Good morning, and welcome to the Gladstone Capital Corporation first quarter, ended December 31, 2011 Shareholder’s Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note, this event is being recorded. I’d now like to turn the conference over to Mr. David Gladstone, Chairman. Please go ahead, sir.

All right. Thank you, Denise, for that nice introduction and those instructions. And hello, and good morning to all of you out there. This is David Gladstone, Chairman, and this is the quarterly conference call to shareholders and analyst for Gladstone Capital, trading symbol GLAD. Thanks for all of you for calling in, and we’re always happy to talk to shareholders about our company, and wish there were many more opportunities to do so. We hope to take this opportunity - we hope you take the opportunity to visit our website at www.gladstonecapital.com, where you can sign up for e-mail notices and you can receive information about the time – in a timely fashion. And please remember that if you’re in the Washington DC area, you have an open invitation to visit us here in McLean, Virginia. Please stop by and say hello. Now I’m going 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 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 and implied in these forward-looking statements, including those factors under the caption “Risk Factors” in our 10-K and 10-Q filings, and our perspectives that’s filed with the Security Exchange Commission. Those can all be found on our website 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. We always start with our President, Chip Stelljes. Chip is the Chief Investment Officer of all three of the Gladstone companies, and he’ll cover a lot of ground here. Chip, go forward please.

Good morning. This quarter the first quarter of our fiscal year, we focused on managing our existing portfolio and renewing our revolving line of credit. We closed one new proprietary investment during the quarter totally 1.6 million, which resulted from the sale of KNDQ, which was one of our non-performing borrows through Ohana Media. And we invested 9.7 million in existing portfolio companies in the form of additional invested or withdrawals of revolving facilities, including an additional 4.75 million to support the acquisition of a competitor by our portfolio company, NAP. Also during the quarter we received three payments of approximately 10.8 million, primarily comprised of the early payoff at PAR of Northern Contours, Inc. for 6.1 million as well as normal amortization, pay down on revolvers. So in total in we had a net production increase in our portfolio of approximately .50 million for the quarter ended December 31, 2011, and we funded the net increase in production from operating income and draws at our credit facility. Since the end of the quarter we invested $3.1 million in investments to eight existing portfolio companies and we received $2.9 million in repayments, which mainly consisted of the early payoff at PAR of our investment in Global Materials Technologies. And as part of this payoff, we received $1 million in success fees, which will be reflected in our quarter ended March 31, 2012. At subsequent to quarter end we extended the maturity date on our $137 million revolving line of credit by nearly three years from the original maturity date of March 15, 2012 to January 18, 2015. The amendment credit facility may be expanded to a maximum of 237 million through the addition of other committed lenders to the facility. The interest rate remained unchanged in the amendment and all…

Good morning, everyone. I’ll go over the financials, starting with the balance sheet. As of December 31, the closed quarter of our fiscal year, we had $308 million in total assets, consisting of $293 million in investments at fair value, and $15 million of cash and other assets. Our borrowings totaled $56.9 million at cost on our line of credit. In addition, during the first quarter of 2012, we completed a public offering of 1.5 million shares or our 7.125% Series 2016 term preferred stock at a price of $25 per share, resulting in gross proceeds of $38.5 million. We used the net proceeds of $36.4 million from the offering, to repay a portion of the outstanding balance on our line of credit. Due to its mandatory redemption feature, we have classified the preferred stock as a liability on our balance sheet as of December 31, 2011. Related to this offering, we incurred 2.1 million in deferred offering cost during the first quarter, which we recorded as an asset on our balance sheet and we’ll amortize over the redemption period ending December 31, 2016. For the quarter ended December 31, 2011, we had approximately $208 million in net assets, or $9.90 per share; therefore we continue to be less, and one-to-one leveraged. This is a safe balance sheet for a finance company, which are usually leveraged at higher. We believe that our overall risk profile is low. At the time of this call, we have $55 million available on our $137 million three-year line of credit, though we have the ability to deploy more capital for the right opportunity. Moving over to the income statement for the December quarter, net [inaudible] income was approximately 4.4 million versus 4.6 million for the same quarter last year, a decrease of 4.7%. The…

Thank you, David Watson, you got through all that presentation with a very bad cold. We thank you for that. I hope all the listeners will read our press releases and study our quarterly reports called a 10-Q which we filed with the SEC. You can access the press release and the 10-Q on our website at www.gladstonecapital.com and also on the SEC website, www.sec.gov. The big news this quarter, we continue to make progress with the portfolio companies. Generally speaking, it’s getting stronger. We worked out two of our non-performing loans. And while we didn’t get all of our money back, we got back a large portion, and this lowers our loans on nonaccrual and also increases the income off of those that were all on nonaccrual. We were the first BDC to complete a public offering of preferred stock, which we believe will alleviate some of our need for long-term debt. We’re still looking for long-term debt, but that helps us plug some of that. We renewed our line of credit in January, 2012 for three years, that’s nice to have that out of the way. You know, all the bankers wanted to wait until January to renew the line of credit, and being cautious as we are, we stopped our new loan production to ensure that we had a line of credit in place before we started up again, but now we have that in place so we can go forward at a hopefully a much rapid pace. We’re back in the market, we’re back in the marketplace looking for new deals. And at this point, I think all of this is good news for shareholders, certainly our team and all of our customers that we hope to bring in to our portfolio. Still, our biggest challenge…

