Welcome to the Ares Capital Corporation first quarter 2008 earnings conference call. (Operator Instructions) I would now like to turn the conference over to Rick Davis, Chief Financial Officer.

Welcome to Ares Capital Corporation's first quarter 2008 earnings conference call. I hope you have had an opportunity to review our earnings release and quarterly report on Form 10-Q. In addition, we are offering a webcast and slide presentation to accompany our call. Copies of the earnings release, Form 10-Q and the slide presentation can be obtained from our website at www.arescapitalcorp.com under the Investor Resources tab. The earnings release is located in the Press Release section, the Form 10-K can be found in the SEC filings section and the slide presentation is located in the Stock Information section. Ares Capital Corporation's first quarter 2008 earnings press release, Form 10-Q, comments made during the course of this conference call and webcast and our companies slide presentation contain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934 and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, and similar expressions. Ares Capital Corporation's actual results could differ materially from those expressed in the forward-looking statements for any reason, including those listed in our SEC filings. Any such forward-looking statements are made pursuant to available Safe Harbor provisions under applicable securities laws and Ares Capital Corporation assumes no obligation to update any such forward-looking statements. Please note that past performance is not a guarantee of future results. Also, during this conference call the company may discuss core earnings per share or core EPS, which is a non-GAAP financial measure as defined by SEC Regulation G. Core EPS is the earnings per share from operations, less realized and unrealized gains and losses and adjusted for any incentive management fees attributable to such realized gains and losses and any income taxes related to such realized gains. A reconciliation of core EPS to earnings per share from operations, the most directly comparable GAAP financial measure, can be found in our earnings press release. The company believes that core EPS provides useful information to investors regarding financial performance, because it is one method the company uses to measure its financial conditions and results of operations. At this time, we would like to invite participants to access the accompanying slide presentation. As previously noted, you can access the presentation on our website at www.arescapitalcorp.com and click on the May 8th, 2008 presentation link under the Stock Information section of the Investor Resources tab. I will now turn the call over to Michael Arougheti, our President.

Before I get into the details of the first quarter, I thought I’d take a minute to summarize our recent operating results in capital markets activities. Despite continue upheaval in the credit markets and a significant decline in overall leverage loan and buyout volume, we closed $304 million of investment commitments in the first quarter. As I’ll discuss in more later and consistent with the expectations that we discuss in our last call, these new investments generally reflected meaningful improved pricing, structure and underlying relative leverage. We also further improved our investments spread by reducing our floating-rate investments from 51.6% of the total portfolio at the end of 2007 to 44% at the end of Q1, while our borrowing cost declined by 1.8%. As you know we have long-standing objective of preserving capital while seeking superior risk adjusted returns through business and credit cycles. Consistent with this strategy we conservatively positioned our balance sheet over the last three years in anticipation of our market that would offer us better risk adjusted return opportunities. Illustrating the continued execution of this strategy, in the first quarter we begin to rotate into higher yielding investments with comparable overall leverage levels to our existing portfolio and as I’ll discuss in more detail later we believe our current portfolio mix, balance sheet, diverse funding source and infrastructure positioned just well in the current environment and we remain very existed by the opportunities we see to continue this strategy. Our ability to aggressively pursue opportunities in this very attractive investment environment is largely dependent on our access to capital. We have diligently work to enhance and diversify our funding sources and over the last six months in an extremely challenging environment. We have increased to extend the terms for over $600 million of debt capital and…

We’d outlined the highlights of the first quarter on slide three of our presentation. Basic core EPS and net investment income were both $0.36 per share for the first quarter representing a penny decline compared to Q4 of 2007. This decrease was primarily driven by the net effect of lower LIBOR rates and lower fee income in Q1. Diluted core EPS and net investment income were both a penny per share are lower in the basic amount of $0.35 per share. The diluted weighted average share outstanding were higher than the basic weighted average shares outstanding, due to inclusion of shares related to the rights offering Mike just mentioned. Even though this transaction closed after the end of the quarter FAS 128 requires we include the shares related to the transferable rights of this offering from March 24, the record date to the end of the quarter. Our GAAP net income of $9.2 million or $0.13 per basic share and $0.12 per diluted share was down sequentially from Q4 and was primarily impacted by net realized and unrealized losses on our portfolio investments and by the lower LIBOR rates and fee income that I just mentioned. As shown on slide seven, we had net unrealized depreciation on our portfolio investments of $17 million or $0.23 per basic and diluted share in the first quarter. Our NAV was down by 1.9% from Q4 of ’07 to $15.17 per share primarily due to these unrealized depreciation adjustments. Our first quarter gross commitments totaled $304.1 million and including $24 million of sales to our Ivy Hill Middle Market Credit Fund totaled excess and repayments were $131.9 million resulting a net commitments of a $172.2 million for the quarter. We closed the quarter with a $1.9 billion investment portfolio covering 82 portfolio companies that…

