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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one):

ý			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

OR

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

FOR THE TRANSITION PERIOD FROM ______ TO _______

COMMISSION FILE NUMBER: 814-00237

GLADSTONE CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

MARYLAND			54-2040781
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
1521 WESTBRANCH DRIVE, SUITE 100			22102
MCLEAN, VIRGINIA			(Zip Code)
(Address of principal executive office)

(703) 287-5800

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

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

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.001 par value per share

GLAD

The Nasdaq Global Stock Market LLC

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The number of shares of the issuer’s common stock, $0.001 par value per share, outstanding as of May 2, 2022 was 34,304,371.

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GLADSTONE CAPITAL CORPORATION

TABLE OF CONTENTS

PART I.			FINANCIAL INFORMATION
Item 1.			Financial Statements (Unaudited)
			Consolidated Statements of Assets and Liabilities as of March 31, 2022 and September 30, 2021			2
			Consolidated Statements of Operations for the three and six months ended March 31, 2022 and 2021			3
			Consolidated Statements of Changes in Net Assets for the six months ended March 31, 2022 and 2021			4
			Consolidated Statements of Cash Flows for the six months ended March 31, 2022 and 2021			5
			Consolidated Schedules of Investments as of March 31, 2022 and September 30, 2021			6
			Notes to Consolidated Financial Statements			16
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			40
			Overview			40
			Results of Operations			45
			Liquidity and Capital Resources			53
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			59
Item 4.			Controls and Procedures			60
PART II.			OTHER INFORMATION
Item 1.			Legal Proceedings			61
Item 1A.			Risk Factors			61
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			61
Item 3.			Defaults Upon Senior Securities			61
Item 4.			Mine Safety Disclosures			61
Item 5.			Other Information			61
Item 6.			Exhibits			61
SIGNATURES						63

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Part I. Financial information

Item I Financial Statements (Unaudited)

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

			March 31, 2022						September 30, 2021
ASSETS
Investments, at fair value:
Non-Control/Non-Affiliate investments (Cost of $449,787 and $447,566, respectively)			$	460,391					$	454,601
Affiliate investments (Cost of $46,106 and $70,682, respectively)			39,883						82,281
Control investments (Cost of $41,572 and $28,264, respectively)			37,429						20,730
Cash and cash equivalents			1,432						671
Restricted cash and cash equivalents			212						175
Interest receivable, net			2,906						2,361
Due from administrative agent			2,341						2,951
Deferred financing costs, net			783						1,033
Other assets, net			2,962						1,697
TOTAL ASSETS			$	548,339					$	566,500
LIABILITIES
Borrowings, at fair value (Cost of $17,400 and $50,500, respectively)			$	17,400					$	50,500
Notes payable, net of unamortized deferred financing costs of $2,664 and $2,202, respectively			197,336						186,611
Accounts payable and accrued expenses			541						490
Interest payable			2,203						1,797
Fees due to Adviser(A)			3,198						2,255
Fee due to Administrator(A)			579						382
Other liabilities			1,615						6,026
TOTAL LIABILITIES			$	222,872					$	248,061
Commitments and contingencies(B)
NET ASSETS
Common stock, $0.001 par value per share, 44,560,000 and 44,560,000 shares authorized, respectively, and 34,304,371 and 34,304,371 shares issued and outstanding, respectively			$	34					$	34
Capital in excess of par value			392,494						392,494
Cumulative net unrealized appreciation (depreciation) of investments			238						11,100
Under (over) distributed net investment income			933						149
Accumulated net realized losses			(68,232)						(85,338)
Total distributable loss			(67,061)						(74,089)
TOTAL NET ASSETS			$	325,467					$	318,439
NET ASSET VALUE PER COMMON SHARE			$	9.49					$	9.28

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

(B)Refer to Note 9—Commitments and Contingencies in the accompanying Notes to Consolidated Financial Statements for additional information.

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

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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

			Three Months Ended March 31,									Six Months Ended March 31,
			2022						2021			2022						2021
INVESTMENT INCOME
Interest income
Non-Control/Non-Affiliate investments			$	10,614					$	9,967		$	20,768					$	20,189
Affiliate investments			739						1,064			1,806						1,974
Control investments			695						410			1,203						825
Cash and cash equivalents			—						—			—						—
Total interest income (excluding PIK interest income)			12,048						11,441			23,777						22,988
PIK interest income
Non-Control/Non-Affiliate investments			914						445			2,051						980
Total PIK interest income			914						445			2,051						980
Total interest income			12,962						11,886			25,828						23,968
Success fee income
Non-Control/Non-Affiliate Investments			3,231						—			3,231						—
Affiliate Investments			—						—			1,563						—
Total success fee income			3,231						—			4,794						—
Dividend income
Non-Control/Non-Affiliate investments			517						209			1,509						575
Control investments			520						30			589						252
Total dividend income			1,037						239			2,098						827
Prepayment fee income
Non-Control/Non-Affiliate investments			—						700			605						900
Affiliate Investments			—						—			44						—
Total prepayment fee income			—						700			649						900
Other income			30						60			58						72
Total investment income			17,260						12,885			33,427						25,767
EXPENSES
Base management fee(A)			2,479						2,095			4,999						4,097
Loan servicing fee(A)			1,520						1,396			2,982						2,744
Incentive fee(A)			1,971						1,381			4,062						2,748
Administration fee(A)			401						332			780						687
Interest expense on borrowings and notes payable			3,020						2,822			6,027						5,390
Amortization of deferred financing costs			274						338			563						756
Professional fees			207						160			471						378
Other general and administrative expenses			315						238			699						562
Expenses, before credits from Adviser			10,187						8,762			20,583						17,362
Credit to base management fee - loan servicing fee(A)			(1,520)						(1,396)			(2,982)						(2,744)
Credits to fees from Adviser - other(A)			(102)						(880)			(2,029)						(1,530)
Total expenses, net of credits			8,565						6,486			15,572						13,088
NET INVESTMENT INCOME			8,695						6,399			17,855						12,679
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss):
Non-Control/Non-Affiliate investments			—						63			472						(2,080)
Affiliate investments			—						—			13,408						—
Control investments			—						—			—						(1)
Other			233						(1,152)			(467)						(1,160)
Total net realized gain (loss)			233						(1,089)			13,413						(3,241)
Net unrealized appreciation (depreciation):
Non-Control/Non-Affiliate investments			(1,083)						13,963			3,569						21,850
Affiliate investments			(2,795)						724			(17,822)						629
Control investments			3,253						1,322			3,391						2,025
Other			—						(20)			—						(340)
Total net unrealized appreciation (depreciation)			(625)						15,989			(10,862)						24,164
Net realized and unrealized gain (loss)			(392)						14,900			2,551						20,923
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS			$	8,303					$	21,299		$	20,406					$	33,602
BASIC AND DILUTED PER COMMON SHARE:
Net investment income			$	0.25					$	0.20		$	0.52					$	0.39
Net increase (decrease) in net assets resulting from operations			$	0.24					$	0.65		$	0.59					$	1.03
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic and Diluted			34,304,371						32,765,980			34,304,371						32,428,089

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

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

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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)

