GAIN Gladstone Investment Corporation

Gladstone Investment Corp. (NASDAQ:GAIN) (the �Company�) today announced earnings for the fourth quarter and fiscal year ended March 31, 2008. All per share references are per basic and diluted weighted average common share outstanding, unless otherwise noted. Net Investment Income for the year ended March 31, 2008 was $13,051,550, or $0.79 per share compared to Net Investment Income for the year ended March 31, 2007 of $11,147,732, or $0.67 per share. For the three months ended March 31, 2008 Net Investment Income was $3,422,242, or $0.21 per share compared to $2,784,614, or $0.17 per share for the same period a year ago. Net Decrease in Net Assets Resulting from Operations for the year ended March 31, 2008 was $941,161, or $0.06 per share compared to the Net Increase in Net Assets Resulting from Operations of $7,268,404, or $0.44 per share for the year ended March 31, 2007. The Net Decrease in Net Assets Resulting from Operations for the three months ended March 31, 2008 was $9,953,471, or $0.60 per share compared to the Net Increase in Net Assets Resulting from Operations of $458,769, or $0.03 per share for the three months ended March 31, 2007. The primary reason for the decrease in net assets for both the quarter and fiscal year end is directly related to the unrealized depreciation adjustments the Company recorded in the fourth quarter as a result of the devaluation in our overall investment portfolio. Total assets were $352,293,092 at March 31, 2008 as compared to $323,590,215 at March 31, 2007. Net asset value was $12.47 per actual common share outstanding at March 31, 2008 as compared to $13.46 per actual common share outstanding at March 31, 2007. The weighted average yield on our portfolio of investments, excluding cash and cash equivalents, was 8.91% for the year ended March 31, 2008 compared to 8.72% for the year ended March 31, 2007. The annualized weighted average yield on the Company�s portfolio for the three months ended March 31, 2008 was 8.42% compared to 8.72% for the three months ended March 31, 2007. During the fourth quarter ended March 31, 2008, the Company recorded the following activity: Invested approximately $10.6�million in senior debt, common stock and common stock warrants in Mathey Investments, Inc.; and Sold ten syndicated loan participations for approximately $16.5 million, realizing an aggregate net loss of approximately $2.2 million on the transactions. At March 31, 2008, the Company held 43 non-control/non-affiliate investments, six control investments and three affiliate investments, totaling an aggregate cost basis of approximately $351 million and a fair value of approximately $336 million. Condensed Schedule of Investments March 31, 2008 Investment Type � Cost � Fair Value Total Non-Control/Non-Affiliate Investments � $ 166,416,086 � $ 142,739,216 Total Control Investments 138,353,930 145,406,928 Total Affiliate Investments � 46,034,721 � � 47,457,910 Total Investments $ 350,804,737 � $ 335,604,054 �Our investing activity continues to include proprietary investments and co- investments in support of equity sponsors. We are also expanding our efforts in the control investment category,� said Chip Stelljes, Co-Vice Chairman and Chief Investment Officer. Subsequent to March 31, 2008, the Company: Successfully sold all 5,520,033 million shares associated with the transferable rights offering for net proceeds of approximately $41 million; Invested approximately $5.7 million in one new investment; Sold nine of its syndicated loan participations totaling approximately $13.2 million, realizing an aggregate net loss of approximately $1.7 million on the transactions; Declared monthly cash dividends of $0.08 per common share for each of the months of April, May and June of 2008. The Company will hold a conference call on Thursday, May 22, 2008 at 8:30 am EDT to discuss fourth quarter and fiscal year financial results. Please call (877) 407-8031 to enter the conference. An operator will monitor the call and set a queue for the questions. A replay of the conference call will be available through June 22, 2008. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 284214. The replay will be available approximately two hours after the call concludes. The live audio broadcast of Gladstone Investment's quarterly conference call will be available online at www.GladstoneInvestment.com and www.investorcalendar.com. The online replay will follow shortly after the call and will be available through June 22, 2008. Gladstone Investment Corporation is an investment company that seeks to make debt and equity investments in small and mid-sized private businesses in the U.S. in connection with acquisitions, changes in control and recapitalizations. For more information please visit our website at http://www.GladstoneInvestment.com. For further information contact Kerry Finnegan at 703-287-5893. This press release may include statements that may constitute �forward-looking statements,� 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 Annual Report on Form 10-K for the year ended March 31, 2008, as filed with the SEC on May 21, 2008. The risk factors set forth in the Form 10-K under the caption �Risk Factors� are specifically incorporated by reference into this press release. 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 INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) � � Three months ended Three months ended March 31, 2008 March 31, 2007 � INVESTMENT INCOME Interest income Non-Control/Non-Affiliate investments $ 3,354,365 $ 2,634,567 Control investments 2,725,237 1,775,004 Affiliate investments 783,892 420,961 Cash and cash equivalents � 23,119 � � 51,141 � Total interest income 6,886,613 4,881,673 Other income � 6,768 � � 3,229 � Total investment income � 6,893,381 � � 4,884,902 � � EXPENSES Base management fee 492,651 198,679 Loan servicing fee 1,272,421 1,060,163 Administration fee 208,346 162,244 Interest expense 1,914,821 538,913 Amortization of deferred finance costs 138,663 142,387 Professional fees 60,172 231,703 Stockholder related costs 47,301 85,974 Insurance expense 48,422 61,406 Directors fees 54,708 53,800 Taxes and licenses 43,815 28,879 General and administrative expenses � 66,215 � � 38,498 � Expenses before credit from Adviser � 4,347,535 � � 2,602,646 � Credits to base management fee � (876,396 ) � (502,358 ) Total expenses net of credit to base management fee � 3,471,139 � � 2,100,288 � NET INVESTMENT INCOME � 3,422,242 � � 2,784,614 � � REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized loss on sale of Non-Control/Non-Affiliate investments (2,213,942 ) (92,906 ) Net unrealized (depreciation) appreciation of Non-Control/Non-Affiliate investments (12,605,949 ) 627,501 Net unrealized appreciation (depreciation) of Control investments 397,358 (2,872,940 ) Net unrealized appreciation of Affiliate investments 1,104,703 12,500 Net unrealized depreciation on derivative � (57,883 ) � - � Net loss on investments � (13,375,713 ) � (2,325,845 ) � � NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (9,953,471 ) $ 458,769 � � NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE: Basic and Diluted $ (0.60 ) $ 0.03 � � SHARES OF COMMON STOCK OUTSTANDING: Basic and diluted weighted average shares 16,560,100 16,560,100 � GLADSTONE INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS � � � For the period June 22, 2005 (Commencement of Year Ended Year Ended Operations) to March 31, 2008 March 31, 2007 March 31, 2006 � INVESTMENT INCOME Interest income Non-Control/Non-Affiliate investments $ 14,574,832 $ 9,572,593 $ 2,450,906 Control investments 10,768,484 5,486,060 255,059 Affiliate investments 2,285,836 535,629 - Cash and cash equivalents � 216,732 � � 1,661,647 � � 4,434,706 � Total interest income 27,845,884 17,255,929 7,140,671 Other income � 47,596 � � 5,707 � � 230,185 � Total investment income � 27,893,480 � � 17,261,636 � � 7,370,856 � � EXPENSES Base management fee 1,802,602 2,413,116 915,360 Loan servicing fee 5,013,503 1,568,854 - Administration fee 855,086 526,595 288,471 Interest expense 7,733,385 607,661 378 Amortization of deferred finance costs 734,195 233,779 - Professional fees 416,348 