GLADSTONE CAPITAL CORPORATION

(Unaudited)

	March 31, 2005			September 30, 2004

ASSETS
Investments at fair value (Cost 3/31/2005: $181,100,807; 9/30/2004: $149,189,306)	$	178,448,617		$	146,446,240
Cash and cash equivalents	19,174,183			15,969,890
Cash and cash equivalents pledged to creditors	—			49,984,950
Interest receivable – investments in debt securities	1,115,302			837,336
Interest receivable – employees	107,187			112,960
Due from custodian	14,472,037			1,203,079
Due from affiliate	—			109,639
Deferred financing costs	166,912			350,737
Prepaid assets	155,540			191,676
Other assets	114,220			127,220

TOTAL ASSETS	$	213,753,998		$	215,333,727

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
Accounts payable	$	155,872		$	105,921
Fees due to affiliate	167,243			113,511
Borrowings under lines of credit	59,100,000			40,743,547
Accrued expenses and deferred liabilities	189,573			798,096
Repurchase agreement	—			21,345,997

Total Liabilities	$	59,612,688		$	63,107,072

STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 50,000,000 shares authorized and 11,298,510 and 11,278,510 shares issued and outstanding, respectively	$	11,299		$	11,279
Capital in excess of par value	164,498,128			164,294,781
Notes receivable for sale of stock to employees	(8,816,389		)	(9,432,678		)
Net unrealized depreciation on investments	(2,652,189		)	(2,743,066		)
Unrealized depreciation on derivative	(223,222		)	(214,259		)
Distributions less than net investment income	1,323,683			310,598

Total Stockholders’ Equity	$	154,141,310		$	152,226,655

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	213,753,998		$	215,333,727

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

GLADSTONE CAPITAL CORPORATION

SCHEDULE OF INVESTMENTS

AS OF MARCH 31, 2005

(UNAUDITED)

Company (1)	Industry	Investment (2)	Cost		Fair Value

Advanced Homecare Management, Inc.	Home health nursing services	Senior Subordinated Term Debt (7) (11.9%, Due 12/2010)	$	7,500,000	$	7,509,375

Allied Extruders, Inc.	Polyethylene film manufacturer	Senior Term Debt (3) (12.3%, Due 7/2009)	4,000,000		4,005,000

ARI Holdings, Inc.	Manufacturing-auto parts	Senior Term Debt (8)	3,920,000		3,920,000
		(9.8%, Due 2/2008)

Badanco Acquisition Corp.	Manufacturing-luggage	Senior Term Debt (8)	7,350,000		7,350,000
		(8.2%, Due 2/2010)
		Senior Term Debt (8)	8,650,000		8,650,000
		(11.8%, Due 2/2010)

Benetech, Inc.	Dust management systems for the coal and electric	Senior Term Debt (6) (8.5%, Due 5/2009)	3,006,250		3,021,281
	utility industries	Senior Term Debt (3) (6)	3,250,000		3,282,500
		(11.5%, Due 5/2009)

Consolidated Bedding, Inc.	Manufacturing-mattresses	Senior Subordinated Term Debt (8)	3,001,835		3,001,835
		(12.0%, Due 3/2009)

Coyne International Enterprises	Industrial services	Senior Term Debt (3) (5) (6) (13.0%, PIK 2%, Due 7/2007)	8,517,337		8,474,750

Finn Corporation	Manufacturing-landscape equipment	Senior Subordinated Term Debt (6) (13.0%, Due 2/2006)	10,500,000		7,402,500
		Common Stock Warrants	37,000		599,176

Gammill, Inc.	Designer and assembler of quilting machines and	Senior Term Debt (6) (9.5%, Due 12/2008)	3,962,292		3,962,292
	accessories	Senior Term Debt (3) (6)	4,720,313		4,690,811
		(12.0%, Due 12/2008)

Global Materials	Manufacturing-steel wool	Senior Term Debt (3) (6)	5,500,000		5,513,750
Technologies, Inc.	products and metal fibers	(13.0%, Due 11/2009)

John Henry Holdings, Inc.	Manufacturing-packaging products	Senior Subordinated Term Debt (7) (9.9%, Due 6/2011)	5,473,565		5,418,829

Maidenform, Inc.	Intimate apparel	Senior Subordinated Term Debt (6)	10,003,304		10,150,000
		(10.2%, Due 5/2011)

