Stacey Thorne – IR Leonard Tannenbaum – Chief Executive Officer Bernard Berman – President William Craig – Chief Financial Officer

Joel Houck – Wells Fargo Troy Ward – Stifel, Nicolaus & Company Robert Dodd with Morgan Keegan Dean Choksi – UBS Ram Shankar – FBR J.T Rogers – Janney Montgomery Scott

Good morning and welcome everyone. My name is Stacey Thorne.

I am the Head of Investor Relations for Fifth Street Finance Corp. This conference call is to discuss Fifth Street Finance Corp’s second fiscal quarter ending March 31, 2011.

I have with me this morning Leonard Tannenbaum, CEO; Bernard Berman, President; and William Craig, Chief Financial Officer. Before I begin, I would like to point out that this call is being recorded.

Replay information is included in our April 8, 2011 press release and is posted on our website www.fifthstreetfinance.com. Please note that this call is the property of Fifth Street Finance Corp.

Any unauthorized rebroadcast of this call of any form is strictly prohibited. Before we go into our earnings portion of the call, I would like to call your attention to the customary Safe Harbor disclosure in our April 8, 2011 press release 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 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.

To obtain copies of our latest SEC filings, please visit our website or call Investor Relations at 914-286-6811. The format for today’s call is as follows.

Len will provide an overview, Bernie will provide an update on our capital structure, and Bill will summarize the financial, and then we will open the line for Q&A. I will now turn the call over to our CEO, Len Tannenbaum.

Thank you Stacey. The wall of liquidity engineered by virtually zero interest rates and the implementation of QE2 is clearly heading the economy.

Though the Federal Reserve is indicating that inflation in tempered, don’t be misled. Companies are raising prices in order to pass along higher input costs.

Wages are generally rising, and the underlying economy is starting to get back on track. The easy monetary stance of Federal Reserve will create a great deal of inflation that eventually will have to be addressed.

We believe our approach to fix our liabilities and float our investments will bear fruit when the fed plays catchup later this year. We’ve enhanced our disclosure in the 10-Q with the amount of floating rate loans and the floors they are subject to, as well as the pro forma income increases we expect to see at various interest rate levels.

As you’ll see, we realized an immediate benefit to our earnings as rates begin to rise. The highlight since our last earnings call was Fifth Street receiving an investment grade rating.

This rating enabled us to lower our cost-to-capital further and ladder out our liability structure. Our recent convertible note offering, which is five-year unsecured, fixed rate debt at 5.375% allows us to enhance the security to our senior debt providers and prepare for an inevitable upward move in rates.

The $150 million five year fixed rate convert, coupled with approximately $138 million of fixed rate ten year SBA debt, and currently undrawn three year credit lines, give us a long-term fixed rate, low cost liability structure. While we have only experienced $13.6 million in refinancings and paydowns in this quarter ended – the quarter ended March 31, 2011, we believe the level would increase as the year progresses.

This should generate an income boost later in the year due to the prepayment penalties and the additional income from the points we received at the time of origination. Turnover of investments is an important point component of earnings for BDCs as refinancings typically raise short-term earnings for those companies who take the conservative approach of amortizing the origination points over the life of loan as we do.

While we expect the quarter ended June 30, 2011 to be weaker for originations, than the previous two quarters, our pipeline in both number of deals and dollars is very robust. Because we originate almost all of our securities, it takes 120 days on average to convert a deal from when it enters the pipeline to closure.

All of indicators point towards stronger levels of M&A activity as the year progresses. We are very pleased to have a second consecutive quarter of over $200 million of originations during the quarter just ended March 31.

I believe we are seeing high growth in deal volume for several reasons. Private equity sponsors view us as a top provider of one-stop middle market solutions.

We’ve gained significant momentum from our recent hires and expansion of the Chicago market. And we are able to offer a full suite of products including senior-only, one-stop, and mezzanine.

In addition, the ability to commit to an entire transaction and syndicate it down later provides us with some additional pricing power. We firmly believe it is still the preference for private equity sponsors to partner with the trust of lender, rather than rely on the syndicate group to complete transactions.