586,028 163,369 Stockholder related costs 267,613 273,483 89,563 Insurance expense 231,211 262,339 184,642 Directors fees 231,689 208,100 160,000 Taxes and licenses 168,833 168,873 195,270 General and administrative expenses � 196,336 � � 142,659 � � 44,494 � Expenses before credit from Adviser � 17,650,801 � � 6,991,487 � � 2,041,547 � Credits to base management fee � (2,808,871 ) � (877,583 ) � (554,589 ) Total expenses net of credit to base management fee � 14,841,930 � � 6,113,904 � � 1,486,958 � NET INVESTMENT INCOME � 13,051,550 � � 11,147,732 � � 5,883,898 � � REALIZED AND UNREALIZED (LOSS) GAIN ON INVESTMENTS Realized (loss) gain on sale of Non-Control/Non-Affiliate investments (2,411,654 ) (93,850 ) 57,431 Net unrealized (depreciation) appreciation of Non-Control/Non-Affiliate investments (23,277,742 ) (562,097 ) 162,968 Net unrealized appreciation (depreciation) of Control investments 10,338,879 (3,235,881 ) (50,000 ) Net unrealized appreciation of Affiliate investments 1,410,689 12,500 - Net unrealized depreciation on derivative � (52,883 ) � - � � - � Net (loss) gain on investments � (13,992,711 ) � (3,879,328 ) � 170,399 � � � NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (941,161 ) $ 7,268,404 � $ 6,054,297 � � NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER COMMON SHARE: Basic and Diluted $ (0.06 ) $ 0.44 � $ 0.37 � � SHARES OF COMMON STOCK OUTSTANDING: Basic and diluted weighted average shares 16,560,100 16,560,100 16,391,589 � GLADSTONE INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES � � � March 31,2008 March 31,2007 � ASSETS Non-Control/Non-Affiliate investments (Cost 3/31/08: $166,416,086; 3/31/07: $138,567,741) $ 142,739,216 $ 138,168,612 Control investments (Cost 3/31/08: $138,353,930; 3/31/07: $116,302,372) 145,406,928 113,016,491 Affiliate investments (Cost 3/31/08: $46,034,721; 3/31/07: $19,750,000) � 47,457,910 � � 19,762,500 � Total investments at fair value (Cost 3/31/08: $350,804,737; 3/31/07: $274,620,113) 335,604,054 270,947,603 Cash and cash equivalents 9,360,154 37,788,941 Interest receivable 1,661,724 1,306,090 Prepaid insurance 90,521 83,819 Deferred finance costs 323,547 627,960 Due from Custodian 4,399,016 12,694,985 Due from Adviser 89,401 20,383 Other assets � 764,675 � � 120,434 � TOTAL ASSETS $ 352,293,092 � $ 323,590,215 � � LIABILITIES Due to Administrator $ 208,346 $ 162,244 Borrowings under line of credit 144,834,500 100,000,000 Accrued expenses 716,107 523,698 Other liabilities � 89,190 � � 85,764 � Total Liabilities � 145,848,143 � � 100,771,706 � NET ASSETS $ 206,444,949 � $ 222,818,509 � � ANALYSIS OF NET ASSETS: Common stock, $0.001 par value, 100,000,000 shares authorized and 16,560,100 shares issued and outstanding $ 16,560 $ 16,560 Capital in excess of par value 224,172,532 226,553,515 Net unrealized depreciation of investment portfolio (15,200,683 ) (3,672,510 ) Net unrealized depreciation of derivative (52,883 ) - Accumulated net investment income 18,200 18,067 Accumulated net realized loss � (2,508,777 ) � (97,123 ) TOTAL NET ASSETS $ 206,444,949 � $ 222,818,509 � Net assets per share $ 12.47 � $ 13.46 � � � GLADSTONE INVESTMENT CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED) � Three months endedMarch 31, 2008 Three months endedMarch 31, 2007 Per Share Data (1) Balance at beginning of period $ 13.31 $ 13.65 � Income from investment operations: Net investment income (2) 0.21 0.17 Realized loss on sale of investments (2) (0.13 ) (0.01 ) Net unrealized depreciation of investments (2) � (0.68 ) � (0.13 ) Total from investment operations � (0.60 ) � 0.03 � Distributions (3) � (0.24 ) � (0.22 ) Net asset value at end of period $ 12.47 � $ 13.46 � � Per share market value at beginning of period $ 9.81 $ 15.31 Per share market value at end of period 9.41 14.87 Total Return (4) (1.77 %) (1.41 %) Shares outstanding at end of period 16,560,100 16,560,100 � Statement of Assets and Liabilities Data: Net assets at end of period $ 206,444,949 $ 222,818,509 Average net assets (5) $ 214,143,553 $ 223,372,272 � Senior Securities Data: Borrowings under line of credit $ 144,834,500 $ 