What changed in this filing

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Item 1. Business

2024-05-08 compared with 2023-05-10 · 81 added, 58 removed, 495 unchanged (22% of the section changed)

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federal income tax purposes and obtain favorable RIC tax treatment, we must meet certain requirements, including certain minimum distribution requirements.

Shares of our common stock, our 5.00% Notes due 2026 (“2026 Notes”) and our 4.875% Notes due 2028 (“2028 Notes”) are traded on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbols “GAIN,” “GAINN” and “GAINZ,” respectively.

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 (the “Advisory Agreement”).

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.

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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 and their respective staffs.

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:

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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 registered investment adviser under the Investment Advisers Act of 1940, as amended.

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.

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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 following:

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.

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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 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.

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 one-month London Interbank Offered Rate (“LIBOR”)) and, to a lesser extent, at fixed rates.

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.

dollar LIBOR are currently anticipated to be phased out in June 2023.

We have amended all outstanding loan agreements with our portfolio companies to include fallback language providing a mechanism for the parties to negotiate a new reference interest rate in the event that LIBOR ceases to exist.

Assuming that the Secured Overnight Financing Rate ("SOFR") replaces LIBOR and is appropriately adjusted to equate to one-month LIBOR, we expect that there should be minimal impact on our operations.

Subsequent to March 31, 2023, certain of our existing investments have been transitioned from LIBOR to SOFR.

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.

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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, or warrants or options to purchase any of the foregoing.

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.

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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 Old World Christmas, Inc.

(“Old World”), Horizon Facilities Services, Inc.

("Horizon"), Dema/Mai Holdings, Inc.

("Dema/Mai"), Nocturne Luxury Villas, Inc.

("Nocturne"), and Brunswick Bowling Products, Inc.

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

March 31, 2023 March 31, 2022

March 31, 2024

March 31, 2023

Fair Value Percentage of

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Home and Office Furnishings, Housewares, and Durable Consumer Products 160,038 17.3 % 143,685 19.1 %

Buildings and Real Estate 60,571 8.0 % — — %

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 %

Leisure, Amusement, Motion Pictures, and Entertainment 47,616 6.3 % 46,514 6.5 %

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 %

Chemicals, Plastics, and Rubber 24,891 3.3 % 26,618 3.7 %

Aerospace and Defense 29,064 3.2 % 22,215 2.8 %

Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) 20,088 2.7 % 13,823 1.9 %

Telecommunications 18,987 2.5 % 32,467 4.6 %

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 %

Diversified/Conglomerate Manufacturing 9,646 1.3 % 14,064 2.0 %

Telecommunications 9,002 1.0 % 18,987 2.5 %

Other < 2.0% 8,490 0.9 % 9,673 1.3 %

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Total Investments

Northeast $ 266,612 35.4 % $ 194,100 27.2 %

West 197,989 26.3 % 158,607 22.2 %

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 %

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We seek companies that demonstrate significant competitive advantages versus their competitors, which we believe will help to protect their market positions and profitability.

• Liquidation Value of Assets:

The projected liquidation value of the assets, if any, is an important factor in our investment analysis in collateralizing our debt securities.

• 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

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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:

• A review of the prospective portfolio company’s historical and projected financial information, including a quality of earnings analysis;

• 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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• 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.

From time to time, 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.

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.

Competitive Advantages

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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 develop a financing structure which best fits the investment and growth profile of the underlying business and yields attractive investment opportunities that will continue to generate current income and capital gain potential throughout the economic cycle, including during turbulent periods in the capital markets.

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

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Valuation Process

The 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.

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 the good faith fair value determination of our investments for which market quotations are not readily available based on the Policy and overseeing the Valuation Designee.

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.

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Fair value determinations and supporting material are sent to the Board of Directors in advance of its quarterly meetings.

Then, the Valuation Committee and chief valuation officer present the Valuation Committee’s findings to the entire Board of Directors, so that the full Board of Directors may review the Valuation Designee's determination of the fair value of such investments in accordance with the Policy.

• 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.

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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 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Investment Valuation.”

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

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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 12, 2022, 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 renewal of the Advisory Agreement through August 31, 2023.

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 fee 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

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

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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, 2023 and 2021, no capital gains-based incentive fees were contractually due and paid to the Adviser.

As of and for the year ended March 31, 2022, capital gains-based incentive fees of $5.3 million were contractually due and paid to the Adviser.

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.

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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 year ended March 31, 2023, we recorded a reversal of capital gains-based incentive fees of $0.3 million.

During the years ended March 31, 2022 and 2021, we recorded capital gains-based incentive fees of $18.3 million and $5.0 million, respectively.

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 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.

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.

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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.

Refer to Note 4 — Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.

For additional information, refer to Note 4 — Related Party Transactions in the accompanying Notes to Consolidated Financial Statements .

Material U.S.

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estate or gift tax.

Stockholders are urged to consult their tax advisors regarding their particular situations and the possible applicable of federal, state, local, non-U.S.

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.

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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

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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 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 .

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.

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Taxation of Our U.S.

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.

stockholders are urged to consult their tax advisors about the U.S.

tax consequences of investing in the fund.

Distributions

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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 of Risk Factors

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.

• Global economic and political conditions could negatively impact our business, results of operations, cash flows and financial condition.

• 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.

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• 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.

• Our investments in lower middle market companies are extremely risky and could cause you to lose all or a part of your investment.

• 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.

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

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• 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.

• 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 of 1933, as amended (the “Securities Act”), and Rule 17j-1 of the 1940 Act.

As required by the 1940 Act, this code establishes procedures for personal investments, restricts certain transactions by such personnel and requires the reporting of certain transactions and holdings by such personnel.

This code of ethics and business conduct is publicly available on our website under “Investors - Governance – Governance Documents” at www.GladstoneInvestment.com .

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.

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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 our Gladstone affiliates.

We have designated a chief compliance officer, John Dellafiora, Jr., who also serves as chief compliance officer for all of the Gladstone companies.

We do not currently have any employees and do not expect to have any employees in the foreseeable future.

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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.

To the extent we acquire more investments, we anticipate that the number of employees of the Adviser and the Administrator who devote time to our matters will increase.

As of March 31, 2024, the Adviser and Administrator collectively had 70 full-time employees.

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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, healthcare and other employee benefits, and by providing employees with appropriate opportunities for professional growth.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business