			2022						2021
NET ASSETS, SEPTEMBER 30			$	318,439					$	233,743
OPERATIONS
Net investment income			9,160						6,280
Net realized gain (loss) on investments			13,880						(2,144)
Net realized gain (loss) on other			(700)						(8)
Net unrealized appreciation (depreciation) of investments			(10,237)						8,495
Net unrealized depreciation (appreciation) of other			—						(320)
Net increase (decrease) in net assets resulting from operations			12,103						12,303
DISTRIBUTIONS
Distributions to common stockholders from net investment income ($0.20 per share and $0.19 per share, respectively)(A)			(6,689)						(6,100)
Distributions to common stockholders from return of capital ($0.00 per share and $0.01 per share, respectively)(A)			—						(180)
Net decrease in net assets from distributions			(6,689)						(6,280)
CAPITAL TRANSACTIONS
Issuance of common stock			—						7,491
Discounts, commissions and offering costs for issuance of common stock			—						(140)
Net increase (decrease) in net assets resulting from capital transactions			—						7,351
NET INCREASE (DECREASE) IN NET ASSETS			5,414						13,374
NET ASSETS, DECEMBER 31			$	323,853					$	247,117
OPERATIONS
Net investment income			8,695						6,399
Net realized gain (loss) on investments			—						63
Net realized gain (loss) on other			233						(1,152)
Net unrealized appreciation (depreciation) of investments			(625)						16,009
Net unrealized depreciation (appreciation) of other			—						(20)
Net increase (decrease) in net assets resulting from operations			8,303						21,299
DISTRIBUTIONS
Distributions to common stockholders from net investment income ($0.20 per share and $0.18 per share, respectively)(A)			(6,689)						(5,714)
Distributions to common stockholders from return of capital ($0.00 per share and $0.02 per share, respectively)(A)			—						(685)
Net decrease in net assets from distributions			(6,689)						(6,399)
CAPITAL TRANSACTIONS
Issuance of common stock			—						9,037
Discounts, commissions and offering costs for issuance of common stock			—						(166)
Net increase (decrease) in net assets resulting from capital transactions			—						8,871
NET INCREASE (DECREASE) IN NET ASSETS			1,614						23,771
NET ASSETS, MARCH 31			$	325,467					$	270,888

(A)Refer to Note 8 – Distributions to Common Stockholders in the accompanying Notes to Consolidated Financial Statements for additional information.

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

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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)

			Six Months Ended March 31,
			2022						2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase (decrease) in net assets resulting from operations			$	20,406					$	33,602
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchase of investments			(121,569)						(101,098)
Principal repayments on investments			130,600						78,456
Net proceeds from sale of investments			16,922						3,690
Increase in investments due to PIK interest or other			(2,614)						(1,081)
Net change in premiums, discounts and amortization			(547)						181
Net realized loss (gain) on investments			(13,880)						2,081
Net realized loss (gain) on other			467						1,160
Net unrealized depreciation (appreciation) of investments			10,862						(24,504)
Net unrealized appreciation (depreciation) of other			—						340
Changes in assets and liabilities:
Amortization of deferred financing costs			563						756
Decrease (increase) in interest receivable, net			(545)						420
Decrease (increase) in funds due from administrative agent			610						(583)
Decrease (increase) in other assets, net			(1,265)						(76)
Increase (decrease) in accounts payable and accrued expenses			51						433
Increase (decrease) in interest payable			406						978
Increase (decrease) in fees due to Adviser(A)			943						(144)
Increase (decrease) in fee due to Administrator(A)			197						167
Increase (decrease) in other liabilities			(3,943)						471
Net cash provided by (used in) operating activities			37,664						(4,751)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit			161,500						157,600
Repayments on line of credit			(194,600)						(244,400)
Proceeds from issuance of long term debt			50,000						150,000
Redemption of long term debt			(38,813)						(57,500)
Financing costs			(1,575)						(1,946)
Proceeds from issuance of common stock			—						16,528
Discounts, commissions and offering costs for issuance of common stock			—						(247)
Distributions paid to common stockholders			(13,378)						(12,679)
Net cash provided by (used in) financing activities			(36,866)						7,356
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS			798						2,605
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD			846						2,469
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD			$	1,644					$	5,074
CASH PAID FOR INTEREST			$	5,621					$	4,412
NON-CASH ACTIVITIES(B)			$	710					$	—

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

(B)Non-cash activities relate to estimated tax liabilities and escrows associated with portfolio company exits.

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS MARCH 31, 2022 (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
NON-CONTROL/NON-AFFILIATE INVESTMENTS(M) – 141.4%
Secured First Lien Debt – 100.5%
Aerospace and Defense – 19.9%
Antenna Research Associates, Inc. – Term Debt (L + 10.0%, 12.0% Cash, 4.0% PIK, Due 11/2023)(E)						$	11,672					$	11,672					$	11,672
Ohio Armor Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 2/2026)(C)						19,500						19,500						19,451
SpaceCo Holdings, LLC – Line of Credit, $400 available (L + 7.0%, 8.0% Cash, Due 12/2025)(C)						1,600						1,600						1,600
SpaceCo Holdings, LLC – Term Debt (L + 7.0%, 8.0% Cash, Due 12/2025)(C)						32,131						31,684						32,131
												64,456						64,854
Beverage, Food, and Tobacco – 13.2%
Café Zupas – Line of Credit, $4,000 available (L + 7.4%, 8.9% Cash, Due 12/2024)(C)						—						—						—
Café Zupas – Delayed Draw Term Loan, $0 available (L + 7.4%, 8.9% Cash, Due 12/2024)(C)						1,970						1,970						1,970
Café Zupas – Term Debt (L + 7.4%, 8.9% Cash, Due 12/2024)(C)						23,820						23,820						23,820
Eegee’s LLC – Line of Credit, $1,000 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						—						—						—
Eegee’s LLC – Delayed Draw Term Loan, $7,500 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						—						—						—
Eegee’s LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						17,000						17,000						17,021
												42,790						42,811
Buildings and Real Estate – 0.5%
GFRC 360, LLC – Line of Credit, $500 available (L + 8.0%, 9.0% Cash, Due 9/2022)(C)						700						700						693
GFRC 360, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 9/2022)(C)						1,000						1,000						990
												1,700						1,683
Diversified/Conglomerate Manufacturing – 10.8%
Engineering Manufacturing Technologies, LLC – Line of Credit, $3,000 available (L + 8.3%, 9.3% Cash, Due 10/2026)(C)						—						—						—
Engineering Manufacturing Technologies, LLC – Term Debt (L + 8.3%, 9.3% Cash, Due 10/2026)(C)						22,500						22,500						22,359
Unirac, Inc. – Line of Credit, $125 available (L + 7.0%, 8.0% Cash, Due 6/2026)(C)						1,128						1,128						1,130
Unirac, Inc. – Delayed Draw Term Loan, $1,254 available (L + 7.0%, 8.0% Cash, Due 6/2026)(C)						—						—						—
Unirac, Inc. – Term Debt (L + 7.0%, 8.0% Cash, Due 6/2026)(C)						11,771						11,527						11,786
												35,155						35,275
Diversified/Conglomerate Service – 27.4%
DKI Ventures, LLC – Term Debt (L + 8.3%, 9.3% Cash, 4.0% PIK, Due 12/2023)(C)						5,876						5,876						4,863
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 12/2022)(C)						1,000						1,000						895
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 4/2025)(C)						29,000						29,000						25,955
Fix-It Group, LLC – Line of Credit, $3,000 available (L + 7.0%, 8.0% Cash, Due 12/2026)(C)						—						—						—
Fix-It Group, LLC – Term Debt (L + 7.0%, 8.0% Cash, Due 12/2026)(C)						10,000						10,000						9,913
Fix-It Group, LLC – Delayed Draw Term Loan, $10,000 available (L + 7.0%, 8.0% Cash, Due 12/2026)(C)						—						—						—
MCG Energy Solutions, LLC – Line of Credit, $3,000 available (L + 7.5%, 8.5% Cash, Due 3/2026)(C)						—						—						—
MCG Energy Solutions, LLC – Term Debt (L + 7.5%, 8.5% Cash, 3.5% PIK, Due 3/2026)(C)						20,451						20,451						19,685
R2i Holdings, LLC – Line of Credit, $1,171 available (8.0% Cash, Due 12/2023)(C)(F)						829						829						763
R2i Holdings, LLC – Term Debt (8.0% Cash, Due 12/2023)(C)(F)						18,500						18,500						17,020
WorkforceQA, LLC – Line of Credit, $2,000 available (L + 6.8%, 7.8% Cash, Due 12/2026)(C)						—						—						—
WorkforceQA, LLC – Term Debt (L + 9.0%, 10.0% Cash, Due 12/2026)(C)(H)						10,000						10,000						9,975
												95,656						89,069
Healthcare, Education, and Childcare – 24.8%
ALS Education, LLC – Line of Credit, $3,000 available (L + 7.0%, 8.5% Cash, Due 5/2025)(C)						—						—						—
ALS Education, LLC – Term Debt (L + 7.0%, 8.5% Cash, Due 5/2025)(C)						20,350						20,350						20,299
HH-Inspire Acquisition, Inc. – Line of Credit, $3,000 available (L + 6.8%, 7.8% Cash, Due 12/2026)(C)						—						—						—
HH-Inspire Acquisition, Inc. – Term Debt (L + 6.8%, 7.8% Cash, Due 12/2026)(C)						16,000						16,000						15,920