Before commenting on the broader market and the opportunities we see looking forward, I want to provide a little color to our recent investment activity and portfolio positioning, both of which reflects the continued execution of our long-standing investment strategy and our opportunistic response to the current investment environment. Despite broader market issues, that have significantly reduced loan volume, we continue to generate healthy levels of deal flow. For example, we’ve reviewed a record 250 transactions during the first quarter, which represents a 20% increase over the number of transactions we reviewed in Q4 of last year. This total doesn’t include the numerous secondary capital market transactions we also reviewed during the quarter. As we stated before, asset selectivity drives good investment decisions and generating significant deal flows is critical for that process. This consistent level of deal flow, even during the period of needed market activity, is we believe a testament to our established self origination platform, the benefits of the broader Ares platform, our ability and willingness to invest in all levels of the capital structure and our demonstrated ability to close transactions in this difficult environment, which set us apart from many other financing providers. Consistent with our historical trend and demonstrating our discipline and patients we closed on 13 deals in the first quarter, reflecting a closing ratio of slightly over 5%. We also continue to build new and strengthen existing sponsor relationships during the quarter and as of the end of Q1, 57 separate private equity sponsors were represented Ares Capital portfolio. As Rick mentioned earlier in the first quarter we’ve closed $304.1 million of new commitments, across 13 portfolio companies. Five of these investments were with new companies and eight were with existing portfolio companies. Eight separate private equity sponsors will represented in these…

(Operator Instructions) Our first question comes from Greg Mason - Stifel Nicolaus.

First on your $13 million of unrealized depreciation, can you give us your opinion on the breakdown of what you think is simply just mark-to-market issues versus actual marks because of the credit deterioration or fundamental deterioration?

Yes, we talked about that in the prepared remarks it's roughly fifty-fifty.

Of the four companies that are now in grade four, how many are new this quarter and are you willing to give those companies that are in there?

The number of new companies that are grade one, I believe is three. We had one last quarter and really what we saw is the rotation from companies that were prior two’s that rotated into a one and we do not disclose the company level information?

Your next question comes from Vernon Plack - BB&T Capital Markets.

Michael looking at and taking into consideration your rights offering, can we assume that your debt capacity, additional debt capacity now is closed to $570 million?

If you look at our balance sheet prior to the rights offerings we've mentioned we were roughly 0.78 time debt-to-equity. Pro forma for the rights offering we were roughly 0.4 times leveled. Our total debt capacity when you add up our revolver. Our CLO and our CP funding facility, excluding Ivy Hill is roughly $1.1 billion and our funded debt pro forma for the rights offering is roughly 600 million. So roughly it’s about $550 million.

Your next question comes from Sanjay Sakhrani - KBW.

I just wanted to get a sense of your thoughts on the migration of the mix in the portfolio I appreciate the comments on the backlog and the pipeline, but I just wanted to sort of get a sense of where we should expect you guys to go between now and the end of the year or maybe end of the 2009 also is base case assumption assuming no equity raise?

No, equity rise in the reminder of the year.

Yes, that’s right.

Handling the first part of the question, there is a really interesting dynamic in the market now where larger companies are having a very difficult time getting finance given the changes that we have seen in the larger Syndicated Loan market and the High-Yield market. So, while number of deals had slowed in the larger market our view is that the size and quality of those deals has increase. There are number of companies that have to make strategic acquisitions or relate strategic growth capital and really the loan alternative is they come to providers like Ares, on the home second lean or mezzanine at very attractive total returns. So in no situations as I mentioned we are very aggressively moving down the balance sheet from a security standpoint, but not from the total leverage standpoint and given the size of those investments you should expect to see continued rotation in the portfolio out of first lien into second lien and mezzanine, that said you will not see first lien go to zero it's still very critical part of how we originate business and how we think about managing the general risk profile of the portfolio. With regard to our traditional middle market business as I mention that’s a little bit more efficient and we are a little bit more reluctant to move down the balance sheet in those companies right now given where we are in the economic cycle. So, what you probably see us doing there is continuing to use our one stop capability and try to get as much of our capital in from $1 as possible to get drive better risk adjust return those types of situations and then with regard to the equity raise our best guess now is that given the rights offerings current portfolio activity and our debt capacity that we will not need to comeback to the equity markets this year. If we do I think that will be very positive sign as the market opportunity just continues to get better for us and we will would look to do something opportunistically, but looking forward I am not quite sure what's going to happen.

You think the seed to the sub debt portion could get to 30%, the low 30% range as a percentage of the total portfolio by the end of the year?

