4.6* | Description of Securities
10.1 | 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.
10.2 | Custody Agreement between the Registrant and The Bank of New York, incorporated by reference to Exhibit j to Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-123699), filed June 21, 2005.
10.3 | 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.

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10.4 | 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.
10.5 | 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 19, 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.
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, Gladstone Management Corporation, the Financial Institutions as party thereto, and Key Equipment Finance, Inc., 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 Gladstone Business Investment, LLC, Gladstone Management Corporation, Key Equipment Finance Inc. and EverBank Commercial Finance, Inc., incorporated by reference to Exhibit 10.1 to 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 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, Gladstone Management Corporation, the Financial Institutions as party thereto, and Key Equipment Finance, a division of KeyBank National Association, 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 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 to 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 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 to 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 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 to 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 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 to the Current Report on Form 8-K (File No. 814-00704), filed September 22, 2014.
10.15 | Amendment No. 2 to Fifth Amended and Restated Credit Agreement, dated November 16, 2016, by and among Gladstone Business Investment, LLC, Gladstone Management Corporation, Keybank National Association, AloStar Bank of Commerce, Manufacturers and Traders Trust, East West Bank, Chemical Bank (as successor in interest to Talmer Bank and Trust) and Customers Bank, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 811-23191), filed November 17, 2016.
10.16 | Amendment No. 3 to Fifth Amended and Restated Credit Agreement, dated January 20, 2017, by and among Gladstone Business Investment, LLC, Gladstone Management Corporation, Keybank National Association, AloStar Bank of Commerce, Manufacturers and Traders Trust, East West Bank, Chemical Bank (as successor in interest to Talmer Bank and Trust) and Customers Bank, incorporated by reference to Exhibit 2.k.12 to Post-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-204996), filed May 11, 2017.
10.17 | Amendment No. 4 to Fifth Amended and Restated Credit Agreement, dated as of August 22, 2018 by and among Gladstone Business Investment, LLC, as Borrower, Gladstone Management Corporation, as Servicer, Keybank National Association, as administrative agent, swingline lender, managing agent and lead arranger and certain other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 814-00704), filed August 23, 2018.

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10.18 | Amendment No. 5 to Fifth Amended and Restated Credit Agreement, dated as of August 10, 2020 by and among Gladstone Business Investment, LLC, as Borrower, Gladstone Management Corporation, as Servicer, KeyBank National Association, as administrative agent, swingline lender, managing agent and lead arranger and certain other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 814-00704), filed August 11, 2020.
10.19 | Amendment No. 6 to Fifth Amended and Restated Credit Agreement, dated as of March 8, 2021 by and among Gladstone Business Investment, LLC, as Borrower, Gladstone Management Corporation, as Servicer, KeyBank National Association, as administrative agent, swingline lender, managing agent and lead arranger and certain other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 814-00704), filed March 8, 2021.
10.20 | Amendment No. 7 to Fifth Amended and Restated Credit Agreement, dated as of April 10, 2023 by and among Gladstone Business Investment, LLC, as Borrower, Gladstone Management Corporation, as Servicer, KeyBank National Association, as administrative agent, swingline lender, managing agent and lead arranger and certain other lenders party thereto, incorporated by reference to Exhibit 1 0.20 to the Annual Report on Form 10-K (File No. 814-00704), filed May 10, 2023.
10.21 | Amendment No. 8 to Fifth Amended and Restated Credit Agreement, dated as of October 30, 2023 by and among Gladstone Business Investment, LLC, as Borrower, Gladstone Management Corporation, as Servicer, KeyBank National Association, as administrative agent, swingline lender, managing agent and lead arranger and certain other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 814-00704), filed October 31, 2023.
10.22 | Amendment No. 9 to Fifth Amended and Restated Credit Agreement, dated as of February 5, 2024 by and among Gladstone Business Investment, LLC, as Borrower, Gladstone Management Corporation, as Servicer, KeyBank National Association, as administrative agent, swingline lender, managing agent and lead arranger and certain other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 814-00704), filed February 6, 2024.
14* | Code of Ethics
19 | Insider Trading Policy for Gladstone Investment Corporation, incorporated by reference to Exhibit 14 filed herewith.
21* | Subsidiaries of the Registrant.
23.1* | Consent of Registered Public Accounting Firm
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.
97.1* | Clawback Policy
101.INS*** | XBRL Instance Document
101.SCH*** | XBRL Taxonomy Extension Schema Document
101.CAL*** | XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*** | XBRL Taxonomy Extension Label Linkbase Document
101.PRE*** | XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*** | XBRL Definition Linkbase
104 | Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)

* | Filed herewith
** | Furnished herewith
*** | Attached as Exhibit 101 to this Annual Report on Form 10-K are the following materials, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Assets and Liabilities as of March 31, 2024 and 2023, (ii) the Consolidated Statements of Operations for the years ended March 31, 2024, 2023 and 2022, (iii) the Consolidated Statements of Changes in Net Assets for the years ended March 31, 2024, 2023 and 2022, (iv) the Consolidated Statements of Cash Flows for the years ended March 31, 2024, 2023 and 2022, (v) the Consolidated Schedules of Investments as of March 31, 2024 and 2023 and (vi) the Notes to Consolidated Financial Statements.

