Good morning, and welcome to the Gladstone Capital Corporation’s Second Quarter Ended March 31, 2013 Shareholders Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note that this event is being recorded. And now, I would like to turn the conference over to David Gladstone. Mr. Gladstone, please go ahead.

Alright thank you Keith, thanks for that nice introduction and hello and good morning to all of you out there. This is David Gladstone, I am the Chairman, and this is the quarterly earnings conference call for shareholders and analysts of Gladstone Capital and with common stocks traded on NASDAQ under GLAD, and we actually have some preferred stock traded under GLAD and P for preferred; both of these on NASDAQ. Thank you all for calling in and please remember that if you happen to be in the Washington D.C. area we have an office in McLean, Virginia which is a suburb of Washington D.C. you are invited to come by and say hello. You’ll see some of the finest people in the business. I want to take the opportunity to introduce you to the website, we’re at www.gladstonecapital.com and you can sign in and sign up for notification service. We don't really send out any junk mail, just news on the company in a timely fashion and you can also find us on Facebook under the keyword The Gladstone Company and you can follow us on Twitter under Gladstone Comps. 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 and other factors even though they’re based on our current plans when we believe those plans to be reasonable. Many of these forward-looking statements can be identified by the use of words such as anticipate, believe, expect, intend, will, should, may and similar expressions. And there are many factors that may cause…

Thank you David and good morning everyone. Yesterday we released our second fiscal quarter earnings press release and filed our Form 10Q which I hope you've had a chance to review. Starting with the income statement for our second quarter ended March 31, 2013 net investment income was $4.4 million or $0.21 per share as compared to the prior quarter ended December 31, 2012 of $4.9 million or $0.23 per share. This 9.2% decrease in net investment income was due primarily to a decrease in investment income of $1.4 million offset by a decrease in total operating expenses of $1 million. Investment income decreased in the three months ended March 31, 2013 as compared to the prior quarter primarily due to the large success fee of $1.1 million received in December 2012 related to an early payoff at par. There were no success fees earned during the quarter ended March 31, 2013. Operating expenses decreased in the three months ended March 31, 2013, as compared to the prior quarter, primarily due to an increased in the incentive fee credit and also to a decrease in professional and other expenses related to receipt of certain reimbursable deal expenses in the current period. 100% of common and preferred stock distribution paid in the six month ended March 31, 2013, and over the last two years were covered by net investment income. This highlights our commitment to predict growth and building shareholder value. The focus of the Gladstone Capital Fund continues to be making consistent monthly distribution to our stockholder that will grow overtime. Let’s turn to realized and unrealized changes in our portfolio. Realized gains and losses come from actual sales or disposals of investment. We had minimal realized activity during the second quarter ended March 31, 2013. Recording unrealized appreciation and…

All right, Melissa. Good report, I hope all the listeners will read our press release and review our quarterly report, that’s on Form 10-Q which was just filed with the SEC. You can have access to the press releases, 10-Qs on our website www.gladstonecapital.com and also on the SEC website. I guess the big news here is we had some production in our portfolio quarter but mostly focused on our existing portfolio of companies. The portfolio yield still remains above 11% quarter-over-quarter and April 2013, since the quarter end, we exited one non-performing loan and finally took the hit there. Also subsequent to the quarter end, we were able to extend our line of credit to maturity in January 2016. I think our biggest challenge today is the access to long-term capital markets that low rates. We have a great line of credit supported lenders there and the line of credit is working fine. We believe this is sufficient for our near-term needs and we can always add people to it if we seek to need more for the revolving line of credit, but in order to make long-term investments, we really need to raise additional long-term debt or long-term capital some course, so such as in November 2011 when we issued the preferred stock. For our portfolio of companies, [we’re worried too]. They don’t really get a long-term senior loans at cheap rates and there is a fair number of regional banks that make new loans based primarily on the assets of the business of these asset-based lenders or much more plentiful, and they were even last year and certainly up from years ago, but the banks are just not extending long-term fixed rate or long-term even variable rate. And I think the banks are coming along and they…

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And the first question comes from Troy with KBW.

