Good morning. Welcome to Ares Capital Corporation's Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Thursday, August 5, 2010. Comments made during the course of this conference call and webcast and the accompanying documents contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of the words such as anticipates, believes, expects, intends, will, should, may and similar expressions. The company's actual results could differ materially from those expressed in the forward-looking statements for any reason, including those listed in its SEC filings. Ares Capital Corporation assumes no obligation to update any such forward-looking statements. Please also note that the past performance or market information is not a guarantee of future results. 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, excluding professional fees and other costs related to the Allied acquisition, is the net-per-share increase or decrease in stockholders' equity resulting from operations, less professional fees and other costs related to the Allied acquisition, realized and unrealized gains and losses, any incentive management fees attributable to such realized gains and the income taxes related to such realized gains and other adjustments as noted. A reconciliation of Core EPS, excluding professional fees and other costs related to the Allied acquisition, to the net-per-share increase or decrease and stockholders' equity resulting from operations, the most directly comparable GAAP financial measure, can be found in the company's 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 condition and results of operations. Certain information discussed on this presentation, including information relating to portfolio companies, was derived from third-party sources and has not been independently verified, and accordingly, the company makes no representation or warranty in respect of this information. At this time, we would like to invite participants to access the accompanying slide presentation by going to the company's website at www.arescapitalcorp.com, and clicking on the Q2-10 Investor Presentation link on the homepage of the Investor Resources section of the website. Ares Capital Corporation's earnings release and quarterly report are also available on the company's website. I will now turn the call over to Mr. Michael Arougheti, Ares Capital Corporation's President. Sir, you may begin.

Great. Thank you, Operator, and good afternoon to everyone, and thanks again for joining us. On the call with me today are the senior partners and the senior management team of Ares Capital’s Investment Advisor as well as our Chief Financial Officer, Rick Davis. I hope you’ve had a chance to review our second quarter earnings press release, including our third quarter dividend announcement this morning, as well as our second quarter investor presentation posted on our website. We will refer to this presentation a little later in our conference call. I'd like to start off by briefly discussing recent economic and market events that influence our primary market, update everyone on the progress and benefits that we believe we have realized to date from our recent Allied Capital acquisitions that closed on April 1, and then highlight our combined company second quarter results before I turn the call over to Rick Davis. After Rick provides the detail behind our second quarter results, I'll walk through the recent investment activity, portfolio statistics, portfolio management strategy and our backlog and pipeline before we close and take Q&A. Please note that for ease of presentation, in a number of places, we provide information separately for the legacy Allied portfolio as well as for the Core ARCC portfolio. As we highlighted in our last earnings call on May 10, the capital markets have recently experienced a significant amount of volatility. For a period of time after early May, the market experienced increased uncertainly over sovereign debt risk, financial reform and mixed economic data. This impacted public equity and high-yield markets, which in turn, reduced risk appetite in our market towards the latter part of the second quarter. High-yield volumes softened in May and June from the robust levels reached in April, and spreads…

Thanks, Mike. Beginning this quarter, we will be reporting a number of our core portfolio statistics separately from the legacy Allied portfolio stats so that investors can continue to track the performance of the core ARCC portfolio as well as the progress we are making with respect to the legacy Allied portfolio. Please turn to the financial and portfolio highlight slide in our presentation, which is Slide 3. As Mike mentioned, our basic and diluted Core EPS were $0.32 per share for the second quarter, excluding $0.06 per share professional fees and other costs related to the Allied acquisition, a 4% per share improvement over Core EPS last quarter, excluding $0.03 of such acquisition-related expenses and a $0.01 lower compared to a year ago. Note that the $0.06 per share of professional fees and other costs includes our merger-advisory fee that was expensed this quarter. The core earnings per share quarterly increase was driven by higher structuring fees, an increased yield on our debt investments and higher management fee and dividend income, which was partially offset by lost income from the net reduction in our fundings and the higher interest costs from the unsecured notes we assumed in the Allied acquisition. We had strong net investment gains for the second quarter of $0.44 per share, comprised of net realized gains of $0.06 per share and net unrealized gains of $0.38 per share. In addition, as Mike mentioned, we booked a one-time realized gain of $1.03 per share associated with the Allied acquisition. This gain was the result of our purchase of Allied at a discount to their Net Asset Value. After accounting for our purchase price of approximately $908 million, we booked a gain of approximately $196 million, reflecting the difference between our purchase price and Allied's Net Asset Value…

