Good morning, and welcome to the Gladstone Capital Corporation's first quarter ended December 31, 2013, shareholders conference call. (Operator Instructions) Now, I would like to turn the conference over to David Gladstone. Mr. Gladstone, please go ahead.

Well, good morning and thank you, Keith, and good morning to all of you. This is David Gladstone, Chairman. This is the quarterly earnings conference call for the shareholders and analysts of Gladstone Capital. Common stock traded at GLAD and the preferred stock is traded at GLAD with a P at the end, for preferred. Again, thank you all for calling in. We're always happy to talk to our loyal shareholders and potential shareholders. I'd like to give an update on our company and our portfolio and our business environment. I wish we could do this more often, but time just doesn't permit. An invitation is extended always. You have an open invitation to come visit us in our office in McLean, Virginia. We're just outside of Washington D.C. Please stop by and say hello. I think you'll see some of the finest people in the business. Please take the opportunity to visit our website, www.gladstonecapital.com, and sign up for our e-mail notification service. We don't send out any junk mail, just timely news about the company. You can also find us on Facebook under the keyword, The Gladstone Companies, and you can follow us on Twitter at Gladstone Comps. Now, let me read the 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 and other factors even though they are based on our current plans and we believe those plans to be reasonable. Many of these forward-looking statements can be identified by the use of the words such as anticipates, believes, expects, intends, will, should, may and similar expressions. There…

Thank you, David. First, I'd like to reiterate what David has said about the funds. Since joining in January, I've had the privilege of working with all the team. I have been very impressed, the level of experience, personal commitment as well as the rigor of the firm's investment practices. While January is traditionally a low point in deal flow, the level of enquiries are healthy and we are taking steps to better institutionalize our investment origination activities. We are also planning to more aggressively engage the private equity sponsor community in the coming quarters, as they represent a substantial portion of the potential investment opportunities in the lower-end of the middle market. With respect to the marketplace and market conditions and outlook, I concur with David's earlier comments, loan demand from both commercial banks and retail loan firms continue to outstrip new loan supply and are continuing to pressure yields by much of the associated refinancing activities have occurred, the continued market pressures are resulting from elevated leverage metrics, which may exceed with the underlying cash flows, business cyclicality or growing support. These supply demand and balances are less pronounced in the low-end of the middle-market where GLAD is traditionally focused, and we are closely monitoring the associated impacts. Moreover, Gladstone's well established reputation and investor-oriented financing approach continues to be well received by the private equity and owner operators in the low-end of the middle-market. These constituents value the dedicated market focus, level of engagement, need to understand their business, and generally welcome the opportunity to establishing long-term financial partnerships. So despite the broader investing market pressures, we continue to be optimistic that GLAD is well-positioned to originate attractive quality deals that will generate solid asset growth and income growth over the coming quarters to enhance the bottomline for the benefit of our stockholders. And now, I would like to turn to our Chief Financial Officer, Melissa Morrison, who will report on the funds financials. Melissa?

Hello and good morning, everyone. I hope you've had a chance to review the Form 10-Q for the quarter ended December 31, 2013, that we filed yesterday with the SEC. Let's start by reviewing the financials of the fund for the first fiscal quarter of 2014 ended December 31, 2013. Net investment income or NII was $4.4 million or $0.21 per share as compared to the prior quarter ended September 30, 2013, of $4.7 million or $0.22 per share. Investment income decreased by 10.2% in the three months ended December 31 as compared to the prior quarter, primarily due to an increase in other income last quarter related to $600,000 in success fees and $150,000 in prepayment fees, both received in early payoffs at par. During the December 2013 quarter end, we earned $200,000 in success fees from Lindmark Acquisition, which paid off at par last quarter. In addition, interest income decreased by $400,000 quarter-over-quarter, as we had two early payoffs at par totaling $21.5 million of interest earned in debt investments, early in the December quarter; and the majority of our new investment, David discussed earlier, was funded late in the December quarter. Operating expenses decreased by 14.3% during the current quarter, as compared to the prior quarter, primarily due to the waiver on incentive fees we paid to our investment adviser. There was no infinity credit needed last quarter. The credit this quarter was needed to ensure distributions to stockholders, were covered entirely by net investment income. 100% of common and preferred stock distributions paid in over the last three years were covered by NII. This highlights our commitment to prudent growth. Success fee accruals are not recorded in our income statement or balance sheet. We only record success fees, when receiving cash. We do not include success…