Marcal Paper Mills, Inc.	Manufacturing-paper products	Senior Subordinated Term Debt (6) (13.0%, Due 12/2006)	6,625,000		6,376,563
		First Mortgage Loan (5)	9,301,053		9,301,053
		(16%, PIK 1%, Due 12/2006)

MedAssets, Inc.	Pharmaceuticals and healthcare GPO	Senior Term Debt (6) (7.6%, Due 3/2007)	1,391,451		1,393,160
		Senior Subordinated Term Debt (6)	6,502,813		6,573,125
		(12.9%, Due 3/2008)

Company (1)	Industry	Investment (2)	Cost		Fair Value

Mistras Holdings Corp.	Nondestructive testing	Senior Term Debt (3) (6)	9,666,666		9,497,499
	instruments, systems	(10.5%, Due 8/2008)
	and services	Senior Term Debt (3) (6)	4,833,334		4,742,709
		(12.5%, Due 8/2008)
		Senior Term Debt (3) (6)	1,000,000		986,750
		(13.5%, Due 8/2008)

Polar Corporation	Manufacturing-trailer parts	Senior Subordinated Term Debt (6) (9.5%, Due 6/2010)	5,556,627		5,639,976

Regency Gas Services LLC	Midstream gas gathering and processing	Senior Subordinated Term Debt (7) (8.8%, Due 12/2010)	3,023,453		3,075,000

Santana Plastics	Manufacturing-polyethylene bathroom	Senior Term Debt (6) (10.5%, Due 11/2009)	6,000,000		6,007,500
	partitions	Senior Term Debt (6)	1,950,000		1,952,438
		(13.0%, Due 11/2009)

SCPH Holdings, Inc.	Manufacturing-underwater	Credit Facility (9)	—		—
Sea Con Phoenix, Inc.	and harsh environment	(8.0%, Due 3/2006)
Phoenix Optix, Inc.	components	Senior Term Debt (8)	3,412,500		3,412,500
		(8.5%, Due 2/2010)
		Senior Term Debt (8)	3,000,000		3,000,000
		(12.0%, Due 2/2010)

Tech Lighting LLC	Manufacturing-low voltage lighting systems	Senior Subordinated Term Debt (6) (9.3%, Due 10/2010)	9,013,681		9,033,750

Woven Electronics Corporation	Custom electrical cable assemblies	Senior Term Debt (3) (6) (7.7%, Due 3/2009)	2,474,000		2,486,370
		Senior Term Debt (4) (6)	11,958,333		12,018,125
		(11.5%, Due 3/2009)

Xspedius Communications	Service-	Senior Subordinated Term Debt (8)	6,000,000		6,000,000
LLC	telecommunications	(9.6%, Due 3/2010)

Total:			$	181,100,807	$	178,448,617

(1) We do not “Control,” and are not an “Affiliate” of, any of our portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). In general, under the 1940 Act, we would “Control” a portfolio company if we owned 25% or more of its voting securities and would be an “Affiliate” of a portfolio company if we owned 5% or more of its voting securities.

(2) Percentage represents interest rates in effect at March 31, 2005 and due date represents the contractual maturity date.

(3) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt.

(4) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt, however the debt is junior to another Last Out Tranche.

(5) Has some paid in kind (PIK) interest. Refer to Note 7 “Payment in Kind Interest” hereto and Note 2 “Summary of Significant Accounting Policies” of the Company’s Form 10-K for the fiscal year ended September 30, 2004.

(6) Fair value was based on valuation prepared and provided by Standard & Poor’s Loan Evaluation Services.

(7) Marketable securities are valued based on the bid price, as of March 31, 2005, from the respective originating syndication agent’s trading desk.

(8) Investment was valued at cost due to recent acquisition.

(9) Availability under the credit facility totals $500,000. There were no borrowings outstanding at March 31, 2005.

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

GLADSTONE CAPITAL CORPORATION

SCHEDULE OF INVESTMENTS

AS OF SEPTEMBER 30, 2004

Company (1)	Industry	Investment (2)	Cost		Fair Value

A and G, Inc.	Activewear products	Senior Term Debt (3) (6)	$	12,250,000	$	12,250,000
(d/b/a Alstyle)		(11.0%, Due 6/2008)

Allied Extruders, Inc.	Polyethylene film manufacturer	Senior Term Debt (3) (12.3%, Due 7/2009)	4,000,000		4,000,000

America’s Water Heater Rentals	Household appliances rental	Senior Term Debt (4) (6) (8) (12.5%, Due 2/2009)	12,000,000		12,840,000

