What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-11-15 compared with 2020-11-10 · 186 added, 183 removed, 607 unchanged (38% of the section changed)

4 unchanged sentences

We were established for the purpose of investing in debt and equity securities of established private businesses operating in the United States (U.S.).

As of September 30, 2020, shares of our common stock, our 6.125% Notes due 2023 (the 2023 Notes) and our 5.375% Notes due 2024 (the

2024 Notes) trade on the Nasdaq Global Select Market (Nasdaq) under the trading symbols GLAD, GLADD and GLADL, respectively.

As of September 30, 2021, shares of our common stock and our 5.375% Notes due 2024 (the 2024 Notes) trade on the Nasdaq Global Select

Market (Nasdaq) under the trading symbols GLAD and GLADL, respectively.

On November 1, 2021, we voluntarily redeemed all of the outstanding 2024 Notes with an aggregate principal amount of $38.8 million.

Investment Adviser and Administrator

38 unchanged sentences

small for the larger capital marketplace.

We intend for our investment portfolio to consist of approximately 90.0% debt investments and 10.0% equity investments, at cost.

As of September 30, 2020, our investment portfolio was made up of

approximately 91.3% debt investments and 8.7% equity investments, at cost.

We invest by ourselves or jointly with other funds and/or management of the

portfolio company, depending on the opportunity.

We expect that our investment portfolio over time will consist of approximately 90.0% debt investments and 10.0% equity investments, at cost.

As of September 30, 2021, our investment portfolio was made

up of approximately 91.6% debt investments and 8.4% equity investments, at cost.

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 Investment 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.

believe the Co-Investment Order has enhanced and will continue to enhance our ability to further our investment objectives and strategies.

Since 2012, we have opportunistically made several co-investments with Gladstone Investment pursuant to the Co-Investment Order.

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.

co-invest, under certain circumstances, with certain of our affiliates, including Gladstone Investment 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

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 no more than seven years, accrue interest at variable rates (generally based on the 30-day London Interbank Offered Rate (LIBOR)) and, to a lesser extent, at fixed rates.

35 unchanged sentences

their debt securities rated by a credit rating agency, we expect that most, if not all, of the debt securities we acquire will be unrated.

Investors should assume that these loans would be rated below what is today considered investment

grade quality.

Investors should assume that these loans would be rated below 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.

In addition, many of the debt securities

we hold may not amortize prior to maturity.

In addition, many of the debt securities we hold may not

amortize prior to maturity.

Investment Policies

3 unchanged sentences

We will at all times conduct our business so as to retain our status as a BDC.

In order to retain that status, we

must operate for the purpose of investing in certain categories of qualifying assets.

In addition, we may not acquire any assets (other than non-investment assets necessary and appropriate to our operations as

a BDC or qualifying assets) if, after giving effect to such acquisition, the value of our qualifying assets is less than 70.0% of the value of our total assets.

We anticipate that the securities we seek to acquire will generally be

qualifying assets.

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.

so, we must meet income source, asset diversification and annual distribution requirements.

We may issue senior securities, such as debt or preferred stock, to the extent permitted by the 1940 Act for the purpose of making investments, to fund share

repurchases, or for temporary emergency or other purposes.

With the exception of our policy to conduct our business as a BDC, these

policies are not fundamental and may be changed without stockholder approval.

Material U.S.

Federal Income Tax Considerations .

With the exception of our policy to conduct our business as a

BDC, these policies are not fundamental and may be changed without stockholder approval.

Investment Concentrations

17 unchanged sentences

Industry Classification

Percentage of

Diversified/Conglomerate Service

Healthcare, Education, and Childcare

Diversified/Conglomerate Manufacturing

Aerospace and Defense

Cargo Transportation

Beverage, Food, and Tobacco

Telecommunications

Diversified Natural Resources, Precious Metals, and Minerals

Telecommunications

Diversified/Conglomerate Manufacturing

Chemicals, Plastics, and Rubber

Textiles and Leather

Home and Office Furnishings, Housewares, and Durable Consumer Products

Cargo Transportation

Hotels, Motels, Inns, and Gaming

Textiles and Leather

Buildings and Real Estate

Personal and Non-Durable Consumer Products

Other, < 2.0%

1 unchanged sentence

Our investments at fair value were included in the following U.S.

geographic regions and Canada as of

September 30, 2020 and 2019:

geographic regions as of September 30,

2021 and 2020:

September 30, 2021

September 30, 2020

Percentage of

Total Investments

11 unchanged sentences

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) to the prospective company from the Advisers investment committee, which

is composed of Messrs.

