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Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
Copyright © 2007 All right reserved
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Copyright © 2007 All right reserved

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  • Read by the Investment Banker
  • DG Make t
  • DG Make t
  • DG Make t
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • DG
  • DG
  • DG
  • DG
  • DG
  • DG
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • TB Gladstone back Garden Ridge before and made a lot of money
  • TB Gladstone back Garden Ridge before and made a lot of money
  • DG
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • TB Due diligence Operating divisions purchased from Sir James Goldsmith
  • Transcript

    • 1. Gladstone Investment General Presentation as of June 30, 2007 Presented by: David Gladstone, Chairman
    • 2. Legal Disclaimer This presentation may include forward-looking statements. These forward-looking statements include comments with respect to our objectives and strategies, and the future results of our operations and our business. However, by their nature, these forward-looking statements involve numerous assumptions, uncertainties and opportunities, both general and specific. The risk exists that these statements may not be fulfilled. We caution readers of this presentation not to place undue reliance on these forward-looking statements as a number of factors such as fluctuations in interest rates and stock indices, the effects of competition in the areas in which we operate, and changes in economic, political, regulatory and technological conditions and those listed in “Risk Factors” section of our filings made with the SEC, could cause future company results to differ materially from these statements. This presentation does not constitute an offer to sell or solicitation of an offer to purchase any securities of Gladstone Investment. Nothing in theses materials should be construed as a recommendation to invest in any securities that may be issued by Gladstone Investment or as legal, accounting or tax advise. An investment in securities of the type descried herein presents certain risk. Before making a decision to invest in any securities of Gladstone Investment, a prospective investor should carefully review all publicly available information respecting Gladstone Investment (including the risk factors described therein) for such securities and consult with its own legal, accounting an, tax and other advisors in order to independently assess the merits of such an investment. Gladstone Investment is managed by Gladstone Management Corp. (“Adviser”), and affiliate. None of Gladstone Investment or any affiliate of the Adviser makes any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained herein and nothing contained herein shall be relied upon as a promise or representation whether as to the past or future performance. The information contained in this presentation is summary information that is intended to be considered in the context of our SEC filings and other public announcements that we may make, by press release or otherwise, from time to time. Accordingly, reference is made to Gladstone Investment’s public available filings with the SEC for more complete discussion of Gladstone Investment’s business and investment activities. We undertake no duty or obligation to publicly update or revise the information contained in this presentation. These materials contain information about Gladstone Investment, certain of its personal and affiliates and its historical performance as well as general information about he market. You should not view information related to the past performance of Gladstone Investment or information about eh market, as indicative of Gladstone Investment’s future results, the achievements of which can not be assured. Further, an investment in Gladstone Investment is discrete from, and does not represent an interest in , any other Gladstone entity.
