Good morning, and welcome to the Gladstone Capital Corporation second quarter ended March 31, 2012 shareholders conference call. (Operator Instructions) Now, I turn the conference over to David Gladstone.

And hello, and good morning to all of you out there. This is David Gladstone, the Chairman, and this is our quarterly earnings conference call for shareholders and analysts of Gladstone Capital, and stocks traded on NASDAQ, symbol GLAD. And we also have a preferred stock now traded on NASDAQ under the symbol GLADP for preferred. Both of those are in the global select trading and markets. And you've noticed our recent transfer of the listing from our preferred stock from the New York Stock Exchange and NASDAQ. And I'll talk about that a little later. Thank you all for calling in. We're always happy to talk to shareholders about the company. I wish there were more, we talked about having an interim call and news on that, yet. We hope you all take the opportunity to visit our website at www.gladstonecapital.com, where you can sign up for e-mail notices. You'll receive information about your company in a very timely fashion. So it's a good place to get information. Please remember that if you're in the Washington D.C. area, you have an open invitation from us to visit us here in McLean, Virginia; a suburb of Washington, D.C. Please stop by and say hello, if you're in the area and see some of the finest people in the business. And now, let me 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 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, and other factors even though they maybe based on our current plans and we believe those plans to be reasonable. Many of these forward-looking statements can be identified by the words such as anticipate, believe, expect, tend, and will, and should, and may, and all of those kind of similar expressions. There are many factors that 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 certainly in our perspectives filed with the Security Exchange Commission. All of those can 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 after the date of this conference call. Please also note the past performance or market information is not a guarantee of future results. Well, we'll start off the presentation as we always do with President, Chip Stelljes. Chip is our Chief Investment Officer of all the Gladstone publicly traded funds, and he'll provide a review of the company's last quarter. Chip?

Good morning. This quarter the second quarter of our fiscal year, we invested $8.5 million in one new portfolio company. We continue to focus on managing our portfolio, investing $7.9 million in existing portfolio companies in the form of additional investments or withdrawals in revolving facilities. During the quarter, the company had repayments, which included normal amortization and pay-down from revolvers of approximately $13.7 million. This also includes three early payoffs at par during the quarter, which generated success fees of $2 million during the period and a total average return on those three deals of 14.8%. So in total we have a net production increase in our portfolio of approximately $2.7 million for the quarter ended March 31, 2012. We funded this net increase and production from operating and current withdrawals on our credit facility. As mentioned on our last call, we extended the maturity days 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 amended credit facility maybe expanded to a maximum $237 million through the addition of other committed lenders to the facility. Interest rates remained unchanged in the amendment. They're not for the 5.25%, and all of the terms of the facility were substantially unchanged. Subsequent to quarter-end, we invested $0.7 million in four existing portfolio companies and we received $1.8 million in repayments. We continue to see solid investment opportunities in an improving marketplace, which are in line with our investment objectives, although, there seems to be a good deal of capital and competition in the market for the most attractive deals. We are pretty far along in the closing process on two proprietary investments totaling $26 million and expect to close them in the next few weeks…

All right, Chip. A good report. Now, let's turn to the financials. For that we'll hear from David Watson, our Chief Financial Officer.

Good morning, everyone. Yesterday we released our fiscal second quarter earnings press release and 10-Q, which I hope you've had a chance to read. On this call I will cover some our financial highlights, starting with the income statement. For the second quarter ended March 31, 2012, net investment income was $5.2 million versus $4.4 million for the same quarter last year, an increase of 17.8%. This increase was primarily due to an increase in interest and other investment income. Interest income increase by $1.7 million or 22.8% during the three months ended March 31, 2012, as compared to the prior-year period. This was due to an increase in overall portfolio size as compared to the prior-year period. The annualized weighted average yield on our interest-bearing debt investments were 11% for the second quarter at 2012, as compared to 11.3% for the second quarter of 2011. The decreased in the yield is primarily due to increase syndicate investments, which generally bear lower interest rates. As well as restructuring of certain of our debt investment interest rates into lower yields. Other investment income totaled $2 million for the three months ended March 31, 2012, an increase 84.3% over the prior-year period and resulted from success fees from the early payoff at par by two of our companies. Offsetting these increases in net investment income were the increases of $1.2 million in aggregate of interest and dividend expense, due to increased borrowings under the credit facility and the payment of the term preferred dividends. Our weighted average borrowings including our term preferred stock increased during the three months ended March 31, 2012, by $86 million over the prior-year period. For the six months ended March 31, 2012, net investment income was $9.6 million versus $9.1 million for the same period last year,…

