Greetings and welcome to the Gladstone Capital Third Quarter 2009 Earnings Conference Call. (Operator Instructions) It is now my pleasure to introduce your host Mr. David Gladstone, Chairman for Gladstone Capital. Thank you Mr. Gladstone, you may begin.

And thank you Claudia for that nice introduction. Hello and good morning to all of you out there. This is David Gladstone, Chairman. This is the quarterly conference call for shareholders and analysts of Gladstone Capital, traded on NASDAQ trading symbol GLAD. Again, thank you all for calling in. We are always happy to talk to shareholders about our company and I really wish there were more often periods that we could get together on the phone. I hope you’ll sign up for the e-mail notices so you get information coming directly to you from the company and please remember that if you are in the Washington DC area, and you have time, you have an open invitation to come by and stop and visit us here in McLean, Virginia, a suburb of Washington DC. Just please stop by and say hello. You’ll see great people, some of the finest people in the business working for you here. And now I need to read the statement. This conference call may include statements that may constitute forward looking statements within the meaning of the Securities Act of 1933 and the Security Exchange Act of 1934 including statements with regard to the future performance of the company. These forward looking statements inherently involve certain risks and uncertainties even though they are based on our current plans and we believe those plans to be reasonable. There are many factors that may cause our actual results to be materially different from any future results that are expressed or implied by these forward looking statements including those factors listed under risk factors in our 10-K and 10-Q filings and our prospectuses filed with the Securities and Exchange Commission. That can be found on our Web site at www.GladstoneCapital.com and also on the SEC website. 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. For those of you who have been on many of these calls before, we have changed the format and go at it a new way of reporting to you so that you can hear from some of the team that’s working here for you other than just me talking all the time. I have no plans to leave, but you should know that there are a lot of talented team members here at the company. And we think shareholders should hear from them. We’ll start with the President of the bunch, Chip Stelljes. Chip is also the Chief Investment Officer of all the Gladstone companies and he’ll cover a lot of ground for us.

Thanks David. As many of you know, we continue to operate in a historically difficult environment from an economic financial sector and investment perspective. And through the first fiscal quarter that ended 12-31-2008, the environment actually worsened for making new investments. And while the longer term prospects and our deal flow remain strong the continued instability of the financial and lending markets combined with the significant downturn in the economy and the lack of any real visibility into the rest of 2009 has left many investors, as well as ourselves, on the sidelines. We did not close any new investments during the quarter. The new investment production of 8.7 million went entirely into existing portfolio companies in the form of additional investments or draws on the walls of facilities. In the quarter, we received repayments of approximately 17.1 million due to loan payoffs, investment sales, normal amortization on loans, and pay down of revolvers resulting in a net production decrease of 8.4 million for the quarter. Since the end of the quarter, we have made about 4.2 million in additional investments in existing portfolio customers. The pipeline continues to be strong. We see noticeable change, obviously, of the opportunities coming to us. Banks and buy-out firms are calling us aggressively because so many lenders are no longer investing and pricing and structure continue to improve. Fortunately finding new investments with strong 2008 performance in a positive outlook for 2009 are few and far between. If we can find them, we can make some strong loans at this time, provided we have the capital to do so. The net decrease of investments from the quarter of 8.4 million allows us to deleverage or to reinvest the funds into higher yielding opportunities. We continue to look at ways to decrease the yield…

Thanks Jim. That was a good report. Now let’s take a look at the financials. For that, we’ll hear from Gresford Gray, our Chief Financial Officer. Gresford, go ahead.

Thanks David. We’ll begin with the balance sheet. Our balance sheet continues to remain strong and at the end of the December quarter we had approximately $403 million in assets consisting of 385 million in investments and fair value and 18 million in cash and other assets. We had about $146 million borrowed on a line of credit and about 254 million in net assets. So we are less than one-to-one leverage. This is a very conservative balance sheet for a company like ours and we believe that our overall risk profile is low. For the December quarter, net investment income, which is before appreciation, depreciation, gains, or losses, was about $5.9 million versus $7.3 million for the same quarter last year, a decrease of about 20%. The decrease in net investment income was primarily due to the lower transactions credited against our base management team and occurred in connection with some amendments we made to our creditability. Note that we’ve also seen LIBOR fall and for our syndicated loans, that has hurt our earnings as well. As rates go back up, we expect that our income will also increase, all other things being equal. On a first-share basis, net investment income for the quarter, was $0.28 per share as compared to $0.43 for the same quarter last year. This was a first share decrease of about 35% due to the dilution from share issuances during the year, or in other words, an additional six-and-a-half million rated average shares outstanding as compared to the same shares last year. Some of this decline should be removed as the money from our last public offering is put to work. As all of you know, net investment income is the most important number to us because it is the number that is closest…

Thank you, Gresford.