    • 3. What Is Gladstone Investment? <ul><li>A company that: </li></ul><ul><ul><li>Makes debt and equity investments in seasoned, private small and medium-sized businesses in buyout transactions </li></ul></ul><ul><ul><li>Generates income from: </li></ul></ul><ul><ul><ul><li>Current income from interest on loans </li></ul></ul></ul><ul><ul><ul><li>Current income from fees </li></ul></ul></ul><ul><ul><ul><li>Other income: preferred stock dividends and capital gains </li></ul></ul></ul><ul><ul><li>A pass-through company that does not pay corporate taxes </li></ul></ul><ul><ul><li>Seeks to pay increasing dividends </li></ul></ul><ul><li>Currently monthly dividend is $0.75 per share ($0.90 per year) </li></ul>
    • 4. Our Objectives <ul><li>Investment Objectives: </li></ul><ul><ul><li>Generate a strong return by lending and owning equity in private small and medium-sized businesses, </li></ul></ul><ul><ul><li>Build a portfolio of high quality performing loans, </li></ul></ul><ul><ul><li>Have significant ownership in the business and </li></ul></ul><ul><ul><li>Increase the distributions to shareholders </li></ul></ul><ul><li>Invest in variable rate loans that generate cash income to be paid to shareholders as monthly dividends </li></ul><ul><li>Target return is 15% un-leveraged before capital gains </li></ul><ul><li>Avoid undue risk in order to preserve assets </li></ul><ul><li>Maintain and grow the experienced management team </li></ul>
    • 5. Experienced Management Team <ul><li>David Gladstone, CEO </li></ul><ul><li>Current Chairman and CEO of three Gladstone public companies </li></ul><ul><li>Past Chairman of Allied Capital Corp, a public company investing in loans and subordinated debt </li></ul><ul><li>Past Chairman of American Capital Strategies, a public company investing in subordinated debt and buyouts </li></ul><ul><li>Invested in more than 500 investments </li></ul><ul><li>Written about by Peter Lynch in his book: Beating the Street </li></ul><ul><li>MBA from Harvard Business School, MA from American University, BA from University of Virginia </li></ul>
    • 6. Experienced Management Team <ul><li>More than 25 Years Experience in Managing Businesses </li></ul><ul><li>Currently COO of all three Gladstone companies </li></ul><ul><li>Previously on the acquisition team of James River Corp. as it grew from $200 million to $7 billion in revenues </li></ul><ul><li>Group VP of two operating divisions at James River with 2,300 employees, $440 million in revenue and 14 locations </li></ul><ul><li>After James River, was CEO of two businesses with 800 employees, $250 million in revenue and 4 locations </li></ul><ul><li>Five years as a consultant with McKinsey & Company </li></ul><ul><li>MBA from Harvard Business School, BSE in Aeronautical Engineering from Princeton University </li></ul>Terry Brubaker, COO
    • 7. Experienced Management Team <ul><li>More than 20 years experience in portfolio investing </li></ul><ul><li>Chief Investment Officer of the three Gladstone companies </li></ul><ul><li>Head of all investing, due diligence, reviewing hundreds of opportunities and supervising the due diligence process on each new investment </li></ul><ul><li>Past EVP at Allied Capital, making loans and investments in middle market companies </li></ul><ul><li>Past manager of Camden Partners and Columbia Capital funds, investing in communications, healthcare and business services </li></ul><ul><li>MBA from University of Virginia Business School, BA Degree in Economics from Vanderbilt University </li></ul>Chip Stelljes, Chief Investment Officer
    • 8. Experienced Management Team Our Managing Directors above all work for the Adviser and have been active in the debt and equity investments for an average of 20 years. Behind our Managing Directors are a team of principals, associates, analysts, controllers, and others members that keep us growing. Paul Giusti Managing Director 32 Years Experience Joe Bute Managing Director 30 Years Experience Michael Brown Managing Director 24 Years Experience Ginger Rollins Managing Director 18 Years Experience John Freal Managing Director 25 Years Experience Bob Pierce Managing Director 23 Years Experience Laura Gladstone Managing Director 10 Years Experience Jennifer Simpson Managing Director 9 Years Experience Bob Corry Managing Director 15 Years Experience John Weller Managing Director 30 Years Experience David Meier Managing Director 23 Years Experience Buzz Cooper Managing Director 20 Years Experience Chris Massey Managing Director 15 Years Experience Bill Cooke Managing Director 15 Years Experience John Sateri Managing Director 18 Years Experience Brian Eick Managing Director 10 Years Experience
