Gladstone Investment Corporation\De - Additional Proxy Soliciting Materials (definitive) (DEFA14A)
July 01 2008 - 3:41PM
Edgar (US Regulatory)
UNITED
STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
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Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
x
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Filed by a Party other than the
Registrant
o
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Check the appropriate box:
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o
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Preliminary Proxy Statement
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Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
§240.14a-12
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Gladstone
Investment Corporation
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the
appropriate box):
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x
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No fee required.
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to
which transaction applies:
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Aggregate number of securities to
which transaction applies:
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of
transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary
materials.
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Check box if any part of the fee is
offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration
Statement No.:
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Filing Party:
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Date Filed:
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On Tuesday, July 1, 2008 at 11:00 am ET,
Gladstone Investment Corporation (the Company) held a conference call
regarding the proposals included in the Companys Definitive Proxy Statement,
which was filed on June 20, 2008 (the Call). A script of the Call
is attached below.
Gladstone
Investment Special Shareholders Call for the Proxy Statement
Script for call on July 1, 2008 at 11:00 AM
Thank you Jackie for
that introduction.
Hello and good morning.
This is a special call
to explain the items in the proxy for shareholders and analysts of Gladstone
Investment, NASDAQ trading symbol GAIN.
Thank you all for
calling in. We are happy to talk to shareholders and you all know that you have
an open invitation to visit us here in the Washington, DC area. Please stop by
at the office in McLean Virginia and say hello.
You will see some of the finest people in the business.
We invite you all to
come to the shareholders meeting on August 7, 2008 at 11am at the Hilton
Hotel in McLean Va. 7920 Jones Branch Drive.
If you are not coming, then please vote your shares using your proxy so
that we get the votes in. You can vote
your proxy by mailing in your proxy card. And you can vote by calling (866)
391-7007, but if you call you have to have your proxy card with the proxy
control number. With that control number, you can also enter your vote at
www.proxyvote.com. And you can vote by
calling your broker and your broker can help you vote too.
Before I begin I need to
read a statement about forward looking statements.
This
conference call may include statements that may constitute forward-looking
statements within the meaning of Securities Act of 1933 and of 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. 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 these forward-looking
statements, including those factors listed under the caption Risk factors in
all our Form 10K fillings as filed with the Securities and Exchange
Commission and can be found on our web site at www.GladstoneInvestment.com and
the SEC web site.
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.
Again thank you all for
calling in. I know these are trying
times for all of you. As shareholders we have all watched the stock price
continue to drop along with the market for all financial stocks. Some of the
financial stocks are off 50 to 75%. We
have watched the way the market has treated our stock and just do not
understand what is going on. It is a very difficult time for shareholders.
The volume last Friday
was extremely high. Millions of shares
traded and it is hard to say what that means.
We think it may be from the notice that our stock has been selected to
be added to the Russell 3000 which is a very broad index for the stock
market. There are some mutual funds and
other money managers that buy based on the Russell 3000 so I hope the increased
volume is from that event.
Before starting with the
matters in the proxy, I want you to know that we will have our quarterly
earnings call for the quarter ending June 30, 2008, sometime around the
first week in August, so I will not be able to
answer questions about
the 10-Q we are planning to file for that quarter (or the June quarter
earnings) on this call.
I can say that our fund
is performing well in these trying times compared to others. And just to make
sure we all remember, as our most recent filings showed, this fund does not
have any investments in home mortgages or the housing industry nor do we intend
to make any. We have no home mortgages
in our portfolio and never have. Also we
do not have investments in the automobile industry such as suppliers to Ford,
GM or Chrysler.
But please do not ask
any questions about the earnings for the June quarter because until we
release our quarterly numbers I cannot discuss them at all.
I can tell you that we
will have our board meeting a week from Wednesday, and I expect our board to
declare our monthly distributions as we have before. We have no plans to cut
the dividend then or in the foreseeable future.
Now lets turn to the
proxy. In the proxy we have asked shareholders to vote on a number of things.
Some are easy to understand and others are not as easy.
1.
First we are
asking you to elect directors. No need
to explain that because we do that every year.
2.
Second we
are asking you to approve a proposal to authorize our fund to offer and issue
long-term rights (such as warrants) to purchase shares of our common stock at
an exercise price per share that will not be less than the greater of the
market value or net asset value of our common stock at the time they are
issued. The reason we are asking you to
do this is that it may be very advantageous for our fund to issue long term
debt with warrants or to issue long term convertible debt. This could give us a
very nice interest rate as compared to the interest rate that we can get on
regular debt. In times like these we
need to have a lot of different ways to raise money so that our fund can
continue to grow. Please notice that we cannot issue the stock options or
warrants (or the conversion feature) at below net asset value. So there is no immediate dilution to
shareholders at the issuance of the options or warrants. If we issue some
warrants it will be because we are putting together a package of securities
that can enhance the common stock of the company. We have no plans to issue any warrants today
and while we asked the board to approve sending this request to shareholders we
have not discussed the particulars of using them with our board. We would need
board approval to issue warrants. I dont want to begin such a discussion until
shareholders have given their approval.