Ladies and gentlemen, thank you for your patience. Your conference call will resume momentarily.

Thank you, Gresford. That was a very good presentation. I don’t know. We had a glitch in the phone and I’m sorry about that. I hope each of you that are listening in will read our press releases and also obtain a copy of our quarterly report called the 10-Q which has been filed with the SEC and can be accessed on our website at www.Gladstonecapital.com and also on the SEC website. As Gresford discussed, we had to change our valuation technique because the market for senior syndicated loans is judged to be inactive and the inactive bids that we were getting from the loan arrangers were not based on actual buying and selling of syndicated loans. It seems it ought to be more like guesses rather than bids. The volume of sales and new issues had almost come to a stop except for a few fire sale transactions and many of the loans that we had purchased in participations are in small loans that have four to eight lenders in the securities. So they just don’t trade at all. And there is no one bidder for these small of loans. Let me say again, the indicative bids we did get for our syndicated loans were based on prices that came from a market that we described as simply very limited volume and in some cases totally inactive. Some of the sales that did occur in the larger loans can only be described as a fire sale and really not an orderly sale. And an orderly sale is what is described by the accounting guidelines and by the publications of the SEC with regard to fair value. With the enactment of FSP 157-3, which Gresford talked about by the accounting profession, we now have the ability to look at the…

Thank you. Ladies and Gentlemen, we will be conducting the question and answer session. (Operator instructions). Our first question is coming from Greg Mason, with Stifel, Nicolaus. Please state your question. Greg Mason – Stifel Nicolaus & Company, Inc.: Hi. Good morning, David. If you could talk a little bit about the gap between your NOI and dividend and how you’re funding that today. And what do you think about the new IRS guidelines that could allow the dividend to be paid, in fact, using stocks to cover that gap?

Thank you, Greg for asking that. We are studying that proposal by the IRS and we’ll look at that. Our board has asked us to put together a memo and some folks here in the office are putting together that memo, so that we can provide it to the board, and perhaps we’ll use it. I just don’t know. It’s too early to say on that part. The main reason we’ve gone down in our ability to pay the dividend has been the fact, first of all, that we’ve had some variable rate loans. And as you know, the variable rates that are tied to LIBOR are really, very low today because LIBOR is real low. We didn’t have floors on some percentage of our loans. Another reason is that because we’ve been so weary and wary of the economy, we just held back from putting new deals on the books. And each time we put a deal on the books, we normally get a 1% or 2% fee. And that fee goes to pay down the fee that we charge the company. So, the company has not been getting that benefit because there has been no fees charged because we haven’t closed loans. If we go back to closing loans and charging 1% to 2%, as most people are doing today, that money would roll in, as well, and help pump up the earnings. But, at this point, obviously, it can’t go forever and borrow the money that we pay out of the dividends. We don’t want to do that for a long period. But, we don’t mind doing it for short stretches, if we think things are going to turn around. So, those are the things that we are looking at today. Do you have another question, Greg? Greg Mason – Stifel Nicolaus & Company, Inc.: Yes, one more and then I’ll hop back in the cue. On those last lines, you know, if we look at what Deutsche Bank did with the gain line and limit it down to what you had borrowed when it came up for renewal, do you foresee, potentially, the same thing happening? And if that occurs, how is that going to impact your ability to borrow to fund the gap dividend shortfall and make new investments?

Yes, the new investments are being driven right now by the fact that we’re so upset about the economy and not being able to figure out which companies will do well and which won’t. So, we’ve concentrated on making sure that our portfolio remains strong. So, that’s been the main driver of why we’ve not put money on the books. We do have a very large line of credit. I would expect, as the line credit could come down by some amount. I don’t think it will be as much in this company as it was in gains of our other fund by some investments, simply because we have three lenders in this. And two of the lenders are quite desirous of continuing the line of credit and have been very supportive. One has been a little less likely to want to continue. So, we’ve been working that and I’m hopeful, in the next three months, we’ll have that ironed out. We’ve already had a couple of meetings with some of the lenders and began down that road. And I’m hopeful that maybe even earlier than in May, when this line comes up, we might have an announcement of very positive that we have our line of credit in place and we’ll go for another year. But, right now, I would expect the line to drop by some small amount. Not a huge amount. And I would expect it to have some room in there for new loans, if we want to do them. Right now, we’re not very excited about doing the new loans. It’s also to note, Greg, that we do have a substantial amount of senior syndicated loans. While the marketplace is not great today, if we wanted to sell them, we could probably find some people to buy a few of the loans at some very discounted prices, in order to do the next deal. We just don’t feel good about doing that yet because we don’t like the way the economy is and the way the marketplace is pricing those loans. You have another question? Greg Mason – Stifel Nicolaus & Company, Inc.: I’ll hop back out and let other people ask and come back, thank you.