We have seen continued positive momentum in the credit quality of our assets. Category 3, 4, and 5 rated securities now account for approximately 3% of the portfolio as of March 31, 2011.

This is a positive trend that we previously talked about and we continue to expect the portfolio quality to strengthen further. Following our approach to be the most transparent in our industry, we will continue to release the debt-to-EBITDA of our rating tranches.

This quarter we saw a dramatic improvement in the largest basket; our 2 rated securities. And the overall debt-to-EBITDA of the entire portfolio has now declined to 3.3 times debt-to-EBITDA.

The investing environment continues to change as highlighted in our recent news letters. We signaled some rate compression last quarter, which has continued as the supply of new deals, which we do believe is coming soon, is still less than the demand from lenders.

While our rates continued to get compressed for the $10 million plus EBITDA sponsor buyouts, premiums are being paid for the one-stop approach and for our relationships. We were fortunate that the majority of our portfolio took advantage of a higher return environment as we are one of the few BDCs that had ample capital to invest during the credit dislocation.

We expect that our vintage 2008 and beyond credit portfolio to generate strong returns as the economy continues to recover. As you’ve heard from me on previous calls, we remain focused on a potential for inflation to increase, given the continued pro-liquidity stance of the Federal Reserve.

Our continued increase in the percentage of floating rate loans should enhance our NII as interest rates increase over the coming years. The current percentage of our debt portfolio with floating rates is approximately 60% with the vast majority of our pipeline still consisting of first-lien floating rate securities.

We expect our portfolio to increase to 70% of floating rate loans within the next 12-months, positioning us well to take advantage of an eventual increase in interest rates. Some of our more recent loans have either low or no LIBOR floors, as we seek to maintain our spread while capturing additional economics when interest rates do rise.

We believe that our strong brand of relationships allow us to capture premium pricing over the market. The market is also differentiating the lenders based on balance sheet capacity.

Our recent investment grade rating, coupled with our large credit capacity gives us comfort – gives comfort to our customers that we want expansion capital available to them when they need it. Our reputation in the middle market as a leader as well as our market share should continue to grow as we add to our platform and provide a high level of service to our private equity sponsors.

We are very excited about the opportunities in the middle market as we expect M&A activity to continue to increase throughout the year. We plan on continuing to take advantage of the current economic climate to gain market share with top quartile private equity sponsors as well as to capture strong risk-adjusted returns.

First-lien loans currently stand at an all-time high and represent over 87% of our portfolio at fair value. We do expect to move towards our goal of 75% first-lien and 25% second-lien and mezzanine over the balance of the year.

Our strong first-lien position however, gives us one of the most secure portfolios of any BDC. Our investment grade rating and our addition of five-year unsecured debt to liability structure should lower our cost of capital over time.

I will now hand the call over to our President, Bernard Berman.

Thanks Len. We were very pleased in April to complete an offering of $150 million of unsecured convertible senior notes.

The notes bear an interest rate of 5.375% per annum and have a five year maturity. The notes are convertible into shares of our common stock at an initial conversion price of approximately $14.76 per share of common stock.

However, we also included a feature called the contingent conversion or CoCo requirement. The CoCo requires us up until the last four months of the five year maturity, the notes cannot be converted into common stock unless the share is traded at premium of at least 10% over the conversion price for at least 20 of the last 30 trading days of the calendar quarter.

At the initial conversion price that means the stock would have to trade above approximately $16.24 and stay there for 20 out of 30 trading days. Not all of the recent BDC convertible offerings have this feature.

The reason we included it is that we really want to keep the debt outstanding for all five years or as close to five year term as possible. That’s because we think 5.375% is a very attractive rate for a five-year fixed rate debt and because this will better help us to manage toward our goal of leverage of 0.6 times.

I also want to emphasize that the notes are unsecured and contain no financial covenants, making them an even more attractive source of capital. One of the reasons we were able to issue them on these terms is that we received an investment grade credit rating from Fitch Ratings in April.

