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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

Filed pursuant to Rule 497
Registration No. 333-181563

PROSPECTUS SUPPLEMENT
(To Prospectus dated August 16, 2012)

$175,000,000

LOGO

5.875% Senior Notes due 2022


                   We are offering $175,000,000 in aggregate principal amount of 5.875% senior notes due 2022, which we refer to as the Notes. The Notes will mature on October 1, 2022. We will pay interest on the Notes on January 1, April 1, July 1, and October 1 of each year, beginning January 1, 2013. We may redeem the Notes in whole or in part at any time or from time to time on or after October 1, 2015, at the redemption price discussed under the caption "Specific Terms of the Notes and the Offering—Optional redemption" in this prospectus supplement. The Notes will be issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

                   The Notes will be our direct senior unsecured obligations and rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by Ares Capital Corporation.

                   We intend to apply to list the Notes on The New York Stock Exchange. If the application is approved, we expect trading in the Notes on The New York Stock Exchange to begin within 30 days of the original issue date. The Notes are expected to trade "flat." This means that purchasers will not pay, and sellers will not receive, any accrued and unpaid interest on the Notes that is not included in the trading price. Currently, there is no public market for the Notes.

                   Ares Capital Corporation is a specialty finance company that is a closed-end, non-diversified management investment company incorporated in Maryland. We have elected to be regulated as a business development company under the Investment Company Act of 1940. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component. To a lesser extent, we also make equity investments.

                   We are externally managed by our investment adviser, Ares Capital Management LLC, a wholly owned subsidiary of Ares Management LLC, a global alternative asset manager and a Securities and Exchange Commission ("SEC") registered investment adviser with approximately $54 billion of total committed capital under management as of June 30, 2012. Ares Operations LLC, a wholly owned subsidiary of Ares Management LLC, provides the administrative services necessary for us to operate.

                   Investing in the Notes involves risks that are described in the "Risk Factors" section beginning on page S-14 of this prospectus supplement and page 24 of the accompanying prospectus, including the risk of leverage.

                   This prospectus supplement and the accompanying prospectus concisely provide important information about us that you should know before investing in the Notes. Please read this prospectus supplement and the accompanying prospectus before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information with the SEC. This information is available free of charge by calling us collect at (310) 201-4200 or on our website at www.arescapitalcorp.com. The SEC also maintains a website at www.sec.gov that contains such information. The information on the websites referred to herein is not incorporated by reference into this prospectus supplement or the accompanying prospectus.


 
 
Per Note
 
Total
 

Public offering price

    100.00 % $ 175,000,000  

Underwriting discount (sales load)

    3.00 % $ 5,250,000  

Proceeds, before expenses, to Ares Capital Corporation(1)

    97.00 % $ 169,750,000  
(1)
Before deducting expenses payable by us related to this offering, estimated at $1,000,000.

                   The public offering price set forth above does not include accrued interest, if any. Interest on the Notes will accrue from September 25, 2012 and must be paid by the purchaser if the Notes are delivered after September 25, 2012.

                   The underwriters may also purchase up to an additional $26,250,000 total aggregate principal amount of Notes offered hereby, to solely cover overallotments, if any, within 30 days of the date of this prospectus supplement. If the underwriters exercise this option in full, the total public offering price will be $201,250,000, the total underwriting discount (sales load) paid by us will be $6,037,500, and total proceeds to us, before deducting expenses payable by us related to this offering, will be $195,212,500.

                   THE NOTES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

                   Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

                   Delivery of the Notes in book-entry form only through The Depository Trust Company will be made on or about September 25, 2012.


Joint Book-Running Managers
BofA Merrill Lynch        
    Morgan Stanley
        UBS Investment Bank
        Wells Fargo Securities


Co-Managers
Stifel Nicolaus Weisel                
    Credit Suisse            
        Janney Montgomery Scott        
            RBC Capital Markets    
                Stephens Inc.


                   The date of this prospectus supplement is September 20, 2012.


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              You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus is accurate only as of the date on the front cover of this prospectus supplement and the accompanying prospectus, as applicable. Our business, financial condition, results of operations and prospects may have changed since that date.

Prospectus Supplement
TABLE OF CONTENTS

 
  Page

Specific Terms of the Notes and the Offering

  S-1

Forward-Looking Statements

  S-6

The Company

  S-8

Risk Factors

  S-14

Use of Proceeds

  S-17

Capitalization

  S-19

United States Federal Income Tax Consequences

  S-20

Underwriting

  S-23

Legal Matters

  S-27


Prospectus
TABLE OF CONTENTS


 


 

Page

Prospectus Summary

  1

The Company

  1

Offerings

  13

Fees and Expenses

  16

Selected Condensed Consolidated Financial Data of Ares Capital

  20

Risk Factors

  24

Forward-Looking Statements

  49

Use of Proceeds

  51

Price Range of Common Stock and Distributions

  53

Ratios of Earnings to Fixed Charges

  55

Management's Discussion and Analysis of Financial Condition and Results of Operations

  56

Senior Securities

  96

Business

  98

Portfolio Companies

  115

Management

  130

Certain Relationships and Related Transactions

  156

Control Persons and Principal Stockholders

  158

Determination of Net Asset Value

  160

Dividend Reinvestment Plan

  162

Certain Material U.S. Federal Income Tax Considerations

  164

Description of Securities

  175

Description of Our Capital Stock

  175

Description of Our Preferred Stock

  182

Description of Our Subscription Rights

  183

i


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  Page

Description of Our Warrants

  184

Description of Our Debt Securities

  186

Description of Our Units

  198

Sales of Common Stock Below Net Asset Value

  199

Issuance of Warrants or Securities to Subscribe For or Convertible Into Shares of Our Common Stock

  204

Regulation

  205

Custodian, Transfer and Dividend Paying Agent and Registrar

  211

Brokerage Allocation and Other Practices

  211

Plan of Distribution

  212

Legal Matters

  214

Independent Registered Public Accounting Firm

  214

Available Information

  214

Financial Statements

  F-1

ii


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SPECIFIC TERMS OF THE NOTES AND THE OFFERING

              This prospectus supplement sets forth certain terms of the Notes that we are offering pursuant to this prospectus supplement and supplements the accompanying prospectus that is attached to the back of this prospectus supplement. This section outlines the specific legal and financial terms of the Notes. You should read this section together with the more general description of the Notes in the accompanying prospectus under the heading "Description of Our Debt Securities" before investing in the Notes. Capitalized terms used in this prospectus supplement and not otherwise defined shall have the meanings ascribed to them in the accompanying prospectus or in the indenture governing the Notes.

Issuer

  Ares Capital Corporation

Title of the securities

 

5.875% Senior Notes due 2022

Initial aggregate principal amount being offered

 

$175,000,000

Overallotment option

 

The underwriters may also purchase from us up to an additional $26,250,000 aggregate principal amount of Notes to cover overallotments, if any, within 30 days of the date of this prospectus supplement.

Initial public offering price

 

100% of the aggregate principal amount

Principal payable at maturity

 

100% of the aggregate principal amount; the principal amount of each Note will be payable on its stated maturity date at the office of the Paying Agent, Registrar and Transfer Agent for the Notes or at such other office in New York City as we may designate.

Type of Note

 

Fixed rate note

Listing

 

We intend to apply to list the Notes on The New York Stock Exchange. If the application is approved, we expect trading in the Notes on The New York Stock Exchange to begin within 30 days of the original issue date.

Interest rate

 

5.875% per year

Day count basis

 

360-day year of twelve 30-day months

Original issue date

 

September 25, 2012

Stated maturity date

 

October 1, 2022

Date interest starts accruing

 

September 25, 2012

Interest payment dates

 

Every January 1, April 1, July 1, and October 1, commencing January 1, 2013. If an interest payment date falls on a non-business day, the applicable interest payment will be made on the next business day and no additional interest will accrue as a result of such delayed payment.

 

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Interest periods

 

The initial interest period will be the period from and including September 25, 2012, to, but excluding, the initial interest payment date of January 1, 2013, and the subsequent interest periods will be the periods from and including an interest payment date to, but excluding, the next interest payment date or the stated maturity date, as the case may be.

Regular record dates for interest

 

Every December 15, March 15, June 15, and September 15, commencing December 15, 2012

Specified currency

 

U.S. Dollars

Place of payment

 

New York City

Ranking of Notes

 

The Notes will be our direct unsecured obligations and will rank:

 

pari passu with our other outstanding and future senior unsecured indebtedness, including without limitation, $143.8 million aggregate principal amount of our 7.00% senior notes that mature on February 15, 2022 (the "2022 Notes"), $200.0 million aggregate principal amount of our 7.75% senior notes that mature on October 15, 2040 (the "2040 Notes"), $230.0 million aggregate principal amount of our 6.875% senior notes that mature on April 15, 2047 (the "2047 Notes" and, together with the 2022 Notes and the 2040 Notes, the "Unsecured Notes"), $575.0 million aggregate principal amount of our convertible senior unsecured notes that mature on February 1, 2016 (the "February 2016 Convertible Notes"), $230.0 million aggregate principal amount of our convertible senior unsecured notes that mature on June 1, 2016 (the "June 2016 Convertible Notes") and $162.5 million aggregate principal amount of our convertible senior unsecured notes that mature on March 15, 2017 (the "2017 Convertible Notes" and, together with the February 2016 Convertible Notes and the June 2016 Convertible Notes, the "Convertible Notes") outstanding, in each case, as of September 14, 2012;

 

senior to any of our future indebtedness that expressly provides it is subordinated to the Notes;

 

effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured in respect of which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, including without limitation, approximately $67.0 million aggregate principal amount of outstanding indebtedness as of September 14, 2012 under our $900 million revolving credit facility (the "Revolving Credit Facility"), to the extent of the value of the assets securing such facility; and

 

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structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries or financing vehicles, if any, including approximately $372.0 million aggregate principal amount of outstanding indebtedness as of September 14, 2012 under the $620 million revolving funding facility of our wholly owned subsidiary, Ares Capital CP Funding LLC ("Ares Capital CP") (the "Revolving Funding Facility") and approximately $133.0 million aggregate principal amount of outstanding indebtedness as of September 14, 2012 under the $400 million revolving funding facility of our wholly owned subsidiary, Ares Capital JB Funding LLC ("ACJB LLC") (the "SMBC Funding Facility" and, together with the Revolving Credit Facility and the Revolving Funding Facility, the "Facilities"). See "The Company—Recent Developments."

Denominations

 

We will issue the Notes in denominations of $25 and integral multiples of $25 in excess thereof.

Business day

 

Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York City are authorized or required by law or executive order to close.

Optional redemption

 

The Notes may be redeemed in whole or in part at any time or from time to time at our option on or after October 1, 2015, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price of $25 per Note plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to the date fixed for redemption.

 

You may be prevented from exchanging or transferring the Notes when they are subject to redemption. In case any Notes are to be redeemed in part only, the redemption notice will provide that, upon surrender of such Note, you will receive, without a charge, a new Note or Notes of authorized denominations representing the principal amount of your remaining unredeemed Notes.

 

Any exercise of our option to redeem the Notes will be done in compliance with the Investment Company Act of 1940, as amended, and the rules, regulations and interpretations promulgated thereunder (collectively, the "Investment Company Act"), to the extent applicable.

 

If we redeem only some of the Notes, the Trustee will determine the method for selection of the particular Notes to be redeemed, in accordance with the Investment Company Act to the extent applicable. Unless we default in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the Notes called for redemption.

 

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Sinking fund

 

The Notes will not be subject to any sinking fund.

Repayment at option of Holders

 

Holders will not have the option to have the Notes repaid prior to the stated maturity date.

Defeasance

 

The Notes are subject to defeasance by us.

Covenant defeasance

 

The Notes are subject to covenant defeasance by us.

Form of Notes

 

The Notes will be represented by global securities that will be deposited and registered in the name of The Depository Trust Company ("DTC") or its nominee. This means that, except in limited circumstances, you will not receive certificates for the Notes. Beneficial interests in the Notes will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold interests in the Notes through either DTC, if they are a participant, or indirectly through organizations that are participants in DTC.

Trustee, Paying Agent, Registrar and Transfer Agent

 

U.S. Bank National Association

Other covenants

 

In addition to the covenants described in the prospectus attached to this prospectus supplement, the following covenants shall apply to the Notes:

 

We agree that for the period of time during which the Notes are outstanding, we will not violate Section 18(a)(1)(A) as modified by Section 61(a)(1) of the Investment Company Act or any successor provisions.

 

If, at any time, we are not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to file any periodic reports with the SEC, we agree to furnish to holders of the Notes and the Trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects, in accordance with applicable United States generally accepted accounting principles.

Modifications to events of default

 

The following event of default, as described in the prospectus attached to this prospectus supplement:

 

We do not pay the principal of, or any premium on, a debt security of the series on its due date, and do not cure this default within 5 days.

 

with respect to the Notes has been revised to read as follows:

 

We do not pay the principal of, or any premium on, any Note on its due date.

 

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Global Clearance and Settlement Procedures

 

Interests in the Notes will trade in DTC's Same Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. None of the Company, the Trustee or the Paying Agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

 

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FORWARD-LOOKING STATEMENTS

              Some of the statements in this prospectus supplement and the accompanying prospectus constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this prospectus supplement and the accompanying prospectus involve a number of risks and uncertainties, including statements concerning:

              We use words such as "anticipates," "believes," "expects," "intends," "will," "should," "may" and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in "Risk Factors" in this prospectus supplement and in the accompanying prospectus and the other information included in this prospectus supplement or the accompanying prospectus.

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              The forward-looking statements included in this prospectus supplement and the accompanying prospectus have been based on information available to us as of their respective dates, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

              The forward-looking statements in this prospectus supplement and the accompanying prospectus are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act.

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THE COMPANY

              This summary highlights some of the information contained elsewhere in this prospectus supplement and the accompanying prospectus. It is not complete and may not contain all of the information that you may want to consider. You should read carefully the more detailed information set forth under "Risk Factors" in this prospectus supplement and in the accompanying prospectus and the other information included in this prospectus supplement and the accompanying prospectus. Except where the context suggests otherwise, the terms "we," "us," "our," "the Company" and "Ares Capital" refer to Ares Capital Corporation and its consolidated subsidiaries; "Ares Capital Management" and the "investment adviser" refer to Ares Capital Management LLC; "Ares Operations" and the "administrator" refer to Ares Operations LLC; and "Ares" refers to Ares Management LLC ("Ares Management") and its affiliated companies (other than portfolio companies of its affiliated funds).

Ares Capital

              Ares Capital, a Maryland corporation, is a specialty finance company that is a closed-end, non-diversified management investment company. We have elected to be regulated as a business development company, or a "BDC," under the Investment Company Act. We were founded on April 16, 2004, were initially funded on June 23, 2004 and completed our initial public offering on October 8, 2004. We are one of the largest BDCs with approximately $5.8 billion of total assets as of June 30, 2012.

              We are externally managed by our investment adviser, Ares Capital Management, a wholly owned subsidiary of Ares Management, a global alternative asset manager and an SEC registered investment adviser with approximately $54 billion of total committed capital under management as of June 30, 2012. Our administrator, Ares Operations, a wholly owned subsidiary of Ares Management, provides the administrative services necessary for us to operate.

              Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. However, we may from time to time invest in larger companies. In this prospectus supplement, we generally use the term "middle-market" to refer to companies with annual EBITDA between $10 million and $250 million. As used herein, EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization.

              We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component. First and second lien senior loans generally are senior debt instruments that rank ahead of subordinated debt of a given portfolio company. Mezzanine debt is subordinated to senior loans and is generally unsecured. Our investments in corporate borrowers generally range between $30 million and $400 million each, investments in the project finance/power generation sector generally range between $10 million and $200 million each and investments in the venture finance sector generally range between $1 million and $25 million each. However, the investment sizes may be more or less than these ranges and may vary based on our capital availability.

              To a lesser extent, we also make preferred and/or common equity investments, which have generally been non-control equity investments of less than $20 million (usually in conjunction with a concurrent debt investment). However, we may increase the size or change the nature of these investments.

              The proportion of these types of investments will change over time given our views on, among other things, the economic and credit environment in which we are operating. In connection with our investing activities, we may make commitments with respect to indebtedness or securities of a potential portfolio company substantially in excess of our final investment. In such situations, while we may

 

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initially agree to fund up to a certain dollar amount of an investment, we may subsequently syndicate a portion of such amount to third parties, such that we are left with a smaller investment than what was reflected in our original commitment. In addition to originating investments, we may also acquire investments in the secondary market.

              The first and second lien senior loans in which we invest generally have stated terms of three to 10 years and the mezzanine debt investments in which we invest generally have stated terms of up to 10 years, but the expected average life of such first and second lien loans and mezzanine debt is generally between three and seven years. However, we may invest in loans and securities with any maturity or duration. The instruments in which we invest typically are not rated by any rating agency, but we believe that if such instruments were rated, they would be below investment grade (rated lower than "Baa3" by Moody's Investors Service, lower than "BBB-" by Fitch Ratings or lower than "BBB-" by Standard & Poor's Rating Services), which is an indication of having predominantly speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. Bonds that are rated below investment grade are sometimes referred to as "high yield bonds" or "junk bonds." We may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by any nationally recognized statistical rating organization.

              We believe that our investment adviser, Ares Capital Management, is able to leverage the current investment platform, resources and existing relationships with financial sponsors, financial institutions, hedge funds and other investment firms of Ares to provide us with attractive investment opportunities. In addition to deal flow, the Ares investment platform assists our investment adviser in analyzing, structuring and monitoring investments. Ares has been in existence for more than 14 years and its senior partners have an average of over 22 years experience investing in senior loans, high yield bonds, mezzanine debt and private equity securities. The Company has access to Ares' investment professionals and to Ares' administrative professionals who provide assistance in accounting, finance, legal, compliance, operations, information technology and investor relations. As of June 30, 2012, Ares had 231 investment professionals and 289 administrative professionals.

              Since our initial public offering on October 8, 2004 through June 30, 2012, our realized gains have exceeded our realized losses by approximately $101 million (excluding the one-time gain on our acquisition of Allied Capital Corporation on April 1, 2010 and gains/losses from the extinguishment of debt and other assets). For this same time period, our exited investments have resulted in an aggregate cash flow realized internal rate of return to us of approximately 14% (based on original cash invested of approximately $5.4 billion and total proceeds from such exited investments of approximately $6.5 billion). Approximately 73% of these exited investments resulted in an aggregate cash flow internal rate of return to us of 10% or greater. Internal rate of return is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. Internal rate of return is gross of expenses related to investments as these expenses are not allocable to specific investments. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the repayment of our debt investment or sale of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized. These internal rates of return results are historical results relating to our past performance and are not necessarily indicative of future results, the achievement of which cannot be assured.

              In addition, we and General Electric Capital Corporation and GE Global Sponsor Finance LLC (collectively, "GE") co-invest through an unconsolidated vehicle, the Senior Secured Loan Fund LLC, which operates using the name "Senior Secured Loan Program" (the "SSLP"). The SSLP was initially formed in December 2007 to co-invest in first lien senior secured loans of middle-market companies. As of June 30, 2012, the SSLP had approximately $7.7 billion of available capital, approximately $5.4 billion in aggregate principal amount of which was funded as of June 30, 2012. At June 30, 2012, we had agreed to make available to the SSLP approximately $1.5 billion, of which

 

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approximately $1.1 billion was funded. The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and GE (with approval from a representative of each required). As of June 30, 2012, our investment in the SSLP was approximately $1.1 billion at fair value (including unrealized appreciation of $26.3 million), which represented approximately 20% of our total portfolio at fair value. Effective March 30, 2012, Ares Capital Management assumed from the Company the role of co-manager of the SSLP. However, this change did not impact the Company's economics in respect of its participation in the SSLP and Ares Capital Management does not receive any remuneration in respect of its co-manager role.

              While our primary focus is to generate current income and capital appreciation through investments in first and second lien senior loans and mezzanine debt and, to a lesser extent, equity securities of eligible portfolio companies, we also may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. See "Regulation" in the accompanying prospectus. Specifically, as part of this 30% basket, we may invest in entities that are not considered "eligible portfolio companies" (as defined in the Investment Company Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the Investment Company Act.

              Our portfolio company, Ivy Hill Asset Management, L.P. ("IHAM"), which became an SEC registered investment adviser effective March 30, 2012, manages 11 unconsolidated credit vehicles and sub-manages or sub-advises four other unconsolidated credit vehicles (these vehicles managed or sub-managed/sub-advised by IHAM are collectively referred to as the "IHAM Vehicles"), which are described in more detail under "Business—Investments—Ivy Hill Management, L.P." in the accompanying prospectus. We have also made direct investments in securities of certain of these vehicles. As of June 30, 2012, IHAM had total committed capital under management of approximately $3.2 billion, which included approximately $0.3 billion invested by Ares Capital in IHAM or securities issued by the IHAM Vehicles. In connection with IHAM's registration as a registered investment adviser, on March 30, 2012, we received exemptive relief from the SEC allowing us to, subject to certain conditions, own directly or indirectly up to 100% of IHAM's outstanding equity interests and make additional investments in IHAM.

About Ares

              Founded in 1997, Ares is a global alternative asset manager and an SEC registered investment adviser with approximately $54 billion of total committed capital under management and 520 employees as of June 30, 2012.

              Ares specializes in originating and managing assets in both the leveraged finance and private equity markets. Ares' leveraged finance activities include the origination, acquisition and management of senior loans, high yield bonds, mezzanine debt and special situation investments. Ares' private equity activities generally focus on control-oriented equity investments in under-capitalized companies with capital structure issues. Ares has the ability to invest across a capital structure, from senior floating rate debt to common equity. This flexibility, combined with Ares' "buy and hold" philosophy, enables Ares to structure an investment to meet the specific needs of a company rather than the less flexible demands of the public markets.

 

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              Ares is comprised of the following groups:

              Ares' senior partners have been working together as a group for many years and have an average of over 22 years of experience in leveraged finance, private equity, distressed debt, investment banking and capital markets. They are backed by a team of 231 highly disciplined investment professionals as of June 30, 2012 covering current investments in more than 1,100 companies across over 30 industries. Ares' rigorous investment approach is based upon an intensive, independent financial analysis, with a focus on preservation of capital, diversification and active portfolio management. These fundamentals underlie Ares' investment strategy and have resulted in large pension funds, banks, insurance companies, endowments and certain high net worth individuals investing in Ares' funds.

Ares Capital Management

              Ares Capital Management, our investment adviser, is served by an origination, investment and portfolio management team of 73 U.S.-based investment professionals as of June 30, 2012 led by the senior partners of the Ares Private Debt Group: Michael Arougheti, Eric Beckman, Kipp deVeer, Mitchell Goldstein and Michael Smith. Ares Capital Management leverages off of Ares' investment platform and benefits from the significant capital markets, trading and research expertise of Ares' investment professionals. Ares Capital Management's investment committee has eight members, including the senior partners of the Ares Private Debt Group, senior partners in the Ares Private Equity Group and a senior adviser to the Ares Capital Markets Group.

 

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Recent Developments

              In July 2012, pursuant to the terms of the amended Revolving Funding Facility, Ares Capital CP received an increase in the commitments under the Revolving Funding Facility of $40 million, bringing the total commitment to $620 million.

              In August 2012, we declared a third quarter dividend of $0.38 per share and an additional dividend of $0.05 per share. Both dividends are payable on September 28, 2012 to stockholders of record as of September 14, 2012.

              In August 2012, we completed a public equity offering (the "August 2012 Offering") through which we sold 25,875,000 shares of common stock (including 3,375,000 shares purchased pursuant to the exercise in full by the underwriters of their option to purchase additional shares). Total proceeds from the August 2012 Offering, net of the underwriting discount and estimated offering expenses payable by us, were approximately $427.4 million. We used the net proceeds from the August 2012 Offering to repay outstanding indebtedness under the Revolving Credit Facility and the Revolving Funding Facility and for general corporate purposes.

              On September 7, 2012, our Board of Directors (the "Board"), on the recommendation of the Nominating & Governance Committee of the Board, appointed Steven B. McKeever as an independent Class I Director to fill the vacancy on the Board following the death of Kenneth R. Heitz in July 2012. Mr. McKeever, age 52, founded and has served as CEO of Hidden Beach Recordings, an independent record label based in Los Angeles, California, since 1997. Mr. McKeever received his B.S. from the University of Illinois at Urbana-Champaign and received his J.D. from Harvard Law School. The initial term of Mr. McKeever will expire at the 2014 annual meeting of stockholders of the Company.

              On September 7, 2012, the Board appointed Daniel F. Nguyen as Treasurer of the Company to fill the vacancy in this position following the resignation of Richard S. Davis. Mr. Nguyen also serves as a Vice President of the Company.

              On September 14, 2012, we and ACJB LLC entered into an amendment (the "SMBC Amendment") to the SMBC Funding Facility with Sumitomo Mitsui Banking Corporation and each of the other parties thereto. The SMBC Amendment, among other things, (a) increased the size of the SMBC Funding Facility from $200 million to $400 million, (b) extended the reinvestment period from January 20, 2015 to September 14, 2015, and (c) extended the stated maturity date from January 20, 2020 to September 14, 2020.

              From July 1, 2012 through September 14, 2012, we had made new investment commitments of $854 million, of which $777 million were funded. Of these new commitments, 76% were in first lien senior secured debt, 11% were investments in subordinated certificates of the SSLP which were applied to co-investments with GE in first lien senior secured loans, 7% were in senior subordinated debt, 4% were in second lien senior secured debt and 2% were in other equity securities. Of the $854 million of new investment commitments, 90% were floating rate, 8% were fixed rate and 2% were non-interest bearing. The weighted average yield of debt and other income producing securities funded during the period at amortized cost was 10.1%. We may seek to syndicate a portion of these new investment commitments to third parties, although there can be no assurance that we will be able to do so.

              From July 1, 2012 through September 14, 2012, we exited $548 million of investment commitments. Of these investment commitments, 60% were first lien senior secured debt, 26% were second lien senior secured debt, 10% were senior subordinated debt, 3% were collateralized loan obligations and 1% were other equity securities. Of the $548 million of exited investment commitments, 85% were floating rate investments, 13% were fixed rate investments, 1% were non-interest bearing and 1% were on non-accrual status. The weighted average yield of debt and other income producing securities exited or repaid during the period at amortized cost was 9.6%. On the $548 million of

 

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investment commitments exited from July 1, 2012 through September 14, 2012, we recognized total net realized gains of approximately $37 million.

              In addition, as of September 14, 2012, we had an investment backlog and pipeline of approximately $296 million and $200 million, respectively. Investment backlog includes transactions approved by our investment adviser's investment committee and/or for which a formal mandate, letter of intent or a signed commitment have been issued, and therefore we believe are likely to close. Investment pipeline includes transactions where due diligence and analysis are in process, but no formal mandate, letter of intent or signed commitment have been issued. The consummation of any of the investments in this backlog and pipeline depends upon, among other things, one or more of the following: satisfactory completion of our due diligence investigation of the prospective portfolio company, our acceptance of the terms and structure of such investment and the execution and delivery of satisfactory transaction documentation. In addition, we may syndicate a portion of these investments to third parties. We cannot assure you that we will make any of these investments or that we will syndicate any portion of these investments.

Our Corporate Information

              Our administrative offices are located at 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067, telephone number (310) 201-4200, and our executive offices are located at 245 Park Avenue, 44th Floor, New York, New York 10167, telephone number (212) 750-7300.

 

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RISK FACTORS

The Notes will be unsecured and therefore will be effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.

              The Notes will not be secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. As of September 14, 2012, we had $67.0 million aggregate principal amount of outstanding indebtedness under the Revolving Credit Facility. The Revolving Credit Facility is secured by certain assets in our portfolio and excludes investments held by Ares Capital CP under the Revolving Funding Facility, those held by ACJB LLC under the SMBC Funding Facility and certain other investments; the indebtedness thereunder is therefore effectively senior to the Notes to the extent of the value of such assets.

The Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

              The Notes are obligations exclusively of Ares Capital and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. A significant portion of the indebtedness required to be consolidated on our balance sheet is held through subsidiary financing vehicles and secured by certain assets of such subsidiaries. For example, the secured indebtedness with respect to the Revolving Funding Facility and the SMBC Funding Facility are each held through our wholly owned subsidiaries, Ares Capital CP Funding LLC and ACJB LLC, respectively. The assets of such subsidiaries are not directly available to satisfy the claims of our creditors, including holders of the Notes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources—Debt Capital Activities" in the accompanying prospectus for more detail on the Revolving Funding Facility and the SMBC Funding Facility.

              Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise. As of September 14, 2012, we had $372.0 million aggregate principal amount of outstanding indebtedness under the Revolving Funding Facility and $133.0 million aggregate principal amount of outstanding indebtedness under the SMBC Funding Facility. All of such indebtedness would be structurally senior to the Notes. In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.

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The indenture under which the Notes will be issued will contain limited protection for holders of the Notes.

              The indenture under which the Notes will be issued offers limited protection to holders of the Notes. The terms of the indenture and the Notes do not restrict our or any of our subsidiaries' ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on your investment in the Notes. In particular, the terms of the indenture and the Notes will not place any restrictions on our or our subsidiaries' ability to:

              In addition, the indenture will not require us to offer to purchase the Notes in connection with a change of control or any other event.

              Furthermore, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity.

              Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.

              Certain of our current debt instruments include more protections for their holders than the indenture and the Notes. See in the accompanying prospectus "Risk Factors—Risks Relating to Our Business—In addition to regulatory requirements that restrict our ability to raise capital, the Facilities, the Unsecured Notes and the Convertible Notes contain various covenants that, if not complied with, could accelerate repayment under the Facilities, the Unsecured Notes and the Convertible Notes, thereby materially and adversely affecting our liquidity, financial condition and results of operations." In addition, other debt we issue or incur in the future could contain more protections for its holders

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than the indenture and the Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes.

An active trading market for the Notes may not develop, which could limit the market price of the Notes or your ability to sell them. If a rating agency assigns the Notes a non-investment grade rating, the Notes may be subject to greater price volatility than similar securities without such a rating. One rating agency has assigned each of the 2040 Notes and the 2047 Notes a non-investment grade rating.

              The Notes are a new issue of debt securities for which there currently is no trading market. We intend to apply to list the Notes on The New York Stock Exchange. If the application is approved, we expect trading in the Notes on The New York Stock Exchange to begin within 30 days of the original issue date. Although we expect the Notes to be listed on The New York Stock Exchange, we cannot provide any assurances that an active trading market will develop for the Notes or that you will be able to sell your Notes. If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. If a rating agency assigns the Notes a non-investment grade rating, the Notes may be subject to greater price volatility than securities of similar maturity without such a non-investment grade rating. One rating agency has assigned each of the 2040 Notes and the 2047 Notes a non-investment grade rating. The underwriters have advised us that they intend to make a market in the Notes, but they are not obligated to do so. The underwriters may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading market will develop for the Notes, that you will be able to sell your Notes at a particular time or that the price you receive when you sell will be favorable. To the extent an active trading market does not develop, the liquidity and trading price for the Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.

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USE OF PROCEEDS

              We estimate that the net proceeds we will receive from the sale of the $175.0 million aggregate principal amount of Notes in this offering will be approximately $168.8 million (or approximately $194.2 million if the underwriters fully exercise their overallotment option), in each case assuming a public offering price of 100% of par, after deducting the underwriting discount of approximately $5.3 million (or approximately $6.0 million if the underwriters fully exercise their overallotment option) payable by us and estimated offering expenses of approximately $1.0 million payable by us.

              We expect to use the net proceeds of this offering to repay outstanding indebtedness under the Revolving Credit Facility ($67.0 million aggregate principal amount outstanding as of September 14, 2012), the Revolving Funding Facility ($372.0 million aggregate principal amount outstanding as of September 14, 2012) and/or the SMBC Funding Facility ($133.0 million aggregate principal amount outstanding as of September 14, 2012).

              Subject to certain exceptions, the interest charged on the indebtedness incurred under the Revolving Credit Facility is based on LIBOR (one, two, three or six month) plus an applicable spread of 2.25% or a "base rate" (as defined in the agreements governing the Revolving Credit Facility) plus an applicable spread of 1.25%. As of September 14, 2012, one, two, three and six month LIBOR were 0.22%, 0.30%, 0.39% and 0.67%, respectively. The Revolving Credit Facility matures on May 4, 2016. Subject to certain exceptions, the interest charged on the Revolving Funding Facility is based on LIBOR plus an applicable spread of 2.50% or on a "base rate" (as defined in the agreements governing the Revolving Funding Facility) plus an applicable spread of 1.50%. The Revolving Funding Facility is scheduled to expire on April 18, 2017 (subject to extension exercisable upon mutual consent). Subject to certain exceptions, the interest rate charged on the SMBC Funding Facility is based on one month LIBOR plus an applicable spread of 2.125% or a "base rate" (as defined in the agreements governing the SMBC Funding Facility) plus an applicable spread of 1.125%. The SMBC Funding Facility is scheduled to expire on September 14, 2020 (subject to extension exercisable upon mutual consent). See "The Company—Recent Developments."

              Affiliates of certain of the underwriters are lenders under the Revolving Credit Facility and affiliates of certain of the underwriters are lenders under the Revolving Funding Facility. Accordingly, affiliates of certain of the underwriters may receive more than 5% of the proceeds of this offering to the extent such proceeds are used to repay or repurchase outstanding indebtedness under the Revolving Credit Facility and/or the Revolving Funding Facility.

              We intend to use any net proceeds from this offering that are not applied as described above for general corporate purposes, which include investing in portfolio companies in accordance with our investment objective.

              Investing in portfolio companies could include investments in our investment backlog and pipeline that, as of September 14, 2012, were approximately $296 million and $200 million, respectively. The consummation of any of the investments in this backlog and pipeline depends upon, among other things: satisfactory completion of our due diligence investigation of the prospective portfolio company, our acceptance of the terms and structure of such investment and the execution and delivery of satisfactory transaction documentation, and there can be no guarantee that we will consummate any of these investments or that we will syndicate any portion of such investments or commitments.

              Our primary focus is to generate current income and capital appreciation through investments in first and second lien senior loans and mezzanine debt and, to a lesser extent, equity securities of eligible portfolio companies. In addition to such investments, we may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. As part of this 30% basket, we may invest in entities that are not considered "eligible portfolio companies" (as defined in the Investment Company Act), including companies located outside of the United States, entities that are

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operating pursuant to certain exceptions under the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the Investment Company Act.

              Pending such investments, we will invest a portion of the net proceeds primarily in cash, cash equivalents, U.S. government securities and other high-quality short-term investments. These securities may earn yields substantially lower than the income that we anticipate receiving once we are fully invested in accordance with our investment objective. As a result, we may not be able to achieve our investment objective and/or pay any dividends during this period or, if we are able to do so, such dividends may be substantially lower than the dividends that we expect to pay when our portfolio is fully invested. If we do not realize yields in excess of our expenses, we may incur operating losses. See "Regulation—Temporary Investments" in the accompanying prospectus for additional information about temporary investments we may make while waiting to make longer-term investments in pursuit of our investment objective.

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CAPITALIZATION

              The following table sets forth our actual capitalization at June 30, 2012. You should read this table together with "Use of Proceeds" described in this prospectus supplement and our most recent balance sheet included elsewhere in this prospectus supplement or the accompanying prospectus.

 
  As of
June 30, 2012
(unaudited,
dollar amounts
in thousands)
 
 
  Actual  

Cash and cash equivalents

  $ 101,265  
       

Debt(1)

       

Revolving Credit Facility

  $ 295,000  

Revolving Funding Facility

    348,000  

SMBC Funding Facility

    107,000  

February 2016 Convertible Notes

    544,769  

June 2016 Convertible Notes

    217,322  

2017 Convertible Notes

    157,876  

2022 Notes

    143,750  

2040 Notes

    200,000  

2047 Notes

    181,091  
       

Total Debt

    2,194,808  

Stockholders' Equity(2)

       

Common stock, par value $.001 per share, 400,000,000 common shares authorized, and 222,150,745 common shares issued and outstanding

    222  

Capital in excess of par value

    3,657,160  

Accumulated overdistributed net investment income

    (9,578 )

Accumulated net realized loss on investments, foreign currency transactions, extinguishment of debt and other assets

    (267,934 )

Net unrealized gain on investments

    66,629  
       

Total stockholders' equity

    3,446,499  
       

Total capitalization

  $ 5,641,307  
       

(1)
The above table reflects the carrying value of indebtedness outstanding as of June 30, 2012. As of September 14, 2012, outstanding indebtedness under the Revolving Credit Facility, the Revolving Funding Facility and the SMBC Funding Facility was $67.0 million, $372.0 million and $133.0 million, respectively. The net proceeds from the sale of the Notes in this offering are expected to be used to pay down outstanding indebtedness under the Revolving Credit Facility, the Revolving Funding Facility and/or the SMBC Funding Facility and for general corporate purposes. See "Use of Proceeds" in this prospectus supplement.

(2)
The above table does not reflect 25,875,000 shares of common stock issued in connection with the August 2012 Offering for total proceeds, net of the underwriting discount and estimated offering expenses payable by us, of approximately $427.4 million.

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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

              The following discussion is a general summary of the material United States federal income tax considerations (and, in the case of a non-U.S. holder (as defined below), the material United States federal estate tax consequences) applicable to an investment in the Notes. This summary does not purport to be a complete description of the income tax considerations applicable to such an investment. The discussion is based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, and administrative and judicial interpretations, each as of the date of this prospectus supplement and all of which are subject to change, potentially with retroactive effect. You should consult your own tax advisor with respect to tax considerations that pertain to your purchase of our Notes.

              This discussion deals only with Notes held as capital assets within the meaning of Section 1221 of the Code and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, controlled foreign corporations, passive foreign investment companies and regulated investment companies (and shareholders of such corporations), dealers in securities or currencies, traders in securities, former citizens of the United States, persons holding the Notes as a hedge against currency risks or as a position in a "straddle," "hedge," "constructive sale transaction" or "conversion transaction" for tax purposes, entities that are tax-exempt for United States federal income tax purposes, retirement plans, individual retirement accounts, tax-deferred accounts, persons subject to the alternative minimum tax, pass-through entities (including partnerships and entities and arrangements classified as partnerships for United States federal income tax purposes) and beneficial owners of pass-through entities, or persons whose functional currency is not the U.S. dollar. It also does not deal with beneficial owners of the Notes other than original purchasers of the Notes who acquire the Notes in this offering for a price equal to their original issue price (i.e., the first price at which a substantial amount of the notes is sold other than to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). If you are considering purchasing the Notes, you should consult your own tax advisor concerning the application of the United States federal tax laws to you in light of your particular situation, as well as any consequences to you of purchasing, owning and disposing of the Notes under the laws of any other taxing jurisdiction.

              For purposes of this discussion, the term "U.S. holder" means a beneficial owner of a Note that is, for United States federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation or other entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision thereof, (iii) a trust (a) subject to the control of one or more United States persons and the primary supervision of a court in the United States, or (b) that has a valid election (under applicable Treasury Regulations) to be treated as a United States person, or (iv) an estate the income of which is subject to United States federal income taxation regardless of its source. The term "non-U.S. holder" means a beneficial owner of a Note that is neither a U.S. holder nor a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes). An individual may, subject to exceptions, be deemed to be a resident alien, as opposed to a non-resident alien, by, among other ways, being present in the United States (i) on at least 31 days in the calendar year, and (ii) for an aggregate of at least 183 days during a three-year period ending in the current calendar year, counting for such purposes all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year. Resident aliens are subject to United States federal income tax as if they were United States citizens.

              If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds any Notes, the United States federal income tax treatment of a partner of the partnership generally will depend upon the status of the partner, the activities of the partnership

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and certain determinations made at the partner level. Partners of partnerships holding Notes should consult their own tax advisors.

Taxation of Note Holders

              Under present law, we are of the opinion that the Notes will constitute indebtedness of us for United States federal income tax purposes, which the below discussion assumes. We intend to treat all payments made with respect to the Notes consistent with this characterization.

              Payments or accruals of interest on a Note generally will be taxable to a U.S. holder as ordinary interest income at the time they are received (actually or constructively) or accrued, in accordance with the U.S. holder's regular method of tax accounting.

              Upon the sale, exchange, redemption or retirement of a Note, a U.S. holder generally will recognize capital gain or loss equal to the difference between the amount realized on the sale, exchange, redemption or retirement (excluding amounts representing accrued and unpaid interest, which are treated as ordinary income) and the U.S. holder's adjusted tax basis in the Note. A U.S. holder's adjusted tax basis in a Note generally will equal the U.S. holder's initial investment in the Note. Capital gain or loss generally will be long-term capital gain or loss if the Note was held for more than one year. Long-term capital gains recognized by individuals and certain other non-corporate U.S. holders generally are eligible for reduced rates of taxation. The distinction between capital gain or loss and ordinary income or loss is also important in other contexts; for example, for purposes of the limitations on a U.S. holder's ability to offset capital losses against ordinary income.

              Recent legislation may require certain noncorporate U.S. holders to pay a 3.8% Medicare tax on, among other things, interest on and capital gains from the sale, exchange, redemption or retirement of the Notes. This legislation would apply for taxable years beginning after December 31, 2012. U.S. holders should consult their own tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of the Notes.

              Taxation of Non-U.S. Holders.    A non-U.S. holder generally will not be subject to United States federal income or withholding taxes on payments of principal or interest on a Note provided that (i) income on the Note is not effectively connected with the conduct by the non-U.S. holder of a trade or business within the United States, (ii) the non-U.S. holder is not a controlled foreign corporation related to the Company through stock ownership, (iii) in the case of interest income, the recipient is not a bank receiving interest described in Section 881(c)(3)(A) of the Code, (iv) the non-U.S. holder does not own (actually or constructively) 10% or more of the total combined voting power of all classes of stock of the Company, and (v) the non-U.S. holder provides a statement on an Internal Revenue Service (IRS) Form W-8BEN (or other applicable form) signed under penalties of perjury that includes its name and address and certifies that it is not a United States person in compliance with applicable requirements, or satisfies documentary evidence requirements for establishing that it is a non-U.S. holder.

              A non-U.S. holder that is not exempt from tax under these rules generally will be subject to United States federal income tax withholding on payments of interest on the Notes at a rate of 30% unless (i) the income is effectively connected with the conduct of a United States trade or business, in which case the interest will be subject to United States federal income tax on a net income basis as applicable to U.S. holders generally (unless an applicable income tax treaty provides otherwise), or (ii) an applicable income tax treaty provides for a lower rate of, or exemption from, withholding tax.

              In the case of a non-U.S. holder that is a corporation and that receives income that is effectively connected with the conduct of a United States trade or business, such income may also be subject to a branch profits tax (which is generally imposed on a non-U.S. corporation on the actual or deemed repatriation from the United States of earnings and profits attributable to a United States

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trade or business) at a 30% rate. The branch profits tax may not apply (or may apply at a reduced rate) if the non-U.S. holder is a qualified resident of a country with which the United States has an income tax treaty.

              To claim the benefit of an income tax treaty or to claim exemption from withholding because income is effectively connected with a United States trade or business, the non-U.S. holder must timely provide the appropriate, properly executed IRS forms. These forms may be required to be periodically updated. Also, a non-U.S. holder who is claiming the benefits of a treaty may be required to obtain a United States taxpayer identification number and to provide certain documentary evidence issued by foreign governmental authorities to prove residence in the foreign country.

              Generally, a non-U.S. holder will not be subject to United States federal income or withholding taxes on any amount that constitutes capital gain upon the sale, exchange, redemption or retirement of a Note, provided the gain is not effectively connected with the conduct of a trade or business in the United States by the non-U.S. holder (and, if required by an applicable income tax treaty, is not attributable to a United States "permanent establishment" maintained by the non-U.S. holder). Certain other exceptions may be applicable, and a non-U.S. holder should consult its tax advisor in this regard.

              A Note that is held by an individual who, at the time of death, is not a citizen or resident of the United States (as specially defined for United States federal estate tax purposes) generally will not be subject to the United States federal estate tax, unless, at the time of death, (i) such individual directly or indirectly, actually or constructively, owns ten percent or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of Section 871(h)(3) of the Code and the Treasury Regulations thereunder or (ii) such individual's interest in the Notes is effectively connected with the individual's conduct of a United States trade or business.

              Information Reporting and Backup Withholding.    A U.S. holder (other than an "exempt recipient," including a corporation and certain other persons who, when required, demonstrate their exempt status) may be subject to backup withholding at a rate of 28% (which rate currently is scheduled to increase to 31% for taxable years beginning on or after January 1, 2013) on, and to information reporting requirements with respect to, payments of principal or interest on, and proceeds from the sale, exchange, redemption or retirement of, the Notes. In general, if a non-corporate U.S. holder subject to information reporting fails to furnish a correct taxpayer identification number or otherwise fails to comply with applicable backup withholding requirements, backup withholding at the applicable rate may apply. Non-U.S. holders generally are exempt from information reporting and backup withholding, provided, if necessary, that they demonstrate their qualification for exemption.

              You should consult your tax advisor regarding the qualification for an exemption from backup withholding and information reporting and the procedures for obtaining such an exemption, if applicable. Any amounts withheld under the backup withholding rules from a payment to a beneficial owner generally would be allowed as a refund or a credit against such beneficial owner's United States federal income tax provided the required information is timely furnished to the IRS.

You should consult your own tax advisor with respect to the particular tax consequences to you of an investment in the Notes, including the possible effect of any pending legislation or proposed regulations.

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UNDERWRITING

              Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities, LLC are acting as representatives of each of the underwriters named below. Subject to the terms and conditions set forth in a purchase agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the aggregate principal amount of Notes set forth opposite its name below.

Underwriter
  Principal
Amount
 

Merrill Lynch, Pierce, Fenner & Smith
                      Incorporated

  $ 32,812,500  

Morgan Stanley & Co. LLC

    32,812,500  

UBS Securities LLC

    32,812,500  

Wells Fargo Securities, LLC

    32,812,500  

Stifel, Nicolaus & Company, Incorporated

    4,375,000  

Credit Suisse Securities (USA) LLC

    3,500,000  

Janney Montgomery Scott LLC

    3,500,000  

RBC Capital Markets, LLC

    3,500,000  

Stephens Inc. 

    2,625,000  

BB&T Capital Markets, a division of Scott & Stringfellow, LLC

    2,187,500  

C.L. King & Associates, Inc. 

    2,187,500  

D.A. Davidson & Co. 

    2,187,500  

Deutsche Bank Securities Inc. 

    2,187,500  

HRC Investment Services, Inc. 

    2,187,500  

J.J.B. Hilliard, W.L. Lyons, Inc. 

    2,187,500  

Keefe Bruyette & Woods, Inc

    2,187,500  

KeyBank Capital Markets Inc. 

    2,187,500  

Mesirow Financial, Inc. 

    2,187,500  

Oppenheimer & Co. Inc. 

    2,187,500  

Wedbush Morgan Securities Inc. 

    2,187,500  

Ziegler Capital Markets Group

    2,187,500  
       

Total

  $ 175,000,000  
       

              Subject to the terms and conditions set forth in the purchase agreement, the underwriters have agreed, severally and not jointly, to purchase all of the Notes sold under the purchase agreement if any of these Notes are purchased. If an underwriter defaults, the purchase agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreement may be terminated.

              We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

              The underwriters are offering the Notes, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreement, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

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Commissions and Discounts

              The following table shows the total underwriting discounts that we are to pay to the underwriters in connection with this offering. The information assumes either no exercise or full exercise by the underwriters of their overallotment option.

 
  Per Note   Without
Option
  With
Option
 

Public offering price

    100.00 % $ 175,000,000   $ 201,250,000  

Underwriting discount (sales load)

    3.00 % $ 5,250,000   $ 6,037,500  

Proceeds, before expenses, to us

    97.00 % $ 169,750,000   $ 195,212,500  

              The underwriters propose to offer some of the Notes to the public at the public offering price set forth on the cover page of this prospectus supplement and some of the Notes to certain other Financial Industry Regulatory Authority (FINRA) members at the public offering price less a concession not in excess of 1.50% of the aggregate principal amount of the Notes. The underwriters may allow, and the dealers may reallow, a discount not in excess of 1.20% of the aggregate principal amount of the Notes. After the initial offering of the Notes to the public, the public offering price and such concessions may be changed. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus supplement.

              The expenses of the offering, not including the underwriting discount, are estimated at $1.0 million and are payable by us.

Overallotment Option

              We have granted an option to the underwriters to purchase up to an additional $26,250,000 aggregate principal amount of the Notes offered hereby at the public offering price within 30 days from the date of this prospectus supplement solely to cover any overallotments. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional Notes proportionate to that underwriter's initial principal amount reflected in the above table.

No Sales of Similar Securities

              Subject to certain exceptions, we have agreed not to directly or indirectly, offer, pledge, sell, contract to sell, grant any option for the sale of, or otherwise transfer or dispose of any debt securities issued or guaranteed by the Company or any securities convertible into or exercisable or exchangeable for debt securities issued or guaranteed by the Company or file any registration statement under the Securities Act with respect to any of the foregoing for a period of 60 days after the date of this prospectus supplement without first obtaining the written consent of the representatives, other than sales of debt securities convertible into or exercisable or exchangeable for shares of capital stock issued by the Company and certain private sales of debt securities. This consent may be given at any time without public notice.

Listing

              The Notes are a new issue of securities with no established trading market. We intend to apply to list the Notes on The New York Stock Exchange. If the application is approved, we expect trading in the Notes on The New York Stock Exchange to begin within 30 days after the original issue date. Currently there is no public market for the Notes.

              We have been advised by the underwriters that they presently intend to make a market in the Notes after completion of the offering as permitted by applicable laws and regulations. The underwriters are not obligated, however, to make a market in the Notes and any such market-making

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may be discontinued at any time in the sole discretion of the underwriters without any notice. Accordingly, no assurance can be given as to the liquidity of, or development of a public trading market for, the Notes. If an active public trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely affected.

Price Stabilization, Short Positions

              In connection with the offering, the underwriters may purchase and sell Notes in the open market. These transactions may include overallotment, covering transactions and stabilizing transactions. Overallotment involves sales of securities in excess of the aggregate principal amount of securities to be purchased by the underwriters in the offering, which creates a short position for the underwriters. Covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions consist of certain bids or purchases of securities made for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress.

              The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased Notes sold by or for the account of such underwriter in stabilizing or short covering transactions.

              Any of these activities may cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of such transactions. These transactions may be affected in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time without any notice relating thereto.

Electronic Offer, Sale and Distribution of Notes

              The underwriters may make prospectuses available in electronic (PDF) format. A prospectus in electronic (PDF) format may be made available on a web site maintained by the underwriters, and the underwriters may distribute such prospectuses electronically. The underwriters may allocate a limited principal amount of the Notes for sale to their online brokerage customers.

Other Relationships

              The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. The underwriters and their respective affiliates have provided in the past and may provide from time to time in the future in the ordinary course of their business certain commercial banking, financial advisory, investment banking and other services to Ares and its affiliates and managed funds and Ares Capital or our portfolio companies for which they have received or will be entitled to receive separate fees. In particular, the underwriters or their affiliates may execute transactions with Ares Capital or on behalf of Ares Capital, Ares or any of our or their portfolio companies, affiliates and/or managed funds. In addition, the underwriters or their affiliates may act as arrangers, underwriters or placement agents for companies whose securities are sold to or whose loans are syndicated to Ares, Ares Capital or Ares Capital Management and their affiliates and managed funds.

              Affiliates of certain of the underwriters are limited partners of private investment funds affiliated with our investment adviser, Ares Capital Management.

              The underwriters or their affiliates may also trade in our securities, securities of our portfolio companies or other financial instruments related thereto for their own accounts or for the account of

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others and may extend loans or financing directly or through derivative transactions to Ares, Ares Capital, Ares Capital Management or any of our portfolio companies.

              We may purchase securities of third parties from the underwriters or their affiliates after the offering. However, we have not entered into any agreement or arrangement regarding the acquisition of any such securities, and we may not purchase any such securities. We would only purchase any such securities if—among other things—we identified securities that satisfied our investment needs and completed our due diligence review of such securities.

              After the date of this prospectus supplement, the underwriters and their affiliates may from time to time obtain information regarding specific portfolio companies or us that may not be available to the general public. Any such information is obtained by the underwriters and their affiliates in the ordinary course of its business and not in connection with the offering of the Notes. In addition, after the offering period for the sale of the Notes, the underwriters or their affiliates may develop analyses or opinions related to Ares, Ares Capital or our portfolio companies and buy or sell interests in one or more of our portfolio companies on behalf of their proprietary or client accounts and may engage in competitive activities. There is no obligation on behalf of these parties to disclose their respective analyses, opinions or purchase and sale activities regarding any portfolio company or regarding Ares Capital to our noteholders or any other persons.

              In the ordinary course of their business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. Certain of the underwriters and their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the Notes. Any such short positions could adversely affect future trading prices of the Notes. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

              Affiliates of certain of the underwriters serve as agents and/or lenders under our credit facilities or other debt instruments (including the Revolving Credit Facility and the Revolving Funding Facility) and are also lenders to private investment funds managed by IHAM. Certain of the underwriters and their affiliates were underwriters in connection with our initial public offering and our subsequent common stock offerings, debt offerings and rights offering, for which they received customary fees.

              Proceeds of this offering will be used to repay or repurchase outstanding indebtedness under the Revolving Credit Facility, the Revolving Funding Facility and/or the SMBC Funding Facility and for general corporate purposes. Affiliates of certain of the underwriters, including Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC, UBS Securities LLC, Stifel, Nicolaus & Company, Incorporated and Credit Suisse Securities (USA) LLC are lenders under the Revolving Credit Facility and affiliates of certain of the underwriters, including Wells Fargo Securities, LLC and RBC Capital Markets, LLC, are lenders under the Revolving Funding Facility. Accordingly, affiliates of certain of the underwriters may receive more than 5% of the proceeds of this offering to the extent such proceeds are used to repay or repurchase outstanding indebtedness under the Revolving Credit Facility and/or the Revolving Funding Facility.

              Frank E. O'Bryan, one of our independent directors, holds certain securities of one or more of this offering's underwriters (or their affiliates). As a result, Mr. O'Bryan may be considered an

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"interested person" of the Company during the pendency of this offering under relevant rules of the Investment Company Act.

              The principal business address of Merrill Lynch, Pierce, Fenner & Smith Incorporated is One Bryant Park, New York, New York 10036. The principal business address of Morgan Stanley & Co. LLC is 1585 Broadway, New York, New York 10036. The principal business address of UBS Securities LLC is 677 Washington Boulevard, Stamford, Connecticut 06901. The principal business address of Wells Fargo Securities, LLC is 301 S. College Street, Charlotte, North Carolina 28288.

Other Jurisdictions

              Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the Notes offered by this prospectus supplement in any jurisdiction where action for that purpose is required. The Notes offered by this prospectus supplement may not be offered or sold, directly or indirectly, nor may this prospectus supplement or any other offering material or advertisements in connection with the offer and sale of any such Notes be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus supplement comes are advised to inform themselves about and to observe any restriction relating to the offering and the distribution of this prospectus supplement. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell or a solicitation of an offer to buy the Notes offered by this prospectus supplement and the accompanying prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.


LEGAL MATTERS

              Certain legal matters in connection with the offering will be passed upon for us by Proskauer Rose LLP, Los Angeles, California, Sutherland Asbill & Brennan LLP, Washington, D.C., and Venable LLP, Baltimore, Maryland. Proskauer Rose LLP has from time to time represented the underwriters, Ares and Ares Capital Management on unrelated matters. Certain legal matters in connection with the offering will be passed upon for the underwriters by Fried, Frank, Harris, Shriver & Jacobson LLP, New York, New York.

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PROSPECTUS

$3,000,000,000

GRAPHIC

Common Stock
Preferred Stock
Debt Securities
Subscription Rights
Warrants
Units



        Ares Capital Corporation is a specialty finance company that is a closed-end, non-diversified management investment company incorporated in Maryland. We have elected to be regulated as a business development company under the Investment Company Act of 1940. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component. To a lesser extent, we also make equity investments.

        We are externally managed by our investment adviser, Ares Capital Management LLC, a wholly owned subsidiary of Ares Management LLC, a global alternative asset manager and a Securities and Exchange Commission ("SEC") registered investment adviser with approximately $54 billion of total committed capital under management as of June 30, 2012. Ares Operations LLC, a wholly owned subsidiary of Ares Management LLC, provides the administrative services necessary for us to operate.

        Our common stock is traded on The NASDAQ Global Select Market under the symbol "ARCC." On August 13, 2012 the last reported sales price of our common stock on The NASDAQ Global Select Market was $17.19 per share. The net asset value per share of our common stock at June 30, 2012 (the last date prior to the date of this prospectus on which we determined net asset value) was $15.51.

        Investing in our securities involves risks that are described in the "Risk Factors" section beginning on page 24 of this prospectus, including the risk of leverage.

        We may offer, from time to time, in one or more offerings or series, up to $3,000,000,000 of our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, or units comprised of any combination of the foregoing, which we refer to, collectively, as the "securities." The preferred stock, debt securities, subscription rights and warrants (including as part of a unit) offered hereby may be convertible or exchangeable into shares of our common stock. The securities may be offered at prices and on terms to be described in one or more supplements to this prospectus. In the event we offer common stock, the offering price per share of our common stock less any underwriting commissions or discounts will generally not be less than the net asset value per share of our common stock at the time we make the offering. However, we may issue shares of our common stock pursuant to this prospectus at a price per share that is less than our net asset value per share (a) in connection with a rights offering to our existing stockholders, (b) with the prior approval of the majority of our common stockholders or (c) under such circumstances as the SEC may permit. This prospectus and the accompanying prospectus supplement concisely provide important information about us that you should know before investing in our securities. Please read this prospectus and the accompanying prospectus supplement before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information with the SEC. This information is available free of charge by calling us collect at (310) 201-4200 or on our website at www.arescapitalcorp.com. The SEC also maintains a website at www.sec.gov that contains such information.



        Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        This prospectus may not be used to consummate sales of securities unless accompanied by a prospectus supplement.



The date of this prospectus is August 16, 2012.


Table of Contents

        You should rely only on the information contained in this prospectus and the accompanying prospectus supplement. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and the accompanying prospectus supplement is accurate only as of the date on the front cover of this prospectus and the accompanying prospectus supplement, as applicable. Our business, financial condition, results of operations and prospects may have changed since that date.


TABLE OF CONTENTS

 
  Page

Prospectus Summary

  1

The Company

  1

Offerings

  13

Fees and Expenses

  16

Selected Condensed Consolidated Financial Data of Ares Capital

  20

Risk Factors

  24

Forward-Looking Statements

  49

Use of Proceeds

  51

Price Range of Common Stock and Distributions

  53

Ratios of Earnings to Fixed Charges

  55

Management's Discussion and Analysis of Financial Condition and Results of Operations

  56

Senior Securities

  96

Business

  98

Portfolio Companies

  115

Management

  130

Certain Relationships and Related Transactions

  156

Control Persons and Principal Stockholders

  158

Determination of Net Asset Value

  160

Dividend Reinvestment Plan

  162

Certain Material U.S. Federal Income Tax Considerations

  164

Description of Securities

  175

Description of Our Capital Stock

  175

Description of Our Preferred Stock

  182

Description of Our Subscription Rights

  183

Description of Our Warrants

  184

Description of Our Debt Securities

  186

Description of Our Units

  198

Sales of Common Stock Below Net Asset Value

  199

Issuance of Warrants or Securities to Subscribe For or Convertible Into Shares of Our Common Stock

  204

Regulation

  205

Custodian, Transfer and Dividend Paying Agent and Registrar

  211

Brokerage Allocation and Other Practices

  211

Plan of Distribution

  212

Legal Matters

  214

Independent Registered Public Accounting Firm

  214

Available Information

  214

Financial Statements

  F-1

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ABOUT THIS PROSPECTUS

        This prospectus is part of a registration statement that we have filed with the SEC, using the "shelf" registration process. Under the shelf registration process, we may offer, from time to time, in one or more offerings or series, up to $3,000,000,000 of our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, or units comprised of any combination of the foregoing, on terms to be determined at the time of the offering. The securities may be offered at prices and on terms described in one or more supplements to this prospectus. This prospectus provides you with a general description of the securities that we may offer. Each time we use this prospectus to offer securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. Please carefully read this prospectus and the prospectus supplement together with any exhibits and the additional information described under the headings "Available Information" and "Risk Factors" before you make an investment decision.

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PROSPECTUS SUMMARY

        This summary highlights some of the information contained elsewhere in this prospectus. It is not complete and may not contain all of the information that you may want to consider. You should read carefully the more detailed information set forth under "Risk Factors" and the other information included in this prospectus. Except where the context suggests otherwise, the terms "we," "us," "our," "the Company" and "Ares Capital" refer to Ares Capital Corporation and its consolidated subsidiaries; "Ares Capital Management" and the "investment adviser" refer to Ares Capital Management LLC; "Ares Operations" and the "administrator" refer to Ares Operations LLC; and "Ares" refers to Ares Management LLC ("Ares Management") and its affiliated companies (other than portfolio companies of its affiliated funds).

        As described in more detail below, we consummated the acquisition (the "Allied Acquisition") of Allied Capital Corporation ("Allied Capital") on April 1, 2010. Other than as specifically set forth herein, financial information presented herein for and as of periods ending on or prior to March 31, 2010 does not include any information in respect of Allied Capital. In addition, other than as specifically set forth herein, financial information for the year ended December 31, 2010, including, without limitation, with respect to the Company's consolidated statements of operations, stockholders' equity and cash flows, only includes results attributable to Allied Capital for the period beginning on April 1, 2010.


THE COMPANY

Overview

        Ares Capital, a Maryland corporation, is a specialty finance company that is a closed-end, non-diversified management investment company. We have elected to be regulated as a business development company, or a "BDC," under the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder, or the "Investment Company Act." We were founded on April 16, 2004, were initially funded on June 23, 2004 and completed our initial public offering on October 8, 2004. We are one of the largest BDCs with approximately $5.8 billion of total assets as of June 30, 2012.

        We are externally managed by our investment adviser, Ares Capital Management, a wholly owned subsidiary of Ares Management, a global alternative asset manager and an SEC registered investment adviser with approximately $54 billion of total committed capital under management as of June 30, 2012. Our administrator, Ares Operations, a wholly owned subsidiary of Ares Management, provides the administrative services necessary for us to operate.

        Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. However, we may from time to time invest in larger companies. In this prospectus, we generally use the term "middle-market" to refer to companies with annual EBITDA between $10 million and $250 million. As used herein, EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization.

        We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component. First and second lien senior loans generally are senior debt instruments that rank ahead of subordinated debt of a given portfolio company. Mezzanine debt is subordinated to senior loans and is generally unsecured. Our investments in corporate borrowers generally range between $30 million and $400 million each, investments in the project finance/power generation sector generally range between $10 million and $200 million each and investments in the venture finance sector generally range between $1 million and $25 million each. However, the investment sizes may be more or less than these ranges and may vary based on our capital availability.

 

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        To a lesser extent, we also make preferred and/or common equity investments, which have generally been non-control equity investments of less than $20 million (usually in conjunction with a concurrent debt investment). However, we may increase the size or change the nature of these investments.

        The proportion of these types of investments will change over time given our views on, among other things, the economic and credit environment in which we are operating. In connection with our investing activities, we may make commitments with respect to indebtedness or securities of a potential portfolio company substantially in excess of our final investment. In such situations, while we may initially agree to fund up to a certain dollar amount of an investment, we may subsequently syndicate a portion of such amount to third parties, such that we are left with a smaller investment than what was reflected in our original commitment. In addition to originating investments, we may also acquire investments in the secondary market.

        The first and second lien senior loans in which we invest generally have stated terms of three to 10 years and the mezzanine debt investments in which we invest generally have stated terms of up to 10 years, but the expected average life of such first and second lien loans and mezzanine debt is generally between three and seven years. However, we may invest in loans and securities with any maturity or duration. The instruments in which we invest typically are not rated by any rating agency, but we believe that if such instruments were rated, they would be below investment grade (rated lower than "Baa3" by Moody's Investors Service, lower than "BBB-" by Fitch Ratings or lower than "BBB-" by Standard & Poor's Rating Services), which is an indication of having predominantly speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. Bonds that are rated below investment grade are sometimes referred to as "high yield bonds" or "junk bonds." We may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by any nationally recognized statistical rating organization.

        We believe that our investment adviser, Ares Capital Management, is able to leverage the current investment platform, resources and existing relationships with financial sponsors, financial institutions, hedge funds and other investment firms of Ares to provide us with attractive investment opportunities. In addition to deal flow, the Ares investment platform assists our investment adviser in analyzing, structuring and monitoring investments. Ares has been in existence for more than 14 years and its senior partners have an average of over 22 years experience investing in senior loans, high yield bonds, mezzanine debt and private equity securities. The Company has access to the Ares staff of 231 investment professionals and 289 administrative professionals as of June 30, 2012, who provide assistance in accounting, finance, legal, compliance, operations, information technology and investor relations.

        Since our initial public offering on October 8, 2004 through June 30, 2012, our realized gains have exceeded our realized losses by approximately $101 million (excluding the one-time gain on the Allied Acquisition and gains/losses from the extinguishment of debt and other assets). For this same time period, our portfolio exits have resulted in an aggregate cash flow realized internal rate of return to us of approximately 14% (based on original cash invested of approximately $5.4 billion and total proceeds from such exits of approximately $6.5 billion). Approximately 73% of these exits resulted in an aggregate cash flow internal rate of return to us of 10% or greater. Internal rate of return is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. Internal rate of return is gross of expenses related to investments as these expenses are not allocable to specific investments. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the repayment of our debt investment or sale of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized. These internal rate of return results are historical results relating to our past performance and are not necessarily indicative of future results, the achievement of which cannot be assured.

 

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        We and General Electric Capital Corporation and GE Global Sponsor Finance LLC (collectively, "GE") also co-invest through an unconsolidated vehicle, the Senior Secured Loan Fund LLC, which operates using the name "Senior Secured Loan Program" (the "SSLP"). The SSLP was initially formed in December 2007 to co-invest in first lien senior secured loans of middle-market companies. As of June 30, 2012, the SSLP had approximately $7.7 billion of available capital, approximately $5.4 billion in aggregate principal amount of which was funded as of June 30, 2012. At June 30, 2012, we had agreed to make available to the SSLP approximately $1.5 billion, of which approximately $1.1 billion was funded. The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and GE (with approval from a representative of each required). As of June 30, 2012, our investment in the SSLP was approximately $1.1 billion at fair value (including unrealized appreciation of $26.3 million) which represented approximately 20% of our total portfolio at fair value. Effective March 30, 2012, Ares Capital Management assumed from the Company the role of co-manager of the SSLP. However, this change did not impact the Company's economics in respect of its participation in the SSLP and Ares Capital Management does not receive any remuneration in respect of its co-manager role.

        While our primary focus is to generate current income and capital appreciation through investments in first and second lien senior loans and mezzanine debt and, to a lesser extent, equity securities of eligible portfolio companies, we also may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. See "Regulation." Specifically, as part of this 30% basket, we may invest in entities that are not considered "eligible portfolio companies" (as defined in the Investment Company Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the Investment Company Act.

        Our portfolio company, Ivy Hill Asset Management, L.P. ("IHAM"), which became an SEC registered investment adviser effective March 30, 2012, manages 11 unconsolidated credit vehicles and sub-manages or sub-advises four other unconsolidated credit vehicles (these vehicles managed or sub-managed/sub-advised by IHAM are collectively referred to as the "IHAM Vehicles"), which are described in more detail under "Business—Investments—Ivy Hill Asset Management, L.P." below. We have also made direct investments in securities of certain of these vehicles. As of June 30, 2012, IHAM had total committed capital under management of approximately $3.2 billion, which included approximately $0.3 billion invested by Ares Capital in IHAM or securities issued by the IHAM Vehicles. In connection with IHAM's registration as a registered investment adviser, on March 30, 2012 we received exemptive relief from the SEC allowing us to, subject to certain conditions, own directly or indirectly up to 100% of IHAM's outstanding equity interests and make additional investments in IHAM.

About Ares

        Founded in 1997, Ares is a global alternative asset manager and an SEC registered investment adviser with approximately $54 billion of total committed capital under management and 520 employees as of June 30, 2012.

        Ares specializes in originating and managing assets in both the leveraged finance and private equity markets. Ares' leveraged finance activities include the origination, acquisition and management of senior loans, high yield bonds, mezzanine debt and special situation investments. Ares' private equity activities focus on providing flexible, junior capital to middle-market companies. Ares has the ability to invest across a capital structure, from senior floating rate debt to common equity. This flexibility, combined with Ares' "buy and hold" philosophy, enables Ares to structure an investment to meet the specific needs of a company rather than the less flexible demands of the public markets.

 

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        Ares is comprised of the following groups:

        Ares' senior partners have been working together as a group for many years and have an average of over 22 years of experience in leveraged finance, private equity, distressed debt, investment banking and capital markets. They are backed by a team of 231 highly disciplined investment professionals as of June 30, 2012 covering current investments in more than 1,100 companies across over 30 industries. Ares' rigorous investment approach is based upon an intensive, independent financial analysis, with a focus on preservation of capital, diversification and active portfolio management. These fundamentals underlie Ares' investment strategy and have resulted in large pension funds, banks, insurance companies, endowments and certain high net worth individuals investing in Ares' funds.

Ares Capital Management

        Ares Capital Management, our investment adviser, is served by an origination, investment and portfolio management team of 73 U.S.-based investment professionals as of June 30, 2012 led by the senior partners of the Ares Private Debt Group: Michael Arougheti, Eric Beckman, Kipp deVeer, Mitchell Goldstein and Michael Smith. Ares Capital Management leverages off of Ares' investment platform and benefits from the significant capital markets, trading and research expertise of Ares' investment professionals. Ares Capital Management's investment committee has eight members, including the senior partners of the Ares Private Debt Group, senior partners in the Ares Private Equity Group and a senior adviser to the Ares Capital Markets Group.

 

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MARKET OPPORTUNITY

        We believe that current market conditions present attractive opportunities for us to invest in middle-market companies; specifically:

COMPETITIVE ADVANTAGES

        We believe that we have the following competitive advantages over other capital providers to middle-market companies:

The Ares Platform

        As of June 30, 2012, Ares had approximately $54 billion of total committed capital under management in the related asset classes of non-syndicated first and second lien senior loans, syndicated loans, high yield bonds, mezzanine debt and private equity. We believe Ares' current investment platform provides a competitive advantage in terms of access to origination and marketing activities and diligence for Ares Capital. Specifically, the Ares platform provides the Company an advantage through its deal flow generation and investment evaluation process. Ares' asset management platform also provides additional market information, company knowledge and industry insight that benefit the investment and due diligence process. Ares' professionals maintain extensive financial sponsor and intermediary relationships, which provide valuable insight and access to transactions and information. Ares' senior partners have an average of more than 22 years of experience in leveraged finance, including substantial experience in investing in leveraged loans, high yield bonds, mezzanine debt, distressed debt and private equity securities.

 

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Seasoned Management Team

        The investment professionals in the Ares Private Debt Group and members of our investment adviser's investment committee have significant experience originating and investing across market cycles. As a result of Ares' extensive investment experience in private debt and the history of the Ares Private Debt Group's seasoned management team, Ares Capital has developed a strong reputation for an ability to originate and invest across market cycles. This experience also provided Ares Capital with a competitive advantage in identifying, originating, investing in and managing a portfolio of investments in middle-market companies.

Broad Origination Strategy

        We focus on self-originating most of our investments by pursuing a broad array of investment opportunities in middle-market companies across multiple channels. We also leverage the extensive relationships of the broader Ares platform, including relationships with the portfolio companies held by the IHAM Vehicles, to identify investment opportunities. We believe that this allows for asset selectivity and that there is a significant relationship between proprietary deal origination and credit performance. We believe that our focus on generating proprietary deal flow and lead investing also gives us greater control over capital structure, deal terms, pricing and documentation and enables us to actively manage our portfolio investments. Moreover, by leading the investment process, we are often able to secure controlling positions in credit tranches, thereby providing additional control in investment outcomes. We also have originated substantial proprietary deal flow from middle-market intermediaries, which often allows us to act as the sole or principal source of institutional capital to the borrower.

Experience with and Focus on Middle-Market Companies

        Ares has historically focused on investments in middle-market companies and we benefit from this experience. In sourcing and analyzing deals, our investment adviser benefits from Ares' extensive network of relationships focused on middle-market companies, including management teams, members of the investment banking community, private equity groups and other investment firms with whom Ares has had long-term relationships. We believe this network enables us to identify well-positioned prospective portfolio company investments. The Ares Private Debt Group works closely with Ares' other investment professionals, who together currently oversee a portfolio of investments in over 1,100 companies across over 30 industries, and provide access to an extensive network of relationships and insights into industry trends and the state of the capital markets.

Disciplined Investment Philosophy

        In making its investment decisions, our investment adviser has adopted Ares' long-standing, consistent, credit-based investment approach that was developed over 22 years ago by its founders. Specifically, our investment adviser's investment philosophy, portfolio construction and portfolio management involve an assessment of the overall macroeconomic environment and financial markets and company-specific research and analysis. Its investment approach emphasizes capital preservation, low volatility and minimization of downside risk. In addition to engaging in extensive due diligence from the perspective of a long-term investor, our investment adviser's approach seeks to reduce risk in investments by focusing on:

 

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Extensive Industry Focus

        We seek to concentrate our investing activities in industries with a history of predictable and dependable cash flows and in which the Ares investment professionals have had extensive investment experience. Ares investment professionals have developed long-term relationships with management teams and management consultants in over 30 industries, and have accumulated substantial information and identified potential trends within these industries. In turn, we benefit from these relationships, information and identification of potential trends in making investments.

Scale and Flexible Transaction Structuring

        We believe that being one of the largest BDCs makes us a more desirable and flexible capital provider, especially in competitive markets. We are flexible in structuring investments, including the types of investments and the terms associated with such investments. Ares has extensive experience investing in a wide variety of structures for companies with a diverse set of terms and conditions. We believe this approach and experience enables our investment adviser to identify attractive investment opportunities throughout economic cycles and across a company's capital structure so we can make investments consistent with our stated investment objective and preserve principal while seeking appropriate risk adjusted returns. In addition, we have the ability to provide "one stop" financing with the ability to invest capital across the balance sheet and syndicate and hold larger investments than many of our competitors. We believe that the ability to underwrite, syndicate and hold larger investments benefits our stockholders by (a) potentially increasing net income and earnings through syndication, (b) increasing originated deal flow flexibility, (c) broadening market relationships and deal flow, (d) allowing us to optimize our portfolio composition and (e) allowing us to provide capital to middle-market companies, which we believe currently have limited access to capital from traditional lending sources. In addition, we believe that the ability to provide capital at every level of the balance sheet provides a strong value proposition to middle-market borrowers and our senior debt capabilities provide superior deal origination and relative value analysis capabilities compared to traditional "mezzanine only" lenders.

OPERATING AND REGULATORY STRUCTURE

        Our investment activities are managed by Ares Capital Management, which is wholly owned by Ares, and supervised by our board of directors, a majority of whom are required to be independent of Ares and its affiliates, subject to certain cure periods. See "Risk Factors—As a result of the death of Kenneth R. Heitz, who was an independent director, we are not in compliance with certain NASDAQ Global Select Market listing requirements." Ares Capital Management is registered under the Investment Advisers Act of 1940, or the "Advisers Act." Under our investment advisory and management agreement, we have agreed to pay Ares Capital Management an annual base management fee based on our total assets, as defined under the Investment Company Act (other than cash and cash equivalents, but including assets purchased with borrowed funds), and an incentive fee based on our performance. See "Management—Investment Advisory and Management Agreement."

        As a BDC, we are required to comply with certain regulatory requirements. While we are permitted to finance investments using debt, our ability to use debt is limited in certain significant respects. See "Business—Operating and Regulatory Structure" and "Regulation." We have elected to be treated for U.S. federal income tax purposes as a regulated investment company, or a "RIC," under

 

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Subchapter M of the Internal Revenue Code of 1986, or the "Code." See "Certain Material U.S. Federal Income Tax Considerations."

MARKET CONDITIONS

        Due to the volatility in global markets, the availability of capital and access to capital markets has been limited over the last several years. As the global liquidity situation and market conditions evolve, we will continue to monitor and adjust our approach to funding accordingly. However, given the unprecedented nature of the volatility in the global markets over the past several years and the uncertainty around the strength of the U.S. and global economies, there can be no assurances that these activities will be successful. While the current markets have improved from various periods of market dislocation and volatility, there can be no assurance that they will not worsen again in the future. If they do, we could face materially higher financing costs. Consequently, our operating strategy could be materially and adversely affected. See "Risk Factors—Risks Relating to Our Business—Capital markets have been in a period of disruption and instability for an extended period of time. These market conditions materially and adversely affected debt and equity capital markets in the United States, which had, and may in the future continue to have, a negative impact on our business and operations."

        In connection with the prior depressed market conditions of the general economy, the stocks of BDCs as an industry have in the past traded at near historic lows as a result of concerns over liquidity, credit quality, leverage restrictions and distribution requirements. In some cases, certain BDCs became "forced sellers" of assets, defaulted on their indebtedness, decreased their distributions to stockholders or announced share repurchase programs. We cannot assure you that the market pressures we may face in the future will not have a material adverse effect on our business, financial condition and results of operations.

ACQUISITION OPPORTUNITIES

        We believe the dislocation and illiquidity in the credit markets over the past several years has increased the likelihood of further consolidation in our industry. To that end, we and our portfolio company IHAM are evaluating (and expect to continue to evaluate in the future) a number of potential strategic acquisition opportunities, including acquisitions of:

        We and our portfolio company IHAM have been and from time to time engage in discussions with counterparties in respect of various potential strategic acquisition and investment transactions, including potential acquisitions of other finance companies. Some of these transactions could be material to our business and, if consummated, could be difficult to integrate, result in increased leverage or dilution and/or subject us to unexpected liabilities. However, none of these discussions has progressed to the point where the consummation of any such transaction could be deemed to be probable or reasonably certain as of the date of this prospectus. Consummation of any such transaction would be subject to completion of due diligence, finalization of key business and financial terms (including price) and negotiation of final definitive documentation as well as a number of other factors and conditions including, without limitation, the approval of our board of directors (after having determined that such transaction is in the best interest of our stockholders), any required third party consents and, in certain cases, the approval of our stockholders. We cannot predict how quickly the terms of any such transaction could be finalized, if at all. Accordingly, there can be no assurance that definitive

 

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documentation for any such transaction would be executed or even if executed, that any such transaction would be consummated. In connection with evaluating potential strategic acquisition and investment transactions, we have, and may in the future, incur significant expenses for the evaluation and due diligence investigation of these potential transactions.

LIQUIDITY

        As of June 30, 2012, we had approximately $2.3 billion in aggregate principal amount of total outstanding indebtedness, approximately $1.5 billion aggregate principal amount of which was unsecured indebtedness of Ares Capital and approximately $0.8 billion of which was secured indebtedness of our consolidated subsidiaries.

        As of June 30, 2012, our outstanding indebtedness consisted of the following: (i) $295.0 million in aggregate principal amount under our revolving credit facility (the "Revolving Credit Facility"), (ii) $348.0 million in aggregate principal amount under the revolving funding facility of our consolidated subsidiary, Ares Capital CP Funding LLC ("Ares Capital CP") (the "Revolving Funding Facility"), (iii) $107.0 million in aggregate principal amount under the revolving funding facility of our consolidated subsidiary, Ares Capital JB Funding LLC ("ACJB"), with Sumitomo Mitsui Banking Corporation ("SMBC") (the "SMBC Funding Facility" and, together with the Revolving Credit Facility and the Revolving Funding Facility, the "Facilities"), (iv) $143.8 million aggregate principal amount of our 7.00% senior notes that mature on February 15, 2022 (the "2022 Notes"), (v) $200.0 million aggregate principal amount of our 7.75% senior notes that mature on October 15, 2040 (the "2040 Notes"), (vi) $230.0 million aggregate principal amount of our 6.875% senior notes due on April 15, 2047 (the "2047 Notes" and, together with the 2022 Notes and the 2040 Notes, the "Unsecured Notes"), (vii) $575.0 million aggregate principal amount of our convertible senior unsecured notes that mature on February 1, 2016 (the "February 2016 Convertible Notes"), (viii) $230.0 million aggregate principal amount of our convertible senior unsecured notes that mature on June 1, 2016 (the "June 2016 Convertible Notes") and (ix) $162.5 million aggregate principal amount of our convertible senior unsecured notes that mature on March 15, 2017 (the "2017 Convertible Notes" and, together with the February 2016 Convertible Notes and the June 2016 Convertible Notes, the "Convertible Notes").

        For more information on the Company's debt, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources" and "Recent Developments."

RECENT DEVELOPMENTS

        In July 2012, pursuant to the terms of the Revolving Funding Facility, Ares Capital CP received an increase in the commitments under the Revolving Funding Facility of $40 million, bringing the total commitments to $620 million.

        In August 2012, we declared a third quarter dividend of $0.38 per share and an additional dividend of $0.05 per share. Both dividends are payable on September 28, 2012 to stockholders of record as of September 14, 2012.

 

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RISK FACTORS

        Investing in Ares Capital involves risks. The following is a summary of certain risks that you should carefully consider before investing in our securities. In addition, see "Risk Factors" beginning on page 24 for a more detailed discussion of the factors you should carefully consider before deciding to invest in our securities.

Risks Relating to Our Business

 

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Risks Relating to Our Investments

 

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Risks Relating to Offerings Pursuant to this Prospectus

OUR CORPORATE INFORMATION

        Our administrative offices are located at 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067, telephone number (310) 201-4200, and our executive offices are located at 245 Park Avenue, 44th Floor, New York, New York 10167, telephone number (212) 750-7300.

 

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OFFERINGS

        We may offer, from time to time, in one or more offerings or series, up to $3,000,000,000 of our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, or units comprised of any combination of the foregoing, on terms to be determined at the time of the offering. We will offer our securities at prices and on terms to be set forth in one or more supplements to this prospectus. The offering price per share of our common stock, less any underwriting commissions or discounts, generally will not be less than the net asset value per share of our common stock at the time of an offering. However, we may issue shares of our common stock pursuant to this prospectus at a price per share that is less than our net asset value per share (a) in connection with a rights offering to our existing stockholders, (b) with the prior approval of the majority of our common stockholders or (c) under such other circumstances as the SEC may permit. Any such issuance of shares of our common stock below net asset value may be dilutive to the net asset value of our common stock. See "Risk Factors—Risks Relating to Offerings Pursuant to this Prospectus."

        At our 2012 annual stockholders meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock, at a price below the then current net asset value per share during a period beginning on June 4, 2012 and expiring on the earlier of June 4, 2013 and the date of our 2013 annual stockholders meeting.

        We may offer our securities directly to one or more purchasers, including existing stockholders in a rights offering, through agents that we designate from time to time or to or through underwriters or dealers. The prospectus supplement relating to each offering will identify any agents or underwriters involved in the sale of our securities, and will set forth any applicable purchase price, fee, commission or discount arrangement between us and our agents or underwriters or among our underwriters or the basis upon which such amount may be calculated. See "Plan of Distribution." We may not sell any of our securities through agents, underwriters or dealers without delivery of a prospectus supplement describing the method and terms of the offering of our securities.

        Set forth below is additional information regarding offerings of our securities:

Use of proceeds

  Unless otherwise specified in a prospectus supplement, we intend to use the net proceeds from the sale of our securities for general corporate purposes, which includes, among other things, (a)  investing in portfolio companies in accordance with our investment objective and (b) repaying indebtedness. Each supplement to this prospectus relating to an offering will more fully identify the use of the proceeds from such offering. See "Use of Proceeds."

Distributions

 

We currently intend to distribute dividends or make distributions to our stockholders on a quarterly basis out of assets legally available for distribution. We may also distribute additional dividends or make additional distributions to our stockholders from time to time. Our quarterly and additional dividends or distributions, if any, will be determined by our board of directors. For more information, see "Price Range of Common Stock and Distributions."

 

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Taxation

 

We have elected to be treated as a RIC for U.S. federal income tax purposes. As a RIC, we generally will not pay corporate-level U.S. federal income taxes on any income and gain that we distribute to our stockholders as dividends on a timely basis. Among other things, in order to maintain our RIC status, we must meet specified source of income and asset diversification requirements and distribute annually generally an amount equal to at least 90% of our investment company taxable income, out of assets legally available for distribution. See "Risk Factors—Risks Relating to Our Business—We may be subject to certain corporate-level taxes regardless of whether we continue to qualify as a RIC" and "Price Range of Common Stock and Distributions."

Dividend reinvestment plan

 

We have a dividend reinvestment plan for our stockholders. This is an "opt out" dividend reinvestment plan. As a result, if we declare a cash dividend, then stockholders' dividends will be automatically reinvested in additional shares of our common stock, unless they specifically "opt out" of the dividend reinvestment plan so as to receive cash. Stockholders whose cash dividends are reinvested in additional shares of our common stock will be subject to the same U.S. federal, state and local tax consequences as stockholders who elect to receive their dividends in cash. See "Dividend Reinvestment Plan."

The NASDAQ Global Select Market symbol

 

"ARCC"

Anti-takeover provisions

 

Our board of directors is divided into three classes of directors serving staggered three-year terms. This structure is intended to provide us with a greater likelihood of continuity of management, which may be necessary for us to realize the full value of our investments. A staggered board of directors also may serve to deter hostile takeovers or proxy contests, as may certain other measures adopted by us. See "Description of Our Capital Stock."

Leverage

 

We borrow funds to make additional investments. We use this practice, which is known as "leverage," to attempt to increase returns to our common stockholders, but it involves significant risks. See "Risk Factors," "Senior Securities" and "Regulation—Indebtedness and Senior Securities." With certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the Investment Company Act, equals at least 200% after such borrowing. The amount of leverage that we employ at any particular time will depend on our investment adviser's and our board of directors' assessments of market and other factors at the time of any proposed borrowing.

Management arrangements

 

Ares Capital Management serves as our investment adviser. Ares Operations serves as our administrator. For a description of Ares Capital Management, Ares Operations, Ares and our contractual arrangements with these companies, see "Management—Investment Advisory and Management Agreement," and "—Administration Agreement."

 

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Available information

 

We are required to file periodic reports, proxy statements and other information with the SEC. This information is available free of charge by calling us collect at (310) 201-4200 or on our website at www.arescapitalcorp.com. The information on our website is not deemed incorporated by reference in this prospectus. The SEC also maintains a website at www.sec.gov that contains this information.

 

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FEES AND EXPENSES

        The following table is intended to assist you in understanding the costs and expenses that an investor in our common stock will bear, directly or indirectly, based on the assumptions set forth below. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this table contains a reference to our fees or expenses, we will pay such fees and expenses out of our net assets and, consequently, stockholders will indirectly bear such fees or expenses as investors in Ares Capital.

Stockholder transaction expenses (as a percentage of offering price):

       

Sales load

        (1)

Offering expenses

        (2)

Dividend reinvestment plan expenses

    None     (3)
       

Total stockholder transaction expenses paid

        (4)
       


Annual expenses (as a percentage of consolidated net assets attributable to common stock)(5):


 

Management fees

    2.46 %(6)

Incentive fees

    2.89 %(7)

Interest payments on borrowed funds

    3.99 %(8)

Other expenses

    1.33 %(9)

Acquired fund fees and expenses

    0.01 %(10)
       

Total annual expenses

    10.68 %(11)
       

(1)
In the event that the securities to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement will disclose the applicable sales load (underwriting discount or commission). Purchases of shares of our common stock on the secondary market are not subject to sales charges but may be subject to brokerage commissions or other charges. The table does not include any sales load that stockholders may have paid in connection with their purchase of shares of our common stock.

(2)
The related prospectus supplement will disclose the estimated amount of offering expenses, the offering price and the offering expenses borne by us as a percentage of the offering price.

(3)
The expenses of the dividend reinvestment plan are included in "Other expenses."

(4)
The related prospectus supplement will disclose the offering price and the total stockholder transaction expenses as a percentage of the offering price.

(5)
The "consolidated net assets attributable to common stock" used to calculate the percentages in this table is our average net assets of $3.4 billion for the six months ended June 30, 2012.

(6)
Our management fee is currently 1.5% of our total assets other than cash and cash equivalents (which includes assets purchased with borrowed amounts). For the purposes of this table, we have assumed that we maintain no cash or cash equivalents. The 2.46% reflected on the table is higher than 1.5% because it is calculated on our average net assets (rather than our average total assets). See "Management—Investment Advisory and Management Agreement."

(7)
This item represents our investment adviser's incentive fees estimated by annualizing our incentive fee related to our pre-incentive fee net investment income for the six months ended June 30, 2012 and annualizing our accrual in accordance with GAAP of a capital gains incentive fee of $6.3 million for the six months ended June 30, 2012, even though no capital gains incentive fee was payable under the investment advisory and management agreement.

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(8)
"Interest payments on borrowed funds" represents our interest expense estimated by annualizing our actual interest and credit facility expenses incurred for the six months ended June 30, 2012. During the six months ended June 30, 2012, our average outstanding borrowings were $2,103.9 million and cash paid for interest expense was $50.4 million. We had outstanding borrowings of $2,291.3 million (with a carrying value of $2,194.8 million) at June 30, 2012. This item is based on our assumption that our borrowings and interest costs after an offering will remain similar to those prior to such offering. The prospectus supplement related to the offering of any debt securities pursuant to this prospectus will calculate this item based on the effects of our borrowings and interest costs after the issuance of such debt securities. The amount of leverage that we employ at any particular time will depend on, among other things, our board of directors' and our investment adviser's assessment of market and other factors at the time of any proposed borrowing. See "Risk Factors—Risks Relating to Our Business—We borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing with us."

(9)
Includes our overhead expenses, including payments under our administration agreement (as defined below), based on our allocable portion of overhead and other expenses incurred by Ares Operations in performing its obligations under the administration agreement, and income taxes. Such expenses are estimated by annualizing "Other expenses" for the six months ended June 30, 2012. The holders of shares of our common stock (and not the holders of our debt securities or preferred stock, if any) indirectly bear the cost associated with our annual expenses. See "Management—Administration Agreement."

(10)
The Company's stockholders indirectly bear the expenses of underlying funds or other investment vehicles that would be investment companies under section 3(a) of the Investment Company Act but for the exceptions to that definition provided for in sections 3(c)(1) and 3(c)(7) of the Investment Company Act ("Acquired Funds") in which the Company invests. This amount includes the estimated annual fees and expenses of Acquired Funds in which the Company is invested as of June 30, 2012. Certain of these Acquired Funds are subject to management fees, which generally range from 1% to 2.5% of total net assets, or incentive fees, which generally range between 15% to 25% of net profits. When applicable, fees and expenses estimates are based on historic fees and expenses for the Acquired Funds. For those Acquired Funds with little or no operating history, fees and expenses are estimates based on expected fees and expenses stated in the Acquired Funds' offering memorandum, private placement memorandum or other similar communication without giving effect to any performance. Future fees and expenses for these Acquired Funds may be substantially higher or lower because certain fees and expenses are based on the performance of the Acquired Funds, which may fluctuate over time.

(11)
"Total annual expenses" as a percentage of consolidated net assets attributable to common stock are higher than the total annual expenses percentage would be for a company that is not leveraged. We borrow money to leverage and increase our total assets. The SEC requires that the "Total annual expenses" percentage be calculated as a percentage of net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the

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Example

        The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that we would have no additional leverage, that none of our assets are cash or cash equivalents, and that our annual operating expenses would remain at the levels set forth in the table above. Transaction expenses are not included in the following example. In the event that shares to which this prospectus relates are sold to or through underwriters, a corresponding prospectus supplement will restate this example to reflect the applicable sales load.

 
  1 year   3 years   5 years   10 years  

You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return(1)

  $ 80   $ 232   $ 376   $ 699  

(1)
The above illustration assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation. The expenses you would pay, based on a $1,000 investment and assuming a 5% annual return resulting entirely from net realized capital gains (and therefore subject to the capital gain incentive fee), and otherwise making the same assumptions in the example above, would be: 1 year, $90; 3 years, $260; 5 years, $420; and 10 years, $772. However, cash payment of the capital incentive fee would be deferred if, during the most recent four full calendar quarter period ending on or prior to the date the payment set forth in the example is to be made, the sum of (a) our aggregate distributions to our stockholders and (b) our change in net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) was less than 7.0% of our net assets (defined as total assets less indebtedness) at the beginning of such period (as adjusted for any share issuances or repurchases).

        The foregoing table is to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the investment advisory and management agreement, which, assuming a 5% annual return, would either not be payable or have an insignificant impact on the expense amounts shown above, is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses, and returns to our investors, would be higher. In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, if our board of directors authorizes and we declare a cash dividend, participants in our dividend reinvestment plan who have not otherwise elected to receive cash will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the dividend. See "Dividend Reinvestment Plan" for additional information regarding our dividend reinvestment plan.

        This example and the expenses in the table above should not be considered a representation of our future expenses as actual expenses (including the cost of debt, if any, and other expenses) that we may incur in the future and such actual expenses may be greater or less than those shown.

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SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA OF ARES CAPITAL

        The following selected financial and other data as of and for the years ended December 31, 2011, 2010, 2009, 2008 and 2007 are derived from our consolidated financial statements, which have been audited by KPMG LLP, an independent registered public accounting firm whose report thereon is included elsewhere in this prospectus. The selected financial and other data for the six months ended June 30, 2012 and other quarterly financial information is derived from our unaudited financial statements, but in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) that are necessary to present fairly the results of such interim periods. Interim results as of and for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The data should be read in conjunction with our consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Senior Securities," which are included elsewhere in this prospectus or the accompanying prospectus supplement.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
As of and For the Six Months Ended June 30, 2012 and
As of and For the Years Ended December 31, 2011, 2010, 2009, 2008 and 2007
(dollar amounts in millions, except per share data)

 
  As of and For
the Six
Months Ended
June 30,
2012
  As of and For
the Year Ended
December 31,
2011
  As of and For
the Year Ended
December 31,
2010
  As of and For
the Year Ended
December 31,
2009
  As of and For
the Year Ended
December 31,
2008
  As of and For
the Year Ended
December 31,
2007
 

Total Investment Income

  $ 345.3   $ 634.5   $ 483.4   $ 245.3   $ 240.4   $ 188.9  

Total Expenses

    174.8     344.6     262.2     111.3     113.2     94.8  
                           

Net Investment Income Before Income Taxes

    170.5     289.9     221.2     134.0     127.2     94.1  
                           

Income Tax Expense (Benefit), Including Excise Tax

    5.6     7.5     5.4     0.6     0.2     (0.8 )
                           

Net Investment Income

    164.9     282.4     215.8     133.4     127.0     94.9  
                           

Net Realized and Unrealized Gains (Losses) on Investments, Foreign Currencies, Extinguishment of Debt and Other Assets

    31.6     37.1     280.1     69.3     (266.5 )   (4.1 )

Gain on the Allied Acquisition

            195.9              
                           

Net Increase (Decrease) in Stockholders' Equity Resulting from Operations

  $ 196.5   $ 319.5   $ 691.8   $ 202.7   $ (139.5 ) $ 90.8  
                           

Per Share Data:

                                     

Net Increase (Decrease) in Stockholder's Equity Resulting from Operations:

                                     

Basic(1)

  $ 0.90   $ 1.56   $ 3.91   $ 1.99   $ (1.56 ) $ 1.34  

Diluted(1)

  $ 0.90   $ 1.56   $ 3.91   $ 1.99   $ (1.56 ) $ 1.34  

Cash Dividend Declared

  $ 0.74   $ 1.41   $ 1.40   $ 1.47   $ 1.68   $ 1.66  

Net Asset Value

  $ 15.51   $ 15.34   $ 14.92   $ 11.44   $ 11.27   $ 15.47  

Total Assets

  $ 5,807.5   $ 5,387.4   $ 4,562.5   $ 2,313.5   $ 2,091.3   $ 1,829.4  

Total Debt (Carrying Value)

  $ 2,194.8   $ 2,073.6   $ 1,378.5   $ 969.5   $ 908.8   $ 681.5  

Total Debt (Principal Amount)

  $ 2,291.3   $ 2,170.5   $ 1,435.1   $ 969.5   $ 908.8   $ 681.5  

Total Stockholders' Equity

  $ 3,446.5   $ 3,147.3   $ 3,050.5   $ 1,257.9   $ 1,094.9   $ 1,124.6  

Other Data:

                                     

Number of Portfolio Companies at Period End(2)

    144     141     170     95     91     78  

Principal Amount of Investments Purchased

  $ 1,086.4   $ 3,239.0   $ 1,583.9   $ 575.0   $ 925.9   $ 1,251.3  

Principal Amount of Investments Acquired as part of the Allied Acquisition

  $   $   $ 1,833.8   $   $   $  

Principal Amount of Investments Sold and Repayments

  $ 775.2   $ 2,468.2   $ 1,555.9   $ 515.2   $ 485.3   $ 718.7  

Weighted Average Yield of Debt and Other Income Producing Securities at Fair Value(3):

    11.6 %   12.0 %   12.9 %   12.7 %   12.8 %   11.7 %

Weighted Average Yield of Debt and Other Income Producing Securities at Amortized Cost(3):

    11.7 %   12.1 %   13.2 %   12.1 %   11.7 %   11.6 %

Total Return Based on Market Value(4)

    8.1 %   2.3 %   43.6 %   119.9 %   (45.3 )%   (14.8 )%

Total Return Based on Net Asset Value(5)

    5.8 %   10.5 %   31.6 %   17.8 %   (11.2 )%   9.0 %

(1)
In accordance with Accounting Standards Codification ("ASC") 260-10 (previously Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share), the weighted average shares of common stock outstanding used in computing basic and diluted earnings per common share have been adjusted retroactively by a factor of 1.02% to recognize the bonus element associated with rights to acquire shares of common stock that we issued to stockholders of record as of March 24, 2008 in connection with a rights offering.

(2)
Includes commitments to portfolio companies for which funding had yet to occur.

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(3)
Weighted average yield on debt and other income producing securities at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount earned on accruing debt and other income producing securities, divided by (b) total debt and other income producing securities at fair value. Weighted average yield on debt and other income producing securities at amortized cost is computed as (a) annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount earned on accruing debt and income producing securities, divided by (b) total debt and other income producing securities at amortized cost.

(4)
Total return based on market value for the six months ended June 30, 2012 equals the increase of the ending market value at June 30, 2012 of $15.96 per share over the ending market value at December 31, 2011 of $15.45 per share plus the declared dividends of $0.74 per share for the six months ended June 30, 2012. Total return based on market value for the year ended December 31, 2011 equals the decrease of the ending market value at December 30, 2011 of $15.45 per share from the ending market value at December 31, 2010 of $16.48 per share plus the declared dividends of $1.41 per share for the year ended December 31, 2011. Total return based on market value for the year ended December 31, 2010 equals the increase of the ending market value at December 31, 2010 of $16.48 per share over the ending market value at December 31, 2009 of $12.45 per share plus the declared dividends of $1.40 per share for the year ended December 31, 2010. Total return based on market value for the year ended December 31, 2009 equals the increase of the ending market value at December 31, 2009 of $12.45 per share over the ending market value at December 31, 2008 of $6.33 per share plus the declared dividends of $1.47 per share for the year ended December 31, 2009. Total return based on market value for the year ended December 31, 2008 equals the decrease of the ending market value at December 31, 2008 of $6.33 per share from the ending market value at December 31, 2007 of $14.63 per share plus the declared dividends of $1.68 per share for the year ended December 31, 2008. Total return based on market value for the year ended December 31, 2007 equals the decrease of the ending market value at December 31, 2007 of $14.63 per share from the ending market value at December 31, 2006 of $19.11 per share plus the declared dividends of $1.66 per share for the year ended December 31, 2007. Total return based on market value is not annualized.

(5)
Total return based on net asset value for the six months ended June 30, 2012 equals the change in net asset value during the period (adjusted for share issuances) plus the declared dividends of $0.74 per share for the six months ended June 30, divided by the beginning net asset value. Total return based on net asset value for the year ended December 31, 2011 equals the change in net asset value during the period (adjusted for share issuances) plus the declared dividends of $1.41 per share for the year ended December 31, 2011, divided by the beginning net asset value. Total return based on net asset value for the year ended December 31, 2010 equals the change in net asset value during the period (adjusted for share issuances) plus the declared dividends of $1.40 per share for the year ended December 31, 2010, divided by the beginning net asset value. Total return based on net asset value for the year ended December 31, 2009 equals the change in net asset value during the period (adjusted for share issuances) plus the declared dividends of $1.47 per share for the year ended December 31, 2009, divided by the beginning net asset value. Total return based on net asset value for the year ended December 31, 2008 equals the change in net asset value during the period (adjusted for share issuances) plus the declared dividends of $1.68 per share for the year ended December 31, 2008, divided by the beginning net asset value. Total return based on net asset value for the year ended December 31, 2007 equals the change in net asset value during the period (adjusted for share issuances) plus the declared dividends of $1.66 per share for the year ended December 31, 2007, divided by the beginning net asset value. Total return based on net asset value is not annualized.

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SELECTED QUARTERLY DATA (Unaudited)
(dollar amounts in thousands, except per share data)

 
  2012  
 
  Q4   Q3   Q2   Q1  

Total investment income

          $ 177,555   $ 167,738  

Net investment income before net realized and unrealized gains (losses) and incentive compensation

          $ 110,634   $ 103,424  

Incentive compensation

          $ 22,733   $ 26,386  

Net investment income before net realized and unrealized gains

          $ 87,901   $ 77,038  

Net realized and unrealized gains (losses)

          $ 3,031   $ 28,509  

Net increase in stockholders' equity resulting from operations

          $ 90,932   $ 105,547  

Basic and diluted earnings per share

          $ 0.41   $ 0.49  

Net asset value per share as of the end of the quarter

          $ 15.51   $ 15.47  

 

 
  2011  
 
  Q4   Q3   Q2   Q1  

Total investment income

  $ 187,123   $ 167,365   $ 144,307   $ 135,691  

Net investment income before net realized and unrealized gains (losses) and incentive compensation

  $ 121,990   $ 108,517   $ 85,509   $ 78,764  

Incentive compensation

  $ 29,531   $ 10,159   $ 41,746   $ 30,941  

Net investment income before net realized and unrealized gains

  $ 92,459   $ 98,358   $ 43,763   $ 47,823  

Net realized and unrealized gains (losses)

  $ 25,666   $ (57,719 ) $ (6,840 ) $ 75,943  

Net increase in stockholders' equity resulting from operations

  $ 118,125   $ 40,639   $ 36,923   $ 123,766  

Basic and diluted earnings per share

  $ 0.58   $ 0.20   $ 0.18   $ 0.61  

Net asset value per share as of the end of the quarter

  $ 15.34   $ 15.13   $ 15.28   $ 15.45  

 

 
  2010  
 
  Q4   Q3   Q2   Q1  

Total investment income

  $ 157,170   $ 138,126   $ 121,590   $ 66,510  

Net investment income before net realized and unrealized gains (losses) and incentive compensation

  $ 99,323   $ 89,025   $ 64,514   $ 39,849  

Incentive compensation

  $ 35,973   $ 17,805   $ 14,973   $ 8,144  

Net investment income before net realized and unrealized gains (losses)

  $ 63,350   $ 71,220   $ 49,541   $ 31,705  

Net realized and unrealized gains (losses)

  $ 93,538   $ 57,157   $ 280,613 (1) $ 44,710  

Net increase in stockholders' equity resulting from operations

  $ 156,888   $ 128,377   $ 330,154   $ 76,415  

Basic and diluted earnings per share

  $ 0.79   $ 0.67   $ 1.73   $ 0.61  

Net asset value per share as of the end of the quarter

  $ 14.92   $ 14.43   $ 14.11   $ 11.78  

(1)
Includes gain on the Allied Acquisition of $195,876.

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RISK FACTORS

        Before you invest in our securities, you should be aware of various risks, including those described below. You should carefully consider these risk factors, together with all of the other information included in this prospectus and the accompanying prospectus supplement, including our consolidated financial statements and the related notes thereto, before you decide whether to make an investment in our securities. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the net asset value of our common stock and the trading price of our securities could decline, and you may lose all or part of your investment.

RISKS RELATING TO OUR BUSINESS

Capital markets have been in a period of disruption and instability for an extended period of time. These market conditions materially and adversely affected debt and equity capital markets in the United States, which had, and may in the future continue to have, a negative impact on our business and operations.

        The U.S. capital markets have been in a period of disruption for an extended period of time as evidenced by a lack of liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of the U.S. federal government, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. While market conditions have improved from the beginning of the disruption, there have been recent periods of volatility and there can be no assurance that adverse market conditions will not repeat themselves or worsen in the future. If these adverse and volatile market conditions continue, we and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital in order to grow. Equity capital may be difficult to raise because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than net asset value without first obtaining approval for such issuance from our stockholders and our independent directors. At our 2012 annual stockholders meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock, at a price below the then current net asset value per share during a period beginning on June 4, 2012 and expiring on the earlier of June 4, 2013 and the date of our 2013 annual stockholders meeting. In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset coverage, as defined in the Investment Company Act, must equal at least 200% immediately after each time we incur indebtedness. The debt capital that will be available to us in the future, if at all, may be at a higher cost and on less favorable terms and conditions than what we currently experience. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations.

        Moreover, the re-appearance of market conditions similar to those experienced from 2007 through 2009 for any substantial length of time could make it difficult to extend the maturity of or refinance our existing indebtedness under similar terms and any failure to do so could have a material adverse effect on our business.

        Given the extreme volatility and dislocation in the capital markets over the past several years, many BDCs have faced, and may in the future face, a challenging environment in which to raise or

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access capital. At times during the recent significant changes in the capital markets, our ability to raise capital was affected and consequently the pace of our investment activity had slowed. In addition, significant changes in the capital markets, including the extreme volatility and disruption over the past several years, has had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). As a result, volatility in the capital markets can adversely affect our investment valuations. Further, the illiquidity of our investments may make it difficult for us to sell such investments to access capital if required. As a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes. An inability to raise or access capital could have a material adverse impact on our business, financial condition or results of operations.

A failure on our part to maintain our status as a BDC would significantly reduce our operating flexibility.

        If we fail to maintain our status as a BDC, we might be regulated as a closed-end investment company that is required to register under the Investment Company Act, which would subject us to additional regulatory restrictions and significantly decrease our operating flexibility. In addition, any such failure could cause an event of default under our outstanding indebtedness, which could have a material adverse effect on our business, financial condition or results of operations.

We are dependent upon certain key personnel of Ares for our future success and upon their access to other Ares investment professionals.

        We depend on the diligence, skill and network of business contacts of certain key personnel of the Ares Private Debt Group. We also depend, to a significant extent, on access to the investment professionals of other groups within Ares and the information and deal flow generated by Ares' investment professionals in the course of their investment and portfolio management activities. Our future success depends on the continued service of the key personnel of the Ares Private Debt Group. The departure of any of these individuals, or of a significant number of the investment professionals or partners of Ares, could have a material adverse effect on our business, financial condition or results of operations. In addition, we cannot assure you that Ares Capital Management will remain our investment adviser or that we will continue to have access to Ares' investment professionals or its information and deal flow.

Our financial condition and results of operations depend on our ability to manage future growth effectively.

        Our ability to achieve our investment objective depends on our ability to acquire suitable investments and monitor and administer those investments, which depends, in turn, on our investment adviser's ability to identify, invest in and monitor companies that meet our investment criteria.

        Accomplishing this result on a cost-effective basis is largely a function of the structuring of our investment process and the ability of our investment adviser to provide competent, attentive and efficient services to us. Our executive officers and the members of our investment adviser's investment committee have substantial responsibilities in connection with their roles at Ares and with the other Ares funds, as well as responsibilities under the investment advisory and management agreement. They may also be called upon to provide significant managerial assistance to certain of our portfolio companies. These demands on their time, which will increase as the number of investments grow, may distract them or slow the rate of investment. In order to grow, Ares will need to hire, train, supervise, manage and retain new employees. However, we cannot assure you that we will be able to do so

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effectively. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.

        In addition, as we grow, we may open up new offices in new geographic regions that may increase our direct operating expenses without corresponding revenue growth.

Our ability to grow depends on our ability to raise capital.

        We will need to periodically access the capital markets to raise cash to fund new investments. We have elected to be treated as a RIC and operate in a manner so as to qualify for the U.S. federal income tax treatment applicable to RICs. Among other things, in order to maintain our RIC status, we must distribute to our stockholders on a timely basis generally an amount equal to at least 90% of our investment company taxable income, and, as a result, such distributions will not be available to fund investment originations. We must continue to borrow from financial institutions and issue additional securities to fund our growth. Unfavorable economic or capital market conditions may increase our funding costs, limit our access to the capital markets or could result in a decision by lenders not to extend credit to us. An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings, if any.

        In addition, with certain limited exceptions, we are only allowed to borrow amounts or issue debt securities or preferred stock, which we refer to collectively as "senior securities," such that our asset coverage, as defined in the Investment Company Act, equals at least 200% immediately after such borrowing, which, in certain circumstances, may restrict our ability to borrow or issue debt securities or preferred stock. The amount of leverage that we employ will depend on our investment adviser's and our board of directors' assessments of market and other factors at the time of any proposed borrowing or issuance of senior securities. We cannot assure you that we will be able to maintain our current Facilities, obtain other lines of credit or issue senior securities at all or on terms acceptable to us.

Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital.

        We may issue senior securities or borrow money from banks or other financial institutions, up to the maximum amount permitted by the Investment Company Act. Under the provisions of the Investment Company Act, we are permitted, as a BDC, to incur indebtedness or issue senior securities only in amounts such that our asset coverage, as calculated in accordance with the Investment Company Act, equals at least 200% after each such incurrence or issuance. If the value of our assets declines, we may be unable to satisfy this test, which may prohibit us from paying dividends and could prevent us from maintaining our status as a RIC or may prohibit us from repurchasing shares of our common stock. In addition, our inability to satisfy this test could cause an event of default under our existing indebtedness. If we cannot satisfy this test, we may be required to sell a portion of our investments at a time when such sales may be disadvantageous and, depending on the nature of our leverage, repay a portion of our indebtedness. Accordingly, any failure to satisfy this test could have a material adverse effect on our business, financial condition or results of operations. As of June 30, 2012, our asset coverage for senior securities was 257%.

        We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the current net asset value per share of our common stock if our board of directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve such sale. Any such sale would be dilutive to the net asset value per share of our common stock. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our board of directors, closely approximates the market value of such securities (less any commission or discount). If our common

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stock trades at a discount to net asset value, this restriction could adversely affect our ability to raise capital.

        At our 2012 annual stockholders meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock, at a price below the then current net asset value per share during a period beginning on June 4, 2012 and expiring on the earlier of June 4, 2013 and the date of our 2013 annual stockholders meeting.

        To generate cash for funding new investments, we have also securitized, and may in the future seek to securitize, our loans. To securitize loans, we may create a separate, wholly owned subsidiary and contribute or sell a pool of loans to such subsidiary (or one of its subsidiaries). Such subsidiary may then sell equity, issue debt or sell interests in the pool of loans, on a limited-recourse basis, the payments on which are generally limited to the pool of loans and the proceeds therefrom. We may also retain a portion of the equity interests in the securitized pool of loans. Any retained equity would be exposed to losses on the related pool of loans before any of the related debt securities. An inability to successfully securitize our loan portfolio could limit our ability to grow our business and fully execute our business strategy. The securitization market is subject to changing market conditions (including the unprecedented dislocation of the securitization and finance markets over the past several years generally) and we may not be able to access this market when we would otherwise deem appropriate. Moreover, the successful securitization of our loan portfolio might expose us to losses as the residual loans in which we do not sell interests may be those that are riskier and more apt to generate losses. The Investment Company Act may also impose restrictions on the structure of any securitization.

We borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing with us.

        Borrowings, also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, increase the risks associated with investing in our securities. We currently borrow under our Facilities and have issued or assumed other senior securities, and in the future may borrow from, or issue additional senior securities to, banks, insurance companies, funds, institutional investors and other lenders and investors. Lenders and holders of such senior securities have fixed dollar claims on our consolidated assets that are superior to the claims of our common stockholders or any preferred stockholders. If the value of our consolidated assets increases, then leveraging would cause the net asset value per share of our common stock to increase more sharply than it would have had we not incurred leverage.

        Conversely, if the value of our consolidated assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not incurred leverage. Similarly, any increase in our consolidated income in excess of consolidated interest payable on the borrowed funds would cause our net income to increase more than it would had we not incurred leverage, while any decrease in our consolidated income would cause net income to decline more sharply than it would have had we not incurred leverage. Such a decline could negatively affect our ability to make common stock dividend payments. There can be no assurance that a leveraging strategy will be successful.

        As of June 30, 2012, we had $750.0 million of outstanding borrowings under our Facilities, $573.8 million in aggregate principal amount outstanding of the Unsecured Notes and $967.5 million in aggregate principal amount outstanding of our Convertible Notes. In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our June 30, 2012 total assets of at least 1.96%. The weighted average stated interest rate charged on our outstanding indebtedness as of June 30, 2012 was 5.0%. We intend to continue borrowing under the Facilities in the future and we may increase the size of the Facilities or issue additional debt securities or other evidences of indebtedness (although there can be no assurance that we will be successful in doing so). For more

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information on the Company's indebtedness, see "Recent Developments." Our ability to service our debt depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. The amount of leverage that we employ at any particular time will depend on our investment adviser's and our board of directors' assessments of market and other factors at the time of any proposed borrowing.

        Our Facilities, the Unsecured Notes and the Convertible Notes impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC. A failure to renew our Facilities or to add new or replacement debt facilities or issue additional debt securities or other evidences of indebtedness could have a material adverse effect on our business, financial condition or results of operations.

        The following table illustrates the effect on return to a holder of our common stock of the leverage created by our use of borrowing at the weighted average stated interest rate of 5.0% as of June 30, 2012, together with (a) our total value of net assets as of June 30, 2012; (b) $2,291.3 million in aggregate principal amount of indebtedness outstanding as of June 30, 2012 and (c) hypothetical annual returns on our portfolio of minus 15% to plus 15%.

Assumed Return on Portfolio (Net of Expenses)(1)

    (15 )%   (10 )%   (5 )%   0 %   5 %   10 %   15 %

Corresponding Return to Common Stockholders(2)

    (28.57 )%   (20.15 )%   (11.72 )%   (3.30 )%   5.13 %   13.55 %   21.98 %

(1)
The assumed portfolio return is required by SEC regulations and is not a prediction of, and does not represent, our projected or actual performance. Actual returns may be greater or less than those appearing in the table. Pursuant to SEC regulations, this table is calculated as of June 30, 2012. As a result, it has not been updated to take into account any changes in assets or leverage since June 30, 2012.

(2)
In order to compute the "Corresponding Return to Common Stockholders," the "Assumed Return on Portfolio" is multiplied by the total value of our assets at June 30, 2012 to obtain an assumed return to us. From this amount, the interest expense (calculated by multiplying the weighted average stated interest rate of 5.0% by the $2,291.3 million of principal debt) is subtracted to determine the return available to stockholders. The return available to stockholders is then divided by the total value of our net assets as of June 30, 2012 to determine the "Corresponding Return to Common Stockholders."

In addition to regulatory requirements that restrict our ability to raise capital, the Facilities, the Unsecured Notes and the Convertible Notes contain various covenants that, if not complied with, could accelerate repayment under the Facilities, the Unsecured Notes and the Convertible Notes, thereby materially and adversely affecting our liquidity, financial condition and results of operations.

        The agreements governing the Facilities, the Unsecured Notes and the Convertible Notes require us to comply with certain financial and operational covenants. These covenants include:

        As of the date of this prospectus, we are in compliance in all material respects with the covenants of the Facilities, the Unsecured Notes and the Convertible Notes. However, our continued compliance

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with these covenants depends on many factors, some of which are beyond our control. For example, depending on the condition of the public debt and equity markets and pricing levels, net unrealized depreciation in our portfolio may increase in the future. Any such increase could result in our inability to comply with our obligation to restrict the level of indebtedness that we are able to incur in relation to the value of our assets or to maintain a minimum level of stockholders' equity.

        Accordingly, although we believe we will continue to be in compliance, there are no assurances that we will continue to comply with the covenants in the Facilities, the Unsecured Notes and the Convertible Notes. Failure to comply with these covenants could result in a default under the Facilities, the Unsecured Notes or the Convertible Notes that, if we were unable to obtain a waiver from the lenders or holders of such indebtedness, as applicable, such lenders or holders could accelerate repayment under such indebtedness and thereby have a material adverse impact on our business, financial condition and results of operations.

Our credit ratings may change and as a result the cost and flexibility under our debt instruments may change.

        As of June 30, 2012, we had a long-term counterparty credit rating from Standard & Poor's Ratings Services of "BBB," a long-term issuer default rating from Fitch Ratings of "BBB" and a long-term issuer rating from Moody's Investors Service of "Ba1." Interest expense on our Revolving Credit Facility is based on a pricing grid that fluctuates depending on our credit ratings. There can be no assurance that our ratings will be maintained. If our ratings are downgraded, our cost of borrowing will increase.

        In addition, ratings agencies are required to make substantial changes to their ratings policies and practices as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which President Obama signed into law on July 21, 2010. There can be no assurance that such changes will not affect our ratings.

We operate in a highly competitive market for investment opportunities.

        A number of entities compete with us to make the types of investments that we make in middle-market companies. We compete with other BDCs, public and private funds, commercial and investment banks, commercial financing companies, insurance companies, hedge funds, and, to the extent they provide an alternative form of financing, private equity funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. Some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the Investment Company Act imposes on us as a BDC and that the Code imposes on us as a RIC. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to pursue attractive investment opportunities from time to time.

        We do not seek to compete primarily based on the interest rates we offer and we believe that some of our competitors may make loans with interest rates that are comparable to or lower than the rates we offer. Rather, we compete with our competitors based on our existing investment platform, seasoned investment professionals, experience and focus on middle-market companies, disciplined investment philosophy, extensive industry focus and flexible transaction structuring. For a more detailed discussion of these competitive advantages, see "Business—Competitive Advantages."

        We may lose investment opportunities if we do not match our competitors' pricing, terms and structure. If we match our competitors' pricing, terms and structure, we may experience decreased net

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interest income and increased risk of credit loss. As a result of operating in such a competitive environment, we may make investments that are on less favorable terms than what we may have originally anticipated, which may impact our return on these investments.

We may be subject to certain corporate-level taxes regardless of whether we continue to qualify as a RIC.

        We have elected to be treated as a RIC under Subchapter M of the Code and operate in a manner so as to qualify for the U.S. federal income tax treatment applicable to RICs. As a RIC, we generally will not pay corporate-level U.S. federal income taxes on our income and gain that we distribute to our stockholders as dividends on a timely basis. We will be subject to corporate-level U.S. federal income tax on any undistributed income and/or gain. To qualify as a RIC, we must meet certain source of income, asset diversification and annual distribution requirements. We may also be subject to certain U.S. federal excise taxes, as well as state, local and foreign taxes.

        To satisfy the Annual Distribution Requirement (as defined below) for a RIC we must distribute to our stockholders on a timely basis generally an amount equal to at least 90% of our investment company taxable income for each year. We have the ability to pay a large portion of our dividends in shares of our stock, and as long as a portion of such dividend is paid in cash and other requirements are met, such stock dividends will be taxable as a dividend for U.S. federal income tax purposes. This may result in our U.S. stockholders having to pay tax on such dividends, even if no cash is received, and may result in our non-U.S. stockholders being subject to withholding tax in respect of amounts distributed in our stock. Because we use debt financing, we are subject to certain asset coverage ratio requirements under the Investment Company Act and financial covenants under our indebtedness that could, under certain circumstances, restrict us from making distributions necessary to qualify as a RIC. If we are unable to obtain cash from other sources, we may fail to qualify as a RIC and, thus, may be subject to corporate- level income tax on all of our income and/or gain.

        To qualify as a RIC, we must also meet certain annual source of income requirements at the end of each taxable year and asset diversification requirements at the end of each calendar quarter. Failure to meet these tests may result in our having to (a) dispose of certain investments quickly or (b) raise additional capital to prevent the loss of RIC status. Because most of our investments are in private companies and are generally illiquid, any such dispositions may be at disadvantageous prices and may result in losses. Also, the rules applicable to our qualification as a RIC are complex with many areas of uncertainty. Accordingly, no assurance can be given that we have qualified or will continue to qualify as a RIC. If we fail to qualify as a RIC for any reason and become subject to regular "C" corporation income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders. The recently enacted "Regulated Investment Company Modernization Act of 2010," which is effective for 2011 and later tax years, provides some relief from RIC disqualification due to failures of the source of income and asset diversification requirements, although there may be additional taxes due in such cases. We cannot assure you that we would qualify for any such relief should we fail the source of income or asset diversification requirements.

We may have difficulty paying our required distributions under applicable tax rules if we recognize income before or without receiving cash representing such income.

        For U.S. federal income tax purposes, we are required to include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise, for example, if we receive warrants in connection with the making of a loan, or payment-in-kind ("PIK") interest representing contractual interest added to the loan principal balance and due at the end of the loan term. Such original issue discount or PIK interest are included in income before we receive any

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corresponding cash payments. We also may be required to include in income certain other amounts that we will not receive in cash, including, for example, amounts attributable to hedging and foreign currency transactions or cancellation of indebtedness income resulting from a restructuring of an investment in debt securities.

        Since, in certain cases, we may recognize income before or without receiving cash in respect of such income, we may have difficulty meeting the U.S. federal income tax requirement to distribute generally an amount equal to at least 90% of our investment company taxable income to maintain our status as a RIC. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are not able to obtain cash from other sources, we may fail to qualify as a RIC and thus be subject to additional corporate-level taxes. Such a failure would have a material adverse effect on us and on our stockholders. See "Certain Material U.S. Federal Income Tax Considerations—Taxation as a RIC."

We are exposed to risks associated with changes in interest rates.

        General interest rate fluctuations may have a substantial negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our investment objective and rate of return on invested capital. Because we borrow money and may issue debt securities or preferred stock to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds or pay interest or dividends on such debt securities or preferred stock and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

        Trading prices for debt that pays a fixed rate of return tend to fall as interest rates rise. Trading prices tend to fluctuate more for fixed-rate securities that have longer maturities. In the past, we have entered into certain hedging transactions, such as interest rate swap agreements, to mitigate our exposure to adverse fluctuations in interest rates, and we may do so again in the future. In addition, we may increase our floating rate investments to position the portfolio for rate increases. However, we cannot assure you that such transactions will be successful in mitigating our exposure to interest rate risk. Hedging transactions may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio investments.

        Although we have no policy governing the maturities of our investments, under current market conditions we expect that we will invest in a portfolio of debt generally having maturities of up to 10 years. This means that we are subject to greater risk (other things being equal) than a fund invested solely in shorter-term securities. A decline in the prices of the debt we own could adversely affect the trading price of our shares. Also, an increase in interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.

Most of our portfolio investments are not publicly traded and, as a result, the fair value of these investments may not be readily determinable.