All right. Thank you, David Watson. That's a very good presentation, very thorough. I hope all our listeners will read the press releases that we put out and study our quarterly report as well as the 10-Q we filed those with the SEC yesterday. You can access the press release, the 10-Qs, and all of our other reports on our website at www.gladstonecapital.com and also on the SEC website. I think some of the big news this quarter was despite the sluggish economy, we're able to continue to make progress with our portfolio companies and exit a few of them as well. We received $2 million in success fees from a couple of the exits and that paid-off at par. I do want to just stop and say, I don't think we get a lot of credit for not using the non-cash ways of increasing income that is paid in time. Those are all phantom income, with no income really coming in. But here we use success fees, as you can see this quarter, we got $2 million of those in and we didn't recognize that until we got the cash unlike paid into our income. The other big news is renewed our line of credits in January for three more years. And also our pipeline is improving. We have a lot of new investments that are coming along. We expect to close several proprietary deals over the next few weeks. In fact, one may close this week, which will move us right along in the direction that we want to go in the second half of 2012. In February 2012, we held our Annual Shareholders Meeting, where all of the proxy proposals that we and the proxy, including the one to sell. Our common stock at price below NAV…

(Operator Instructions) Our first question will come from Barry Burns, Private Investor.

I'd just couple of quick questions. One is what are you seeing in terms of private equity with regard to some of our portfolio companies. Are you seeing more interest in terms of opportunities there? Number two is, do you have an appropriate level for what you think are the draw at any given time on our credit facilities. And then last question is any thoughts assuming of things being equal, what would you gestimate meet the likely of being able to increase the dividend this calendar year.

Private equity question, we do see private equity companies come in and look at some of our companies for acquisition, particularly these smaller businesses for the larger private equities or good what they call a bolt on that is their rolling up an industry. They will come and buy those. We are looking at one right now that we may sell during the next six to eight month, who knows at this point in time. And then, as you probably know, Barry, there just tons of private equity dollars out there to buy companies. There is a lack of subordinated debt and that's where we play a role. But it's a very profit marketplace from return standpoint of private equity. They've got plenty of money and they're spending it. On the credit facility, we like to leave some room under the credit facility. Obviously we've got plenty of room today, since we've paid it down all the preferred stock. So we are in great shape. I don't really have a number other than obviously as we get close to the magic number of two to one leverage or as we get close to the fact that the borrowings are getting up close to the amount that we have under the line of credit. We end up either stopping investing as we have done in the past or we raise common stock or deferred stock in order to pay it down. And I would say once we've cross the $100 million mark and move up to say $110 million. That would be start to get us and a point in time when we would feel like we really need to look at world a different way. We don't want to go up against the tall line of credit and have no room for anything. So you have to watch for that. And in terms of being able to increase the dividend, we've got a couple of problems in the portfolio that I want to fix before we consider increasing the dividend. And I think as we add a couple of more transactions to the portfolio. You will see the income begin to increase. And I think as we've fix a couple of more of these you'll see that this summer I think and we'll be a the position to discuss maybe in for our June quarter, but certainly for our September quarter, start to discuss what we might do in our year ending September 2013 in terms of the increasing the dividend but probably nothing during the summer in terms of increasing the dividend.

The next question comes from J. T. Rogers of Janney.

I guess first, it sounds like you got two new deals on the Horizon, can you provide any detail on what industry that they are in and maybe where you're seeing the best opportunity?

J. T. I wish I could answer that question. That's the sort of the kiss of death when you talk about one that's about to close. It just seems like it slows it down. So rather than talk about it, I'm afraid you're going to have to wait for the press release to get the information.

You also have I guess over the next six to twelve months a number of scheduled maturities, I was wondering, if you're seeing the new deal for essentially replacing those deals out there, refinance stock or do you on balance, what do you think your current borrowers are thinking in terms of I mean refinancing mature debt or restructuring there existing investments with you.

Chip Stelljes is going to answer that one.

It's a mix bag. I mean we have scheduled in our projections internally all of our contractual repayments debt. We are expecting, we know one of our companies that's sizable investment is going to be put up for sale. We've been invited being part of the process of financing that deal with the new buyer which we may or may not to do the company that is. We do seem to have enough pipeline right now to replace the maturities that are coming. So we can get them all across the line or not, I don't know. At least one company that we were told that we were going to be taken out of because there were going to sell it, they have now changed their mind and they've asked us to coming in, finance an acquisition with them. So it's moving pieces all the time depending on a number of these private equity shops that we're working with and what they're trying to accomplish for their portfolio. But do like the pipelines to good enough that it's scheduled repayments come in and then we'll be able to replace them. And in some cases, hopefully higher yielding debt, because the number of these were very successful companies in over the time period, returns have come down as we kept those loans on the books.

On the portfolio, looking at you know BAS, Heartland and Sunburst Media, I guess they continue to be weak, might if that some of that's been attributable to yields set before to you know weak auto advertising. Just wondering if you can talk about more about what's going on with these companies and sort of what the risk is that we maybe seen an uptick on non-accruals, given that these guys are bring value that $0.50 or below on the dollar.