Fitch assigned us a long-term issued default rating, secured debt rating, and unsecured debt rating of BBB minus. This should help us continue to lower our cost-to-debt capital in the future.

In March, the pricing on 65.3 million of SBA debentures was locked at a rate of 4.084% per annum for ten years. Not only is this an excellent rate for ten year fixed rate debt, but it will also serve as a hedge against rising interest rates.

We also are in the process of applying for a second SBA license which we hope to receive before the end of the year, and ex-granted would give us another $75 million in debt capacity. With respect to our bank credit lines, as we discussed in our last call, we expanded our ING led credit facility to $215 million in February.

And we are in discussions with additional lenders about having them join the facility. Now that we have received an investment grade credit rating, we expect to be able to continue to lower our cost of debt.

I’m now going to turn it over to our CFO, Bill Craig.

Thanks, Bernie. With respect to our balance sheet as of March 31, 2011, total assets were $995.7 million, which included total investments of $939.7 million at fair value, and cash and cash equivalents of $38.6 million.

Liabilities were $284 million, which included a $138.3 million of SBA debentures and $134 million of borrowings outstanding under our credit facilities. We’ve had substantial NAV growth quarter-over-quarter, with net assets of $711.7 million, or $10.68 per share as of March 31, 2011, up from $574.9 million or $10.44 per share as of December 31, 2010.

With respect to our operations, total investment income for the three-months ended March 31, 2011 was $29.7 million. This was comprised of $25.8 million of interest income, including $3.5 million of PIK interest and $3.9 million of fee income.

We ended with net investment income for common share of $0.27 and earnings per common share of $0.25. For the three-months ended March 31, 2011 we recorded net unrealized appreciation of $0.4 million.

This consisted of $1.4 million of net unrealized depreciation of equity investments, offset by $0.2 million of net unrealized appreciation on debt investments, $0.6 million of net reclassifications to realize losses and $0.2 million of net unrealized depreciation on our interest rate swap. Our weighted average yield on debt investments at March 31, 2011 was 12.8%, which included a cash component of 11.3%.

Our average portfolio company investment was $19.6 million. This compares to the previous quarter with a weighted average yield on debt investments at December 31, 2010 of 13.2%, which included a cash component of 11.4 % and our average portfolio of company investment of $19.5 million.

A point worth noting is that for the six months ended March 31, 2011, we recorded net PIK income of $6.6 million and have collected $6.7 million of PIK interest in cash over the same period. With respect to the portfolio, during the quarter ended March 31, 2011, we invested $218 million across ten new and 14 existing portfolio companies.

At March 31, 2011, our portfolio consisted of investments in 55 companies. At fair value, 98.8% of our portfolio consisted of debt investments and 87.5% of the portfolio were first-lien loans.

As of March 31, 2011, we have stopped accruing cash interest, PIK interest and OID on three investments, which had not paid all of their scheduled cash interest payments. At March 31, 2011, approximately 60% of our debt investment portfolio at fair value bore interest at floating rates.

With respect to our ratings at March 31, 2011, the distribution of our debt investments on the 1 to 5 rating scale at fair value was as follows. The percentage of one and two-rated securities was 97.2% in comparison to 94.5% as of December 31, 2010.

We are closely monitoring all of our investments and continue to provide proactive managerial assistance. Concerning our dividends, earlier this week, our Board of Directors declared the following monthly dividends for our four fiscal quarter of 2011.

$0.1066 per share, payable on July 29, 2011 to stockholders of record on July 1, 2011; $0.1066 per share, payable on August 31, 2011 to stockholders of record on August 1, 2011; and $0.1066 per share, payable on September 30, 2011 to stockholders of record on September 1, 2011. I would like to turn the call back to Stacey to open the lines for Q&A.

Thank you, Bill. Before I open the line for questions, I would like to remind everyone that for the months that Fifth Street doesn’t report quarterly earnings, we generally release a newsletter.

If you want to be added to our mailing list and receive these communications directly, you can either call me directly at 914-286-6811 or send a request by e-mail to [email protected]. Thank you for participating on the call today.