    • 9. Growing the Total Assets of all Gladstone Funds Number of Staff in Box above the Calendar Year $ Millions 56 46 32 22 15 12 7 Does not include $340 million of loans that paid off
    • 10. Track Record: Gladstone Investment <ul><li>Debt and equity investor in small and medium-sized businesses </li></ul><ul><li>IPO in June 2005 at $15 symbol GAIN (NASDAQ) </li></ul><ul><li>Paying dividends of $0.075 per month , $0.90 per year </li></ul><ul><li>Raised $230 million in equity and is borrowing under a credit line of $200 million further to grow the assets </li></ul><ul><li>At June 30, 2007 have invested $145 million in 7 buyouts and $175 million in 46 senior syndicated loans </li></ul><ul><li>Solid portfolio: All loans paying as agreed except one syndicated loan </li></ul><ul><li>Solid dividends: Never missed a dividend and never cut a dividend </li></ul><ul><li>Past performance is not an indication of future performance </li></ul>
    • 11. Earnings by Calendar Years Millions of dollars
    • 12. Annual Total Cash Dividends and Distributions Calendar Year Distributions Dollars per share
    • 13. Dividend History Quarterly Per Share Dollars per share
    • 14. Target Different Size Companies Purchase Price as a Multiple of Earnings
    • 15. Gladstone Market Opportunities <ul><li>Focus on long-term debt and equity for private small and middle market companies </li></ul><ul><li>Use the deal flow from long-term relationships with business brokers and senior lenders </li></ul><ul><li>Concentrate on conventional businesses with real cash flow that can weather a downturn in the economy </li></ul><ul><li>Build a well diversified portfolio of good investments in small and medium-sized companies </li></ul><ul><li>Use a conservative capital structure with lower leverage than traditional finance companies: less than 1 to 1 leverage </li></ul>Our Strategy: To acquire with management smaller private businesses and finance their growth
    • 16. Gladstone Market Opportunities <ul><li>Areas Where the Opportunities Exist </li></ul><ul><li>Light Manufacturing </li></ul><ul><li>-Manufacturing of non-high technology items (Examples: (1) industrial doors and (2)rail road car components. </li></ul><ul><li>Specialty Manufacturing </li></ul><ul><li>-Special purpose businesses (Examples: a manufacturer of pipes and fittings for liquid and gas storage and transportation in very cold applications.) </li></ul><ul><li>Business Services </li></ul><ul><li>-Special service companies (Examples: A company that provides water to workers in industrial work places.) </li></ul><ul><li>Specialty Situations </li></ul><ul><li>-Special purpose selling (Examples: school bus dealerships that sells to public and private schools) </li></ul><ul><li>No high technology or finance companies </li></ul>
    • 17. Gladstone Business Model <ul><li>Characteristics of our Investments </li></ul><ul><li>Term: We are long-term capital providers for five or more years </li></ul><ul><li>Variable rates: We use variable rates where possible to mitigate the changes in interest rates </li></ul><ul><li>Strong rates: Seeking current pay of 10% to 12% </li></ul><ul><li>Added income: Expect to have dividends from our preferred stock investments and some fees </li></ul><ul><li>Gains: If the business is sold there should be a strong capital gain </li></ul><ul><li>Security: Loans generally secured by the assets of the business </li></ul><ul><li>Flexible: Provide funding for additional financing if needed </li></ul>
    • 18. Gladstone Business Model Characteristics of our Portfolio <ul><li>Cash flow Proven cash flow </li></ul><ul><li>Management Experienced team in place </li></ul><ul><li>Growth Potential to grow cash flow </li></ul><ul><li>Exit Strategy If we exit there should be a capital gain </li></ul>Company Characteristics <ul><li>Range of investments $10 to $20 million </li></ul><ul><li>Business sales $25 to $500 million </li></ul><ul><li>Ratings parameters Risk rating criteria developed internally </li></ul><ul><li>Investment by management We require management to co-invest with us </li></ul>Conditions
    • 19. Chase Doors <ul><li>Management sought to purchase the company. </li></ul><ul><li>Strong steady income to pay interest and in turn monthly dividends to Gladstone Investment shareholders. </li></ul><ul><li>Long-term company to hold in portfolio. </li></ul>Chase Doors is the world's oldest, largest, and most progressive manufacturer of double-acting impact traffic doors.