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS MARCH 31, 2022 (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
HH-Inspire Acquisition, Inc. – Delayed Draw Term Loan, $10,000 available (L + 6.8%, 7.8% Cash, Due 12/2026)(C)						—						—						—
Pansophic Learning Ltd. – Term Debt (L + 7.3%, 8.3% Cash, Due 3/2027)(C)(Y)						28,000						27,958						28,000
Pansophic Learning Ltd. – Term Debt (L + 7.3%, 8.3% Cash, Due 3/2027)(C)(Y)						5,000						4,993						5,000
Turn Key Health Clinics, LLC – Line of Credit, $1,500 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						500						500						499
Turn Key Health Clinics, LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						11,000						11,000						10,986
												80,801						80,704
Machinery – 1.7%
Arc Drilling Holdings LLC – Line of Credit, $875 available (L + 8.0%, 9.3% Cash, Due 11/2022)(C)						125						125						120
Arc Drilling Holdings LLC – Term Debt (L + 9.5%, 10.8% Cash, 3.0% PIK, Due 11/2022)(C)						5,837						5,837						5,459
												5,962						5,579
Printing and Publishing – 0.0%
Chinese Yellow Pages Company – Line of Credit, $0 available (PRIME + 4.0%, 7.5% Cash, Due 2/2015)(E)(V)(Q)						$	107					107						—
Telecommunications – 2.2%
B+T Group Acquisition, Inc.(S) – Line of Credit, $0 available (L + 11.0%, 13.0% Cash, Due 12/2024)(C)						1,200						1,200						1,173
B+T Group Acquisition, Inc.(S) – Term Debt (L + 11.0%, 13.0% Cash, Due 12/2024)(C)						6,000						6,000						5,865
												7,200						7,038
Total Secured First Lien Debt												$	333,827					$	327,013
Secured Second Lien Debt – 23.8%
Automobile – 3.2%
Sea Link International IRB, Inc. – Term Debt (11.3% Cash, 2.0% PIK, Due 3/2023)(C)(F)						$	11,003					$	11,003					$	10,343
Beverage, Food, and Tobacco – 1.0%
8th Avenue Food & Provisions, Inc. – Term Debt (L + 7.8%, 8.2% Cash, Due 10/2026)(D)						3,682						3,700						3,315
Diversified/Conglomerate Manufacturing – 10.6%
Springfield, Inc. – Term Debt (L + 9.0%, 10.0% Cash, Due 12/2026)(C)						30,000						30,000						29,925
Tailwind Smith Cooper Intermediate Corporation – Term Debt (L + 9.0%, 9.5% Cash, Due 5/2027)(D)						5,000						4,815						4,662
												34,815						34,587
Diversified/Conglomerate Service – 1.5%
CHA Holdings, Inc. – Term Debt (L + 8.8%, 9.8% Cash, Due 4/2026)(D)(U)						3,000						2,963						2,760
Gray Matter Systems, LLC – Term Debt (12.0% Cash, Due 12/2026)(C)(F)						2,100						2,066						2,100
												5,029						4,860
Machinery – 0.2%
CPM Holdings, Inc. – Term Debt (L + 8.3%, 8.7% Cash, Due 11/2026)(D)						798						798						790
Oil and Gas – 7.3%
Imperative Holdings Corporation – Term Debt (L + 10.3%, 12.3% Cash, 1.8% PIK, Due 9/2024)(C)						25,296						25,237						23,778
Total Secured Second Lien Debt												$	80,582					$	77,673
Unsecured Debt – 0.0%
Diversified/Conglomerate Service – 0.0%
Frontier Financial Group Inc. – Convertible Debt (6.0%, Due 6/2022)(E)(F)						$	198					$	198					$	64
Preferred Equity – 5.9%
Automobile – 0.0%
Sea Link International IRB, Inc. – Preferred Stock(E)(G)						98,039						98						139
Beverage, Food, and Tobacco – 0.0%
Triple H Food Processors, LLC – Preferred Stock(E)(G)						75						75						111
Buildings and Real Estate – 0.3%
GFRC 360, LLC – Preferred Stock(E)(G)						1,000						1,025						964
Diversified/Conglomerate Service – 2.6%
Frontier Financial Group Inc. – Preferred Stock(E)(G)						766						500						—
Frontier Financial Group Inc. – Preferred Stock Warrant(E)(G)						168						—						—
MCG Energy Solutions, LLC – Preferred Stock(E)						7,000,000						7,000						8,503

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS MARCH 31, 2022 (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
												7,500						8,503
Healthcare, Education, and Childcare – 0.3%
HH-Inspire Acquisition, Inc. – Preferred Stock(E)(G)						750,000						750						802
Oil and Gas – 0.6%
FES Resources Holdings LLC – Preferred Equity Units(E)(G)						6,350						6,350						—
Imperative Holdings Corporation – Preferred Equity Units(E)(G)						13,740						632						1,770
												6,982						1,770
Telecommunications – 2.1%
B+T Group Acquisition, Inc.(S) – Preferred Stock(E)(G)						6,130						2,024						6,320
NetFortris Holdings LLC – Preferred Stock(E)(G)(Z)						7,890,860						789						647
												2,813						6,967
Total Preferred Equity												$	19,243					$	19,256
Common Equity – 11.2%
Aerospace and Defense – 4.3%
Antenna Research Associates, Inc. – Common Equity Units(E)(G)						4,283						$	4,283					$	11,985
Ohio Armor Holdings, LLC – Common Equity(E)(G)						1,000						1,000						1,912
												5,283						13,897
Automobile – 0.0%
Sea Link International IRB, Inc.– Common Equity Units(E)(G)						823,333						823						43
Beverage, Food, and Tobacco – 0.3%
Triple H Food Processors, LLC – Common Stock(E)(G)						250,000						250						914
Buildings and Real Estate – 0.0%
GFRC 360, LLC – Common Stock Warrants(E)(G)						45.0		%				—						—
Diversified/Conglomerate Manufacturing – 0.9%
Engineering Manufacturing Technologies, LLC – Common Stock(E)(G)						6,000						3,000						2,779
Diversified/Conglomerate Service – 0.2%
WorkforceQA, LLC – Common Stock(E)(G)						500						500						590
Healthcare, Education, and Childcare – 1.9%
GSM MidCo LLC – Common Stock(E)(G)						767						767						1,184
Leeds Novamark Capital I, L.P. – Limited Partnership Interest ($843 uncalled capital commitment)(G)(L)(R)						3.5		%				1,223						4,964
												1,990						6,148
Machinery – 0.0%
Arc Drilling Holdings LLC – Common Stock(E)(G)						15,000						1,500						—
Oil and Gas – 0.0%
FES Resources Holdings LLC – Common Equity Units(E)(G)						6,233						—						—
Total Safety Holdings, LLC – Common Equity(E)(G)						435						499						83
												499						83
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0%
Funko Acquisition Holdings, LLC(S) – Common Units(G)(T)						6,290						30						76
Telecommunications – 0.1%
B+T Group Acquisition, Inc.(S) – Common Stock Warrant(E)(G)						1.5		%				—						395
Textiles and Leather – 3.5%
Targus Cayman HoldCo, Ltd. – Common Stock(E)(G)						3,076,414						2,062						11,460
Total Common Equity												$	15,937					$	36,385
Total Non-Control/Non-Affiliate Investments												$	449,787					$	460,391
AFFILIATE INVESTMENTS(N) – 12.3%
Secured First Lien Debt – 11.2%
Diversified/Conglomerate Manufacturing – 1.9%
Edge Adhesives Holdings, Inc. (S) – Term Debt (L + 5.5%, 7.5% Cash, Due 8/2024)(C)						$	6,140					$	6,140					$	6,048
Diversified/Conglomerate Service – 9.3%
Encore Dredging Holdings, LLC – Line of Credit, $1,000 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)						2,000						2,000						1,988
Encore Dredging Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 12/2025)(C)						23,500						23,500						23,353