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Item 16. Form 10-K Summary.
None.
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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 8, 2024 | By: | /s/ RACHAEL EASTON
|  | Rachael Easton
|  | 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 8, 2024 | By: | /s/ DAVID GLADSTONE
|  | David Gladstone
|  | Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)
Date: May 8, 2024 | By: | /s/ RACHAEL EASTON
|  | Rachael Easton
|  | Chief Financial Officer and Treasurer (principal financial and accounting officer)
Date: May 8, 2024 | By: | /s/ ANTHONY W. PARKER
|  | Anthony W. Parker
|  | Director
Date: May 8, 2024 | By: | /s/ MICHELA A. ENGLISH
|  | Michela A. English
|  | Director
Date: May 8, 2024 | By: | /s/ PAUL ADELGREN
|  | Paul Adelgren
|  | Director
Date: May 8, 2024 | By: | /s/ JOHN H. OUTLAND
|  | John H. Outland
|  | Director
Date: May 8, 2024 | By: | /s/ WALTER H. WILKINSON, JR.
|  | Walter H. Wilkinson, Jr.
|  | Director
Date: May 8, 2024 | By: | /s/ PAULA NOVARA
|  | Paula Novara
|  | Director

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SCHEDULE 12-14
GLADSTONE INVESTMENT CORPORATION
INVESTMENTS IN AND ADVANCES TO AFFILIATES
(AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(C)(D)(E) |  | Principal/ Shares/Units(F)(G) |  | Net Realized Gain (Loss) for Period(P) |  | Amount of Investment Income(H) |  | Value as of March 31, 2023 |  | Gross Additions(I) |  | Gross Reductions(J) |  | Net Unrealized Appreciation (Depreciation) |  | Value as of March 31, 2024
AFFILIATE INVESTMENTS – 59.9% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Secured First Lien Debt – 30.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Diversified/Conglomerate Manufacturing – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Edge Adhesives Holdings, Inc.(M) –Term Debt |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,255 |  |  | $ | — |  |  | $ | (4,342) |  |  | $ | 87 |  |  | $ | — |
Diversified/Conglomerate Services – 15.7% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ImageWorks Display and Marketing Group, Inc. – Term Debt (SOFR +11.0%, 16.3% Cash, Due 11/2025) |  | 22,000 |  |  | — |  |  | 4,526 |  |  | 22,000 |  |  | — |  |  | — |  |  | — |  |  | 22,000 |
J.R. Hobbs Co. - Atlanta, LLC - Line of Credit, $0 available ( SOFR + 6.0%, 11.3% Cash, Due 6/2025)(K) |  | 5,000 |  |  | — |  |  | — |  |  | 2,744 |  |  | — |  |  | — |  |  | (62) |  |  | 2,682 |
J.R. Hobbs Co. - Atlanta, LLC - Term Debt (SOFR+6.0%, 11.3% Cash, Due 6/2025) (K) |  | 16,500 |  |  | — |  |  | — |  |  | 9,054 |  |  | — |  |  | — |  |  | (202) |  |  | 8,852 |
J.R. Hobbs Co. - Atlanta, LLC – Term Debt (SOFR+10.3%, 15.6% Cash, Due 6/2025) (K) |  | 26,000 |  |  | — |  |  | — |  |  | 14,268 |  |  | — |  |  | — |  |  | (319) |  |  | 13,949 |
J.R. Hobbs Co. - Atlanta, LLC – Term Debt (SOFR+6.0%, 11.3% Cash, Due 6/2025) (K) |  | 2,438 |  |  | — |  |  | — |  |  | 1,338 |  |  | — |  |  | — |  |  | (30) |  |  | 1,308 |
The Maids International, LLC – Term Debt (SOFR+10.5%, 15.8% Cash, Due 3/2025) |  | 28,560 |  |  | — |  |  | 4,567 |  |  | 28,560 |  |  | — |  |  | — |  |  | — |  |  | 28,560 |
|  |  |  | — |  |  | 9,093 |  |  | 77,964 |  |  | — |  |  | — |  |  | (613) |  |  | 77,351 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 8.7% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Old World Christmas, Inc. – Term Debt (SOFR+9.5%, 14.8% Cash, Due 12/2025) |  | 43,000 |  |  | — |  |  | 8,694 |  |  | 40,500 |  |  | 2,500 |  |  | — |  |  | — |  |  | 43,000 |
Mining, Steel, Iron and Non-Precious Metals Total – 3.7% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Utah Pacific Bridge & Steel, Ltd. (SOFR+10.0%, 15.3% Cash, Due 7/2026) |  | 18,250 |  |  | — |  |  | 2,826 |  |  | 18,250 |  |  | — |  |  | — |  |  | — |  |  | 18,250 |