I do

On the purpose of investments may take existing companies, could you just talk about that, were any of them in on non-accrual or would it just add-on financing for growth?

All add-on financing for growth, but two companies I think we talked about on our last call that are on non-accruals. Have liquidity has actually cash to make the sub debt interest, that its been turned over to the seniors, one of those companies is actually for sale today and the other we are in an active discussion with the private equity sponsors to what a longer term capital structure fix would be. I’ll give you an example of one situation which I think will highlight the current market opportunities as well as the opportunity we see within our existing portfolio which is this investment that we made in the acute care hospital company in the second quarter that’s been an existing portfolio company of or us for about 2.5 years and the company has grown through a series of acquisitions prior to the deal that was done in the first quarter it was financing itself in the syndicated loan market even given the liquidity issues that we’ve obviously spent a lot of time talking about. They came to us directly with an opportunity to provide $95 million of second-lien at very attractive total return in leverage levels. So what we are seeing mostly in the existing portfolio is, we are investing middle market companies that are dynamic, a lot of them grow through acquisition and a lot of them had very attractive organic growth, opportunities that required capital and given our common position with the first and sometimes the only call that they are making.

Does it make sense and can you lock in the funding rates at these levels?

We can I think as we mentioned before we look regularly at our interest rate exposure as we highlighted, it’s actually been a big benefit over the last year for us. If you look at the, spread between our costs of funds and the rates that which we’re deploying capital, right now is continuing to widen as we mentioned. We think that it will continue to do so for the reminder of the year. It’s something that we look at closely as we go through the year and we realize some of our backlog and pipeline and we get a better sense for our fixing and floating rate assets. We may look to better match fund but for now it’s been uneconomic to actually look to locking our cost of funds.

And that sub debts coming in fixed costs, I’m sorry fixed rate?

Yes.

And just rough area of the types of yield that you are seeing on that?

On the sub debt today is getting roughly 2% to 3% upfront fees, stated coupons are somewhere between 12% and 14% or 15% and then, typically hard call protection of another 500 basis points scaling down to maybe a 100 basis point.

Your next question comes from Faye Elliott - Merrill Lynch. Faye Elliott - Merrill Lynch. You’ve raised your dividend in the quarter bringing it, further above your NOI run rate. Can we assume then from that, that you have some level of comfort with the certain level of gains to come and if so, can you give us a little bit more information on that?

Yes, as we have said before it’s challenging to evaluate dividend coverage in quarters where we are growing significantly through equity assurance. So as a dividend strategy you have to look at what’s the earnings capacity of the businesses is once fully invested and the challenges when you look at historical period given the level of activity we've had in the equity market you will see periods of time where we are not covering the dividend from NOI and then we catch up the coverage as we invest the proceeds from equity offerings. If you smooth that out you’ll notice that we have one of the highest dividend coverage from NOI in the peer group. Another thing that we do to support dividend stability and dividend growth is obviously to roll over excess taxable income year-to-year and as Rick mentioned in his remarks for the year we are estimating roughly $8 million of roll over income from 2007 into 2008, which could be used to bridge, the shortfall of NOI to the dividend level and then thirdly, as you point out, we do feel very good about a number of portfolio companies and the prospects for gains. We can't promise it or guarantee it but, we expect to see some capital gains this year that will provide some further stability, but when you look at the again the run rate earnings power of the business once fully funded the dividend coverage is not dependent on those case gains. Faye Elliott - Merrill Lynch. Okay so, you then would imagine that, you would probably get us to about this $0.42 a quarter on a fully invested portfolio given the right environment?

We would hope so.

Your next question comes from Jon Arfstrom - RBC Capital Markets.

Just a follow-up on the fixed versus floating, rate question. Do you have a preference at this point for what’s you’re reporting on in terms of fixed and floating and then do you have a type of rate environment you are managing the balance sheet for?

Yes, we’ve been aggressively moving into fixed rate investments and you can see that over the last three quarters. If you look historically we have the opposite strategy and we actually rode the steepening LIBOR curve very profitably over the last 3.5 years. Our current view is that we were in a flat to rising environment towards to the end of the year and we will keep our eye on that. That said though we still have a very strong preference for fixed rate investments given where our interest rates are now and where we expect them to be in the future.

Mike in your prepared comments you talked about some medium term weakness in the market in general for asset quality not necessarily, specifically Ares, but how do you define the medium term and what level of credit weakness do you think we are likely to see in the industry.