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS MARCH 31, 2022 (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
Encore Dredging Holdings, LLC – Delayed Draw Term Loan, $0 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)						5,000						5,000						4,969
												30,500						30,310
Total Secured First Lien Debt												$	36,640					$	36,358
Preferred Equity – 0.9%
Diversified/Conglomerate Manufacturing – 0.0%
Edge Adhesives Holdings, Inc.(S) – Preferred Stock(E)(G)						5,466						$	5,466					$	—
Diversified/Conglomerate Service– 0.7%
Encore Dredging Holdings, LLC – Preferred Stock(E)(G)						3,200,000						3,200						$	2,057
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2%
Canopy Safety Brands, LLC – Preferred Stock(E)(G)						500,000						500						768
Total Preferred Equity												$	9,166					$	2,825
Common Equity – 0.2%
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2%
Canopy Safety Brands, LLC – Common Stock(E)(G)						800,000						300						700
Total Common Equity												$	300					$	700
Total Affiliate Investments												$	46,106					$	39,883
CONTROL INVESTMENTS(O) – 11.5%
Secured First Lien Debt – 4.5%
Diversified/Conglomerate Manufacturing – 0.8%
LWO Acquisitions Company LLC – Term Debt (L + 7.5%, 10.0% Cash, Due 6/2021)(E)(Q)(X)						$	6,000					$	6,000					$	2,638
LWO Acquisitions Company LLC – Term Debt (Due 6/2021)(E)(P)(Q)(X)						10,732						10,732						—
												16,732						2,638
Personal and Non-Durable Consumer Products (Manufacturing Only) – 3.3%
WB Xcel Holdings, LLC – Line of Credit, $682 available (L + 10.5%, 11.5% Cash, Due 11/2026)(E)						818						818						818
WB Xcel Holdings, LLC – Term Debt (L + 10.5%, 11.5% Cash, Due 11/2026)(E)						9,975						9,975						9,975
												10,793						10,793
Printing and Publishing – 0.4%
TNCP Intermediate HoldCo, LLC – Line of Credit, $900 available (8.0% Cash, Due 10/2024)(E)(F)						1,100						1,100						1,100
Total Secured First Lien Debt												$	28,625					$	14,531
Secured Second Lien Debt – 2.4%
Automobile– 2.4%
Defiance Integrated Technologies, Inc. – Term Debt (L + 9.5%, 11.0% Cash, Due 5/2026)(E)						$	7,825					$	7,825					$	7,825
Unsecured Debt – 0.0%
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Term Debt (Due 6/2023)(E)(P)(X)						$	95					$	95					$	—
LWO Acquisitions Company LLC – Term Debt (Due 8/2022)(E)(P)(X)						25						25						—
												$	120					$	—
Preferred Equity – 1.8%
Automobile– 0.1%
Defiance Integrated Technologies, Inc. – Preferred Stock(E)(G)						6,043						$	250					$	278
Personal and Non-Durable Consumer Products (Manufacturing Only) – 1.7%
WB Xcel Holdings, LLC – Preferred Stock(E)(G)						333						2,750						5,576
Total Preferred Equity												$	3,000					$	5,854
Common Equity – 2.8%
Automobile– 0.9%
Defiance Integrated Technologies, Inc. – Common Stock(E)(G)						33,231						$	580					$	3,034
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Common Units(E)(G)(X)						921,000						921						—
Machinery – 1.2%
PIC 360, LLC – Common Equity Units(E)(G)						750						1						4,061

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS MARCH 31, 2022 (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
Printing and Publishing – 0.7%
TNCP Intermediate HoldCo, LLC – Common Equity Units(E)(G)						790,000						500						2,124
Total Common Equity												$	2,002					$	9,219
Total Control Investments												$	41,572					$	37,429
TOTAL INVESTMENTS – 165.2%												$	537,465					$	537,703

(A)Certain of the securities listed in this schedule are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $478.3 million at fair value, are pledged as collateral under our revolving line of credit, as described further in Note 5—Borrowings in the accompanying Notes to Consolidated Financial Statements. Under the Investment Company Act of 1940, as amended (the “1940 Act”), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of March 31, 2022, our investments in Leeds Novamark Capital I, L.P. (“Leeds”) and Funko Acquisition Holdings, LLC (“Funko”) are considered non-qualifying assets under Section 55 of the 1940 Act. Such non-qualifying assets represent 0.9% of total investments, at fair value, as of March 31, 2022.

(B)Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (“LIBOR” or “L”), which was 0.45% as of March 31, 2022. If applicable, paid-in-kind (“PIK”) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date.

(C)Fair value was based on an internal yield analysis or on estimates of value submitted by ICE Data Pricing and Reference Data, LLC (“ICE”).

(D)Fair value was based on the indicative bid price on or near March 31, 2022, offered by the respective syndication agent’s trading desk.

(E)Fair value was based on the total enterprise value of the portfolio company, which was then allocated to the portfolio company’s securities in order of their relative priority in the capital structure.

(F)Debt security has a fixed interest rate.

(G)Security is non-income producing.

(H)The Company has entered into an agreement that entitles it to the "last out" tranche of the first lien secured loan, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 6.75% (Floor 1.0%) per the credit agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(I)Represents the principal balance for debt investments and the number of shares/units held for equity investments. Warrants are represented as a percentage of ownership, as applicable.

(J)Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase.

(K)Category percentages represent the fair value of each category and subcategory as a percentage of net assets as of March 31, 2022.

(L)There are certain limitations on our ability to withdraw our partnership interest prior to dissolution of the entity, which must occur no later than May 9, 2024 or two years after all outstanding leverage has matured.

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

(N)Affiliate investments, as defined by the 1940 Act, are those in which we own, with the power to vote, between and inclusive of 5.0% and 25.0% of the issued and outstanding voting securities.

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

(P)Debt security does not have a stated interest rate that is payable thereon.

(Q)Investment maturity date has passed. Investment continues to make applicable interest payments.

(R)Fair value was based on net asset value provided by the fund as a practical expedient.

(S)One of our affiliated funds, Gladstone Investment Corporation, co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.

(T)Our investment in Funko was valued using Level 2 inputs within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Our common units in Funko are convertible to class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Global Select Market under the trading symbol “FNKO.” Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.

(U)The cash interest rate on this investment was indexed to 90-day LIBOR, which was 0.96% as of March 31, 2022.

(V)The cash interest rate on this investment was indexed to the U.S. Prime Rate (“PRIME”), which was 3.50% as of March 31, 2022.

