Exhibit 99.1 Gladstone Capital Reports Fiscal Year End Results for September 30, 2004: Net Increase in Stockholders' Equity Resulting from Operations was $10,570,290, or $1.02 Per Diluted Common Share. Net Investment Income was $13,292,775, or $1.29 Per Diluted Common Share MCLEAN, Va., Dec. 14 /PRNewswire-FirstCall/ -- Gladstone Capital Corp. (Nasdaq: GLAD) (the "Company") announced earnings for the fiscal year ended September 30, 2004 today. Net Increase in Stockholders' Equity Resulting from Operations was $10,570,290, or $1.02 per diluted common share for the fiscal year ended September 30, 2004, a decrease from $11,073,581, or $1.09 per diluted common share for the fiscal year ended September 30, 2003. Net Increase in Stockholders' Equity Resulting from Operations for the three months ended September 30, 2004 was $750,740, or $0.07 per diluted common share compared to $2,628,513, or $0.26 per diluted common share for the three months ended September 30, 2003. Total assets were $215,333,727 at September 30, 2004, an increase of $767,064 from $214,566,663 at September 30, 2003. Net Investment Income for the fiscal year ended September 30, 2004 was $13,292,775, or $1.29 per diluted common share, compared to the fiscal year ended September 30, 2003 of $11,295,921, or $1.11 per diluted common share. This shows an 18% increase over the prior year. Net Investment Income for the three months ended September 30, 2004 was $2,501,950, or $0.24 per diluted common share, compared to the three months ended September 30, 2003 of $2,848,440, or $0.28 per diluted common share. The Company wrote off in the fourth quarter of 2004 loan fees of $1,021,762 that it was amortizing over five years. These fees were charged by CIBC when CIBC set up a credit line for the Company. Since CIBC was leaving the lending business related to securitization and since the Company had established a new line of credit, it was necessary to write off the fees. This should be a one-time-event, but it lowered earnings for the fourth quarter 2004. At September 30, 2004, the Company had investments in debt securities (loans to or syndicated participations) in sixteen private companies having a cost basis of $149.2 million and a fair value of $146.4 million. As previously reported, several portfolio companies repaid their outstanding loan balances earlier than the scheduled maturity dates. During the fiscal year ended September 30, 2004, five loans repaid ahead of maturity date for an aggregate return of capital of approximately $36.5 million. In addition, the Company's cash balance was increased because in September 2004 the Company had a small secondary offering of common stock which provided net proceeds of approximately $24.4 million for the issuance of 1,150,000 new shares of stock. Subsequent to September 30, 2004, two loans repaid ahead of maturity date and one loan was sold for an aggregate return of capital of approximately $25.2 million. In the fourth quarter the Company made a loan of $4.0 million to Allied Extruders, Inc. In November 2004, the Company purchased a $9.0 million loan in Tech Lighting Inc., and an $8.0 million loan in Valor Telecommunications, Inc. The Company recently made loans to Global Materials Technology, Inc. for $5.5 million and to Santana Products, Inc. for $7.95 million. "The fiscal year ending September 2005 is underway and our Company is already in full swing building the portfolio. The economy is stronger and showing signs of continual improvement. Our goal remains the same: to increase the dividends for our shareholders for 2005," said a spokesperson for the Company. The financial statements below are without footnotes. We have filed a Form 10-K for the fiscal year ended September 30, 2004 with the Securities and Exchange Commission (the "SEC") and that form can be retrieved from the SEC website at http://www.SEC.gov or from the Company's web site at http://www.GladstoneCapital.com. A