Greetings, and welcome to the Gladstone Investment's Third Quarter 2009 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Gladstone, Chairman for Gladstone Investment. Thank you, Mr. Gladstone, you may begin.

Thank you, Claudia for that nice introduction, and good morning to you all out there. This is David Gladstone, Chairman. This is the quarterly conference call for shareholders and analysts of Gladstone Investment; trading symbol is GAIN or GAIN. And we thank you for all for calling in. We're so happy to be able to talk to shareholders, and I would like to see come by the office sometime at here in the Washington DC area. We're in McLean, Virginia, a suburb of Washington. Please stop by and say hello your great team work in for you. I think they are the best in the business. Now, I am going to read the statement of our forward-looking statements. This conference 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 the forward-looking statements, including those factors listed under the caption, Risk Factors, in our periodic filings is filed with the Securities and Exchange Commission, and those can be found on our website at www.gladstoneinvestment.com, and they can also be found on the SEC's 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 some of you know, we have a new tradition at the company regarding calls to shareholders. In the past, I did all the talking, but we have a lot of talented people here at the company. So, we've invited some of them to talk to you today as well, and those shareholders are like to hear from some of our talented team. Well, I'm not going anywhere, and neither is Chip Stelljes or Terry Brubaker. We just want you to hear from some of the other top people as part of the team. First we'll hear from Dave Dullum, our President, he will cover a lot of ground including the view of the future. Dave, why don't you start now?

Thanks, David, and good morning everyone. GAIN as you know, we invest principally in buyout transactions, where we buy small businesses with their management team and the private equity sponsors. Our products to this market are primarily mezzanine or subordinated debt investments combined with an equity co-investment feature. We accommodate and facilitate the private equity sponsors in their ability to achieve the necessary leverage for a transaction. The recent environment, one we're currently in for typical asset based and bank senior term loans has led to a decrease in this total leverage which in turn has increased the demand for our products. Through mid-calendar '08, we had also built an investment portfolio in senior syndicated loans of large and middle market buyout. This was never intended to be a continuing aspect of our investing strategy, and as mentioned in previous calls, we no longer make these investments. In fact, we use our existing portfolio of loans from time to time as a source of capital for our principal buyout investing activity. This portfolio has also been affected by the lack of liquidity in the financial market. So, we are being very prudent in liquidating these loans to minimize those losses. Since the end of the year, we are seeing areas of some improvement in these prices, and we expect this to continue into the New Year. Through the buyout portfolio, for the nine months ending December 31, 2008, we invested in three new buyouts for a total of approximately $37.9 million, and we made one add-on investment of $3.8 million to one of our portfolio companies in order to facilitate an acquisition. The new investments include the buyout of CCE, a large independent golf car distributor, which was made in the quarter-ending December. This investment was for $10.7 million, with…

All right, thank you. That was great report, very nice in detail. We are excited to have you working on this side of the business force and we expect this fund to do better during the calendar year. Now, let's hear from our CFO, Mark Perrigo, you're on the fund financial performance. Mark takes away.

Thank you, Dave, and good morning. Let's begin with our balance sheet. Our balance sheet continues to remain strong. As end of December quarter, we had approximately 343 million in assets, consisting of 325 million investments at fair value, and 18 million in cash and other assets. We had about 118 million borrowed on the line of credit, and had about 224 million in net assets. So we are less than 1:1 leverage. This is a very conservative balance sheet for a company like ours, and we believe our overall risk profile as well. During the quarter, we did amend our credit facility to extend the maturity date to April of 2009 and reduced the borrowing capacity and its facility 225 million. Moving to the income statement, the December quarter-end, total investment income was approximately 7 million versus 7.5 million in the prior year quarter, our total expenses including credits were approximately 3.4 million versus 3.8 million in the prior year quarter. Even net investment income, which is before appreciation, depreciation, tender losses, were approximately $3.6 million versus $3.7 million for the quarter last year, a decrease of about 30%. For the nine months ending December 31st, total investment income was approximately $19.9 million versus $21 million for the same period last year of total expenses including credit were approximately $9.4 million versus $11.4 million in the prior year, leaving net investment income of approximately $10.4 million versus $9.6 million for the nine months last year, an increase of about 8.3%. Okay, now let's turn to realized and unrealized gains and losses. This is mixture of appreciation, depreciation; actual gains and losses on our investments. Said another way, net realized gains and losses meaning actual gains and losses are from cash sales, for disposable of assets, meaning investment. Net unrealized…

Thank you Mark. That was a very good report and good summary of our financials... (Technical Difficulty) Operator: Ladies and gentlemen, please stand by. Your teleconference will resume momentarily.

