McLean, VA: Gladstone Capital Corp. (NASDAQ: GLAD) gave general comments on short sellers.

During the past months we have been asked by a number of our shareholders about Business Development Companies (BDCs) and activities of some hedge funds that have sold short the stock of some BDC's. Here are the most frequently asked questions and our responses:

Question: Are we supporting any short sellers of BDC stocks?
Absolutely not. To support any short sellers in our industry would be detrimental to the success of our industry and therefore contrary to our company's interests. A battered industry hurts all companies in the sector, regardless of their performance. We have no incentive to support any short seller.

Question: What do you think about the valuations of other BDCs' portfolio companies?
The SEC has set out guidelines for establishing fair value of the loans and investments BDCs make. We presume the other BDCs do what we do, which is to value our portfolio of loans utilizing these SEC guidelines. Moreover because the portfolio companies of BDCs are private businesses, there is no way for anyone outside the BDCs to assess accurately the reasonableness of those portfolio valuations. We do not have information about other BDCs' private portfolios and therefore we cannot shed light on the fair value of those private portfolios.

Question: Why are some hedge funds long on Gladstone Capital and short on some other BDCs?
We understand that hedge funds often pair up similar stocks to hedge their bets, which enables them to use the dividend income from the long position to cover the dividend expense in their short position.

Question: What will Gladstone Capital do if it comes under fire from short sellers?
We have always believed the most appropriate response is to run our business as usual and continue to pay dividends. That strategy was effective in the early 1990's when the short sellers were in Allied Capital's stock for over a year and at American Capital Strategies when the short sellers came in at the secondary offerings. Strong, consistent dividends eventually run off any short seller.

The Business Development Company industry is in its early stages of development. Members of our management team are gratified to have contributed to three of the biggest BDC's in the industry and we think that the future is bright. Short sellers are a fact of life. Our free and open stock market is wonderful even though it attracts some investors who emphasize the negative. We emphasize the positive and are confident the long-term outlook will be very good.

For further information contact Harry Brill or David Gladstone at 703-286-7000.

This press release may include statements that may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements with regard to the future performance of the Company. Words such as "believes" and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans that are believed to be reasonable as of the date of this press release. Factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements include, among others, those factors listed under the caption "Risk factors" of the Company's prospectus dated August 23, 2001, as filed with the Securities and Exchange Commission on August 24, 2001. 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.