(Operator instructions). Our first question this morning will come from Greg Mason of Stifel Nicolaus. Please go ahead. Greg Manson Stifel Nicolaus & Co.: Morning, David. Thank you, gentlemen. David, you talked about how now that you have got the credit facility locked up, you are ready to start looking at new investments. As we look back last year, you did a significant amount of syndicated investments. As you are going forward, do you think you are going to continue making more syndicated investments or more of the kind of self-originated investments that you find on your own?

Well, we would do more syndicated loans if we found good ones out there. They are just very hard for us to find right now because the market place, the syndicated loans is so strong, we could easily sell off our syndicated loans, or most of them, pretty quickly if we needed to. So I would say, as you look forward, we are mostly going to be doing proprietary originations rather than syndicated loans. Greg Manson Stifel Nicolaus & Co.: Then, on the new facility, is there any borrowing base or other covenant restrictions, or will you have full access to the 137 million if you choose it?

We should have full access. Greg Manson Stifel Nicolaus & Co.: Okay, then in the Q, I think there was the right downs in Sunshine, and ViaPack and GFRC. First, on Sunshine, we saw the rate change from about 10.5 to 5%. Did that new rate take effect for the full quarter, or was the quarter partially accruing that old 10.5% rate? I am just trying to get a feel for the impacted revenues.

It is at the new rate for the full quarter. We didn’t run it at all full price and then somehow book a lot of fictitious income, we booked what we received. Greg Manson Stifel Nicolaus & Co.: Okay, and if you wouldn’t mind, just some quick comments on ViaPack that was written down $1 million. I think that is still on accrual status, but I think it is only valued at $0.17 on the dollar – just kind of your view and outlook going there for that income, and GFRC, I think that was also down $1 million; it looks like it is at $0.65 on the dollar. Can you give us an update on those two investments?

Yeah, Chip is following ViaPack closer than I am and that has been one that we are in the process of turning around, but go ahead Chip.

Sure. If you recall, ViaPack was a company that was moving along rather nicely, and performed theoretically well all the way through the downturn, until we had some significant accounting challenges, irregularities that showed up, causing us to basically have to remove the CEO and the CFO there and take control of the business. It has been a more difficult transition and we have forecasted that we do have almost an entirely new management team there. One of the issues with write downs is that I think whenever you have an accounting irregularity; obviously that puts the entire performance of the business in question. So we’re getting our hands around it, and obviously if we commit additional capital there, it’s immediately written down to whatever percentage the loan is valued at. So we are working hard on that one and we have got a number of individuals in the problem that are focused on it, but at this point we are trying to work through the problems that we didn’t create but we inherited. As for GFRC – a little better story there. This company, if you recall, basically makes cladding or skins for commercial buildings and so obviously, that business has been off for a while and has not recovered from the down turn. The good news is, even though there was a markdown for the quarter, after the end of the quarter we signed a term sheet with the equity sponsor there to inject additional capital. They have plenty of liquidity, and with the additional capital coming in, we do not see any issues there on accrual through the remainder of the calendar year. Greg Manson Stifel Nicolaus & Co., Inc.: Great, thank you for that color. One last thing, I know you said you have got $1 million success fee in the first quarter and I missed what company that was with.

It was actually after the end of the fourth quarter; it was Global Materials Technologies and we had only about $2.8 million of remaining principal on that deal, and when they refinance us they pay us $1 million of success fees. So, you will see that in the quarter ending March 31. Greg Manson Stifel Nicolaus & Co.: Great, thank you guys.

Our next question will come from David West of Davenport and Company, please go ahead. Dave West - Davenport & Co., LLC: Good morning.

Morning. Dave West - Davenport & Co., LLC: I’m first curious, you had two situations regarding non-accrual loans where one restructured and one sold. Was this part of a new strategic focus or just more opportunistic situations?

I can say that the radio station was something that we have been working on for some time. We have had to put a receiver in, and of course, I got written down dramatically by our rating agency that writes those down and we used their numbers. Obviously, the return on that is dramatic, even though we had to write off some of it. I think that one is fine. Chip, why don’t you talk about the one you worked out?

Yeah, Newhall Holdings, this is the situation that had been marked down considerably last quarter. The company had been for sale, but the consumer products basis of that revenue base had declined and the equity sponsor refused to support the business. So we had the company up for sale for a sizable amount of capital and quite frankly, the bids just weren’t there to justify it. We looked at the situation and said, this is a reasonable solution to a company that we do not have any better idea of how to turn the company around, and the sponsor wasn’t willing to support. So the assets were sold for less than we had hoped, but a better recovery than we had in March. So, we will move on from Newhall Holdings and hopefully not have that issue again. Dave West - Davenport & Co., LLC: Do you think there is much likelihood of further transactions regarding some of the non-accruals in the current quarter?