        A large percentage of our portfolio investments are not publicly traded. The fair value of investments that are not publicly traded may not be readily determinable. We value these investments quarterly at fair value as determined in good faith by our board of directors based on, among other things, the input of our management and audit committee and independent valuation firms that have been engaged at the direction of our board of directors to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing 12-month period (with certain de minimis exceptions). The valuation process is conducted at the end of each fiscal

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quarter, with a minimum of 50% (based on value) of our valuations of portfolio companies without readily available market quotations subject to review by an independent valuation firm each quarter. However, we may use additional independent valuation firms to review the value of our investments more frequently, including in connection with the occurrence of significant events or changes in value affecting a particular investment. In addition, our independent accountants review our valuation process as part of their overall integrated audit. The types of factors that may be considered in valuing our investments include the enterprise value of the portfolio company (the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time), the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, a comparison of the portfolio company's securities to similar publicly traded companies, changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments would trade in their principal markets and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate our valuation. Because such valuations, and particularly valuations of private investments and private companies are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these investments existed and may differ materially from the values that we may ultimately realize. Our net asset value per share could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that we realize upon disposition of such investments.

The lack of liquidity in our investments may adversely affect our business.

        As we generally make investments in private companies, substantially all of these investments are subject to legal and other restrictions on resale or are otherwise less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we could realize significantly less than the value at which we have recorded our investments. In addition, we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we or an affiliated manager of Ares has material non-public information regarding such portfolio company.

We may experience fluctuations in our quarterly results.

        We could experience fluctuations in our quarterly operating results due to a number of factors, including the interest rates payable on the debt investments we make, the default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

There are significant potential conflicts of interest that could impact our investment returns.

        Certain of our executive officers and directors, and members of the investment committee of our investment adviser, serve or may serve as officers, directors or principals of other entities and affiliates of our investment adviser and investment funds managed by our affiliates. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in our or our stockholders' best interests or that may require them to devote time to services for other entities, which could interfere with the time available to provide services to us. Certain members of our investment adviser's investment committee have significant responsibilities for other Ares funds. For example,

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Messrs. Ressler and Rosenthal are required to devote a substantial majority of their business time to the affairs of ACOF. Similarly, although the professional staff of our investment adviser will devote as much time to the management of the Company as appropriate to enable our investment adviser to perform its duties in accordance with the investment advisory and management agreement, the investment professionals of our investment adviser may have conflicts in allocating their time and services among the Company, on the one hand, and investment vehicles managed by Ares or one or more of its affiliates, on the other hand. These activities could be viewed as creating a conflict of interest insofar as the time and effort of the professional staff of our investment adviser and its officers and employees will not be devoted exclusively to the business of the Company but will instead be allocated between the business of the Company and the management of these other investment vehicles. However, Ares believes that the efforts of such individuals are synergistic with and beneficial to the affairs of Ares Capital, ACOF and these other investment vehicles managed by Ares or its affiliates.

        In addition, certain Ares funds may have investment objectives that compete or overlap with, and may from time to time invest in asset classes similar to those targeted by, Ares Capital. Consequently, we, on the one hand, and these other entities, may from time to time pursue the same or similar capital and investment opportunities. Ares and our investment adviser endeavor to allocate investment opportunities in a fair and equitable manner, and in any event consistent with any fiduciary duties owed to Ares Capital. Nevertheless, it is possible that we may not be given the opportunity to participate in certain investments made by investment funds managed by investment managers affiliated with Ares. In addition, there may be conflicts in the allocation of investment opportunities among us and the funds managed by us or one or more of our controlled affiliates or among the funds they manage. We may or may not participate in investments made by funds managed by us or one or more of our controlled affiliates.

        We have from time to time sold assets to certain of the vehicles managed by IHAM and, as part of our investment strategy, we may offer to sell additional assets to vehicles managed by us and/or one or more of our controlled affiliates (including IHAM) or we may purchase assets from vehicles managed by us and/or one or more of our controlled affiliates. In addition, vehicles managed by us or one or more of our controlled affiliates (including IHAM) may offer assets to or may purchase assets from one another. While assets may be sold or purchased at prices that are consistent with those that could be obtained from third parties in the marketplace, and although these types of transactions generally require approval of one or more independent parties, there may be an inherent conflict of interest in such transactions between us and funds managed by us or one of our controlled affiliates.

        We pay management and incentive fees to our investment adviser, and reimburse our investment adviser for certain expenses it incurs. In addition, investors in our common stock will invest on a gross basis and receive distributions on a net basis after expenses, resulting in, among other things, a lower rate of return than one might achieve if distributions were made on a gross basis.

        Our investment adviser's base management fee is based on a percentage of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) and, consequently, our investment adviser may have conflicts of interest in connection with decisions that could affect our total assets, such as decisions as to whether to incur indebtedness or to make future investments.

        The part of the incentive fee payable by us to our investment advisor that relates to our pre-incentive fee net investment income is computed and paid on income that may include interest that is accrued but not yet received in cash. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible.

        Our investment advisory and management agreement renews for successive annual periods if approved by our board of directors or by the affirmative vote of the holders of a majority of our

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outstanding voting securities, including, in either case, approval by a majority of our directors who are not "interested persons" of the Company as defined in Section 2(a)(19) of the Investment Company Act. However, both we and our investment adviser have the right to terminate the agreement without penalty upon 60 days' written notice to the other party. Moreover, conflicts of interest may arise if our investment adviser seeks to change the terms of our investment advisory and management agreement, including, for example, the terms for compensation. See "Management—Investment Advisory and Management Agreement." While any material change to the investment advisory and management agreement must be submitted to stockholders for approval under the Investment Company Act, we may from time to time decide it is appropriate to seek stockholder approval to change the terms of the agreement.

        We are party to an administration agreement (as defined below), with our administrator, Ares Operations, a wholly owned subsidiary of Ares, pursuant to which our administrator furnishes us with administrative services and we pay our administrator at cost our allocable portion of overhead and other expenses (including travel expenses) incurred by our administrator in performing its obligations under our administration agreement, including our allocable portion of the cost of certain of our officers (including our chief compliance officer, chief financial officer, general counsel, secretary and treasurer) and their respective staffs, but not investment professionals.

        Our portfolio company, IHAM, is party to an administration agreement, referred to herein as the "IHAM administration agreement," with Ares Operations. Pursuant to the IHAM administration agreement, Ares Operations provides IHAM with administrative services and IHAM reimburses Ares Operations for all of the actual costs associated with such services, including Ares Operations' allocable portion of overhead and the cost of its officers and respective staff in performing its obligations under the IHAM administration agreement. Prior to entering into the IHAM administration agreement, IHAM was party to a services agreement with our investment adviser, pursuant to which our investment adviser provided similar services.

        We are party to an office lease that will expire in February 2026 pursuant to which we are leasing office facilities from a third party. We are also party to an office sublease with Ares Commercial Real Estate Management LLC ("ACREM"), the manager of Ares Commercial Real Estate Corporation, pursuant to which we are subleasing approximately 12% of ACREM's office space for a fixed rent equal to 12% of the basic annual rent payable by ACREM under its office lease, plus certain additional costs and expenses. We also entered into separate subleases with Ares Management and IHAM, pursuant to which Ares Management and IHAM sublease approximately 15% and 20%, respectively, of our New York office space, for a fixed rent equal to 15% and 20%, respectively, of the basic annual rent payable by us under our office lease, plus certain additional costs and expenses.

        As a result of the arrangements described above, there may be times when the management team of Ares (including those members of management focused primarily on managing Ares Capital) has interests that differ from those of our stockholders, giving rise to a conflict.

        Our stockholders may have conflicting investment, tax and other objectives with respect to their investments in us. The conflicting interests of individual stockholders may relate to or arise from, among other things, the nature of our investments, the structure or the acquisition of our investments, and the timing of dispositions of our investments. As a consequence, conflicts of interest may arise in connection with decisions made by our investment adviser, including with respect to the nature or structuring of our investments, that may be more beneficial for one stockholder than for another stockholder, especially with respect to stockholders' individual tax situations. In selecting and structuring investments appropriate for us, our investment adviser will consider the investment and tax objectives of the Company and our stockholders, as a whole, not the investment, tax or other objectives of any stockholder individually.

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Changes in laws or regulations governing our operations or the operations of our portfolio companies, changes in the interpretation thereof or newly enacted laws or regulations, such as the Dodd-Frank Act, and any failure by us or our portfolio companies to comply with these laws or regulations, could require changes to certain business practices of us or our portfolio companies, negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.

        We and our portfolio companies are subject to regulation by laws and regulations at the local, state, federal and, in some cases, foreign levels. These laws and regulations, as well as their interpretation, may be changed from time to time, and new laws and regulations may be enacted. Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations and any failure by us or our portfolio companies to comply with these laws or regulations, could require changes to certain business practices of us or our portfolio companies, negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.

        On July 21, 2010, President Obama signed into law the Dodd-Frank Act. Many of the provisions of the Dodd-Frank Act have extended implementation periods and delayed effective dates and will require extensive rulemaking by regulatory authorities. While the impact of the Dodd-Frank Act on us and our portfolio companies may not be known for an extended period of time, the Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals directed at the financial services industry or affecting taxation that are proposed or pending in the U.S. Congress, may negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies, intensify the regulatory supervision of us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.

Our investment adviser's liability is limited under the investment advisory and management agreement, and we are required to indemnify our investment adviser against certain liabilities, which may lead our investment adviser to act in a riskier manner on our behalf than it would when acting for its own account.

        Our investment adviser has not assumed any responsibility to us other than to render the services described in the investment advisory and management agreement, and it will not be responsible for any action of our board of directors in declining to follow our investment adviser's advice or recommendations. Pursuant to the investment advisory and management agreement, our investment adviser and its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entity affiliated with it will not be liable to us for their acts under the investment advisory and management agreement, absent willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. We have agreed to indemnify, defend and protect our investment adviser and its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entity affiliated with it with respect to all damages, liabilities, costs and expenses resulting from acts of our investment adviser not arising out of willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties under the investment advisory and management agreement. These protections may lead our investment adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account. See "Risk Factors—Risks Relating to Our Investments—Our investment adviser's incentive fee may induce it to make certain investments, including speculative investments."

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We may be obligated to pay our investment adviser incentive compensation even if we incur a loss.

        Our investment adviser is entitled to incentive compensation for each fiscal quarter in an amount equal to a percentage of the excess of our pre-incentive fee net investment income for that quarter (before deducting incentive compensation and certain other items) above a threshold return for that quarter. Our pre-incentive fee net investment income for incentive compensation purposes excludes realized and unrealized capital losses or depreciation and income taxes related to realized gains that we may incur in the fiscal quarter, even if such capital losses or depreciation and income taxes related to realized gains result in a net loss on our statement of operations for that quarter. Thus, we may be required to pay our investment adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or we incur a net loss for that quarter.

        Under the investment advisory and management agreement, we will defer cash payment of any incentive fee otherwise earned by our investment adviser if, during the most recent four full calendar quarter periods ending on or prior to the date such payment is to be made, the sum of (a) our aggregate distributions to our stockholders and (b) our change in net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) is less than 7.0% of our net assets (defined as total assets less indebtedness) at the beginning of such period. These calculations will be adjusted for any share issuances or repurchases. Any deferred incentive fees will be carried over for payment in subsequent calculation periods to the extent such payment can then be made under the investment advisory and management agreement.

        If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible. Our investment adviser is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never receive as a result of a default on the obligation that resulted in the accrual of such income.

We may not replicate Ares' historical success and our ability to enter into transactions with Ares and our other affiliates is restricted.

        We cannot assure you that Ares Capital will replicate Ares' historical success, and we caution you that our investment returns could be substantially lower than the returns achieved by other Ares managed funds.

        Further, we and certain of our controlled affiliates are prohibited under the Investment Company Act from knowingly participating in certain transactions with our upstream affiliates, or our investment adviser and its affiliates, without the prior approval of our independent directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is our upstream affiliate for purposes of the Investment Company Act and we are generally prohibited from buying or selling any security (other than our securities) from or to such affiliate, absent the prior approval of our independent directors. The Investment Company Act also prohibits "joint" transactions with an upstream affiliate, or our investment adviser or its affiliates, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our independent directors. In addition, we and certain of our controlled affiliates are prohibited from buying or selling any security from or to, or entering into joint transactions with, our investment adviser and its affiliates, or any person who owns more than 25% of our voting securities or is otherwise deemed to control, be controlled by, or be under common control with us, absent the prior approval of the SEC through an exemptive order (other than in certain limited situations pursuant to current regulatory guidance). The analysis of whether a particular transaction constitutes a joint transaction requires a review of the relevant facts and circumstances.

        We have applied for an exemptive order from the SEC that would permit us and certain of our controlled affiliates to co-invest with funds managed by Ares. Any such order, if issued, will be subject

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to certain terms and conditions and there can be no assurance that such order will be granted by the SEC. Accordingly, we cannot assure you that we or our controlled affiliates will be permitted to co-invest with funds managed by Ares, other than in the limited circumstances currently permitted by regulatory guidance or in the absence of a joint transaction.

As a result of the death of Kenneth R. Heitz, who was an independent director, we are not in compliance with certain NASDAQ Global Select Market listing requirements.

        Kenneth R. Heitz, who was an independent member of our board of directors, passed away on July 9, 2012. As a result of Mr. Heitz's death, we are no longer in compliance with NASDAQ Marketplace Rule 5605(b)(1), because a majority of our board of directors is no longer comprised of independent directors. We notified the NASDAQ Global Select Market that we intend to rely on the cure provisions of Rule 5605(b)(1)(A), which provides that we have until the earlier of our next annual shareholders meeting or July 9, 2013 to comply with the above-referenced listing requirements.

RISKS RELATING TO OUR INVESTMENTS

Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio, which in turn would reduce our net asset value.

        As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of our board of directors. We may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time), the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company's securities to similar publicly traded securities, changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments would trade in their principal markets and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). As a result, volatility in the capital markets can also adversely affect our investment valuations. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. The effect of all of these factors on our portfolio can reduce our net asset value by increasing net unrealized depreciation in our portfolio. Depending on market conditions, we could incur substantial realized losses and may suffer unrealized losses, which could have a material adverse impact on our business, financial condition and results of operations.

Economic recessions or downturns could impair our portfolio companies and harm our operating results.

        Many of our portfolio companies may be susceptible to economic downturns or recessions (including the economic downturn that began in 2007) and may be unable to repay our loans during these periods. Therefore, during these periods our non-performing assets may increase and the value of our portfolio may decrease if we are required to write down the values of our investments. Adverse economic conditions may also decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by

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lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results. We experienced to some extent such effects during the economic downturn that began in 2007 and may experience such effects again in any future downturn or recession.

        A portfolio company's failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its assets representing collateral for its obligations, which could trigger cross defaults under other agreements and jeopardize our portfolio company's ability to meet its obligations under the debt that we hold and the value of any equity securities we own. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company.

Investments in privately held middle-market companies involve significant risks.

        We primarily invest in privately held U.S. middle-market companies. Investments in privately held middle-market companies involve a number of significant risks, including the following:

Our debt investments may be risky and we could lose all or part of our investment.

        The debt that we invest in is typically not initially rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade (rated lower than "Baa3" by Moody's Investors Service, lower than "BBB-" by Fitch Ratings or lower than "BBB-" by Standard & Poor's Ratings Services). Indebtedness of below investment grade quality is regarded as having predominantly speculative characteristics with respect to the issuer's capacity to pay interest and repay principal. Therefore, our investments may result in an above average amount of risk and volatility or loss of principal. We also invest in assets other than first and second lien and mezzanine debt investments, including high-yield securities, U.S. government securities, credit derivatives and other structured securities and certain direct equity investments. These investments entail additional risks that could adversely affect our investment returns.

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Investments in equity securities, many of which are illiquid with no readily available market, involve a substantial degree of risk.

        We may purchase common and other equity securities. Although common stock has historically generated higher average total returns than fixed income securities over the long-term, common stock also has experienced significantly more volatility in those returns and in recent years has significantly under performed relative to fixed income securities. The equity securities we acquire may fail to appreciate and may decline in value or become worthless and our ability to recover our investment will depend on our portfolio company's success. Investments in equity securities involve a number of significant risks, including:

        There are special risks associated with investing in preferred securities, including:

        Additionally, when we invest in first and second lien senior loans or mezzanine debt, we may acquire warrants or other equity securities as well. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

        We may invest, to the extent permitted by law, in the equity securities of investment funds that are operating pursuant to certain exceptions to the Investment Company Act and in advisers to similar investment funds and, to the extent we so invest, will bear our ratable share of any such company's expenses, including management and performance fees. We will also remain obligated to pay

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management and incentive fees to Ares Capital Management with respect to the assets invested in the securities and instruments of such companies. With respect to each of these investments, each of our common stockholders will bear his or her share of the management and incentive fee of Ares Capital Management as well as indirectly bearing the management and performance fees and other expenses of any such investment funds or advisers.

        As a result of the Allied Acquisition, Allied Capital's equity investments, including equity investments larger than those we have traditionally made and controlled portfolio company equity investments, became part of our portfolio. We continue to actively seek opportunities over time to dispose of certain of these investments and generally rotate them into higher-yielding first and second lien senior loans and mezzanine debt or other investments. However, there can be no assurance that this strategy will be successful.

There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.

        If one of our portfolio companies were to go bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, a bankruptcy court might recharacterize our debt holding as an equity investment and subordinate all or a portion of our claim to that of other creditors. In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower's business or exercise control over the borrower. For example, we could become subject to a lender's liability claim, if, among other things, we actually render significant managerial assistance.

Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies.

        Our portfolio companies may have, or may be permitted to incur, other debt, or issue other equity securities, that rank equally with, or senior to, our investments. By their terms, such instruments may provide that the holders are entitled to receive payment of dividends, interest or principal on or before the dates on which we are entitled to receive payments in respect of our investments. These debt instruments would usually prohibit the portfolio companies from paying interest on or repaying our investments in the event and during the continuance of a default under such debt. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company typically are entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such holders, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of securities ranking equally with our investments, we would have to share on an equal basis any distributions with other security holders in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

        The rights we may have with respect to the collateral securing any junior priority loans we make to our portfolio companies may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that senior obligations are outstanding, we may forfeit certain rights with respect to the collateral to the holders of the senior obligations. These rights may include the right to commence enforcement proceedings against the collateral, the right to control the conduct of such enforcement proceedings, the right to approve amendments to collateral documents, the right to release liens on the collateral and the right to waive past defaults under collateral documents. We may not have the ability to control or direct such actions, even if as a result our rights as junior lenders are adversely affected.

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When we are a debt or minority equity investor in a portfolio company, we are often not in a position to exert influence on the entity, and other equity holders and management of the company may make decisions that could decrease the value of our portfolio holdings.

        When we make debt or minority equity investments, we are subject to the risk that a portfolio company may make business decisions with which we disagree and the other equity holders and management of such company may take risks or otherwise act in ways that do not serve our interests. As a result, a portfolio company may make decisions that could decrease the value of our investment.

Our portfolio companies may be highly leveraged.

        Some of our portfolio companies may be highly leveraged, which may have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair these companies' ability to finance their future operations and capital needs. As a result, these companies' flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company's income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.

Our investment adviser's incentive fee may induce it to make certain investments, including speculative investments.

        The incentive fee payable by us to Ares Capital Management may create an incentive for Ares Capital Management to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee payable to our investment adviser is determined, which is calculated as a percentage of the return on invested capital, may encourage our investment adviser to use leverage to increase the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor the holders of our common stock and the holders of securities convertible into our common stock. In addition, our investment adviser will receive the incentive fee based, in part, upon net capital gains realized on our investments. Unlike the portion of the incentive fee based on income, there is no hurdle rate applicable to the portion of the incentive fee based on net capital gains. As a result, our investment adviser may have a tendency to invest more in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

        The part of the incentive fee payable by us that relates to our pre-incentive fee net investment income will be computed and paid on income that may include interest that is accrued but not yet received in cash. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible. Our investment adviser is not under any obligation to reimburse us for any part of the incentive fee it received that was based on such accrued interest that we never actually receive.

        Because of the structure of the incentive fee, it is possible that we may have to pay an incentive fee in a quarter where we incur a loss. For example, if we receive pre-incentive fee net investment income in excess of the hurdle rate for a quarter, we will pay the applicable incentive fee even if we have incurred a loss in that quarter due to realized and/or unrealized capital losses. In addition, if market interest rates rise, we may be able to invest our funds in debt instruments that provide for a higher return, which would increase our pre-incentive fee net investment income and make it easier for our investment adviser to surpass the fixed hurdle rate and receive an incentive fee based on such net investment income.

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Our investments in foreign companies may involve significant risks in addition to the risks inherent in U.S. investments.

        Our investment strategy contemplates potential investments in foreign companies. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes (potentially at confiscatory levels), less liquid markets, less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.

        Although most of our investments will be U.S. dollar denominated, our investments that are denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments. We may employ hedging techniques to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us.

We may expose ourselves to risks if we engage in hedging transactions.

        We have and may in the future enter into hedging transactions, which may expose us to risks associated with such transactions. We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Use of these hedging instruments may include counter-party credit risk.

        Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.

        The success of our hedging transactions will depend on our ability to correctly predict movements in currencies and interest rates. Therefore, while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to (or be able to) establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations. See also "Risk Factors—Risk Relating to Our Business—We are exposed to risks associated with changes in interest rates."

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We may initially invest a portion of the net proceeds of offerings pursuant to this prospectus primarily in high-quality short-term investments, which will generate lower rates of return than those expected from the interest generated on first and second lien loans and mezzanine debt.

        We may initially invest a portion of the net proceeds of offerings primarily in cash, cash equivalents, U.S. government securities and other high-quality short-term investments. These securities may earn yields substantially lower than the income that we anticipate receiving once we are fully invested in accordance with our investment objective. As a result, we may not be able to achieve our investment objective and/or pay any dividends during this period or, if we are able to do so, such dividends may be substantially lower than the dividends that we expect to pay when our portfolio is fully invested. If we do not realize yields in excess of our expenses, we may incur operating losses and the market price of our shares may decline.

RISKS RELATING TO OFFERINGS PURSUANT TO THIS PROSPECTUS

Our shares of common stock have traded at a discount from net asset value and may do so again in the future, which could limit our ability to raise additional equity capital.

        Shares of closed-end investment companies frequently trade at a market price that is less than the net asset value that is attributable to those shares. This characteristic of closed-end investment companies is separate and distinct from the risk that our net asset value per share may decline. It is not possible to predict whether any shares of our common stock will trade at, above, or below net asset value. In the recent past, including during much of 2009, the stocks of BDCs as an industry, including at times shares of our common stock, traded below net asset value and at near historic lows as a result of concerns over liquidity, leverage restrictions and distribution requirements. When our common stock is trading below its net asset value per share, we will generally not be able to issue additional shares of our common stock at its market price without first obtaining approval for such issuance from our stockholders and our independent directors. At our 2012 annual stockholders meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock, at a price below the then current net asset value per share during a period beginning on June 4, 2012 and expiring on the earlier of June 4, 2013 and the date of our 2013 annual stockholders meeting.

There is a risk that investors in our common stock may not receive dividends or that our dividends may not grow over time and that investors in our debt securities may not receive all of the interest income to which they are entitled.

        We intend to make distributions on a quarterly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. If we declare a dividend and if more stockholders opt to receive cash distributions rather than participate in our dividend reinvestment plan, we may be forced to sell some of our investments in order to make cash dividend payments.

        In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions. Further, if we invest a greater amount of assets in equity securities that do not pay current dividends, it could reduce the amount available for distribution. See "Price Range of Common Stock and Distributions."

        The above-referenced restrictions on distributions may also inhibit our ability to make required interest payments to holders of our debt, which may cause a default under the terms of our debt agreements. Such a default could materially increase our cost of raising capital, as well as cause us to incur penalties under the terms of our debt agreements.

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Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.

        The Maryland General Corporation Law, our charter and our bylaws contain provisions that may discourage, delay or make more difficult a change in control of Ares Capital or the removal of our directors. We are subject to the Maryland Business Combination Act (the "Business Combination Act"), subject to any applicable requirements of the Investment Company Act. Our board of directors has adopted a resolution exempting from the Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our board, including approval by a majority of our disinterested directors. If the resolution exempting business combinations is repealed or our board or disinterested directors do not approve a business combination, the Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act (the "Control Share Acquisition Act") acquisitions of our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act, the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such an offer.

        We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our board of directors into three classes serving staggered three-year terms, and provisions of our charter authorizing our board of directors to classify or reclassify shares of our stock into one or more classes or series, to cause the issuance of additional shares of our stock, and to amend our charter from time to time, without stockholder approval, to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may discourage, delay, defer, make more difficult or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.

Investing in our common stock may involve an above average degree of risk.

        The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive and, therefore, an investment in our securities may not be suitable for someone with lower risk tolerance.

The market price of our common stock may fluctuate significantly.

        The capital and credit markets have experienced periods of extreme volatility and disruption over the past several years. The market price and liquidity of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:

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        In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been brought against that company. If our stock price fluctuates significantly, we may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management's attention and resources from our business.

We may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock.

        The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive. In addition, the dividends on any preferred stock we issue must be cumulative. Payment of dividends and repayment of the liquidation preference of preferred stock must take preference over any dividends or other payments to our common stockholders, and holders of preferred stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than convertible preferred stock that converts into common stock). In addition, under the Investment Company Act, preferred stock constitutes a "senior security" for purposes of the 200% asset coverage test.

The net asset value per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock or securities to subscribe for or convertible into shares of our common stock.

        At our 2012 annual stockholders meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock, at a price below the then current net asset value per share during a period beginning on June 4, 2012 and expiring on the earlier of June 4, 2013 and the date of our 2013 annual stockholders meeting.

        In addition, at our 2009 annual stockholders meeting, our stockholders approved a proposal authorizing us to sell or otherwise issue warrants or securities to subscribe for or convertible into shares of our common stock subject to certain limitations (including, without limitation, that the number of shares issuable does not exceed 25% of our then outstanding common stock and that the exercise or conversion price thereof is not, at the date of issuance, less than the greater of the market value per share and the net asset value per share of our common stock). The authorization granted to sell or issue warrants or securities to subscribe for or convertible into shares of our common stock has no expiration.

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        Any decision to sell shares of our common stock below its then current net asset value per share or securities to subscribe for or convertible into shares of our common stock would be subject to the determination by our board of directors that such issuance is in our and our stockholders' best interests.

        If we were to sell shares of our common stock below its then current net asset value per share, such sales would result in an immediate dilution to the net asset value per share of our common stock. This dilution would occur as a result of the sale of shares at a price below the then current net asset value per share of our common stock and a proportionately greater decrease in the stockholders' interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such issuance. Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted.

        In addition, if we issue warrants or securities to subscribe for or convertible into shares of our common stock, subject to certain limitations, the exercise or conversion price per share could be less than net asset value per share at the time of exercise or conversion (including through the operation of anti-dilution protections). Because we would incur expenses in connection with any issuance of such securities, such issuance could result in a dilution of the net asset value per share at the time of exercise or conversion. This dilution would include reduction in net asset value per share as a result of the proportionately greater decrease in the stockholders' interest in our earnings and assets and their voting interest than the increase in our assets resulting from such issuance.

        Further, if current stockholders of the Company do not purchase any shares to maintain their percentage interest, regardless of whether such offering is above or below the then current net asset value per share, their voting power will be diluted. For additional information and hypothetical examples of these risks, see "Sales of Common Stock Below Net Asset Value" and the prospectus supplement pursuant to which such sale is made.

Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering. In addition, if the subscription price is less than our net asset value per share, then you will experience an immediate dilution of the aggregate net asset value of your shares.

        In the event we issue subscription rights, stockholders who do not fully exercise their subscription rights should expect that they will, at the completion of a rights offering pursuant to this prospectus, own a smaller proportional interest in us than would otherwise be the case if they fully exercised their rights. We cannot state precisely the amount of any such dilution in share ownership because we do not know at this time what proportion of the shares will be purchased as a result of such rights offering.

        In addition, if the subscription price is less than the net asset value per share of our common stock, then our stockholders would experience an immediate dilution of the aggregate net asset value of their shares as a result of the offering. The amount of any decrease in net asset value is not predictable because it is not known at this time what the subscription price and net asset value per share will be on the expiration date of a rights offering or what proportion of the shares will be purchased as a result of such rights offering. Such dilution could be substantial. See "Risk Factors—Risks Relating to Offerings Pursuant to this Prospectus—The net asset value per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock or securities to subscribe for or convertible into shares of our common stock" and "Sales of Common Stock Below Net Asset Value."

Investors in offerings of our common stock will likely incur immediate dilution upon the closing of such offering.

        We generally expect the public offering price of any offering of shares of our common stock to be higher than the book value per share of our outstanding common stock (unless we offer shares

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pursuant to a rights offering or after obtaining prior approval for such issuance from our stockholders and our independent directors). Accordingly, investors purchasing shares of common stock in offerings pursuant to this prospectus may pay a price per share that exceeds the tangible book value per share after such offering.

Our stockholders will experience dilution in their ownership percentage if they opt out of our dividend reinvestment plan.

        All dividends declared in cash payable to stockholders that are participants in our dividend reinvestment plan are automatically reinvested in shares of our common stock. As a result, our stockholders that opt out of our dividend reinvestment plan will experience dilution in their ownership percentage of our common stock over time.

Our stockholders may experience dilution upon the conversion of the Convertible Notes.

        The February 2016 Convertible Notes are convertible into shares of our common stock beginning August 15, 2015 or, under certain circumstances, earlier. The June 2016 Convertible Notes are convertible into shares of our common stock beginning on December 15, 2015 or, under certain circumstances, earlier. The 2017 Convertible Notes are convertible into shares of our common stock beginning on September 15, 2016 or, under certain circumstances, earlier. Upon conversion of the Convertible Notes, we have the choice to pay or deliver, as the case may be, at our election, cash, shares of our common stock or a combination of cash and shares of our common stock. The current conversion price of the February 2016 Convertible Notes is approximately $19.13 per share of common stock, the current conversion price of the June 2016 Convertible Notes is approximately $19.04 per share and the current conversion price of the 2017 Convertible Notes is approximately $19.34 per share, in each case subject to adjustment in certain circumstances. If we elect to deliver shares of common stock upon a conversion at the time our tangible book value per share exceeds the conversion price in effect at such time, our stockholders may incur dilution. In addition, our stockholders will experience dilution in their ownership percentage of common stock upon our issuance of common stock in connection with the conversion of the Convertible Notes and any dividends paid on our common stock will also be paid on shares issued in connection with such conversion after such issuance.

Our stockholders may receive shares of our common stock as dividends, which could result in adverse tax consequences to them.

        In order to satisfy the Annual Distribution Requirement applicable to RICs, we have the ability to declare a large portion of a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash (which portion can be as low as 10% for dividends declared with respect to our taxable years ending on or before December 31, 2011) and certain requirements are met, the entire distribution would be treated as a dividend for U.S. federal income tax purposes. As a result, a stockholder would be taxed on 100% of the fair market value of the dividend on the date a stockholder received it in the same manner as a cash dividend, even though most of the dividend was paid in shares of our common stock.

Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.

        Sales of substantial amounts of our common stock, or the availability of such common stock for sale (including as a result of the conversion of our Convertible Notes into common stock), could adversely affect the prevailing market prices for our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.

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The trading market or market value of our publicly issued debt securities may fluctuate.

        Our publicly issued debt securities may or may not have an established trading market. We cannot assure you that a trading market for our publicly issued debt securities will ever develop or be maintained if developed. In addition to our creditworthiness, many factors may materially adversely affect the trading market for, and market value of, our publicly issued debt securities. These factors include, but are not limited to, the following:

        You should also be aware that there may be a limited number of buyers when you decide to sell your debt securities. This too may materially adversely affect the market value of the debt securities or the trading market for the debt securities.

Terms relating to redemption may materially adversely affect your return on any debt securities that we may issue.

        If your debt securities are redeemable at our option, we may choose to redeem your debt securities at times when prevailing interest rates are lower than the interest rate paid on your debt securities. In addition, if your debt securities are subject to mandatory redemption, we may be required to redeem your debt securities also at times when prevailing interest rates are lower than the interest rate paid on your debt securities. In this circumstance, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as your debt securities being redeemed.

Our credit ratings may not reflect all risks of an investment in our debt securities.

        Our credit ratings are an assessment by third parties of our ability to pay our obligations. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of our debt securities. Our credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed above on the market value of or trading market for the publicly issued debt securities.

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FORWARD-LOOKING STATEMENTS

        Some of the statements in this prospectus constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this prospectus involve a number of risks and uncertainties, including statements concerning:

        We use words such as "anticipates," "believes," "expects," "intends," "will," "should," "may" and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those projected in the forward-looking statements for any reason, including the factors set forth in "Risk Factors" and elsewhere in this prospectus.

        The forward-looking statements included in this prospectus have been based on information available to us on the date of this prospectus, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any

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forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

        The forward-looking statements in this prospectus are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Exchange Act.

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USE OF PROCEEDS

        Unless otherwise specified in a prospectus supplement, we intend to use the net proceeds from the sale of our securities for general corporate purposes, which includes investing in portfolio companies in accordance with our investment objective. We also expect to use the net proceeds of an offering to repay or repurchase outstanding indebtedness, which may include indebtedness ($2.5 billion aggregate principal amount outstanding as of August 10, 2012) under (a) the Revolving Credit Facility ($427.0 million aggregate principal amount outstanding as of August 10, 2012), (b) the Revolving Funding Facility ($372.0 million aggregate principal amount outstanding as of August 10, 2012), (c) the SMBC Funding Facility ($133.0 million aggregate principal amount outstanding as of August 10, 2012), (d) the 2022 Notes ($143.8 million aggregate principal amount outstanding as of August 10, 2012), (e) the 2040 Notes ($200.0 million aggregate principal amount outstanding as of August 10, 2012), (f) the 2047 Notes ($230.0 million aggregate principal amount outstanding as of August 10, 2012), (g) the February 2016 Convertible Notes ($575.0 million aggregate principal amount outstanding as of August 10, 2012), (h) the June 2016 Convertible Notes ($230.0 million aggregate principal amount outstanding as of August 10, 2012) and (i) the 2017 Convertible Notes ($162.5 million aggregate principal amount outstanding as of August 10, 2012).

        Subject to certain exceptions, the interest charged on the indebtedness incurred under the Revolving Credit Facility is based on LIBOR (one, two, three or six month) plus an applicable spread of 2.25% or a "base rate" (as defined in the agreements governing the Revolving Credit Facility) plus an applicable spread of 1.25%. As of August 10, 2012, one, two, three and six month LIBOR were 0.24%, 0.33%, 0.44% and 0.72%, respectively. The Revolving Credit Facility matures on May 4, 2016. Subject to certain exceptions, the interest charged on the Revolving Funding Facility is based on LIBOR plus an applicable spread of 2.50% or on a "base rate" (as defined in the agreements governing the Revolving Funding Facility) plus an applicable spread of 1.50%. The Revolving Funding Facility is scheduled to expire on April 18, 2017 (subject to extension exercisable upon mutual consent). Subject to certain exceptions, the interest charged on the indebtedness incurred under the SMBC Funding Facility is based on one month LIBOR plus an applicable spread of 2.125% or a "base rate" (as defined in the agreements governing the SMBC Funding Facility) plus an applicable spread of 1.125%. The SMBC Funding Facility is scheduled to expire on January 20, 2020 (subject to two one-year extension options exercisable upon mutual consent). The interest charged on the Unsecured Notes and Convertible Notes is as follows: (a) 7.00% in the case of the 2022 Notes, (b) 7.75% in the case of the 2040 Notes, (c) 6.875% in the case of the 2047 Notes, (d) 5.75% in the case of the February 2016 Convertible Notes, (e) 5.125% in the case of the June 2016 Convertible Notes and (f) 4.875% in the case of the 2017 Convertible Notes. The 2022 Notes, 2040 Notes, 2047 Notes, February 2016 Convertible Notes, June 2016 Convertible Notes and 2017 Convertible Notes mature on February 15, 2022, October 15, 2040, April 15, 2047, February 1, 2016, June 1, 2016 and March 15, 2017, respectively. The supplement to this prospectus relating to an offering may more fully identify the use of the proceeds from such offering.

        We anticipate that substantially all of the net proceeds of an offering of securities pursuant to this prospectus and its related prospectus supplement will be used for the above purposes within three months of any such offering, depending on the availability of appropriate investment opportunities consistent with our investment objective, but no longer than within six months of any such offerings.

        Our primary focus is to generate current income and capital appreciation through investments in first and second lien senior loans and mezzanine debt and, to a lesser extent, equity securities of eligible portfolio companies. In addition to such investments, we may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. See "Regulation." Specifically, as part of this 30% basket, we may invest in entities that are not considered "eligible portfolio companies" (as defined in the Investment Company Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the Investment Company

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Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the Investment Company Act. Pending such investments, we will invest a portion of the net proceeds primarily in cash, cash equivalents, U.S. government securities and other high-quality short-term investments. These securities generally earn yields substantially lower than the income that we anticipate receiving once we are fully invested in accordance with our investment objective. As a result, we may not be able to achieve our investment objective and/or pay any dividends during this period or, if we are able to do so, such dividends may be substantially lower than the dividends that we expect to pay when our portfolio is fully invested. If we do not realize yields in excess of our expenses, we may incur operating losses and the market price of our common stock and debt securities may decline. See "Regulation—Temporary Investments" for additional information about temporary investments we may make while waiting to make longer-term investments in pursuit of our investment objective.

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PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

        Our common stock is traded on The NASDAQ Global Select Market under the symbol "ARCC." Our common stock has historically traded at prices both above and below our net asset value per share. It is not possible to predict whether our common stock will trade at, above or below net asset value. See "Risk Factors—Risks Relating to Offerings Pursuant to this Prospectus—Our shares of common stock have traded at a discount from net asset value and may do so again in the future, which could limit our ability to raise additional equity capital."

        The following table sets forth, for each fiscal quarter for the fiscal years ended December 31, 2010, 2011 and 2012, the net asset value per share of our common stock, the range of high and low closing sales prices of our common stock, the closing sales price as a percentage of net asset value and the dividends or distributions declared by us. On August 13, 2012, the last reported closing sales price of our common stock on The NASDAQ Global Select Market was $17.19 per share, which represented a premium of approximately 10.8% to the net asset value per share reported by us as of June 30, 2012.

 
   
  Price Range   High
Sales Price
to Net Asset
Value(2)
  Low
Sales Price
to Net Asset
Value(2)
  Cash
Dividend
Per
Share(3)
 
 
  Net Asset
Value(1)
 
 
  High   Low  

Year ended December 31, 2010

                                     

First Quarter

  $ 11.78   $ 14.82   $ 11.75     125.8 %   99.7 % $ 0.35  

Second Quarter

  $ 14.11   $ 16.40   $ 12.53     116.2 %   88.8 % $ 0.35  

Third Quarter

  $ 14.43   $ 15.89   $ 12.44     110.1 %   86.2 % $ 0.35  

Fourth Quarter

  $ 14.92   $ 17.26   $ 15.64     115.7 %   104.8 % $ 0.35  

Year ending December 31, 2011

                                     

First Quarter

  $ 15.45   $ 17.83   $ 16.08     115.4 %   104.1 % $ 0.35  

Second Quarter

  $ 15.28   $ 17.71   $ 15.70     115.9 %   102.7 % $ 0.35  

Third Quarter

  $ 15.13   $ 16.30   $ 13.07     107.7 %   86.4 % $ 0.35  

Fourth Quarter

  $ 15.34   $ 15.95   $ 13.26     104.0 %   86.4 % $ 0.36  

Year ending December 31, 2012

                                     

First Quarter

  $ 15.47   $ 16.70   $ 15.51     108.0 %   100.3 % $ 0.37  

Second Quarter

  $ 15.51   $ 16.55   $ 14.67     106.7 %   94.6 % $ 0.37  

Third Quarter (through August 13, 2012)

    *   $ 17.19   $ 16.04     *     *   $ 0.43 (4)

(1)
Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low closing sales prices. The net asset values shown are based on outstanding shares at the end of the relevant quarter.

(2)
Calculated as the respective high or low closing sales price divided by net asset value.

(3)
Represents the dividend or distribution declared in the relevant quarter.

(4)
Consists of a quarterly dividend of $0.38 per share and an additional dividend of $0.05 per share.

*
Net asset value has not yet been calculated for this period.

        We currently intend to distribute dividends or make distributions to our stockholders on a quarterly basis out of assets legally available for distribution. We may also distribute additional dividends or make additional distributions to our stockholders from time to time. Our quarterly and additional dividends or distributions, if any, will be determined by our board of directors.

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        The following table summarizes our dividends or distributions declared for the fiscal years ended December 31, 2010, 2011 and 2012:

Date Declared
  Record Date   Payment Date   Amount  

February 25, 2010

  March 15, 2010   March 31, 2010   $ 0.35  

May 10, 2010

  June 15, 2010   June 30, 2010   $ 0.35  

August 5, 2010

  September 15, 2010   September 30, 2010   $ 0.35  

November 4, 2010

  December 15, 2010   December 31, 2010   $ 0.35  
               

Total declared for 2010

          $ 1.40  
               

March 1, 2011

  March 15, 2011   March 31, 2011   $ 0.35  

May 3, 2011

  June 15, 2011   June 30, 2011   $ 0.35  

August 4, 2011

  September 15, 2011   September 30, 2011   $ 0.35  

November 8, 2011

  December 15, 2011   December 31, 2011   $ 0.36  
               

Total declared for 2011

          $ 1.41  
               

February 28, 2012

  March 15, 2012   March 30, 2012   $ 0.37  

May 8, 2012

  June 15, 2012   June 29, 2012   $ 0.37  

August 7, 2012

  September 14, 2012   September 28, 2012   $ 0.38  

August 7, 2012

  September 14, 2012   September 28, 2012   $ 0.05 (1)
               

Total declared for 2012

          $ 1.17  
               

(1)
Represents an additional dividend.

        To maintain our RIC status, we must timely distribute an amount equal to at least 90% of our investment company taxable income (as defined by the Code, which generally includes net ordinary income and net short term capital gains) to our stockholders. In addition, we generally will be required to pay an excise tax equal to 4% of the amount by which (i) 98% of our ordinary income recognized during a calendar year and (ii) 98.2% of our capital gain net income, as defined by the Code, recognized for the one year period ending on October 31st of a calendar year exceeds the distributions for the year. The taxable income on which excise tax is paid is generally distributed to stockholders in the next tax year. Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income for distribution in the following year, and pay any applicable excise tax. For the six months ended June 30, 2012 we recorded a net excise tax expense of $4.0 million. For the years ended December 31, 2011 and 2010, we recorded a net excise tax expense of $6.6 million and $2.2 million, respectively. We cannot assure you that we will achieve results that will permit the payment of any cash distributions. We maintain an "opt out" dividend reinvestment plan for our common stockholders. As a result, if we declare a cash dividend, then stockholders' cash dividends will be automatically reinvested in additional shares of our common stock unless they specifically "opt out" of the dividend reinvestment plan so as to receive cash dividends. See "Dividend Reinvestment Plan."

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RATIOS OF EARNINGS TO FIXED CHARGES

        For the six months ended June 30, 2012 and the years ended December 31, 2011, 2010, 2009, 2008 and 2007, the ratios of earnings to fixed charges of the Company, computed as set forth below, were as follows:

 
  For the Six
Months Ended
June 30,
2012
  For the
Year Ended
December 31,
2011
  For the
Year Ended
December 31,
2010
  For the
Year Ended
December 31,
2009
  For the
Year Ended
December 31,
2008
  For the
Year Ended
December 31,
2007
 

Earnings to Fixed Charges(1)

    4.0 (2)   3.7 (3)   9.8 (4)   9.4 (5)   (2.8 )   3.4  

        For purposes of computing the ratios of earnings to fixed charges, earnings represent net increase in stockholders' equity resulting from operations plus (or minus) income tax expense (benefit) including excise tax expense plus fixed charges. Fixed charges include interest and credit facility fees expense and amortization of debt issuance costs.

(1)
Earnings include net realized and unrealized gains or losses. Net realized and unrealized gains or losses can vary substantially from period to period.

Excluding the net unrealized gains or losses, the earnings to fixed charges ratio would be 2.8 for the six months ended June 30, 2012, 4.0 for the year ended December 31, 2011, 6.9 for the year ended December 31, 2010, 5.7 for the year ended December 31, 2009, 4.7 for the year ended December 31, 2008 and 3.7 for the year ended December 31, 2007.

Excluding the net realized and unrealized gains or losses, the earnings to fixed charges ratio would be 3.5 for the six months ended June 30, 2012, 3.4 for the year ended December 31, 2011, 3.8 for the year ended December 31, 2010, 6.5 for the year ended December 31, 2009, 4.5 for the year ended December 31, 2008 and 3.6 for the year ended December 31, 2007.

(2)
Earnings for the six months ended June 30, 2012 included a net realized loss on the extinguishment of debt of $2.7 million.

(3)
Earnings for the year ended December 31, 2011 included a net realized loss on the extinguishment of debt of $19.3 million.

(4)
Earnings for year ended December 31, 2010, included a one-time gain on the Allied Acquisition of $195.9 million, a net realized loss on the extinguishment of debt of $2.0 million and net realized gain on sale of other assets of $5.9 million.

(5)
Earnings for the year ended December 31, 2009, included a net realized gain on the extinguishment of debt of $26.5 million.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The information contained in this section should be read in conjunction with the "Selected Condensed Consolidated Financial Data of Ares Capital" and our financial statements and notes thereto appearing elsewhere in this prospectus or the accompanying prospectus supplement.

OVERVIEW

        We are a specialty finance company that is a closed-end, non-diversified management investment company incorporated in Maryland. We have elected to be regulated as a BDC under the Investment Company Act.

        Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component like warrants.

        To a lesser extent, we also make preferred and/or common equity investments, which have generally been non-control equity investments, of less than $20 million (usually in conjunction with a concurrent debt investment). However, we may increase the size or change the nature of these investments. Also, as a result of the Allied Acquisition, Allied Capital's equity investments, which included equity investments larger than those we have historically made and controlled portfolio company equity investments, became part of our portfolio. We intend to continue actively seeking opportunities over time to dispose of certain of the assets that were acquired in the Allied Acquisition, particularly non-yielding equity investments and controlled portfolio company investments, as well as lower or non-yielding debt investments and investments that may not be core to our investment strategy, and generally rotate them into higher-yielding first and second lien senior loans and mezzanine debt investments. However, there can be no assurance that this strategy will be successful.

        As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in "qualifying assets," including securities and indebtedness of private U.S. companies and certain public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We also may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. Specifically, as part of this 30% basket, we may invest in entities that are not considered "eligible portfolio companies" (as defined in the Investment Company Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the Investment Company Act.

        We are externally managed by Ares Capital Management, a wholly owned subsidiary of Ares, a global alternative asset manager and an SEC registered investment adviser, pursuant to an investment advisory and management agreement. Ares Operations, a wholly owned subsidiary of Ares, provides the administrative services necessary for us to operate.

        We have elected to be treated as a RIC under Subchapter M of the Code, and operate in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, we must, among other things, meet certain source of income and asset diversification requirements and timely distribute to our stockholders generally at least 90% of our investment company taxable income, as defined by the Code, for each year. Pursuant to this election, we generally will not have to pay corporate level taxes on any income that we distribute to our stockholders provided that we satisfy those requirements.

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Allied Acquisition

        On April 1, 2010, we consummated the Allied Acquisition in an all stock merger whereby each existing share of common stock of Allied Capital was exchanged for 0.325 shares of our common stock. The Allied Acquisition was valued at approximately $908 million as of April 1, 2010. In connection therewith, we issued approximately 58.5 million shares of our common stock to Allied Capital's then-existing stockholders, resulting in our then-existing stockholders owning approximately 69% of the combined company and the then-existing Allied Capital stockholders owning approximately 31% of the combined company.

        Information presented herein as of and for the three and six months ended June 30, 2012 and 2011 and as of and for the year ended December 31, 2011 and the period from April 1, 2010 through December 31, 2010 includes the results of operations and financial condition of the combined company following the Allied Acquisition unless otherwise indicated in the footnotes. Information presented herein as of and for the year ended December 31, 2009 relates solely to Ares Capital, as it existed before the Allied Acquisition.

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PORTFOLIO AND INVESTMENT ACTIVITY

        The Company's investment activity for the six months ended June 30, 2012 and 2011 and the years ended December 31, 2011, 2010 and 2009 is presented below (information presented herein is at amortized cost unless otherwise indicated).

 
  Six Months
Ended June 30,
  Year Ended December 31,  
(dollar amounts in millions)
  2012   2011   2011   2010   2009  

New investment commitments(1)(6):

                               

New portfolio companies

  $ 459.6   $ 797.3   $ 1,778.0   $ 774.3   $ 317.6  

Existing portfolio companies(2)

    652.3     594.5     1,896.4     933.8     162.2  
                       

Total new investment commitments

    1,111.9     1,391.8     3,674.4     1,708.1     479.8  

Less:

                               

Investment commitments exited

    804.7     943.2     2,603.1     1,644.5     604.4  
                       

Net investment commitments (exits)

  $ 307.2   $ 448.6   $ 1,071.3   $ 63.6   $ (124.6 )

Principal amount of investments funded(6):

                               

Senior term debt

  $ 963.0   $ 953.1   $ 2,484.2   $ 715.3   $ 289.5  

Subordinated Certificates of the SSLP(3)

    83.2     183.6     496.8     391.6     165.0  

Senior subordinated debt

    36.1     30.3     51.8     308.7     59.4  

Collateralized loan obligations

                51.8      

Preferred equity securities

        15.3     164.1     49.4     47.9  

Other equity securities

    4.1     30.4     41.2     66.9     13.2  

Commercial real estate

            0.9     0.2      
                       

Total

  $ 1,086.4   $ 1,212.7   $ 3,239.0   $ 1,583.9   $ 575.0  

Principal amount of investments acquired as part of the Allied Acquisition:

                               

Senior term debt

  $   $   $   $ 661.1   $  

Senior subordinated debt

                746.6      

Collateralized loan obligations

                114.3      

Preferred equity securities

                42.3      

Other equity securities

                228.5      

Commercial real estate

                41.0      
                       

Total

  $   $   $   $ 1,833.8   $  

Principal amount of investments sold or repaid:

                               

Senior term debt

  $ 508.2   $ 423.5   $ 1,607.5   $ 987.4   $ 283.4  

Subordinated Certificates of the SSLP(3)

    17.9             15.4      

Senior subordinated debt

    151.0     274.3     463.2     461.9     202.4  

Collateralized loan obligations

    15.0     114.4     166.3     6.8     0.3  

Preferred equity securities

    18.3     39.7     43.5     21.5     18.7  

Other equity securities

    64.0     74.9     166.1     61.9     10.4  

Commercial real estate

    0.8     18.8     21.6     1.0      
                       

Total

  $ 775.2   $ 945.6   $ 2,468.2   $ 1,555.9   $ 515.2  

Number of new investment commitments(4)(6)

    32     34     72     63     33  

Average new investment commitment amount(6)

  $ 34.7   $ 40.9   $ 51.0   $ 27.1   $ 14.5  

Weighted average term for new investment commitments (in months)(6)

    60     64     63     61     74  

Percentage of new investment commitments at floating rates(6)

    88 %   91 %   94 %   71 %   65 %

Percentage of new investment commitments at fixed rates

    12 %   6 %   5 %   23 %   22 %

Weighted average yield of debt and other income producing securities(5):

                               

Funded during the period at fair value(6)

    9.8 %   10.6 %   10.9 %   13.2 %   13.4 %

Funded during the period at amortized cost(6)

    9.8 %   10.6 %   10.9 %   13.3 %   13.7 %

Exited or repaid during the period at fair value(7)

    10.1 %   14.0 %   11.5 %   12.8 %   13.4 %

Exited or repaid during the period at amortized cost

    10.2 %   15.3 %   11.8 %   12.9 %   12.2 %

Weighted average yield of debt and other income producing securities acquired as part of the Allied Acquisition:

                               

Funded during the period at fair value and amortized cost

    %   %   %   14.0 %   %

(1)
New investment commitments include new agreements to fund revolving credit facilities or delayed draw loans.

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(2)
Includes investment commitments to the SSLP to make co-investments with GE in first lien senior secured loans of middle market companies of $83.2 million and $183.6 million for the six months ended June 30, 2012 and 2011, respectively, and $496.8 million, $391.6 million and $165.0 million for the years ended December 31, 2011, 2010 and 2009, respectively.

(3)
See Note 4 to our consolidated financial statements for the three and six months ended June 30, 2012 for more detail on the SSLP.

(4)
Number of new investment commitments represents each commitment to a particular portfolio company.

(5)
"Weighted average yield at fair value" is computed as the (a) annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount earned on accruing debt and other income producing securities, divided by (b) total debt and other income producing securities at fair value. "Weighted average yield at amortized cost" is computed as the (a) annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount earned on accruing debt and other income producing securities, divided by (b) total debt and other income producing securities at amortized cost.

(6)
Excludes investments or investment commitments acquired as part of the Allied Acquisition on April 1, 2010.

(7)
Represents fair value for investments in the portfolio as of the most recent prior quarter end, if applicable.

        As of June 30, 2012 and December 31, 2011, investments consisted of the following:

 
  As of  
 
  June 30, 2012   December 31, 2011  
(in millions)
  Amortized
Cost
  Fair
Value
  Amortized
Cost
  Fair
Value
 

Senior term debt

  $ 3,155.6   $ 3,123.7   $ 2,691.0   $ 2,671.1  

Subordinated Certificates of the SSLP(1)

    1,099.5     1,125.8     1,034.3     1,059.2  

Senior subordinated debt

    486.2     457.9     592.6     515.0  

Collateralized loan obligations

    40.5     40.2     55.5     54.0  

Preferred equity securities

    233.3     246.6     251.2     251.1  

Other equity securities

    403.7     494.8     463.9     527.0  

Commercial real estate

    19.4     15.8     20.2     17.1  
                   

Total

  $ 5,438.2   $ 5,504.8   $ 5,108.7   $ 5,094.5  
                   

(1)
The proceeds from these certificates were applied to co-investments with GE to fund first lien senior secured loans to 34 and 32 different borrowers as of June 30, 2012 and December 31, 2011, respectively.

        The weighted average yields at fair value and amortized cost of the following portions of our portfolio as of June 30, 2012 and December 31, 2011 were as follows:

 
  As of  
 
  June 30, 2012   December 31, 2011  
 
  Amortized
Cost
  Fair
Value
  Amortized
Cost
  Fair
Value
 

Debt and other income producing securities

    11.7 %   11.6 %   12.1 %   12.0 %

Total portfolio

    10.4 %   10.3 %   10.4 %   10.4 %

Senior term debt

    9.9 %   10.0 %   10.5 %   10.5 %

First lien senior term debt

    9.1 %   9.1 %   9.6 %   9.7 %

Second lien senior term debt

    11.4 %   11.6 %   12.4 %   12.4 %

Subordinated Certificates of the SSLP(1)

    16.0 %   15.6 %   16.0 %   15.7 %

Senior subordinated debt

    12.3 %   13.1 %   10.3 %   11.9 %

Collateralized loan obligations

    9.9 %   10.0 %   8.8 %   9.1 %

Income producing equity securities (excluding collateralized loan obligations)

    9.8 %   9.5 %   10.4 %   10.0 %

(1)
The proceeds from these certificates were applied to co-investments with GE to fund first lien senior secured loans.

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        Ares Capital Management, our investment adviser, employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our investment adviser grades the credit risk of all investments on a scale of 1 to 4 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors. Under this system, investments with a grade of 4 involve the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit. Investments graded 3 involve a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing as expected and the risk factors to our ability to ultimately recoup the cost of our investment are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a grade of 3. Investments graded 2 indicate that the risk to our ability to recoup the initial cost basis of such investment has increased materially since origination or acquisition, including as a result of factors such as declining performance and non-compliance with debt covenants; however, payments are generally not more than 120 days past due. An investment grade of 1 indicates that the risk to our ability to recoup the initial cost basis of such investment has substantially increased since origination or acquisition, and the portfolio company likely has materially declining performance. For debt investments with an investment grade of 1, most or all of the debt covenants are out of compliance and payments are substantially delinquent. For investments graded 1, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit. For investments graded 1 or 2, our investment adviser enhances its level of scrutiny over the monitoring of such portfolio company. Our investment adviser grades the investments in our portfolio at least each quarter and it is possible that the grade of certain of these portfolio investments may be reduced or increased over time.

        Set forth below is the grade distribution of our portfolio companies as of June 30, 2012 and December 31, 2011:

 
  As of  
 
  June 30, 2012   December 31, 2011  
(dollar amounts in millions)
  Fair
Value
  %   Number of
Companies
  %   Fair
Value
  %   Number of
Companies
  %  

Grade 1

    74.6     1.4 %   8     5.6 % $ 77.1     1.5 %   9     6.4 %

Grade 2

    211.4     3.8 %   14     9.7 %   184.4     3.7 %   11     7.8 %

Grade 3

    4,625.3     84.0 %   109     75.7 %   4,265.5     83.7 %   110     78.0 %

Grade 4

    593.5     10.8 %   13     9.0 %   567.5     11.1 %   11     7.8 %
                                   

  $ 5,504.8     100.0 %   144     100.0 % $ 5,094.5     100.0 %   141     100.0 %
                                   

        As of each June 30, 2012 and December 31, 2011, the weighted average grade of the investments in our portfolio at fair value was 3.0.

        As of June 30, 2012, 2.3% and 0.7% of the total investments at amortized cost and at fair value, respectively, were on non-accrual status. As of December 31, 2011, 3.3% and 0.9% of the total investments at amortized cost and at fair value, respectively, were on non-accrual status.

Senior Secured Loan Program

        The Company has an investment in the subordinated certificates (the "SSLP Certificates") issued by the Senior Secured Loan Fund LLC, which operates using the name "Senior Secured Loan Program," an unconsolidated vehicle. The Company, through the SSLP, co-invests in first lien senior

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secured loans of middle market companies with GE. The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and GE (with approval from a representative of each required).

        As of June 30, 2012 and December 31, 2011, the SSLP had available capital of approximately $7.7 billion, of which approximately $5.4 billion and $5.0 billion in aggregate principal amount was funded at June 30, 2012 and December 31, 2011, respectively. As of June 30, 2012 and December 31, 2011, the Company had agreed to make available to the SSLP $1.5 billion, of which $377 million and $443 million was unfunded, respectively. It is within the Company's discretion to make these additional amounts available to the SSLP.

        As of June 30, 2012 and December 31, 2011, the SSLP had total assets of $5.4 billion and $5.0 billion, respectively. GE's investment in the SSLP consisted of senior notes of $4.1 billion and $3.8 billion and SSLP Certificates of $159 million and $149 million at June 30, 2012 and December 31, 2011, respectively. The SSLP Certificates are junior in right of payment to the senior notes owned by GE. As of June 30, 2012 and December 31, 2011, the Company and GE owned 87.5% and 12.5%, respectively, of the outstanding SSLP Certificates.

        As of June 30, 2012 and December 31, 2011, the SSLP's portfolio was comprised of all first lien senior secured loans to U.S. middle-market companies and none of these loans was on non-accrual status. The portfolio companies in the SSLP are in industries similar to the companies in the Company's portfolio.

        Below is a summary of the SSLP's portfolio, followed by a listing of the individual first lien senior secured loans in the SSLP's portfolio as of June 30, 2012 and December 31, 2011:

 
  As of  
(dollar amounts in millions)
  June 30, 2012   December 31, 2011  

Total first lien senior secured loans(1)

  $ 5,399.5   $ 5,017.9  

Weighted average yield on first lien senior secured loans(2)

    8.1 %   8.2 %

Number of borrowers in the SSLP

    34     32  

Largest loan to a single borrower(1)

  $ 300.0   $ 300.0  

Total of five largest loans to borrowers(1)

  $ 1,387.2   $ 1,362.9  

(1)
At principal amount.

(2)
Computed as the (a) annual stated interest rate on accruing first lien senior secured loans, divided by (b) total first lien senior secured loans at principal amount.

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(dollar amounts in millions)

SSLP Loan Portfolio as of June 30, 2012  
Portfolio Company
  Business Description   Maturity
Date
  Interest
Rate(1)
  Principal
Amount
 
ADG, LLC   Dental services     10/2016     8.8 % $ 200.4  
*   Specialty chemicals manufacturer     6/2014     7.8 %   156.2  
Anthony, Inc. and Anthony Holdings, Inc.   Manufacturer of refrigeration glass doors and related products     6/2017     7.1 %   242.6  
BECO Holding Company, Inc.(3)   Wholesale distributor of first response fire protection equipment and related parts     7/2015     9.0 %   109.0  
*   Manufacturer of custom designed and engineered metal products     4/2018     8.0 %   90.0  
Chariot Acquisition, LLC   Distributor and designer of aftermarket golf cart parts and accessories     1/2018     8.8 %   135.0  
*(3)   Expedited travel document processing services     12/2017     8.5 %   142.9  
CCS Group Holdings, LLC(3)   Correctional facility healthcare operator     4/2016     8.0 %   105.6  
*   Manufacturer and supplier of brake systems and replacement parts for vehicles     3/2014     8.8 %   121.8  
*(2)(3)   Healthcare analysis services     3/2017     7.8 %   286.4  
Driven Holdings, LLC(3)   Automotive aftermarket car care franchisor     12/2016     8.0 %   168.9  
Excelligence Learning Corporation(3)   Developer, manufacturer and retailer of educational products     8/2016     8.0 %   120.4  
Fleischmann's Vinegar Company, Inc.   Manufacturer and marketer of industrial vinegar     5/2016     8.8 %   61.8  
Fox Hill Holdings, LLC   Operating company that develops middle market manufacturing and industrial distribution companies     12/2017     8.0 %   296.2  
III US Holdings, LLC   Provider of library automation software and systems     3/2018     7.6 %   210.0  
Implus Footcare, LLC(3)   Manufacturer of footwear and other accessories     10/2016     9.5 %   178.9  
Industrial Air Tool, L.P.   Industrial products manufacturer     6/2014     7.5 %   28.9  
Instituto de Banca y Comercio, Inc. & Leeds IV Advisors, Inc.(3)   Private school operator     6/2015     10.5 %   168.0  
Intermedix Corporation   Provider of revenue cycle management to the emergency healthcare industry     8/2016     6.0 %   224.8  
LJSS Acquisition, Inc.   Fluid power distribution company in the industrial and mobile equipment markets     10/2017     8.8 %   166.0  
MWI Holdings, Inc.(2)   Provider of highly engineered springs, fastners, and other precision components     6/2017     8.0 %   252.5  
Nordco, Inc.   Designer and manufacturer of railroad maintenance-of-way machinery     6/2016     7.0 %   113.8  
Oak Parent, Inc.(2)   Manufacturer of athletic apparel     4/2018     8.0 %   300.0  
Opinionology, LLC   Provider of outsourced data collection to the market research industry     7/2017     8.5 %   155.5  
Penn Detroit Diesel Allison, LLC   Diesel engine manufacturer     12/2016     9.0 %   65.8  
PetroChoice Holdings, LLC   Provider of lubrication solutions     1/2017     10.0 %   115.6  
Powersport Auctioneer Holdings(3)   Powersport vehicle auction operator     12/2016     8.5 %   42.5  
Pregis Corporation(2)   Provider of highly-customized, tailored protective packaging solutions     3/2017     7.8 %   126.5  
PSSI Holdings, LLC   Provider of mission-critical outsourced cleaning and sanitation services to the food processing industry     6/2017     6.8 %   149.3  
Singer Sewing Company   Manufacturer of consumer sewing machines     6/2017     7.3 %   200.0  
The Teaching Company, LLC and The Teaching Company Holdings, Inc.(2)(3)   Education publications provider     3/2017     9.0 %   115.0  
United Central Industrial Supply Company, L.L.C.   Provider of mining supplies and services to the U.S. underground coal mining industry     10/2015     6.3 %   142.0  
WB Merger Sub, Inc.   Importer, distributor and developer of premium wine and spirits     12/2016     9.0 %   155.1  
WP CPP Holding, LLC   Precision engineered castings manufacturer     10/2017     8.5 %   252.1  
                       
                    $ 5,399.5  
                       

(1)
Represents the weighted average annual stated interest rate as of June 30, 2012. All interest rates are payable in cash.

(2)
The Company also holds a portion of the first lien senior secured loan in this portfolio company.

(3)
The Company holds an equity investment in this portfolio company.

*
Disclosure of the names of these portfolio companies is restricted by the terms of the underlying agreements governing the loans to these portfolio companies.

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(dollar amounts in millions)

SSLP Loan Portfolio as of December 31, 2011  
Portfolio Company
  Business Description   Maturity
Date
  Interest
Rate(1)
  Principal
Amount
 
ADG, LLC   Dental services     10/2016     8.8 % $ 176.4  
*   Specialty chemicals manufacturer     6/2014     7.8 %   156.6  
Anthony, Inc. and Anthony Holdings, Inc.   Manufacturer of refrigeration glass doors and related products     6/2017     7.1 %   243.8  
Augusta Sportswear, Inc.(2)   Manufacturer of athletic apparel     7/2015     8.5 %   239.9  
BECO Holding Company, Inc.(4)   Wholesale distributor of first response fire protection equipment and related parts     7/2015     9.0 %   116.0  
*   Manufacturer of custom designed and engineered metal products     12/2015     8.8 %   73.7  
*(4)   Expedited travel document processing services     12/2017     9.3 %   133.0  
CCS Group Holdings, LLC(4)   Correctional facility healthcare operator     4/2016     8.0 %   109.9  
*   Manufacturer and supplier of brake systems and replacement parts for vehicles     3/2014     8.8 %   123.8  
*(2)(4)   Healthcare analysis services     3/2017     7.8 %   288.5  
Driven Holdings, LLC(4)   Automotive aftermarket car care franchisor     12/2016     8.5 %   170.0  
ELC Acquisition Corp., ELC Holdings Corporation, and Excelligence Learning Corporation(4)   Developer, manufacturer and retailer of educational products     8/2016     8.0 %   121.0  
Fleischmann's Vinegar Company, Inc.   Manufacturer and marketer of industrial vinegar     5/2016     8.8 %   62.3  
Fox Hill Holdings, LLC   Operating company that develops middle market manufacturing and industrial distribution companies     12/2017     8.8 %   300.0  
Huddle House, Inc.(3)(4)   Restaurant owner and operator     6/2013     11.0 %(5)   58.2  
Implus Footcare, LLC(4)   Provider of footwear and other accessories     10/2016     9.5 %   179.8  
Industrial Air Tool, L.P.   Industrial products     6/2014     7.5 %   34.1  
Instituto de Banca y Comercio, Inc. & Leeds IV Advisors, Inc.(4)   Private school operator     6/2015     10.5 %   173.8  
Intermedix Corporation   Provider of revenue cycle management to the emergency healthcare industry     8/2016     6.0 %   225.9  
LJSS Acquisition, Inc.   Fluid power distribution company in the industrial and mobile equipment markets     10/2017     8.8 %   167.0  
MWI Holdings, Inc.(2)   Provider of highly engineered springs, fastners, and other precision components     6/2017     8.0 %   253.7  
Nivel Parts and Manufacturing Co., LLC   Provider of golf car aftermarket parts and accessories     2/2016     8.0 %   88.0  
Nordco, Inc.   Designer and manufacturer of railroad maintenance-of-way machinery     6/2016     7.0 %   119.4  
Opinionology, LLC and Survey Sampling International LLC   Provider of outsourced data collection to the market research industry     7/2017     9.0 %   158.5  
Penn Detroit Diesel Allison, LLC   Diesel engine manufacturer     12/2016     9.0 %   66.0  
PG Mergersub, Inc. and PGA Holdings, Inc.(2)(3)(4)   Provider of patient surveys, management reports and national databases for the integrated healthcare delivery system     11/2015     6.8 %   267.3  
Powersport Auctioneer Holdings, LLC   Powersport vehicle auction operator     12/2016     8.8 %   74.5  
PSSI Holdings, LLC   Provider of mission-critical outsourced cleaning and sanitation services to the food processing industry     6/2017     6.8 %   158.8  
The Teaching Company, LLC and The Teaching Company Holdings, Inc.(4)   Education publications provider     3/2017     9.0 %   116.2  
United Central Industrial Supply Company, LLC   Provider of mining supplies and services to the U.S. underground coal mining industry     10/2015     6.3 %   152.5  
WB Merger Sub, Inc.   Importer, distributor and developer of premium wine and spirits     12/2016     9.0 %   155.9  
WP CPP Holdings, LLC(2)   Precision engineered castings manufacturer     10/2017     8.5 %   253.4  
                       
                    $ 5,017.9  
                       

(1)
Represents the weighted average annual stated interest rate as of December 31, 2011. Unless otherwise stated, all interest rates are payable in cash.

(2)
The Company also holds a portion of the first lien senior secured loan in this portfolio company.

(3)
The Company holds a senior subordinated loan in this portfolio company.

(4)
The Company holds an equity investment in this portfolio company.

(5)
Consists of 9.0% interest payable in cash and 2.0% of payment-in-kind interest.

*
Disclosure of the names of these portfolio companies is restricted by the terms of the underlying agreements governing the loans to these portfolio companies.

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        The amortized cost and fair value of the SSLP Certificates held by the Company was $1.1 billion and $1.1 billion, respectively, as of June 30, 2012, and $1.0 billion and $1.1 billion, respectively, as of December 31, 2011. The SSLP Certificates pay a weighted average contractual coupon of three month LIBOR plus approximately 8.0% and also entitle the Company to receive a portion of the excess cash flow from the loan portfolio, which may result in a return to the holders of the SSLP Certificates that is greater than both the contractual coupon on the SSLP Certificates as well as the weighted average yield on the SSLP's portfolio of 8.1% and 8.2% at June 30, 2012 and December 31, 2011, respectively. The Company's yield on its investment in the SSLP at fair value was 15.6% and 15.7% as of June 30, 2012 and December 31, 2011, respectively. For the three and six months ended June 30, 2012, the Company earned interest income of $44 million and $88 million, respectively. For the three and six months ended June 30, 2011, the Company earned interest income of $27 million and $50 million, respectively. For the years ended December 31, 2011, 2010 and 2009, the Company earned interest income of $118 million, $50 million and $5 million, respectively. The Company is also entitled to certain fees in connection with the SSLP. For the three and six months ended June 30, 2012, in connection with the SSLP, the Company earned capital structuring service fees and sourcing, management and other fees totaling $12 million and $26 million, respectively. For the three and six months ended June 30, 2011, in connection with the SSLP, the Company earned capital structuring service fees and sourcing, management and other fees totaling $11 million and $19 million, respectively. For the years ended December 31, 2011, 2010 and 2009, in connection with the SSLP, the Company earned capital structuring service fees and sourcing, management and other fees totaling $55 million, $36 million and $1 million, respectively.

RESULTS OF OPERATIONS

For the three and six months ended June 30, 2012 and 2011

        Operating results for the three and six months ended June 30, 2012 and 2011 were as follows:

 
  For the three months ended   For the six months ended  
(in millions)
  June 30, 2012   June 30, 2011   June 30, 2012   June 30, 2011  

Total investment income

  $ 177.6   $ 144.3   $ 345.3   $ 280.0  

Total expenses

    86.8     98.6     174.8     184.5  
                   

Net investment income before income taxes

    90.8     45.7     170.5     95.5  

Income tax expense, including excise tax

    2.9     1.9     5.6     3.9  
                   

Net investment income

    87.9     43.8     164.9     91.6  

Net realized gains (losses) from investments

    (38.9 )   (6.4 )   (46.5 )   56.2  

Net unrealized gains from investments

    44.6     10.0     80.8     32.2  

Realized loss on extinguishment of debt

    (2.7 )   (10.5 )   (2.7 )   (19.3 )
                   

Net increase in stockholders' equity resulting from operations

  $ 90.9   $ 36.9   $ 196.5   $ 160.7  
                   

        Net income can vary substantially from period to period due to various factors, including the level of new investment commitments, the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, quarterly comparisons of net income may not be meaningful.

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Investment Income

 
  For the three months ended   For the six months ended  
(in millions)
  June 30, 2012   June 30, 2011   June 30, 2012   June 30, 2011  

Interest

  $ 138.0   $ 111.3   $ 270.9   $ 221.8  

Capital structuring service fees

    21.3     20.1     38.9     31.1  

Dividend income

    8.9     6.7     18.2     15.5  

Management and other fees

    4.5     4.6     9.4     8.1  

Other income

    4.9     1.6     7.9     3.5  
                   

Total investment income

  $ 177.6   $ 144.3   $ 345.3   $ 280.0  
                   

        The increase in interest income for the three months ended June 30, 2012 was primarily due to the increase in the size of the portfolio, which increased from an average of $4.4 billion at amortized cost for the three months ended June 30, 2011 to an average of $5.3 billion at amortized cost for the comparable period in 2012. Even though new investment commitments decreased from $890 million for the three months ended June 30, 2011 to $728 million for the comparable period in 2012, capital structuring service fees increased for the three months ended June 30, 2012 as compared to 2011 primarily due to the increase in the average capital structuring service fees received on new investments, which increased from 2.3% in 2011 to 2.9% in 2012. The increase in dividend income for the three months ended June 30, 2012 was primarily attributable to dividend income of $3.1 million earned from a preferred equity investment that was made in August 2011, offset by a decrease in non-recurring dividends. The increase in other income for the three months ended June 30, 2012 was primarily attributable to higher amendment and letter of credit fees.

        The increase in interest income for the six months ended June 30, 2012 was primarily due to the increase in the size of the portfolio which increased from an average of $4.3 billion at amortized cost for the six months ended June 30, 2011 to an average of $5.2 billion at amortized cost for the comparable period in 2012. Even though new investment commitments decreased from $1.4 billion for the six months ended June 30, 2011 to $1.1 billion for the comparable period in 2012, capital structuring service fees increased for the six months ended June 30, 2012 as compared to 2011 primarily due to the increase in the average capital structuring service fees received on new investments which increased from 2.2% in 2011 to 3.5% in 2012. The increase in management and other fees for the six months ended June 30, 2012 was primarily due to the management and sourcing fees earned from the SSLP, which increased from $5.2 million for the six months ended June 30, 2011 to $7.7 million for the comparable period in 2012 as the aggregate principal amount of investments made through the SSLP increased from approximately $3.3 billion at June 30, 2011 to approximately $5.4 billion at June 30, 2012. The increase in dividend income for the six months ended June 30, 2012 was primarily attributable to dividend income of $6.3 million earned from a preferred equity investment that was made in August 2011, offset by a decrease in non-recurring dividends. The increase in other income for the six months ended June 30, 2012 was primarily attributable to higher amendment and letter of credit fees.

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Operating Expenses

 
  For the three months ended   For the six months ended  
(in millions)
  June 30, 2012   June 30, 2011   June 30, 2012   June 30, 2011  

Interest and credit facility fees

  $ 35.0   $ 28.6   $ 67.8   $ 58.8  

Incentive fees related to pre-incentive fee net investment income

    22.1     17.1     42.8     32.9  

Incentive fees related to capital gains per GAAP

    0.6     24.6     6.3     39.8  

Base management fees

    20.8     17.4     40.8     34.1  

Professional fees

    3.5     5.5     7.2     8.2  

Administrative fees

    2.2     2.5     4.5     4.9  

Other general and administrative

    2.6     2.9     5.4     5.8  
                   

Total operating expenses

  $ 86.8   $ 98.6   $ 174.8   $ 184.5  
                   

        Interest and credit facility fees for the three and six months ended June 30, 2012 and 2011, were comprised of the following:

 
  For the three months ended   For the six months ended  
(in millions)
  June 30, 2012   June 30, 2011   June 30, 2012   June 30, 2011  

Stated interest expense

  $ 27.8   $ 20.4   $ 53.2   $ 42.1  

Facility fees

    1.2     2.2     2.5     4.3  

Amortization of debt issuance cost

    3.2     3.4     6.7     6.2  

Accretion of discount related to the Allied Unsecured Notes

    0.1     0.2     0.1     2.6  

Accretion of original issuance discount on the Convertible Notes

    2.7     2.4     5.3     3.6  
                   

Total interest and credit facility fees

  $ 35.0   $ 28.6   $ 67.8   $ 58.8  
                   

        Stated interest expense for the three months ended June 30, 2012 increased from the comparable period in 2011 due to the increase in our average principal amount of debt outstanding, partially offset by a decrease in our weighted average stated interest rate of our debt. For the three months ended June 30, 2012, our average principal amount of debt outstanding was approximately $2.2 billion as compared to $1.5 billion for the comparable period in 2011, and the weighted average stated interest rate on our debt was 5.0% for the three months ended June 30, 2012 as compared to 5.5% for the comparable period in 2011.

        Stated interest expense for the six months ended June 30, 2012 increased from the comparable period in 2011 due to the increase in the average principal amount of debt outstanding, partially offset by a decrease in our weighted average stated interest rate of our debt. For the six months ended June 30, 2012, our average principal debt outstanding was $2.1 billion as compared to $1.5 billion for the comparable period in 2011, and the weighted average stated interest rate on our debt was 5.1% for the six months ended June 30, 2012 as compared to 5.6% for the comparable period in 2011.

        The increase in base management fees and incentive fees related to pre-incentive fee net investment income for the three and six months ended June 30, 2012 from the comparable periods in 2011 was primarily due to the increase in the size of the portfolio and in the case of incentive fees, the related increase in pre-incentive fee net investment income.

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        For the three and six months ended June 30, 2012, the capital gains incentive fee expense was $0.6 million and $6.3 million, respectively, bringing the total capital gains incentive fee accrual calculated in accordance with GAAP to $55.3 million (included in management and incentive fees payable in the consolidated balance sheet) as of June 30, 2012. For the three and six months ended June 30, 2011, the capital gains incentive fee expense calculated in accordance with GAAP was $24.6 million and $39.8 million, respectively. As a result of an amendment to the capital gains portion of the incentive fee under the investment advisory and management agreement that was adopted June 6, 2011, for the three and six months ended June 30, 2011 we accrued $26 million of capital gains incentive fees in respect of the assets purchased in the Allied Acquisition. The accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future. For the three and six months ended June 30, 2012 and 2011, we did not incur a capital gains fee under the investment advisory and management agreement and there are no amounts currently due under the agreement. See Note 3 to the Company's consolidated financial statements for the three and six months ended June 30, 2012 for more information on the incentive and base management fees.

        Professional fees include legal, accounting, valuation and other professional fees incurred related to the management of the Company. Administrative fees represent fees paid to Ares Operations for our allocable portion of overhead and other expenses incurred by Ares Operations in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staffs. Other general and administrative expenses include rent, insurance, depreciation, director's fees and other costs.

Income Tax Expense, Including Excise Tax

        The Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Company must, among other things, timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. In order to maintain its RIC status, the Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders which will generally relieve the Company from U.S. federal income taxes.

        Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, the Company accrues excise tax on estimated excess taxable income. For the three and six months ended June 30, 2012, a net expense of $2.0 million and $4.0 million was recorded for U.S. federal excise tax, respectively. For the three and six months ended June 30, 2011, a net expense of $1.0 million and $1.7 million was recorded for U.S. federal excise tax, respectively.

        Certain of our consolidated subsidiaries are subject to U.S. federal and state income taxes. For the three and six months ended June 30, 2012, we recorded a tax expense of approximately $0.9 million and $1.6 million, respectively, for these subsidiaries. For the three and six months ended June 30, 2011, we recorded a tax expense of approximately $0.9 million and $2.2 million, respectively, for these subsidiaries.

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Net Realized Gains/Losses

        During the three months ended June 30, 2012, the Company had $416.8 million of sales, repayments or exits of investments resulting in $38.9 million of net realized losses. These sales, repayments or exits included $30.0 million of investments sold to IHAM and certain vehicles managed by IHAM. A net realized loss of $0.8 million was recorded on these transactions. See Note 12 to the Company's consolidated financial statements for the three and six months ended June 30, 2012 for more detail on IHAM and its managed vehicles. Net realized losses of $38.9 million on investments were comprised of $26.3 million of gross realized gains and $65.2 million of gross realized losses. The realized gains and losses on investments during the three months ended June 30, 2012 consisted of the following:

(in millions)
Portfolio Company
  Net Realized
Gains (Losses)
 

BenefitMall Holdings Inc. 

  $ 12.9  

Things Remembered Inc. and TRM Holdings Corporation

    9.5  

Crescent Hotels & Resorts, LLC

    (5.5 )

Making Memories Wholesale, Inc. 

    (11.1 )

Prommis Solutions, LLC

    (46.8 )

Other, net

    2.1  
       

Total

  $ (38.9 )
       

        During the three months ended June 30, 2011, the Company had $380.0 million of sales, repayments or exits of investments resulting in $6.4 million of net realized losses. These sales, repayments or exits included $38.7 million of investments sold to certain vehicles managed by IHAM. A net realized gain of $1.6 million was recorded on these transactions. See Note 12 to the Company's consolidated financial statements for the three and six months ended June 30, 2012 for more detail on IHAM and its managed vehicles. Net realized losses on investments were comprised of $22.1 million of gross realized gains and $28.5 million of gross realized losses. The realized gains and losses on investments during the three months ended June 30, 2011 consisted of the following:

(in millions)
Portfolio Company
  Net Realized
Gains (Losses)
 

Border Foods, Inc. 

  $ 5.2  

BB&T Capital Partners/Windsor Mezzanine Fund

    4.2  

Network Hardware Resale, Inc. 

    2.8  

Univita Health Inc. 

    2.1  

Van Ness Hotel, Inc. 

    (2.3 )

Carador PLC

    (3.0 )

Trivergance Capital Partners, LP

    (3.8 )

AWTP, LLC

    (7.6 )

Summit Business Media, LLC

    (10.1 )

Other, net

    6.1  
       

Total

  $ (6.4 )
       

        During the six months ended June 30, 2012, the Company had $727.9 million of sales, repayments or exits of investments resulting in $46.6 million of net realized losses. These sales, repayments or exits included $36.1 million of investments sold to IHAM and certain vehicles managed by IHAM. A net realized loss of $0.8 million was recorded on these transactions. See Note 12 to the Company's consolidated financial statements for the three and six months ended June 30, 2012 for more detail on IHAM and its managed vehicles. Net realized losses on investments were comprised of $26.6 million of

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gross realized gains and $73.2 million of gross realized losses. The realized gains and losses on investments during the six months ended June 30, 2012 consisted of the following:

(in millions)
Portfolio Company
  Net Realized
Gains (Losses)
 

BenefitMall Holdings Inc. 

  $ 12.9  

Things Remembered Inc. and TRM Holdings Corporation

    9.5  

Crescent Hotels & Resorts, LLC

    (5.5 )

LVCG Holdings LLC

    (6.6 )

Making Memories Wholesale, Inc. 

    (11.1 )

Prommis Solutions, LLC

    (46.8 )

Other, net

    1.0  
       

Total

  $ (46.6 )
       

        During the six months ended June 30, 2011, the Company had $1,002.7 million of sales, repayments or exits of investments resulting in $56.2 million of net realized gains. These sales, repayments or exits included $80.5 million of investments sold to certain vehicles managed by IHAM. A net realized gain of $0.8 million was recorded on these transactions. See Note 12 to the Company's consolidated financial statements for the three and six months ended June 30, 2012 for more detail on IHAM and its managed vehicles. Net realized gains on investments were comprised of $130.4 million of gross realized gains and $74.2 million of gross realized losses. The realized gains and losses on investments during the six months ended June 30, 2011 consisted of the following:

(in millions)
Portfolio Company
  Net Realized
Gains (Losses)
 

Callidus Debt Partners CLO Fund VI, Ltd. 

  $ 23.9  

Dryden XVIII Leveraged Loan 2007 Limited

    19.3  

Callidus MAPS CLO Fund I LLC

    15.0  

Callidus Debt Partners CLO Fund VII, Ltd. 

    10.8  

Callidus MAPS CLO Fund II Ltd. 

    8.2  

Callidus Debt Partners CLO Fund IV, Ltd. 

    8.0  

Callidus Debt Partners CLO Fund V, Ltd. 

    5.7  

Border Foods, Inc. 

    5.2  

Callidus Debt Partners CLO Fund III, Ltd. 

    4.4  

BB&T Capital Partners/Windsor Mezzanine Fund

    4.2  

United Consumers Club, Inc. 

    3.6  

Network Hardware Resale LLC

    2.8  

Univita Health Inc. 

    2.1  

Pangaea CLO 2007-1 Ltd. 

    2.0  

Van Ness Hotel, Inc. 

    (2.3 )

Carador PLC

    (3.0 )

Trivergance Capital Partners, LP

    (3.8 )

Coverall North America, Inc. 

    (7.6 )

AWTP, LLC

    (7.6 )

Universal Trailer Corporation

    (7.9 )

Summit Business Media, LLC

    (10.1 )

MPBP Holdings, Inc. 

    (27.7 )

Other, net

    11.0  
       

Total

  $ 56.2  
       

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        During the three and six months ended June 30, 2012, in connection with the repayment in full of the $60 million aggregate principal amount of the Company's asset-backed notes (the "CLO Notes") issued under its 2006 debt securitization (the "Debt Securitization") ahead of their scheduled maturities, $2.7 million of unamortized debt issuance costs were expensed and recorded as a realized loss on the extinguishment of debt. During the three months ended June 30, 2011, in connection with the redemption of all of the Company's outstanding 6.000% notes due on April 1, 2012 (the "2012 Notes"), the Company recognized a realized loss on the extinguishment of debt of $10.5 million. During the six months ended June 30, 2011, in connection with the redemption of all of the Company's outstanding 2012 Notes and 6.625% notes due on July 15, 2011, the Company recognized a realized loss on the extinguishment of debt of $19.3 million.

Net Unrealized Gains/Losses

        We value our portfolio investments quarterly and the changes in value are recorded as unrealized gains or losses. Net unrealized gains and losses for the Company's portfolio were comprised of the following:

 
  For the three months ended   For the six months ended  
(in millions)
  June 30, 2012   June 30, 2011   June 30, 2012   June 30, 2011  

Unrealized appreciation

  $ 49.0   $ 82.5   $ 100.8   $ 151.7  

Unrealized depreciation

    (51.5 )   (84.8 )   (76.0 )   (134.8 )

Net unrealized (appreciation) depreciation reversed related to net realized gains or losses(1)

    47.1     12.3     56.0     15.3  
                   

Total net unrealized gains from investments

  $ 44.6   $ 10.0   $ 80.8   $ 32.2  
                   

(1)
The net unrealized (appreciation) depreciation reversed related to net realized gains or losses represents the unrealized appreciation or depreciation recorded on the related asset at the end of the prior period.

        The changes in unrealized appreciation and depreciation during the three months ended June 30, 2012 consisted of the following:

(in millions)
Portfolio Company
  Net Unrealized
Appreciation
(Depreciation)
 

Stag-Parkway, Inc

  $ 6.6  

ADF Restaurant Group, LLC

    4.3  

Firstlight Financial Corporation

    4.3  

Ivy Hill Asset Management, L.P. 

    3.8  

Savers, Inc. 

    3.1  

Universal Lubricants, LLC

    2.1  

U.S. Renal Care, Inc. 

    2.0  

Community Education Centers, Inc. 

    (2.1 )

Hcp Acquisition Inc

    (2.2 )

CT Technologies Holdings LLC

    (4.6 )

MVL Group, Inc

    (5.2 )

eInstruction Corporation

    (7.0 )

Orion Foods, LLC

    (7.1 )

American Broadband Communications, LLC

    (8.6 )

Other, net

    8.1  
       

Total

  $ (2.5 )
       

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        The changes in unrealized appreciation and depreciation during the three months ended June 30, 2011 consisted of the following:

(in millions)
Portfolio Company
  Net Unrealized
Appreciation
(Depreciation)
 

Reflexite Corporation

  $ 34.3  

Ivy Hill Asset Management, L.P. 

    7.0  

AWTP, LLC

    4.3  

BenefitMall Holdings Inc. 

    3.1  

Industrial Container Services, LLC

    3.0  

Insight Pharmaceuticals Corporation

    3.0  

Growing Family, Inc. 

    2.5  

CT Tech (Healthport)

    2.0  

Making Memories Wholesale, Inc. 

    (2.3 )

ADF Restaurant Group, LLC

    (2.5 )

The Step2 Company, LLC

    (2.5 )

eInstruction Corporation

    (3.0 )

VSS-Tranzact Holdings, LLC

    (4.7 )

Orion Foods, LLC

    (4.9 )

Ciena Capital LLC

    (8.9 )

Prommis Solutions, LLC

    (13.9 )

Cook Inlet Alternative Risk, LLC

    (14.0 )

United Consumers Club, Inc. 

    (14.8 )

Other, net

    10.0  
       

Total

  $ (2.3 )
       

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        The changes in unrealized appreciation and depreciation during the six months ended June 30, 2012 consisted of the following:

(in millions)
Portfolio Company
  Net Unrealized
Appreciation
(Depreciation)
 

Firstlight Financial Corporation

  $ 10.5  

Ivy Hill Asset Management, L.P. 

    10.4  

ADF Restaurant Group, LLC

    8.7  

Stag-Parkway, Inc

    8.0  

Savers, Inc. 

    7.3  

The Dwyer Group

    3.8  

Universal Lubricants, LLC

    3.5  

Tripwire, Inc. 

    3.0  

ICSH, Inc. 

    2.4  

Campus Management Corp. 

    2.2  

U.S. Renal Care, Inc. 

    2.2  

R3 Education, Inc. 

    2.0  

OnCURE Medical Corp. 

    (2.4 )

HCP Acquisition Holdings, LLC

    (2.7 )

S.B. Restaurant Company

    (3.1 )

Matrixx Initiatives, Inc. 

    (3.5 )

RE Community Holdings II, Inc. 

    (3.8 )

CT Technologies Holdings LLC

    (4.2 )

Community Education Centers, Inc. 

    (4.5 )

MVL Group, Inc. 

    (5.6 )

Orion Foods, LLC

    (10.4 )

American Broadband Communications, LLC

    (11.1 )

eInstruction Corporation

    (13.4 )

Other, net

    25.5  
       

Total

  $ 24.8  
       

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        The changes in unrealized appreciation and depreciation during the six months ended June 30, 2011 consisted of the following:

(in millions)
Portfolio Company
  Net Unrealized
Appreciation
(Depreciation)
 

Reflexite Corporation

  $ 34.3  

Ivy Hill Asset Management, L.P. 

    31.8  

Industrial Container Services, LLC

    4.9  

American Broadband Communications, LLC

    4.7  

AWTP, LLC

    4.2  

Insight Pharmaceuticals Corporation

    4.2  

Bushnell Inc. 

    4.1  

Knightsbridge CLO 2007-1 Ltd. 

    4.0  

BenefitMall Holdings, Inc. 

    4.0  

Growing Family, Inc. 

    3.5  

Knightsbridge CLO 2008-1 Ltd. 

    3.4  

Savers, Inc. 

    3.1  

Firstlight Financial Corporation

    3.0  

Allbridge Financial, LLC

    3.0  

DSI Renal, Inc. 

    2.4  

Vistar Corporation

    2.1  

Passport Health Communications, Inc. 

    (2.6 )

The Step2 Company, LLC

    (2.6 )

Callidus Capital Management, LLC

    (3.5 )

VSS-Tranzact Holdings, LLC

    (4.5 )

Senior Secured Loan Fund LLC

    (4.6 )

Orion Foods, LLC

    (5.3 )

Making Memories Wholesale, Inc. 

    (5.9 )

CitiPostal Inc. 

    (6.6 )

eInstruction Corporation

    (8.1 )

Ciena Capital LLC

    (16.6 )

Cook Inlet Alternative Risk, LLC

    (17.5 )

Prommis Solutions, LLC

    (22.9 )

United Consumers Club, Inc. 

    (23.5 )

Other, net

    24.4  
       

Total

  $ 16.9  
       

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For the years ended December 31, 2011, 2010 and 2009

        Operating results for the years ended December 31, 2011, 2010 and 2009 are as follows:

 
  For the Years Ended
December 31,
 
(in millions)
  2011   2010   2009  

Total investment income

  $ 634.5   $ 483.4   $ 245.3  

Total expenses

    344.6     262.2     111.3  
               

Net investment income before income taxes

    289.9     221.2     134.0  

Income tax expense, including excise tax

    7.5     5.4     0.6  
               

Net investment income

    282.4     215.8     133.4  

Net realized gains (losses) from investments and foreign currencies

    96.6     45.5     (45.9 )

Net unrealized gains (losses) from investments

    (40.2 )   230.7     88.7  

Gain from the acquisition of Allied Capital

        195.9      

Realized gains (losses) on extinguishment of debt

    (19.3 )   (2.0 )   26.5  

Realized gain on sale of other assets

        5.9      
               

Net increase in stockholders' equity resulting from operations

  $ 319.5   $ 691.8   $ 202.7  
               

Investment Income

 
  For the Years Ended
December 31,
 
(in millions)
  2011   2010   2009  

Interest

  $ 473.2   $ 393.6   $ 225.3  

Capital structuring service fees

    97.4     54.7     5.6  

Dividend income

    38.4     14.4     3.9  

Management fees

    16.7     14.4     3.5  

Other income

    8.8     6.3     7.0  
               

Total investment income

  $ 634.5   $ 483.4   $ 245.3  
               

        The increase in interest income for the year ended December 31, 2011 as compared to 2010 was primarily due to the increase in the size of the portfolio, which increased from an average of $3.7 billion at amortized cost for the year ended December 31, 2010 to an average of $4.6 billion at amortized cost in 2011. The increase in capital structuring service fees for the year ended December 31, 2011 as compared to 2010 was primarily due to the increase in new investment commitments, which increased from $1.7 billion for the year ended December 31, 2010 to $3.7 billion for the comparable period in 2011. The increase in dividend income for the year ended December 31, 2011 as compared to 2010 is primarily attributable to dividend income from IHAM which was $7.3 million for the year ended December 31, 2010 and $19.0 million for the comparable period in 2011, which resulted from the growth of and increased earnings in IHAM. In addition, there was an increase in dividends from certain portfolio companies in which we have an equity investment. Total dividend income for the year ended December 31, 2011 included $10.3 million of dividend income that was non-recurring in nature from non-income producing equity securities. Management fees for the year ended December 31, 2011 included management fees earned from the SSLP totaling $11.6 million, as compared to $5.9 million for 2010. Additionally management fees earned related to investments and management contracts acquired in the Allied Acquisition decreased to $3.6 million for the year ended December 31, 2011 from $7.2 million in 2010.

        The increase in interest income for the year ended December 31, 2010 as compared to 2009 was primarily due to the increase in the size of the portfolio, which was largely due to the investments

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acquired as part of the Allied Acquisition. Interest income from investments acquired as part of the Allied Acquisition was approximately $139.2 million for the year ended December 31, 2010. The remainder of the increase in interest income was due to an increase in the Ares Capital investment portfolio, which increased from an average of $2.3 billion at amortized cost for the year ended December 31, 2009 to an average of $2.5 billion at amortized cost for the comparable period in 2010. The increase in capital structuring service fees for the year ended December 31, 2010 was primarily due to the increase in new investment commitments, which increased from $480 million for the year ended December 31, 2009 to $1.7 billion for the comparable period in 2010. The increase in dividend income for the year ended December 31, 2010 as compared to 2009 was primarily attributable to dividend income from IHAM, which was $2.5 billion for the year ended December 31, 2009 and $7.3 million for 2010. Total dividend income for the year ended December 31, 2010 included $2.6 million of dividend income that was non-recurring in nature from non-income producing equity securities. The increase in management fees for the year ended December 31, 2010 as compared to 2009 was primarily due to the management fees earned from the SSLP, which increased from $0.6 million for the year ended December 31, 2009 to $5.9 million for the comparable period in 2010 as the SSLP increased from approximately $900 million aggregate principal amount of investments at December 31, 2009 to approximately $2.5 billion principal amount of investments at December 31, 2010. Additionally, management fees earned related to investments and management contracts acquired in the Allied Acquisition were $7.2 million for the year ended December 31, 2010.

Operating Expenses

 
  For the Year Ended
December 31,
 
(in millions)
  2011   2010   2009  

Interest and credit facility fees

  $ 122.5   $ 79.3   $ 24.3  

Incentive fees related to pre-incentive fee net investment income

    79.0     61.3     33.4  

Incentive fees related to capital gains per GAAP

    33.3     15.6      

Base management fees

    71.6     52.0     30.4  

Professional fees

    14.7     12.3     7.8  

Administrative fees

    9.3     8.7     4.0  

Professional fees and other costs related to the Allied Acquisition

    3.2     19.8     4.9  

Other general and administrative

    11.0     13.2     6.5  
               

Total operating expenses

  $ 344.6   $ 262.2   $ 111.3  
               

        Interest and credit facility fees for the years ended December 31, 2011 and 2010, were comprised of the following:

 
  For the Year Ended
December 31,
 
(in millions)
  2011   2010   2009  

Stated interest expense

  $ 92.2   $ 57.7   $ 18.8  

Facility fees

    6.1     4.6     1.3  

Amortization of debt issuance costs

    13.2     8.8     4.2  

Accretion of discount related to Allied Unsecured Notes (as defined below)

    2.6     8.2      

Accretion of original issue discount on the Convertible Notes

    8.4          
               

Total interest and credit facility fees expense

  $ 122.5   $ 79.3   $ 24.3  
               

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        Stated interest expense for the year ended December 31, 2011 increased from 2010 due to the increase in our average principal debt outstanding and an increase in our weighted average stated interest rate. For 2011, our average principal debt outstanding was $1.8 billion as compared to $1.5 billion for 2010, and the weighted average stated interest rate on our debt was 5.1% as compared to 3.9% for 2010. Our weighted average stated interest rate of our debt for 2011 increased from 2010 due to having higher amounts of unsecured indebtedness, with longer durations to maturity and higher stated interest rates, outstanding during 2011. Amortization of debt issuance costs for the year ended December 31, 2011 increased from 2010 primarily due to the debt issuance costs associated with the Convertible Notes issued in early 2011.

        Stated interest expense for the year ended December 31, 2010 increased from 2009 due to the increase in our average principal debt outstanding and an increase in our weighted average stated interest rate. For 2010, the average principal debt outstanding was $1.5 billion as compared to $870 million for 2009, and the weighted average stated interest rate on our debt was 3.9% as compared to 2.2% for 2009. In connection with the Allied Acquisition, we acquired $746 million in principal amount of debt on April 1, 2010, which had a weighted average stated interest rate of 6.56% and resulted in total interest expense for the year ended December 31, 2010 of $43.5 million, including $8.2 million of purchased discount accretion.

        The increase in base management fees and incentive fees related to pre-incentive fee net investment income for the year ended December 31, 2011 from 2010 was primarily due to the increase in the size of the portfolio and in the case of incentive fees, the related increase in pre-incentive fee net investment income. For the year ended December 31, 2011, the capital gains incentive fee expense was $33.3 million bringing the total capital gains incentive fee accrual in accordance with GAAP to $48.9 million (included in management and incentive fees payable in the consolidated balance sheet) as of December 31, 2011. As a result of the Capital Gains Amendment, the year ended December 31, 2011 included an accrual of $26.0 million of capital gains incentive fees in accordance with GAAP as a result of the application of the Capital Gains Amendment with respect to the assets purchased in the Allied Acquisition. The accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future. For the year ended December 31, 2011 we did not incur a capital gains fee under the investment advisory and management agreement and therefore there are no amounts currently due under the agreement. See Note 3 to the Company's consolidated financial statements for the year ended December 31, 2011 for more information on the incentive and base management fees.

        Incentive and base management fees for the year ended December 31, 2010 increased from 2009 primarily due to the increase in the size of the portfolio and in the case of the incentive fees, the related increase in net investment income as well as the net appreciation of the investment portfolio. In 2010 we did not incur a Capital Gains Fee under the investment advisory and management agreement; however, in accordance with GAAP, we accrued $15.6 million in incentive fees as a result of the unrealized appreciation in the portfolio. In 2009 we did not incur a Capital Gains Fee under the investment advisory and management agreement or record any such fee in accordance with GAAP.

        Professional fees include legal, accounting, valuation and other professional fees incurred related to the management of the Company. Administrative fees represent fees paid to Ares Operations for our allocable portion of overhead and other expenses incurred by Ares Operations in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staffs. Other general and administrative expenses include rent, insurance, depreciation, director's fees and other costs. The general increases in professional fees and administrative fees were primarily due to the increase in the size of the company following the

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Allied Acquisition and the various associated costs of managing a larger portfolio. The decline in professional fees and other costs related to the Allied Acquisition for the year ended December 31, 2011 as compared to 2010, primarily resulted from having substantially completed the integration of Allied Capital by December 31, 2010. The increase in professional fees and other costs related to the Allied Acquisition for the year ended December 31, 2010 as compared to 2009 were primarily as a result of the occurrence of various closing and transition related costs following the Allied Acquisition.

Income Tax Expense, Including Excise Tax

        The Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Company must, among other things, timely distribute to its stockholders generally at least 90% of its investment company taxable income, as defined by the Code, for each year. In order to maintain its RIC status, the Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders which will generally relieve the Company from U.S. federal income taxes.

        Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, the Company accrues excise tax on estimated excess taxable income as such taxable income is earned. For the years ended December 31, 2011 and 2010, a net expense of $6.6 million and $2.2 million was recorded for U.S. federal excise tax, respectively. For the year ended December 31, 2009 a net benefit of $0.1 million was recorded for U.S. federal excise tax.

        Certain of our consolidated subsidiaries are subject to U.S. federal and state income taxes. For the years ended December 31, 2011, 2010 and 2009, we recorded a tax expense of approximately $0.9 million, $3.2 million and $0.6 million, respectively, for these subsidiaries.

Net Realized Gains/Losses

        During the year ended December 31, 2011, the Company had $2.5 billion of sales, repayments or exits of investments resulting in $96.6 million of net realized gains. These sales, repayments or exits included $261.3 million of investments sold to IHAM or certain vehicles managed by IHAM (see Note 13 to the Company's consolidated financial statements for the year ended December 31, 2011 for more detail on IHAM and its managed vehicles). Net realized gains of $96.6 million on investments were comprised of $249.1 million of gross realized gains and $152.5 million of gross realized losses. These net realized gains included approximately $86.9 million in net realized gains from investments acquired as part of the Allied Acquisition (see Note 17 to the Company's consolidated financial

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statements for year ended December 31, 2011). The realized gains and losses on investments during the year ended December 31, 2011 consisted of the following:

(in millions) Portfolio Company
  Net Realized
Gains (Losses)
 

Reflexite Corporation

  $ 40.9  

DSI Renal, Inc. 

    27.5  

Callidus Debt Partners CLO Fund VI, Ltd. 

    23.9  

Industrial Container Services, LLC

    19.9  

Dryden XVIII Leveraged Loan 2007 Limited

    19.3  

Penn Detroit Diesel Allison, LLC

    18.4  

Callidus MAPS CLO Fund I LLC

    15.0  

Callidus Debt Partners CLO Fund VII, Ltd. 

    10.8  

Callidus MAPS CLO Fund II, Ltd. 

    8.2  

Callidus Debt Partners CLO Fund IV, Ltd. 

    8.0  

Callidus Debt Partners CLO Fund V, Ltd. 

    5.7  

Border Foods, Inc. 

    5.2  

Driven Brands, Inc. 

    4.5  

Callidus Debt Partners CLO Fund III, Ltd. 

    4.4  

BB&T Capital Partners/Windsor Mezzanine Fund, LLC

    3.9  

Knightsbridge CLO 2007-1 Ltd. 

    3.7  

Network Hardware Resale, Inc. 

    2.8  

Tradesmen International, Inc. 

    2.5  

Univita Health Inc. 

    2.1  

INC Research, Inc. 

    2.0  

Pangaea CLO 2007-1 Ltd. 

    2.0  

Van Ness Hotel, Inc. 

    (2.3 )

Carador PLC

    (3.0 )

Trivergance Capital Partners, LP

    (3.8 )

Sigma International Group, Inc. 

    (4.3 )

AWTP, LLC

    (7.6 )

Universal Trailer Corporation

    (7.9 )

HB&G Building Products, Inc. 

    (9.1 )

Summit Business Media, LLC

    (10.1 )

Wastequip, Inc. 

    (10.2 )

Coverall North America, Inc. 

    (12.3 )

Primis Marketing Group, Inc. 

    (14.1 )

Cook Inlet Alternative Risk, LLC

    (15.7 )

Direct Buy Holdings, Inc. 

    (17.7 )

MPBP Holdings, Inc. 

    (27.7 )

Other, net

    11.7  
       

Total

  $ 96.6  
       

        During the year ended December 31, 2010, the Company had $1.6 billion of sales, repayments or exits of investments resulting in $45.4 million of net realized gains. These sales, repayments or exits included $113.1 million of investments sold to IHAM or certain vehicles managed by IHAM. Net realized gains of $45.4 million on investments were comprised of $64.6 million of gross realized gains and $19.2 million of gross realized losses. These net realized gains included approximately $29.2 million

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from investments acquired as part of the Allied Acquisition. The realized gains and losses on investments during the year ended December 31, 2010 consisted of the following:

(in millions) Portfolio Company
  Net Realized
Gains (Losses)
 

Air Medical Group Holdings, LLC

  $ 14.9  

Bumble Bee Foods, LLC

    6.1  

DSI Renal, Inc. 

    3.9  

Instituto de Banca y Comercio, Inc. 

    3.6  

Cortec Group Fund IV, L.P. 

    3.4  

Community Education Centers, Inc. 

    2.9  

Callidus Capital Corporation

    2.6  

Best Brands Corporation

    2.4  

The Step2 Company, LLC

    2.0  

3091779 Nova Scotia Inc. 

    (3.3 )

Growing Family, Inc. 

    (7.7 )

Other, net

    14.6  
       

Total

  $ 45.4  
       

        During the year ended December 31, 2009, the Company had $461.8 million of sales, repayments or exits of investments resulting in $46.2 million of net realized losses. These sales, repayments or exits included $45.5 million of investments sold to certain vehicles managed by IHAM. Net realized losses were comprised of $20.3 million of gross realized gains and $66.5 million of gross realized losses. The realized gains and losses during the year ended December 31, 2009 consisted of the following:

(in millions) Portfolio Company
  Net Realized
Gains (Losses)
 

Waste Pro USA, Inc. 

  $ 12.3  

Bumble Bee Foods, LLC. 

    3.6  

Making Memories Wholesale, Inc

    (14.2 )

Wear Me Apparel, LLC

    (15.0 )

Courtside Acquisition Corp. 

    (34.3 )

Other, net

    1.4  
       

Total

  $ (46.2 )
       

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Net Unrealized Gains/Losses

        We value our portfolio investments quarterly and the changes in value are recorded as unrealized gains or losses. Net unrealized gains and losses for the Company's total portfolio were comprised of the following:

 
  For the Years Ended
December 31,
 
(in millions)
  2011   2010   2009  

Unrealized appreciation

  $ 144.1   $ 317.5   $ 125.0  

Unrealized depreciation

    (205.1 )   (85.3 )   (92.4 )

Net unrealized (appreciation) depreciation reversed related to net realized gains or losses(1)

    20.8     (1.5 )   56.1  
               

Total net unrealized gains (losses)

  $ (40.2 ) $ 230.7   $ 88.7  
               

(1)
The net unrealized (appreciation) depreciation reversed related to net realized gains or losses represents the unrealized appreciation or depreciation recorded on the related asset at the end of the prior year.

        Included in net unrealized gains and losses above were net unrealized gains and losses for the investments acquired as part of the Allied Acquisition as follows:

 
  For the Years Ended
December 31,
 
(in millions)
  2011   2010  

Unrealized appreciation

  $ 29.6   $ 134.6  

Unrealized depreciation

    (105.5 )   (52.1 )

Net unrealized appreciation reversed related to net realized gains or losses(1)

    (55.2 )    
           

Total net unrealized gains (losses)

  $ (131.1 ) $ 82.5  
           

(1)
The net unrealized (appreciation) depreciation reversed related to net realized gains or losses represents the unrealized appreciation or depreciation recorded on the related asset at the end of the prior year.

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        The changes in net unrealized appreciation and depreciation during the year ended December 31, 2011 consisted of the following:

(in millions) Portfolio Company
  Net Unrealized
Appreciation
(Depreciation)
 

Ivy Hill Asset Management, L.P. 

  $ 48.9  

Firstlight Financial Corporation

    15.4  

BenefitMall Holdings, Inc. 

    9.5  

Things Remembered Inc. 

    5.5  

American Broadband Holding Company

    5.3  

Insight Pharmaceuticals Corporation

    4.9  

Savers, Inc. 

    4.9  

The Step2 Company, LLC

    (4.5 )

Direct Buy Holdings, Inc. 

    (5.6 )

VSS-Tranzact Holdings, LLC

    (6.3 )

Orion Foods, LLC

    (6.8 )

Making Memories Wholesale, Inc. 

    (7.0 )

Reed Group, Ltd. 

    (8.3 )

CitiPostal Inc. 

    (11.0 )

Pillar Processing LLC

    (12.6 )

Ciena Capital LLC

    (27.0 )

eInstruction Corporation

    (27.9 )

Prommis Solutions, LLC

    (43.2 )

Other, net

    4.8  
       

Total

  $ (61.0 )
       

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        The changes in net unrealized appreciation and depreciation during the year ended December 31, 2010 consisted of the following:

(in millions) Portfolio Company
  Net Unrealized
Appreciation
(Depreciation)
 

DSI Renal, Inc. 

  $ 24.7  

Senior Secured Loan Fund LLC (1)

    24.3  

Ivy Hill Asset Management, L.P. 

    21.6  

R3 Education, Inc. 

    16.3  

Stag-Parkway, Inc. 

    15.5  

Callidus Debt Partners CDO Fund VI, Ltd. 

    12.7  

Hot Stuff Foods, LLC

    11.3  

Things Remembered, Inc. 

    11.1  

Dryden XVIII Leveraged Loan 2007 Limited

    8.2  

Vantage Oncology, Inc. 

    7.8  

Tradesmen International, Inc. 

    7.7  

Industrial Container Services, LLC

    7.0  

Callidus Debt Partners CDO Fund VII, Ltd. 

    7.0  

S.B. Restaurant Company

    6.8  

Callidus MAPS CLO Fund I, Ltd. 

    6.2  

Reflexite Corporation

    5.9  

Callidus MAPS CLO Fund II, Ltd. 

    5.7  

Component Hardware Group, Inc. 

    5.5  

Woodstream Corporation

    5.2  

American Broadband Holding Company

    4.8  

Callidus Debt Partners CDO Fund IV, Ltd. 

    4.7  

Direct Buy Holdings, Inc. 

    4.2  

The Step2 Company, LLC

    4.0  

MPBP Holdings, Inc. 

    (4.7 )

Reed Group, Ltd. 

    (5.6 )

Ciena Capital LLC

    (6.1 )

Aquila Binks Forest Development, LLC

    (6.5 )

ADF Restaurant Group, LLC

    (6.7 )

Coverall North America, Inc. 

    (7.6 )

Other, net

    41.2  
       

Total

  $ 232.2  
       

(1)
See Note 4 to our consolidated financial statements for the year ended December 31, 2010.

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        The changes in net unrealized appreciation and depreciation during the year ended December 31, 2009 consisted of the following:

(in millions) Portfolio Company
  Net Unrealized
Appreciation
(Depreciation)
 

DSI Renal, Inc. 

  $ 19.0  

Apple & Eve, LLC

    12.4  

Ivy Hill Asset Management, L.P. 

    11.6  

Best Brands Corporation

    7.9  

Capella Healthcare, Inc. 

    7.2  

Wear Me Apparel, LLC

    6.0  

Prommis Solutions, LLC

    4.8  

Waste Pro USA, Inc. 

    4.2  

Growing Family, Inc. 

    (5.0 )

AWTP, LLC. 

    (5.5 )

Summit Business Media, LLC

    (5.7 )

Wastequip, Inc. 

    (5.9 )

LVCG Holdings LLC

    (8.2 )

Reflexite Corporation

    (10.9 )

Firstlight Financial Corporation

    (11.1 )

Other, net

    11.8  
       

Total

  $ 32.6  
       

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

        The Company's liquidity and capital resources have been generated primarily from the net proceeds of public offerings of common stock, advances from the Facilities, net proceeds from the issuance of unsecured notes as well as cash flows from operations.

        As of June 30, 2012, the Company had $101.3 million in cash and cash equivalents and approximately $2.2 billion in total indebtedness outstanding at carrying value (approximately $2.3 billion in aggregate principal amount). Subject to leverage and borrowing base restrictions, the Company had approximately $884 million available for additional borrowings under the Facilities as of June 30, 2012.

        We may from time to time seek to retire or repurchase our common stock through cash purchases, as well as retire, cancel or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. The amounts involved may be material. In addition, we may from time to time enter into additional debt facilities, increase the size of existing facilities or issue additional debt securities, including unsecured debt and/or debt securities convertible into our common stock. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the Investment Company Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing.

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Equity Issuances

        The following table summarizes the total shares issued and proceeds we received in underwritten public offerings of our common stock net of underwriting and offering costs for the six months ended June 30, 2012 and the years ended December 31, 2011, 2010 and 2009:

(in millions, except per share data)
  Shares
issued
  Offering
price per
share
  Proceeds net of
underwriting and
offering costs
 

2012

                   

January 2012 public offering

    16.4   $ 15.41 (1) $ 252.4  
                 

Total for the six months ended June 30, 2012

    16.4         $ 252.4  

2011

                   

None

             

2010

                   

November 2010 public offering

    11.5   $ 16.50   $ 180.6  

February 2010 public offering

    23.0   $ 12.75   $ 277.2  
                 

Total for the year ended December 31, 2010

    34.5         $ 457.8  

2009

                   

August 2009 public offering

    12.4   $ 9.25   $ 109.1  
                 

Total for the year ended December 31, 2009

    12.4         $ 109.1  

(1)
The shares were sold to the underwriters for a price of $15.41 per share, which the underwriters were then permitted to sell at variable prices to the public.

        The Company used the net proceeds from these public equity offerings to repay outstanding indebtedness and for general corporate purposes, which included funding investments in portfolio companies in accordance with our investment objective.

        As of June 30, 2012, total market capitalization for the Company was $3.5 billion compared to $3.2 billion as of December 31, 2011.

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Debt Capital Activities

        Our debt obligations consisted of the following as of June 30, 2012 and December 31, 2011:

 
  As of  
 
  June 30, 2012   December 31, 2011  
(in millions)
  Total
Aggregate
Principal
Amount
Available/
Outstanding(1)
  Principal
Amount
  Carrying
Value
  Total
Aggregate
Principal
Amount
Available/
Outstanding(1)
  Principal
Amount
  Carrying
Value
 

Revolving Credit Facility

  $ 900.0 (2) $ 295.0   $ 295.0   $ 810.0 (2) $ 395.0   $ 395.0  

Revolving Funding Facility

    580.0 (3)   348.0     348.0     500.0     463.0     463.0  

SMBC Funding Facility

    200.0     107.0     107.0              

Debt Securitization

                77.5     77.5     77.5  

February 2016 Convertible Notes

    575.0     575.0     544.7 (4)   575.0     575.0     541.2 (4)

June 2016 Convertible Notes

    230.0     230.0     217.3 (4)   230.0     230.0     215.9 (4)

2017 Convertible Notes

    162.5     162.5     157.9 (4)            

2022 Notes

    143.8     143.8     143.8              

2040 Notes

    200.0     200.0     200.0     200.0     200.0     200.0  

2047 Notes

    230.0     230.0     181.1 (5)   230.0     230.0     181.0 (5)
                           

  $ 3,221.3   $ 2,291.3   $ 2,194.8   $ 2,622.5   $ 2,170.5   $ 2,073.6  
                           

(1)
Subject to borrowing base and leverage restrictions. Represents the total aggregate amount available or outstanding, as applicable, under such instrument.

(2)
Provides for a feature that allows the Company, under certain circumstances, to increase the size of the Revolving Credit Facility to a maximum of $1,350.0 million and $1,050.0 million as of June 30, 2012 and December 31, 2011, respectively.

(3)
Provides for a feature that allows the Company and Ares Capital CP, under certain circumstances, to increase the size of the Revolving Funding Facility to a maximum of $865.0 million as of June 30, 2012.

(4)
Represents the aggregate principal amount outstanding of the Convertible Notes less the unaccreted discount initially recorded upon issuance of the Convertible Notes. The total unaccreted discount for the February 2016 Convertible Notes, the June 2016 Convertible Notes and the 2017 Convertible Notes was $30.2 million, $12.7 million and $4.6 million, respectively, at June 30, 2012.

(5)
Represents the aggregate principal amount outstanding less the unaccreted purchased discount. The total unaccreted purchased discount on the 2047 Notes was $48.9 million and $49.0 million as of June 30, 2012 and December 31, 2011, respectively.

        The weighted average stated interest rate and weighted average maturity, both on aggregate principal amount, of all our debt outstanding as of June 30, 2012 were 5.0% and 9.8 years, respectively and as of December 31, 2011 were 4.8% and 9.3 years, respectively.

        The ratio of total principal amount of debt outstanding to stockholders' equity as of June 30, 2012 was 0.66:1.00 compared to 0.69:1.00 as of December 31, 2011. The ratio of total carrying value of debt outstanding to stockholders' equity as of June 30, 2012 was 0.64:1.00 compared to 0.66:1.00 as of December 31, 2011.

        In accordance with the Investment Company Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the Investment Company Act, is

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at least 200% after such borrowing. As of June 30, 2012, our asset coverage for senior securities was 257%.

Revolving Credit Facility

        In December 2005, we entered into the Revolving Credit Facility, which as of June 30, 2012, allowed us to borrow up to $900 million. On May 4, 2012, we amended and restated the Revolving Credit Facility to, among other things, increase the size of the facility from $810 million to $900 million, extend the expiration of the revolving period from January 22, 2013 to May 4, 2015 and extend the stated maturity date from January 22, 2013 to May 4, 2016. The Revolving Credit Facility also provides for a feature that allows us, under certain circumstances, to increase the size of the facility to a maximum of $1.35 billion. Subject to certain exceptions, as of June 30, 2012, the interest rate charged on the Revolving Credit Facility was based on LIBOR plus an applicable spread of 2.25% or a "base rate" (as defined in the agreements governing the Revolving Credit Facility) plus an applicable spread of 1.25%. Additionally, we are required to pay a commitment fee of 0.375% per annum on any unused portion of the Revolving Credit Facility. As of June 30, 2012, the principal amount outstanding under the Revolving Credit Facility was $295.0 million and the amount available for borrowing (net standby letters of credit issued) was $559.2 million. As of June 30, 2012, we were in compliance in all material respects with the terms of the Revolving Credit Facility.

Revolving Funding Facility

        In October 2004, we established through our consolidated subsidiary, Ares Capital CP, the Revolving Funding Facility, which as of June 30, 2012 provided for up to $580 million of borrowings by Ares Capital CP. The Revolving Funding Facility is secured by all of the assets held by, and the membership interest in, Ares Capital CP. On June 7, 2012, we and Ares Capital CP amended the Revolving Funding Facility to, among other things, increase the size of the Revolving Funding Facility from $500 million to $580 million, add a feature that allows, under certain circumstances, for an increase in the size of the facility to a maximum of $865 million, extend the reinvestment period from January 18, 2015 to April 18, 2015, and extend the stated maturity date from January 18, 2017 to April 18, 2017. Subject to certain exceptions, as of June 30, 2012, the interest rate charged on the Revolving Funding Facility was one month LIBOR plus an applicable spread of 2.50% and an applicable spread over a "base rate" (as defined in the agreements governing the Revolving Funding Facility) of 1.50%. Additionally, we are required to pay a commitment fee of between 0.50% and 1.75% per annum on any unused portion of the Revolving Funding Facility. As of June 30, 2012, the principal amount outstanding under the Revolving Funding Facility was $348.0 million and we and Ares Capital CP were in compliance in all material respects with the terms of the Revolving Funding Facility. See the Recent Developments as well as Note 15 to our consolidated financial statements for the three and six months ended June 30, 2012 for more information regarding the Revolving Funding Facility.

SMBC Funding Facility

        In January 2012, we established through our consolidated subsidiary, ACJB, the SMBC Funding Facility, which as of June 30, 2012 provided for up to $200 million of borrowings by ACJB. The SMBC Funding Facility is secured by all of the assets held by ACJB. The SMBC Funding Facility has a reinvestment period ending January 20, 2015 and a stated maturity date of January 20, 2020, both of which are subject to two one-year extensions by mutual agreement. As of June 30, 2012, the interest rate charged on the SMBC Funding Facility was based on one month LIBOR plus an applicable spread of 2.125% or a "base rate" (as defined in the agreements governing the SMBC Funding Facility) plus an applicable spread of 1.125%. Beginning on July 20, 2012, we are required to pay a commitment fee of 0.50% per annum on any unused portion of the SMBC Funding Facility. As of June 30, 2012, the

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principal amount outstanding under the SMBC Funding Facility was $107.0 million and we and ACJB were in compliance in all material respects with the terms of the SMBC Funding Facility.

Debt Securitization

        In July 2006, through ARCC Commercial Loan Trust 2006, a vehicle serviced by our consolidated subsidiary ARCC CLO 2006 LLC, we completed a $400 million Debt Securitization and issued approximately $314 million aggregate principal amount of the CLO Notes that were secured by a pool of middle-market loans that were purchased or originated by us. We initially retained approximately $86 million of aggregate principal amount of certain "BBB" and non-rated securities in the Debt Securitization. In June 2012, the Company repaid in full the $60.0 million in aggregate principal amount of the outstanding CLO Notes, and terminated or discharged the agreements governing the Debt Securitization.

Unsecured Notes

        In January 2011, we issued $575 million aggregate principal amount of unsecured convertible senior notes that mature on February 1, 2016, unless previously converted or repurchased in accordance with their terms. In March 2011, we issued $230 million aggregate principal amount of unsecured convertible senior notes that mature on June 1, 2016, unless previously converted or repurchased in accordance with their terms. In March 2012, we issued $162.5 million aggregate principal amount of unsecured convertible senior notes that mature on March 15, 2017, unless previously converted or repurchased in accordance with their terms. We do not have the right to redeem the Convertible Notes prior to maturity. The February 2016 Convertible Notes, the June 2016 Convertible Notes and the 2017 Convertible Notes bear interest at a rate of 5.75%, 5.125% and 4.875%, respectively, per year, payable semi-annually.

        In certain circumstances, the Convertible Notes will be convertible into cash, shares of Ares Capital's common stock or a combination of cash and shares of our common stock, at our election, at their respective initial conversion rates (listed below) subject to customary anti-dilution adjustments and the requirements of their respective indentures (the "Convertible Notes Indentures"). Prior to the close of business on the business day immediately preceding their respective conversion date (listed below), holders may convert their Convertible Notes only under certain circumstances set forth in the respective Convertible Notes Indentures. On or after their respective conversion dates until the close of business on the scheduled trading day immediately preceding their respective maturity date, holders may convert their Convertible Notes at any time. In addition, if we engage in certain corporate events as described in the respective Convertible Notes Indentures, holders of the Convertible Notes may require us to repurchase for cash all or part of the Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest through, but excluding, the required repurchase date.

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        Certain key terms related to the conversion features for each series of the Convertible Notes are listed below.

 
  February 2016
Convertible Notes
  June 2016
Convertible Notes
  2017
Convertible Notes
 

Conversion premium

    17.5 %   17.5 %   17.5 %

Closing stock price

  $ 16.28   $ 16.20   $ 16.46  

Closing stock price date

    January 19, 2011     March 22, 2011     March 8, 2012  

Initial conversion price

  $ 19.13   $ 19.04   $ 19.34  

Initial conversion rate (shares per one thousand dollar principal amount)

    52.2766     52.5348     51.7050  

Conversion dates

    August 15, 2015     December 15, 2015     September 15, 2016  

        The Convertible Notes are our senior unsecured obligations and rank senior in right of payment to our existing and future indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment to our existing and future unsecured indebtedness that is not expressly subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities. As of June 30, 2012, we were in compliance in all material respects with the terms of the Convertible Notes Indentures.