Okay. Claudia, next question.

Our next question is coming from Vernon Plack with BB&T Capital Markets. Please state your question. Vernon Plack –BB&T Capital Markets: Thanks, and David I was curious in terms on how close you were at the end of the quarter on your- the minimum net worth covenant on your revolver.

Oh, I don’t know. Gresford, how close were we? What was the difference between, how far did we miss it? About $2 million. Vernon Plack –BB&T Capital Markets: Okay, thanks. And other than growing the portfolio, this is tied to the previous question, what can you do other than grow the portfolio in order to close the gap between NOI and the dividends? Are there some other things that you’re thinking about?

Hi Vernon, it’s Chip Stelljes, we have, across the company, probably 60 active projects going on, probably 30 of which are tied to Gladstone Capital. And I would tell you that we are actively looking at every single company and saying, let’s get out of the lower yielding INGER (ph) loans and revolvers and get them over to the assets based lenders that David discussed. We did go as an order to facilitate the closing of those transactions but obviously, we don’t make much money on it. The revolvers pick up room on our line of credit, with our lenders, and so if we can get out of those positions and move them over in a refinance mode, we don’t take losses and yet we get a higher yielding portfolio. So, we’re actively looking at recycling money that we do get, continuing to deleverage, but the same time, get in the higher yielding pieces of paper and stay out of the lower yielding ones.

Vernon, go ahead. Do you have another question? Vernon Plack –BB&T Capital Markets: No, that was it. Thank you David. Thank you Chip.

Alright. Next question, Claudia.

I’m showing we have no further questions, at this time. And let me give another reminder, (Operator instructions). And it looks like we do have a follow up coming from Greg Mason with Stifel, Nicolaus. Please, state your question. Greg Mason – Stifel Nicolaus & Company, Inc.: Can you talk about, as we went through the cue looking at your fees, it looks like your advisory fees fell to virtually zero this quarter and they had been running about $400,000 a quarter. What’s the cause behind that? Are portfolio companies not paying advisory fees right now?

I’m just trying to see what you are looking at because we did get our loan servicing fee and our base management fee and - oh, advisory fees? Well, advisory fees are typically paid from — what are you looking at? Greg, which line are you looking at? Greg Mason – Stifel Nicolaus & Company, Inc.: Yes, so when you refund fees.

Oh, sorry, that’s down at the bottom, yes. I know what you mean, now. You mean the advisory fee went from 2.3 to 1.2. And that again, is when we do a transaction, the fee that we charge is an investment banking fee or something like that. That fee comes into the management company and then gets credited back. And the reason we do that is because the work has been done by the management company and so it charges the fee, but then credits it back to the portfolio company. And when you don’t have a lot of closings, as result of not a lot of closings and not a lot of fees coming in, that’s why it went down. Greg Mason – Stifel Nicolaus & Company, Inc.: Okay, and then you talked about.

You have your three loans on non-accrual, but you talked about two other problem loans. Can you discuss those? Or discuss the magnitude, at least, or size of those other two problem loans.

Well, all five of them are 12.6 million, so —

The two additional loans are approximately 150 days past due. One of those, we are very close to being, pitting control of. We think there is value in both loans. Plus, they are not paying interest as a read, and we’ll, you know, be on our list next time of non-accruals. But, again, all five loans are 12.6 million. Greg Mason – Stifel Nicolaus & Company, Inc.: Okay. And then, you mentioned that you are trying to get approval to issue stock below book and that there’s a strong pipeline if you had the capital. If you look at, you know, your dividend yield today, nearly 17%, are you able to find new investments today that would be accretive if you raised capital at these levels?