Great. Thanks, Rick. Now I'd like to say a few words about our recent investment activity, review performance stats for both portfolios, discuss our portfolio-rotation initiatives and highlight our backlog and pipeline before concluding. If folks could turn to Slide 13, you'll see that in the second quarter, we booked 13 new commitments totaling about $410 million, with average commitment sizes approaching $32 million. We hope to continue to consistently increase our average commitment size given our greater ability to underwrite and hold logic commitments. We expect to accomplish this by making larger commitments to our existing target borrowers rather than altering our target area focus to larger companies. As Rick stated, our investments exited were rather significant in the quarter at $681.3 million, which more than offset our gross new commitments by over $270 million. Most of the repayment activity was involuntary from the core ARCC portfolio, reflecting the increased liquidity, repayment activity and velocity prevalent in the market, particularly early in the second quarter. Turning to Slide 14, you'll find more detail behind the specific asset classes of the investments and exits. The table on the left illustrates that we were particularly active with first- and second-lien debt investments, representing 56% and 18% of new investments, reflecting our strategy to move up the balance sheet into higher attachment points as the leverage finance markets transition. A select few of our most significant new commitments included $103 million in senior-subordinated and delayed-draw debt to a healthcare-technology provider, $73 million in second-lien senior-secured and delayed-draw debt to an airport food service operator, $43 million in first-lien senior debt to a collection services provider, and $33 million in subordinated notes in the Senior Secured Loan Fund to finance a post-secondary education provider. These investments have an aggregate yield of 14.2% at…

[Operator Instructions] And our first question comes from John Hecht from JMP Securities.

The first one is just looking at the facts for the quarter. You had a pretty substantial increase of structuring fees, dividend income and other income. Are these good new run rate figures to think about in a pro forma situation or are there some noise in there that we should think about?

Well, you have to look at both categories separately, John. With regard to dividend income, I think that's much more of a steady-state number based on investments that have already been made and are in the book. I think as everybody is aware, structuring fee income is obviously a function of new investment activity. So as we continue to grow the book, I think you should expect to see continuing structuring fee income, but it will be a function of the size of the new investment portfolio on a quarter-by-quarter basis.

And then in thinking about the relatively high turnover of the Ares' core portfolio and the payoffs, what are you seeing in the market -- what's driving these payoffs? And what type of rate would you expect through the second half of this year?

The amount of activity that we saw, or repayment activity we saw, really came in a pretty significant way early this quarter, and subsided towards the end of the quarter. As we talked about in the prepared remarks, a lot of that was really being driven by significant inflows into the high-yield market and risk aspect in that market early in the quarter, and we’ve not experienced that towards the end of the quarter as well. Also as we highlighted in the prepared remarks, we don't expect our repayments to exceed our new investments in Q3 based on what we see in front of us today. If you were to go back and look at our historical averages, even through the downturn, we were experiencing roughly 20% to 30% annual velocity in a portfolio. So the best thing I could point you to is to be to look at the historical experience as a proxy for what you could expect in a portfolio like ours.

Okay. And final question is I wonder if you could characterize the pipeline. I know you did mention that you expect to increase the average size of commitment. But are you changing your focus in terms of where you might invest in a capital structure? Will that just change over time with something like a Unitranche Fund at your fingertips?