        On February 2, 2012, we issued $143.8 million in aggregate principal amount of senior unsecured notes which bear interest at a rate of 7.00% and mature on February 15, 2022. The 2022 Notes require payment of interest quarterly, and all principal is due upon maturity. These notes are redeemable in whole or in part at any time or from time to time at our option on or after February 15, 2015, at a par redemption price of $25 per security plus accrued and unpaid interest.

        On October 21, 2010, we issued $200 million in aggregate principal amount of senior unsecured notes which bear interest at a rate of 7.75% and mature on October 15, 2040. The 2040 Notes require payment of interest quarterly, and all principal is due upon maturity. These notes are redeemable in whole or in part at any time or from time to time at our option on or after October 15, 2015, at a par redemption price of $25 per security plus accrued and unpaid interest.

        As of June 30, 2012, there was $230 million aggregate principal amount outstanding of the 2047 Notes which bear interest at a rate of 6.875% and mature on April 15, 2047. The 2047 Notes require payment of interest quarterly, and all principal is due upon maturity. These notes are redeemable in whole or in part at any time or from time to time at our option, at a par redemption price of $25 per security plus accrued and unpaid interest and upon the occurrence of certain tax events as stipulated in the indenture governing the 2047 Notes.

        As of June 30, 2012 we were in compliance in all material respects with the terms of the 2022 Notes, the 2040 Notes and the 2047 Notes.

        See Note 5 to our consolidated financial statements for the three and six months ended June 30, 2012 for more detail on the Company's debt obligations.

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OFF BALANCE SHEET ARRANGEMENTS

        The Company has various commitments to fund investments in its portfolio, as described below.

        As of June 30, 2012 and December 31, 2011, the Company had the following commitments to fund various revolving and delayed draw senior secured and subordinated loans, including commitments the funding of which is at (or substantially at) the Company's discretion:

 
  As of  
(in millions)
  June 30, 2012   December 31, 2011  

Total revolving and delayed draw commitments

  $ 576.9   $ 565.6  

Less: funded commitments

    (123.5 )   (125.0 )
           

Total unfunded commitments

    453.4     440.6  

Less: commitments substantially at discretion of the Company

    (6.3 )   (64.8 )

Less: unavailable commitments due to borrowing base or other covenant restrictions

    (20.5 )   (5.5 )
           

Total net adjusted unfunded revolving and delayed draw commitments

  $ 426.6   $ 370.3  
           

        Included within the total revolving and delayed draw commitments as of June 30, 2012 were commitments to issue up to $65.5 million in standby letters of credit through a financial intermediary on behalf of certain portfolio companies. Under these arrangements, if the standby letters of credit were to be issued, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. As of June 30, 2012, the Company had $42.4 million in standby letters of credit issued and outstanding under these commitments on behalf of the portfolio companies, of which no amounts were recorded as a liability on our balance sheet as such letters of credit are considered in the valuation of the investments in the portfolio company. Of these letters of credit, $40.6 million expire in 2012 and $1.8 million expire in 2013.

        As of June 30, 2012 and December 31, 2011, the Company was party to subscription agreements to fund equity investments in private equity investment partnerships:

 
  As of  
(in millions)
  June 30, 2012   December 31, 2011  

Total private equity commitments

  $ 149.1   $ 132.0  

Less: funded private equity commitments

    (79.5 )   (67.4 )
           

Total unfunded private equity commitments

    69.6     64.6  

Less: private equity commitments substantially at discretion of the Company

    (53.5 )   (53.5 )
           

Total net adjusted unfunded private equity commitments

  $ 16.1   $ 11.1  
           

        In addition, as of June 30, 2012 and December 31, 2011, the Company had outstanding guarantees or similar obligations on behalf of certain portfolio companies totaling $0.8 million.

        Further in the ordinary course of business, we may sell certain of our investments to third party purchasers. In particular, in connection with the sale of certain controlled portfolio company equity investments (as well as certain other sales) we have, and may continue to do so in the future, agreed to indemnify such purchasers for future liabilities arising from the investments and the related sale transaction. Such indemnification provisions may give rise to future liabilities.

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        As of June 30, 2012, one of the Company's portfolio companies, Ciena Capital LLC ("Ciena"), had one non-recourse securitization Small Business Administration ("SBA") loan warehouse facility, which has reached its maturity date but remains outstanding. Ciena is working with the providers of the SBA loan warehouse facility with regard to the repayment of that facility. Allied Capital had previously issued a performance guaranty (which Ares Capital succeeded to as a result of the Allied Acquisition) whereby Ares Capital must indemnify the warehouse providers for any damages, losses, liabilities and related costs and expenses that they may incur as a result of Ciena's failure to perform any of its obligations as loan originator, loan seller or loan servicer under the warehouse facility. As of June 30, 2012, there were no known issues or claims with respect to this performance guaranty.

RECENT DEVELOPMENTS

        In July 2012, pursuant to the terms of the amended Revolving Funding Facility, Ares Capital CP received an increase in the commitments under the Revolving Funding Facility of $40 million, bringing the total commitments to $620 million.

        In August 2012, we declared a third quarter dividend of $0.38 per share and an additional dividend of $0.05 per share. Both dividends are payable on September 28, 2012 to stockholders of record as of September 14, 2012.

CRITICAL ACCOUNTING POLICIES

Basis of Presentation

        The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with GAAP, and include the accounts of the Company and its consolidated subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition as of and for the periods presented. All significant intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

        Cash and cash equivalents include funds from time to time deposited with financial institutions and short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value.

Concentration of Credit Risk

        The Company places its cash and cash equivalents with financial institutions and, at times, cash held in money market accounts may exceed the Federal Deposit Insurance Corporation insured limit.

Investments

        Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, we look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available (i.e., substantially all of our investments) are valued at fair value as

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determined in good faith by our board of directors, based on, among other things, the input of our investment adviser, audit committee and independent third-party valuation firms that have been engaged at the direction of our board of directors to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing 12 month period (with certain de minimis exceptions), and under a valuation policy and a consistently applied valuation process. The valuation process is conducted at the end of each fiscal quarter, and a minimum of 50% of our portfolio at fair value is subject to review by an independent valuation firm each quarter. In addition, our independent accountants review our valuation process as part of their overall integrated audit.

        As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time), the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company's securities to any similar publicly traded securities, changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments would trade in their principal markets and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate our valuation.

        Because there is not a readily available market value for most of the investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our board of directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

        In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned. See "Risk Factors—Risks Relating to our Investments—Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio, which in turn would reduce our net asset value."

        Our board of directors undertakes a multi-step valuation process each quarter, as described below:

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Interest and Dividend Income Recognition

        Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.

        Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current. The Company may make exceptions to this if the loan has sufficient collateral value and is in the process of collection.

        Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

Payment-in-Kind Interest

        The Company has loans in its portfolio that contain PIK provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and recorded as interest income. To maintain the Company's status as a RIC, this non-cash source of income must be paid out to stockholders in the form of dividends even though the Company has not yet collected the cash.

Capital Structuring Service Fees and Other Income

        The Company's investment adviser seeks to provide assistance to our portfolio companies in connection with the Company's investments and in return the Company may receive fees for capital structuring services. These fees are generally only available to the Company as a result of the Company's underlying investments, are normally paid at the closing of the investments, are generally non-recurring and are recognized as revenue when earned upon closing of the investment. The services that the Company's investment adviser provides vary by investment, but generally include reviewing existing credit facilities, arranging bank financing, arranging equity financing, structuring financing from multiple lenders, structuring financing from multiple equity investors, restructuring existing loans, raising equity and debt capital, and providing general financial advice, which concludes upon closing of the investment. Any services of the above nature subsequent to the closing would generally generate a separate fee payable to the Company. In certain instances where the Company is invited to participate as a co-lender in a transaction and does not provide significant services in connection with the investment, a portion of loan fees paid to the Company in such situations will be deferred and amortized over the estimated life of the loan. The Company's investment adviser may also take a seat on the board of directors of a portfolio company, or observe the meetings of the board of directors without taking a formal seat.

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        Other income includes fees for asset management, management and consulting services, loan guarantees, commitments, amendments and other services rendered by the Company to portfolio companies. Such fees are recognized as income when earned or the services are rendered.

Foreign Currency Translation

        The Company's books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

        Results of operations based on changes in foreign exchange rates are separately disclosed in the statement of operations. Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuation and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

Accounting for Derivative Instruments

        The Company does not utilize hedge accounting and marks its derivatives, if applicable at such time, to market through unrealized gains (losses) in the accompanying statement of operations.

Equity Offering Expenses

        The Company's offering costs, excluding underwriters' fees, are charged against the proceeds from equity offerings when received.

Debt Issuance Costs

        Debt issuance costs are amortized over the life of the related debt instrument using the straight line method, which closely approximates the effective yield method.

U.S. Federal Income Taxes

        The Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Company must, among other things, timely distribute to its stockholders at least 90% of its investment company taxable income, as defined by the Code, for each year. The Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes.

        Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions from such income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as such taxable income is earned.

        Certain of our consolidated subsidiaries are subject to U.S. federal and state income taxes.

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Dividends to Common Stockholders

        Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by our board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are generally distributed, although we may decide to retain such capital gains for investment.

        We have adopted a dividend reinvestment plan that provides for reinvestment of any distributions we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not "opted out" of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividend. We intend to use primarily newly issued shares to implement the dividend reinvestment plan (so long as we are trading at a premium to net asset value). If our shares are trading at a significant enough discount to net asset value and we are otherwise permitted under applicable law to purchase such shares, we intend to purchase shares in the open market in connection with our obligations under our dividend reinvestment plan. However, we reserve the right to issue new shares of our common stock in connection with our obligations under the dividend reinvestment plan even if our shares are trading below net asset value.

Use of Estimates in the Preparation of Financial Statements

        The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of actual and contingent assets and liabilities at the date of the financial statements and the reported amounts of income or loss and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation of investments.

Quantitative and Qualitative Disclosures About Market Risk

        We are subject to financial market risks, including changes in interest rates and the valuations of our investment portfolio.

Interest Rate Risk

        Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

        As of June 30, 2012, approximately 17% of the investments at fair value in our portfolio bore interest at fixed rates, approximately 72% bore interest at variable rates, 10% were non-interest earning and 1% were on non-accrual status. Additionally, for the variable rate investments, 68% of these investments contained interest rate floors (representing 49% of total investments at fair value). The Revolving Credit Facility, the Revolving Funding Facility and the SMBC Funding Facility all bear interest at variable rates with no interest rate floors, while the 2022 Notes, 2040 Notes, 2047 Notes and the Convertible Notes bear interest at fixed rates.

        We regularly measure our exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on that review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates.

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        While hedging activities may mitigate our exposure to adverse fluctuations in interest rates, certain hedging transactions that we may enter into in the future, such as interest rate swap agreements, may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio investments. In addition, there can be no assurance that we will be able to effectively hedge our interest rate risk.

        Based on our June 30, 2012 balance sheet, the following table shows the annual impact on net income of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:

(in millions)
Basis Point Change
  Interest Income   Interest Expense   Net Income  

     Up 300 basis points

  $ 67.7   $ 22.5   $ 45.2  

     Up 200 basis points

  $ 29.1   $ 15.0   $ 14.1  

     Up 100 basis points

  $ (8.1 ) $ 7.5   $ (15.6 )

Down 100 basis points

  $ 6.2   $ (1.9 ) $ 8.1  

Down 200 basis points

  $ 5.9   $ (1.9 ) $ 7.8  

Down 300 basis points

  $ 5.7   $ (1.9 ) $ 7.6  

        Based on our December 31, 2011 balance sheet, the following table shows the annual impact on net income of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:

(in millions)
Basis Point Change
  Interest Income   Interest Expense   Net Income  

     Up 300 basis points

  $ 65.7   $ 28.1   $ 37.6  

     Up 200 basis points

  $ 32.5   $ 18.7   $ 13.8  

     Up 100 basis points

  $ 0.5   $ 9.4   $ (8.9 )

Down 100 basis points

  $ 3.8   $ (3.1 ) $ 6.9  

Down 200 basis points

  $ 3.6   $ (3.1 ) $ 6.7  

Down 300 basis points

  $ 3.4   $ (3.1 ) $ 6.5  

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SENIOR SECURITIES
(dollar amounts in thousands, except per share data)

        Information about our senior securities (including preferred stock, debt securities and other indebtedness) is shown in the following tables as of the end of each fiscal year ended December 31 since we commenced operations and as of June 30, 2012. The report of our independent registered public accounting firm, KPMG LLP, on the senior securities table as of December 31, 2011, is attached as an exhibit to the registration statement of which this prospectus is a part. The "—" indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.

Class and Year
  Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
  Asset
Coverage
Per Unit(2)
  Involuntary
Liquidating
Preference
Per Unit(3)
  Average
Market Value
Per Unit(4)
 

Revolving Credit Facility

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $ 295,000   $ 2,570   $     N/A  

Fiscal 2011

  $ 395,000   $ 2,518   $     N/A  

Fiscal 2010

  $ 146,000   $ 3,213   $     N/A  

Fiscal 2009

  $ 474,144   $ 2,298   $     N/A  

Fiscal 2008

  $ 480,486   $ 2,205   $     N/A  

Fiscal 2007

  $ 282,528   $ 2,650   $     N/A  

Fiscal 2006

  $ 193,000   $ 2,638   $     N/A  

Fiscal 2005

  $   $   $     N/A  

Revolving Funding Facility

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $ 348,000   $ 2,570   $     N/A  

Fiscal 2011

  $ 463,000   $ 2,518   $     N/A  

Fiscal 2010

  $ 242,050   $ 3,213   $     N/A  

Fiscal 2009

  $ 221,569   $ 2,298   $     N/A  

Fiscal 2008

  $ 114,300   $ 2,205   $     N/A  

Fiscal 2007

  $ 85,000   $ 2,650   $     N/A  

Fiscal 2006

  $ 15,000   $ 2,638   $     N/A  

Fiscal 2005

  $ 18,000   $ 32,645   $     N/A  

Fiscal 2004

  $ 55,500   $ 3,878   $     N/A  

Revolving Funding II Facility

                         

Fiscal 2009

  $   $   $     N/A  

SMBC Revolving Funding Facility

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $ 107,000   $ 2,570   $     N/A  

Debt Securitization

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $   $   $     N/A  

Fiscal 2011

  $ 77,531   $ 2,518   $     N/A  

Fiscal 2010

  $ 155,297   $ 3,213   $     N/A  

Fiscal 2009

  $ 273,752   $ 2,298   $     N/A  

Fiscal 2008

  $ 314,000   $ 2,205   $     N/A  

Fiscal 2007

  $ 314,000   $ 2,650   $     N/A  

Fiscal 2006

  $ 274,000   $ 2,638   $     N/A  

2011 Notes

                         

Fiscal 2010

  $ 296,258   $ 3,213   $   $ 1,018  

2012 Notes

                         

Fiscal 2010

  $ 158,108   $ 3,213   $   $ 1,018  

2022 Notes

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $ 143,750   $ 2,570   $   $ 1,016  

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Class and Year
  Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
  Asset
Coverage
Per Unit(2)
  Involuntary
Liquidating
Preference
Per Unit(3)
  Average
Market Value
Per Unit(4)
 

2040 Notes

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $ 200,000   $ 2,570   $   $ 1,021  

Fiscal 2011

  $ 200,000   $ 2,518   $   $ 984  

Fiscal 2010

  $ 200,000   $ 3,213   $   $ 952  

2047 Notes

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $ 181,091   $ 2,570   $   $ 963  

Fiscal 2011

  $ 180,988   $ 2,518   $   $ 917  

Fiscal 2010

  $ 180,795   $ 3,213   $   $ 847  

February 2016 Convertible Notes

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $ 544,769   $ 2,570   $   $ 1,029  

Fiscal 2011

  $ 541,153   $ 2,518   $   $ 1,001  

June 2016 Convertible Notes

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $ 217,322   $ 2,570   $   $ 1,003  

Fiscal 2011

  $ 215,931   $ 2,518   $   $ 984  

2017 Convertible Notes

                         

Fiscal 2012 (as of June 30, 2012, unaudited)

  $ 157,876   $ 2,570   $   $ 975  

(1)
Total amount of each class of senior securities outstanding at carrying value at the end of the period presented.

(2)
The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the "Asset Coverage Per Unit" (including for the 2022 Notes, the 2040 Notes and the 2047 Notes, which were issued in $25 increments).

(3)
The amount to which such class of senior security would be entitled upon our involuntary liquidation in preference to any security junior to it.

(4)
Not applicable, except for with respect to the 2011 Notes, the 2012 Notes, the 2022 Notes, the 2040 Notes, the 2047 Notes, the February 2016 Convertible Notes, the June 2016 Convertible Notes and the 2017 Convertible Notes. The average market value per unit for each of the 2011 Notes, the 2012 Notes, the 2022 Notes, the 2040 Notes, the 2047 Notes, the February 2016 Convertible Notes, the June 2016 Convertible Notes and the 2017 Convertible Notes is based on the average daily prices of such notes and is expressed per $1,000 of indebtedness (including for the 2022 Notes, the 2040 Notes and the 2047 Notes, which were issued in $25 increments).

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BUSINESS

GENERAL

        Ares Capital, a Maryland corporation, is a specialty finance company that is a closed-end, non-diversified management investment company. We have elected to be regulated as a BDC under the Investment Company Act. We were founded on April 16, 2004, were initially funded on June 23, 2004 and completed our initial public offering on October 8, 2004. We are one of the largest BDCs with approximately $5.8 billion of total assets as of June 30, 2012.

        We are externally managed by our investment adviser, Ares Capital Management, a wholly owned subsidiary of Ares Management, a global alternative asset manager and an SEC registered investment adviser with approximately $54 billion of total committed capital under management as of June 30, 2012. Our administrator, Ares Operations, a wholly owned subsidiary of Ares Management, provides the administrative services necessary for us to operate.

        Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. However, we may from time to time invest in larger companies. In this prospectus, we generally use the term "middle-market" to refer to companies with annual EBITDA between $10 million and $250 million. As used herein, EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization.

        We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component. First and second lien senior loans generally are senior debt instruments that rank ahead of subordinated debt of a given portfolio company. Mezzanine debt is subordinated to senior loans and is generally unsecured. Our investments in corporate borrowers generally range between $30 million and $400 million each, investments in the project finance/power generation sector generally range between $10 million and $200 million each and investments in the venture finance sector generally range between $1 million and $25 million each. However, the investment sizes may be more or less than these ranges and may vary based on our capital availability.

        To a lesser extent, we also make preferred and/or common equity investments, which have generally been non-control equity investments of less than $20 million (usually in conjunction with a concurrent debt investment). However, we may increase the size or change the nature of these investments.

        The proportion of these types of investments will change over time given our views on, among other things, the economic and credit environment we are operating in. In connection with our investing activities, we may make commitments with respect to indebtedness or securities of a potential portfolio company substantially in excess of our final investment. In such situations, while we may initially agree to fund up to a certain dollar amount of an investment, we may subsequently syndicate a portion of such amount to third parties, such that we are left with a smaller investment than what was reflected in our original commitment. In addition to originating investments, we may also acquire investments in the secondary market.

        The first and second lien senior loans in which we invest generally have stated terms of three to 10 years and the mezzanine debt investments in which we invest generally have stated terms of up to 10 years, but the expected average life of such first and second lien loans and mezzanine debt is generally between three and seven years. However, we may invest in loans and securities with any maturity or duration. The instruments in which we invest typically are not rated by any rating agency, but we believe that if such instruments were rated, they would be below investment grade (rated lower than "Baa3" by Moody's Investors Service, lower than "BBB-" by Fitch Ratings or lower than "BBB-" by Standard & Poor's Rating Services), which is an indication of having predominantly speculative

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characteristics with respect to the issuer's capacity to pay interest and repay principal. Bonds that are rated below investment grade are sometimes referred to as "high yield bonds" or "junk bonds." We may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by any nationally recognized statistical rating organization.

        We believe that our investment adviser, Ares Capital Management, is able to leverage the current investment platform, resources and existing relationships with financial sponsors, financial institutions, hedge funds and other investment firms of Ares to provide us with attractive investment opportunities. In addition to deal flow, the Ares investment platform assists our investment adviser in analyzing, structuring and monitoring investments. Ares has been in existence for more than 14 years and its senior partners have an average of over 22 years experience investing in senior loans, high yield bonds, mezzanine debt and private equity securities. The Company has access to the Ares staff of 231 investment professionals and 289 administrative professionals as of June 30, 2012, who provide assistance in accounting, finance, legal, compliance, operations, information technology and investor relations.

        Since our initial public offering on October 8, 2004 through June 30, 2012, our realized gains have exceeded our realized losses by approximately $101 million (excluding the one-time gain on the Allied Acquisition and gains/losses from the extinguishment of debt and other assets). For this same time period, our portfolio exits have resulted in an aggregate cash flow realized internal rate of return to us of approximately 14% (based on original cash invested of approximately $5.4 billion and total proceeds from such exits of approximately $6.5 billion). Approximately 73% of these exits resulted in an aggregate cash flow internal rate of return to us of 10% or greater. Internal rate of return is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. Internal rate of return is gross of expenses related to investments as these expenses are not allocable to specific investments. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the repayment of our debt investment or sale of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized. These internal rate of return results are historical results relating to our past performance and are not necessarily indicative of future results, the achievement of which cannot be assured.

        We and GE also co-invest through an unconsolidated vehicle, the SSLP. The SSLP was initially formed in December 2007 by Allied Capital and GE to co-invest in first lien senior secured loans of middle-market companies. In October 2009, we acquired from Allied Capital subordinated certificates issued by the SSLP and management rights in respect thereto. As of June 30, 2012, the SSLP had approximately $7.7 billion of available capital, approximately $5.4 billion in aggregate principal amount of which was funded as of June 30, 2012. At June 30, 2012, we had agreed to make available to the SSLP approximately $1.5 billion, of which approximately $1.1 billion was funded. The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and GE (with approval from a representative of each required). As of June 30, 2012, our investment in the SSLP was approximately $1.1 billion at fair value (including unrealized appreciation of $26.3 million) which represented approximately 20% of our total portfolio at fair value. Effective March 30, 2012, Ares Capital Management assumed from the Company the role of co-manager of the SSLP. However, this change did not impact the Company's economics in respect of its participation in the SSLP and Ares Capital Management does not receive any remuneration in respect of its co-manager role.

        While our primary focus is to generate current income and capital appreciation through investments in first and second lien senior loans and mezzanine debt and, to a lesser extent, equity securities of eligible portfolio companies, we also may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. See "Regulation." Specifically, as

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part of this 30% basket, we may invest in entities that are not considered "eligible portfolio companies" (as defined in the Investment Company Act), including companies outside of the United States, entities that are operating pursuant to certain exceptions to the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for in the Investment Company Act.

        In the first quarter of 2011, the staff of the SEC (the "Staff") informally communicated to certain BDCs the Staff's belief that certain entities, which would be classified as an "investment company" under the Investment Company Act but for the exception from the definition of "investment company" set forth in Rule 3a-7 promulgated under the Investment Company Act, could not be treated as eligible portfolio companies (as defined in Section 2(a)(46) of the Investment Company Act) (i.e., in a BDC's 70% basket of "qualifying assets"). Subsequently, in August 2011 the SEC issued a concept release (the "Concept Release") which stated that "[a]s a general matter, the Commission presently does not believe that Rule 3a-7 issuers are the type of small, developing and financially troubled businesses in which Congress intended BDCs primarily to invest" and requested comment on whether or not a 3a-7 issuer should be considered an "eligible portfolio company". We provided a comment letter in respect of the Concept Release and continue to believe that the language of Section 2(a)(46) of the Investment Company Act permits a BDC to treat as "eligible portfolio companies" entities that rely on the 3a-7 exception. However, given the current uncertainty in this area (including the language in the Concept Release), we have, solely for purposes of calculating the composition of our portfolio pursuant to Section 55(a) of the Investment Company Act, identified such entities, which include the SSLP, as "non-qualifying assets" should the Staff ultimately take an official view that 3a-7 issuers are not "eligible portfolio companies".

        Our portfolio company, IHAM, which became an SEC registered investment adviser effective March 30, 2012, manages (or sub-manages/sub-advises) the IHAM Vehicles, which are described in more detail under "—Investments—Ivy Hill Asset Management, L.P." below. We have also made direct investments in securities of certain of these vehicles. As of June 30, 2012, IHAM had total committed capital under management of approximately $3.2 billion, which included approximately $0.3 billion invested by Ares Capital in IHAM or securities issued by the IHAM Vehicles. In connection with IHAM's registration as a registered investment adviser, on March 30, 2012, we received exemptive relief from the SEC allowing us to, subject to certain conditions, own directly or indirectly up to 100% of IHAM's outstanding equity interests and make additional investments in IHAM.

About Ares

        Founded in 1997, Ares is a global alternative asset manager and an SEC registered investment adviser with approximately $54 billion of total committed capital under management and 520 employees as of June 30, 2012.

        Ares specializes in originating and managing assets in both the leveraged finance and private equity markets. Ares' leveraged finance activities include the origination, acquisition and management of senior loans, high yield bonds, mezzanine debt and special situation investments. Ares' private equity activities focus on providing flexible, junior capital to middle-market companies. Ares has the ability to invest across a capital structure, from senior floating rate debt to common equity. This flexibility, combined with Ares' "buy and hold" philosophy, enables Ares to structure an investment to meet the specific needs of a company rather than the less flexible demands of the public markets.

        Ares is comprised of the following groups:

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        Ares' senior partners have been working together as a group for many years and have an average of over 22 years of experience in leveraged finance, private equity, distressed debt, investment banking and capital markets. They are backed by a team of 231 highly disciplined investment professionals as of June 30, 2012 covering current investments in more than 1,100 companies across over 30 industries. Ares' rigorous investment approach is based upon an intensive, independent financial analysis, with a focus on preservation of capital, diversification and active portfolio management. These fundamentals underlie Ares' investment strategy and have resulted in large pension funds, banks, insurance companies, endowments and certain high net worth individuals investing in Ares' funds.

Ares Capital Management

        Ares Capital Management, our investment adviser, is served by an origination, investment and portfolio management team of 73 U.S.-based investment professionals as of June 30, 2012 led by the senior partners of the Ares Private Debt Group: Michael Arougheti, Eric Beckman, Kipp deVeer, Mitchell Goldstein and Michael Smith. Ares Capital Management leverages off of Ares' investment platform and benefits from the significant capital markets, trading and research expertise of Ares' investment professionals. Ares Capital Management's investment committee has eight members, including the senior partners of the Ares Private Debt Group, senior partners in the Ares Private Equity Group and a senior adviser to the Ares Capital Markets Group.

MARKET OPPORTUNITY

        We believe that current market conditions present attractive opportunities for us to invest in middle-market companies; specifically:

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COMPETITIVE ADVANTAGES

        We believe that we have the following competitive advantages over other capital providers to middle-market companies:

The Ares Platform

        As of June 30, 2012, Ares had approximately $54 billion of total committed capital under management in the related asset classes of non-syndicated first and second lien senior loans, syndicated loans, high yield bonds, mezzanine debt and private equity. We believe Ares' current investment platform provides a competitive advantage in terms of access to origination and marketing activities and diligence for Ares Capital. Specifically, the Ares platform provides the Company an advantage through its deal flow generation and investment evaluation process. Ares' asset management platform also provides additional market information, company knowledge and industry insight that benefit the investment and due diligence process. Ares' professionals maintain extensive financial sponsor and intermediary relationships, which provide valuable insight and access to transactions and information. Ares' senior partners have an average of more than 22 years of experience in leveraged finance, including substantial experience in investing in leveraged loans, high yield bonds, mezzanine debt, distressed debt and private equity securities.

Seasoned Management Team

        The investment professionals in the Ares Private Debt Group and members of our investment adviser's investment committee also have significant experience originating and investing across market cycles. As a result of Ares' extensive investment experience in private debt and the history of the Ares Private Debt Group's seasoned management team, Ares Capital has developed a strong reputation for an ability to originate and invest across market cycles. This experience also provided Ares Capital with a competitive advantage in identifying, originating, investing in and managing a portfolio of investments in middle-market companies.

Broad Origination Strategy

        We focus on self-originating most of our investments by pursuing a broad array of investment opportunities in middle-market companies across multiple channels. We also leverage the extensive

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relationships of the broader Ares platform, including relationships with the portfolio companies held by the IHAM Vehicles, to identify investment opportunities. We believe that this allows for asset selectivity and that there is a significant relationship between proprietary deal origination and credit performance. We believe that our focus on generating proprietary deal flow and lead investing also gives us greater control over capital structure, deal terms, pricing and documentation and enables us to actively manage our portfolio investments. Moreover, by leading the investment process, we are often able to secure controlling positions in credit tranches, thereby providing additional control in investment outcomes. We also have originated substantial proprietary deal flow from middle-market intermediaries, which often allows us to act as the sole or principal source of institutional capital to the borrower.

Experience with and Focus on Middle-Market Companies

        Ares has historically focused on investments in middle-market companies and we benefit from this experience. In sourcing and analyzing deals, our investment adviser benefits from Ares' extensive network of relationships focused on middle-market companies, including management teams, members of the investment banking community, private equity groups and other investment firms with whom Ares has had long-term relationships. We believe this network enables us to identify well-positioned prospective portfolio company investments. The Ares Private Debt Group works closely with Ares' other investment professionals, who together currently oversee a portfolio of investments in over 1,100 companies across over 30 industries, and provide access to an extensive network of relationships and insights into industry trends and the state of the capital markets.

Disciplined Investment Philosophy

        In making its investment decisions, our investment adviser has adopted Ares' long-standing, consistent, credit-based investment approach that was developed over 22 years ago by its founders. Specifically, our investment adviser's investment philosophy, portfolio construction and portfolio management involve an assessment of the overall macroeconomic environment and financial markets and company-specific research and analysis. Its investment approach emphasizes capital preservation, low volatility and minimization of downside risk. In addition to engaging in extensive due diligence from the perspective of a long-term investor, our investment adviser's approach seeks to reduce risk in investments by focusing on:

Extensive Industry Focus

        We seek to concentrate our investing activities in industries with a history of predictable and dependable cash flows and in which the Ares investment professionals have had extensive investment experience. Ares investment professionals have developed long-term relationships with management teams and management consultants in over 30 industries, and have accumulated substantial information and identified potential trends within these industries. In turn, we benefit from these relationships, information and identification of potential trends in making investments.

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Scale and Flexible Transaction Structuring

        We believe that being one of the largest BDCs makes us a more desirable and flexible capital provider, especially in competitive markets. We are flexible in structuring investments, including the types of investments and the terms associated with such investments. Ares has extensive experience investing in a wide variety of structures for companies with a diverse set of terms and conditions. We believe this approach and experience enables our investment adviser to identify attractive investment opportunities throughout economic cycles and across a company's capital structure so we can make investments consistent with our stated investment objective and preserve principal while seeking appropriate risk adjusted returns. In addition, we have the ability to provide "one stop" financing with the ability to invest capital across the balance sheet and syndicate and hold larger investments than many of our competitors. We believe that the ability to underwrite, syndicate and hold larger investments benefits our stockholders by (a) potentially increasing net income and earnings through syndication, (b) increasing originated deal flow flexibility, (c) broadening market relationships and deal flow, (d) allowing us to optimize our portfolio composition and (e) allowing us to provide capital to middle-market companies, which we believe currently have limited access to capital from traditional lending sources. In addition, we believe that the ability to provide capital at every level of the balance sheet provides a strong value proposition to middle-market borrowers and our senior debt capabilities provide superior deal origination and relative value analysis capabilities compared to traditional "mezzanine only" lenders.

OPERATING AND REGULATORY STRUCTURE

        Our investment activities are managed by Ares Capital Management, which is wholly owned by Ares, and supervised by our board of directors, a majority of whom are required to be independent of Ares and its affiliates, subject to certain cure periods. See "Risk Factors—As a result of the death of Kenneth R. Heitz, who was an independent director, we are not in compliance with certain NASDAQ Global Select Market listing requirements." Ares Capital Management is registered under the Advisers Act. Under our investment advisory and management agreement, we have agreed to pay Ares Capital Management an annual base management fee based on our total assets, as defined under the Investment Company Act (other than cash and cash equivalents, but including assets purchased with borrowed funds), and an incentive fee based on our performance. See "Management—Investment Advisory and Management Agreement."

        As a BDC, we are required to comply with certain regulatory requirements. For example, we are not generally permitted to invest in any portfolio company in which funds managed by Ares or any of its downstream affiliates (including Ares Capital Management) (other than Ares Capital and its downstream affiliates) currently has an investment. However, we may co-invest on a concurrent basis with funds managed by Ares or any of its downstream affiliates (including, subject to certain exceptions, Ares Capital Management), subject to compliance with existing regulatory guidance, applicable regulations and our allocation procedures. Some of these co-investments would only be permitted pursuant to an exemptive order from the SEC. We have applied for an exemptive order from the SEC that would permit us to co-invest with funds managed by Ares or its downstream affiliates (including Ares Capital Management). Any such order will be subject to certain terms and conditions. There is no assurance that the application for exemptive relief will be granted by the SEC. Accordingly, we cannot assure you that we will be permitted to co-invest with funds managed by Ares or any of its downstream affiliates (including Ares Capital Management). See "Risk Factors—Risks Relating to Our Business—We may not replicate Ares' historical success and our ability to enter into transactions with Ares and our other affiliates is restricted."

        Also, while we may borrow funds to make investments, our ability to use debt is limited in certain significant respects. As a consequence of our being a RIC for U.S. federal income tax purposes, as well as our status as a BDC, we are dependent on our ability to raise capital through the issuance of

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common stock. RICs generally must distribute substantially all of their earnings to stockholders as dividends in order to preserve their status as a RIC and avoid corporate-level U.S. federal income tax. This requirement, in turn, generally prevents us from using earnings to support our operations including making new investments. Further, BDCs must have at least 200% asset coverage in order to incur debt or issue preferred stock (which we refer to collectively as "senior securities"), which requires us to finance our investments with at least as much equity as senior securities in the aggregate. Certain of our Facilities also require that we maintain asset coverage of 200%.

INVESTMENTS

Ares Capital Corporation Portfolio

        We have built an investment portfolio of primarily first and second lien loans, mezzanine debt and, to a lesser extent, equity investments in private middle-market companies. Our portfolio is well diversified by industry sector and its concentration to any single issuer is limited. Our largest investment as of June 30, 2012 was in the subordinated certificates of the SSLP, which represented 20% of our portfolio at fair value as of June 30, 2012. The proceeds from these subordinated certificates are applied to make co-investments with GE in middle-market loans. However, the SSLP consists of a diverse portfolio of first lien senior secured loans to 34 different borrowers as of June 30, 2012 and the portfolio companies in the SSLP are in industries similar to the companies in Ares Capital's portfolio.

        Our investments in corporate borrowers generally range between $30 million and $400 million each, investments in the project finance/power generation sector generally range between $10 million and $200 million each and investments in the venture finance sector generally range between $1 million and $25 million each. However, the investment sizes may be more or less than these ranges and may vary based on our capital availability. To a lesser extent, we also make preferred and/or common equity investments, which have generally been non-control equity investments of less than $20 million (usually in conjunction with a concurrent debt investment). However, we may increase the size or change the nature of these investments.

        In addition, the proportion of these types of investments will change over time given our views on, among other things, the economic and credit environment in which we are operating. In connection with our investing activities, we may make commitments with respect to indebtedness or securities of a potential portfolio company substantially in excess of our final investment. In such situations, while we may initially agree to fund up to a certain dollar amount of an investment, we may subsequently syndicate a portion of such amount to third parties such that we are left with a smaller investment than what was reflected in our original commitment. In addition to originating investments, we may also acquire investments in the secondary market.

        We make senior secured loans primarily in the form of first and/or second lien loans. Our first and second lien loans generally have terms of three to 10 years. Such first and second lien loans are granted a security interest in certain of the assets of the borrower and consequently such assets serve as collateral in support of the repayment of such senior secured loans. Senior secured loans are generally exposed to the least amount of credit risk because they typically hold a senior position with respect to scheduled interest and principal payments and security interests in assets of the borrower. However, unlike mezzanine debt, senior secured loans typically do not receive any stock, warrants to purchase stock or other yield enhancements. Senior secured loans may include revolving lines of credit, senior term loans, senior syndicated loans and senior last-out tranche loans.

        Structurally, mezzanine debt usually ranks subordinate in priority of payment to senior loans and is often unsecured. However, mezzanine debt ranks senior to common and preferred equity in a borrowers' capital structure. Typically, mezzanine debt has elements of both debt and equity instruments, offering the fixed returns in the form of interest payments associated with senior loans, while providing lenders an opportunity to participate in the capital appreciation of a borrower, if any,

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through an equity interest. This equity interest typically takes the form of an equity co-investment and/or warrants. Due to its higher risk profile and often less restrictive covenants as compared to senior loans, mezzanine debt generally yields a higher return than senior secured debt. The equity co-investment and warrants associated with mezzanine debt typically allow lenders to receive repayment of their principal on an agreed amortization schedule while retaining their equity interest in the borrower. Equity issued in connection with mezzanine debt also may include a "put" feature, which permits the holder to sell its equity interest back to the borrower at a price determined through an agreed formula.

        In making an equity investment, in addition to considering the factors discussed below under "—Investment Selection," we also consider the anticipated timing of a liquidity event, such as a public offering, sale of the company or redemption of our equity securities.

        Our principal focus is investing in first and second lien senior loans and mezzanine debt and, to a lesser extent, equity capital, of private middle-market companies in a variety of industries. We generally seek to invest in companies in the industries in which Ares' investment professionals have direct expertise. The following is a representative list of the industries in which we have invested:

        However, we may invest in other industries if we are presented with attractive opportunities.

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        The industrial and geographic compositions of our portfolio at fair value at June 30, 2012 and December 31, 2011 were as follows:

 
  As of  
Industry
  June 30,
2012
  December 31,
2011
 

Investment Funds and Vehicles(1)

    22.7 %   23.6 %

Healthcare Services

    13.3     13.4  

Education

    9.5     11.2  

Consumer Products

    8.3     5.4  

Restaurants and Food Services

    7.6     6.8  

Business Services

    6.7     6.6  

Financial Services

    6.3     6.4  

Containers and Packaging

    4.1     4.5  

Other Services

    4.0     2.5  

Manufacturing

    3.2     2.8  

Grocery

    1.7     1.9  

Telecommunications

    1.6     2.0  

Retail

    1.6     1.8  

Energy

    1.6     1.3  

Aerospace and Defense

    1.4     3.6  

Other

    6.4     6.2  
           

Total

    100.0 %   100.0 %
           

(1)
Includes our investment in the SSLP, which represented 20% and 21% of the Company's total portfolio at fair value as of June 30, 2012 and December 31, 2011, respectively. The SSLP had made loans to 34 and 32 different borrowers as of June 30, 2012 and December 31, 2011, respectively. The portfolio companies in the SSLP are in industries similar to the companies in the Company's portfolio.

 

 
  As of  
Geographic Region
  June 30,
2012
  December 31,
2011
 

West

    49.0 %   48.4 %

Southeast

    17.8     21.2  

Midwest

    14.7     14.5  

Mid Atlantic

    13.8     12.8  

International

    2.5     1.4  

Northeast

    2.2     1.7  
           

Total

    100.0 %   100.0 %
           

        As of June 30, 2012, 2.3% of total investments at amortized cost (or 0.7% of total investments at fair value), were on non-accrual status. As of December 31, 2011, 3.3% of total investments at amortized cost (or 0.9% of total investments at fair value), were on non-accrual status.

        While our primary focus is to generate current income and capital appreciation through investments in first and second lien senior loans and mezzanine debt and, to a lesser extent, equity securities of eligible portfolio companies, we also may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. Specifically, as part of this 30% basket, we may invest in entities that are not considered "eligible portfolio companies" (as defined in the Investment Company Act), including companies outside of the United States, entities that are

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operating pursuant to certain exceptions to the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for in the Investment Company Act.

Ivy Hill Asset Management, L.P.

        We have made investments in our portfolio company, IHAM, an SEC registered investment adviser, as well as in certain vehicles managed by IHAM. IHAM manages 11 unconsolidated credit vehicles: Ivy Hill Middle Market Credit Fund, Ltd. ("Ivy Hill I"), Ivy Hill Middle Market Credit Fund II, Ltd. ("Ivy Hill II"), Ivy Hill Middle Market Credit Fund III, Ltd. ("Ivy Hill III"), Ivy Hill Middle Market Credit Fund IV, Ltd. ("Ivy Hill IV"), Ivy Hill Senior Debt Fund, L.P. and related vehicles ("Ivy Hill SDF" and, together with Ivy Hill I, Ivy Hill II, Ivy Hill III and Ivy Hill IV, the "Ivy Hill Funds"), Knightsbridge CLO 2007-1 Limited, Emporia Preferred Funding I, Ltd., Emporia Preferred Funding II, Ltd. and Emporia Preferred Funding III, Ltd. (collectively, the "Emporia Funds") and Ares Private Debt Strategies Fund II, L.P. and Ares Private Debt Strategies Fund III, L.P. (collectively, the "PDS Funds"). In addition, IHAM serves as the sub-adviser/sub-manager for four others: CoLTS 2005-1 Ltd., CoLTS 2005-2 Ltd. and CoLTS 2007-1 Ltd. (collectively, the "CoLTS Funds") and FirstLight Funding I, Ltd. ("FirstLight"). As of June 30, 2012, IHAM had total committed capital under management of approximately $3.2 billion, which included approximately $0.3 billion invested by Ares Capital in IHAM or securities issued by the IHAM Vehicles.

        IHAM or certain IHAM Vehicles have purchased investments from us for a purchase price equal to the fair market value of such investments determined at the time of such purchases, including approximately $36 million, $261 million, $113 million and $46 million for the six months ending June 30, 2012 and the years ending December 31, 2011, 2010 and 2009, respectively.

        IHAM is party to the IHAM administration agreement with Ares Operations. Pursuant to the IHAM administration agreement, Ares Operations provides IHAM with office facilities, equipment, clerical, bookkeeping and record keeping services, services of, and oversight of, custodians, depositories, accountants, attorneys, underwriters and such other persons in any other capacity deemed to be necessary. Under the IHAM administration agreement, IHAM reimburses Ares Operations for all of the actual costs associated with such services, including Ares Operations' allocable portion of overhead and the cost of its officers and respective staff in performing its obligations under the IHAM administration agreement.

INVESTMENT SELECTION

        Ares' investment philosophy was developed over the past 22 years and has remained consistent and relevant throughout a number of economic cycles. We are managed using a similar investment philosophy used by the investment professionals of Ares in Ares' private investment funds.

        This investment philosophy involves, among other things:

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        The foundation of Ares' investment philosophy is intensive credit investment analysis, a portfolio management discipline based on both market technicals and fundamental value-oriented research, and diversification strategy. We follow a rigorous investment process based on:

        We seek to identify those companies exhibiting superior fundamental risk-reward profiles and strong defensible business franchises while focusing on the relative value of the investment across the industry as well as for the specific company.

Intensive Due Diligence

        The process through which an investment decision is made involves extensive research into the target company, its industry, its growth prospects and its ability to withstand adverse conditions. If the senior investment professional responsible for the transaction determines that an investment opportunity should be pursued, we will engage in an intensive due diligence process. Approximately 30-40% of the investments initially reviewed by us proceed to this phase. Though each transaction will involve a somewhat different approach, the regular due diligence steps generally undertaken include:

Selective Investment Process

        After an investment has been identified and preliminary diligence has been completed, a credit research and analysis report is prepared. This report is reviewed by the senior investment professional in charge of the potential investment. If such senior and other investment professionals are in favor of the potential investment, then it is first presented to an underwriting committee, which is comprised of the senior partners of the Ares Private Debt Group. The investment professionals of Ares Capital Management are responsible for the day-to-day management of our portfolio.

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        After the investment is approved by the underwriting committee, a more extensive due diligence process is employed by the transaction team. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys, independent accountants, and other third party consultants and research firms prior to the closing of the investment, as appropriate on a case-by-case basis. Approximately 7-10% of all investments initially reviewed by us will be presented to the investment committee. Approval of an investment for funding requires the approval of the majority of the investment committee of Ares Capital Management, although unanimous consent is sought.

Issuance of Formal Commitment

        Once we have determined that a prospective portfolio company is suitable for investment, we work with the management and/or sponsor of that company and its other capital providers, including senior, junior and equity capital providers, if any, to finalize the structure of the investment. Approximately 5-7% of the investments initially reviewed by us eventually result in the issuance of formal commitments.

Debt Investments

        We invest in portfolio companies primarily in the form of first and second lien senior loans and mezzanine debt. The first and second lien senior loans generally have terms of three to seven years. Such first and second lien senior loans have security interests in the assets of our portfolio companies that will serve as collateral in support of the repayment of such loans. First and second lien senior loans generally have floating interest rates, which may have LIBOR floors, and also may provide for some amortization of principal and excess cash flow payments, with the remaining principal balance due at maturity.

        We structure our mezzanine investments primarily as unsecured subordinated loans that provide for relatively high fixed interest rates that provide us with significant current interest income. The mezzanine debt investments generally have terms of up to 10 years. These loans typically have interest-only payments in the early years, with amortization of principal deferred to the later years of the mezzanine investment. In some cases, we may enter into loans that, by their terms, convert into equity or additional debt or defer payments of interest (or at least cash interest) for the first few years after our investment. Also, in some cases our mezzanine debt will be secured by a subordinated lien on some or all of the assets of the borrower.

        In some cases, our debt investments may provide for a portion of the interest payable to be PIK interest. To the extent interest is PIK, it will be payable through the increase of the principal amount of the loan by the amount of interest due on the then-outstanding aggregate principal amount of such loan.

        In the case of our first and second lien senior loans and mezzanine debt, we tailor the terms of the investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that aims to protect our rights and manage our risk while creating incentives for the portfolio company to achieve its business plan and improve its profitability. For example, in addition to seeking a senior position in the capital structure of our portfolio companies, we will seek, where appropriate, to limit the downside potential of our investments by:

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        We generally require financial covenants and terms that require an issuer to reduce leverage, thereby enhancing credit quality. These methods include: (a) maintenance leverage covenants requiring a decreasing ratio of indebtedness to cash flow over time, (b) maintenance cash flow covenants requiring an increasing ratio of cash flow to the sum of interest expense and capital expenditures and (c) indebtedness incurrence prohibitions, limiting a company's ability to take on additional indebtedness. In addition, by including limitations on asset sales and capital expenditures we may be able to prevent a company from changing the nature of its business or capitalization without our consent.

        Our debt investments may include equity features, such as warrants or options to buy a minority interest in the portfolio company. Warrants we receive with our debt investments may require only a nominal cost to exercise, and thus, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. We may structure the warrants to provide provisions protecting our rights as a minority-interest holder, as well as puts, or rights to sell such securities back to the portfolio company, upon the occurrence of specified events. In many cases, we also obtain registration rights in connection with these equity interests, which may include demand and "piggyback" registration rights.

Equity Investments

        To a lesser extent, we also make preferred and/or common equity investments, which have generally been non-control equity investments of less than $20 million (usually in conjunction with a concurrent debt investment). However, we may increase the size or change the nature of these investments.

ON-GOING RELATIONSHIPS WITH AND MONITORING OF PORTFOLIO COMPANIES

        We closely monitor each investment we make, maintain a regular dialogue with both the management team and other stakeholders and seek specifically tailored financial reporting. In addition, senior investment professionals may take board seats or obtain board observation rights for our portfolio companies. As of June 30, 2012, of our 144 portfolio companies, we were entitled to board seats or board observation rights on 55% of these companies.

        We seek to exert significant influence post-investment, in addition to covenants and other contractual rights and through board participation, when appropriate, by actively working with management on strategic initiatives. We often introduce managers of companies in which we have invested to other portfolio companies to capitalize on complementary business activities and best practices.

        Our investment adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our investment adviser grades the credit risk of all investments on a scale of 1 to 4 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors. Under this system, investments with a grade of 4 involve the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit. Investments graded 3 involve a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This

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portfolio company is generally performing as expected and the risk factors to our ability to ultimately recoup the cost of our investment are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a grade of 3. Investments graded 2 indicate that the risk to our ability to recoup the initial cost basis of such investment has increased materially since origination or acquisition, including as a result of factors such as declining performance and non-compliance with debt covenants; however, payments are generally not more than 120 days past due. An investment grade of 1 indicates that the risk to our ability to recoup the initial cost basis of such investment has substantially increased since origination or acquisition, and the portfolio company likely has materially declining performance. For debt investments with an investment grade of 1, most or all of the debt covenants are out of compliance and payments are substantially delinquent. For investments graded 1, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit. For investments graded 1 or 2, our investment adviser enhances its level of scrutiny over the monitoring of such portfolio company. Our investment adviser grades the investments in our portfolio at least each quarter and it is possible that the grade of certain of these portfolio investments may be reduced or increased over time.

        As of June 30, 2012, the weighted average grade of our portfolio was 3.0. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Portfolio and Investment Activity."

MANAGERIAL ASSISTANCE

        As a BDC, we must offer, and must provide upon request, significant managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. We may receive fees for these services.

COMPETITION

        Our primary competitors include public and private funds, commercial and investment banks, commercial finance companies, other BDCs and private equity funds, each of which we compete with for financing opportunities. Many of our competitors are substantially larger and have considerably greater financial and marketing resources than we do. For example, some competitors may have access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than Ares Capital. Furthermore, many of our competitors are not subject to the regulatory restrictions that the Investment Company Act imposes on us as a BDC. For additional information concerning the competitive risks we face, see "Risk Factors—Risks Relating to Our Business—We operate in a highly competitive market for investment opportunities."

        We believe that the relationships of the members of our investment adviser's investment committee and of the senior partners of Ares enable us to learn about, and compete effectively for, financing opportunities with attractive middle-market companies in the industries in which we seek to invest. We believe that Ares' professionals' deep and long-standing direct sponsor relationships and the resulting proprietary transaction opportunities that these relationships often present, provide valuable insight and access to transactions and information. We use the industry information of Ares' investment professionals to which we have access to assess investment risks and determine appropriate pricing for our investments in portfolio companies.

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MARKET CONDITIONS

        Due to the volatility in global markets, the availability of capital and access to capital markets has been limited over the last several years. As the global liquidity situation and market conditions evolve, we will continue to monitor and adjust our approach to funding accordingly. However, given the unprecedented nature of the volatility in the global markets over the past several years and the uncertainty around the strength of the U. S. economic recovery, there can be no assurances that these activities will be successful. While the current markets have improved from various periods of market dislocation and volatility, there can be no assurance that they will not worsen again in the future. If they do, we could face materially higher financing costs. Consequently, our operating strategy could be materially and adversely affected. See "Risk Factors—Risks Relating to Our Business—Capital markets have been in a period of disruption and instability for an extended period of time. These market conditions materially and adversely affected debt and equity capital markets in the United States, which had, and may in the future continue to have, a negative impact on our business and operations."

        In connection with the prior depressed market conditions of the general economy, the stocks of BDCs as an industry have in the past traded at near historic lows as a result of concerns over liquidity, credit quality, leverage restrictions and distribution requirements. In some cases, certain BDCs became "forced sellers" of assets, defaulted on their indebtedness, decreased their distributions to stockholders or announced share repurchase programs. We cannot assure you that the market pressures we may face in the future will not have a material adverse effect on our business, financial condition and results of operations.

STAFFING

        We do not currently have any employees and do not expect to have any employees. Services necessary for our business are provided by individuals who are employees or affiliates of our investment adviser or our administrator, each of which is a wholly owned subsidiary of Ares Management, pursuant to the terms of our investment advisory and management agreement and administration agreement, respectively, each as described below. Each of our executive officers is an employee or affiliate of our investment adviser or our administrator. Our day-to-day investment activities are managed by our investment adviser. Most of the services necessary for the origination and administration of our investment portfolio are provided by investment professionals employed by our investment adviser or our administrator. Our investment adviser has 73 U.S.-based investment professionals as of June 30, 2012, who focus on origination, transaction development, investment and the ongoing monitoring of our investments. See "Management—Investment Advisory and Management Agreement." We reimburse both our investment adviser and our administrator for a certain portion of expenses incurred in connection with such staffing, as described in more detail below. Because we have no employees, Ares Capital does not have a formal employee relations policy.

PROPERTIES

        We do not own any real estate or other physical properties materially important to our operation. Our headquarters are currently located at 245 Park Avenue, 44th Floor, New York, New York 10167. We rent the office space directly from a third party pursuant to a lease that expires in February 2026. We entered into a sublease with ACREM pursuant to which we are subleasing approximately 12% of ACREM's office space for a fixed rent equal to 12% of the basic annual rent payable by ACREM under its office lease, plus certain additional costs and expenses. We also entered into separate subleases with Ares Management and IHAM, pursuant to which Ares Management and IHAM sublease approximately 15% and 20%, respectively, of our New York office space, for a fixed rent equal to 15% and 20%, respectively, of the basic annual rent payable by us under our office lease, plus certain additional costs and expenses.

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LEGAL PROCEEDINGS

        We are party to certain lawsuits in the normal course of business. Allied Capital was also involved in various other legal proceedings that we assumed in connection with the Allied Acquisition. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any such legal proceedings cannot at this time be predicted with certainty, we do not expect these matters will materially affect our business, financial condition or results of operations.

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PORTFOLIO COMPANIES

        The following table describes each of the businesses included in our portfolio and reflects data as of June 30, 2012. Percentages shown for class of investment securities held by us represent percentage of the class owned and do not necessarily represent voting ownership. Percentages shown for equity securities, other than warrants or options, represent the actual percentage of the class of security held before dilution. Percentages shown for warrants and options held represent the percentage of class of security we may own assuming we exercise our warrants or options before dilution.

        We have indicated by footnote portfolio companies (a) where we directly or indirectly own more than 25% of the outstanding voting securities of such portfolio company and, therefore, are presumed to be "controlled" by us under the Investment Company Act and (b) where we directly or indirectly own 5% to 25% of the outstanding voting securities of such portfolio company or where we hold one or more seats on the portfolio company's board of directors and, therefore, are deemed to be an "affiliated person" under the Investment Company Act. We directly or indirectly own less than 5% of the outstanding voting securities of all other portfolio companies (or have no other affiliations with such portfolio companies) listed on the table. We offer to make significant managerial assistance to certain of our portfolio companies. Where we do not hold a seat on the portfolio company's board of directors, we may also receive rights to observe such board meetings.

        Where we have indicated by footnote the amount of unfunded commitments to portfolio companies to fund various revolving and delayed draw senior secured and subordinated loans, such unfunded commitments are presented net of (i) standby letters of credit treated as funded commitments because they are issued and outstanding, (ii) commitments substantially at the Company's discretion and (iii) commitments that are unavailable due to borrowing base or other covenant restrictions.

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ARES CAPITAL AND SUBSIDIARIES
PORTFOLIO COMPANIES
As of June 30, 2012
(dollar amounts in thousands)

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
6-30-12
  Fair
Value
 

10th Street, LLC[3]

  Real estate holding   Senior subordinated loan   8.93% Cash, 4.07% PIK     11/2/2014         $ 24,706  

5 North 11th Street

  company   Member interest               10.00 % $ 492  

Brooklyn, NY 11211

      Option               40.10 % $ 25  

ADF Capital, Inc. & ADF Restaurant Group, LLC

 

Restaurant owner and operator

 

Senior secured revolving loan

 

6.50%
(Libor + 3.50%/Q)

   
11/27/2013
       
$

1,868

[5]

165 Passaic Avenue
Fairfield, NJ 07004

      Senior secured loan   6.50%
(Libor + 3.50%/Q)
    11/27/2013         $ 7,060  

      Senior secured loan   12.50%
(Libor + 9.50%/Q)
    11/27/2014         $ 20,538  

      Promissory note         11/27/2016         $ 17,724  

      Warrants               87.72 % $ 1,897 [2]

AGILE Fund I, LLC[4]

 

Investment partnership

 

Member interest

             
0.50

%

$

111
 

4445 Willard Avenue, 11th Floor

                               

Chevy Chase, MD 20815

                               

AllBridge Financial, LLC[4]

 

Asset management services

 

Equity interests

             
100.00

%

$

11,009
 

13760 Noel Road, Suite 1100

                               

Dallas, TX 75240

                               

American Academy
Holdings, LLC

 

Provider of education,
training, certification,

 

Senior secured revolving loan

 

   
3/18/2016
       
$


[6]

2480 South 3850 West, Suite B
Salt Lake City, UT 84120

  networking, and consulting services to medical coders and other healthcare professionals   Senior secured loan   9.50%
(Libor + 8.50%/Q)
    3/18/2016         $ 75,737  

American Broadband Communications, LLC,

 

Broadband communication services

 

Senior secured loan

 

7.50%
(Libor + 5.50%/Q)

   
9/1/2013
       
$

8,077
 

American Broadband Holding Company and

      Senior subordinated loan   12.00% Cash, 2.00% PIK     11/7/2014         $ 42,620  

Cameron Holdings of NC, Inc.

      Senior subordinated loan   10.00% Cash, 4.00% PIK     11/7/2014         $ 21,904  

401 N. Tryon Street,

      Warrants               17.00 % $ 808 [2]

10th Floor
Charlotte, NC 28202

      Warrants               20.00 % $ 427 [2]

American Commercial Coatings, Inc.

 

Real estate property

 

Commercial mortgage loan

       
12/1/2025
       
$

2,004
 

2008 Cypress Street

                               

Paris, KY 40362

                               

Apple & Eve, LLC and US Juice Partners, LLC[3]

 

Juice manufacturer

 

Senior secured revolving loan

 

   
10/1/2013
       
$


[7]

2 Seaview Blvd
Port Washington, NY

      Senior secured loan   13.00%
(Libor + 10.00%/M)
    10/1/2013         $ 26,347  

11050

      Senior units               9.71 % $ 2,030  

Aquila Binks Forest Development, LLC

 

Real estate developer

 

Commercial mortgage loan

       
12/31/2014
       
$

2,966
 

15430 Endeavour Drive
Jupiter, FL 33478

      Real estate equity interests               85.00 % $  

Athletic Club Holdings, Inc.
5201 East Tudor Road
Anchorage, AL 99507

 

Premier health club operator

 

Senior secured loan

 

4.75%
(Libor + 4.50%/M)

   
10/11/2013
       
$

11,385
 

Aviation Properties Corporation[4]
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067

 

Aviation services

 

Common stock

             
100.00

%

$

 

AWTP, LLC[4]

 

Water treatment services

 

Junior secured loan

 

5.00% Cash, 5.00% PIK

   
6/23/2015
       
$

4,212
 

2080 Lunt Avenue

      Junior secured loan   15.00% PIK     6/23/2015         $ 5,826  

Elk Grove Village, IL 60007

      Membership interest               90.00 % $ 333  

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Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
6-30-12
  Fair
Value
 

BECO Holding Company, Inc.
10926 David Taylor Drive, Suite 300
Charlotte, NC 28262

 

Wholesale distributor of first response fire protection equipment and related parts

 

Common stock

              2.39 % $ 3,455  

Bushnell Inc.
9200 Cody

 

Sports optics manufacturer

 

Senior secured loan

 

6.00%
(Libor + 4.50%/Q)

   
8/24/2015
       
$

22,657
 

Overland Park, KS 66214

      Senior secured loan   5.75%
(Libor + 4.25%/Q)
    8/24/2015         $ 26,285  

      Junior secured loan   9.00%
(Libor + 7.50%/Q)
    2/24/2016         $ 55,198  

      Junior secured loan   9.50%
(Libor + 8.00%/Q)
    2/24/2016         $ 43,238  

Callidus Capital Corporation[4]
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067

 

Asset management services

 

Common stock

             
100.00

%

$

1,005
 

Campus Management Corp. and Campus Management Acquisition Corp.[3]
350 Park Avenue, 23rd Floor
New York, NY 10022

 

Education software developer

 

Preferred stock

             
16.75

%

$

13,330
 

Cast & Crew Payroll, LLC
2300 Empire Avenue

 

Payroll services provider to the entertainment industry

 

Senior secured revolving loan

 

   
6/13/2017
       
$


[8]

5th Floor
Burbank, CA 91504

      Senior secured loan   8.50%
(Libor + 7.00%/Q)
    6/13/2017         $ 80,000  

CCS Group Holdings, LLC
3343 Perimeter Hill Drive, Suite 300
Nashville, TN 37211

 

Correctional facility healthcare operator

 

Class A units

             
1.41

%

$

1,054
 

Charter Baking Company, Inc.

 

Baked goods manufacturer

 

Senior subordinated loan

 

16.00% PIK

   
2/6/2013
       
$

8,230
 

3300 Walnut Street, Unit C
Boulder, CO 80301

      Preferred stock   8.00% PIK           2.79 % $ 1,542  

CIBT Investment Holdings, LLC
111 Huntington Ave., 30th Floor
Boston, MA 02199

 

Expedited travel document processing services

 

Class A shares

             
1.97

%

$

2,886
 

CIC Flex, LP
60 South Sixth Street, Suite 3720
Minneapolis, MN 55402

 

Investment partnership

 

Limited partnership units

             
14.28

%

$

3,608
 

Ciena Capital LLC[4]
1633 Broadway,

 

Real estate and small business loan servicer

 

Senior secured revolving loan

 

6.00%

   
12/31/2013
       
$

14,000

[9]

39th Floor

      Senior secured loan   12.00%     12/31/2015         $ 32,000  

New York, NY 10019

      Equity interests               100.00 % $ 21,622  

CitiPostal Inc.[4]
5 North 11th Street

 

Document storage and management services

 

Senior secured revolving loan

 

6.75%
(Base Rate + 3.25%/Q)

   
12/21/2013
       
$

1,400

[10]

Brooklyn, NY 11211

      Senior secured loan   8.50% Cash, 5.50% PIK     12/21/2013         $ 53,107  

      Senior subordinated loan         12/21/2015         $ 2,109  

      Common stock               63.10 % $  

Cleveland East Equity, LLC
26300 Harvard Road
Warrensville Heights, OH 44122

 

Hotel operator

 

Real estate equity interests

             
50.00

%

$

2,624
 

Commercial Credit Group, Inc.
121 West Trade Street, Suite 2100
Charlotte, NC 28202

 

Commercial equipment finance and leasing company

 

Senior subordinated loan

 

12.75%

   
5/10/2018
       
$

28,000
 

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Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
6-30-12
  Fair
Value
 

Commons R-3, LLC
5555 Glenridge Connector, Suite 700
Atlanta, GA 30342

 

Real estate developer

 

Real estate equity interests

              20.00 % $  

Community Education Centers, Inc.
35 Fairfield Place

 

Offender re-entry and in-prison treatment services provider

 

Senior secured loan

 

6.25%
(Libor + 5.25%/Q)

   
12/13/2014
       
$

16,429
 

West Caldwell, NJ 07006

      Senior secured loan   7.50%
(Base Rate + 4.25%/M)
    12/13/2014         $ 714  

      Junior secured loan   15.47%
(Libor + 11.47% Cash, 4.00% PIK /Q)
    12/13/2015         $ 38,036  

      Warrants               12.50 % $ [2]

Competitor Group, Inc.
9401 Waples Street,

 

Endurance sports media and event operator

 

Senior secured loan

 

9.50%
(Libor + 8.00%/Q)

   
1/30/2017
       
$

34,458
 

Suite 150
San Diego, CA 92121

      Senior secured loan       1/30/2017         $ [11]

Component Hardware

 

Commercial equipment

 

Junior secured loan

 

7.00% Cash, 3.00% PIK

   
12/31/2014
       
$

3,154
 

Group, Inc.

      Senior subordinated loan   7.50% Cash, 5.00% PIK     12/31/2014         $ 10,866  

1890 Swarthmore Avenue
Lakewood, NJ 08701

      Warrants               20.00 % $ 4,213 [2]

Cook Inlet Alternative Risk, LLC
10 British American Blvd.
Latham, NY 12110

 

Risk management services

 

Senior subordinated loan

 

9.00%

   
9/30/2015
       
$

3,250
 

Cornerstone Records Management, LLC

 

Physical records storage and management service

 

Senior secured revolving loan

 

   
8/12/2016
       
$


[12]

10440 Little Patuxent Parkway, Suite 900

  provider   Senior secured loan   8.50%
(Libor + 7.00%/M)
    8/12/2016         $ 18,202  

Columbia, MD 21044

      Senior secured loan       8/12/2016         $ [13]

Coverall North America, Inc.
5201 Congress Avenue, Suite 275
Boca Raton, FL 33487

 

Commercial janitorial service provider

 

Subordinated notes

 

10.00% Cash, 2.00% PIK

   
2/22/2016
       
$

9,529
 

Covestia Capital Partners, LP
11111 Santa Monica Blvd, Suite 1620
Los Angeles, CA 90025

 

Investment partnership

 

Limited partnership interest

             
46.67

%

$

1,135
 

Crescent Hotels &

 

Hotel operator

 

Senior subordinated loan

       
9/8/2011
       
$

 

Resorts, LLC and

      Senior subordinated loan         6/1/2017         $  

affiliates[4]

      Common equity interest               90.00 % $  

2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067

      Member interest               100.00 % $  

CT Technologies
Intermediate

 

Healthcare analysis services

 

Senior secured loan

 

7.75%
(Libor + 6.50%/Q)

   
3/15/2017
       
$

13,924
 

Holdings, Inc. and CT

      Class A common stock               4.49 % $ 5,276  

Technologies Holdings LLC[3]
8901 Farrow Rd
Columbia, SC 29203

      Class C common stock               20.00 % $ 843  

Dialog Telecom LLC
756 Tyvola Road, Suite 100
Charlotte, NC 28217

 

Broadband communication services

 

Senior secured loan

 

12.00%
(Libor + 10.50% Cash, 1.50% PIK /Q)

   
12/31/2013
       
$

16,476
 

Direct Buy Holdings, Inc. and Direct Buy

 

Membership based buying club franchisor and

 

Limited partnership interest

             
3.89

%

$

 

Investors, LP[3]
8450 Broadway
Merrillville, IN 46410

  operator   Limited partnership interest               4.86 % $  

Distant Lands Trading Co.

 

Coffee manufacturer

 

Class A common stock

             
3.32

%

$

275
 

801 Houser Way North
Renton, WA 98055

      Class A-1 common stock               7.33 % $  

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Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
6-30-12
  Fair
Value
 

Diversified Collections Services, Inc.
333 North Canyons Pkwy.
Livermore, CA 94551

 

Collections services

 

Common stock

              2.81 % $ 5,482  

Driven Holdings, LLC

 

Automotive aftermarket car

 

Preferred stock

             
1.96

%

$

2,550
 

128 S. Tryon St., Ste 900
Charlotte, NC 28202

  care franchisor   Common stock               1.96 % $ 56  

Dynamic India Fund IV, LLC
IFS Court, Twenty Eight
Cybercity, Ebene, Mauritius

 

Investment company

 

Member interest

             
5.44

%

$

3,509
 

Earthcolor Group, LLC
249 Pomeroy Road
Parsippany, NJ 07054

 

Printing management services

 

Limited liability company interests

             
9.30

%

$

 

eInstruction Corporation

 

Developer, manufacturer

 

Junior secured loan

       
7/2/2014
       
$

372
 

308 N. Carroll Blvd.

  and retailer of educational   Senior subordinated loan         1/2/2015         $  

Denton, TX 76201

  products   Common stock               2.40 % $  

ELC Acquisition Corp.,

 

Developer, manufacturer

 

Preferred stock

 

12.00% PIK

         
10.57

%

$

8,934
 

ELC Holdings Corporation, and Excelligence Learning Corporation[3]
2 Lower Ragsdale Drive
Monterey, CA 93940

  and retailer of educational products   Common stock               8.47 % $  

EquiPower Resources Holdings, LLC
100 Constitution Plaza, 10th Floor
Hartford, CT 06103

 

Gas-fired power generation facilities operator

 

Junior secured loan

 

10.00%
(Libor + 8.50%/Q)

   
6/21/2019
       
$

22,050
 

Financial Pacific Company

 

Commercial finance leasing

 

Preferred stock

 

8.00% PIK

         
14.84

%

$

8,453
 

3455 South 344th Way, Suite 300
Federal Way, WA 98001

      Common stock               14.84 % $  

Firstlight Financial

 

Investment company

 

Senior subordinated loan

 

5.00% PIK

   
12/31/2016
       
$

63,517
 

Corporation[3]

      Class A common stock               20.00 % $  

1700 E. Putnum Ave.
Old Greenwich, CT 06870

      Class B common stock               100.00 % $  

Fulton Holdings Corp.

 

Airport restaurant operator

 

Senior secured loan

 

12.50%

   
5/28/2016
       
$

40,000
 

5950 Fulton Industrial Blvd
Atlanta, GA 30336

      Common stock               2.16 % $ 1,563  

Geotrace Technologies, Inc.

 

Reservoir processing,

 

Warrants

             
62.97

%

$


[2]

1011 Highway 6 South, Suite 220
Houston, TX 77077

  development   Warrants               50.76 % $ 1,576 [2]

Gilchrist & Soames, Inc.
1535 E. Naomi Street

 

Personal care manufacturer

 

Senior secured revolving loan

 

6.25%
(Libor + 5.00%/Q)

   
10/5/2013
       
$

3,500

[14]

PO Box 33806
Indianapolis, IN 46203

      Senior secured loan   13.44%     10/5/2013         $ 20,844  

Grocery Outlet Inc.
2000 Fifth Street

 

Value grocery retailer

 

Senior secured revolving loan

 

   
12/15/2017
       
$


[15]

Berkeley, CA 94710

      Senior secured loan   10.50%
(Libor + 9.00%/Q)
    12/15/2017         $ 87,143  

      Senior secured loan   11.25%
(Base Rate + 8.00%/Q)
    12/15/2017         $ 3,442  

HCI Equity, LLC[4]
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067

 

Investment company

 

Member interest

             
100.00

%

$

534
 

HCP Acquisition Holdings, LLC[4]
600 Fifth Avenue, 17th Floor
New York, NY 10020

 

Healthcare compliance advisory services

 

Class A units

             
26.20

%

$

3,437
 

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Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
6-30-12
  Fair
Value
 

Hojeij Branded Foods, Inc.
12700 Spine Rd SW

 

Airport restaurant operator

 

Senior secured revolving loan

 

    2/15/2017         $ [16]

Atlanta, GA 30320

      Senior secured loan   10.25%
(Base Rate + 7.00%/Q)
    2/15/2017         $ 3,920  

      Senior secured loan   9.00%
(Libor + 8.00%/Q)
    2/15/2017         $ 14,700  

      Senior secured loan       2/15/2017         $ [17]

      Warrants               7.50 % $ 808 [2]

      Warrants               7.50 % $ [2]

HOPPY Holdings Corp.
428 Peyton Street
P.O. Box 1157
Emporia, KS 66801

 

Automotive and recreational vehicle aftermarket products

 

Senior secured loan

 

5.00%
(Libor + 3.75%/M)

   
6/2/2016
       
$

12,973
 

Hot Light Brands, Inc.[4]

 

Real estate holding

 

Senior secured loan

       
2/1/2011
       
$

2,566
 

11780 Manchester Road, Suite 207
St. Louis, MO 63131

  company   Common stock               100.00 % $  

ICSH, Inc.
1540 Greenwood Avenue

 

Industrial container manufacturer, reconditioner

 

Senior secured revolving loan

 

   
8/31/2016
       
$


[18]

Montebello, CA 90640

  and servicer   Senior secured loan   8.00%
(Base Rate + 7.00%/Q)
    8/31/2016         $ 15,080  

      Senior secured loan   8.00%
(Libor + 7.00%/Q)
    8/31/2016         $ 100,504  

      Senior secured loan       8/31/2016         $ [19]

Impact Innovations Group, LLC
2500 Northwinds Parkway, Suite 200
Alpharetta, GA 30004

 

IT consulting and outsourcing services

 

Member interest

             
50.00

%

$

200
 

Imperial Capital

 

Investment services

 

Class A common units

             
5.00

%

$

21,100
 

Group LLC
2000 Avenue of the Stars,

      2006 Class B common units               5.00 % $ 4  

9th Floor S
Los Angeles, CA 90067

      2007 Class B common units               5.00 % $  

Imperial Capital Private Opportunities, LP
2000 Avenue of the Stars, 9th Floor S
Los Angeles, CA 90067

 

Investment partnership

 

Limited partnership interest

             
80.00

%

$

5,000
 

Implus Footcare, LLC

 

Provider of footwear and

 

Preferred stock

 

6.00% PIK

         
2.58

%

$

4,729
 

2001 TW Alexander Drive
P.O. Box 13925
Durham, NC 27709

  other accessories   Common stock               2.39 % $ 357  

INC Research, Inc.
3201 Beechleaf Court, Suite 600
Raleigh, NC 27604

 

Pharmaceutical and biotechnology consulting services

 

Common stock

             
18.18

%

$

1,024
 

Infilaw Holding, LLC
1100 5th Avenue South,

 

Operator of for-profit law schools

 

Senior secured revolving loan

 

   
8/25/2016
       
$


[20]

Suite 301
Naples, FL 34102

      Senior secured loan   9.50%
(Libor + 8.50%/Q)
    8/25/2016         $ 28,847  

      Senior secured loan       8/25/2016         $ [21]

      Series A preferred units   9.50%
(Libor + 8.50%/Q)
          97.56 % $ 126,928  

Insight Pharmaceuticals Corporation[3]

 

OTC drug products manufactuer

 

Junior secured loan

 

13.25%
(Libor + 11.75%/Q)

   
8/26/2017
       
$

24,500
 

1170 Wheeler Way,

      Class A common stock               12.60 % $ 8,950  

Suite 150
Langhorne, PA 19047

      Class B common stock               12.60 % $ 8,950  

Instituto de Banca y

 

Private school operator

 

Series B preferred stock

             
19.59

%

$

6,628
 

Comercio, Inc. &

      Series C preferred stock               0.80 % $ 949  

Leeds IV Advisors, Inc.
Calle Santa Ana 1660
Santurce, Puerto Rico 00909-2309

      Common stock               0.83 % $  

120


Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
6-30-12
  Fair
Value
 

Investor Group
Services, LLC[3]

 

Business consulting for private equity and

 

Senior secured revolving loan

 

    6/23/2013         $ [22]

2020 Front Street, Suite 100
Boston, MA 02116

  corporate clients   Limited liability company membership interest               10.00 % $ 1,009  

Itel Laboratories, Inc.
6745 Phillips Industrial

 

Data services provider for building materials to

 

Senior secured revolving loan

 

6.25%
(Libor + 5.00%/Q)

   
6/29/2018
       
$

175

[23]

Boulevard
Jacksonville, Florida

  property insurance industry   Senior secured loan   7.00%
(Base Rate + 3.75%/Q)
    6/29/2018         $ 22,350  

32256

      Preferred units               1.80 % $ 1,000  

Ivy Hill Asset Management, L.P.[4]
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067

 

Asset management services

 

Member interest

             
100.00

%

$

204,977
 

Ivy Hill Middle Market Credit Fund, Ltd.[4]

 

Investment company

 

Subordinated notes

 

15.00%

   
11/20/2018
       
$

16,480
 

2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067

      Class B deferrable interest notes   6.49%
(Libor + 6.00%/Q)
    11/20/2018         $ 23,750  

Kodiak Funding, LP
2107 Wilson Blvd, Suite 400
Arlington, VA 22201

 

Investment partnership

 

Limited partnership interest

             
3.96

%

$

695
 

La Paloma Generating Company, LLC
24 Waterway Avenue, Suite 800
Houston, TX 77380

 

Natural gas fired, combined cycle plant operator

 

Junior secured loan

 

10.25%
(Libor + 8.75%/Q)

   
8/27/2018
       
$

56,050
 

Lakeland Tours, LLC
218 West Water Street,

 

Educational travel provider

 

Senior secured revolving loan

 

6.00%
(Libor + 4.50%/S)

   
12/31/2016
       
$

13,875

[24]

Suite 400
Charlottesville, VA 22902

      Senior secured revolving loan   6.75%
(Base Rate + 3.50%/Q)
    12/31/2016         $ 7,875 [24]

      Senior secured loan   6.00%
(Libor + 4.50%/M)
    12/31/2016         $ 21,676  

      Senior secured loan   10.00%
(Libor + 8.50%/M)
    12/31/2016         $ 102,199  

      Common stock               3.53 % $ 4,750  

Lighting Science Group Corporation
1227 South Patrick Drive, Building 2A
Satellite Beach, FL 32937

 

Designer, developer and manufacturer of advanced lighting products

 

Letter of credit facility

 

   
2/20/2014
       
$


[25]

Magnacare Holdings, Inc., Magnacare

 

Healthcare professional provider

 

Senior secured revolving loan

 

   
3/16/2018
       
$


[26]

Administrative Services, LLC, and Magnacare, LLC
825 East Gate Blvd.
Garden City, NY 11530

      Senior secured loan   9.75%
(Libor + 8.75%/Q)
    3/16/2018         $ 136,305  

Making Memories Wholesale, Inc.[4]

 

Scrapbooking branded products manufacturer

 

Senior secured revolving loan

       
8/21/2014
       
$

805

[27]

1168 West 500 North
Centerville, UT 84014

      Common stock               92.00 % $  

Matrixx Initiatives, Inc. and Wonder Holdings

 

Developer and marketer of over-the-counter healthcare

 

Senior secured revolving loan

 

13.00%
(Libor + 12.00%/Q)

   
6/30/2016
       
$

5,060

[28]

Acquisition Corp.
8515 E. Anderson Dr.

  products   Senior secured loan   13.00%
(Libor + 12.00%/Q)
    6/30/2016           37,145  

Scottsdale, AZ 85255

      Warrants               4.56 % $ [2]

      Warrants               5.00 % $ 335 [2]

McKenzie Sports
Products, LLC

 

Designer, manufacturer and distributor of taxidermy

 

Senior secured revolving loan

 

   
3/30/2017
       
$


[29]

1910 Saint Luke's Church
Road

  forms and supplies   Senior secured loan   7.00%
(Libor + 5.50%/S)
    3/30/2017         $ 31,686  

Salisbury, NC 28146

      Senior secured loan   7.75%
(Base Rate + 4.50%/M)
    3/30/2017         $ 234  

121


Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
3-31-12
  Fair
Value
 

Microstar Logistics LLC
5613 DTC Pkwy
Greenwood Vlg, CO 80111

  Keg management solutions provider   Junior secured loan   10.00%
(Libor + 9.00%/Q)
    8/5/2016         $ 110,000  

Multi-Ad Services, Inc.[3]

 

Marketing services and

 

Preferred units

             
13.95

%

$

2,329
 

1720 W. Detweiller Drive
Peoria, IL 61615

  software provider   Common units               7.48 % $  

MVL Group, Inc.[4]
1061 E. Indiantown

 

Marketing research provider

 

Senior secured revolving loan

 

4.75%
(Base Rate + 1.50%/M)

   
6/30/2012
       
$

940

[30]

Road, Suite 300

      Senior secured loan   12.00%     7/8/2012         $ 22,772  

Jupiter, FL 33477

      Senior subordinated loan   12.00% Cash, 2.50% PIK     7/8/2012         $ 28,716  

      Junior subordinated loan   10.00%     7/8/2012         $  

      Common stock               56.10 % $  

MW Dental Holding Corp.
680 Hehli Way

 

Dental services

 

Senior secured revolving loan

 

8.50%
(Libor + 7.00%/M)

   
4/12/2017
       
$

1,000

[31]

PO Box 69
Mondovi, WI 54755

      Senior secured loan   8.50%
(Libor + 7.00%/M)
    4/12/2017         $ 105,014  

      Senior secured loan       4/12/2017         $ [32]

                            k  

MWI Holdings, Inc.
101 Godfrey Street
P.O. Box 7008
Logansport, IN 46947

 

Highly engineered springs, fastners, and other precision components

 

Senior secured loan

 

10.00%
(Libor + 8.00%/Q)

   
6/15/2017
       
$

48,274
 

Napa Management Services Corporation
68 South Service Road, Suite 350
Melville, NY 11747

 

Anesthesia management services provider

 

Senior secured revolving loan
Senior secured revolving loan
Senior secured loan

 

7.50%
(Libor + 6.00%/M)
8.25%
(Base Rate + 5.00%/Q)
7.50%
(Libor + 6.00%/M)

   
4/15/2016
4/15/2016
4/15/2016
       
$
$
$

600
75
21,966

[33]
[33]

      Senior secured loan   7.50%
(Libor + 6.00%/Q)
    4/15/2016         $ 28,875  

      Common units               8.90 % $ 5,692  

National Print Group, Inc.
2464 Amicola Highway

 

Printing management services

 

Senior secured revolving loan

 

9.00%
(Libor + 6.00%/Q)

   
10/31/2013
       
$

1,096

[34]

Chattanooga, TN 37406

      Senior secured revolving loan   9.00%
(Base Rate + 5.00%/M)
    10/31/2013         $ 602 [34]

      Senior secured loan   10.00%
(Libor + 9.00% Cash, 1.00% PIK /Q)
    10/31/2013         $ 7,360  

      Preferred stock               5.17 % $  

NetShape Technologies, Inc.
8751 Old State Road 60
Sellersburg, IN 47172

 

Metal precision engineered components

 

Senior secured revolving loan

 

4.21%
(Libor + 3.75%/Q)

   
2/2/2013
       
$

549

[35]

Novak Biddle Venture Partners III, L.P.
7501 Wisconsin Avenue
East Tower, Suite 1380
Bethesda, MD 20814

 

Investment partnership

 

Limited partnership interest

             
2.47

%

$

179
 

NPH, Inc.
13175 Gregg Street
Poway, CA 92064

 

Hotel property

 

Real estate equity interests

             
100.00

%

$

8,170
 

NS Merger Sub. Inc. and

 

Healthcare technology

 

Senior subordinated loan

 

   
6/21/2017
       
$


[36]

NS Holdings, Inc.

  provider   Senior subordinated loan   13.50%     6/21/2017         $ 50,579  

3500 Sunrise Highway, Suite D122
Great River, NY 11739

      Common stock               1.70 % $ 3,015  

Oak Parent, Inc.
425 Park 20 W
Grovetown, GA 30813

 

Manufacturer of athletic apparel

 

Senior secured loan

 

8.00%
(Libor + 7.00%/Q)

   
4/2/2018
       
$

67,000
 

OnCURE Medical Corp.
188 Inverness Drive West, Suite 650
Englewood, CO 80112

 

Radiation oncology care provider

 

Common stock

             
3.29

%

$

707
 

122


Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
3-31-12
  Fair
Value
 

Orion Foods, LLC (fka Hot Stuff Foods, LLC)[4]

 

Convenience food service retailer

 

Senior secured revolving loan

 

10.75%
(Base Rate + 7.50%/M)

    9/30/2014         $ 9,800 [37]

2930 W. Maple Street
Sioux Falls, SD 57118

      Senior secured loan   10.00%
(Libor + 8.50%/Q)
    9/30/2014         $ 33,697  

      Junior secured loan   14.00%     9/30/2014         $ 20,370  

      Preferred units               100.00 % $  

      Class A common units               25.00 % $  

      Class B common units               93.53 % $  

OTG Management, Inc.
One International Plaza,

 

Airport restaurant operator

 

Senior secured revolving loan

 

8.50%
(Libor + 7.00%/Q)

   
8/9/2016
       
$

937

[38]

Suite 130
Philadelphia, PA 19113

      Senior secured loan   8.50%
(Libor + 7.00%/Q)
    8/9/2016         $ 22,437  

      Senior secured loan       8/9/2016         $ [39]

      Junior secured loan   14.50%
(Libor + 13.00%/M)
    8/9/2016         $ 31,428  

      Junior secured loan   15.25%
(Base Rate + 12.00%/Q)
    8/9/2016         $ 6,000  

      Junior secured loan       8/9/2016         $ [40]

      Common units               4.44 % $ 2,801  

      Warrants               8.27 % $ 4,877 [2]

Partnership Capital Growth Fund I, L.P.
One Embarcadero, Suite 3810
San Francisco, CA 94111

 

Investment partnership

 

Limited partnership interest

             
25.00

%

$

4,266
 

Partnership Capital Growth Fund III, L.P.
One Embarcadero, Suite 3810
San Francisco, CA 94111

 

Investment partnership

 

Limited partnership interest

             
2.50

%

$

1,270
 

Passport Health Communications, Inc., Passport Holding Corp. and Prism Holding Corp.
720 Cool Springs Blvd., Suite 450
Franklin, TN 37067

 

Healthcare technology provider

 

Series A preferred stock
Common stock

             
4.31
4.31

%
%

$
$

10,144
 

PG Mergersub, Inc. and PGA Holdings, Inc.

 

Provider of patient surveys, management reports and

 

Junior secured loan

 

8.25%
(Libor + 7.00%/S)

   
10/20/2018
       
$

45,000
 

245 Park Avenue,

  national databases for the   Preferred stock               0.13 % $ 16  

41st Floor
New York, NY 10167

  integrated healthcare delivery system   Common stock               0.13 % $ 786  

Pillar Processing LLC and PHL Holding Co.[3]

 

Mortgage services

 

Senior secured revolving loan

 

   
11/20/2013
       
$


[41]

220 Northpointe

      Senior secured loan         11/20/2013         $ 10,672  

Parkway, Suite G

      Senior secured loan         5/20/2014         $ 757  

Buffalo, NY 14228

      Common stock               8.48 % $  

PODS Funding Corp.
5585 Rio Vista Drive
Clearwater, FL 33760

 

Storage and warehousing

 

Junior subordinated loan

 

12.75% Cash, 2.75% PIK

   
5/29/2017
       
$

39,675
 

Powersport Auctioneer Holdings, LLC
13175 Gregg Street
Poway, CA 92064

 

Powersport vehicle auction operator

 

Common units

             
2.38

%

$

915
 

PRA Holdings, Inc.
4130 Parklake Avenue, Suite 400
Raleigh, NC 27612

 

Drug testing services

 

Senior secured loan

 

4.25%
(Libor + 4.00%/M)

   
12/13/2014
       
$

22,863
 

Pregis Corporation, Pregis Intellipack Corp. and Pregis Innovative Packaging Inc.
1650 Lake Cook Rd., Suite 400
Deerfield, IL 60015

 

Provider of a broad range of highly-customized, tailored protective packaging solutions

 

Senior secured loan

 

7.75%
(Libor + 6.25%/M)

   
3/23/2017
       
$

1,000
 

Prommis Holdings, LLC
1544 Old Alabama Road
Roswell, GA 30076

 

Bankruptcy and foreclosure processing services

 

Class B common units

             
17.27

%

$

 

123


Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
3-31-12
  Fair
Value
 

Promo Works, LLC
300 Martingale Road
Schaumburg, IL 60173

 

Marketing services

 

Senior secured loan

        12/23/2013         $ 2,281  

Protective Industries, Inc.
2150 Elmwood Avenue

 

Plastic protection products

 

Senior secured revolving loan

 

6.25%
(Base Rate + 3.00%/M)

   
5/23/2016
       
$

229

[42]

Buffalo, NY 14207

      Senior secured revolving loan   5.75%
(Libor + 4.25%/M)
    5/23/2016         $ 915 [42]

      Senior secured loan   5.75%
(Libor + 4.25%/M)
    5/23/2017         $ 5,449  

      Senior secured loan   6.25%
(Base Rate + 3.00%/M)
    5/23/2017         $ 14  

      Senior secured loan       5/23/2017         $ [43]

      Senior subordinated loan   8.00% Cash, 7.25% PIK     5/23/2018         $ 746  

      Preferred stock               2.50 % $ 3,759  

PRV Aerospace, LLC
2600 94th Street SW,

 

Aerospace precision components manufacturer

 

Senior secured loan

 

6.50%
(Libor + 5.25%/Q)

   
5/9/2018
       
$

8,500
 

Suite 150
Everett, WA 98204

      Junior secured loan   10.50%
(Libor + 9.25%/Q)
    5/9/2019         $ 68,000  

R2 Acquisition Corp.
207 NW Park Ave
Portland, OR 97209

 

Marketing services

 

Common stock

             
0.33

%

$

89
 

R3 Education, Inc. and EIC Acquisitions Corp.

 

Medical school operator

 

Senior secured revolving loan

 

   
4/30/2013
       
$


[44]

1750 W. Broadway St.
#222

      Senior secured loan   9.00%
(Libor + 6.00%/Q)
    4/30/2013         $ 8,688  

Oviedo, FL 32765

      Senior secured loan   13.00% PIK     4/30/2013         $ 17,516  

      Preferred stock               15.66 % $ 1,760  

      Common membership interest               22.19 % $ 25,156 [2]

      Warrants               10.00 % $  

RCHP, Inc.
103 Continental Place, Suite 200
Brentwood, TN 37027

 

Operator of general acute care hospitals

 

Junior secured loan

 

11.50%
(Libor + 10.00%/Q)

   
5/4/2019
       
$

65,000
 

RE Community Holdings II, Inc.and Pegasus Community Energy, LLC.
809 West Hill Street
Charlotte, NC 28208

 

Operator of municipal recycling facilities

 

Preferred stock

 

12.50% PIK

         
21.43

%

$

5,032
 

Reed Group, Ltd.
10155 Westmoor Drive,

 

Medical disability management services

 

Senior secured revolving loan

       
12/19/2013
       
$

1,260

[45]

Suite 210

  provider   Senior secured loan         12/19/2013         $ 10,840  

Westminster, CO 80021

      Senior secured loan         12/19/2013         $ 1,533  

      Equity interests               4.00 % $  

Respicardia, Inc.

 

Developer of implantable

 

Senior secured loan

 

11.00%

   
7/1/2015
       
$

6,000
 

12400 Whitewater Drive, Suite 150
Minnetonka, MN 55343

  therapies to improve cardiovascular health   Warrants               0.19 % $ 38 [2]

Restaurant Holding
Company, LLC

 

Fast food restaurant operator

 

Senior secured loan

 

9.75%
(Base Rate + 6.50%/Q)

   
2/17/2017
       
$

2,693
 

Carretera 165 Km 6.2
Zona Industrial Cataño
Cataño, Puerto Rico 00962

      Senior secured loan   9.00%
(Libor + 7.50%/M)
    2/17/2017         $ 72,307  

S.B. Restaurant Company
14241 Firestone Blvd,
Suite 315

 

Restaurant owner and operator

 

Senior secured loan

 

13.00%
(Libor + 11.00% Cash, 2.00% PIK /Q)

   
7/16/2012
       
$

34,173
 

La Mirada, CA 90638

      Preferred stock               2.15 % $  

      Warrants               2.50 % $ [2]

Savers, Inc. and SAI Acquisition Corporation
11400 SE 6th St. Suite 220
Bellevue, WA 98004

 

For-profit thrift retailer

 

Common stock

             
1.86

%

$

19,834
 

Saw Mill PCG Partners LLC
8751 Old State Road 60
Sellersburg, IN 47172

 

Metal precision engineered components

 

Common units

             
66.67

%

$

 

124


Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
3-31-12
  Fair
Value
 

Senior Secured Loan Fund LLC[4]
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067

 

Co-investment vehicle

 

Subordinated certificates

 

8.47%
(Libor + 8.00%/Q)

          87.50 % $ 1,125,812  

Sigma International Group, Inc.
700 Goldman Drive
Cream Ridge, NJ 08514

 

Water treatment parts

 

Junior secured loan

 

10.00%
(Libor + 5.00% Cash, 5.00% PIK /A)

   
4/10/2014
       
$

3,487
 

Soteria Imaging

 

Outpatient medical imaging

 

Junior secured loan

       
11/10/2010
       
$

1,683
 

Services, LLC[3]
9200 Leesgate Road, Suite 800
Fairfax, VA 22030

  provider   Preferred member units               89.23 % $  

SSH Environmental
Industries, Inc. and

 

Magnetic sensors and
supporting sensor products

 

Senior secured loan

 

9.00%
(Libor + 7.50%/Q)

   
12/16/2016
       
$

11,867
 

SSH Non-Destructive
Testing, Inc.
875 N. Michigan Ave.,
Suite 4020
Chicago, IL 60611

      Senior secured loan       12/16/2016         $ [46]

    

                               

Stag-Parkway, Inc.[4]
7095 Tradewater Parkway

  Automotive aftermarket components supplier   Senior secured loan   12.50%
(Libor + 11.00%/Q)
    12/1/2014         $ 34,500  

Atlanta, GA 30336

      Preferred stock   16.50% PIK           100.00 % $ 4,200  

      Common stock               100.00 % $ 23,067  

Startec Equity, LLC[4]
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067

 

Communication services

 

Member interest

             
100.00

%

$

 

Summit Business Media Parent Holding Company LLC
375 Park Avenue
New York, NY 10152-0002

 

Business media consulting services

 

Limited liability company membership interest

             
22.99

%

$

757
 

Sunquest Information Systems, Inc.
250 South Williams Blvd
Tucson, AZ 85711

 

Laboratory software solutions provider

 

Junior secured loan

 

9.75%
(Libor + 8.50%/Q)

   
6/16/2017
       
$

125,000
 

The Dwyer Group[3]
7 Times Square,

 

Operator of multiple franchise concepts primarily

 

Senior subordinated loan

 

12.00% Cash, 1.50% PIK

   
6/29/2018
       
$

25,303
 

Suite 4307
New York, NY 10036

  related to home maintenance or repairs   Series A preferred units   8.00% PIK           18.26 % $ 12,439  

The Step2 Company, LLC

 

Toy manufacturer

 

Junior secured loan

 

10.00%

   
4/13/2015
       
$

27,000
 

10010 Aurora-Hudson Road

      Junior secured loan   10.00% Cash, 5.00% PIK     4/13/2015         $ 28,134  

Streetsboro, OH 44241

      Common units               1.77 % $ 9  

      Warrants               5.00 % $ 25 [2]

The Teaching
Company, LLC and

 

Education publications provider

 

Senior secured loan

 

9.00%
(Libor + 7.50%/Q)

   
3/16/2017
       
$

31,531
 

The Teaching Company Holdings, Inc.
4151 Lafayette Center Drive, No. 100
Chantilly, VA 20151

      Preferred stock
Common stock
              1.77
3.64
%
%
$
$
4,483
11
 

The Thymes, LLC[4]

 

Cosmetic products

 

Preferred units

 

8.00% PIK

         
67.50

%

$

6,672
 

629 9th Street SE
Minneapolis, MN 55414

  manufacturer   Common units               67.50 % $ 1,071  

Things Remembered Inc. and TRM Holdings

 

Personalized gifts retailer

 

Senior secured revolving loan

 

   
5/24/2017
       
$


[47]

Corporation
5500 Avion Park Drive
Highland Heights, OH 44143

      Senior secured loan   8.00%
(Libor + 6.50%/Q)
    5/24/2018         $ 25,000  

Tradesmen International, Inc.

 

Construction labor support

 

Junior secured loan

 

13.00% Cash, 1.00% PIK

   
5/25/2014
       
$

3,126
 

9760 Shepard Road
Macedonia, OH 44056

      Warrants               10.00 % $ 7,279 [2]

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Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
3-31-12
  Fair
Value
 

Tripwire, Inc.
101 SW Main St.,

 

IT security software provider

 

Senior secured revolving loan

 

    5/23/2018         $ [48]

Ste. 1500
Portland, OR 97204

      Senior secured loan   6.00%
(Libor + 4.75%/Q)
    5/23/2018         $ 80,000  

      Senior secured loan       5/23/2018         $ [49]

      Class A common stock               2.95 % $ 6,727  

      Class B common stock               2.95 % $ 68  

U.S. Renal Care, Inc.
2400 Dallas Parkway,

 

Dialysis provider

 

Senior secured loan

 

6.25%
(Libor + 3.00%/Q)

   
12/14/2016
       
$

7,406
 

Suite 350
Plano, TX 75093

      Senior subordinated loan   11.25% Cash, 2.00% PIK     6/9/2018         $ 53,124  

UL Holding Co., LLC and Universal
Lubricants, LLC[3]

 

Petroleum product manufacturer

 

Junior secured loan

 

9.34%
(Libor + 7.34% Cash, 2.00% PIK /Q)

   
12/31/2014
       
$

30,211
 

2824 N Ohio
Wichita, KS 67201

      Junior secured loan   12.00% Cash, 2.00% PIK     12/31/2014         $ 23,458  

      Junior secured loan   12.00% Cash, 3.00% PIK     12/31/2014         $ 5,025  

      Class A common units               0.26 % $ 82  

      Class B-5 common units               29.68 % $ 4,541  

      Class B-4 common units               2.48 % $ 379  

      Class C common units               8.55 % $ 4,685  

United Road Towing, Inc.
9550 Bornet Drive, Suite 301
Mokena, IL 60448

 

Towing company

 

Warrants

             
3.00

%

$


[2]

USG Nevada LLC
1505 Tyrell Lane
Boise, ID 83705

 

Geothermal, renewable energy, developer for electrical power and direct uses

 

Junior secured loan

 

11.97%
(Libor + 11.50%/Q)

   
6/30/2012
       
$

7,500
 

Vantage Oncology, Inc.
1500 Rosecrans Ave, Suite 400
Manhattan Beach, CA 90266

 

Radiation oncology care provider

 

Common stock

             
5.67

%

$

4,560
 

Venturehouse-Cibernet Investors, LLC
509 Seventh Street, N.W. Washington, DC 20004

 

Financial settlement services for intercarrier wireless roaming

 

Equity interest

             
3.31

%

$

 

Vistar Corporation and

 

Food service distributor

 

Junior secured loan

 

11.00%

   
5/23/2015
       
$

100,250
 

Wellspring Distribution

      Junior secured loan       5/23/2015         $ [50]

Corp.
12650 East Arapahoe Road
Centennial, CO 80112

      Class A non-voting common stock               33.33 % $ 7,247  

VSC Investors LLC
401 Vance Street
Los Angeles, CA 90272

 

Investment company

 

Membership interest

             
1.95

%

$

1,531
 

VSS-Tranzact

 

Management consulting

 

Series B preferred units

             
8.54

%

$

921
 

Holdings, LLC[3]
350 Park Avenue

  services   Common membership interest               8.54 % $ 388  

New York, NY 10022

      Warrants               8.54 % $ 191 [2]

Wash Multifamily Laundry Systems, LLC (fka Web

 

Laundry service and equipment provider

 

Senior secured loan

 

7.00%
(Base Rate + 3.75%/Q)

   
8/28/2014
       
$

27,325
 

Services Company, LLC)
3690 Redondo Beach Ave.
Redondo Beach, CA 90278

      Junior secured loan   10.88%
(Libor + 9.38%/Q)
    8/28/2015         $ 90,000  

Waste Pro USA, Inc
2101 West State Road 434, Suite 315
Longwood, FL 32779

 

Waste management services

 

Preferred Class A common equity

             
2.47

%

$

22,380
 

Woodstream Corporation
69 N. Locust Street

 

Pet products manufacturer

 

Senior secured loan

 

6.50%
(Libor + 5.00%/Q)

   
8/31/2014
       
$

18,000
 

Lititz, PA 17543-1714

      Senior subordinated loan   12.00%     2/27/2015         $ 45,000  

      Common stock               2.17 % $ 3,320  

WP CPP Holdings, LLC
4200 West Valley Boulevard
Pomona, CA 91769

 

Precision engineered castings

 

Senior secured loan

 

8.50%
(Libor + 7.00%/M)

   
10/11/2017
       
$

70,467
 

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Table of Contents

Company
  Business Description   Investment   Interest[1]   Maturity
Date
  % of Class
Held at
3-31-12
  Fair
Value
 

Wyle Laboratories, Inc. and

 

Provider of specialized

 

Senior preferred stock

 

8.00% PIK

          0.77 % $ 99  

Wyle Holdings, Inc.
1960 E. Grand Ave., Suite 900
El Segundo, CA 90245-5023

  engineering, scientific and technical services   Common stock               0.66 % $ 2,093  

[1]
All interest is payable in cash unless otherwise indicated. A majority of the variable rate loans to our portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower's option, which resets daily (D), monthly (M), bimonthly (B), quarterly (Q) or semiannually (S). For each such loan, we have provided the current interest rate in effect as of June 30, 2012.

[2]
Percentages shown for warrants or convertible preferred stock held represents the percentages of common stock we may own on a fully diluted basis, assuming we exercise our warrants or convert our preferred stock to common stock.

[3]
As defined in the Investment Company Act, we are an "Affiliate" of this portfolio company because we own 5% or more of the portfolio company's outstanding voting securities.

[4]
As defined in the Investment Company Act, we are an "Affiliate" of this portfolio company because we own 5% or more of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). In addition, as defined in the Investment Company Act, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement).

[5]
$3,132 of total commitment of $5,000 remains unfunded as of June 30, 2012.

[6]
Total commitment of $4,400 remains unfunded as of June 30, 2012.

[7]
$0 of total commitment of $10,000 remains unfunded as of June 30, 2012.

[8]
Total commitment of $10,000 remains unfunded as of June 30, 2012.

[9]
$0 of total commitment of $20,000 remains unfunded as of June 30, 2012.

[10]
$2,300 of total commitment of $3,700 remains unfunded as of June 30, 2012.

[11]
Total commitment of $3,400 remains unfunded as of June 30, 2012.

[12]
$0 of total commitment of $2,333 remains unfunded as of June 30, 2012.

[13]
$0 of total commitment of $3,867 remains unfunded as of June 30, 2012.

[14]
$6,500 of total commitment of $10,000 remains unfunded as of June 30, 2012.

[15]
$14,056 of total commitment of $15,500 remains unfunded as of June 30, 2012.

[16]
Total commitment of $2,500 remains unfunded as of June 30, 2012.

[17]
Total commitment of $28,500 remains unfunded as of June 30, 2012.

[18]
$8,065 of total commitment of $10,000 remains unfunded as of June 30, 2012.

[19]
Total commitment of $50,000 remains unfunded as of June 30, 2012.

[20]
$13,812 of total commitment of $25,000 remains unfunded as of June 30, 2012.

[21]
Total commitment of $15,000 remains unfunded as of June 30, 2012.

[22]
$1,875 of total commitment of $2,000 remains unfunded as of June 30, 2012.

[23]
$2,325 of total commitment of $2,500 remains unfunded as of June 30, 2012.

[24]
$6,912 of total commitment of $30,000 remains unfunded as of June 30, 2012.

[25]
$0 of total commitment of $25,000 remains unfunded as of June 30, 2012.

[26]
Total commitment of $10,000 remains unfunded as of June 30, 2012.

[27]
$0 of total commitment of $2,500 remains unfunded as of June 30, 2012.

[28]
$9,500 of total commitment of $15,000 remains unfunded as of June 30, 2012.

[29]
Total commitment of $3,000 remains unfunded as of June 30, 2012.

[30]
$9,060 of total commitment of $10,000 remains unfunded as of June 30, 2012.

[31]
$9,000 of total commitment of $10,000 remains unfunded as of June 30, 2012.

[32]
Total commitment of $20,000 remains unfunded as of June 30, 2012.

[33]
$8,325 of total commitment of $9,000 remains unfunded as of June 30, 2012.

[34]
$1,647 of total commitment of $4,109 remains unfunded as of June 30, 2012.

[35]
$324 of total commitment of $972 remains unfunded as of June 30, 2012.

[36]
Total commitment of $50,000 remains unfunded as of June 30, 2012.

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Table of Contents

[37]
$200 of total commitment of $10,000 remains unfunded as of June 30, 2012.

[38]
$1,875 of total commitment of $2,813 remains unfunded as of June 30, 2012.

[39]
Total commitment of $2,250 remains unfunded as of June 30, 2012.

[40]
Total commitment of $17,572 remains unfunded as of June 30, 2012.

[41]
$0 of total commitment of $3,750 remains unfunded as of June 30, 2012.

[42]
$3,461 of total commitment of $4,667 remains unfunded as of June 30, 2012.

[43]
Total commitment of $4,666 remains unfunded as of June 30, 2012.

[44]
Total commitment of $9,000 remains unfunded as of June 30, 2012.

[45]
$0 of total commitment of $1,482 remains unfunded as of June 30, 2012.

[46]
Total commitment of $10,455 remains unfunded as of June 30, 2012.

[47]
Total commitment of $5,000 remains unfunded as of June 30, 2012.

[48]
Total commitment of $10,000 remains unfunded as of June 30, 2012.

[49]
Total commitment of $18,500 remains unfunded as of June 30, 2012.

[50]
Total commitment of $50,000 remains unfunded as of June 30, 2012.

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Table of Contents

        Set forth below is a brief description of each portfolio company in which we have made an investment that represents greater than 5% of our total assets as of June 30, 2012.

Senior Secured Loan Fund LLC

        The Senior Secured Loan Fund LLC, or SSLP, was formed in December 2007. Ares Capital and GE co-invest through the SSLP in first lien senior secured loans of middle-market companies and, as of June 30, 2012, the SSLP had approximately $7.7 billion of available capital, approximately $5.4 billion in aggregate principal amount of which was funded as of June 30, 2012. At June 30, 2012, we had agreed to make available to the SSLP approximately $1.5 billion, of which approximately $1.1 billion was funded. The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and GE (with approval from a representative of each required). The SSLP consists of a diverse portfolio of loans to 34 different borrowers as of June 30, 2012 and the portfolio companies in the SSLP are in industries similar to the companies in Ares Capital's portfolio.

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MANAGEMENT

        Our business and affairs are managed under the direction of our board of directors. The responsibilities of the board of directors include, among other things, the quarterly valuation of our assets. The size of our board of directors is set at nine members and currently consists of one vacant position, four directors who are "interested persons" of Ares Capital as defined in Section 2(a)(19) of the Investment Company Act and four directors who are not such "interested persons." We refer to the directors who are non-interested persons as our "independent directors." We refer to our directors who are "interested persons" as our "interested directors." Our board of directors elects our officers, who serve at the discretion of the board of directors. The board of directors maintains an audit committee and nominating and governance committee, and may establish additional committees from time to time as necessary.

        The vacancy on our board of directors occurred as a result of the July 9, 2012 death of Kenneth R. Heitz, one of our independent directors. On July 9, 2012, we notified the NASDAQ Global Select Market that, as a result of Mr. Heitz's death, we are no longer in compliance with NASDAQ Marketplace Rule 5605(b)(1) because our board of directors is no longer comprised of a majority of independent directors, and that we intend to rely on the cure provisions of Rule 5605(b)(1)(A), which provides that we have until the earlier of our next annual shareholders meeting or July 9, 2013 to comply with the above-referenced listing requirements.

EXECUTIVE OFFICERS AND BOARD OF DIRECTORS

        Under our charter and bylaws, our directors are divided into three classes. Directors are elected for staggered terms of three years each, with the term of office of only one of these three classes of directors expiring each year. Each director will hold office for the term to which he or she is elected and until his or her successor is duly elected and qualifies.

Directors

        Information regarding the board of directors is as follows:

Name
  Age   Position   Director
Since
  Expiration
of Term
 

Independent Directors

                     

Ann Torre Bates

  54   Director     2010     2014  

Frank E. O'Bryan

  78   Director     2005     2013  

Gregory W. Penske

  50   Director     2009     2012  

Eric B. Siegel

  54   Director     2004     2013  

Interested Directors

                     

Michael J. Arougheti

  39   President and Director     2009     2014  

Antony P. Ressler

  51   Director     2010     2013  

Robert L. Rosen

  65   Director     2004     2012  

Bennett Rosenthal

  48   Chairman and Director     2004     2012  

        The address for Mr. Arougheti and Mr. Rosen is c/o Ares Capital Corporation, 245 Park Avenue, 44th Floor, New York, New York 10167. The address for each other director is c/o Ares Capital Corporation, 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.

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Executive Officers and Certain Other Officers Who Are Not Directors

        Information regarding our executive officers who are not directors is as follows:

Name
  Age   Position

Joshua M. Bloomstein

  38   Vice President, General Counsel and Secretary

Richard S. Davis

  53   Treasurer

Miriam Krieger

  36   Chief Compliance Officer

Scott C. Lem

  34   Assistant Treasurer

Daniel F. Nguyen

  40   Vice President

Penni F. Roll

  46   Chief Financial Officer

Michael D. Weiner

  59   Vice President

        The address for Mr. Bloomstein and Ms. Roll is c/o Ares Capital Corporation, 245 Park Avenue, 44th Floor, New York, New York 10167. The address for each other executive officer is c/o Ares Capital Corporation, 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.

Biographical Information and Discussion of Experience and Qualifications, etc.

Directors

        We divide our directors into two groups—interested directors and independent directors. Interested directors are "interested persons" as defined in Section 2(a)(19) of the Investment Company Act and independent directors are not "interested persons" as defined in Section 2(a)(19) of the Investment Company Act.

        As described below under "Committees of the Board of Directors—Nominating and Governance Committee," the board of directors has identified certain desired attributes for director nominees. Each of our directors has demonstrated high character and integrity, superior credentials and recognition in his or her respective field and the relevant expertise and experience upon which to be able to offer advice and guidance to our management. Each of our directors also has sufficient time available to devote to the affairs of the Company, is able to work with the other members of the board of directors and contribute to the success of the Company and can represent the long-term interests of the Company's stockholders as a whole. Our directors have been selected such that the board of directors represents a range of backgrounds and experience. Set forth below is biographical information of each director and in the paragraph immediately following such director's biographical information, a paragraph discussing such director's particular experience, qualifications, attributes or skills that lead us to conclude, as of the date of this prospectus, that such individual should serve as a director, in light of the Company's business and structure.

Independent Directors

        Ann Torre Bates, 54, has served as a director of the Company since 2010 and is currently the chairperson of the audit committee. Ms. Bates has been a strategic and financial consultant since 1997, principally with respect to corporate finance matters. From 1995 to 1997, Ms. Bates served as Executive Vice President, Chief Financial Officer and Treasurer of NHP, Inc., a national real estate services firm. From 1991 to 1995, Ms. Bates was Vice President and Treasurer of US Airways, and held various finance positions from 1988 to 1991. Ms. Bates holds a BBA in Accountancy from the University of Notre Dame and an MBA in Finance and Economics from Cornell University. She currently serves on the board of directors of the Franklin Mutual Series and Recovery Funds, the Franklin Templeton Funds and SLM Corporation (Sallie Mae). She served as a director of Allied Capital Corporation from 2003 to 2010.

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        Ms. Bates' experience as a previous director of Allied Capital Corporation provides the board of directors with important knowledge and continuity in dealing with matters related to the integration of Allied Capital Corporation's business into that of the Company. In addition, Ms. Bates' experience serving as a director of other public companies in the financial sector, as well as her past experience as a chief financial officer, provides the board of directors and, specifically, the audit committee of the board of directors with valuable knowledge and insight in the financial services sector as well as experience in financial and accounting matters.

        Frank E. O'Bryan, 78, has served as a director of the Company since 2005 and currently serves on the audit committee and the nominating and governance committee. Mr. O'Bryan served as Chairman of the Board of WMC Mortgage Company from 1997 to 2003 and as a Vice Chairman until 2004, when the company was sold to General Electric Corporation. Mr. O'Bryan served as Vice Chairman of Shearson/American Express Mortgage Corp. (formerly Western Pacific Financial) and as a Director of Shearson American Express from 1981 to 1985 and prior to that served as a Director and senior executive of Shearson Hayden Stone from 1979 to 1981. Mr. O'Bryan holds a BS in Business from the University of Arizona. Mr. O'Bryan has been a Director of The First American Corporation since 1994. Mr. O'Bryan is a past member of the boards of directors of Damon Corporation, Grubb & Ellis, Standard Pacific Corporation and Farmers & Merchants Bank.

        Mr. O'Bryan's long and varied business career, including his service as a director of numerous public and private companies, allows him to provide key experience and insight, especially with respect to issues specific to boards of directors of public companies and companies in the financial services industry. Mr. O'Bryan also provides valuable knowledge and expertise in financial and accounting matters to the board of directors from his service on the audit committees of The First American Corporation and Standard Pacific Corporation.

        Gregory W. Penske, 50, has served as a director of the Company since 2009 and is currently the chairperson of the nominating and governance committee. Mr. Penske has served as President and CEO of Penske Motor Group, Inc., an automotive group that owns and operates Toyota, Lexus and Scion dealerships in California, since 1993. Mr. Penske was the former President and CEO of Penske Motorsports, Inc., which operated racetracks across the country. Penske Motorsports, Inc. was publicly traded on the NASDAQ exchange and was thereafter sold to International Speedway Corporation in 1999. Mr. Penske serves as a member of the boards of directors for Penske Corporation, the Los Angeles Sports Council and Friends of Golf, Inc. He is a member of the Toyota Parts and Service Advisory Council, the Toyota President's Cabinet and the Toyota Board of Governors. Mr. Penske is also a former member of the boards of directors of the Alltel Corporation, International Speedway Corporation and the Southern California Committee for the Olympic Games and the Board of Trustees of the John Thomas Dye School. Mr. Penske holds a BS in Business from Cornell University.

        Because of Mr. Penske's experience as the chief executive officer of both public and private companies, as well as his previous service as director of several other publicly traded companies, he is able to provide the board of directors with the perspective of an experienced executive officer and is able to give insight related to the management and operations of a publicly traded company.

        Eric B. Siegel, 54, has served as a director of the Company since 2004 and has been the lead independent director of the board of directors since 2010. Mr. Siegel currently serves on the audit committee and the nominating and governance committee. Since 1995, Mr. Siegel has been an independent business consultant providing advice through a limited liability company owned by Mr. Siegel, principally with respect to acquisition strategy and structuring, and the subsequent management of acquired entities. Mr. Siegel is currently a member of the Advisory Board of and Special Advisor to the Chairman of the Milwaukee Brewers Baseball Club and a Director and Chairman of the Executive Committee of El Paso Electric Company, a NYSE publicly traded utility company. Mr. Siegel is also a past member of the boards of directors of a number of public and private

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companies, including Kerzner International Ltd. until it went private in 2006. Mr. Siegel rejoined the board of Kerzner International Ltd., currently a private company, in 2008. Mr. Siegel is a retired limited partner of Apollo Advisors, L.P. and Lion Advisors, L.P., private investment management firms. Mr. Siegel is a past member of the Board of Trustees of the Marlborough School, a member of the board of directors of the Friends of the Los Angeles Saban Free Clinic and a board member of Reprise Theatre Company, a non-profit theatre organization. Mr. Siegel holds his BA summa cum laude and Phi Beta Kappa and JD Order of the Coif from the University of California at Los Angeles.

        Mr. Siegel's experience practicing as a corporate lawyer provides valuable insight to the board of directors on regulatory and risk management issues. In addition, Mr. Siegel's experience as a partner in investment firms and over 20 years of experience serving as a director for both public and private companies provide industry-specific knowledge and expertise to the board of directors.

Interested Directors

        Michael J. Arougheti, 39, has served as President of the Company since May 2004 and as a director of the Company since 2009. Mr. Arougheti joined Ares Management in May 2004 and is a Senior Partner in the Ares Private Debt Group. He is a member of the Executive Committee of Ares Partners Management Company LLC. Mr. Arougheti is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group, ACE (Ares' European private debt business) and Ares Commercial Real Estate Management LLC, the manager of Ares Commercial Real Estate Corporation. Mr. Arougheti may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. In addition, Mr. Arougheti is the Chairman of Ares Commercial Real Estate Corporation's board of directors. From 2001 to 2004, Mr. Arougheti was employed by Royal Bank of Canada, where he was a Managing Partner of the Principal Finance Group of RBC Capital Partners and a member of the firm's Mezzanine Investment Committee. At RBC Capital Partners, Mr. Arougheti oversaw an investment team that originated, managed and monitored a diverse portfolio of middle market leveraged loans, senior and junior subordinated debt, preferred equity and common stock and warrants on behalf of RBC and other third-party institutional investors. Mr. Arougheti joined Royal Bank of Canada in October 2001 from Indosuez Capital, where he was a Principal, responsible for originating, structuring and executing leveraged transactions across a broad range of products and asset classes. Mr. Arougheti also sat on the firm's Investment Committee. Prior to joining Indosuez in 1994, Mr. Arougheti worked at Kidder, Peabody & Co., where he was a member of the firm's Mergers and Acquisitions Group. In addition to serving as Chairman of the board of directors of Ares Commercial Real Estate Corporation, Mr. Arougheti also serves on the boards of directors of Investor Group Services, Riverspace Arts and Operation Hope. Mr. Arougheti received a BA in Ethics, Politics and Economics, cum laude, from Yale University.

        Mr. Arougheti's depth of experience in investment management, leveraged finance and financial services, as well as his intimate knowledge of the Company's business and operations, gives the board of directors valuable industry-specific knowledge and expertise on these and other matters.

        Mr. Arougheti is an interested director because he is the President of the Company, is on the Investment Committee of Ares Capital Management, the Company's investment adviser, and is a member and serves on the Executive Committee of Ares Partners Management Company LLC, which indirectly controls Ares Management, the managing member of the investment adviser.

        Antony P. Ressler, 51, has served as a director of the Company since April 2010. Mr. Ressler co-founded Ares Management in 1997 and is a Senior Partner in the Ares Private Equity Group and sits on the Executive Committee of Ares Partners Management Company LLC and Ares Management. Mr. Ressler is a Senior Advisor to the Ares Capital Markets Group and is a member of the Investment Committees of funds managed by the Ares Private Equity Group and certain funds managed by the

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Ares Capital Markets Group. Mr. Ressler may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. Prior to Ares, Mr. Ressler was a co-founder of Apollo Management, L.P. in 1990 and was a member of the original six-member management team. Mr. Ressler oversaw and led the capital markets activities of Apollo Management, L.P. and Lion Advisors, L.P. from 1990 until 1997, particularly focusing on high yield bonds, leveraged loans and other fixed income assets. Prior to 1990, Mr. Ressler served as a Senior Vice President in the High Yield Bond Department of Drexel Burnham Lambert Inc., with responsibility for the New Issue/Syndicate Desk. Mr. Ressler currently serves on the board of directors of Air Lease Corporation. Mr. Ressler is also a member of the Executive Committee of the Board of Trustees of the Cedars-Sinai Medical Center, is Finance Chair and a member of the Executive Committee of the Los Angeles County Museum of Art (LACMA), and is Founder and Co-Chairman of the Alliance for College-Ready Public Schools, a high performing group of eighteen charter high schools and middle schools based in Los Angeles. Mr. Ressler is also one of the founding members of the board and Finance Chair of the Painted Turtle Camp, a southern California based organization (affiliated with Paul Newman's Hole in the Wall Association), which was created to serve children dealing with chronic and life threatening illnesses by creating memorable, old-fashioned camping experiences. Mr. Ressler is also a former member of the boards of directors of Allied Waste Industries, Inc. and WCA Waste Corporation. Mr. Ressler received his BSFS from Georgetown University's School of Foreign Service and received his MBA from Columbia University's Graduate School of Business.

        Mr. Ressler's intimate knowledge of the business and operations of Ares Management and the Company, his extensive experience in the financial industry and as a partner in investment firms and his service as a director of other public companies provides industry-specific knowledge and expertise to the board of directors. Mr. Ressler is an interested director because he is a member and serves on the Executive Committee of Ares Partners Management Company LLC, which indirectly controls Ares Management, the managing member of the investment adviser.

        Robert L. Rosen, 65, has served as a director of the Company since 2004. Mr. Rosen is an Operating Advisor to the Ares Private Equity Group. Mr. Rosen is managing partner of RLR Capital Partners, which invests principally in the securities of publicly traded North American companies. From 2005 to 2008, Mr. Rosen was a Managing Partner of RLR Focus Fund LP, an "active value" hedge fund. From 1995 to 2001, Mr. Rosen served as an exclusive consultant to Apollo Management, L.P. In 1998, Mr. Rosen founded National Financial Partners (NYSE: "NFP"), an independent provider of financial services to high net worth individuals and small to medium-sized corporations. He served as NFP's CEO from 1998 to 2000 and as its Chairman until January 2002. From 1987 to 1993, Mr. Rosen was a Managing Partner of Ballantrae Partners, L.P., an investment partnership. From 1989 to 1993, Mr. Rosen was Chairman and CEO of Damon Corporation, a leading healthcare and laboratory testing company that was ultimately sold to Quest Diagnostics. From 1983 to 1987, Mr. Rosen was Vice Chairman of Maxxam Group. Prior to that, Mr. Rosen spent twelve years at Shearson American Express in positions in research, investment banking and senior management, and for two years was Assistant to Sanford Weill, the then Chairman and CEO of Shearson. In 2012, Mr. Rosen joined the Board of Directors of Ares Commercial Real Estate Corporation and Sapient Corporation. Mr. Rosen is a member of the NYU Stern School of Business Board of Overseers and a member of the Council on Foreign Relations. Mr. Rosen received an undergraduate degree from City University of New York and an M.B.A. in finance from NYU's Stern School.

        Mr. Rosen's over 31 years of experience as a senior executive of financial services, healthcare services and private equity funds brings broad financial industry and specific investment management insight and experience to the board of directors. Mr. Rosen's expertise in finance, which served as the basis for his appointment as an Adjunct Professor of Finance at Fordham University Graduate School

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of Business, provides valuable knowledge to the board of directors. Mr. Rosen is an interested director because he has entered into a strategic advisory relationship with Ares.

        Bennett Rosenthal, 48, has served as Chairman of our board of directors since 2004. Mr. Rosenthal joined Ares Management in 1998 and is a Senior Partner in and the Co-Head of the Ares Private Equity Group. He is a member of the Executive Committee of Ares Partners Management Company LLC. Mr. Rosenthal also is a member of the Investment Committees of Ares Capital Management and the Ares Private Debt Group. Mr. Rosenthal may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. Prior to joining Ares, Mr. Rosenthal was Managing Director in the Global Leveraged Finance Group of Merrill Lynch and was responsible for originating, structuring and negotiating leveraged loan and high yield financings. Mr. Rosenthal was also a senior member of Merrill Lynch's Leveraged Transaction Commitment Committee. Mr. Rosenthal is a member of the following boards of directors: AmeriQual Management, Inc., AOT Bedding Holdings Corp., Aspen Dental Management, Inc., City Ventures, LLC, Jacuzzi Brands Inc., Nortek, Inc., Serta, Inc. and Simmons Bedding Company. Mr. Rosenthal is also a former member of the board of directors of Hanger Orthopedic Group, Inc. and Maidenform Brands, Inc. Mr. Rosenthal graduated summa cum laude with a BS in Economics from the University of Pennsylvania's Wharton School of Business where he also received his MBA with distinction.

        Mr. Rosenthal's intimate knowledge of the business and operations of Ares Management, extensive experience in the financial industry as well as the management of private equity and debt investments in particular and experience as a director of other public and private companies not only give the board of directors valuable insight but also position him well to continue to serve as the chairman of our board of directors. Mr. Rosenthal is an interested director because he is on the Investment Committee of Ares Capital Management, the Company's investment adviser, and is a member and serves on the Executive Committee of Ares Partners Management Company LLC, which indirectly controls Ares Management, the managing member of the investment adviser.

Executive Officers and Certain Other Officers Who Are Not Directors

        Joshua M. Bloomstein, 38, serves as the General Counsel, Vice President and Secretary of the Company. He joined Ares Management in November 2006 and currently serves as the Deputy General Counsel of Ares Management, and may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. Prior to joining Ares, Mr. Bloomstein was an associate with Latham & Watkins LLP specializing in leveraged buyouts and private equity investments as well as general partnership and corporate matters. Mr. Bloomstein graduated magna cum laude with a BA in Political Science from the State University of New York at Albany and received a JD degree, magna cum laude, from the University of Miami School of Law.