Gladstone, Brubaker and Marcotte.

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 companys historical financial statements, industry, competitive position and management team, analyzing its conformity to our general investment criteria.

investment professionals then present this profile to the Advisers investment committee, which must approve each investment.

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.

currently is comprised of David Gladstone, Terry Lee Brubaker, Robert L.

Marcotte, Laura Gladstone, and Jonathan Sateri.

Gladstone and Mr.

Sateri were appointed to the investment committee effective October 18, 2021.

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 companys historical financial statements, industry, competitive position and management team, analyzing its conformity to our general investment criteria.

The investment professionals then present this profile to the Advisers

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.

Growth-and-Income Orientation

73 unchanged sentences

Company is comprised of Messrs.

Gladstone, Brubaker and Marcotte, each of whom have a wealth of experience in our area of operation.

Gladstone and Mr.

Brubaker also serve on the Advisers investment committee for the other

Affiliated Public Funds.

Gladstone and Mr.

Marcotte both have over 25 years of experience in investing in middle market companies and with operating in the BDC marketplace in general.

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 15 years.

Gladstone, Brubaker, Marcotte and Sateri and Ms.

Gladstone, each of whom have a wealth of experience in our area of operation.

Gladstone and Messrs.

Gladstone, Brubaker and Sateri also serve on the

Advisers investment committee for the other Affiliated Public Funds.

Gladstone has over 20 years of experience in investing in middle market companies and previously held the role of managing director with the Company.

Each of Messrs.

Gladstone, Marcotte and Sateri have over 25 years of experience in investing in middle market companies and with operating in the BDC marketplace in general.

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 15 years.

Brubaker has over 25 years of experience in acquisitions and operations of companies.

three individuals dedicate a significant portion of their time to managing our investment portfolio.

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 Advisers investment professionals and support staff who possess a broad range of transactional, financial, managerial, and investment skills.

See the additional discussion regarding management of portfolio companies by our

Adviser below under Ongoing Management of Investments and Portfolio Company Relationships.

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 private equity firms and other members of the financial community with whom the Advisers investment professionals have long-term relationships.

We believe that the

Advisers investment professionals have developed a broad network of contacts within the investment, commercial banking, private

In addition, we have access to the resources and expertise of the

Advisers investment professionals and support staff who possess a broad range of transactional, financial, managerial, and investment skills.

See the additional discussion regarding management of portfolio companies by our Adviser below under

Ongoing Management of Investments and Portfolio Company Relationships.

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 private equity firms and other members of the financial community with whom the Advisers investment professionals have long-term relationships.

We believe that the Advisers 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

32 unchanged sentences

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, such as the current COVID-19 pandemic.

Ongoing Management of Investments and Portfolio Company Relationships

The Advisers investment professionals actively oversee each investment by continuously evaluating the portfolio companys performance and typically

working collaboratively with the portfolio companys management to identify and incorporate best resources and practices that help us achieve our projected investment performance.

the economic cycle, including during turbulent periods in the capital markets.

Ongoing Management of Investments and Portfolio Company

Relationships

The Advisers investment professionals actively oversee each investment by continuously evaluating the portfolio companys

performance and typically working collaboratively with the portfolio companys management to identify and incorporate best resources and practices that help us achieve our projected investment performance.

The Advisers investment professionals monitor the financial performance, trends, and changing risks of each portfolio company on an ongoing basis to

determine if each company is performing within expectations and to guide the portfolio companys management in taking the appropriate courses of action.