(W)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the ASC 820 fair value hierarchy. Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.

(X)In February 2022, LWO Acquisitions Company LLC filed for Chapter 11 bankruptcy protection.

(Y)Investment formerly known as EL Academies, Inc.

(Z)Investment formerly known as NetFortris Corp.

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
NON-CONTROL/NON-AFFILIATE INVESTMENTS(M) – 142.8%
Secured First Lien Debt – 95.5%
Aerospace and Defense – 20.3%
Antenna Research Associates, Inc. – Term Debt (L + 10.0%, 12.0% Cash, 4.0% PIK, Due 11/2023)(E)						$	11,763					$	11,763					$	11,763
Ohio Armor Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 2/2026)(C)						19,500						19,500						19,549
SpaceCo Holdings, LLC – Line of Credit, $1,300 available (L + 6.8%, 7.8% Cash, Due 12/2025)(C)						700						700						700
SpaceCo Holdings, LLC – Term Debt (L + 6.8%, 7.8% Cash, Due 12/2025)(C)						32,544						32,044						32,544
												64,007						64,556
Beverage, Food, and Tobacco – 13.5%
Café Zupas – Line of Credit, $4,000 available (L + 7.4%, 8.9% Cash, Due 12/2024)(C)						—						—						—
Café Zupas – Delayed Draw Term Loan, $3,030 available (L + 7.4%, 8.9% Cash, Due 12/2024)(C)						1,970						1,970						1,987
Café Zupas – Term Debt (L + 7.4%, 8.9% Cash, Due 12/2024)(C)						24,000						24,000						24,210
Eegee’s LLC – Line of Credit, $1,000 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						—						—						—
Eegee’s LLC – Delayed Draw Term Loan, $7,500 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						—						—						—
Eegee’s LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						17,000						17,000						16,936
												42,970						43,133
Buildings and Real Estate – 0.5%
GFRC 360, LLC – Line of Credit, $500 available (L + 8.0%, 9.0% Cash, Due 9/2022)(C)						700						700						699
GFRC 360, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 9/2022)(C)						1,000						1,000						999
												1,700						1,698
Diversified/Conglomerate Manufacturing – 3.8%
Unirac, Inc. – Line of Credit, $1,003 available (L + 7.0%, 8.0% Cash, Due 6/2026)(C)(U)						251						251						250
Unirac, Inc. – Delayed Draw Term Loan, $1,254 available (L + 7.0%, 8.0% Cash, Due 6/2026)(C)(U)						—						—						—
Unirac, Inc. – Term Debt (L + 7.0%, 8.0% Cash, Due 6/2026)(C)(U)						11,921						11,652						11,891
												11,903						12,141
Diversified/Conglomerate Service – 21.3%
DKI Ventures, LLC – Line of Credit, $2,500 available (L + 8.3%, 9.3% Cash, 2.0% PIK, Due 12/2021)(C)						—						—						—
DKI Ventures, LLC – Term Debt (L + 8.3%, 9.3% Cash, 2.0% PIK, Due 12/2023)(C)						5,739						5,724						5,008
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 12/2022)(C)						1,000						1,000						785
ENET Holdings, LLC – Term Debt (L + 8.8%, 10.2% Cash, Due 4/2025)(C)						29,000						29,000						22,765
MCG Energy Solutions, LLC – Line of Credit, $3,000 available (L + 7.5%, 8.5% Cash, Due 3/2026)(C)						—						—						—
MCG Energy Solutions, LLC – Term Debt (L + 7.5%, 8.5% Cash, 1.5% PIK, Due 3/2026)(C)						20,129						20,129						19,927
MCG Energy Solutions, LLC – Delayed Draw Term Loan, $3,000 available (L + 7.5%, 8.5% Cash, 1.5% PIK, Due 3/2026)(C)						—			`			—						—
R2i Holdings, LLC – Line of Credit, $1,171 available (8.0% Cash, Due 12/2021)(C)(F)						829						829						803
R2i Holdings, LLC – Term Debt (8.0% Cash, Due 12/2021)(C)(F)						19,000						19,000						18,406
												75,682						67,694
Healthcare, Education, and Childcare – 24.9%
ALS Education, LLC – Line of Credit, $3,000 available (L + 7.0%, 8.5% Cash, Due 5/2025)(C)						—						—						—
ALS Education, LLC – Term Debt (L + 7.0%, 8.5% Cash, Due 5/2025)(C)						20,680						20,680						20,809
Effective School Solutions LLC – Line of Credit, $2,000 available (L + 7.3%, 8.3% Cash, Due 12/2025)(C)						—						—						—
Effective School Solutions LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 12/2025)(C)						19,000						19,000						19,095
Effective School Solutions LLC – Delayed Draw Term Loan, $3,200 available (L + 7.3%, 8.3% Cash, Due 12/2025)(C)						—						—						—
EL Academies, Inc. – Delayed Draw Term Loan, $0 available (L + 8.0%, 9.0% Cash, Due 8/2022)(C)						16,000						16,000						16,000
EL Academies, Inc. – Term Debt (L + 8.0%, 9.0% Cash, Due 8/2022)(C)						12,000						12,000						12,000
Turn Key Health Clinics, LLC – Line of Credit, $1,500 available (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						500						500						499
Turn Key Health Clinics, LLC – Term Debt (L + 7.3%, 8.3% Cash, Due 6/2026)(C)						11,000						11,000						10,986
												79,180						79,389

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
Machinery – 1.8%
Arc Drilling Holdings LLC – Line of Credit, $875 available (L + 8.0%, 9.3% Cash, Due 11/2022)(C)						125						125						122
Arc Drilling Holdings LLC – Term Debt (L + 9.5%, 10.8% Cash, 3.0% PIK, Due 11/2022)(C)						5,824						5,824						5,577
												5,949						5,699
Printing and Publishing – 0.0%
Chinese Yellow Pages Company – Line of Credit, $0 available (PRIME + 4.0%, 7.3% Cash, Due 2/2015)(E)(V)(Q)						$	107					107						—
Telecommunications – 9.4%
B+T Group Acquisition, Inc.(S) – Line of Credit, $0 available (L + 11.0%, 13.0% Cash, Due 12/2021)(C)						1,200						1,200						1,158
B+T Group Acquisition, Inc.(S) – Term Debt (L + 11.0%, 13.0% Cash, Due 12/2021)(C)						6,000						6,000						5,790
NetFortris Corp. – Term Debt (L + 11.0%, 4.0% Cash, 7.5% PIK, Due 5/2021)(C)(Q)						27,350						26,946						22,837
												34,146						29,785
Total Secured First Lien Debt												$	315,644					$	304,095
Secured Second Lien Debt – 30.6%
Automobile – 3.3%
Sea Link International IRB, Inc. – Term Debt (11.3% Cash, 2.0% PIK, Due 3/2023)(C)(F)						$	10,893					$	10,893					$	10,376
Beverage, Food, and Tobacco – 1.1%
8th Avenue Food & Provisions, Inc. – Term Debt (L + 7.8%, 7.8% Cash, Due 10/2026)(D)						3,682						3,702						3,646
Chemicals, Plastics, and Rubber – 3.2%
Phoenix Aromas & Essential Oils, LLC – Term Debt (L + 9.3%, 10.3% Cash, Due 5/2024)(C)						10,012						9,986						10,062
Diversified/Conglomerate Manufacturing – 1.5%
Tailwind Smith Cooper Intermediate Corporation – Term Debt (L + 9.0%, 9.1% Cash, Due 5/2027)(D)						5,000						4,801						4,701
Diversified/Conglomerate Service – 8.7%
CHA Holdings, Inc. – Term Debt (L + 8.8%, 9.8% Cash, Due 4/2026)(D)(U)						3,000						2,960						2,700
Gray Matter Systems, LLC – Term Debt (12.0% Cash, Due 12/2026)(C)(F)						8,100						8,064						8,130
Keystone Acquisition Corp. – Term Debt (L + 9.3%, 10.3% Cash, Due 5/2025)(D)(U)						4,000						3,954						3,790
Prophet Brand Strategy – Delayed Draw Term Loan, $5,000 available (L + 8.5%, 10.5% Cash, Due 2/2025)(Y)(Z)						—						—						—
Prophet Brand Strategy – Term Debt (L + 8.5%, 10.5% Cash, Due 2/2025)(Y)(Z)						13,000						13,000						13,130
												27,978						27,750
Healthcare, Education, and Childcare – 1.8%
Medical Solutions Holdings, Inc. – Term Debt (L + 8.4%, 9.4% Cash, Due 6/2025)(C)						3,000						2,974						2,940
Medical Solutions Holdings, Inc. – Term Debt (L + 8.8%, 9.8% Cash, Due 6/2025)(C)						3,000						2,957						2,940
												5,931						5,880
Home and Office Furnishings, Housewares and Durable Consumer Products – 3.2%
Belnick, Inc. – Term Debt (11.0% Cash, Due 8/2023)(C)(F)						10,000						10,000						10,025
Machinery – 0.2%
CPM Holdings, Inc. – Term Debt (L + 8.3%, 8.3% Cash, Due 11/2026)(D)						798						798						790
Oil and Gas – 7.6%
Imperative Holdings Corporation – Term Debt (L + 10.3%, 12.3% Cash, 1.8% PIK, Due 9/2022)(C)						26,569						26,569						24,178
Total Secured Second Lien Debt												$	100,658					$	97,408
Unsecured Debt – 0.0%
Diversified/Conglomerate Service – 0.0%
Frontier Financial Group Inc. – Convertible Debt (6.0%, Due 6/2022)(E)(F)						$	198					$	198					$	10
Preferred Equity – 5.7%
Automobile – 0.0%
Sea Link International IRB, Inc. – Preferred Stock(E)(G)						98,039						98						127
Beverage, Food, and Tobacco – 0.0%
Triple H Food Processors, LLC – Preferred Stock(E)(G)						75						75						102
Buildings and Real Estate – 0.3%
GFRC 360, LLC – Preferred Stock(E)(G)						1,000						1,025						864

