Good morning. And welcome to the Gladstone Capital Corporation’s Fourth Quarter Year Ended September 30, 2011 Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note that this event is being recorded. And now I’d like to turn the conference over to David Gladstone. Mr. Gladstone, please go ahead.

Well, thank you, Keith. And hello out there all of you. Good morning. This is David Gladstone, Chairman and this is the quarterly conference call for shareholders and analysts of Gladstone Capital, trading symbol, GLAD. We thank you all for calling in. As always, I love these moments and I’m happy to talk to shareholders about the company. I wish we do it more often, but once a quarter is the thing that we do. We hope you’ll take the opportunity to visit our website, gladstonecapital.com where you can find and sign up for e-mail notices. You can receive information about the time -- in the timely fashion about the company. Please remember that if you’re in the Washington, D.C. area and you have a little extra time, you have an open invitation to come by here in McLean, Virginia stop by and say hello. You’ll see some of the finest people in the business. And now I need to read the statement about forward-looking statements. 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 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 the caption "Risk Factors" in our 10-K and 10-Q filings and in our prospectus as filed with the Securities and Exchange Commission. All those can be found on our website as well as 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. As we always do, we’ll start off with our President, Chip Stelljes. Chip is also the Chief Investment Officer of all the Gladstone companies and he’ll cover a lot of ground. So, Chip, go ahead.

Good morning. We closed two new investments during the quarter totaling $9.9 million and we invested $7.7 million in existing portfolio of companies in the form of additional investments or draws on revolver facilities. Also during the quarter, we received repayments of approximately $6 million due to normal amortization, pay-downs of revolvers. So, in total we had a net production increase in our portfolio of approximately $11.6 million for the quarter. And we funded the net increase in production from operating income and draws on our credit facility. For the fiscal year ended September 30, 2011, we invested $136 million and have repayments of $46 million for a total net production of $90 million compared to a total net contraction of $59 million last year. So, we’re pleased we were able to make any new investments this year. Since the end of the quarter, we invested $3.6 million in existing portfolio of companies and we received $3.9 million repayments. This is primarily against scheduled principal amortization. Included in these numbers was an investment of $1.5 million to our new portfolio of company in relation to a workout of a non-accrual investment that we’ll talk about in a few minutes. Also, after the quarter end, we sold $1.4 million term preferred shares. We received $33 million in net proceeds. By completing this term preferred offer, we were able to pay down $33 million on our credit facility. Now, we’re encouraged by this capital raise and look forward to using the capital to make new investments over the next six months. At the time of this call, we owe $64 million on our line of credit. And since that line is $137 million in capacity, we’ve got liquidity to make new investments. We continue to see attractive investment opportunities. Although there seems…

All right. Thanks, Chip for the good report. And now, let’s turn to financials and for that we’ll hear from David Watson, our Chief Financial Officer. David?

Great. Good morning, everyone. I’ll go over the financial starting with the balance sheet. As of September 30, we had approximately $318 million in total assets consisting of $303 million in investments at fair value and $50 million in cash and other assets. Our borrowings outstanding totaled $99.4 million on our line of credit and we had approximately $214 million in net assets as of the 2011 fiscal year-end. Therefore, we are less than 1/1 leverage. This is a conservative balance sheet for a finance company, which are usually levered much higher and we believe that our overall risk profile is low. At the time of this call, we only have $64 million borrowed on our $137 million line of credit. So, we have the ability to deploy more capital for the right opportunities. Moving over to the income statement. For the September quarter, net investment income was approximately $4.8 million versus $4.4 million for the same quarter last year, an increase of 8.7%. The increase was primarily due to an increase in interest income resulting from 20 net new investments since September 30, 2010. On a per common share basis, net investment income for the current quarter was $0.23 per share compared to $0.21 per share for the fourth quarter ended September 30, 2010. For the fiscal year ended September 30, 2011, net investment income was $18.4 million or $0.88 per share as compared to $17.8 million or $0.84 per share for the prior year, an increase in net investment income of 3.7%. Net investment income increased primarily due to decreased interest expenses resulting from decreased borrowing costs under our credit facility. The effective interest rate was 6% for the fiscal year ended September 30, 2011, as compared to 7% for the prior year which is due in part…