Yes, I think as we mentioned, quarter-to-date, Q3 to date, most of the new investment activity is occurring with the Unitranche product either within the Senior Secured Loan Fund or without the Senior Secured Loan Fund. That's a function of two things: number one, it's an extremely compelling product to borrowers, and that provides a good blended cost of capital, certainty of closing, et cetera, et cetera. It's also driven by our view that, that offers an unbelievably attractive risk-adjusted return. And so it's a win-win for us as the lender and a win-win for our borrowers. I think generally speaking, given where we see interest rates and given where we are in the recovery, I do think we have a bias towards Unitranche and floating-rate Senior Secured Loan product. But given the scope of our origination activity, we continue to see attractive mezzanine investments. And if we do see them, we're obviously going to invest in them. But generally, I think you'll see a bias towards off the balance sheet investment.

Our next question comes from Greg Mason from Stifel, Nicolaus [Stifel Financial Corp.] Greg Mason - Stifel, Nicolaus & Co., Inc.: Great. I wanted to spend a little bit of time focusing on the liability side. First, the interest expense in the Q, you reported $15 million of Allied debt yet, kind of multiplying the principal times the coupon rate, that was $12 million. Can you talk about the difference? And then, the remaining interest expense of $8 million was kind of in line with last quarter, yet your borrowings declined by about $200 million excluding Allied. Can you talk about the movements in the interest expense?

Yes, I think part of it is you need to also include the accretion with the discount, the purchase accounting discount of the unsecured notes. And then, we also had a full quarter of amortization with the upsized revolver that also flowed through this quarter. So that may help as you're trying to reconcile. Greg Mason - Stifel, Nicolaus & Co., Inc.: Okay. And can you talk about, do you want to keep the Allied debt out there given that it's a significantly higher rate than your current borrowing credit facilities? What is your thought towards that debt?

Yes. I think in order for us to successfully achieve our objectives over a long period of time, we have to be focused not only on cost of capital, but diversity of funding sources. Having a presence in the unsecured markets is important to us in developing those relationships. I think it's key to the long-term success of our business. The nice thing is the debt that we inherited, waterfalls nicely from maturity standpoint, and we have a lot of options in how we choose to ultimately resolve those maturities. We're obviously in a rising interest-rate environment, or at least, we believe that we will be. And in that type of environment, we have to look to all of the debt markets to get not only efficient pricing, but efficient access. So yes, I think for the time being, our goal would be to leave those out and either resolve them at maturity or prior to maturity through new debt issuance or extensions. Greg Mason - Stifel, Nicolaus & Co., Inc.: Great. And then can you talk about for alternative debt sourcing, the ability of new on-balance sheet securitizations, what you're seeing in that market? We saw Galav just closed one. What’s your thoughts there?

Yes, I think the Galav transaction is a pretty good indicator of where that market is today. Generally speaking, I think we talked about this on our last call as well. Depending on the nature of the asset and some of the restrictions that you would incur in a securitization, you can lever middle-market assets somewhere between two and 3x. And your cost on those, excluding fees, but just on a spread basis is probably going to be somewhere between LIBOR 200 and 300, probably closer to the high end of that range. If you look at where that market had been, obviously, leverage is lower and spreads are wider. Given the amount of liquidity that we're finding still remains in the bank-loan market, as evidenced by the fact that we're still bringing people into our accordion feature, at LIBOR 300 there's so much more flexibility in terms of how you manage your balance sheet through bank lines that for us, at least for the time being, while we're looking at the securitization market on a relative basis, it’s not all that attractive to us, but clearly signs of life in that market, and I think we'll continue to see improvement there as well. Greg Mason - Stifel, Nicolaus & Co., Inc.: To follow up on John's question on the structuring fees, are those fees generally paid on the commitments or the fundings? You had $409 of commitments, but $275 million of fundings. Which number should we think about going forward for structuring?