paper copy can be obtained by writing to us at 1616 Anderson Road, McLean, VA 22102. The Company will hold a conference call Wednesday, December 15, 2004, at 1:00 pm EST. Please call 866-818-1223 and use the ID code 615328 to enter the conference. An operator will monitor the call and set a queue for the questions. The replay number will be available for approximately 30 days. To hear the replay, please dial 888-266-2081 and use the ID code 615328 to listen to the call. For further information contact Harry Brill, CFO or Skye Breeden, Director of Shareholders Relations at 703-286-7000. 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," "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, 2004, as filed with the Securities and Exchange Commission on December 14, 2004. 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 BALANCE SHEETS September 30, September 30, 2004 2003 ASSETS Investments at fair value (Cost 9/30/2004: $149,189,306; 9/30/2003: $109,529,893) $146,446,240 $109,307,553 Cash and cash equivalents 15,969,890 21,143,972 Cash and cash equivalents pledged to creditors 49,984,950 80,022,249 Interest receivable - investments in debt securities 837,336 1,041,943 Interest receivable - cash and cash equivalents - 955 Interest receivable - officers 112,960 108,657 Due from custodian 1,203,079 1,207,000 Due from affiliate 109,639 42,131 Deferred financing fees 350,737 1,086,864 Prepaid assets 191,676 392,951 Other assets 127,220 212,388 TOTAL ASSETS $215,333,727 $214,566,663 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable $105,921 $23,247 Dividends payable - 3,327,009 Borrowings under lines of credit 40,743,547 - Accrued expenses and deferred liabilities 911,607 1,965,025 Repurchase agreement 21,345,997 78,449,000 Total Liabilities $63,107,072 $83,764,281 STOCKHOLDERS' EQUITY Common stock, $0.001 par value, 50,000,000 shares authorized and 11,278,510 and 10,081,844 shares issued and outstanding, respectively $11,279 $10,082 Capital in excess of par value 164,294,781 140,416,674 Notes receivable - officers (9,432,678) (8,985,940) Net unrealized depreciation on investments (2,743,066) (222,340) Unrealized depreciation on derivative (214,259) - Distributions less than (in excess of) net investment income 310,598 (416,094) Total Stockholders' Equity 152,226,655 130,802,382 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $215,333,727 $214,566,663 SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2004 Company(1) Industry Investment(2) Cost Fair Value A and G, Inc. Activewear Senior Term Debt(3)(6) $12,250,000 $12,250,000 (d/b/a products (11.0%, Due 6/2008) Alstyle) Allied Polyethylene Senior Term Debt(3) 4,000,000 4,000,000 Extruders, film (12.3%, Due 7/2009) Inc. manufacturer America's Household Senior Term Debt 12,000,000 12,840,000 Water Heater appliances (4)(6)(8) Rentals rental (12.5%, Due 2/2009) ARI Manufacturing Senior Term Debt(6) 1,190,141 1,188,653 Holdings, auto parts (9.75%, Due 6/2008) Inc. Senior Subordinated 3,657,164 3,634,306 Term Debt(5)(6) (11%, PIK 4%, Due 12/2008) Bear Creek Premium Senior Subordinated 6,000,000 6,090,000 Corporation horticultural Term Debt(7) food products and(9.1%, Due 6/2010) Benetech, Dust manage- Senior Term Debt(6) 3,168,750 3,160,828 Inc. ment systems (8.5%, Due 5/2009) for the coal Senior Term Debt(3)(6) 3,250,000 3,241,875 and electric (11.5%, Due 5/2009) utility industries Burt's Bees, Personal & Senior Term Debt(7) 975,000 987,188 Inc. household (5.4%, Due 11/2009) products Coyne Industrial Senior Term Debt(3) 15,700,625 15,308,110 Inter- services (5)(6) national (13.0%, PIK 2%, Enterprises Due 7/2007) Finn Manufacturing Senior Subordinated 10,500,000 7,612,500 Corporation landscape Term Debt(6) equipment (13.0%, Due 2/2006) Common Stock Warrants 37,000 474,984 Gammill, Designer and Senior Term Debt(6) 4,708,013 4,731,553 Inc. assembler of (9.5%, Due 12/2008) quilting Senior Term Debt(3)(6) 4,750,000 