ARI Holdings, Inc.	Manufacturing-auto parts	Senior Term Debt (6)	1,190,141		1,188,653
		(9.75%, Due 6/2008)
		Senior Subordinated Term Debt (5) (6)	3,657,164		3,634,306
		(11%, PIK 4%, Due 12/2008)

Bear Creek Corporation	Premium horticultural and food products	Senior Subordinated Term Debt (7) (9.1%, Due 6/2010)	6,000,000		6,090,000

Benetech, Inc.	Dust management systems for the coal and electric	Senior Term Debt (6) (8.5%, Due 5/2009)	3,168,750		3,160,828
	utility industries	Senior Term Debt (3) (6)	3,250,000		3,241,875
		(11.5%, Due 5/2009)

Burt’s Bees, Inc.	Personal & household products	Senior Term Debt (7) (5.4%, Due 11/2009)	975,000		987,188

Coyne International Enterprises	Industrial services	Senior Term Debt (3) (5) (6)(13.0%, PIK 2%, Due 7/2007)	15,700,625		15,308,110

Finn Corporation	Manufacturing-landscape equipment	Senior Subordinated Term Debt (6) (13.0%, Due 2/2006)	10,500,000		7,612,500
		Common Stock Warrants	37,000		474,984

Gammill, Inc.	Designer and assembler of quilting machines and	Senior Term Debt (6) (9.5%, Due 12/2008)	4,708,013		4,731,553
	accessories	Senior Term Debt (3) (6)	4,750,000		4,767,813
		(12.0%, Due 12/2008)

Inca Metal Products Corporation	Material handling and storage products	Senior Term Debt (3) (6) (4.6%, Due 9/2006)	2,387,548		2,136,855
Kingway Acquisition, Inc.
Clymer Acquisition, Inc.

Maidenform, Inc.	Intimate apparel	Senior Subordinated Term Debt (7)	10,003,571		10,175,000
		(9.4%, Due 5/2011)

Marcal Paper Mills, Inc.	Manufacturing-paper products	Senior Subordinated Term Debt (6) (13.0%, Due 12/2006)	6,800,000		6,188,000
		First Mortgage Loan (5)	9,254,715		9,254,715
		(16%, Due 12/2006)

MedAssets, Inc.	Pharmaceuticals and healthcare GPO	Senior Term Debt (7) (5.9%, Due 3/2007)	1,815,497		1,806,887
		Senior Subordinated Term Debt (7)	6,503,282		6,500,000
		(11.2%, Due 3/2008)

Mistras Holdings Corp.	Nondestructive testing	Senior Term Debt (3) (6)	9,833,333		9,759,583
	instruments, systems	(10.5%, Due 8/2008)
	and services	Senior Term Debt (3) (6)	4,916,667		4,867,500
		(12.5%, Due 8/2008)
		Senior Term Debt (3) (6)	1,000,000		1,000,000
		(13.5%, Due 8/2008)

Woven Electronics Corporation	Custom electrical cable assemblies	Senior Term Debt (3) (6) (6.5%, Due 3/2009)	2,488,000		2,484,890
		Senior Term Debt (4) (6)	12,000,000		11,985,000
		(11.5%, Due 3/2009)

Total:			$	149,189,306	$	146,446,240

(2) Percentage represents interest rates in effect at September 30, 2004 and due date represents the contractual maturity date.

(3) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt.

(6) Fair value was based on valuation prepared and provided by Standard & Poor’s Loan Evaluation Services.

(7) Marketable securities are valued based on the bid price, as of September 30, 2004, from the respective originating syndication agent’s trading desk.

(8) Includes a success fee with a fair value of $660,000 and no cost basis.

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

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	Three Months Ended
	March 31, 2005			March 31, 2004
INVESTMENT INCOME
Interest income – investments	$	5,198,180		$	3,878,817
Interest income – cash and cash equivalents	5,130			17,334
Interest income – notes receivable from employees	113,599			109,538
Fee income (Refer to Note 12)	—			356,231
Other income	569,620			6,000
Total investment income	5,886,529			4,367,920

EXPENSES
Loan servicing (Refer to Note 10)	585,542			—
Management fee (Refer to Notes 10 and 13)	390,007			—
Professional fees	156,383			271,075
Amortization of deferred financing costs	91,912			69,881
Interest	439,521			101,952
Stockholder related costs	104,541			67,320
Directors fees	24,000			32,877
Insurance	43,890			63,274
Salaries and benefits	—			419,769
Rent	—			33,964
General and administrative	69,475			181,183
Expenses before credit from Gladstone Management	1,905,271			1,241,295
Credit to management fee for fees collected by Gladstone Management (Refer to Note 13)	(450,000		)	—
Total expenses net of credit to management fee	1,455,271			1,241,295