Generally speaking, it's paid on the fundings. I think from a modeling standpoint, you'll get a much better proxy. This quarter was slightly different in that, as we mentioned in the prepared remarks, we did provide a mezzanine backstop to a transaction as a commitment that actually did not fund. So from a percentage standpoint, it's actually a little overstated if you try to back into the actual fee percentages. Generally speaking in the market today, we're getting somewhere between two and four points of structuring fee for new commitments. Obviously, there's going to be some play between the commitments and the fundings to the extent that we're syndicating. We obviously tend to syndicate at a lower fee than what we generate as an underwriter.

Our next question comes from Jim Ballan from Lazard Capital Markets.

I was looking at the non-accrual rate. It was considerably lower than what we had estimated, just looking at the Allied book as of the end of last year. And so, I was just wondering where -- it looks like it was just based on what I saw in the slides, there wasn't a lot of sales of Allied non-performing assets. So were there a number of assets on the Allied side that either came out non-accrual? Did you invest incremental capital into some of those to bring them off non-accrual? Can you just comment on that?

I think it's a combination of all of those things. We were very active, or I should say, Allied was very active in working through the portfolio prior to the April 1 closing. And so a lot of that work was getting done prior to our acquisition on April 1, where they were, in fact, disposing of some of the more challenged names in the portfolio. Since we have acquired the portfolio, some of it has come from either restructuring and rehabilitating those companies, and some has come from actually selling some of those companies. So it's really a combination of all of those things. Lastly as you saw, and we're quite happy with it, but the Allied portfolio showed 10% cash flow growth on flat revenues year-to-date. And so, you also have the benefit of just improving underlying performance that helps not only those who are already on non-accrual, but obviously those that may have been close.

Jim, the other thing too, if you were comparing or looking at the 1231 Allied balances, it's obviously that, that's a little different from the numbers we're reporting as our fair value at 41 is now our cost basis. So that may be part of the difference you’re looking at too.

Yes, I was trying to look at it on a cost basis. But that’s helpful. The other thing I just wanted to follow up here on the capital structure questions. And when you think about -- obviously, you have kind of two capital structures that were put together here. When you think about kind of the optimal capital structure, of where you'd like to be within a reasonable time frame, how do you think about that? I mean, are you happy where you are? Is there a way that you think you'd be better off?

Yes. We're happy where we are. Although we'd be happier if we had longer duration and cheaper costs. So we're looking at all of the available avenues out there. That includes unsecured notes in the private and public markets. That includes unsecured or secured notes in the retail market. It includes looking at various convertible structures. It includes the securitization market. It includes continuing to try to tap the bank-loan market. So our goal is to manage our balance sheet as aggressively as we can. I think when you look at where the portfolio is positioned relative to the liability side of the balance sheet, we're actually quite happy with it. I think we can continue to improve it from here, but by no means are we unhappy. I think the key is, there's a lot of volatility in the capital markets, generally speaking. Windows in all of our available funding markets are opening and closing with more frequency and much more volatility. So we're adopting the view that we're going to keep an eye on our debt capacity, we're going to keep an eye on our interest rate exposure. We're going to keep an eye on our pending maturities, and we'll continue to try to optimize it. But I think the good news is while there is always a sense of urgency about getting that right when you look at the maturity schedule and the net spreads that we’re able to generate off of our current balance sheet, it's still very compelling.

Our next question comes from John Stilmar from SunTrust.

Two quick questions for you, the first of which has to do with the fair value, the write-up on the core portfolio after you've acquired Allied, which was I think $0.44 this quarter. The question really is, is the growth from better-than-expected portfolio performance? The statistics you referenced in both in Allied and your own portfolio are certainly impressive, but it sounds like you also may have anticipated those. So I guess, my question comes in is, is this really a relative of how you're valuing the portfolio because the structures are different than current market conditions? Or is it because the fundamental business performance is better than your anticipation in aggregate? I know there's lots of moving pieces, but wondering if you could kind of broadly characterize sort of the general trend underneath in some of those vests [ph 1:14:26].