        Richard S. Davis, 53, serves as Treasurer of the Company. He joined Ares Management in June 2006 and currently serves as Chief Operating Officer of Ares Management, and may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. Mr. Davis has also served as Chief Financial Officer of Ares Commercial Real Estate Corporation since 2012. He is a member of the Investment Committee of Ares Commercial Real Estate Management LLC, the manager of Ares Commercial Real Estate Corporation. From March 2007 to December 2010, Mr. Davis served as the Company's Chief Financial Officer. From December 1997 to May 2006, Mr. Davis was with Arden Realty, Inc., a real estate investment trust and formerly the largest publicly traded office owner in Southern California, serving as its Executive Vice President and Chief Financial Officer since July 2000. From 1996 to 1997, Mr. Davis was with Catellus Development Corporation, where he was responsible for accounting and finance for the asset management and development divisions. From 1985 to 1996,

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Mr. Davis served as a member of the audit staff of both KPMG LLP and Price Waterhouse LLP. Mr. Davis is a Certified Public Accountant (Inactive). Mr. Davis received a BS in Accounting from the University of Missouri at Kansas City.

        Miriam Krieger, 36, serves as Chief Compliance Officer of the Company. She joined Ares Management in April 2010 and currently serves as Ares Management's Deputy Chief Compliance Officer—Private Debt, and may from time to time, serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. From March 2008 until joining Ares, Ms. Krieger was Chief Compliance Officer and Corporate Secretary of Allied Capital Corporation, where she also served as Executive Vice President from August 2008 until April 2010 and as Senior Vice President from March 2008 to August 2008. Ms. Krieger also served as Senior Vice President and Chief Compliance Officer at MCG Capital Corporation, a business development company, from 2006 to 2008 and Vice President and Assistant General Counsel from 2004 to 2006. From 2001 to 2004, Ms. Krieger was an associate in the Financial Services Group of the law firm of Sutherland Asbill & Brennan LLP. Ms. Krieger graduated with a BA in Economics and Political Science from Wellesley College and received a JD and an MA in Economics from Duke University.

        Scott C. Lem, 34, serves as Assistant Treasurer of the Company. He joined Ares Management in July 2003 and currently serves as Chief Accounting Officer of Ares Capital Management, and may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. From July 2003 to December 2008, Mr. Lem served as Controller of Ares Management. Previously, Mr. Lem was with Ernst & Young LLP and Arthur Andersen LLP, most recently as a Senior Associate conducting audits for clients across several industries including entertainment, hospitality and real estate. Mr. Lem graduated summa cum laude with a BS in Accounting from the University of Southern California's Leventhal School of Accounting and summa cum laude with a BS in Business Administration from the University of Southern California's Marshall School of Business. Mr. Lem has also received an MBA in Finance from UCLA's Anderson School of Management. Mr. Lem is a Certified Public Accountant (Inactive).

        Daniel F. Nguyen, 40, serves as a Vice President of the Company. He joined Ares Management in August 2000 and currently serves as an Executive Vice President and the Chief Financial Officer of Ares Management, and may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. Mr. Nguyen has also served as Treasurer of Ares Commercial Real Estate Corporation since 2012. From March 2007 to December 2010, Mr. Nguyen served as Treasurer of the Company and from August 2004 to March 2007, as Chief Financial Officer of the Company. From 1996 to 2000, Mr. Nguyen was with Arthur Andersen LLP, where he was in charge of conducting business audits on numerous financial clients, performing due diligence investigation of potential mergers and acquisitions, and analyzing changes in accounting guidelines for derivatives. At Arthur Andersen LLP, Mr. Nguyen also focused on treasury risk management and on mortgage backed securities and other types of structured financing. Mr. Nguyen graduated with a BS in Accounting from the University of Southern California's Leventhal School of Accounting and received an MBA in Global Business from Pepperdine University's Graziadio School of Business and Management. Mr. Nguyen also studied European Business at Oxford University as part of the MBA curriculum. Mr. Nguyen is a Chartered Financial Analyst and a Certified Public Accountant.

        Penni F. Roll, 46, serves as the Chief Financial Officer of the Company. She joined Ares Management in April 2010 as Executive Vice President-Finance of Ares Capital Management and may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. Ms. Roll served as Chief Financial Officer of Allied Capital Corporation from 1998 until April 2010, when Allied Capital Corporation was acquired by the Company. Ms. Roll joined Allied Capital Corporation in 1995 as its

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Controller after serving as a Manager in KPMG LLP's financial services practice. Ms. Roll graduated magna cum laude with a BSBA in Accounting from West Virginia University. Ms. Roll is a Certified Public Accountant (Inactive).

        Michael D. Weiner, 59, serves as Vice President of the Company. Mr. Weiner is also Vice President, General Counsel, and Secretary of Ares Management, and may from time to time serve as an officer, director or principal of entities affiliated with Ares Management or of investment funds managed by Ares Management and its affiliates. Mr. Weiner has also served as Vice President and General Counsel of Ares Commercial Real Estate Corporation since 2012. From September 2006 to January 2010, Mr. Weiner served as General Counsel of the Company. Mr. Weiner joined Ares Management in September 2006. Previously, Mr. Weiner served as General Counsel to Apollo Management L.P. and had been an officer of the corporate general partners of Apollo since 1992. Prior to joining Apollo, Mr. Weiner was a partner in the law firm of Morgan, Lewis & Bockius specializing in corporate and alternative financing transactions, securities law as well as general partnership, corporate and regulatory matters. Mr. Weiner has served on the boards of directors of several corporations. Mr. Weiner also serves on the Board of Governors of the Cedars Sinai Medical Center in Los Angeles. Mr. Weiner graduated with a BS in Business and Finance from the University of California at Berkeley and a JD from the University of Santa Clara.

INVESTMENT COMMITTEE

        Information regarding the members of Ares Capital Management's investment committee is as follows:

Name
  Age   Position

Michael J. Arougheti

  39   President and Director of the Company, Member of Investment Committee, Portfolio Manager

Eric B. Beckman

  46   Member of Investment Committee, Portfolio Manager

R. Kipp deVeer

  39   Member of Investment Committee, Portfolio Manager

Mitchell Goldstein

  45   Member of Investment Committee, Portfolio Manager

John Kissick

  70   Member of Investment Committee, Portfolio Manager

Bennett Rosenthal

  48   Chairman and Director of the Company, Member of Investment Committee, Portfolio Manager

David Sachs

  53   Member of Investment Committee, Portfolio Manager

Michael L. Smith

  41   Member of Investment Committee, Portfolio Manager

        The principal business address for Messrs. Arougheti, deVeer, Goldstein and Smith is c/o Ares Management LLC, 245 Park Avenue, 44th Floor, New York, New York 10167. The principal business address for Messrs. Beckman, Kissick, Rosenthal and Sachs is c/o Ares Management LLC, 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.

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Members of Ares Capital Management's Investment Committee Who Are Not Directors or Officers of the Company

        Eric B. Beckman—Mr. Beckman joined Ares Management in 1998 and serves as a Senior Partner in the Ares Private Debt Group of Ares Management LLC. He is a member of the Investment Committees of Ares Capital Management and the Ares Private Debt Group. Before joining the Ares Private Debt Group, he served as a Partner in the Ares Private Equity Group and a Principal in Ares' mezzanine and special situations effort. While at Ares, he has been responsible for originating, structuring and managing investments in senior loans, mezzanine debt, private equity and distressed securities across a number of industries. Mr. Beckman joined Ares from Goldman, Sachs & Co. where he specialized in leveraged loan and high yield bond financings. While at Goldman Sachs, he was also involved in raising and managing the West Street Bridge Loan Fund, and in certain restructuring advisory and distressed lending activities. Earlier in his career he worked in the Office of the Mayor and for the City Council of New York. Mr. Beckman is the chair of the Los Angeles Advisory Committee and a member of the national board of directors of the Posse Foundation, a college access program for inner city youth. He graduated summa cum laude with a BA in Political Theory and Economics from Cornell University, and received his JD from the Yale Law School where he was a senior editor of the Yale Law Journal.

        R. Kipp deVeer—Mr. deVeer joined Ares Management in May 2004 and serves as a Senior Partner in the Private Debt Group of Ares Management LLC. He is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group and ACE, Ares' European private debt business. Mr. deVeer is also a director of ACE. Prior to joining Ares, Mr. deVeer was a partner at RBC Capital Partners, a division of Royal Bank of Canada, which led the firm's middle-market financing and principal investment business. Mr. deVeer joined RBC in October 2001 from Indosuez Capital, where he was Vice President in the Merchant Banking Group. Mr. deVeer has also worked at J.P. Morgan and Co., both in the Special Investment Group of J.P. Morgan Investment Management, Inc. and the Investment Banking Division of J.P. Morgan Securities Inc. Mr. deVeer received a BA from Yale University and an MBA from Stanford University's Graduate School of Business.

        Mitchell Goldstein—Mr. Goldstein joined Ares Management in May 2005 and serves as a Senior Partner in the Ares Private Debt Group. He is a member of the Investment Committees of Ares Capital Management and the Ares Private Debt Group. Prior to joining Ares, Mr. Goldstein worked at Credit Suisse First Boston, where he was a Managing Director in the Financial Sponsors Group. At CSFB, Mr. Goldstein was responsible for providing investment banking services to private equity funds and hedge funds with a focus on M&A and restructurings as well as capital raisings, including high yield, bank debt, mezzanine debt, and IPOs. Mr. Goldstein joined CSFB in 2000 at the completion of the merger with Donaldson, Lufkin & Jenrette. From 1998 to 2000, Mr. Goldstein was at Indosuez Capital, where he was a member of the Investment Committee and a Principal, responsible for originating, structuring and executing leveraged transactions across a broad range of products and asset classes. From 1993 to 1998, Mr. Goldstein worked at Bankers Trust. Mr. Goldstein graduated summa cum laude from the State University of New York at Binghamton with a BS in Accounting, received an MBA from Columbia University's Graduate School of Business and is a Certified Public Accountant.

        John Kissick—Mr. Kissick is a Senior Partner in the Ares Private Equity Group. Mr. Kissick is also a Senior Advisor to the Ares Capital Markets Group and is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group and all Ares capital markets and private equity funds. Prior to Ares, Mr. Kissick was a co-founder of Apollo Management, L.P. in 1990 and a member of the original six-member management team. Together with Mr. Ressler, Mr. Kissick oversaw and led the capital markets activities of Apollo Management, L.P. and Lion Advisors, L.P. from 1990 until 1997, particularly focusing on high yield bonds, leveraged loans and other

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fixed income assets. Prior to 1990, Mr. Kissick served as a Senior Executive Vice President of Drexel Burnham Lambert Inc., where he began in 1975, eventually heading its Corporate Finance Department. Mr. Kissick serves on the boards of the Cedars-Sinai Medical Center in Los Angeles, the Stanford University Athletic Department and its Initiative for Improving K-12 Education, and MLA Partner Schools, which helps economically disadvantaged children graduate from high school through a variety of mentoring and other programs. Mr. Kissick graduated from Yale University with a BA in Economics and with highest honors from the Stanford Business School with an MBA in Finance.

        David Sachs—Mr. Sachs is a Senior Advisor in the Ares Capital Markets Group. Mr. Sachs is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group, Ares Commercial Real Estate Management LLC, the manager of Ares Commercial Real Estate Corporation, and all other Ares funds. From 1994 to 1997, Mr. Sachs was a principal of Onyx Partners, Inc. specializing in merchant banking and related capital raising activities in the private equity and mezzanine debt markets. From 1990 to 1994, Mr. Sachs was employed by Taylor & Co., an investment manager providing investment advisory and consulting services to members of the Bass Family of Fort Worth, Texas. From 1984 to 1990, Mr. Sachs was with Columbia Savings and Loan Association, most recently as Executive Vice President, responsible for all asset-liability management as well as running the Investment Management Department. Mr. Sachs serves on the Board of Directors of Terex Corporation. Mr. Sachs serves on the McCormick Advisory Council at Northwestern University. Mr. Sachs graduated from Northwestern University with a BS in Industrial Engineering and Management Science.

        Michael L. Smith—Mr. Smith joined Ares Management in May 2004 and serves as a Senior Partner in the Ares Private Debt Group. He is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group and Ares Commercial Real Estate Management LLC, the manager of Ares Commercial Real Estate Corporation. Prior to joining Ares, Mr. Smith was a Partner at RBC Capital Partners, a division of Royal Bank of Canada, which led the firm's middle-market financing and principal investment business. Mr. Smith joined RBC in October 2001 from Indosuez Capital, where he was a Vice President in the Merchant Banking Group. Previously, Mr. Smith worked at Kenter, Glastris & Company, and at Salomon Brothers Inc., in their Debt Capital Markets Group and Financial Institutions Group. Mr. Smith received a BS in Business Administration, cum laude, from the University of Notre Dame and a Masters in Management from Northwestern University's Kellogg Graduate School of Management.

BOARD LEADERSHIP STRUCTURE

        Our board of directors monitors and performs an oversight role with respect to the business and affairs of the Company, including with respect to investment practices and performance, compliance with regulatory requirements and the services, expenses and performance of service providers to the Company. Among other things, our board of directors approves the appointment of our investment adviser, administrator and officers, reviews and monitors the services and activities performed by our investment adviser, administrator and officers and approves the engagement, and reviews the performance of, our independent registered public accounting firm.

        Under the Company's bylaws, our board of directors may designate a chairman to preside over the meetings of the board of directors and meetings of the stockholders and to perform such other duties as may be assigned to him by the board of directors. We do not have a fixed policy as to whether the chairman of the board of directors should be an independent director and believe that our flexibility to select our chairman and reorganize our leadership structure from time to time is in the best interests of the Company and its stockholders.

        Presently, Mr. Rosenthal serves as the chairman of our board of directors. Mr. Rosenthal is an interested director because he is on the investment committee of our investment adviser and is a

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member of and serves on the Executive Committee of Ares Partners Management Company LLC ("APMC"), the indirect parent of Ares Management, the managing member of our investment adviser. We believe that Mr. Rosenthal's history with the Company, familiarity with the Ares investment platform and extensive experience in the management of private equity and debt investments qualifies him to serve as the chairman of our board of directors. Moreover, we believe that we are best served through our existing leadership structure with Mr. Rosenthal as chairman of our board of directors, as Mr. Rosenthal's relationship with our investment adviser provides an effective bridge between our board of directors and our investment adviser, thus ensuring an open dialogue between our board of directors and our investment adviser and that both groups act with a common purpose.

        The independent directors have designated a lead independent director whose duties include, among other things, chairing executive sessions of the independent directors, acting as a liaison between the independent directors and the chairman of the board of directors and between the independent directors and management, facilitating communication among the independent directors and the Company's counsel, reviewing and commenting on board and committee meeting agendas and calling additional meetings of the independent directors as appropriate. In August 2010, the board of directors designated and appointed Mr. Siegel as the lead independent director and Mr. Siegel has served as lead independent director since that time.

        We believe that board leadership structures must be evaluated on a case by case basis and that our existing board leadership structure is appropriate. However, we re-examine our corporate governance policies on an ongoing basis to ensure that they continue to meet the Company's needs.

BOARD'S ROLE IN RISK OVERSIGHT

        Our board of directors performs its risk oversight function primarily through (a) its two standing committees, which report to the entire board of directors and are comprised solely of independent directors and (b) monitoring by our Chief Compliance Officer in accordance with our compliance policies and procedures.

        As described below in more detail under "Committees of the Board of Directors," the audit committee and the nominating and governance committee assist the board of directors in fulfilling its risk oversight responsibilities. The audit committee's risk oversight responsibilities include overseeing the Company's accounting and financial reporting processes, the Company's systems of internal controls regarding finance and accounting and audits of the Company's financial statements and discussing with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies. The nominating and governance committee's risk oversight responsibilities include selecting, researching and nominating directors for election by our stockholders, developing and recommending to our board of directors a set of corporate governance principles and overseeing the evaluation of our board of directors and its committees. Both the audit committee and the nominating and governance committee consist solely of independent directors.

        Our board of directors also performs its risk oversight responsibilities with the assistance of the Chief Compliance Officer. Our Chief Compliance Officer prepares a written report annually discussing the adequacy and effectiveness of the compliance policies and procedures of the Company and certain of its service providers. The Chief Compliance Officer's report, which is reviewed by our board of directors, addresses at a minimum (a) the operation of the compliance policies and procedures of the Company and certain of its service providers since the last report; (b) any material changes to such policies and procedures since the last report; (c) any recommendations for material changes to such policies and procedures as a result of the Chief Compliance Officer's annual review; and (d) any compliance matter that has occurred since the date of the last report about which our board of directors would reasonably need to know to oversee the Company's compliance activities and risks. In

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addition, the Chief Compliance Officer meets separately in executive session with the independent directors periodically, but in no event less than once each year.

        We believe that our board of directors' role in risk oversight is effective and appropriate given the extensive regulation to which we are already subject as a BDC. Specifically, as a BDC we must comply with certain regulatory requirements that control the levels of risk in our business and operations. For example, our ability to incur indebtedness is limited such that our asset coverage must equal at least 200% immediately after each time we incur indebtedness, we generally have to invest at least 70% of our total assets in "qualifying assets" and, subject to certain exceptions, we are not generally permitted to invest in any portfolio company in which Ares or any of its affiliates currently has an investment. See "Regulation." In addition, we have elected to be treated as a RIC under Subchapter M of the Code. As a RIC we must, among other things, meet certain source of income and asset diversification requirements. See "Certain Material U.S. Federal Income Tax Considerations."

        We believe that the extent of our board of directors' (and its committees') role in risk oversight complements our board of directors' leadership structure because it allows our independent directors, through the two fully independent board committees, a lead independent director, executive sessions with the Chief Compliance Officer, auditor and independent valuation providers and otherwise, to exercise oversight of risk without any conflict that might discourage critical review.

        We believe that our board of directors' role in risk oversight must be evaluated on a case by case basis and that our existing board of directors' role in risk oversight is appropriate. However, we re-examine the manner in which the board of directors administers its oversight function on an ongoing basis to ensure that it continues to meet the Company's needs.

COMMITTEES OF THE BOARD OF DIRECTORS

        Our board of directors has established an audit committee and a nominating and governance committee. We do not have a compensation committee because our executive officers do not receive any direct compensation from us. During 2011, the board of directors held 10 formal meetings, the audit committee held seven formal meetings and the nominating and governance committee held three formal meetings. We encourage, but do not require, the directors to attend our annual meeting of stockholders.

Audit Committee

        The members of the audit committee are Ms. Bates and Messrs. O'Bryan and Siegel, each of whom is independent for purposes of the Investment Company Act and The NASDAQ Global Select Market's corporate governance regulations. Ms. Bates currently serves as chairperson of the audit committee. The board of directors has adopted a charter for the audit committee, which is available on our website at www.arescapitalcorp.com. The contents of our website are not intended to be incorporated by reference into this prospectus or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.

        The audit committee is responsible for approving our independent accountants and recommending them to our board of directors (including a majority of the independent directors) for approval and submission to our stockholders for ratification, reviewing with our independent accountants the plans and results of the audit engagement, approving professional services provided by our independent accountants, reviewing the independence of our independent accountants and reviewing the adequacy of our internal accounting controls.

        The audit committee is also responsible for aiding our board of directors in determining the fair value of debt and equity securities that are not publicly traded or for which current market values are not readily available. The audit committee also currently receives input from third parties, including

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independent third-party valuation firms that have been engaged at the direction of the board of directors to value certain portfolio investments. In addition, the audit committee is responsible for discussing with the Company's officers the Company's major financial risk exposures and the steps that the Company has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies.

        Our board of directors has determined that Ms. Bates and Mr. O'Bryan are each an "audit committee financial expert" within the meaning of the rules of the SEC.

Nominating and Governance Committee

        The members of the nominating and governance committee are Messrs. O'Bryan, Penske and Siegel, each of whom is independent for purposes of the Investment Company Act and The NASDAQ Global Select Market's corporate governance regulations. Mr. Penske currently serves as chairman of the nominating and governance committee. Our board of directors has adopted a charter for the nominating and governance committee, which is available on our website at www.arescapitalcorp.com. The nominating and governance committee is responsible for selecting, researching and nominating directors for election by our stockholders, selecting nominees to fill vacancies on the board or a committee of the board, developing and recommending to the board a set of corporate governance principles and overseeing the evaluation of the board and its committees.

        In considering possible candidates for election as a director, the nominating and governance committee takes into account, in addition to such other factors as it deems relevant, the desirability of selecting directors who:

        The nominating and governance committee may consider recommendations for nomination of directors from our stockholders. Nominations made by stockholders must be delivered to or mailed (setting forth the information required by our bylaws) and received at our principal executive offices not earlier than 150 days nor fewer than 120 days in advance of the first anniversary of the date on which we first mailed our proxy materials for the previous year's annual meeting of stockholders; provided, however, that if the date of the annual meeting has changed by more than 30 days from the prior year, the nomination must be received not earlier than the 150th day prior to the date of such annual meeting nor later than the later of (1) the 120th day prior to the date of such annual meeting or (2) the 10th day following the day on which public announcement of such meeting date is first made.

Compensation Committee

        We do not have a compensation committee because our executive officers do not receive any direct compensation from us. However, the compensation payable to our investment adviser pursuant

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to the investment advisory and management agreement is separately approved by a majority of our independent directors in accordance with NASDAQ Marketplace Rule 5605(d).

BENEFICIAL OWNERSHIP OF OUR DIRECTORS

        The following table sets forth the dollar range of our equity securities based on the closing price of our common stock on August 13, 2012 and the number of shares beneficially owned by each of our directors as of December 31, 2011. We are not part of a "family of investment companies," as that term is defined in the Investment Company Act.

Name of Director
  Aggregate Dollar Range
of Equity Securities
in Ares Capital(1)(2)

Independent Directors(3)

   

Ann Torre Bates

  Over $100,000

Frank E. O'Bryan

  Over $100,000

Gregory W. Penske

  None

Eric B. Siegel

  Over $100,000

Interested Directors

   

Michael J. Arougheti(4)

  Over $100,000

Antony P. Ressler(4)

  Over $100,000

Robert L. Rosen

  Over $100,000

Bennett Rosenthal(4)

  Over $100,000

(1)
The dollar ranges are as follows: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000 or over $100,000. The dollar range of our equity securities beneficially owned is calculated based on the closing sales price of our common stock as reported on The NASDAQ Global Select Market as of August 13, 2012.

(2)
Beneficial ownership determined in accordance with Rule 16a-1(a)(2) under the Exchange Act.

(3)
As of December 31, 2011, to the best of our knowledge, except as listed above, none of the independent directors, nor any of their immediate family members, had any interest in us, our investment adviser or any person or entity directly or indirectly controlling, controlled by or under common control with us or our investment adviser.

(4)
Ares Investments Holding LLC ("Ares Investments"), whose indirect parent is APMC, owned 2,859,882 shares of our common stock as of December 31, 2011. APMC is managed by an executive committee comprised of Messrs. Arougheti, Ressler and Rosenthal, David Kaplan, a Senior Partner in and Co-Head of the Ares Private Equity Group, and Gregory Margolies, a Senior Partner in and Head of the Ares Capital Markets Group. Each of the members of the executive committee disclaims beneficial ownership of all shares of our common stock owned by Ares Investments, except to the extent of any indirect pecuniary interest therein. The shares of our common stock held by Ares Investments have been pledged in the ordinary course to secure indebtedness under a credit facility under which Ares Investments is a co-borrower with Ares Management.

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COMPENSATION TABLE

        The following table shows information regarding the compensation received by our directors, none of whom is our employee, for the fiscal year ended December 31, 2011. No compensation is paid by us to interested directors. No information has been provided with respect to our executive officers who are not directors, since our executive officers do not receive any direct compensation from us.

Name
  Fees Earned or
Paid in Cash(1)
  Total  

Independent Directors

             

Ann Torre Bates

  $ 142,208   $ 142,208  

Douglas E. Coltharp(2)

  $ 97,125   $ 97,125  

Kenneth R. Heitz(3)

  $ 36,667   $ 36,667  

Frank E. O'Bryan

  $ 135,500   $ 135,500  

Gregory W. Penske

  $ 137,500   $ 137,500  

Eric B. Siegel

  $ 152,500   $ 152,500  

Interested Directors

             

Michael J. Arougheti

    None     None  

Antony P. Ressler

    None     None  

Robert L. Rosen(4)

    None     None  

Bennett Rosenthal

    None     None  

(1)
For a discussion of the independent directors' compensation, see below.

(2)
Mr. Coltharp's term expired at our 2011 annual meeting of stockholders.

(3)
Mr. Heitz became a director in June 2011 and served on the board of directors until he passed away on July 9, 2012.

(4)
While Mr. Rosen did not receive any compensation from us for the fiscal year ended December 31, 2011, he did receive $130,000 from Ares Management for such period in connection with his service as our director.

        The independent directors receive an annual fee of $125,000. They also receive $2,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairperson of the audit committee receives an additional annual fee of $5,000, the lead independent director receives an additional annual fee of $10,000, and each chairperson of any other committee receives an additional annual fee of $2,000 for his or her additional services in these capacities. In addition, we purchase directors' and officers' liability insurance on behalf of our directors and officers.

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PORTFOLIO MANAGERS

        The following individuals function as portfolio managers primarily responsible for the day-to-day management of our portfolio. The portfolio managers are comprised of (a) the underwriting committee, whose primary responsibility is to recommend investments for approval to the Investment Committee of Ares Capital Management and (b) members of the Investment Committee of Ares Capital Management who are not otherwise on the underwriting committee.

Name
  Position   Length of
Service with
Ares (years)
  Principal Occupation(s) During Past 5 Years

Michael J. Arougheti

  President and Director of the Company     8   Mr. Arougheti joined Ares in May 2004 and has served as President of the Company since May 2004 and a director of the Company since February 2009. He is a founding member of Ares, where he serves as a member of the Executive Committee of APMC, and a Senior Partner in the Ares Private Debt Group. Mr. Arougheti also is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group, ACE (Ares' European private debt business) and Ares Commercial Real Estate Management LLC.

Eric B. Beckman

  Senior Partner in Ares Private Debt Group     14   Mr. Beckman joined Ares in 1998 and serves as a Senior Partner in the Ares Private Debt Group. He is a member of the Investment Committees of Ares Capital Management and the Ares Private Debt Group. Before joining the Ares Private Debt Group, Mr. Beckman served as a Senior Partner of the Ares Private Equity Group and Principal in Ares' mezzanine and special situations efforts.

R. Kipp deVeer

  Senior Partner in Ares Private Debt Group     8   Mr. deVeer joined Ares in May 2004 and serves as a Senior Partner in the Ares Private Debt Group. He is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group and ACE. Mr. deVeer is also a director of ACE.

Mitchell Goldstein

  Senior Partner in Ares Private Debt Group     7   Mr. Goldstein joined Ares in May 2005 and serves as a Senior Partner in the Ares Private Debt Group. He is a member of the Investment Committees of Ares Capital Management and the Ares Private Debt Group.

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Name
  Position   Length of
Service with
Ares (years)
  Principal Occupation(s) During Past 5 Years

John Kissick

  Senior Partner in Ares Private Equity Group     15   Mr. Kissick serves as a Senior Partner in the Ares Private Equity Group. Mr. Kissick is also a Senior Advisor to the Ares Capital Markets Group and is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group and all Ares capital markets and private equity funds.

Bennett Rosenthal

  Chairman of the board of directors of the Company; Senior Partner in and Co-Head of the Ares Private Equity Group     15   Mr. Rosenthal has served as Chairman of the Company's board of directors since 2004. He joined Ares in 1998 and is a founding member of Ares, where he serves on the Executive Committee of APMC, and is a Senior Partner in and the Co-Head of the Ares Private Equity Group. Mr. Rosenthal also is a member of the Investment Committees of Ares Capital Management and the Ares Private Debt Group.

David Sachs

  Senior Advisor to Ares Capital Markets Group     15   Mr. Sachs serves as a Senior Advisor to the Ares Capital Markets Group. Mr. Sachs is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group, Ares Commercial Real Estate Management LLC and all other Ares funds.

Michael L. Smith

  Senior Partner in Ares Private Debt Group     8   Mr. Smith joined Ares in May 2004 and serves as a Senior Partner in the Ares Private Debt Group. He is a member of the Investment Committees of Ares Capital Management, the Ares Private Debt Group and Ares Commercial Real Estate Management LLC.

        None of the individuals listed above is primarily responsible for the day-to-day management of the portfolio of any other account, except that:

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See "Risk Factors—Risks Relating to Our Business—There are significant potential conflicts of interest that could impact our investment returns."

        Each of Messrs. Arougheti, Beckman, deVeer, Goldstein and Smith is equally responsible for deal origination, execution and portfolio management. Mr. Arougheti, as our President, however, spends a greater amount of his time on corporate and administrative activities in his role as an officer of the Company. Each of Messrs. Arougheti, Beckman, deVeer, Goldstein and Smith is a senior partner in the Ares Private Debt Group and receives a compensation package that includes some combination of fixed draw and variable incentive compensation based primarily on our performance for services provided. None of the portfolio managers receives any direct compensation from us.

        The following table sets forth the dollar range of our equity securities based on the closing price of our common stock on August 13, 2012 and the number of shares beneficially owned by each of the portfolio managers described above as of December 31, 2011 unless otherwise indicated below.

Name
  Aggregate Dollar Range
of Equity Securities
in Ares Capital(1)

Michael J. Arougheti

  Over $1,000,000(2)

Eric B. Beckman

  Over $1,000,000

R. Kipp deVeer

  $500,001-$1,000,000

Mitchell Goldstein

  Over $1,000,000

John Kissick

  None

Bennett Rosenthal

  Over $1,000,000(2)

David Sachs

  $500,001-$1,000,000

Michael L. Smith

  Over $1,000,000

(1)
Dollar ranges are as follows: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000, $100,001-$500,000, $500,001-$1,000,000 or over $1,000,000.

(2)
Ares Investments, whose indirect parent is APMC, owned 2,859,882 shares of our common stock as of December 31, 2011. APMC is managed by an executive committee comprised of Messrs. Arougheti, Kaplan, Margolies, Ressler and Rosenthal. Each of the members of the executive committee disclaims beneficial ownership of all shares of our common stock owned by Ares Investments, except to the extent of any indirect pecuniary interest therein. The shares of our common stock held by Ares Investments have been pledged in the ordinary course to secure indebtedness under a credit facility under which Ares Investments is a co-borrower with Ares Management.

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

Management Services

        Ares Capital Management serves as our investment adviser and is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our board of directors, our investment adviser manages the day-to-day operations of, and provides investment advisory and management services to, Ares Capital. Under the terms of the investment advisory and management agreement, Ares Capital Management:

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        Ares Capital Management's services to us under the investment advisory and management agreement are not exclusive, and it is free to furnish similar services to other entities. Similarly, affiliates of our investment adviser may directly or indirectly manage funds or other investment vehicles with investment objectives similar to ours. Accordingly, we may compete with these Ares funds or other investment vehicles managed by our investment adviser and its affiliates for capital and investment opportunities. Ares Capital Management endeavors to allocate investment opportunities in a fair and equitable manner, and in any event consistent with any fiduciary duties owed to Ares Capital. Nevertheless, it is possible that we may not be given the opportunity to participate in certain investments made by investment funds or other investment vehicles managed by Ares Capital Management or its affiliates.

        The sole member of Ares Capital Management is Ares Management, a global alternative asset manager and an SEC registered investment adviser. Ares funds, including funds managed by Ares, had, as of June 30, 2012, approximately $54 billion of total committed capital under management.

Management Fee

        Pursuant to the investment advisory and management agreement and subject to the overall supervision of our board of directors, our investment adviser provides investment advisory and management services to us. For providing these services, our investment adviser receives a fee from us consisting of two components—a base management fee and an incentive fee.

        The base management fee is calculated at an annual rate of 1.5% based on the average value of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears.

Incentive Fee

        The incentive fee has two parts. The first part is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the quarter. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the administration agreement, and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities, accrued income that we have not yet received in cash. Our investment adviser is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued interest that we never actually receive. See "Risk Factors—Risks Relating to Our Business—There are significant potential conflicts of interest that could impact our investment returns" and "Risk Factors—Risks Relating to Our Business—We may be obligated to pay our investment adviser incentive compensation even if we incur a loss."

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        Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses, unrealized capital appreciation, unrealized capital depreciation or income tax expense related to realized gains. Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a quarter where we incur a loss. For example, if we receive pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, we will pay the applicable incentive fee even if we have incurred a loss in that quarter due to realized and/or unrealized capital losses.

        Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed "hurdle rate" of 1.75% per quarter. If market credit spreads rise, we may be able to invest our funds in debt instruments that provide for a higher return, which may increase our pre-incentive fee net investment income and make it easier for our investment adviser to surpass the fixed hurdle rate and receive an incentive fee based on such net investment income. To the extent we have retained pre-incentive fee net investment income that has been used to calculate this part of the incentive fee, it is also included in the amount of our total assets (other than cash and cash equivalents but including assets purchased with borrowed funds) used to calculate the 1.5% base management fee.

        We pay our investment adviser an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

        These calculations are adjusted for any share issuances or repurchases during the quarter.

        The following is a graphical representation of the calculation of the income-related portion of the incentive fee:

Quarterly Incentive Fee Based on Net Investment Income

Pre-incentive fee net investment income
(expressed as a percentage of the value of net assets)

GRAPHIC

Percentage of pre-incentive fee net investment income
allocated to income-related portion of incentive fee

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        These calculations will be appropriately pro rated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.

        The Capital Gains Fee is determined and payable in arrears as of the end of each calendar year (or, upon termination of our investment advisory and management agreement, as of the termination date) and is calculated at the end of each applicable year by subtracting (a) the sum of our cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (b) our cumulative aggregate realized capital gains, in each case calculated from October 8, 2004. Realized capital gains and losses include gains and losses on investments and foreign currencies, as well as gains and losses on extinguishment of debt and other assets. If such amount is positive at the end of such year, then the Capital Gains Fee for such year is equal to 20% of such amount, less the aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then there is no Capital Gains Fee for such year.

        The cumulative aggregate realized capital gains are calculated as the sum of the differences, if positive, between (a) the net sales price of each investment in our portfolio when sold and (b) the accreted or amortized cost basis of such investment.

        The cumulative aggregate realized capital losses are calculated as the sum of the amounts by which (a) the net sales price of each investment in our portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.

        The aggregate unrealized capital depreciation is calculated as the sum of the differences, if negative, between (a) the valuation of each investment in our portfolio as of the applicable Capital Gains Fee calculation date and (b) the accreted or amortized cost basis of such investment.

        Notwithstanding the foregoing, as a result of an amendment to the capital gains portion of the incentive fee under the investment advisory and management agreement that was adopted on June 6, 2011, if we are required by GAAP to record an investment at its fair value as of the time of acquisition instead of at the actual amount paid for such investment by us (including, for example, as a result of the application of the acquisition method of accounting), then solely for the purposes of calculating the Capital Gains Fee, the "accreted or amortized cost basis" of an investment shall be an amount (the "Contractual Cost Basis") equal to (1)(x) the actual amount paid by us for such investment plus (y) any amounts recorded in our financial statements as required by GAAP that are attributable to the accretion of such investment plus (z) any other adjustments made to the cost basis included in our financial statements, including payment-in-kind interest or additional amounts funded (net of repayments) minus (2) any amounts recorded in our financial statements as required by GAAP that are attributable to the amortization of such investment, whether such calculated Contractual Cost Basis is higher or lower than the fair value of such investment (as determined in accordance with GAAP) at the time of acquisition.

        We defer cash payment of any incentive fee otherwise earned by our investment adviser if during the most recent four full calendar quarter period ending on or prior to the date such payment is to be made the sum of (a) the aggregate distributions to our stockholders and (b) the change in net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) is less than 7.0% of our net assets (defined as total assets less indebtedness) at the beginning of such period. Any deferred incentive fees are carried over for payment in subsequent calculation periods to the extent such payment is payable under our investment advisory and management agreement.

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Examples of Quarterly Incentive Fee Calculation

Example 1—Income Related Portion of Incentive Fee(1):

Assumptions

Alternative 1

Additional Assumptions

        Pre-incentive fee net investment income does not exceed the hurdle rate, therefore there is no incentive fee.


(1)
The hypothetical amount of pre-incentive fee net investment income shown is based on a percentage of total net assets. In addition, the example assumes that during the most recent four full calendar quarter period ending on or prior to the date the payment set forth in the example is to be made, the sum of (a) our aggregate distributions to our stockholders and (b) our change in net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) is at least 7% of our net assets (defined as total assets less indebtedness) at the beginning of such period (as adjusted for any share issuances or repurchases).

(2)
Represents a quarter of the 7.0% annualized hurdle rate.

(3)
Represents a quarter of the 1.5% annualized management fee.

(4)
Excludes offering expenses.

Alternative 2

Additional Assumptions

        Pre-incentive fee net investment income exceeds hurdle rate, therefore there is an incentive fee.

    Incentive Fee   =   100% × "Catch-Up" + the greater of 0% AND (20% × (pre-incentive fee net investment income - 2.1875%)    
        =   (100% × (2.125% - 1.75%)) + 0%    
        =   100% × 0.375%    
        =   0.375%    

Alternative 3

Additional Assumptions

        Pre-incentive fee net investment income exceeds hurdle rate, therefore there is an incentive fee.

    Incentive Fee   =   100% × "Catch-Up" + the greater of 0% AND (20% × (pre-incentive fee net investment income - 2.1875%)    
        =   (100% × (2.1875% - 1.75%)) + (20% × (2.925% - 2.1875%))    
        =   0.4375% + (20% × 0.7375%)    
        =   0.4375% + 0.1475%    
        =   0.585%    

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Example 2—Capital Gains Portion of Incentive Fee:

Alternative 1:

Assumptions

The capital gains portion of the incentive fee, if any, would be:

Alternative 2

Assumptions

The capital gains portion of the incentive fee, if any, would be:

        For the three and six months ended June 30, 2012, we incurred $20.8 million and $40.8 million in base management fees, respectively, and $22.1 million and $42.8 million in incentive fees related to pre-incentive fee net investment income, respectively. The incentive fees related to the capital gains incentive fee as calculated under the investment advisory and management agreement for the three and six months ended June 30, 2012 was $0. However, in accordance with GAAP, the Company accrued a capital gains incentive fee of $0.6 million and $6.3 million for the three and six months ended June 30, 2012, respectively, bringing the total cumulative GAAP accrual related to the capital gains incentive fee to $55.3 million as of June 30, 2012. GAAP requires that the capital gains incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable

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under the investment advisory and management agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the Capital Gains Fee plus the aggregate cumulative unrealized capital appreciation. If such amount is positive at the end of a period, then GAAP requires us to record a capital gains incentive fee equal to 20% of such cumulative amount, less the aggregate amount of actual Capital Gains Fees paid or capital gains incentive fees accrued under GAAP in all prior periods. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reversal of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future.

        For the year ended December 31, 2011, we incurred $71.6 million in base management fees and $79.0 million in incentive fees related to pre-incentive fee net investment income. The incentive fees related to the capital gains incentive fee as calculated under the investment advisory and management agreement for the year ended December 31, 2011 was $0. However, in accordance with GAAP, the Company accrued a capital gains incentive fee of $33.3 million for the year ended December 31, 2011, including $26.0 million recognized in the second quarter of 2011 as a result of the application of the Capital Gains Amendment described above with respect to the assets purchased in the Allied Acquisition, bringing the total GAAP accrual related to the capital gains incentive fee to $49.0 million as of December 31, 2011.

        For the year ended December 31, 2010, we incurred $52.0 million in base management fees, $61.3 million in incentive fees related to pre-incentive fee net investment income and no incentive fees related to realized capital gains under the investment advisory and management agreement. In accordance with GAAP, the Company accrued a capital gains incentive fee of $15.6 million for the year ended December 31, 2010.

        For the year ended December 31, 2009, we incurred $30.4 million in base management fees, $33.3 million in incentive fees related to pre-incentive fee net investment income and no incentive fees related to realized capital gains under the investment advisory and management agreement or in accordance with GAAP.

Payment of Our Expenses

        The services of all investment professionals and staff of our investment adviser, when and to the extent engaged in providing investment advisory and management services to us and routine overhead expenses of such personnel allocable to such services, are provided and paid for by our investment adviser. We bear all other costs and expenses of our operations and transactions, including, but not limited to, those relating to: rent; organization; calculation of our net asset value (including, but not limited to, the cost and expenses of any independent valuation firm); expenses incurred by our investment adviser payable to third parties, including agents, consultants or other advisers, in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies; interest payable on indebtedness, if any, incurred to finance our investments; offerings of our common stock and other securities; investment advisory and management fees; administration fees; fees payable to third parties, including agents, consultants or other advisers, relating to, or associated with, evaluating and making investments; transfer agent and custodial fees; registration fees; listing fees; taxes; independent directors' fees and expenses; costs of preparing and filing reports or other documents with the SEC; the costs of any reports, proxy statements or other notices to stockholders, including printing costs; to the extent we are covered by any joint insurance policies, our allocable portion of the insurance premiums for such policies; direct costs and expenses of administration, including auditor and legal costs; and all other expenses incurred

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by us or our administrator in connection with administering our business as described in more detail under "Administration Agreement" below.

Duration, Termination and Amendment

        At an in-person meeting of our board of directors on March 16, 2011, the form of our current investment advisory and management agreement, including two proposed amendments to our then existing investment advisory and management agreement, was approved by our board of directors with the recommendation that stockholders of the Company vote to approve the proposed amendments. On June 6, 2011, our stockholders approved the proposed amendments, and we entered into a restated investment advisory and management agreement reflecting such amendments on June 6, 2011. At an in-person meeting of our board of directors on May 3, 2012, our board of directors, including a majority of the directors who are not "interested persons" of the Company as defined in the Investment Company Act, voted to approve the continuation of the investment advisory and management agreement through June 1, 2013. A discussion regarding the basis for our board of directors' approval for the 2011 adoption of the form of our current investment advisory and management agreement is available in our annual report on Form 10-K for the fiscal year ended December 31, 2011.

        Unless terminated earlier, the investment advisory and management agreement will automatically renew for successive annual periods if approved annually by our board of directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our independent directors. The investment advisory and management agreement will automatically terminate in the event of its assignment. The investment advisory and management agreement may be terminated by either party without penalty upon 60 days' written notice to the other party. Material amendments to our investment advisory and management agreement must be approved by the affirmative vote of the holders of a majority of our outstanding voting securities and by a majority of our independent directors.

        Conflicts of interest may arise if our investment adviser seeks to change the terms of our investment advisory and management agreement, including, for example, the amount of the management fee, the incentive fee or other compensation terms. Any material change to the investment advisory and management agreement must be submitted to stockholders for approval under the Investment Company Act and we may from time to time decide it is appropriate to seek stockholder approval to change the terms of the agreement. See "Risk Factors—Risks Relating to Our Business—We are dependent upon certain key personnel of Ares for our future success and upon their access to other Ares investment professionals."

Indemnification

        The investment advisory and management agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, our investment adviser, its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entity affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of our investment adviser's services under the investment advisory and management agreement or otherwise as our investment adviser.

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Organization of the Investment Adviser

        Our investment adviser is a Delaware limited liability company that is registered as an investment adviser under the Advisers Act. The principal executive offices of Ares Capital Management are located at 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.

Administration Agreement

        We are also party to a separate administration agreement with Ares Operations, an affiliate of our investment adviser and a wholly owned subsidiary of Ares Management. Our board of directors approved the continuation of our administration agreement on May 3, 2012, which extended the term of the agreement until June 1, 2013. Pursuant to the administration agreement, Ares Operations furnishes us with office equipment and clerical, bookkeeping and record keeping services at our office facilities. Under the administration agreement, Ares Operations also performs, or oversees the performance of, our required administrative services, which include, among other things, providing assistance in accounting, legal, compliance, operations, technology, and investor relations, being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, Ares Operations assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under the administration agreement are equal to an amount based upon our allocable portion of Ares Operations' overhead and other expenses (including travel expenses) incurred by Ares Operations in performing its obligations under the administration agreement, including our allocable portion of the compensation of certain of our officers (including our chief compliance officer, chief financial officer, general counsel, treasurer and assistant treasurer) and their respective staffs. The administration agreement may be terminated by either party without penalty upon 60 days' written notice to the other party.

        For the three and six months ended June 30, 2012, we incurred $2.2 million and $4.5 million, respectively, in administrative fees. As of June 30, 2012, $2.2 million was unpaid and included in "accounts payable and other liabilities" in our June 30, 2012 consolidated balance sheet. For the years ended December 31, 2011, 2010 and 2009, we incurred $9.3 million, $8.7 million and $4.0 million, respectively, in administrative fees.

Indemnification

        The administration agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Ares Operations, its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entity affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of Ares Operations' services under the administration agreement or otherwise as our administrator.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        We are party to an investment advisory and management agreement with Ares Capital Management, whose sole member is Ares Management, an entity in which certain of our directors, officers and members of the investment committee of our investment adviser have indirect ownership and financial interests. Certain of our directors, officers and members of the investment committee of our investment adviser also serve as principals of other investment managers affiliated with Ares Management that currently, and may in the future, manage investment funds with investment objectives similar to our investment objective. In addition, certain of our officers and directors and the members of the investment committee of our investment adviser serve or may serve as officers, directors or principals of entities that operate in the same or related line of business as we do or of investment funds managed by our affiliates. Accordingly, we may not be given the opportunity to participate in certain investments made by investment funds managed by advisers affiliated with Ares Management. However, our investment adviser and other members of Ares intend to allocate investment opportunities in a fair and equitable manner that meets our investment objective so that we are not disadvantaged in relation to any other client. See "Risk Factors—Risks Relating to Our Business—There are significant potential conflicts of interest that could impact our investment returns."

        Pursuant to the terms of the administration agreement Ares Operations currently provides us with the administrative services necessary to conduct our day-to-day operations, and we pay Ares Operations at cost our allocable portion of overhead and other expenses (including travel expenses) incurred by Ares Operations in performing its obligations under our administration agreement, including our allocable portion of the compensation of certain of our officers (including our chief compliance officer, chief financial officer, general counsel, treasurer and assistant treasurer) and their respective staffs.

        Our portfolio company IHAM, is party to the IHAM administration agreement with Ares Operations. Pursuant to the IHAM administration agreement, Ares Operations provides IHAM with office facilities, equipment, clerical, bookkeeping and record keeping services, services of, and oversight of, custodians, depositories, accountants, attorneys, underwriters and such other persons in any other capacity deemed to be necessary. Under the IHAM administration agreement, IHAM reimburses Ares Operations for all of the actual costs associated with such services, including Ares Operations' allocable portion of overhead and the cost of its officers and respective staff in performing its obligations under the IHAM administration agreement.

        We rent office space directly from a third party pursuant to a lease that expires in February 2026. We entered into a sublease with ACREM pursuant to which we are subleasing approximately 12% of ACREM's office space for a fixed rent equal to 12% of the basic annual rent payable by ACREM under its office lease, plus certain additional costs and expenses. We have also entered into separate subleases with Ares Management and IHAM pursuant to which Ares Management and IHAM sublease approximately 15% and 20%, respectively, of our New York office space for a fixed rent equal to 15% and 20%, respectively, of the base annual rent payable by us under our lease for this space, plus certain additional costs and expenses. Under our previous lease that expired on February 27, 2011, we were party to a sublease agreement with Ares Management whereby Ares Management subleased approximately 25% of such office space for a fixed rent equal to 25% of the base annual rent payable by us under this lease, plus certain additional costs and expenses. For the years ended December 31, 2011, 2010 and 2009, such amounts payable to us totaled $0.4 million, $0.3 million and $0.7 million, respectively.

        We have also entered into a license agreement with Ares Management pursuant to which Ares Management has agreed to grant us a non-exclusive, royalty-free license to use the name "Ares." Under this agreement, we will have a right to use the Ares name for so long as Ares Capital Management remains our investment adviser. Other than with respect to this limited license, we have no legal right to the "Ares" name. This license agreement will remain in effect for so long as the investment advisory and management

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agreement with Ares Capital Management is in effect and Ares Capital Management remains our investment adviser. Like the investment advisory and management agreement, the license agreement may also be terminated by either party without penalty upon 60 days' written notice to the other.

        As of June 30, 2012, Ares Investments Holdings LLC, an affiliate of Ares Management (the sole member of our investment adviser), owned approximately 2.9 million shares of our common stock representing approximately 1.3% of the total shares outstanding as of June 30, 2012.

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CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS

        To our knowledge, as of August 13, 2012, there were no persons that owned 25% or more of our outstanding voting securities and no person would be deemed to control us, as such term is defined in the Investment Company Act.

        The following table sets forth, as of August 13, 2012 (unless otherwise noted), the number of shares of our common stock beneficially owned by each of our current directors and named executive officers, all directors, executive officers and certain other officers as a group and certain beneficial owners, according to information furnished to us by such persons or publicly available filings.

        Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Ownership information for those persons who beneficially own 5% or more of our shares of common stock is based upon Schedule 13D, Schedule 13G, Form 13F or other filings by such persons with the SEC and other information obtained from such persons. To our knowledge, as of August 13, 2012, there were no persons that owned 5% or more of our shares of common stock. Except as otherwise noted below, each person named in the following table has sole voting and investment power with respect to all shares of our common stock that he or she beneficially owns.

        The address for Mr. Arougheti, Mr. Rosen and Ms. Roll is c/o Ares Capital Corporation, 245 Park Avenue, 44th Floor, New York, New York 10167. The address for each of the other directors and executive officers is c/o Ares Capital Corporation, 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.

Name of Beneficial Owner
  Amount and
Nature of
Beneficial
Ownership
  Percent of
Class(1)
 

Directors and Executive Officers:

             

Interested Directors

             

Michael J. Arougheti

    353,679 (2)   *  

Antony P. Ressler

    1,483,957 (2)(3)   *  

Robert L. Rosen

    15,000     *  

Bennett Rosenthal

    75,000 (2)(4)      

Independent Directors

             

Ann Torre Bates

    5,149 (5)   *  

Frank E. O'Bryan

    12,400 (6)   *  

Gregory W. Penske

    None        

Eric B. Siegel

    25,501 (7)   *  

Named Executive Officers Who Are Not Directors

             

Penni F. Roll

    49,452 (8)   *  

All Directors, Executive Officers and Certain Other Officers as a Group (15 persons)

    2,043,959 (2)(9)   *  

*
Represents less than 1%.

(1)
Based on 222,150,745 shares of common stock outstanding as of August 13, 2012.

(2)
Ares Investments, whose indirect parent is APMC, owned 2,859,882 shares of our common stock as of August 13, 2012. APMC is managed by an executive committee comprised of Messrs. Arougheti, Kaplan, Margolies, Ressler and Rosenthal. Each of the members of the executive committee, APMC, its controlled affiliates (other than Ares Investments) and the officers, partners, members and managers of APMC and its controlled affiliates, including Ares Investments, expressly disclaims beneficial ownership of all shares of our common stock owned by

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(3)
Consists of (i) 983,250 shares of common stock indirectly beneficially owned by Mr. Ressler through Greek Associates of which Mr. Ressler is the general partner and (ii) 500,707 shares of common stock indirectly beneficially owned by Mr. Ressler through a family foundation of which Mr. Ressler is the trustee.

(4)
Consists of 75,000 shares of common stock indirectly beneficially owned by Mr. Rosenthal through BAR Holdings, LLC of which Mr. Rosenthal is the manager.

(5)
Consists of (i) 2,874 shares of common stock owned individually and (ii) 2,275 shares of common stock indirectly beneficially owned by Ms. Bates through her spouse.

(6)
Consists of (i) 400 shares of common stock owned individually and (ii) 12,000 shares of common stock indirectly beneficially owned by Mr. O'Bryan through a family trust of which Mr. O'Bryan is the trustee and beneficiary.

(7)
Consists of (i) 15,174 shares of common stock owned individually; (ii) 8,166 shares of common stock indirectly beneficially owned by Mr. Siegel through his spouse and (iii) 2,161 shares of common stock indirectly beneficially owned by Mr. Siegel as a custodian for the accounts of his children. Mr. Siegel has shared voting and investment authority with respect to shares held by his spouse.

(8)
Consists of (i) 8,147 shares of common stock owned individually; and (ii) 41,305 shares of common stock indirectly beneficially owned by Ms. Roll through a trust for the benefit of Ms. Roll, her spouse and her children.

(9)
Includes shares owned by certain officers of the Company that are not "Named Executive Officers," as defined in Item 402 of Regulation S-K, as promulgated under the Securities Act.

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DETERMINATION OF NET ASSET VALUE

        The net asset value per share of our outstanding shares of common stock is determined quarterly by dividing the value of total assets minus liabilities by the total number of shares outstanding.

        Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, we look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Debt and equity securities that are not publicly traded or whose market price is not readily available (i.e., substantially all of our investments) are valued at fair value as determined in good faith by our board of directors, based on, among other things, the input of our management and audit committee and independent valuation firms that have been engaged at the direction of the board to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing 12-month period (with certain de minimis exceptions). Effective January 1, 2008, the Company adopted ASC 820-10, which expands the application of fair value accounting for investments (see Note 7 to the consolidated financial statements for the period ended December 31, 2011 and Note 7 to the consolidated financial statements for the period ended June 30, 2012). ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date.

        The valuation process is conducted at the end of each fiscal quarter, with a minimum of 50% (based on value) of our valuations of portfolio companies without readily available market quotations subject to review by an independent valuation firm each quarter. In addition, our independent accountants review our valuation process as part of their overall integrated audit.

        As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time), the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company's securities to publicly traded securities, changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments would trade in their principal markets and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation.

        Because there is not a readily available market value for most of the investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our board of directors, based on, among other things, the input of our management and audit committee and independent valuation firms under a valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize significantly less than the value at which we have previously recorded it.

        In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned. For example, during 2008 and much of 2009, the state of the economy in the U.S. and abroad had deteriorated. See "Risk

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Factors—Risks Relating to Our Investments—Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio, which in turn would reduce our net asset value."

        With respect to investments for which market quotations are not readily available, our board of directors undertakes a multi-step valuation process each quarter, as described below:

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DIVIDEND REINVESTMENT PLAN

        We have adopted a dividend reinvestment plan that provides for reinvestment of any distributions we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash as provided below. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not "opted out" of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends.

        No action is required on the part of a registered stockholder to have their cash dividend reinvested in shares of our common stock. A registered stockholder may elect to receive an entire cash dividend in cash by notifying Computershare Shareowner Services LLC ("Computershare"), the plan administrator and our transfer agent and registrar, in writing so that such notice is received by the plan administrator no later than the record date fixed by the board of directors for dividends to stockholders. The plan administrator will set up an account for shares acquired through the dividend reinvestment plan for each stockholder who has not elected to receive dividends in cash and hold such shares in non-certificated form. Upon request by a stockholder participating in the dividend reinvestment plan, received in writing no later than 10 days prior to the record date, the plan administrator will, instead of crediting fractional shares to the participant's account, issue a check for any fractional share.

        Those stockholders whose shares are held by a broker or other financial intermediary may receive dividends in cash by notifying their broker or other financial intermediary of their election.

        We intend to use primarily newly issued shares to implement the dividend reinvestment plan so long as our shares are trading at a premium to net asset value. If our shares are trading at a discount to net asset value and we are otherwise permitted under applicable law to purchase such shares, we intend to purchase shares in the open market in connection with our obligations under our dividend reinvestment plan. However, we reserve the right to issue new shares of our common stock in connection with our obligations under the dividend reinvestment plan even if our shares are trading below net asset value. If newly issued shares are used to implement the dividend reinvestment plan, the number of shares to be issued to a stockholder is determined by dividing the total dollar amount of the dividend payable to such stockholder by the market price per share of our common stock at the close of regular trading on The NASDAQ Global Select Market on the dividend payment date. Market price per share on that date will be the closing price for such shares on The NASDAQ Global Select Market or, if no sale is reported for such day, at the average of their reported bid and asked prices. If shares are purchased in the open market to implement the dividend reinvestment plan, the number of shares to be issued to a stockholder shall be determined by dividing the dollar amount of the cash dividend payable to such stockholder by the weighted average price per share for all shares purchased by the plan administrator in the open market in connection with the dividend. The number of shares of our common stock to be outstanding after giving effect to payment of the dividend cannot be established until the value per share at which additional shares will be issued has been determined and elections of our stockholders have been tabulated.

        There are no brokerage charges or other charges to stockholders who participate in the dividend reinvestment plan. The plan administrator's fees under the plan are paid by us. If a participant elects by notice to the plan administrator in advance of termination to have the plan administrator sell part or all of the shares held by the plan administrator in the participant's account and remit the proceeds to the participant, the plan administrator is authorized to deduct a transaction fee of up to $15 plus a $0.12 per share fee from the proceeds.

        Stockholders whose cash dividends are reinvested in shares of our common stock are subject to the same U.S. federal, state and local tax consequences as are stockholders who elect to receive their dividends in cash. A stockholder's initial basis for determining gain or loss upon the sale of stock

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received in a dividend from us will be equal to the total dollar amount of the dividend payable to the stockholder. Any stock received on reinvestment of a cash dividend will have a new holding period for tax purposes commencing on the day following the day on which the shares are credited to the U.S. stockholder's account. See "Certain Material U.S. Federal Income Tax Considerations."

        Participants may terminate their accounts under the dividend reinvestment plan by notifying the plan administrator via its website at www.bnymellon.com/shareowner/equityaccess, by filling out the transaction request form located at bottom of their statement and sending it to the plan administrator at P.O. Box 358035, Pittsburgh, PA 15252-8035 or by calling the plan administrator's hotline at 1-866-365-2497.

        The dividend reinvestment plan may be terminated by us upon notice in writing mailed to each participant at least 30 days prior to any record date for the payment of any dividend by us. All correspondence concerning the dividend reinvestment plan should be directed to the plan administrator via the Internet at www.bnymellon.com/shareowner/equityaccess, by mail at P.O. Box 358035, Pittsburgh, PA 15252-8035 or by telephone at 1-866-365-2497.

        Additional information about the dividend reinvestment plan may be obtained by contacting the plan administrator via the Internet at www.bnymellon.com/shareowner/equityaccess, by mail at P.O. Box 358035, Pittsburgh, PA 15252-8035 or by telephone at 1-866-365-2497.

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CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

        The following discussion is a general summary of certain material U.S. federal income tax considerations applicable to us and to an investment in shares of our preferred stock or our common stock and our qualification and taxation as a regulated investment company, or "RIC", for U.S. federal income tax purposes. This summary does not purport to be a complete description of all of the tax considerations relating thereto. In particular, we have not described certain considerations that may be relevant to certain types of holders subject to special treatment under U.S. federal income tax laws, including stockholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, dealers in securities, traders in securities that elect to use a mark-to-market method of accounting for securities holdings, pension plans and trusts, financial institutions, persons who hold our preferred stock and our common stock as part of a straddle or a hedging or conversion transaction, and U.S. stockholders (as defined below) whose functional currency is not the U.S. dollar. This summary assumes that investors hold our preferred stock or common stock as capital assets (within the meaning of the Code). The discussion is based upon the Code, its legislative history, existing and proposed regulations, published rulings and court decisions, each as of the date of this prospectus and all of which are subject to change, possibly retroactively, which could affect the continuing accuracy of this discussion. We have not sought and will not seek any ruling from the Internal Revenue Service (the "IRS") regarding the offerings pursuant to this prospectus or pursuant to any accompanying prospectus supplement unless expressly stated therein. This summary does not discuss any aspects of U.S. estate or gift tax or foreign, state or local tax. It does not discuss the special treatment under U.S. federal income tax laws that could result if we invested in tax-exempt securities or certain other investment assets. It also does not discuss the tax aspects of common or preferred stock sold in units with the other securities being registered.

        If we issue preferred stock that may be convertible into or exercisable or exchangeable for securities or other property or preferred stock with other terms that may have different U.S. federal income tax consequences than those described in this summary, the U.S. federal income tax consequences of such preferred stock will be described in the relevant prospectus supplement. This summary does not discuss the consequences of an investment in our subscription rights, debt securities or warrants representing rights to purchase shares of our preferred stock, common stock or debt securities or as units in combination with such securities. The U.S. federal income tax consequences of such an investment will be discussed in the relevant prospectus supplement.

        A "U.S. stockholder" is a beneficial owner of shares of our preferred stock or common stock that is for U.S. federal income tax purposes:

        A "non-U.S. stockholder" is a beneficial owner of shares of our preferred stock or common stock that is not a U.S. stockholder, nor an entity treated as a partnership for U.S. federal income tax purposes.

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        If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds shares of our preferred stock or common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A prospective stockholder that is a partnership holding shares of our preferred stock or common stock or a partner of such a partnership should consult his, her or its tax advisers with respect to the purchase, ownership and disposition of shares of our preferred stock or common stock.

        Tax matters are very complicated and the tax consequences to an investor of an investment in our shares will depend on the facts of his, her or its particular situation. We encourage investors to consult their own tax advisers regarding the specific consequences of such an investment, including tax reporting requirements, the applicability of U.S. federal, state, local and foreign tax laws, eligibility for the benefits of any applicable tax treaty and the effect of any possible changes in the tax laws.

ELECTION TO BE TAXED AS A RIC

        As a BDC, we have elected to be treated as a RIC under Subchapter M of the Code. As a RIC, we generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends. To qualify as a RIC, we must, among other things, meet certain source of income and asset diversification requirements (as described below). In addition, we must distribute to our stockholders, for each taxable year, generally an amount equal to at least 90% of our "investment company taxable income," as defined by the Code (the "Annual Distribution Requirement"). See "Risk Factors—Risks Relating to Our Business—We may be subject to certain corporate-level taxes regardless of whether we continue to qualify as a RIC."

TAXATION AS A RIC

        If we:

then we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain (generally, net long-term capital gain in excess of net short-term capital loss) we distribute (or are deemed to distribute) to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gain not distributed (or deemed distributed) to our stockholders.

        We will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (collectively, the "Excise Tax Requirement"). We have paid in the past, and can be expected to pay in the future, such excise tax on a portion of our income.

        Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and (2) other requirements relating to our status as a RIC, including the Diversification Tests (as defined below). If we dispose of assets to meet the Annual Distribution Requirement, the Diversification Tests, or the Excise Tax Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

        To qualify as a RIC for U.S. federal income tax purposes, we generally must, among other things:

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        We may be required to recognize taxable income in circumstances in which we do not receive cash, such as income from hedging or foreign currency transactions. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, that have increasing interest rates or that are issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement and/or the Excise Tax Requirement, even though we will not have received any corresponding cash amount.

        Furthermore, a portfolio company in which we invest may face financial difficulty that requires us to work-out, modify or otherwise restructure our investment in the portfolio company. Any such restructuring could, depending on the specific terms of the restructuring, result in unusable capital losses and future non-cash income. Such restructuring may also result in our receiving assets that could give rise to non-qualifying income for purposes of the 90% Income Test or otherwise would not count toward satisfying the Diversification Requirements.

        In addition, certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (a) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (b) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income, (c) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (d) adversely affect the time when a purchase or sale of stock or securities is deemed to occur or (e) adversely alter the characterization of certain complex financial transactions. We will monitor our transactions and may make certain tax elections in order to mitigate the effects of these provisions; however, no assurance can be given that we will be eligible for any such tax elections or that any elections we make will fully mitigate the effects of these provisions.

        Gain or loss recognized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant.

        Our investment in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes. In that case, our yield on those securities would be decreased. Stockholders generally will not be entitled to claim a U.S. foreign tax credit or deduction with respect to non-U.S. taxes paid by us.

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        If we purchase shares in a "passive foreign investment company" (a "PFIC"), we may be subject to U.S. federal income tax on a portion of any "excess distribution" or gain from the disposition of such shares, even if such income is distributed as a taxable dividend by us to our stockholders. Additional charges in the nature of interest may be imposed on us in respect of deferred taxes arising from such distributions or gains. If we invest in a PFIC and elect to treat the PFIC as a "qualified electing fund" under the Code (a "QEF"), in lieu of the foregoing requirements, we will be required to include in income each year a portion of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed to us. Alternatively, we may elect to mark-to-market at the end of each taxable year our shares in such PFIC; in this case, we will recognize as ordinary income any increase in the value of such shares, and as ordinary loss any decrease in such value to the extent it does not exceed prior increases included in income. Our ability to make either election will depend on factors beyond our control, and are subject to limitations which may limit the availability of benefit of these elections. Under either election, we may be required to recognize in any year income in excess of our distributions from PFICs and our proceeds from dispositions of PFIC stock during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of determining whether we satisfy the Excise Tax Requirement.

        Our functional currency is the U.S. dollar for U.S. federal income tax purposes. Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time we accrue income, expenses or other liabilities denominated in a foreign currency and the time we actually collect such income or pay such expenses or liabilities may be treated as ordinary income or loss. Similarly, gains or losses on foreign currency forward contracts, the disposition of debt denominated in a foreign currency and other financial transactions denominated in foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, may also be treated as ordinary income or loss.

        If we borrow money, we may be prevented by loan covenants from declaring and paying dividends in certain circumstances. Even if we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements, under the Investment Company Act, we generally are not permitted to make distributions to our stockholders while our debt obligations and senior securities are outstanding unless certain "asset coverage" tests or other financial covenants are met. Limits on our payment of dividends may prevent us from meeting the Annual Distribution Requirement, and may, therefore, jeopardize our qualification for taxation as a RIC, or subject us to the 4% excise tax on undistributed income.

        Some of the income and fees that we recognize, such as management fees or income recognized in connection with assets received in a work-out or restructuring of a portfolio investment, may not satisfy the 90% Income Test. In order to ensure that such income and fees do not disqualify us as a RIC for a failure to satisfy the 90% Income Test, we may be required to recognize such income and fees through one or more entities treated as U.S. corporations for U.S. federal income tax purposes. While we expect that recognizing such income through such corporations will assist us in satisfying the 90% Income Test, no assurance can be given that this structure will be respected for U.S. federal income tax purposes, which could result in such income not being counted towards satisfying the 90% Income Test. If the amount of such income were too great and we were otherwise unable to mitigate this effect, it could result in our disqualification as a RIC. If, as we expect, the structure is respected, such corporations will be required to pay U.S. corporate income tax on their earnings, which ultimately will reduce the yield on such income and fees.

        If we fail to satisfy the 90% Income Test or the Diversification Tests in any taxable year, we may be eligible for relief provisions if the failures are due to reasonable cause and not willful neglect and if a penalty tax is paid with respect to each failure to satisfy the applicable requirements. Additionally, relief is provided for certain de minimis failures of the diversification requirements where we correct the failure within a specified period. If the applicable relief provisions are not available or cannot be met, all of our income would be subject to corporate-level U.S. federal income tax as described below.

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We cannot provide assurance that we would qualify for any such relief should we fail the 90% Income Test or the Diversification Test.

        If we fail to satisfy the Annual Distribution Requirement or otherwise fail to qualify as a RIC in any taxable year, and are not eligible for relief as described above, we will be subject to tax in that year on all of our taxable income, regardless of whether we make any distributions to our stockholders. In that case, all of our income will be subject to corporate-level U.S. federal income tax, reducing the amount available to be distributed to our stockholders. In contrast, assuming we qualify as a RIC, our corporate-level U.S. federal income tax should be substantially reduced or eliminated. See "Election to Be Taxed as a RIC" above and "Risk Factors—Risks Relating to Our Business—We may be subject to certain corporate-level taxes regardless of whether we continue to qualify as a RIC."

Capital Loss Carryforwards and Unrealized Losses

        As a RIC, we are permitted to carry forward a net capital loss realized in a taxable year beginning on or before January 1, 2011 to offset our capital gain, if any, realized during the eight years following the year of the loss. A capital loss carryforward realized in a taxable year beginning before January 1, 2011 is treated as a short-term capital loss in the year to which it is carried. We are permitted to carry forward a net capital loss realized in taxable years beginning on or after January 1, 2011 to offset capital gain indefinitely. For net capital losses realized in taxable years beginning on or after January 1, 2011, the excess of our net short-term capital loss over our net long-term capital gain is treated as a short-term capital loss arising on the first day of our next taxable year and the excess of our net long-term capital loss over our net short-term capital gain is treated as a long-term capital loss arising on the first day of our next taxable year. If future capital gain is offset by carried-forward capital losses, such future capital gain is not subject to fund-level U.S. federal income tax, regardless of whether distributed to stockholders. A RIC cannot carry back or carry forward any net operating losses.

        It is believed that transactions we have undertaken, including the Allied Acquisition, have resulted in a limitation on our ability to use both our own and Allied Capital's capital loss carryforwards and, potentially, to use unrealized capital losses inherent in the tax basis of our own pre-acquisition assets and Allied Capital's assets we acquired. These limitations, imposed by Section 383 of the Code and based on the principles of Section 382 of the Code, are imposed on an annual basis. Losses in excess of the limitation may be carried forward, subject to the overall eight-year limitation. The Section 382 limitation applied to our and Allied Capital's losses generally will equal the product of the net asset value of each corporation immediately prior to the Allied Acquisition, respectively, and the "long-term tax-exempt rate," published by the IRS, in effect at such time. As of April 2010, the month during which the Allied Acquisition was consummated, the long-term tax-exempt rate was 4.03%. Additionally, under Section 384 of the Code, we may also be prohibited from using Allied Capital's loss carryforwards and unrealized losses against any of our unrealized gains at the time of the Allied Acquisition, to the extent such gains are realized within five years following the Allied Acquisition. While our ability to utilize losses in the future depends upon a variety of factors that cannot be known in advance, because capital loss carryforwards realized in taxable years beginning before January 1, 2011 generally expire eight taxable years following recognition, substantially all of our and Allied Capital's losses may become permanently unavailable. Future transactions we enter into may further limit our ability to utilize losses.

        As of December 31, 2011, for U.S. federal income tax purposes, we had capital loss carryforwards of approximately $207 million and net unrealized losses of approximately $1.0 billion. These amounts are estimates and will not be finally determined until we file our 2011 income tax return in 2012.

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TAXATION OF U.S. STOCKHOLDERS

        Whether an investment in the shares of our preferred stock or common stock is appropriate for a U.S. stockholder will depend upon that person's particular circumstances. An investment in the shares of our preferred stock or common stock by a U.S. stockholder may have adverse tax consequences. The following summary generally describes certain U.S. federal income tax consequences of an investment in shares of our preferred stock and common stock by taxable U.S. stockholders and not by U.S. stockholders that generally are exempt from U.S. federal income taxation. U.S. stockholders should consult their own tax advisors before investing in shares of our preferred stock or common stock.

        Distributions by us generally are taxable to U.S. stockholders as ordinary income or long-term capital gain. Distributions of our investment company taxable income (which is, generally, our ordinary income excluding net capital gain) will be taxable as ordinary income to U.S. stockholders to the extent of our current and accumulated earnings and profits, whether paid in cash or reinvested in additional shares of our common stock. Distributions of our net capital gain (which generally is the excess of our net long-term capital gain over our net short-term capital loss) properly reported by us as "capital gain dividends" will be taxable to a U.S. stockholder as long-term capital gains (which, under current law, are taxed at preferential rates for taxable years beginning before January 1, 2013) in the case of individuals, trusts or estates. This is true regardless of the U.S. stockholder's holding period for his, her or its preferred stock or common stock and regardless of whether the dividend is paid in cash or reinvested in additional common stock. Distributions in excess of our earnings and profits first will reduce a U.S. stockholder's adjusted tax basis in such stockholder's preferred stock or common stock and, after the adjusted basis is reduced to zero, will constitute capital gain to such U.S. stockholder. We have made distributions in excess of our earnings and profits and may continue to do so in the future. As a result, a U.S. stockholder will need to consider the effect of our distributions on such U.S. stockholder's adjusted tax basis in our preferred stock or common stock in their individual circumstances.

        A portion of our ordinary income dividends, but not capital gain dividends, paid to corporate U.S. stockholders may, if certain conditions are met, qualify for the 70% dividends-received deduction to the extent that we have received dividends from certain corporations during the taxable year, but only to the extent such ordinary income dividends are treated as paid out of our earnings and profits. We expect only a small portion of our dividends to qualify for this deduction. A corporate U.S. stockholder may be required to reduce its basis in its preferred stock with respect to certain "extraordinary dividends," as provided under Section 1059 of the Code. Corporate U.S. stockholders should consult their own tax advisors in determining the application of these rules in their particular circumstances.

        In general, for taxable years beginning before January 1, 2013, "qualified dividend income" realized by non-corporate U.S. stockholders is taxable at the same rate as net capital gain. Generally, qualified dividend income is dividend income attributable to certain U.S. and foreign corporations, as long as certain holding period requirements as met. As long as certain requirements are met, our dividends paid to non-corporate U.S. stockholders attributable to qualified dividend income may be treated by such U.S. stockholders as qualified dividend income, but only to the extent such ordinary income dividends are treated as paid out of our earnings and profits. We expect only a small portion of our dividends to qualify as qualified dividend income.

        Although we currently intend to distribute any of our net capital gain, we may in the future decide to retain some or all of our net capital gain, but designate the retained amount as a "deemed distribution." In that case, among other consequences, we will pay tax on the retained amount, each U.S. stockholder will be required to include his, her or its share of the deemed distribution in income as if it had been actually distributed to the U.S. stockholder, and the U.S. stockholder will be entitled

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to claim a credit equal to his, her or its allocable share of the tax paid thereon by us. The amount of the deemed distribution net of such tax will be added to the U.S. stockholder's tax basis for his, her or its preferred stock or common stock.

        Because we expect to pay tax on any retained net capital gain at our regular corporate tax rate, and because that rate currently is in excess of the maximum rate currently payable by individuals on net capital gain, the amount of tax that individual stockholders will be treated as having paid and for which they will receive a credit would exceed the tax they owe on the retained net capital gain. Such excess generally may be claimed as a credit against the U.S. stockholder's other U.S. federal income tax obligations or may be refunded to the extent it exceeds the stockholder's liability for U.S. federal income tax. A U.S. stockholder that is not subject to U.S. federal income tax or otherwise is not required to file a U.S. federal income tax return would be required to file a U.S. federal income tax return on the appropriate form in order to claim a refund for the taxes we paid. In order to utilize the deemed distribution approach, we must provide a written statement to our stockholders reporting the deemed distribution after the close of the relevant taxable year. We cannot treat any of our investment company taxable income as a "deemed distribution."

        We will be subject to the alternative minimum tax, also referred to as the "AMT," but any items that are treated differently for AMT purposes must be apportioned between us and our stockholders and this may affect U.S. stockholders' AMT liabilities. Although regulations explaining the precise method of apportionment have not yet been issued, such items generally will be apportioned in the same proportion that dividends paid to each stockholder bear to our taxable income (determined without regard to the dividends paid deduction), unless a different method for a particular item is warranted under the circumstances.

        For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any year and (2) the amount of dividends paid for that year, we may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If we make such an election, the U.S. stockholder will still be treated as receiving the dividend in the taxable year in which the distribution is made. However, any dividend declared by us in October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it had been received by our U.S. stockholders on December 31 of the year in which the dividend was declared.

        We have the ability to declare a large portion of a dividend in shares of our stock. As long as a portion of such dividend is paid in cash and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, our stockholders will be taxed on 100% of the fair market value of the dividend on the date the dividend is received in the same manner as a cash dividend, even though most of the dividend was paid in shares of our stock, which may result in our U.S. stockholders having to pay tax on such dividends, even if no cash is received, and our non-U.S. stockholders may be subject to withholding tax in respect of amounts distributed in our common stock. In general, any dividend on shares of our preferred stock will be taxable as a dividend, regardless of whether any portion is paid in stock.

        If an investor purchases shares of our preferred stock or common stock shortly before the record date of a distribution, the price of the shares will include the value of the distribution and the investor will be subject to tax on the distribution even though it represents a return of his, her or its investment. We have built-up or have the potential to build up large amounts of unrealized gain which, when realized and distributed, could have the effect of a taxable return of capital to stockholders.

        A U.S. stockholder generally will recognize taxable gain or loss if the U.S. stockholder sells or otherwise disposes of his, her or its shares of our preferred stock or common stock. The amount of

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gain or loss will be measured by the difference between such stockholder's adjusted tax basis in the stock sold and the amount of the proceeds received in exchange. Any gain arising from such sale or disposition generally will be treated as long-term capital gain or loss if the stockholder has held his, her or its shares for more than one year. Otherwise, it will be classified as short-term capital gain or loss. However, any capital loss arising from the sale or disposition of shares of our preferred stock or common stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to such shares. In addition, all or a portion of any loss recognized upon a disposition of shares of our preferred stock or common stock may be disallowed if substantially identical stock or securities are purchased (whether through reinvestment of distributions or otherwise) within 30 days before or after the disposition.

        For taxable years beginning before January 1, 2013, in general, U.S. stockholders that are individuals, trusts or estates are taxed at preferential rates on their net capital gain (generally, the excess of net long-term capital gain over net short-term capital loss for a taxable year, including long-term capital gain derived from an investment in our shares). Such rate is lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. stockholders currently are subject to U.S. federal income tax on net capital gain at the maximum rate that also applies to ordinary income. Non-corporate U.S. stockholders with net capital losses for a year (i.e., capital loss in excess of capital gain) generally may deduct up to $3,000 of such losses against their ordinary income each year; any net capital losses of a non-corporate U.S. stockholder in excess of $3,000 generally may be carried forward and used in subsequent years as provided in the Code. Corporate U.S. stockholders generally may not deduct any net capital losses for a year, but may carry back such losses for three years or carry forward such losses for five years.

        We will send to each of our U.S. stockholders, after the end of each calendar year, a notice providing, on a per share and per distribution basis, the amounts includible in such U.S. stockholder's taxable income for such year as ordinary income and as long-term capital gain. In addition, the U.S. federal tax status of each year's distributions generally will be reported to the IRS. Distributions may also be subject to additional state, local and foreign taxes depending on a U.S. stockholder's particular situation.

        We may be required to withhold U.S. federal income tax ("backup withholding") from all taxable distributions to any non-corporate U.S. stockholder (1) who fails to furnish us with a correct taxpayer identification number or a certificate that such stockholder is exempt from backup withholding or (2) with respect to whom the IRS notifies us that such stockholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect. An individual's taxpayer identification number is his or her social security number. Backup withholding is not an additional tax. Any amount withheld under backup withholding is allowed as a credit against the U.S. stockholder's U.S. federal income tax liability and may entitle such stockholder to a refund, provided that proper information is timely provided to the IRS.

        For taxable years beginning after December 31, 2012, non-corporate U.S. stockholders generally will be subject to a Medicare tax on their "net investment income," which ordinarily includes taxable distributions or deemed distributions on stock, such as our preferred stock and our common stock, as well as taxable gain on the disposition of stock, including our preferred stock or common stock. It is also very likely that "net investment income" would include, for this purpose any taxable income or gain on any other securities we may offer.

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        Under legislation enacted in 2010 and recent guidance from the IRS, the relevant withholding agent generally will be required to withhold 30% of any dividends on our preferred stock and common stock paid after December 31, 2013 and the gross proceeds from a sale of our preferred stock and common stock paid after December 31, 2014 to (i) a foreign financial institution (whether such financial institution is the beneficial owner or an intermediary) unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity (whether such entity is the beneficial owner or an intermediary) unless such entity certifies that it does not have any substantial United States owners or provides the name, address and taxpayer identification number of each substantial United States owner and such entity meets certain other specified requirements. We will not pay any additional amounts in respect to any amounts withheld.

        Under U.S. Treasury regulations, if a stockholder recognizes a loss with respect to shares of $2 million or more for a non-corporate stockholder or $10 million or more for a corporate stockholder in any single taxable year (or a greater loss over a combination of years), the stockholder must file with the IRS a disclosure statement on Form 8886. Direct stockholders of portfolio securities in many cases are excepted from this reporting requirement, but under current guidance, stockholders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to stockholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Significant monetary penalties apply to a failure to comply with this reporting requirement. States may also have a similar reporting requirement. Stockholders should consult their own tax advisors to determine the applicability of these regulations in light of their individual circumstances.

TAXATION OF NON-U.S. STOCKHOLDERS

        Whether an investment in shares of our preferred stock or common stock is appropriate for a non-U.S. stockholder will depend upon that person's particular circumstances. An investment in shares of our preferred stock or common stock by a non-U.S. stockholder may have adverse tax consequences and, accordingly, may not be appropriate for a non-U.S. stockholder. Non-U.S. stockholders should consult their own tax advisors before investing in our preferred stock or common stock.

        Distributions of our investment company taxable income to non-U.S. stockholders will be subject to U.S. withholding tax (unless lowered or eliminated by an applicable income tax treaty) to the extent payable from our current and accumulated earnings and profits unless an exception applies.

        If a non-U.S. stockholder receives distributions and such distributions are effectively connected with a U.S. trade or business of the non-U.S. stockholder and, if an income tax treaty applies, attributable to a permanent establishment in the United States of such non-U.S. stockholder, such distributions generally will be subject to U.S. federal income tax at the rates applicable to U.S. persons. In that case, we will not be required to withhold U.S. federal income tax if the non-U.S. stockholder complies with applicable certification and disclosure requirements. Special certification requirements apply to a non-U.S. stockholder that is a foreign trust and such entities are urged to consult their own tax advisors.

        Actual or deemed distributions of our net capital gain (which generally is the excess of our net long-term capital gain over our net short-term capital loss) to a non-U.S. stockholder, and gains recognized by a non-U.S. stockholder upon the sale of our preferred stock or common stock, will not

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be subject to withholding of U.S. federal income tax and generally will not be subject to U.S. federal income tax unless (a) the distributions or gains, as the case may be, are effectively connected with a U.S. trade or business of the non-U.S. stockholder and, if an income tax treaty applies, are attributable to a permanent establishment maintained by the non-U.S. stockholder in the United States (as discussed above) or (b) the non-U.S. stockholder is an individual, has been present in the United States for 183 days or more during the taxable year, and certain other conditions are satisfied. For a corporate non-U.S. stockholder, distributions (both actual and deemed), and gains recognized upon the sale of our preferred stock or common stock that are effectively connected with a U.S. trade or business may, under certain circumstances, be subject to an additional "branch profits tax" (unless lowered or eliminated by an applicable income tax treaty). Non-U.S. stockholders of our preferred stock or common stock are encouraged to consult their own advisors as to the applicability of an income tax treaty in their individual circumstances.

        If we distribute our net capital gain in the form of deemed rather than actual distributions (which we may do in the future), a non-U.S. stockholder will be entitled to a U.S. federal income tax credit or tax refund equal to the non-U.S. stockholder's allocable share of the tax we pay on the capital gain deemed to have been distributed. In order to obtain the refund, the non-U.S. stockholder must obtain a U.S. taxpayer identification number (if one has not been previously obtained) and file a U.S. federal income tax return even if the non-U.S. stockholder would not otherwise be required to obtain a U.S. taxpayer identification number or file a U.S. federal income tax return.

        We have the ability to declare a large portion of a dividend in shares of our stock. As long as a portion of such dividend is paid in cash (which portion can be as low as 10% for dividends declared with respect to our taxable years ending on or before December 31, 2011) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, our non-U.S. stockholders will be taxed on 100% of the fair market value of the dividend on the date the dividend is received in the same manner as a cash dividend (including the application of withholding tax rules described above), even though most of the dividend was paid in shares of our stock. In such a circumstance, we may be required to withhold all or substantially all of the cash we would otherwise distribute to a non-U.S. stockholder. In general, any dividend on shares of our preferred stock will be taxable as a dividend, regardless of whether any portion is paid in stock.

        A non-U.S. stockholder who is otherwise subject to withholding of U.S. federal income tax, may be subject to information reporting and backup withholding of U.S. federal income tax on dividends unless the non-U.S. stockholder provides us or the dividend paying agent with an IRS Form W-8BEN (or an acceptable substitute form) or otherwise meets documentary evidence requirements for establishing that it is a non-U.S. stockholder or otherwise establishes an exemption from backup withholding.

        Under legislation enacted in 2010 and recent guidance from the IRS, the relevant withholding agent generally will be required to withhold 30% of any dividends on our preferred stock and common stock paid after December 31, 2013 and the gross proceeds from a sale of our preferred stock and common stock paid after December 31, 2014 to (i) a foreign financial institution unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity that is the beneficial owner of the payment unless such entity certifies that it does not have any substantial United States owners or provides the name, address and taxpayer identification number of each substantial United States owner and such entity meets certain other specified requirements. If payment of this withholding tax is made, non-U.S. stockholders that are otherwise eligible for an exemption from, or reduction of, U.S. federal withholding taxes with respect to such dividends or proceeds will be required to seek a credit or refund from the IRS to obtain the benefit of such exemption or reduction. Non-U.S. stockholders should consult their own tax advisers regarding the particular consequences to them of this legislation and guidance.

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FAILURE TO QUALIFY AS A RIC

        If we were unable to qualify for treatment as a RIC, and relief were not available as discussed above, we would be subject to tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to stockholders and would not be required to make distributions for tax purposes. Distributions generally would be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate U.S. stockholders would be eligible for the dividends-received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder's tax basis, and any remaining distributions would be treated as a capital gain. If we were to fail to meet the RIC requirements for more than two consecutive years and then sought to requalify as a RIC, we would be required to recognize gain to the extent of any unrealized appreciation in our assets unless we made a special election to pay corporate-level tax on any such unrealized appreciation recognized during the succeeding 10-year period.

POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX CONSIDERATIONS

        Prospective investors should recognize that the present U.S. federal income tax treatment of an investment in shares of our preferred stock or common stock may be modified by legislative, judicial or administrative action at any time, and that any such action may affect investments and commitments previously made. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department, resulting in revisions of regulations and revised interpretations of established concepts as well as statutory changes. Revisions in U.S. federal tax laws and interpretations thereof could adversely affect the tax consequences of an investment in us.

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DESCRIPTION OF SECURITIES

        This prospectus contains a summary of the common stock, preferred stock, subscription rights, debt securities, warrants and units. These summaries are not meant to be a complete description of each security. However, this prospectus and the accompanying prospectus supplement will contain the material terms and conditions for each security.


DESCRIPTION OF OUR CAPITAL STOCK

        The following description is based on relevant portions of the Maryland General Corporation Law and on our charter and bylaws. This summary is not necessarily complete, and we refer you to the Maryland General Corporation Law and our charter and bylaws for a more detailed description of the provisions summarized below.

STOCK

        Our authorized stock consists of 400,000,000 shares of stock, par value $0.001 per share, all of which are currently designated as common stock. Our common stock trades on The NASDAQ Global Select Market under the symbol "ARCC." On August 13, 2012, the last reported sales price of our common stock on The NASDAQ Global Select Market was $17.19 per share. There are no outstanding options or warrants to purchase our stock. No stock has been authorized for issuance under any equity compensation plans. Under Maryland law, our stockholders generally are not personally liable for our indebtedness or obligations.

        Under our charter, our board of directors is authorized to classify and reclassify any unissued shares of stock into other classes or series of stock and authorize the issuance of shares of stock without obtaining stockholder approval. As permitted by the Maryland General Corporation Law, our charter provides that the board of directors, without any action by our stockholders, may amend the charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue.

Common Stock

        All shares of our common stock have equal rights as to earnings, assets, dividends and voting and, when they are issued, will be duly authorized, validly issued, fully paid and nonassessable. Distributions may be paid to the holders of our common stock if, as and when authorized by our board of directors and declared by us out of funds legally available therefor. Shares of our common stock have no preemptive, exchange, conversion or redemption rights and are freely transferable, except where their transfer is restricted by federal and state securities laws or by contract.

        In the event of a liquidation, dissolution or winding up of the Company, each share of our common stock would be entitled to share ratably in all of our assets that are legally available for distribution after we pay off all indebtedness and other liabilities and subject to any preferential rights of holders of our preferred stock, if any preferred stock is outstanding at such time.

        Each share of our common stock is entitled to one vote on all matters submitted to a vote of stockholders, including the election of directors. Except as provided with respect to any other class or series of stock, the holders of our common stock will possess exclusive voting power. There is no cumulative voting in the election of directors, which means that holders of a majority of the outstanding shares of common stock can elect all of our directors, and holders of less than a majority of such shares will be unable to elect any director.

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        The following are our outstanding classes of capital stock as of August 13, 2012:

(1)
Title of Class
  (2)
Amount Authorized
  (3)
Amount Held by
Registrant
or for its
Account
  (4)
Amount Outstanding
Exclusive of Amount
Shown Under
Column (3)
 

Common Stock

    400,000,000         222,150,745  

Preferred Stock

        Our charter authorizes our board of directors to classify and reclassify any unissued shares of stock into other classes or series of stock, including preferred stock. Prior to issuance of shares of each class or series, the board of directors is required by Maryland law and by our charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, our board of directors could authorize the issuance of shares of our preferred stock with terms and conditions that could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest.

        You should note, however, that any issuance of preferred stock must comply with the requirements of the Investment Company Act. The Investment Company Act requires, among other things, that (a) immediately after issuance and before any dividend or other distribution is made with respect to our common stock and before any purchase of common stock is made, such preferred stock together with all other indebtedness and senior securities must not exceed an amount equal to 50% of our total assets after deducting the amount of such dividend, distribution or purchase price, as the case may be and (b) the holders of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if dividends on such preferred stock are in arrears by two years or more. Certain matters under the Investment Company Act require the separate vote of the holders of any issued and outstanding preferred stock. For example, holders of preferred stock would vote separately from the holders of common stock on a proposal to cease operations as a BDC. We believe that the availability for issuance of preferred stock may provide us with increased flexibility in structuring future financings and acquisitions.

LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION AND ADVANCE OF EXPENSES

        Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment as being material to the cause of action. Our charter contains such a provision, which eliminates directors' and officers' liability to the maximum extent permitted by Maryland law, subject to the requirements of the Investment Company Act.

        Our charter authorizes us to obligate ourselves, and our bylaws obligate us, to the maximum extent permitted by Maryland law and subject to the requirements of the Investment Company Act, to indemnify any present or former director or officer or any individual who, while a director or officer and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise as a director, officer, partner or trustee, from and against any claim or liability to which that person may become subject or which that person may incur by reason of his or her service in that capacity and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding. The charter and bylaws also permit us to indemnify and advance expenses to any person who served a predecessor of us in any of the capacities described above and any of our employees or agents or any employees or agents of our predecessor. In

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accordance with the Investment Company Act, we will not indemnify any person for any liability to that such person would be subject by reason of such person's willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.

        In addition to the indemnification provided for in our bylaws, we have entered into indemnification agreements with each of our current directors and certain of our officers and with members of our investment adviser's investment committee and we intend to enter into indemnification agreements with each of our future directors, members of our investment committee and certain of our officers. The indemnification agreements attempt to provide these directors, officers and other persons the maximum indemnification permitted under Maryland law and the Investment Company Act. The agreements provide, among other things, for the advancement of expenses and indemnification for liabilities which such person may incur by reason of his or her status as a present or former director or officer or member of our investment adviser's investment committee in any action or proceeding arising out of the performance of such person's services as a present or former director or officer or member of our investment adviser's investment committee.

        Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or are threatened to be made a party by reason of their service in those or other capacities unless it is established that (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, (b) the director or officer actually received an improper personal benefit in money, property or services or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that a personal benefit was improperly received, unless in either case a court orders indemnification, and then only for expenses. In addition, Maryland law permits a corporation to advance reasonable expenses to a director or officer upon the corporation's receipt of (x) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (y) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.

PROVISIONS OF THE MARYLAND GENERAL CORPORATION LAW AND OUR CHARTER AND BYLAWS

        The Maryland General Corporation Law and our charter and bylaws contain provisions that could make it more difficult for a potential acquiror to acquire us by means of a tender offer, proxy contest or otherwise. These provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of these provisions outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the negotiation of such proposals may improve their terms.

Classified Board of Directors

        Our board of directors is divided into three classes of directors serving staggered three-year terms, with the term of office of only one of the three classes expiring each year. A classified board may render a change in control of us or removal of our incumbent management more difficult. We believe,

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however, that the longer time required to elect a majority of a classified board of directors helps to ensure the continuity and stability of our management and policies.

Election of Directors

        Our charter and bylaws provide that the affirmative vote of the holders of a majority of the outstanding shares of stock entitled to vote in the election of directors will be required to elect a director. Pursuant to the charter, our board of directors may amend the bylaws to alter the vote required to elect directors.

Number of Directors; Vacancies; Removal

        Our charter provides that the number of directors will be set only by the board of directors in accordance with our bylaws. Our bylaws provide that a majority of our entire board of directors may at any time increase or decrease the number of directors. However, unless our bylaws are amended, the number of directors may never be less than four or more than eleven. Our charter sets forth our election, subject to certain requirements, to be subject to the provision of Subtitle 8 of Title 3 of the Maryland General Corporation Law regarding the filling of vacancies on the board of directors. Accordingly, except as may be provided by the board of directors in setting the terms of any class or series of preferred stock, any and all vacancies on the board of directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies, subject to any applicable requirements of the Investment Company Act.

        Our charter provides that a director may be removed only for cause, as defined in our charter, and then only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors.

Action by Stockholders

        Under the Maryland General Corporation Law and our charter, stockholder action can be taken only at an annual or special meeting of stockholders or by unanimous written or electronically transmitted consent instead of a meeting. These provisions, combined with the requirements of our bylaws regarding the calling of a stockholder-requested special meeting of stockholders discussed below, may have the effect of delaying consideration of a stockholder proposal until the next annual meeting.

Advance Notice Provisions for Stockholder Nominations and Stockholder Proposals

        Our bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to the board of directors and the proposal of business to be considered by stockholders may be made only (a) pursuant to our notice of the meeting, (b) by or at the direction of the board of directors or (c) by a stockholder who is a stockholder of record both at the time of giving the advance notice required by the bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and who has complied with the advance notice procedures of the bylaws. With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of individuals for election to the board of directors at a special meeting may be made only (a) by or at the direction of the board of directors or (b) provided that the special meeting has been called in accordance with the bylaws for the purpose of electing directors, by a stockholder who is a stockholder of record both at the time of giving the advance notice required by the bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the advance notice provisions of the bylaws.

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        The purpose of requiring stockholders to give us advance notice of nominations and other business is to afford our board of directors a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or desirable by our board of directors, to inform stockholders and make recommendations about such qualifications or business, as well as to provide a more orderly procedure for conducting meetings of stockholders. Although our bylaws do not give our board of directors any power to disapprove stockholder nominations for the election of directors or proposals recommending certain action, they may have the effect of precluding a contest for the election of directors or the consideration of stockholder proposals if proper procedures are not followed and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our stockholders.

Calling of Special Meetings of Stockholders

        Our bylaws provide that special meetings of stockholders may be called by our board of directors and certain of our officers. Additionally, our bylaws provide that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting the meeting, a special meeting of stockholders will be called by the secretary of the corporation to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.

Approval of Extraordinary Corporate Action; Amendment of Charter and Bylaws

        Under Maryland law, a Maryland corporation generally cannot dissolve, amend its charter, merge, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business, unless approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter. See "Risk Factors—Risks Relating to Offerings Pursuant to this Prospectus—Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock." However, a Maryland corporation may provide in its charter for approval of these matters by a lesser percentage, but not less than a majority of all of the votes entitled to be cast on the matter. Our charter generally provides for approval of charter amendments and extraordinary transactions by the stockholders entitled to cast at least a majority of the votes entitled to be cast on the matter. Our charter also provides that certain charter amendments and any proposal for our conversion, whether by merger or otherwise, from a closed-end company to an open-end company or any proposal for our liquidation or dissolution requires the approval of the stockholders entitled to cast at least 80 percent of the votes entitled to be cast on such matter. However, if such amendment or proposal is approved by at least two-thirds of our continuing directors (as defined below) (in addition to approval by our board of directors), such amendment or proposal may be approved by a majority of the votes entitled to be cast on such a matter. The "continuing directors" are defined in our charter as our current directors as well as those directors whose nomination for election by the stockholders or whose election by the directors to fill vacancies is approved by a majority of the continuing directors then on the board of directors.

        Our charter and bylaws provide that the board of directors will have the exclusive power to adopt, alter or repeal any provision of our bylaws and to make new bylaws.

No Appraisal Rights

        Except with respect to appraisal rights arising in connection with the Control Share Acquisition Act discussed below, as permitted by the Maryland General Corporation Law, our charter provides that stockholders will not be entitled to exercise appraisal rights unless a majority of our board of directors

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determines that such rights will apply, with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which stockholders would otherwise be entitled to exercise appraisal rights.

Control Share Acquisitions

        The Control Share Acquisition Act provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror, by officers or by employees who are directors of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power:

        The requisite stockholder approval must be obtained each time an acquiror crosses one of the thresholds of voting power set forth above. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means the acquisition of issued and outstanding control shares, subject to certain exceptions.

        A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

        If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may repurchase for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to repurchase control shares is subject to certain conditions and limitations, including, as provided in our bylaws, compliance with the Investment Company Act, which will prohibit any such repurchase other than in limited circumstances. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or of any meeting of stockholders at which the voting rights of the shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition.

        The Control Share Acquisition Act does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation.

        Our bylaws contain a provision exempting from the Control Share Acquisition Act any and all acquisitions by any person of our shares of stock and, as a result, any control shares of the Company will have the same voting rights as all of the other shares of the Company common stock. Such provision could be amended or eliminated at any time in the future. However, we will amend our

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bylaws to be subject to the Control Share Acquisition Act only if the board of directors determines that it would be in our best interests and we determine (after consultation with the SEC staff) that our being subject to the Control Share Acquisition Act does not conflict with the Investment Company Act.

Business Combinations

        Under Maryland law, "business combinations" between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

        A person is not an interested stockholder under this statute if the board of directors approved in advance the transaction by which such person otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

        After the five-year prohibition, any business combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:

        These super-majority vote requirements do not apply if the corporation's common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

        The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. Our board of directors has adopted a resolution that any business combination between us and any other person is exempted from the provisions of the Business Combination Act, provided that the business combination is first approved by the board of directors, including a majority of the independent directors. This resolution, however, may be altered or repealed in whole or in part at any time. If this resolution is repealed, or the board of directors does not otherwise approve a business combination, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

Conflict with the Investment Company Act

        Our bylaws provide that, if and to the extent that any provision of the Maryland General Corporation Law, including the Control Share Acquisition Act (if we amend our bylaws to be subject to such act) and the Business Combination Act, or any provision of our charter or bylaws conflicts with any provision of the Investment Company Act, the applicable provision of the Investment Company Act will control.

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DESCRIPTION OF OUR PREFERRED STOCK

        In addition to shares of common stock, our charter authorizes the issuance of preferred stock. If we offer preferred stock under this prospectus, we will issue an appropriate prospectus supplement. We may issue preferred stock from time to time in one or more classes or series, without stockholder approval. Prior to issuance of shares of each class or series, our board of directors is required by Maryland law and by our charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Any such an issuance must adhere to the requirements of the Investment Company Act, Maryland law and any other limitations imposed by law.

        The Investment Company Act currently requires, among other things, that (a) immediately after issuance and before any distribution is made with respect to common stock, the liquidation preference of the preferred stock, together with all other senior securities, must not exceed an amount equal to 50% of our total assets (taking into account such distribution), (b) the holders of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if dividends on the preferred stock are in arrears by two years or more and (c) such class of stock have complete priority over any other class of stock as to distribution of assets and payment of dividends, which dividends shall be cumulative.

        For any series of preferred stock that we may issue, our board of directors will determine and the articles supplementary and the prospectus supplement relating to such series will describe:

        All shares of preferred stock that we may issue will be identical and of equal rank except as to the particular terms thereof that may be fixed by our board of directors, and all shares of each series of preferred stock will be identical and of equal rank except as to the dates from which dividends, if any, thereon will be cumulative.

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DESCRIPTION OF OUR SUBSCRIPTION RIGHTS

GENERAL

        We may issue subscription rights to our stockholders to purchase common stock. Subscription rights may be issued independently or together with any other offered security and may or may not be transferable by the person purchasing or receiving the subscription rights. In connection with a subscription rights offering to our stockholders, we would distribute certificates evidencing the subscription rights and a prospectus supplement to our stockholders on the record date that we set for receiving subscription rights in such subscription rights offering.

        The applicable prospectus supplement would describe the following terms of subscription rights in respect of which this prospectus is being delivered:

        We will not offer any subscription rights to purchase shares of our common stock under this prospectus or an accompanying prospectus supplement without first filing a new post-effective amendment to the registration statement.

EXERCISE OF SUBSCRIPTION RIGHTS

        Each subscription right would entitle the holder of the subscription right to purchase for cash such amount of shares of common stock at such exercise price as shall in each case be set forth in, or be determinable as set forth in, the prospectus supplement relating to the subscription rights offered thereby. Subscription rights may be exercised at any time up to the close of business on the expiration date for such subscription rights set forth in the prospectus supplement. After the close of business on the expiration date, all unexercised subscription rights would become void.

        Subscription rights may be exercised as set forth in the prospectus supplement relating to the subscription rights offered thereby. Upon receipt of payment and the subscription rights certificate properly completed and duly executed at the corporate trust office of the subscription rights agent or any other office indicated in the prospectus supplement we will forward, as soon as practicable, the shares of common stock purchasable upon such exercise. To the extent permissible under applicable law, we may determine to offer any unsubscribed offered securities directly to persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, as set forth in the applicable prospectus supplement.

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DESCRIPTION OF OUR WARRANTS

        The following is a general description of the terms of the warrants we may issue from time to time. Particular terms of any warrants we offer will be described in the prospectus supplement relating to such warrants.

        We may issue warrants to purchase shares of our common stock, preferred stock or debt securities. Such warrants may be issued independently or together with shares of common stock, preferred stock or debt securities and may be attached or separate from such securities. We will issue each series of warrants under a separate warrant agreement to be entered into between us and a warrant agent. The warrant agent will act solely as our agent and will not assume any obligation or relationship of agency for or with holders or beneficial owners of warrants.

        A prospectus supplement will describe the particular terms of any series of warrants we may issue, including the following:

        We and the warrant agent may amend or supplement the warrant agreement for a series of warrants without the consent of the holders of the warrants issued thereunder to effect changes that

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are not inconsistent with the provisions of the warrants and that do not materially and adversely affect the interests of the holders of the warrants.

        Prior to exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including, in the case of warrants to purchase debt securities, the right to receive principal, premium, if any, or interest payments, on the debt securities purchasable upon exercise or to enforce covenants in the applicable indenture or, in the case of warrants to purchase common stock or preferred stock, the right to receive dividends, if any, or payments upon our liquidation, dissolution or winding up or to exercise any voting rights.

        Under the Investment Company Act, we may generally only offer warrants provided that (a) the warrants expire by their terms within ten years, (b) the exercise or conversion price is not less than the current market value at the date of issuance, (c) our stockholders authorize the proposal to issue such warrants, and our board of directors approves such issuance on the basis that the issuance is in the best interests of Ares Capital and its stockholders and (d) if the warrants are accompanied by other securities, the warrants are not separately transferable unless no class of such warrants and the securities accompanying them has been publicly distributed. The Investment Company Act also provides that the amount of our voting securities that would result from the exercise of all outstanding warrants, as well as options and rights, at the time of issuance may not exceed 25% of our outstanding voting securities.

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DESCRIPTION OF OUR DEBT SECURITIES

        We may issue debt securities in one or more series. The specific terms of each series of debt securities will be described in the particular prospectus supplement relating to that series. The prospectus supplement may or may not modify the general terms found in this prospectus and will be filed with the SEC. For a complete description of the terms of a particular series of debt securities, you should read both this prospectus and the prospectus supplement relating to that particular series.

        As required by federal law for all bonds and notes of companies that are publicly offered, the debt securities are governed by a document called an "indenture." An indenture is a contract between us and U.S. Bank National Association, a financial institution acting as trustee on your behalf, and is subject to and governed by the Trust Indenture Act of 1939, as amended. The trustee has two main roles. First, the trustee can enforce your rights against us if we default. There are some limitations on the extent to which the trustee acts on your behalf, described in the second paragraph under "Events of Default—Remedies if an Event of Default Occurs." Second, the trustee performs certain administrative duties for us.

        Because this section is a summary, it does not describe every aspect of the debt securities and the indenture. We urge you to read the indenture because it, and not this description, defines your rights as a holder of debt securities. For example, in this section, we use capitalized words to signify terms that are specifically defined in the indenture. Some of the definitions are repeated in this prospectus, but for the rest you will need to read the indenture. We have filed the form of the indenture with the SEC. See "Available Information" for information on how to obtain a copy of the indenture.

        The prospectus supplement, which will accompany this prospectus, will describe the particular series of debt securities being offered, including, among other things:

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        The debt securities may be secured or unsecured obligations. Unless the prospectus supplement states otherwise, principal (and premium, if any) and interest, if any, will be paid by us in immediately available funds.

        We are permitted, under specified conditions, to issue multiple classes of indebtedness if our asset coverage, as defined in the Investment Company Act, is at least equal to 200% immediately after each such issuance. In addition, while any indebtedness and senior securities remain outstanding, we must make provisions to prohibit the distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. Specifically, we may be precluded from declaring dividends or repurchasing shares of our common stock unless our asset coverage is at least 200%. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see "Risk Factors—Risks Relating to Our Business—Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital."

GENERAL

        The indenture provides that any debt securities proposed to be sold under this prospectus and the attached prospectus supplement ("offered debt securities") and any debt securities issuable upon the exercise of warrants or upon conversion or exchange of other offered securities ("underlying debt securities"), may be issued under the indenture in one or more series.

        For purposes of this prospectus, any reference to the payment of principal of or premium or interest, if any, on debt securities will include additional amounts if required by the terms of the debt securities.

        The indenture does not limit the amount of debt securities that may be issued thereunder from time to time. Debt securities issued under the indenture, when a single trustee is acting for all debt securities issued under the indenture, are called the "indenture securities." The indenture also provides that there may be more than one trustee thereunder, each with respect to one or more different series of indenture securities. See "Resignation of Trustee" below. At a time when two or more trustees are acting under the indenture, each with respect to only certain series, the term "indenture securities" means the one or more series of debt securities with respect to which each respective trustee is acting. In the event that there is more than one trustee under the indenture, the powers and trust obligations of each trustee described in this prospectus will extend only to the one or more series of indenture securities for which it is trustee. If two or more trustees are acting under the indenture, then the

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indenture securities for which each trustee is acting would be treated as if issued under separate indentures.

        The indenture does not contain any provisions that give you protection in the event we issue a large amount of debt or we are acquired by another entity.

        We refer you to the prospectus supplement for information with respect to any deletions from, modifications of or additions to the Events of Default or our covenants that are described below, including any addition of a covenant or other provision providing event risk or similar protection.

        We have the ability to issue indenture securities with terms different from those of indenture securities previously issued and, without the consent of the holders thereof, to reopen a previous issue of a series of indenture securities and issue additional indenture securities of that series unless the reopening was restricted when that series was created.

        We expect that we will usually issue debt securities in book entry only form represented by global securities.

CONVERSION AND EXCHANGE

        If any debt securities are convertible into or exchangeable for other securities, the prospectus supplement will explain the terms and conditions of the conversion or exchange, including the conversion price or exchange ratio (or the calculation method), the conversion or exchange period (or how the period will be determined), if conversion or exchange will be mandatory or at the option of the holder or us, provisions for adjusting the conversion price or the exchange ratio and provisions affecting conversion or exchange in the event of the redemption of the underlying debt securities. These terms may also include provisions under which the number or amount of other securities to be received by the holders of the debt securities upon conversion or exchange would be calculated according to the market price of the other securities as of a time stated in the prospectus supplement.

PAYMENT AND PAYING AGENTS

        We will pay interest to the person listed in the applicable trustee's records as the owner of the debt security at the close of business on a particular day in advance of each due date for interest, even if that person no longer owns the debt security on the interest due date. That day, usually about two weeks in advance of the interest due date, is called the "record date." Because we will pay all the interest for an interest period to the holders on the record date, holders buying and selling debt securities must work out between themselves the appropriate purchase price. The most common manner is to adjust the sales price of the debt securities to prorate interest fairly between buyer and seller based on their respective ownership periods within the particular interest period. This prorated interest amount is called "accrued interest."

Payments on Global Securities

        We will make payments on a global security in accordance with the applicable policies of the depositary as in effect from time to time. Under those policies, we will make payments directly to the depositary, or its nominee, and not to any indirect holders who own beneficial interests in the global security. An indirect holder's right to those payments will be governed by the rules and practices of the depositary and its participants.

Payments on Certificated Securities

        We will make payments on a certificated debt security as follows. We will pay interest that is due on an interest payment date by check mailed on the interest payment date to the holder at his or her address shown on the trustee's records as of the close of business on the regular record date. We will

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make all payments of principal and premium, if any, by check at the office of the applicable trustee in New York, NY and/or at other offices that may be specified in the prospectus supplement or in a notice to holders against surrender of the debt security.

        Alternatively, if the holder asks us to do so, we will pay any amount that becomes due on the debt security by wire transfer of immediately available funds to an account at a bank in New York City, on the due date. To request payment by wire, the holder must give the applicable trustee or other paying agent appropriate transfer instructions at least 15 business days before the requested wire payment is due. In the case of any interest payment due on an interest payment date, the instructions must be given by the person who is the holder on the relevant regular record date. Any wire instructions, once properly given, will remain in effect unless and until new instructions are given in the manner described above.

Payment When Offices Are Closed

        If any payment is due on a debt security on a day that is not a business day, we will make the payment on the next day that is a business day. Payments made on the next business day in this situation will be treated under the indenture as if they were made on the original due date, except as otherwise indicated in the attached prospectus supplement. Such payment will not result in a default under any debt security or the indenture, and no interest will accrue on the payment amount from the original due date to the next day that is a business day.

        Book-entry and other indirect holders should consult their banks or brokers for information on how they will receive payments on their debt securities.

EVENTS OF DEFAULT

        You will have rights if an Event of Default occurs in respect of the debt securities of your series and is not cured, as described later in this subsection.

        The term "Event of Default" in respect of the debt securities of your series means any of the following (unless the prospectus supplement relating to such debt securities states otherwise):

        An Event of Default for a particular series of debt securities does not necessarily constitute an Event of Default for any other series of debt securities issued under the same or any other indenture.

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The trustee may withhold notice to the holders of debt securities of any default, except in the payment of principal, premium or interest, if it considers the withholding of notice to be in the best interests of the holders.

Remedies if an Event of Default Occurs

        If an Event of Default has occurred and has not been cured, the trustee or the holders of at least 25% in principal amount of the debt securities of the affected series may declare the entire principal amount of all the debt securities of that series to be due and immediately payable. This is called a declaration of acceleration of maturity. In certain circumstances, a declaration of acceleration of maturity may be canceled by the holders of a majority in principal amount of the debt securities of the affected series.

        The trustee is not required to take any action under the indenture at the request of any holders unless the holders offer the trustee reasonable protection from expenses and liability (called an "indemnity") (Section 315 of the Trust Indenture Act of 1939). If reasonable indemnity is provided, the holders of a majority in principal amount of the outstanding debt securities of the relevant series may direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy available to the trustee. The trustee may refuse to follow those directions in certain circumstances. No delay or omission in exercising any right or remedy will be treated as a waiver of that right, remedy or Event of Default.

        Before you are allowed to bypass your trustee and bring your own lawsuit or other formal legal action or take other steps to enforce your rights or protect your interests relating to the debt securities, the following must occur:

        However, you are entitled at any time to bring a lawsuit for the payment of money due on your debt securities on or after the due date.

        Holders of a majority in principal amount of the debt securities of the affected series may waive any past defaults other than:

        Book-entry and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the trustee and how to declare or cancel an acceleration of maturity.

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        Each year, we will furnish to each trustee a written statement of certain of our officers certifying that to their knowledge we are in compliance with the indenture and the debt securities, or else specifying any default.

MERGER OR CONSOLIDATION

        Under the terms of the indenture, we are generally permitted to consolidate or merge with another entity. We are also permitted to sell all or substantially all of our assets to another entity. However, unless the prospectus supplement relating to certain debt securities states otherwise, we may not take any of these actions unless all the following conditions are met:

MODIFICATION OR WAIVER

        There are three types of changes we can make to the indenture and the debt securities issued thereunder.

Changes Requiring Your Approval

        First, there are changes that we cannot make to your debt securities without your specific approval. The following is a list of those types of changes:

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Changes Not Requiring Approval

        The second type of change does not require any vote by the holders of the debt securities. This type is limited to clarifications and certain other changes that would not adversely affect holders of the outstanding debt securities in any material respect. We also do not need any approval to make any change that affects only debt securities to be issued under the indenture after the change takes effect.

Changes Requiring Majority Approval

        Any other change to the indenture and the debt securities would require the following approval:

        The holders of a majority in principal amount of all of the series of debt securities issued under an indenture, voting together as one class for this purpose, may waive our compliance with some of our covenants in that indenture. However, we cannot obtain a waiver of a payment default or of any of the matters covered by the bullet points included above under "—Changes Requiring Your Approval."

Further Details Concerning Voting

        When taking a vote, we will use the following rules to decide how much principal to attribute to a debt security:

        Debt securities will not be considered outstanding, and therefore not eligible to vote, if we have deposited or set aside in trust money for their payment or redemption. Debt securities will also not be eligible to vote if they have been fully defeased as described later under "Defeasance—Full Defeasance."

        We will generally be entitled to set any day as a record date for the purpose of determining the holders of outstanding indenture securities that are entitled to vote or take other action under the indenture. If we set a record date for a vote or other action to be taken by holders of one or more

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series, that vote or action may be taken only by persons who are holders of outstanding indenture securities of those series on the record date and must be taken within eleven months following the record date.

        Book-entry and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if we seek to change the indenture or the debt securities or request a waiver.

DEFEASANCE

        The following provisions will be applicable to each series of debt securities unless we state in the applicable prospectus supplement that the provisions of covenant defeasance and full defeasance will not be applicable to that series.

Covenant Defeasance

        If certain conditions are satisfied, we can make the deposit described below and be released from some of the restrictive covenants in the indenture under which the particular series was issued. This is called "covenant defeasance." In that event, you would lose the protection of those restrictive covenants but would gain the protection of having money and government securities set aside in trust to repay your debt securities. If applicable, you also would be released from the subordination provisions described under "Indenture Provisions—Subordination" below. In order to achieve covenant defeasance, we must do the following:

        We must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the Investment Company Act and a legal opinion and officers' certificate stating that all conditions precedent to covenant defeasance have been complied with.

        If we accomplish covenant defeasance, you can still look to us for repayment of the debt securities if there were a shortfall in the trust deposit or the trustee is prevented from making payment. For example, if one of the remaining Events of Default occurred (such as our bankruptcy) and the debt securities became immediately due and payable, there might be a shortfall. Depending on the event causing the default, you may not be able to obtain payment of the shortfall.

Full Defeasance

        If there is a change in U.S. federal tax law, as described below, we can legally release ourselves from all payment and other obligations on the debt securities of a particular series (called "full defeasance") if we put in place the following other arrangements for you to be repaid:

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        If we ever did accomplish full defeasance, as described above, you would have to rely solely on the trust deposit for repayment of the debt securities. You could not look to us for repayment in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be protected from claims of our lenders and other creditors if we ever became bankrupt or insolvent. If applicable, you would also be released from the subordination provisions described later under "Indenture Provisions—Subordination."

FORM, EXCHANGE AND TRANSFER OF CERTIFICATED REGISTERED SECURITIES

        Holders may exchange their certificated securities, if any, for debt securities of smaller denominations or combined into fewer debt securities of larger denominations, as long as the total principal amount is not changed.

        Holders may exchange or transfer their certificated securities, if any, at the office of their trustee. We have appointed the trustee to act as our agent for registering debt securities in the names of holders transferring debt securities. We may appoint another entity to perform these functions or perform them ourselves.

        Holders will not be required to pay a service charge to transfer or exchange their certificated securities, if any, but they may be required to pay any tax or other governmental charge associated with the transfer or exchange. The transfer or exchange will be made only if our transfer agent is satisfied with the holder's proof of legal ownership.

        If we have designated additional transfer agents for your debt security, they will be named in your prospectus supplement. We may appoint additional transfer agents or cancel the appointment of any particular transfer agent. We may also approve a change in the office through which any transfer agent acts.

        If any certificated securities of a particular series are redeemable and we redeem less than all the debt securities of that series, we may block the transfer or exchange of those debt securities during the period beginning 15 days before the day we mail the notice of redemption and ending on the day of that mailing, in order to freeze the list of holders to prepare the mailing. We may also refuse to register transfers or exchanges of any certificated securities selected for redemption, except that we will continue to permit transfers and exchanges of the unredeemed portion of any debt security that will be partially redeemed.

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RESIGNATION OF TRUSTEE

        Each trustee may resign or be removed with respect to one or more series of indenture securities provided that a successor trustee is appointed to act with respect to these series. In the event that two or more persons are acting as trustee with respect to different series of indenture securities under the indenture, each of the trustees will be a trustee of a trust separate and apart from the trust administered by any other trustee.

INDENTURE PROVISIONS—SUBORDINATION

        Upon any distribution of our assets upon our dissolution, winding up, liquidation or reorganization, the payment of the principal of (and premium, if any) and interest, if any, on any indenture securities denominated as subordinated debt securities is to be subordinated to the extent provided in the indenture in right of payment to the prior payment in full of all Senior Indebtedness (as defined below), but our obligation to you to make payment of the principal of (and premium, if any) and interest, if any, on such subordinated debt securities will not otherwise be affected. In addition, no payment on account of principal (or premium, if any), sinking fund or interest, if any, may be made on such subordinated debt securities at any time unless full payment of all amounts due in respect of the principal (and premium, if any), sinking fund and interest on Senior Indebtedness has been made or duly provided for in money or money's worth.

        In the event that, notwithstanding the foregoing, any payment by us is received by the trustee in respect of subordinated debt securities or by the holders of any of such subordinated debt securities before all Senior Indebtedness is paid in full, the payment or distribution must be paid over to the holders of the Senior Indebtedness or on their behalf for application to the payment of all the Senior Indebtedness remaining unpaid until all the Senior Indebtedness has been paid in full, after giving effect to any concurrent payment or distribution to the holders of the Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness upon this distribution by us, the holders of such subordinated debt securities will be subrogated to the rights of the holders of the Senior Indebtedness to the extent of payments made to the holders of the Senior Indebtedness out of the distributive share of such subordinated debt securities.

        By reason of this subordination, in the event of a distribution of our assets upon our insolvency, certain of our senior creditors may recover more, ratably, than holders of any subordinated debt securities. The indenture provides that these subordination provisions will not apply to money and securities held in trust under the defeasance provisions of the indenture.

        "Senior Indebtedness" is defined in the indenture as the principal of (and premium, if any) and unpaid interest on:

        If this prospectus is being delivered in connection with the offering of a series of indenture securities denominated as subordinated debt securities, the accompanying prospectus supplement will set forth the approximate amount of our Senior Indebtedness outstanding as of a recent date.

THE TRUSTEE UNDER THE INDENTURE

        U.S. Bank National Association will serve as the trustee under the indenture.

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CERTAIN CONSIDERATIONS RELATING TO FOREIGN CURRENCIES

        Debt securities denominated or payable in foreign currencies may entail significant risks. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved and will be more fully described in the applicable prospectus supplement.

BOOK-ENTRY DEBT SECURITIES

        The Depository Trust Company ("DTC") will act as securities depository for the debt securities. The debt securities will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for the debt securities, in the aggregate principal amount of such issue, and will be deposited with DTC.

        DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC").

        DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's Ratings Services' highest rating: AAA. The DTC Rules applicable to its participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org.

        Purchases of debt securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the debt securities on DTC's records. The ownership interest of each actual purchaser of each security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the debt securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in debt securities, except in the event that use of the book-entry system for the debt securities is discontinued.

        To facilitate subsequent transfers, all debt securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of debt securities with DTC and their

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registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the debt securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such debt securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

        Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

        Redemption notices shall be sent to DTC. If less than all of the debt securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

        Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the debt securities unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to us as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the debt securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

        Redemption proceeds, distributions, and dividend payments on the debt securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from us or the trustee on the payment date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the trustee, or us, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of us or the trustee, but disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

        DTC may discontinue providing its services as securities depository with respect to the debt securities at any time by giving reasonable notice to us or to the trustee. Under such circumstances, in the event that a successor securities depository is not obtained, certificates are required to be printed and delivered. We may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered to DTC.

        The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof.

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DESCRIPTION OF OUR UNITS

        The following is a general description of the terms of the units we may issue from time to time. Particular terms of any units we offer will be described in the prospectus supplement relating to such units. For a complete description of the terms of particular units, you should read both this prospectus and the prospectus supplement relating to those particular units.

        We may issue units comprised of one or more of the other securities described in this prospectus in any combination. Each unit may also include debt obligations of third parties, such as U.S. Treasury securities. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security.

        A prospectus supplement will describe the particular terms of any series of units we may issue, including the following:

        We will not offer any units under this prospectus or an accompanying prospectus supplement without first filing a new post-effective amendment to the registration statement.

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SALES OF COMMON STOCK BELOW NET ASSET VALUE

        At our 2012 annual stockholders meeting, subject to certain determinations required to be made by our board of directors, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our then outstanding common stock, at a price below the then current net asset value per share during a period beginning on June 4, 2012 and expiring on the earlier of June 4, 2013 and the date of our 2013 annual stockholders meeting.

        In order to sell shares of common stock pursuant to this authorization, no further authorization from our stockholders has to be solicited, but a majority of our directors who have no financial interest in the sale and a majority of our independent directors must (a) find that the sale is in our best interests and in the best interests of our stockholders and (b) in consultation with any underwriter or underwriters of the offering, make a good faith determination as of a time either immediately prior to the first solicitation by us or on our behalf of firm commitments to purchase such shares of common stock, or immediately prior to the issuance of such common stock, that the price at which such shares of common stock are to be sold is not less than a price which closely approximates the market value of those shares of common stock, less any distributing commission or discount.

        Any offering of common stock below its net asset value per share will be designed to raise capital for investment in accordance with our investment objective.

        In making a determination that an offering of common stock below its net asset value per share is in our and our stockholders' best interests, our board of directors will consider a variety of factors including:

        Our board of directors will also consider the fact that sales of shares of common stock at a discount will benefit our investment adviser as the investment adviser will earn additional investment management fees on the proceeds of such offerings, as it would from the offering of any other of our securities or from the offering of common stock at premium to net asset value per share.

        We will not sell shares of our common stock pursuant to stockholder approval (or any rights, warrants or units to purchase shares of our common stock) under this prospectus or an accompanying prospectus supplement without first filing a new post-effective amendment to the registration statement if the cumulative dilution to our net asset value per share from offerings under the registration statement, as amended by such post-effective amendment, exceeds 15%. This would be measured separately for each offering pursuant to the registration statement, as amended by this post-effective

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amendment, by calculating the percentage dilution or accretion to aggregate net asset value from that offering and then summing the percentage from each offering. For example, if our most recently determined net asset value per share at the time of the first offering is $15.00 and we have 30 million shares of common stock outstanding, the sale of 6 million shares of common stock at net proceeds to us of $7.50 per share (a 50% discount) would produce dilution of 8.33%. If we subsequently determined that our net asset value per share increased to $15.75 on the then 36 million shares of common stock outstanding and then made an additional offering, we could, for example, sell approximately an additional 7.2 million shares of common stock at net proceeds to us of $9.45 per share, which would produce dilution of 6.67%, before we would reach the aggregate 15% limit.