All right. Thank you, David Watson. And that was a very good presentation. I hope all our listeners out there will read our press release, study our year-end report. That’s called the 10-K which we filed with the SEC yesterday. You can access the press releases and the 10-Ks and 10-Qs on our website at www.gladstonecapital.com. And you can also find them on the SEC website at www.sec.gov. I think the big news this quarter is the continuation to make progress with our portfolio companies. They’re getting stronger as the economy gets better. So, we continue to work them out and make them better for everybody. Also this quarter, we see our backlog of opportunities to lend money increasing and I think that will continue. I don’t see any slowdown coming in that area. Also, we added a lot of new investments in our portfolio of loans during the year, about $136 million and that will help us make more money for the shareholders. It has been -- in my estimation, a very sluggish three years, but I think we’ve finally come around and things will be better over the next three years. But I want to remind everybody that our biggest challenge today is the long-term debt marketplace for our company. We have a line of credit with very supportive lenders. Those institutions seem to be behind us. The line of credit is working fine and we believe it’s sufficient for our near-term needs, but it is a short-term line of credit. And we are near to signing a commitment with the lenders and I hope we can -- at our next call in the quarter, we can have that closed and out to you. But at this point in time, I can just say that we’re moving forward…

Thank you. (Operator Instructions) And the first question comes from Troy Ward with Stifel Nicolaus. Troy Ward – Stifel Nicolaus: Thank you. Good morning, gentlemen.

Good morning. Troy Ward – Stifel Nicolaus: Hey, David, you talked about -- you felt like you’ve really turned the corner. It feels like the worst is behind you. But if we look at the portfolio, again, this quarter you had two additional companies on non-accrual. And as we look at, if you exclude the $90 plus million of syndicated loans, you have about $290 million of self-originated assets. Of those, 14% are on non-accrual and almost 16% are marked less than $0.50 on the $1. That’s 30% of the portfolio that your team has underwritten. Are you showing some pretty extreme levels of stress? How should we think about the underwriting process at Gladstone? Has anything changed to make us think that credit quality should be better going forward? And what can you do to, quite honestly retrieve some of the value in this portfolio?

Well, I’d only point to the past and we’ve had very few losses over the years. If you go back and look at the losses, yes, we put companies in non-accrual maybe faster than some others. We certainly don’t do what others had done which is convert all the debt to equity in order to make their numbers look good. We leave them in debt positions so that we can work on them and continue to work and get them fixed. As you know, Chip mentioned that we have the one that came off non-accrual as we fixed it. I think most of the problems that we had on our portfolio have come out of the broadcast area, which are dependent on advertising. Advertising has had a much slower comeback than other parts of the economy. And so, as a result, those have performed poorly. There are others in the portfolio that have performed very well. And I think you’ll see over the next year, some of those companies that we’ve taken over and fixed are actually going to get sold or will be put out for sale. And you’ll see some tremendous capital gains from that portfolio as well. So, you have to remember that we did go through the worst recession we’ve ever seen. And I know we can -- we are compared to some of the other BDCs out there that have very small portfolios before the recession and have now made hay in the good times of the recession bottoming out and more power to them. We’re in favor of everybody making money. But I think you’ll see that the newer transactions that we have will continue to grow. And those that have gone through the recession and that we’ve taken over, we fixed. And then, Chip, you have a couple of deals that we’ve taken over and that we’re now in a position to sell, you want to comment on those?

Yes. I mean, not specifically. But, yeah, it leads to companies in the portfolio that we took over during the downturn, both of which we’re going to make, in my opinion, substantially more money on those deals. And we would have made it big not the original business planning. We’ve just been mezzanine holder of them. So, you see some of that in the valuations. And I’ll also just note on valuations. Valuations for us are primarily where we’re looking. So, where you might see a large valuation of portfolio company we may look at it and say that’s the history. But we know what the current plan is and we’re comfortable with the management team. We use S&P and S&P tends to look backwards at trailing 12 months of performance. And we have to look as stewards of the money. We have to look at forward performance and plans and what the company is trying to achieve. We’re working hard on the ones that have had issues. Troy Ward – Stifel Nicolaus: Great. That’s good color. Thanks, guys. David -- I think Chip, the one you mentioned that came off non-accrual, was that the KMBQ?

Mainly it is there. Troy Ward – Stifel Nicolaus: And will you end up with a positive IRR on that transaction?