Yes, I think it's broad-based and we mentioned it in our prepared remarks. But the good news was, it was across asset classes, across companies and across industries. It was clearly a combination of improved underlying revenue and EBITDA performance in the portfolio, as well as just looking at the data points in the market with higher leverage, obviously, helping mark-to-market valuations on certain companies. And as we also mentioned, there was a fair amount of rallying that occurred in the structured-products market, generally. And so there was a fair bit of appreciation in that part of the portfolio, but I can't attribute it to one of those things disproportionately. It was really all of those things.

Okay, great. And then obviously, the portfolio rotation story has been certainly very much discussed for this year. But as I look at your own page, Slide 15, the debt securities and non-accrual, and then looking through your schedule of investment, the average cost fair value is if you're holding those it’s about $0.80 on the dollar. So from here on out, should we really be focused on the debt securities or how a non-accrual is really having the most opportunity for near-term portfolio rotation? Or should we look at the performing securities because they might be more liquid? How should we be thinking about over the next quarter or two in sort of gauging your performance?

I think one of the reasons we laid this out and again, we'll continue to report against this and look for new ways to help you all understand what we're trying to accomplish here, but I would look at all of these things, John. If you look at, obviously, performing equity investments, those don't carry any current yield in a market such as the one we're in now. Those are fairly liquid investments and those have as much impact on our ability to generate income as it does if we were to sell some of the performing investments as well. So I would expect that you'll see continued changes in each of these categories as the year progresses.

Our next question comes from Sanjay Sakhrani from KBW. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc.: It seems like the credit metrics was pretty good and some of your commentary seems to indicate the worst may be over, or the worst may be behind us. And I was just wondering if you guys felt that way about the portfolio and kind of what the portfolio of companies were telling you guys as far as the economy was concerned.

Yes. I think if you look at the revenue and the EBITDA trends that we’ve reported out of our portfolio over the last 12 to 24 months, I think consistently you'll hear that. There may be some sectors where you're not hearing that. But I think generally speaking, people have made appropriate adjustments to their operating cost structures that they're feeling pretty good about the world today, and they have good balance sheet liquidity, et cetera, et cetera. So yes, it does feel like the worst is behind us. It's interesting though because Ares as a credit manager has a slightly different view and sentiment. As we've said in our prepared remarks, as a credit investor, we actually favor slow growth to no-growth types of economic environments because that's where we generate outsized risk-adjusted return. So we don't require meaningful economic recovery to generate outsized return unlike you would see if you were heavily weighted in the equity-asset class. So yes, I think the worst is definitely behind us. A lot of the volatility right now in the public markets feels sentiment-driven and maybe it's difficult to reconcile with some of the fundamentals, but the data continues to be mixed. So I guess that’s it. We feel that we’re in a recovery. Our portfolio companies and the performance of those companies would seem to corroborate that. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc.: As far as like the growth, where is that going to come from in terms of asset class, industries and sourcing, maybe over the next three to six months?

Well, you look at where we're sourcing business, and we're sourcing it across the entire country from the sponsored community and the non-sponsored community. We do believe that we have very compelling, competitive advantages both in terms of the scale of our origination capability and the scope of our product set. So we continue to invest very heavily in originations to try to drive good credit decisions, and I don't think that, that's going to slow. As I mentioned earlier, though, when you look at where we're focusing and where we're getting the most traction, the Unitranche product, whether it's in the Senior Secured Loan Fund or not, seems to be a very compelling product in the market today that is getting a lot of uptake. So I'd expect to continue to see that, that product represent a fairly sizable piece of our origination numbers. It's interesting because I think you hear different things from different people depending on the size of their platform and the breadth of the relationship network. We look at our pipeline and our backlog today, and we look at the amount of activity that's flowing through the shop, and we are extremely busy. The pipeline is growing. There's quality deal flow coming through the house. And so as we mentioned, Q3 we expect that we will actually begin to net grow the assets again, and I don't expect that trend necessarily to reverse itself.

