Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corp.'s Fiscal Fourth Quarter and Year End 2014 Financial Results Conference Call. Please note that today's call is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Saratoga Investment Corp.'s Interim Chief Financial Officer, Mr. Henri Steenkamp. Sir, please go ahead.

Thank you, operator. I would like to welcome everyone to Saratoga Investment Corp.'s Fiscal Fourth Quarter and Year End 2014 Earnings Conference Call. Today's conference call includes forward-looking statements and projections. We ask you to refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these forward-looking statements and projections. We do not undertake to update our forward-looking statements unless required by law. Today, for the first time, we will be referencing a presentation during our call. You can find our FY 2014 presentation in the Events and Presentation section of our IR website. A link to our Investor Relations page is in the earnings press release distributed last night. A replay of this conference call will also be available from 1 p.m. today through June 3. Please refer to our earnings press release for details. I would now like to turn the call over to our Chief Executive Officer, Christian Oberbeck, who will be making a few introductory remarks.

Thank you, Henri, and welcome, everyone. Firstly, we'd like to welcome Henri to our team. We are thrilled to have him join us at this exciting time for the firm and look forward to working closely with him as we continue to grow and execute Saratoga's total return growth story. Looking back to when Saratoga took over as manager at the end of July 2010, there were some significant challenges to address, including: trading at approximately 50% of price to NAV; no identifiable identity or franchise in the BDC marketplace; significant issues with the legacy portfolio; and being significantly subscale. Since then, management has achieved much including: successfully managing the legacy portfolio and building up a high-quality new portfolio of investments; continuing to add high-quality investment professionals and management; successfully getting an SBIC license, differentiating us from any other BDCs; and more than doubling NAV. In fiscal 2014, we continue to make progress on our long-term strategy of strengthening our financial foundation by continuing to expand our assets under management to $205 million; improving investment quality and credit; increasing our liquidity by completing a $48.3 million public baby bond offering; broadening our investor base; and continuing to add quality senior management and professionals to our team. As you can see on Slide 2, during the past year, we continued to significantly grow our asset base and achieved a substantial increase in the percentage of what we view as the highest rated credits in the BDC portfolio, utilizing our internal credit and monitoring system. We've seen a 32% year-on-year increase in our assets under management, and over 77% of our investments hold the highest internal rating that we award. This increases to over 85% when you exclude our investment in our CLO portfolio. In addition, 2014 allowed us to develop plans to extend our capital resources, which came to fruition with the completion of our $48.3 million fixed-rate note issuance, which significantly expanded our liquidity resources and our investor base. We have realized that total return, combining dividends and stock price appreciation of approximately 108% since May 2010 compared to the BDC index, which has realized a total return of 71% in that period, yet our current earnings potential, investment portfolio and stock price offer further opportunities for our shareholders. I would like to now turn the call back over to Henri to review our financial results.

Thanks, Chris. Looking at the metrics on Slide 3, we see that for the year ended February 28, 2014, our net investment income was $9.1 million or $1.85 on a weighted average per share basis. This represented an increase of $2.1 million or $0.14 per share as compared to the same period last year. During this year, we experienced a net loss on investments of $0.4 million or $0.08 on a weighted average per share basis, resulting in a total increase in net assets from operations of $8.7 million or $1.78 per share. Net realized gains of $1.3 million was offset by net unrealized depreciation of $1.6 million. Our net investment income for the fourth quarter ended February 28, 2014, was $1.5 million or $0.28 on a weighted average per share basis. Adjusted for the incentive fee accrual related to net unrealized capital gains in the second incentive fee calculation, our net investment income was $2 million or $0.56 per share. Net gain on investments was $2.2 million or $0.42 per share, resulting in an increase in net assets from operations of $3.7 million or $0.69 per share. Net unrealized appreciation for the quarter was $2.1 million and net realized gains was $0.1 million. Net investment income yield, as percentage of average net asset value, was 8.1% and 5.2% for the year and quarter ended February 28, 2014, respectively. Adjusted for the same incentive fee accrual related to net unrealized capital gain, the net investment income yield was 7.9% and 6.9% for the same year and quarter, respectively. Return on equity was 7.8% and 13.2% for the year and quarter, respectively. These are performance metrics that we feel are important indicators of how successful we are in pursuing our strategy of growing the asset base, building scale and generating competitive…

