Exhibit 99.1 Gladstone Capital Corporation Reports Fiscal Year End Results for 2006 -- Net Investment Income was $19.4 million or $1.67 per diluted common share, an increase of 11.9% per diluted common share -- Net Increase in Net Assets Resulting from Operations was $24.4 million or $2.10 per diluted common share, an increase of 57.6% per diluted common share Business Editors MCLEAN, Va.--(BUSINESS WIRE)--xx--Gladstone Capital Corp. (NASDAQ:GLAD) (the "Company") today announced earnings for the fiscal year and three months ended September 30, 2006. All share references are based on weighted average common shares outstanding, unless otherwise noted. Net Investment Income for the fiscal year ended September 30, 2006 increased 11.9% to $19,350,580, or $1.70 per basic share and $1.67 per diluted share, as compared to $17,286,145, or $1.53 per basic share and $1.49 per diluted share for the fiscal year ended September 30, 2005. Net Investment Income for the three months ended September 30, 2006 increased 29.2% to $4,916,268, as compared to $3,805,057, for the three months ended September 30, 2005. Net Investment Income for the three months ended September 30, 2006 was $0.42 per basic and diluted share and $0.34 per basic share and $0.33 per diluted share for the three months ended September 30, 2005. Net Increase in Net Assets Resulting from Operations for the fiscal year ended September 30, 2006 increased nearly 58% to $24,430,235, or $2.15 per basic share and $2.10 per diluted share, as compared to $15,490,682 or $1.37 per basic share and $1.33 per diluted share for the fiscal year ended September 30, 2005. For the three months ended September 30, 2006, Net Increase in Net Assets Resulting from Operations was $5,063,429 or $0.44 per basic share and $0.43 per diluted share, as compared to $2,336,203 or $0.21 per basic share and $0.20 per diluted share for the same period one year ago. Total assets were $225,783,215 at September 30, 2006, as compared to $205,793,094 at September 30, 2005. Net asset value was $172,570,487 or $14.02 per actual common share outstanding, at September 30, 2006 as compared to $151,610,683, or $13.41 per actual common share outstanding, at September 30, 2005. For the fiscal year ended September 30, 2006, the Company reported the following activity: -- Purchased approximately $136.0 million of new loans in 22 companies; -- Received principal repayments of $124.0 million, which included scheduled principal repayments; -- Received $1.3 million of success fees in connection with the full repayment of three investments; and -- Received prepayment penalties of approximately $0.8 million. At September 30, 2006, the Company had investments in debt and equity securities and loans to syndicated loan participants in 32 private companies having an aggregate cost basis of $216.2 million and a fair value of $217.6 million. Subsequent to September 30, 2006, the Company: -- Purchased additional debt securities in 12 syndicated participations of approximately $25.2 million; -- Received principal repayments of approximately $1.7 million; -- Received full repayment of 2 loans of approximately $20.0 million; -- Entered into an amended and restated investment advisory agreement with Gladstone Management Corporation and an administration agreement with Gladstone Administration, LLC as approved by our stockholders on December 2, 2005. "Fiscal year 2006 produced double-digit growth, with nearly a 12% increase in Net Investment Income and nearly 8% growth in the annual dividend. Our year over year results reflect the dedication and hard work of our Gladstone team," said Chip Stelljes, President and Chief Investment Officer. "We are proud of these accomplishments and will strive to produce even greater results in 2007." The financial statements below are without footnotes. We have filed a Form 10-K today for the fiscal year ended September 30, 2006 with the Securities and Exchange Commission (the "SEC"), which can be retrieved from the SEC's website at www.SEC.gov or from the Company's web site at www.GladstoneCapital.com. A paper copy can be obtained free of charge by writing to us at 1521 Westbranch Drive, Suite 200, McLean, VA 22102. Gladstone Capital will host a conference call at 8:30 a.m. EST, December 7, 2006. Please call 877-407-8031 to enter the conference. An operator will monitor the call and set a queue for the questions. The replay number will be available two hours after the call for approximately 30 days. To hear the replay, please dial 877-660-6853 and use Access Code 286 and ID code 221530. For further information contact Investor Relations at 703-287-5835. This press release may include statements that may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements with regard to the future performance of the Company. Words such as "should," "believes," "feel," "expects," "projects," "strive," "goals," and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans that are believed to be reasonable as of the date of this press release. Factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements include, among others, those factors listed under the caption "Risk factors" of the Company's Form 10-K for the Fiscal Year Ended September 30, 2006, as filed with the Securities and Exchange Commission on December 6, 2006. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF ASSETS & LIABILITIES September 30, September 30, 2006 2005 ------------- ------------- ASSETS Investments at fair value (Cost 9/30/2006: $216,202,986; 9/30/2005: $205,375,554) $217,642,750 $200,846,763 Cash and cash equivalents 731,744 503,776 Interest receivable - investments in debt securities 1,394,942 1,406,212 Interest receivable - employees 37,396 27,067 Due from custodian 3,587,152 2,624,074 Deferred financing fees 145,691 70,000 Prepaid assets 226,747 177,848 Due from employees 1,803,283 - Other assets 213,510 137,354 ------------- ------------- TOTAL ASSETS $225,783,215 $205,793,094 ============= ============= LIABILITIES Accounts payable $4,072 $21,893 Interest payable 247,530 183,707 Fees due to Adviser 240,363 391,322 Borrowings under lines of credit 49,993,000 53,034,064 Withholding taxes payable 1,803,283 - Accrued expenses and deferred liabilities 721,287 350,665 Funds held in escrow 203,193 200,760 ------------- ------------- TOTAL LIABILITIES 53,212,728 54,182,411 ------------- ------------- NET ASSETS $172,570,487 $151,610,683 ============= ============= ANALYSIS OF NET ASSETS Common stock, $0.001 par value, 50,000,000 shares authorized and 12,305,008 and 11,303,510 shares issued and outstanding, respectively $12,305 $11,304 Capital in excess of par value 181,270,565 164,610,873 Notes receivable - employees (10,248,308) (8,745,781) Net unrealized appreciation (depreciation) on investments 1,439,764 (4,528,791) Unrealized depreciation on derivative (253,716) (253,747) Realized (loss) gain on sale of investments (861,695) 42,250 Realized gain on settlement of derivative 15,014 - Distributions less than net investment income 1,196,558 474,575 ------------- ------------- TOTAL NET ASSETS $172,570,487 $151,610,683 ============= ============= NET ASSETS PER SHARE $14.02 $13.41 ------------- ------------- GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended September 30, 2006 2005 ------------ ------------ INVESTMENT INCOME Interest income - investments $25,646,746 $22,407,605 Interest income - cash and cash equivalents 38,381 32,807 Interest income - notes receivable from employees 441,341 444,170 Prepayment fees and other income 773,378 1,065,177 ------------ ------------ Total investment income 26,899,846 23,949,759 ------------ ------------ EXPENSES Loan servicing 2,907,875 2,549,728 Management fee 1,266,875 1,359,643 Professional fees 548,326 725,336 Amortization of deferred financing fees 140,143 385,737 Interest expense 3,238,615 1,774,629 Stockholder related costs 303,709 220,445 Directors fees 116,212 101,843 Insurance expense 206,554 178,214 Stock option compensation 285,318 - Other expenses 484,722 235,861 ------------ ------------ Expenses before credit from Gladstone Management 9,498,349 7,531,436 ------------ ------------ Credit to management fee for fees collected by Gladstone Management (2,051,000) (1,077,100) ------------ ------------ Total expenses net of credit to management fee 7,447,349 6,454,336 ------------ ------------ NET INVESTMENT INCOME BEFORE INCOME TAXES 19,452,497 17,495,423 ------------ ------------ Income tax expense 101,917 209,278 ------------ ------------ NET INVESTMENT INCOME 19,350,580 17,286,145 ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized (loss) gain on sale of investments (903,945) 29,750 Realized gain on settlement of derivative 15,014 - Unrealized appreciation (depreciation) on derivative 31 (39,488) Net unrealized appreciation (depreciation) on investments 5,968,555 (1,785,725) ------------ ------------ Net gain (loss) on investments 5,079,655 (1,795,463) NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $24,430,235 $15,490,682 ============ ============ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE: Basic $2.15 $1.37 ============ ============ Diluted $2.10 $1.33 ============ ============ WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic 11,381,378 11,292,466 Diluted 11,615,922 11,609,146 GLADSTONE CAPITAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, 2006 2005 ------------ ------------ INVESTMENT INCOME Interest income - investments $7,148,853 $5,735,849 Interest income - cash and cash equivalents 16,667 3,706 Interest income - notes receivable from employees 118,338 107,788 Prepayment fees and other income 62,153 10,260 ------------ ------------ Total investment income 7,346,011 5,857,603 ------------ ------------ EXPENSES Loan servicing 763,851 745,263 Management fee 314,755 283,703 Professional fees 148,568 196,726 Amortization of deferred financing fees 45,571 101,250 Interest expense 935,922 600,042 Stockholder related costs 30,539 27,660 Directors fees 34,500 24,219 Insurance expense 