        Sales by us of our common stock at a discount from net asset value per share pose potential risks for our existing stockholders whether or not they participate in the offering, as well as for new investors who participate in the offering. Any sale of common stock at a price below net asset value per share would result in an immediate dilution to existing common stockholders who do not participate in such sale on at least a pro-rata basis. See "Risk Factors—Risks Relating to Offerings Pursuant to this Prospectus—The net asset value per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock or securities to subscribe for or convertible into shares of our common stock."

        The following three headings and accompanying tables explain and provide hypothetical examples on the impact of an offering of our common stock at a price less than net asset value per share on three different types of investors:

Impact On Existing Stockholders Who Do Not Participate in the Offering

        Our existing stockholders who do not participate in an offering below net asset value per share or who do not buy additional shares in the secondary market at the same or lower price as we obtain in the offering (after expenses and commissions) face the greatest potential risks. These stockholders will experience an immediate dilution in the net asset value of the shares of common stock they hold and their net asset value per share. These stockholders will also experience a disproportionately greater decrease in their participation in our earnings and assets and their voting power than the increase we will experience in our assets, potential earning power and voting interests due to such offering. These stockholders may also experience a decline in the market price of their shares, which often reflects to some degree announced or potential increases and decreases in net asset value per share. This decrease could be more pronounced as the size of the offering and level of discounts increases. Further, if current stockholders do not purchase any shares to maintain their percentage interest, regardless of whether such offering is above or below the then current net asset value, their voting power will be diluted.

        The following chart illustrates the level of net asset value dilution that would be experienced by a nonparticipating stockholder in three different hypothetical offerings of different sizes and levels of discount from net asset value per share. It is not possible to predict the level of market price decline that may occur.

        The examples assume that the issuer has 30 million shares outstanding, $600 million in total assets and $150 million in total liabilities. The current net asset value and net asset value per share are thus $450 million and $15.00. The chart illustrates the dilutive effect on Stockholder A of (a) an offering of 1.5 million shares of common stock (5% of the outstanding shares) at $14.25 per share after offering

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expenses and commissions (a 5% discount from net asset value), (b) an offering of 3 million shares of common stock (10% of the outstanding shares) at $13.50 per share after offering expenses and commissions (a 10% discount from net asset value) and (c) an offering of 6 million shares of common stock (20% of the outstanding shares) at $12.00 per share after offering expenses and commissions (a 20% discount from net asset value). The prospectus supplement pursuant to which any discounted offering is made will include a chart based on the actual number of shares of common stock in such offering and the actual discount to the most recently determined net asset value. It is not possible to predict the level of market price decline that may occur.

 
   
  Example 1   Example 2   Example 3  
 
   
  5% Offering at
5% Discount
  10% Offering at
10% Discount
  20% Offering at
20% Discount
 
 
  Prior to Sale
Below NAV
  Following
Sale
  %
Change
  Following
Sale
  %
Change
  Following
Sale
  %
Change
 

Offering Price

                                           

Price per Share to Public

          $15.00         $14.21         $12.63      

Net Proceeds per Share to Issuer

          $14.25         $13.50         $12.00      

Decrease to Net Asset Value

                                           

Total Shares Outstanding

    30,000,000     31,500,000     5.00 %   33,000,000     10.00 %   36,000,000     20.00 %

Net Asset Value per Share

    $15.00     $14.96     (0.24 )%   $14.86     (0.91 )%   $14.50     (3.33 )%

Dilution to Nonparticipating Stockholder

                                           

Shares Held by Stockholder A

    30,000     30,000     0.00 %   30,000     0.00 %   30,000     0.00 %

Percentage Held by Stockholder A

    0.10 %   0.10 %(1)   (4.76 )%   0.09 %   (9.09 )%   0.08 %   (16.67 )%

Total Net Asset Value Held by Stockholder A

    $450,000     $448,929     (0.24 )%   $445,909     (0.91 )%   $435,000     (3.33 )%

Total Investment by Stockholder A (Assumed to Be $15.00 per Share)

    $450,000     $450,000           $450,000           $450,000        

Total Dilution to Stockholder A (Total Net Asset Value Less Total Investment)

          $(1,071 )         $(4,091 )         $(15,000 )      

Investment per Share Held by Stockholder A (Assumed to be $15.00 per Share on Shares Held Prior to Sale)

    $15.00     $15.00     0.00 %   $15.00     0.00 %   $15.00     0.00 %

Net Asset Value per Share Held by Stockholder A

          $14.96           $14.86           $14.50        

Dilution per Share Held by Stockholder A (Net Asset Value per Share Less Investment per Share)

          $(0.04 )         $(0.14 )         $(0.50 )      

Percentage Dilution to Stockholder A (Dilution per Share Divided by Investment per Share)

                (0.24 )%         (0.91 )%         (3.33 )%

(1)
To be carried out to the third decimal place.

Impact On Existing Stockholders Who Do Participate in the Offering

        Our existing stockholders who participate in an offering below net asset value per share or who buy additional shares in the secondary market at the same or lower price as we obtain in the offering (after expenses and commissions) will experience the same types of net asset value dilution as the nonparticipating stockholders, although at a lower level, to the extent they purchase less than the same percentage of the discounted offering as their interest in shares of our common stock immediately prior to the offering. The level of net asset value dilution will decrease as the number of shares such

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stockholders purchase increases. Existing stockholders who buy more than such percentage will experience net asset value dilution but will, in contrast to existing stockholders who purchase less than their proportionate share of the offering, experience accretion in net asset value per share over their investment per share and will also experience a disproportionately greater increase in their participation in our earnings and assets and their voting power than our increase in assets, potential earning power and voting interests due to such offering. The level of accretion will increase as the excess number of shares such stockholder purchases increases. Even a stockholder who over-participates will, however, be subject to the risk that we may make additional discounted offerings in which such stockholder does not participate, in which case such a stockholder will experience net asset value dilution as described above in such subsequent offerings. These stockholders may also experience a decline in the market price of their shares, which often reflects to some degree announced or potential increases and decreases in net asset value per share. This decrease could be more pronounced as the size of the offering and level of discounts increases.

        The following chart illustrates the level of dilution and accretion in the hypothetical 20% discount offering from the prior chart (Example 3) for a stockholder that acquires shares equal to (a) 50% of its proportionate share of the offering (i.e., 3,000 shares, which is 0.05% of an offering of 6 million shares) rather than its 0.10% proportionate share and (b) 150% of such percentage (i.e. 9,000 shares, which is 0.15% of an offering of 6 million shares rather than its 0.10% proportionate share). The prospectus supplement pursuant to which any discounted offering is made will include a chart for these examples based on the actual number of shares in such offering and the actual discount from the most recently determined net asset value per share. It is not possible to predict the level of market price decline that may occur.

 
   
  50% Participation   150% Participation  
 
  Prior to Sale
Below NAV
  Following
Sale
  %
Change
  Following
Sale
  %
Change
 

Offering Price

                               

Price per Share to Public

          $12.63           $12.63        

Net Proceeds per Share to Issuer

          $12.00           $12.00        

Decrease/Increase to Net Asset Value

                               

Total Shares Outstanding

    30,000,000     36,000,000     20 %   36,000,000     20 %

Net Asset Value per Share

    $15.00     $14.50     (3.33 )%   $14.50     (3.33 )%

Dilution/Accretion to Participating Stockholder Shares Held by Stockholder A

    30,000     33,000     10 %   39,000     30 %

Percentage Held by Stockholder A

    0.10 %   0.09 %   (8.33 )%   0.11 %   8.33 %

Total Net Asset Value Held by Stockholder A

    $450,000     $478,500     6.33 %   $565,500     25.67 %

Total Investment by Stockholder A (Assumed to be $15.00 per Share on Shares Held Prior to Sale)

          $487,895           $563,684        

Total Dilution/Accretion to Stockholder A (Total Net Asset Value Less Total Investment)

          $(9,395 )         $1,816        

Investment per Share Held by Stockholder A (Assumed to Be $15.00 on Shares Held Prior to Sale)

    $15.00     $14.78     (1.44 )%   $14.45     (3.64 )%

Net Asset Value per Share Held by Stockholder A

          $14.50           $14.50        

Dilution/Accretion per Share Held by Stockholder A (Net Asset Value per Share Less Investment per Share)

          $(0.28 )         $0.05     0.40 %

Percentage Dilution/Accretion to Stockholder A (Dilution per Share Divided by Investment per Share)

                (1.96 )%         0.32 %

Impact On New Investors

        Investors who are not currently stockholders and who participate in an offering of shares of our common stock below net asset value, but whose investment per share is greater than the resulting net asset value per share due to selling compensation and expenses paid by the Company, will experience an immediate decrease, although small, in the net asset value of their shares and their net asset value

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per share compared to the price they pay for their shares. Investors who are not currently stockholders and who participate in an offering of shares of our common stock below net asset value per share and whose investment per share is also less than the resulting net asset value per share due to selling compensation and expenses paid by the Company being significantly less than the discount per share, will experience an immediate increase in the net asset value of their shares and their net asset value per share compared to the price they pay for their shares. These investors will experience a disproportionately greater participation in our earnings and assets and their voting power than our increase in assets, potential earning power and voting interests due to such offering. These investors will, however, be subject to the risk that we may make additional discounted offerings in which such new stockholder does not participate, in which case such new stockholder will experience dilution as described above in such subsequent offerings. These investors may also experience a decline in the market price of their shares, which often reflects to some degree announced or potential increases and decreases in net asset value per share. This decrease could be more pronounced as the size of the offering and level of discounts increases.

        The following chart illustrates the level of dilution or accretion for new investors that would be experienced by a new investor in the same hypothetical 5%, 10% and 20% discounted offerings as described in the first chart above. The illustration is for a new investor who purchases the same percentage (0.10%) of the shares in the offering as Stockholder A in the prior examples held immediately prior to the offering. The prospectus supplement pursuant to which any discounted offering is made will include a chart for these examples based on the actual number of shares in such offering and the actual discount from the most recently determined net asset value per share. It is not possible to predict the level of market price decline that may occur.

 
   
  Example 1   Example 2   Example 3  
 
   
  5% Offering at
5% Discount
  10% Offering at
10% Discount
  20% Offering at
20% Discount
 
 
  Prior to Sale
Below NAV
  Following
Sale
  %
Change
  Following
Sale
  %
Change
  Following
Sale
  %
Change
 

Offering Price

                                           

Price per Share to Public

          $15.00           $14.21           $12.63        

Net Proceeds per Share to Issuer

          $14.25           $13.50           $12.00        

Decrease/Increase to Net Asset Value

                                           

Total Shares Outstanding

    30,000,000     31,500,000     5 %   33,000,000     10 %   36,000,000     20 %

Net Asset Value per Share

    $15.00     $14.96     (0.24 )%   $14.86     (0.91 )%   $14.50     (3.33 )%

Dilution/Accretion to New Investor A

                                           

Shares Held by Investor A

    0     1,500           3,000           6,000        

Percentage Held by Investor A

    0.00 %   0.00 %         0.01 %         0.02 %      

Total Net Asset Value Held by Investor A

    $0     $22,446           $44,591           $87,000        

Total Investment by Investor A (At Price to Public)

          $22,500           $42,632           $75,789        

Total Dilution/Accretion to Investor A (Total Net Asset Value Less Total Investment)

          $(54 )         $1,959           $11,211        

Investment per Share Held by Investor A

    $0     $15.00           $14.21           $12.63        

Net Asset Value per Share Held by Investor A

          $14.96           $14.86           $14.50        

Dilution/Accretion per Share Held by Investor A (Net Asset Value per Share Less Investment per Share)

          $(0.04 )         $0.65           $1.87        

Percentage Dilution/Accretion to Investor A (Dilution per Share Divided by Investment per Share)

                (0.24 )%         4.60 %         14.79 %

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ISSUANCE OF WARRANTS OR SECURITIES TO SUBSCRIBE FOR
OR CONVERTIBLE INTO SHARES OF OUR COMMON STOCK

        At our 2008 annual stockholders meeting, our stockholders approved our ability to sell or otherwise issue warrants or securities to subscribe for or convertible into shares of our common stock, not exceeding 25% of our then outstanding common stock, at an exercise or conversion price that, at the date of issuance, will not be less than the greater of the market value per share of our common stock and the net asset value per share of our common stock. The authorization granted to sell or authorize issue warrants or securities to subscribe for or convertible into shares of our common stock has no expiration. Any exercise of warrants or securities to subscribe for or convertible into shares of our common stock at an exercise or conversion price that is below net asset value at the time of such exercise or conversion would result in an immediate dilution to existing common stockholders. This dilution would include reduction in net asset value as a result of the proportionately greater decrease in the stockholders' interest in our earnings and assets and their voting interest than the increase in our assets resulting from such offering.

        As a result of obtaining this authorization, in order to sell or otherwise issue such securities, (a) the exercise, conversion or subscription rights in such securities must expire by their terms within 10 years, (b) with respect to any warrants, options or rights to subscribe or convert to our common stock that are issued along with other securities, such warrants, options or rights must not be separately transferable, (c) the exercise or conversion price of such securities must not be less than the greater of the market value per share of our common stock and the net asset value per share of our common stock at the date of issuance of such securities, (d) the issuance of such securities must be approved by a majority of the board of directors who have no financial interest in the transaction and a majority of the independent directors on the basis that such issuance is in the best interests of the Company and its stockholders and (e) the number of shares of our common stock that would result from the exercise or conversion of such securities and all other securities convertible, exercisable or exchangeable into shares of our common stock outstanding at the time of issuance of such securities must not exceed 25% of our outstanding common stock at such time.

        We could also sell shares of common stock below net asset value per share in certain other circumstances, including through subscription rights issued in rights offerings. See "Description of Our Subscription Rights" and "Risk Factors—Risks Relating to Offerings Pursuant to this Prospectus—Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering. In addition, if the subscription price is less than our net asset value per share, then you will experience an immediate dilution of the aggregate net asset value of your shares."

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REGULATION

        We have elected to be regulated as a BDC under the Investment Company Act and have elected to be treated as a RIC under Subchapter M of the Code. As with other companies regulated by the Investment Company Act, a BDC must adhere to certain substantive regulatory requirements. The Investment Company Act contains prohibitions and restrictions relating to transactions between BDCs and certain affiliates (including any investment advisers or sub-advisers), principal underwriters and certain affiliates of those affiliates or underwriters. Among other things, we generally cannot invest in any portfolio company in which funds managed by Ares or any of its downstream affiliates (including Ares Capital Management) (other than Ares Capital and its downstream affiliates) currently has an investment (although we may co-invest on a concurrent basis with other funds managed by Ares or any of its downstream affiliates (including Ares Capital Management), subject to compliance with existing regulatory guidance, applicable regulations and our allocation procedures). Some of these co-investments would only be permitted pursuant to an exemptive order from the SEC. We have applied for an exemptive order from the SEC that would permit us to co-invest with funds managed by Ares or its downstream affiliates (including Ares Capital Management). Any such order will be subject to certain terms and conditions. There is no assurance that the application for exemptive relief will be granted by the SEC. Accordingly, we cannot assure you that we will be permitted to co-invest with funds managed by Ares or any of its downstream affiliates (including Ares Capital Management). See "Risk Factors—Risks Relating to Our Business—We may not replicate Ares' historical success and our ability to enter into transactions with Ares and our other affiliates is restricted."

        The Investment Company Act also requires that a majority of our directors be persons other than "interested persons," as that term is defined in Section 2(a)(19) of the Investment Company Act, referred to herein as "independent directors." In addition, the Investment Company Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless that change is approved by holders of at least a majority of our outstanding voting securities. Under the Investment Company Act, the vote of holders of at least a "majority of the outstanding voting securities" means the vote of the holders of the lesser of: (a) 67% or more of the outstanding shares of our common stock present at a meeting or represented by proxy if holders of more than 50% of the shares of our common stock are present or represented by proxy or (b) more than 50% of the outstanding shares of our common stock.

        We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an "underwriter" as that term is defined in the Securities Act. Our intention is to not write (sell) or buy put or call options to manage risks associated with the publicly traded securities of our portfolio companies. We may enter into hedging transactions to manage the risks associated with interest rate and currency fluctuations. We may purchase or otherwise receive warrants or options to purchase the common stock of our portfolio companies in connection with acquisition financings or other investments. In connection with such an acquisition, we may acquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances. We also do not intend to acquire securities issued by any investment company that exceed the limits imposed by the Investment Company Act. Under these limits, we generally cannot acquire more than 3% of the voting stock of any investment company (as defined in the Investment Company Act), invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of investment companies in the aggregate. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might subject our stockholders to additional expenses.

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QUALIFYING ASSETS

        A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) below. Thus, under the Investment Company Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the Investment Company Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company's total assets. The principal categories of qualifying assets relevant to our business are the following:

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MANAGERIAL ASSISTANCE TO PORTFOLIO COMPANIES

        In order to count portfolio securities as qualifying assets for the purpose of the 70% test discussed above under "Qualifying Assets," the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance (as long as the BDC itself does not make available significant managerial assistance solely in this fashion). Making available managerial assistance means, among other things, exercising control over the management or policies of the portfolio company or any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if the offer is accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.

TEMPORARY INVESTMENTS

        Pending investment in other types of "qualifying assets," as described above, our investments may consist of cash, cash items, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as "temporary investments," so that 70% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. Government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we may not meet the Diversification Tests in order to qualify as a RIC. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our investment adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.

INDEBTEDNESS AND SENIOR SECURITIES

        We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the Investment Company Act, is at least equal to 200% immediately after each such issuance. In addition, while any indebtedness and senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. Specifically, we may be precluded from declaring dividends or repurchasing shares of our common stock unless our asset coverage is at least 200%. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see "Risk Factors—Risks Relating to Our Business—Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital."

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CODE OF ETHICS

        We and Ares Capital Management have each adopted a code of ethics pursuant to Rule 17j-1 under the Investment Company Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code's requirements. Our code of ethics is filed as an exhibit to our registration statement of which this prospectus is a part. For information on how to obtain a copy of the code of ethics, see "Where You Can Find More Information."

PROXY VOTING POLICIES AND PROCEDURES

        SEC-registered advisers that have the authority to vote (client) proxies (which authority may be implied from a general grant of investment discretion) are required to adopt policies and procedures reasonably designed to ensure that the adviser votes proxies in the best interests of its clients. Registered advisers also must maintain certain records on proxy voting. In most cases, we invest in securities that do not generally entitle it to voting rights in its portfolio companies. When we do have voting rights, we delegate the exercise of such rights to Ares Capital Management. Ares Capital Management's proxy voting policies and procedures are summarized below:

        In determining how to vote, officers of our investment adviser consult with each other and other investment professionals of Ares, taking into account our and our investors' interests as well as any potential conflicts of interest. Our investment adviser consults with legal counsel to identify potential conflicts of interest. Where a potential conflict of interest exists, our investment adviser may, if it so elects, resolve it by following the recommendation of a disinterested third party, by seeking the direction of the independent directors of the Company or, in extreme cases, by abstaining from voting. While our investment adviser may retain an outside service to provide voting recommendations and to assist in analyzing votes, our investment adviser will not delegate its voting authority to any third party.

        An officer of Ares Capital Management keeps a written record of how all such proxies are voted. Our investment adviser retains records of (a) proxy voting policies and procedures, (b) all proxy statements received (or it may rely on proxy statements filed on the SEC's EDGAR system in lieu thereof), (c) all votes cast, (d) investor requests for voting information and (e) any specific documents prepared or received in connection with a decision on a proxy vote. If it uses an outside service, our investment adviser may rely on such service to maintain copies of proxy statements and records, so long as such service will provide a copy of such documents promptly upon request.

        Our investment adviser's proxy voting policies are not exhaustive and are designed to be responsive to the wide range of issues that may be subject to a proxy vote. In general, our investment adviser votes our proxies in accordance with these guidelines unless: (a) it has determined otherwise due to the specific and unusual facts and circumstances with respect to a particular vote, (b) the subject matter of the vote is not covered by these guidelines, (c) a material conflict of interest is present or (d) we find it necessary to vote contrary to our general guidelines to maximize stockholder value or the best interests of Ares Capital. In reviewing proxy issues, our investment adviser generally uses the following guidelines:

        Elections of Directors:    In general, our investment adviser will vote in favor of the management-proposed slate of directors. If there is a proxy fight for seats on a portfolio company's board of directors, or our investment adviser determines that there are other compelling reasons for withholding our vote, it will determine the appropriate vote on the matter. Our investment adviser may withhold votes for directors when it (a) believes a direct conflict of interest exists between the interests of the director and the stockholders, (b) concludes that the actions of the director are unlawful, unethical or negligent or (c) believes the board is entrenched in or dealing inadequately with performance problems, and/or acting with insufficient independence between the board and management. Finally, our

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investment adviser may withhold votes for directors of non-U.S. issuers where there is insufficient information about the nominees disclosed in the proxy statement.

        Appointment of Auditors:    We believe that a portfolio company remains in the best position to choose its independent auditors and our investment adviser will generally support management's recommendation in this regard.

        Changes in Capital Structure:    Changes in a portfolio company's charter or bylaws may be required by state or federal regulation. In general, our investment adviser will cast our votes in accordance with the management on such proposals. However, our investment adviser will consider carefully any proposal regarding a change in corporate structure that is not required by state or federal regulation.

        Corporate Restructurings, Mergers and Acquisitions:    We believe proxy votes dealing with corporate reorganizations are an extension of the investment decision. Accordingly, our investment adviser will analyze such proposals on a case-by-case basis and vote in accordance with its perception of our interests.

        Proposals Affecting Stockholder Rights:    We will generally vote in favor of proposals that give stockholders a greater voice in the affairs of a portfolio company and oppose any measure that seeks to limit such rights. However, when analyzing such proposals, our investment adviser will balance the financial impact of the proposal against any impairment of stockholder rights as well as of our investment in the portfolio company.

        Corporate Governance:    We recognize the importance of good corporate governance. Accordingly, our investment adviser will generally favor proposals that promote transparency and accountability within a portfolio company.

        Anti-Takeover Measures:    Our investment adviser will evaluate, on a case-by-case basis, any proposals regarding anti-takeover measures to determine the measure's likely effect on stockholder value dilution.

        Stock Splits:    Our investment adviser will generally vote with management on stock split matters.

        Limited Liability of Directors:    Our investment adviser will generally vote with management on matters that could adversely affect the limited liability of directors.

        Social and Corporate Responsibility:    Our investment adviser will review proposals related to social, political and environmental issues to determine whether they may adversely affect stockholder value. Our investment adviser may abstain from voting on such proposals where they do not have a readily determinable financial impact on stockholder value.

        Stockholders may obtain information regarding how we voted proxies with respect to our portfolio securities during the twelve-month period ended June 30, 2012 free of charge by making a written request for proxy voting information to: Ares Capital Corporation, 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067 or by calling us collect at (310) 401-4200.

PRIVACY PRINCIPLES

        We are committed to maintaining the privacy of our stockholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.

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        Generally, we do not receive any non-public personal information relating to our stockholders, although certain non-public personal information of our stockholders may become available to us. The non-public personal information that we may receive falls into the following categories:

        We do not disclose any non-public personal information about our stockholders or former stockholders to anyone, except:

        When the Company shares non-public stockholder personal information referred to above, the information is made available for limited business purposes and under controlled circumstances designed to protect our stockholders' privacy. The Company does not permit use of stockholder information for any non-business or marketing purpose, nor does the Company permit third parties to rent, sell, trade or otherwise release or disclose information to any other party.

        The Company's service providers, such as its investment adviser, administrator and transfer agent, are required to maintain physical, electronic, and procedural safeguards to protect stockholder non-public personal information to prevent unauthorized access or use and to dispose of such information when it is no longer required.

        Personnel of our affiliates may access stockholder information only for business purposes. The degree of access is based on the sensitivity of the information and on personnel need for the information to service a stockholder's account or comply with legal requirements.

        If a stockholder ceases to be a stockholder, we will adhere to the privacy policies and practices as described above. We may choose to modify our privacy policies at any time. Before we do so, we will notify stockholders and provide a description of our privacy policy.

        In the event of a corporate change in control resulting from, for example, a sale to, or merger with, another entity, or in the event of a sale of assets, we reserve the right to transfer stockholders' non-public personal information to the new party in control or the party acquiring assets.

OTHER

        We have designated a chief compliance officer and established a compliance program pursuant to the requirements of the Investment Company Act. We are periodically examined by the SEC for compliance with the Investment Company Act.

        We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from

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protecting any director or officer against any liability to the Company or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person's office.

Compliance with the Sarbanes-Oxley Act of 2002 and The NASDAQ Global Select Market Corporate Governance Regulations

        The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. The Sarbanes-Oxley Act has required us to review our policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We will continue to monitor our compliance with all future regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.

        In addition, The NASDAQ Global Select Market has adopted various corporate governance requirements as part of its listing standards. We believe we are in compliance with such corporate governance listing standards. We will continue to monitor our compliance with all future listing standards and will take actions necessary to ensure that we are in compliance therewith.


CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR

        Our securities are held under a custody agreement by U.S. Bank National Association. The address of the custodian is Corporate Trust Services, One Federal Street, 3rd Floor, Boston, MA 02110. Computershare acts as the transfer agent, dividend paying agent and registrar for our common stock. The principal business address of Computershare is 250 Royall Street, Canton, MA 02021.


BROKERAGE ALLOCATION AND OTHER PRACTICES

        Since we generally acquire and dispose of our investments in privately negotiated transactions, we infrequently use brokers in the normal course of business.

        Subject to policies established by our board of directors, the investment adviser, Ares Capital Management, is primarily responsible for the execution of the publicly traded securities portion of our portfolio transactions and the allocation of brokerage commissions. The investment adviser does not expect to execute transactions through any particular broker or dealer, but seeks to obtain the best net results for the Company, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm's risk and skill in positioning blocks of securities.

        While the investment adviser generally seeks reasonably competitive trade execution costs, we will not necessarily pay the lowest spread or commission available. Subject to applicable legal requirements, the investment adviser may select a broker based partly upon brokerage or research services provided to the investment adviser and us and any other clients. In return for such services, we may pay a higher commission than other brokers would charge if the investment adviser determines in good faith that such commission is reasonable in relation to the services provided.

        We have not paid any brokerage commissions during the three most recent fiscal years.

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PLAN OF DISTRIBUTION

        We may offer, from time to time, in one or more offerings or series, up to $3,000,000,000 of our common stock, preferred stock, debt securities, subscription rights to purchase shares of our common stock or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, or units comprised of any combination of the foregoing, in one or more underwritten public offerings, at-the-market offerings, negotiated transactions, block trades, best efforts or a combination of these methods. We may sell the securities through underwriters or dealers, directly to one or more purchasers, including existing stockholders in a rights offering, through agents or through a combination of any such methods of sale. In the case of a rights offering, the applicable prospectus supplement will set forth the number of shares of our common stock issuable upon the exercise of each right and the other terms of such rights offering. Any underwriter or agent involved in the offer and sale of the securities will be named in the applicable prospectus supplement. A prospectus supplement or supplements will also describe the terms of the offering of the securities, including: the purchase price of the securities and the proceeds we will receive from the sale; any over-allotment options under which underwriters may purchase additional securities from us; any agency fees or underwriting discounts and other items constituting agents' or underwriters' compensation; the public offering price; any discounts or concessions allowed or re-allowed or paid to dealers; and any securities exchange or market on which the securities may be listed. Only underwriters named in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement.

        The distribution of the securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at prevailing market prices at the time of sale, at prices related to such prevailing market prices, or at negotiated prices, provided, however, that the offering price per share of our common stock, less any underwriting commissions or discounts, must equal or exceed the net asset value per share of our common stock at the time of the offering except (a) in connection with a rights offering to our existing stockholders, (b) with the consent of the majority of our common stockholders or (c) under such circumstances as the SEC may permit. The price at which securities may be distributed may represent a discount from prevailing market prices.

        In connection with the sale of the securities, underwriters or agents may receive compensation from us or from purchasers of the securities, for whom they may act as agents, in the form of discounts, concessions or commissions. Underwriters may sell the securities to or through dealers and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution of the securities may be deemed to be underwriters under the Securities Act, and any discounts and commissions they receive from us and any profit realized by them on the resale of the securities may be deemed to be underwriting discounts and commissions under the Securities Act. Any such underwriter or agent will be identified and any such compensation received from us will be described in the applicable prospectus supplement. The maximum aggregate commission or discount to be received by any member of FINRA or independent broker-dealer will not be greater than 8% of the gross proceeds of the sale of securities offered pursuant to this prospectus and any applicable prospectus supplement. We may also reimburse the underwriter or agent for certain fees and legal expenses incurred by it.

        Any underwriter may engage in over-allotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. Over-allotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum price. Syndicate-covering or other short-covering transactions involve purchases of the securities, either through exercise of the over-allotment option or in the open market after the distribution is completed, to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a stabilizing or covering

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transaction to cover short positions. Those activities may cause the price of the securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time.

        Any underwriters that are qualified market makers on the NASDAQ Global Market may engage in passive market making transactions in our common stock on the NASDAQ Global Market in accordance with Regulation M under the Exchange Act, during the business day prior to the pricing of the offering, before the commencement of offers or sales of our common stock. Passive market makers must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker's bid, however, the passive market maker's bid must then be lowered when certain purchase limits are exceeded. Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time.

        We may sell securities directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the period of its appointment.

        Unless otherwise specified in the applicable prospectus supplement, each class or series of securities will be a new issue with no trading market, other than our common stock, which is traded on The NASDAQ Global Select Market. We may elect to list any other class or series of securities on any exchanges, but we are not obligated to do so. We cannot guarantee the liquidity of the trading markets for any securities.

        Under agreements that we may enter, underwriters, dealers and agents who participate in the distribution of shares of our securities may be entitled to indemnification by us against certain liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to these liabilities. Underwriters, dealers and agents may engage in transactions with, or perform services for, us in the ordinary course of business.

        If so indicated in the applicable prospectus supplement, we will authorize underwriters or other persons acting as our agents to solicit offers by certain institutions to purchase our securities from us pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by us. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of our securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The underwriters and such other agents will not have any responsibility in respect of the validity or performance of such contracts. Such contracts will be subject only to those conditions set forth in the prospectus supplement, and the prospectus supplement will set forth the commission payable for solicitation of such contracts.

        We may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of stock. The third parties in such sale transactions will be underwriters and, if not identified in this prospectus, will be identified in the applicable prospectus supplement.

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        In order to comply with the securities laws of certain states, if applicable, our securities offered hereby will be sold in such jurisdictions only through registered or licensed brokers or dealers.


LEGAL MATTERS

        The legality of the securities offered hereby will be passed upon for the Company by Proskauer Rose LLP, Los Angeles, California and Venable LLP, Baltimore, Maryland. Certain legal matters in connection with the offering will be passed upon for the underwriters, if any, by the counsel named in the prospectus supplement.


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        KPMG LLP, located at 355 South Grand Avenue, Los Angeles, California 90071, is the independent registered public accounting firm of the Company.


AVAILABLE INFORMATION

        We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to the securities offered by this prospectus. The registration statement contains additional information about us and the securities being offered by this prospectus.

        We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. This information is available free of charge by calling us collect at (310) 201-4200 or on our website at www.arescapitalcorp.com. Information contained on our website is not incorporated into this document and you should not consider such information to be part of this document. You also may inspect and copy these reports, proxy statements and other information, as well as the registration statement and related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549, the SEC's Northeast Regional Office at 3 World Financial Center, Suite 400, New York, NY 10281 and the SEC's Midwest Regional Office at 175 W. Jackson Blvd., Suite 900, Chicago, IL 60604. Such information is also available from the EDGAR database on the SEC's web site at http://www.sec.gov. You also can obtain copies of such information, after paying a duplicating fee, by sending a request by e-mail to publicinfo@sec.gov or by writing the SEC's Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549. You may obtain information on the operation of the SEC's Public Reference Room by calling the SEC at (202) 551-8090 or (800) SEC-0330.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

ARES CAPITAL CORPORATION

       

Audited Annual Financial Statements

       

Report of Independent Registered Public Accounting Firm

    F-2  

Consolidated Balance Sheet as of December 31, 2011 and 2010

    F-3  

Consolidated Statement of Operations for the years ended December 31, 2011, 2010 and 2009

    F-4  

Consolidated Schedule of Investments as of December 31, 2011 and 2010

    F-5  

Consolidated Statement of Stockholders' Equity for the years ended December 31, 2011, 2010 and 2009

    F-50  

Consolidated Statement of Cash Flows for the years ended December 31, 2011, 2010 and 2009

    F-51  

Notes to Consolidated Financial Statements

    F-52  

Interim Unaudited Financial Statements

       

Consolidated Balance Sheet as of June 30, 2012 (unaudited) and December 31, 2011

    F-90  

Consolidated Statement of Operations for the three and six months ended June 30, 2012 and 2011 (unaudited)

    F-91  

Consolidated Schedule of Investments as of June 30, 2012 (unaudited) and December 31, 2011

    F-92  

Consolidated Statement of Stockholders' Equity for the six months ended June 30, 2012 (unaudited)

    F-134  

Consolidated Statement of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited)

    F-135  

Notes to Consolidated Financial Statements (unaudited)

    F-136  

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Ares Capital Corporation

        We have audited the accompanying consolidated balance sheet of Ares Capital Corporation (and subsidiaries) (the Company) as of December 31, 2011 and 2010, including the consolidated schedules of investments as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders' equity, and cash flows, and the financial highlights (included in Note 15), for each of the years in the three-year period ended December 31, 2011. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ares Capital Corporation (and subsidiaries) as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ares Capital Corporation's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO), and our report dated February 27, 2012 expressed an unqualified opinion on the effectiveness of Ares Capital Corporation's internal control over financial reporting.

        As explained in Note 8 to the consolidated financial statements, the accompanying consolidated financial statements include investments valued at $5.1 billion (162% of net assets), whose fair values have been estimated by the Board of Directors and management in the absence of readily determinable fair values. Such estimates are based on financial and other information provided by management of its portfolio companies, pertinent market and industry data, as well as input from independent valuation firms. These investments are valued in accordance with FASB ASC 820, Fair Value Measurements and Disclosures, which requires the Company to assume that the portfolio investments are sold in a principal market to market participants. The Company has considered its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to these valuation techniques are observable or unobservable. $5.1 billion of investments at December 31, 2011 are valued based on unobservable inputs. Because such valuations, and particularly valuations of private investments and private companies, are inherently uncertain, they may fluctuate significantly over short periods of time. These determinations of fair value could differ materially from the values that would have been utilized had a ready market for these investments existed.

LOGO

Los Angeles, California
February 27, 2012

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ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in thousands, except per share data)

 
  As of December 31,  
 
  2011   2010  

ASSETS

             

Investments at fair value

             

Non-controlled/non-affiliate investments

  $ 3,060,084   $ 2,482,642  

Non-controlled affiliate company investments

    267,324     380,396  

Controlled affiliate company investments

    1,767,098     1,454,952  
           

Total investments at fair value (amortized cost of $5,108,663 and $4,291,955, respectively)

    5,094,506     4,317,990  

Cash and cash equivalents

    120,782     100,752  

Receivable for open trades

    550     8,876  

Interest receivable

    99,078     72,548  

Other assets

    72,521     62,380  
           

Total assets

  $ 5,387,437   $ 4,562,546  
           

LIABILITIES

             

Debt

  $ 2,073,602   $ 1,378,509  

Management and incentive fees payable

    92,496     52,397  

Accounts payable and other liabilities

    47,404     34,742  

Interest and facility fees payable

    26,383     21,763  

Payable for open trades

        24,602  

Dividend payable

    287      
           

Total liabilities

    2,240,172     1,512,013  

Commitments and contingencies (Note 7)

             

STOCKHOLDERS' EQUITY

             

Common stock, par value $.001 per share, 400,000 and 300,000 common shares authorized, respectively, 205,130 and 204,419 common shares issued and outstanding, respectively

    205     204  

Capital in excess of par value

    3,390,354     3,205,326  

Accumulated overdistributed net investment income

    (10,449 )   (11,336 )

Accumulated net realized loss on investments, foreign currency transactions, extinguishment of debt and other assets

    (218,688 )   (169,696 )

Net unrealized gain (loss) on investments and foreign currency transactions

    (14,157 )   26,035  
           

Total stockholders' equity

    3,147,265     3,050,533  
           

Total liabilities and stockholders' equity

  $ 5,387,437   $ 4,562,546  
           

NET ASSETS PER SHARE

  $ 15.34   $ 14.92  
           

   

See accompanying notes to consolidated financial statements.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except per share data)

 
  For the Years Ended December 31,  
 
  2011   2010   2009  

INVESTMENT INCOME:

                   

From non-controlled/non-affiliate company investments:

                   

Interest from investments

  $ 267,039   $ 238,278   $ 188,126  

Capital structuring service fees

    55,013     23,921     5,429  

Dividend income

    12,430     4,340     1,162  

Management fees

    1,315     4,797     113  

Interest from cash & cash equivalents

    120     112     265  

Other income

    6,137     5,310     6,484  
               

Total investment income from non-controlled/non-affiliate company investments

    342,054     276,758     201,579  

From non-controlled affiliate company investments:

                   

Interest from investments

    30,560     51,386     21,866  

Capital structuring service fees

    730     813      

Dividend income

    4,294     2,125     285  

Management fees

    502     813     1,443  

Other income

    881     569     377  
               

Total investment income from non-controlled affiliate company investments

    36,967     55,706     23,971  

From controlled affiliate company investments:

                   

Interest from investments

    175,534     103,853     15,074  

Capital structuring service fees

    41,592     29,946     194  

Dividend income

    21,643     7,903     2,391  

Management fees

    14,925     8,762     1,942  

Other income

    1,771     468     121  
               

Total investment income from controlled affiliate company investments

    255,465     150,932     19,722  
               

Total investment income

    634,486     483,396     245,272  
               

EXPENSES:

                   

Interest and credit facility fees

    122,512     79,347     24,262  

Incentive management fees

    112,377     76,895     33,332  

Base management fees

    71,603     51,998     30,409  

Professional fees

    14,692     12,320     7,820  

Administrative fees

    9,317     8,721     4,009  

Professional fees and other costs related to the acquisition of Allied Capital Corporation

    3,145     19,833     4,939  

Other general and administrative

    10,963     13,074     6,519  
               

Total expenses

    344,609     262,188     111,290  

NET INVESTMENT INCOME BEFORE INCOME TAXES

    289,877     221,208     133,982  
               

Income tax expense, including excise tax

    7,474     5,392     576  
               

NET INVESTMENT INCOME

    282,403     215,816     133,406  
               

REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS AND FOREIGN CURRENCIES:

                   

Net realized gains (losses):

                   

Non-controlled/non-affiliate company investments

    24,618     26,865     (17,010 )

Non-controlled affiliate company investments

    13,647     11,965     (15,478 )

Controlled affiliate company investments

    58,295     6,563     (13,680 )

Foreign currency transactions

        85     205  
               

Net realized gains (losses)

    96,560     45,478     (45,963 )

Net unrealized gains (losses):

                   

Non-controlled/non-affiliate company investments

    (29,430 )   138,619     60,339  

Non-controlled affiliate company investments

    (19,395 )   40,595     21,361  

Controlled affiliate company investments

    8,633     51,681     7,194  

Foreign currency transactions

        (152 )   (187 )
               

Net unrealized gains (losses)

    (40,192 )   230,743     88,707  

Net realized and unrealized gains from investments and foreign currencies

    56,368     276,221     42,744  
               

GAIN ON THE ACQUISITION OF ALLIED CAPITAL CORPORATION

        195,876      

REALIZED GAIN (LOSS) ON EXTINGUISHMENT OF DEBT

    (19,318 )   (1,961 )   26,543  

REALIZED GAIN ON SALE OF OTHER ASSETS

        5,882      
               

NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS

  $ 319,453   $ 691,834   $ 202,693  
               

BASIC AND DILUTED EARNINGS PER COMMON SHARE (Note 10)

  $ 1.56   $ 3.91   $ 1.99  
               

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING—BASIC AND DILUTED (Note 10)

    204,860     176,732     101,720  
               

   

See accompanying notes to consolidated financial statements.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Investment Funds and Vehicles                                      
AGILE Fund I, LLC(7)(9)   Investment partnership   Member interest (0.50% interest)         4/1/2010   $ 216   $ 132        
                                       
CIC Flex, LP(9)   Investment partnership   Limited partnership units (0.94 unit)         9/7/2007     2,533     3,130        
                                       
Covestia Capital Partners, LP(9)   Investment partnership   Limited partnership interest (47.00% interest)         6/17/2008     1,059     1,111        
                                       
Dynamic India Fund IV, LLC(9)   Investment company   Member interest (5.44% interest)         4/1/2010     4,822     4,728        
                                       
Firstlight Financial Corporation(6)(9)   Investment company   Senior subordinated loan ($71,542 par due 12/2016)   1.00% PIK     12/31/2006     71,269     67,947 (4)      
        Class A common stock (10,000 shares)         12/31/2006     10,000            
        Class B common stock (30,000 shares)         12/31/2006     30,000            
                                   
                        111,269     67,947        
                                       
HCI Equity, LLC(7)(8)(9)   Investment company   Member interest (100.00% interest)         4/1/2010     808     730        
                                       
Imperial Capital Private Opportunities, LP(9)   Investment partnership   Limited partnership interest (80.00% interest)         5/10/2007     6,643     5,120        
                                       
Ivy Hill Middle Market Credit Fund, Ltd.(7)(8)(9)   Investment company   Class B deferrable interest notes ($40,000 par due 11/2018)   6.25% (Libor + 6.00%/Q)     11/20/2007     40,000     38,000        
        Subordinated notes ($16 par due 11/2018)   15.00%     11/20/2007     15,515     16,000        
                                   
                        55,515     54,000        
                                       
Kodiak Funding, LP(9)   Investment partnership   Limited partnership interest (1.52% interest)         4/1/2010     868     823        
                                       
Novak Biddle Venture Partners III, L.P.(9)   Investment partnership   Limited partnership interest (2.47% interest)         4/1/2010     221     196        
                                       
Partnership Capital Growth Fund I, L.P.(9)   Investment partnership   Limited partnership interest (25.00% interest)         6/16/2006     1,791     3,726        
                                       
Partnership Capital Growth Fund III, L.P.(9)   Investment partnership   Limited partnership interest (2.50% interest)         10/5/2011     1,322     1,250        
                                       
Senior Secured Loan Fund LLC(7)(11)(19)   Co-investment vehicle   Subordinated certificates ($1,044,977 par due 12/2020)   8.38% (Libor + 8.00%/Q)     10/30/2009     1,034,254     1,059,178        
                                       
VSC Investors LLC(9)   Investment company   Membership interest (1.95% interest)         1/24/2008     1,139     997        
                                   
                        1,222,460     1,203,068     38.23 %
                                   
                                     

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Healthcare—Services                                      
BenefitMall Holdings Inc.(7)   Employee benefits broker services company   Senior subordinated loan ($40,326 par due 6/2014)   18.00%     4/1/2010     40,326     40,326        
        Common stock (39,274,290 shares)         4/1/2010     53,510     59,990        
        Warrants         4/1/2010                
                                   
                        93,836     100,316        
                                       
CCS Group Holdings, LLC   Correctional facility healthcare operator   Class A units (601,937 units)         8/19/2010     602     1,158        
                                       
CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings LLC(6)   Healthcare analysis services   Senior secured loan ($7,245 par due 3/2017)   7.75% (Libor + 6.50%/Q)     3/15/2011     7,245     6,883 (2)(18)      
        Senior secured loan ($18 par due 3/2017)   8.75% (Base Rate + 5.50%/Q)     3/15/2011     18     17 (2)(18)      
        Senior secured loan ($7,642 par due 3/2017)   7.75% (Libor + 6.50%/Q)     3/15/2011     7,642     7,260 (3)(18)      
        Senior secured loan ($19 par due 3/2017)   8.75% (Base Rate + 5.50%/Q)     3/15/2011     19     18 (3)(18)      
        Class A common stock (9,679 shares)         6/15/2007     4,000     8,745        
        Class C common stock (1,546 shares)         6/15/2007         1,397        
                                   
                        18,924     24,320        
                                       
INC Research, Inc.   Pharmaceutical and biotechnology consulting services   Common stock (1,410,000 shares)         9/27/2010     1,512     1,403        
                                       
Magnacare Holdings, Inc., Magnacare Administrative Services, LLC, and Magnacare, LLC   Healthcare professional provider   Senior secured loan ($12,638 par due 9/2016)   9.75% (Libor + 8.75%/Q)     9/15/2010     12,638     12,638 (18)      
        Senior secured loan ($44,393 par due 9/2016)   9.75% (Libor + 8.75%/Q)     9/15/2010     44,393     44,393 (2)(18)      
        Senior secured loan ($8,257 par due 9/2016)   9.75% (Libor + 8.75%/Q)     9/15/2010     8,257     8,257 (3)(18)      
                                   
                        65,288     65,288        
                                       
MW Dental Holding Corp.   Dental services   Senior secured revolving loan ($1,700 par due 4/2017)   8.50% (Libor + 7.00%/M)     4/12/2011     1,700     1,700 (18)      
        Senior secured loan ($15,384 par due 4/2017)   8.50% (Libor + 7.00%/M)     4/12/2011     15,384     15,384 (18)      
        Senior secured loan ($49,750 par due 4/2017)   8.50% (Libor + 7.00%/M)     4/12/2011     49,750     49,750 (2)(18)      
        Senior secured loan ($2,686 par due 4/2017)   8.50% (Libor + 7.00%/M)     4/12/2011     2,686     2,686 (3)(18)      
                                   
                        69,520     69,520        
                                     

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Napa Management Services Corporation   Anesthesia management services provider   Senior secured loan ($10,892 par due 4/2016)   8.50% (Libor + 7.00%/Q)     4/15/2011     10,563     10,892 (18)      
        Senior secured loan ($29,437 par due 4/2016)   8.50% (Libor + 7.00%/Q)     4/15/2011     29,437     29,437 (2)(18)      
        Senior secured loan ($7,752 par due 4/2016)   8.50% (Libor + 7.00%/Q)     4/15/2011     7,752     7,752 (3)(18)      
        Common units (5,000 units)         4/15/2011     5,000     5,513        
                                   
                        52,752     53,594        
                                       
NS Merger Sub. Inc. and NS Holdings, Inc.   Healthcare technology provider   Senior subordinated loan ($579 par due 6/2017)   13.50%     6/21/2010     579     579        
        Senior subordinated loan ($50,000 par due 6/2017)   13.50%     6/21/2010     50,000     50,000 (2)      
        Common stock (2,500,000 shares)         6/21/2010     2,500     2,985        
                                   
                        53,079     53,564        
                                       
OnCURE Medical Corp.   Radiation oncology care provider   Common stock (857,143 shares)         8/18/2006     3,000     3,073        
                                       
Passport Health Communications, Inc., Passport Holding Corp. and Prism Holding Corp.   Healthcare technology provider   Series A preferred stock (1,594,457 shares)         7/30/2008     11,156     9,218        
        Common stock (16,106 shares)         7/30/2008     100            
                                   
                        11,256     9,218        
                                       
PG Mergersub, Inc. and PGA Holdings, Inc.   Provider of patient surveys, management reports and national databases for the integrated healthcare delivery system   Senior secured loan ($9,108 par due 11/2015)   6.75% (Libor + 5.00%/Q)     11/3/2010     9,085     9,108 (3)(18)      
        Senior subordinated loan ($4,000 par due 3/2016)   12.50%     3/12/2008     3,956     4,000        
        Preferred stock (333 shares)         3/12/2008     125     15        
        Common stock (16,667 shares)         3/12/2008     167     754        
                                   
                        13,333     13,877        
                                       
PRA Holdings, Inc.   Drug testing services   Senior secured loan ($11,330 par due 12/2014)   4.56% (Libor + 4.00%/Q)     12/14/2007     11,034     11,103 (2)      
        Senior secured loan ($12,000 par due 12/2014)   4.56% (Libor + 4.00%/Q)     12/14/2007     11,682     11,760 (3)      
                                   
                        22,716     22,863        
                                       
RCHP, Inc.   Operator of general acute care hospitals   Junior secured loan ($15,000 par due 5/2019)   11.50% (Libor + 10.00%/Q)     11/4/2011     15,000     15,000 (18)      
        Junior secured loan ($50,000 par due 5/2019)   11.50% (Libor + 10.00%/Q)     11/4/2011     50,000     50,000 (2)(18)      
                                   
                        65,000     65,000        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Reed Group, Ltd.   Medical disability management services provider   Senior secured revolving loan ($1,650 par due 12/2013)         4/1/2010     1,497     1,402 (17)      
        Senior secured loan ($10,755 par due 12/2013)         4/1/2010     9,129     9,142 (17)      
        Senior secured loan ($20,777 par due 12/2013)         4/1/2010     15,918     2,431 (17)      
        Equity interests         4/1/2010     203            
                                   
                        26,747     12,975        
                                       
Soteria Imaging Services, LLC(6)   Outpatient medical imaging provider   Junior secured loan ($1,189 par due 11/2010)   14.50%     4/1/2010     1,057     808        
        Junior secured loan ($1,699 par due 11/2010)   12.50%     4/1/2010     1,529     1,154        
        Preferred member units (1,823,179 units)         4/1/2010                
                                   
                        2,586     1,962        
                                       
Sunquest Information Systems, Inc.   Laboratory software solutions provider   Junior secured loan ($75,000 par due 6/2017)   9.75% (Libor + 8.50%/Q)     12/16/2010     75,000     74,250 (18)      
        Junior secured loan ($50,000 par due 6/2017)   9.75% (Libor + 8.50%/Q)     12/16/2010     50,000     49,500 (2)(18)      
                                   
                        125,000     123,750        
                                       
U.S. Renal Care, Inc.   Dialysis provider   Senior secured loan ($7,444 par due 12/2016)   5.50% (Libor + 4.00%/Q)     6/9/2011     7,407     7,295 (18)      
        Senior subordinated loan ($50,569 par due 6/2018)   11.25% Cash, 2.00% PIK     5/24/2010     50,569     50,569 (2)(4)      
                                   
                        57,976     57,864        
                                       
Vantage Oncology, Inc.   Radiation oncology care provider   Common stock (62,157 shares)         2/3/2011     4,670     5,057        
                                   
                        687,797     684,802     21.76 %
                                   
                                       
Education                                      
American Academy Holdings, LLC   Provider of education, training, certification, networking, and consulting services to medical coders and other healthcare professionals   Senior secured revolving loan ($100 par due 3/2016)   9.50% (Libor + 8.50%/Q)     3/18/2011     100     100 (18)      
        Senior secured loan ($26,199 par due 3/2016)   9.50% (Libor + 8.50%/Q)     3/18/2011     26,199     26,199 (18)      
        Senior secured loan ($53,468 par due 3/2016)   9.50% (Libor + 8.50%/Q)     3/18/2011     53,468     53,468 (2)(18)      
                                   
                        79,767     79,767        
                                       
Campus Management Corp. and Campus Management Acquisition Corp.(6)   Education software developer   Preferred stock (485,159 shares)         2/8/2008     10,520     11,096        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Community Education Centers, Inc.   Offender re-entry and in-prison treatment services provider   Senior secured loan ($17,857 par due 12/2014)   6.25% (Libor + 5.25%/Q)     12/10/2010     17,857     17,857 (18)      
        Junior secured loan ($31,835 par due 12/2015)   15.40% (Libor + 11.00% Cash, 4.00% PIK /Q)     12/10/2010     31,835     31,835 (4)      
        Junior secured loan ($9,582 par due 12/2015)   15.46% (Libor + 11.00% Cash, 4.00% PIK /Q)     12/10/2010     9,582     9,582 (4)      
        Warrants to purchase up to 578,427 shares         12/10/2010         258        
                                   
                        59,274     59,532        
                                       
eInstruction Corporation   Developer and manufacturer of educational software products   Junior secured loan ($17,000 par due 7/2014)   12.00% (Base Rate + 8.25%/M)     4/1/2010     15,396     12,410        
        Senior subordinated loan ($27,281 par due 1/2015)         4/1/2010     24,151     1,467 (17)      
        Common stock (2,406 shares)         4/1/2010     926            
                                   
                        40,473     13,877        
                                       
ELC Acquisition Corp., ELC Holdings Corporation, and Excelligence Learning Corporation (6)   Developer, manufacturer and distributor of educational products   Preferred stock (99,492 shares)         8/1/2011     10,149     9,154        
        Common stock (50,800 shares)         8/1/2011     51            
                                   
                        10,200     9,154        
                                       
Infilaw Holding, LLC   Operator of for-profit law schools   Senior secured loan ($29,925 par due 8/2016)   9.50% (Libor + 8.50%/Q)     8/25/2011     29,925     29,925 (2)(18)      
        Series A preferred units (131,000 units)   10.75% (Base Rate + 7.50%/Q)     8/25/2011     131,000     131,000 (18)      
                                   
                        160,925     160,925        
                                       
Instituto de Banca y Comercio, Inc. & Leeds IV Advisors, Inc.   Private school operator   Series B preferred stock (1,750,000 shares)         8/5/2010     5,000     6,153        
        Series C preferred stock (2,512,586 shares)         6/7/2010     689     303        
        Common stock (20 shares)         6/7/2010                
                                   
                        5,689     6,456        
                                       
JTC Education Holdings, Inc.   Postsecondary school operator   Senior secured revolving loan ($2,225 par due 12/2014)   12.75% (Base Rate + 9.50%/Q)     12/31/2009     2,225     2,225 (18)      
        Senior secured loan ($20,056 par due 12/2014)   12.50% (Libor + 9.50%/M)     12/31/2009     20,056     20,056 (18)      
        Senior secured loan ($9,714 par due 12/2014)   12.50% (Libor + 9.50%/M)     12/31/2009     9,714     9,714 (3)(18)      
                                   
                        31,995     31,995        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Lakeland Tours, LLC   Educational travel provider   Senior secured revolving loan ($3,750 par due 12/2016)   6.75% (Base Rate + 3.50%/Q)     10/4/2011     3,750     3,750 (18)      
        Senior secured loan ($64,338 par due 12/2016)   10.00% (Libor + 8.50%/Q)     10/4/2011     64,136     64,338 (15)(18)      
        Senior secured loan ($15,362 par due 12/2016)   6.00% (Libor + 4.50%/Q)     10/4/2011     15,314     15,362 (18)      
        Senior secured loan ($40,362 par due 12/2016)   10.00% (Libor + 8.50%/Q)     10/4/2011     40,231     40,362 (2)(15)(18)      
        Senior secured loan ($9,638 par due 12/2016)   6.00% (Libor + 4.50%/Q)     10/4/2011     9,606     9,638 (2)(18)      
        Common stock (5,000 shares)         10/4/2011     5,000     5,000        
                                   
                        138,037     138,450        
                                       
R3 Education, Inc. and EIC Acquisitions Corp. (8)   Medical school operator   Senior secured loan ($6,162 par due 4/2013)   9.00% (Libor + 6.00%/Q)     9/21/2007     6,162     11,508 (18)      
        Senior secured loan ($4,819 par due 4/2013)   9.00% (Libor + 6.00%/Q)     9/21/2007     4,819     8,996 (3)(18)      
        Senior secured loan ($6,509 par due 4/2013)   13.00% PIK     12/8/2009     4,030     12,149 (4)      
        Preferred stock (8,800 shares)         7/30/2008     2,200     1,650        
        Common membership interest (26.27% interest)         9/21/2007     15,800     23,207        
        Warrants to purchase up to 27,890 shares         12/8/2009                
                                   
                        33,011     57,510        
                                   
                        569,891     568,762     18.07 %
                                   
                                       
Restaurants and Food Services                                      
ADF Capital, Inc. & ADF Restaurant Group, LLC   Restaurant owner and operator   Senior secured revolving loan ($2,010 par due 11/2013)   6.50% (Libor + 3.50%/Q)     11/27/2006     2,010     2,010 (18)      
        Senior secured revolving loan ($258 par due 11/2013)   6.50% (Base Rate + 2.50%/Q)     11/27/2006     258     258 (18)      
        Senior secured loan ($7,305 par due 11/2013)   6.50% (Libor + 3.50%/Q)     11/27/2006     7,305     7,305 (18)      
        Senior secured loan ($64 par due 11/2013)   6.50% (Base Rate + 2.50%/Q)     11/27/2006     64     64 (18)      
        Senior secured loan ($11,277 par due 11/2014)   12.50% (Libor + 9.50%/Q)     11/27/2006     11,280     11,277 (2)(18)      
        Senior secured loan ($9,402 par due 11/2014)   12.50% (Libor + 9.50%/Q)     11/27/2006     9,402     9,402 (3)(18)      
        Promissory note ($14,897,360 par due 11/2016)         6/1/2006     14,886     10,905        
        Warrants to purchase up to 0.61 shares         6/1/2006                
                                   
                        45,205     41,221        
                                       
Huddle House, Inc. (7)   Restaurant owner and operator   Senior subordinated loan ($20,924 par due 12/2015)   12.00% Cash, 3.00% PIK     4/1/2010     20,641     18,939 (4)      
        Common stock (358,279 shares)         4/1/2010                
                                   
                        20,641     18,939        
                                     

F-10


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Orion Foods, LLC (fka Hot Stuff Foods, LLC) (7)   Convenience food service retailer   Senior secured revolving loan ($3,300 par due 9/2014)   10.75% (Base Rate + 7.50%/M)     4/1/2010     3,300     3,300 (18)      
        Senior secured loan ($33,917 par due 9/2014)   10.00% (Libor + 8.50%/Q)     4/1/2010     33,917     33,917 (2)(18)      
        Junior secured loan ($37,552 par due 9/2014)   14.00%     4/1/2010     26,111     30,483        
        Preferred units (10,000 units)         10/28/2010                
        Class A common units (25,001 units)         4/1/2010                
        Class B common units (1,122,452 units)         4/1/2010                
                                   
                        63,328     67,700        
                                       
OTG Management, Inc.   Airport restaurant operator   Senior secured revolving loan ($1,875 par due 8/2016)   8.50% (Libor + 7.00%/Q)     8/9/2011     1,875     1,875 (18)      
        Senior secured revolving loan ($937 par due 8/2016)   9.25% (Base Rate + 6.00%/M)     8/9/2011     937     937 (18)      
        Senior secured loan ($17,187 par due 8/2016)   8.50% (Libor + 7.00%/Q)     8/9/2011     17,187     17,187 (18)      
        Junior secured loan ($29,285 par due 8/2016)   14.50% (Libor + 13.00%/M)     8/9/2011     29,285     29,285 (18)      
        Common units (3,000,000 units)         1/5/2011     3,000     2,610        
        Warrants to purchase up to 100,866 shares of common stock         6/19/2008     100     4,544        
                                   
                        52,384     56,438        
                                       
PMI Holdings, Inc.   Restaurant owner and operator   Senior secured revolving loan ($2,500 par due 5/2015)   10.00% (Libor + 8.00%/M)     5/5/2010     2,500     2,500 (18)      
        Senior secured revolving loan ($250 par due 5/2015)   10.25% (Base Rate + 7.00%/Q)     5/5/2010     250     250 (18)      
        Senior secured loan ($9,008 par due 5/2015)   10.00% (Libor + 8.00%/M)     5/5/2010     9,008     9,008 (2)(18)      
        Senior secured loan ($4 par due 5/2015)   10.25% (Base Rate + 7.00%/M)     5/5/2010     4     4 (2)(18)      
        Senior secured loan ($9,008 par due 5/2015)   10.00% (Libor + 8.00%/M)     5/5/2010     9,008     9,008 (3)(18)      
        Senior secured loan ($4 par due 5/2015)   10.25% (Base Rate + 7.00%/M)     5/5/2010     4     4 (3)(18)      
                                   
                        20,774     20,774        
                                       
S.B. Restaurant Company   Restaurant owner and operator   Senior secured loan ($34,575 par due 7/2012)   13.00% (Libor + 9.00% Cash, 2.00% PIK /Q)     4/1/2010     31,283     34,575 (4)(18)      
        Preferred stock (46,690 shares)         4/1/2010         117        
        Warrants to purchase up to 257,429 shares of common stock         4/1/2010                
                                   
                        31,283     34,692        
                                     

F-11


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Vistar Corporation and Wellspring Distribution Corp.   Food service distributor   Junior secured loan ($70,250 par due 5/2015)   11.00%     5/23/2008     68,885     70,250        
        Junior secured loan ($30,000 par due 5/2015)   11.00%     5/23/2008     30,000     30,000 (2)      
        Class A non-voting common stock (1,366,120 shares)         5/3/2008     7,500     6,211        
                                   
                        106,385     106,461        
                                   
                        340,000     346,225     11.00 %
                                   
                                       
Business Services                                      
Acentia (fka Interactive Technology Solutions, LLC)   IT services provider   Senior secured loan ($7,332 par due 6/2015)   8.75% (Base Rate + 5.50%/Q)     10/21/2010     7,332     7,332 (18)      
        Senior secured loan ($8,214 par due 6/2015)   8.75% (Base Rate + 5.50%/Q)     10/21/2010     8,214     8,214 (3)(18)      
                                   
                        15,546     15,546        
                                       
Aviation Properties Corporation(7)   Aviation services   Common stock (100 shares)         4/1/2010                
                                       
CIBT Investment Holdings, LLC   Travel documents services   Class A shares (2,500 shares)         12/15/2011     2,500     2,500        
                                       
CitiPostal Inc.(7)   Document storage and management services   Senior secured revolving loan ($3,200 par due 12/2013)   6.75% (Base Rate + 3.25%/Q)     4/1/2010     3,200     3,200 (18)      
        Senior secured loan ($499 par due 12/2013)   8.50% Cash, 5.50% PIK     4/1/2010     499     499 (4)      
        Senior secured loan ($51,161 par due 12/2013)   8.50% Cash, 5.50% PIK     4/1/2010     51,161     51,161 (2)(4)      
        Senior subordinated loan ($14,698 par due 12/2015)         4/1/2010     13,038     1,574 (17)      
        Common stock (37,024 shares)         4/1/2010                
                                   
                        67,898     56,434        
                                       
Cornerstone Records Management, LLC   Physical records storage and management service provider   Senior secured loan ($18,377 par due 8/2016)   8.50% (Libor + 7.00%/Q)     8/12/2011     18,377     18,193 (18)      
                                       
Coverall North America, Inc.(7)   Commercial janitorial service provider   Subordinated notes ($9,386 par due 2/2016)   10.00% Cash, 2.00% PIK     2/22/2011     9,386     9,386 (4)      
                                       
Diversified Collections Services, Inc.   Collections services   Senior secured loan ($34,000 par due 9/2012)   14.00% (Base Rate+ 10.75%/M)     6/25/2010     34,000     34,000 (2)(18)      
        Senior secured loan ($5,263 par due 3/2012)   7.75% (Base Rate + 4.50%/M)     6/25/2010     5,263     5,263 (3)(18)      
        Senior secured loan ($2,000 par due 9/2012)   14.00% (Base Rate + 10.75%/M)     6/25/2010     2,000     2,000 (3)(18)      
        Preferred stock (14,927 shares)         5/18/2006     169     328        
        Common stock (478,816 shares)         4/1/2010     1,478     3,274        
        Common stock (114,004 shares)         2/5/2005     295     918        
                                   
                        43,205     45,783        
                                       
HCP Acquisition Holdings, LLC(7)   Healthcare compliance advisory services   Class A units (11,092,585 units)         6/26/2008     11,093     4,923        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Impact Innovations Group, LLC   IT consulting and outsourcing services   Member interest (50.00% interest)         4/1/2010         200        
                                       
Investor Group Services, LLC(6)   Business consulting for private equity and corporate clients   Limited liability company membership interest (10.00% interest)         6/22/2006         859        
                                       
Multi-Ad Services, Inc.(6)   Marketing services and software provider   Preferred units (1,725,280 units)         4/1/2010     788     1,828        
        Common units (1,725,280 units)         4/1/2010                
                                   
                        788     1,828        
                                       
MVL Group, Inc.(7)   Marketing research provider   Senior secured loan ($22,772 par due 7/2012)   12.00%     4/1/2010     22,772     22,772        
        Senior subordinated loan ($35,851 par due 7/2012)   12.00% Cash, 2.50% PIK     4/1/2010     35,283     33,844 (4)      
        Junior subordinated loan ($144 par due 7/2012)   10.00%     4/1/2010                
        Common stock (560,716 shares)         4/1/2010                
                                   
                        58,055     56,616        
                                       
Pillar Processing LLC and PHL Holding Co.(6)   Mortgage services   Senior secured loan ($7,375 par due 5/2014)         7/31/2008     7,375     1,250 (17)      
        Senior secured loan ($7,142 par due 11/2013)         11/20/2007     7,064     6,571 (17)      
        Senior secured loan ($4,458 par due 11/2013)         11/20/2007     4,409     4,101 (3)(17)      
        Common stock (85 shares)               3,768            
                                   
                        22,616     11,922        
                                       
Prommis Solutions, LLC, E-Default Services, LLC, Statewide Tax and Title Services, LLC & Statewide Publishing Services, LLC   Bankruptcy and foreclosure processing services   Senior subordinated loan ($44,926 par due 2/2014)         2/9/2007     43,819     5,273 (17)      
        Preferred units (30,000 units)         4/11/2006     3,000            
                                   
                        46,819     5,273        
                                       
Promo Works, LLC   Marketing services   Senior secured loan ($8,655 par due 12/2013)         4/1/2010     4,222     3,389 (17)      
                                       
R2 Acquisition Corp.   Marketing services   Common stock (250,000 shares)         5/29/2007     250     157        
                                       
Summit Business Media Parent Holding Company LLC   Business media consulting services   Limited liability company membership interest (45.98% interest)         5/20/2011         566        
                                       
Tradesmen International, Inc.   Construction labor support   Junior secured loan ($10,050 par due 5/2014)   13.00% Cash, 1.00% PIK     4/1/2010     7,872     10,050 (4)      
        Warrants to purchase up to 771,036 shares         4/1/2010         5,002        
                                   
                        7,872     15,052        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Tripwire, Inc.   IT security software provider   Senior secured loan ($30,000 par due 5/2018)   8.50% (Libor + 7.25%/Q)     5/23/2011     30,000     30,000 (18)      
        Senior secured loan ($50,000 par due 5/2018)   8.50% (Libor + 7.25%/Q)     5/23/2011     50,000     50,000 (2)(18)      
        Class B common stock (2,655,638 shares)         5/23/2011     30     38        
        Class A common stock (2,970 shares)         5/23/2011     2,970     3,754        
                                   
                        83,000     83,792        
                                       
Venturehouse-Cibernet Investors, LLC   Financial settlement services for intercarrier wireless roaming   Equity interest         4/1/2010                
                                       
VSS-Tranzact Holdings, LLC(6)   Management consulting services   Series B preferred units (854 units)         11/7/2011     867     768        
        Common membership interest (8.54% interest)         10/26/2007     10,204     200        
        Warrants to purchase up to 4,206 units         11/7/2011         98        
                                   
                        11,071     1,066        
                                   
                        402,698     333,485     10.60 %
                                   
                                       
Financial Services                                      
AllBridge Financial, LLC(7)   Asset management services   Equity interests         4/1/2010     11,395     11,733        
                                       
Callidus Capital Corporation(7)   Asset management services   Common stock (100 shares)         4/1/2010     3,000     776        
                                       
Ciena Capital LLC(7)   Real estate and small business loan servicer   Senior secured revolving loan ($14,000 par due 12/2013)   6.00%     11/29/2010     14,000     14,000        
        Senior secured loan ($32,000 par due 12/2015)   12.00%     11/29/2010     32,000     32,000        
        Equity interests         11/29/2010     53,374     20,051        
                                   
                        99,374     66,051        
                                       
Commercial Credit Group, Inc.   Commercial equipment finance and leasing company   Senior subordinated loan ($19,500 par due 6/2015)   15.00%     4/1/2010     19,500     19,500        
                                       
Cook Inlet Alternative Risk, LLC   Risk management services   Senior subordinated loan ($3,750 par due 9/2015)   9.00%     9/30/2011     3,750     3,550        
                                       
Financial Pacific Company   Commercial finance leasing   Preferred stock (6,500 shares)   8.00% PIK     10/13/2010     6,500     7,822 (4)      
        Common stock (650,000 shares)         10/13/2010                
                                   
                        6,500     7,822        
                                       
Imperial Capital Group, LLC   Investment services   Class A common units (7,710 units)         5/10/2007     14,997     20,445        
        2006 Class B common units (2,526 units)         5/10/2007     3     4        
        2007 Class B common units (315 units)         5/10/2007                
                                   
                        15,000     20,449        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Ivy Hill Asset Management, L.P.(7)(9)   Asset management services   Member interest (100.00% interest)         6/15/2009     112,876     194,597        
                                   
                        271,395     324,478     10.31 %
                                   
                                       
Consumer Products—Non-durable                                      
Augusta Sportswear, Inc.   Manufacturer of athletic apparel   Senior secured loan ($26 par due 7/2015)   9.50% (Base Rate + 6.25%/Q)     9/3/2010     26     26 (3)(18)      
        Senior secured loan ($8,819 par due 7/2015)   8.50% (Libor + 7.50%/Q)     9/3/2010     8,819     8,819 (3)(18)      
                                   
                        8,845     8,845        
                                       
Gilchrist & Soames, Inc.   Personal care manufacturer   Senior secured loan ($21,941 par due 10/2013)   13.44%     4/1/2010     21,435     21,941        
                                       
Implus Footcare, LLC   Provider of footwear and other accessories   Preferred stock (455 shares)   6.00% PIK     10/31/2011     4,591     4,591 (4)      
        Common stock (455 shares)         10/31/2011     455     455        
                                   
                        5,046     5,046        
                                       
Insight Pharmaceuticals Corporation(6)   OTC drug products manufactuer   Junior secured loan ($25,000 par due 8/2017)   13.25% (Libor + 11.75%/Q)     8/26/2011     24,740     24,000 (2)(18)      
        Class A common stock (155,000 shares)         8/26/2011     6,035     9,559        
        Class B common stock (155,000 shares)         8/26/2011     6,035     9,559        
                                   
                        36,810     43,118        
                                       
Making Memories Wholesale, Inc.(7)   Scrapbooking branded products manufacturer   Senior secured revolving loan ($2,250 par due 8/2014)         8/21/2009     2,229     963 (17)      
        Senior secured loan ($9,625 par due 8/2014)         8/21/2009     7,193     (17)      
        Senior secured loan ($5,973 par due 8/2014)         8/21/2009     3,874     (17)      
        Common stock (100 shares)         8/21/2009                
                                   
                        13,296     963        
                                       
Matrixx Initiatives, Inc. and Wonder Holdings Acquisition Corp.   Developer and marketer of over-the-counter healthcare products   Senior secured revolving loan ($10,000 par due 6/2016)   13.00% (Libor + 12.00%/M)     6/30/2011     10,000     9,700 (18)      
        Senior secured loan ($41,437 par due 6/2016)   13.00% (Libor + 12.00%/Q)     6/30/2011     41,178     40,194 (2)(18)      
        Warrants to purchase up to 1,654,678 shares of common stock         7/27/2011                
        Warrants to purchase up to 1,489 shares of preferred stock         7/27/2011         1,504        
                                   
                        51,178     51,398        

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
The Step2 Company, LLC   Toy manufacturer   Junior secured loan ($27,000 par due 4/2015)   10.00%     4/1/2010     25,764     27,000        
        Junior secured loan ($31,178 par due 4/2015)   10.00% Cash, 5.00% PIK     4/1/2010     29,879     28,060 (4)      
        Common units (1,116,879 units)         4/1/2010     24     25        
        Warrants to purchase up to 3,157,895 units         4/1/2010         72        
                                   
                        55,667     55,157        
                                       
The Thymes, LLC(7)   Cosmetic products manufacturer   Preferred units (6,283 units)   8.00% PIK     6/21/2007     6,111     6,420 (4)      
        Common units (5,400 units)         6/21/2007         754        
                                   
                        6,111     7,174        
Woodstream Corporation   Pet products manufacturer   Senior subordinated loan ($45,000 par due 2/2015)   12.00%     1/22/2010     40,444     44,100        
        Common stock (4,254 shares)         1/22/2010     1,222     2,280        
                                   
                        41,666     46,380        
                                   
                        240,054     240,022     7.63 %
                                   
                                       
Containers—Packaging                                      
ICSH, Inc.   Industrial container manufacturer, reconditioner and servicer   Senior secured loan ($71,318 par due 8/2016)   8.00% (Libor + 7.00%/Q)     8/31/2011     71,318     69,891 (18)      
        Senior secured loan ($49,873 par due 8/2016)   8.00% (Libor + 7.00%/Q)     8/31/2011     49,873     48,875 (2)(18)      
                                   
                        121,191     118,766        
                                       
Microstar Logistics LLC   Keg management solutions provider   Junior secured loan ($60,000 par due 8/2016)   10.00% (Libor + 9.00%/Q)     8/5/2011     60,000     60,000 (18)      
        Junior secured loan ($50,000 par due 8/2016)   10.00% (Libor + 9.00%/Q)     8/5/2011     50,000     50,000 (2)(18)      
                                   
                        110,000     110,000        
                                   
                        231,191     228,766     7.27 %
                                   
                                       
Aerospace and Defense                                      
AP Global Holdings, Inc.   Safety and security equipment manufacturer   Senior secured loan ($134,475 par due 7/2017)   7.25% (Libor + 5.75%/M)     7/22/2011     134,475     132,794 (16)(18)      
        Senior secured loan ($49,875 par due 7/2017)   7.25% (Libor + 5.75%/M)     7/22/2011     49,875     49,252 (2)(18)      
                                   
                        184,350     182,046        
Wyle Laboratories, Inc. and Wyle Holdings, Inc.   Provider of specialized engineering, scientific and technical services   Senior preferred stock (775 shares)   8.00% PIK     1/17/2008     95     95 (4)      
        Common stock (1,885,195 shares)         1/17/2008     2,291     1,920        
                                   
                        2,386     2,015        
                                   
                        186,736     184,061     5.85 %
                                   

F-16


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Manufacturing                                      
Component Hardware Group, Inc.   Commercial equipment   Junior secured loan ($3,106 par due 12/2014)   7.00% Cash, 3.00% PIK     8/4/2010     3,106     3,106 (4)      
        Senior subordinated loan ($10,596 par due 12/2014)   7.50% Cash, 5.00% PIK     4/1/2010     6,932     10,596 (4)      
        Warrants to purchase up to 1,462,500 shares of common stock         8/4/2010         3,181        
                                   
                        10,038     16,883        
                                       
HOPPY Holdings Corp.   Automotive and recreational vehicle aftermarket products   Senior secured loan ($13,988 par due 6/2016)   5.00% (Libor + 3.75%/M)     6/3/2011     13,988     13,289 (18)      
                                       
MWI Holdings, Inc.   Highly engineered springs, fastners, and other precision components   Senior secured loan ($29,914 par due 6/2017)   10.00% (Libor + 8.00%/Q)     6/15/2011     29,914     29,914 (18)      
                                       
NetShape Technologies, Inc.   Metal precision engineered components manufacturer   Senior secured revolving loan ($91 par due 2/2013)   3.96% (Libor + 3.75%/M)     4/1/2010     44     69        
        Senior secured revolving loan ($778 par due 2/2013)   4.33% (Libor + 3.75%/Q)     4/1/2010     374     587        
                                   
                        418     656        
                                       
Protective Industries, Inc.   Plastic protection products   Senior secured loan ($14 par due 5/2017)   6.25% (Base Rate + 3.00%/M)     5/23/2011     14     14 (18)      
        Senior secured loan ($5,589 par due 5/2017)   5.75% (Libor + 4.25%/M)     5/23/2011     5,589     5,421 (18)      
        Senior subordinated loan ($720 par due 5/2018)   8.00% Cash, 7.25% PIK     5/23/2011     720     720 (4)      
        Preferred stock (2,379,361 shares)         5/23/2011     2,307     3,101        
                                   
                        8,630     9,256        
                                       
Saw Mill PCG Partners LLC   Metal precision engineered components   Common units (1,000 units)         1/30/2007     1,000            
                                       
Sigma International Group, Inc.(8)   Water treatment parts   Junior secured loan ($4,048 par due 4/2014)   10.00% (Libor + 3.50% Cash, 5.00% PIK /A)     7/8/2011     4,048     3,036 (4)(18)      
                                       
WP CPP Holdings, LLC   Precision engineered castings   Senior secured loan ($20,822 par due 10/2017)   8.50% (Libor + 7.00%/M)     10/11/2011     20,720     20,406 (18)      
        Senior secured loan ($50,000 par due 10/2017)   8.50% (Libor + 7.00%/M)     10/11/2011     49,745     49,000 (2)(18)      
                                   
                        70,465     69,406        
                                   
                        138,501     142,440     4.53 %
                                   
                                       
Services—Other                                      
The Dwyer Group(6)   Operator of multiple franchise concepts primarily related to home maintenance or repairs   Senior subordinated loan ($17,100 par due 12/2016)   14.50%     12/22/2010     17,100     17,100        
        Series A preferred units (13,292,377 units)   8.00% PIK     12/22/2010     14,413     17,011 (4)      
                                   
                        31,513     34,111        
                                     

F-17


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Wash Multifamily Laundry Systems, LLC (fka Web Services Company, LLC)   Laundry service and equipment provider   Senior secured loan ($4,850 par due 8/2014)   7.00% (Base Rate + 3.75%/Q)     6/15/2009     4,723     4,850 (3)(18)      
        Junior secured loan ($36,900 par due 8/2015)   10.88% (Libor + 9.38%/Q)     1/25/2011     36,900     36,900 (18)      
        Junior secured loan ($50,000 par due 8/2015)   10.88% (Libor + 9.38%/Q)     1/25/2011     50,000     50,000 (2)(18)      
        Junior secured loan ($3,100 par due 8/2015)   10.88% (Libor + 9.38%/Q)     1/25/2011     3,100     3,100 (3)(18)      
                                   
                        94,723     94,850        
                                   
                        126,236     128,961     4.10 %
                                   
                                       
Telecommunications                                      
American Broadband Communications, LLC, American Broadband Holding Company and Cameron Holdings of NC, Inc.   Broadband communication services   Senior secured loan ($8,754 par due 9/2013)   7.50% (Libor + 5.50%/Q)     9/1/2010     8,754     8,754 (3)(18)      
        Senior subordinated loan ($10,529 par due 11/2014)   12.00% Cash, 2.00% PIK     11/7/2007     10,529     10,529 (4)      
        Senior subordinated loan ($22,150 par due 11/2014)   12.00% Cash, 4.00% PIK     9/1/2010     22,150     22,150 (4)      
        Senior subordinated loan ($33,429 par due 11/2014)   12.00% Cash, 2.00% PIK     2/8/2008     33,429     33,429 (2)(4)      
        Warrants to purchase up to 378 shares         11/7/2007         6,286        
        Warrants to purchase up to 200 shares         9/1/2010         3,326        
                                   
                        74,862     84,474        
                                       
Dialog Telecom LLC   Broadband communication services   Senior secured loan ($16,412 par due 12/2012)   12.08% (Libor + 7.50% Cash, 4.00% PIK /Q)     6/20/2011     16,412     16,412 (4)(18)      
                                       
Startec Equity, LLC(7)   Communication services   Member interest         4/1/2010                
                                   
                        91,274     100,886     3.21 %
                                   
                                       
Grocery                                      
Grocery Outlet Inc.   Value grocery retailer   Senior secured revolving loan ($3,100 par due 12/2017)   11.25% (Base Rate + 8.00%/Q)     12/15/2011     3,100     3,100 (18)      
        Senior secured loan ($91,500 par due 12/2017)   10.50% (Libor + 9.00%/Q)     12/15/2011     91,500     91,500 (18)      
                                   
                        94,600     94,600        
                                   
                        94,600     94,600     3.01 %
                                   
                                       
Retail                                      
Direct Buy Holdings, Inc. and Direct Buy Investors, LP(6)   Membership based buying club franchisor and operator   Limited partnership interest (66,667 shares)         4/1/2010     2,594            
        Limited partnership interest (83,333 shares)         11/30/2007     8,333            
                                   
                        10,927            
                                     

F-18


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Fulton Holdings Corp.   Airport restaurant operator   Senior secured loan ($40,000 par due 5/2016)   12.50%     5/28/2010     40,000     40,000 (2)(13)      
        Common stock (19,672 shares)         5/28/2010     1,967     1,618        
                                   
                        41,967     41,618        
                                       
Savers, Inc. and SAI Acquisition Corporation   For-profit thrift retailer   Common stock (1,218,481 shares)         8/8/2006     4,909     12,556        
                                       
Things Remembered Inc. and TRM Holdings Corporation   Personalized gifts retailer   Senior secured loan ($21,433 par due 3/2014)   9.00% (Base Rate + 7.00%/M)     9/28/2006     21,414     21,433 (18)      
        Senior secured loan ($8,226 par due 3/2014)   9.00% (Base Rate + 7.00%/M)     9/28/2006     8,302     8,226 (3)(18)      
        Class B Preferred stock (73 shares)         3/19/2009         2,056        
        Preferred stock (80 shares)         9/28/2006     1,800     2,249        
        Common stock (800 shares)         9/28/2006     200     2,172        
        Warrants to purchase up to 859 shares of preferred stock         3/19/2009         2,324        
                                   
                        31,716     38,460        
                                   
                        89,519     92,634     2.94 %
                                   
                                       
Energy                                      
La Paloma Generating Company, LLC   Natural gas fired, combined cycle plant operator   Junior secured loan ($59,000 par due 8/2018)   10.25% (Libor + 8.75%/Q)     8/9/2011     57,775     56,050 (18)      
                                       
USG Nevada LLC   Geothermal, renewable energy, developer for electrical power and direct uses   Junior secured loan ($7,500 par due 6/2012)   3.94% (Libor + 3.50%/Q)     11/9/2011     7,500     7,500        
                                   
                        65,275     63,550     2.02 %
                                   
                                       
Automotive Services                                      
Driven Holdings, LLC   Automotive aftermarket car care franchisor   Preferred stock (247,500 units)         12/16/2011     2,475     2,475        
        Common stock (25,000 units)         12/16/2011     25     25        
                                   
                        2,500     2,500        
                                       
Stag-Parkway, Inc.(7)   Automotive aftermarket components supplier   Senior secured loan ($34,500 par due 12/2014)   12.50% (Libor + 11.00%/Q)     9/30/2010     34,500     34,500 (18)      
        Preferred stock (4,200 shares)   16.50% PIK     9/30/2010     2,368     4,200 (4)      
        Common stock (10,200 shares)         9/30/2010         14,807        
                                   
                        36,868     53,507        
                                   
                        39,368     56,007     1.78 %
                                   
                                       
Commercial Real Estate Finance                                      
10th Street, LLC(6)   Real estate holding company   Senior subordinated loan ($24,213 par due 11/2014)   8.93% Cash, 4.07% PIK     4/1/2010     24,213     24,213 (4)      
        Member interest (10.00% interest)         4/1/2010     594     529        
        Option (25,000 units)         4/1/2010     25     25        
                                   
                        24,832     24,767        
                                     

F-19


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Allied Capital REIT, Inc.(7)   Real estate investment trust   Real estate equity interests         4/1/2010     50     50        
        Real estate equity interests         4/1/2010     325     639        
                                   
                        375     689        
                                       
American Commercial Coatings, Inc.   Real estate property   Commercial mortgage loan ($2,000 par due 12/2025)         4/1/2010     1,611     1,967 (17)      
                                       
Aquila Binks Forest Development, LLC   Real estate developer   Commercial mortgage loan ($13,477 par due 12/2014)         4/1/2010     11,900     4,013 (17)      
        Real estate equity interests         4/1/2010                
                                   
                        11,900     4,013        
                                       
Cleveland East Equity, LLC   Hotel operator   Real estate equity interests         4/1/2010     1,026     2,507        
                                       
Commons R-3, LLC   Real estate developer   Real estate equity interests         4/1/2010                
                                       
Crescent Hotels & Resorts, LLC and affiliates(7)   Hotel operator   Senior secured loan ($433 par due 6/2010)   10.00%     4/1/2010     433     444        
        Senior subordinated loan ($9,071 par due 1/2012)         4/1/2010     1,475     138 (17)      
        Senior subordinated loan ($9,399 par due 6/2017)         4/1/2010     2,410     241 (17)      
        Senior subordinated loan ($10,967 par due 9/2012)         4/1/2010     2,051     202 (17)      
        Senior subordinated loan ($261 par due 3/2013)         4/1/2010     263     9 (17)      
        Senior subordinated loan ($2,236 par due 9/2011)         4/1/2010         (17)      
        Preferred equity interest         4/1/2010         39        
        Common equity interest         4/1/2010     35            
                                   
                        6,667     1,073        
                                       
Hot Light Brands, Inc.(7)   Real estate holding company   Senior secured loan ($35,239 par due 2/2011)         4/1/2010     3,945     3,692 (17)      
        Common stock (93,500 shares)         4/1/2010                
                                   
                        3,945     3,692        
                                       
NPH, Inc.   Hotel property   Real estate equity interests         4/1/2010     5,291     7,959        
                                   
                        55,647     46,667     1.48 %
                                   
                                       
Food and Beverage                                      
Apple & Eve, LLC and US Juice Partners, LLC(6)   Juice manufacturer   Senior secured revolving loan ($2,000 par due 10/2013)   12.00% (Libor + 9.00%/M)     10/5/2007     2,000     2,000 (18)      
        Senior secured revolving loan ($2,500 par due 10/2013)   12.00% (Base Rate + 8.00%/Q)     10/5/2007     2,500     2,500 (18)      
        Senior secured loan ($13,325 par due 10/2013)   12.00% (Libor + 9.00%/M)     10/5/2007     13,325     13,325 (18)      
        Senior secured loan ($14,019 par due 10/2013)   12.00% (Libor + 9.00%/M)     10/5/2007     14,019     14,019 (3)(18)      
        Senior units (50,000 units)         10/5/2007     5,000     3,326        
                                   
                        36,844     35,170        
                                       
Charter Baking Company, Inc.   Baked goods manufacturer   Senior subordinated loan ($7,615 par due 2/2013)   16.00% PIK     2/6/2008     7,615     7,615 (4)      
        Preferred stock (6,258 shares)         9/1/2006     2,500     1,519        
                                   
                        10,115     9,134        
                                     

F-20


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Distant Lands Trading Co.   Coffee manufacturer   Class A common stock (1,294 shares)         4/1/2010     980     568        
        Class A-1 common stock (2,157 shares)         4/1/2010                
                                   
                        980     568        
                                   
                        47,939     44,872     1.43 %
                                   
                                       
Consumer Products—Durable                                      
Bushnell Inc.   Sports optics manufacturer   Junior secured loan ($41,325 par due 2/2014)   7.08% (Libor + 6.50%/Q)     4/1/2010     33,467     37,192        
                                   
                        33,467     37,192     1.18 %
                                   
                                       
Transportation                                      
PODS Funding Corp.   Storage and warehousing   Junior subordinated loan ($37,020 par due 5/2017)   10.50% Cash, 5.00% PIK     11/29/2011     37,020     37,020 (4)      
                                       
United Road Towing, Inc.   Towing company   Warrants to purchase up to 607 shares         4/1/2010                
                                   
                        37,020     37,020     1.18 %
                                   
                                       
Environmental Services                                      
AWTP, LLC(7)   Water treatment services   Junior secured loan ($4,109 par due 6/2015)   5.00% Cash, 5.00% PIK     4/18/2011     4,109     4,109 (4)      
        Junior secured loan ($896 par due 6/2015)   15.00% PIK     4/18/2011     896     623 (4)      
        Junior secured loan ($4,518 par due 6/2015)   15.00% PIK     4/18/2011     4,518     3,142 (3)(4)      
        Membership interests (90% interest)         4/18/2011                
                                   
                        9,523     7,874        
                                       
RE Community Holdings II, Inc.and Pegasus Community Energy, LLC.   Operator of municipal recycling facilities   Preferred stock (1,000 shares)   12.50% PIK     3/1/2011     8,311     8,283 (4)      
                                       
Waste Pro USA, Inc   Waste management services   Preferred Class A common equity (611,615 shares)         11/9/2006     12,263     20,540        
                                   
                        30,097     36,697     1.17 %
                                   
                                       
Oil and Gas                                      
Geotrace Technologies, Inc.   Reservoir processing, development   Warrants to purchase up to 69,978 shares of common stock         4/1/2010     88            
        Warrants to purchase up to 210,453 shares of preferred stock         4/1/2010     2,805     172        
                                   
                        2,893     172        
                                     

F-21


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
UL Holding Co., LLC   Petroleum product manufacturer   Junior secured loan ($2,098 par due 12/2012)   9.31% (Libor + 8.88%/Q)     12/24/2007     2,098     2,098        
        Junior secured loan ($4,073 par due 12/2012)   14.00%     12/24/2007     4,073     4,073        
        Junior secured loan ($2,000 par due 12/2012)   9.45% (Libor + 8.88%/Q)     6/17/2011     2,000     2,000        
        Junior secured loan ($5,000 par due 12/2012)   15.00%     8/13/2010     5,000     5,000        
        Junior secured loan ($2,926 par due 12/2012)   14.00%     12/24/2007     2,926     2,926 (2)      
        Junior secured loan ($835 par due 12/2012)   9.31% (Libor + 8.88%/Q)     12/24/2007     835     835 (3)      
        Junior secured loan ($1,801 par due 12/2012)   14.00%     12/24/2007     1,801     1,801 (3)      
        Junior secured loan ($10,728 par due 12/2012)   9.32% (Libor + 8.88%/Q)     12/24/2007     10,728     10,728 (3)      
        Class A common units (8,982 units)         6/17/2011     90     46        
        Class B-4 common units (50,000 units)         4/25/2008     500     255        
        Class B-5 common units (499,000 units)         6/17/2011     4,990     2,541        
        Class C common units (549,491 units)         4/25/2008         2,798        
                                   
                        35,041     35,101        
                                   
                        37,934     35,273     1.12 %
                                   
                                       
Chemicals, Plastic and Rubber                                      
Emerald Performance Materials, LLC   Polymers and performance materials manufacturer   Senior secured loan ($3,603 par due 11/2013)   13.00% Cash, 3.00% PIK     5/22/2006     3,603     3,603 (4)      
        Senior secured loan ($9,967 par due 11/2013)   10.25% (Base Rate + 3.50%/M)     6/29/2011     9,967     9,967 (18)      
        Senior secured loan ($6,639 par due 11/2013)   10.00% (Libor + 6.00%/M)     6/29/2011     6,639     6,639 (18)      
        Senior secured loan ($5,246 par due 11/2013)   13.00% Cash, 3.00% PIK     5/22/2006     5,246     5,246 (2)(4)      
        Senior secured loan ($8,227 par due 11/2013)   8.25% (Libor + 4.25%/M)     5/22/2006     8,227     8,227 (3)(18)      
        Senior secured loan ($915 par due 11/2013)   10.25% (Base Rate + 3.50%/M)     6/29/2011     915     915 (3)(18)      
        Senior secured loan ($610 par due 11/2013)   10.00% (Libor + 6.00%/M)     6/29/2011     610     610 (3)(18)      
                                   
                        35,207     35,207        
                                   
                        35,207     35,207     1.12 %
                                   
                                       
Printing, Publishing and Media                                      
EarthColor, Inc.(7)   Printing management services   Common stock (89,435 shares)         4/1/2010                
                                       
LVCG Holdings LLC(7)   Commercial printer   Membership interests (56.53% interest)         10/12/2007     6,600            
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(12)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
National Print Group, Inc.   Printing management services   Senior secured revolving loan ($1,141 par due 10/2013)   9.00% (Libor + 6.00%/M)     3/2/2006     1,141     1,027 (18)      
        Senior secured revolving loan ($1,031 par due 10/2013)   9.00% (Base Rate + 5.00%/M)     3/2/2006     1,031     928 (18)      
        Senior secured loan ($20 par due 10/2013)   10.00% (Libor + 6.00% Cash, 1.00% PIK/Q)     3/2/2006     20     18 (4)(18)      
        Senior secured loan ($7,520 par due 10/2013)   10.00% (Libor + 6.00% Cash, 1.00% PIK/Q)     3/2/2006     7,217     6,919 (3)(4)(18)      
        Senior secured loan ($181 par due 10/2013)   10.00% (Base Rate + 5.00% Cash, 1.00% PIK/M)     3/2/2006     174     166 (3)(4)(18)      
        Preferred stock (9,344 shares)         3/2/2006     2,000            
                                   
                        11,583     9,058        
                                       
The Teaching Company, LLC and The Teaching Company Holdings, Inc.   Education publications provider   Preferred stock (21,711 shares)         9/29/2006     2,171     5,339        
        Common stock (15,393 shares)         9/29/2006     3     13        
                                   
                        2,174     5,352        
                                   
                        20,357     14,410     0.46 %
                                   
                                       
Health Clubs                                      
Athletic Club Holdings, Inc.   Premier health club operator   Senior secured loan ($11,500 par due 10/2013)   4.80% (Libor + 4.50%/M)     10/11/2007     11,500     11,270 (3)(14)      
                                   
                        11,500     11,270     0.36 %
                                   
                                       
Wholesale Distribution                                      
BECO Holding Company, Inc.   Wholesale distributor of first response fire protection equipment and related parts   Common stock (25,000 shares)         7/30/2010     2,500     3,151        
                                   
                        2,500     3,151     0.10 %
                                   
                      $ 5,108,663   $ 5,094,506     161.87 %
                                   

(1)
Other than our investments listed in footnote 7 below, we do not "Control" any of our portfolio companies, as defined in the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Company Act"). In general, under the Investment Company Act, we would "Control" a portfolio company if we owned more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company. All of our portfolio company investments, which as of December 31, 2011 represented 162% of the Company's net assets or 95% of the Company's total assets, are subject to legal restrictions on sales.

The investments not otherwise pledged as collateral in respect of the Debt Securitization (as defined below) or the Revolving Funding Facility (as defined below) by the respective obligors thereunder are pledged as collateral by the Company and certain of its other subsidiaries for the Revolving Credit Facility (as defined below) (except for a limited number of exceptions as provided in the credit agreement governing the Revolving Credit Facility).

(2)
These assets are owned by the Company's wholly owned subsidiary Ares Capital CP Funding LLC ("Ares Capital CP"), are pledged as collateral for the Revolving Funding Facility and, as a result, are not directly available to the creditors of the Company to satisfy any obligations of the Company other than Ares Capital CP's obligations under the Revolving Funding Facility (see Note 5 to the consolidated financial statements).

(3)
Pledged as collateral for the Debt Securitization.

(4)
Has a payment-in-kind interest feature (see Note 2 to the consolidated financial statements).

(5)
Investments without an interest rate are non-income producing.

(6)
As defined in the Investment Company Act, we are deemed to be an "Affiliated Person" of this portfolio company because we own 5% or more of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company

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Table of Contents

 
Company
  Purchases   Redemptions
(cost)
  Sales
(cost)
  Interest
income
  Capital
structuring
service fees
  Dividend
Income
  Other
income
  Net
realized
gains (losses)
  Net
unrealized
gains (losses)
 
 

10th Street, LLC

  $   $   $   $ 3,096   $   $   $   $   $ (48 )
 

Apple & Eve, LLC and US Juice Partners, LLC

  $ 5,500   $ 3,918   $   $ 3,478   $   $   $ 35   $   $ (1,709 )
 

BB&T Capital Partners/Windsor Mezzanine Fund, LLC

  $   $ 2,640   $ 9,260   $   $   $   $   $ 3,902   $ (3,804 )
 

Carador, PLC

  $   $   $ 9,033   $   $   $ 160   $   $ (2,989 ) $ 3,700  
 

Campus Management Corp. and Campus Management Acquisition Corp.

  $ 571   $   $   $   $   $   $   $   $ (3,308 )
 

CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings, LLC

  $   $ 75   $ 8,763   $ 943   $   $ 2,590   $   $ 1,561   $ (1,364 )
 

Direct Buy Holdings, Inc. and Direct Buy Investors, LP

  $ 38,800   $ 80,315   $ 40,695   $ 2,637   $   $   $   $ (17,661 ) $ (9,356 )
 

Driven Brands, Inc.

  $   $ 3,569   $ 4,939   $ 255   $   $   $   $ 4,510   $ (1,473 )
 

DSI Renal, Inc.

  $   $ 77,774   $ 19,684   $ 7,919   $   $   $ 33   $ 27,522   $ (21,565 )
 

The Dwyer Group

  $   $   $ 11,708   $ 3,479   $   $ 1,135   $   $   $ 2,598  
 

ELC Acquisition Corp., ELC Holdings Corporation, and Excelligence Learning Corporation

  $ 137,200   $ 135,661   $   $ 1,056   $   $ 203   $ 22   $   $ (1,046 )
 

Firstlight Financial Corporation

  $   $ 2,988   $   $ 681   $   $   $ 250   $ 12   $ 16,197  
 

Growing Family, Inc. and GFH Holdings, LLC

  $   $ 34   $ 10,296   $ 615   $   $   $ 13   $ (1,545 ) $ 5,991  
 

Industrial Container Services, LLC

  $ 3,304   $ 8,491   $ 1,800   $ 69   $   $   $ 109   $ 19,881   $ (13,403 )
 

Insight Pharmaceuticals Corporation

  $ 24,730   $ 56,080   $   $ 4,424   $ 730   $   $ 765   $   $ 4,944  
 

Investor Group Services, LLC

  $ 500   $ 500   $   $ 3   $   $ 206   $ 9   $   $ 295  
 

Multi-Ad Services, Inc.

  $   $   $   $   $   $   $   $   $ 462  
 

Pillar Processing LLC and PHL Holding Co.

  $   $ 12,450   $   $ 1,584   $   $   $ 147   $   $ (12,628 )
 

Primis Marketing Group, Inc. and Primis Holdings, LLC

  $   $ 154   $ 14,068   $   $   $   $   $ (14,068 ) $ 14,120  
 

Regency Healthcare Group, LLC

  $   $   $ 2,007   $   $   $   $   $ 380   $ 335  
 

Soteria Imaging Services, LLC

  $   $ 1,419   $   $ 321   $   $   $   $ 72   $ 12  
 

VSS-Tranzact Holdings, LLC

  $ 867   $   $   $   $   $   $   $   $ (6,275 )
 

Universal Environmental Services, LLC

  $   $   $   $   $   $   $   $   $  
 

Universal Trailer Corporation

  $   $   $ 7,930   $   $   $   $   $ (7,930 ) $ 7,930  
(7)
As defined in the Investment Company Act, we are deemed to be an "Affiliated Person" of this portfolio company because we own 5% or more of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). In addition, as defined in the Investment Company Act, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such

F-24


Table of Contents

 
Company
  Purchases   Redemptions
(cost)
  Sales
(cost)
  Interest
income
  Capital
structuring
service fees
  Dividend
Income
  Other
income
  Net
realized
gains (losses)
  Net
unrealized
gains (losses)
 
 

AGILE Fund I, LLC

  $   $ 36   $   $   $   $ 10   $   $   $ (37 )
 

Allied Capital REIT, Inc.

  $ 325   $ 115   $   $   $   $   $   $ 585   $ (255 )
 

AllBridge Financial, LLC

  $   $   $   $   $   $   $   $   $ (1,379 )
 

Aviation Properties Corporation

  $   $   $   $   $   $   $   $   $  
 

AWTP, LLC

  $ 2,926   $   $   $ 751   $   $   $   $   $ (1,648 )
 

BenefitMall Holdings, Inc.

  $   $   $   $ 7,360   $   $   $ 500   $   $ 9,541  
 

Border Foods, Inc.

  $   $ 28,526   $ 34,818   $ 1,401   $   $   $   $ 5,174   $ 3,601  
 

Callidus Capital Corporation

  $ 6,000   $ 3,000   $   $   $   $   $   $   $ (2,470 )
 

Ciena Capital LLC

  $   $   $   $ 3,549   $   $   $   $   $ (27,011 )
 

Citipostal, Inc.

  $ 2,850   $ 2,802   $   $ 7,356   $   $   $ 353   $   $ (10,960 )
 

Coverall North America, Inc.

  $   $ 30,907   $   $ 642   $   $   $   $ (12,334 ) $ 7,624  
 

Crescent Hotels & Resorts, LLC and affiliates

  $   $   $   $ 213   $   $   $   $   $ (2,666 )
 

EarthColor, Inc.

  $   $   $   $   $   $   $   $   $  
 

HCI Equity, LLC

  $   $   $   $   $   $   $   $   $ (263 )
 

HCP Acquisition Holdings, LLC

  $ 1,048   $   $   $   $   $   $   $   $ (1,196 )
 

Hot Light Brands, Inc.

  $   $ 929   $   $   $   $   $   $   $ (8 )
 

Huddle House Inc.

  $   $   $   $ 3,123   $   $   $ 750   $   $ 2,129  
 

Industrial Air Tool, LP and affiliates

  $   $   $ 13,419   $   $   $ 1,170   $ 185   $ 581   $ (1,517 )
 

Ivy Hill Asset Management, L.P.

  $ 9,419   $   $   $   $   $ 19,048   $   $   $ 48,943  
 

Ivy Hill Middle Market Credit Fund, Ltd.

  $   $   $   $ 4,879   $   $   $   $   $ 1,899  
 

Knightsbridge CLO 2007-1 Ltd.

  $   $   $ 14,852   $ 1,019   $   $   $   $ 3,724   $ 307  
 

Knightsbridge CLO 2008-1 Ltd.

  $   $ 36,996   $   $ 2,568   $   $   $   $ 1,254   $ 3,108  
 

LVCG Holdings, LLC

  $   $   $   $   $   $   $   $   $  
 

Making Memories Wholesale, Inc.

  $ 1,750   $ 345   $   $ 34   $   $   $ 2   $   $ (7,090 )
 

MVL Group, Inc.

  $   $   $   $ 8,452   $   $   $   $   $ (2,525 )
 

Orion Foods, LLC

  $ 3,300   $ 330   $   $ 10,265   $   $   $ 811   $   $ (6,832 )
 

Penn Detroit Diesel Allison, LLC

  $   $ 4,077   $ 15,993   $   $   $   $ 500   $ 18,388   $ (1,987 )
 

Reflexite Corporation

  $   $ 9,281   $ 27,435   $ 1,130   $   $   $ 39   $ 40,923   $ (3,088 )
 

Senior Secured Loan Fund LLC*

  $ 496,816   $   $   $ 118,420   $ 41,592   $   $ 13,307   $   $ 688  
 

Stag-Parkway, Inc.

  $   $   $   $ 4,372   $   $ 925   $ 249   $   $ 780  
 

Startec Equity, LLC

  $   $   $   $   $   $   $   $   $  
 

The Thymes, LLC

  $   $ 1,162   $   $   $   $ 490   $   $   $ 945  
(8)
Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(9)
Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(10)
Public company with outstanding equity with a market value in excess of $250 million and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(11)
In the first quarter of 2011, the staff of the Securities and Exchange Commission (the "Staff") informally communicated to certain business development companies the Staff's belief that certain entities, which would be classified as an "investment company" under the Investment Company Act but for the exception from the definition of "investment company" set forth in Rule 3a-7 promulgated under the Investment Company Act, could not be treated as eligible portfolio companies (as defined in Section 2(a)(46) of the Investment Company Act). Subsequently, in August 2011 the Securities and Exchange Commission issued a concept release (the "Concept Release") which states that "[a]s a general matter, the Commission presently does not believe that Rule 3a-7 issuers are the type of small, developing and financially troubled businesses in which Congress intended BDCs primarily to invest" and requested comment on whether or not a 3a-7 issuer should be considered an "eligible portfolio company". Ares Capital continues to believe that the language of Section 2(a)(46) of the Investment Company Act permits a business development company to treat as "eligible portfolio companies" entities that rely on the 3a-7 exception. However, given the current uncertainty in this area (including the language in the Concept Release), Ares Capital has, solely for purposes of calculating the composition of its portfolio pursuant to Section 55(a) of the Investment Company Act, identified these entities in our schedule of investments as "non-qualifying assets" should the Staff ultimately disagree with Ares Capital's position.

(12)
Variable rate loans to our portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower's option, which reset annually (A), semi-annually (S), quarterly (Q), bi-monthly (B), monthly (M) or daily (D). For each such loan, we have provided the interest rate in effect on the date presented.

(13)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 5.00% on $18 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

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Table of Contents

(14)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 2.50% on $12 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(15)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 4.00% on $45 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(16)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 1.25% on $74 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(17)
Loan was on non-accrual status as of December 31, 2011.

(18)
Loan includes interest rate floor feature.

(19)
In addition to the interest earned based on the stated contractual interest rate of this security, the certificates entitle us to receive a portion of the excess cash flow from the SSLP's loan portfolio, which may result in a return to the Company greater than the contractual stated interest rate.

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Investment Funds and Vehicles                                      
AGILE Fund I, LLC(7)(9)   Investment partnership   Member interest (0.50% interest)         4/1/2010   $ 264   $ 217        
                                       
BB&T Capital Partners/Windsor Mezzanine Fund, LLC(6)(9)   Investment company   Member interest (32.59% interest)         4/1/2010     11,900     15,704        
                                       
Callidus Debt Partners CDO Fund I, Ltd.(8)(9)   Investment company   Class C notes ($18,800 par due 12/2013)         4/1/2010     2,669     1,239        
        Class D notes ($9,400 par due 12/2013)         4/1/2010         (14)      
                                   
                        2,669     1,239        
                                       
Callidus Debt Partners CLO Fund III, Ltd.(8)(9)   Investment company   Preferred shares (23,600,000 shares)   7.18%     4/1/2010     4,343     7,324        
                                       
Callidus Debt Partners CLO Fund IV, Ltd.(8)(9)   Investment company   Class D notes ($3,000 par due 4/2020)   4.84% (Libor + 4.55%/Q)     4/1/2010     1,824     1,817        
        Subordinated notes ($17,500 par due 4/2020)   14.92%     4/1/2010     6,935     11,720        
                                   
                        8,759     13,537        
                                       
Callidus Debt Partners CLO Fund V, Ltd.(8)(9)   Investment company   Subordinated notes ($14,150 par due 11/2020)   23.49%     4/1/2010     8,586     11,995        
                                       
Callidus Debt Partners CLO Fund VI, Ltd.(8)(9)   Investment company   Class D notes ($9,000 par due 10/2021)   6.29% (Libor + 6.00%/Q)     4/1/2010     4,039     5,538        
        Subordinated notes ($25,500 par due 10/2021)   20.14%     4/1/2010     11,572     22,711        
                                   
                        15,611     28,249        
                                       
Callidus Debt Partners CLO Fund VII, Ltd.(8)(9)   Investment company   Subordinated notes ($28,000 par due 1/2021)   11.94%     4/1/2010     10,216     17,197        
                                       
Callidus MAPS CLO Fund I LLC   Investment company   Class E notes ($17,000 par due 12/2017)   5.79% (Libor + 5.5%/Q)     4/1/2010     11,863     11,535        
        Subordinated notes ($47,900 par due 12/2017)   8.62%     4/1/2010     12,652     19,156        
                                   
                        24,515     30,691        
                                       
Callidus MAPS CLO Fund II, Ltd.(8)(9)   Investment company   Class D notes ($7,700 par due 7/2022)   4.54% (Libor + 4.25%/Q)     4/1/2010     3,428     4,364        
        Subordinated notes ($17,900 par due 7/2022)   18.41%     4/1/2010     8,857     13,624        
                                   
                        12,285     17,988        
                                       
Carador PLC(6)(8)(9)(10)   Investment company   Ordinary shares (7,110,525 shares)         12/15/2006     9,033     5,333        
                                       
CIC Flex, LP(9)   Investment partnership   Limited partnership units (0.94 unit)         9/7/2007     2,553     2,500        
                                       
Covestia Capital Partners, LP(9)   Investment partnership   Limited partnership interest (47.00% interest)         6/17/2008     1,059     1,041        
                                       
Dryden XVIII Leveraged Loan 2007 Limited(8)(9)   Investment company   Class B notes ($9,000 par due 10/2019)   4.79% (Libor + 4.50%/Q)     4/1/2010     3,816     4,823        
        Subordinated notes ($21,164 par due 10/2019)   23.01%     4/1/2010     12,266     19,436        
                                       
Dynamic India Fund IV, LLC(9)   Investment company   Member interest (5.44% interest)         4/1/2010     4,822     4,822        
                                       
Fidus Mezzanine Capital, L.P.(9)   Investment partnership   Limited partnership interest (29.12% interest)         4/1/2010     9,206     7,499        

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Firstlight Financial Corporation(6)(9)   Investment company   Senior subordinated loan ($73,811 par due 12/2016)   1.00% PIK     12/31/2006     73,569     54,050 (4)      
        Common stock (10,000 shares)         12/31/2006     10,000            
        Common stock (30,000 shares)         12/31/2006     30,000            
                                   
                        113,569     54,050        
                                       
HCI Equity, LLC(7)(8)(9)   Investment company   Member interest (100% interest)         4/1/2010     808     993        
                                       
Imperial Capital Private Opportunities, LP(9)   Investment partnership   Limited partnership interest (80% interest)         5/10/2007     6,643     5,300        
                                       
Ivy Hill Middle Market Credit Fund, Ltd.(7)(8)(9)   Investment company   Class B deferrable interest notes ($40,000 par due 11/2018)   6.25% (Libor + 6.00%/Q)     11/20/2007     40,000     37,200        
        Subordinated notes ($15,351 par due 11/2018)   15.50%     11/20/2007     15,351     14,737        
                                   
                        55,351     51,937        
                                       
Knightsbridge CLO 2007-1 Ltd.(7)(8)(9)   Investment company   Class E notes ($20,350 par due 1/2022)   9.29% (Libor + 9.00%/Q)     3/24/2010     14,852     14,545        
                                       
Knightsbridge CLO 2008-1 Ltd.(7)(8)(9)   Investment company   Class C notes ($14,400 par due 6/2018)   7.80% (Libor + 7.50%/Q)     3/24/2010     14,400     14,400        
        Class D notes ($9,000 par due 6/2018)   8.79% (Libor + 8.50%/Q)     3/24/2010     9,000     9,000        
        Class E notes ($14,850 par due 6/2018)   5.29% (Libor + 5.00%/Q)     3/24/2010     13,596     10,488        
                                   
                        36,996     33,888        
                                       
Kodiak Funding, LP(9)   Investment partnership   Limited partnership interest (1.52% interest)         4/1/2010     918     788        
                                       
Novak Biddle Venture Partners III, L.P.(9)   Investment partnership   Limited partnership interest (2.47% interest)         4/1/2010     221     254        
                                       
Pangaea CLO 2007-1 Ltd. (8)(9)   Investment company   Class D notes ($15,000 par due 1/2021)   5.04% (Libor + 4.75%/Q)     4/1/2010     9,061     8,307        
                                       
Partnership Capital Growth Fund I, LP(9)   Investment partnership   Limited partnership interest (25% interest)         6/16/2006     2,370     2,393        
                                       
Senior Secured Loan Fund LLC(7)(16)   Co-investment vehicle   Subordinated certificates ($548,161 par due 12/2020)   8.30% (Libor + 8.00%/Q)     10/30/2009     537,439     561,674        
                                       
Trivergance Capital Partners, LP(9)   Investment partnership   Limited partnership interest (100% interest)         6/5/2008     3,162            
                                       
VSC Investors LLC(9)   Investment company   Membership interest (4.63% interest)         1/24/2008     994     699        
                                   
                        924,287     924,423     30.30 %
                                   
                                       
Healthcare—Services                                      
Axium Healthcare Pharmacy, Inc.   Specialty pharmacy provider   Senior subordinated loan ($3,160 par due 3/2015)   8.00%     4/1/2010     2,915     3,002 (4)      
                                       
BenefitMall Holdings Inc.(7)   Employee benefits broker services   Senior subordinated loan ($40,326 par due 6/2014)   18.00%     4/1/2010     40,326     40,326        
        Common stock (39,274,290 shares)         4/1/2010     53,510     50,450        
        Warrants         4/1/2010                
                                   
                        93,836     90,776        
                                     

F-28


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
CCS Group Holdings, LLC   Correctional facility healthcare operator   Class A units (1,000,000 units)         8/19/2010     1,000     1,000        
                                       
CT Technologies Intermediate Holdings, Inc. and CT   Healthcare analysis services   Preferred stock (7,427 shares)         6/15/2007     8,763     8,325        
Technologies Holdings, LLC(6)       Common stock (9,679 shares)         6/15/2007     4,000     9,656        
        Common stock (1,546 shares)         6/15/2007         1,542        
                                   
                        12,763     19,523        
                                       
DSI Renal Inc.(6)   Dialysis provider   Senior secured loan ($9,359 par due 3/2013)   8.50% (Libor + 6.50%/M)     4/4/2006     9,284     9,359 (15)      
        Senior subordinated loan ($69,009 par due 4/2014)   6.00% Cash, 10.00% PIK     4/4/2006     68,523     69,006 (4)      
        Common units (19,726 units)         4/4/2006     19,684     40,687        
                                   
                        97,491     119,052        
                                       
GG Merger Sub I, Inc.   Drug testing services   Senior secured loan ($11,330 par due 12/2014)   4.31% (Libor + 4.0%/Q)     12/14/2007     10,944     10,764 (2)      
        Senior secured loan ($12,000 par due 12/2014)   4.31% (Libor + 4.0%/Q)     12/14/2007     11,586     11,400 (3)      
                                   
                        22,530     22,164        
                                       
Heartland Dental Care, Inc.   Dental services   Senior subordinated loan ($27,717 par due 7/2014)   14.25%     7/31/2008     27,717     28,548        
                                       
INC Research, Inc.   Pharmaceutical and biotechnology consulting   Senior subordinated loan ($10,039 par due 9/2017)   13.50%     9/27/2010     10,039     10,039        
    services   Common stock (1,000,000 shares)         9/27/2010     1,000     1,000        
                                   
                        11,039     11,039        
                                       
Magnacare Holdings, Inc., Magnacare Administrative   Healthcare professional provider   Senior secured loan ($66,169 par due 9/2016)   9.75% (Libor + 8.75%/Q)     9/15/2010     66,169     66,169 (15)      
Services, LLC, and Magnacare, LLC       Senior secured loan ($48,511 par due 9/2016)   9.75% (Libor + 8.75%/Q)     9/15/2010     48,511     48,511 (2)(15)      
        Senior secured loan ($9,023 par due 9/2016)   9.75% (Libor + 8.75%/Q)     9/15/2010     9,023     9,023 (3)(15)      
                                   
                        123,703     123,703        
                                       
MPBP Holdings, Inc., Cohr Holdings, Inc. and MPBP   Healthcare equipment services   Junior secured loan ($18,851 par due 1/2014)         1/31/2007     18,851     943 (14)      
Acquisition Co., Inc.       Junior secured loan ($11,310 par due 1/2014)         1/31/2007     11,310     566 (3)(14)      
        Common stock (50,000 shares)         1/31/2007     5,000            
                                   
                        35,161     1,509        
                                       
MWD Acquisition Sub, Inc.   Dental services   Junior secured loan ($5,000 par due 5/2013)   6.51% (Libor + 6.25%/M)     5/3/2007     5,000     4,800 (3)      
                                       
NS Merger Sub. Inc. and NS Holdings, Inc.   Healthcare technology provider   Senior subordinated loan ($579 par due 6/2017)   13.50%     6/21/2010     579     579        
        Senior subordinated loan ($50,000 par due 6/2017)   13.50%     6/21/2010     50,000     50,000 (2)      
        Common stock (2,500,000 shares)         6/21/2010     2,500     2,500        
                                   
                        53,079     53,079        
                                       
OnCURE Medical Corp.   Radiation oncology care provider   Common stock (857,143 shares)         8/18/2006     3,000     2,910        
                                       
Passport Health Communications, Inc., Passport   Healthcare technology provider   Senior secured loan ($11,287 par due 5/2014)   8.25% (Libor + 7.0%/Q)     5/9/2008     11,287     11,287 (2)(15)      

F-29


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Holding Corp. and Prism Holding Corp.       Senior secured loan ($10,419 par due 5/2014)   8.25% (Libor + 7.0%/Q)     5/9/2008     10,419     10,419 (3)(15)      
        Series A preferred stock (1,594,457 shares)         7/30/2008     11,156     10,978 (4)      
        Common stock (16,106 shares)         7/30/2008     100            
                                   
                        32,962     32,684        
                                       
PG Mergersub, Inc.   Provider of patient surveys, management   Senior secured loan ($1,100 par due 11/3/2015)   6.75% (Libor + 5.0%/Q)     11/3/2010     1,098     1,100 (15)      
    reports and national databases for integrated   Senior secured loan ($9,200 par due 11/3/2015)   6.75% (Libor + 5.0%/Q)     11/3/2010     9,171     9,200 (3)(15)      
    healthcare delivery system   Senior subordinated loan ($4,000 par due 3/2016)   12.50%     3/12/2008     3,948     4,000        
        Preferred stock (333 shares)         3/12/2008     125     9        
        Common stock (16,667 shares)         3/12/2008     167     471        
                                   
                        14,509     14,780        
                                       
Reed Group, Ltd.   Medical disability management services   Senior secured loan ($10,755 par due 12/2013)         4/1/2010     9,129     9,142 (14)      
    provider   Senior secured revolving loan ($1,250 par due 12/2013)         4/1/2010     1,097     1,063 (14)      
        Senior subordinated loan ($19,625 par due 12/2013)         4/1/2010     15,918     10,714 (14)      
        Equity interests         4/1/2010     203            
                                   
                        26,347     20,919        
                                       
Regency Healthcare Group, LLC(6)   Hospice provider   Preferred member interest (1,293,960 shares)         4/1/2010     2,007     1,672        
                                       
Soteria Imaging Services, LLC(6)   Outpatient medical imaging provider   Junior secured loan ($1,687 par due 11/2010)         4/1/2010     1,644     1,383 (14)      
        Junior secured loan ($2,422 par due 11/2010)         4/1/2010     2,361     1,986 (14)      
        Preferred member interest (1,881,234 units)         4/1/2010                
                                   
                        4,005     3,369        
                                       
Sunquest Information Systems, Inc.   Laboratory software solutions provider   Junior secured loan ($95,000 par due 6/2017)   9.75% (Libor + 8.50%/M)     12/16/2010     95,000     95,000 (15)      
        Junior secured loan ($50,000 par due 6/2017)   9.75% (Libor + 8.50%/M)     12/16/2010     50,000     50,000 (2)(15)      
                                   
                        145,000     145,000        
                                       
U.S. Renal Care, Inc.   Dialysis provider   Senior subordinated loan ($20,235 par due 5/2017)   11.25% Cash, 2.00% PIK     5/24/2010     20,235     20,235 (4)      
                                       
Univita Health Inc.   Outsourced services provider   Senior subordinated loan ($21,094 par due 12/2014)   12.00% Cash, 3.00% PIK     12/22/2009     21,094     21,094 (4)      
                                       
VOTC Acquisition Corp.   Radiation oncology care provider   Senior secured loan ($7,580 par due 7/2012)   11.00% Cash, 2.00% PIK     6/30/2008     7,580     7,580 (4)      
        Preferred stock (3,888,222 shares)         7/14/2008     8,748     11,624        
                                   
                        16,328     19,204        
                                   
                        771,721     760,062     24.91 %
                                   
                                       
Business Services                                      
Aviation Properties Corporation(7)   Aviation services   Common stock (100 shares)         4/1/2010                
                                     

F-30


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Booz Allen Hamilton, Inc.   Strategy and technology consulting services   Senior secured loan ($733 par due 7/2015)   7.50% (Libor + 4.50%/M)     7/31/2008     721     733 (3)(15)      
        Senior subordinated loan ($101 par due 7/2016)   13.00%     7/31/2008     90     104        
        Senior subordinated loan ($5,007 par due 7/2016)   13.00%     7/31/2008     4,983     5,157 (2)      
                                   
                        5,794     5,994        
                                       
CitiPostal Inc.(7)   Document storage and management services   Senior secured revolving loan ($691 par due 12/2013)   6.50% (Libor + 4.50%/M)     4/1/2010     691     691 (15)      
        Senior secured revolving loan ($700 par due 12/2013)   6.50% (Libor + 4.50%/Q)     4/1/2010     700     700 (15)      
        Senior secured revolving loan ($1,250 par due 12/2013)   6.75% (Base Rate + 3.25%/Q)     4/1/2010     1,250     1,250 (15)      
        Senior secured loan ($49,333 par due 12/2013)   11.00% Cash, 2.00% PIK     4/1/2010     49,333     49,333 (2)(4)      
        Senior secured loan ($482 par due 12/2013)   11.00% Cash, 2.00% PIK     4/1/2010     482     482 (4)      
        Senior subordinated loan ($12,526 par due 12/2015)   16.00% PIK     4/1/2010     12,526     12,022 (4)      
        Common stock (37,024 shares)         4/1/2010                
                                   
                        64,982     64,478        
                                       
Coverall North America, Inc.(7)   Commercial janitorial service provider   Senior secured loan ($15,763 par due 7/2011)   12.00%     4/1/2010     15,763     15,763 (2)      
        Senior secured loan ($15,864 par due 7/2011)   12.00%     4/1/2010     15,864     15,864 (2)      
        Senior subordinated loan ($5,557 par due 7/2011)         4/1/2010     5,554     928 (14)      
        Common stock (763,333 shares)         4/1/2010     2,999            
                                   
                        40,180     32,555        
                                       
Digital Videostream, LLC   Media content supply chain services company   Senior secured loan ($256 par due 2/2012)   10.00% Cash, 1.00% PIK     4/1/2010     256     256 (4)      
        Senior secured loan ($9 par due 2/2012)   10.00% Cash, 1.00% PIK     4/1/2010     9     9 (2)(4)      
        Senior secured loan ($10,403 par due 2/2012)   10.00% Cash, 1.00% PIK     4/1/2010     10,345     10,403 (2)(4)      
        Convertible subordinated loan ($5,538 par due 2/2016)   10.00% PIK     4/1/2010     5,978     6,025 (4)      
                                   
                        16,588     16,693        
                                       
Diversified Collections Services, Inc.   Collections services   Senior secured loan ($6,921 par due 3/2012)   7.50% (Libor + 5.50%/Q)     4/1/2010     6,921     6,921 (3)(15)      
        Senior secured loan ($79 par due 3/2012)   7.50% (Libor + 5.50%/Q)     4/1/2010     79     79 (3)(15)      
        Senior secured loan ($34,000 par due 9/2012)   13.75% (Libor + 11.75%/Q)     4/1/2010     34,000     34,000 (2)(15)      
        Senior secured loan ($2,000 par due 9/2012)   13.75% (Libor + 11.75%/Q)     4/1/2010     2,000     2,000 (2)(15)      
        Preferred stock (14,927 shares)         5/18/2006     169     289        
        Common stock (114,004 shares)         2/5/2005     295     445        
        Common stock (478,816 shares)         4/1/2010     1,478     1,586        
                                   
                        44,942     45,320        
                                       
Diversified Mercury Communications, LLC   Business media consulting services   Senior secured loan ($1,774 par due 3/2013)   8.00% (Base Rate + 4.50%/M)     4/1/2010     1,613     1,596 (15)      
                                     

F-31


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
HCP Acquisition Holdings, LLC(7)   Healthcare compliance advisory services   Class A units (10,044,176 units)         6/26/2008     10,044     5,070        
                                       
Impact Innovations Group, LLC(7)   IT consulting and outsourcing services   Member interest (50% interest)         4/1/2010                
                                       