    • 20. Auto Safety House <ul><li>Largest school bus dealer in Phoenix, AZ and Las Vegas, NV. </li></ul><ul><li>Also largest bus mechanical shop in those locations. </li></ul><ul><li>Strong steady profits and a nice company to own for the long-term. </li></ul>An LBO fund owned a bus company and wanted to divest the business so Gladstone Investment purchased it with management.
    • 21. A Stucki Company <ul><li>A business that had been family owned for 100 years. </li></ul><ul><li>Non-family management wished to buy the company. </li></ul><ul><li>We provided all the debt and equity for the buyout. </li></ul><ul><li>Management also made a significant investment in the business. </li></ul>Manufacturing rail road car parts and accessories This business should pay interest and dividends to our fund for many years. A good solid business with a great management team that should be in our portfolio for many years.
    • 22. Acme Cryogenics Corp. <ul><li>A business that had been owned by a family </li></ul><ul><li>Non-family management wished to buy the business </li></ul><ul><li>We provided all the debt and equity for the buyout. </li></ul><ul><li>Management also made a significant investment in the business. </li></ul>Manufacturing of manifolds and pipes for industrial gasses This business should pay interest and dividends to our fund for many years. A good solid business that should be in our portfolio for many years.
    • 23. High Quality of Assets and Income <ul><li>Conservative Investors </li></ul><ul><li>Quality of Assets: </li></ul><ul><li>-Standard & Poors values most of our loan portfolio each quarter </li></ul><ul><li>-Positive IRR on investments since inception </li></ul><ul><li>-Currently have no expected loan losses in the portfolio </li></ul><ul><li>Quality of Income: </li></ul><ul><li>- Avoid non-cash income from Paid-In-Kind interest (PIK) – results in predictable cash income </li></ul><ul><li>-Not dependent on capital gains to pay dividends – income is derived from monthly interest payments </li></ul><ul><li>Preservation of Capital: </li></ul><ul><li>-Make loans that are based on variable rates with floors on how low the interest rate can decline </li></ul>
    • 24. Outlook for this Company <ul><li>Strong deal flow of investment opportunities </li></ul><ul><li>Adding more investment professionals </li></ul><ul><li>Should there be a recession, the portfolio should stand up to the difficulties </li></ul><ul><li>Seeking to increase the Net Investment Income </li></ul><ul><li>Seeking to increase the dividend </li></ul><ul><li>Summary: the outlook is good for 2007 and beyond </li></ul>
    • 25. Investment Highlights <ul><li>Experienced Team: Operating team has a successful track record of underwriting small private businesses </li></ul><ul><li>Successful CEO with a reputation demonstrated by the success of nine public companies none of which ever missed a dividend or reduced the dividend. </li></ul><ul><li>Good Business Model: Emphasis on deal flow from strong relationships with business brokers and senior lenders </li></ul><ul><li>Conservative Underwriting: Focused on the cash flow of the small value-oriented business </li></ul><ul><li>Good Market Opportunity: Right time in the business cycle to buy smaller companies and generate good returns </li></ul><ul><li>Focused on paying monthly dividends to shareholders </li></ul>
    • 26. Why Own Gladstone Investment? <ul><li>Emphasis on capital preservation </li></ul><ul><li>Striving to produce consistent monthly dividends </li></ul><ul><li>Seeing to increase dividends over time </li></ul><ul><li>If successful in increasing the dividend then the stock price should increase especially if interest rates are falling </li></ul><ul><li>Focused on investing in businesses with steady cash flow </li></ul><ul><li>Management has a significant ownership in the stock </li></ul>
    • 27. Historical Financials For the years ending 2006 to 2007 – Fiscal year is March 31 $ in Millions (except per share data)
    • 28. Current Financials For the 3 months ended June 30, 2007 $ in Millions (except per share)
    • 29. Current Financials Balance Sheet as of June 30, 2007 $ in Millions

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