54,598 44,161 Stock option compensation 5,700 - Other expenses 333,059 58,922 ------------ ------------ Expenses before credit from Gladstone Management 2,667,063 2,081,946 ------------ ------------ Credit to management fee for fees collected by Gladstone Management (289,000) (100,000) ------------ ------------ Total expenses net of credit to management fee 2,378,063 1,981,946 ------------ ------------ NET INVESTMENT INCOME BEFORE INCOME TAXES 4,967,948 3,875,657 ------------ ------------ Income tax expense 51,680 70,600 ------------ ------------ NET INVESTMENT INCOME 4,916,268 3,805,057 ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain on settlement of derivative 13,647 - Unrealized appreciation (depreciation) on derivative (65,221) 18,519 Net unrealized appreciation (depreciation) on investments 198,735 (1,487,373) ------------ ------------ Net gain (loss) on investments 147,161 (1,468,854) NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,063,429 $2,336,203 ============ ============ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE: Basic $0.44 $0.21 ============ ============ Diluted $0.43 $0.20 ============ ============ WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic 11,573,200 11,303,510 Diluted 11,767,902 11,628,555 GLADSTONE CAPITAL CORPORATION FINANCIAL HIGHLIGHTS (Unaudited) Three Months Ended September 30, 2006 2005 ------------- ------------- Per Share Data (1) Net asset value at beginning of period $13.95 $13.61 ------------- ------------- Income from investment operations: Net investment income (2) 0.42 0.34 Net unrealized gain (loss) on investments (2) 0.02 (0.13) Net unrealized gain on derivatives (2) (0.01) - ------------- ------------- Total from investment operations 0.43 0.21 ------------- ------------- Less distributions: Distributions from net investment income (0.42) (0.41) ------------- ------------- Total distributions (0.42) (0.41) ------------- ------------- Issuance of common stock under stock option plan 1.10 - Dilutive effect of share issuance (7) (1.04) - ------------- ------------- Net asset value at end of period $14.02 $13.41 ============= ============= Per share market value at beginning of period $21.39 $23.40 Per share market value at end of period 22.01 22.55 Total return (3) 4.85% -1.99% Shares outstanding at end of period 12,305,008 11,303,510 Ratios/Supplemental Data Net assets at end of period $172,570,487 $151,610,683 Average net assets - not annualized (4) $162,057,242 $151,387,098 Ratio of expenses to average net assets - annualized (5) 6.71% 5.69% Ratio of net expenses to average net assets - annualized (6) 6.00% 5.42% Ratio of net investment income to average net assets - annualized 12.13% 10.05% Fiscal Year Ended September 30, 2006 2005 ------------- ------------- Per Share Data (1) Net asset value at beginning of period $13.41 $13.50 ------------- ------------- Income from investment operations: Net investment income (2) 1.70 1.53 Realized (loss) gain on sale of investments (2) (0.08) - Net unrealized gain (loss) on investments (2) 0.53 (0.16) ------------- ------------- Total from investment operations 2.15 1.37 ------------- ------------- Less distributions: Distributions from net investment income (1.64) (1.52) ------------- ------------- Total distributions (1.64) (1.52) ------------- ------------- Issuance of common stock under stock option plan 1.19 0.02 Stock compensation expense 0.02 - Repayment of principal on notes receivable 0.02 0.07 Offering costs - (0.01) Dilutive effect of share issuance (7) (1.13) (0.02) ------------- ------------- Net asset value at end of period $14.02 $13.41 ============= ============= Per share market value at beginning of period $22.55 $22.71 Per share market value at end of period 22.01 22.55 Total return (3) 5.21% 5.93% Shares outstanding at end of period 12,305,008 11,303,510 Ratios/Supplemental Data Net assets at end of period $172,570,487 $151,610,683 Average net assets (4) $155,867,538 $151,897,549 Ratio of expenses to average net assets - annualized (5) 6.16% 5.10% Ratio of net expenses to average net assets - annualized (6) 4.84% 4.39% Ratio of net investment income to average net assets - annualized 12.42% 11.38% (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) Average net assets are computed by taking the average balance of net assets at the end of each month of the reporting period. (5) Ratio of expenses to average net assets is computed using expenses before credit from Gladstone Management and including income tax expense. (6) Ratio of net expenses to average net assets is computed using total expenses net of credits from Gladstone Management and including income tax expense. (7) Represents the anti-dilutive impact of (i) the other components in the changes in net assets and (ii) the different share amounts used in calculating per share data as a result of calculating certain per share data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date. CONTACT: Gladstone Capital Corp. Robert Johnson, 703-287-5835