4,767,813 machines and (12.0%, Due 12/2008) accessories Inca Metal Material Senior Term Debt(3)(6) 2,387,548 2,136,855 Products handling (4.6%, Due 9/2006) Corporation and storage Kingway products Acquisition, Inc. Clymer Acquisition, Inc. Maidenform, Intimate Senior Subordinated 10,003,571 10,175,000 Inc. apparel Term Debt(7) (9.4%, Due 5/2011) Marcal Manufacturing Senior Subordinated 6,800,000 6,188,000 Paper paper Term Debt(6) Mills, Inc. products (13.0%, Due 12/2006) First Mortgage Loan(5) 9,254,715 9,254,715 (16%, Due 12/2006) MedAssets, Pharma- Senior Term Debt(7) 1,815,497 1,806,887 Inc. ceuticals (5.9%, Due 3/2007) and Senior Subordinated 6,503,282 6,500,000 healthcare Term Debt(7) GPO (11.2%, Due 3/2008) Mistras Nonde- Senior Term Debt(3)(6) 9,833,333 9,759,583 Holdings structive (10.5%, Due 8/2008) Corp. testing Senior Term Debt(3)(6) 4,916,667 4,867,500 instruments, (12.5%, Due 8/2008) systems Senior Term Debt(3)(6) 1,000,000 1,000,000 and (13.5%, Due 8/2008) services Woven Custom Senior Term Debt(3)(6) 2,488,000 2,484,890 Electronics electrical (6.5%, Due 3/2009) Corporation cable Senior Term Debt(4)(6) 12,000,000 11,985,000 assemblies (11.5%, Due 3/2009) Total: $149,189,306 $146,446,240 (1) We do not "Control," and are not an "Affiliate" of, any of our portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the "1940 Act"). In general, under the 1940 Act, we would "Control" a portfolio company if we owned 25% or more of its voting securities and would be an "Affiliate" of a portfolio company if we owned 5% or more of its voting securities. (2) Percentage represents interest rates in effect at September 30, 2004 and due date represents the contractual maturity date. (3) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt. (4) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt, however the debt is junior to another Last Out Tranche. (5) Has some paid in kind (PIK) interest. Refer to Note 2 "Summary of Significant Accounting Policies" of Form 10-K for the fiscal year ended September 30, 2004. (6) Fair value was based on valuation prepared and provided by Standard & Poor's Loan Evaluation Services. (7) Marketable securities are valued based on the bid price, as of September 30, 2004, from the respective originating syndication agent's trading desk. (8) Includes a success fee with a fair value of $660,000 and no cost basis. SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2003 Company (1) Industry Investment (2) Cost Fair Value America's Water Household Senior Term Debt 12,000,000 12,000,000 Heater Rentals appliances (3)(5) rental (12.5%, Due 2/2009) ARI Holdings, Manufacturing Second Lien Term 1,500,000 1,500,000 Inc. - auto parts Debt (3) (5.1%, Due 6/2008) Senior Term Debt 3,511,667 3,511,667 (3)(4) (8.0%, PIK 4%, Due 12/2008) Coyne Industrial Senior Term Debt 15,421,740 15,306,077 International services (3)(4)(5) Enterprises (13.0%, PIK 2%, Due 7/2007) Finn Manufacturing Senior 10,500,000 10,421,250 Corporation - landscape Subordinated equipment Term Debt (6) (13.0%, Due 2/2006) Common Stock 37,000 431,111 Warrants Fugate and Aggregator & Senior Term Debt 3,412,500 3,412,500 Associates, Reseller - (5) Inc. (d/b/a Printer (12.0%, Due 4/2007) ERS Imaging) Cartridges, Senior Term Debt etc. (5) 1,833,333 1,833,333 (9.0%, Due 4/2007) Home Care Medical Senior Term Debt 18,000,000 18,428,400 Supply, Inc. equipment (3)(5)(6) rental (12.0%, Due 10/2008) Inca Metal Material Senior Term Debt 5,775,000 4,995,375 Products handling and (3)(5) Corporation storage (12.5%, Due 9/2007) Kingway products Acquisition, Inc. Clymer Acquisition, Inc. Kozy Schack Food Senior Term Debt 900,000 909,000 Enterprises, production (3)(5) Inc. and sales (18.0%, Due 5/2006) Marcal Paper Manufacturing Senior Term Debt 6,975,000 6,922,687 Mills, Inc. - paper (3)(5) products (13.0%, Due 12/2006) First Mortgage 9,163,653 9,163,653 Debt (4) (16.0%, PIK 1%, Due 12/2006) Mistras Holdings Nondestructive