Greetings and welcome to the Gladstone Capital Fourth Quarter 2009 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Gladstone. Thank you, Mr. Gladstone. You may begin.

This is David Gladstone, I am the Chairman and this is our quarterly conference call for all the shareholders as well as analyst of Gladstone Capital. We are traded on NASDAQ under the symbol, GLAD, and again thank you all for calling in. We’re always happy to talk with shareholders about our company. I wish we had more often, more call like this, but unfortunately it’s just once a quarter. I do hope you’ll take the opportunity to visit our website at www.gladstonecapital.com where you can find a lot of information about us. You can also signup for e-mail notices, and you will get notifications when we have information that’s coming out about the company in a timely fashion I think. Please remember that, you have an open invitation that if you are ever in the Washington D.C., area. Please stop by and see us here in McLean, Virginia, we are just a short drive from downtown. Come by and say hello, you will see some of the finest people in the business, and you are always welcome to stop by and see where the people are that are managing your money. I need to read a statement of our forward-looking statements now. This conference call may include statements that may constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, including the statements with regard to the future performance of the company. These forward-looking statements inherently involve certain risk 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 the forward-looking statements including those factors listed under the caption “Risk Factors” in our 10-K and 10-Q filings that are in our prospectus and also filed with the Securities and Exchange Commission. Those can also be found on our website at gladstonecapital.com, and of course they are on the SEC website at www.sec.com. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a results of new information, future events or otherwise. Well we always start with our President, and our President of course is Chip Stelljes. Chip is the Chief Investment Officer for all the Gladstone companies, and he's the President of this one and he’ll cover a lot of ground. So, Chip, why don’t you start off please?

As most of you know, we continue to operate in a difficult economic environment. Through the quarter ended 9/30/2009 that environment did not improve materially. While some new investments are being made in the market, the continued instability of the financial and lending markets combined with continued downturn in the economy and the lack of real visibility heading into 2010 has just made us cautious. But we did not close any new investments during the quarter just ended, and the investment activity of $1.7 million was entirely in existing portfolio companies in the form of additional investments or draws on revolver facilities. During the quarter, we received net payments of approximately $11.3 million, due to loan sales, payoffs, normal amortization and pay-downs of revolvers. This resulted in a net production decrease in our portfolio of $9.6 million for the quarter. Since the end of the quarter, we made about $1.6 million in additional investments in existing portfolio companies. Additionally, after the end of the quarter, we sold two syndicated loan that were held in our portfolio of investments at September 30. These syndicated loans have aggregate fair value of $2.7 million of which we have received all proceeds. As we continue to seek new investment opportunities with pricing [instructions], structures that are attractive. Unfortunately, companies that have a positive outlook into the 2010 are limited, but we are seeing some, if we can access to more capital, we believe that we can make investments with a cheaper and attractive rates of returns in this environment. As I mentioned, the net decrease in investment assets for the quarter just ended was $9.6 million from loan sales, prepayment and repayments. We used this money to pay down our line of credit, which allows us to further deleverage. We continue to explore ways…

That was a good report; you have a good understanding of what's going on in the last quarter. Now let’s turn over to the financials and hear from our Chief Financial Officer, Gresford Gray. Gresford?

We’ll begin with our balance sheet, which continues to remain strong. At the end of the September quarter, we had approximately $336 million in assets, consisting of $321 million in investments at fair value and $15 million in cash and other assets. We borrowed about $83 million on the line of credit and had about $249 million in net assets. As such, we’re less than one-to-one leverage. This is a very conservative balance sheet for finance companies, which are usually leveraged much higher. We believe our overall risk profile is low. In May 2009, we entered into a new credit agreement, a $127 million revolving line of credit with Key Equipment Finance, a part of KeyBanc, which replaced Deutsche Bank as the administrative agency. BB&T Bank also joined the credit facility as a committed lender. The new facility matures on May 14, 2010. Subsequent to September 30, we reduced the size of our credit facility by $20 million, from $127 million to $107 million. We are in good standing with our line of credits from KeyBanc and BB&T. We're required to review KeyBanc's participation [NOI] from $100 million to $75 million by December 31, 2009, and as of today, we have reduced them to $80 million and have the ability to reduce them the additional $5 million today. Turning to our income statement, for the September quarter, net investment income was about $4.2 million versus $6.1 million for the same quarter last year, a decrease of about 31%. The decrease was primarily due to a decline in investment income, resulting from the exit of loans during the quarter, lower transaction fees paid by the portfolio companies which are credited against our base management fees, and professional fees incurred in connection with troubled loans. Please note that LIBOR has fallen and…