Interactive Technology Solutions, LLC   IT services provider   Senior secured loan ($7,944 par due 6/2015)   9.50% (Libor + 6.50%/Q)     10/21/2010     7,944     7,944 (15)      
        Senior secured loan ($8,900 par due 6/2015)   9.50% (Libor + 6.50%/Q)     10/21/2010     8,900     8,900 (3)(15)      
                                   
                        16,844     16,844        
                                       
Investor Group Services, LLC(6)   Business consulting for private equity and corporate clients   Limited liability company membership interest (10.00% interest)         6/22/2006         564        
                                       
Multi-Ad Services, Inc.(6)   Marketing services and software provider   Preferred units (1,725,280 units)         4/1/2010     788     1,366        
        Common units (1,725,280 units)         4/1/2010                
                                   
                        788     1,366        
                                       
MVL Group, Inc.(7)   Marketing research provider   Senior secured loan ($22,772 par due 7/2012)   12.00%     4/1/2010     22,772     22,772        
        Senior subordinated loan ($34,937 par due 7/2012)   12.00% Cash, 2.50% PIK     4/1/2010     33,884     34,937 (4)      
        Junior subordinated loan ($144 par due 7/2012)   10.00%     4/1/2010         33        
        Common stock (554,091 shares)         4/1/2010                
        Common stock (560,716 shares)         4/1/2010                
                                   
                        56,656     57,742        
                                       
PC Helps Support, LLC   Technology support provider   Senior secured loan ($7,153 par due 12/2013)   3.54% (Libor + 3.25%/Q)     4/1/2010     7,153     7,153 (3)      
        Senior subordinated loan ($23,377 par due 12/2013)   12.76%     4/1/2010     23,377     23,377        
                                   
                        30,530     30,530        
                                       
Pillar Processing LLC and PHL Holding Co.(6)   Mortgage services   Senior secured loan ($1,875 par due 5/2014)   14.50%     7/31/2008     1,875     1,875        
        Senior secured loan ($5,500 par due 5/2014)   14.50%     7/31/2008     5,500     5,500 (2)      
        Senior secured loan ($14,730 par due 11/2013)   5.80% (Libor + 5.50%/Q)     11/20/2007     14,730     14,730 (2)      
        Senior secured loan ($9,194 par due 11/2013)   5.80% (Libor + 5.50%/Q)     11/20/2007     9,194     9,194 (3)      
        Common stock (85 shares)         11/20/2007     3,768     5,701        
                                   
                        35,067     37,000        
                                       
Primis Marketing Group, Inc. and Primis Holdings, LLC(6)   Database marketing services   Senior subordinated loan ($10,222 par due 2/2013)         8/24/2006     10,222     102 (14)      
        Preferred units (4,000 units)         8/24/2006     3,600            
        Common units (4,000,000 units)         8/24/2006     400            
                                   
                        14,222     102        
                                       
Prommis Solutions, LLC, E-Default Services, LLC,   Bankruptcy and foreclosure processing   Senior subordinated loan ($16,788 par due 2/2014)   11.50% Cash, 2.00% PIK     2/9/2007     16,788     16,788 (4)      

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Statewide Tax and Title Services, LLC & Statewide Publishing Services, LLC (formerly known as MR Processing Holding Corp.)   services   Senior subordinated loan ($27,032 par due 2/2014)   11.50% Cash, 2.00% PIK     2/9/2007     27,032     27,032 (2)(4)      
        Preferred units (30,000 units)         4/11/2006     3,000     4,661        
                                   
                        46,820     48,481        
                                       
Promo Works, LLC   Marketing services   Senior secured loan ($8,655 par due 12/2013)   11.00%     4/1/2010     5,105     5,438        
                                       
R2 Acquisition Corp.   Marketing services   Common stock (250,000 shares)         5/29/2007     250     257        
                                       
Summit Business Media, LLC   Business media consulting services   Junior secured loan ($11,930 par due 7/2014)         8/3/2007     10,276     239 (3)(14)      
                                       
Summit Energy Services, Inc.   Energy management consulting services   Common stock (38,778 shares)         4/1/2010     222     287        
        Common stock (385,608 shares)         4/1/2010     2,336     2,850        
                                   
                        2,558     3,137        
                                       
Tradesmen International, Inc.   Construction labor support   Senior subordinated loan ($20,000 par due 5/2014)   10.00%     4/1/2010     14,364     20,000        
        Warrants to purchase up to 771,036 shares         4/1/2010         2,086        
                                   
                        14,364     22,086        
                                       
VSS-Tranzact Holdings, LLC(6)   Management consulting services   Common membership interest (8.51% interest)         10/26/2007     10,204     6,475        
                                       
Venturehouse-Cibernet Investors, LLC   Financial settlement services for intercarrier   Equity interest         4/1/2010                
    wireless roaming   Equity interest         4/1/2010                
                                   
                                   
                                   
                        427,827     401,967     13.17 %
                                   
                                       
Financial Services                                      
AllBridge Financial, LLC(7)   Asset management services   Equity interests         4/1/2010     11,395     13,112        
                                       
Callidus Capital Corporation(7)   Asset management services   Common stock (100 shares)         4/1/2010         246        
                                       
Ciena Capital LLC(7)   Real estate and small business loan servicer   Senior secured loan ($14,000 par due 12/2013)   6.00%     11/23/2010     14,000     14,000        
        Senior secured loan ($2,000 par due 12/2015)   12.00%     11/29/2010     2,000     2,000        
        Senior secured loan ($20,000 par due 12/2015)   12.00%     11/29/2010     20,000     20,000        
        Senior secured loan ($10,000 par due 12/2015)   12.00%     11/29/2010     10,000     10,000        
        Equity interests         11/29/2010     53,374     47,063        
                                   
                        99,374     93,063        
                                       
Commercial Credit Group, Inc.   Commercial equipment finance and leasing   Senior subordinated loan ($6,000 par due 6/2015)   15.00%     4/1/2010     6,000     6,000        
    company   Senior subordinated loan ($4,000 par due 6/2015)   15.00%     4/1/2010     4,000     4,000        
        Senior subordinated loan ($9,500 par due 6/2015)   15.00%     4/1/2010     9,500     9,500        
                                   
                        19,500     19,500        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Compass Group Diversified Holdings, LLC(10)   Middle market business manager   Senior secured revolving loan ($735 par due 12/2012)   2.76% (Libor + 2.50%/M)     4/1/2010     735     735        
        Senior secured revolving loan ($882 par due 12/2012)   2.76% (L ibor + 2.50%/M)     4/1/2010     882     882        
                                   
                        1,617     1,617        
                                       
Cook Inlet Alternative Risk, LLC   Risk management services   Senior secured loan ($40,000 par due 4/2013)   8.50%     4/1/2010     25,124     26,083        
        Senior secured loan ($44,346 par due 4/2013)   8.50%     4/1/2010     26,622     28,917        
        Member interest (3.17%)         4/1/2010                
                                   
                        51,746     55,000        
                                       
Financial Pacific Company(7)   Commercial finance leasing   Preferred stock (6,500 shares)   8.00% PIK     10/13/2010     6,500     6,543        
        Common stock (650,000 shares)         10/13/2010                
                                   
                        6,500     6,543        
                                       
Imperial Capital   Investment services   Common units (2,526 units)         5/10/2007     3     4,735        
Group, LLC(6)       Common units (315 units)         5/10/2007         590        
        Common units (7,710 units)         5/10/2007     14,997     14,453        
                                   
                        15,000     19,778        
                                       
Ivy Hill Asset Management, L.P.(7)   Asset management services   Member interest (100% interest)         6/15/2009     103,458     136,235        
                                   
                        308,590     345,094     11.31 %
                                   
                                       
Restaurants and Food Services                                      
ADF Capital, Inc. & ADF Restaurant Group, LLC   Restaurant owner and operator   Senior secured revolving loan ($2,010 par due 11/2012)   6.50% (Libor + 3.50%/Q)     11/27/2006     2,010     2,010 (15)      
        Senior secured revolving loan ($108 par due 11/2012)   6.50% (Base Rate + 2.50%/Q)     11/27/2006     108     108 (15)      
        Senior secured loan ($22,839 par due 11/2013)   12.50% (Libor + 9.50%/Q)     11/27/2006     22,845     22,839 (2)(15)      
        Senior secured loan ($10,705 par due 11/2013)   12.50% (Libor + 9.50%/Q)     11/27/2006     10,705     10,705 (3)(15)      
        Promissory note ($14,897 par due 11/2016)         6/1/2006     14,886     10,957 (4)      
        Warrants to purchase up to 0.61 shares         6/1/2006                
                                   
                        50,554     46,619        
                                       
Encanto Restaurants, Inc.   Restaurant owner and operator   Junior secured loan ($20,997 par due 8/2013)   11.00%     8/2/2006     20,997     19,947 (2)      
        Junior secured loan ($3,999 par due 8/2013)   11.00%     8/2/2006     3,999     3,799 (3)      
                                   
                        24,996     23,746        
                                       
Orion Foods, LLC (fka Hot Stuff Foods, LLC)(7)   Convenience food service retailer   Senior secured loan ($34,357 par due 9/2014)   10.00% (Libor + 8.50%/Q)     4/1/2010     34,357     34,357 (15)      
        Junior secured loan ($37,552 par due 9/2014)   14.00%     4/1/2010     24,881     36,085        
        Preferred stock ($10,000 par due)         4/1/2010                
        Class A common units (25,001 units)         4/1/2010                
        Class B common units (1,122,452 units)         4/1/2010                
                                   
                        59,238     70,442        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Huddle House, Inc.(7)   Restaurant owner and operator   Senior subordinated loan ($20,300 par due 12/2015)   12.00% Cash, 3.00% PIK     4/1/2010     20,032     16,202 (4)      
        Common stock (358,428 shares)         4/1/2010                
                                   
                        20,032     16,202        
                                       
OTG Management, Inc.   Airport restaurant operator   Junior secured loan ($12,603 par due 6/2013)   16.00% (Libor + 11.00% Cash, 2.00% PIK/M)     6/19/2008     12,603     12,603 (4)(15)      
        Junior secured loan ($42,030 par due 6/2013)   18.00% (Libor + 11.00% Cash, 4.00% PIK/M)     6/19/2008     42,030     42,030 (4)(15)      
        Warrants to purchase up to 100,857 shares of common stock         6/19/2008     100     4,939        
        Warrants to purchase up to 9 shares of common stock         6/19/2008                
                                   
                        54,733     59,572        
                                       
PMI Holdings, Inc.   Restaurant owner and operator   Senior secured revolving loan ($575 par due 5/2015)   10.00% (Libor + 8.00%/Q)     5/5/2010     575     575 (15)      
        Senior secured loan ($9,918 par due 5/2015)   10.00% (Libor + 8.00%/M)     5/5/2010     9,918     9,918 (2)(15)      
        Senior secured loan ($9,918 par due 5/2015)   10.00% (Libor + 8.00%/M)     5/5/2010     9,918     9,918 (3)(15)      
        Senior secured loan ($7 par due 5/2015)   10.25% (Base Rate + 7.00%/M)     5/5/2010     7     7 (2)      
        Senior secured loan ($7 par due 5/2015)   10.25% (Base Rate + 7.00%/M)     5/5/2010     7     7 (3)      
                                   
                        20,425     20,425        
                                       
S.B. Restaurant Company   Restaurant owner and operator   Senior secured loan ($35,406 par due 7/2012)   13.00% (Libor + 11.00%/Q)     4/1/2010     26,872     33,635 (15)      
        Preferred stock (46,690 shares)         4/1/2010                
        Warrants to purchase up to 257,429 shares of common stock         4/1/2010                
                                   
                        26,872     33,635        
                                       
Vistar Corporation and Wellspring Distribution Corp.   Food service distributor   Senior subordinated loan ($31,625 par due 5/2015)   13.50%     5/23/2008     31,625     31,625        
        Senior subordinated loan ($30,000 par due 5/2015)   13.50%     5/23/2008     30,000     30,000 (2)      
        Class A non-voting common stock (1,366,120 shares)         5/3/2008     7,500     5,287        
                                   
                        69,125     66,912        
                                   
                        325,975     337,553     11.06 %
                                   
                                       
Retail                                      
Apogee Retail, LLC   For-profit thrift retailer   Senior secured revolving loan ($780 par due 3/2012)   7.25% (Base Rate + 4.00%/Q)     3/27/2007     780     765        
        Senior secured loan ($11,523 par due 9/2012)   12.00% Cash, 4.00% PIK     5/28/2008     11,523     11,523 (4)      
        Senior secured loan ($2,939 par due 3/2012)   5.51% (Libor + 5.25%/M)     3/27/2007     2,939     2,880 (2)      
        Senior secured loan ($3,420 par due 9/2012)   12.00% Cash, 4.00% PIK     5/28/2008     3,420     3,420 (4)      
        Senior secured loan ($25,841 par due 3/2012)   5.51% (Libor + 5.25%/M)     3/27/2007     25,841     25,324 (2)      
        Senior secured loan ($11,307 par due 3/2012)   5.51% (Libor + 5.25%/M)     3/27/2007     11,307     11,081 (3)      
                                   
                        55,810     54,993        
                                     

F-35


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Direct Buy Holdings, Inc. and Direct Buy Investors, LP(6)   Membership based buying club franchisor   Senior secured loan ($1,897 par due 11/2012)   8.25% (Base Rate + 5.00%/Q)     12/14/2007     1,858     1,897 (2)(15)      
    and operator   Senior subordinated loan ($81,634 par due 5/2013)   12.00% Cash, 4.00% PIK     4/1/2010     77,892     81,634 (4)      
        Limited partnership interest (80,000 shares)         4/1/2010     3,112     3,414        
        Partnership interests (100,000 shares)         11/30/2007     10,000     4,347        
                                   
                        92,862     91,292        
                                       
Fulton Holdings Corp   Airport restaurant operator   Senior secured loan ($40,000 par due 5/2016)   12.50%     5/28/2010     40,000     40,000 (2)(12)      
        Common stock (19,672 shares)         5/28/2010     1,967     2,430        
                                   
                        41,967     42,430        
                                       
Savers, Inc. and SAI Acquisition Corporation   For-profit thrift retailer   Common stock (1,170,182 shares)         8/8/2006     4,500     7,238        
                                       
Things Remembered, Inc. and TRM Holdings Corporation   Personalized gifts retailer   Senior secured loan ($2,413 par due 9/2012)   6.50% (Base Rate + 1.25% Cash, 1.00% PIK/M)     9/28/2006     2,409     2,364 (3)(4)(15)      
        Senior secured loan ($28,122 par due 9/2012)   6.50% (Base Rate + 1.25% Cash, 1.00% PIK/M)     9/28/2006     28,089     27,560 (4)(15)      
        Senior secured loan ($7,110 par due 9/2012)   6.50% (Base Rate + 1.25% Cash, 1.00% PIK/M)     9/28/2006     7,188     6,968 (3)(4)(15)      
        Preferred stock (73 shares)         3/19/2009         1,939        
        Preferred stock (80 shares)         9/28/2006     1,800     2,121        
        Common stock (800 shares)         9/28/2006     200            
        Warrants to purchase up to 859 shares of preferred stock         3/19/2009                
                                   
                        39,686     40,952        
                                   
                        234,825     236,905     7.77 %
                                   
                                       
Consumer Products—Non-durable                                      
Augusta Sportswear, Inc.   Manufacturer of athletic apparel   Senior secured loan ($6,556 par due 7/2015)   8.50% (Libor + 7.50%/Q)     9/3/2010     6,556     6,556 (2)(15)      
        Senior secured loan ($9,353 par due 7/2015)   8.50% (Libor + 7.50%/Q)     9/3/2010     9,353     9,353 (3)(15)      
                                   
                        15,909     15,909        
                                       
Gilchrist & Soames, Inc.   Personal care manufacturer   Senior subordinated loan ($22,902 par due 10/2013)   13.44%     4/1/2010     22,128     22,902        
                                       
Insight Pharmaceuticals Corporation(6)   OTC drug products manufacturer   Senior subordinated loan ($50,255 par due 9/2012)   13.00% Cash, 2.00% PIK     4/1/2010     50,255     50,255 (2)(4)(15)      
        Senior subordinated loan ($5,298 par due 9/2012)   13.00% Cash, 2.00% PIK     4/1/2010     5,298     5,298 (4)(15)      
        Common stock (155,000 shares)         4/1/2010     12,070     13,432        
                                   
                        67,623     68,985        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Making Memories Wholesale, Inc.(7)   Scrapbooking branded products manufacturer   Senior secured revolving loan ($250 par due 8/2014)   10.00% (Libor + 6.50%/Q)     8/21/2009     250     250 (15)      
        Senior secured revolving loan ($250 par due 8/2014)   10.00% (Libor + 6.50%/Q)     8/21/2009     250     250 (15)      
        Senior secured loan ($9,388 par due 8/2014)         8/21/2009     7,433     6,048 (14)(15)      
        Senior secured loan ($5,129 par due 8/2014)         8/21/2009     3,979     (14)      
        Common stock (100 shares)         8/21/2009                
                                   
                        11,912     6,548        
                                       
The Step2 Company, LLC   Toy manufacturer   Senior secured loan ($27,000 par due 4/2015)   10.00%     4/1/2010     25,557     27,000 (4)      
        Senior subordinated loan ($30,000 par due 4/2015)   15.00%     4/1/2010     28,396     30,000 (4)      
        Common units (1,114,343 units)         4/1/2010     24     1,010        
        Warrants to purchase up to 3,157,895 shares         4/1/2010                
                                   
                        53,977     58,010        
                                       
The Thymes, LLC(7)   Cosmetic products manufacturer   Preferred units (6,283 units)   8.00% PIK     6/21/2007     6,784     6,902 (4)      
        Common units (5,400 units)         6/21/2007                
                                   
                        6,784     6,902        
                                       
Woodstream Corporation   Pet products manufacturer   Senior subordinated loan ($4,743 par due 2/2015)   12.00%     1/22/2010     4,772     4,505        
        Senior subordinated loan ($50,257 par due 2/2015)   12.00%     1/22/2010     43,287     47,745        
        Common stock (4,254 shares)         1/22/2010     1,222     2,194        
                                   
                        49,281     54,444        
                                   
                        227,614     233,700     7.66 %
                                   
                                       
Education                                      
Campus Management Corp. and Campus Management Acquisition Corp.(6)   Education software developer   Preferred stock (465,509 shares)         2/8/2008     9,949     13,834        
                                       
Community Education Centers, Inc.   Offender re-entry and in-prison treatment services provider   Senior secured loan ($20,000 par due 12/2014)   6.25% (Libor + 5.25%/M)     12/10/2010     20,000     20,000 (15)      
        Junior secured loan ($9,231 par due 12/2015)   15.28% (Libor + 15.00%/M)     12/10/2010     9,231     9,231        
        Junior secured loan ($30,769 par due 12/2015)   15.30% (Libor + 15.00%/M)     12/10/2010     30,769     30,769        
        Warrants to purchase up to 578,407 shares         12/13/2010         1,009        
                                   
                        60,000     61,009        
                                       
eInstruction Corporation   Developer, manufacturer and retailer of educational products   Senior subordinated loan ($23,270 par due 1/2015)   16.00% PIK     4/1/2010     21,290     22,106 (4)      
        Junior secured loan ($17,000 par due 7/2014)   7.80% (Libor + 7.50%/Q)     4/1/2010     14,881     14,960        
        Common stock (2,406 shares)         4/1/2010     926     1,326        
                                   
                        37,097     38,392        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
ELC Acquisition Corporation   Developer, manufacturer and retailer of educational products   Senior secured loan ($160 par due 11/2012)   3.51% (Libor + 3.25%/M)     11/30/2006     160     160 (3)      
        Junior secured loan ($8,333 par due 11/2013)   7.26% (Libor + 7.00%/M)     11/30/2006     8,333     8,333 (3)      
                                   
                        8,493     8,493        
                                       
Instituto de Banca y Comercio, Inc. & Leeds IV Advisors, Inc.   Private school operator   Series B preferred stock (1,401,385 shares)         8/5/2010     4,004     4,244        
        Series B preferred stock (348,615 shares)         8/5/2010     996     1,056        
        Series C preferred stock (1,994,644 shares)         6/7/2010     547     2,586        
        Series C preferred stock (517,942 shares)         6/7/2010     142     672        
        Common stock (16 shares)         6/7/2010                
        Common stock (4 shares)         6/7/2010                
                                   
                        5,689     8,558        
                                       
JTC Education Holdings, Inc.   Postsecondary school operator   Senior secured loan ($19,997 par due 12/2014)   12.50% (Libor + 9.50%/M)     12/31/2009     19,997     19,997 (15)      
        Senior secured loan ($10,863 par due 12/2014)   12.50% (Libor + 9.50%/M)     12/31/2009     10,863     10,863 (3)(15)      
                                   
                        30,860     30,860        
                                       
R3 Education, Inc. (formerly known as Equinox EIC Partners, LLC and MUA Management Company) and EIC Acquisitions Corp.(8)   Medical school operator   Senior secured loan ($6,275 par due 4/2013)   9.00% (Libor + 6.00%/Q)     4/3/2007     6,275     9,652 (3)(15)      
        Senior secured loan ($10,113 par due 4/2013)   9.00% (Libor + 6.00%/Q)     9/21/2007     10,113     15,555 (15)      
        Senior secured loan ($4,000 par due 4/2013)   9.00% (Libor + 6.00%/Q)     9/21/2007     4,000     6,153 (3)(15)      
        Senior secured loan ($5,727 par due 4/2013)   13.00% PIK     12/8/2009     2,335     8,809 (4)      
        Preferred stock (800 shares)         7/30/2008     200     100        
        Preferred stock (8,000 shares)         7/30/2008     2,000     1,000        
        Common membership interest (26.27% interest)         9/21/2007     15,800     20,734        
        Warrants to purchase up to 27,890 shares         12/8/2009                
                                   
                        40,723     62,003        
                                   
                        192,811     223,149     7.32 %
                                   
                                       
Manufacturing                                      
Component Hardware Group, Inc.   Commercial equipment   Senior secured loan ($3,014 par due 12/2014)   7.00% Cash, 3.00% PIK     8/4/2010     3,014     3,014 (4)      
        Senior subordinated loan ($10,078 par due 12/2014)   7.50% Cash, 5.00% PIK     4/1/2010     5,775     10,078 (4)      
        Warrants to purchase up to 1,462,500 shares of common stock         8/4/2010         1,240        
                                   
                        8,789     14,332        
                                     

F-38


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Industrial Air Tool, LP and Affiliates d/b/a Industrial Air Tool(7)   Industrial products   Class B common units (37,125 units)         4/1/2010     6,000     14,787        
        Member interest (375 units)         4/1/2010     7,419     149        
                                   
                        13,419     14,936        
                                       
NetShape Technologies, Inc.   Metal precision engineered components   Senior secured revolving loan ($972 par due 2/2013)   4.06% (Libor + 3.75%/M)     4/1/2010     521     602        
        Common units (1,000 units)         1/30/2007     1,000            
                                   
                        1,521     602        
                                       
Reflexite Corporation(7)   High-visibility reflective products   Senior subordinated loan ($3,282 par due 11/2014)   20.00% (Base Rate + 12.25% Cash, 7.50% PIK/Q)     2/26/2008     3,282     3,282 (4)(15)      
        Senior subordinated loan ($5,999 par due 11/2014)   20.00% (Base Rate + 12.25% Cash, 7.50% PIK/Q)     2/26/2008     5,999     5,999 (3)(4)(15)      
        Common stock (1,821,860 shares)         3/28/2006     27,435     30,523        
                                   
                        36,716     39,804        
                                       
Sigma International Group, Inc.(8)   Water treatment parts manufacturer   Junior secured loan ($1,833 par due 10/2013)   16.00% (Libor + 8.00%/Q)     10/11/2007     1,833     1,283 (15)      
        Junior secured loan ($917 par due 10/2013)   16.00% (Libor + 8.00%/Q)     10/11/2007     917     642 (15)      
        Junior secured loan ($2,778 par due 10/2013)   16.00% (Libor + 8.00%/Q)     10/11/2007     2,778     1,944 (15)      
        Junior secured loan ($4,000 par due 10/2013)   16.00% (Libor + 8.00%/Q)     10/11/2007     4,000     2,800 (3)(15)      
        Junior secured loan ($2,000 par due 10/2013)   16.00% (Libor + 8.00%/Q)     10/11/2007     2,000     1,400 (3)(15)      
        Junior secured loan ($6,060 par due 10/2013)   16.00% (Libor + 8.00%/Q)     10/11/2007     6,060     4,242 (3)(15)      
                                   
                        17,588     12,311        
                                       
STS Operating, Inc.   Hydraulic systems equipment and supplies   Senior subordinated loan ($30,386 par due 1/2013)   11.00%     4/1/2010     29,461     30,386 (2)      
                                       
Bundy Refrigeration International Holding B.V. (aka Tyde Group Worldwide)(8)   Refrigeration and cooling systems parts   Senior secured loan ($9,010 par due 4/2012)   13.13% (Base Rate + 9.88%/Q)     12/15/2010     9,010     9,010        
        Senior secured loan ($15,592 par due 4/2012)   15.38% (Base Rate + 12.13%/Q)     12/15/2010     15,592     15,592        
                                   
                        24,602     24,602        
                                       
Universal Trailer Corporation(6)   Livestock and specialty trailers   Common stock (74,920 shares)         10/8/2004     7,930            
                                   
                        140,026     136,973     4.49 %
                                   
                                     

F-39


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Telecommunications                                      
American Broadband Communications, LLC and American Broadband Holding Company   Broadband communication services   Senior secured loan ($5,530 par due 9/2013)   7.50% (Libor + 5.50%/Q)     9/1/2010     5,861     5,530 (15)      
        Senior secured loan ($17,775 par due 9/2013)   7.50% (Libor + 5.50%/Q)     9/1/2010     16,924     17,775 (2)(15)      
        Senior secured loan ($9,283 par due 9/2013)   7.50% (Libor + 5.50%/Q)     9/1/2010     9,283     9,283 (3)(15)      
        Senior subordinated loan ($30,594 par due 11/2014)   12.00% Cash, 4.00% PIK     9/1/2010     30,594     30,594 (4)      
        Senior subordinated loan ($32,768 par due 11/2014)   12.00% Cash, 4.00% PIK     2/8/2008     32,768     32,768 (2)(4)      
        Senior subordinated loan ($10,321 par due 11/2014)   12.00% Cash, 4.00% PIK     11/7/2007     10,321     10,321 (4)      
        Warrants to purchase up to 200 shares         11/7/2007         3,915        
        Warrants to purchase up to 208 shares         9/1/2010                
                                   
                        105,751     110,186        
                                       
Startec Equity, LLC(7)   Communication services   Member interest         4/1/2010                
                                   
                        105,751     110,186     3.61 %
                                   
                                       
Food and Beverage                                      
Apple & Eve, LLC and US Juice Partners, LLC(6)   Juice manufacturer   Senior secured revolving loan ($1,200 par due 10/1/2013)   12.00% (Base Rate + 8.00%/Q)     10/5/2007     1,200     1,200 (15)      
        Senior secured loan ($14,162 par due 10/2013)   12.00% (Libor + 9.00%/M)     10/5/2007     14,162     14,162 (15)      
        Senior secured loan ($14,900 par due 10/2013)   12.00% (Libor + 9.00%/M)     10/5/2007     14,900     14,900 (3)(15)      
        Senior units (50,000 units)         10/5/2007     5,000     5,036        
                                   
                        35,262     35,298        
                                       
Border Foods, Inc.(7)   Green chile and jalapeno products manufacturer   Senior secured loan ($28,526 par due 3/2012)   13.50%     4/1/2010     28,526     28,526        
        Preferred stock (100,000 shares)         4/1/2010     21,346     22,801        
        Common stock (148,838 shares)         4/1/2010     13,472     4,809        
        Common stock (87,707 shares)         4/1/2010         2,834        
        Common stock (23,922 shares)         4/1/2010         773        
                                   
                        63,344     59,743        
                                       
Charter Baking Company, Inc.   Baked goods manufacturer   Senior subordinated loan ($6,673 par due 2/2013)   13.00% PIK     2/6/2008     6,673     6,673 (4)      
        Preferred stock (6,258 shares)         9/1/2006     2,500     1,650        
                                   
                        9,173     8,323        
                                       
Distant Lands Trading Co.   Coffee manufacturer   Common stock (1,294 shares)         4/1/2010     980     1,048        
        Common stock (2,157 shares)         4/1/2010                
                                   
                        980     1,048        
                                     

F-40


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Ideal Snacks Corporation   Snacks manufacturer   Senior secured revolving loan ($1,084 par due 6/2011)   8.50% (Base Rate + 4.00%/M)     4/1/2010     1,084     922 (15)      
                                   
                        109,843     105,334     3.45 %
                                   
                                       
Services-Other                                      
The Dwyer Group   Operator of multiple franchise concepts primarily related to home maintenance or repairs   Senior subordinated loan ($27,100 par due 12/2016)   14.50%     12/22/2010     27,100     27,100        
        Series A preferred units (15,000,000 units)   8.00% PIK     12/22/2010     15,000     15,000        
                                   
                        42,100     42,100        
                                       
Growing Family, Inc. and GFH Holdings, LLC(6)   Photography services   Senior secured revolving loan ($182 par due 8/2011)   9.00% (Base Rate + 1.75% Cash, 4.00% PIK/M)     3/16/2007     178     80 (4)(15)      
        Senior secured revolving loan ($2,252 par due 8/2011)   9.00% (Base Rate + 1.75% Cash, 4.00% PIK/M)     3/16/2007     2,207     991 (4)(15)      
        Senior secured loan ($524 par due 3/2013)   9.00% (Base Rate + 1.75% Cash, 4.00% PIK/M)     3/16/2007     514     230 (4)(15)      
        Senior secured loan ($6,498 par due 3/2013)   9.00% (Base Rate + 1.75% Cash, 4.00% PIK/M)     3/16/2007     6,378     2,859 (4)(15)      
        Preferred stock (8,750 shares)         3/16/2007                
        Common stock (552,430 shares)         3/16/2007     872            
        Warrants to purchase up to 11,313,678 Class B units         3/16/2007                
                                   
                        10,149     4,160        
                                       
Web Services Company, LLC   Laundry service and equipment provider   Senior secured loan ($4,888 par due 8/2014)   7.00% (Base Rate + 3.75%/Q)     6/15/2009     4,718     4,888 (3)      
        Senior subordinated loan ($13,563 par due 8/2016)   11.50% Cash, 2.50% PIK     8/29/2008     13,563     13,563 (4)      
        Senior subordinated loan ($26,462 par due 8/2016)   11.50% Cash, 2.50% PIK     8/29/2008     26,462     26,462 (2)(4)      
                                   
                        44,743     44,913        
                                   
                        96,992     91,173     2.98 %
                                   
                                       
Automotive Services                                      
Driven Brands, Inc.(6)   Automotive aftermarket car care franchisor   Senior secured loan ($3,200 par due 10/2014)   6.50% (Libor + 5.00%/M)     5/12/2010     3,116     3,200 (3)(15)      
        Senior secured loan ($520 par due 10/2014)   6.50% (Libor + 5.00%/M)     4/1/2010     506     520(3 )(15)      
        Senior secured loan ($213 par due 10/2014)   7.00% (Base Rate + 3.75%/M)     4/1/2010     207     213 (3)      
        Common stock (3,772,098 shares)         4/1/2010     4,939     6,308        
                                   
                        8,768     10,241        
                                       
Penn Detroit Diesel Allison, LLC(7)   Diesel engine manufacturer   Member interest (70,249 shares)         4/1/2010     20,069     22,057        
                                     

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Stag-Parkway, Inc.(7)   Automotive aftermarket components supplier   Senior secured loan ($34,500 par due 12/2014)   12.50% (Libor + 11.00%/Q)     9/30/2010     34,500     34,500 (15)      
        Preferred stock (4,200 shares)   16.50%     9/30/2010     2,328     4,200        
        Common stock (10,200 shares)         9/30/2010         13,987        
                                   
                        36,828     52,687        
                                   
                        65,665     84,985     2.79 %
                                   
                                       
Commercial Real Estate Finance                                      
10th Street, LLC(6)   Real estate holding company   Senior subordinated loan ($23,247 par due 11/2014)   8.93% Cash, 4.07% PIK     4/1/2010     23,247     23,247 (4)      
        Member interest (10.00% interest)         4/1/2010     594     578        
        Option (25,000 units)         4/1/2010     25     25        
                                   
                        23,866     23,850        
                                       
Allied Capital REIT, Inc.(7)   Real estate investment trust   Real estate equity interests         4/1/2010     50     35        
        Real estate equity interests         4/1/2010     115     699        
                                   
                        165     734        
                                       
American Commercial Coatings, Inc.   Real estate property   Commercial mortgage loan ($2,000 par due 12/2025)         4/1/2010     1,927     1,875 (14)      
                                       
Aquila Binks Forest Development, LLC   Real estate developer   Commercial mortgage loan ($12,870 par due 6/2011)         4/1/2010     11,293     4,812 (14)      
        Real estate equity interest         4/1/2010                
                                   
                        11,293     4,812        
                                       
Cleveland East Equity, LLC   Hotel operator   Real estate equity interest (2,522,748 shares)         4/1/2010     1,026     2,051        
                                       
Commons R-3, LLC   Real estate developer   Real estate equity interest         4/1/2010                
                                       
Crescent Hotels & Resorts, LLC and affiliates(7)   Hotel operator   Senior subordinated loan ($433 par due 6/2010)         4/1/2010     433     444 (14)      
        Senior subordinated loan ($4,124 par due 1/2012)         4/1/2010     1,475     (14)      
        Senior subordinated loan ($4,348 par due 6/2017)         4/1/2010     1,482     1,288 (14)      
        Senior subordinated loan ($2,722 par due 6/2017)         4/1/2010     928     1,963 (14)      
        Senior subordinated loan ($5,974 par due 9/2012)         4/1/2010     2,051     (14)      
        Senior subordinated loan ($263 par due 3/2013)         4/1/2010     263     (14)      
        Senior subordinated loan ($2,112 par due 9/2011)         4/1/2010         (14)      
        Senior subordinated loan ($3,078 par due 1/2012)         4/1/2010         (14)      
        Senior subordinated loan ($2,926 par due 6/2017)         4/1/2010         (14)      
        Senior subordinated loan ($2,050 par due 6/2017)         4/1/2010         (14)      
        Senior subordinated loan ($4,826 par due 9/2012)         4/1/2010         (14)      
        Preferred equity interest         4/1/2010                
        Preferred equity interest         4/1/2010         43        
        Common equity interest         4/1/2010     35            
        Member interests         4/1/2010                
                                   
                        6,667     3,738        

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
DI Safford, LLC   Hotel operator   Commercial mortgage loan ($5,311 par due 5/2032)         4/1/2010     2,757     2,750 (14)      
                                       
Holiday Inn West Chester   Hotel property   Real estate owned         4/1/2010     3,513     3,330        
                                       
Hot Light Brands, Inc.(7)   Real estate holding company   Senior secured loan ($27,393 par due 2/2011)         4/1/2010     4,875     4,629 (14)      
        Common stock (93,500 shares)         4/1/2010                
                                   
                        4,875     4,629        
                                       
MGP Park Place Equity, LLC   Office building operator   Commercial mortgage loan ($6,170 par due 5/2011)         4/1/2010     320     163 (14)      
                                       
NPH, Inc.   Hotel property   Real estate equity interest         4/1/2010     5,291     6,907        
                                       
Van Ness Hotel, Inc.   Hotel operator   Commercial mortgage loan ($3,750 par due 8/2013)         4/1/2010     1,027     (14)      
        Commercial mortgage loan ($13,702 par due 12/2011)   5.50%     4/1/2010     13,702     11,291        
        Real estate equity interests         4/1/2010                
                                   
                        14,729     11,291        
                                   
                        76,429     66,130     2.17 %
                                   
                                       
Transportation                                      
PODS Funding Corp.   Storage and warehousing   Senior subordinated loan ($25,125 par due 6/2015)   15.00%     12/23/2009     25,125     25,125        
        Senior subordinated loan ($7,582 par due 12/2015)   16.64% PIK     12/23/2009     6,290     7,430 (4)      
                                   
                        31,415     32,555        
                                       
United Road Towing, Inc.   Towing company   Junior secured loan ($18,840 par due 1/2014)   14.75% (Libor + 11.25% Cash, 1.00% PIK/Q)     4/1/2010     18,606     18,840 (4)(15)      
        Warrants to purchase up to 607 shares         4/1/2010         4        
                                   
                        18,606     18,844        
                                   
                        50,021     51,399     1.68 %
                                   
                                       
Computers and Electronics                                      
Network Hardware Resale, Inc.   Networking equipment resale provider   Senior subordinated loan ($12,343 par due 12/2011)   12.00% (Base Rate + 6.00%/A)     4/1/2010     12,343     12,343 (2)(15)      
        Convertible junior subordinated loan ($17,518 par due 12/2015)   9.75% PIK     4/1/2010     17,680     21,039 (4)      
                                   
                        30,023     33,382        
                                       
TZ Merger Sub, Inc.   Healthcare enterprise software developer   Senior secured loan ($4,678 par due 8/2015)   6.75% (Base Rate + 3.50%/Q)     6/15/2009     4,597     4,678 (3)      
                                   
                        34,620     38,060     1.25 %
                                   
                                       
Consumer Products—Durable                                      
Bushnell Inc.   Sports optics manufacturer   Senior subordinated loan ($41,325 par due 2/2014)   6.80% (Libor + 6.50%/Q)     4/1/2010     30,708     30,994        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Carlisle Wide Plank Floors, Inc.   Hardwood floor manufacturer   Senior secured loan ($1,545 par due 6/2011)         4/1/2010     1,449     773 (4)(14)      
        Common stock (345,056 shares)         4/1/2010                
                                   
                        1,449     773        
                                   
                        32,157     31,767     1.04 %
                                   
                                       
Chemicals, Plastics and Rubber                                      
Emerald Performance Materials, LLC   Polymers and performance materials manufacturer   Senior secured loan ($375 par due 5/2011)   8.25% (Libor + 4.25%/M)     5/22/2006     375     375 (15)      
        Senior secured loan ($5,801 par due 5/2011)   8.25% (Libor + 4.25%/M)     5/22/2006     5,801     5,801 (15)      
        Senior secured loan ($536 par due 5/2011)   8.25% (Libor + 4.25%/M)     5/22/2006     536     536 (3)(15)      
        Senior secured loan ($8,296 par due 5/2011)   8.25% (Libor + 4.25%/M)     5/22/2006     8,296     8,296 (3)(15)      
        Senior secured loan ($3,806 par due 5/2011)   10.00% (Libor + 6.00%/M)     5/22/2006     3,806     3,806 (15)      
        Senior secured loan ($1,579 par due 5/2011)   10.00% (Libor + 6.00%/M)     5/22/2006     1,579     1,579 (3)(15)      
        Senior secured loan ($3,558 par due 5/2011)   13.00% Cash, 3.00% PIK     5/22/2006     3,558     3,558 (4)      
        Senior secured loan ($5,089 par due 5/2011)   13.00% Cash, 3.00% PIK     5/22/2006     5,089     5,089 (2)(4)      
                                   
                        29,040     29,040     0.95 %
                                   
                                       
Oil and Gas                                      
Geotrace Technologies, Inc.   Reservoir processing, development   Warrants to purchase up to 43,356 shares of common stock         4/1/2010     54            
        Warrants to purchase up to 26,622 shares of common stock         4/1/2010     33            
        Warrants to purchase up to 80,063 shares of preferred stock         4/1/2010     1,738     207        
        Warrants to purchase up to 130,390 shares of preferred stock         4/1/2010     1,067     337        
                                   
                        2,892     544        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
UL Holding Co., LLC   Petroleum products   Senior secured loan ($5,000 par due 12/2012)   15.00%     8/13/2010     5,000     5,000        
        Junior secured loan ($2,108 par due 12/2012)   9.66% (Libor + 9.38%/Q)     12/21/2007     2,108     2,108        
        Junior secured loan ($839 par due 12/2012)   9.66% (Libor + 9.38%/Q)     12/21/2007     839     839 (3)      
        Junior secured loan ($2,119 par due 12/2012)   14.50%     12/21/2007     2,119     2,119        
        Junior secured loan ($844 par due 12/2012)   14.50%     12/21/2007     844     844 (3)      
        Junior secured loan ($10,809 par due 12/2012)   9.66% (Libor + 9.38%/Q)     12/21/2007     10,809     10,809 (3)      
        Junior secured loan ($2,963 par due 12/2012)   14.50%     12/21/2007     2,963     2,963 (2)      
        Junior secured loan ($988 par due 12/2012)   14.50%     12/21/2007     988     988 (3)      
        Common units (50,000 units)         4/25/2008     500     97        
        Common units (207,843 units)         4/25/2008         403        
                                   
                        26,170     26,170        
                                   
                        29,062     26,714     0.89 %
                                   
                                       
Environmental Services                                      
AWTP, LLC   Water treatment services   Junior secured loan ($4,755 par due 12/2012)         12/21/2005     4,755     1,517 (14)      
        Junior secured loan ($2,086 par due 12/2012)         12/21/2005     2,086     666 (3)(14)      
        Junior secured loan ($4,755 par due 12/2012)         12/21/2005     4,755     1,517 (14)      
        Junior secured loan ($2,086 par due 12/2012)         12/21/2005     2,086     666 (3)(14)      
                                   
                        13,682     4,366        
                                       
Mactec, Inc.   Engineering and environmental services   Class B-4 stock (16 shares)         11/3/2004                
        Class C stock (5,556 shares)         11/3/2004         162        
                                   
                            162        
                                       
Universal Environmental Services, LLC   Hydrocarbon recycling and related waste management services and products   Preferred member interest (15.00% interest)         4/1/2010                
        Preferred member interest (850,242 shares)         4/1/2010                
        Preferred member interest (7,099 shares)         4/1/2010                
        Preferred member interest (763,889 shares)         4/1/2010                
                                   
                                   
                                       
Waste Pro USA, Inc   Waste management services   Preferred Class A Common Equity (611,615 shares)         11/9/2006     12,263     16,861        
                                       
Wastequip, Inc.(6)   Waste management equipment manufacturer   Senior subordinated loan ($12,669 par due 2/2015)         2/5/2007     12,581     760 (14)      
        Common stock (13,889 shares)         2/2/2007     1,389            
                                   
                        13,970     760        
                                   
                        39,915     22,149     0.73 %
                                   
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Containers and Packaging                                      
Industrial Container Services, LLC(6)   Industrial container manufacturer, reconditioner and servicer   Senior secured loan ($1,033 par due 9/2011)   5.75% (Base Rate + 2.50%/Q)     9/30/2005     1,033     1,033        
        Senior secured loan ($20 par due 9/2011)   4.26% (Libor + 4.00%/Q)     6/21/2006     20     20 (2)      
        Senior secured loan ($101 par due 9/2011)   4.26% (Libor + 4.00%/Q)     6/21/2006     101     101 (2)      
        Senior secured loan ($308 par due 9/2011)   4.26% (Libor + 4.00%/Q)     6/21/2006     308     308 (3)      
        Senior secured loan ($1,539 par due 9/2011)   4.26% (Libor + 4.00%/Q)     6/21/2006     1,539     1,539 (3)      
        Senior secured loan ($107 par due 9/2011)   4.26% (Libor + 4.00%/Q)     6/21/2006     107     107 (2)      
        Senior secured loan ($1,642 par due 9/2011)   4.26% (Libor + 4.00%/Q)     6/21/2006     1,642     1,642 (3)      
        Senior secured loan ($27 par due 9/2011)   5.75% (Base Rate + 2.50%/Q)     6/21/2006     27     27 (2)      
        Senior secured loan ($410 par due 9/2011)   5.75% (Base Rate + 2.50%/Q)     6/21/2006     410     410 (3)      
        Common units (1,800,000 units)         9/29/2005     1,800     15,203        
                                   
                        6,987     20,390        
                                   
                        6,987     20,390     0.67 %
                                   
                                       
Health Clubs                                      
Athletic Club Holdings, Inc.   Premier health club operator   Senior secured loan ($7,250 par due 10/2013)   4.76% (Libor + 4.50%/M)     10/11/2007     7,250     6,453 (2)(13)      
        Senior secured loan ($11,500 par due 10/2013)   4.76% (Libor + 4.50%/M)     10/11/2007     11,500     10,235 (3)(13)      
                                   
                        18,750     16,688        
                                   
                        18,750     16,688     0.55 %
                                   
                                       
Printing, Publishing and Media                                      
EarthColor, Inc.(7)   Printing management services   Common stock (89,435 shares)         4/1/2010                
                                       
LVCG Holdings LLC(7)   Commercial printer   Membership interests (56.53% interest)         10/12/2007     6,600            
                                       
National Print Group, Inc.   Printing management services   Senior secured revolving loan ($1,141 par due 10/2012)   9.00% (Libor + 6.00%/Q)     3/2/2006     1,141     965 (15)      
        Senior secured revolving loan ($1,250 par due 10/2012)   9.00% (Base Rate + 5.00%/Q)     3/2/2006     1,250     1,057 (15)      
        Senior secured loan ($7,685 par due 10/2012)   14.00% (Libor + 6.00% Cash, 5.00% PIK/Q)     3/2/2006     7,359     7,091 (3)(4)(15)      
        Senior secured loan ($187 par due 10/2012)   14.00% (Base Rate + 5.00% Cash, 5.00% PIK/Q)     3/2/2006     179     173 (3)(4)(15)      
        Preferred stock (9,344 shares)         3/2/2006     2,000            
                                   
                        11,929     9,286        
                                     

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2010
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(5)(11)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
The Teaching Company, LLC and The Teaching Company Holdings, Inc.   Education publications provider   Preferred stock (29,969 shares)         9/29/2006     2,997     3,851        
        Common stock (15,393 shares)         9/29/2006     3     4        
                                   
                        3,000     3,855        
                                   
                        21,529     13,141     0.43 %
                                   
                                       
Aerospace and Defense                                      
AP Global Holdings, Inc.   Safety and security equipment manufacturer   Senior secured loan ($6,274 par due 10/2013)   4.02% (Libor + 3.75%/M)     11/18/2007     6,243     6,274 (3)      
                                       
Wyle Laboratories, Inc. and Wyle Holdings, Inc.   Provider of specialized engineering, scientific and technical services   Senior preferred stock (775 shares)   8.00%     1/17/2008     87     87        
        Common stock (1,885,195 shares)         1/17/2008     2,291     1,968        
                                   
                        2,378     2,055        
                                   
                        8,621     8,329     0.27 %
                                   
                                       
Wholesale Distribution                                      
BECO Holding Company, Inc.   Wholesale distributor of first response fire protection equipment and related parts   Common stock (25,000 shares)         7/30/2010     2,500     2,500        
                                   
                        2,500     2,500     0.08 %
                                   
                                       
Housing—Building Materials                                      
HB&G Building Products   Synthetic and wood product manufacturer   Senior subordinated loan ($8,956 par due 3/2013)         10/8/2004     8,991     179 (14)      
        Common stock (2,743 shares)         10/8/2004     753            
        Warrants to purchase up to 4,464 shares of common stock         10/8/2004     653            
                                   
                        10,397     179        
                                   
                        10,397     179     0.01 %
                                   
                      $ 4,291,955   $ 4,317,990     141.55 %
                                   

(1)
Other than our investments listed in footnote 7 below, we do not "Control" any of our portfolio companies, as defined in the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Company Act"). In general, under the Investment Company Act, we would "Control" a portfolio company if we owned more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company. All of our portfolio company investments, which as of December 31, 2010 represented 142% of the Company's net assets or 95% of the Company's total assets, are subject to legal restrictions on sales.

The investments not otherwise pledged as collateral in respect of the Debt Securitization (as defined below) or the Revolving Funding Facility (as defined below) by the respective obligors thereunder are pledged as collateral by the Company and certain of its other subsidiaries for the Revolving Credit Facility (as defined below) (except for a limited number of exceptions as provided in the credit agreement governing the Revolving Credit Facility).

(2)
These assets are owned by the Company's wholly owned subsidiary Ares Capital CP Funding LLC ("Ares Capital CP"), are pledged as collateral for the Revolving Funding Facility and, as a result, are not directly available to the creditors of the Company to satisfy any obligations of the Company other than Ares Capital CP's obligations under the Revolving Funding Facility (see Note 5 to the consolidated financial statements).

(3)
Pledged as collateral for the Debt Securitization.

(4)
Has a payment-in-kind interest feature (see Note 2 to the consolidated financial statements).

(5)
Investments without an interest rate are non-income producing.

(6)
As defined in the Investment Company Act, we are deemed to be an "Affiliated Person" of this portfolio company because we own 5% or more of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company

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Table of Contents

Company
  Purchases   Redemptions
(cost)
  Sales
(cost)
  Interest
income
  Capital
structuring
service fees
  Dividend
Income
  Other
income
  Net realized
gains (losses)
  Net unrealized
gains (losses)
 

10th Street, LLC

  $ 23,171   $   $   $ 2,465   $   $   $   $   $ (16 )

Air Medical Group

  $ 30,065   $ 11,955   $ 18,205   $ 106   $   $   $ 13   $ 14,909   $  

Apple & Eve, LLC and US Juice Partners, LLC

  $ 3,500   $ 5,022   $ 2,816   $ 3,753   $   $   $ 47   $   $ 36  

BB&T Capital Partners/Windsor Mezzanine Fund, LLC

  $ 13,943   $ 2,043   $   $   $   $   $   $   $ 3,804  

Carador PLC

  $   $   $   $   $   $ 616   $   $   $ 2,844  

Campus Management Corp. and Campus Management Acquisition Corp.

  $   $ 43,462   $   $ 4,829   $   $   $ 1   $   $ (197 )

CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings, LLC

  $   $   $   $ 297   $   $   $   $   $ 3,070  

Direct Buy Holdings, Inc. and Direct Buy Investors, LP

  $ 78,350   $ 219   $   $ 10,767   $   $   $   $ 6   $ 826  

Driven Brands, Inc.

  $ 103,157   $ 41   $ 96,643   $ 3,032   $   $   $   $ 843   $ 1,473  

DSI Renal, Inc.

  $ 1,505   $ 5,346   $ 7,991   $ 13,449   $   $   $ 57   $ 3,863   $ 24,699  

The Dwyer Group

  $ 42,100   $   $   $ 97   $ 813   $   $   $   $  

Firstlight Financial Corporation

  $   $   $   $ 545   $   $   $ 312   $   $ (1,295 )

Growing Family, Inc. and GFH Holdings, LLC

  $   $   $   $ 1,097   $   $   $   $ (7,659 ) $ 1,668  

Imperial Capital Group, LLC

  $   $   $ 151   $   $   $ 1,509   $   $   $ 464  

Industrial Container Services, LLC

  $ 1,446   $ 10,692   $   $ 391   $   $   $ 148   $   $ 7,049  

Insight Pharmaceuticals Corporation

  $ 66,790   $   $   $ 6,325   $   $   $ 375   $   $ 1,362  

Investor Group Services, LLC

  $ 100   $ 100   $   $ 203   $   $   $ 20   $   $ 64  

Multi-Ad Services, Inc.

  $ 2,666   $ 1,886   $   $ 149   $   $   $ 17   $   $ 578  

Pillar Processing LLC and PHL Holding Co.

  $   $ 4,597   $   $ 2,564   $   $   $ 36   $   $ (2,116 )

Primis Marketing Group, Inc. and Primis Holdings, LLC

  $   $   $   $   $   $   $   $   $ (409 )

Regency Healthcare Group, LLC

  $ 2,007   $   $   $   $   $   $   $   $ (335 )

Service Champ, Inc.

  $ 28,463   $ 26,585   $ 28,463   $ 969   $   $   $ 75   $   $  

Soteria Imaging Services, LLC

  $ 4,080   $   $ 142   $ 348   $   $   $   $   $ (636 )

VSS-Tranzact Holdings, LLC

  $ 204   $   $   $   $   $   $   $   $ (1,579 )

Universal Corporation

  $   $   $   $   $   $   $   $   $  

Universal Trailer Corporation

  $   $   $   $   $   $   $   $   $  

Wastequip, Inc.

  $   $   $ 449   $   $   $   $ 281   $ 3   $ (759 )
(7)
As defined in the Investment Company Act, we are deemed to be an "Affiliated Person" of this portfolio company because we own 5% or more of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). In addition, as defined in the Investment Company Act, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). Transactions during the period for the year ended December 31, 2010 in which the issuer was both an Affiliated company and a portfolio company that we Control are as follows:

Company
  Purchases   Redemptions
(cost)
  Sales
(cost)
  Interest
income
  Capital
structuring
service fees
  Dividend
Income
  Other
income
  Net realized
gains (losses)
  Net unrealized
gains (losses)
 

AGILE Fund I, LLC

  $ 264   $   $   $   $   $ 124   $   $   $ (47 )

Allied Capital REIT, Inc.

  $ 765   $ 600   $   $   $   $ 40   $   $   $ 569  

AllBridge Financial, LLC

  $ 11,370   $   $   $   $   $   $ 29   $   $ 1,717  

Avborne, Inc.

  $ 39   $   $ 39   $   $   $   $   $ 41   $  

Aviation Properties Corporation

  $   $   $   $   $   $   $   $   $  

BenefitMall Holdings, Inc.

  $ 93,837   $   $   $ 5,525   $   $   $ 375   $   $ (3,060 )

Border Foods, Inc.

  $ 68,944   $ 5,600   $   $ 3,107   $   $   $ 25   $   $ (3,601 )

Callidus Capital Corporation

  $ 20,120   $ 16,000   $ 4,120   $   $   $   $   $ 2,580   $ (2,354 )

Ciena Capital LLC

  $ 98,012   $   $   $ 429   $   $   $   $   $ (6,058 )

Citipostal, Inc.

  $ 63,961   $ 1,020   $   $ 7,308   $   $   $ 282   $   $ (504 )

Coverall North America, Inc.

  $ 40,189   $   $   $ 3,541   $   $   $ 225   $   $ (7,624 )

Crescent Hotels & Resorts, LLC and affiliates

  $ 6,653   $   $   $ 532   $   $   $   $ 216   $ (2,894 )

Direct Capital Corporation

  $ 10,109   $   $   $   $   $   $   $ (31 ) $  

EarthColor, Inc.

  $   $   $   $   $   $   $   $   $  

Financial Pacific Company

  $ 32,800   $   $ 32,899   $ 3,191   $   $   $ 500   $ 1,592   $ 1,543  

HCI Equity, LLC

  $ 808   $   $   $   $   $   $   $   $ 186  

HCP Acquisition Holdings, LLC

  $   $   $   $   $   $   $   $   $ 814  

Hot Light Brands, Inc.

  $ 6,746   $ 1,896   $   $ 2   $   $   $   $ 266   $ (246 )

Hot Stuff Foods, LLC

  $ 69,167   $ 10,230   $   $ 3,201   $   $   $ 71   $   $ 11,203  

Huddle House Inc.

  $ 19,607   $   $   $ 2,265   $   $   $ 564   $   $ (3,830 )

Industrial Air Tool, LP and affiliates

  $ 13,419   $   $   $   $   $   $ 130   $   $ 1,432  

Ivy Hill Asset Management, L.P.

  $ 71,116   $ 4,834   $   $   $   $ 7,320   $   $   $ 21,633  

Ivy Hill Middle Market Credit Fund, Ltd.

  $   $   $ 330   $ 6,859   $   $   $   $   $ 884  

Knightsbridge CLO 2007-1 Ltd.

  $ 14,852   $   $   $ 1,823   $   $   $   $   $ (307 )

Knightsbridge CLO 2008-1 Ltd.

  $ 36,996   $   $   $ 2,189   $   $   $   $   $ (3,108 )

LVCG Holdings, LLC

  $   $   $   $   $   $   $   $   $ (330 )

Making Memories Wholesale, Inc.

  $ 1,250   $ 1,007   $   $ 1,062   $   $   $ 188   $ 73   $ (3,883 )

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Table of Contents

Company
  Purchases   Redemptions
(cost)
  Sales
(cost)
  Interest
income
  Capital
structuring
service fees
  Dividend
Income
  Other
income
  Net realized
gains (losses)
  Net unrealized
gains (losses)
 

MVL Group, Inc.

  $ 60,707   $ 4,837   $   $ 6,686   $   $   $   $ 80   $ 1,086  

Penn Detroit Diesel Allison LLC

  $ 20,069   $   $   $   $   $   $ 375   $   $ 1,987  

Reflexite Corporation

  $   $   $ 8,450   $ 3,568   $   $   $ 141   $ 950   $ 5,928  

Senior Secured Loan Fund LLC*

  $ 391,571   $ 15,410   $   $ 50,013   $ 29,946   $   $ 6,096   $ 796   $ 24,235  

Stag-Parkway, Inc.

  $ 36,810   $   $   $ 2,131   $   $ 18   $ 229   $   $ 15,513  

Startec Equity, LLC

  $   $   $   $   $   $   $   $   $  

The Thymes, LLC

  $   $   $   $ 421   $   $ 401   $   $   $ 797  

*
Together with GE Global Sponsor Finance LLC and General Electric Capital Corporation (together, "GE"), we co-invest through the Senior Secured Loan Fund LLC d/b/a the "Senior Secured Loan Program" (the "SSLP"). The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by GE and the Company; therefore, although the Company owns more than 25% of the voting securities of the SSLP, the Company does not believe that it has control over the SSLP (for purposes of the Investment Company Act or otherwise).
(8)
Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(9)
Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(10)
Public company with outstanding equity with a market value in excess of $250 million and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(11)
Variable rate loans to our portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower's option, which reset annually (A), semi-annually (S), quarterly (Q), bi-monthly (B), monthly (M) or daily (D). For each such loan, we have provided the interest rate in effect on the date presented.

(12)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 5.00% on $40 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(13)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 2.50% on $25 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(14)
Loan was on non-accrual status as of December 31, 2010.

(15)
Loan includes interest rate floor feature.

(16)
In addition to the interest earned based on the stated contractual interest rate of this security, the certificates entitle us to receive a portion of the excess cash flow from the SSLP's loan portfolio, which may result in a return to the Company greater than the contractual stated interest rate.

   

See accompanying notes to consolidated financial statements.

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(in thousands, except per share data)

 
   
   
   
   
  Accumulated Net
Realized Loss
on Investments,
Foreign Currency
Transactions,
Extinguishment of
Debt and Other Assets
  Net Unrealized
Gain (Loss)
on Investments
and Foreign
Currency
Transactions
   
 
 
   
   
   
  Accumulated
(Overdistributed)
Undistributed
Net Investment
Income
   
 
 
  Common Stock    
   
 
 
  Capital in
Excess of
Par Value
  Total
Stockholders'
Equity
 
 
  Shares   Amount  

Balance at December 31, 2008

    97,153   $ 97   $ 1,395,958   $ (7,637 ) $ (124 ) $ (293,415 ) $ 1,094,879  

Issuance of common stock from August add-on offering (net of offering and underwriting costs)

    12,440     13     109,073                 109,086  

Shares issued in connection with dividend reinvestment plan

    352         4,025                 4,025  

Net increase in stockholders' equity resulting from operations

                133,406     (19,420 )   88,707     202,693  

Dividend declared ($1.47 per share)

                (128,210 )   (24,585 )       (152,795 )

Tax reclassification of stockholders' equity in accordance with generally accepted accounting principles

            (18,598 )   5,584     13,014          
                               

Balance at December 31, 2009

    109,945   $ 110   $ 1,490,458   $ 3,143   $ (31,115 ) $ (204,708 ) $ 1,257,888  
                               

Issuance of common stock in add-on offerings (net of offering and underwriting costs)

    34,458     34     457,815                 457,849  

Shares issued in connection with dividend reinvestment plan

    1,523     2     22,529                 22,531  

Issuance of common stock in the acquisition of Allied Capital Corporation

    58,493     58     872,669                 872,727  

Gain on the acquisition of Allied Capital Corporation

                    195,876         195,876  

Net increase in stockholders' equity resulting from operations (excluding gain on the acquisition of Allied Capital Corporation)

                215,816     49,399     230,743     495,958  

Dividend declared ($1.40 per share)

                (252,296 )           (252,296 )

Tax reclassification of stockholders' equity in accordance with generally accepted accounting principles

            361,855     22,001     (383,856 )        
                               

Balance at December 31, 2010

    204,419   $ 204   $ 3,205,326   $ (11,336 ) $ (169,696 ) $ 26,035   $ 3,050,533  
                               

Issuance of common stock in add-on offerings (net of offering and underwriting costs)

                             

Shares issued in connection with dividend reinvestment plan

    711     1     11,552                 11,553  

Issuance of the Convertible Notes (See Note 5)

            54,716                 54,716  

Net increase in stockholders' equity resulting from operations

                282,403     77,242     (40,192 )   319,453  

Dividend declared ($1.41 per share)

                (288,990 )           (288,990 )

Tax reclassification of stockholders' equity in accordance with generally accepted accounting principles

            118,760     7,474     (126,234 )        
                               

Balance at December 31, 2011

    205,130   $ 205   $ 3,390,354   $ (10,449 ) $ (218,688 ) $ (14,157 ) $ 3.147,265  
                               

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

 
  For the Years Ended December 31,  
 
  2011   2010   2009  

OPERATING ACTIVITIES:

                   

Net increase in stockholders' equity resulting from operations

  $ 319,453   $ 691,834   $ 202,693  

Adjustments to reconcile net increase in stockholders' equity resulting from operations:

                   

Gain on the acquisition of Allied Capital Corporation

        (195,876 )    

Realized loss (gain) from extinguishment of debt

    19,318     1,961     (26,543 )

Realized gain on sale of intangible asset

        (5,882 )    

Net realized (gains) losses from investment and foreign currency transactions

    (96,560 )   (45,478 )   45,963  

Net unrealized (gains) losses from investment and foreign currency transactions

    40,192     (230,743 )   (88,707 )

Net accretion of discount on securities

    (15,894 )   (12,594 )   (2,554 )

Increase in accrued payment-in-kind interest and dividends

    (28,043 )   (45,002 )   (40,761 )

Collections of payment-in-kind interest and dividends

    55,814     32,668     6,371  

Amortization of debt issuance costs

    13,145     8,824     4,198  

Accretion of discount on the Allied Unsecured Notes

    2,624     8,201      

Accretion of discount on Convertible Notes

    8,433          

Depreciation

    876     923     672  

Proceeds from sales and repayments of investments

    2,516,090     1,562,356     455,437  

Purchases of investments

    (3,263,626 )   (1,559,819 )   (575,046 )

Acquisition of Allied Capital Corporation, net of cash acquired

        (774,190 )    

Changes in operating assets and liabilities:

                   

Interest receivable

    (28,557 )   (4,076 )   (8,165 )

Other assets

    2,440     12,547     (709 )

Management and incentive fees payable

    40,099     (14,098 )   33,506  

Accounts payable and accrued expenses

    12,662     (93,484 )   7,126  

Interest and facility fees payable

    4,620     5,437     (1,224 )
               

Net cash provided by (used in) operating activities

    (396,914 )   (656,491 )   12,257  
               

FINANCING ACTIVITIES:

                   

Net proceeds from issuance of common stock

        1,330,577     109,086  

Borrowings on debt

    2,458,067     1,737,264     477,403  

Repayments and repurchases of debt

    (1,738,632 )   (2,154,884 )   (392,136 )

Debt issuance costs

    (25,341 )   (25,176 )   (7,192 )

Dividends paid in cash

    (277,150 )   (229,765 )   (189,574 )
               

Net cash provided by (used in) financing activities

    416,944     658,016     (2,413 )
               

CHANGE IN CASH AND CASH EQUIVALENTS

    20,030     1,525     9,844  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

    100,752     99,227     89,383  
               

CASH AND CASH EQUIVALENTS, END OF PERIOD

  $ 120,782   $ 100,752   $ 99,227  
               

Supplemental Information:

                   

Interest paid during the period

  $ 87,421   $ 53,117   $ 19,963  

Taxes paid during the period

  $ 9,112   $ 1,323   $ 818  

Dividends declared during the period

  $ 288,852   $ 252,296   $ 152,795  

   

See accompanying notes to consolidated financial statements.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2011
(in thousands, except per share data, percentages and as otherwise indicated;
for example, with the words "million," "billion" or otherwise)

1.     ORGANIZATION

        Ares Capital Corporation (the "Company" or "ARCC" or "we") is a specialty finance company that is a closed-end, non-diversified management investment company incorporated in Maryland. We have elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Company Act"). We were incorporated on April 16, 2004 and were initially funded on June 23, 2004. On October 8, 2004, we completed our initial public offering. On the same date, we commenced substantial investment operations.

        On April 1, 2010, we consummated our acquisition of Allied Capital Corporation ("Allied Capital"), in an all stock merger where each existing share of common stock of Allied Capital was exchanged for 0.325 shares of our common stock (the "Allied Acquisition"). The Allied Acquisition was valued at approximately $908 million as of April 1, 2010. In connection therewith, we issued approximately 58.5 million shares of our common stock to Allied Capital's then-existing stockholders, thereby resulting in our then-existing stockholders owning approximately 69% of the combined company and then-existing Allied Capital stockholders owning approximately 31% of the combined company (see Note 17).

        The Company has elected to be treated as a regulated investment company, or a "RIC", under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and operates in a manner so as to qualify for the tax treatment applicable to RICs. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component. To a lesser extent, we also make equity investments. Also, as a result of the Allied Acquisition, Allied Capital's equity investments, including equity investments larger than those we have historically made and controlled portfolio company equity investments, became part of our portfolio.

        We are externally managed by Ares Capital Management LLC ("Ares Capital Management" or our "investment adviser"), a wholly owned subsidiary of Ares Management LLC ("Ares Management"), a global alternative asset manager and a Securities and Exchange Commission ("SEC") registered investment adviser. Ares Operations LLC ("Ares Operations" or our "administrator"), a wholly owned subsidiary of Ares Management, provides the administrative services necessary for us to operate.

2.     SIGNIFICANT ACCOUNTING POLICIES

        The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with GAAP, and include the accounts of the Company and its wholly owned subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition as of and for the periods presented. All significant intercompany balances and transactions have been eliminated.

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        Cash and cash equivalents include funds from time to time deposited with financial institutions and short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value.

        The Company places its cash and cash equivalents with financial institutions and, at times, cash held in money market accounts may exceed the Federal Deposit Insurance Corporation insured limit.

        Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized.

        Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, we look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available (i.e., substantially all of our investments) are valued at fair value as determined in good faith by our board of directors, based on, among other things, the input of our investment adviser, audit committee and independent third-party valuation firms that have been engaged at the direction of our board of directors to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing 12 month period and under a valuation policy and a consistently applied valuation process. The valuation process is conducted at the end of each fiscal quarter, and a minimum of 50% of our portfolio at fair value is subject to review by an independent valuation firm each quarter. In addition, our independent accountants review our valuation process as part of their overall integrated audit.

        As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (an estimate of the total fair value of the portfolio company's debt and equity), the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company's securities to any similar publicly traded securities, changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate our valuation.

        Because there is not a readily available market value for most of the investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our board of directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded

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securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

        In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the gains or losses reflected in the valuations currently assigned.

        Our board of directors undertakes a multi-step valuation process each quarter, as described below:

        Effective January 1, 2008, the Company adopted Accounting Standards Codification ("ASC") 820-10 (previously Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements), which expands the application of fair value accounting for investments (see Note 8). Investments acquired as part of the Allied Acquisition were accounted for in accordance with ASC 805-10 (previously SFAS No. 141(R), Business Combinations), which requires that all assets be recorded at fair value. As a result, the initial amortized cost basis and fair value for the acquired investments were the same at April 1, 2010 (see Note 17).

        Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.

        Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current. The Company may make exceptions to this if the loan has sufficient collateral value and is in the process of collection.

        Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

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        The Company has loans in its portfolio that contain payment-in-kind ("PIK") provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and recorded as interest income. To maintain the Company's status as a RIC, this non-cash source of income must be paid out to stockholders in the form of dividends, even though the Company has not yet collected the cash.

        The Company's investment adviser seeks to provide assistance to our portfolio companies in connection with the Company's investments and in return the Company may receive fees for capital structuring services. These fees are generally only available to the Company as a result of the Company's underlying investments, are normally paid at the closing of the investments, are generally non-recurring and are recognized as revenue when earned upon closing of the investment. The services that the Company's investment adviser provides vary by investment, but generally include reviewing existing credit facilities, arranging bank financing, arranging equity financing, structuring financing from multiple lenders, structuring financing from multiple equity investors, restructuring existing loans, raising equity and debt capital, and providing general financial advice, which concludes upon closing of the investment. Any services of the above nature subsequent to the closing would generally generate a separate fee payable to the Company. In certain instances where the Company is invited to participate as a co-lender in a transaction and does not provide significant services in connection with the investment, a portion of loan fees paid to the Company in such situations will be deferred and amortized over the estimated life of the loan. The Company's investment adviser may also take a seat on the board of directors of a portfolio company, or observe the meetings of the board of directors without taking a formal seat.

        Other income includes fees for asset management, management and consulting services, loan guarantees, commitments, amendments and other services rendered by the Company to portfolio companies. Such fees are recognized as income when earned or the services are rendered.

        The Company's books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

        Results of operations based on changes in foreign exchange rates are separately disclosed in the statement of operations. Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuation and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

        The Company does not utilize hedge accounting and marks its derivatives to market through unrealized gains (losses) in the accompanying statement of operations.

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        The Company's offering costs, excluding underwriters' fees, are charged against the proceeds from equity offerings when received.

        Debt issuance costs are amortized over the life of the related debt instrument using the straight line method, which closely approximates the effective yield method.

        The Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Company must, among other things, timely distribute to its stockholders at least 90% of its investment company taxable income, as defined by the Code, for each year. The Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes.

        Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions from such income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as such taxable income is earned.

        Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by our board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are generally distributed at least annually, although we may decide to retain such capital gains for investment.

        We have adopted a dividend reinvestment plan that provides for reinvestment of any distributions we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not "opted out" of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividend. While we generally use newly issued shares to implement the dividend reinvestment plan (especially if our shares are trading at a premium to net asset value), we may purchase shares in the open market in connection with our obligations under the dividend reinvestment plan. In particular, if our shares are trading at a significant enough discount to net asset value and we are otherwise permitted under applicable law to purchase such shares, we intend to purchase shares in the open market in connection with our obligations under our dividend reinvestment plan.

        The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of actual and contingent assets and liabilities at the date of the financial statements and the reported amounts of income or loss and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation of investments.

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        In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs ("ASU 2011-04"). ASU 2011-04 was issued concurrently with International Financial Reporting Standards No.13 ("IFRS 13"), Fair Value Measurements, to provide largely identical guidance about fair value measurement and disclosure requirements as is currently required under ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). The new standards do not extend the use of fair value but, rather, provide guidance about how fair value should be applied where it already is required or permitted under IFRS or GAAP. For GAAP, most of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. ASU 2011-04 eliminates the concepts of in-use and in-exchange when measuring fair value of all financial instruments. For Level 3 fair value measurements, the ASU requires that our disclosure include quantitative information about significant unobservable inputs, a qualitative discussion about the sensitivity of the fair value measurement to changes in the unobservable inputs and the interrelationship between inputs, and a description of our valuation process. Public companies are required to apply ASU 2011-04 prospectively for interim and annual periods beginning after December 15, 2011. The Company is currently evaluating the impact of the adoption of ASU 2011-04 on its financial statements and disclosures.

3.     AGREEMENTS

        The Company is party to an investment advisory and management agreement (the "investment advisory and management agreement") with Ares Capital Management. Subject to the overall supervision of our board of directors, Ares Capital Management provides investment advisory and management services to the Company. For providing these services, Ares Capital Management receives a fee from us consisting of two components—a base management fee and an incentive fee.

        The base management fee is calculated at an annual rate of 1.5% based on the average value of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears.

        The incentive fee has two parts. The first part is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the quarter. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the administration agreement, and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities, accrued income that we have not yet received in cash. Our investment adviser is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued interest that we never actually receive.

        Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses, unrealized capital appreciation, unrealized capital depreciation or income tax expense related to realized gains. Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a quarter where we incur a loss. For example, if we receive pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, we will pay the applicable

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incentive fee even if we have incurred a loss in that quarter due to realized and/or unrealized capital losses.

        Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed "hurdle rate" of 1.75% per quarter. If market credit spreads rise, we may be able to invest our funds in debt instruments that provide for a higher return, which may increase our pre-incentive fee net investment income and make it easier for our investment adviser to surpass the fixed hurdle rate and receive an incentive fee based on such net investment income. To the extent we have retained pre-incentive fee net investment income that has been used to calculate this part of the incentive fee, it is also included in the amount of our total assets (other than cash and cash equivalents but including assets purchased with borrowed funds) used to calculate the 1.5% base management fee.

        We pay our investment adviser an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

        These calculations are adjusted for any share issuances or repurchases during the quarter.

        The second part of the incentive fee (the "Capital Gains Fee"), is determined and payable in arrears as of the end of each calendar year (or, upon termination of the investment advisory and management agreement, as of the termination date) and is calculated at the end of each applicable year by subtracting (a) the sum of our cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (b) our cumulative aggregate realized capital gains, in each case calculated from October 8, 2004. Realized capital gains and losses include gains and losses on investments and foreign currencies, as well as gains and losses on extinguishment of debt and other assets. If such amount is positive at the end of such year, then the Capital Gains Fee for such year is equal to 20% of such amount, less the aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then there is no Capital Gains Fee for such year.

        The cumulative aggregate realized capital gains are calculated as the sum of the differences, if positive, between (a) the net sales price of each investment in our portfolio when sold and (b) the accreted or amortized cost basis of such investment.

        The cumulative aggregate realized capital losses are calculated as the sum of the amounts by which (a) the net sales price of each investment in our portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.

        The aggregate unrealized capital depreciation is calculated as the sum of the differences, if negative, between (a) the valuation of each investment in our portfolio as of the applicable Capital Gains Fee calculation date and (b) the accreted or amortized cost basis of such investment.

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        Notwithstanding the foregoing, as a result of an amendment to the capital gains portion of the incentive fee under the investment advisory and management agreement (the "Capital Gains Amendment") that was adopted on June 6, 2011, if we are required by GAAP to record an investment at its fair value as of the time of acquisition instead of at the actual amount paid for such investment by us (including, for example, as a result of the application of the acquisition method of accounting), then solely for the purposes of calculating the Capital Gains Fee, the "accreted or amortized cost basis" of an investment shall be an amount (the "Contractual Cost Basis") equal to (1) (x) the actual amount paid by the Company for such investment plus (y) any amounts recorded in the Company's financial statements as required by GAAP that are attributable to the accretion of such investment plus (z) any other adjustments made to the cost basis included in the Company's financial statements, including payment-in-kind interest or additional amounts funded (net of repayments) minus (2) any amounts recorded in the Company's financial statements as required by GAAP that are attributable to the amortization of such investment, whether such calculated Contractual Cost Basis is higher or lower than the fair value of such investment (as determined in accordance with GAAP) at the time of acquisition.

        We defer cash payment of any incentive fee otherwise earned by our investment adviser if during the most recent four full calendar quarter period ending on or prior to the date such payment is to be made the sum of (a) the aggregate distributions to our stockholders and (b) the change in net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) is less than 7.0% of our net assets (defined as total assets less indebtedness) at the beginning of such period. Any deferred incentive fees are carried over for payment in subsequent calculation periods to the extent such payment is payable under the investment advisory and management agreement.

        The Capital Gains Fee due to our investment adviser as calculated under the investment advisory and management agreement (as described above) for the year ended December 31, 2011 was $0. However, in accordance with GAAP, for the year ended December 31, 2011, the Company recorded a capital gains incentive fee of $33,348, including $26,012 recognized in the second quarter of 2011 as a result of the application of the Capital Gains Amendment described above with respect to the assets purchased in the Allied Acquisition, bringing the total GAAP accrual related to the capital gains incentive fee to $48,957 as of December 31, 2011. GAAP requires that the capital gains incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the investment advisory and management agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the Capital Gains Fee plus the aggregate cumulative unrealized capital appreciation. If such amount is positive at the end of a period, then GAAP requires us to record a capital gains incentive fee equal to 20% of such cumulative amount, less the aggregate amount of actual Capital Gains Fees paid or capital gains incentive fees accrued under GAAP in all prior periods. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reversal of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future. Also for the year ended December 31, 2010, in accordance with GAAP, the Company recorded a capital gains incentive fee of $15,609. There was no similar GAAP expense for the year ended December 31, 2009.

        For the year ended December 31, 2011, base management fees were $71,603, incentive management fees related to pre-incentive fee net investment income were $79,029 and incentive management fees related to capital gains were $33,348. As of December 31, 2011, $92,496 was included in "management and incentive fees payable" in the accompanying consolidated balance sheet, of which

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$43,539 is currently payable to the Company's investment adviser under the investment advisory and management agreement.

        For the year ended December 31, 2010, base management fees were $51,998, incentive management fees related to pre-incentive fee net investment income were $61,286 and incentive management fees related to capital gains were $15,609.

        For the year ended December 31, 2009, base management fees were $30,409, incentive management fees related to pre-incentive fee net investment income were $33,332 and there were no incentive management fees related to capital gains.

        We are party to a separate administration agreement, referred to herein as the "administration agreement", with our administrator, Ares Operations. Pursuant to the administration agreement, Ares Operations furnishes us with office equipment and clerical, bookkeeping and record keeping services at our office facilities. Under the administration agreement, Ares Operations also performs, or oversees the performance of, our required administrative services, which include, among other things, providing assistance in accounting, legal, compliance, operations, technology, and investor relations, being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, Ares Operations assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under our administration agreement are equal to an amount based upon our allocable portion of Ares Operations' overhead and other expenses (including travel expenses) incurred by Ares Operations in performing its obligations under the administration agreement, including our allocable portion of the compensation of certain of our officers (including our chief compliance officer, chief financial officer, general counsel, treasurer and assistant treasurer) and their respective staffs. The administration agreement may be terminated by either party without penalty upon 60 days' written notice to the other party.

        For the years ended December 31, 2011, 2010 and 2009, we incurred $9,317, $8,721 and $4,009, respectively, in administrative fees. As of December 31, 2011, $2,416 was unpaid and included in "accounts payable and accrued expenses" in the accompanying consolidated balance sheet.

4.     INVESTMENTS

        As of December 31, 2011 and 2010, investments consisted of the following:

 
  As of December 31,  
 
  2011   2010  
 
  Amortized Cost(1)   Fair Value   Amortized Cost(1)   Fair Value  

Senior term debt

  $ 2,691,018   $ 2,671,114   $ 1,722,130   $ 1,695,532  

Subordinated Certificates of the SSLP(2)

    1,034,254     1,059,178     537,439     561,674  

Senior subordinated debt

    592,618     515,014     1,055,440     1,014,514  

Collateralized loan obligations

    55,515     54,000     219,324     261,156  

Preferred equity securities

    251,192     251,064     137,424     143,546  

Other equity securities

    463,861     527,002     579,177     607,656  

Commercial real estate

    20,205     17,134     41,021     33,912  
                   

Total

  $ 5,108,663   $ 5,094,506   $ 4,291,955   $ 4,317,990  
                   

(1)
The amortized cost represents the original cost adjusted for the accretion of discounts and amortization of premiums on debt investments using the effective interest method.

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(2)
The proceeds from these certificates were applied to co-investments with GE Global Sponsor Finance LLC and General Electric Capital Corporation to fund first lien senior secured loans to 32 and 20 different borrowers as of December 31, 2011 and December 31, 2010, respectively.

        The industrial and geographic compositions of our portfolio at fair value at December 31, 2011 and December 31, 2010 were as follows:

 
  As of December 31,  
 
  2011   2010  

Industry

             

Investment Funds and Vehicles(1)

    23.6 %   21.4 %

Healthcare Services

    13.4     17.6  

Education

    11.2     5.2  

Restaurant and Food Services

    6.8     7.8  

Business Services

    6.6     9.3  

Financial Services

    6.4     8.0  

Consumer Products

    5.4     6.2  

Containers and Packaging

    4.5     0.5  

Aerospace and Defense

    3.6     0.2  

Manufacturing

    2.8     3.2  

Other Services

    2.5     2.1  

Telecommunications

    2.0     2.6  

Grocery

    1.9     0.0  

Retail

    1.8     5.5  

Energy

    1.3     0.0  

Other

    6.2     10.4  
           

Total

    100.0 %   100.0 %
           

(1)
Includes our investment in the SSLP (as defined below), which had issued loans to 32 and 20 different issuers as of December 31, 2011 and 2010, respectively. The portfolio companies in the SSLP are in industries similar to the companies in our portfolio.

 
  As of December 31,  
 
  2011   2010  

Geographic Region

             

West

    48.4 %   34.5 %

Southeast

    21.2     16.5  

Midwest

    14.5     20.2  

Mid-Atlantic

    12.8     24.4  

Northeast

    1.7     1.4  

International

    1.4     3.0  
           

Total

    100.0 %   100.0 %
           

        As of December 31, 2011, 3.3% of total investments at amortized cost (or 0.9% of total investments at fair value), were on non-accrual status, including 1.8% of total investments at amortized cost (or 0.6% of total investments at fair value) of investments acquired as part of the Allied Acquisition. As of December 31, 2010, 3.8% of total investments at amortized cost (or 1.3% of total investments at fair value), were on non-accrual status, including 1.5% of total investments at amortized cost (or 1.0% of total investments at fair value) of investments acquired as part of the Allied Acquisition.

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        In October 2009, the Company completed its acquisition from Allied Capital of subordinated certificates (the "SSLP Certificates") issued by the Senior Secured Loan Fund LLC, which operates using the name "Senior Secured Loan Program" (the "SSLP"), an unconsolidated vehicle. The SSLP was formed in December 2007 to co-invest in "stretch senior" and "unitranche" loans (loans that combine both senior and subordinated debt, generally in a first lien position) of middle-market companies with GE Global Sponsor Finance LLC and General Electric Capital Corporation (together, "GE"). The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by both the Company and an affiliate of GE.

        As of December 31, 2011 and December 31, 2010, the SSLP had available capital of approximately $7.7 billion and $5.1 billion, respectively, approximately $5.0 billion and $2.5 billion in aggregate principal amount of which was funded at December 31, 2011 and 2010, respectively. At December 31, 2011, the Company had agreed to make available to the SSLP $1,487,500, of which $442,523 was unfunded. At December 31, 2010, the Company had agreed to make available to the SSLP $958,794, of which $410,633 was unfunded. It is within the Company's discretion to make these additional amounts available to the SSLP.

        As of December 31, 2011 and December 31, 2010, the SSLP had total assets of $5.0 billion and $2.6 billion, respectively. GE's investment in the SSLP consisted of senior notes of $3.8 billion and $1.9 billion and subordinated certificates of $149 million and $78 million at December 31, 2011 and 2010, respectively. The subordinated certificates are junior to the senior notes invested by GE and the Company owned 87.5% and 88.6% of the outstanding subordinated certificates as of December 31, 2011 and 2010, respectively. The SSLP's portfolio consisted of senior and unitranche loans to 32 and 20 different issuers as of December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the portfolio was comprised of all first lien senior secured loans to U.S. middle-market companies and none of these loans were on non-accrual status. At December 31, 2011 and 2010, the largest loan to a single issuer in the SSLP's portfolio in aggregate principal amount was $300.0 million and $270.0 million, respectively, and loans to the top five issuers totaled $1.4 billion and $1.1 billion, respectively. The portfolio companies in the SSLP are in industries similar to the companies in Ares Capital's portfolio.

        The amortized cost and fair value of the SSLP Certificates held by the Company was $1,034,254 and $1,059,178, respectively, at December 31, 2011, and $537,439 and $561,674, respectively, at December 31, 2010. The SSLP Certificates pay a weighted average coupon of approximately LIBOR plus 8.0% and also entitle the Company to receive a portion of the excess cash flow from the loan portfolio, which may result in a return greater than the contractual coupon. The Company's yield on its investment in the SSLP at fair value was 15.7% and 15.8% at December 31, 2011 and 2010, respectively. For the years ended December 31, 2011 and December 31, 2010, the Company earned interest income of $118,420 and $50,013, respectively, in respect of its SSLP investment. The Company is also entitled to certain other sourcing and management fees in connection with the SSLP.

5.     BORROWINGS

        In accordance with the Investment Company Act, with certain limited exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of December 31, 2011 our asset coverage for borrowed amounts was 252%.

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        The Company's outstanding debt as of December 31, 2011 and 2010 was as follows:

 
  As of December 31,  
 
  2011   2010  
(in millions)
  Total
Aggregate
Principal
Amount
Available/
Outstanding(1)
  Principal
Amount
  Carrying
Value
  Total
Aggregate
Principal
Amount
Available/
Outstanding(1)
  Principal
Amount
  Carrying
Value
 

Revolving Funding Facility

  $ 500,000   $ 463,000   $ 463,000   $ 400,000   $ 242,050   $ 242,050  

Revolving Credit Facility

    810,000 (2)   395,000     395,000     810,000 (2)   146,000     146,000  

Debt Securitization

    77,531     77,531     77,531     183,190     155,297     155,297  

2011 Notes

                300,584     300,584     296,258 (3)

2012 Notes

                161,210     161,210     158,108 (3)

February 2016 Convertible Notes

    575,000     575,000     541,152 (4)            

June 2016 Convertible
Notes

    230,000     230,000     215,931 (4)            

2040 Notes

    200,000     200,000     200,000     200,000     200,000     200,000  

2047 Notes

    230,000     230,000     180,988 (3)   230,000     230,000     180,796 (3)
                           

Total

  $ 2,622,531   $ 2,170,531   $ 2,073,602   $ 2,284,984   $ 1,435,141   $ 1,378,509  
                           

(1)
Subject to borrowing base and leverage restrictions. Represents the total aggregate amount available or outstanding, as applicable, under such instrument.

(2)
Includes an "accordion" feature that allows us, under certain circumstances, to increase the size of the facility to a maximum of $1,050,000.

(3)
Represents the aggregate principal amount outstanding of the applicable series of notes less the unaccreted discount initially recorded as a part of the Allied Acquisition. The total unaccreted discount on the Allied Unsecured Notes was $49,012 and $56,633 at December 31, 2011 and December 31, 2010, respectively.

(4)
Represents the aggregate principal amount outstanding of the Convertible Notes (as defined below) less the unaccreted discount initially recorded upon issuance of the Convertible Notes. The total unaccreted discount for the February 2016 Convertible Notes and the June 2016 Convertible Notes was $33,848 and $14,069, respectively, at December 31, 2011.

        The weighted average stated interest rate and weighted average maturity, both on aggregate principal amount, of all our principal debt outstanding as of December 31, 2011 were 4.8% and 9.3 years, respectively, and as of December 31, 2010 were 5.2% and 11.8 years, respectively.

        In October 2004, we formed Ares Capital CP Funding LLC ("Ares Capital CP"), a wholly owned subsidiary of the Company, through which we established a revolving facility (as amended, the "Revolving Funding Facility") that, as amended at such time, allowed Ares Capital CP to issue up to $350,000 of variable funding certificates ("VFC"). On May 7, 2009, the Company and Ares Capital CP entered into an amendment that, among other things, converted the Revolving Funding Facility from a revolving facility to an amortizing facility, extended the maturity from July 21, 2009 to May 7, 2012, reduced the availability from $350,000 to $225,000 (with a reduction in the outstanding balance required by each of December 31, 2010 and December 31, 2011) and decreased the advance rates applicable to certain types of eligible loans. In addition, the interest rate charged on the Revolving Funding Facility was increased from the commercial paper rate plus 2.50% to the commercial paper, Eurodollar or adjusted Eurodollar rate, as applicable, plus 3.50% and the commitment fee requirement was removed.

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        On July 21, 2009, the Company and Ares Capital CP entered into an agreement to establish an additional revolving facility (the "Revolving Funding II Facility") for an aggregate principal amount not exceeding $200,000 at any one time outstanding. The Revolving Funding II Facility was scheduled to expire on July 21, 2012.

        On January 22, 2010, the Company and Ares Capital CP combined the Revolving Funding II Facility into the Revolving Funding Facility, creating a single $400,000 revolving securitized facility. In connection with the combination, we terminated the Revolving Funding II Facility and entered into an Amended and Restated Purchase and Sale Agreement with Ares Capital CP Funding Holdings LLC, our wholly owned subsidiary ("CP Holdings"), pursuant to which we may sell to CP Holdings certain loans that we have originated or acquired from time to time, which CP Holdings will subsequently sell to Ares Capital CP, which is a wholly owned subsidiary of CP Holdings. The Revolving Funding Facility is secured by all of the assets held by, and the membership interest in, Ares Capital CP. The January 22, 2010 amendment to the Revolving Funding Facility, among other things, extended the maturity date of the facility to January 22, 2013. On January 18, 2011, we and Ares Capital CP amended the Revolving Funding Facility to, among other things, provide for a three year reinvestment period until January 18, 2014 (with two one-year extension options, subject to our and our lenders' consent, see Note 19 for subsequent events relating to the Revolving Funding Facility) and extend the stated maturity date to January 18, 2016 (with two one-year extension options, subject to our and our lenders' consent, see Note 19 for subsequent events relating to the Revolving Funding Facility). On October 13, 2011, the Revolving Funding Facility was amended to increase the facility size to $500,000.

        As part of the Revolving Funding Facility, we and Ares Capital CP are subject to limitations as to how borrowed funds may be used including restrictions on geographic concentrations, sector concentrations, loan size, payment frequency and status, average life, collateral interests and investment ratings as well as regulatory restrictions on leverage which may affect the amount of VFC that we may issue from time to time. There are also certain requirements relating to portfolio performance, including required minimum portfolio yield and limitations on delinquencies and charge offs, violation of which could result in the early amortization of the Revolving Funding Facility and limit further advances under the Revolving Funding Facility and in some cases could be an event of default. The Revolving Funding Facility is also subject to a borrowing base that applies different advance rates to assets held by Ares Capital CP. Such limitations, requirements, and associated defined terms are as provided for in the documents governing the Revolving Funding Facility. As of December 31, 2011, the Company and Ares Capital CP were in material compliance with the terms of the Revolving Funding Facility.

        As of December 31, 2011 and 2010, there was $463,000 and $242,050 outstanding under the Revolving Funding Facility, respectively.

        Prior to the January 22, 2010 amendment, the interest rate charged on the Revolving Funding Facility was based on the commercial paper rate plus 3.50%. After January 22, 2010, subject to certain exceptions, the interest rate charged on the Revolving Funding Facility is based on LIBOR plus an applicable spread of between 2.25% and 3.75% or on a "base rate" (which is the higher of a prime rate, or the federal funds rate plus 0.50%) plus an applicable spread of between 1.25% to 2.75%, in each case, based on a pricing grid depending upon our credit rating (see Note 19 for subsequent events relating to the Revolving Funding Facility). As of December 31, 2011 and for the period from January 22, 2010 through December 31, 2011, the effective LIBOR spread under the Revolving Funding Facility was 2.75%. As of December 31, 2011 and December 31, 2010, the rate in effect was one month LIBOR, which was 0.30% and 0.26%, respectively.

        We are also required to pay a commitment fee of between 0.50% and 2.00% depending on the usage level on any unused portion of the Revolving Funding Facility. Prior to May 7, 2009, we were required to pay a commitment fee for any unused portion of the Revolving Funding Facility equal to

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0.50% per annum for any unused portion of the Revolving Funding Facility. Prior to January 22, 2010, we were also required to pay a commitment fee on any unused portion of the Revolving Funding II Facility of between 0.50% and 2.00% depending on the usage level.

        The components of interest and credit facility fees expense, cash paid for interest expense, average interest rates (i.e., rate in effect plus the spread) and average outstanding balances for the Revolving Funding Facility were as follows:

 
  For the Year Ended December 31,  
 
  2011   2010   2009  

Stated interest expense

  $ 7,380   $ 7,458   $ 6,751  

Facility fees(1)

    2,226     1,453     899  

Amortization of debt issuance costs

    2,225     1,787     2,716  
               

Total interest and credit facility fees expense

  $ 11,831   $ 10,698   $ 10,366  
               

Cash paid for interest expense

  $ 6,281   $ 7,224   $ 6,501  

Average stated interest rate

    3.0 %   3.0 %   3.8 %

Average outstanding balance

  $ 243,639   $ 247,490   $ 179,443  

(1)
Includes facility fees incurred related to the Revolving Funding II Facility.

        In December 2005, we entered into a senior secured revolving credit facility (as amended and restated, the "Revolving Credit Facility"), under which, as amended, the lenders agreed to extend credit to the Company. On January 22, 2010, we entered into an agreement to amend and restate the Revolving Credit Facility. The amendment and restatement of the Revolving Credit Facility, among other things, increased the size of the facility from $525,000 to $690,000 (comprised of $615,000 in commitments on a stand-alone basis and an additional $75,000 in commitments contingent upon the closing of the Allied Acquisition), extended the maturity date from December 28, 2010 to January 22, 2013 and modified pricing. The Revolving Credit Facility also includes an "accordion" feature that allows, under certain circumstances, for an increase in the size of the facility to a maximum of $1,050,000. During the year ended December 31, 2010, we exercised this "accordion" feature and increased the size of the facility by $120,000 to bring the total facility size to $810,000. The Revolving Credit Facility generally requires payments of interest at the end of each LIBOR interest period, but no less frequently than quarterly, on LIBOR-based loans, and monthly payments of interest on other loans. All principal is due upon maturity.

        Under the Revolving Credit Facility, we are required to comply with various covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including, without limitation, covenants related to: (a) limitations on the incurrence of additional indebtedness and liens, (b) limitations on certain investments, (c) limitations on certain restricted payments, (d) maintaining a certain minimum stockholders' equity, (e) maintaining a ratio of total assets (less total liabilities) to total indebtedness, of the Company and its subsidiaries, of not less than 2.0:1.0, (f) maintaining minimum liquidity, and (g) limitations on the creation or existence of agreements that prohibit liens on certain properties of the Company and its subsidiaries. As of December 31, 2011, the Company was in material compliance with terms of the Revolving Credit Facility.

        In addition to the asset coverage ratio described above, borrowings under the Revolving Credit Facility (and the incurrence of certain other permitted debt) will be subject to compliance with a borrowing base that will apply different advance rates to different types of assets in our portfolio.

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        As of December 31, 2011 and 2010, there was $395,000 and $146,000, respectively, outstanding under the Revolving Credit Facility. The Revolving Credit Facility also provides for a sub-limit for the issuance of letters of credit for up to an aggregate amount of $100,000. As of December 31, 2011 and 2010, the Company had $47,249 and $7,281 in standby letters of credit issued through the Revolving Credit Facility, respectively. The amount available for borrowing under the Revolving Credit Facility is reduced by any standby letters of credit issued. At December 31, 2011, there was $404,751 available for borrowing (net of standby letters of credit issued) under the Revolving Credit Facility.

        Prior to amending and restating the Revolving Credit Facility on January 22, 2010, subject to certain exceptions, the interest rate charged on the Revolving Credit Facility was based on LIBOR plus 1.00% or on an "alternate base rate" (which was the highest of a prime rate, the federal funds rate plus 0.50%, or one month LIBOR plus 1.00%). After January 22, 2010, subject to certain exceptions, the interest rate charged on the Revolving Credit Facility is based on LIBOR plus an applicable spread of between 2.50% and 4.00% or on the "alternate base rate" plus an applicable spread of between 1.50% and 3.00%, in each case, based on a pricing grid depending upon our credit rating. As of December 31, 2011 and for the period from January 22, 2010 through December 31, 2011, the effective LIBOR spread under the Revolving Credit Facility was 3.00%. As of December 31, 2011, the one, two, three and six month LIBOR was 0.30%, 0.43%, 0.58% and 0.81%, respectively. As of December 31, 2010, the one, two, three and six month LIBOR was 0.26%, 0.28%, 0.30% and 0.46%, respectively.

        In addition to the stated interest expense on the Revolving Credit Facility, the Company is required to pay a commitment fee of 0.50% per annum on any unused portion of the Revolving Credit Facility and a letter of credit fee of 3.25% per annum on letters of credit issued, both of which are payable quarterly. The letter of credit fee is also based on a pricing grid depending on our credit ratings. In connection with the expansion and extension of the Revolving Credit Facility in January 2010, we paid arrangement fees totaling approximately $15,600.

        With certain exceptions, the Revolving Credit Facility is secured by substantially all of the assets in our portfolio (other than investments held by Ares Capital CP under the Revolving Funding Facility, those held as a part of the Debt Securitization, discussed below, and certain other investments).

        The components of interest and credit facility fees expense, cash paid for interest expense, average interest rates (i.e., rate in effect plus the spread) and average outstanding balances for the Revolving Credit Facility were as follows:

 
  For the Year Ended December 31,  
 
  2011   2010   2009  

Stated interest expense(1)

  $ 5,541   $ 10,370   $ 8,855  

Facility fees

    3,864     3,158     396  

Amortization of debt issuance costs

    6,510     6,635     723  
               

Total interest and credit facility fees expense

  $ 15,915   $ 20,163   $ 9,974  
               

Cash paid for interest expense(1)

  $ 5,278   $ 10,301   $ 9,758  

Average stated interest rate(1)

    3.4 %   4.3 %   2.1 %

Average outstanding balance

  $ 163,216   $ 244,254   $ 410,947  

(1)
The stated interest expense, cash paid for interest expense and average stated interest rate reflect the impact of the interest rate swap agreement entered into by the Company in October 2008 and terminated in December 2010 whereby the Company paid a fixed interest rate of 2.985% and received a floating rate based on the prevailing three-month LIBOR. See Note 6 for more information on the interest rate swap agreement.

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        In July 2006, through ARCC Commercial Loan Trust 2006, a vehicle serviced by our wholly owned subsidiary, ARCC CLO 2006 LLC ("ARCC CLO"), the Company completed a $400,000 debt securitization (the "Debt Securitization") and issued approximately $314,000 aggregate principal amount of asset-backed notes (the "CLO Notes") to third parties that are secured by a pool of middle-market loans that were purchased or originated by the Company. The Company initially retained approximately $86,000 of aggregate principal amount of certain "BBB" and non-rated securities in the Debt Securitization. The CLO Notes are included in the consolidated balance sheet.

        During the year ended December 31, 2011, we had net repayments of $28,265, $9,587, $20,819 and $19,095 of the Class A-1-A, Class A-1A-VFN, Class A-2A Notes and Class A-2B Notes, respectively. During the year ended December 31, 2010, we repaid $39,996, $26,665 and $51,795 of the Class A-1-A, Class A-1A-VFN and Class A-2A Notes, respectively. During the year ended December 31, 2009, we repurchased, in several open market transactions, $34,790 of CLO Notes consisting of $14,000 of Class B Notes and $20,790 of Class C Notes for a total purchase price of $8,247. As a result of these purchases, we recognized a $26,543 gain on the extinguishment of debt during the year ended December 31, 2009. As of December 31, 2011, we held an aggregate principal amount of $120,790 of CLO Notes (the "Retained Notes") in total. The CLO Notes mature on December 20, 2019, and, as of December 31, 2011, there was $77,531 outstanding under the Debt Securitization (excluding the Retained Notes).

        During the first five years from the closing date, principal collections received on the underlying collateral could be used to purchase new collateral. This reinvestment period expired on June 17, 2011. Because the reinvestment period expired, all principal collections received on the underlying collateral will be used to paydown the CLO Notes outstanding in their order of legal priority.

        All of the notes are secured by the assets of ARCC Commercial Loan Trust 2006, including commercial loans totaling $308,100 as of the closing date, which were sold to the trust by the Company, the originator and servicer of the assets. Additional commercial loans were purchased by the trust from the Company primarily using the proceeds from the Class A-1A VFN Notes as well as proceeds from loan repayments. As of December 31, 2011, the Company was in material compliance with the terms of the Debt Securitization.

        The classes, amounts and interest rates (expressed as a spread to LIBOR) of the CLO Notes as of December 31, 2011 and 2010 are as follows:

 
  2011   2010  
Class
  Amount   LIBOR
Spread
(basis points)
  Amount   LIBOR
Spread
(basis points)
 

A-1A

  $ 4,896     25   $ 33,161     25  

A-1A VFN

    12,520     28     22,107     28  

A-1B

    14,000     37     14,000     37  

A-2A

        22     20,819     22  

A-2B

    13,905     35     33,000     35  

B

    9,000     43     9,000     43  

C

    23,210     70     23,210     70  
                       

Total

  $ 77,531         $ 155,297        
                       

        The interest charged under the Debt Securitization is based on 3-month LIBOR, which as of December 31, 2011 was 0.56% and as of December 31, 2010 was 0.30%. The blended interest rate charged on the CLO Notes, excluding fees, at December 31, 2011 and 2010, was approximately 3-month LIBOR plus 45 and 36 basis points, respectively.

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        The Company was also required to pay a commitment fee of 0.175% for any unused portion of the Class A-1A VFN Notes through June 17, 2011, which is included in facility fees below.

        The components of interest and credit facility fees expense, cash paid for interest expense, average interest rates (i.e., rate in effect plus the spread) and average outstanding balances for the Debt Securitization are as follows:

 
  For the Year Ended December 31,  
 
  2011   2010   2009  

Stated interest expense

  $ 897   $ 1,534   $ 3,568  

Facility fees

    25     21      

Amortization of debt issuance costs

    356     358     354  
               

Total interest and credit facility fees expense

  $ 1,278   $ 1,913   $ 3,922  
               

Cash paid for interest expense

  $ 903   $ 1,536   $ 3,704  

Average stated interest rate

    0.8 %   0.7 %   1.3 %

Average outstanding balance

  $ 128,468   $ 228,252   $ 282,856  

        As part of the Allied Acquisition, the Company assumed all outstanding debt obligations of Allied Capital, including Allied Capital's unsecured notes, which consisted of 6.625% Notes due on July 15, 2011 (the "2011 Notes"), 6.000% Notes due on April 1, 2012 (the "2012 Notes") and 6.875% Notes due on April 15, 2047 (the "2047 Notes" and, together with the 2011 Notes and the 2012 Notes, the "Allied Unsecured Notes"). On March 16, 2011 we redeemed the remaining balance of the 2011 Notes for a total redemption price (including a redemption premium) of $306,800, in accordance with the terms of the indenture governing the 2011 Notes, which resulted in a loss on the extinguishment of debt of $8,860. On April 27, 2011, we redeemed the remaining balance of the 2012 Notes for a total redemption price (including a redemption premium) of $169,338, in accordance with the terms of the indenture governing the 2012 Notes, which resulted in a loss on the extinguishment of debt of $10,458.

        As of December 31, 2011 and 2010, the Company had the following outstanding Allied Unsecured Notes:

 
  As of December 31,  
 
  2011   2010  
 
  Outstanding
Principal
  Carrying
Value(1)
  Outstanding
Principal
  Carrying
Value(1)
 

2011 Notes

  $   $   $ 300,584   $ 296,258  

2012 Notes

            161,210     158,108  

2047 Notes

    230,000     180,988     230,000     180,795  
                   

Total

  $ 230,000   $ 180,988   $ 691,794   $ 635,161  
                   

(1)
Represents the principal amount of the Allied Unsecured Notes less the unaccreted discount initially recorded as a part of the Allied Acquisition

        The 2047 Notes bear interest at a rate of 6.875% and mature on April 15, 2047. The 2047 Notes require payment of interest quarterly, and all principal is due upon maturity. The 2047 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after April 15, 2012, at a par redemption price of $25 per security plus accrued and unpaid interest and upon the occurrence of certain tax events as stipulated in the indenture governing the 2047 Notes.

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        In accordance with ASC 805-10, the initial carrying value of the Allied Unsecured Notes was equal to the fair value as of April 1, 2010 resulting in an initial unaccreted discount from the principal value of the Allied Unsecured Notes of approximately $65,800. Accretion expense related to this discount which is included in "interest and credit facility fees" in the accompanying statement of operations.

        The Company may purchase the 2047 Notes in the market to the extent permitted by the Investment Company Act. During the year ended December 31, 2010, the Company purchased $19,350 principal amount of the 2011 Notes and $34,400 principal amount of the 2012 Notes. As a result of these transactions, the Company recognized a realized loss of $1,961 during the year ended December 31, 2010.

        The components of interest expense and cash paid for interest expense for the Allied Unsecured Notes are as follows:

 
  For the Years Ended December 31,  
 
  2011   2010  

Stated interest expense

  $ 23,078   $ 35,314  

Accretion of discount

    2,624     8,201  
           

Total interest expense

  $ 25,702   $ 43,515  
           

Cash paid for interest expense

  $ 34,678   $ 34,056  

        On October 21, 2010, we issued $200,000 aggregate principal amount of senior unsecured notes that mature on October 15, 2040 (the "2040 Notes"). The 2040 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after October 15, 2015, at a par redemption price of $25 per security plus accrued and unpaid interest. The 2040 Notes bear interest at a rate of 7.75% per annum, payable quarterly, and all principal is due upon maturity. Total proceeds from the issuance of the 2040 Notes, net of underwriting discounts and offering costs, were approximately $193,000.

        The components of interest expense and cash paid for interest expense for the 2040 Notes are as follows:

 
  For the Years Ended December 31,  
 
  2011   2010  

Stated interest expense

  $ 15,500   $ 3,014  

Amortization of debt issuance costs

    242     44  
           

Total interest expense

  $ 15,742   $ 3,058  
           

Cash paid for interest expense

  $ 15,242   $  

        The 2047 Notes and the 2040 Notes contain certain covenants, including covenants requiring Ares Capital to comply with Section 18(a)(1)(A) as modified by Section 61(a)(1) of the Investment Company Act and to provide financial information to the holders of such notes under certain circumstances. These covenants are subject to important limitations and exceptions. As of December 31, 2011, the Company was in material compliance with the terms of the 2047 Notes and the 2040 Notes.

        In January 2011, we issued $575,000 aggregate principal amount of unsecured convertible senior notes that mature on February 1, 2016 (the "February 2016 Convertible Notes"), unless previously

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converted or repurchased in accordance with their terms. In March 2011, we issued $230,000 aggregate principal amount of unsecured convertible senior notes that mature on June 1, 2016 (the "June 2016 Convertible Notes" and, together with the February 2016 Convertible Notes, the "Convertible Notes"), unless previously converted or repurchased in accordance with their terms. We do not have the right to redeem the Convertible Notes prior to maturity. The February 2016 Convertible Notes and the June 2016 Convertible Notes bear interest at a rate of 5.75% and 5.125%, respectively, per year, payable semi-annually.

        In certain circumstances, the February 2016 Convertible Notes will be convertible into cash, shares of Ares Capital's common stock or a combination of cash and shares of our common stock, at our election, at an initial conversion rate of 52.2766 shares of common stock per one thousand dollar principal amount of the February 2016 Convertible Notes, which is equivalent to an initial conversion price of approximately $19.13 per share of our common stock, subject to customary anti-dilution adjustments. The initial conversion price of the February 2016 Convertible Notes was approximately 17.5% above the $16.28 per share closing price of our common stock on January 19, 2011. In certain circumstances, the June 2016 Convertible Notes will be convertible into cash, shares of Ares Capital's common stock or a combination of cash and shares of our common stock, at our election, at an initial conversion rate of 52.5348 shares of common stock per one thousand dollar principal amount of the June 2016 Convertible Notes, which is equivalent to an initial conversion price of approximately $19.04 per share of our common stock, subject to customary anti-dilution adjustments. The initial conversion price of the June 2016 Convertible Notes was approximately 17.5% above the $16.20 per share closing price of our common stock on March 22, 2011. At December 31, 2011, the principal amounts of both the February 2016 Convertible Notes and the June 2016 Convertible Notes exceeded the value of the underlying shares multiplied times the per share closing price of our common stock.

        The Convertible Notes are Ares Capital's senior unsecured obligations and rank senior in right of payment to our existing and future indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment to our existing and future unsecured indebtedness that is not expressly subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities.

        Prior to the close of business on the business day immediately preceding August 15, 2015, holders may convert their February 2016 Convertible Notes only under certain circumstances set forth in the indenture governing the terms of the February 2016 Convertible Notes (the "February 2016 Indenture"). On or after August 15, 2015 until the close of business on the scheduled trading day immediately preceding February 1, 2016, holders may convert their February 2016 Convertible Notes at any time. Upon conversion, we will pay or deliver, as the case may be, at our election, cash, shares of our common stock or a combination of cash and shares of our common stock, subject to the requirements of the February 2016 Indenture. Prior to the close of business on the business day immediately preceding December 15, 2015, holders may convert their June 2016 Convertible Notes only under certain circumstances set forth in the indenture governing the terms of the June 2016 Convertible Notes (the "June 2016 Indenture"). On or after December 15, 2015 until the close of business on the scheduled trading day immediately preceding June 1, 2016, holders may convert their June 2016 Convertible Notes at any time. Upon conversion, we will pay or deliver, as the case may be, at our election, cash, shares of our common stock or a combination of cash and shares of our common stock, subject to the requirements of the June 2016 Indenture.

        In addition, if we engage in certain corporate events as described in both the February 2016 Indenture and the June 2016 Indenture (collectively, the "Convertible Notes Indentures"), holders of the Convertible Notes may require us to repurchase for cash all or part of the Convertible Notes at a

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repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest through, but excluding, the required repurchase date.

        The Convertible Notes Indentures contain certain covenants, including covenants requiring us to comply with Section 18(a)(1)(A) as modified by Section 61(a)(1) of the Investment Company Act and to provide financial information to the holders of the Convertible Notes under certain circumstances. These covenants are subject to important limitations and exceptions that are described in the Convertible Notes Indentures. As December 31, 2011, the Company was in material compliance with the terms of the Convertible Notes Indentures.

        The Convertible Notes are accounted for in accordance with ASC 470-20 (previously FASB Staff Position No. APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)"). Upon conversion of any of the Convertible Notes, we intend to pay the outstanding principal amount in cash and to the extent that the conversion value exceeds the principal amount, we have the option to pay in cash or shares of our common stock (or a combination of cash and shares) in respect of the excess amount, subject to the requirements of the Convertible Notes Indentures. The Company has determined that the embedded conversion options in both the February 2016 Convertible Notes and the June 2016 Convertible Notes are not required to be separately accounted for as a derivative under GAAP. In accounting for the February 2016 Convertible Notes, we estimated at the time of issuance that the values of the debt and equity components of the February 2016 Convertible Notes were approximately 93% and 7%, respectively. In accounting for the June 2016 Convertible Notes, we estimated at the time of issuance that the values of the debt and equity components of the June 2016 Convertible Notes were approximately 93% and 7%, respectively. The original issue discount equal to the equity component of 7% of both the June 2016 Convertible Notes and the February 2016 Convertible Notes was recorded in "capital in excess of par value" in the accompanying consolidated balance sheet. As a result, we record interest expense comprised of both stated interest expense as well as accretion of the original issue discount. Additionally, the issuance costs associated with the Convertible Notes were allocated to the debt and equity components in proportion to the allocation of the proceeds and accounted for as debt issuance costs and equity issuance costs, respectively.

        At the time of issuance, the debt issuance costs and equity issuance costs for the February 2016 Convertible Notes were $15,778 and $1,188, respectively, and for the June 2016 Convertible Notes were $5,913 and $445, respectively. At the time of issuance and as of December 31, 2011, the equity component, net of issuance costs as recorded in the "capital in excess of par value" in the consolidated balance sheet for the February 2016 Convertible Notes and the June 2016 Convertible Notes was $39,063 and $15,653, respectively.

        As of December 31, 2011 the components of the carrying value of the Convertible Notes were as follows:

 
  As of December 31, 2011  
 
  February 2016
Convertible Notes
  June 2016
Convertible Notes
 

Principal amount of debt

  $ 575,000   $ 230,000  

Original issue discount, net of accretion

    (33,848 )   (14,069 )
           

Carrying value of debt

  $ 541,152   $ 215,931  
           

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        For the year ended December 31, 2011 the components of interest expense and cash paid for interest expense for the February 2016 Convertible Notes were as follows:

 
  For year ended
December 31, 2011
 

Stated interest expense

  $ 30,858  

Accretion of original issue discount

    6,403  

Amortization of debt issuance costs

    2,938  
       

Total interest expense

  $ 40,199  
       

Cash paid for interest expense

  $ 17,082  

        The estimated effective interest rate of the debt component of the February 2016 Convertible Notes, equal to the stated interest of 5.75% plus the accretion of the original issue discount, was approximately 7.49% for the year ended December 31, 2011.

        For the year ended December 31, 2011, the components of interest expense and cash paid for interest expense for the June 2016 Convertible Notes were as follows:

 
  For year ended
December 31, 2011
 

Stated interest expense

  $ 8,939  

Accretion of original issue discount

    2,031  

Amortization of debt issuance costs

    875  
       

Total interest expense

  $ 11,845  
       

Cash paid for interest expense

  $ 7,957  

        The estimated effective interest rate of the debt component of the June 2016 Convertible Notes equal to the stated interest of 5.125% plus the accretion of the original issue discount, was approximately 6.79% for the year ended December 31, 2011.

6.     DERIVATIVE INSTRUMENTS

        In October 2008, we entered into an interest rate swap agreement that terminated on December 20, 2010 to mitigate our exposure to adverse fluctuations in interest rates for a total notional amount of $75,000. Under the interest rate swap agreement, we paid a fixed interest rate of 2.985% and receive a floating rate based on the prevailing three-month LIBOR. For the years ended December 31, 2010 and 2009, we recognized $1,741 and $423, in unrealized appreciation related to this swap agreement. Upon termination of this swap agreement in 2010, no realized gain or loss was recognized.

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7.     COMMITMENTS AND CONTINGENCIES

        The Company has various commitments to fund investments in its portfolio as described below.

        As of the years ended December 31, 2011 and 2010, the Company had the following commitments to fund various revolving and delayed draw senior secured and subordinated loans, including commitments the funding of which is at (or substantially at) the Company's discretion:

 
  As of December 31,  
 
  2011   2010  

Total revolving and delayed draw commitments

  $ 565,630   $ 260,691  

Less: funded commitments

    (125,037 )   (59,980 )
           

Total unfunded commitments

    440,593     200,711  

Less: commitments substantially at discretion of the Company

    (64,750 )   (19,922 )

Less: unavailable commitments due to borrowing base or other covenant restrictions

    (5,518 )   (6,738 )
           

Total net adjusted unfunded revolving and delayed draw commitments

  $ 370,325   $ 174,051  
           

        Included within the total revolving and delayed draw commitments as of December 31, 2011 are commitments to issue up to $79,372 in standby letters of credit through a financial intermediary on behalf of certain portfolio companies. Under these arrangements, if the standby letters of credit were to be issued, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. As of December 31, 2011, the Company had $43,321 in standby letters of credit issued and outstanding under these commitments on behalf of the portfolio companies, of which no amounts were recorded as a liability on our balance sheet as such letters of credit are considered in the valuation of the investments in the portfolio company. Of these letters of credit $41,171 expire in 2012 and $2,150 expire in 2013.

        As of the years ended December 31, 2011 and 2010, the Company was party to subscription agreements to fund equity investments in private equity investment partnerships:

 
  As of December 31,  
 
  2011   2010  

Total private equity commitments

  $ 132,030   $ 537,600  

Less: funded private equity commitments

    (67,428 )   (104,300 )
           

Total unfunded private equity commitments

    64,602     433,300  

Less: private equity commitments substantially at discretion of the Company

    (53,525 )   (400,400 )
           

Total net adjusted unfunded private equity commitments

  $ 11,077   $ 32,900  
           

        In the ordinary course of business, Allied Capital had issued guarantees on behalf of certain portfolio companies. Under these arrangements, payments would be required to be made to third parties if the portfolio companies were to default on their related payment. As part of the Allied Acquisition, the Company assumed such outstanding guarantees or similar obligations. As a result, as of December 31, 2011 and 2010, the Company had outstanding guarantees or similar obligations totaling $800.

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        Further in the ordinary course of business, we may sell certain of our investments to third party purchasers. In particular, since the Allied Acquisition we have sold and currently continue to seek opportunities to sell, certain of Allied Capital's equity investments larger than those we have historically made and controlled portfolio company equity investments. In connection with these sales (as well as certain other sales) we have, and may continue to do so in the future, agreed to indemnify such purchasers for future liabilities arising from the investments and the related sale transaction. Such indemnification provisions may give rise to future liabilities.

        As of December 31, 2011, one of the Company's portfolio companies, Ciena Capital LLC ("Ciena"), had one non-recourse securitization Small Business Administration ("SBA") loan warehouse facility, which has reached its maturity date but remains outstanding. Ciena is working with the providers of the SBA loan warehouse facility with regard to the repayment of that facility. Allied Capital had previously issued a performance guaranty (which Ares Capital succeeded to as a result of the Allied Acquisition) whereby Ares Capital must indemnify the warehouse providers for any damages, losses, liabilities and related costs and expenses that they may incur as a result of Ciena's failure to perform any of its obligations as loan originator, loan seller or loan servicer under the warehouse facility. As of December 31, 2011, there are no known issues or claims with respect to this performance guaranty.

        The Company is obligated under a number of operating leases for office spaces with terms ranging from less than one year to more than 15 years. Rent expense for the years ended December 31, 2011, 2010 and 2009 was $3,343, $5,167 and $1,803, respectively.

        The following table shows future minimum payments under the Company's operating leases:

For the year ending December 31,
  Amount  

2012

  $ 6,912  

2013

    7,061  

2014

    6,603  

2015

    5,198  

2016

    5,380  

Thereafter

    48,701  
       

Total

  $ 79,855  
       

        For certain of its operating leases, the Company has entered into subleases including ones with Ares Management and Ivy Hill Asset Management, L.P. ("IHAM") (see Note 13).

        The following table shows future expected rental payments to be received under the Company's subleases:

For the year ending December 31,
  Amount  

2012

  $ 2,475  

2013

    2,505  

2014

    2,271  

2015

    1,567  

2016

    1,625  

Thereafter

    16,130  
       

Total

  $ 26,573  
       

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8.     FAIR VALUE OF FINANCIAL INSTRUMENTS

        Effective January 1, 2008, the Company adopted ASC 825-10 (previously SFAS No. 159, the Fair Value Option for Financial Assets and Liabilities), which provides companies the option to report selected financial assets and liabilities at fair value. ASC 825-10 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect of the company's choice to use fair value on its earnings. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the balance sheet. The Company has not elected the ASC 8 25-10 option to report selected financial assets and liabilities at fair value. With the exception of the line items entitled "other assets" and "debt," which are reported at amortized cost, all assets and liabilities approximate fair value on the balance sheet. The carrying value of the line items entitled "interest receivable," "receivable for open trades," "payable for open trades," "accounts payable and accrued expenses," "management and incentive fees payable" and "interest and facility fees payable" approximate fair value due to their short maturity.

        Effective January 1, 2008, the Company adopted ASC 820-10 (previously SFAS No. 157, Fair Value Measurements), which expands the application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Company to assume that the portfolio investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820-10, the Company has considered its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity. ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:

        Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur. In addition to using the above inputs in investment valuations, we continue to employ the net asset valuation policy approved by our board of directors that is consistent with ASC 820-10 (see Note 2). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. Our valuation policy considers the fact that because there is not a readily available market value for most of the investments in our portfolio, the fair value of the investments must typically be determined using unobservable inputs.

        Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other

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restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

        In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the gains or losses reflected in the valuations currently assigned.

        The following table presents fair value measurements of cash and cash equivalents and investments as of December 31, 2011:

 
  Fair Value Measurements Using  
 
  Total   Level 1   Level 2   Level 3  

Cash and cash equivalents

  $ 120,782   $ 120,782   $   $  

Investments

  $ 5,094,506   $   $   $ 5,094,506  

        The following tables present changes in investments that use Level 3 inputs for the years ended December 31, 2011:

 
  As of and for the
year ended
December 31, 2011
 

Balance as of December 31, 2010

  $ 4,312,657  

Net realized and unrealized gains

    69,658  

Purchases

    3,239,023  

Sales

    (994,989 )

Redemptions

    (1,553,167 )

Payment-in-kind interest and dividends

    30,070  

Accretion of discount on securities

    15,894  

Net transfers in and/or out of Level 3

    (24,640 )
       

Balance as of December 31, 2011

  $ 5,094,506  
       

        As of December 31, 2011, the net unrealized depreciation on the investments that use Level 3 inputs was $14,157.

        The following table presents fair value measurements of cash and cash equivalents and investments as of December 31, 2010:

 
  Fair Value Measurements Using  
 
  Total   Level 1   Level 2   Level 3  

Cash and cash equivalents

  $ 100,752   $ 100,752   $   $  

Investments

  $ 4,317,990   $   $ 5,333   $ 4,312,657  

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        The following tables present changes in investments that use Level 3 inputs for the year ended December 31, 2010:

 
  As of and for the
year ended
December 31, 2010
 

Balance as of December 31, 2009

  $ 2,166,687  

Net realized and unrealized gains

    272,940  

Purchases

    3,454,507  

Sales

    (513,175 )

Redemptions

    (1,126,158 )

Payment-in-kind interest and dividends

    45,262  

Accretion of discount on securities

    12,594  

Net transfers in and/or out of Level 3

     
       

Balance as of December 31, 2010

  $ 4,312,657  
       

        As of December 31, 2010, the net unrealized appreciation on the investments that use Level 3 inputs was $29,735. Transfers between levels, if any, are recognized at the beginning of the quarter in which transfers occur.

        Following are the carrying and fair values of our debt instruments as of December 31, 2011 and December 31, 2010. Fair value is estimated by discounting remaining payments using applicable current market rates which take into account changes in the Company's marketplace, credit ratings, or market quotes, if available.

 
  As of December 31,  
 
  2011   2010  
 
  Carrying value(1)   Fair value   Carrying value(1)   Fair value  

Revolving Funding Facility

  $ 463,000     467,900   $ 242,050   $ 242,000  

Revolving Credit Facility

    395,000     399,400     146,000     146,000  

Debt Securitization

    77,531     68,215     155,297     133,000  

2011 Notes (principal amount outstanding of $0 and $300,584, respectively)

            296,258 (2)   297,290  

2012 Notes (principal amount outstanding of $0 and $161,210, respectively)

            158,108 (2)   164,595  

February 2016 Convertible Notes (principal amount outstanding of $575,000)

    541,152 (3)   545,445          

June 2016 Convertible Notes (principal amount outstanding of $230,000)

    215,931 (3)   215,717          

2040 Notes (principal amount outstanding of $200,000)

    200,000     198,808     200,000     184,986  

2047 Notes (principal amount outstanding of $230,000)

    180,988 (2)   212,218     180,796 (2)   197,314  
                   

  $ 2,073,602 (4) $ 2,107,703   $ 1,378,509 (4) $ 1,365,185  
                   

(1)
Except for the Allied Unsecured Notes, the 2040 Notes and the Convertible Notes, all carrying values are the same as the principal amounts outstanding.

(2)
Represents the aggregate principal amount of the applicable series of notes less the unaccreted discount initially recorded as a part of the Allied Acquisition.

(3)
Represents the aggregate principal amount outstanding of the Convertible Notes less the unaccreted discount initially recorded upon issuance of the Convertible Notes.

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(4)
Total principal amount of debt outstanding totaled $2,170,531 and $1,435,141 as of December 31, 2011 and December 31, 2010, respectively.

9.     STOCKHOLDERS' EQUITY

        There were no sales of our equity securities during the year ended December 31, 2011.