100,000,000 Average coverage ratio (6) 243 % 324 % Average coverage per unit (7) $ 3,513 $ 3,228 � Ratios/Supplemental Data Ratio of expenses to average net assets (8) (9) 8.12 % 4.66 % Ratio of net expenses to average net assets (8) (10) 6.48 % 3.76 % Ratio of net investment income to average net assets (8) 6.39 % 4.99 % � (1) � Based on actual shares outstanding at the end of the corresponding period. (2) Based on weighted average basic per share data. (3) Distributions are determined based on taxable income calculated in accordance with income tax regulations which may differ from amounts determined under accounting principles generally accepted in the United States of America. (4) Total return equals the change in the 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 our dividend reinvestment plan. (5) Calculated using the average of the ending monthly net assets for the respective periods. (6) As a business development company, we are generally required to maintain a ratio of 200% of total assets to total borrowings. (7) Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness. (8) Amounts are annualized. (9) Ratio of expenses to average net assets is computed using expenses before credit from the Adviser. (10) Ratio of net expenses to average net assets is computed using total expenses net of credits to the management fee. � � � GLADSTONE INVESTMENT CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS � For the year endedMarch 31, 2008 For the year endedMarch 31, 2007 For the periodJune 22, 2005(Commencement ofOperations) toMarch 31, 2006 Per Share Data (1) Balance at beginning of period $ 13.46 $ 13.88 $ - Net proceeds from initial public offering (2) - - 13.95 Offering costs - - (0.05 ) � Income from investment operations: Net investment income (3) 0.79 0.67 0.36 Realized loss on sale of investments (3) (0.15 ) (0.01 ) - Net unrealized (depreciation) appreciation of investments (3) � (0.70 ) � (0.22 ) � 0.01 � Total from investment operations � (0.06 ) � 0.44 � � 0.37 � � Total distributions (4) (0.93 ) (0.85 ) (0.39 ) Shelf registration offering costs - (0.01 ) - � � � Net asset value at end of period $ 12.47 � $ 13.46 � $ 13.88 � � Per share market value at beginning of period $ 14.87 $ 15.10 $ 15.00 Per share market value at end of period 9.41 14.87 15.10 Total Return (5) (31.54 %) 4.36 % 3.39 % Shares outstanding at end of period 16,560,100 16,560,100 16,560,100 � Statement of Assets and Liabilities Data: Net assets at end of period $ 206,444,949 $ 222,818,509 $ 229,841,697 Average net assets (6) $ 219,625,608 $ 225,642,593 $ 226,875,738 � Senior Securities Data: Borrowings under line of credit $ 144,834,500 $ 100,000,000 $ - Average coverage ratio (7) 243 % 324 % N/A Average coverage per unit (8) $ 3,513 $ 3,228 N/A � Ratios/Supplemental Data Ratio of expenses to average net assets (9) (10) 8.04 % 3.10 % 1.08 % Ratio of net expenses to average net assets (9) (11) 6.76 % 2.71 % 0.79 % Ratio of net investment income to average net assets (9) 5.94 % 4.94 % 3.11 % � (1) � Based on actual shares outstanding at the end of the corresponding period. (2) Net of initial underwriting discount of $1.05 per share. (3) Based on weighted average basic per share data. (4) Distributions are determined based on taxable income calculated in accordance with income tax regulations which may differ from amounts determined under accounting principles generally accepted in the United States of America. (5) Total return equals the change in the 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 our dividend reinvestment plan. (6) Calculated using the average of the ending monthly net assets for the respective periods. (7) As a business development company, we are generally required to maintain a ratio of 200% of total assets to total borrowings. (8) Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness. (9) Amounts are annualized. (10) Ratio of expenses to average net assets is computed using expenses before credit from the Adviser. (11) Ratio of net expenses to average net assets is computed using total expenses net of credits to the management fee.