I hope all of our listeners out there will read our press release and also obtain a copy of the quarterly report called the 10-Q and 10-K. We filed the 10-K yesterday with the SEC. You can access the press release and the 10-Ks and 10-Qs on our website at gladstonecapital.com and also see on the SEC website. I think the big news for this quarter was, we continued to make progress with our portfolio of investments and our desire to pay down our short-term line of credit with KeyBanc and BB&T. As many of you know that they replaced our primary lender, Deutsche Bank. As part of the new agreement, we have or promised to reduce the commitment of KeyBanc to $75 million by December 31, 2009, and after the quarter ended as Gresford reported, we reduced KeyBanc to $80 million, and we are in the process of reducing them to $75 million, probably this week, and now we are in the process of working on it now. So, our line of credit will be at a $102 million soon and there is plenty of room for our company, especially short-term line of credit. We are happy with our new lenders and have moved away, we’re very happy to have moved away now from Deutsche Bank which placed us in a very difficult position, when Deutsche Bank decided not to renew our line of credit. They did this to a number of other people in our industry and other industry. So, it’s not just us that we are damaged; they damaged a lot of other companies as well. Our biggest challenge today is the debt marketplace for companies like ours as well as for our portfolio companies that we finance. So, we have a line of credit with very…

[Operator Instructions]. Our first question is from the line of Vernon Plack with BB&T Capital Markets. Please go ahead with your question, sir. Vernon Plack - BB&T Capital Markets: Dave I am trying to understand, the interest income line this quarter, and if you look at what the number was with $9.2 million versus $10.6 million in the June quarter, which is a 13% decline. I’m trying to fully account for this difference. I know the portfolio shrunk a little bit about 6% and you also had some additional non-accruals. If that doesn’t account for all the difference, may be there are some timing difference or something else going on there.

Gresford why not you answer that one please.

Vernon the September interest income number also included the reversal of interest income related to the loan that was written off or a bit dangled during the quarter. Vernon Plack - BB&T Capital Markets: Do you know how much that was?

(inaudible), but I will be happy to follow-up with you and get that.

We’ll put that on the questionnaires and answers in our website, if you don’t mind Vernon. All right we have another question please.

Yes, we do have. A question is coming from the line of Greg Mason with Stifel Nicolaus. Please go ahead with your question, sir.

Could you talk about the average LIBOR for in your portfolio for those investments that you have a floor?

Gresford you know the --.

It’s between three and four.

It’s between three and four is the floor.

Could you talk a little bit more about the SBIC opportunity and where you are in the process? Have you officially filed you application yet and waiting to hear back?

Chip you want to answer that please?

Yes the application being filed. We were asked for some additional information. We've now delivered to them. We either have or are about to receive our comment letter on our application. This is will [broad] the legal documentation list as they requires, and so we are likely in the process, and it’s just a question of how quickly they will get to us and make a decision.

Do you have any kind of timeline that you guys are thinking or hoping about that you are willing to share on the completion of that license?

We've made so many estimates on that I am almost afraid to do it. SBA is working I'm sure as hard as they can. We had a gentleman over here about a week or so ago (inaudible) where she came over for again to ask questions and get more information and we've provided that. So we're hopeful that this final letter will come the final questions and that will move quickly through the process, but we have no control over that whatsoever. My guess is we're probably two months away, but that's again a really rough guess.

One last question, are you able to get separate licenses for GAIN, GLAD and GOOD or do they view your entity as the term one whole for the license process?

No, we can have a license in both GLAD and GAIN. What we won't do is get one for our real estate company. SBIC are precluded from doing those kind of transactions, so it would be inappropriate for us to ply through Gladstone Commercial. But our hope is to get the license for Gladstone Capital, this company soon, and make a success of that so that SBA would like us to get the license for GAIN as well.

[Operator Instructions]. Our next question gentlemen, is from the line of David West with Davenport Company.

In the fourth quarter, it looked like your professional expenses were in excess of $800,000, materially higher than had been in prior quarters. Any particular activity drive that figure?

Chip is going to answer that one.

We had significant professional fees. The tough part of the [normal] recurring professional fees that we get at year end in the company. We had significant ones related to portfolio company issues. The primary one was the bankruptcy and write-off of the banker had significant legal expenses associated with that Chapter 11 filings. Those are other things that perhaps (inaudible), those are behind us now, and we should not see those going forward. An unfortunate result from that particular testament all around.