No, I don’t know. We’ve got to, first of all, get them paying interest which is the first to order business and then see if we can get them to pay off the loan. But I suspect it will positive once you do that. Troy Ward – Stifel Nicolaus: Okay. Great. And then one last one, sticking with the credit quality. Obviously, Sunshine Media is and you had some commentary in your prepared remarks. It’s still a sizeable investment. It’s still on occurring status. Can you just give us a little more color on what’s going on there? It’s marked at $0.30 or close to $0.30 on the $1. Are you still receiving current interest on it and it’s marked at $0.30 or close to $0.30 on the $1. Are you still receiving current interest on it and do you anticipate this going on non-accrual?

We are getting current interest from Sunshine. Sunshine remains a work in progress. We have -- as we have mentioned in the past call, we’re being repositioned with the media company subject to the advertising type revenues that David talked about. We have a very strong management team in here. We’ve taken out the control equity investor in the deal. I’ll tell you just about being -- specifically about portfolio companies. This company has a low profitability but is doing a lot of the right things to improve the business. And almost all of the capital that we committed to Sunshine is from new initiatives that we’ll build the business. It’s not eating operating cash. It’s just that a good deal of leverage, that’s the valuation. But, I mean we have some confidence that the right things are being done there. Troy Ward – Stifel Nicolaus: Great. And then one for David Watson, just a quick modeling question. What’s in that other expense line item? It’s grown over the last couple of years from about $270,000 to $800,000. And this year, it’s up around $1.2 million. How should we look at that? What’s in it, first of all and how should we look at it going forward? I mean, it’s not super material but it’ll be a couple -- if this increase continues, it’ll be a couple cents to the model.

Yeah. The other expense, the $1.2 million for the year, fiscal year ended 2011, Troy? Troy Ward – Stifel Nicolaus: Yes. That’s the line item.

Okay. That’s actually down a little bit from last year where it was at $1.3 million. Troy Ward – Stifel Nicolaus: I’m sorry. I had it in my model at $800,000. Maybe I had back something out as I include -- considered it one time. So, what do you think about that line of item going forward? Do you think it’ll stay -- do you think you’ll stay relatively flat in that range?

I believe so, Troy. Troy Ward – Stifel Nicolaus: Okay. Great. Thanks guys.

Thank you.

All right. Next question, please?

Thank you. And the our next question comes from Jeff Rudner from UBS. Jeff Rudner – UBS: Good morning, David. Good morning, guys. David, just stepping back a little bit, looking at the dividend and the comments made and, obviously, the net investment income being at $0.23 for the quarter, which amply covered the $0.21 dividend. When you cut the dividend back in 2009 from $0.14 a month to $0.07 a month, obviously, everybody understood what the necessity was for that. Now that things seem to be improving and the net investment income for the first quarter now should be even a little bit above the $0.23, do you anticipate the possibility of raising the dividend, albeit gradually, as you go through 2012?

Jeff, that is the question that everybody asks. And the answer, of course, is always the same. We’re going to raise it as fast as we possibly it can based on earnings. Right now, earnings are dependent on new transactions being put on the books, new portfolio of companies, of course. And that’s an unknown that we just never know how to model into our models of how much we’re going to be able to put on the books each quarter. As the largest shareholder, I can assure you that I want to increase the dividend as much as I possibly can. So, we’re working toward that. Whether that means that we might be able to do it in this fiscal year, I’m hopeful. Jeff Rudner – UBS: Okay. Thank you.

Next question.

(Operator Instructions) And we do have a question from J.T. Rogers with Janney Montgomery Scott. J.T. Rogers – Janney Montgomery Scott: Hi. Good morning, everyone. I have a quick question. You all referenced problems in the media portfolio. I was wondering if you could comment about maybe trends that you’re seeing in advertising spending in some of the smaller markets that you all invest in, if that is…