All right, Melissa. That was a great report. I hope all our listeners, reading our press release that we issued yesterday and also review our 10-Q for December 2013 quarter end. You can access all of that on our website at www.gladstonecapital.com and also on the SEC website. Just as a summary, the first fiscal quarter ending December 31, I think Gladstone Capital accomplished a number of items, had good production with $44.1 million and fortunately only $21.5 million in early payoffs. We exited the one non-accrual investment that had our team tied up and now we are focus on marketing and putting new loans on the books. We are maintaining a strong portfolio yield at about 11.6%. And significantly, subsequent to quarter end, our board appointed a new President of the fund, which we feel will have a very positive impact on the future. Our biggest challenge, like most people in our business will continue to be, finding new investments that we believe can survive another possible recession, and a possible forthcoming strong inflation that we believe is on the way. Availability of capital is also a concern in the near future. We will utilize our credit facility and look for raising additional long-term debt and equity, as time goes on. Of course, we have other concerns, the ever-changing political and economic environment, specifically the uncertainties around the Federal Reserve and their monitory policies and the impact on future interest rates. Fiscal crisis at the federal government level is still top of our minds, as the federal deficit is now over $17 trillion and continues to climb, as government spending is just on sustainable bottomline over all of that. Many private companies, like those in which we invest, feel that too much regulation around such things as healthcare, financial…

(Operator Instructions) And the first question comes from Troy Ward with KBW.

Can you provide any color on, obviously with you in D.C. there, I mean the BDC legislative issues, that potential for those and kind of step back? And how do you look at the potential for new laws that could affect the leverage at the BDC level?

My guess is watching how the SEC weighed in on leverage that it's highly unlikely that you're going to get a leverage increase from legislation. Not impossible. But when the SEC weighed in so heavily against leverage, I think it's going to be a big uphill math battle. I think you'll get many of the other things that are in that bill that's currently before Congress. I just have limited faith that they're going to be letting BDCs leverage more than one-to-one. That came out of the 1940 Act, in 1940s when they cleaned up the mutual fund industry, overleveraging and all kind of gimmicks that were going on. And we'll see, Mary Jo is tough to deal with over the SEC. So we'll see how she weighs in with Congress.

And then can you speak a little bit kind of compare your two different buckets. Your proprietary and your syndicated loan bucket, they're really not that different as we look at. I mean there's about a 100 basis points of additional yield in your proprietary loans versus your syndicated loans. So when we usually think about a syndicated loan, it's got a much lower yield. So from a credit quality perspective, how do you view your syndicated portfolio and your proprietary portfolio?

Yes, it's very difficult to do the syndicated deals these days, even the second liens, because there is so much money in the high yield marketplace, they pressed returns down to a very low level and they pretty much stripped all the conditions that would protect a lender out of many of the loans. However, as you mentioned, we've gotten great returns on our syndicated loans when they payoff, we usually purchase them at below par, and there is usually a penalty for prepayment. So we've been averaging a very strong return compared to our existing portfolio. I don't think that's going to hold up going forward, simply because the marketplace is just so aggressive these days. And now that people are piling out of common stocks and equity marketplace and piling back into the debt marketplace, I can imagine the pressures on syndicated loans will be even greater. At this point in time, I would say that we are doing very few syndicated loans only because the terms and conditions and the yields are, I think they are really worse than they were before the last recession. And that was an extremely hot marketplace then. It's just as hot or hotter right now.

So we could expect that your current available capital will be pointed at more proprietary opportunities?

I think so. Proprietary deals, we have good luck in our relationships with a lot of the LBO funds that are buying companies and we are able to tag along and provide the subordinated debt. We also had good luck in just dealing with smaller businesses that want to borrow money, generally for growth, some times to buy another company. So those tend to be the two debt places for us right now. We look at all the syndicated loans that come out for over the last two or three months, it's been [indiscernible].

And then, one final one. I think you talked about the portfolio appreciation was driven by both an increase in fundamentals and a change in the multiple kind of your assumptions in the waterfall analysis. Could you provide a little additional color on maybe what those changes in the assumptions were?