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GLADSTONE INVESTMENT CORPORATION
INVESTMENTS IN AND ADVANCES TO AFFILIATES (Continued)
(AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(C)(D)(E) |  | Principal/ Shares/Units(F)(G) |  | Net Realized Gain (Loss) for Period(P) |  | Amount of Investment Income(H) |  | Value as of March 31, 2023 |  | Gross Additions(I) |  | Gross Reductions(J) |  | Net Unrealized Appreciation (Depreciation) |  | Value as of March 31, 2024
Telecommunications – 1.9% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
B+T Group Acquisition, Inc. – Line of Credit, $0 available (SOFR+2.0%, 7.3% Cash, Due 12/2026) |  | 3,080 |  |  | — |  |  | 273 |  |  | 2,800 |  |  | 280 |  |  | — |  |  | — |  |  | 3,080 |
B+T Group Acquisition, Inc. – Line of Credit, $394 available (SOFR+2.0%, 7.3% Cash, Due 6/2025)(L) |  | 656 |  |  |  |  | 3 |  |  |  |  | 656 |  |  | — |  |  | — |  |  | 656 |
B+T Group Acquisition, Inc. – Term Debt (SOFR+2.0%, 7.3% Cash, Due 12/2026) |  | 14,000 |  |  | — |  |  | 1,348 |  |  | 14,000 |  |  | — |  |  | — |  |  | (8,734) |  |  | 5,266 |
|  |  |  | — |  |  | 1,624 |  |  | 16,800 |  |  | 936 |  |  | — |  |  | (8,734) |  |  | 9,002 |
Total Secured First Lien Debt |  |  |  | $ | — |  |  | $ | 22,237 |  |  | $ | 157,769 |  |  | $ | 3,436 |  |  | $ | (4,342) |  |  | $ | (9,260) |  |  | $ | 147,603 |
Secured Second Lien Debt – 9.2% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Chemicals, Plastics, and Rubber – 4.1% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
PSI Molded Plastics, Inc. – Term Debt ( SOFR +5.5%, 10.8% Cash, Due 1/2026)(M) |  | $ | 26,618 |  |  | $ | — |  |  | $ | 2,903 |  |  | $ | 24,892 |  |  | $ | — |  |  | $ | — |  |  | $ | (4,529) |  |  | $ | 20,363 |
Diversified/Conglomerate Services – 5.1% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nth Degree, Inc. – Term Debt (SOFR+8.5%, 13.8% Cash, Due 6/2029)(I) |  | 25,000 |  |  | — |  |  | 2,665 |  |  | — |  |  | 25,000 |  |  | — |  |  | — |  |  | 25,000 |
Total Secured Second Lien Debt |  |  |  | $ | — |  |  | $ | 5,568 |  |  | $ | 24,892 |  |  | $ | 25,000 |  |  | $ | — |  |  | $ | (4,529) |  |  | $ | 45,363 |
Preferred Equity – 10.3% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Chemicals, Plastics, and Rubber – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
PSI Molded Plastics, Inc. – Preferred Stock |  | 158,598 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Diversified/Conglomerate Manufacturing – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Edge Adhesives Holdings, Inc. – Preferred Stock(M) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Diversified/Conglomerate Services – 1.6% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ImageWorks Display and Marketing Group, Inc. – Preferred Stock |  | 67,490 |  |  | — |  |  | — |  |  | 10,926 |  |  | — |  |  | — |  |  | (8,319) |  |  | 2,607 |
J.R. Hobbs Co. – Atlanta, LLC – Preferred Stock |  | 10,920 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
The Maids International, LLC - Preferred Stock |  | 6,640 |  |  | — |  |  | — |  |  | 3,200 |  |  | — |  |  | — |  |  | 2,226 |  |  | 5,426 |
|  |  |  | — |  |  | — |  |  | 14,126 |  |  | — |  |  | — |  |  | (6,093) |  |  | 8,033 |
Home and Office Furnishings, Housewares, and Durable Consumer Products – 6.2% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Old World Christmas, Inc. – Preferred Stock |  | 6,180 |  |  | 273 |  |  | — |  |  | 33,990 |  |  | — |  |  | — |  |  | (3,352) |  |  | 30,638 |