Our next question comes from Vernon Plack from BB&T. Vernon Plack - BB&T Capital Markets: Mike, I'm trying to get a sense for, from a modeling standpoint, there is an agreement that you have where you could defer up to $15 million in base management and incentive fees if certain earnings targets are not met. And I don't know what those earnings targets are, but will you in fact -- do you think you’ll actually be deferring some of your base management and incentive fees in order to hit targets?

It's still too early to tell, but based on everything that we're seeing to date and based on some of the things that hopefully we've demonstrated this quarter in terms of our ability to show the accretion in earnings and NAV, at least as we sit here today I don't think that we're going to hit that hurdle. And therefore, I don't think that we will need to defer fees in order to prove that out.

Just to keep in mind too that, that's a deferral so we would continue to accrue that fee. Vernon Plack - BB&T Capital Markets: Sure. What are those earnings targets? Have you disclosed that?

We haven't disclosed that.

Our next question comes from Don Fandetti from Citigroup.

Michael, I mean obviously, it looks like the Allied acquisition’s shaping up pretty nicely for you. As you sort of look over the landscape, do you see that as a model? Would you consider other deals? And also as your company gets bigger, do you sort of hit that law of numbers where it's harder to grow and you feel compelled to make bigger bets?

Two separate questions; I'll handle the first one first. You should assume that if there is a company for sale or there's a portfolio for sale in our core market or in an adjacent market, we're looking at it. That said, we're not seeing very many opportunities either through acquisition of portfolios or companies that are attractive to us right now. The unique opportunity that was in Allied was the scale of the portfolio, the timing and the overlap of our skill set and capital base with that portfolio opportunity. The reality of it is given the rally in the market, the valuation on some of the portfolios that are "for sale" are just really not that attractive. And it's all well and good to try to acquire something to show that you can do it, but if you can’t actually say that it's accretive to earnings and book value in a relatively short order, it's difficult to justify putting the time and resource in capital behind it. Secondly, most of those opportunities are actually quite small. And when you look at what we believe is the opportunity in front of us in the new issue market and our continuing access to capital, it's hard to justify putting the amount of resource it takes behind that type of activity versus just going out and continuing to grow the book on a regular-way basis. So we'll continue to look at things and if there's something that makes sense and we can be opportunistic, we'll obviously do it. But I think one of the nice things about Allied is, we timed it well and the market recovered. I'm not quite sure that there are very many Allied-type opportunities left out there in the world. The second question, I apologize, I can't actually remember what it was.

It was just more that you're a larger company. Do you feel like there's enough opportunities in your footprint to grow the portfolio? Do you feel the need to...

I think this is why we're investing heavily in origination. And as I mentioned in our prepared remarks, a lot of the growth in the short term is going to come from reducing the number of portfolio of companies that we have and increasing the average final hold position. But we don't expect to increase the average final hold position by changing our strategy or changing the way that we approach the market. It's really to become more relevant and more impactful than our existing market. So that's fairly straightforward. If you have a $50 million EBITDA company that's looking to borrow $250 million at a different point in our development cycle, maybe we were holding $25 million. Whereas today, we could hold $150 million and still have it represent a 3% portfolio position size. So I'm pretty confident we can maintain appropriate diversification without taking bigger bets relative to the portfolio. But I do think that you highlight an issue that we will necessarily have to grapple with years from now, which is at some point, obviously, the growth of the portfolio will be always challenged by continued velocity in the portfolio, but we're not quite there yet.

Due to time constraints we have time for two additional questions. Our first question comes from Jasper Birch from Macquarie Capital.

Just starting out looking at the 14.29% yield on the Allied book, can you remind us what portion of that is due to purchase discount accretion? And does that include any prepayment assumptions and sort of what is your outlook for prepayments on the book?

We had about $3.5 million of total accretion coming through in the second quarter to be included in that yield. Your second question, I'm sorry.

And then just sort of modeling out prepayment assumptions on the book, I know that you said this coming quarter you expect less divestiture than investments, but on the Allied book specifically, do you have any visibility, any prepayments that might be coming through?