NET INVESTMENT INCOME BEFORE INCOME TAXES	4,431,258			3,126,625
Income tax expense	—			—
NET INVESTMENT INCOME	4,431,258			3,126,625

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on sale of investment	20,000			12,500
Unrealized appreciation (depreciation) on derivative	15,848			(5,067		)
Net unrealized depreciation on investments	(191,728		)	(305,475		)
Net realized and unrealized loss on investments	(155,880		)	(298,042		)

NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM OPERATIONS	$	4,275,378		$	2,828,583

NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE:
Basic	$	0.38		$	0.28
Diluted	$	0.37		$	0.27

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
Basic	11,288,833			10,087,615
Diluted	11,620,603			10,375,281

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

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	Six Months Ended
	March 31, 2005			March 31, 2004
INVESTMENT INCOME
Interest income – investments	$	10,905,523		$	7,418,513
Interest income – cash and cash equivalents	21,470			65,955
Interest income – notes receivable from employees	228,317			218,170
Fee income (Refer to Note 12)	—			611,231
Other income	809,620			22,000
Total investment income	11,964,930			8,335,869

EXPENSES
Loan servicing (Refer to Note 10)	1,116,494			—
Management fee (Refer to Notes 10 and 13)	717,309			—
Professional fees	395,105			423,846
Amortization of deferred financing costs	183,824			153,432
Interest	611,251			180,152
Stockholder related costs	176,310			119,980
Directors fees	51,000			57,210
Insurance	90,162			137,285
Salaries and benefits	—			810,476
Rent	—			71,724
General and administrative	112,635			316,503
Expenses before credit from Gladstone Management	3,454,090			2,270,608
Credit to management fee for fees collected by Gladstone Management (Refer to Note 13)	(736,500		)	—
Total expenses net of credit to management fee	2,717,590			2,270,608

NET INVESTMENT INCOME BEFORE INCOME TAXES	9,247,340			6,065,261
Income tax expense	138,678			—
NET INVESTMENT INCOME	9,108,662			6,065,261

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on sale of investment	29,750			12,500
Unrealized depreciation on derivative	(8,963		)	(5,067		)
Net unrealized appreciation (depreciation) on investments	90,877			(1,863,037		)
Net realized and unrealized gain (loss) on investments	111,664			(1,855,604		)

NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM OPERATIONS	$	9,220,326		$	4,209,657

NET INCREASE IN STOCKHOLDERS’ EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE:
Basic	$	0.82		$	0.42
Diluted	$	0.79		$	0.41

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
Basic	11,283,671			10,084,729
Diluted	11,614,219			10,354,405

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

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

										Distributions
							Notes			Less Than/(in			Realized		Unrealized			Unrealized
				Capital in			Receivable			Excess of) Net			Gain on		Appreciation/			Appreciation/			Total
	Common Stock			Excess of			From Sale of			Investment			Sale of		(Depreciation)			(Depreciation)			Stockholders’
	Shares	Amount		Par Value			Common Stock			Income			Investment		of Investments			of Derivatives			Equity

Balance at September 30, 2003	10,081,844	$	10,082	$	140,416,674		$	(8,985,940	)	$	(416,094	)	$	—	$	(222,340	)	$	—		$	130,802,382

Issuance of Common Stock under Stock option Plan	23,334	23		349,987			(350,010		)	—			—		—			—			—

Repayment of Principal on Notes Receivable	—	—		—			103,252			—			—		—			—			103,252

Shelf Offering Costs	—	—		(43,598		)	—			—			—		—			—			(43,598		)

Net Increase in Stockholders’ Equity Resulting from Operations	—	—		—			—			6,065,261			12,500		(1,863,037		)	(5,067		)	4,209,657

Distributions Declared ($0.66 per common share)	—	—		—			—			(6,656,584		)	—		—			—			(6,656,584		)

Balance at March 31, 2004	10,105,178	$	10,105	$	140,723,063		$	(9,232,698	)	$	(1,007,417	)	$	12,500	$	(2,085,377	)	$	(5,067	)	$	128,415,109