Just a real quick, can we get an update on Reliable Biopharma; I know you said you put an extra $2 million in that and its now a controlled company. Can you let us know what percentage of ownership you have of that now?

Yeah, I don't know the percentage over the phone I am sorry I'll get that for you; but we are in a control position as I mentioned. I am trying to remember the name actually, I probably shouldn't say it, anyway the sponsor there decided that they were up against some limits inside of their company and couldn’t put anymore money and company stumbled a little bit mainly because two of its big customers were a little bit slow and had some problems with the FDA, but they are now back on track and I think this company will come back very strong and that was the reason we wanted to put additional money and make sure it went forward. They have a good backlog and they are doing well. It’s just; it was a temporary change because of their customer base had some changes. The FDA has become much more difficult to deal with now in terms of quality controls as we've all read in the newspaper there have been some really horrendous quality control problems. But Reliable did not have those problems, but some of its customers did and so its customers had to slowdown some of its purchases, but the company is back on track now and I think you will see some significant appreciation over the next year or two years.

And I think the private equity firm is public, who did this, had opportunity, are they still the ones in there?

I think that's true.

Okay. So my question is, if you look at your, I mean this is the largest investment in your portfolio about 9% of the portfolio on a cost basis. You have a senior sub-term debt that looks like you have marked to zero. Is that still accruing to 12.5% interest?

It is. We're still accruing because what happens when a company has financial problems even if it's not due to their own problems internally, you have to mark down process that goes on now. It is extremely complicated. The auditors and the government have become fixated on trying to determine real values of private companies, which I mentioned briefly that they take a very short-term view; what could you liquidate the company for in the next three months, six months and as a result of that, you get very low numbers when the company stumbles. But I think you will see that rise pretty dramatically over the next couple of years, simply because the company is coming back very strong and the people are good folks there. You got a good management team and a good marketing team. So I think this will pay big dividends for our shareholders as we go forward.

(Operator Instructions) We have a question from J.T. Rogers from Janney Capital Markets.

I had a question on precision acquisition. It looks it matures in March of 2013 as I am reading the schedule of investments rate; I was just wondering what was going on with that investments?

We're talking to them. They don’t have enough money on hand obviously to pay us all. They probably wouldn’t be even talking about it if they could, but we are renegotiating the loan and we will term out some of that. Quite frankly I am glad to have it mainly because it's always so far and difficult to go find another good investment. They will probably be able to pay down some of it overtime. But we like precision and I think that one will continue to pay interest income that we can pay out of dividends.

Is there any opportunity restructured or since there past due, do you got fees and other associated income from that potentially in coming quarters?

You do, and the biggest problem and you always hear people talk about being able to restructure deals and get fees never been a big fan of taking huge fees from companies that just because of the economy happens to be in a more difficult circumstance, precision is not in that case but I think precision overtime will continue to grow and prosper and it just takes time to get there and this is one of the company that’s continuing to go along at a pretty good pace.

Well, alright and then I think you guys mentioned reimbursable deal fees during the quarter that reduced your professional expenses, just wondering what those work if you could put a number on that?

Melissa, you have what we had on the reimbursable deal fees, I don't remember these numbers, I happen to be sitting in New York unfortunately. Go ahead Melissa.

That’s okay. We had approximately about 200,000 in a receipts on some reimbursable deal expenses. So that actually we reversed the allowance for doubtful accounts, which reduced our other professional expenses this quarter.

And then just one last question, you guys mentioned increased competition; I was wondering what you saw as general deal for doing the first quarter and then where rates and leverage are trending for middle market companies?