Thank you, Henri. I would like to update everyone on the current market as we see it, as well as review the composition and performance of our investment portfolio. Current market conditions remain extremely competitive, as there is an abundance of capital chasing a historically low volume of new investment opportunities. This dynamic is particularly evident at the larger end of the middle market. As you can see on Slide 5, middle market leverage now equals precrisis levels. At the same time, pricing is contracted considerably. We are seeing a consistent flow of investment opportunities where, in our view, the debt providers are underpricing and taking on too much risk. In this environment, we believe our shareholders will benefit from our experienced investment perspective and our disciplined approach to deploying capital. We like to reside on the lower end of the middle market, and believe this is the place to be on a relative basis with the best risk-adjusted returns. There are also substantial opportunities found here as banks and other capital providers are less focused on this end of the market. Our objective is to maximize our risk-adjusted returns in a manner that utilizes the low cost of capital and 2:1 leverage advantage we possess through our SBIC license. By focusing on the smaller less competitive end of the market, we are able to reduce the risk profile of our portfolio, while delivering highly accretive returns to our investors. As you can see on Slide 6, as of February 28, 2014, over 70% of our SBIC investments are in senior debt securities, and the leverage profile of these investments is low, especially when compared to market leverage shown previously on Slide 5. Because of the leverage and the cost of money advantages inherent in the SBIC program, we can…

Thank you, Mike. Moving on to our final slide, 14, we are committed to further developing a financial base that supports a growth total return profile, and this remains a clear strategic path that we intend to follow going forward. As I mentioned at the beginning of today's call, we have achieved much and continue the execution of our long-term strategy to expand our asset base without sacrificing credit quality. We also continue to increase our capacity to source, analyze, close and manage our investments by adding to our management team. The key contributor to achieving our growth objectives is fully deploying our SBIC financing, thereby, generating 20%-plus returns on the equity invested and utilizing the 2:1 leverage of the SBIC. This allows us to reach scale and increase our assets under management and net investment income yield, thereby enabling us to increase returns to shareholders and achieving growth in our net asset and stock values. Along with our objectives of increasing our net assets and total returns to shareholders, our actions to increase assets under management are geared towards best positioning ourselves to begin paying regular quarterly cash dividends in the future. In closing, I would again like to thank all of our shareholders for their ongoing support. We are excited for the growth and profitability that lies ahead for Saratoga Investment Corp., and I would like to now open the call for questions.

[Operator Instructions] And our first question comes from Casey Alexander from Gilford Securities.

First off, can -- it's May 28, so there's 2 days left in the current quarter. Can you give us an update as to your investment activity in the current quarter?

It's Henri. Yes, you're right. Year end sort of tends to flow into quarter end. We've -- I think we've continued to see some activity in the market, and Mike can, perhaps, give a bit more color on that as well. There are a lot of opportunities that they're looking at, but obviously, the focus is on credit quality. So I think if you look at the last quarter, our growth is probably in that range, being very cautious in a very competitive market to grab opportunities that present itself.

Yes, I think this quarter, we expect to close more transactions than we did in the past quarter, probably a little under $20 million of new investment activity.

And how does that -- I mean, it's the end of the quarter, so you must have some idea of what your repayment activity is also.

Yes, there's been minimal payment activity, thus far, in the quarter.

Okay. So I mean my understanding, if I hear the remarks correctly, is that the portfolio, as it exists, is an exceedingly healthy portfolio, is that correct?

That's right.

Okay. And the strategic focus in terms of deployments is geared towards the SBIC subsidiary, going forward, because that's where the best returns lie, right?

Yes, that's correct, although we do have flexibility in the BDC, and we're looking to add quality assets across the platform. Although, as you correctly point out, the highest return would be in the SBIC subsidiary.

