Net Investment Income for the quarter and fiscal year ended September 30, 2012, was $4.5 million and $19.0 million, or $0.22 and $0.91 per share, respectively.

Net Increase (Decrease) in Net Assets Resulting From Operations for the quarter and fiscal year ended September 30, 2012, was $5.5 million and ($8.0) million, or $0.26 and ($0.38) per share, respectively.

Investment Activity: The Company invested $2.6 million in six existing portfolio companies, through revolver draws or additional equity.

Principal Repayments: The Company received aggregate repayments of $27.4 million, which includes various scheduled and unscheduled principal repayments. Of the $27.4 million, $24.3 million was from the early payoffs at par of three portfolio companies. Related to these early payoffs, the Company received $1.2 million in exit fees.

Investment Exits: The Company sold its investments of a combined principal amount of $5.0 million in BERTL and USHC, which resulted in realized losses of $5.0 million. Both of these portfolio companies were on non-accrual status at the time of sale.

Recurring Distributions: The Company paid monthly cash distributions to stockholders of $0.07 per common share for each of July, August and September 2012. The Company also made Term Preferred Stock cash distributions of $0.1484375 per preferred share in each of July, August and September 2012.

Investment Activity: Subsequent to September 30, 2012, the Company extended an aggregate amount of approximately $0.7 million to three existing portfolio companies in revolver draws and invested a combined $5.5 million in two new portfolio companies.

Principal Repayments: Subsequent to September 30, 2012, the Company’s investments in Mood Media Corporation, HGI Holding, Inc., Wall Street Systems Holdings, Inc. and Blue Coat Systems, Inc. all paid off early at par for a combined aggregate total of $21.1 million in principal. Additionally, we received an aggregate of $1.7 million in scheduled and unscheduled principal repayments from 14 different portfolio companies.

Distributions Declared: In October 2012, the Company’s board of directors declared the following monthly cash distributions to stockholders:

Record Date

Payment Date

October 22, 2012

November 19, 2012

December 19, 2012

For the Three Months Ended:

Net investment income

Net increase (decrease) in net assets resulting from operations

Average yield on interest-bearing investments

Total dollars invested

Total dollars repaid

For the Year Ended:

Net investment income

Net decrease in net assets resulting from operations

Weighted average yield on interest-bearing investments

Total dollars invested

Total dollars repaid

As of:

Fair value as a percent of cost

Net asset value per common share

Number of portfolio companies

Total assets at fair value

ASSETS

Investments at fair value:

Non-Control/Non-Affiliate investments (Cost of $268,500 and $288,266, respectively)

Control investments (Cost of $96,521 and $94,549, respectively)

Total investments (Cost of $365,021 and $382,815, respectively)

Cash and cash equivalents

Restricted cash

Interest receivable

Due from custodian

Deferred financing fees

Other assets

TOTAL ASSETS

LIABILITIES

Borrowings at fair value (Cost of $58,800 and $99,400, respectively)

Mandatorily redeemable preferred stock, $0.001 par value per share, $25 liquidation preference per share; 4,000,000 and no shares authorized; 1,539,882 and no shares issued and outstanding at September 30, 2012 and September 30, 2011, respectively

Accounts payable and accrued expenses

Interest payable

Fees due to Adviser

Fee due to Administrator

Other liabilities

TOTAL LIABILITIES

Commitments and contingencies

NET ASSETS

ANALYSIS OF NET ASSETS

Common stock, $0.001 par value, 46,000,000 and 50,000,000 shares authorized and 21,000,160 and 21,039,242 shares issued and outstanding at September 30, 2012 and 2011, respectively

Capital in excess of par value

Notes receivable from employees

Cumulative net unrealized depreciation on investments

Cumulative net unrealized appreciation on borrowings

(Overdistributed) underdistributed net investment income

Accumulated net realized losses

TOTAL NET ASSETS

NET ASSET VALUE PER COMMON SHARE AT END OF YEAR

INVESTMENT INCOME

Interest income

Non-Control/Non-Affiliate investments

Control investments

Cash and cash equivalents

Notes receivable from employees

Total interest income

Other income

Non-Control/Non-Affiliate investments

Total investment income

EXPENSES

Base management fee

Incentive fee

Administration fee

Interest expense on borrowings

Dividend expense on mandatorily redeemable preferred stock

Amortization of deferred financing fees

Professional fees

Other general and administrative expenses

Expenses before credits from Adviser

Credit to fees from Adviser

Total expenses net of credits

NET INVESTMENT INCOME

REALIZED AND UNREALIZED GAIN (LOSS)

Net realized loss

Non-Control/Non-Affiliate investments

Control investments

Total net realized loss

Net unrealized appreciation (depreciation):

Non-Control/Non-Affiliate investments

Control investments

Borrowings

Total net unrealized appreciation (depreciation)

Net realized and unrealized gain (loss)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE

Basic and Diluted

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING

Basic and Diluted

INVESTMENT INCOME

Interest income

Non-Control/Non-Affiliate investments

Control investments

Cash and cash equivalents

Notes receivable from employees

Total interest income

Other income

Non-Control/Non-Affiliate investments

Control investments

Total investment income

EXPENSES

Base management fee

Incentive fee

Administration fee

Interest expense on borrowings

Dividend expense on mandatorily redeemable preferred stock

Amortization of deferred financing fees

Professional fees

Other general and administrative expenses

Expenses before credits from Adviser

Credit to fees from Adviser

Total expenses net of credits

NET INVESTMENT INCOME

REALIZED AND UNREALIZED (LOSS) GAIN

Net realized loss

Non-Control/Non-Affiliate investments

Control investments

Total net realized loss

Net unrealized (depreciation) appreciation:

Non-Control/Non-Affiliate investments

Control investments

Borrowings

Total net unrealized depreciation

Net realized and unrealized loss

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE

Basic and Diluted

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING

Basic and Diluted

Per Common Share Data^(B):

Net asset value at beginning of period^(A)

Net investment income

Net realized loss on the sale of investments

Net unrealized appreciation (depreciation) on investments

Net unrealized depreciation (appreciation) on borrowings

Distributions to common stockholders^(C)

Repayment of principal on employee notes

Net asset value at end of period^(A)

Per common share market value at beginning of period

Per common share market value at end of period

Total return^(D)

Common stock outstanding at end of period^(A)

Statement of Assets and Liabilities Data:

Net assets at end of period

Average net assets^(E)

Senior Securities Data:

Borrowings under Credit Facility, at cost

Mandatorily redeemable preferred stock

Asset coverage ratio^(F)

Average coverage per unit^(G)

Ratios/Supplemental Data:

Ratio of expenses to average net assets^(H)

Ratio of net expenses to average net assets^(I)(J)

Ratio of net investment income to average net assets^(K)

Based on actual shares outstanding at the end of the corresponding period.

Based on weighted average basic per share data.

Distributions are determined based on taxable income calculated in accordance with income tax regulations which may differ from amounts determined under generally accepted accounting principles in the United States (“GAAP”).

Total return equals the change in the ending market value of the Company’s common stock from the beginning of the period, taking into account dividends reinvested in accordance with the terms of the Company’s dividend reinvestment plan. Total return does not take into account distributions that may be characterized as a return of capital.

Average net assets are computed using the average of the balance of net assets at the end of each month of the reporting period.

As a business development company (“BDC”), as defined under the Investment Company Act of 1940 (“1940 Act”), as amended, the Company is generally required to maintain an asset coverage ratio (as defined in Section 18(h) of the 1940 Act) of at least 200% on the Company’s senior securities representing indebtedness and the Company’s senior securities that are stock. The Company’s mandatorily redeemable preferred stock is a senior security that is stock.

Asset coverage per unit is the asset coverage ratio expressed in terms of dollar amounts per one thousand dollars of indebtedness.

Ratio of expenses to average net assets is computed using expenses before credits from Gladstone Management Corporation, the Company’s investment adviser (the “Adviser”), to the base management and incentive fees, including income tax expense.

Ratio of net expenses to average net assets is computed using total expenses net of credits from the Adviser to the base management and incentive fees, including income tax expense.

Had the Company not received any voluntary waivers of fees due to the Adviser, the ratio of net expenses to average net assets would have been 11.49% and 9.06% annualized for the fiscal quarters ended September 30, 2012 and 2011, respectively.

Had the Company not received any voluntary waivers of fees due to the Adviser, the ratio of net investment income to average net assets would have been 9.45% and 8.69% annualized for the fiscal quarters ended September 30, 2012 and 2011, respectively.

Per Common Share Data:

Net asset value at beginning of year ^(A)

Income from investment operations^(B)

Net investment income

Net realized loss on the sale of investments

Net unrealized depreciation on investments

Net unrealized (appreciation) depreciation on borrowings

Total from investment operations

Distributions to common stockholders from^(B)(C)

Taxable ordinary income

Return on capital

Total distributions

Capital share transactions^(B)

Repayment of principal on employee notes

Stock redemption for repayment on employee notes

Total from capital share transactions

Other, net^(B)(D)

Net asset value at end of year^(A)

Per common share market value at beginning of year

Per common share market value at end of year

Total return^(E)

Common stock outstanding at end of year^(A)

Statement of Assets and Liabilities Data:

Net assets at end of year

Average net assets^(F)

Senior Securities Data:

Borrowings under Credit Facility, at cost

Mandatorily redeemable preferred stock

Asset coverage ratio^(G)

Average coverage per unit^(H)

Ratios/Supplemental Data:

Ratio of expenses to average net assets^(I)

Ratio of net expenses to average net assets^(J)(K)

Ratio of net investment income to average net assets^(L)

Based on actual shares outstanding at the end of the corresponding year.

Based on weighted average basic per share data.

Distributions are determined based on taxable income calculated in accordance with income tax regulations which may differ from amounts determined under GAAP.

Represents the impact of the different share amounts (weighted average shares outstanding during the year and shares outstanding at the end of the period) in the per share data calculations and rounding impacts.

Total return equals the change in the ending market value of the Company’s common stock from the beginning of the year, taking into account dividends reinvested in accordance with the terms of the Company’s dividend reinvestment plan. Total return does not take into account distributions that may be characterized as a return of capital.

Average net assets are computed using the average of the balance of net assets at the end of each month of the reporting year.

As a BDC, the Company is generally required to maintain an asset coverage ratio (as defined in Section 18(h) of the 1940 Act) of at least 200% on the Company’s senior securities representing indebtedness and the Company’s senior securities that are stock. The Company’s mandatorily redeemable preferred stock is a senior security that is stock.

Asset coverage per unit is the asset coverage ratio expressed in terms of dollar amounts per one thousand dollars of indebtedness.

Ratio of expenses to average net assets is computed using expenses before credits from the Adviser to the base management and incentive fees, including income tax expense.

Ratio of net expenses to average net assets is computed using total expenses net of credits from the Adviser to the base management and incentive fees, including income tax expense.

Had the Company not received any voluntary waivers of fees due to the Adviser, the ratio of net expenses to average net assets would have been 10.24% and 6.95% for the fiscal years ended September 30, 2012 and 2011, respectively.

Had the Company not received any voluntary waivers of fees due to the Adviser, the ratio of net investment income to average net assets would have been 9.13% and 7.64% for the fiscal years ended September 30, 2012 and 2011, respectively.