Don’t have one right now that I think. We actually have a company that is in the non-accrual bucket that we are negotiating a sale on that would be a good, good transaction for us if it works out. We’re continuing to work on it but I do not know if we have any indicated write-offs for the current quarter at this point. Dave West - Davenport & Co., LLC: Just doing a quick calculation, it looked like the preferred and the borrowings of the line of credit, you have about 46%, I guess, leverage relative to your net assets. What is the comfort factor as far as increasing that to 100% before you feel like you would have to raise common equity?

Generally speaking, when we get up around 50%, we start thinking about is there a way to make this lower leverage, but I feel comfortable now that we have a line of credit in place for three years, and the preferred doesn’t come through for five years, that we could probably run that up to 75%. Dave West-Davenport & Co., LLC: Great. Then, just a technical matter, you had an item for restricted cash balance on the sheet this quarter. What does that relate to?

David Watson?

Sure, David. That relates to some escrow proceeds we received related to the Newhall sale that will run their course over the next year or so. Dave West-Davenport & Co., LLC: Okay, thanks very much.

All right, just one other footnote on transactions; we have one company that we worked out, it’s in good shape and have asked to sell it, so it looks like we will probably sell that in the calendar year that we are in. Next question, please.

Our next question will come from Brian (Burn), a private investor. Brian (Burn) – Private Investor: Do you have any projections in terms of this coming year, or fiscal year, either in terms of dividends and/or earnings?

We don’t put projections out, and we don’t do the way some people do and advise you as to what they are trying to do, other than the fact that our goal is to increase the dividend. We are in a much stronger position now that we have reduced some of our non-accruals, so the hope is that in this calendar year we can move forward and maybe move the dividend, but at this point in time there is no way of giving you a forecast on that.

(Operator instructions). We have a question from J.T. Rogers of Janney Montgomery and Scott. Please go ahead.

Morning, David. Quick question on sourcing debt – just wondering where you are looking and where you think you might be able to find additionally long-term debt capital.

We capped at preferred market place because we have not been able to find a good long-term debt, but we have a couple of letters that we’ve received from some long-term lenders and we are currently working on those for both this company, and for Gladstone Investment. So we will just have to see if those pan out. They are actually cheaper than the preferred stock, but not that much. We will just have to see if the conditions on those will be limiting on our ability to move forward and also have to work out the relationship with our revolving line of credit lenders. So, we are working on it, and hopefully we can announce something in the next six months, but we have put that in place.

Great, then the revolver, it looks like you’ve extended it out three years, making it a significantly longer maturation that you have had before. I was wondering if you were looking at adding any additional lenders to that facility.

We probably won’t do that until we get into the line a lot more than we are today. We have contacted a couple of revolving lenders. Believe it or not, there are not that many lenders that lend to finance companies in the world today, so as a result, we are a little bit limiting in the number of people that are in the business of lending to business development companies.

All right, thanks a lot.

Our next question will come from Jeff Rudner, or UBS. Please go ahead.

Good morning, David. A question for you and Chip about investment philosophy; in that you mentioned that one of your concerns was the possibility of inflation increasing again, where on the other hand, Ben Bernanke has come out recently and indicated that he is not only more concerned about deflation than inflation, but indicated that interest rates will probably stay where they are now through 2014. Obviously, there is no way of knowing or predicting how low interest rates will stay and for how long, but when it comes to investing the portfolio’s monies, the more you are concerned about inflation, obviously you would be looking to make variable rate loans, versus someone who is less concerned about inflation who would like to get a fixed rate loan, not thinking that the rates will go up over a near-term period. So, how does the conflict between you and Ben Bernanke affect the investment philosophy of the team?

We are all hoping that Ben Bernanke won’t be reappointed, but assuming that he will be, we can’t judge what they are going to do. I can remember back in the early 1980s when Roker came in and took a bitter pill and we all saw rates go crazy up. So we’re protected from that happening if it should happen this time Mr. Bernanke gets thrown out and somebody with a more conservative dent gets put in. I think it is still better for us to have variable rate loans -- they are all reasonably high. All of our loans, especially the new ones, are in the 10% or above range, even though they are variable, so as a result, we are not compromising our returns by not doing fixed-rate loans in this market place today, and we want to remain conservative in the hopes that something will go forward and the economy will be fixed. One of the fixes is going to have to be paying higher interest rates.

Hey, Jeff, this is David Watson. I guess I would point to the fact that only 6.3% of our debt investments are at fixed rates. All of the other ones are at variable rates, and of those, 87% of them have a floor.

Okay, great. Thanks, David, and thank you David.

Okay, next question.

(Operator instructions). Mr. Gladstone, I am showing no additional questions in the cue. I would like to turn the conference back over to you for any closing comments.

All right, thank you all for dialing in. We appreciate it and we look forward to some good news for you when we meet again at the end of the March 31 quarter. That is the end of this call.

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