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GLADSTONE INVESTMENT CORPORATION
INVESTMENTS IN AND ADVANCES TO AFFILIATES (Continued)
(AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(C)(D)(E) |  | Principal/ Shares/Units(F)(G) |  | Net Realized Gain (Loss) for Period(P) |  | Amount of Investment Income(H) |  | Value as of March 31, 2023 |  | Gross Additions(I) |  | Gross Reductions(J) |  | Net Unrealized Appreciation (Depreciation) |  | Value as of March 31, 2024
Mining, Steel, Iron and Non-Precious Metals - 2.5% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Utah Pacific Bridge & Steel, Ltd. - Preferred Stock |  | 6,000 |  |  | — |  |  | — |  |  | 7,748 |  |  | — |  |  | — |  |  | 4,539 |  |  | 12,287 |
Telecommunications – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
B+T Group Acquisition, Inc. – Preferred Stock |  | 14,304 |  |  | — |  |  | — |  |  | 2,187 |  |  | — |  |  | — |  |  | (2,187) |  |  | — |
Total Preferred Equity |  |  |  | $ | 273 |  |  | $ | — |  |  | $ | 58,051 |  |  | $ | — |  |  | $ | — |  |  | $ | (7,093) |  |  | $ | 50,958 |
Common Equity/Equivalents – 10.4% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Diversified/Conglomerate Services - 10.4% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nth Degree Investment Group, LLC – Common Stock |  | 17,216,976 |  |  | $ | — |  |  | $ | — |  |  | $ | 15,243 |  |  | $ | 5,000 |  |  | $ | — |  |  | $ | 31,199 |  |  | $ | 51,442 |
Telecommunications - 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
B+T Group Acquisition, Inc. - Common Stock Warrants |  | 3.5 | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total Common Equity/Equivalents |  |  |  | $ | — |  |  | $ | — |  |  | $ | 15,243 |  |  | $ | 5,000 |  |  | $ | — |  |  | $ | 31,199 |  |  | $ | 51,442 |
TOTAL AFFILIATE INVESTMENTS |  |  |  | $ | 273 |  |  | $ | 27,805 |  |  | $ | 255,955 |  |  | $ | 33,436 |  |  | $ | (4,342) |  |  | $ | 10,317 |  |  | $ | 295,366 |
CONTROL INVESTMENTS – 0.6% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Secured First Lien Debt – 0.6% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
The Mountain Corporation – Line of Credit(N) |  | $ | — |  |  | $ | (4,550) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (4,550) |  |  | $ | 4,550 |  |  | $ | — |
Diversified/Conglomerate Manufacturing – 0.6% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Edge Adhesives Holdings, Inc. – Term Debt (SOFR+5.5%, 10.8% Cash, Due 8/2024)(K)(M) |  | $ | 9,210 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 4,342 |  |  | $ | — |  |  | $ | (1,437) |  |  | $ | 2,905 |
Total Secured Second Lien Debt |  |  |  | $ | (4,550) |  |  | $ | — |  | $ | — |  | $ | — |  |  | $ | 4,342 |  |  | $ | (4,550) |  |  | $ | 3,113 |  |  | $ | 2,905 |
Secured Second Lien Debt – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
The Mountain Corporation – Term Debt(N) |  | $ | — |  |  | $ | (3,200) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (3,200) |  |  | $ | 3,200 |  |  | $ | — |
Total Secured Second Lien Debt |  |  |  | $ | (3,200) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (3,200) |  |  | $ | 3,200 |  |  | $ | — |

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GLADSTONE INVESTMENT CORPORATION
INVESTMENTS IN AND ADVANCES TO AFFILIATES (Continued)
(AMOUNTS IN THOUSANDS)