Well if you look historically and assume would be credit for bank loans, the historical average default rate is roughly 3% as I mentioned we are closer to 1.5% at the end of the first quarter, obviously for high yield bond its been higher almost twice that. It’s very likely that we see those levels towards the back end of this year, what we are seeing in the portfolio companies broadly across the platform is interesting. There is still fairly consistent year-over-year revenue growth, but a lot of portfolio companies in the lot of sectors are grappling with all sorts of inflationary pressure on the raw materials and labor side. The other issue we have is, obviously leading up to the current market environment a lot of companies took on a lot of leverage and even in the situation where revenues and earnings where growing, if the rate of that growth slows you could find yourself in situations were people are having credit issue. So medium term for us is 6 months to 9 months from now and our best guess it will start to approach the mean here by the third or fourth quarter of this year.

Your next question comes from Brian Roman - Robeco Investment Management.

Maybe I might have more than two, pick income how big was out in the quarter?

It was $5.4 million for the quarter

Yes, it was $5.4 million just the thick income.

So, that would be under, that’s not the net number that just a line interest for investments?

Yes it’s in the interest income line item.

$4 million, is that change meaningfully and as you are going forward with better terms and conditions do you see less pick out there?

Its roughly consistent, we have been hovering over the last 12 months to 18 months, somewhere between 8% and 10% thick income. I remind people that we had very few securities where they are exclusively thick typically that thick income is being generated on top of significant cash incomes, for example we might have a stuff that investments, but as 14% stated yield, 12% cash, 2% pick and that dynamic given changing so typically -- and the question that Sanjay asked earlier about the types of returns that we’re seeing. We are still seeing in most situations roughly 200 basis points of the stated yield and the subject in the secondary market coming from picking up cash.

Next question is about the share account. Did I hear you correctly that you were made to assume that the warrants were issued as of March 24th? Did you say that?

That’s correct.

What’s the logic there?

The logic is really incorporated in a FASB announcement that essentially it’s -- it doesn’t increase the basic share count, but it does the dilutive share account, and it’s just effectively it’s like a stock options and things like that were for the diluted number you include those that are somewhat of a contingent nature.

And then that all washes out the date of deal as it pleased, it will actually close, correct.

Yes, it will washout throughout the year, that’s correct.

And your NAV was 517, do you know what it would be, closer to the deal assuming March 31 numbers?

I think the additional share count was, probably a little over $1 per share, impact.

So, 517 is closer to 417 all in?

1517.

1517 is now – we’ve flip the page on the transaction and the issuance.

Yes, and I think that the impact of the rights offering was a little over $1 per share.

Your next question comes from Greg Mason - Stifel Nicolaus.

Two quick modeling questions, first the $197,000 of asset management fees from Ivy Hill. How does that flow into your income statement, under what lines?

It’s on the other income line item.

Okay, on a Controlled Affiliate company or non-Controlled Affiliate?

Controlled Affiliate

And your interest rate sensitivity analysis in the queue is that based on the average LIBOR rate from the first quarter change or changes from quarter end LIBOR rates?

It’s on the average change.

Okay perfect and just senses to your largest company and there is a lot of pres on it, FirstLight Financial there has been some stories out there that there is another round of layoffs. Can you talk about what’s going on there and why you’re comfortable with no change in valuation this quarter?

I would not quite say that there has been a lot of press, I think that as some industry lags are prone to do, people look for news where often times there isn’t. I would say that we as investors in that company and the board of that company would be remiss, that they weren’t laying people off in the current financing environment and obviously you can name the financial services company on Wall Street and obviously layoffs are not an uncommon thing today. The way that that business is capitalized is it’s roughly $1 billion portfolio with very low leverage that is locked in for seven years at very attractive rates. The issue that’s facing that company is not that there is a lot of downside risks to the existing portfolio, the existing structure, but simply that we and the management team of that company had very high hopes for growth and market share gains for that business and given the dislocation in the credit market obviously those good prospects that we see in the near-term have changed and in order to right-size the business for the current market opportunity, the prudent thing to do was unfortunately to let a number of people go and so where that situation stands is we have a portfolio that is very healthy, that is generating consistent cash flow given it’s structure and the cost of its leverage and a very talented and sophisticated management team that is looking for ways to maximize value in that investment.

I know the origination can be lumpy, but $2.6 million so far in 2Q seems a little low; any thoughts on the rights offering to track you from originating new investments or any commentary there other than just lumpy business?

No, it’s just lumpy business. Again the right offering was fairly straight forward and while some of the senior management team were on the road for a couple of days, obviously it’s a very large firm and business goes on as usual. As we mentioned we do have a significant backlog in the pipeline and we expect that we will just see some investments closings in the back half of the quarter.

Mr. Arougheti there are no further questions.

Again we wanted to thank everybody for joining our call this afternoon and for your continued support and we look forward to speaking with all of you on our next quarterly call. Thanks again.