Lacey, can you open the line for Q&A please?

Thanks and good morning. You know, I guess there’re two things that you guys seem to be bucking the trend of the industry.

One is, your senior papers still have double-digit yield. There’s not much yield compression, which we think is you know, perhaps 300 basis points or 400 basis points over what other BDCs are getting on first-lien investments.

And the other – other is repayments. You guys seem to be – I don’t know renewing is not the best word, but you guys certainly seem lower repayment.

So maybe walk us through those two dynamics, how much it has to do with your origination franchise, the size of the company, and might as where you invested in ’09, 2010, why we are not seeing a higher level of repayments relative to some other BDCs? Thanks.

So let’s start with the first one. So, if you look at through the structure of our securities, part of what you will see is Term A and Term B notes.

And the Term A has always less interest rate than the Term B. The Term B is typically a bullet.

The Term A is amortizing over life of loan. If you amortize down your cheaper piece of paper and you keep your more expensive piece of paper in a static environment yield thrice [ph].

So that’s one thing that consistently gives us a lift you know, during the quarters. You’ve seen weighted average yield drop from 13.2 to 12.8.

And I think that’s in line now with many of our peers. However, as you pointed out, having 87% first-lien portfolio is safer than most.

So, the disparity that I would – the disparity that I would say between the two is, what I pointed out to be our 2008 and 2009 assets, which were done 400 basis points higher than today’s pricing, 300 basis points higher. And we – we do not mark them up, using the mark-yield approach path, that’s prepayment penalty.

So even though they are marked maybe only 100 or 101, these are very high yielding securities that in today’s market clearly would realize a lower yield. The second – the second question was…

Repayment why are we seeing…

Oh repayments. Much of the portfolio is still relatively new and is protected by non-core provisions and high prepayment penalties.

That’s part of the reason. And I think the other part of the reason that we are not seeing higher prepayments is really there is a lot of frictional costs for the equity sponsor to refinance this out.

They have to pay new points upfront, they have to deal with a new relationship, they have to pay new legal fees. And most likely they – they are pretty happy with us as a partner.

In the cases where it’s dropped for example, to less than 2.5 times debt-to-EBITDA, we often cut the rates, 50 basis points or 75 basis points to keep the loan, because it’s a great loan that we have been in, and why not keep it. And with a great sponsor that’s very supportive.

So, our repayments really have not accelerated and we don’t really expect them to materially grow over the course of the year, though you definitely will see repayments.

All right. Thanks for the detailed explanation Len.

No problem.

Great. Hey Len, can you tell us on the ING lines?

I believe previously you had an unused fee of – 250 basis points if you don’t use half that facility. Can you talk about, as you have restructured that, is that still in there?

And obviously could that be a negative impact, post the convertible debt offering if that gets paid down.

So clearly when you do – when you did that convertible offering, in paying down revolver debt with little bit more expensive debt, and having an unused fee for a period of time, it’s definitely costly in this quarter. But the unused fee has dropped dramatically as we’ve restructured the agreement from $90 million to $215 million [ph].

We have lowered the unused fee to 1%. And we’ve also – we’ve also really worked at on last time, as well as we also lowered from $250 million to about $200 million.

So the unused fee in both cases, you know, dropped somewhat, which should help us in the quarter.

Great. Can you tell us of your floating rate investment you have.

How many of those have LIBOR floors today and kind of what’s your average LIBOR floor?

That – it’s definitely disclosed into these tables in the Q. I don’t have the answer, but they are fully disclosed, where the floors are, and how much we benefit from interest rate increases.

What I will say is many of the new loans have 1% floors or no floors but we are still keeping the spreads. So over time, we are even going to have a bigger lift, if and when – the answer is really when interest rates start to increase.

Great. Thanks so much Len.

Actually hello, I am fortunate to say that my question was just answered. Thank you.

No problem.

Hi, good afternoon and congratulations on the investment grade rating from Fitch. Can you talk about where you are with the other rating agencies, and getting a second investment grade rating?