Yes. The media marketplace is then one of the areas that was damaged the greatest. While we didn’t invest in the housing industry, many of the advertisements on both radio and magazines have been related to the housing industry. So, we took our leaks from that portfolio -- in that part of the portfolio from a different way of looking at it. Also, much of the media portfolio, it was tied to automobile advertising and the dealers. And of course, that went through the ringer as well. So, you got two of the biggest advertisers in the business which is automobiles and that just destroyed the media area altogether. So, some of the smaller marketplaces are coming back now. The automobile people are backflow for us. If you watched the TV, you see every other ads seems to be an automobile add. And the same thing is happening with the smaller marketplaces. They are now coming back. The media advertisement for automobiles in the newspapers and the magazines I think is still low. And it’s been replaced somewhat by some of the media advertisements from the medical profession and the legal profession. But it’s still not strong. And so, what we’ve seen in things like our yellow page directories is, yes, it’s coming back but it’s very slow. And people are reticent to spend money at this point in time. Still, today, it’s just slowness. So, nothing out there, J.T. that I can point to that says it’s going to be a quick turnaround and advertising in yellow books and magazines and radios are going to flourish again. It’s helped a lot that we have a political campaign right now for the presidency, as well as congressmen and senators. That will be on radio, TV, billboards. We have billboards, as you know. So, all of those have had an impact. And I think this year that we’re in, this election year that we’re coming in to, is going to be a good one for most of the media portfolio. But it’s still -- it’s still not where it was before the recession. And it’s one of the areas that we worry about but not much you can do other than continue to work hard and put thing together. J.T. Rogers – Janney Montgomery Scott: Well, thanks, David. That’s helpful. And just one other question. You have been with various shareholders friendly with the credit to base to your incentive and base management fees. Would you all now out earning the dividend? I was wondering if you were reconsidering or considering changing your policy in terms of the credit to base management fee?

We haven’t gone through that. We go through it once a year and real detail with our Board of Directors and we did it in June -- actually in July, the July Board Meeting. So, we didn’t make any changes then but we always look at it. And right now, that’s not on the agenda. J.T. Rogers – Janney Montgomery Scott: Okay. Well, thanks a lot.

Next question, please?

We have a follow-up with Troy Ward with Stifel Nicolaus. Troy Ward – Stifel Nicolaus: Hi, David, real quick. Can you just give us again -- as we think of the overall funding in the portfolio with a $92 million syndicated portfolio, I’m having a little trouble understanding the real value of that portfolio for shareholders. I mean, as we saw in the last downturn, I mean, that provides liquidity until times get tough and then the liquidity is not there. I mean, you had to sell out of those portfolios -- that portfolio last time at a loss. What is the rationale for holding $90 million as syndicated loans?

As you just mentioned, the important thing is liquidity. First of all, you say it’s not liquid but it really is. Our proprietary portfolio is absolutely liquid. There is no way to sell that stuff whereas we sold it actually at a 10% premium to where it was valued at. But nonetheless, it provided a way for us to pay off the banks in real trouble times. I know it’s not something everybody thinks about. It provided a way for us to pay off the banks in real troubled times. I know it’s not something everybody thinks about every day, but I do and that is matching the book. And so, I’d like to match the book with something that I know I can work with. And if, God forbid, [Peabank] was bought by Deutsche Bank and we needed to get out of that situation, we would have the ability to do that pretty easily even though we might take a hit in terms of the down stroke in terms of the valuation and what we might get for that syndicated loan portfolio. But it does provide us with the opportunity to liquidate that. And my goal is to build up the right-hand side of the balance sheet with long-term debt and long-term equity as opposed to revolving lines of credit. And we are very thankful with our line of credit, but we know that things can change there overnight. You could have the government put all of these loans to BDCs on some kind of watch list as they have done a few of the BDCs. And we’re not on anybody’s watch list that I know of. And at this point in time, I think we’ll stay off of it because of the way we structured our loan. But if you talk to some of the lenders, they worry that the government might put these on credit watch of some kind and so as a result, make them put a lot more equity on it. With the syndicated loans, it helps us with our banks. They understand syndicated loans. They’ve had some in their own portfolio. So, it makes us easier to work with. And if you noticed, a couple of the BDCs out there do nothing but syndicated loans. And they’ve positioned themselves that way. So, all of the above are the reasons we’re, again, syndicated loans. So, would I like to be 100% in proprietary loans? The answer is yes. I think we get much more bang for our buck there. But at the end of the day, I’m going to keep a good slog of syndicated loans just for liquidity purposes. Troy Ward – Stifel Nicolaus: Right. Thank you, David.

Other questions?

(Operator Instructions) Okay. We have a question from Dixon Braden from Morgan Keegan. Dixon Braden – Morgan Keegan: Hi. Good morning, gentlemen

Good morning. Dixon Braden – Morgan Keegan: I was just a little curious, if you could walk me through the rationale behind your preferred offering. It seems kind of small, a little bit extensive. Were you not able to expand that credit facility or were you in negotiations to expand that facility? Just a little color there would be helpful.