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
Diversified/Conglomerate Service – 2.8%
Frontier Financial Group Inc. – Preferred Stock(E)(G)						766						500						—
Frontier Financial Group Inc. – Preferred Stock Warrant(E)(G)						168						—						—
MCG Energy Solutions, LLC – Preferred Stock(E)						7,000,000						7,000						8,861
												7,500						8,861
Oil and Gas – 0.5%
FES Resources Holdings LLC – Preferred Equity Units(E)(G)						6,350						6,350						—
Imperative Holdings Corporation – Preferred Equity Units(E)(G)						13,740						632						1,551
												6,982						1,551
Telecommunications – 2.1%
B+T Group Acquisition, Inc.(S) – Preferred Stock(E)(G)						6,130						2,024						5,691
NetFortris Corp. – Preferred Stock(E)(G)						7,890,860						789						914
												2,813						6,605
Total Preferred Equity												$	18,493					$	18,110
Common Equity – 11.0%
Aerospace and Defense – 4.8%
Antenna Research Associates, Inc. – Common Equity Units(E)(G)						4,283						$	4,283					$	13,444
Ohio Armor Holdings, LLC – Common Equity(E)(G)						1,000						1,000						1,749
												5,283						15,193
Automobile– 0.1%
Sea Link International IRB, Inc.– Common Equity Units(E)(G)						823,333						823						300
Beverage, Food, and Tobacco – 0.5%
Triple H Food Processors, LLC – Common Stock(E)(G)						250,000						250						1,504
Buildings and Real Estate – 0.0%
GFRC 360, LLC – Common Stock Warrants(E)(G)						45.0		%				—						—
Healthcare, Education, and Childcare – 2.3%
GSM MidCo LLC – Common Stock(E)(G)						767						767						924
Leeds Novamark Capital I, L.P. – Limited Partnership Interest ($843 uncalled capital commitment)(G)(L)(R)						3.5		%				1,358						6,487
												2,125						7,411
Machinery – 0.0%
Arc Drilling Holdings LLC – Common Stock(E)(G)						15,000						1,500						—
Oil and Gas – 0.0%
FES Resources Holdings LLC – Common Equity Units(E)(G)						6,233						—						—
Total Safety Holdings, LLC – Common Equity(E)(G)						435						499						132
												499						132
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.0%
Funko Acquisition Holdings, LLC(S) – Common Units(G)(T)						6,290						30						78
Telecommunications – 0.1%
B+T Group Acquisition, Inc.(S) – Common Stock Warrant(E)(G)						1.5		%				—						330
NetFortris Corp. – Common Stock Warrant(E)(G)						1						1						—
												1						330
Textiles and Leather – 3.2%
Targus Cayman HoldCo, Ltd. – Common Stock(E)(G)						3,076,414						2,062						10,030
Total Common Equity												$	12,573					$	34,978
Total Non-Control/Non-Affiliate Investments												$	447,566					$	454,601
AFFILIATE INVESTMENTS(N) – 25.8%
Secured First Lien Debt – 9.1%
Diversified/Conglomerate Manufacturing – 1.7%
Edge Adhesives Holdings, Inc. (S) – Term Debt (L + 10.5%, 12.5% Cash, Due 2/2022)(C)						$	5,540					$	5,540					$	5,540
Diversified/Conglomerate Service – 7.4%
Encore Dredging Holdings, LLC – Line of Credit, $3,000 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)						—						—						—
Encore Dredging Holdings, LLC – Term Debt (L + 8.0%, 9.0% Cash, Due 12/2025)(C)						23,500						23,500						23,618

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
Encore Dredging Holdings, LLC – Delayed Draw Term Loan, $5,000 available (L + 8.0%, 9.0% Cash, Due 12/2025)(C)						—						—						—
												23,500						23,618
Total Secured First Lien Debt												$	29,040					$	29,158
Secured Second Lien Debt – 9.6%
Diversified Natural Resources, Precious Metals and Minerals – 9.6%
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)						$	6,000					$	6,000					$	6,540
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)						8,000						8,000						8,633
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)						3,300						3,300						3,491
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)						3,000						3,000						3,199
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)						2,500						2,500						2,500
Lignetics, Inc. – Term Debt (L + 9.8%, 11.8% Cash, Due 6/2026)(Y)(Z)						6,200						6,200						6,200
												29,000						30,563
Total Secured Second Lien Debt												$	29,000					$	30,563
Preferred Equity – 3.4%
Diversified/Conglomerate Manufacturing – 0.0%
Edge Adhesives Holdings, Inc.(S) – Preferred Stock(E)(G)						5,466						$	5,466					$	—
Diversified/Conglomerate Service– 1.4%
Encore Dredging Holdings, LLC – Preferred Stock(E)(G)						3,200,000						3,200						4,525
Diversified Natural Resources, Precious Metals and Minerals – 1.8%
Lignetics, Inc. – Preferred Stock(G)(Y)(Z)						78,097						1,321						5,602
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2%
Canopy Safety Brands, LLC – Preferred Stock(E)(G)						500,000						500						739
Total Preferred Equity												$	10,487					$	10,866
Common Equity – 3.7%
Diversified Natural Resources, Precious Metals and Minerals – 3.5%
Lignetics, Inc. – Common Stock(G)(Y)(Z)						152,603						$	1,855					$	10,969
Personal and Non-Durable Consumer Products (Manufacturing Only) – 0.2%
Canopy Safety Brands, LLC – Common Stock(E)(G)						800,000						300						725
Total Common Equity												$	2,155					$	11,694
Total Affiliate Investments												$	70,682					$	82,281
CONTROL INVESTMENTS(O) – 6.5%
Secured First Lien Debt – 1.3%
Diversified/Conglomerate Manufacturing – 0.9%
LWO Acquisitions Company LLC – Term Debt (L + 7.5%, 10.0% Cash, Due 6/2021)(E)(Q)						$	6,000					$	6,000					$	2,841
LWO Acquisitions Company LLC – Term Debt (Due 6/2021)(E)(P)(Q)						10,632						10,632						—
												16,632						2,841
Printing and Publishing – 0.4%
TNCP Intermediate HoldCo, LLC – Line of Credit, $700 available (8.0% Cash, Due 10/2024)(E)(F)						1,300						1,300						1,300
Total Secured First Lien Debt												$	17,932					$	4,141
Secured Second Lien Debt – 2.5%
Automobile– 2.5%
Defiance Integrated Technologies, Inc. – Term Debt (L + 9.5%, 11.0% Cash, Due 5/2026)(E)						$	7,985					$	7,985					$	7,985
Unsecured Debt – 0.0%
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Term Debt (Due 6/2023)(E)(P)						$	95					$	95					$	—
Preferred Equity – 0.1%
Automobile– 0.1%
Defiance Integrated Technologies, Inc. – Preferred Stock(E)(G)						6,043						$	250					$	270
Common Equity – 2.6%
Automobile– 0.8%
Defiance Integrated Technologies, Inc. – Common Stock(E)(G)						33,231						$	580					$	2,623
Diversified/Conglomerate Manufacturing – 0.0%
LWO Acquisitions Company LLC – Common Units(E)(G)						921,000						921						—