So I hope you will vote for this proposal.
In this second proposal that is the
ability to issue warrants we are asking shareholders to approve something
that other business development companies, or BDCs, are doing or talking about
doing. We do not know when or if we may want to do this, but it is one more way
to help finance our growth, and shareholder permission is necessary to do
so. None of these warrants or purchase
rights would be issued to management or our management company or to any of the
folks working for the management company because that is prohibited by the 1940
Act. This is not a way to pay
management. It is a way to sell warrants
(or other long-term purchase rights) to potential buyers of the companys
securities and to get some capital in without any immediate effect on the
distributions to shareholders since, warrants do not have a dividend or
distribution required. We may also want
to issue convertible debt and we need this approval to do so. Let me say again we do not have any present
plans to issue any convertible debt or warrants but we want the flexibility to
do so if the situation is right for the company. We simply wish to have the ability to do this
if the situation will give us a better outcome.
3.
Third we are
asking shareholders to approve a proposal to authorize our fund to sell shares
of our common stock at a price below our then current net asset value per
share.
Many BDCs are asking shareholders to do
this because almost all of the BDCs today are selling at below their net asset
value per share. As you all know our
fund must pay out 98% of our income to avoid paying taxes. And we do that each
year.
This means the only way to grow is to
raise equity or debt. We are limited by
law to having less than our equity in the amount of debt (in other words, a 1:1
debt to equity ratio) so none of the companies like ours are highly
leveraged. And that is a good
thing. And we have a line of credit for
the amount of equity we have issued so there is no room to grow our debt beyond
where it is today. We currently have
some capacity on that line, but it is expected to be fully drawn on over the
next six months.
In order to grow we will need to raise
equity some time in the distant future. With the stock price so low it is not
possible in the current environment except as a rights offering. As you all know we did a rights offering and
it was fully subscribed. So in that sense the rights offering was a success.
What was not good is that some speculators purchased the rights on the open
market, shorted the stock, and then used the rights to buy the stock at a lower
price and cover their short positions.
We were shocked to see how low the stock fell during that subscription
period. I consulted with three different
Investment Bankers on this and followed their recommendation. But we and other
BDCs had the same experience. So rights offerings are not the most attractive
method of raising capital for our fund.
If at the time of the rights offering, we
had shareholder approval to sell stock below net asset value, then we could
have instead completed an overnight stock offering. In light of the experience that we gained
with the rights offering, we now believe that such an overnight offering might
not have the same likelihood of a fall off of the stock price due to the short
interests activity.
We need your vote to put in place - this
ability to sell below net asset value in order not to have to do another rights
offering. Doing overnight offerings does
not let the short seller come in and push down the stock price, so we need your
help to put this in place.
Let me add one other item. We presently
have no intent to sell stock today at this low price. We have money in place from the rights
offering and we have about $145 million of senior syndicated loans to be
redeployed. So we should be in good shape for quite a while. We are not planning a stock offering until we
use up most of that money from our line of credit and the redeployment of the
$145 million. And, although things may change, right now we believe it will
take a while for us to use up the funding we have in place.
We need to have this proposal to pass so
we have an alternative to a rights offering.
4.
Finally we
need shareholders to ratify the selection by our audit committees of
PricewaterhouseCoopers as our independent auditor for the next year end.
Those are the proposals
that are in the proxy. Now I must ask
all of you to please vote your shares.
It is ever so costly and time consuming to get shareholders to vote. The
fund spends thousands of dollars trying to contact voters to vote on these
issues, so please vote your shares. I
would like to pay that money out as a dividend and not spend it on efforts like
this.
And our dividend has been
$0.8 per month a run rate of $0.96 per year.
A week from Wednesday we will have our board meeting to declare the
payout for July, August and September.
Summary
As far as we can see out
the economy is not in as bad a shape as the mainstream media would make it out
to be. There is a credit squeeze because banks have slowed down their lending.
That hurts the economy a lot because there is no debt money to finance growth. But we can only see a couple of quarters out
so we
want to be careful. We are stewards of your money. We will stay the course and continue to be
conservative in our investment approach.
We invite you all to
come to the shareholders meeting on August 7, 2008 at 11am at the Hilton
Hotel in McLean Va., 7920 Jones Branch Drive. We would like to see you all there
and talk about the company and answer your questions at that meeting. If you
are not coming, then please vote your shares of stock so that we get past
this. You can vote your stock by mailing
your proxy. You can vote by calling your
broker. And you can vote by calling
(866) 391-7007, but you have to have your proxy card with the proxy control
number. If you have your proxy control
number you can vote by going to www.proxyvote.com. If you havent received your proxy in the
mail yet, it should be coming very soon so please look for it, it will include
more information on these proposals, which you should read carefully, and it
will also contain the proxy control number on your card which you will need to
vote by phone or on the internet. But
please vote so we can continue to grow the company.
That is the end of the
call.
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