Balance at September 30, 2004	11,278,510	$	11,279	$	164,294,781		$	(9,432,678	)	$	298,098		$	12,500	$	(2,743,066	)	$	(214,259	)	$	152,226,655

Issuance of Common Stock under Stock Option Plan	20,000	20		314,580			(157,100		)	—			—		—			—			157,500

Repayment of Principal on Notes Receivable	—	—		—			773,389			—			—		—			—			773,389

Shelf Offering Costs	—	—		(111,233		)	—			—			—		—			—			(111,233		)

Net Increase in Stockholders’ Equity Resulting from Operations	—	—		—			—			9,108,662			29,750		90,877			(8,963		)	9,220,326

Distributions Declared ($0.72 per common share)	—	—		—			—			(8,125,327		)	—		—			—			(8,125,327		)

Balance at March 31, 2005	11,298,510	$	11,299	$	164,498,128		$	(8,816,389	)	$	1,281,433		$	42,250	$	(2,652,189	)	$	(223,222	)	$	154,141,310

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

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	March 31, 2005			March 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES

Net increase in stockholders’ equity resulting from operations	$	9,220,326		$	4,209,657
Adjustments to reconcile net increase in stockholders’ equity resulting from operations to net cash provided by operating activities:
Depreciation	—			14,438
Net amortization of premiums and discounts	(8,267		)	—
Amortization of deferred financing costs	183,824			117,328
Unrealized depreciation on derivative	8,963			5,067
Change in net unrealized (appreciation) depreciation	(90,877		)	1,863,037
Increase in interest receivable	(272,193		)	(228,868		)
(Increase) decrease in funds due from custodian	(13,268,958		)	982,000
Decrease in prepaid assets	36,136			27,949
Decrease (increase) in due from affiliate	109,639			(426,267		)
Decrease (increase) in other assets	4,038			(329,717		)
Increase in accounts payable	49,951			63,548
(Decrease) increase in accrued expenses and deferred liabilities	(608,523		)	219,141
Increase in fees due to affiliate	53,732			—
Increase in investment balance due to payment in kind interest	(275,483		)	(275,316		)
Net cash (used in) provided by operating activities	(4,857,692		)	6,241,997

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of investments	(91,463,375		)	(36,000,000		)
Principal repayments on investments	59,835,625			5,178,541
Proceeds from repurchase agreements	—			186,206,000
Repayment of repurchase agreements	(21,345,997		)	(171,550,000		)
Receipt of principal on notes receivable - employees	773,389			103,252
Purchase of furniture & equipment	—			(4,558		)
Net cash used in investing activities	(52,200,358		)	(16,066,765		)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings from the lines of credit	100,400,000			20,500,000
Repayments on the lines of credit	(82,043,547		)	—
Distributions paid	(8,125,327		)	(9,983,593		)
Shelf offering costs	(111,233		)	(43,598		)
Exercise of stock options	157,500
Net cash provided by financing activities	10,277,393			10,472,809

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1)	(46,780,657		)	648,041
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	65,954,840			101,166,221
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	19,174,183		$	101,814,262

CASH PAID DURING PERIOD FOR INTEREST	$	417,143		$	—
CASH PAID DURING PERIOD FOR INCOME TAXES	$	138,678		$	—
NON-CASH FINANCING ACTIVITIES
Notes receivable issued in exchange for common stock associated with the exercise of employee stock options	$	157,100		$	350,010

(1) Cash and cash equivalents consist of demand deposits and highly liquid investments with original maturities of three months or less when purchased.

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

GLADSTONE CAPITAL CORPORATION

FINANCIAL HIGHLIGHTS

(UNAUDITED)

	Three Months Ended
	March 31, 2005			March 31, 2004

Per Share Data (1)
Net asset value at beginning of period	$	13.58		$	12.79
Income from investment operations:
Net investment income (2)	0.39			0.31
Realized gain on sale of investment (2)	—			—
Net unrealized gain/(loss) on investments (2)	(0.02		)	(0.03		)
Net unrealized (loss) on derivatives (2)	—			—
Total from investment operations	0.37			0.28
Less distributions:
Distributions from net investment income	(0.36		)	(0.33		)
Total distributions	(0.36		)	(0.33		)
Issuance of common stock under stock option plan	0.01			(0.03		)
Repayment of principal on notes receivable	0.06			—
Dilutive effect of share issuance	(0.02		)	—
Net asset value at end of period	$	13.64		$	12.71

Per share market value at beginning of period	$	23.70		$	22.35
Per share market value at end of period	21.22			22.41
Total Return (3)(4)	-9.07		%	1.76		%
Shares outstanding at end of period	11,298,510			10,105,178

Ratios/Supplemental Data
Net assets at end of period	$	154,141,310		$	128,415,109
Average net assets	$	152,288,314		$	127,521,641
Ratio of expenses to average net assets-annualized (5)	5.00		%	3.87		%
Ratio of net expenses to average net assets-annualized (6)	3.82		%	3.87		%
Ratio of net investment income to average net assets-annualized	11.64		%	9.68		%

(1) Basic per share data.