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

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2021 (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(W)(K)						Principal/ Shares/ Units(J)(I)						Cost						Fair Value
Machinery – 1.3%
PIC 360, LLC – Common Equity Units(E)(G)						750						1						3,983
Printing and Publishing – 0.5%
TNCP Intermediate HoldCo, LLC – Common Equity Units(E)(G)						790,000						500						1,728
Total Common Equity												$	2,002					$	8,334
Total Control Investments												$	28,264					$	20,730
TOTAL INVESTMENTS – 175.1%												$	546,512					$	557,612

(A)Certain of the securities listed in this schedule are issued by affiliate(s) of the indicated portfolio company. The majority of the securities listed, totaling $512.0 million at fair value, are pledged as collateral under our revolving line of credit, as described further in Note 5—Borrowings in the accompanying Notes to Consolidated Financial Statements. Under the Investment Company Act of 1940, as amended (the “1940 Act”), we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2021, our investments in Leeds Novamark Capital I, L.P. (“Leeds”) and Funko Acquisition Holdings, LLC (“Funko”) are considered non-qualifying assets under Section 55 of the 1940 Act. Such non-qualifying assets represent 1.2% of total investments, at fair value, as of September 30, 2021.

(B)Unless indicated otherwise, all cash interest rates are indexed to 30-day London Interbank Offered Rate (“LIBOR” or “L”), which was 0.08% as of September 30, 2021. If applicable, paid-in-kind (“PIK”) interest rates are noted separately from the cash interest rate. Certain securities are subject to an interest rate floor. The cash interest rate is the greater of the floor or LIBOR plus a spread. Due dates represent the contractual maturity date.

(C)Fair value was based on an internal yield analysis or on estimates of value submitted by ICE Data Pricing and Reference Data, LLC (“ICE”).

(D)Fair value was based on the indicative bid price on or near September 30, 2021, offered by the respective syndication agent’s trading desk.

(E)Fair value was based on the total enterprise value of the portfolio company, which was then allocated to the portfolio company’s securities in order of their relative priority in the capital structure.

(F)Debt security has a fixed interest rate.

(G)Security is non-income producing.

(H)Reserved.

(I)Represents the principal balance for debt investments and the number of shares/units held for equity investments. Warrants are represented as a percentage of ownership, as applicable.

(J)Where applicable, aggregates all shares of a class of stock owned without regard to specific series owned within such class (some series of which may or may not be voting shares) or aggregates all warrants to purchase shares of a class of stock owned without regard to specific series of such class of stock such warrants allow us to purchase.

(K)Category percentages represent the fair value of each category and subcategory as a percentage of net assets as of September 30, 2021.

(L)There are certain limitations on our ability to withdraw our partnership interest prior to dissolution of the entity, which must occur no later than May 9, 2024 or two years after all outstanding leverage has matured.

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

(N)Affiliate investments, as defined by the 1940 Act, are those in which we own, with the power to vote, between and inclusive of 5.0% and 25.0% of the issued and outstanding voting securities.

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

(P)Debt security does not have a stated interest rate that is payable thereon.

(Q)Investment maturity date has passed. Investment continues to make applicable interest payments.

(R)Fair value was based on net asset value provided by the fund as a practical expedient.

(S)One of our affiliated funds, Gladstone Investment Corporation, co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.

(T)Our investment in Funko was valued using Level 2 inputs within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Our common units in Funko are convertible to class A common stock in Funko, Inc. upon meeting certain requirements. Fair value was based on the closing market price of shares of Funko, Inc. as of the reporting date, less a discount for lack of marketability. Funko, Inc. is traded on the Nasdaq Global Select Market under the trading symbol “FNKO.” Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.

(U)The cash interest rate on this investment was indexed to 90-day LIBOR, which was 0.13% as of September 30, 2021.

(V)The cash interest rate on this investment was indexed to the U.S. Prime Rate (“PRIME”), which was 3.25% as of September 30, 2021.

(W)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the ASC 820 fair value hierarchy. Refer to Note 3—Investments in the accompanying Notes to Consolidated Financial Statements for additional information.

(X)Cumulative gross unrealized depreciation for federal income tax purposes is $59.4 million; cumulative gross unrealized appreciation for federal income tax purposes is $57.7 million. Cumulative net unrealized depreciation is $1.7 million, based on a tax cost of $559.3 million.

(Y)Fair value was based on the expected exit or payoff amount, where such event has occurred or is expected to occur imminently.

(Z)Investment was exited subsequent to September 30, 2021.

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

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GLADSTONE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2022

(DOLLAR AMOUNTS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA AND AS OTHERWISE INDICATED)

NOTE 1. ORGANIZATION

Gladstone Capital Corporation was incorporated under the Maryland General Corporation Law on May 30, 2001 and completed an initial public offering on August 24, 2001. The terms “the Company,” “we,” “our” and “us” all refer to Gladstone Capital Corporation and its consolidated subsidiaries. We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), and are applying the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 “Financial Services-Investment Companies” (“ASC 946”). In addition, we have elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”). We were established for the purpose of investing in debt and equity securities of established private businesses operating in the United States (“U.S.”). Our investment objectives are to: (1) achieve and grow current income by investing in debt securities of established lower middle market companies (which we generally define as companies with annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $3 million to $15 million) in the U.S. that we believe will provide stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions to stockholders that grow over time; and (2) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of established businesses that we believe can grow over time to permit us to sell our equity investments for capital gains.

Gladstone Business Loan, LLC (“Business Loan”), a wholly-owned subsidiary of ours, was established on February 3, 2003, for the sole purpose of holding certain investments pledged as collateral to our line of credit. The financial statements of Business Loan are consolidated with those of Gladstone Capital Corporation. We may also have significant subsidiaries (as defined under Rule 1-02(w)(2) of the U.S. Securities and Exchange Commission’s (“SEC”) Regulation S-X) whose financial statements are not consolidated with ours. We did not have any unconsolidated subsidiaries that met any of the significance conditions under Rule 1-02(w)(2) of the SEC’s Regulation S-X as of or during the six month period ended March 31, 2022 or the six month period ended March 31, 2021.