All right. The existing facility is being worked on now. I think we’ll have a term sheet soon. And I think the closing will happen maybe this quarter, but probably most likely next quarter. So, we’ll end up with a transaction, I think, will be very similar to the one that we have in Gladstone Investment because two of the lenders are the same and one of them is the lead in this Gladstone Capital. No guarantees, of course, but that’s what I believe will happen. And we are getting indications that that’s what’s going to happen. The problem with the line of credit even though it may turn out to be a two or three year line of credit is that it’s just that it’s short term and what we need is long term. The only long term that we came across that we could issue was the preferred stock. And our common stock has been beaten down to such a low rate that issuing common at a 10% yield plus some kind of discount for the market would have been astronomically a high capital. We’ve seen some of the BDCs issued that kind of common stock and they’d end up having to cut their dividend. And while that may be good for them and their long-term outlook, we don’t think cutting the dividend as something that we can do for our shareholders. So, as a result, we run the company with the idea that we search for their cheapest long-term capital we can find. We had engaged several underwriters to work on some debt side for us. We were not able to find any long-term debt that made sense for us. Yes, we found a long-term debt. It was very expensive even more expensive than the preferred. Actually,…

I wish I could tell you. The problem with that, of course, is that we have a great pipeline. It is very strong and robust today. We have a good feel for the marketplace. There is competition. Your friends that you’ve worked with in the BDC community are competing with us. We see one or two of them from time to time. It does seem to be a very large marketplace today with plenty of room for us to put loans on the books. It’s just a matter of -- in competitive environment where we’re willing to go at a lower rate and take the risk profile and -- sometimes, we market that and others take it and go with it. And God bless my hope they win. But trading 140 is the number. It would be very hard for me to say. Dixon Braden – Morgan Keegan: Sure.

I’m sorry. I can’t do better than that. Dixon Braden – Morgan Keegan: No problem. Well, thank you very much for taking my questions.

Okay. Next question.

The next question comes from Mark Hughes from Lafayette Investments. Mark Hughes – Lafayette Investments: Just a follow-up on kind of the credit qualities issue, given the size of the accumulated net realized losses as well as the cumulative net unrealized depreciation on the investments, you’re not making loans to IBM in AAA credits or any AA credits. We realize many of your companies will get in trouble periodically. But I’m a little bit surprised that the magnitude of the losses, of realized and unrealized, when companies are getting in trouble. Maybe some of this unrealized depreciation does come back. But can you talk a little bit about how you protect yourself when a company gets in trouble? And are there ways you can do this better so that maybe the loss is $0.20 on the $1 instead of $0.70, $0.80 or $0.90 on the $1? How do you go about protecting yourself so that the hit isn’t so extensive when a company gets in trouble?

Well, Mark, it’s a good question. And at the end of the day, it depends on the ability of the company to generate cash flow. And when hard times come, especially companies that are in media business or in the service business, it can get hammered pretty hard as well as the manufacturers for that matter. But we do have a security interest in the assets. Sometimes it is the second behind the bank that’s providing the revolving line of credit. And in some cases, it’s the first on the line of credit. When we do these transactions, we look for the amount of equity that’s already in the company, as well as what might be contributed by someone else, such as a buyout fund. And usually, there is a substantial amount of equity in the buyout being put -- placed into the company. And one of the companies that I think Chip mentioned, he has a situation in which he took over the company in which the buyout firm had put some 30% of the purchase price in equity and they lost it all. We have turned those companies, two of them around in which the equity was lost. And we’ve turned those around now. And then hopefully we will list them for sale this year and recover all of our income, as well as all of our debt that we owed on those. At the end of the day, there is no good way to salvage a company that has an operating problem that can’t be fixed. If we can fix the operating problem, sure, you can bring them back to life. And sometimes, as it did in KMBQ, it takes you two years. Maybe it was even longer than that one. That one got in trouble. We’ve…

Next question.

Actually, there are no more questions at the present time. So, this concludes our question-and-answer session. I’d like to hand the conference back over to David Gladstone for any closing remarks.

All right. Well, we thank all of you for your good questions and the time that we had with you. And we appreciate it. And we’ll see you next quarter. That’s the end of this call.

Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.