Company and Investment(A)(B)(C)(D)(E) |  | Principal/ Shares/Units(F)(G) |  | Net Realized Gain (Loss) for Period(P) |  | Amount of Investment Income(H) |  | Value as of March 31, 2023 |  | Gross Additions(I) |  | Gross Reductions(J) |  | Net Unrealized Appreciation (Depreciation) |  | Value as of March 31, 2024
Preferred Equity – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
The Mountain Corporation – Preferred Stock (N) |  | — |  |  | $ | (6,899) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (6,899) |  |  | $ | 6,899 |  |  | $ | — |
Diversified/Conglomerate Manufacturing – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Edge Adhesives Holdings, Inc. – Preferred Stock(K) |  | 8,199 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total Preferred Equity |  |  |  | $ | (6,899) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (6,899) |  |  | $ | 6,899 |  |  | $ | — |
Common Equity/Equivalents – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Leisure, Amusement, Motion Pictures, and Entertainment – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gladstone SOG Investments, Inc. - Common Stock(O) |  | — |  |  | $ | 882 |  |  | $ | — |  |  | $ | 713 |  |  | $ | — |  |  | $ | (620) |  |  | $ | (93) |  |  | $ | — |
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0% |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
The Mountain Corporation - Common Stock (N) |  | — |  |  | (1) |  |  | — |  |  | — |  |  | — |  |  | (1) |  |  | 1 |  |  | — |
Total Common Equity/Equivalents |  |  |  | $ | 881 |  |  | $ | — |  |  | $ | 713 |  |  | $ | — |  |  | $ | (621) |  |  | $ | (92) |  |  | $ | — |
TOTAL CONTROL INVESTMENTS |  |  |  | $ | (13,768) |  |  | $ | — |  |  | $ | 713 |  |  | $ | 4,342 |  |  | $ | (15,270) |  |  | $ | 13,120 |  |  | $ | 2,905 |
TOTAL AFFILIATE AND CONTROL INVESTMENTS |  |  |  | $ | (13,495) |  |  | $ | 27,805 |  |  | $ | 256,668 |  |  | $ | 37,778 |  |  | $ | (19,612) |  |  | $ | 23,437 |  |  | $ | 298,271 |

(A)Certain of the listed securities are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, together with certain non-control and non-affiliate investments, totaling $717.3 million at fair value, are pledged as collateral to our revolving line of credit, as described further in Note 5—Borrowings in the accompanying Notes to Consolidated Financial Statements. Additionally, under Section 55 of the Investment Company Act of 1940, as amended (the “1940 Act”), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of March 31, 2024, our investment in Funko Acquisition Holdings, LLC (“Funko”) is considered a non-qualifying asset under Section 55 of the 1940 Act and represents less than 0.1% of total investments, at fair value.
(B)Common stock, warrants, options and, in some cases, preferred stock are generally non-income-producing and restricted.
(C)Unless indicated otherwise, all cash interest rates are indexed to 30-day Secured Overnight Financing Rate ("SOFR"), which was 5.3% as of March 31, 2024. If applicable, paid-in-kind interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or reference rate plus a spread. Due dates represent the contractual maturity date.
(D)Category percentages represent the fair value of each category and subcategory as a percentage of net assets as of March 31, 2024.
(E)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the Financial Accounting Standards Board Accounting Standard Codification Topic 820, “Fair Value Measurements and Disclosures” fair value hierarchy. Refer to Note 3 — Investments in the accompanying Notes to Consolidated Financial Statements for additional information.
(F)Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase.
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INVESTMENTS IN AND ADVANCES TO AFFILIATES (Continued)
(AMOUNTS IN THOUSANDS)
(G)Represents the principal balance, presented in thousands, for debt investments and the number of shares/units held for equity investments as of March 31, 2024. Warrants are represented as a percentage of ownership, as applicable, as of March 31, 2024.
(H)Represents the total amount of interest, dividend, success fee, or other investment income credited to income for the portion of the year ending March 31, 2024 an investment was an affiliate investment or control investment and on accrual status, as appropriate.
(I)Gross additions include increases in investments resulting from new portfolio investments, the amortization of discounts and fees, and the exchange of one or more existing securities for one or more new securities during the year ended March 31, 2024.
(J)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 during the year ended March 31, 2024.
(K)Debt security is on non-accrual status as of March 31, 2024.
(L)New investment during the year ended March 31, 2024.
(M)Edge Adhesives Holdings, Inc.'s term debt and equity were transferred from Affiliate to Control investment during the year ended March 31, 2024.
(N)During the year ended March 31, 2024, we recognized a realized loss of $14.7 million upon the liquidation and dissolution of The Mountain. .
(O)During the year ended March 31, 2024, we received a $1.5 million escrow settlement in connection with our December 2021 exit of SOG Specialty Knives & Tools, LLC, which resulted in no remaining assets being held by Gladstone SOG Investments, Inc.
(P)Net realized gain (loss) excludes amounts related to portfolio companies no longer in the portfolio for the periods presented.
**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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