Senior Term Debt 10,000,000 10,000,000 Corp. testing (3) instruments, (10.5%, Due 8/2008) systems Senior Term Debt 5,000,000 5,000,000 and services (3) (12.5%, Due 8/2008) Wingstop Restaurant - Senior Term Debt 3,500,000 3,482,500 Restaurants fast food (5) International, (12.5%, Due 1/2008) Inc. Senior Debt (5) 2,000,000 1,990,000 (8.5%, Due 1/2008) Total: $109,529,893 $109,307,553 (1) We do not "Control," and are not an "Affiliate" of, any of our portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the "1940 Act"). In general, under the 1940 Act, we would "Control" a portfolio company if we owned 25% or more of its voting securities and would be an "Affiliate" of a portfolio company if we owned 5% or more of its voting securities. (2) Percentage represents interest rates in effect at September 30, 2003 and due date represents the contractual maturity date. (3) Last Out Tranche of senior debt, meaning if the company is liquidated then the holder of the Last Out Tranche is paid after the senior debt. (4) Has some paid in kind (PIK) interest. Refer to Note 2 "Summary of Significant Accounting Policies" of Form 10-K for the fiscal year ended September 30, 2004. (5) Fair value was based on valuation prepared and provided by Standard & Poor's Loan Evaluation Services. (6) Includes a success fee with a fair value of $473,400 and no cost basis. CONSOLIDATED STATEMENT OF OPERATIONS Year Ended September 30, 2004 2003 INVESTMENT INCOME Interest income - investments $18,176,617 $13,248,415 Interest income - cash and cash equivalents 84,273 466,316 Interest income - notes receivable from officers 443,658 437,737 Managerial assistance fees 1,118,106 885,500 Other income 573,314 116,906 Total investment income 20,395,968 15,154,874 EXPENSES Salaries and benefits 2,554,490 2,018,004 Rent 139,399 209,864 Professional fees 579,599 409,826 Directors fees 112,210 73,647 Insurance 258,358 275,511 Stockholder related costs 140,090 143,273 Financing fees 1,373,415 222,038 Interest 741,621 - Loan servicing 501,670 - General and administrative 702,341 506,790 Total expenses 7,103,193 3,858,953 NET INVESTMENT INCOME 13,292,775 11,295,921 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Realized gain on sale of investment 12,500 - Unrealized depreciation on derivative (214,259) - Net unrealized depreciation on investments (2,520,726) (222,340) Net loss on investments (2,722,485) (222,340) NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS $ 10,570,290 $ 11,073,581 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE: Basic $ 1.05 $ 1.10 Diluted $ 1.02 $ 1.09 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic 10,101,341 10,072,677 Diluted 10,344,388 10,188,488 CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) Three Months Ended September 30, 2004 2003 INVESTMENT INCOME Interest income - investments $ 5,057,965 $ 3,360,506 Interest income - cash and cash equivalents 3,050 75,739 Interest income - notes receivable from officers 112,960 108,659 Managerial assistance fees 107,500 402,500 Other income 68,814 53,001 Total investment income 5,350,289 4,000,405 EXPENSES Salaries and benefits 490,941 613,002 Rent 32,802 45,820 Professional fees 119,007 107,348 Directors fees 27,000 19,000 Insurance 57,704 58,787 Stockholder related costs 9,467 19,614 Financing fees 1,122,118 159,683 Interest 340,385 - Loan servicing 501,670 - General and administrative 147,245 128,711 Total expenses 2,848,339 1,151,965 NET INVESTMENT INCOME 2,501,950 2,848,440 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net unrealized depreciation on investments (1,671,594) (219,927) Unrealized depreciation on derivative (79,616) - Net loss on investments (1,751,210) (219,927) NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS $ 750,740 $ 2,628,513 NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS PER COMMON SHARE: Basic $ 0.07 $ 0.26 Diluted $ 0.07 $ 0.26 WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic 10,130,635 10,072,677 Diluted 10,397,151 10,270,403 FINANCIAL HIGHLIGHTS (UNAUDITED) Year Ended Year Ended September 30, September 30, 2004 2003 Per Share Data (1) Net asset value at beginning of period $ 12.97 $ 12.97 Income from investment operations: Net investment income (4) 1.32 1.12 Realized gain on sale of investment (4) - - Net unrealized gain/(loss) on investments (4) (0.25) (0.02) Net unrealized (loss) on derivatives (4) (0.02) - Total from investment operations 1.05 1.10 Less distributions: Distributions from net investment income (1.28) (1.10) Tax return of capital distribution (0.09) - Total distributions (1.37) (1.10) Issuance of common stock under shelf offering 0.99 - Issuance of common stock under stock option plan 0.01 - Offering costs and underwriting discount (0.16) - Repayment of principal on notes receivable 0.01 - Net asset value at end of period $ 13.50 $ 12.97 Per share market value at beginning of period $ 19.45 $ 16.88 Per share market value at end of period 22.71 19.45 Total Return (2)(3) 24.40% 21.74% Shares outstanding at end of period 11,278,510 10,081,844 Ratios/Supplemental Data Net assets at end of period $152,226,655 $130,802,382 Average net assets $130,385,129 $132,196,505 Ratio of expenses to average net assets 5.45% 2.92% Ratio of net investment income to average net assets 10.20% 8.38% (1) Basic per share data. (2) For the fiscal year ended September 30, 2004, the 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. For the fiscal year ended September 30, 2004, total return equals the increase of the ending market value over the beginning market value, plus distributions, divided by the beginning market value assuming quarterly dividend reinvestment. (3) Amounts were not annualized. (4) Weighted average per share data was used. FINANCIAL HIGHLIGHTS (UNAUDITED) Three Months Three Months Ended Ended September 30, September 30, 2004 2003 Per Share Data (1) Net asset value at beginning of period $ 12.91 $ 13.04 Income from investment operations: Net investment income (4) 0.25 0.28 Realized gain on sale of investment (4) - - Net unrealized gain/(loss) on investments (4) (0.17) (0.02) Net unrealized (loss) on derivatives (4) (0.01) - Total from investment operations 0.07 0.26 Less distributions: Distributions from net investment income (0.24) (0.33) Tax return of capital distribution (0.12) - Total distributions (0.36) (0.33) Issuance of common stock under shelf offering 1.04 - Issuance of common stock under stock option plan - - Offering costs and underwriting discount (0.16) - Repayment of principal on notes receivable - - Net asset value at end of period $ 13.50 $ 12.97 Per share market value at beginning of period $ 20.15 $ 16.88 Per share market value at end of period 22.71 19.45 Total Return (2)(3) 14.54% 21.74% Shares outstanding at end of period 11,278,510 10,081,844 Ratios/Supplemental Data Net assets at end of period $152,226,655 $130,802,382 Average net assets $136,731,528 $132,196,505 Ratio of expenses to average net assets-annualized 8.33% 2.92% Ratio of net investment income to average net assets-annualized 7.32% 8.38% (1) Basic per share data. (2) For the fiscal year ended September 30, 2004, the 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. For the fiscal year ended September 30, 2004, total return equals the increase of the ending market value over the beginning market value, plus distributions, divided by the beginning market value assuming quarterly dividend reinvestment. (3) Amounts were not annualized. (4) Weighted average per share data was used. SOURCE Gladstone Capital Corp. -0- 12/14/2004 /CONTACT: Harry Brill, CFO, or Skye Breeden, Director of Shareholders Relations, of Gladstone Capital Corp., +1-703-286-7000/ /First Call Analyst: / /FCMN Contact: skye.breeden@gladstonecapital.com / /Web site: http://www.gladstonecapital.com / (GLAD) CO: Gladstone Capital Corp. ST: Virginia IN: FIN SU: ERN CCA