(2) Based on weighted average basic per share data.

(3) Total return equals the increase of the ending market value over the beginning market value plus monthly dividends divided by the monthly beginning market value, assuming monthly dividend reinvestment.

(4) Amounts were not annualized.

(5) Ratio of expenses to average net assets is computed using expenses before credit from Gladstone Management and income tax expense.

(6) Ratio of net expenses to average net assets is computed using total expenses net of credits to management fee and income tax expense.

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

	Six Months Ended March 31, 2005			Six Months Ended March 31, 2004

Per Share Data (1)
Net asset value at beginning of period	$	13.50		$	12.97
Income from investment operations:
Net investment income (2)	0.81			0.60
Realized gain on sale of investment (2)	—			—
Net unrealized gain/(loss) on investments (2)	0.01			(0.18		)
Net unrealized (loss) on derivatives (2)	—			—
Total from investment operations	0.82			0.42
Less distributions:
Distributions from net investment income	(0.72		)	(0.66		)
Total distributions	(0.72		)	(0.66		)
Offering costs	(0.01		)	—
Issuance of common stock under stock option plan	0.01			(0.03		)
Repayment of principal on notes receivable	0.07			0.01
Dilutive effect of share issuance	(0.03		)	—
Net asset value at end of period	$	13.64		$	12.71

Per share market value at beginning of period	$	22.71		$	19.45
Per share market value at end of period	21.22			22.41
Total Return (3)(4)	-3.66		%	18.76		%
Shares outstanding at end of period	11,298,510			10,105,178

Ratios/Supplemental Data
Net assets at end of period	$	154,141,310		$	128,415,109
Average net assets	$	151,859,115		$	128,261,840
Ratio of expenses to average net assets-annualized (5)	4.73		%	3.55		%
Ratio of net expenses to average net assets-annualized (6)	3.76		%	3.55		%
Ratio of net investment income to average net assets-annualized	12.00		%	9.45		%

(1) Basic per share data.

(2) Based on weighted average basic per share data.

(4) Amounts were not annualized.

(5) Ratio of expenses to average net assets is computed using expenses before credit from Gladstone Management and income tax expense.

(6) Ratio of net expenses to average net assets is computed using total expenses net of credits to management fee and income tax expense.

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

MARYLAND		54-2040781
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets as of March 31, 2005 and September 30, 2004
	Schedules of Investments as of March 31, 2005 and September 30, 2004
	Consolidated Statements of Operations for the three months ended March 31, 2005 and March 31, 2004
	Consolidated Statements of Operations for the six months ended March 31, 2005 and March 31, 2004
	Consolidated Statement of Stockholders’ Equity for the six months ended March 31, 2005 and March 31, 2004
	Consolidated Statements of Cash Flows for the six months ended March 31, 2005 and March 31, 2004
	Financial Highlights for the three and six months ended March 31, 2005 and March 31, 2004
	Notes to Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Overview
	Results of Operations
	Liquidity and Capital Resources

Item 3.	Quantitative and Qualitative Disclosure About Market Risk

Item 4.	Controls and Procedures

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.	Defaults Upon Senior Securities

Item 4.	Submission of Matters to a Vote of Security Holders

Item 5.	Other Information

Item 6.	Exhibits

SIGNATURES

	Three Months Ended
	March 31, 2005			March 31, 2004

Net increase in stockholders’ equity resulting from operations as reported:	$	4,275,378		$	2,828,583

Deduct: Total stock-based compensation expense determined using the fair value based method for all awards	(76,222		)	(406,271		)

Pro forma net increase in stockholders’ equity resulting from operations	$	4,199,156		$	2,422,312

Per share:
As reported - basic	$	0.38		$	0.28
As reported - diluted	$	0.37		$	0.27

Pro forma-basic	$	0.37		$	0.24
Pro forma-diluted	$	0.36		$	0.23