Thank you for your patience. Your teleconference will begin momentarily. Mr. Gladstone, you may continue.

All right. Thank you very much. It's very embarrassing on our part. We don't know what happened that some reason the phone was dead. Again, Mark, thank you for that good report and summary of our financials. I hope each of our listeners will read our press releases and also obtain a copy of our quarterly reports called the 10-Q, which was filed with the SEC and can be accessed on our website, www.gladstoneinvestment.com, and it's also on the SEC website. As Mark discussed, we had to change our valuation technique because the market for senior syndicated loans was judged to be inactive. The inactive bids that we were getting from the loan arrangers were left based on actual market activity and more, it looked like to me more like guesses than actual bids. And the volume on the sales was the new issues that almost dried up and for many of the others, they just stopped for... except for few prior sales. And let me just add as a footnote. The senior syndicated loans that we invest in are the smaller transactions with maybe four to 10 institutions holding those pieces of the loans. So, these smaller ones don't trade at all and are very inactive in this marketplace. They are not nearly as active as you'd find that some of the big ones in which Moore's (ph) purchased Wrigley's and that was a huge transaction. And those tend to get some kind of activity in the marketplace. But we are not in those large ones; we have been doing the smaller ones. And the inactive bids that we get for our syndicated loans are based on prices that come from a market that everyone that looked at it from our perspective came up, to say, wasn't active. And…

Thank you (Operator Instructions). Our first question is coming from Jon Arfstrom with RBC Capital. Please state your question.

Thank you. Good morning.

Good morning.

A couple of questions here. To the extent you can David, can you talk a little bit about the debt levels of the company, and where we're likely to see that go and maybe give us a bit of an update in terms of how your conversations are going with the banks?

Yeah, we've only had conversations with two of the lenders. And we have a schedule in the next couple of weeks with the third. Both of them have very strong desire to be part of the credit. We think we'll go forward on that basis, but we need to have a conversation with the third one. We are talking about maintaining a level at about 125 which is where we are today. And we also want to help those banks. We don't have one bank that's been not interested in being part of the Group, and they've been part of the Group anyway. But, our hope is that now that things seem to be leveling out a bit that the banks will be more straight forward and want to lend money. But, Jon, I don't know, we've started very early, obviously we started at the end of January for a line of credit that comes up in April. So, we certainly have plenty of time to workout all the teams and, as I mentioned, a couple of the banks are very interested and very strong in their support of us. We just have to see where it goes during the next 30 days, or take that much time to get everything in place.

Okay. And then in terms of the change in valuation procedures, they certainly understand that, it looks like there is one of your syndicated loans where you're able to use a quoted price on, or RPG Holdings? Then I'm just curious what the issue was with that particular credit. And then also wondering, is some of those firmer activity in the market in this -- since year end, describe you to be maybe a bit more optimistic that you'll go back to using quotes at some point?

RPG is the one that you're talking about. And that's because we have a settlement going along there in which we're going to get some cash and another note. And we pretty much know what all of that is. So, it was easier to point to that. And then, it was in the others. RPG sponsors in difficult times and it's being purchased by another company. So, we pretty much know where we're going on that one. And that's the reason for that. And the answer is -- second part of your answer is yes, we intend to go back to market pricing as soon as the market comes back. And, I'm pretty optimistic that market price for syndicated loans did change somewhat in January. We're seeing some actual new issues come to market now. And it maybe that in March, we can go back to that. And, I guess this is certainly by June, we'll be back using market quotes. But given the fact that we have some deals in which there four of us in the transaction, four five of us in the transaction and none of us were selling and none of us are buying. So, there are no quotes. And as a result, the loan arrangers who are the people, and some of them are actually own part of the loan pool as well. They just make guesses, this is to what they think might go on if you dumped it in there is a marketplace today. At this point, there is just no way to use the general guidelines that we'd love to use, which is market price because the market does not care for us.