The assumptions are something that we agonize over every quarter. And as you know, I've said many times, it's very hard to come up with the value that everyone can agree on. We of course use for much of our debt instruments, Standard and Poor's, they help us some of the valuations. Our board looks at what S&P draw out and we have of course the different methodology that are in the valuation world. And so we work through those, and quite frankly they change every quarter. And it adds volatility, both up and down to our valuation procedures, but we don't know of any other way of doing it. So it's something I caution everybody about. Yes, we have a valuation today at $10.10. If we had to liquidate today, yes, we'll definitely get $10.10 a share, but it really is more of a guess than a science. As you can probably imagine, any private business trying to come up with a value, you gave it to 10 people, you'll get 10 different values. We do pride ourselves on spending a lot of time on this and I think we are about as accurate as anybody can be. But people who are running around, trading on BDCs and others in our industry based on net asset value would be better off looking at the quality of income and the growth in income than looking at net asset value.

And, Troy, just to tag on to that and tag on to what David said, our valuation methodologies have remained consistent quarter-over-quarter. So there have been no changes in our waterfall calculations, in our index multiples and using S&P, as David stated. So the valuation methodologies were the same and consistent.

The next question comes from J.T. Rogers with Janney Capital Markets.

It looks like there is about $20 million in portfolio coming due in March. Generally these investments are marked to the pretty big discount to par. Do you have any visibility to whether these are going to be repaid, extended or moved to non-accrual?

We have two smaller ones that are probably going to be repaid. I'm not sure they're strong enough to know at this point in time, whether we can give you any indication of which they are, even how much. But these are both Radio transactions, and as a result they have gone into the small business administration to get an SBA-guaranteed loan, whether they get approved that it flows all the way through, really difficult to know J.T. We are prepared to extend the loan. We're not in a foreclosure mode on those. We might ask them to do some things that we want them to do that they wouldn't have to do, if they get an SBA-guaranteed loan. So they have an incentive to get there. So as a result, I would say that $20 million have probability of some portion of it being paid and some portion of it being extended.

And then there are two other investments, I don't know, if this is included in what you were just discussing. But BAS Broadcasting and Legend Communications, those are past due, they are still accruing, but are marked to pretty big discounts to par. Just wondering if you had any additional details to what's going on there?

Yes. We do have additional details. I'm sorry, I can't talk about them, because they are private companies. But both of them are in the radio business. There is another one. There is three of them that we work with that have gone through some very difficult times. They have comeback some, but it's just difficult to say how far or how long they are going to be in repaying us at this point in time. Any comments on that?

The only comment I would add, and say, they are paying their interest and we are involved in some transactions, that probably over the next several quarters we'll see some either pay-offs or extensions as David mentioned.

When we talked to other people about radio stations and valuations, it's very difficult to get them on the same page that we are on. I have probably financed, I don't know, hundreds of radio stations over the years. And they usually come back. This recession has been one in which radio stations, especially the smaller groups, have not come back as quickly, although, they have come back firm and continue to grow. It's just hard to know where that industry is going long-term at this point in time. Nonetheless, we are hopeful that some of these radio stations that have applied to SBA for SBA-guaranteed loans will come through and gets paid. I'm pretty sure one of them will come through. I am just not willing to put my money down on which one right now.

And just sort of one last follow-up question on that. In terms of discussing the radio stations coming back, is this a recovery, so that the equity investors are going to get some sort of return or are you looking for them to bounce back, so that they can repay your loan?

I think this is more about repaying our loan and the equity investors continuing to work in that company and fill that out. We're not the equity investors in those companies. So what they are doing is swapping out our debt for SBA-guaranteed loan debt or some other debt from a bank. And this is a continuation and they'll continue to work it and hopefully the equity will yield them something. Many times in this case, the equity is from the owner operator and it's a lifelong desire for them to own a radio station and we have just been part of the financing in past years. So they are just moving from one vendor to another.

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 comments.

Thank you, Keith. And thanks all of you for calling in and the questions that you asked. Hopefully, if you have other questions you can come through our department here and get your questions answered. But we appreciate all of you calling in. And that's the end of this call.

Thank you. Conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Have a nice day.