In addition, the Adviser has closely monitored our portfolio companies in connection with

the COVID-19 pandemic to help them navigate the significant challenges posed by the pandemic.

The Adviser employs various methods of evaluating and monitoring the performance of our investments in portfolio

companies, which can include the following:

In addition, the Adviser has closely monitored our portfolio companies throughout the COVID-19 pandemic to assist them with operational and other challenges as they arise.

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;

59 unchanged sentences

investments may involve subjective judgment and estimates.

Due to the inherent uncertainty of determining these fair values, the fair value of our investments may fluctuate, from period to period.

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.

Due to the inherent uncertainty in valuing these securities, the determinations of fair value of our investments 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 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

2006, we entered into the Advisory Agreement, which was subsequently amended in October 2015 and amended and restated in April 2020.

In accordance with the Advisory Agreement, we pay the Adviser fees as compensation for its services, consisting of a

base management fee and an incentive fee.

On July 14, 2020, our Board of Directors, including a majority of the directors who are not parties to the Advisory Agreement or interested persons of such party, unanimously approved the renewal of the

Advisory Agreement through August 31, 2021.

2006, we entered into the Advisory Agreement, which was most recently amended and restated in April 2021.

In accordance with the Advisory Agreement, we pay the Adviser fees as compensation for its services, consisting of a base management fee and an

incentive fee.

On July 13, 2021, our Board of Directors, including a majority of the directors who are not parties to the Advisory Agreement or interested persons of such party, unanimously approved the renewal of the Advisory Agreement through

August 31, 2022.

Gladstone, our chairman and chief executive officer, controls the Adviser.

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

shareholders;

(2) the investment performance of the Company and the Adviser;

The 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 shareholders;

(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;

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 Companys investors;

structure of the advisory and administrative agreements of comparable funds;

(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 Companys 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.

Based on the information reviewed and the considerations detailed above, our Board of Directors, including all of the

directors who are not interested persons as that term is defined in the 1940 Act, concluded that the investment advisory fee rates and terms are fair and reasonable in relation to the services provided and approved the Advisory

Agreement, as being in the best interests of our stockholders.

and (7) in light of the foregoing considerations, the overall fairness of the advisory fees paid under the Advisory Agreement.

Based on the information reviewed and the considerations detailed above, our Board of Directors, including all of the directors who are not interested

persons as that term is defined in the 1940 Act, concluded that the investment advisory fee rates and terms are fair and reasonable in relation to the services provided and approved the Advisory Agreement, as being in the best interests of our

stockholders.

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 1.75%, computed on the

basis of the value of our average total assets at the end of the two most recently-completed quarters (inclusive of the current quarter), which are total assets, including investments made with proceeds of borrowings, less any uninvested cash or

cash equivalents resulting from borrowings and adjusted appropriately for any share issuances or repurchases during the period.

Our Board of Directors may (as it has for the years ended September 30, 2020, 2019, and 2018) accept a non-contractual, unconditional and irrevocable credit from the Adviser to reduce the annual 1.75% base management fee on syndicated loan participations to 0.5%, to the extent that proceeds resulting from borrowings

were used to purchase such syndicated loan participations.

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.

The Adviser non-contractually, unconditionally, and irrevocably credits 100% of these fees against the base management fee that we would otherwise be required to pay to the Adviser;

however, pursuant to the terms of the

Advisory Agreement, a small percentage of certain of such fees is retained by the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser, primarily for the valuation of portfolio companies.

Loan servicing fees

that are payable to the Adviser pursuant to our Fifth Amended and Restated Credit Agreement, with KeyBank National Association (KeyBank), as administrative agent, lead arranger and lender, as amended (our Credit Facility),

are also 100% credited against the base management fee as discussed below, Loan Servicing Fee Pursuant to Credit Agreement.

management fee is payable quarterly to the Adviser pursuant to our Advisory Agreement and is assessed at an annual rate of 1.75%, computed on the basis of the value of our average total assets at the end of the two most recently-completed quarters

(inclusive of the current quarter), which are total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings and adjusted appropriately for any share issuances or

repurchases during the period.