We aren’t going to raise capital at these levels unless it was just some kind of sheer emergency. Again, that’s why we’re talking about flexibility. However, if we went back up to something close to book value and we wanted to have some shares issued, not that we are planning any, but if we did, and during the road show or the three day whatever, we would have the price drop down a nickel under net asset value, we wouldn’t be able to have the issue without this permission from shareholders. And the permission is only for a year. And it has to be approved by our independent directors, as well, each time. So, again, I hope everyone out there will give us the vote of confidence on this and let us go forward on it. I did want to add, and Greg, let me just jump on one thing that Vernon asked about and finish up. We did apply for an FDIC license in this company. We are hopeful that the SBA will grant us the license. We’re going through that process now. It seems to be on a positive track. No guarantees, but we’ve all run, as you probably know, I’ve run four FDICs before, so we think we have a good reputation at the SBA and we’ll get a license. But the new stimulus package does have one thing for FDICs, in that you can borrow more money from the government than you could in the past. So, you can borrow up to $150 million through the SBA, not that we would be able to get all of that money right away. And the nice thing about that $150 million is that it doesn’t count in your tenth of 1:1 for the PEC test and so, business development companies have. And so, as a result, it’s like having a freebie, in that regards. And that would be another way, Vernon, for example, in Vernon’s question, of how we could build the income of the company. And sorry to do that to you, Greg, but I just wanted to make sure I got that in before we hang up. Did you have another question, Greg? Greg Mason – Stifel Nicolaus & Company, Inc.: One more, we agree completely that your thoughts about raising capital at these levels, but you want to have the flexibility. Would you also agree that issuing stocks for a dividend, at these levels, would be just as diluted to the shareholders?

It would be, except, you are diluting everybody and not bringing new people in. So, everybody gets the same dilution. It’s like a stock dividend, so it’s a little bit different, but you’re right, it’s very diluted. Greg Mason – Stifel Nicolaus & Company, Inc.: Right, from an ownership perspective, but clearly the next quarter you have that many new shares to pay the dividend on.

We agree with your analysis. Greg Mason – Stifel Nicolaus & Company, Inc.: Great, okay. Thank you David.

Now, do we have anymore, Claudia?

Yes, we have a follow up coming from Vernon Plack, with BB&T Capital. Please, state you question. Vernon Plack –BB&T Capital Markets: David, you must have been reading my mind because actually, I was going to follow up on the whole SPIC issue and you addressed it, so thanks very much.

Okay, Vernon. Anybody else out there have a question?

Yes, we do have one question coming from Fred Muffler, with MMA Realty (ph). Please state your question. [Fred Muffler - MMA Realty]: Yes, hi,. I’m involved in the new investments area and, I’ve been listening to a lot of great financial talk this morning. And I realize that the market is terrible, but I think it is a good market to at least pay some attention to a new investment area. You had mentioned, Mr. Gladstone, that you can not figure out which ones are best, you know? And maybe if you would reach down to some of the other areas, you might, you might learn a lot. For example, your company bought Danco, I think through Boen Capital about a few years ago. We were influential in that, and I happen to know that situation very well. They do a lot of work for intuitive surgical, a large growing robot manufacturer, you probably all know about. The big opportunities there, for synergies, for them to acquire a plastic company right now, and I think if you look at- if you look at those synergies and you look at Danco’s earnings, which have to be about the best of any of the companies that are out there, you might see that the 10 million in new loans that might be made, at that point, might yield two or three years down the line tremendous, tremendous results. I realize it might be hard to get the 10 million, but what I’m suggesting is that by looking at the transaction and getting our heads out of the sand, we might really, may really find some- some golden eggs, so to speak.

Hi, Fred. This is Chip Stelljes. We know Danco very well. Danco is actually a Gladstone Investment Portfolio Company, not a Gladstone Capital Portfolio Company. [Fred Muffler - MMA Realty]: Oh, okay.

And we’re in daily – we’re in weekly contact with Boen Capital. We’re very close to the company’s projections and where they think they’re going to go with that customer. I don’t want to speak anymore on a portfolio company, especially one that’s not part of this company. But, we are well aware of the opportunities there and the situation. [Fred Muffler - MMA Realty]: Glad to hear that. I didn’t realize it wasn’t the same company.

Okay. Do we have any other questions?

No, we have no further questions, at this time.

All right. Well, since we have no questions, again, thank you all for calling in and being part of this conference, and we’ll see you next quarter. That’s the end of this conference.

Ladies and Gentlemen, this does conclude today’s teleconference. (Operator instructions)