Thank you for joining today's Capital Southwest Fourth Fiscal Quarter Earnings Call. Participating on the call today is Bowen Diehl, CEO; Michael Sarner, CFO; and Chris Rehberger, Vice President of Finance. I'll now turn the call over to Chris Rehberger.

Thank you. I would like to remind everyone that in the course of this call we will be making certain forward-looking statements. These statements are based on current conditions, currently available information, and management's expectations, assumptions, and beliefs. They are not guarantees of future results and are subject to numerous risks, uncertainties, and assumptions that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Capital Southwest's publicly available filings with the SEC. The company does not undertake any obligation to update or revise any forward-looking statements whether as a result of new information, future events, changing circumstances, or any other reason after the date of this press release, except as required by law. I will now hand the call off to our President and Chief Executive Officer, Bowen Diehl.

Thanks, Chris and thanks to everyone for joining us for our fourth quarter 2017 earnings call. Throughout our prepared remarks, we will refer to various slides in our earnings presentation, which can be found on our website at www.capitalsouthwest.com. We are pleased to report that fiscal year 2017 marked the first full fiscal year, post the spinoff of CSW Industrials, and a year in which we achieved our goal of establishing a premier middle market lending firm. Our focus remains on building a portfolio that consists of a diverse set of debt and equity investments from both the lower middle market and the upper middle market. To this point, we believe we are well on our way to building a high-performing portfolio that generates market dividends to our shareholders while growing NAV per share. We continued to execute under our shareholder-friendly, internally managed structure which at its foundation closely aligns our interests with the interests of our fellow shareholders in generating sustainable, long-term value through stable increasing dividends and NAV per share growth. During our fiscal year ended March 31st, we delivered a 28% all-in return to shareholders, paying $0.79 per share in cumulative dividends during the year while experiencing stock price appreciation of 22%. We believe this is evidence of the market both understanding and appreciating the evolution underway at Capital Southwest, from an all-equity focused BDC paying a negligible dividend to a credit-focused BDC paying a market dividend. Slide seven illustrates our progress in this evolution during fiscal year 2017. As of the end of the March quarter, we generated a 4.5% annualized dividend yield to our shareholders, exclusive of the $0.26 per share special dividend, after increasing NAV per share during the year from $17.34 per share to $17.80 per share. Though we are proud of our…

Thanks Bowen. On the capital raising front, during fiscal year 2017, we closed on a $150 million ING Capital led credit facility, consisting of $100 million in commitments from five banks, and a $50 million accordion. As of March 31, 2017, we had $25 million drawn on their credit facility. In addition, we were able to close on the remainder of the I-45 credit facility commitments led by Deutsche Bank, bringing the facility to its target size of $165 million. As of March 31, 2017, I-45 had $122 million drawn on the facility. As of the end of the quarter, we had $22 million in balance sheet cash, $75 million available on the ING credit facility and $43 million in additional capacity on the I-45 credit facility, leaving us with significant liquidity to fund investments going forward. Further, we had a leverage ratio of 0.1 to 1, leaving us substantial running room to increase our balance sheet leverage and drive dividend growth for our shareholders. Turning to the income statement on slide 18, our investment portfolio produced $7.7 million in investment income this quarter, with a weighted average yield on all investments of 10.5%. This represented an increase of $900,000 or 13% from the previous quarter's investment income of $6.9 million. The increase was due to net investment growth in the credit portfolio during the quarter and an increase in prepayment fees, as well as an increase in the cash dividend from I-45 generated from short-term realized gains. We incurred $3.6 million in operating expenses, excluding tax and interest expense, this quarter, an increase of $500,000 or 16% versus $3.1 million in the previous quarter. The increase in operating expenses was due primarily to legal fees related to corporate matters and an increase in our year-end bonus accrual. For the…

Thanks Michael and thank you to our shareholders for giving us the opportunity to be stewards of your capital, a responsibility that we take very seriously. We continue to thoughtfully and carefully execute our investment strategy with the creation of long-term sustainable shareholder value as our most important goal. This concludes our prepared remarks. I would like to turn the call over to the operator to open up the line for Q&A.

Thank you. [Operator Instructions] Our first question comes from the line of Bryce Rowe of Baird. Your line is now open.

Thanks good morning.

Hey Bryce.

Bowen, I was -- maybe you've covered this in past calls, but did want to ask you about the undistributed spillover income on the balance sheet. Just curious how you think about that philosophically, how you think about paying that out to shareholders over the course of time.

Yes, you want to cover that?

Sure. So, first of all, thanks for the question, Bryce. First of all, that's built up, first and foremost, by some undistributed realized gains in the past as well as some of the taxable income that we earned this year that wasn't paid out. We see having a UTI balance is important sort of for the shareholders for a surety on the dividend. We see ourselves paying out a portion in time, certainly not the entire amount, as we think building up and maintaining NAV growth is important to our shareholders.

Yes, I mean like you said, I think paying that out over time is our intent. It does provide surety of the dividend in times where we might have heavy prepayments at the same time as light originations if the market gets really white hot and we're just not comfortable investing. There's also a benefit as we move towards a time where we're above book and we have an equity offering on the table that it helps cushion the dividends, the J curve effect, if you will, post-equity offer.

Yes, got it. That's helpful. And then appreciate the comments around the market, bifurcating both lower middle market and upper middle market. It sounds like the upper middle market is increasingly competitive and maybe a little less attractive. Do we read into that that maybe future activity, at least over the next couple quarters, will likely be driven by lower middle market activity?

Yes, I mean I would say that's absolutely right. Our lower middle market activity is -- we're finding some pretty attractive opportunities, as you saw in our quarterly release, the deals we closed recently. We've seen similar transactions coming into this quarter. So, the lower middle market, as we've said before, is our premium product. The upper middle market is important to manage cash inflows and outflows. It's a slightly more liquid market obviously. The spreads for quality deals have been -- have tightened significantly. I-45 remains a very attractive financing vehicle, given the terms, provisions of that credit facility with Deutsche Bank. So, for the quality companies there's room -- they fit in that vehicle and still create ROEs that make sense for our shareholders. On our balance sheet, those assets right now -- we're pretty heavily focused on the lower middle market, because we think the value is there where it's tougher on the upper middle market side.

Yes, got it. And then maybe one more for you, Michael. On the expense side of the income statement, you obviously called out some bonus accruals, incentive accruals, as well as some legal expenses. Just curious what portion of that may recur here in the future? Thanks.

Sure. So, a portion of this was included in actually in the proxy when we discuss the reincorporation. So, we're seeing about $100,000 to $200,000 of expense that we've spent over the last quarter. I think we're really at the tail end of that, so some of that is going to go away. And in terms of the bonus accrual the Board had indicated, based on performance for the company, that they increased a few hundred thousand -- $200,000 for the bonus accruals for the entire pool this year. And that's obviously a one-time in nature. So, we expect really the run rate to come back down to around a $3.4 million to $3.5 million on a quarterly basis.

Great. That's helpful. Thank you, guys. Appreciate it.

Thanks Bryce.

Thank you. [Operator Instructions] And I'm showing no further questions at this time. I'd hand the call back over to Bowen Diehl for any closing remarks.

Thank you, operator and thank you all for participating in our call today. We look forward to keeping you apprised of our progress on future quarterly calls. Again, shareholder value creation is our absolute first priority and we intend to work hard to make that happen. Thank you very much and we hope everyone has a great rest of the week.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You can [ph] disconnect. Everyone have a great day.