I guess just a more subjective question. Obviously there were somewhat non-reoccurring unusual items that depressed the top line this particular quarter. But do you think you are getting close at some point to starting to make new loans at this point in the cycle?

I do. I think the process that we've been going through is to make sure that our short term line of credit was in place and paid down to the amounts that they wanted us to have it at. As you know, the existing line needs to be reduced by May to $50 million for KeyBanc. But they are now in here telling us that they would like to talk about renegotiating our line of credit. So, we don’t know where that’s gone, but I think it would be view to have a positive that they come back and or starting to talk with us again. But it’s just too early in the process of discussing that to -- to make any projection without where that will go. I am hopeful that during this quarter, we can find some long-term debt from some two or three institutions and raise $25 million to $50 million of long-term debt; that would help us a lot as well. Okay. Do we have any other question?

Yes, really sir. Our next question is from the line of Scott Valentin with FBR Capital Markets. Please go ahead with your question, sir.

Regarding the investment I think you just might have answered part of the question in the last response, but we’re trying to get a sense of when you would resume making loans. I know you are making portfolio investments, but is it more, are the returns are adequate today or is it just you mention all that’s going on with credit situations right now. Maybe more of an asset liability duration matching issue?

Well certainly the latter, we don’t want to make long-term investments with short-term debt, and that is what probably destroyed a lot of people in the industry and it certainly was one of our downfall for using the very large line of credit with some one that we thought was going to roll over the line of credit because they’ve given us many promises along those lines. So, we are not going to go down that road again of having a large short-term line of credit and using it to make long-term investments. So, that’s certainly on our mind and that’s why I’ve mentioned so many times that we need to raise long-term debt before we can get into the marketplace of making new investments. But second of all, the marketplace is still very uncertain. We’ve looked at any number of transactions and decided against them or just pass because we thought the economy was not strong enough, and there are a number of economist that keep saying to us that there is going to be a second write down and to be careful. So we are being careful. So I think its both ways, however Scott if at this point in time, we were able to raise a reasonably priced long-term debt or equity, we could probably fund any number of transactions that would be satisfactory to us and let us do it. But I think right now we are hampered by both of those, due to the uncertainty in the market places as well as the lack of capital in the marketplace.

But in terms of the pricing of assets and competition you feel comfortable making (inaudible)?

The pricing has all moved back up. If you look even at the marketplace that you can view, the senior syndicated loan market place, you are watching transactions, they are priced out at in the positions that we would be taking in 10% and 12% current pay. We think that we can get those kinds of rates quite easily, with equity options as well. So the market place is back where it should have been all along, because that's where the risk reward we are taking to in terms of pricing deals. The pricing in the market place is not the problem anymore, as it was two years ago. Pricing was a problem, you could find plenty of deals, but the pricing was still behind that, you didn’t feel like the risk reward ratio was there. Today pricing is not the problem; the real question is what's the risk associated with that transaction today, given this current economic downturn. So, we’ve got to raise long-term capital first to make long-term investments. We might raise it from having an SBIC if we get an announcement that we're going to have an SBIC that would be a very positive news about doing new investments. But I want to warn you that we're going to be very tricky in this marketplace unless we see open running room and things clearing out, so that we can make long term investments without feeling like we might get another downturn in the economy next week or next month. Next question, please.

Hi, the next question is from Greg Mason with Stifel Nicolaus.

One additional follow-up; if I understand correctly, just trying to get my hands around the SBIC opportunity. I think the new rules in the SBA is that you have to fund your equity portion before you can draw the debt, is that correct and how much then of your own capital do you have to put up to get that debt?

Yes. You do it in stages, you can put up some of our equity and then draw down money and then put up more equity and draw down money. It’s a process that you go through. You don’t have to put up every single dollar before you can draw your first loan. There are obviously some very small SBICs that are never going to hit the limit that you can get from SBA. There might be $15 million in equity and all and draw down $30 million from SBA. So you can incrementally go along in that process.

So you don’t have to start off by stating if you want to go for the 450, you can ratchet it up as you get equity?

That's right. You could have a small SBIC. They are not requiring you to have a large SBIC on day one.

[Operator Instructions]

Any other questions?

There are no further questions at this time Mr. Gladstone.

Thank you all for attending our meeting. I hope to see you next quarter and hopefully we have a lot of good news next. That’s the end of this conference call.

This concludes today conference. You may now disconnect your lines at this time. Thank you for your participation.