When you take together the SBIC, as well as the middle market loans, which you didn't include in your liquidity presentation, but those really are another measure of liquidity, if the appropriate investment opportunities were there, there's really substantial liquidity without having to raise new capital. Isn't that correct?

Yes, I think that's fair. I think that was the purpose of the slide as well, Casey, to show how we have a lot of dry powder that we can reinvest, and we sort of have a lot of different levers that we can pull and make decisions on how we deploy that capital. You're right about the middle market loans, they're liquid investments. We've tended to have them just run off naturally in the past, but that is also a potential source that we did not include in that slide. The focus is obviously on finding the right opportunities in a very competitive market, where to deploy one's capital.

Right, okay. So the actual -- there isn't precisely any real need for capital at this point in time. You have ample liquidity. You have an exceedingly healthy BDC portfolio. You have identifiable cash flow. So what I'm curious about is in looking at Slide 14, in what way are you not positioned to begin paying regular quarterly cash dividends?

Well, I think, Casey, as we've discussed in the past, there are several objectives we have. One, I think we've been consistent in saying that we think being in the high $200 million level of assets is important scale point, given all...

To who?

Fixed costs. I'm sorry....

To who? That may be important to you as a management team, but is that necessarily what's most important to the shareholders?

Well, I think what's important to shareholders is to the extent that we pay a cash dividend, it's important that: number one, we earn the cash dividend; and number two, that after paying the cash dividend, we are in a position to basically earn the cash dividend and trade at a level where we would have access to the capital markets.

Yes. But right now, you're trading at a 28% discount to NAV. So you don't have access to the capital markets doing it the way that you're doing it now, and by your own presentation, you have no need for access to the capital markets right now. You have ample liquidity for every line of business that you'd like to deploy assets, including the middle market portfolio, which you don't even include in your -- so again, it doesn't match. I mean, you don't need an access to capital. You need to do something in order to amortize the discount to NAV. So I still don't understand in what way you're not positioned to begin paying a regular quarterly dividend. You can identify what your cash flow is.

Well, it has to do with leverage as well, Casey. I think it's important for us to make sure -- I think the capital that we do have access to is the retention of our earnings, and by retaining those earnings, we're able to grow our NAV and our -- if we paid out 100% of our dividends, we wouldn't grow our NAV. By growing our NAV, we are incrementally able to increase our hold positions. By increasing our hold positions, we're able to accelerate our growth. By accelerating our growth, we have the ability to underwrite larger and larger deals, which allows us basically to capture a better investment profile than we have right now, and we are all the while maintaining our leverage at a reasonable level. The access to liquidity that we have, as we point out, is almost entirely debt access other than middle market loans. And so we want to make sure that we're not over-leveraging ourselves as we scale.

Well then, by your own admission, you're being cautious because, as Michael said, on what was it, Slide #5, that the middle market multiples are back at precrisis levels. So you have to be very cautious about the deals that you're doing, and then the SBIC, there's a limit to the size of the deals that you can do anyway. They're not larger deals. So again, I mean, yes, we've had this discussion, and I think we're going to continue to have this discussion because I think it's important that you also recognize what your shareholders are looking for out of the management team. And at 28% discount to NAV, I think that the market is still telling you that maybe this is not necessarily the right path.

Well, Casey, we appreciate your point of view. As you can appreciate, we and the management team are very substantial shareholders of the company. And so therefore, we, in effect, are recipients of this dividend policy and active participants in it as shareholders, and we fully believe that adding to the scale is critically important for us. You mentioned about the SBIC size of portfolio companies, the size of companies in the SBIC. We've had numerous instances where we've had the opportunity to make substantially larger investments in our hold positions, and we've had to bring in partners or lost the deals because we were unable to hold a larger position and maintain our desired credit quality and proper diversification. So as we scale, it's going to make us a much more effective investor in the SBIC environment.

And I'm not showing any further questions at this time. I would now like to turn the call back to Christian Oberbeck for any closing remarks.

Well, thank you, everyone, for joining us today. We appreciate your support, as we said earlier, and we look forward to our next call and speaking with you next quarter. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.