Gladstone Investment Corporation\De - Current report filing (8-K)
June 26 2008 - 4:10PM
Edgar (US Regulatory)
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported):
June 22, 2008
Gladstone Investment Corporation
(Exact name of registrant as specified in its
chapter)
Delaware
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814-00704
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83-0423116
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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1521 Westbranch Drive, Suite 200
McLean, Virginia
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22102
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(Address of principal executive offices)
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(Zip Code)
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Registrants telephone number, including area code:
(703) 287-5800
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
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Written communications pursuant
to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01. Entry into a Material Definitive Agreement
On June 23, 2008, Gladstone Investment Corporation
(the
Company
) renewed its Investment Advisory and Management Agreement (the
Advisory Agreement
) with
its external investment adviser, Gladstone Management Corporation (the
Adviser
), and
its Administration Agreement (the
Administration
Agreement
) with Gladstone Administration,
LLC, a wholly-owned subsidiary of the Adviser (
Gladstone Administration
). The renewal of the Advisory and Administration Agreements extends
their respective terms through August 31, 2008. The Board of Directors of the Company will
consider the renewal of the agreement through August 31, 2009 at its next
regular meeting.
The Companys Board of Directors approved the renewal of
the Advisory Agreement at a meeting held on August 9, 2007. In its
consideration of the Advisory Agreement, the Board of Directors focused on
information it had received relating to, among other things: the reasonableness
of the advisory fee (including the incentive fee), the experience of the Advisers
personnel, the potential for additional attractive investments resulting from
synergies with other funds to be managed by the Adviser, and potential savings
due to economies of scale. The Board of Directors considered the investment
advisory and incentive fees under the Advisory Agreement and the administrative
fees under the Administration Agreement (the
Fees
) and
information on fees charged by other investment advisers and administrators for
comparable services, and determined that the Fees were reasonable in relation
to the services to be provided by the Adviser and Gladstone Administration.
In recommending that the Company continue to use the
Adviser as its investment adviser, the Companys Board of Directors considered
the fact that the advisory and administrative team of the Adviser and Gladstone
Administration were expected to be in all material respects, for at least the
next year, the same as the then-current team responsible for the Companys management
and administration and the fact that the Companys investment objectives are
consistent with the investment selection process employed by the Adviser. In
connection with its final deliberations, the Board of Directors reviewed and
discussed additional materials provided by the Adviser in response to the Boards
request, including information regarding the nature, extent and quality of
services to be performed; the prior experience of the Advisers personnel in
connection with the types of investments the Company proposes to make,
including such personnels extensive network of contacts; the size of the staff
of the Adviser and Gladstone Administration; anticipated changes in the current
personnel of the Adviser and Gladstone Administration; the compensation of such
personnel; the Advisers ability to provide managerial assistance to portfolio
companies; the written plan for allocating investment opportunities among the
Advisers current and future clients; the operations of the Adviser and
Gladstone Administration; and the organizational capabilities and financial
condition of the Adviser and Gladstone Administration as evidenced by their
respective levels of service to the Company and its affiliates, Gladstone Capital
Corporation and Gladstone Commercial Corporation. The Board of Directors also
relied upon comparisons of the services to be rendered and the amounts to be
paid under the Advisory and Administration Agreements with those under other
investment advisory and administrative contracts, including those of Gladstone Capital
Corporation and Gladstone Commercial Corporation, which have entered into
agreements with the Adviser and Gladstone Administration on substantially
identical terms and conditions.
When evaluating comparisons, the Board of Directors
considered, among other things:
·
The high
quality and extensive level of the advisory and other services that the Company
expects the Adviser to continue to provide;
2
·
The fact
that the Companys projected operating expenses and expense ratio are equal to
or lower than those of other business development companies with similar
investment objectives; and
·
The
difficulty of obtaining similar services from other third party service
providers.
The Board of Directors acknowledged that the fees to be
received by the Adviser under the Advisory Agreement are expected to exceed the
Advisers costs of providing services to the Company. However, the board did
not attempt to quantify the Advisers level of profits (including those based
on fees received from the Companys portfolio companies) because of its
satisfaction with the Advisers performance advising the Company. The Advisory
Agreement does not provide for any reduction in fees in the event that the
Adviser experiences any economies of scale in its provision of management
services to the Company. The Board of Directors also considered the fact that
Gladstone Administration allocates the costs of providing administrative
services to the Advisers externally managed funds on a pro-rata basis and,
therefore, to the extent the Adviser recognizes economies of scale in providing
administrative services to its externally managed funds, those economies of
scale will also be indirectly recognized by the Company under the
Administration Agreement. Thus, to the extent that Gladstone Administrations
costs decrease, those reductions will be passed through indirectly to the
Company in the form of a reduced administration fee.
Based on the information reviewed by, and the ensuing
discussions of, the Companys Board of Directors, the board, including a
majority of the non-interested directors, concluded that the Fees under the
Advisory and Administration Agreements were reasonable in relation to the
services to be provided by the Adviser and Gladstone Administration. Based on
its review and discussion, the board approved the renewal of the Advisory and
Administration Agreements as being in the best interests of the Companys
stockholders.
Item
9.01. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d)
Exhibit 10.1
Investment Advisory and Management Agreement between the Company and Gladstone
Management Corporation, dated June 22, 2005 and incorporated by reference
to Exhibit 10.1 to the Companys Annual Report on Form 10-K filed June 14,
2006.
Exhibit 10.2
Administration Agreement between the Company and Gladstone
Administration, LLC, dated June 22, 2005 and incorporated by reference to Exhibit 10.2
to the Companys Annual Report on Form 10-K filed June 14, 2006.
3
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Gladstone Investment
Corporation
(Registrant)
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June 26,
2008
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By:/s/ Mark Perrigo
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(Mark Perrigo, Chief
Financial Officer)
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