We are externally managed by Gladstone Management Corporation (the “Adviser”), an affiliate of ours and an SEC registered investment adviser, pursuant to an investment advisory and management agreement (as amended and/or restated from time to time, the “Advisory Agreement”). Administrative services are provided by Gladstone Administration, LLC (the “Administrator”), an affiliate of ours and the Adviser, pursuant to an administration agreement (the “Administration Agreement”). Refer to Note 4—Related Party Transactions for additional information regarding these arrangements.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Statements and Basis of Presentation

We prepare our interim financial statements in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6, 10 and 12 of Regulation S-X. Accordingly, we have not included in this quarterly report all of the information and notes required by GAAP for annual financial statements. The accompanying Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In accordance with Article 6 of Regulation S-X, we do not consolidate portfolio company investments. Under the investment company rules and regulations pursuant to the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, codified in ASC 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries. In our opinion, all adjustments, consisting solely of normal recurring accruals, necessary for the fair statement of financial statements for the interim periods have been included. The results of operations for the three and six months ended March 31, 2022 are not necessarily indicative of results that ultimately may be achieved for the fiscal year ending

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September 30, 2022 or any future interim periods. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, as filed with the SEC on November 15, 2021.

Use of Estimates

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

Investment Valuation Policy

Accounting Recognition

We record our investments at fair value in accordance with the FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) and the 1940 Act. Investment transactions are recorded on the trade date. Realized gains or losses are generally measured by the difference between the net proceeds from the repayment or sale and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the period, net of recoveries. Unrealized appreciation or depreciation primarily reflects the change in investment fair values, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Board Responsibility

In accordance with the 1940 Act, our board of directors (“Board of Directors”) has the ultimate responsibility for reviewing and determining, in good faith, the fair value of our investments for which market quotations are not readily available based on our investment valuation policy (which has been approved by our Board of Directors) (the “Policy”). Such review occurs in three phases. First, prior to its quarterly meetings, the Board of Directors receives written valuation recommendations and supporting materials provided by professionals of the Adviser and Administrator with oversight and direction from the chief valuation officer (the “Valuation Team”). Second, the Valuation Committee of our Board of Directors (comprised entirely of independent directors) meets to review the valuation recommendations and supporting materials, discusses the information provided by the Valuation Team, determines whether the Valuation Team has followed the Policy, determines whether the Valuation Team’s recommended fair value is reasonable in light of the Policy, and reviews other facts and circumstances, as necessary. Third, after the Valuation Committee concludes its meeting, it and the chief valuation officer present the Valuation Committee’s findings to the entire Board of Directors so that the full Board of Directors may review and determine in good faith the fair value of such investments in accordance with the Policy.

There is no single standard for determining fair value (especially for privately-held businesses), as fair value depends upon the specific facts and circumstances of each individual investment. In determining the fair value of our investments, the Valuation Team, led by the chief valuation officer, uses the Policy, and each quarter the Valuation Committee and Board of Directors review the Policy to determine if changes thereto are advisable and whether the Valuation Team has applied the Policy consistently.

Use of Third Party Valuation Firms

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

ICE Data Pricing and Reference Data, LLC (“ICE”), a valuation specialist, generally provides estimates of fair value on our proprietary debt investments. The Valuation Team generally assigns ICE’s estimates of fair value to our debt investments where we do not have the ability to effectuate a sale of the applicable portfolio company. The Valuation Team corroborates ICE’s estimates of fair value using one or more of the valuation techniques discussed below. The Valuation Team’s estimate of value on a specific debt investment may significantly differ from ICE’s. When this occurs, our Valuation Committee and Board of Directors review whether the Valuation Team has followed the Policy and whether the Valuation Team’s recommended fair value is reasonable in light of the Policy and other facts and circumstances before determining fair value.

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We may engage other independent valuation firms to provide earnings multiple ranges, as well as other information, and evaluate such information for incorporation into the total enterprise value (“TEV”) of certain of our investments.  Generally, at least once per year, we engage an independent valuation firm to value or review the valuation of each of our significant equity investments, which includes providing the information noted above. The Valuation Team evaluates such information for incorporation into our TEV, including review of all inputs provided by the independent valuation firm.  The Valuation Team then makes a recommendation to our Valuation Committee and Board of Directors as to the fair value.  Our Board of Directors reviews the recommended fair value, and whether it is reasonable in light of the Policy, and other relevant facts and circumstances, as necessary, before determining fair value.

Valuation Techniques

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

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

TEV is primarily calculated using EBITDA and EBITDA multiples; however, TEV may also be calculated using revenue and revenue multiples or a discounted cash flow (“DCF”) analysis whereby future expected cash flows of the portfolio company are discounted to determine a net present value using estimated risk-adjusted discount rates, which incorporate adjustments for nonperformance and liquidity risks. Generally, the Valuation Team uses a DCF analysis to calculate TEV to corroborate estimates of value for our equity investments where we do not have the ability to effectuate a sale of a portfolio company or for debt of credit impaired portfolio companies.

•Yield Analysis — The Valuation Team generally determines the fair value of our debt investments for which we do not have the ability to effectuate a sale of the applicable portfolio company using the yield analysis, which includes a DCF calculation and assumptions that the Valuation Team believes market participants would use, including, estimated remaining life, current market yield, current leverage, and interest rate spreads. This technique develops a modified discount rate that incorporates risk premiums including increased probability of default, increased loss upon default and increased liquidity risk. Generally, the Valuation Team uses the yield analysis to corroborate both estimates of value provided by ICE and market quotes.

•Market Quotes — For our investments for which a limited market exists, we generally base fair value on readily available and reliable market quotations which are corroborated by the Valuation Team (generally by using the yield analysis described above). In addition, the Valuation Team assesses trading activity for similar investments and evaluates variances in quotations and other market insights to determine if any available quoted prices are reliable. Typically, the Valuation Team uses the lower indicative bid price (“IBP”) in the bid-to-ask price range obtained from the respective originating syndication agent’s trading desk on or near the valuation date. The Valuation Team may take further steps to consider additional information to validate that price in accordance with the Policy. For securities that are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date. For restricted securities that are publicly traded, we generally base fair value on the closing market price of the securities we hold as of the reporting date less a discount for the restriction, which includes consideration of the nature and term to expiration of the restriction.

•Investments in Funds — For equity investments in other funds for which we cannot effectuate a sale of the fund, the Valuation Team generally determines the fair value of our invested capital at the net asset value (“NAV”) provided by the fund. Any invested capital that is not yet reflected in the NAV provided by the fund is valued at

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par value. The Valuation Team may also determine fair value of our investments in other investment funds based on the capital accounts of the underlying entity.

In addition to the valuation techniques listed above, the Valuation Team may also consider other factors when determining the fair value of our investments, including: the nature and realizable value of the collateral, including external parties’ guaranties, any relevant offers or letters of intent to acquire the portfolio company, timing of expected loan repayments, and the markets in which the portfolio company operates.

Fair value measurements of our investments may involve subjective judgments and estimates and due to the uncertainty inherent in valuing these securities, the determinations of fair value may fluctuate from period to period and may differ materially from the values that could be obtained if a ready market for these securities existed. Our NAV could be materially affected if the determinations regarding the fair value of our investments are materially different from the values that we ultimately realize upon our disposal of such securities. Additionally, changes in the market environment and other events that may occur over the life of the investment may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which it is recorded.

Refer to Note 3—Investments for additional information regarding fair value measurements and our application of ASC 820.

Revenue Recognition

Interest Income Recognition

Interest income, including the amortization of premiums, acquisition costs and amendment fees, the accretion of original issue discounts (“OID”), and paid-in-kind (“PIK”) interest, is recorded on the accrual basis to the extent that such amounts a