While I'll let Chip go into that but just as so everybody knows, we trying not to go into detail on our per company basis. Simply because these are private companies and they haven't given us permission to go on and talk about their numbers. But Chip you want to talk about that area.

The ones you mentioned, BAS, Heartland, Legend, Sunburst are radio stations, all four are radio stations. And that obviously is still sort of out of favor and I think the marks may reflect that on those. I would say that number of those aren't doing worse than they have been doing. They are all performing in that and they're making there interest payment. One or two of those have had some challenges making principle payments. But we are not injecting any capital into them and they're making their payment. So at least one of those is threatened to refinance which will be bind. But there is one of the ones today, we don't want to talk about individual, one is struggling more than the others. But the others are back where they have been so I think the marks are reflective of S&P and not necessarily indicative of the situations deteriorating.

It seem like there were a lot of mark downs during the quarter in terms of fair value to sort of across the board and anything changed at S&P, anything changed for with their fundamentals, for the portfolio broadly so I would have that thought that you know might have seen more portfolio appreciations rather than depreciation this quarter.

I don't think there been any changes at Standard and Poor's, who give us a marks. Obviously, the Board of Directors as the final determined and they followed S&P. I don't think they have ever changed in S&P mark. But they do make the final determination. So I wouldn't blend it on S&P rather then they continue to be very conservative, very rear view mirror looking in terms of the world never looking for the future. So as a result, I would say that it's just sort of standard operation is going on in the marketplace. And I can't attribute it to anything at this point.

Our next question comes from Greg Manson of Stifel Nicolaus.

Lot of my questions have been answered. But I guess one question I had on Sunshine Media. You had restructured the debt, reprised those interest rates lower last quarter. So I was surprised to see the term BP has gone non-accrual. What's the potential for that $17 million first lien piece going on non-accrual given that it's $0.15 on the dollar? How should we be thinking about our confidence in that piece remaining on accrual status?

Well, Chip is close to that one.

I'm not going to talk too much about Sunshine particular, but Sunshine as we mentioned before in this call, as the work in progress. We've been maneuvering this company to the higher-value add products and services that takes time in investment. We've lowered the interest burden to the company this time through to give them some more running room. With that, two Gladstone professionals dedicated almost full time to the company and we're working with the senior management team there. We've been working hard on this one, but there is the possibility that we may have to place the entire investment on non-accrual. That the efforts that we're placing on it don't translate into a stronger company and better results. So we're starting to look at that as an option that we obviously are not excited about but we want the company to succeed.

Can I just add thing on Sunshine, they have the new products that they introduced that haven't taken off as quick as possible. They are incredibly strong products for hospitals and this is for marketing for hospitals. And it's just taking guess we should have planned it a little bit different but their product, once it's compared to any of their competitors, which aren't even close in terms of the dynamics of the product. It's a software product. Assuming that product takes off as it should overtime this will be a dynamite company. It's just going to take us a longer time to get there than we've ever anticipated and that was the mistake that we probably made on that as determining that it would happen sooner rather than later. But once this software gets in place, it's pretty much guaranteed to stay in place because it is so strong for the marketing and hospitals. And I would guess, that next year when we look back at that product we'll have blossom and it's in, I don't know half a dozen hospitals now. So just give it a little more time, we're trying to ease up on them and not accrue a lot of interest in order to give them breathing room to market that product.

And one last question, one of your big winners in the portfolio defiance, you've got almost $9 million of appreciations that common stock piece. What's your ability to affect the monetization of that equity piece and be able to redeploy into yielding assets.

The good news is that that's one that's as there are others as well but that one is going along at extremely fine rate. And we've had enquiries about it from a number of different buyers. And I don't what we'll do there but you just have to stay. I think that could be sold and obviously given the losses that we have from our product periods we would shelter that capital gains and redeploy it into something that would be income producing. Little bit early to talk about it. Although, lots of activity there.

And do you control the exit timing on that investment or is this controlled by a private equity guy and subject to what there decision is?

Chip's is riding that's one, so I'll let him finish out.

The answer to the question is we do control the exit on it. The story here which is a good one for us is this was a private equity backed something with that in the downturn, the private equity guys watched from the deal and we've supported to work with management and now we are in control of the company.

Okay, Greg. Thank you for your question, do we have some other questions.

(Operator Instructions) This time I'm not showing any questions, so this concludes our question and answer session. I would like to turn the conference back over to Mr. Gladstone for any closing remarks.

All right, thank you so much for all of your questions and we enjoy this time together. And if you have questions, you can lobby them to our Investor Relations person and Lindsey is always ever present at the company and ready to take your questions and hopefully she can answer them. And that's the end of this call.

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