Our Board of Directors may (as it has for the years ended September 30, 2021, 2020, and 2019) accept a non-contractual, unconditional and irrevocable credit from the Adviser

to reduce the annual 1.75% base management fee on syndicated loan participations to 0.5%, to the extent that proceeds resulting from borrowings were used to purchase such syndicated loan participations.

Additionally, pursuant to the requirements of the 1940 Act, the Adviser makes available significant managerial assistance to our portfolio companies.

Adviser may also provide other services to our portfolio companies under certain agreements and may receive fees for services other than managerial assistance.

The Adviser non-contractually, unconditionally,

and irrevocably credits 100% of these fees against the base management fee that we would otherwise be required to pay to the Adviser;

however, pursuant to the terms of the Advisory Agreement, a small percentage of certain of such fees is retained by

the Adviser in the form of reimbursement, at cost, for tasks completed by personnel of the Adviser, primarily for the valuation of portfolio companies.

Loan servicing fees that are payable to the Adviser pursuant to our revolving credit facility

with KeyBank National Association (KeyBank), as administrative agent, lead arranger and lender (as amended and restated from time to time, our Credit Facility) are also 100% credited against the base management fee as

discussed below, Loan Servicing Fee Pursuant to Credit Agreement.

Incentive Fee

1 unchanged sentence

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 (2.0% during

the one year period from April 1, 2020 through March 31, 2021), 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 generally payable quarterly to the Adviser and is computed as follows:

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 (2.0% during the period from April 1, 2020 through March 31, 2022), 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 generally payable quarterly to the Adviser and is computed as

no incentive fee in any calendar quarter in which our pre-incentive fee

1 unchanged sentence

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% (2.4375% during the one year period from April 1, 2020 through March 31,

2021) of our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter;

that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% (2.4375% during the period from April 1, 2020 through March 31, 2022) of

our net assets, adjusted appropriately for any share issuances or repurchases during the period, in any calendar quarter;

20.0% of the amount of our pre-incentive fee net investment income, if

any, that exceeds 2.1875% (2.4375% during the one year period from April 1, 2020 through March 31, 2021) 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 for the Year Period Ending March 31, 2021 (A)

any, that exceeds 2.1875% (2.4375% during the period from April 1, 2020 through March 31, 2022) 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 for the Period Ending March 31, 2022 (A)

Pre-incentive fee net investment

40 unchanged sentences

the total base management fee paid to the Adviser pursuant to the Advisory Agreement cannot exceed 1.75% of total assets (less any uninvested cash or cash equivalents resulting from borrowings and adjusted appropriately for any share issuances or

repurchases during the period) during any given calendar year, we treat payment of the loan servicing fee pursuant to our line of credit as a pre-payment of the base management fee under the Advisory

repurchases during the period) during any given calendar year, we treat payment of the loan servicing fee pursuant to our Credit Facility as a pre-payment of the base management fee under the Advisory

Accordingly, these loan servicing fees are 100% non-contractually, unconditionally, and irrevocably credited back to us by the Adviser.

85 unchanged sentences

event, we may be required to sell investments or other assets to meet the RIC distribution requirements.

For the year ended September 30, 2020, we recorded $0.3 million of OID income and the unamortized balance of OID investments (which

are primarily all syndicated loans) as of September 30, 2020 totaled $0.6 million.

As of September 30, 2020, we had seven investments which had a PIK interest component and we recorded PIK interest income of $2.6 million during

the year ended September 30, 2020.

For the year ended September 30, 2021, we recorded $0.3 million of OID income and the unamortized balance of OID investments as of

September 30, 2021 totaled $1.1 million.

As of September 30, 2021, we had seven investments which had a PIK interest component and we recorded PIK interest income of $2.5 million during the year ended September 30, 2021.

Taxation of Our U.S.

17 unchanged sentences

shares and preferred shares in proportion to the total distributions paid to each class with respect to such tax year.

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

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.

28 unchanged sentences

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.

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.

Capital losses are subject to limitations on use for both corporate and non-corporate stockholders.