Okay. Fair enough. Thanks, David.

Are there questions?

Yes. Our next question is coming from Vernon Plack with BB&T Capital. Please state your question. Vernon Plack - BB&T Capital: Thanks very much. David, I had a question about, looking at your 10-Q, I know you have -- you estimate ordinary income versus return on capital given that you declare your dividends ahead of time. And I noticed for the months of January, February and March, comes to your estimates, it looks like the estimate for March is almost $8.8 almost $0.09 for the month, which is much higher than January and February and much higher than it seems in recent history. I'm just curious in terms of why that is, why would ordinary income for that months forecasted to be much higher than any months we've seen here for quite sometime?

Yeah. The quarterly payment of the syndicated loans, they normally don't pay month like value, you get a bigger bonds at the end of the quarter. Vernon Plack - BB&T Capital: Okay. Thank you.

Any other question.

At this time, we have no further questions.

Well, we'll hold one second, if there is anybody out there wants to ask a question.

Okay. We do have another question coming in from Lee Carter of Private Investor. Please state your question.

Good morning, David.

Good morning, Lee.

Mark, Dave, all of you. I hear that Mark, Mark said the book is today, is 10 something book value?

$10.15.

Okay.

10.15.

Okay. Last year, in order -- we have 13 million of bad loans that you were working on, is any loan started to workout for you?

I'm just trying to remember who was in the portfolio, we have our same cost company and that continues to be about where it was before.

Okay. All right.

And -- I'm sorry. We have Lexicon, so that's gone, it was a syndicated loan. But one that still giving us the problem, I say problem what happened is our bus company, the county are short of cash. So they can't buy buses and so that was the material part of their business they obviously have other parts of the business where they fix buses and trucks and do all kind of other stuff, they actually outfit police cars and so they're very geared into a lot of different businesses. But bus sales they want to bid for county last year, I am trying to remember the numbers correctly, they don't hold me towards but it is something like a 100 some buses that they had won. But the County only bought about 2o some I think, as I remember right.

No money.

Yeah. So, they just don't have the money and still the county is... either get governments funds or state funds or funds from somewhere or float a bond many times the counties will float the bond and be able to buy the bus in that way. They obviously can't run those buses for a long time and you're talking about Phoenix and Las Vegas, those are long distances those buses run. But we are not going to be able to run for ever and at some point in time they'll start buying buses again and I think our company will do well then. But we just got to weigh through it. They are right now paying all their bills and frank along but I think they'll be fine when the buses get back in.

Okay. What on your balance sheet, what you're valuing the senior security loans there, David what percent discount? 16 was last year, it seem to be when we kind of heard.

Have to do a quick number here. I don't have the adjust return on our syndicated loans busted out what are they look like -- we're scrambling close. They're about 76% of cost of senior syndicated loans.

It's a little bit (ph). Any sell-outs possible in '09? Nothing darkened about now?

No, we've talked about a couple of the companies, it's very hard to sell when you're in a recession because everybody discount future cash flows so badly that it makes it difficult to get a decent price. We have one or two of our companies that we talked about. We've actually had people end to see a couple of the companies, but no transactions that we can announce today. Just an indication with interests.

If things open up that you could invest in several companies. How much do you have available, what's kind of investment, total investment you might, you make it was possible. So with the money you got and where you stand today, could you make another 50 billion in investments or what?

The only way -- just two approaches there. First of all if we had to borrow of the money, our line of credit 125 and we've got about 114 drawn on it. So we don't have a lot of money to make new investments from our line of credit.

Right.

As you heard, Dave Dullum talk about is the desire if we found the right deal would be to sell off some of the senior syndicated loans and make that investment.

Okay.