        The following table summarizes the total shares issued and proceeds received in public offerings of the Company's common stock net of underwriting discounts and offering costs for the years ended December 31, 2010 and 2009:

 
  Shares
issued
  Offering price
per share
  Proceeds net of
underwriting and
offering costs
 

2010

                   

November 2010 public offering

    11,500   $ 16.50   $ 180,642  

February 2010 public offering

    22,958   $ 12.75   $ 277,207  
                 

Total for the year ended December 31, 2010

    34,458         $ 457,849  

2009

                   

August 2009 public offering

    12,440   $ 9.25   $ 109,086  
                 

Total for the year ended December 31, 2009

    12,440         $ 109,086  

        For the years ended December 31, 2010 and 2009, the Company incurred approximately $1,440 and $806 in offering costs, respectively.

        In connection with the Allied Acquisition, on April 1, 2010, the Company issued 58,493 shares valued at approximately $872,727.

        In November 2010, the Company completed a public add-on equity offering (the "November Add-on Offering") of 11,500 shares of common stock (including 1,500 shares purchased pursuant to the underwriters' over-allotment option) at a price of $16.50 per share, less an underwriting discount totaling approximately $0.7425 per share. Total proceeds received from the November Add-on Offering, net of underwriting discounts and offering costs, were approximately $180,642.

        In February 2010, the Company completed a public add-on equity offering (the "February Add-on Offering") of approximately 22,958 shares of common stock (including approximately 1,958 shares purchased pursuant to the partial exercise by the underwriters of their over-allotment option) at a price of $12.75 per share, less an underwriting discount totaling approximately $0.6375 per share. Total proceeds received from the February Add-on Offering, net of underwriting discounts and offering costs, were approximately $277,207.

        In August 2009, the Company completed a public add-on equity offering (the "August Add-on Offering") of approximately 12,440 shares of common stock (including approximately 1,440 shares purchased pursuant to the underwriters' over-allotment option) at a price of $9.25 per share, less an underwriting discount totaling approximately $0.42 per share. The shares were offered at a discount from the then most recently determined net asset value per share of $11.21 pursuant to authority granted by our common stockholders at the annual meeting of stockholders held on May 4, 2009. Total proceeds received from the August Add-on Offering, net of underwriting discounts and offering costs, were approximately $109,086.

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10.   EARNINGS PER SHARE

        The following information sets forth the computations of basic and diluted net increase in stockholders' equity resulting from operations per share for the years ended December 31, 2011, 2010 and 2009:

 
  For the years ended December 31,  
 
  2011   2010   2009  

Net increase in stockholders' equity resulting from operations available to common stockholders:

  $ 319,453   $ 691,834   $ 202,693  

Weighted average shares of common stock outstanding—basic and diluted:

    204,860     176,732     101,720  

Basic and diluted net increase in stockholders' equity resulting from operations per share:

  $ 1.56   $ 3.91   $ 1.99  

        For the purposes of calculating diluted earnings per share, since the average closing price of the Company's common stock for the period from the time of issuance of both the February 2016 Convertible Notes and the June 2016 Convertible Notes through December 31, 2011 was less than the current conversion price for each respective series of the Convertible Notes, the underlying shares for the intrinsic value of the embedded options had no impact.

11.   INCOME AND EXCISE TAXES

        For income tax purposes, dividends and distributions paid to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. Dividends or distributions paid per common share for the years ended December 31, 2011, 2010 and 2009 were taxable as follows (unaudited):

 
  For the years ended December 31,  
 
  2011   2010   2009  

Ordinary income(1)(2)

  $ 1.16   $ 1.40   $ 1.36  

Capital gains

    0.25          

Return of capital

            0.11  
               

Total

  $ 1.41   $ 1.40   $ 1.47  
               

(1)
For the years ended December 31, 2011, 2010 and 2009, ordinary income included dividend income of approximately $0.0619, $0.0164 and $0.0107, per share, respectively, that qualified to be taxed at the 15% maximum capital gains rate.

(2)
For certain eligible corporate shareholders, dividends eligible for the dividend received deduction for 2011, 2010 and 2009, was approximately $0.0619, $0.0164 and $0.0107, per share, respectively.

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        The following reconciles net increase in stockholders' equity resulting from operations to taxable income for the years ended December 31, 2011, 2010 and 2009:

 
  For the years ended December 31,  
 
  2011   2010   2009  
 
  (Estimated)(1)
   
   
 

Net increase in stockholders' equity resulting from operations

  $ 319,453   $ 691,834   $ 202,693  

Adjustments:

                   

Net unrealized (gain) loss on investments

    40,192     (230,743 )   (88,707 )

Items related to the Allied Acquisition:

                   

Gain on the Allied Acquisition

        (195,876 )    

Other merger-related items

        (4,007 )    

Other income not currently taxable

    (52,385 )   (36,486 )   (21,310 )

Other income for tax but not book

    63,923     71,997     51,218  

Expenses not currently deductible

    52,856     33,499     10,545  

Other deductible expenses

    (820 )   (786 )   (29,636 )

Other realized gain/loss differences

    (25,028 )   (12,736 )    
               

Taxable income

  $ 398,191   $ 316,696   $ 124,803  
               

(1)
The calculation of estimated 2011 taxable income includes a number of estimated inputs, including information received from third parties and, as a result, actual 2011 taxable income will not be finally determined until the Company's 2011 tax return is filed in 2012 (and, therefore, such estimate is subject to change).

        Taxable income generally differs from net increase in stockholders' equity resulting from operations for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized gains or losses, as unrealized gains or losses are generally not included in taxable income until they are realized. Additionally, on April 1, 2010, the Company acquired Allied Capital in a tax free merger and recorded a book gain of $195,876, which is not a realized event for tax purposes. Similarly, there were certain merger-related items that vary in their deductibility for GAAP and tax.

        Capital losses in excess of capital gains earned in a tax year may generally be carried forward and used to offset capital gains, subject to certain limitations. As of December 31, 2011, the Company estimates that it will have a capital loss carryforward of approximately $207 million available for use in later tax years. Because of the loss limitation rules of the Code, some of the tax basis losses may be limited in their use. The unused balance will be carried forward and utilized as gains are realized, subject to such limitations. In addition to the capital loss carryforwards, the Company realized net losses totaling approximately $0.3 billion from the Allied Capital portfolio since the acquisition through December 31, 2011, however, these losses have not yet been deducted for tax purposes as their deductibility in 2011 and 2010 was limited by the Code. While our ability to utilize losses in the future depends upon a variety of factors that cannot be known in advance, substantially all of our capital loss carryforwards and the net realized losses from the Allied Capital portfolio may become permanently unavailable due to limitations by the Code.

        For 2010, the Company had taxable income in excess of distributions made from such taxable income of approximately $64 million and therefore, the Company carried forward the excess for distribution to shareholders in 2011. For 2011, the Company had taxable income in excess of the distributions made from such taxable income during the year, and therefore, the Company has elected to carry forward the excess for distribution to shareholders in 2012. The amount carried forward to 2012 is estimated to be approximately $170 million, although this amount will not be finalized until the 2011 tax returns are filed in 2012. To the extent that the Company determines that its estimated current

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year annual taxable income will be in excess of estimated current year dividend distribution from such income, the Company accrues excise tax on estimated excess taxable income. For the years ended December 31, 2011 and 2010, a net expense of $6,605 and $2,229 was recorded for U.S. federal excise tax, respectively. For the year ended December 31, 2009, a net benefit of $30 was recorded for U.S. federal excise tax.

        As of December 31, 2011, the cost basis of investments for tax purposes was $6.1 billion resulting in estimated gross unrealized gains and losses of $0.2 billion and $1.2 billion, respectively. As of December 31, 2010, the cost basis of investments for tax purposes was $5.4 billion resulting in estimated gross unrealized gains and losses of $0.3 billion and $1.4 billion, respectively. As of December 31, 2011 and 2010, the cost of investments for tax purposes was greater than the amortized cost of investments for book purposes of $5.1 billion and $4.3 billion, respectively, primarily as a result of the Allied Acquisition. The Allied Acquisition qualified as a tax free merger, which resulted in the acquired assets retaining Allied Capital's cost basis at the merger date.

        In general, the Company may make certain adjustments to the classification of stockholders' equity as a result of permanent book-to-tax differences, which may include merger-related items, differences in the book and tax basis of certain assets and liabilities, and nondeductible federal taxes, among other items. During the year ended December 31, 2011, the Company increased accumulated undistributed net investment income by $7,474, increased accumulated net realized loss on sale of investments by $126,234 and increased capital in excess of par value by $118,760. During the year ended December 31, 2010, as a result of certain permanent book-to-tax differences, including the nontaxability of the book gain on the Allied Acquisition and the nondeductibility of certain merger-related expenses, the Company increased accumulated undistributed net investment income by $22,001, increased accumulated net realized loss on sale of investments by $383,856 and increased capital in excess of par value by $361,855. During the year ended December 31, 2009, the Company increased accumulated undistributed net investment income by $5,584, decreased accumulated net realized loss on sale of investments by $13,014 and decreased capital in excess of par value by $18,598.

        Certain of our wholly owned subsidiaries are subject to U.S. federal and state income taxes. For the years ended December 31, 2011, 2010 and 2009, we recorded a tax expense of approximately $869, $3,163 and $606, respectively, for these subsidiaries.

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12.   DIVIDENDS AND DISTRIBUTIONS

        The following table summarizes our dividends declared for the years ended December 31, 2011, 2010 and 2009:

Date declared
  Record date   Payment date   Per share
amount
  Total amount  

November 8, 2011

    December 15, 2011     December 30, 2011   $ 0.36   $ 73,847  

August 4, 2011

    September 15, 2011     September 30, 2011   $ 0.35     71,795  

May 3, 2011

    June 15, 2011     June 30, 2011   $ 0.35     71,663  

March 1, 2011

    March 15, 2011     March 31, 2011   $ 0.35     71,547  
                       

Total declared for 2011

              $ 1.41   $ 288,852  
                       

November 4, 2010

    December 15, 2010     December 31, 2010   $ 0.35   $ 71,423  

August 5, 2010

    September 15, 2010     September 30, 2010   $ 0.35     67,266  

May 10, 2010

    June 15, 2010     June 30, 2010   $ 0.35     67,091  

February 25, 2010

    March 15, 2010     March 31, 2010   $ 0.35     46,516  
                       

Total declared for 2010

              $ 1.40   $ 252,296  
                       

November 5, 2009

    December 15, 2009     December 31, 2009   $ 0.35   $ 39,630  

August 6, 2009

    September 15, 2009     September 30, 2009   $ 0.35     38,357  

May 7, 2009

    June 15, 2009     June 30, 2009   $ 0.35     34,004  

March 2, 2009

    March 16, 2009     March 31, 2009   $ 0.42     40,804  
                       

Total declared for 2009

              $ 1.47   $ 152,795  
                       

        The Company has a dividend reinvestment plan, whereby the Company may buy shares of its common stock in the open market or issue new shares in order to satisfy dividend reinvestment requests. If the Company issues new shares, the issue price is equal to closing price on the record date. Dividend reinvestment plan activity for the years ended December 31, 2011, 2010, and 2009, was as follows:

 
  2011   2010   2009  

Shares issued

    711     1,523     352  

Average price per share

  $ 16.24   $ 14.79   $ 11.43  

Shares purchased by plan agent for shareholders

    785         1,629  

Average price per share

  $ 14.71       $ 6.85  

13.   RELATED PARTY TRANSACTIONS

        In accordance with the investment advisory and management agreement, we bear all costs and expenses of the operation of the Company and reimburse our investment adviser for certain of such costs and expenses incurred in the operation of the Company. For the years ended December 31, 2011, 2010 and 2009 our investment adviser incurred such expenses totaling $4,646, $3,264 and $2,461, respectively. As of December 31, 2011, $496 was unpaid and such payable is included in "accounts payable and accrued expenses" in the accompanying consolidated balance sheet.

        We have entered into separate subleases with Ares Management and IHAM, a wholly owned portfolio company, pursuant to which Ares Management and IHAM sublease approximately 15% and 20%, respectively, of the Company's New York office space for a fixed rent equal to 15% and 20%, respectively, of the base annual rent payable by us under the Company's lease for this space, plus certain additional costs and expenses. For the year ended December 31, 2011, such amounts payable to the Company totaled $348 and $464, respectively. Under our previous lease that expired on February 27, 2011, we were party to a sublease agreement with Ares Management whereby Ares

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Management subleased approximately 25% of such office space for a fixed rent equal to 25% of the basic annual rent payable by us under this lease, plus certain additional costs and expenses. For the years ended December 31, 2011, 2010 and 2009, such amounts payable to the Company totaled $396, $253 and $652, respectively.

        As of December 31, 2011, Ares Investments Holdings LLC, an affiliate of Ares Management, (the sole member of our investment adviser) owned approximately 2.9 million shares of the Company's common stock representing approximately 1.4% of the total shares outstanding as of December 31, 2011.

        See Notes 3 and 14 for descriptions of other related party transactions.

14.   IVY HILL ASSET MANAGEMENT, L.P. AND OTHER MANAGED FUNDS

        In November 2007, the Company established IHAM to serve as a manager for Ivy Hill Middle Market Credit Fund, Ltd. ("Ivy Hill I"), an unconsolidated investment vehicle focusing on investments in middle-market loans. From inception until the second quarter of 2009, IHAM's financial results were consolidated with those of the Company. In June 2009, because of a shift in activity from being primarily a manager, with no dedicated employees, of funds in which the Company had invested debt and equity, to a manager with individuals dedicated to managing an increasing number of third party funds, the Company concluded that GAAP required the financial results of IHAM to be reported as a portfolio company in the schedule of investments rather than as a consolidated subsidiary in the Company's financial results. The Company made an equity investment of $3,816 into IHAM in June 2009. As of December 31, 2011, the Company's total investment in IHAM at fair value was $194,597, including unrealized appreciation of $81,721. As of December 31, 2010, the Company's total investment in IHAM at fair value was $136,235, including unrealized appreciation of $32,777. For the years ended December 31, 2011, 2010 and 2009, the Company received distributions from IHAM of $19,048, $12,154 and $3,120, respectively. The distributions for the years ended December 31, 2011, 2010 and 2009 included dividend income of $19,048, $7,320 and $2,390, respectively.

        Ivy Hill I primarily invests in first and second lien bank debt of middle-market companies. Ivy Hill I was initially funded with $404,000 of capital including a $56,000 investment by the Company, consisting of $40,000 of Class B notes and $16,000 of subordinated notes. For the years ended December 31, 2011, 2010 and 2009, the Company earned $4,879, $6,859 and $5,742, respectively, from its investments in Ivy Hill I.

        Ivy Hill I purchased investments from the Company of $24,428 and $12,000, during the years ended December 31, 2011 and 2010, respectively, and may from time to time purchase additional investments from the Company. A realized loss of $135 was recorded on these transactions for the year ended December 31, 2011.

        In November 2008, the Company established a second middle-market credit vehicle, Ivy Hill Middle Market Credit Fund II, Ltd. ("Ivy Hill II"), which is also managed by IHAM.

        In December 2009, the Company made an additional cash investment of approximately $33,000 in IHAM to facilitate IHAM's acquisition of Allied Capital's management rights in respect of, and interests in, the Allied Capital Senior Debt Fund, L.P. (now referred to as Ivy Hill Senior Debt Fund, L.P. (and related vehicles) "Ivy Hill SDF"). In October 2010, the Company made an additional cash investment of approximately $4,000 in IHAM to facilitate IHAM's acquisition of an equity interest in Ivy Hill SDF.

        In March 2010, the Company made an additional cash investment of approximately $48,000 in IHAM to facilitate IHAM's acquisition of Allied Capital's management rights in respect of, and equity interests in, the Knightsbridge CLO 2007-1, Limited. ("Knightsbridge 2007-1") and Knightsbridge CLO 2008-1, Limited (now referred to as Ivy Hill Middle Market Credit Fund III, Ltd.) ("Knightsbridge

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Funds"). At the time, the Company also acquired from Allied Capital certain debt investments of the Knightsbridge Funds for approximately $52,000. During the year ended December 31, 2011, the Company's investments in the Knightsbridge Funds were repaid or sold resulting in a realized gain of $4,978. The Knightsbridge Funds purchased $25,448 of investments from the Company during the year ended December 31, 2011. A realized loss of $279 was recorded on these transactions for the year ended December 31, 2011. In December 2011, Knightsbridge CLO 2008-1 Limited. was refinanced and subsequently renamed as Ivy Hill Middle Market Credit Fund III, Ltd. ("Ivy Hill III" and, together with Ivy Hill I, Ivy Hill II and Ivy Hill SDF, the "Ivy Hill Funds").

        The Company, through its wholly owned subsidiary, A.C. Corporation, previously managed Emporia Preferred Funding I, Ltd., Emporia Preferred Funding II, Ltd. and Emporia Preferred Funding III, Ltd. (collectively, the "Emporia Funds"). In August 2010, the Company made an additional cash investment of approximately $8,000 in IHAM to facilitate IHAM's acquisition of an equity interest in Emporia Preferred Funding III, Ltd. In November 2010, the Company made an additional cash investment of $7,900 in IHAM, which IHAM then used to purchase these management rights and related receivables in respect of the Emporia Funds from A.C. Corporation for $7,900. This amount represented the fair value of those management rights and related management fees receivable as of the date of the sale. A realized gain of $5,882 was recognized on this transaction. In January 2011, the Company made an additional cash investment of approximately $9,400 in IHAM to facilitate IHAM's acquisition of equity interests in certain of the Emporia Funds. The Emporia Funds purchased $47,972 of investments from the Company during the year ended December 31, 2011. A realized loss of $495 was recorded on these transactions for the year ended December 31, 2011.

        In addition to the Ivy Hill Funds and Knightsbridge 2007-1, IHAM also serves as the sub-adviser/sub-manager to four other vehicles: CoLTS 2005-1 Ltd., CoLTS 2005-2 Ltd., CoLTS 2007-1 Ltd. (collectively, the "CoLTS Funds") and FirstLight Funding I, Ltd. ("FirstLight"), which is affiliated with the Company's portfolio company, Firstlight Financial Corporation. The CoLTS Funds purchased $12,993 of investments from the Company during the year ended December 31, 2011. A realized loss of $154 was recorded on these transactions for the year ended December 31, 2011. The Company also purchased $3,777 of investments from FirstLight during the year ended December 31, 2011.

        In addition, IHAM serves as the general partner of, and manages, Ares Private Debt Strategies Fund II, L.P. ("Ares PDS II") and Ares Private Debt Strategies Fund III, L.P. (the "PDS Funds"). The PDS Funds purchased $144,532 of investments from the Company during the year ended December 31, 2011. A realized gain of $1,161 was recorded on these transactions for the year ended December 31, 2011.

        IHAM purchased $5,949 of investments from the Company during the year ended December 31, 2011. A realized loss of $48 was recorded on these transactions for the year ended December 31, 2011.

        IHAM or the vehicles managed by IHAM may, from time to time, buy or sell additional investments from or to the Company. For any such purchases or sales by IHAM or by vehicles managed by IHAM from or to the Company, approval is obtained from third parties unaffiliated with the Company or IHAM, as applicable.

        Beginning in November 2008, IHAM was party to a separate services agreement, referred to herein as the "services agreement," with Ares Capital Management. Pursuant to the services agreement, Ares Capital Management provided IHAM with office facilities, equipment, clerical, bookkeeping and record keeping services, services of investment professionals and others to perform investment advisory, research and related services, services of, and oversight of, custodians, depositories, accountants, attorneys, underwriters and such other persons in any other capacity deemed to be necessary. Under the services agreement, IHAM reimbursed Ares Capital Management for all of the actual costs associated with such services, including Ares Capital Management's allocable portion of overhead and the cost of its officers and respective staff in performing its obligations under the services

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agreement. The services agreement was terminated effective June 30, 2010 and replaced with a different services agreement with similar terms between IHAM and the Company's administrator.

        As part of the Allied Acquisition, the Company acquired the management rights for an unconsolidated vehicle, the AGILE Fund I, LLC ("AGILE Fund"), which had $62 million of total committed capital under management as of December 31, 2011. The Company's investment in AGILE Fund was $132 at fair value, including unrealized depreciation of $84 as of December 31, 2011.

15.   FINANCIAL HIGHLIGHTS

        The following is a schedule of financial highlights as of and for the years ended December 31, 2011, 2010 and 2009:

Per Share Data:
  As of and for
the year ended
December 31, 2011
  As of and for
the year ended
December 31, 2010
  As of and for
the year ended
December 31, 2009
 

Net asset value, beginning of period(1)

  $ 14.92   $ 11.44   $ 11.27  

Issuance of common stock

    0.00     0.95     (0.35 )

Issuances of the Convertible Notes

    0.27          

Net investment income for period(2)

    1.38     1.23     1.32  

Gain on the Allied Acquisition(2)

        1.11      

Net realized and unrealized gains (loss) for period(2)

    0.18     1.59     0.67  
               

Net increase in stockholders' equity

    1.83     4.88     1.64  

Distributions from net investment income

    (1.16 )   (1.40 )   (1.35 )

Distributions from net realized gains

    (0.25 )       (0.12 )
               

Total distributions to stockholders

    (1.41 )   (1.40 )   (1.47 )
               

Net asset value at end of period(1)

  $ 15.34   $ 14.92   $ 11.44  
               

Per share market value at end of period

  $ 15.45   $ 16.48   $ 12.45  

Total return based on market value(3)

    2.31 %   43.61 %   119.91 %

Total return based on net asset value(4)

    10.45 %   31.61 %   17.84 %

Shares outstanding at end of period

    205,130     204,419     109,945  

Ratio/Supplemental Data:

                   

Net assets at end of period

  $ 3,147,265   $ 3,050,533   $ 1,257,888  

Ratio of operating expenses to average net assets(5)(6)

    10.94 %   11.02 %   9.78 %

Ratio of net investment income to average net assets(5)(7)

    8.97 %   9.07 %   11.72 %

Portfolio turnover rate(5)

    53 %   45 %   26 %

(1)
The net assets used equals the total stockholders' equity on the consolidated balance sheets.

(2)
Weighted average basic per share data.

(3)
For the year ended December 31, 2011, the total return based on market value for the year ended December 31, 2011 equals the decrease of the ending market value at December 30, 2011 of $15.45 per share from the ending market value at December 31, 2010 of $16.48 per share plus the declared dividends of $1.41 per share for the year ended December 31, 2011, divided by the market value at December 31, 2010. For the year ended December 31, 2010, the total return based on market value for the year ended December 31, 2010 equals the increase of the ending market value at December 31, 2010 of $16.48 per share over the ending market value at December 31, 2009 of $12.45 per share plus the declared dividends of $1.40 per share for the year ended December 31, 2010, divided by the market value at December 31, 2009. For the year ended December 31, 2009, the total return based on market value for the year ended December 31, 2009 equals the increase of the ending market value at December 31, 2009 of $12.45 per share over the ending market value at December 31, 2008 of $6.33 per share plus the declared dividends of $1.47 per share for the year ended December 31, 2009, divided by the market value at December 31, 2008. Total return based on market value is

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(4)
For the year ended December 31, 2011, the total return based on net asset value equals the change in net asset value during the period plus the declared dividends of $1.41 per share for the year ended December 31, 2011 divided by the beginning net asset value for the period. For the year ended December 31, 2010, the total return based on net asset value equals the change in net asset value during the period plus the declared dividends of $1.40 per share for the year ended December 31, 2010 divided by the beginning net asset value for the period. For the year ended December 31, 2009, the total return based on net asset value equals the change in net asset value during the period plus the declared dividends of $1.47 per share for the year ended December 31, 2009 divided by the beginning net asset value for the period. These calculations are adjusted for shares issued in connection with the dividend reinvestment plan and the issuance of common stock in connection with any equity offerings. Total return based on net asset value is not annualized. The Company's performance changes over time and currently may be different than that shown. Past performance is no guarantee of future results.

(5)
The ratios reflect an annualized amount.

(6)
For the year ended December 31, 2011, the ratio of operating expenses to average net assets consisted of 2.27% of base management fees, 3.57% of incentive management fees, 3.89% of the cost of borrowing and other operating expenses of 1.21%. For the year ended December 31, 2010, the ratio of operating expenses to average net assets consisted of 2.19% of base management fees, 3.23% of incentive management fees, 3.34% of the cost of borrowing and other operating expenses of 2.27%. For the year ended December 31, 2009, the ratio of operating expenses to average net assets consisted of 2.67% of base management fees, 2.93% of incentive management fees, 2.13% of the cost of borrowing and other operating expenses of 2.05%. These ratios reflect annualized amounts.

(7)
The ratio of net investment income to average net assets excludes income taxes related to realized gains.

16.   SELECTED QUARTERLY DATA (Unaudited)

 
  2011  
 
  Q4   Q3   Q2   Q1  

Total investment income

  $ 187,123   $ 167,365   $ 144,307   $ 135,691  

Net investment income before net realized and unrealized gain (losses) and incentive compensation

  $ 121,990   $ 108,517   $ 85,509   $ 78,764  

Incentive compensation

  $ 29,531   $ 10,159   $ 41,746   $ 30,941  

Net investment income before net realized and unrealized gain (losses)

  $ 92,459   $ 98,358   $ 43,763   $ 47,823  

Net realized and unrealized gains (losses)

  $ 25,666   $ (57,719 ) $ (6,840 ) $ 75,943  

Net increase in stockholders' equity resulting from operations

  $ 118,125   $ 40,639   $ 36,923   $ 123,766  

Basic and diluted earnings per common share

  $ 0.58   $ 0.20   $ 0.18   $ 0.61  

Net asset value per share as of the end of the quarter

  $ 15.34   $ 15.13   $ 15.28   $ 15.45  

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  2010  
 
  Q4   Q3   Q2   Q1  

Total investment income

  $ 157,170   $ 138,126   $ 121,590   $ 66,510  

Net investment income before net realized and unrealized gain (losses) and incentive compensation

  $ 99,323   $ 89,025   $ 64,514   $ 39,849  

Incentive compensation

  $ 35,973   $ 17,805   $ 14,973   $ 8,144  

Net investment income before net realized and unrealized gain (losses)

  $ 63,350   $ 71,220   $ 49,541   $ 31,705  

Net realized and unrealized gains (losses)

  $ 93,538   $ 57,157   $ 280,613 (1) $ 44,710  

Net increase in stockholders' equity resulting from operations

  $ 156,888   $ 128,377   $ 330,154   $ 76,415  

Basic and diluted earnings per common share

  $ 0.79   $ 0.67   $ 1.73   $ 0.61  

Net asset value per share as of the end of the quarter

  $ 14.92   $ 14.43   $ 14.11   $ 11.78  

(1)
Includes gain on the Allied Acquisition of $195,876.

 
  2009  
 
  Q4   Q3   Q2   Q1  

Total investment income

  $ 69,264   $ 60,881   $ 59,111   $ 56,016  

Net investment income before net realized and unrealized gain (losses) and incentive compensation

  $ 47,920   $ 41,133   $ 39,935   $ 37,750  

Incentive compensation

  $ 9,568   $ 8,227   $ 7,987   $ 7,550  

Net investment income before net realized and unrealized gain (losses)

  $ 38,352   $ 32,906   $ 31,948   $ 30,200  

Net realized and unrealized gains (losses)

  $ 31,278   $ 30,370   $ 2,805   $ 4,834  

Net increase in stockholders' equity resulting from operations

  $ 69,630   $ 63,276   $ 34,753   $ 35,034  

Basic and diluted earnings per common share

  $ 0.64   $ 0.62   $ 0.36   $ 0.36  

Net asset value per share as of the end of the quarter

  $ 11.44   $ 11.16   $ 11.21   $ 11.20  

17.   ALLIED ACQUISITION

        On April 1, 2010, the Company completed the Allied Acquisition by acquiring the outstanding shares of Allied Capital in exchange for shares of our common stock in a transaction valued at approximately $908 million as of the closing date. Concurrently with the completion of the Allied Acquisition, we repaid in full the $137 million of remaining principal amounts outstanding on Allied Capital's $250 million senior secured term loan. We also assumed all of Allied Capital's other outstanding debt obligations, including approximately $745 million in aggregate principal amount outstanding of the Allied Unsecured Notes.

        Under the terms of the Allied Acquisition each Allied Capital stockholder received 0.325 shares of our common stock for each share of Allied Capital common stock then owned by such stockholder. In connection with the Allied Acquisition, approximately 58.5 million shares of our common stock (including the effect of outstanding in-the money Allied Capital stock options) were issued to Allied Capital's then-existing stockholders, resulting in our then-existing stockholders owning approximately 69% of the combined company and the then-existing Allied Capital stockholders owning approximately 31% of the combined company.

        The Allied Acquisition was accounted for in accordance with the acquisition method of accounting as detailed in ASC 805-10 (previously SFAS No. 141(R)), Business Combinations. The acquisition method of accounting requires an acquirer to recognize the assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity based on their fair values as of the date of acquisition. As described in more detail in ASC 805-10, if the total acquisition date fair value of the

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identifiable net assets acquired exceeds the fair value of the consideration transferred, the excess will be recognized as a gain. Upon completion of our determination of the fair value of Allied Capital's identifiable net assets as of April 1, 2010, the fair value of such net assets exceeded the fair value of the consideration transferred, resulting in the recognition of a gain. The valuation of the investments acquired as part of the Allied Acquisition was done in accordance with Ares Capital's valuation policy (see Notes 2 and 8).

        Set forth below is the allocation of the purchase price to the assets acquired and liabilities assumed in connection with the Allied Acquisition:

Common stock issued

  $ 872,727  

Payments to holders of "in-the-money" Allied Capital stock options

    35,011 (1)
       

Total purchase price

  $ 907,738  
       

Assets acquired:

       

Investments

  $ 1,833,766  

Cash and cash equivalents

    133,548  

Other assets

    80,078  
       

Total assets acquired

    2,047,392  

Debt and other liabilities assumed

    (943,778 )
       

Net assets acquired

    1,103,614  
       

Gain on Allied Acquisition

    (195,876 )
       

  $ 907,738  
       

(1)
Represents cash payment for holders of any "in-the-money" Allied Capital stock options that elected to receive cash.

        The following pro forma condensed combined financial information does not purport to be indicative of actual financial position or results of our operations had the Allied Acquisition actually been consummated at the beginning of each period presented. Certain one-time charges have been eliminated. For year ended December 31, 2010, we recognized $19,833 in professional fees and other costs related to the Allied Acquisition. The pro forma adjustments reflecting the allocation of the purchase price of Allied Capital and the gain of $195,876 recognized on the Allied Acquisition have been eliminated from all periods presented. The pro forma condensed combined financial information does not reflect the potential impact of possible synergies and does not reflect any impact of additional accretion which would have been recognized on the transaction, except for that which was recorded after the transaction was consummated on April 1, 2010.

 
  Year Ended December 31,  
 
  2010   2009  

Total investment income

  $ 537,488   $ 563,958  

Net investment income

  $ 238,982   $ 184,641  

Net increase (decrease) in stockholders' equity resulting from operations

  $ 479,979   $ (323,133 )

Net increase (decrease) in stockholders' equity resulting from operations per share

  $ 2.51   $ (2.02 )

        Prior to the completion of the Allied Acquisition we purchased $340 million of assets from Allied Capital in arm's length transactions. Additionally, during the same period of time, IHAM purchased $69 million of assets from Allied Capital, also in arm's length transactions.

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18.   LITIGATION

        The Company is party to certain lawsuits in the normal course of business. In addition, Allied Capital was involved in various legal proceedings which the Company assumed in connection with the Allied Acquisition. Furthermore, third parties may try to seek to impose liability on the Company in connection with the activities of its portfolio companies. While the outcome of any such legal proceedings cannot at this time be predicted with certainty, the Company does not expect that these legal proceedings will materially affect its business, financial condition or results of operations.

19.   SUBSEQUENT EVENTS

        The Company's management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-K or would be required to be recognized in the Consolidated Financial Statements as of and for the year ended December 31, 2011, except as disclosed below.

        In January 2012, Ares Capital and Ares Capital CP amended the Revolving Funding Facility to, among other things, (i) extend the reinvestment period by one year to January 18, 2015, (ii) extend the maturity date by one year to January 18, 2017, and (iii) replace the pricing grid with an applicable spread over LIBOR of 2.50% and an applicable spread over "base rate" of 1.50%.

        In January 2012, we established, through our wholly owned subsidiary Ares Capital JB Funding LLC ("ACJB LLC"), a revolving funding facility (the "SMBC Funding Facility") by entering into a Loan and Servicing Agreement (the "SMBC Loan and Servicing Agreement") with ACJB LLC, as the borrower, Sumitomo Mitsui Banking Corporation ("SMBC"), as the administrative agent, collateral agent, and lender, pursuant to which SMBC has agreed to extend credit to ACJB LLC in an aggregate principal amount up to $200 million at any one time outstanding. In connection with the SMBC Funding Facility, we entered into a Purchase and Sale Agreement with ACJB LLC, pursuant to which we may sell ACJB LLC certain first lien loans we have originated or acquired, or will originate or acquire (the "SMBC Loans") from time to time. The SMBC Funding Facility is a revolving funding facility with a reinvestment period ending January 20, 2015 and a final maturity date of January 20, 2020. The reinvestment period and final maturity are both subject to two one-year extensions by mutual agreement. Subject to certain exceptions, the interest rate charged on the SMBC Funding Facility is based on LIBOR plus 2.125% (with no floor) or a "base rate" (which is the greater of a prime rate and the federal funds rate plus 0.50%) plus 1.125% (with no floor). The SMBC Loan and Servicing Agreement includes usual and customary events of default for revolving funding facilities of this nature, including allowing SMBC, upon a default, to accelerate and foreclose on the SMBC Loans and to pursue the rights under the SMBC Loans directly with the obligors thereof.

        In January 2012, we completed a public add-on equity offering (the "January 2012 Offering") through which we sold 16,422 shares of common stock at a net price of $15.41 per share. Total proceeds from the January 2012 Offering, net of underwriting discounts and commissions and estimated offering expenses payable by us, were approximately $252.5 million.

        In February 2012, we issued $143,750 aggregate principal amount of senior unsecured notes that mature on February 15, 2022 (the "2022 Notes"). The 2022 Notes mature on February 15, 2022 and may be redeemed in whole or in part at any time or from time to time at our option on or after February 15, 2015 at a par redemption price of $25 per security plus accrued and unpaid interest. The principal amount of the 2022 Notes will be payable at maturity. The 2022 Notes bear interest at a rate of 7.00% per year payable quarterly commencing on May 15, 2012. Total proceeds from the issuance of the 2022 Notes, net of underwriting discounts and offering costs, were approximately $138,338.

        We used the net proceeds of the January 2012 Offering and the issuance of the 2022 Notes to repay outstanding indebtedness under the Revolving Credit Facility and the Revolving Funding Facility.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)

 
  As of  
 
  June 30, 2012   December 31, 2011  
 
  (unaudited)
   
 

ASSETS

             

Investments at fair value

             

Non-controlled/non-affiliate investments

  $ 3,461,544   $ 3,060,084  

Non-controlled affiliate company investments

    329,333     267,324  

Controlled affiliate company investments

    1,713,936     1,767,098  
           

Total investments at fair value (amortized cost of $5,438,184 and $5,108,663, respectively)

    5,504,813     5,094,506  

Cash and cash equivalents

    101,265     120,782  

Interest receivable

    101,135     99,078  

Receivable for open trades

    304     550  

Other assets

    99,961     72,521  
           

Total assets

  $ 5,807,478   $ 5,387,437  
           

LIABILITIES

             

Debt

  $ 2,194,808   $ 2,073,602  

Management and incentive fees payable

    98,202     92,496  

Accounts payable and other liabilities

    38,970     47,691  

Interest and facility fees payable

    28,999     26,383  
           

Total liabilities

    2,360,979     2,240,172  
           

Commitments and contingencies (Note 6)

             

STOCKHOLDERS' EQUITY

             

Common stock, par value $.001 per share, 400,000 common shares authorized 222,151 and 205,130 common shares issued and outstanding, respectively

    222     205  

Capital in excess of par value

    3,657,160     3,390,354  

Accumulated overdistributed net investment income

    (9,578 )   (10,449 )

Accumulated net realized loss on investments, foreign currency transactions, extinguishment of debt and other assets

    (267,934 )   (218,688 )

Net unrealized gain (loss) on investments

    66,629     (14,157 )
           

Total stockholders' equity

    3,446,499     3,147,265  
           

Total liabilities and stockholders' equity

  $ 5,807,478   $ 5,387,437  
           

NET ASSETS PER SHARE

  $ 15.51   $ 15.34  
           

   

See accompanying notes to consolidated financial statements.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)

 
  For the three months ended   For the six months ended  
 
  June 30, 2012   June 30, 2011   June 30, 2012   June 30, 2011  
 
  (unaudited)
  (unaudited)
  (unaudited)
  (unaudited)
 

INVESTMENT INCOME:

                         

From non-controlled/non-affiliate company investments:

                         

Interest

  $ 77,097   $ 60,435   $ 149,360   $ 122,242  

Capital structuring service fees

    12,568     13,082     20,445     18,500  

Dividend income

    3,518     521     7,320     2,036  

Management and other fees

    332     474     660     628  

Other income

    4,471     880     7,215     2,116  
                   

Total investment income from non-controlled/non-affiliate company investments

    97,986     75,392     185,000     145,522  

From non-controlled affiliate company investments:

                         

Interest

    5,762     8,759     10,259     18,891  

Capital structuring service fees

    895         895      

Dividend income

    323     1,255     639     3,631  

Management and other fees

    63     188     126     376  

Other income

    265     62     294     638  
                   

Total investment income from non-controlled affiliate company investments

    7,308     10,264     12,213     23,536  

From controlled affiliate company investments:

                         

Interest

    55,183     42,079     111,308     80,700  

Capital structuring service fees

    7,804     7,113     17,587     12,706  

Dividend income

    5,097     4,901     10,198     9,801  

Management and other fees

    4,117     3,939     8,658     7,046  

Other income

    60     619     329     687  
                   

Total investment income from controlled affiliate company investments

    72,261     58,651     148,080     110,940  
                   

Total investment income

    177,555     144,307     345,293     279,998  
                   

EXPENSES:

                         

Interest and credit facility fees

    35,018     28,593     67,794     58,768  

Incentive fees

    22,733     41,746     49,119     72,687  

Base management fees

    20,811     17,414     40,797     34,144  

Professional fees

    3,548     5,514     7,234     8,146  

Administrative fees

    2,217     2,459     4,537     4,884  

Other general and administrative

    2,474     2,911     5,275     5,829  
                   

Total expenses

    86,801     98,637     174,756     184,458  

NET INVESTMENT INCOME BEFORE INCOME TAXES

   
90,754
   
45,670
   
170,537
   
95,540
 
                   

Income tax expense, including excise tax

    2,853     1,907     5,598     3,954  
                   

NET INVESTMENT INCOME

    87,901     43,763     164,939     91,586  
                   

REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:

                         

Net realized gains (losses):

                         

Non-controlled/non-affiliate company investments

    (35,040 )   (14,223 )   (34,578 )   58,189  

Non-controlled affiliate company investments

    68     1,580     71     (2,016 )

Controlled affiliate company investments

    (3,925 )   6,269     (12,061 )   22  
                   

Net realized gains (losses)

    (38,897 )   (6,374 )   (46,568 )   56,195  

Net unrealized gains (losses):

                         

Non-controlled/non-affiliate company investments

    33,192     (7,372 )   39,209     (20,426 )

Non-controlled affiliate company investments

    4,038     (9,453 )   14,131     (2,906 )

Controlled affiliate company investments

    7,376     26,817     27,446     55,558  
                   

Net unrealized gains

    44,606     9,992     80,786     32,226  
                   

Net realized and unrealized gains from investments

    5,709     3,618     34,218     88,421  

REALIZED LOSS ON EXTINGUISHMENT OF DEBT

   
(2,678

)
 
(10,458

)
 
(2,678

)
 
(19,318

)
                   

NET INCREASE IN STOCKHOLDERS' EQUITY RESULTING FROM OPERATIONS

  $ 90,932   $ 36,923   $ 196,479   $ 160,689  
                   

BASIC AND DILUTED EARNINGS PER COMMON SHARE (Note 9)

  $ 0.41   $ 0.18   $ 0.90   $ 0.79  
                   

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING—BASIC AND DILUTED (Note 9)

    221,878     204,752     219,461     204,586  
                   

See accompanying notes to consolidated financial statements.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Investment Funds and Vehicles                                  
AGILE Fund I, LLC(7)(9)   Investment partnership   Member interest (0.50% interest)         4/1/2010   $ 201   $ 111 (2)      
                                       
CIC Flex, LP(9)   Investment partnership   Limited partnership units (0.94 unit)         9/7/2007     2,409     3,608 (2)      
                                       
Covestia Capital Partners, LP(9)   Investment partnership   Limited partnership interest (47.00% interest)         6/17/2008     1,059     1,135 (2)      
                                       
Dynamic India Fund IV, LLC(9)   Investment company   Member interest (5.44% interest)         4/1/2010     4,822     3,509 (2)      
                                       
Firstlight Financial Corporation(6)(9)   Investment company   Senior subordinated loan ($56,570 par due 12/2016)   5.00% PIK     12/31/2006     56,358     63,517 (2)      
        Class A common stock (10,000 shares)         12/31/2006     10,000     (2)      
        Class B common stock (30,000 shares)         12/31/2006     30,000     (2)      
                                   
                        96,358     63,517        
                                       
HCI Equity, LLC(7)(8)(9)   Investment company   Member interest (100.00% interest)         4/1/2010     633     534 (2)      
                                       
Imperial Capital Private Opportunities, LP(9)   Investment partnership   Limited partnership interest (80.00% interest)         5/10/2007     6,531     5,000 (2)      
                                       
Ivy Hill Middle Market Credit Fund, Ltd.(7)(8)(9)   Investment company   Subordinated notes ($16 par due 11/2018)   15.00%     11/20/2007     15,515     16,480        
        Class B deferrable interest notes ($25,000 par due 11/2018)   6.49%
(Libor + 6.00%/Q)
    11/20/2007     25,000     23,750        
                                   
                        40,515     40,230        
                                       
Kodiak Funding, LP(9)   Investment partnership   Limited partnership interest (1.52% interest)         4/1/2010     850     695        
                                       
Novak Biddle Venture Partners III, L.P.(9)   Investment partnership   Limited partnership interest (2.47% interest)         4/1/2010     83     179 (2)      
                                       
Partnership Capital Growth Fund I, L.P.(9)   Investment partnership   Limited partnership interest (25.00% interest)         6/16/2006     1,721     4,266 (2)      
                                       
Partnership Capital Growth Fund III, L.P.(9)   Investment partnership   Limited partnership interest (2.50% interest)         10/5/2011     1,413     1,270 (2)      
                                       
Senior Secured Loan Fund LLC(7)(10)(18)   Co-investment vehicle   Subordinated certificates ($1,110,027 par due 12/2020)   8.47%
(Libor + 8.00%/Q)
    10/30/2009     1,099,476     1,125,812        
                                       
VSC Investors LLC(9)   Investment company   Membership interest (1.95% interest)         1/24/2008     1,398     1,531 (2)      
                                   
                        1,257,469     1,251,397     36.31 %
                                   
                                       
Healthcare—Services                                  
CCS Group Holdings, LLC   Correctional facility healthcare operator   Class A units (601,937 units)         8/19/2010     602     1,054 (2)      
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings LLC(6)   Healthcare analysis services   Senior secured loan ($7,209 par due 3/2017)   7.75%
(Libor + 6.50%/Q)
    3/15/2011     7,209     6,776 (3)(17)      
        Senior secured loan ($7,604 par due 3/2017)   7.75%
(Libor + 6.50%/Q)
    3/15/2011     7,604     7,148 (2)(17)      
        Class A common stock (9,679 shares)         6/15/2007     4,000     5,276 (2)      
        Class C common stock (1,546 shares)         6/15/2007         843 (2)      
                                   
                        18,813     20,043        
                                       
INC Research, Inc.   Pharmaceutical and biotechnology consulting services   Common stock (1,410,000 shares)         9/27/2010     1,512     1,024 (2)      
                                       
Magnacare Holdings, Inc., Magnacare Administrative Services, LLC, and Magnacare, LLC   Healthcare professional provider   Senior secured loan ($15,573 par due 3/2018)   9.75%
(Libor + 8.75%/Q)
    9/15/2010     15,573     15,573 (2)(17)      
        Senior secured loan ($43,616 par due 3/2018)   9.75%
(Libor + 8.75%/Q)
    9/15/2010     43,616     43,616 (3)(17)      
        Senior secured loan ($4,956 par due 3/2018)   9.75%
(Libor + 8.75%/Q)
    9/15/2010     4,956     4,956 (4)(17)      
                                   
        Senior secured loan ($56,301 par due 3/2018)   9.75%
(Libor + 8.75%/Q)
    3/16/2012     56,301     56,301 (2)(17)      
        Senior secured loan ($15,859 par due 3/2018)   9.75%
(Libor + 8.75%/Q)
    3/16/2012     15,859     15,859 (3)(17)      
                                   
                        136,305     136,305        
                                       
MW Dental Holding Corp.   Dental services   Senior secured revolving loan ($1,000 par due 4/2017)   8.50%
(Libor + 7.00%/M)
    4/12/2011     1,000     1,000 (2)(17)      
        Senior secured loan ($45,563 par due 4/2017)   8.50%
(Libor + 7.00%/M)
    4/12/2011     45,563     45,563 (2)(17)      
        Senior secured loan ($49,501 par due 4/2017)   8.50%
(Libor + 7.00%/M)
    4/12/2011     49,501     49,501 (3)(17)      
        Senior secured loan ($9,950 par due 4/2017)   8.50%
(Libor + 7.00%/M)
    4/12/2011     9,950     9,950 (4)(17)      
                                   
                        106,014     106,014        
                                       
Napa Management Services Corporation   Anesthesia management services provider   Senior secured revolving loan ($600 par due 4/2016)   7.50%
(Libor + 6.00%/M)
    4/15/2011     600     600 (2)(17)      
        Senior secured revolving loan ($75 par due 4/2016)   8.25%
(Base Rate + 5.00%/Q)
    4/15/2011     75     75 (2)(17)      
        Senior secured loan ($21,966 par due 4/2016)   7.50%
(Libor + 6.00%/M)
    4/15/2011     21,668     21,966 (2)(17)      
        Senior secured loan ($28,875 par due 4/2016)   7.50%
(Libor + 6.00%/Q)
    4/15/2011     28,875     28,875 (3)(17)      
        Common units (5,000 units)         4/15/2011     5,000     5,692 (2)      
                                   
                        56,218     57,208        
                                       
NS Merger Sub. Inc. and NS Holdings, Inc.   Healthcare technology provider   Senior subordinated loan ($579 par due 6/2017)   13.50%     6/21/2010     579     579 (2)      
        Senior subordinated loan ($50,000 par due 6/2017)   13.50%     6/21/2010     50,000     50,000 (3)      
        Common stock (2,500,000 shares)         6/21/2010     2,500     3,015 (2)      
                                   
                        53,079     53,594        
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
OnCURE Medical Corp.   Radiation oncology care provider   Common stock (857,143 shares)         8/18/2006     3,000     707 (2)      
                                       
Passport Health Communications, Inc., Passport Holding Corp. and Prism Holding Corp.   Healthcare technology provider   Series A preferred stock (1,594,457 shares)         7/30/2008     11,156     10,144 (2)      
        Common stock (16,106 shares)         7/30/2008     100     (2)      
                                   
                        11,256     10,144        
                                       
PG Mergersub, Inc. and PGA Holdings, Inc.   Provider of patient surveys, management reports and national databases for the integrated healthcare delivery system   Junior secured loan ($45,000 par due 10/2018)   8.25%
(Libor + 7.00%/S)
    4/19/2012     45,000     45,000 (2)(17)      
        Preferred stock (333 shares)         3/12/2008     125     16 (2)      
        Common stock (16,667 shares)         3/12/2008     167     786 (2)      
                                   
                        45,292     45,802        
                                       
PRA Holdings, Inc.   Drug testing services   Senior secured loan ($11,330 par due 12/2014)   4.25%
(Libor + 4.00%/M)
    12/14/2007     11,081     11,103 (4)      
        Senior secured loan ($12,000 par due 12/2014)   4.25%
(Libor + 4.00%/M)
    12/14/2007     11,732     11,760 (2)      
                                   
                        22,813     22,863        
                                       
RCHP, Inc.   Operator of general acute care hospitals   Junior secured loan ($15,000 par due 5/2019)   11.50%
(Libor + 10.00%/Q)
    11/4/2011     15,000     15,000 (2)(17)      
        Junior secured loan ($50,000 par due 5/2019)   11.50%
(Libor + 10.00%/Q)
    11/4/2011     50,000     50,000 (3)(17)      
                                   
                        65,000     65,000        
                                       
Reed Group, Ltd.   Medical disability management services provider   Senior secured revolving loan ($1,482 par due 12/2013)         4/1/2010     1,080     1,260 (2)(16)      
        Senior secured loan ($12,753 par due 12/2013)         4/1/2010     9,285     10,840 (2)(16)      
        Senior secured loan ($27,528 par due 12/2013)         4/1/2010     16,658     1,533 (2)(16)      
        Equity interests         4/1/2010     203     (2)      
                                   
                        27,226     13,633        
                                       
Respicardia, Inc.   Developer of implantable therapies to improve cardiovascular health   Senior secured loan ($6,000 par due 7/2015)   11.00% (11.00%/Q)     6/28/2012     5,962     6,000 (2)      
        Warrants to purchase up to 99,094 shares of series C preferred stock         6/28/2012     38     38 (2)      
                                   
                        6,000     6,038        
                                       
Soteria Imaging Services, LLC(6)   Outpatient medical imaging provider   Junior secured loan ($2,809 par due 11/2010)         4/1/2010     2,326     1,683 (2)(16)      
        Preferred member units (1,823,179 units)         4/1/2010         (2)      
                                   
                        2,326     1,683        
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Sunquest Information Systems, Inc.   Laboratory software solutions provider   Junior secured loan ($67,000 par due 6/2017)   9.75%
(Libor + 8.50%/Q)
    12/16/2010     67,000     67,000 (2)(17)      
        Junior secured loan ($58,000 par due 6/2017)   9.75%
(Libor + 8.50%/Q)
    12/16/2010     58,000     58,000 (3)(17)      
                                   
                        125,000     125,000        
                                       
U.S. Renal Care, Inc.   Dialysis provider   Senior secured loan ($7,406 par due 12/2016)   6.25%
(Libor + 3.00%/Q)
    6/9/2011     7,369     7,406 (2)(17)      
        Senior subordinated loan ($51,081 par due 6/2018)   11.25% Cash, 2.00% PIK     5/24/2010     51,081     53,124 (3)      
                        58,450     60,530        
                                       
Vantage Oncology, Inc.   Radiation oncology care provider   Common stock (62,157 shares)         2/3/2011     4,670     4,560 (2)      
                                   
                        743,576     731,202     21.22 %
                                   
                                       
Education                                  
American Academy Holdings, LLC   Provider of education, training, certification, networking, and consulting services to medical coders and other healthcare professionals   Senior secured loan ($16,177 par due 3/2016)   9.50%
(Libor + 8.50%/Q)
    3/18/2011     16,177     16,177 (2)(17)      
        Senior secured loan ($54,633 par due 3/2016)   9.50%
(Libor + 8.50%/Q)
    3/18/2011     54,633     54,633 (3)(17)      
        Senior secured loan ($4,927 par due 3/2016)   9.50%
(Libor + 8.50%/Q)
    3/18/2011     4,927     4,927 (4)(17)      
                                   
                        75,737     75,737        
                                       
Campus Management Corp. and Campus Management Acquisition Corp.(6)   Education software developer   Preferred stock (485,159 shares)         2/8/2008     10,520     13,330 (2)      
                                       
Community Education Centers, Inc.   Offender re-entry and in-prison treatment services provider   Senior secured loan ($16,429 par due 12/2014)   6.25%
(Libor + 5.25%/Q)
    12/10/2010     16,429     16,429 (2)(15)(17)      
        Senior secured loan ($714 par due 12/2014)   7.50%
(Base Rate + 4.25%/M)
    12/10/2010     714     714 (2)(15)(17)      
        Junior secured loan ($42,263 par due 12/2015)   15.47%
(Libor + 11.47% Cash, 4.00% PIK /Q)
    12/10/2010     42,263     38,036 (2)      
        Warrants to purchase up to 578,427 shares         12/10/2010         (2)      
                                   
                        59,406     55,179        
                                       
eInstruction Corporation   Developer, manufacturer and retailer of educational products   Junior secured loan ($17,000 par due 7/2014)         4/1/2010     15,257     372 (2)(16)      
        Senior subordinated loan ($29,545 par due 1/2015)         4/1/2010     24,151     (2)(16)      
        Common stock (2,406 shares)         4/1/2010     926     (2)      
                                   
                        40,334     372        
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
ELC Acquisition Corp., ELC Holdings Corporation, and Excelligence Learning Corporation(6)   Developer, manufacturer and retailer of educational products   Preferred stock (99,492 shares)   12.00% PIK     8/1/2011     10,149     8,934 (2)      
        Common stock (50,800 shares)         8/1/2011     51     (2)      
                                   
                        10,200     8,934        
                                       
Infilaw Holding, LLC   Operator of for-profit law schools   Senior secured loan ($28,847 par due 8/2016)   9.50%
(Libor + 8.50%/Q)
    8/25/2011     28,847     28,847 (3)(17)      
        Series A preferred units (126,928 units)   9.50%
(Libor + 8.50%/Q)
    8/25/2011     126,928     126,928 (2)(17)      
                                   
                        155,775     155,775        
                                       
Instituto de Banca y Comercio, Inc. & Leeds IV Advisors, Inc.   Private school operator   Series B preferred stock (1,750,000 shares)         8/5/2010     5,000     6,628 (2)      
        Series C preferred stock (2,512,586 shares)         6/7/2010     689     949 (2)      
        Common stock (20 shares)         6/7/2010         (2)      
                                   
                        5,689     7,577        
                                       
Lakeland Tours, LLC   Educational travel provider   Senior secured revolving loan ($13,875 par due 12/2016)   6.00%
(Libor + 4.50%/S)
    10/4/2011     13,875     13,875 (2)(17)      
        Senior secured revolving loan ($7,875 par due 12/2016)   6.75%
(Base Rate + 3.50%/Q)
    10/4/2011     7,875     7,875 (2)(17)      
        Senior secured loan ($10,512 par due 12/2016)   6.00%
(Libor + 4.50%/M)
    10/4/2011     10,481     10,512 (2)(14)(17)      
        Senior secured loan ($53,765 par due 12/2016)   10.00%
(Libor + 8.50%/M)
    10/4/2011     53,608     53,765 (2)(17)      
        Senior secured loan ($9,303 par due 12/2016)   6.00%
(Libor + 4.50%/M)
    10/4/2011     9,275     9,303 (3)(14)(17)      
        Senior secured loan ($40,362 par due 12/2016)   10.00%
(Libor + 8.50%/M)
    10/4/2011     40,243     40,362 (3)(17)      
        Senior secured loan ($1,861 par due 12/2016)   6.00%
(Libor + 4.50%/M)
    10/4/2011     1,855     1,861 (4)(14)(17)      
        Senior secured loan ($8,072 par due 12/2016)   10.00%
(Libor + 8.50%/M)
    10/4/2011     8,048     8,072 (4)(17)      
        Common stock (5,000 shares)         10/4/2011     5,000     4,750 (2)      
                                   
                        150,260     150,375        
                                       
R3 Education, Inc. and EIC Acquisitions Corp.   Medical school operator   Senior secured loan ($3,442 par due 4/2013)   9.00%
(Libor + 6.00%/Q)
    9/21/2007     3,442     8,688 (2)(17)      
        Senior secured loan ($6,940 par due 4/2013)   13.00% PIK     12/8/2009     5,168     17,516 (2)      
        Preferred stock (8,800 shares)         7/30/2008     2,200     1,760 (2)      
        Common membership interest (26.27% interest)         9/21/2007     15,800     25,156 (2)      
        Warrants to purchase up to 27,890 shares         12/8/2009         (2)      
                                   
                        26,610     53,120        
                                   
                        534,531     520,399     15.10 %
                                   
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Restaurants and Food Services                                  
ADF Capital, Inc. & ADF Restaurant Group, LLC   Restaurant owner and operator   Senior secured revolving loan ($1,868 par due 11/2013)   6.50%
(Libor + 3.50%/Q)
    11/27/2006     1,868     1,868 (2)(17)      
        Senior secured loan ($7,060 par due 11/2013)   6.50%
(Libor + 3.50%/Q)
    11/27/2006     7,060     7,060 (2)(17)      
        Senior secured loan ($11,200 par due 11/2014)   12.50%
(Libor + 9.50%/Q)
    11/27/2006     11,203     11,200 (3)(17)      
        Senior secured loan ($9,338 par due 11/2014)   12.50%
(Libor + 9.50%/Q)
    11/27/2006     9,338     9,338 (2)(17)      
        Promissory note ($14,897 par due 11/2016)         11/27/2006     14,887     17,724 (2)      
        Warrants to purchase up to 0.61 shares         6/1/2006         1,897 (2)      
                                   
                        44,356     49,087        
                                       
Hojeij Branded Foods, Inc.   Airport restaurant operator   Senior secured loan ($4,000 par due 2/2017)   10.25%
(Base Rate + 7.00%/Q)
    2/15/2012     4,000     3,920 (2)(17)      
        Senior secured loan ($15,000 par due 2/2017)   9.00%
(Libor + 8.00%/Q)
    2/15/2012     14,370     14,700 (2)(17)      
        Warrants to purchase up to 324 shares of Class A common stock         2/15/2012     669     808 (2)      
        Warrants to purchase up to 7.5% of membership interest         2/15/2012         (2)      
                                   
                        19,039     19,428        
                                       
Orion Foods, LLC (fka Hot Stuff Foods, LLC)(7)   Convenience food service retailer   Senior secured revolving loan ($9,800 par due 9/2014)   10.75%
(Base Rate + 7.50%/M)
    4/1/2010     9,800     9,800 (2)(17)      
        Senior secured loan ($33,697 par due 9/2014)   10.00%
(Libor + 8.50%/Q)
    4/1/2010     33,697     33,697 (3)(17)      
        Junior secured loan ($37,552 par due 9/2014)   14.00%     4/1/2010     26,397     20,370 (2)      
        Preferred units (10,000 units)         10/28/2010         (2)      
        Class A common units (25,001 units)         4/1/2010         (2)      
        Class B common units (1,122,452 units)         4/1/2010         (2)      
                                   
                        69,894     63,867        
                                       
OTG Management, Inc.   Airport restaurant operator   Senior secured revolving loan ($937 par due 8/2016)   8.50%
(Libor + 7.00%/Q)
    8/9/2011     937     937 (2)(17)      
        Senior secured loan ($22,437 par due 8/2016)   8.50%
(Libor + 7.00%/Q)
    8/9/2011     22,437     22,437 (2)(17)      
        Junior secured loan ($29,285 par due 8/2016)   14.50%
(Libor + 13.00%/M)
    8/9/2011     29,285     29,285 (2)(17)      
        Junior secured loan ($2,143 par due 8/2016)   14.50%
(Libor + 13.00%/M)
    8/9/2011     2,143     2,143 (2)(17)      
        Junior secured loan ($6,000 par due 8/2016)   15.25%
(Base Rate + 12.00%/Q)
    8/9/2011     6,000     6,000 (2)(17)      
        Common units (3,000,000 units)         1/5/2011     3,000     2,801 (2)      
        Warrants to purchase up to 189,857 shares of common stock         6/19/2008     100     4,877 (2)      
                                   
                        63,902     68,480        
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Restaurant Holding Company, LLC   Fast food restaurant operator   Senior secured loan ($1,903 par due 2/2017)   9.75%
(Base Rate + 6.50%/Q)
    2/15/2012     1,867     1,903 (2)(17)      
        Senior secured loan ($51,097 par due 2/2017)   9.00%
(Libor + 7.50%/M)
    2/15/2012     50,148     51,097 (2)(17)      
        Senior secured loan ($431 par due 2/2017)   9.75%
(Base Rate + 6.50%/Q)
    2/15/2012     422     431 (3)(17)      
        Senior secured loan ($11,569 par due 2/2017)   9.00%
(Libor + 7.50%/M)
    2/15/2012     11,345     11,569 (3)(17)      
        Senior secured loan ($359 par due 2/2017)   9.75%
(Base Rate + 6.50%/Q)
    2/15/2012     352     359 (4)(17)      
        Senior secured loan ($9,641 par due 2/2017)   9.00%
(Libor + 7.50%/M)
    2/15/2012     9,457     9,641 (4)(17)      
                                   
                        73,591     75,000        
                                       
S.B. Restaurant Company   Restaurant owner and operator   Senior secured loan ($34,173 par due 7/2012)   13.00%
(Libor + 11.00% Cash, 2.00% PIK /Q)
    4/1/2010     33,899     34,173 (2)(17)      
        Preferred stock (46,690 shares)         4/1/2010         (2)      
        Warrants to purchase up to 257,429 shares of common stock         4/1/2010         (2)      
                                   
                        33,899     34,173        
                                       
Vistar Corporation and Wellspring Distribution Corp.   Food service distributor   Junior secured loan ($50,250 par due 5/2015)   11.00%     5/23/2008     49,402     50,250 (2)      
        Junior secured loan ($50,000 par due 5/2015)   11.00%     5/23/2008     49,653     50,000 (3)      
        Class A non-voting common stock (1,366,120 shares)         5/3/2008     7,500     7,247 (2)      
                                   
                        106,555     107,497        
                                   
                        411,236     417,532     12.12 %
                                   
                                       
Business Services                                  
Aviation Properties Corporation(7)   Aviation services   Common stock (100 shares)         4/1/2010         (2)      
                                       
Cast & Crew Payroll, LLC   Payroll services provider to the entertainment industry   Senior secured loan ($70,000 par due 6/2017)   8.50%
(Libor + 7.00%/Q)
    6/13/2012     70,000     70,000 (2)(17)      
        Senior secured loan ($10,000 par due 6/2017)   8.50%
(Libor + 7.00%/Q)
    6/13/2012     10,000     10,000 (4)(17)      
                                   
                        80,000     80,000        
                                       
CIBT Investment Holdings, LLC   Expedited travel document processing services   Class A shares (2,500 shares)         12/15/2011     2,500     2,886 (2)      
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
CitiPostal Inc.(7)   Document storage and management services   Senior secured revolving loan ($1,400 par due 12/2013)   6.75%
(Base Rate + 3.25%/Q)
    4/1/2010     1,400     1,400 (2)(17)      
        Senior secured loan ($513 par due 12/2013)   8.50% Cash, 5.50% PIK     4/1/2010     513     513 (2)      
        Senior secured loan ($52,594 par due 12/2013)   8.50% Cash, 5.50% PIK     4/1/2010     52,594     52,594 (3)      
        Senior subordinated loan ($15,911 par due 12/2015)         4/1/2010     13,038     2,109 (2)(16)      
        Common stock (37,024 shares)         4/1/2010                
                                   
                        67,545     56,616        
                                       
Cornerstone Records Management, LLC   Physical records storage and management service provider   Senior secured loan ($18,573 par due 8/2016)   8.50%
(Libor + 7.00%/M)
    8/12/2011     18,573     18,202 (2)(17)      
                                       
Coverall North America, Inc.   Commercial janitorial service provider   Subordinated notes ($9,529 par due 2/2016)   10.00% Cash, 2.00% PIK     2/22/2011     9,529     9,529 (2)      
                                       
Diversified Collections Services, Inc.   Collections services   Common stock (478,816 shares)         4/1/2010     1,478     4,319 (2)      
        Common stock (128,931 shares)         2/5/2005     306     1,163 (2)      
                                   
                        1,784     5,482        
                                       
HCP Acquisition Holdings, LLC(7)   Healthcare compliance advisory services   Class A units (12,287,082 units)         6/26/2008     12,287     3,437 (2)      
                                       
Impact Innovations Group, LLC   IT consulting and outsourcing services   Member interest (50.00% interest)         4/1/2010         200        
                                       
Investor Group Services, LLC(6)   Business consulting for private equity and corporate clients   Limited liability company membership interest (10.00% interest)         6/22/2006         1,009        
                                       
Itel Laboratories, Inc.   Data services provider for building materials to property insurance industry   Senior secured revolving loan ($175 par due 6/2018)   6.25%
(Libor + 5.00%/Q)
    6/29/2012     175     175 (2)(17)      
        Senior secured loan ($22,350 par due 6/2018)   7.00%
(Base Rate + 3.75%/Q)
    6/29/2012     22,350     22,350 (2)(17)      
        Preferred units (1,798,391 units)         6/29/2012     1,000     1,000 (2)      
                                   
                        23,525     23,525        
                                       
Multi-Ad Services, Inc.(6)   Marketing services and software provider   Preferred units (1,725,280 units)         4/1/2010     788     2,329 (2)      
        Common units (1,725,280 units)         4/1/2010         (2)      
                                   
                        788     2,329        
                                       

F-99


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
MVL Group, Inc.(7)   Marketing research provider   Senior secured revolving loan ($940 par due 6/2012)   4.75%
(Base Rate + 1.50%/M)
    6/28/2012     940     940 (2)      
        Senior secured loan ($22,772 par due 7/2012)   12.00%     4/1/2010     22,772     22,772 (2)      
        Senior subordinated loan ($36,306 par due 7/2012)   12.00% Cash, 2.50% PIK     4/1/2010     35,737     28,716 (2)      
        Junior subordinated loan ($144 par due 7/2012)   10.00%     4/1/2010         (2)      
        Common stock (560,716 shares)         4/1/2010         (2)      
                                   
                        59,449     52,428        
                                       
Pillar Processing LLC and PHL Holding Co.(6)   Mortgage services   Senior secured loan ($11,600 par due 11/2013)         7/31/2008     11,473     10,672 (2)(16)      
        Senior secured loan ($7,375 par due 5/2014)         11/20/2007     7,375     757 (2)(16)      
        Common stock (85 shares)         11/20/2007     3,768     (2)(16)      
                                   
                        22,616     11,429        
                                       
Powersport Auctioneer Holdings, LLC   Powersport vehicle auction operator   Common Units (1,972 units)         3/2/2012     1,000     915 (2)      
                                       
Prommis Holdings, LLC   Bankruptcy and foreclosure processing services   Class B common units (1,727 units)         6/12/2012         (2)      
                                       
Promo Works, LLC   Marketing services   Senior secured loan ($8,655 par due 12/2013)         4/1/2010     3,738     2,281 (2)(16)      
                                       
R2 Acquisition Corp.   Marketing services   Common stock (250,000 shares)         5/29/2007     250     89 (2)      
                                       
Summit Business Media Parent Holding Company LLC   Business media consulting services   Limited liability company membership interest (22.99% interest)         5/20/2011         757 (2)      
                                       
Tradesmen International, Inc.   Construction labor support   Junior secured loan ($3,126 par due 5/2014)   13.00% Cash, 1.00% PIK     4/1/2010     2,599     3,126 (2)      
        Warrants to purchase up to 771,036 shares         4/1/2010         7,279        
                                   
                        2,599     10,405        
                                       
Tripwire, Inc.   IT security software provider   Senior secured loan ($20,000 par due 5/2018)   6.00%
(Libor + 4.75%/Q)
    5/23/2011     20,000     20,000 (2)(17)      
        Senior secured loan ($50,000 par due 5/2018)   6.00%
(Libor + 4.75%/Q)
    5/23/2011     50,000     50,000 (3)(17)      
        Senior secured loan ($10,000 par due 5/2018)   6.00%
(Libor + 4.75%/Q)
    5/23/2011     10,000     10,000 (4)(17)      
        Class A common stock (2,970 shares)         5/23/2011     2,970     6,727 (2)      
        Class B common stock (2,655,638 shares)         5/23/2011     30     68 (2)      
                                   
                        83,000     86,795        
                                       
Venturehouse-Cibernet Investors, LLC   Financial settlement services for intercarrier wireless roaming   Equity interest         4/1/2010         (2)      
                                       

F-100


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
VSS-Tranzact Holdings, LLC(6)   Management consulting services   Series B preferred units (854 units)         11/7/2011     867     921        
        Common membership interest (8.54% interest)         10/26/2007     10,204     388        
        Warrants to purchase up to 4,206 units         11/7/2011         191        
                                   
                        11,071     1,500        
                                   
                        400,254     369,814     10.73 %
                                   
                                       
Financial Services                                  
AllBridge Financial, LLC(7)   Asset management services   Equity interests         4/1/2010     8,435     11,009 (2)      
                                       
Callidus Capital Corporation(7)   Asset management services   Common stock (100 shares)         4/1/2010     3,000     1,005        
                                       
Ciena Capital LLC(7)   Real estate and small business loan servicer   Senior secured revolving loan ($14,000 par due 12/2013)   6.00%     11/29/2010     14,000     14,000 (2)      
        Senior secured loan ($32,000 par due 12/2015)   12.00%     11/29/2010     32,000     32,000 (2)      
        Equity interests         11/29/2010     53,374     21,622 (2)      
                                   
                        99,374     67,622        
                                       
Commercial Credit Group, Inc.   Commercial equipment finance and leasing company   Senior subordinated loan ($28,000 par due 5/2018)   12.75%     5/10/2012     28,000     28,000 (2)      
                                       
Cook Inlet Alternative Risk, LLC   Risk management services   Senior subordinated loan ($3,250 par due 9/2015)   9.00%     9/30/2011     3,250     3,250 (2)      
                                       
Financial Pacific Company   Commercial finance leasing   Preferred stock (6,500 shares)   8.00% PIK     10/13/2010     5,181     8,453 (2)      
        Common stock (650,000 shares)         10/13/2010         (2)      
                                   
                        5,181     8,453        
                                       
Imperial Capital Group LLC   Investment services   Class A common units (7,710 units)         5/10/2007     14,997     21,100 (2)      
        2006 Class B common units (2,526 units)         5/10/2007     3     4 (2)      
        2007 Class B common units (315 units)         5/10/2007         (2)      
                                   
                        15,000     21,104        
                                       
Ivy Hill Asset Management, L.P.(7)(9)   Asset management services   Member interest (100.00% interest)         6/15/2009     112,876     204,977        
                                   
                        275,116     345,420     10.02 %
                                   
                                       
Consumer Products—Non-durable                                  
Gilchrist & Soames, Inc.   Personal care manufacturer   Senior secured revolving loan ($3,500 par due 10/2013)   6.25%
(Libor + 5.00%/Q)
    4/1/2010     3,500     3,500 (2)(17)      
        Senior secured loan ($21,941 par due 10/2013)   13.44%     4/1/2010     21,564     20,844 (2)      
                                   
                        25,064     24,344        
                                       

F-101


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Implus Footcare, LLC   Provider of footwear and other accessories   Preferred stock (455 shares)   6.00% PIK     10/31/2011     4,729     4,729 (2)      
        Common stock (455 shares)         10/31/2011     455     357 (2)      
                                   
                        5,184     5,086        
                                       
Insight Pharmaceuticals Corporation(6)   OTC drug products manufactuer   Junior secured loan ($25,000 par due 8/2017)   13.25%
(Libor + 11.75%/Q)
    8/26/2011     24,756     24,500 (3)(17)      
        Class A common stock (155,000 shares)         8/26/2011     6,035     8,950 (2)      
        Class B common stock (155,000 shares)         8/26/2011     6,035     8,950 (2)      
                                   
                        36,826     42,400        
                                       
Making Memories Wholesale, Inc.(7)   Scrapbooking branded products manufacturer   Senior secured revolving loan ($2,250 par due 8/2014)         8/21/2009     2,229     805 (2)(16)      
        Common stock (100 shares)         8/21/2009         (2)      
                                   
                        2,229     805        
                                       
Matrixx Initiatives, Inc. and Wonder Holdings Acquisition Corp.   Developer and marketer of over-the-counter healthcare products   Senior secured revolving loan ($5,500 par due 6/2016)   13.00%
(Libor + 12.00%/Q)
    6/30/2011     5,500     5,060 (2)(17)      
        Senior secured loan ($40,375 par due 6/2016)   13.00%
(Libor + 12.00%/Q)
    6/30/2011     40,144     37,145 (3)(17)      
        Warrants to purchase up to 1,654,678 shares of common stock         7/27/2011         (2)      
        Warrants to purchase up to 1,489 shares of preferred stock         7/27/2011         335 (2)      
                                   
                        45,644     42,540        
                                       
Oak Parent, Inc.   Manufacturer of athletic apparel   Senior secured loan ($57,000 par due 4/2018)   8.00%
(Libor + 7.00%/Q)
    4/2/2012     56,742     57,000 (2)(17)      
        Senior secured loan ($10,000 par due 4/2018)   8.00%
(Libor + 7.00%/Q)
    4/2/2012     9,954     10,000 (4)(17)      
                                   
                        66,696     67,000        
                                       
The Step2 Company, LLC   Toy manufacturer   Junior secured loan ($27,000 par due 4/2015)   10.00%     4/1/2010     25,922     27,000 (2)      
        Junior secured loan ($31,971 par due 4/2015)   10.00% Cash, 5.00% PIK     4/1/2010     30,839     28,134 (2)      
        Common units (1,116,879 units)         4/1/2010     24     9 (2)      
        Warrants to purchase up to 3,157,895 units         4/1/2010         25 (2)      
                                   
                        56,785     55,168        
                                       
The Thymes, LLC(7)   Cosmetic products manufacturer   Preferred units (6,283 units)   8.00% PIK     6/21/2007     5,952     6,672        
        Common units (5,400 units)         6/21/2007         1,071 (2)      
                                   
                        5,952     7,743        
                                       

F-102


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Woodstream Corporation   Pet products manufacturer   Senior secured loan ($3,000 par due 8/2014)   6.50%
(Libor + 5.00%/Q)
    4/18/2012     3,000     3,000 (2)(17)      
        Senior secured loan ($15,000 par due 8/2014)   6.50%
(Libor + 5.00%/Q)
    4/18/2012     15,000     15,000 (4)(17)      
        Senior subordinated loan ($45,000 par due 2/2015)   12.00%     1/22/2010     41,013     45,000 (2)      
        Common stock (4,254 shares)         1/22/2010     1,222     3,320 (2)      
                                   
                        60,235     66,320        
                                   
                        304,615     311,406     9.04 %
                                   
                                       
Containers—Packaging                                  
ICSH, Inc.   Industrial container manufacturer, reconditioner and servicer   Senior secured loan ($131 par due 8/2016)   8.00%
(Base Rate + 7.00%/Q)
    8/31/2011     131     131 (2)(17)      
        Senior secured loan ($50,886 par due 8/2016)   8.00%
(Libor + 7.00%/Q)
    8/31/2011     50,886     50,886 (2)(17)      
        Senior secured loan ($49,618 par due 8/2016)   8.00%
(Libor + 7.00%/Q)
    8/31/2011     49,618     49,618 (3)(17)      
        Senior secured loan ($14,949 par due 8/2016)   8.00%
(Base Rate + 7.00%/Q)
    8/31/2011     14,949     14,949 (4)(17)      
                                   
                        115,584     115,584        
                                       
Microstar Logistics LLC   Keg management solutions provider   Junior secured loan ($60,000 par due 8/2016)   10.00%
(Libor + 9.00%/Q)
    8/5/2011     60,000     60,000 (2)(17)      
        Junior secured loan ($50,000 par due 8/2016)   10.00%
(Libor + 9.00%/Q)
    8/5/2011     50,000     50,000 (3)(17)      
                                   
                        110,000     110,000        
                                       
Pregis Corporation, Pregis Intellipack Corp. and Pregis Innovative Packaging Inc.   Provider of a broad range of highly-customized, tailored protective packaging solutions   Senior secured loan ($1,000 par due 3/2017)   7.75%
(Libor + 6.25%/M)
    4/25/2012     1,000     1,000 (2)(17)      
                                   
                        226,584     226,584     6.58 %
                                   
                                       
Services—Other                                  
Competitor Group, Inc.   Endurance sports media and event operator   Senior secured loan ($29,489 par due 1/2017)   9.50%
(Libor + 8.00%/Q)
    1/30/2012     29,489     29,489 (2)(17)      
        Senior secured loan ($4,969 par due 1/2017)   9.50%
(Libor + 8.00%/Q)
    1/30/2012     4,969     4,969 (4)(17)      
                                   
                        34,458     34,458        
                                       
McKenzie Sports Products, LLC   Designer, manufacturer and distributor of taxidermy forms and supplies   Senior secured loan ($21,784 par due 3/2017)   7.00%
(Libor + 5.50%/S)
    3/30/2012     21,784     21,784 (2)(17)      
        Senior secured loan ($161 par due 3/2017)   7.75%
(Base Rate + 4.50%/M)
    3/30/2012     161     161 (2)(17)      
        Senior secured loan ($9,902 par due 3/2017)   7.00%
(Libor + 5.50%/S)
    3/30/2012     9,902     9,902 (4)(17)      
        Senior secured loan ($73 par due 3/2017)   7.75%
(Base Rate + 4.50%/M)
    3/30/2012     73     73 (4)(17)      
                                   
                        31,920     31,920        
                                       

F-103


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
The Dwyer Group(6)   Operator of multiple franchise concepts primarily related to home maintenance or repairs   Senior subordinated loan ($25,303 par due 6/2018)   12.00% Cash, 1.50% PIK     12/22/2010     25,303     25,303 (2)      
        Series A preferred units (13,292,377 units)   8.00% PIK     12/22/2010     6,089     12,439 (2)      
                                   
                        31,392     37,742        
                                       
Wash Multifamily Laundry Systems, LLC (fka Web Services Company, LLC)   Laundry service and equipment provider   Senior secured loan ($27,325 par due 8/2014)   7.00%
(Base Rate + 3.75%/Q)
    6/26/2012     27,220     27,325 (2)(17)      
        Junior secured loan ($40,000 par due 8/2015)   10.88%
(Libor + 9.38%/Q)
    1/25/2011     40,000     40,000 (2)(17)      
        Junior secured loan ($50,000 par due 8/2015)   10.88%
(Libor + 9.38%/Q)
    1/25/2011     50,000     50,000 (3)(17)      
                                   
                        117,220     117,325        
                                   
                        214,990     221,445     6.43 %
                                   
                                       
Manufacturing                                  
Component Hardware Group, Inc.   Commercial equipment   Junior secured loan ($3,154 par due 12/2014)   7.00% Cash, 3.00% PIK     8/4/2010     3,154     3,154 (2)      
        Senior subordinated loan ($10,866 par due 12/2014)   7.50% Cash, 5.00% PIK     4/1/2010     7,606     10,866 (2)      
        Warrants to purchase up to 1,462,500 shares of common stock         8/4/2010         4,213 (2)      
                                   
                        10,760     18,233        
                                       
HOPPY Holdings Corp.   Automotive and recreational vehicle aftermarket products   Senior secured loan ($13,238 par due 6/2016)   5.00%
(Libor + 3.75%/M)
    6/3/2011     13,238     12,973 (4)(17)      
                                       
MWI Holdings, Inc.   Highly engineered springs, fastners, and other precision components   Senior secured loan ($38,274 par due 6/2017)   10.00%
(Libor + 8.00%/Q)
    6/15/2011     38,274     38,274 (2)(17)      
        Senior secured loan ($10,000 par due 6/2017)   10.00%
(Libor + 8.00%/Q)
    6/15/2011     10,000     10,000 (4)(17)      
                                   
                        48,274     48,274        
                                       
NetShape Technologies, Inc.   Metal precision engineered components   Senior secured revolving loan ($648 par due 2/2013)   4.21%
(Libor + 3.75%/Q)
    4/1/2010     197     549 (2)      
                                   
                        197     549        
                                       
Protective Industries, Inc.   Plastic protection products   Senior secured revolving loan ($233 par due 5/2016)   6.25%
(Base Rate + 3.00%/M)
    5/23/2011     233     229 (2)(17)      
        Senior secured revolving loan ($933 par due 5/2016)   5.75%
(Libor + 4.25%/M)
    5/23/2011     933     915 (2)(17)      
        Senior secured loan ($5,561 par due 5/2017)   5.75%
(Libor + 4.25%/M)
    5/23/2011     5,561     5,449 (2)(17)      
        Senior secured loan ($14 par due 5/2017)   6.25%
(Base Rate + 3.00%/M)
    5/23/2011     14     14 (2)(17)      
        Senior subordinated loan ($746 par due 5/2018)   8.00% Cash, 7.25% PIK     5/23/2011     746     746 (2)      
        Preferred stock (2,379,361 shares)         5/23/2011     2,307     3,759 (2)      
                                   
                        9,794     11,112        
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair
Value
  Percentage
of Net
Assets
 
Saw Mill PCG Partners LLC   Metal precision engineered components   Common units (1,000 units)         1/30/2007     1,000     (2)      
                                       
Sigma International Group, Inc.   Water treatment parts   Junior secured loan ($4,151 par due 4/2014)   10.00%
(Libor + 5.00% Cash, 5.00% PIK /A)
    7/8/2011     4,151     3,487 (2)(17)      
                                       
SSH Environmental Industries, Inc. and SSH Non-Destructive Testing, Inc.   Magnetic sensors and supporting sensor products   Senior secured loan ($11,867 par due 12/2016)   9.00%
(Libor + 7.50%/Q)
    3/23/2012     11,640     11,867 (2)(17)      
                                       
WP CPP Holdings, LLC   Precision engineered castings   Senior secured loan ($10,743 par due 10/2017)   8.50%
(Libor + 7.00%/M)
    10/11/2011     10,696     10,743 (2)(17)      
        Senior secured loan ($49,749 par due 10/2017)   8.50%
(Libor + 7.00%/M)
    10/11/2011     49,511     49,749 (3)(17)      
        Senior secured loan ($9,975 par due 10/2017)   8.50%
(Libor + 7.00%/M)
    10/11/2011     9,929     9,975 (4)(17)      
                                   
                        70,136     70,467        
                                   
                        169,190     176,962     5.14 %
                                   
                                       
Consumer Products—Durable                                  
Bushnell Inc.   Sports optics manufacturer   Senior secured loan ($22,886 par due 8/2015)   6.00%
(Libor + 4.50%/Q)
    4/30/2012     22,886     22,657 (2)(17)      
        Senior secured loan ($26,685 par due 8/2015)   5.75%
(Libor + 4.25%/Q)
    4/19/2012     26,551     26,285 (2)(17)      
        Junior secured loan ($56,325 par due 2/2016)   9.00%
(Libor + 7.50%/Q)
    4/1/2010     49,584     55,198 (2)(17)      
        Junior secured loan ($43,675 par due 2/2016)   9.50%
(Libor + 8.00%/Q)
    4/30/2012     43,675     43,238 (2)(17)      
                                   
                        142,696     147,378        
                                   
                        142,696     147,378     4.28 %
                                   
                                       
Grocery                                  
Grocery Outlet Inc.   Value grocery retailer   Senior secured loan ($30,000 par due 12/2017)   10.50%
(Libor + 9.00%/Q)
    12/15/2011     30,000     30,000 (2)(17)      
        Senior secured loan ($1,185 par due 12/2017)   11.25%
(Base Rate + 8.00%/Q)
    12/15/2011     1,185     1,185 (2)(17)      
        Senior secured loan ($47,619 par due 12/2017)   10.50%
(Libor + 9.00%/Q)
    12/15/2011     47,619     47,619 (3)(17)      
        Senior secured loan ($1,881 par due 12/2017)   11.25%
(Base Rate + 8.00%/Q)
    12/15/2011     1,881     1,881 (3)(17)      
        Senior secured loan ($9,524 par due 12/2017)   10.50%
(Libor + 9.00%/Q)
    12/15/2011     9,524     9,524 (4)(17)      
        Senior secured loan ($376 par due 12/2017)   11.25%
(Base Rate + 8.00%/Q)
    12/15/2011     376     376 (4)(17)      
                                   
                        90,585     90,585        
                                   
                        90,585     90,585     2.63 %
                                   
                                       
Telecommunications                                  
American Broadband Communications, LLC, American Broadband Holding Company and Cameron Holdings of NC, Inc.   Broadband communication services   Senior secured loan ($8,077 par due 9/2013)   7.50%
(Libor + 5.50%/Q)
    9/1/2010     8,077     8,077 (2)(17)      

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
        Senior subordinated loan ($10,634 par due 11/2014)   12.00% Cash, 2.00% PIK     9/1/2010     10,634     10,208 (2)      
        Senior subordinated loan ($22,816 par due 11/2014)   10.00% Cash, 4.00% PIK     11/7/2007     22,816     21,904 (2)      
        Senior subordinated loan ($33,762 par due 11/2014)   12.00% Cash, 2.00% PIK     11/7/2007     33,762     32,412 (3)      
        Warrants to purchase up to 378 shares         11/7/2007         808 (2)      
        Warrants to purchase up to 200 shares         9/1/2010         427 (2)      
                                   
                        75,289     73,836        
                                       
Dialog Telecom LLC   Broadband communication services   Senior secured loan ($16,476 par due 12/2013)   12.00% (Libor + 10.50% Cash, 1.50% PIK /Q)     6/20/2011     16,476     16,476 (2)(17)      
                                       
Startec Equity, LLC(7)   Communication services   Member interest         4/1/2010         (2)      
                                   
                        91,765     90,312     2.62 %
                                   
                                       
Retail                                      
Direct Buy Holdings, Inc. and Direct Buy Investors, LP(6)   Membership based buying club franchisor and operator   Limited partnership interest (66,667 shares)         4/1/2010     2,594     (2)      
        Limited partnership interest (83,333 shares)         11/30/2007     8,333     (2)      
                                   
                        10,927            
                                       
Fulton Holdings Corp.   Airport restaurant operator   Senior secured loan ($40,000 par due 5/2016)   12.50%     5/28/2010     40,000     40,000 (3)(12)      
        Common stock (19,672 shares)         5/28/2010     1,967     1,563 (2)      
                                   
                        41,967     41,563        
                                       
Savers, Inc. and SAI Acquisition Corporation   For-profit thrift retailer   Common stock (1,218,481 shares)         8/8/2006     4,909     19,834 (2)      
                                       
Things Remembered Inc. and TRM Holdings Corporation   Personalized gifts retailer   Senior secured loan ($15,000 par due 5/2018)   8.00% (Libor + 6.50%/Q)     5/24/2012     15,000     15,000 (2)(17)      
        Senior secured loan ($10,000 par due 5/2018)   8.00% (Libor + 6.50%/Q)     5/24/2012     10,000     10,000 (4)(17)      
                                   
                        25,000     25,000        
                                   
                        82,803     86,397     2.51 %
                                   
                                       
Energy                                      
EquiPower Resources Holdings, LLC   Gas-fired power generation facilities operator   Junior secured loan ($22,500 par due 6/2019)   10.00% (Libor + 8.50%/Q)     6/27/2012     22,050     22,050 (2)(17)      
                                       
La Paloma Generating Company, LLC   Natural gas fired, combined cycle plant operator   Junior secured loan ($59,000 par due 8/2018)   10.25% (Libor + 8.75%/Q)     8/9/2011     57,840     56,050 (2)(17)      
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
USG Nevada LLC   Geothermal, renewable energy, developer for electrical power and direct uses   Junior secured loan ($7,500 par due 6/2012)   11.97% (Libor + 11.50%/Q)     11/10/2011     7,500     7,500 (2)      
                                   
                        87,390     85,600     2.48 %
                                   
                                       
Aerospace and Defense                                      
PRV Aerospace, LLC   Aerospace precision components manufacturer   Senior secured loan ($8,500 par due 5/2018)   6.50% (Libor + 5.25%/Q)     5/15/2012     8,416     8,500 (4)(17)      
        Junior secured loan ($68,000 par due 5/2019)   10.50% (Libor + 9.25%/Q)     5/10/2012     68,000     68,000 (2)(17)      
                                   
                        76,416     76,500        
                                       
Wyle Laboratories, Inc. and Wyle Holdings, Inc.   Provider of specialized engineering, scientific and technical services   Senior preferred stock (775 shares)   8.00% PIK     1/17/2008     99     99 (2)      
        Common stock (1,885,195 shares)         1/17/2008     2,291     2,093 (2)      
                                   
                        2,390     2,192        
                                   
                        78,806     78,692     2.28 %
                                   
                                       
Oil and Gas                                      
Geotrace Technologies, Inc.   Reservoir processing, development   Warrants to purchase up to 69,978 shares of common stock         4/1/2010     88     (2)      
        Warrants to purchase up to 210,453 shares of preferred stock         4/1/2010     2,806     1,576 (2)      
                                   
                        2,894     1,576        
                                       
UL Holding Co., LLC and Universal Lubricants, LLC(6)   Petroleum product manufacturer   Junior secured loan ($30,211 par due 12/2014)   9.34% (Libor + 7.34% Cash, 2.00% PIK /Q)     4/30/2012     30,211     30,211 (2)      
        Junior secured loan ($20,532 par due 12/2014)   12.00% Cash, 2.00% PIK     4/30/2012     20,532     20,532 (2)      
        Junior secured loan ($5,025 par due 12/2014)   12.00% Cash, 3.00% PIK     4/30/2012     5,025     5,025 (2)      
        Junior secured loan ($2,926 par due 12/2014)   12.00% Cash, 2.00% PIK     4/30/2012     2,926     2,926 (3)      
        Class A common units (10,782 units)         6/17/2011     108     82 (2)      
        Class B-5 common units (599,200 units)         4/25/2008     5,472     4,541 (2)      
        Class B-4 common units (50,000 units)         6/17/2011     500     379 (2)      
        Class C common units (618,091 units)         4/25/2008         4,685 (2)      
                                   
                        64,774     68,381        
                                   
                        67,668     69,957     2.03 %
                                   
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Automotive Services                                      
Driven Holdings, LLC   Automotive aftermarket car care franchisor   Preferred stock (247,500 units)         12/16/2011     2,475     2,550 (2)      
        Common stock (25,000 units)         12/16/2011     25     56 (2)      
                                   
                        2,500     2,606        
                                       
Stag-Parkway, Inc.(7)   Automotive aftermarket components supplier   Senior secured loan ($34,500 par due 12/2014)   12.50% (Libor + 11.00%/Q)     9/30/2010     34,500     34,500 (2)(17)      
        Preferred stock (4,200 shares)   16.50% PIK     9/30/2010     2,664     4,200 (2)      
        Common stock (10,200 shares)         9/30/2010         23,067 (2)      
                                   
                        37,164     61,767        
                                   
                        39,664     64,373     1.87 %
                                   
                                       
Printing, Publishing and Media                                      
Earthcolor Group, LLC(6)   Printing management services   Limited liability company interests (9.30%)         5/18/2012                
                                       
National Print Group, Inc.   Printing management services   Senior secured revolving loan ($1,141 par due 10/2013)   9.00% (Libor + 6.00%/Q)     3/2/2006     1,141     1,096 (2)(17)      
        Senior secured revolving loan ($627 par due 10/2013)   9.00% (Base Rate + 5.00%/M)     3/2/2006     627     602 (2)(17)      
        Senior secured loan ($7,510 par due 10/2013)   10.00% (Libor + 9.00% Cash, 1.00% PIK /Q)     3/2/2006     7213     7,360 (2)(17)      
        Preferred stock (9,344 shares)         3/2/2006     2,000     (2)      
                                   
                        10,981     9,058        
                                       
The Teaching Company, LLC and The Teaching Company Holdings, Inc.   Education publications provider   Senior secured loan ($21,531 par due 3/2017)   9.00% (Libor + 7.50%/Q)     9/29/2006     21,531     21,531 (2)(17)      
        Senior secured loan ($10,000 par due 3/2017)   9.00% (Libor + 7.50%/Q)     9/29/2006     10,000     10,000 (4)(17)      
        Preferred stock (10,663 shares)         9/29/2006     1,066     4,483 (2)      
        Common stock (15,393 shares)         9/29/2006     3     11 (2)      
                                   
                        32,600     36,025        
                                   
                        43,581     45,083     1.31 %
                                   
                                       
Commercial Real Estate Finance                                      
10th Street, LLC(6)   Real estate holding company   Senior subordinated loan ($24,706 par due 11/2014)   8.93% Cash, 4.07% PIK     4/1/2010     24,706     24,706 (2)      
        Member interest (10.00% interest)         4/1/2010     594     492        
        Option (25,000 units)         4/1/2010     25     25        
                                   
                        25,325     25,223        
                                       
American Commercial Coatings, Inc.   Real estate property   Commercial mortgage loan ($2,000 par due 12/2025)         4/1/2010     1,238     2,004 (16)      
                                       

F-108


Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Aquila Binks Forest Development, LLC   Real estate developer   Commercial mortgage loan ($13,477 par due 12/2014)         4/1/2010     11,900     2,966 (2)(16)      
        Real estate equity interests         4/1/2010                
                                   
                        11,900     2,966        
                                       
Cleveland East Equity, LLC   Hotel operator   Real estate equity interests         4/1/2010     1,026     2,624        
                                       
Commons R-3, LLC   Real estate developer   Real estate equity interests         4/1/2010                
                                       
Crescent Hotels & Resorts, LLC and affiliates(7)   Hotel operator   Senior subordinated loan ($2,236 par due 9/2011)         4/1/2010         (2)(16)      
        Senior subordinated loan ($2,092 par due 6/2017)         4/1/2010         (2)(16)      
        Common equity interest         4/1/2010                
                                   
                                   
                                       
Hot Light Brands, Inc.(7)   Real estate holding company   Senior secured loan ($34,239 par due 2/2011)         4/1/2010     2,946     2,566 (2)(16)      
        Common stock (93,500 shares)         4/1/2010         (2)      
                                   
                        2,946     2,566        
                                       
NPH, Inc.   Hotel property   Real estate equity interests         4/1/2010     5,291     8,170        
                                   
                        47,726     43,553     1.26 %
                                   
                                       
Transportation                                      
PODS Funding Corp.   Storage and warehousing   Junior subordinated loan ($39,675 par due 5/2017)   12.75% Cash, 2.75% PIK     11/29/2011     39,675     39,675 (2)      
                                       
United Road Towing, Inc.   Towing company   Warrants to purchase up to 607 shares         4/1/2010                
                                   
                        39,675     39,675     1.14 %
                                   
                                       
Food and Beverage                                      
Apple & Eve, LLC and US Juice Partners, LLC(6)   Juice manufacturer   Senior secured loan ($21,530 par due 10/2013)   13.00% (Libor + 10.00%/M)     10/5/2007     21,530     21,529 (2)(17)      
        Senior secured loan ($4,818 par due 10/2013)   13.00% (Libor + 10.00%/M)     10/5/2007     4,818     4,818 (4)(17)      
        Senior units (50,000 units)         10/5/2007     5,000     2,030        
                                   
                        31,348     28,377        
                                       
Charter Baking Company, Inc.   Baked goods manufacturer   Senior subordinated loan ($8,230 par due 2/2013)   16.00% PIK     2/6/2008     8,230     8,230 (2)      
        Preferred stock (6,258 shares)   8.00% PIK     9/1/2006     2,566     1,542 (2)      
                                   
                        10,796     9,772        
                                       
Distant Lands Trading Co.   Coffee manufacturer   Class A common stock (1,294 shares)         4/1/2010     980     275 (2)      
        Class A-1 common stock (2,157 shares)         4/1/2010         (2)      
                                   
                        980     275        
                                   
                        43,124     38,424     1.11 %
                                   
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company(1)
  Business Description   Investment   Interest(5)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Environmental Services                                      
AWTP, LLC(7)   Water treatment services   Junior secured loan ($4,212 par due 6/2015)   5.00% Cash, 5.00% PIK     4/18/2011     4,212     4,212 (2)      
        Junior secured loan ($5,826 par due 6/2015)   15.00% PIK     4/18/2011     5,826     5,826 (2)      
        Membership interests (90% interest)         4/18/2011         333 (2)      
                                   
                        10,038     10,371        
                                       
RE Community Holdings II, Inc.and Pegasus Community Energy, LLC.   Operator of municipal recycling facilities   Preferred stock (1,000 shares)   12.50% PIK     3/1/2011     8,839     5,032 (2)      
                                       
Waste Pro USA, Inc   Waste management services   Preferred Class A common equity (611,615 shares)         11/9/2006     12,263     22,380 (2)      
                                   
                        31,140     37,783     1.10 %
                                   
                                       
Health Clubs                                      
Athletic Club Holdings, Inc.   Premier health club operator   Senior secured loan ($11,500 par due 10/2013)   4.75% (Libor + 4.50%/M)     10/11/2007     11,500     11,385 (2)(13)      
                                   
                        11,500     11,385     0.33 %
                                   
                                       
Wholesale Distribution                                      
BECO Holding Company, Inc.   Wholesale distributor of first response fire protection equipment and related parts   Common stock (25,000 shares)         7/30/2010     2,500     3,455 (2)      
                                   
                        2,500     3,455     0.10 %
                                   
                      $ 55,438,184   $ 5,504,813     159.74 %
                                   

(1)
Other than our investments listed in footnote 7 below (subject to the limitations set forth therein), we do not "Control" any of our portfolio companies, as defined in the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Company Act"). In general, under the Investment Company Act, we would "Control" a portfolio company if we owned more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company. All of our portfolio company investments, which as of June 30, 2012 represented 160% of the Company's net assets or 95% of the Company's total assets, are subject to legal restrictions on sales.

(2)
These assets are pledged as collateral for the Revolving Credit Facility and, as a result, are not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company's obligations under the Revolving Credit Facility (see Note 5 to the consolidated financial statements).

(3)
These assets are owned by the Company's consolidated subsidiary Ares Capital CP Funding LLC ("Ares Capital CP"), are pledged as collateral for the Revolving Funding Facility and, as a result, are not directly available to the creditors of the Company to satisfy any obligations of the Company other than Ares Capital CP's obligations under the Revolving Funding Facility (see Note 5 to the consolidated financial statements).

(4)
These assets are owned by the Company's consolidated subsidiary Ares Capital JB Funding LLC ("ACJB"), are pledged as collateral for the SMBC Funding Facility and, as a result, are not directly available to the creditors of the Company to satisfy any obligations of the Company other than ACJB's obligations under the SMBC Funding Facility (see Note 5 to the consolidated financial statements).

(5)
Investments without an interest rate are non-income producing.

(6)
As defined in the Investment Company Act, we are deemed to be an "Affiliated Person" of a portfolio company because we own 5% or more of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

Company
  Purchases
(cost)
  Redemptions
(cost)
  Sales
(cost)
  Interest
income
  Capital
structuring
service fees
  Dividend
income
  Other
income
  Net
realized
gains (losses)
  Net
unrealized
gains (losses)
 

10th Street, LLC

  $   $   $   $ 1,597   $   $   $   $   $ (38 )

Apple & Eve, LLC and US Juice Partners, LLC

  $   $ 5,497   $   $ 1,786   $   $   $ 22   $   $ (1,297 )

Campus Management Corp. and Campus Management Acquisition Corp

  $   $   $   $   $   $   $   $   $ 2,234  

CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings, LLC

  $   $ 113   $   $ 583   $   $   $   $   $ (4,166 )

The Dwyer Group

  $   $   $   $ 1,238   $ 162   $ 537   $ 86   $   $ 3,751  

ELC Acquisition Corp. and ELC Holdings Corporation

  $   $   $   $   $   $   $ 6   $   $ (220 )

Firstlight Financial Corporation

  $   $ 15,939   $   $ 1,034   $   $   $ 125   $ 61   $ 10,480  

Insight Pharmaceuticals Corporation

  $   $   $   $ 1,690   $   $   $   $   $ (733 )

Investor Group Services, LLC

  $   $   $   $   $   $ 102   $ 8   $   $ 151  

Multi-Ad Services, Inc.

  $   $   $   $   $   $   $   $   $ 501  

Pillar Processing LLC and PHL Holding Co.

  $   $   $   $   $   $   $   $   $ (493 )

Soteria Imaging Services, LLC

  $   $ 164   $   $   $   $   $   $ 10   $ (20 )

VSS-Tranzact Holdings, LLC

  $   $   $   $   $   $   $   $   $ 433  

UL Holding Co., LLC

  $ 43,128   $ 13,536   $   $ 2,331   $ 733   $   $ 173   $   $ 3,548  
(7)
As defined in the Investment Company Act, we are deemed to be both an "Affiliated Person" and "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). Transactions during the period for the six months ended June 30, 2012 in which the issuer was both an Affiliated company and a portfolio company that we are deemed to Control are as follows:

Company
  Purchases   Redemptions
(cost)
  Sales
(cost)
  Interest
income
  Capital
structuring
service fees
  Dividend
income
  Other
income
  Net
realized
gains (losses)
  Net
unrealized
gains (losses)
 

AGILE Fund I, LLC

  $   $ 9   $   $   $   $ 3   $   $   $ (6 )

Allied Capital REIT, Inc.

  $   $   $ 375   $   $   $ 41   $   $ 147   $ (314 )

AllBridge Financial, LLC

  $   $   $   $   $   $   $   $   $ 2,236  

Aviation Properties Corporation

  $   $   $   $   $   $   $   $   $  

AWTP, LLC

  $   $   $   $ 629   $   $   $   $   $ 1,982  

BenefitMall Holdings, Inc.

  $   $ 40,326   $ 53,510   $ 2,440   $   $   $ 167   $ 12,903   $ (6,479 )

Callidus Capital Corporation

  $   $   $   $   $   $   $   $   $ 229  

Ciena Capital LLC

  $   $   $   $ 2,366   $   $   $   $   $ 1,570  

Citipostal, Inc.

  $   $ 1,800   $   $ 3,817   $   $   $ 98   $   $ 535  

Crescent Hotels & Resorts, LLC and affiliates

  $   $   $ 2,843   $ 20   $   $   $   $ (5,473 ) $ 5,595  

HCI Equity, LLC

  $   $   $   $   $   $   $   $   $ (21 )

HCP Acquisition Holdings, LLC

  $ 1,194   $   $   $   $   $   $   $   $ (2,680 )

Hot Light Brands, Inc.

  $   $ 1,000   $   $   $   $   $   $   $ (126 )

Huddle House Inc.

  $   $ 20,801   $   $ 678   $   $   $ 187   $ (1,404 ) $ 1,701  

Ivy Hill Asset Management, L.P.

  $   $   $   $   $   $ 9,524   $   $   $ 10,380  

Ivy Hill Middle Market Credit Fund, Ltd.

  $   $   $ 15,000   $ 2,473   $   $   $   $ (750 ) $ 1,230  

LVCG Holdings, LLC

  $   $   $ 6,600   $   $   $   $   $ (6,590 ) $ 6,600  

Making Memories Wholesale, Inc.

  $   $   $   $   $   $   $   $ (11,067 ) $ 10,892  

MVL Group, Inc.

  $ 940   $   $   $ 4,019   $   $   $   $   $ (5,582 )

Orion Foods, LLC

  $ 6,500   $ 220   $   $ 4,972   $   $   $ 406   $   $ (10,400 )

Senior Secured Loan Fund LLC*

  $ 83,159   $ 17,937   $   $ 87,743   $ 17,587   $   $ 8,004   $ 173   $ 1,413  

Stag-Parkway, Inc.

  $   $   $   $ 2,151   $   $ 388   $ 125   $   $ 7,964  

Startec Equity, LLC

  $   $   $   $   $   $   $   $   $  

The Thymes, LLC

  $   $   $   $   $   $ 242   $   $   $ 728  

*
Together with GE Global Sponsor Finance LLC and General Electric Capital Corporation (together, "GE"), we co-invest through the Senior Secured Loan Fund LLC d/b/a the "Senior Secured Loan Program" (the "SSLP"). The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and GE; therefore, although the Company owns more than 25% of the voting securities of the SSLP, the Company does not believe that it has control over the SSLP (for purposes of the Investment Company Act or otherwise).

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2012
(dollar amounts in thousands)
(unaudited)

(8)
Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(9)
Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(10)
In the first quarter of 2011, the staff of the Securities and Exchange Commission (the "Staff") informally communicated to certain business development companies the Staff's belief that certain entities, which would be classified as an "investment company" under the Investment Company Act but for the exception from the definition of "investment company" set forth in Rule 3a-7 promulgated under the Investment Company Act, could not be treated as eligible portfolio companies (as defined in Section 2(a)(46) of the Investment Company Act). Subsequently, in August 2011 the Securities and Exchange Commission issued a concept release (the "Concept Release") which states that "[a]s a general matter, the Commission presently does not believe that Rule 3a-7 issuers are the type of small, developing and financially troubled businesses in which Congress intended BDCs primarily to invest" and requested comment on whether or not a 3a-7 issuer should be considered an "eligible portfolio company". Ares Capital provided a comment letter in respect of the Concept Release and continues to believe that the language of Section 2(a)(46) of the Investment Company Act permits a business development company to treat as "eligible portfolio companies" entities that rely on the 3a-7 exception. However, given the current uncertainty in this area (including the language in the Concept Release), Ares Capital has, solely for purposes of calculating the composition of its portfolio pursuant to Section 55(a) of the Investment Company Act, identified these entities in our schedule of investments as "non-qualifying assets" should the Staff ultimately disagree with Ares Capital's position.

(11)
Variable rate loans to our portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower's option, which reset annually (A), semi-annually (S), quarterly (Q), bi-monthly (B), monthly (M) or daily (D). For each such loan, we have provided the interest rate in effect on the date presented.

(12)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 5.00% on $17 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(13)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 2.50% on $12 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(14)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 4.00% on $43 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(15)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 1.13% on $21 million aggregate principal amount outstanding of the portfolio company's senior term debt.

(16)
Loan was on non-accrual status as of June 30, 2012.

(17)
Loan includes interest rate floor feature.

(18)
In addition to the interest earned based on the stated contractual interest rate of this security, the certificates entitle us to receive a portion of the excess cash flow from the SSLP's loan portfolio, which may result in a return to the Company greater than the contractual stated interest rate.