I think if you look at any of the lending institutions from banks all the way down to us, there has been a slow down in demand for money. Businesses are still trying to figure out which way the world is going in terms of their economies and they are just somewhat frustrated by all of the new taxes, the new implementation of the Obamacare. So you’ve seen a lot of people kind of take a deep breadth and say I am going to sit on things and see how things shake out and see what’s going on before. I borrow more money and continue to grow. And we have seen that, I think the small business community is not exempt from that at all. There are of course still demand for loans and still going on. We have seen changes in rates pretty substantially move down from, I would say the 11% and 12% range to pretty consistent 10% as a request for loans at that rate. And the syndicated loan market place, we have seen it go from 10% or 11% down to 8% to 9%. So there is a decrease in rates as lenders have sort out good borrowers. I think its still the difficult borrowers are having to pay up or even refinancing have to pay up pretty substantially, and its just a difficult market place from that perspective. We have a very large reach and we have of course people in California, Chicago and New York in our main office in Washington DC. We see in a normal deal flow and sometimes surprised when I read the public documents of some of the people in our business and see some of the deals that they have done and the rates they have done and when…

And just one last follow-up question if I could; you are talking about lower business activity given uncertainty, what about private equity sponsors, do you see them gearing up for increased activity.

Well, it’s certainly raising substantial amount of money. The buyout Bio funds are continuing to raise a lot of money, but this raising is primarily in the larger buyout funds. Though I would expect that would translate into larger acquisitions from a public companies taking them private I think it will also impact funds that and this is LBO funds that bought something five, six, seven years ago have now got them back to working order and are selling them to somebody who has raised a new fund. So as a result there is these fund to fund transfers as I call them from one LBO fund to another as companies, as funds need to exit and liquidate they tend to sell them to other funds. There isn't a big public marketplace to take any of these out these days. I know that's affecting the high technology marketplace pretty dramatically as there's still just not a robust area for people to do offerings unless they are big companies with well-known names, which there aren't that many of those. So from our perspective, there's a slowdown in terms of the amount of deals that are getting done, that are new transactions, the sort of swapping around we see a lot of that. The syndicated loan marketplace is the place they go for their senior and sub-debt, that's very active but very, very low rates there. It's not where we are going to be able to get a lot of our activity. And so we are left working with some of the sponsors that we like very much, the mid-sized and lower-sized and buy out funds that need senior and subordinated debt. And when they come to us, they are coming to us asking us to fulfill the right hand side of the balance sheet. And that's what we do. And sometimes we co-invest a little bit of equity with them, but our goal is to continue to do that. We have one transaction coming up that I hope we can close this month, say this month I mean in the May timeframe, sometime that will be a very nice transaction that I think we got a great rate at and we've got another one behind that one. So hopefully, those two close before June and we can show some good activity for the June quarter.

We do a follow-up from Troy Ward with KBW.

Real quick to follow up on [JT’s] on precision acquisition. Just looking at that, it looks like it's marked at $0.83 on the dollar. Can you first comment on that and then comment on as a -- I understand you don’t want to hit a company with fees too often, but as the lender here, I mean you have a responsibility to protect your position and would you consider taking equity and something like this in order to refinance, I mean? And in the current environment, I would think that you talked about how aggressive some lenders are, why can’t this get refinance if this company is doing okay?

Well, I think it can get refinanced at rates that perhaps prohibitive for them and we know these guys, they know us, we like working together. So as a result, I think this one will get refinanced at a market rate. Whatever that means these days in terms of its ability to go on and get refinancing, I think they could get some pretty good senior debt and they would want subordinated debt below that and we're in a good position to do that. So we will work with them, get them through this period of time and hopefully make a lot of money for our shareholders. And again I am not putting precision in the workout category by any means and I think they are coming along as many companies are in this day and age.

And in the industry, just as machinery, can you tell me what they make or what they sell or what they do?

Well, out there, precision manufacturing, you come in, you want something made and they are able to make it for you. They are partially integrated with some of the truck manufacturers. They are partially integrated with some of the more industrial machinery. And so they are in that mix. So as you see these pieces of machinery getting sold, this would be a company that would be providing parts to those who are assembling and putting those together, they would be in that business. They have got a wide list of customers. There isn’t one big dominant customer that they are into.

Okay, thanks, David.

(Operator Instructions) All right, there are no more questions at the present time. So I would like to turn the call back over to Mr. Gladstone for any closing remarks.

All right. Thank you all for tuning in, sorry to be a little bit hasty on working the marketplace. And if you have any questions, you can always e-mail them and we work hard to answer them as best we can. That’s the end of this conference call.

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