Good day and welcome to the Oxford Lane First Fiscal Quarter Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jonathan Cohen. Please go ahead.

Good morning. Welcome everyone to the Oxford Lane Capital Corp. first fiscal quarter 2019 earnings conference call. I am joined today by Saul Rosenthal, our President and Bruce Rubin, our Chief Financial Officer and Treasurer. Bruce, could you open the call today with a discussion regarding forward-looking statements?

Sure, Jonathan. Today’s call is being recorded. An audio replay of the conference call will be available for 30 days. Replay information is included in our press release that was released earlier this morning. Please note that this call is the property of Oxford Lane Capital Corp. Any unauthorized rebroadcast of this call in any form is strictly prohibited. I would also like to call your attention to the customary disclosure in our press release this morning regarding forward-looking information. Today’s conference call includes forward-looking statements and projections and we ask that you refer to our most recent filings at the SEC for important factors that could cause our actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website at www.oxlc.com. With that, I would like turn the presentation back over to Jonathan.

Thanks, Bruce. On June 30, 2018, our net asset value per share stood at $9.98 compared with a net asset value per share at March 31 of $10.08. We generated a total return of approximately 3% for shareholders during the quarter ended June 30, 2018. That return reflects the change in net asset value per share for the period as well as the impact of a 40.5 cent distribution. For the quarter ended June 30, we recorded GAAP total investment income of approximately $21.2 million, representing an increase of approximately $800,000 when compared to the quarter ended March 31, 2018. The first quarter’s GAAP investment income from our portfolio was produced as follows. Approximately $20.5 million from our CLO equity investments and approximately $700,000 from our CLO debt investments and from other income. Oxford Lane also recorded GAAP net investment income of approximately $11.5 million or $0.39 per share for the quarter ended June 30 compared with $11 million or $0.40 per share for the prior quarter. Our core net investment income was approximately $14.6 million or approximately $0.50 per share for the quarter ended June 30 compared with $8.6 million or approximately $0.31 per share for the quarter ended March 31, 2018. During the quarter ended June 30, we issued a total of approximately 2.5 million shares of our common stock, pursuant to an aftermarket offering, resulting in net proceeds of approximately $26.5 million after deducting various expenses. On June 23, 2018, we amended our repurchase transaction with Nomura Securities. Under the amended agreement, the term of the facility was extended until April 2, 2019. For the quarter ended June 30, we recorded net realized gains of approximately $700,000 or $0.03 per share. We recorded net unrealized depreciation of $4.1 million or $0.14 per share. We had a net…

[Operator Instructions] The first question comes from the line of Mickey Schleien of Ladenburg.

Yes. Good morning, everyone. Jonathan, with as much demand as there has been for floating rate investments, it's pretty well known that asset quality is deteriorating when you look at things like the proportion of [indiscernible] multiples that we're seeing in the market. The rating agencies are looking at these trends and they're saying that it could result in below average recovery rates down the road. So I'd like to understand, or perhaps you can describe to us how you're managing OXLC’s portfolio to protect against declining asset quality and what level of recovery rates are you assuming to value the CLO equity in the portfolio?

Sure, Mickey. Thank you for the question. The principal thing we have and continue to do to protect against or to attempt to protect against the scenario you've just described is that we have and continue to push out our reinvestment period to the greatest extent we are able to do and that we see as desirable. So within a CLO structure, as you know, there is an arbitrage between the cost of capital and the use of proceeds. That use of proceeds, those investments essentially represent a pool of collateral, collateral consisting of leveraged loans. Those leverage loans have attached to them assumed default rates and recovery rates. To our mind, one way to attempt to mitigate a higher than expected or higher than forecasted default rate and a correspondingly lower than expected or projected recovery rate is to construct a portfolio with as long dated as possible CLO equity structures that will give us the longest period during a market dislocation or a spread widening environment to rebuild par and to essentially exploit the arbitrage evidence between that use of proceeds and those costs of capital. So that's our sort of principal view on that. Now that said, default rates within US CLO structures within those collateral pool continue to be very, very low. We assume, from an underwriting perspective, a much higher default rate than is currently being evidenced in the marketplace, but your issue and your question is certainly a very valid one that we think about all the time.

And just if I may, one follow-up Jonathan. Without picking on particular asset managers, do you look, I'm curious, what level of granularity you look at in terms of their performance during previous down cycles? I mean, is there enough data out there and is your relationship close enough with the asset managers to sort of gauge how well they are at managing through downside and how do you approach that?

That is a great question, Mickey and I believe that the answer is yes. We have very good relationships and very longstanding relationships with a great number of collateral managers and there has been a wide dispersion historically. We saw this in 2008 and 2009 in the performance of various collateral managers and in various types of indenture structures. And so those are things that we take very much into account from an underwriting and portfolio management perspective. But yes, we do get the benefit of a high degree of granularity, not just by virtue of our relationships with these various collateral managers, but by virtue of the fact that we received [indiscernible] reports that have complete lists of the collateral pools within each one of these structures that allow us to make determinations on that basis.

And Jonathan based on what you just said, does that imply that you are proactively avoiding some of the newer managers that have entered the market, given that you may not have a good sense of how well they can manage a downside scenario.

I think there is a cost that attaches itself, Mickey, to different collateral managers. Different collateral managers have historically performed better in certain parts of the credit cycle. And I wouldn't say that we are necessarily avoiding any particular collateral manager, but we value the work being done by different collateral managers in different ways.

I show no further questions. I would like to turn the conference back over to Mr. Cohen.

Wonderful. Well, thank you all very much. Mickey, thank you for your questions and thank you for everyone who's participated. We look forward to speaking again soon. Thank you all very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.