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

10 unchanged sentences

The Foreign Account Tax Compliance Act imposes a U.S.

federal withholding tax on certain types of payments made

to foreign financial institutions and certain other non-U.S.

entities unless certain due diligence, reporting, withholding, and certification obligation requirements are satisfied.

federal withholding tax on certain types of

payments made to foreign financial institutions and certain other non-U.S.

entities unless certain due diligence, reporting, withholding, and certification obligation requirements are

Information Reporting

We will send to each of our

stockholders, after the end of each calendar year, a notice providing, on a per share and per distribution basis, the amounts includible in the U.S.

stockholders taxable income for such year as ordinary income and as long-term capital

gain, if any.

We will send to each of our U.S.

stockholders, after the end of each calendar year, a notice providing, on a per share and per distribution basis, the amounts

includible in the U.S.

stockholders taxable income for such year as ordinary income and as long-term capital gain, if any.

In addition, the U.S.

federal tax status of each years 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).

federal tax status of each years 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 majority of our outstanding voting securities, as defined in the 1940 Act.

We intend to conduct our business so as to retain

our status as a BDC.

A BDC may use capital provided by public stockholders and from other sources to make long-term investments in private companies.

A BDC provides stockholders the ability to retain the liquidity of a publicly traded stock while

sharing in the possible benefits, if any, of investing in primarily privately owned companies.

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.

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.

We intend to conduct our business so as to retain our status as a BDC.

A BDC may use capital provided by public stockholders and from other sources to make

long-term investments in private companies.

A BDC provides stockholders the ability to retain the liquidity of a publicly traded stock while sharing in the possible benefits, if any, of investing in primarily privately owned companies.

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 70.0% of total assets,

exclusive of Operating 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 70.0% of total assets, exclusive of Operating Assets.

The types of qualifying assets in which we may invest under the 1940 Act include the following:

Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer is an eligible portfolio company.

(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:

45 unchanged sentences

In addition to the below, you should carefully consider the

information included in Risk Factors beginning on page 24 of this

Annual Report together with all of the other information included in this Annual Report and the other reports and documents filed or furnished 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.

information included in Risk Factors beginning on page 23 of this Annual Report together with all of the other information included in this Annual Report and the other reports and documents filed or furnished 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

4 unchanged sentences

financial condition, results of operations, and cash flows.

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.

We often invest in transactions involving acquisitions, buyouts and recapitalizations of companies, which will

subject us to the risks associated with change in control transactions.

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

18 unchanged sentences

Common shares of closed-end investment companies frequently trade at a

discount to the net asset value of our common stock (NAV).

We may choose to redeem the 2023 Notes or 2024 Notes when prevailing interest rates are relatively low.

discount to the net asset value (NAV) per share.

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.

operating results.

Code of Ethics

2 unchanged sentences

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.GladstoneCapital.com .

We intend to provide any required disclosure of any amendments to or waivers of the provisions of this

code by posting information regarding any such amendment or waiver to our website or in a Current Report on Form 8-K.

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.GladstoneCapital.com .

We intend to provide any required disclosure of any amendments to or waivers of the provisions of this code by posting information regarding any such amendment or waiver to our

website or in a Current Report on Form 8-K.

Compliance Policies and Procedures

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.

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.

We expect that 25 to 30 full time employees of the Adviser and the Administrator will spend substantial time on our matters during the remainder of calendar year 2020 and all of calendar year 2021.

September 30, 2020, the Adviser and the Administrator collectively had 68 full-time employees.

A breakdown of these employees is summarized by functional area in the table below:

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.

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.

We expect that 25 to 30 full time employees of the Adviser and the

Administrator will spend substantial time on our matters during the remainder of calendar year 2021 and all of calendar year 2022.

As of September 30, 2021, the Adviser and the Administrator collectively had 69 full-time employees.

of these employees is summarized by functional area in the table below:

Number of Individuals

8 unchanged sentences

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 section of our website at www.GladstoneCapital.com

as soon as reasonably practicable after such materials are electronically filed with or

furnished to the SEC.

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 .

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 .

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