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Investment Funds and Vehicles                              
AGILE Fund I, LLC(6)(8)   Investment partnership   Member interest (0.50% interest)         4/1/2010   $ 216   $ 132        
                                       
CIC Flex, LP(8)   Investment partnership   Limited partnership units (0.94 unit)         9/7/2007     2,533     3,130        
                                       
Covestia Capital Partners, LP(8)   Investment partnership   Limited partnership interest (47.00% interest)         6/17/2008     1,059     1,111        
                                       
Dynamic India Fund IV, LLC(8)   Investment company   Member interest (5.44% interest)         4/1/2010     4,822     4,728        
                                       
Firstlight Financial Corporation(5)(8)   Investment company   Senior subordinated loan ($71,542 par due 12/2016)   1.00% PIK     12/31/2006     71,269     67,947        
        Class A common stock (10,000 shares)         12/31/2006     10,000            
        Class B common stock (30,000 shares)         12/31/2006     30,000            
                                   
                        111,269     67,947        
                                       
HCI Equity, LLC(6)(7)(8)   Investment company   Member interest (100.00% interest)         4/1/2010     808     730        
                                       
Imperial Capital Private Opportunities, LP(8)   Investment partnership   Limited partnership interest (80.00% interest)         5/10/2007     6,643     5,120        
                                       
Ivy Hill Middle Market Credit Fund, Ltd.(6)(7)(8)   Investment company   Class B deferrable interest notes ($40,000 par due 11/2018)   6.25% (Libor + 6.00%/Q)     11/20/2007     40,000     38,000        
        Subordinated notes ($16 par due 11/2018)   15.00%     11/20/2007     15,515     16,000        
                                   
                        55,515     54,000        
                                       
Kodiak Funding, LP(8)   Investment partnership   Limited partnership interest (1.52% interest)         4/1/2010     868     823        
                                       
Novak Biddle Venture Partners III, L.P.(8)   Investment partnership   Limited partnership interest (2.47% interest)         4/1/2010     221     196        
                                       
Partnership Capital Growth Fund I, L.P.(8)   Investment partnership   Limited partnership interest (25.00% interest)         6/16/2006     1,791     3,726        
                                       
Partnership Capital Growth Fund III, L.P.(8)   Investment partnership   Limited partnership interest (2.50% interest)         10/5/2011     1,322     1,250        
                                       
Senior Secured Loan Fund LLC(6)(9)(17)   Co-investment vehicle   Subordinated certificates ($1,044,977 par due 12/2020)   8.38% (Libor + 8.00%/Q)     10/30/2009     1,034,254     1,059,178        
                                       
VSC Investors LLC(8)   Investment company   Membership interest (1.95% interest)         1/24/2008     1,139     997        
                                   
                        1,222,460     1,203,068     38.23 %
                                   
                                       
Healthcare-Services                              
BenefitMall Holdings Inc.(6)   Employee benefits broker services company   Senior subordinated loan ($40,326 par due 6/2014)   18.00%     4/1/2010     40,326     40,326        
        Common stock (39,274,290 shares)         4/1/2010     53,510     59,990        
        Warrants         4/1/2010                
                                   
                        93,836     100,316        
                                       
CCS Group Holdings, LLC   Correctional facility healthcare operator   Class A units (601,937 units)         8/19/2010     602     1,158        
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings LLC(5)   Healthcare analysis services   Senior secured loan ($7,245 par due 3/2017)   7.75% (Libor + 6.50%/Q)     3/15/2011     7,245     6,883 (2)(16)      
        Senior secured loan ($18 par due 3/2017)   8.75% (Base Rate + 5.50%/Q)     3/15/2011     18     17 (2)(16)      
        Senior secured loan ($7,642 par due 3/2017)   7.75% (Libor + 6.50%/Q)     3/15/2011     7,642     7,260 (3)(16)      
        Senior secured loan ($19 par due 3/2017)   8.75% (Base Rate + 5.50%/Q)     3/15/2011     19     18 (3)(16)      
        Class A common stock (9,679 shares)         6/15/2007     4,000     8,745        
        Class C common stock (1,546 shares)         6/15/2007         1,397        
                                   
                        18,924     24,320        
                                   
                                       
INC Research, Inc.   Pharmaceutical and biotechnology consulting services   Common stock (1,410,000 shares)         9/27/2010     1,512     1,403        
                                       
Magnacare Holdings, Inc., Magnacare Administrative Services, LLC, and Magnacare, LLC   Healthcare professional provider   Senior secured loan ($12,638 par due 9/2016)   9.75% (Libor + 8.75%/Q)     9/15/2010     12,638     12,638 (16)      
        Senior secured loan ($44,393 par due 9/2016)   9.75% (Libor + 8.75%/Q)     9/15/2010     44,393     44,393 (2)(16)      
        Senior secured loan ($8,257 par due 9/2016)   9.75% (Libor + 8.75%/Q)     9/15/2010     8,257     8,257 (3)(16)      
                                   
                        65,288     65,288        
                                       
MW Dental Holding Corp.   Dental services   Senior secured revolving loan ($1,700 par due 4/2017)   8.50% (Libor + 7.00%/M)     4/12/2011     1,700     1,700 (16)      
        Senior secured loan ($15,384 par due 4/2017)   8.50% (Libor + 7.00%/M)     4/12/2011     15,384     15,384 (16)      
        Senior secured loan ($49,750 par due 4/2017)   8.50% (Libor + 7.00%/M)     4/12/2011     49,750     49,750 (2)(16)      
        Senior secured loan ($2,686 par due 4/2017)   8.50% (Libor + 7.00%/M)     4/12/2011     2,686     2,686 (3)(16)      
                                   
                        69,520     69,520        
                                       
Napa Management Services Corporation   Anesthesia management services provider   Senior secured loan ($10,892 par due 4/2016)   8.50% (Libor + 7.00%/Q)     4/15/2011     10,563     10,892 (16)      
        Senior secured loan ($29,437 par due 4/2016)   8.50% (Libor + 7.00%/Q)     4/15/2011     29,437     29,437 (2)(16)      
        Senior secured loan ($7,752 par due 4/2016)   8.50% (Libor + 7.00%/Q)     4/15/2011     7,752     7,752 (3)(16)      
        Common units (5,000 units)         4/15/2011     5,000     5,513        
                                   
                        52,752     53,594        
                                       
NS Merger Sub. Inc. and NS Holdings, Inc.   Healthcare technology provider   Senior subordinated loan ($579 par due 6/2017)   13.50%     6/21/2010     579     579        
        Senior subordinated loan ($50,000 par due 6/2017)   13.50%     6/21/2010     50,000     50,000 (2)      
        Common stock (2,500,000 shares)         6/21/2010     2,500     2,985        
                                   
                        53,079     53,564        
                                       
OnCURE Medical Corp.   Radiation oncology care provider   Common stock (857,143 shares)         8/18/2006     3,000     3,073        
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Passport Health Communications, Inc., Passport Holding Corp. and Prism Holding Corp.   Healthcare technology provider   Series A preferred stock (1,594,457 shares)         7/30/2008     11,156     9,218        
        Common stock (16,106 shares)         7/30/2008     100            
                                   
                        11,256     9,218        
                                       
PG Mergersub, Inc. and PGA Holdings, Inc.   Provider of patient surveys, management reports and national databases for the integrated healthcare delivery system   Senior secured loan ($9,108 par due 11/2015)   6.75% (Libor + 5.00%/Q)     11/3/2010     9,085     9,108 (3)(16)      
        Senior subordinated loan ($4,000 par due 3/2016)   12.50%     3/12/2008     3,956     4,000        
        Preferred stock (333 shares)         3/12/2008     125     15        
        Common stock (16,667 shares)         3/12/2008     167     754        
                                   
                        13,333     13,877        
                                   
                                       
PRA Holdings, Inc.   Drug testing services   Senior secured loan ($11,330 par due 12/2014)   4.56% (Libor + 4.00%/Q)     12/14/2007     11,034     11,103 (2)      
        Senior secured loan ($12,000 par due 12/2014)   4.56% (Libor + 4.00%/Q)     12/14/2007     11,682     11,760 (3)      
                                   
                        22,716     22,863        
                                       
RCHP, Inc.   Operator of general acute care hospitals   Junior secured loan ($15,000 par due 5/2019)   11.50% (Libor + 10.00%/Q)     11/4/2011     15,000     15,000 (16)      
        Junior secured loan ($50,000 par due 5/2019)   11.50% (Libor + 10.00%/Q)     11/4/2011     50,000     50,000 (2)(16)      
                                   
                        65,000     65,000        
                                       
Reed Group, Ltd.   Medical disability management services provider   Senior secured revolving loan ($1,650 par due 12/2013)         4/1/2010     1,497     1,402 (15)      
        Senior secured loan ($10,755 par due 12/2013)         4/1/2010     9,129     9,142 (15)      
        Senior secured loan ($20,777 par due 12/2013)         4/1/2010     15,918     2,431 (15)      
        Equity interests         4/1/2010     203            
                                   
                        26,747     12,975        
                                       
Soteria Imaging Services, LLC(5)   Outpatient medical imaging provider   Junior secured loan ($1,189 par due 11/2010)   14.50%     4/1/2010     1,057     808        
        Junior secured loan ($1,699 par due 11/2010)   12.50%     4/1/2010     1,529     1,154        
        Preferred member units (1,823,179 units)         4/1/2010                
                                   
                        2,586     1,962        
                                       
Sunquest Information Systems, Inc.   Laboratory software solutions provider   Junior secured loan ($75,000 par due 6/2017)   9.75% (Libor + 8.50%/Q)     12/16/2010     75,000     74,250 (16)      
        Junior secured loan ($50,000 par due 6/2017)   9.75% (Libor + 8.50%/Q)     12/16/2010     50,000     49,500 (2)(16)      
                                   
                        125,000     123,750        
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
U.S. Renal Care, Inc.   Dialysis provider   Senior secured loan ($7,444 par due 12/2016)   5.50% (Libor + 4.00%/Q)     6/9/2011     7,407     7,295 (16)      
        Senior subordinated loan ($50,569 par due 6/2018)   11.25% Cash, 2.00% PIK     5/24/2010     50,569     50,569 (2)      
                                   
                        57,976     57,864        
                                       
Vantage Oncology, Inc.   Radiation oncology care provider   Common stock (62,157 shares)         2/3/2011     4,670     5,057        
                                   
                        687,797     684,802     21,76 %
                                   
                                       
Education                              
American Academy Holdings, LLC   Provider of education, training, certification, networking, and consulting services to medical coders and other healthcare professionals   Senior secured revolving loan ($100 par due 3/2016)   9.50% (Libor + 8.50%/Q)     3/18/2011     100     100 (16)      
        Senior secured loan ($26,199 par due 3/2016)   9.50% (Libor + 8.50%/Q)     3/18/2011     26,199     26,199 (16)      
        Senior secured loan ($53,468 par due 3/2016)   9.50% (Libor + 8.50%/Q)     3/18/2011     53,468     53,468 (2)(16)      
                                   
                        79,767     79,767        
                                       
Campus Management Corp. and Campus Management Acquisition Corp.(5)   Education software developer   Preferred stock (485,159 shares)         2/8/2008     10,520     11,096        
                                       
Community Education Centers, Inc.   Offender re-entry and in-prison treatment services provider   Senior secured loan ($17,857 par due 12/2014)   6.25% (Libor + 5.25%/Q)     12/10/2010     17,857     17,857 (16)      
        Junior secured loan ($31,835 par due 12/2015)   15.40% (Libor + 11.00% Cash, 4.00% PIK /Q)     12/10/2010     31,835     31,835        
        Junior secured loan ($9,582 par due 12/2015)   15.46% (Libor + 11.00% Cash, 4.00% PIK /Q)     12/10/2010     9,582     9,582        
        Warrants to purchase up to 578,427 shares         12/10/2010         258        
                                   
                        59,274     59,532        
                                       
eInstruction Corporation   Developer and manufacturer of educational software products   Junior secured loan ($17,000 par due 7/2014)   12.00% (Base Rate + 8.25%/M)     4/1/2010     15,396     12,410        
        Senior subordinated loan ($27,281 par due 1/2015)         4/1/2010     24,151     1,467 (15)      
        Common stock (2,406 shares)         4/1/2010     926            
                                   
                        40,473     13,877        
                                       
ELC Acquisition Corp., ELC Holdings Corporation, and Excelligence Learning Corporation(5)   Developer, manufacturer and distributor of educational products   Preferred stock (99,492 shares)         8/1/2011     10,149     9,154        
        Common stock (50,800 shares)         8/1/2011     51            
                                   
                        10,200     9,154        
                                       
Infilaw Holding, LLC   Operator of for-profit law schools   Senior secured loan ($29,925 par due 8/2016)   9.50% (Libor + 8.50%/Q)     8/25/2011     29,925     29,925 (2)(16)      
        Series A preferred units (131,000 units)   10.75% (Base Rate + 7.50%/Q)     8/25/2011     131,000     131,000 (16)      
                                   
                        160,925     160,925        
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Instituto de Banca y Comercio, Inc. & Leeds IV Advisors, Inc.   Private school operator   Series B preferred stock (1,750,000 shares)         8/5/2010     5,000     6,153        
        Series C preferred stock (2,512,586 shares)         6/7/2010     689     303        
        Common stock (20 shares)         6/7/2010                
                                   
                        5,689     6,456        
                                       
JTC Education Holdings, Inc.   Postsecondary school operator   Senior secured revolving loan ($2,225 par due 12/2014)   12.75% (Base Rate + 9.50%/Q)     12/31/2009     2,225     2,225 (16)      
        Senior secured loan ($20,056 par due 12/2014)   12.50% (Libor + 9.50%/M)     12/31/2009     20,056     20,056 (16)      
        Senior secured loan ($9,714 par due 12/2014)   12.50% (Libor + 9.50%/M)     12/31/2009     9,714     9,714 (3)(16)      
                                   
                        31,995     31,995        
                                       
Lakeland Tours, LLC   Educational travel provider   Senior secured revolving loan ($3,750 par due 12/2016)   6.75% (Base Rate + 3.50%/Q)     10/4/2011     3,750     3,750 (16)      
        Senior secured loan ($64,338 par due 12/2016)   10.00% (Libor + 8.50%/Q)     10/4/2011     64,136     64,338 (13)(16)      
        Senior secured loan ($15,362 par due 12/2016)   6.00% (Libor + 4.50%/Q)     10/4/2011     15,314     15,362 (16)      
        Senior secured loan ($40,362 par due 12/2016)   10.00% (Libor + 8.50%/Q)     10/4/2011     40,231     40,362 (2)(13)(16)      
        Senior secured loan ($9,638 par due 12/2016)   6.00% (Libor + 4.50%/Q)     10/4/2011     9,606     9,638 (2)(16)      
        Common stock (5,000 shares)         10/4/2011     5,000     5,000        
                                   
                        138,037     138,450        
                                   
                                       
R3 Education, Inc. and EIC Acquisitions Corp.(7)   Medical school operator   Senior secured loan ($6,162 par due 4/2013)   9.00% (Libor + 6.00%/Q)     9/21/2007     6,162     11,508 (16)      
        Senior secured loan ($4,819 par due 4/2013)   9.00% (Libor + 6.00%/Q)     9/21/2007     4,819     8,996 (3)(16)      
        Senior secured loan ($6,509 par due 4/2013)   13.00% PIK     12/8/2009     4,030     12,149        
        Preferred stock (8,800 shares)         7/30/2008     2,200     1,650        
        Common membership interest (26.27% interest)         9/21/2007     15,800     23,207        
        Warrants to purchase up to 27,890 shares         12/8/2009                
                                   
                        33,011     57,510        
                                   
                        569,891     568,762     18.07 %
                                   
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Restaurants and Food Services                              
ADF Capital, Inc. & ADF Restaurant Group, LLC   Restaurant owner and operator   Senior secured revolving loan ($2,010 par due 11/2013)   6.50% (Libor + 3.50%/Q)     11/27/2006     2,010     2,010 (16)      
        Senior secured revolving loan ($258 par due 11/2013)   6.50% (Base Rate + 2.50%/Q)     11/27/2006     258     258 (16)      
        Senior secured loan ($7,305 par due 11/2013)   6.50% (Libor + 3.50%/Q)     11/27/2006     7,305     7,305 (16)      
        Senior secured loan ($64 par due 11/2013)   6.50% (Base Rate + 2.50%/Q)     11/27/2006     64     64 (16)      
        Senior secured loan ($11,277 par due 11/2014)   12.50% (Libor + 9.50%/Q)     11/27/2006     11,280     11,277 (2)(16)      
        Senior secured loan ($9,402 par due 11/2014)   12.50% (Libor + 9.50%/Q)     11/27/2006     9,402     9,402 (3)(16)      
        Promissory note ($14,897,360 par due 11/2016)         6/1/2006     14,886     10,905        
        Warrants to purchase up to 0.61 shares         6/1/2006                
                                   
                        45,205     41,221        
                                       
Huddle House, Inc.(6)   Restaurant owner and operator   Senior subordinated loan ($20,924 par due 12/2015)   12.00% Cash, 3.00% PIK     4/1/2010     20,641     18,939        
        Common stock (358,279 shares)         4/1/2010                
                                   
                        20,641     18,939        
                                       
Orion Foods, LLC (fka Hot Stuff Foods, LLC)(6)   Convenience food service retailer   Senior secured revolving loan ($3,300 par due 9/2014)   10.75% (Base Rate + 7.50%/M)     4/1/2010     3,300     3,300 (16)      
        Senior secured loan ($33,917 par due 9/2014)   10.00% (Libor + 8.50%/Q)     4/1/2010     33,917     33,917 (2)(16)      
        Junior secured loan ($37,552 par due 9/2014)   14.00%     4/1/2010     26,111     30,483        
        Preferred units (10,000 units)         10/28/2010                
        Class A common units (25,001 units)         4/1/2010                
        Class B common units (1,122,452 units)         4/1/2010                
                                   
                        63,328     67,700        
                                       
OTG Management, Inc.   Airport restaurant operator   Senior secured revolving loan ($1,875 par due 8/2016)   8.50% (Libor + 7.00%/Q)     8/9/2011     1,875     1,875 (16)      
        Senior secured revolving loan ($937 par due 8/2016)   9.25% (Base Rate + 6.00%/M)     8/9/2011     937     937 (16)      
        Senior secured loan ($17,187 par due 8/2016)   8.50%
(Libor + 7.00%/Q)
    8/9/2011     17,187     17,187 (16)      
        Junior secured loan ($29,285 par due 8/2016)   14.50%
(Libor + 13.00%/M)
    8/9/2011     29,285     29,285 (16)      
        Common units (3,000,000 units)         1/5/2011     3,000     2,610        
        Warrants to purchase up to 100,866 shares of common stock         6/19/2008     100     4,544        
                                   
                        52,384     56,438        

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
PMI Holdings, Inc.   Restaurant owner and operator   Senior secured revolving loan ($2,500 par due 5/2015)   10.00%
(Libor + 8.00%/M)
    5/5/2010     2,500     2,500 (16)      
        Senior secured revolving loan ($250 par due 5/2015)   10.25%
(Base Rate + 7.00%/Q)
    5/5/2010     250     250 (16)      
        Senior secured loan ($9,008 par due 5/2015)   10.00%
(Libor + 8.00%/M)
    5/5/2010     9,008     9,008 (2)(16)      
        Senior secured loan ($4 par due 5/2015)   10.25%
(Base Rate + 7.00%/M)
    5/5/2010     4     4 (2)(16)      
        Senior secured loan ($9,008 par due 5/2015)   10.00%
(Libor + 8.00%/M)
    5/5/2010     9,008     9,008 (3)(16)      
        Senior secured loan ($4 par due 5/2015)   10.25%
(Base Rate + 7.00%/M)
    5/5/2010     4     4 (3)(16)      
                                   
                        20,774     20,774        
                                       
S.B. Restaurant Company   Restaurant owner and operator   Senior secured loan ($34,575 par due 7/2012)   13.00%
(Libor + 9.00% Cash, 2.00% PIK /Q)
    4/1/2010     31,283     34,575 (16)      
        Preferred stock (46,690 shares)         4/1/2010         117        
        Warrants to purchase up to 257,429 shares of common stock         4/1/2010                
                                   
                        31,283     34,692        
                                       
Vistar Corporation and Wellspring Distribution Corp.   Food service distributor   Junior secured loan ($70,250 par due 5/2015)   11.00%     5/23/2008     68,885     70,250        
        Junior secured loan ($30,000 par due 5/2015)   11.00%     5/23/2008     30,000     30,000 (2)      
        Class A non-voting common stock (1,366,120 shares)         5/3/2008     7,500     6,211        
                                   
                        106,385     106,461        
                                   
                        340,000     346,225     11.00 %
                                   
                                       
Business Services                              
Acentia (fka Interactive Technology Solutions, LLC)   IT services provider   Senior secured loan ($7,332 par due 6/2015)   8.75%
(Base Rate + 5.50%/Q)
    10/21/2010     7,332     7,332 (16)      
        Senior secured loan ($8,214 par due 6/2015)   8.75%
(Base Rate + 5.50%/Q)
    10/21/2010     8,214     8,214 (3)(16)      
                                   
                        15,546     15,546        
                                       
Aviation Properties Corporation(6)   Aviation services   Common stock (100 shares)         4/1/2010                
                                       
CIBT Investment Holdings, LLC   Travel documents services   Class A shares (2,500 shares)         12/15/2011     2,500     2,500        
                                       
CitiPostal Inc.(6)   Document storage and management services   Senior secured revolving loan ($3,200 par due 12/2013)   6.75%
(Base Rate + 3.25%/Q)
    4/1/2010     3,200     3,200 (16)      
        Senior secured loan ($499 par due 12/2013)   8.50% Cash, 5.50% PIK     4/1/2010     499     499        
        Senior secured loan ($51,161 par due 12/2013)   8.50% Cash, 5.50% PIK     4/1/2010     51,161     51,161 (2)      
        Senior subordinated loan ($14,698 par due 12/2015)         4/1/2010     13,038     1,574 (15)      
        Common stock (37,024 shares)         4/1/2010                
                                   
                        67,898     56,434        
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Cornerstone Records Management, LLC   Physical records storage and management service provider   Senior secured loan ($18,377 par due 8/2016)   8.50%
(Libor + 7.00%/Q)
    8/12/2011     18,377     18,193 (16)      
                                       
Coverall North America, Inc.(6)   Commercial janitorial service provider   Subordinated notes ($9,386 par due 2/2016)   10.00% Cash, 2.00% PIK     2/22/2011     9,386     9,386        
                                       
Diversified Collections Services, Inc.   Collections services   Senior secured loan ($34,000 par due 9/2012)   14.00%
(Base Rate+ 10.75%/M)
    6/25/2010     34,000     34,000 (2)(16)      
        Senior secured loan ($5,263 par due 3/2012)   7.75%
(Base Rate + 4.50%/M)
    6/25/2010     5,263     5,263 (3)(16)      
        Senior secured loan ($2,000 par due 9/2012)   14.00%
(Base Rate + 10.75%/M)
    6/25/2010     2,000     2,000 (3)(16)      
        Preferred stock (14,927 shares)         5/18/2006     169     328        
        Common stock (478,816 shares)         4/1/2010     1,478     3,274        
        Common stock (114,004 shares)         2/5/2005     295     918        
                                   
                        43,205     45,783        
                                       
HCP Acquisition Holdings, LLC(6)   Healthcare compliance advisory services   Class A units (11,092,585 units)         6/26/2008     11,093     4,923        
                                       
Impact Innovations Group, LLC   IT consulting and outsourcing services   Member interest (50.00% interest)         4/1/2010         200        
                                       
Investor Group Services, LLC(5)   Business consulting for private equity and corporate clients   Limited liability company membership interest (10.00% interest)         6/22/2006         859        
                                       
Multi-Ad Services, Inc.(5)   Marketing services and software provider   Preferred units (1,725,280 units)         4/1/2010     788     1,828        
        Common units (1,725,280 units)         4/1/2010                
                                   
                        788     1,828        
                                       
MVL Group, Inc.(6)   Marketing research provider   Senior secured loan ($22,772 par due 7/2012)   12.00%     4/1/2010     22,772     22,772        
        Senior subordinated loan ($35,851 par due 7/2012)   12.00% Cash, 2.50% PIK     4/1/2010     35,283     33,844        
        Junior subordinated loan ($144 par due 7/2012)   10.00%     4/1/2010                
        Common stock (560,716 shares)         4/1/2010                
                                   
                        58,055     56,616        
                                       
Pillar Processing LLC and PHL Holding Co.(5)   Mortgage services   Senior secured loan ($7,375 par due 5/2014)         7/31/2008     7,375     1,250 (15)      
        Senior secured loan ($7,142 par due 11/2013)         11/20/2007     7,064     6,571 (15)      
        Senior secured loan ($4,458 par due 11/2013)         11/20/2007     4,409     4,101 (3)(15)      
        Common stock (85 shares)               3,768            
                                   
                        22,616     11,922        
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Prommis Solutions, LLC, E-Default Services, LLC, Statewide Tax and Title Services, LLC & Statewide Publishing Services, LLC   Bankruptcy and foreclosure processing services   Senior subordinated loan ($44,926 par due 2/2014)         2/9/2007     43,819     5,273 (15)      
        Preferred units (30,000 units)         4/11/2006     3,000            
                                   
                        46,819     5,273        
                                       
Promo Works, LLC   Marketing services   Senior secured loan ($8,655 par due 12/2013)         4/1/2010     4,222     3,389 (15)      
                                       
R2 Acquisition Corp.   Marketing services   Common stock (250,000 shares)         5/29/2007     250     157        
                                       
Summit Business Media Parent Holding Company LLC   Business media consulting services   Limited liability company membership interest (45.98% interest)         5/20/2011         566        
                                       
Tradesmen International, Inc.   Construction labor support   Junior secured loan ($10,050 par due 5/2014)   13.00% Cash, 1.00% PIK     4/1/2010     7,872     10,050        
        Warrants to purchase up to 771,036 shares         4/1/2010         5,002        
                                   
                        7,872     15,052        
                                       
Tripwire, Inc.   IT security software provider   Senior secured loan ($30,000 par due 5/2018)   8.50%
(Libor + 7.25%/Q)
    5/23/2011     30,000     30,000 (16)      
        Senior secured loan ($50,000 par due 5/2018)   8.50%
(Libor + 7.25%/Q)
    5/23/2011     50,000     50,000 (2)(16)      
        Class B common stock (2,655,638 shares)         5/23/2011     30     38        
        Class A common stock (2,970 shares)         5/23/2011     2,970     3,754        
                                   
                        83,000     83,792        
                                       
Venturehouse-Cibernet Investors, LLC   Financial settlement services for intercarrier wireless roaming   Equity interest         4/1/2010                
                                       
VSS-Tranzact Holdings, LLC(5)   Management consulting services   Series B preferred units (854 units)         11/7/2011     867     768        
        Common membership interest (8.54% interest)         10/26/2007     10,204     200        
        Warrants to purchase up to 4,206 units         11/7/2011         98        
                                   
                        11,071     1,066        
                                   
                        402,698     333,485     10.60 %
                                   
                                       
Financial Services                                      
AllBridge Financial, LLC(6)   Asset management services   Equity interests         4/1/2010     11,395     11,733        
                                       
Callidus Capital Corporation(6)   Asset management services   Common stock (100 shares)         4/1/2010     3,000     776        
                                       
Ciena Capital LLC(6)   Real estate and small business loan servicer   Senior secured revolving loan ($14,000 par due 12/2013)   6.00%     11/29/2010     14,000     14,000        
        Senior secured loan ($32,000 par due 12/2015)   12.00%     11/29/2010     32,000     32,000        
        Equity interests         11/29/2010     53,374     20,051        
                                   
                        99,374     66,051        
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Commercial Credit Group, Inc.   Commercial equipment finance and leasing company   Senior subordinated loan ($19,500 par due 6/2015)   15.00%     4/1/2010     19,500     19,500        
                                       
Cook Inlet Alternative Risk, LLC   Risk management services   Senior subordinated loan ($3,750 par due 9/2015)   9.00%     9/30/2011     3,750     3,550        
                                       
Financial Pacific Company   Commercial finance leasing   Preferred stock (6,500 shares)   8.00% PIK     10/13/2010     6,500     7,822        
        Common stock (650,000 shares)         10/13/2010                
                                   
                        6,500     7,822        
                                       
Imperial Capital Group, LLC   Investment services   Class A common units (7,710 units)         5/10/2007     14,997     20,445        
        2006 Class B common units (2,526 units)         5/10/2007     3     4        
        2007 Class B common units (315 units)         5/10/2007                
                                   
                        15,000     20,449        
                                       
Ivy Hill Asset Management, L.P.(6)(8)   Asset management services   Member interest (100.00% interest)         6/15/2009     112,876     194,597        
                                   
                        271,395     324,478     10.31 %
                                   
                                       
Consumer Products—Non-durable                                      
Augusta Sportswear, Inc.   Manufacturer of athletic apparel   Senior secured loan ($26 par due 7/2015)   9.50%
(Base Rate + 6.25%/Q)
    9/3/2010     26     26 (3)(16)      
        Senior secured loan ($8,819 par due 7/2015)   8.50%
(Libor + 7.50%/Q)
    9/3/2010     8,819     8,819 (3)(16)      
                                   
                        8,845     8,845        
                                       
Gilchrist & Soames, Inc.   Personal care manufacturer   Senior secured loan ($21,941 par due 10/2013)   13.44%     4/1/2010     21,435     21,941        
                                       
Implus Footcare, LLC   Provider of footwear and other accessories   Preferred stock (455 shares)   6.00% PIK     10/31/2011     4,591     4,591        
        Common stock (455 shares)         10/31/2011     455     455        
                                   
                        5,046     5,046        
                                       
Insight Pharmaceuticals Corporation(5)   OTC drug products manufacturer   Junior secured loan ($25,000 par due 8/2017)   13.25%
(Libor + 11.75%/Q)
    8/26/2011     24,740     24,000 (2)(16)      
        Class A common stock (155,000 shares)         8/26/2011     6,035     9,559        
        Class B common stock (155,000 shares)         8/26/2011     6,035     9,559        
                                   
                        36,810     43,118        
                                       
Making Memories Wholesale, Inc.(6)   Scrapbooking branded products manufacturer   Senior secured revolving loan ($2,250 par due 8/2014)         8/21/2009     2,229     963 (15)      
        Senior secured loan ($9,625 par due 8/2014)         8/21/2009     7,193     (15)      
        Senior secured loan ($5,973 par due 8/2014)         8/21/2009     3,874     (15)      
        Common stock (100 shares)         8/21/2009                
                                   
                        13,296     963        
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Matrixx Initiatives, Inc. and Wonder Holdings Acquisition Corp.   Developer and marketer of over-the-counter healthcare products   Senior secured revolving loan ($10,000 par due 6/2016)   13.00%
(Libor + 12.00%/M)
    6/30/2011     10,000     9,700 (16)      
        Senior secured loan ($41,437 par due 6/2016)   13.00%
(Libor + 12.00%/Q)
    6/30/2011     41,178     40,194 (2)(16)      
        Warrants to purchase up to 1,654,678 shares of common stock         7/27/2011                
                                   
        Warrants to purchase up to 1,489 shares of preferred stock         7/27/2011         1,504        
                                   
                        51,178     51,398        
                                       
The Step2 Company, LLC   Toy manufacturer   Junior secured loan ($27,000 par due 4/2015)   10.00%     4/1/2010     25,764     27,000        
        Junior secured loan ($31,178 par due 4/2015)   10.00% Cash, 5.00% PIK     4/1/2010     29,879     28,060        
        Common units (1,116,879 units)         4/1/2010     24     25        
        Warrants to purchase up to 3,157,895 units         4/1/2010         72        
                                   
                        55,667     55,157        
                                       
The Thymes, LLC(6)   Cosmetic products manufacturer   Preferred units (6,283 units)   8.00% PIK     6/21/2007     6,111     6,420        
        Common units (5,400 units)         6/21/2007         754        
                                   
                        6,111     7,174        
                                       
Woodstream Corporation   Pet products manufacturer   Senior subordinated loan ($45,000 par due 2/2015)   12.00%     1/22/2010     40,444     44,100        
        Common stock (4,254 shares)         1/22/2010     1,222     2,280        
                                   
                        41,666     46,380        
                                   
                        240,054     240,022     7.63 %
                                   
                                       
Containers—Packaging                                      
ICSH, Inc.   Industrial container manufacturer, reconditioner and servicer   Senior secured loan ($71,318 par due 8/2016)   8.00%
(Libor + 7.00%/Q)
    8/31/2011     71,318     69,891 (16)      
        Senior secured loan ($49,873 par due 8/2016)   8.00%
(Libor + 7.00%/Q)
    8/31/2011     49,873     48,875 (2)(16)      
                                   
                        121,191     118,766        
                                       
Microstar Logistics LLC   Keg management solutions provider   Junior secured loan ($60,000 par due 8/2016)   10.00%
(Libor + 9.00%/Q)
    8/5/2011     60,000     60,000 (16)      
        Junior secured loan ($50,000 par due 8/2016)   10.00%
(Libor + 9.00%/Q)
    8/5/2011     50,000     50,000 (2)(16)      
                                   
                        110,000     110,000        
                                   
                        231,191     228,766     7.27 %
                                   
                                       
Aerospace and Defense                                      
AP Global Holdings, Inc.   Safety and security equipment manufacturer   Senior secured loan ($134,475 par due 7/2017)   7.25%
(Libor + 5.75%/M)
    7/22/2011     134,475     132,794 (14)(16)      
        Senior secured loan ($49,875 par due 7/2017)   7.25%
(Libor + 5.75%/M)
    7/22/2011     49,875     49,252 (2)(16)      
                                   
                        184,350     182,046        
                                       

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Table of Contents


ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Wyle Laboratories, Inc. and Wyle Holdings, Inc.   Provider of specialized engineering, scientific and technical services   Senior preferred stock (775 shares)   8.00% PIK     1/17/2008     95     95        
        Common stock (1,885,195 shares)         1/17/2008     2,291     1,920        
                                   
                        2,386     2,015        
                                   
                        186,736     184,061     5.85 %
                                   
                                       
Manufacturing                                      
Component Hardware Group, Inc.   Commercial equipment   Junior secured loan ($3,106 par due 12/2014)   7.00% Cash, 3.00% PIK     8/4/2010     3,106     3,106        
        Senior subordinated loan ($10,596 par due 12/2014)   7.50% Cash, 5.00% PIK     4/1/2010     6,932     10,596        
        Warrants to purchase up to 1,462,500 shares of common stock         8/4/2010         3,181        
                                   
                        10,038     16,883        
                                       
HOPPY Holdings Corp.   Automotive and recreational vehicle aftermarket products   Senior secured loan ($13,988 par due 6/2016)   5.00%
(Libor + 3.75%/M)
    6/3/2011     13,988     13,289 (16)      
                                       
MWI Holdings, Inc.   Highly engineered springs, fasteners, and other precision components   Senior secured loan ($29,914 par due 6/2017)   10.00%
(Libor + 8.00%/Q)
    6/15/2011     29,914     29,914 (16)      
                                       
NetShape Technologies, Inc.   Metal precision engineered components manufacturer   Senior secured revolving loan ($91 par due 2/2013)   3.96%
(Libor + 3.75%/M)
    4/1/2010     44     69        
        Senior secured revolving loan ($778 par due 2/2013)   4.33%
(Libor + 3.75%/Q)
    4/1/2010     374     587        
                                   
                        418     656        
                                       
Protective Industries, Inc.   Plastic protection products   Senior secured loan ($14 par due 5/2017)   6.25%
(Base Rate + 3.00%/M)
    5/23/2011     14     14 (16)      
        Senior secured loan ($5,589 par due 5/2017)   5.75%
(Libor + 4.25%/M)
    5/23/2011     5,589     5,421 (16)      
        Senior subordinated loan ($720 par due 5/2018)   8.00% Cash, 7.25% PIK     5/23/2011     720     720        
        Preferred stock (2,379,361 shares)         5/23/2011     2,307     3,101        
                                   
                        8,630     9,256        
                                       
Saw Mill PCG Partners LLC   Metal precision engineered components   Common units (1,000 units)         1/30/2007     1,000            
                                       
Sigma International Group, Inc.(7)   Water treatment parts   Junior secured loan ($4,048 par due 4/2014)   10.00%
(Libor + 3.50% Cash, 5.00% PIK /A)
    7/8/2011     4,048     3,036 (16)      
                                       
WP CPP Holdings, LLC   Precision engineered castings   Senior secured loan ($20,822 par due 10/2017)   8.50%
(Libor + 7.00%/M)
    10/11/2011     20,720     20,406 (16)      
        Senior secured loan ($50,000 par due 10/2017)   8.50%
(Libor + 7.00%/M)
    10/11/2011     49,745     49,000 (2)(16)      
                                   
                        70,465     69,406        
                                   
                        138,501     142,440     4.53 %
                                   
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Services—Other                                  
The Dwyer Group(5)   Operator of multiple franchise concepts primarily related to home maintenance or repairs   Senior subordinated loan ($17,100 par due 12/2016)   14.50%     12/22/2010     17,100     17,100        
        Series A preferred units (13,292,377 units)   8.00% PIK     12/22/2010     14,413     17,011        
                                   
                        31,513     34,111        
                                       
Wash Multifamily Laundry Systems, LLC (fka Web Services Company, LLC)   Laundry service and equipment provider   Senior secured loan ($4,850 par due 8/2014)   7.00%
(Base Rate + 3.75%/Q)
    6/15/2009     4,723     4,850 (3)(16)      
        Junior secured loan ($36,900 par due 8/2015)   10.88%
(Libor + 9.38%/Q)
    1/25/2011     36,900     36,900 (16)      
        Junior secured loan ($50,000 par due 8/2015)   10.88%
(Libor + 9.38%/Q)
    1/25/2011     50,000     50,000 (2)(16)      
        Junior secured loan ($3,100 par due 8/2015)   10.88%
(Libor + 9.38%/Q)
    1/25/2011     3,100     3,100 (3)(16)      
                                   
                        94,723     94,850        
                                   
                        126,236     128,961     4.10 %
                                   
                                       
Telecommunications                                  
American Broadband Communications, LLC, American Broadband Holding Company and Cameron Holdings of NC, Inc.   Broadband communication services   Senior secured loan ($8,754 par due 9/2013)   7.50%
(Libor + 5.50%/Q)
    9/1/2010     8,754     8,754 (3)(16)      
        Senior subordinated loan ($10,529 par due 11/2014)   12.00% Cash, 2.00% PIK     11/7/2007     10,529     10,529        
        Senior subordinated loan ($22,150 par due 11/2014)   12.00% Cash, 4.00% PIK     9/1/2010     22,150     22,150        
        Senior subordinated loan ($33,429 par due 11/2014)   12.00% Cash, 2.00% PIK     2/8/2008     33,429     33,429 (2)      
        Warrants to purchase up to 378 shares         11/7/2007         6,286        
        Warrants to purchase up to 200 shares         9/1/2010         3,326        
                                   
                        74,862     84,474        
                                       
Dialog Telecom LLC   Broadband communication services   Senior secured loan ($16,412 par due 12/2012)   12.08%
(Libor + 7.50% Cash, 4.00% PIK /Q)
    6/20/2011     16,412     16,412 (16)      
                                       
Startec Equity, LLC(6)   Communication services   Member interest         4/1/2010                
                                   
                        91,274     100,886     3.21 %
                                   
                                       
Grocery                                  
Grocery Outlet Inc.   Value grocery retailer   Senior secured revolving loan ($3,100 par due 12/2017)   11.25%
(Base Rate + 8.00%/Q)
    12/15/2011     3,100     3,100 (16)      
        Senior secured loan ($91,500 par due 12/2017)   10.50%
(Libor + 9.00%/Q)
    12/15/2011     91,500     91,500 (16)      
                                   
                        94,600     94,600        
                                   
                        94,600     94,600     3.01 %
                                   
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Retail                                  
Direct Buy Holdings, Inc. and Direct Buy Investors, LP(5)   Membership based buying club franchisor and operator   Limited partnership interest (66,667 shares)         4/1/2010     2,594            
        Limited partnership interest (83,333 shares)         11/30/2007     8,333            
                                   
                        10,927            
                                       
Fulton Holdings Corp.   Airport restaurant operator   Senior secured loan ($40,000 par due 5/2016)   12.50%     5/28/2010     40,000     40,000 (2)(11)      
        Common stock (19,672 shares)         5/28/2010     1,967     1,618        
                                   
                        41,967     41,618        
                                       
Savers, Inc. and SAI Acquisition Corporation   For-profit thrift retailer   Common stock (1,218,481 shares)         8/8/2006     4,909     12,556        
                                       
Things Remembered Inc. and TRM Holdings Corporation   Personalized gifts retailer   Senior secured loan ($21,433 par due 3/2014)   9.00%
(Base Rate + 7.00%/M)
    9/28/2006     21,414     21,433 (16)      
        Senior secured loan ($8,226 par due 3/2014)   9.00%
(Base Rate + 7.00%/M)
    9/28/2006     8,302     8,226 (3)(16)      
        Class B Preferred stock (73 shares)         3/19/2009         2,056        
        Preferred stock (80 shares)         9/28/2006     1,800     2,249        
        Common stock (800 shares)         9/28/2006     200     2,172        
        Warrants to purchase up to 859 shares of preferred stock         3/19/2009         2,324        
                                   
                        31,716     38,460        
                                   
                        89,519     92,634     2.94 %
                                   
                                       
Energy                                  
La Paloma Generating Company, LLC   Natural gas fired, combined cycle plant operator   Junior secured loan ($59,000 par due 8/2018)   10.25%
(Libor + 8.75%/Q)
    8/9/2011     57,775     56,050 (16)      
                                       
USG Nevada LLC   Geothermal, renewable energy, developer for electrical power and direct uses   Junior secured loan ($7,500 par due 6/2012)   3.94%
(Libor + 3.50%/Q)
    11/9/2011     7,500     7,500        
                                   
                        65,275     63,550     2.02 %
                                   
                                       
Automotive Services                                  
Driven Holdings, LLC   Automotive aftermarket car care franchisor   Preferred stock (247,500 units)         12/16/2011     2,475     2,475        
        Common stock (25,000 units)         12/16/2011     25     25        
                                   
                        2,500     2,500        
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Stag-Parkway, Inc.(6)   Automotive aftermarket components supplier   Senior secured loan ($34,500 par due 12/2014)   12.50%
(Libor + 11.00%/Q)
    9/30/2010     34,500     34,500 (16)      
        Preferred stock (4,200 shares)   16.50% PIK     9/30/2010     2,368     4,200        
        Common stock (10,200 shares)         9/30/2010         14,807        
                                   
                        36,868     53,507        
                                   
                        39,368     56,007     1.78 %
                                   
                                       
Commercial Real Estate Finance                                  
10th Street, LLC(5)   Real estate holding company   Senior subordinated loan ($24,213 par due 11/2014)   8.93% Cash, 4.07% PIK     4/1/2010     24,213     24,213        
        Member interest (10.00% interest)         4/1/2010     594     529        
        Option (25,000 units)         4/1/2010     25     25        
                                   
                        24,832     24,767        
                                       
Allied Capital REIT, Inc.(6)   Real estate investment trust   Real estate equity interests         4/1/2010     50     50        
        Real estate equity interests         4/1/2010     325     639        
                                   
                        375     689        
                                       
American Commercial Coatings, Inc.   Real estate property   Commercial mortgage loan ($2,000 par due 12/2025)         4/1/2010     1,611     1,967 (15)      
                                       
Aquila Binks Forest Development, LLC   Real estate developer   Commercial mortgage loan ($13,477 par due 12/2014)         4/1/2010     11,900     4,013 (15)      
        Real estate equity interests         4/1/2010                
                                   
                        11,900     4,013        
                                       
Cleveland East Equity, LLC   Hotel operator   Real estate equity interests         4/1/2010     1,026     2,507        
                                       
Commons R-3, LLC   Real estate developer   Real estate equity interests         4/1/2010                
                                       
Crescent Hotels & Resorts, LLC and affiliates(6)   Hotel operator   Senior secured loan ($433 par due 6/2010)   10.00%     4/1/2010     433     444        
        Senior subordinated loan ($9,071 par due 1/2012)         4/1/2010     1,475     138 (15)      
        Senior subordinated loan ($9,399 par due 6/2017)         4/1/2010     2,410     241 (15)      
        Senior subordinated loan ($10,967 par due 9/2012)         4/1/2010     2,051     202 (15)      
        Senior subordinated loan ($261 par due 3/2013)         4/1/2010     263     9 (15)      
        Senior subordinated loan ($2,236 par due 9/2011)         4/1/2010         (15)      
        Preferred equity interest         4/1/2010         39        
        Common equity interest         4/1/2010     35            
                                   
                        6,667     1,073        
                                       
Hot Light Brands, Inc.(6)   Real estate holding company   Senior secured loan ($35,239 par due 2/2011)         4/1/2010     3,945     3,692 (15)      
        Common stock (93,500 shares)         4/1/2010                
                                   
                        3,945     3,692        
                                       
NPH, Inc.   Hotel property   Real estate equity interests         4/1/2010     5,291     7,959        
                                   
                        55,647     46,667     1.48 %
                                   
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Food and Beverage                                  
Apple & Eve, LLC and US Juice Partners, LLC(5)   Juice manufacturer   Senior secured revolving loan ($2,000 par due 10/2013)   12.00%
(Libor + 9.00%/M)
    10/5/2007     2,000     2,000 (16)      
        Senior secured revolving loan ($2,500 par due 10/2013)   12.00%
(Base Rate + 8.00%/Q)
    10/5/2007     2,500     2,500 (16)      
        Senior secured loan ($13,325 par due 10/2013)   12.00%
(Libor + 9.00%/M)
    10/5/2007     13,325     13,325 (16)      
        Senior secured loan ($14,019 par due 10/2013)   12.00%
(Libor + 9.00%/M)
    10/5/2007     14,019     14,019 (3)(16)      
        Senior units (50,000 units)         10/5/2007     5,000     3,326        
                                   
                        36,844     35,170        
                                       
Charter Baking Company, Inc.   Baked goods manufacturer   Senior subordinated loan ($7,615 par due 2/2013)   16.00% PIK     2/6/2008     7,615     7,615        
        Preferred stock (6,258 shares)         9/1/2006     2,500     1,519        
                                   
                        10,115     9,134        
                                       
Distant Lands Trading Co.   Coffee manufacturer   Class A common stock (1,294 shares)         4/1/2010     980     568        
        Class A-1 common stock (2,157 shares)         4/1/2010                
                                   
                        980     568        
                                   
                        47,939     44,872     1.43 %
                                   
                                       
Consumer Products—Durable                                  
Bushnell Inc.   Sports optics manufacturer   Junior secured loan ($41,325 par due 2/2014)   7.08%
(Libor + 6.50%/Q)
    4/1/2010     33,467     37,192        
                                   
                        33,467     37,192     1.18 %
                                   
                                       
Transportation                                  
PODS Funding Corp.   Storage and warehousing   Junior subordinated loan ($37,020 par due 5/2017)   10.50% Cash, 5.00% PIK     11/29/2011     37,020     37,020        
                                       
United Road Towing, Inc.   Towing company   Warrants to purchase up to 607 shares         4/1/2010                
                                   
                        37,020     37,020     1.18 %
                                   
                                       
Environmental Services                                  
AWTP, LLC(6)   Water treatment services   Junior secured loan ($4,109 par due 6/2015)   5.00% Cash, 5.00% PIK     4/18/2011     4,109     4,109        
        Junior secured loan ($896 par due 6/2015)   15.00% PIK     4/18/2011     896     623        
        Junior secured loan ($4,518 par due 6/2015)   15.00% PIK     4/18/2011     4,518     3,142 (3)      
        Membership interests (90% interest)         4/18/2011                
                                   
                        9,523     7,874        
                                       
RE Community Holdings II, Inc.and Pegasus Community Energy, LLC.   Operator of municipal recycling facilities   Preferred stock (1,000 shares)   12.50% PIK     3/1/2011     8,311     8,283        
                                       
Waste Pro USA, Inc   Waste management services   Preferred Class A common equity (611,615 shares)         11/9/2006     12,263     20,540        
                                   
                        30,097     36,697     1.17 %
                                   
                                       

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
Oil and Gas                                  
Geotrace Technologies, Inc.   Reservoir processing, development   Warrants to purchase up to 69,978 shares of common stock         4/1/2010     88            
        Warrants to purchase up to 210,453 shares of preferred stock         4/1/2010     2,805     172        
                                   
                        2,893     172        
                                       
UL Holding Co., LLC   Petroleum product manufacturer   Junior secured loan ($2,098 par due 12/2012)   9.31%
(Libor + 8.88%/Q)
    12/24/2007     2,098     2,098        
        Junior secured loan ($4,073 par due 12/2012)   14.00%     12/24/2007     4,073     4,073        
        Junior secured loan ($2,000 par due 12/2012)   9.45%
(Libor + 8.88%/Q)
    6/17/2011     2,000     2,000        
        Junior secured loan ($5,000 par due 12/2012)   15.00%     8/13/2010     5,000     5,000        
        Junior secured loan ($2,926 par due 12/2012)   14.00%     12/24/2007     2,926     2,926 (2)      
        Junior secured loan ($835 par due 12/2012)   9.31%
(Libor + 8.88%/Q)
    12/24/2007     835     835 (3)      
        Junior secured loan ($1,801 par due 12/2012)   14.00%     12/24/2007     1,801     1,801 (3)      
        Junior secured loan ($10,728 par due 12/2012)   9.32%
(Libor + 8.88%/Q)
    12/24/2007     10,728     10,728 (3)      
        Class A common units (8,982 units)         6/17/2011     90     46        
        Class B-4 common units (50,000 units)         4/25/2008     500     255        
        Class B-5 common units (499,000 units)         6/17/2011     4,990     2,541        
        Class C common units (549,491 units)         4/25/2008         2,798        
                                   
                        35,041     35,101        
                                   
                        37,934     35,273     1.12 %
                                   
                                       
Chemicals, Plastic and Rubber                                  
Emerald Performance Materials, LLC   Polymers and performance materials manufacturer   Senior secured loan ($3,603 par due 11/2013)   13.00% Cash, 3.00% PIK     5/22/2006     3,603     3,603        
        Senior secured loan ($9,967 par due 11/2013)   10.25%
(Base Rate + 3.50%/M)
    6/29/2011     9,967     9,967 (16)      
        Senior secured loan ($6,639 par due 11/2013)   10.00%
(Libor + 6.00%/M)
    6/29/2011     6,639     6,639 (16)      
        Senior secured loan ($5,246 par due 11/2013)   13.00% Cash, 3.00% PIK     5/22/2006     5,246     5,246 (2)      
        Senior secured loan ($8,227 par due 11/2013)   8.25%
(Libor + 4.25%/M)
    5/22/2006     8,227     8,227 (3)(16)      
        Senior secured loan ($915 par due 11/2013)   10.25%
(Base Rate + 3.50%/M)
    6/29/2011     915     915 (3)(16)      
        Senior secured loan ($610 par due 11/2013)   10.00%
(Libor + 6.00%/M)
    6/29/2011     610     610 (3)(16)      
                                   
                        35,207     35,207        
                                   
                        35,207     35,207     1.12 %
                                   
                                       
Printing, Publishing and Media                                  
EarthColor, Inc.(6)   Printing management services   Common stock (89,435 shares)         4/1/2010                
                                       
LVCG Holdings LLC(6)   Commercial printer   Membership interests (56.53% interest)         10/12/2007     6,600            

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2011
(dollar amounts in thousands)

Company(1)
  Business Description   Investment   Interest(4)(10)   Acquisition
Date
  Amortized
Cost
  Fair Value   Percentage
of Net
Assets
 
National Print Group, Inc.   Printing management services   Senior secured revolving loan ($1,141 par due 10/2013)   9.00%
(Libor + 6.00%/M)
    3/2/2006     1,141     1,027 (16)      
        Senior secured revolving loan ($1,031 par due 10/2013)   9.00%
(Base Rate + 5.00%/M)
    3/2/2006     1,031     928 (16)      
        Senior secured loan ($20 par due 10/2013)   10.00%
(Libor + 6.00% Cash, 1.00% PIK/Q)
    3/2/2006     20     18 (16)      
        Senior secured loan ($7,520 par due 10/2013)   10.00%
(Libor + 6.00% Cash, 1.00% PIK/Q)
    3/2/2006     7,217     6,919 (3)(16)      
        Senior secured loan ($181 par due 10/2013)   10.00%
(Base Rate + 5.00% Cash, 1.00% PIK/M)
    3/2/2006     174     166 (3)(16)      
        Preferred stock (9,344 shares)         3/2/2006     2,000            
                                   
                        11,583     9,058        

The Teaching Company, LLC and The Teaching Company Holdings, Inc.

 

Education publications provider

 

Preferred stock (21,711 shares)

 

 

 

 

9/29/2006

 

 

2,171

 

 

5,339

 

 

 

 
        Common stock (15,393 shares)         9/29/2006     3     13        
                                   
                        2,174     5,352        
                                   
                        20,357     14,410     0.46 %
                                   

Health Clubs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Athletic Club Holdings, Inc.   Premier health club operator   Senior secured loan ($11,500 par due 10/2013)   4.80%
(Libor + 4.50%/M)
    10/11/2007     11,500     11,270 (3)(12)      
                                   
                        11,500     11,270     0.36 %
                                   

Wholesale Distribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
BECO Holding Company, Inc.   Wholesale distributor of first response fire protection equipment and related parts   Common stock (25,000 shares)         7/30/2010     2,500     3,151        
                                   
                        2,500     3,151     0.10 %
                                   
                      $ 5,108,663   $ 5,094,506     161.87 %
                                   

(1)
Other than our investments listed in footnote 6 below, we do not "Control" any of our portfolio companies, as defined in the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Company Act"). In general, under the Investment Company Act, we would "Control" a portfolio company if we owned more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company. All of our portfolio company investments, which as of December 31, 2011 represented 162% of the Company's net assets or 95% of the Company's total assets, are subject to legal restrictions on sales.

  The investments not otherwise pledged as collateral for the Debt Securitization the Revolving Funding Facility (each as defined in Note 5 to the consolidated financial statements) by the respective obligors thereunder are pledged as collateral by the Company and certain of its other subsidiaries for the Revolving Credit Facility (as defined in Note 5 to the consolidated financial statements) (except for a limited number of exceptions as provided in the credit agreement governing the Revolving Credit Facility).

(2)
These assets are owned by the Company's consolidated subsidiary Ares Capital CP Funding LLC ("Ares Capital CP"), are pledged as collateral for the Revolving Funding Facility and, as a result, are not directly available to the creditors of the Company to satisfy any obligations of the Company other than Ares Capital CP's obligations under the Revolving Funding Facility (see Note 5 to the consolidated financial statements).

(3)
Pledged as collateral for the Debt Securitization.

(4)
Investments without an interest rate are non-income producing.

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(5)
As defined in the Investment Company Act, we are deemed to be an "Affiliated Person" of a portfolio company because we own 5% or more of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such portfolio company (including through a management agreement). Transactions during the year ended December 31, 2011 in which the issuer was an Affiliated company (but not a portfolio company that we "Control") are as follows:

Company
  Purchases   Redemptions (cost)   Sales
(cost)
  Interest
income
  Capital
structuring
service
fees
  Dividend
Income
  Other income   Net
realized
gains
(losses)
  Net
unrealized
gains
(losses)
 

10th Street, LLC

  $   $   $   $ 3,096   $   $   $   $   $ (48 )

Apple & Eve, LLC and US Juice Partners, LLC

  $ 5,500   $ 3,918   $   $ 3,478   $   $   $ 35   $   $ (1,709 )

BB&T Capital Partners/Windsor Mezzanine Fund, LLC

  $   $ 2,640   $ 9,260   $   $   $   $   $ 3,902   $ (3,804 )

Carador, PLC

  $   $   $ 9,033   $   $   $ 160   $   $ (2,989 ) $ 3,700  

Campus Management Corp. and Campus Management Acquisition Corp.

  $ 571   $   $   $   $   $   $   $   $ (3,308 )

CT Technologies Intermediate Holdings, Inc. and CT Technologies Holdings, LLC

  $   $ 75   $ 8,763   $ 943   $   $ 2,590   $   $ 1,561   $ (1,364 )

Direct Buy Holdings, Inc. and Direct Buy Investors, LP

  $ 38,800   $ 80,315   $ 40,695   $ 2,637   $   $   $   $ (17,661 ) $ (9,356 )

Driven Brands, Inc.

  $   $ 3,569   $ 4,939   $ 255   $   $   $   $ 4,510   $ (1,473 )

DSI Renal, Inc.

  $   $ 77,774   $ 19,684   $ 7,919   $   $   $ 33   $ 27,522   $ (21,565 )

The Dwyer Group

  $   $   $ 11,708   $ 3,479   $   $ 1,135   $   $   $ 2,598  

ELC Acquisition Corp., ELC Holdings Corporation, and Excelligence Learning Corporation

  $ 137,200   $ 135,661   $   $ 1,056   $   $ 203   $ 22   $   $ (1,046 )

Firstlight Financial Corporation

  $   $ 2,988   $   $ 681   $   $   $ 250   $ 12   $ 16,197  

Growing Family, Inc. and GFH Holdings, LLC

  $   $ 34   $ 10,296   $ 615   $   $   $ 13   $ (1,545 ) $ 5,991  

Industrial Container Services, LLC

  $ 3,304   $ 8,491   $ 1,800   $ 69   $   $   $ 109   $ 19,881   $ (13,403 )

Insight Pharmaceuticals Corporation

  $ 24,730   $ 56,080   $   $ 4,424   $ 730   $   $ 765   $   $ 4,944  

Investor Group Services, LLC

  $ 500   $ 500   $   $ 3   $   $ 206   $ 9   $   $ 295  

Multi-Ad Services, Inc.

  $   $   $   $   $   $   $   $   $ 462  

Pillar Processing LLC and PHL Holding Co.

  $   $ 12,450   $   $ 1,584   $   $   $ 147   $   $ (12,628 )

Primis Marketing Group, Inc. and Primis Holdings, LLC

  $   $ 154   $ 14,068   $   $   $   $   $ (14,068 ) $ 14,120  

Regency Healthcare Group, LLC

  $   $   $ 2,007   $   $   $   $   $ 380   $ 335  

Soteria Imaging Services, LLC

  $   $ 1,419   $   $ 321   $   $   $   $ 72   $ 12  

VSS-Tranzact Holdings, LLC

  $ 867   $   $   $   $   $   $   $   $ (6,275 )

Universal Environmental Services, LLC

  $   $   $   $   $   $   $   $   $  

Universal Trailer Corporation

  $   $   $ 7,930   $   $   $   $   $ (7,930 ) $ 7,930  
(6)
As defined in the Investment Company Act, we are deemed to be both an "Affiliated Person" and to "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities or we have the power to exercise control over the management or policies of such

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Company
  Purchases   Redemptions
(cost)
  Sales
(cost)
  Interest
income
  Capital
structuring
service
fees
  Dividend
Income
  Other
income
  Net
realized
gains
(losses)
  Net
unrealized
gains
(losses)
 

AGILE Fund I, LLC

  $   $ 36   $   $   $   $ 10   $   $   $ (37 )

Allied Capital REIT, Inc.

  $ 325   $ 115   $   $   $   $   $   $ 585   $ (255 )

AllBridge Financial, LLC

  $   $   $   $   $   $   $   $   $ (1,379 )

Aviation Properties Corporation

  $   $   $   $   $   $   $   $   $  

AWTP, LLC

  $ 2,926   $   $   $ 751   $   $   $   $   $ (1,648 )

BenefitMall Holdings, Inc.

  $   $   $   $ 7,360   $   $   $ 500   $   $ 9,541  

Border Foods, Inc.

  $   $ 28,526   $ 34,818   $ 1,401   $   $   $   $ 5,174   $ 3,601  

Callidus Capital Corporation

  $ 6,000   $ 3,000   $   $   $   $   $   $   $ (2,470 )

Ciena Capital LLC

  $   $   $   $ 3,549   $   $   $   $   $ (27,011 )

Citipostal, Inc.

  $ 2,850   $ 2,802   $   $ 7,356   $   $   $ 353   $   $ (10,960 )

Coverall North America, Inc.

  $   $ 30,907   $   $ 642   $   $   $   $ (12,334 ) $ 7,624  

Crescent Hotels & Resorts, LLC and affiliates

  $   $   $   $ 213   $   $   $   $   $ (2,666 )

EarthColor, Inc.

  $   $   $   $   $   $   $   $   $  

HCI Equity, LLC

  $   $   $   $   $   $   $   $   $ (263 )

HCP Acquisition Holdings, LLC

  $ 1,048   $   $   $   $   $   $   $   $ (1,196 )

Hot Light Brands, Inc.

  $   $ 929   $   $   $   $   $   $   $ (8 )

Huddle House Inc.

  $   $   $   $ 3,123   $   $   $ 750   $   $ 2,129  

Industrial Air Tool, LP and affiliates

  $   $   $ 13,419   $   $   $ 1,170   $ 185   $ 581   $ (1,517 )

Ivy Hill Asset Management, L.P.

  $ 9,419   $   $   $   $   $ 19,048   $   $   $ 48,943  

Ivy Hill Middle Market Credit Fund, Ltd.

  $   $   $   $ 4,879   $   $   $   $   $ 1,899  

Knightsbridge CLO 2007-1 Ltd.

  $   $   $ 14,852   $ 1,019   $   $   $   $ 3,724   $ 307  

Knightsbridge CLO 2008-1 Ltd.

  $   $ 36,996   $   $ 2,568   $   $   $   $ 1,254   $ 3,108  

LVCG Holdings, LLC

  $   $   $   $   $   $   $   $   $  

Making Memories Wholesale, Inc.

  $ 1,750   $ 345   $   $ 34   $   $   $ 2   $   $ (7,090 )

MVL Group, Inc.

  $   $   $   $ 8,452   $   $   $   $   $ (2,525 )

Orion Foods, LLC

  $ 3,300   $ 330   $   $ 10,265   $   $   $ 811   $   $ (6,832 )

Penn Detroit Diesel Allison, LLC

  $   $ 4,077   $ 15,993   $   $   $   $ 500   $ 18,388   $ (1,987 )

Reflexite Corporation

  $   $ 9,281   $ 27,435   $ 1,130   $   $   $ 39   $ 40,923   $ (3,088 )

Senior Secured Loan Fund LLC*

  $ 496,816   $   $   $ 118,420   $ 41,592   $   $ 13,307   $   $ 688  

Stag-Parkway, Inc.

  $   $   $   $ 4,372   $   $ 925   $ 249   $   $ 780  

Startec Equity, LLC

  $   $   $   $   $   $   $   $   $  

The Thymes, LLC

  $   $ 1,162   $   $   $   $ 490   $   $   $ 945  

*
Together with GE Global Sponsor Finance LLC and General Electric Capital Corporation (together, "GE"), we co-invest through the Senior Secured Loan Fund LLC d/b/a the "Senior Secured Loan Program" (the "SSLP"). The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by GE and the Company; therefore, although the Company owns more than 25% of the voting securities of the SSLP, the Company does not believe that it has control over the SSLP (for purposes of the Investment Company Act or otherwise).
(7)
Non-U.S. company or principal place of business outside the U.S. and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(8)
Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

(9)
In the first quarter of 2011, the staff of the Securities and Exchange Commission (the "Staff") informally communicated to certain business development companies the Staff's belief that certain entities, which would be classified as an "investment company" under the Investment Company Act but for the exception from the definition of "investment company" set forth in Rule 3a-7 promulgated under the Investment Company Act, could not be treated as eligible portfolio companies (as defined in Section 2(a)(46) of the Investment Company Act). Subsequently, in August 2011 the Securities and Exchange Commission issued a concept release (the "Concept Release") which states that "[a]s a general matter, the Commission presently does not believe that Rule 3a-7 issuers are the type of small, developing and financially troubled businesses in which Congress intended BDCs primarily to invest" and requested comment on whether or not a 3a-7 issuer should be considered an "eligible portfolio company". Ares Capital provided a comment letter in respect of the Concept Release and continues to believe that the language of Section 2(a)(46) of the Investment Company Act permits a business development company to treat as "eligible portfolio companies" entities that rely on the 3a-7 exception. However, given the current uncertainty in this area (including the language in the Concept Release), Ares Capital has, solely for purposes of calculating the composition of its portfolio pursuant to Section 55(a) of the Investment Company Act, identified these entities in our schedule of investments as "non-qualifying assets" should the Staff ultimately disagree with Ares Capital's position.

(10)
Variable rate loans to our portfolio companies bear interest at a rate that may be determined by reference to either LIBOR or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower's option, which reset annually (A), semi-annually (S), quarterly (Q), bi-monthly (B), monthly (M) or daily (D). For each such loan, we have provided the interest rate in effect on the date presented.

(11)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 5.00% on $18 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

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(12)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 2.50% on $12 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(13)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 4.00% on $45 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(14)
In addition to the interest earned based on the stated interest rate of this security, we are entitled to receive an additional interest amount of 1.25% on $74 million aggregate principal amount outstanding of the portfolio company's senior term debt previously syndicated by us.

(15)
Loan was on non-accrual status as of December 31, 2011.

(16)
Loan includes interest rate floor feature.

(17)
In addition to the interest earned based on the stated contractual interest rate of this security, the certificates entitle us to receive a portion of the excess cash flow from the SSLP's loan portfolio, which may result in a return to the Company greater than the contractual stated interest rate.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2012
(in thousands, except per share data)
(unaudited)

 
   
   
   
   
  Accumulated
Net Realized
Loss on
Investments,
Foreign Currency
Transactions,
Extinguishment
of Debt and
Other Assets
   
   
 
 
  Common Stock    
  Accumulated
Overdistributed
Net Investment
Income
   
   
 
 
  Capital in
Excess of
Par Value
  Net Unrealized
Gain (Loss) on
Investments
  Total
Stockholders'
Equity
 
 
  Shares   Amount  

Balance at December 31, 2011

    205,130   $ 205   $ 3,390,354   $ (10,449 ) $ (218,688 ) $ (14,157 ) $ 3,147,265  

Issuance of common stock in add-on offerings (net of offering and underwriting costs)

    16,422     16     252,399                 252,415  

Shares issued in connection with dividend reinvestment plan

    599     1     9,682                 9,683  

Issuance of the Convertible Notes (see Note 5)

            4,725                 4,725  

Net increase in stockholders' equity resulting from operations

                164,939     (49,246 )   80,786     196,479  

Dividends declared ($0.74 per share)

                (164,068 )           (164,068 )
                               

Balance at June 30, 2012

    222,151   $ 222   $ 3,657,160   $ (9,578 ) $ (267,934 ) $ 66,629   $ 3,446,499  
                               

   

See accompanying notes to consolidated financial statements.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

 
  For the six months ended  
 
  June 30, 2012   June 30, 2011  
 
  (unaudited)
  (unaudited)
 

OPERATING ACTIVITIES:

             

Net increase in stockholders' equity resulting from operations

  $ 196,479   $ 160,689  

Adjustments to reconcile net increase in stockholders' equity resulting from operations:

             

Realized loss from extinguishment of debt

    2,678     19,318  

Net realized (gains) losses on investments

    46,568     (56,195 )

Net unrealized gains on investments

    (80,786 )   (32,226 )

Net accretion of discount on securities

    (7,503 )   (7,850 )

Increase in accrued payment-in-kind interest and dividends

    (13,710 )   (18,719 )

Collections of payment-in-kind interest and dividends

    5,217     18,610  

Amortization of debt issuance costs

    6,672     6,227  

Accretion of discount on notes payable

    5,362     6,128  

Depreciation

    398     477  

Proceeds from sales and repayments of investments

    713,399     966,449  

Purchases of investments

    (1,086,383 )   (1,232,544 )

Changes in operating assets and liabilities:

             

Interest receivable

    (1,899 )   (6,282 )

Other assets

    (8,146 )   1,561  

Management and incentive fees payable

    5,706     37,486  

Accounts payable and accrued expenses

    (8,434 )   4,961  

Interest and facility fees payable

    2,616     977  
           

Net cash used in operating activities

    (221,766 )   (130,933 )
           

FINANCING ACTIVITIES:

             

Net proceeds from issuance of common stock

    252,415      

Borrowings on debt

    1,250,101     1,403,888  

Repayments and repurchases of debt

    (1,129,531 )   (1,132,983 )

Debt issuance costs

    (16,064 )   (24,177 )

Dividends paid

    (154,672 )   (131,658 )
           

Net cash provided by financing activities

    202,249     115,070  
           

CHANGE IN CASH AND CASH EQUIVALENTS

    (19,517 )   (15,863 )

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

    120,782     100,752  
           

CASH AND CASH EQUIVALENTS, END OF PERIOD

  $ 101,265   $ 84,889  
           

Supplemental Information:

             

Interest paid during the period

  $ 50,424   $ 38,356  

Taxes, including excise tax, paid during the period

  $ 8,529   $ 8,306  

Dividends declared during the period

  $ 164,068   $ 143,210  

   

See accompanying notes to consolidated financial statements.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2012
(unaudited)
(in thousands, except per share data, percentages and as otherwise indicated;
for example, with the words "million," "billion" or otherwise)

1.     ORGANIZATION

        Ares Capital Corporation (the "Company" or "ARCC" or "we") is a specialty finance company that is a closed-end, non-diversified management investment company incorporated in Maryland. We have elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Company Act"). The Company has elected to be treated as a regulated investment company, or a "RIC", under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and operates in a manner so as to qualify for the tax treatment applicable to RICs.

        On April 1, 2010, we consummated our acquisition of Allied Capital Corporation ("Allied Capital"), in an all stock merger where each existing share of common stock of Allied Capital was exchanged for 0.325 shares of our common stock (the "Allied Acquisition"). The Allied Acquisition was valued at approximately $908 million as of April 1, 2010. In connection therewith, we issued approximately 58.5 million shares of our common stock to Allied Capital's then-existing stockholders.

        Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component. To a lesser extent, we also make equity investments. Also, as a result of the Allied Acquisition, Allied Capital's equity investments, including equity investments larger than those we have historically made and controlled portfolio company equity investments, became part of our portfolio.

        We are externally managed by Ares Capital Management LLC ("Ares Capital Management" or our "investment adviser"), a wholly owned subsidiary of Ares Management LLC ("Ares Management"), a global alternative asset manager and a Securities and Exchange Commission ("SEC") registered investment adviser. Ares Operations LLC ("Ares Operations" or our "administrator"), a wholly owned subsidiary of Ares Management, provides the administrative services necessary for us to operate.

        Interim financial statements are prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period presented, have been included. The current period's results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2012.

2.     SIGNIFICANT ACCOUNTING POLICIES

        The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with GAAP, and include the accounts of the Company and its consolidated subsidiaries. The consolidated financial statements reflect all adjustments and reclassifications that, in the opinion of management, are necessary for the fair presentation of the results of the operations and financial condition as of and for the periods presented. All significant intercompany balances and transactions have been eliminated.

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        Cash and cash equivalents include funds from time to time deposited with financial institutions and short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value.

        The Company places its cash and cash equivalents with financial institutions and, at times, cash held in money market accounts may exceed the Federal Deposit Insurance Corporation insured limit.

        Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized.

        Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, we look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available (i.e., substantially all of our investments) are valued at fair value as determined in good faith by our board of directors, based on, among other things, the input of our investment adviser, audit committee and independent third-party valuation firms that have been engaged at the direction of our board of directors to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing 12 month period (with certain de minimis exceptions) and under a valuation policy and a consistently applied valuation process. The valuation process is conducted at the end of each fiscal quarter, and a minimum of 50% of our portfolio at fair value is subject to review by an independent valuation firm each quarter. In addition, our independent accountants review our valuation process as part of their overall integrated audit.

        As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time), the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company's securities to any similar publicly traded securities, changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments would trade in their principal markets and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate our valuation.

        Because there is not a readily available market value for most of the investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our board of directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded

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securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

        In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.

        Our board of directors undertakes a multi-step valuation process each quarter, as described below:

        See Note 7 for more information on our valuation process.

        Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.

        Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current. The Company may make exceptions to this if the loan has sufficient collateral value and is in the process of collection.

        Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.

        The Company has loans in its portfolio that contain payment-in-kind ("PIK") provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and recorded as interest income. To maintain the Company's status as a RIC, this

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non-cash source of income must be paid out to stockholders in the form of dividends, even though the Company has not yet collected the cash.

        The Company's investment adviser seeks to provide assistance to our portfolio companies in connection with the Company's investments and in return the Company may receive fees for capital structuring services. These fees are generally only available to the Company as a result of the Company's underlying investments, are normally paid at the closing of the investments, are generally non-recurring and are recognized as revenue when earned upon closing of the investment. The services that the Company's investment adviser provides vary by investment, but generally include reviewing existing credit facilities, arranging bank financing, arranging equity financing, structuring financing from multiple lenders, structuring financing from multiple equity investors, restructuring existing loans, raising equity and debt capital, and providing general financial advice, which concludes upon closing of the investment. Any services of the above nature subsequent to the closing would generally generate a separate fee payable to the Company. In certain instances where the Company is invited to participate as a co-lender in a transaction and does not provide significant services in connection with the investment, a portion of loan fees paid to the Company in such situations will be deferred and amortized over the estimated life of the loan. The Company's investment adviser may also take a seat on the board of directors of a portfolio company, or observe the meetings of the board of directors without taking a formal seat.

        Other income includes fees for asset management, management and consulting services, loan guarantees, commitments, amendments and other services rendered by the Company to portfolio companies. Such fees are recognized as income when earned or the services are rendered.

        The Company's books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

        Results of operations based on changes in foreign exchange rates are separately disclosed in the statement of operations. Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuation and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

        The Company does not utilize hedge accounting and marks its derivatives to market through unrealized gains (losses) in the accompanying statement of operations.

        The Company's offering costs, excluding underwriters' fees, are charged against the proceeds from equity offerings when received.

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        Debt issuance costs are amortized over the life of the related debt instrument using the straight line method, which closely approximates the effective yield method.

        The Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, the Company must, among other things, timely distribute to its stockholders at least 90% of its investment company taxable income, as defined by the Code, for each year. The Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes.

        Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year dividend distributions from such income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as such taxable income is earned.

        Certain of our consolidated subsidiaries are also subject to U.S. federal and state income taxes.

        Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is determined by our board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are generally distributed, although we may decide to retain such capital gains for investment.

        We have adopted a dividend reinvestment plan that provides for reinvestment of any distributions we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our board of directors authorizes, and we declare, a cash dividend, then our stockholders who have not "opted out" of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividend. We intend to use primarily newly issued shares to implement the dividend reinvestment plan (so long as we are trading at a premium to net asset value). If our shares are trading at a significant enough discount to net asset value and we are otherwise permitted under applicable law to purchase such shares, we intend to purchase shares in the open market in connection with our obligations under our dividend reinvestment plan. However, we reserve the right to issue new shares of our common stock in connection with our obligations under the dividend reinvestment plan even if our shares are trading below net asset value.

        The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of actual and contingent assets and liabilities at the date of the financial statements and the reported amounts of income or loss and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation of investments.

        In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value

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Measurement and Disclosure Requirements in U.S. GAAP and IFRSs ("ASU 2011-04"). ASU 2011-04 was issued concurrently with International Financial Reporting Standards No.13 ("IFRS 13"), Fair Value Measurements, to provide largely identical guidance about fair value measurement and disclosure requirements as is currently required under ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). The new standards do not extend the use of fair value but, rather, provide guidance about how fair value should be applied where it already is required or permitted under IFRS or GAAP. For GAAP, most of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. ASU 2011-04 eliminates the concepts of in-use and in-exchange when measuring fair value of all financial instruments. For Level 3 fair value measurements, the ASU requires that our disclosure include quantitative information about significant unobservable inputs, a qualitative discussion about the sensitivity of the fair value measurement to changes in the unobservable inputs and the interrelationship between inputs, and a description of our valuation process. Public companies are required to apply ASU 2011-04 prospectively for interim and annual periods beginning after December 15, 2011. The Company has evaluated the impact of the adoption of ASU 2011-04 on its financial statements and disclosures and determined the adoption of ASU 2011-04 has had no material effect on the Company's financial condition and results of operations. See Note 7 for the disclosure required by ASU 2011-04.

3.     AGREEMENTS

        The Company is party to an investment advisory and management agreement (the "investment advisory and management agreement") with Ares Capital Management. Subject to the overall supervision of our board of directors, Ares Capital Management provides investment advisory and management services to the Company. For providing these services, Ares Capital Management receives a fee from us consisting of two components—a base management fee and an incentive fee.

        The base management fee is calculated at an annual rate of 1.5% based on the average value of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears.

        The incentive fee has two parts. The first part is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the quarter. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the administration agreement, and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities, accrued income that we have not yet received in cash. Our investment adviser is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued interest that we never actually receive.

        Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses, unrealized capital appreciation, unrealized capital depreciation or income tax expense related to realized gains. Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a quarter where we incur a loss. For example, if we receive pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, we will pay the applicable

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incentive fee even if we have incurred a loss in that quarter due to realized and/or unrealized capital losses.

        Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed "hurdle rate" of 1.75% per quarter. If market credit spreads rise, we may be able to invest our funds in debt instruments that provide for a higher return, which may increase our pre-incentive fee net investment income and make it easier for our investment adviser to surpass the fixed hurdle rate and receive an incentive fee based on such net investment income. To the extent we have retained pre-incentive fee net investment income that has been used to calculate this part of the incentive fee, it is also included in the amount of our total assets (other than cash and cash equivalents but including assets purchased with borrowed funds) used to calculate the 1.5% base management fee.

        We pay our investment adviser an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

        These calculations are adjusted for any share issuances or repurchases during the quarter.

        The second part of the incentive fee (the "Capital Gains Fee"), is determined and payable in arrears as of the end of each calendar year (or, upon termination of the investment advisory and management agreement, as of the termination date) and is calculated at the end of each applicable year by subtracting (a) the sum of our cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (b) our cumulative aggregate realized capital gains, in each case calculated from October 8, 2004 (the date we completed our initial public offering). Realized capital gains and losses include gains and losses on investments and foreign currencies, as well as gains and losses on extinguishment of debt and other assets. If such amount is positive at the end of such year, then the Capital Gains Fee for such year is equal to 20% of such amount, less the aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then there is no Capital Gains Fee for such year.

        The cumulative aggregate realized capital gains are calculated as the sum of the differences, if positive, between (a) the net sales price of each investment in our portfolio when sold and (b) the accreted or amortized cost basis of such investment.

        The cumulative aggregate realized capital losses are calculated as the sum of the amounts by which (a) the net sales price of each investment in our portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.

        The aggregate unrealized capital depreciation is calculated as the sum of the differences, if negative, between (a) the valuation of each investment in our portfolio as of the applicable Capital Gains Fee calculation date and (b) the accreted or amortized cost basis of such investment.

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        Notwithstanding the foregoing, as a result of an amendment to the capital gains portion of the incentive fee under the investment advisory and management agreement that was adopted on June 6, 2011, if we are required by GAAP to record an investment at its fair value as of the time of acquisition instead of at the actual amount paid for such investment by us (including, for example, as a result of the application of the acquisition method of accounting), then solely for the purposes of calculating the Capital Gains Fee, the "accreted or amortized cost basis" of an investment shall be an amount (the "Contractual Cost Basis") equal to (1) (x) the actual amount paid by the Company for such investment plus (y) any amounts recorded in the Company's financial statements as required by GAAP that are attributable to the accretion of such investment plus (z) any other adjustments made to the cost basis included in the Company's financial statements, including payment-in-kind interest or additional amounts funded (net of repayments) minus (2) any amounts recorded in the Company's financial statements as required by GAAP that are attributable to the amortization of such investment, whether such calculated Contractual Cost Basis is higher or lower than the fair value of such investment (as determined in accordance with GAAP) at the time of acquisition.

        We defer cash payment of any incentive fee otherwise earned by our investment adviser if during the most recent four full calendar quarter period ending on or prior to the date such payment is to be made the sum of (a) the aggregate distributions to our stockholders and (b) the change in net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) is less than 7.0% of our net assets (defined as total assets less indebtedness) at the beginning of such period. Any deferred incentive fees are carried over for payment in subsequent calculation periods to the extent such payment is payable under the investment advisory and management agreement.

        The Capital Gains Fee due to our investment adviser as calculated under the investment advisory and management agreement (as described above) for the three and six months ended June 30, 2012 was $0. However, in accordance with GAAP, the Company has cumulatively accrued a capital gains incentive fee of $55,264 as of June 30, 2012. GAAP requires that the capital gains incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the investment advisory and management agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the Capital Gains Fee plus the aggregate cumulative unrealized capital appreciation. If such amount is positive at the end of a period, then GAAP requires us to record a capital gains incentive fee equal to 20% of such cumulative amount, less the aggregate amount of actual Capital Gains Fees paid or capital gains incentive fees accrued under GAAP in all prior periods. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reversal of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future.

        For the three and six months ended June 30, 2012, base management fees were $20,811 and $40,797, respectively, incentive fees related to pre-incentive fee net investment income were $22,127 and $42,812, respectively, and incentive fees related to capital gains in accordance with GAAP were $606 and 6,307, respectively.

        As of June 30, 2012, $98,202 was included in "management and incentive fees payable" in the accompanying consolidated balance sheet, of which $42,938 is currently payable to the Company's investment adviser under the investment advisory and management agreement.

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        For the three and six months ended June 30, 2011, base management fees were $17,414 and $34,144, respectively, incentive fees related to pre-incentive fee net investment income were $17,102 and $32,928, respectively, and incentive fees related to capital gains in accordance with GAAP were $24,644 and $39,759, respectively.

        We are party to an administration agreement, referred to herein as the "administration agreement", with our administrator, Ares Operations. Pursuant to the administration agreement, Ares Operations furnishes us with office equipment and clerical, bookkeeping and record keeping services at our office facilities. Under the administration agreement, Ares Operations also performs, or oversees the performance of, our required administrative services, which include, among other things, providing assistance in accounting, legal, compliance, operations, technology, and investor relations, being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, Ares Operations assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under our administration agreement are equal to an amount based upon our allocable portion of Ares Operations' overhead and other expenses (including travel expenses) incurred by Ares Operations in performing its obligations under the administration agreement, including our allocable portion of the compensation of certain of our officers (including our chief compliance officer, chief financial officer, general counsel, treasurer and assistant treasurer) and their respective staffs. The administration agreement may be terminated by either party without penalty upon 60 days' written notice to the other party.

        For the three and six months ended June 30, 2012, we incurred $2,217 and $4,537, respectively, in administrative fees. For the three and six months ended June 30, 2011, we incurred $2,459 and $4,884, respectively, in administrative fees. As of June 30, 2012, $2,217 of these fees were unpaid and included in "accounts payable and other liabilities" in the accompanying consolidated balance sheet.

4.     INVESTMENTS

        As of June 30, 2012 and December 31, 2011, investments consisted of the following:

 
  June 30, 2012   December 31, 2011  
 
  Amortized
Cost(1)
  Fair Value   Amortized
Cost(1)
  Fair Value  

Senior term debt

  $ 3,155,582   $ 3,123,660   $ 2,691,018   $ 2,671,114  

Subordinated Certificates of the SSLP(2)

    1,099,477     1,125,812     1,034,254     1,059,178  

Senior subordinated debt

    486,215     457,873     592,618     515,014  

Collateralized loan obligations

    40,515     40,230     55,515     54,000  

Preferred equity securities

    233,275     246,649     251,192     251,064  

Other equity securities

    403,665     494,825     463,861     527,002  

Commercial real estate

    19,455     15,764     20,205     17,134  
                   

Total

  $ 5,438,184   $ 5,504,813   $ 5,108,663   $ 5,094,506  
                   

(1)
The amortized cost represents the original cost adjusted for the accretion of discounts and amortization of premiums, if any.

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(2)
The proceeds from these certificates were applied to co-investments with GE Global Sponsor Finance LLC and General Electric Capital Corporation to fund first lien senior secured loans to 34 and 32 different borrowers as of June 30, 2012 and December 31, 2011, respectively.

        The industrial and geographic compositions of our portfolio at fair value at June 30, 2012 and December 31, 2011 were as follows:

 
  As of  
 
  June 30, 2012   December 31, 2011  

Industry

             

Investment Funds and Vehicles(1)

    22.7 %   23.6 %

Healthcare Services

    13.3     13.4  

Education

    9.5     11.2  

Consumer Products

    8.3     5.4  

Restaurants and Food Services

    7.6     6.8  

Business Services

    6.7     6.6  

Financial Services

    6.3     6.4  

Containers and Packaging

    4.1     4.5  

Other Services

    4.0     2.5  

Manufacturing

    3.2     2.8  

Grocery

    1.7     1.9  

Telecommunications

    1.6     2.0  

Retail

    1.6     1.8  

Energy

    1.6     1.3  

Aerospace and Defense

    1.4     3.6  

Other

    6.4     6.2  
           

Total

    100.0 %   100.0 %
           

(1)
Includes our investment in the SSLP (as defined below), which had made loans to 34 and 32 different borrowers as of June 30, 2012 and December 31, 2011, respectively. The portfolio companies in the SSLP are in industries similar to the companies in the Company's portfolio.

 
  As of  
 
  June 30, 2012   December 31, 2011  

Geographic Region

             

West

    49.0 %   48.4 %

Southeast

    17.8     21.2  

Midwest

    14.7     14.5  

Mid Atlantic

    13.8     12.8  

International

    2.5     1.4  

Northeast

    2.2     1.7  
           

Total

    100.0 %   100.0 %
           

        As of June 30, 2012, 2.3% of total investments at amortized cost (or 0.7% of total investments at fair value), were on non-accrual status. As of December 31, 2011, 3.3% of total investments at amortized cost (or 0.9% of total investments at fair value), were on non-accrual status.

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        The Company has an investment in the subordinated certificates (the "SSLP Certificates") issued by the Senior Secured Loan Fund LLC, which operates using the name "Senior Secured Loan Program" (the "SSLP"), an unconsolidated vehicle. The Company, through the SSLP, co-invests in first lien senior secured loans of middle market companies with GE Global Sponsor Finance LLC and General Electric Capital Corporation (together, "GE"). The SSLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SSLP must be approved by an investment committee of the SSLP consisting of representatives of the Company and GE (with approval from a representative of each required).

        As of June 30, 2012 and December 31, 2011, the SSLP had available capital of approximately $7.7 billion, of which approximately $5.4 billion and $5.0 billion in aggregate principal amount was funded at June 30, 2012 and December 31, 2011, respectively. As of June 30, 2012 and December 31, 2011, the Company had agreed to make available to the SSLP $1,487,500, of which $377,473 and $442,523 was unfunded, respectively. It is within the Company's discretion to make these additional amounts available to the SSLP.

        As of June 30, 2012 and December 31, 2011, the SSLP had total assets of $5.4 billion and $5.0 billion, respectively. GE's investment in the SSLP consisted of senior notes of $4.1 billion and $3.8 billion and SSLP Certificates of $159 million and $149 million at June 30, 2012 and December 31, 2011, respectively. The SSLP Certificates are junior to the senior notes invested by GE and the Company owned 87.5% of the outstanding SSLP Certificates as of June 30, 2012 and December 31, 2011. The SSLP's portfolio consisted of first lien senior secured loans to 34 and 32 different borrowers as of June 30, 2012 and December 31, 2011, respectively. As of June 30, 2012 and December 31, 2011, the portfolio was comprised of all first lien senior secured loans to U.S. middle-market companies and none of these loans was on non-accrual status. As of June 30, 2012 and December 31, 2011, the largest loan to a single borrower in the SSLP's portfolio in aggregate principal amount was $300.0 million and the five largest loans to borrowers totaled $1.4 billion. The portfolio companies in the SSLP are in industries similar to the companies in the Company's portfolio.

        The amortized cost and fair value of the SSLP Certificates held by the Company was $1,099,477 and $1,125,812, respectively, as of June 30, 2012, and $1,034,254 and $1,059,178, respectively, as of December 31, 2011. The SSLP Certificates pay a weighted average coupon of approximately LIBOR plus 8.0% and also entitle the Company to receive a portion of the excess cash flow from the loan portfolio, which may result in a return greater than the contractual coupon. The Company's yield on its investment in the SSLP at fair value was 15.6% and 15.7% as of June 30, 2012 and December 31, 2011, respectively. For the three and six months ended June 30, 2012, the Company earned interest income of $44,476 and $87,743, respectively, in respect of its SSLP investment. For the three and six months ended June 30, 2011, the Company earned interest income of $27,003 and $50,324, respectively, in respect of its SSLP investment. The Company is also entitled to certain fees in connection with the SSLP.

        Effective March 30, 2012, Ares Capital Management assumed from the Company the role of co-manager of the SSLP. However, this change did not impact the Company's economics in respect of its participation in the SSLP and Ares Capital Management does not receive any remuneration in respect of its co-manager role.

5.     DEBT

        In accordance with the Investment Company Act, with certain limited exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the Investment Company Act, is at least 200% after such borrowing. As of June 30, 2012 our asset coverage for borrowed amounts was 257%.

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        The Company's outstanding debt obligations as of June 30, 2012 and December 31, 2011 was as follows:

 
  As of  
 
  June 30, 2012   December 31, 2011  
 
  Total
Aggregate
Principal
Amount
Available/
Outstanding(1)
  Principal
Amount
  Carrying
Value
  Total
Aggregate
Principal
Amount
Available/
Outstanding(1)
  Principal
Amount
  Carrying
Value
 

Revolving Credit Facility

  $ 900,000 (2) $ 295,000   $ 295,000   $ 810,000 (2) $ 395,000   $ 395,000  

Revolving Funding Facility

    580,000 (3)   348,000     348,000     500,000     463,000     463,000  

SMBC Funding Facility

    200,000     107,000     107,000              

Debt Securitization

                77,531     77,531     77,531  

February 2016 Convertible Notes

    575,000     575,000     544,769 (4)   575,000     575,000     541,152 (4)

June 2016 Convertible Notes

    230,000     230,000     217,322 (4)   230,000     230,000     215,931 (4)

2017 Convertible Notes

    162,500     162,500     157,876 (4)            

2022 Notes

    143,750     143,750     143,750              

2040 Notes

    200,000     200,000     200,000     200,000     200,000     200,000  

2047 Notes

    230,000     230,000     181,091 (5)   230,000     230,000     180,988 (5)
                           

  $ 3,221,250   $ 2,291,250   $ 2,194,808   $ 2,622,531   $ 2,170,531   $ 2,073,602  
                           

(1)
Subject to borrowing base and leverage restrictions. Represents the total aggregate amount available or outstanding, as applicable, under such instrument.

(2)
Provides for a feature that allows the Company, under certain circumstances, to increase the size of the facility to a maximum of $1,350,000 and $1,050,000 for the Revolving Credit Facility as of June 30, 2012 and December 31, 2011, respectively.

(3)
Provides for a feature that allows the Company and Ares Capital CP, under certain circumstances, to increase the size of the facility to a maximum of $865,000 for the Revolving Funding Facility as of June 30, 2012.

(4)
Represents the aggregate principal amount outstanding of the Convertible Notes (as defined below) less the unaccreted discount initially recorded upon issuance of the Convertible Notes. The total unaccreted discount for the February 2016 Convertible Notes, the June 2016 Convertible Notes and the 2017 Convertible Notes was $30,231, $12,678 and $4,624, respectively, at June 30, 2012.

(5)
Represents the aggregate principal amount outstanding less the unaccreted purchased discount. The total unaccreted purchased discount on the 2047 Notes was $48,909 and $49,012 as of June 30, 2012 and December 31, 2011, respectively.

        The weighted average stated interest rate and weighted average maturity, both on aggregate principal amount, of all our outstanding debt as of June 30, 2012 were 5.0% and 9.8 years, respectively, and as of December 31, 2011 were 4.8% and 9.3 years, respectively.

        In December 2005, the Company entered into a senior secured revolving credit facility (as amended and restated, the "Revolving Credit Facility"), which as of June 30, 2012, allows the Company to borrow up to $900,000 at any one time outstanding. On May 4, 2012, the Company amended and restated the Revolving Credit Facility to, among other things, increase the size of the facility from $810,000 to $900,000, extend the expiration of the revolving period from January 22, 2013 to May 4, 2015 and extend the stated maturity date from January 22, 2013 to May 4, 2016. The Revolving Credit Facility also includes a feature that allows, under certain circumstances, for an increase in the size of the facility to a maximum of $1,350,000. The Revolving Credit Facility generally requires payments of interest at the end of each LIBOR interest period, but no less frequently than quarterly, on LIBOR based loans, and monthly payments of interest on other loans. From the end of the revolving period to the stated maturity date, the Company is required to repay outstanding principal amounts under the

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Revolving Credit Facility on a monthly basis in an amount equal to 1/12th of the outstanding principal amount at the end of the revolving period.

        Under the Revolving Credit Facility, the Company is required to comply with various covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including, without limitation, covenants related to: (a) limitations on the incurrence of additional indebtedness and liens, (b) limitations on certain investments, (c) limitations on certain restricted payments, (d) maintaining a certain minimum stockholders' equity, (e) maintaining a ratio of total assets (less total liabilities other than indebtedness) to total indebtedness of the Company and its consolidated subsidiaries, of not less than 2.0:1.0, (f) limitations on pledging certain unencumbered assets, and (g) limitations on the creation or existence of agreements that prohibit liens on certain properties of the Company and certain of its subsidiaries. Borrowings under the Revolving Credit Facility (and the incurrence of certain other permitted debt) are also subject to compliance with a borrowing base that applies different advance rates to different types of assets in our portfolio that are pledged as collateral. As of June 30, 2012, the Company was in compliance in all material respects with the terms of the Revolving Credit Facility.

        As of June 30, 2012 and December 31, 2011, there was $295,000 and $395,000 outstanding, respectively, under the Revolving Credit Facility. The Revolving Credit Facility also provides for a sub-limit for the issuance of letters of credit for up to an aggregate amount of $125,000. As of June 30, 2012 and December 31, 2011, the Company had $45,764 and $47,249, respectively, in standby letters of credit issued through the Revolving Credit Facility. The amount available for borrowing under the Revolving Credit Facility is reduced by any standby letters of credit issued. As of June 30, 2012, there was $559,236 available for borrowing (net of standby letters of credit issued) under the Revolving Credit Facility.

        After May 4, 2012, subject to certain exceptions, the interest rate charged on the Revolving Credit Facility is based on LIBOR plus an applicable spread of 2.25% or a "base rate" (as defined in the agreements governing the Revolving Credit Facility) plus an applicable spread of 1.25%. Prior to May 4, 2012, the interest rate charged on the Revolving Credit Facility was based on LIBOR plus an applicable spread of between 2.50% and 4.00% or on a "base rate" plus an applicable spread of between 1.50% and 3.00%, in each case, based on a pricing grid depending upon our credit ratings. As of June 30, 2012, the one, two, three and six month LIBOR was 0.25%, 0.34%, 0.46% and 0.73%, respectively. As of December 31, 2011, the one, two, three and six month LIBOR was 0.30%, 0.43%, 0.58% and 0.81%, respectively. In addition to the stated interest expense on the Revolving Credit Facility, after May 4, 2012, the Company is required to pay a commitment fee of 0.375% per annum on any unused portion of the Revolving Credit Facility and a letter of credit fee of 2.50% per annum on letters of credit issued, both of which are payable quarterly. Prior to May 4, 2012, the commitment fee was 0.50%, and the letter of credit fee was 3.25%.

        The Revolving Credit Facility is secured by certain assets in our portfolio and excludes investments held by Ares Capital CP under the Revolving Funding Facility, those held by ACJB under the SMBC Funding Facility and prior to the termination of the Debt Securitization, those previously held as part of the Debt Securitization, each as discussed below, and certain other investments.

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        The components of interest and credit facility fees expense, cash paid for interest expense, average interest rates (i.e., rate in effect plus the spread) and average outstanding balances for the Revolving Credit Facility were as follows:

 
  For the three months
ended June 30,
  For the six months
ended June 30,
 
 
  2012   2011   2012   2011  

Stated interest expense

  $ 1,021   $   $ 1,929   $ 222  

Facility fees

    1,047     1,068     2,277     2,118  

Amortization of debt issuance costs

    1,043     1,639     2,603     3,233  
                   

Total interest and credit facility fees expense

  $ 3,111   $ 2,707   $ 6,809   $ 5,573  
                   

Cash paid for interest expense

  $ 578   $   $ 2,081   $ 563  

Average stated interest rate

    2.73 %   %   3.03 %   3.34 %

Average outstanding balance

  $ 149,451   $   $ 126,484   $ 13,254  

Revolving Funding Facility

        In October 2004, the Company established through its consolidated subsidiary, Ares Capital CP Funding LLC ("Ares Capital CP"), a revolving funding facility (as amended, the "Revolving Funding Facility"), which as of June 30, 2012, allows Ares Capital CP to borrow up to $580,000 at any one time outstanding. The Revolving Funding Facility is secured by all of the assets held by, and the Company's membership interest in, Ares Capital CP. On June 7, 2012, the Company and Ares Capital CP amended the Revolving Funding Facility to, among other things, increase the size of the Revolving Funding Facility from $500 million to $580 million, add a feature that allows, under certain circumstances, for an increase in the size of the facility to a maximum of $865 million, extend the reinvestment period from January 18, 2015 to April 18, 2015, and extend the stated maturity date from January 18, 2017 to April 18, 2017. See Note 15 for subsequent events relating to the Revolving Funding Facility.

        Amounts available to borrow under the Revolving Funding Facility are subject to a borrowing base that applies different advance rates to different types of assets held by Ares Capital CP. Ares Capital CP is also subject to limitations with respect to the loans securing the Revolving Funding Facility, including restrictions on sector concentrations, loan size, payment frequency and status, collateral interests, loans with fixed rates and loans with certain investment ratings, as well as restrictions on portfolio company leverage, which may also affect the borrowing base and therefore amounts available to borrow. The Company and Ares Capital CP are also required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. As of June 30, 2012, the Company and Ares Capital CP were in compliance in all material respects with the terms of the Revolving Funding Facility.

        As of June 30, 2012 and December 31, 2011, there was $348,000 and $463,000 outstanding, respectively, under the Revolving Funding Facility. After a January 18, 2012 amendment to the Revolving Funding Facility, the interest rate charged on the Revolving Funding Facility is based on LIBOR plus an applicable spread of 2.50% or on a "base rate" (as defined in the agreements governing the Revolving Funding Facility) plus an applicable spread of 1.50%. Prior to January 18, 2012, the interest rate charged on the Revolving Funding Facility, subject to certain exceptions, was based on LIBOR plus an applicable spread of between 2.25% and 3.75% or on a "base rate" plus an applicable spread of between 1.25% to 2.75%, in each case, based on a pricing grid depending upon the Company's credit ratings. As of June 30, 2012 and December 31, 2011, the interest rate in effect was based on one month LIBOR of 0.25% and 0.30%, respectively. Ares Capital CP is also required to pay a commitment fee of between 0.50% and 1.75% depending on the size of the unused portion of the Revolving Funding Facility.

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        The components of interest and credit facility fees expense, cash paid for interest expense, average stated interest rates (i.e., rate in effect plus the spread) and average outstanding balances for the Revolving Funding Facility were as follows:

 
  For the three months
ended June 30,
  For the six months
ended June 30,
 
 
  2012   2011   2012   2011  

Stated interest expense

  $ 2,695   $ 448   $ 5,871   $ 1,125  

Facility fees

    168     1,127     235     2,139  

Amortization of debt issuance costs

    403     545     777     1,070  
                   

Total interest and credit facility fees expense

  $ 3,266   $ 2,120   $ 6,883   $ 4,334  
                   

Cash paid for interest expense

  $ 3,175   $ 677   $ 6,626   $ 3,029  

Average stated interest rate

    2.77 %   2.97 %   2.79 %   3.00 %

Average outstanding balance

  $ 389,110   $ 60,276   $ 418,132   $ 75,016  

SMBC Funding Facility

        In January 2012, the Company established through its consolidated subsidiary, Ares Capital JB Funding LLC ("ACJB"), a revolving funding facility (the "SMBC Funding Facility") with ACJB, as the borrower, Sumitomo Mitsui Banking Corporation ("SMBC"), as the administrative agent, collateral agent, and lender, which ACJB may borrow up to $200,000 at any one time outstanding. The SMBC Funding Facility is secured by all of the assets held by ACJB. The SMBC Funding Facility has a reinvestment period scheduled to end on January 20, 2015 and a stated maturity date of January 20, 2020. The reinvestment period and the stated maturity date are both subject to two one-year extensions by mutual agreement.

        Amounts available to borrow under the SMBC Funding Facility are subject to a borrowing base that applies different advance rates to assets held by ACJB. The Company and ACJB are also required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. As of June 30, 2012, the Company and ACJB were in compliance in all material respects with the terms of the SMBC Funding Facility.

        As of June 30, 2012, there was $107,000 outstanding under the SMBC Funding Facility. Subject to certain exceptions, the interest rate charged on the SMBC Funding Facility is based on one month LIBOR plus an applicable spread of 2.125% or a "base rate" (as defined in the agreements governing the SMBC Funding Facility) plus an applicable spread of 1.125%. As of June 30, 2012, one month LIBOR was 0.25%. Prior to July 20, 2012, there was no commitment fee required to be paid. Beginning on July 20, 2012, ACJB is required to pay a commitment fee of 0.50% depending on the size of the unused portion of the SMBC Funding Facility.

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        The components of interest and credit facility fees expense, cash paid for interest expense, average interest rates (i.e., rate in effect plus the spread) and average outstanding balances for the SMBC Funding Facility were as follows:

 
  For the three
months ended
June 30, 2012
  For the six
months ended
June 30, 2012
 

Stated interest expense

  $ 449   $ 526  

Amortization of debt issuance costs

    155     267  
           

Total interest and credit facility fees expense

  $ 604   $ 793  
           

Cash paid for interest expense

  $ 373   $ 410  

Average stated interest rate

    2.36 %   2.35 %

Average outstanding balance

  $ 76,075   $ 44,452  

Debt Securitization

        In July 2006, through ARCC Commercial Loan Trust 2006, a vehicle serviced by the Company's consolidated subsidiary, ARCC CLO 2006 LLC ("ARCC CLO"), the Company completed a $400,000 debt securitization (the "Debt Securitization") and issued approximately $314,000 aggregate principal amount of asset backed notes to third parties (the "CLO Notes") that were secured by a pool of middle market loans that were purchased or originated by the Company. The Company initially retained approximately $86,000 of aggregate principal amount of certain "BBB" and non-rated securities in the Debt Securitization and subsequently repurchased $34,790 of the CLO Notes. In June 2012, the Company repaid in full the $60,049 aggregate principal amount outstanding of the CLO Notes and terminated or discharged the agreements governing the Debt Securitization.

 
  As of  
 
  June 30, 2012   December 31, 2011  
Class
  Amount   LIBOR
Spread
(basis points)
  Amount   LIBOR
Spread
(basis points)
 

A-1A

  $       $ 4,896     25  

A-1A VFN

            12,520     28  

A-1B

            14,000     37  

A-2B

            13,905     35  

B

            9,000     43  

C

            23,210     70  
                       

Total

  $         $ 77,531        
                       

        The interest charged under the Debt Securitization was based on 3-month LIBOR, which as of December 31, 2011 was 0.56%. The blended interest rate charged on the CLO Notes, excluding fees, at December 31, 2011, was approximately 3-month LIBOR plus 45 basis points. The Company was also required to pay a commitment fee of 0.175% for any unused portion of the Class A-1A VFN Notes through June 17, 2011, the end of the reinvestment period, which is included in facility fees below.

        In connection with the repayment in full of the CLO Notes ahead of their scheduled maturities, the remaining unamortized debt issuance costs related to the CLO Notes of $2,678 were expensed and recorded as a "realized loss on extinguishment of debt" in the accompanying consolidated statement of operations.

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        The components of interest and credit facility fees expense, cash paid for interest expense, average interest rates (i.e., rate in effect plus the spread) and average outstanding balances for the Debt Securitization are as follows:

 
  For the three months
ended June 30,
  For the six months
ended June 30,
 
 
  2012   2011   2012   2011  

Stated interest expense

  $ 120   $ 235   $ 321   $ 490  

Facility fees

        14         25  

Amortization of debt issuance costs

    89     89     179     177  
                   

Total interest and credit facility fees expense

  $ 209   $ 338   $ 500   $ 692  
                   

Cash paid for interest expense

  $ 149   $ 239   $ 347   $ 500  

Average stated interest rate

    0.90 %   0.72 %   1.00 %   0.71 %

Average outstanding balance

  $ 52,791   $ 138,561   $ 64,008   $ 145,868  

Unsecured Notes

        In January 2011, we issued $575,000 aggregate principal amount of unsecured convertible senior notes that mature on February 1, 2016 (the "February 2016 Convertible Notes"), unless previously converted or repurchased in accordance with their terms. In March 2011, we issued $230,000 aggregate principal amount of unsecured convertible senior notes that mature on June 1, 2016 (the "June 2016 Convertible Notes"), unless previously converted or repurchased in accordance with their terms. In March 2012, we issued $162,500 aggregate principal amount of unsecured convertible senior notes that mature on March 15, 2017 (the "2017 Convertible Notes" and together with the February 2016 Convertible Notes and the June 2016 Convertible Notes, the "Convertible Notes"), unless previously converted or repurchased in accordance with their terms. We do not have the right to redeem the Convertible Notes prior to maturity. The February 2016 Convertible Notes, the June 2016 Convertible Notes and the 2017 Convertible Notes bear interest at a rate of 5.75%, 5.125% and 4.875%, respectively, per year, payable semi-annually.

        In certain circumstances, the Convertible Notes will be convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, at their respective initial conversion rates (listed below) subject to customary anti-dilution adjustments and the requirements of their respective indentures (the "Convertible Notes Indentures"). Prior to the close of business on the business day immediately preceding their respective conversion date (listed below), holders may convert their Convertible Notes only under certain circumstances set forth in the Convertible Notes Indentures. On or after their respective conversion dates until the close of business on the scheduled trading day immediately preceding their respective maturity date, holders may convert their Convertible Notes at any time. In addition, if we engage in certain corporate events as described in their respective Convertible Notes Indenture, holders of the Convertible Notes may require us to repurchase for cash all or part of the Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest through, but excluding, the required repurchase date.

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        Certain key terms related to the convertible features for each of the Convertible Notes are listed below.

 
  February 2016
Convertible Notes
  June 2016
Convertible Notes
  2017
Convertible Notes
 

Conversion premium

    17.5 %   17.5 %   17.5 %

Closing stock price

  $ 16.28   $ 16.20   $ 16.46  

Closing stock price date

    January 19, 2011     March 22, 2011     March 8, 2012  

Initial conversion price

  $ 19.13   $ 19.04   $ 19.34  

Initial conversion rate (shares per one thousand dollar principal amount)

    52.2766     52.5348     51.7050  

Conversion dates

    August 15, 2015     December 15, 2015     September 15, 2016  

        As of June 30, 2012, the principal amounts of each series of the Convertible Notes exceeded the value of the underlying shares multiplied by the per share closing price of our common stock.

        The Convertible Notes are our senior unsecured obligations and rank senior in right of payment to our existing and future indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment to our existing and future unsecured indebtedness that is not expressly subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities.

        The Convertible Notes Indentures contain certain covenants, including covenants requiring us to comply with Section 18(a)(1)(A) as modified by Section 61(a)(1) of the Investment Company Act and to provide financial information to the holders of the Convertible Notes under certain circumstances. These covenants are subject to important limitations and exceptions that are described in the Convertible Notes Indentures. As June 30, 2012, the Company was in compliance in all material respects with the terms of the Convertible Notes Indentures.

        The Convertible Notes are accounted for in accordance with Accounting Standards Codification ("ASC") 470-20. Upon conversion of any of the Convertible Notes, we intend to pay the outstanding principal amount in cash and to the extent that the conversion value exceeds the principal amount, we have the option to pay in cash or shares of our common stock (or a combination of cash and shares) in respect of the excess amount, subject to the requirements of the Convertible Notes Indentures. The Company has determined that the embedded conversion options in the Convertible Notes are not required to be separately accounted for as a derivative under GAAP. In accounting for the Convertible Notes, we estimated at the time of issuance that the values of the debt and equity components were approximately 93% and 7%, respectively, for each of the February 2016 Convertible Notes and the June 2016 Convertible Notes, and the debt and equity components approximately 97% and 3%, respectively, for the 2017 Convertible Notes. The original issue discount equal to the equity components of the Convertible Notes were recorded in "capital in excess of par value" in the accompanying consolidated balance sheet. As a result, we record interest expense comprised of both stated interest expense as well as accretion of the original issue discount. Additionally, the issuance costs associated with the Convertible Notes were allocated to the debt and equity components in proportion to the allocation of the proceeds and accounted for as debt issuance costs and equity issuance costs, respectively.

        At the time of issuance, the debt issuance costs and equity issuance costs for the February 2016 Convertible Notes were $15,778 and $1,188, respectively, for the June 2016 Convertible Notes were $5,913 and $445, respectively, and for the 2017 Convertible Notes were $4,813 and $149, respectively. At the time of issuance and as of June 30, 2012, the equity component, net of issuance costs as

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recorded in the "capital in excess of par value" in the accompanying consolidated balance sheet for the February 2016 Convertible Notes, the June 2016 Convertible Notes and the 2017 Convertible Notes was $39,063, $15,653 and $4,725, respectively.

        As of June 30, 2012, the components of the carrying value of the Convertible Notes, the stated interest rate and the effective interest rate were as follows:

 
  February 2016
Convertible Notes
  June 2016
Convertible Notes
  2017
Convertible Notes
 

Principal amount of debt

  $ 575,000   $ 230,000   $ 162,500  

Original issue discount, net of accretion

    (30,231 )   (12,678 )   (4,624 )
               

Carrying value of debt

  $ 544,769   $ 217,322   $ 157,876  
               

Stated interest rate

    5.75 %   5.125 %   4.875 %

Effective interest rate(1)

    7.0 %   6.3 %   5.4 %

(1)
The effective interest rate of the debt component of the convertible notes is equal to the stated interest rate plus the accretion of original issue discount.

        For the three and six months ended June 30, 2012 and 2011, the components of interest expense and cash paid for interest expense for the Convertible Notes were as follows:

 
  For the three months
ended June 30,
  For the six months
ended June 30,
 
 
  2012   2011   2012   2011  

Stated interest expense

  $ 13,193   $ 11,180   $ 24,780   $ 17,372  

Accretion of original issue discount

    2,740     2,351     5,259     3,603  

Amortization of debt issuance costs

    1,334     1,087     2,507     1,628  
                   

Total interest expense

  $ 17,267   $ 14,618   $ 32,546   $ 22,603  
                   

Cash paid for interest expense

  $ 5,894   $   $ 22,425   $  

        On February 2, 2012, we issued $143,750 aggregate principal amount of senior unsecured notes that mature on February 15, 2022 (the "2022 Notes"). The 2022 Notes bear interest at a rate of 7.00% per year payable quarterly commencing on May 15, 2012 and all principal is due upon maturity. The 2022 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after February 15, 2015, at a par redemption price of $25 per security plus accrued and unpaid interest. Total proceeds from the issuance of the 2022 Notes, net of underwriting discounts and offering costs, were approximately $138,338.

        On October 21, 2010, we issued $200,000 aggregate principal amount of senior unsecured notes that mature on October 15, 2040 (the "2040 Notes"). The 2040 Notes bear interest at a rate of 7.75% per annum, payable quarterly, and all principal is due upon maturity. The 2040 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after October 15, 2015, at a par redemption price of $25 per security plus accrued and unpaid interest. Total proceeds from the issuance of the 2040 Notes, net of underwriting discounts and offering costs, were approximately $193,000.

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        For the three and six months ended June 30, 2012 and 2011, the components of interest expense and cash paid for interest expense for the 2022 Notes and the 2040 Notes are as follows:

 
  For the three months
ended June 30,
  For the six months
ended June 30,
 
 
  2012   2011   2012   2011  

Stated interest expense

  $ 6,363   $ 3,875   $ 11,915   $ 7,750  

Amortization of debt issuance costs

    193     61     339     119  
                   

Total interest expense

  $ 6,556   $ 3,936   $ 12,254   $ 7,869  
                   

Cash paid for interest expense

  $ 6,754   $ 3,875   $ 10,629   $ 7,492  

        As part of the Allied Acquisition, the Company assumed all outstanding debt obligations of Allied Capital, including Allied Capital's unsecured notes, which consisted of 6.625% Notes due on July 15, 2011 (the "2011 Notes"), 6.000% Notes due on April 1, 2012 (the "2012 Notes") and 6.875% Notes due on April 15, 2047 (the "2047 Notes" and, together with the 2011 Notes and the 2012 Notes, the "Allied Unsecured Notes"). In accordance with ASC 805-10, the initial carrying value of the Allied Unsecured Notes was equal to the fair value as of April 1, 2010 resulting in an initial unaccreted discount from the principal value of the Allied Unsecured Notes of approximately $65,800. Accretion expense related to this discount is included in "interest and credit facility fees" in the accompanying statement of operations.

        On March 16, 2011 we redeemed the remaining balance of the 2011 Notes for a total redemption price (including a redemption premium) of $306,800, in accordance with the terms of the indenture governing the 2011 Notes, which resulted in a loss on the extinguishment of debt of $8,860. On April 27, 2011, we redeemed the remaining balance of the 2012 Notes for a total redemption price (including a redemption premium) of $169,338, in accordance with the terms of the indenture governing the 2012 Notes, which resulted in a loss on the extinguishment of debt of $10,458.

        As of June 30, 2012 and December 31, 2011, the 2047 Notes were outstanding as follows:

 
  As of  
 
  June 30, 2012   December 31, 2011  
 
  Outstanding
Principal
  Carrying
Value(1)
  Outstanding
Principal
  Carrying
Value(1)
 

2047 Notes

  $ 230,000   $ 181,091   $ 230,000   $ 180,988  
                   

(1)
Represents the principal amount of the 2047 Notes less the unaccreted purchased discount initially recorded as a part of the Allied Acquisition

        The 2047 Notes bear interest at a rate of 6.875% and mature on April 15, 2047. The 2047 Notes require payment of interest quarterly, and all principal is due upon maturity. The 2047 Notes may be redeemed in whole or in part at any time or from time to time at our option, at a par redemption price of $25 per security plus accrued and unpaid interest and upon the occurrence of certain tax events as stipulated in the indenture governing the 2047 Notes.

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        For the three and six months ended June 30, 2012 and 2011, the components of interest expense and cash paid for interest expense for the Allied Unsecured Notes are as follows:

 
  For the three
months ended
June 30,
  For the six
months ended
June 30,
 
 
  2012   2011   2012   2011  

Stated interest expense

  $ 3,953   $ 4,652   $ 7,906   $ 15,172  

Accretion on original issue discount

    52     222     103     2,525  
                   

Total interest and credit facility fees expense

  $ 4,005   $ 4,874   $ 8,009   $ 17,697  
                   

Cash paid for interest expense

  $ 3,953   $ 9,488   $ 7,906   $ 26,772  
                   

        The 2022 Notes, the 2040 Notes and the 2047 Notes contain certain covenants, including covenants requiring the Company to comply with Section 18(a)(1)(A) as modified by Section 61(a)(1) of the Investment Company Act and to provide financial information to the holders of such notes under certain circumstances. These covenants are subject to important limitations and exceptions. As of June 30, 2012, the Company was in compliance in all material respects with the terms of the 2022 Notes, the 2040 Notes and the 2047 Notes.

6.     COMMITMENTS AND CONTINGENCIES

        The Company has various commitments to fund investments in its portfolio as described below.

        As of June 30, 2012 and December 31, 2011, the Company had the following commitments to fund various revolving and delayed draw senior secured and subordinated loans, including commitments the funding of which is at (or substantially at) the Company's discretion:

 
  As of  
 
  June 30, 2012   December 31, 2011  

Total revolving and delayed draw commitments

  $ 576,912   $ 565,630  

Less: funded commitments

    (123,531 )   (125,037 )
           

Total unfunded commitments

    453,381     440,593  

Less: commitments substantially at discretion of the Company

    (6,250 )   (64,750 )

Less: unavailable commitments due to borrowing base or other covenant restrictions

    (20,521 )   (5,518 )
           

Total net adjusted unfunded revolving and delayed draw commitments

  $ 426,610   $ 370,325  
           

        Included within the total revolving and delayed draw commitments as of June 30, 2012 were commitments to issue up to $65,485 in standby letters of credit through a financial intermediary on behalf of certain portfolio companies. Under these arrangements, if the standby letters of credit were to be issued, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. As of June 30, 2012, the Company had $42,408 in standby letters of credit issued and outstanding under these commitments on behalf of the portfolio companies, of which no amounts were recorded as a liability on our balance sheet as such letters of credit are considered in the valuation of the investments in the portfolio company. Of these letters of credit $40,649 expire in 2012 and $1,759 expire in 2013.

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        As of June 30, 2012 and December 31, 2011, the Company was party to subscription agreements to fund equity investments in private equity investment partnerships:

 
  As of  
 
  June 30, 2012   December 31, 2011  

Total private equity commitments

  $ 149,117   $ 132,030  

Less: funded private equity commitments

    (79,490 )   (67,428 )
           

Total unfunded private equity commitments

    69,627     64,602  

Less: private equity commitments substantially at discretion of the Company

    (53,525 )   (53,525 )
           

Total net adjusted unfunded private equity commitments

  $ 16,102   $ 11,077  
           

        In addition, as of each of June 30, 2012 and December 31, 2011, the Company had outstanding guarantees or similar obligations on behalf of certain portfolio companies totaling $800.

        Further in the ordinary course of business, we may sell certain of our investments to third party purchasers. In particular, in connection with the sale of certain controlled portfolio company equity investments (as well as certain other sales) we have, and may continue to do so in the future, agreed to indemnify such purchasers for future liabilities arising from the investments and the related sale transaction. Such indemnification provisions may give rise to future liabilities.

        As of June 30, 2012, one of the Company's portfolio companies, Ciena Capital LLC ("Ciena"), had one non-recourse securitization Small Business Administration ("SBA") loan warehouse facility, which has reached its maturity date but remains outstanding. Ciena is working with the providers of the SBA loan warehouse facility with regard to the repayment of that facility. Allied Capital had previously issued a performance guaranty (which the Company succeeded to as a result of the Allied Acquisition) whereby the Company must indemnify the warehouse providers for any damages, losses, liabilities and related costs and expenses that they may incur as a result of Ciena's failure to perform any of its obligations as loan originator, loan seller or loan servicer under the warehouse facility. As of June 30, 2012, there are no known issues or claims with respect to this performance guaranty.

7.     FAIR VALUE OF FINANCIAL INSTRUMENTS

        Effective January 1, 2008, the Company adopted ASC 825-10, which provides companies the option to report selected financial assets and liabilities at fair value. ASC 825-10 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect of the company's choice to use fair value on its earnings. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the balance sheet. The Company has not elected the ASC 825-10 option to report selected financial assets and liabilities at fair value. With the exception of the line items entitled "other assets" and "debt," which are reported at amortized cost, all assets and liabilities approximate fair value on the balance sheet. The carrying value of the line items entitled "interest receivable," "receivable for open trades," "payable for open trades," "accounts payable and accrued expenses," "management and incentive fees payable" and "interest and facility fees payable" approximate fair value due to their short maturity.

        Effective January 1, 2008, the Company adopted ASC 820-10, which expands the application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the

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Company to assume that the portfolio investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820-10, the Company has considered its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity. ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:

        In addition to using the above inputs in investment valuations, we continue to employ the net asset valuation policy approved by our board of directors that is consistent with ASC 820-10 (see Note 2). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. Our valuation policy considers the fact that because there is not a readily available market value for most of the investments in our portfolio, the fair value of the investments must typically be determined using unobservable inputs.

        The Company's portfolio investments (other than as discussed below in the following paragraph) are typically valued using two different valuation techniques. The first valuation technique is an analysis of the enterprise value ("EV") of the portfolio company. Enterprise value means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The primary method for determining EV uses a multiple analysis whereby appropriate multiples are applied to the portfolio company's EBITDA (net income before net interest expense, income tax expense, depreciation and amortization). EBITDA multiples are typically determined based upon review of market comparable transactions and publicly traded comparable companies, if any. The second method for determining EV uses a discounted cash flow analysis whereby future expected cash flows of the portfolio company are discounted to determine a present value using estimated discount rates (typically a weighted average cost of capital based on costs of debt and equity consistent with current market conditions). The EV analysis is performed to determine the value of equity investments, the value of debt investments in portfolio companies where the Company has control or could gain control through an option or warrant security, and to determine if there is credit impairment for debt investments. If debt investments are credit impaired, an EV analysis may be used to value such debt investments; however, in addition to the methods outlined above, other methods such as a liquidation or wind-down analysis may be utilized to estimate enterprise value. The second valuation technique is a yield analysis, which is typically performed for non-credit impaired debt investments in portfolio companies where we do not own a controlling equity position. To determine fair value using a yield analysis, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk. In the yield analysis, we consider the current contractual interest rate, the maturity and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the enterprise value of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded

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transactions, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.

        For other portfolio investments such as investments in collateralized loan obligations and the subordinated certificates of the SSLP, discounted cash flow analysis is the primary technique utilized to determine fair value. Expected future cash flows associated with the investment are discounted to determine a present value using a discount rate that reflects estimated market return requirements.

        The following table summarizes the significant unobservable inputs the Company used to value the majority of its investments categorized within Level 2 or 3 as of June 30, 2012. The table is not intended to be all-inclusive, but instead captures the significant unobservable inputs relevant to our determination of fair values.

 
   
   
  Unobservable Input  
Asset Category
  Fair Value   Primary Valuation
Technique
  Input   Range   Weighted
Average
 

Senior term debt

  $ 3,123,660   Yield Analysis   Market Yield   5.5% - 20.8%     10.1 %

Subordinated Certificates of the SSLP

    1,125,812   Discounted Cash Flow   Discount Rate   14.0% - 16.0%     15.0 %

Senior subordinated debt

    457,873   Yield Analysis   Market Yield   9.0% - 18.6%     14.1 %

Collateralized loan obligations

    40,230   Discounted Cash Flow   Discount Rate   8.8% - 13.5%     10.7 %

Preferred equity securities

    246,649   EV Market Multiple Analysis   EBITDA Multiple   4.5x - 10.5x     8.0x  

Other equity securities and other

    510,589   EV Market Multiple Analysis   EBITDA Multiple   4.5x - 12.0x     7.4x  
                         

Total

  $ 5,504,813                    
                         

        Changes in market yields, discount rates or EBITDA multiples, each in isolation, may change the fair value of certain of our investments. Generally, an increase in market yields or discount rates or decrease in EBITDA multiples may result in a decrease in the fair value of certain of our investments.

        Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

        In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.

        The following table presents fair value measurements of cash and cash equivalents and investments as of June 30, 2012:

 
  Fair Value Measurements Using  
 
  Total   Level 1   Level 2   Level 3  

Cash and cash equivalents

  $ 101,265   $ 101,265   $   $  

Investments

  $ 5,504,813   $   $   $ 5,504,813  

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        The following table presents changes in investments that use Level 3 inputs as of and for the three and six months ended June 30, 2012:

 
  As of and for the
three months ended
June 30, 2012
 

Balance as of March 31, 2012

  $ 5,204,531  

Net realized and unrealized gains

    5,709  

Purchases

    703,812  

Sales

    (111,543 )

Redemptions

    (305,739 )

Payment-in-kind interest and dividends

    4,495  

Accretion of discount on securities

    3,548  

Net transfers in and/or out of Level 3

     
       

Balance as of June 30, 2012

  $ 5,504,813  
       

 

 
  As of and for the
six months ended
June 30, 2012
 

Balance as of December 31, 2011

  $ 5,094,506  

Net realized and unrealized gains

    34,218  

Purchases

    1,086,383  

Sales

    (119,593 )

Redemptions

    (609,546 )

Payment-in-kind interest and dividends

    11,342  

Accretion of discount on securities

    7,503  

Net transfers in and/or out of Level 3

     
       

Balance as of June 30, 2012

  $ 5,504,813  
       

        As of June 30, 2012, the net unrealized appreciation on the investments that use Level 3 inputs was $66,629.

        The following table presents fair value measurements of cash and cash equivalents and investments as of December 31 2011:

 
  Fair Value Measurements Using  
 
  Total   Level 1   Level 2   Level 3  

Cash and cash equivalents

  $ 120,782   $ 120,782   $   $  

Investments

  $ 5,094,506   $   $   $ 5,094,506  

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        The following table presents changes in investments that use Level 3 inputs as of and for the three and six months ended June 30, 2011:

 
  As of and for the
three months ended
June 30, 2011
 

Balance as of March 31, 2011

  $ 4,256,420  

Net realized and unrealized gains

    15,707  

Purchases

    744,455  

Sales

    (112,884 )

Redemptions

    (259,785 )

Payment-in-kind interest and dividends

    6,919  

Accretion of discount on securities

    3,851  

Net transfers in and/or out of Level 3

    (24,640 )
       

Balance as of June 30, 2011

  $ 4,630,043  
       

 

 
  As of and for the
six months ended
June 30, 2011
 

Balance as of December 31, 2010

  $ 4,312,657  

Net realized and unrealized gains

    99,231  

Purchases

    1,212,723  

Sales

    (403,433 )

Redemptions

    (592,302 )

Payment-in-kind interest and dividends

    17,957  

Accretion of discount on securities

    7,850  

Net transfers in and/or out of Level 3

    (24,640 )
       

Balance as of June 30, 2011

  $ 4,630,043  
       

        As of June 30, 2011, the net unrealized appreciation on the investments that use Level 3 inputs was $76,210.

        Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

        Following are the carrying and fair values of our debt obligations as of June 30, 2012 and December 31, 2011. Fair value is estimated by discounting remaining payments using applicable current

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market rates, which take into account changes in the Company's marketplace credit ratings, or market quotes, if available.

 
  As of  
 
  June 30, 2012   December 31, 2011  
 
  Carrying value(1)   Fair value   Carrying value(1)   Fair value  

Revolving Credit Facility

  $ 295,000   $ 295,000   $ 395,000   $ 399,400  

Revolving Funding Facility

    348,000     348,000     463,000     467,900  

SMBC Funding Facility

    107,000     107,000          

Debt Securitization

            77,531     68,215  

February 2016 Convertible Notes (principal amount outstanding of $575,000)

    544,769 (2)   589,985     541,152 (2)   545,445  

June 2016 Convertible Notes (principal amount outstanding of $230,000)

    217,322 (2)   229,209     215,931 (2)   215,717  

2017 Convertible Notes (principal amount outstanding of $162,500)

    157,876 (2)   156,354          

2022 Notes (principal amount outstanding of $143,750)

    143,750     149,077          

2040 Notes (principal amount outstanding of $200,000)

    200,000     207,288     200,000     198,808  

2047 Notes (principal amount outstanding of $230,000)

    181,091 (3)   224,362     180,988 (3)   212,218  
                   

  $ 2,194,808 (4) $ 2,306,275   $ 2,073,602 (4) $ 2,107,703  
                   

(1)
Except for the Convertible Notes and the 2047 Notes, all carrying values are the same as the principal amounts outstanding.

(2)
Represents the aggregate principal amount outstanding of the Convertible Notes less the unaccreted discount initially recorded upon issuance of each respective series of the Convertible Notes.

(3)
Represents the aggregate principal amount outstanding of the 2047 Notes less the unaccreted purchased discount.

(4)
Total principal amount of debt outstanding totaled $2,291,250 and $2,170,531 as of June 30, 2012 and December 31, 2011, respectively.

        The following table presents fair value measurements of our debt obligations as of June 30, 2012 and December 31, 2011:

 
  As of  
Fair Value Measurements Using
  June 30, 2012   December 31, 2011  

Level 1

  $ 580,727   $ 411,026  

Level 2

    1,725,548     1,696,677  
           

Total

  $ 2,306,275   $ 2,107,703  
           

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8.     STOCKHOLDERS' EQUITY

        The following table summarizes the total shares issued and proceeds received in public offerings of the Company's common stock net of underwriting discounts and offering costs for the six months ended June 30, 2012:

 
  Shares issued   Offering price
per share
  Proceeds net of
underwriting
and
offering costs
 

January 2012 public offering

    16,422   $ 15.41   $ 252,415  
               

Total for the six months ended June 30, 2012

    16,422   $ 15.41   $ 252,415  
               

        The Company used the net proceeds from the January 2012 public equity offering to repay outstanding debt and for general corporate purposes, which included funding investments.

        There were no sales of our equity securities for the six months ended June 30, 2011.

9.     EARNINGS PER SHARE

        The following information sets forth the computations of basic and diluted net increase in stockholders' equity resulting from operations per share for the three and six months ended June 30, 2012 and 2011:

 
  For the three months ended   For the six months ended  
 
  June 30, 2012   June 30, 2011   June 30, 2012   June 30, 2011  

Net increase in stockholders' equity resulting from operations available to common stockholders:

  $ 90,932   $ 36,923   $ 196,479   $ 160,689  

Weighted average shares of common stock outstanding—basic and diluted:

    221,878     204,752     219,461     204,586  

Basic and diluted net increase in stockholders' equity resulting from operations per share:

  $ 0.41   $ 0.18   $ 0.90   $ 0.79  

        For the purposes of calculating diluted earnings per share, the average closing price of the Company's common stock for the three and six months ended June 30, 2012 and for the period from the time of issuance of the 2017 Convertible Notes through June 30, 2012 was less than the current conversion price for each respective series of the Convertible Notes and therefore, the underlying shares for the intrinsic value of the embedded options in the Convertible Notes had no impact on this calculation. The average closing price of the Company's common stock for the three months ended June 30, 2011 and for the period from the time of issuance of both the February 2016 Convertible Notes and the June 2016 Convertible Notes through June 30, 2011 was less than the current conversion price for each respective series of the Convertible Notes and therefore, the underlying shares for the intrinsic value of the embedded options in the Convertible Notes had no impact on this calculation.

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10.   DIVIDENDS AND DISTRIBUTIONS

        The following table summarizes our dividends declared during the six months ended June 30, 2012 and 2011 :

Date Declared
  Record Date   Payment Date   Per Share
Amount
  Total
Amount
 

May 8, 2012

  June 15, 2012   June 29, 2012   $ 0.37   $ 82,094  

February 28, 2012

  March 15, 2012   March 30, 2012   $ 0.37   $ 81,974  
                   

Total declared for the six months ended June 30, 2012

          $ 0.74   $ 164,068  
                   

May 5, 2011

  June 15, 2011   June 30, 2011   $ 0.35   $ 71,663  

March 1, 2011

  March 15, 2011   March 31, 2011   $ 0.35   $ 71,547  
                   

Total declared for the six months ended June 30, 2011

          $ 0.70   $ 143,210  
                   

        The Company has a dividend reinvestment plan that was amended effective March 28, 2012, whereby the Company may buy shares of its common stock in the open market or issue new shares in order to satisfy dividend reinvestment requests. Prior to the amendment, if the Company issued new shares to implement the dividend reinvestment plan, the issue price was equal to the closing price of its common stock on the dividend record date. As a result of the amendment, when the Company issues new shares in connection with the dividend reinvestment plan, the issue price is equal to the closing price of its common stock on the dividend payment date. Dividend reinvestment plan activity for the six months ended June 30, 2012 and 2011, was as follows:

 
  For the six
months ended
June 30,
 
 
  2012   2011  

Shares issued

    599     711  

Average price per share

  $ 16.16   $ 16.24  

Shares purchased by plan agent for shareholders

         

Average price per share

  $   $  

11.   RELATED PARTY TRANSACTIONS

        In accordance with the investment advisory and management agreement, we bear all costs and expenses of the operation of the Company and reimburse our investment adviser for certain costs and expenses incurred by the Company's investment adviser in the operation of the Company. For the three and six months ended June 30, 2012, the Company's investment adviser incurred costs and expenses in respect of which it was entitled to reimbursement totaling $954 and $1,863, respectively. For the three and six months ended June 30, 2011, the Company's investment adviser incurred costs and expenses in respect of which it was entitled to reimbursement totaling $2,469 and $3,112, respectively. As of June 30, 2012, $1,125 of this amount was unpaid and such payable is included in "accounts payable and accrued expenses" in the accompanying consolidated balance sheet.

        We have entered into separate subleases with Ares Management and Ivy Hill Asset Management, L.P. ("IHAM"), a wholly owned portfolio company of the Company, pursuant to which Ares Management and IHAM sublease approximately 15% and 20%, respectively, of the Company's New York office space for a fixed rent equal to 15% and 20%, respectively, of the base annual rent payable by us under the Company's lease for this space, plus certain additional costs and expenses. For the three and six months ended June 30, 2012, amounts payable to the Company under these subleases

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totaled $407 and $775, respectively. For the three and six months ended June 30, 2011, amounts payable to the Company under these subleases totaled $137. Under our previous lease that expired on February 27, 2011, we were party to a sublease agreement with Ares Management whereby Ares Management subleased approximately 25% of such office space for a fixed rent equal to 25% of the basic annual rent payable by us under this lease, plus certain additional costs and expenses. For the three and six months ended June 30, 2011, amounts payable under this sublease to the Company totaled $396.

        We are also party to an office sublease with Ares Commercial Real Estate Management LLC ("ACREM"), a wholly owned subsidiary of Ares Management, pursuant to which we are subleasing approximately 12% of ACREM's office space for a fixed rent equal to 12% of the basic annual rent payable by ACREM under its office lease, plus certain additional costs and expenses. For the three and six months ended June 30, 2012, amounts payable under this sublease by the Company to ACREM totaled $26.

        As of June 30, 2012, Ares Investments Holdings LLC, an affiliate of Ares Management (the sole member of our investment adviser), owned approximately 2.9 million shares of the Company's common stock representing approximately 1.3% of the total shares outstanding as of June 30, 2012.

        See Notes 3 and 12 for descriptions of other related party transactions.

12.   IVY HILL ASSET MANAGEMENT, L.P. AND OTHER MANAGED VEHICLES

        In November 2007, the Company established IHAM to serve as a manager for Ivy Hill Middle Market Credit Fund, Ltd., an unconsolidated investment vehicle focusing on investments in middle-market loans. From inception until the second quarter of 2009, IHAM's financial results were consolidated with those of the Company. In June 2009, because of a shift in activity from being primarily a manager, with no dedicated employees, of funds in which the Company had invested debt and equity, to a manager with individuals dedicated to managing an increasing number of third party funds, the Company concluded that GAAP required the financial results of IHAM to be reported as a portfolio company in the schedule of investments rather than as a consolidated subsidiary in the Company's financial results. The Company made an initial equity investment of $3,816 into IHAM in June 2009. As of June 30, 2012, the Company's total investment in IHAM at fair value was $204,977, including unrealized appreciation of $92,101. As of December 31, 2011, the Company's total investment in IHAM at fair value was $194,597 including unrealized appreciation of $81,721. For the three and six months ended June 30, 2012, the Company received distributions consisting entirely of dividend income from IHAM of $4,762 and $9,524, respectively. For the three and six months ended June 30, 2011, the Company received distributions consisting entirely of dividend income from IHAM of $4,762 and $9,524, respectively.

        IHAM, which became an SEC registered investment adviser effective March 30, 2012, as of June 30, 2012 managed 10 unconsolidated credit vehicles and sub-managed or sub-advised four other unconsolidated credit vehicles (these vehicles managed or sub-managed /sub-advised by IHAM are collectively, the "IHAM Vehicles"). As of June 30, 2012 and December 31, 2011, the Company had investments in two of the IHAM Vehicles.

        IHAM or certain of the IHAM Vehicles purchased investments from the Company of $36,147, during the six months ended June 30, 2012. A net realized loss of $848 was recorded on these transactions for the six months ended June 30, 2012. IHAM or the IHAM Vehicles may, from time to time, buy or sell additional investments from or to the Company. For any such purchases or sales by the IHAM Vehicles from or to the Company, the IHAM Vehicles must obtain approval from third parties unaffiliated with the Company or IHAM, as applicable.

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        IHAM is party to an administration agreement, referred to herein as the "IHAM administration agreement," with Ares Operations. Pursuant to the IHAM administration agreement, Ares Operations provides IHAM with office facilities, equipment, clerical, bookkeeping and record keeping services, services of, and oversight of, custodians, depositories, accountants, attorneys, underwriters and such other persons in any other capacity deemed to be necessary. Under the IHAM administration agreement, IHAM reimburses Ares Operations for all of the actual costs associated with such services, including Ares Operations' allocable portion of overhead and the cost of its officers and respective staff in performing its obligations under the IHAM administration agreement.

        As part of the Allied Acquisition, the Company acquired the management rights for an unconsolidated vehicle, the AGILE Fund I, LLC ("AGILE Fund"). Effective March 30, 2012, the management rights for the AGILE Fund were transferred for de minimis, non-monetary consideration to an unrelated third party. The Company's investment in AGILE Fund was $201 at fair value, including unrealized depreciation of $90 as of June 30, 2012.

13.   FINANCIAL HIGHLIGHTS

        The following is a schedule of financial highlights for the six months ended June 30, 2012 and 2011:

 
  For the six months ended  
Per Share Data:
  June 30, 2012   June 30, 2011  

Net asset value, beginning of period(1)

  $ 15.34   $ 14.92  

Issuance of common stock

         

Issuances of Convertible Notes

    0.02     0.27  

Net investment income for period(2)

    0.75     0.45  

Net realized and unrealized gains for period(2)

    0.14     0.34  
           

Net increase in stockholders' equity

    0.91     1.06  

Total distributions to stockholders

    (0.74 )   (0.70 )
           

Net asset value at end of period(1)

  $ 15.51   $ 15.28  
           

Per share market value at end of period

  $ 15.96   $ 16.07  

Total return based on market value(3)

    8.09 %   1.76 %

Total return based on net asset value(4)

    5.83 %   5.26 %

Shares outstanding at end of period

    222,151     205,130  

Ratio/Supplemental Data:

             

Net assets at end of period

  $ 3,446,499   $ 3,134,281  

Ratio of operating expenses to average net assets(5)(6)

    10.32 %   11.76 %

Ratio of net investment income to average net assets(5)(7)

    9.73 %   5.84 %

Portfolio turnover rate(5)

    30 %   44 %

(1)
The net assets used equals the total stockholders' equity on the consolidated balance sheets.

(2)
Weighted average basic per share data.

(3)
For the six months ended June 30, 2012, the total return based on market value equals the increase of the ending market value at June 30, 2012 of $15.96 per share over the ending market value at December 31, 2011 of $15.45 per share plus the declared dividends of $0.74 per share for the six months ended June 30, 2012, divided by the market value at December 31, 2011. For the six months ended June 30, 2011, the total return based on market value equals the decrease of the ending market value at June 30, 2011 of $16.07 per share from the ending market value at December 31, 2010 of $16.48 per share, plus the declared dividends of $0.70 per share for the six months ended June 30, 2011, divided by the market value at December 31, 2010. Total return

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(4)
For the six months ended June 30, 2012, the total return based on net asset value equals the change in net asset value during the period plus the declared dividends of $0.74 per share for the six months ended June 30, 2012, divided by the beginning net asset value. For the six months ended June 30, 2011, the total return based on net asset value equals the change in net asset value during the period plus the declared dividends of $0.70 per share for the six months ended June 30, 2011 divided by the beginning net asset value. These calculations are adjusted for shares issued in connection with the dividend reinvestment plan and the issuance of common stock in connection with any equity offerings. Total return based on net asset value is not annualized. The Company's performance changes over time and currently may be different than that shown. Past performance is no guarantee of future results.

(5)
The ratios reflect an annualized amount.

(6)
For the six months ended June 30, 2012, the ratio of operating expenses to average net assets consisted of 2.41% of base management fees, 2.90% of incentive fees, 4.00% of the cost of borrowing and 1.01% of other operating expenses. For the six months ended June 30, 2011, the ratio of operating expenses to average net assets consisted of 2.18% of base management fees, 4.63% of incentive fees, 3.75% of the cost of borrowing and 1.02% of other operating expenses. These ratios reflect annualized amounts.

(7)
The ratio of net investment income to average net assets excludes income taxes related to realized gains.

14.   LITIGATION

        The Company is party to certain lawsuits in the normal course of business. In addition, Allied Capital was involved in various legal proceedings which the Company assumed in connection with the Allied Acquisition. Furthermore, third parties may try to seek to impose liability on the Company in connection with the activities of its portfolio companies. While the outcome of any such legal proceedings cannot at this time be predicted with certainty, the Company does not expect that these legal proceedings will materially affect its business, financial condition or results of operations.

15.   SUBSEQUENT EVENTS

        The Company's management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the Consolidated Financial Statements as of and for the six months ended June 30, 2012, except as disclosed below.

        In July 2012, pursuant to the terms of the amended Revolving Funding Facility, the Company and Ares Capital CP received an increase in the commitments under the Revolving Funding Facility of $40,000, bringing the total commitments to $620,000.

        In August 2012, the Company declared a third quarter dividend of $0.38 per share and an additional dividend of $0.05 per share. Both dividends are payable on September 28, 2012 to stockholders of record as of September 14, 2012.

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$175,000,000

GRAPHIC

5.875% Senior Notes due 2022

   
 
   

PROSPECTUS SUPPLEMENT

 

 



 

 

BofA Merrill Lynch
Morgan Stanley
UBS Investment Bank
Wells Fargo Securities
Stifel Nicolaus Weisel
Credit Suisse
Janney Montgomery Scott
RBC Capital Markets
Stephens Inc.

   

September 20, 2012