Can we talk where we are on the other agencies – rating agencies? We obviously look at all of them and look at how they view our industry, look at how our peers are rated.

We believe on a financial basis, obviously that we fit investment grade rating regardless of where we are rated. But Fitch was the rating agency that we chose to go to first for this offering.

And I assume overtime we will go to the other ones.

And then, do you step down in price in the ING facility? Does that just require one rating agency marking investment grade?

It does require only one rating agency. But it’s BBB not BBB minus, we think that we are going to get partial credit for having a BBB minus rating and we expect eventually, as we continue to grow and grow our platform and grow our assets and perform to achieve a BBB rating, hopefully over time and we will continue lowering our cost-to-credit.

Okay. Thank you.

Can you just reaffirm sorry, Lacey before we end the call?

Good afternoon guys. Thanks for taking my question.

Thanks for giving me the second chance.

No problem.

Just let any updates on Fifth Street Asset Managers? I think at the time of the Investor Day you talked about closing four investments in it.

How is that going? Any updates if you can give on that front?

Yes, we continue to close small investments that would set in an asset manager format, as we prepare, as you saw probably syndicated CLOs are getting done very well. Still has not entered middle market, but we are going to be prepared when it does.

We are also watching close with the SEC and the regulations surrounding consolidation of debt to an asset manager. So we are watching how the SEC is coming out.

And we are waiting for more firm rules around what’s accepted and what’s not. So, as we sit there and our holding pattern to wait for definitely forming an entity or not forming an entity, we are certainly continuing to build assets for it.

Okay. Thanks for the call.

And this disclosure, new disclosure in the 10-Q is really helpful. Thank you for that.

Now I assume that’s a kind of static balance, do you assume and have you tried shocking it for any prepayments, speeds?

No. Prepaid.

Everything that we do is you know, we look at on a hold to maturity basis. And if things get prepaid, we just have more earnings than we anticipate.

We don’t budget that even into or underwriting the deal. And we don’t budget, for example, the points upfront being written to the deal.

We do everything [inaudible] is on the hold to maturity basis.

Okay. It’s very helpful schedule.

Thank you.

Very welcome.

Hey good afternoon. I was just wondering you were talking about the weight of first-lien loans dropping to 75% as you go through the year.

Would that indicate that you expect weighted average yield to maybe kick up as you are originating more second lien and mezzanine debts? And then also I was wondering where those yields are right now.

What, you know, what sort are the market clearing rate?

For second-lien, mezzanine?

For – on the second-lien, mezzanine you know, versus first-lien.

So, without a LIBOR increase, right, first-lien one-stop transactions are happening between 10% and 11%. And second-lien are 13% to 14% – second-lien to mezzanine.

And you know, first-lien senior is, at least the parts that we are doing which are bigger deals, very likely [ph] are LIBOR five to six. So, and you could see that simply by looking at our balance sheet and looking at the different securities we are doing.

Clearly, as we move towards our target, which is our target for definitely this year of 75% first-lien and 25% second-lien and mezz, our weighted average yield will stop dropping and will start to stabilize. When we drop the asset manager type very safe credits, which you are seeing on our balance sheet, you will seem to see into some other vehicle some day, you will also see weighted average yield rise and be able to – more efficient in our capital structure.

So we look forward to doing that in both of those to drive – get more earnings towards the end of the year.

Okay, great. And then I know covenants have been a big part of the story for you guys in terms of maintaining strong credit quality.

But the upper end of the recent syndicated loan market, it looks like covenant lite is making a comeback. Are you getting any push back on your covenants from borrowers?

You know, as we very rarely look at the very high end of the market, we do notice covenant lite and we turn down every deal that has that feature or anything like that feature. In middle market, now covenant lite is not there and lower-middle market, it’s definitely not there.

But we are definitely – as we have seen some broadly syndicated deals, syndicated deals, and widely club deals in the upper markets, we are seeing pressure on covenants. But we are not doing those deals.

Okay. Thanks a lot.