At this point of time, Lee, the real problem for me right now is making any investment given this economy that we're in and we haven't seen the turn, we've seen good indications though we haven't seen the turn that we normally would see before we start investing heavily and so, that's really the biggest problem for me right now is, if I had a lot of money, I'm not sure how much I would put out given the circumstances that we're trying to invest in, and as I say in the business and you know better than me, don't price a stake. And when the stake is going down as it has been, I mean I've watched in March of last year, we thought the world had turned and started to look very heavily and doing buyouts, and by the summer of course it was miserable again. And then we've said, well this is bottom and we are looking and felling pretty good about that and of course October, November and December were just disastrous periods of time. So now January is come along, it's not been much stronger, we've seen some good news in the January numbers, but still marketplace hasn't told us that it's time to make a lot of new investments. So, given the fact, that fact I wouldn't look to us given a lot of transaction in this quarter.

Well certainly I don't blame. It's not good, by higher the worse we have ever seen, by far what's going on here. Anyway with the three year except the four pause for the last quarter in '08.

What is that mean?

Very happy. One of you got it all that...

I wasn't sure what you were saying. Therefore Mr. Carter, you got me worried.

(Indiscernible) pause up.

Pause up. I got it now. Okay. That's very good and thank you for the compliment.

Okay.

In this quarter, we're jumping through the hoops.

Oh, I have to tell you.

All right.

You've done a very measurable job, I'd say, compared to American Capital, I see really in trouble. Anyway, thanks, and I'll be talking to you.

All right. Any other questions, Claudia.

Yes. We do have another question coming from Adrian Day with Adrian Day Asset Management. Please state your question.

Yeah. Hi, David. I just want to talk, about the last conference call in November, a few months ago, I believe you kind of said, you're going to have to be earning the dividend by the end of March. And you sort of touched on that today, do you have any sort of new estimate of when you must be earning the dividend?

Yeah, we apologize. We plunged on that estimate and guess that was a mistake on our part. We just hope that we're going to do it I guess and we didn't quite get to it. My guess is now that we will be earning at maybe by the end of September. But given the economy, I'm just not sure where things are right now. And so, we are very skittish about making any forecast.

All right. The mistake was probably mentioning it?

No, that's okay.

Okay.

We'd like to tell our shareholders what we are thinking. Whether it comes out to be right or wrong, it's better to hear from management what we think might be happening.

I've got you. Okay, thank you.

Any other questions, Claudia.

Yes, we do have one last question coming from David West with Davenport & Company. Please state your question. David West - Davenport & Company: Good morning. Actually if the question kind of follows in the vein of the last questioner, to what extent does the Board think about reducing the dividend more in light with net investment income given the capital constraints of this market? It seems like the marketplace may actually welcome that even though at the lower dividend payout.

Well, the Board does consider it. We looked at the numbers this time. We looked at the forecast for the fiscal year that will end... our fiscal year is March 31, '09 for this year, which we're well into. And the Board didn't look at the projections for 2010, March of 2010. We went through the numbers, talked about it. And there is so many variables right now that are just... we're unable to determine what they are that the Board has voted in favor of continuing the distribution. And my guess is that when we look in April, early April, that will continue the distribution at least another quarter to take a look and see what's going on. I really don't think there is any reason to cut the dividend, because my guess is that we will begin to earn it. I think pricing is going to start to move up. And I also think that we're going be able to move some money at some at some point in time out of our low paying loans into our high paying loans even though it will cost us some loss of equity. But it's such a unusual marketplace right now, so many variables that are undetermined that we are sort of trying to figure out which way the wind is blowing and January wasn't good for many things. But the fact that we are working with a lot of banks now that do revolving lines of credit. I am really surprised how many we got on the list now that are indicating that they are interested in making short-term revolving lines of credit to our smaller businesses. And I feel the marketplace has changed in that regard. The big problem that you all know, I am sure, many people…

Any more questions?

No sir, we've no questions at this time.

All right. Well we thank you all again for calling in. I'm sorry about the loss of the line. We'll try to not hit the speaker in the button next time and as we move the phone around. And thank you all for calling in and that's the end of this conference call.

Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time and we thank you for your participation.