No, only what we've done to date is a good indicator of the types of things that we think we can do. But again, our goal is to rotate that book as aggressively as we can. It's obviously going to be lumpy and it's going to be a function of where the markets are, but I think you'll continue to see pretty significant movements in that portfolio as the year unfolds.

Just looking at your taxable income. Clearly, could you remind us what the actual number was in the quarter? And I mean just looking at your dividend, I'm assuming that you're committed to maintaining it even if you have taxable-income shortfall?

We don't disclose the taxable-income number and have not on a quarterly or – we will give some information at the end of the year as to what that is, but we don’t disclose that.

Okay, great. FirstLight Financial, I saw it was written down just slightly in the quarter. I was wondering what’s going on with that. Do you see upside in the name? And was the, sort of, quarter-over-quarter right now, is that just due to spread widening in general or company-specific?

FirstLight is effectively a portfolio that is in wind-down as we've talked about before. Ivy Hill Asset Management took over the management of that portfolio about a year ago. The good news is the velocity on the book has been pretty significant and continues to shrink, which is always good when you're seeing a wind-down. The challenge is obviously the more velocity you see in a wind-down, the more challenged your IRR becomes as you don't capture excess spread. So the write-down was really a function of two things. Was number one, a change in the spread environment. And number two, frankly, just increased velocity in the portfolio, which constrained the IRR opportunity over time. What we’re playing for there, frankly, is we want to get all of our principal back that we made in the original investment. I think given the nature of that investment at the time that we made it, that would be a big win. Given where we have written it down to, obviously, we believe that it’s now written down to a level to generate an appropriate IRR based on what we're seeing in the market today.

And our final question comes from Faye Elliott from Bank of America-Merrill Lynch.

Is there room for additional gains to be recognized from the Allied purchase? And can you just give a little bit of color around why, why not?

Yes. I think the answer is yes, that opportunity will come either through the equity book continuing to appreciate and us being able to realize gains upon the exit of some of our equity investments. As we mentioned, we've seen some pretty meaningful improvements in our structured products portfolio. And I think as those markets continue to heal there’s opportunities in that book as well. And when you look at some of the names that we inherited and where we mark them, I do think that there's still upside to those marks over time, but depending on whether it's performing or not performing, it's obviously going to take more or less time and require more or less incremental capital. I think the nice thing about the deal given when we bought it and where we bought it, if all we did was recover fair value for it, it was a wonderful transaction for the shareholders economically, not to mention all the qualitative advantages we had. But obviously, that's not what we're playing for. We’re looking to continue to drive both gains and incremental income from rotating the portfolio. So, yes, I think, it's a part of the opportunity. I don't think it’s as big of a part of the opportunity in the short-term as the income rotation, but over a long-term I think it could be pretty meaningful.

And then what would your strategy be for, I guess, returning that or passing it along, given that it is a bit chunky? I assume you wouldn't want to increase the dividend.

Yes. I don’t think we’re, as we said, we believe that our dividend should try to approximate our sustainable core earnings. To the extent that we have capital gains, we'll make that determination when and if we have them. But again, I think all things being equal, we would probably roll those over versus pay them out.

Ladies and gentlemen, that does conclude our conference call for today. If you missed any part of today's call, an archived replay of this conference call will be available one hour after the end of this call through August 20, 2010, to domestic callers by dialing (877) 344-7529 and to international callers by dialing (412) 317-0088. For all replays, please reference conference passcode 442579 followed by the pound sign. An archived replay will also be available on a webcast link located on the homepage of the Investor Resources section of our website. And at this time, I would like to turn the call over to management for any final remarks.

Great. Sorry to have kept everybody so long, but we really do appreciate everybody spending time with us today. We're excited about everything we were able to accomplish this quarter, and really look forward to giving everybody a progress report at the end of next quarter. Thanks, again.

We thank you for attending today's presentation. That concludes today's conference call. You may now disconnect your telephone lines.