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As filed with the Securities and Exchange Commission on March 19, 2010

Registration No. 333-            

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

o PRE-EFFECTIVE AMENDMENT NO.      
o POST-EFFECTIVE AMENDMENT NO.     

ARES CAPITAL CORPORATION
(Exact Name of Registrant as Specified in Charter)

280 Park Avenue, 22nd Floor
Building East
New York, New York 10017
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (212) 750-7300

Joshua M. Bloomstein
Ares Capital Corporation
280 Park Avenue, 22nd Floor
Building East
New York, New York 10017
(212) 750-7300
(Name and Address of Agent for Service)

Copies of information to:

Monica J. Shilling
Proskauer Rose LLP
2049 Century Park East, 32nd Floor
Los Angeles, CA 90067-3206
(310) 557-2900

Approximate Date of Proposed Public Offering: From time to time after the effective date of this Registration Statement.

If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. ý

It is proposed that this filing will become effective (check appropriate box):

ý
when declared effective pursuant to section 8(c).

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

Title of Securities Being Registered   Amount Being
Registered
  Proposed Maximum
Offering Price
Per Unit
  Proposed Maximum
Aggregate Offering
Price(1)
  Amount of
Registration
Fee(2)
Common Stock, $0.001 par value per share(3)(4)                
Preferred Stock, $0.001 par value per share(3)                
Subscription Rights(3)                
Warrants(5)                
Debt Securities(6)                
Total           $1,000,000,000(7)   $71,300
(1)
Estimated pursuant to Rule 457(o) solely for the purpose of determining the registration fee. The proposed maximum offering price per security will be determined from time to time, by the Registrant in connection with the sale by the Registrant of the securities registered under this registration statement.

(2)
Prior to the initial filing of this registration statement, $592,216,440 aggregate principal amount of securities remained registered and unsold pursuant to Registration Statement No. 333-158211, which was initially filed by the Registrant on March 25, 2009. Pursuant to Rule 457(p), $36,920 of the entire fee of $71,300 required in connection with the initial registration of $1,000,000,000 aggregate principal amount of securities under this registration statement is being offset against the $36,920 filing fee associated with the unsold securities registered under Registration Statement No. 333-158211, and an additional $34,380 is being paid in connection herewith.

(3)
Subject to Note 7 below, there is being registered hereunder an indeterminate number of shares of common stock or preferred stock, or subscription rights to purchase shares of common stock as may be sold, from time to time separately or as units in combination with other securities registered hereunder.

(4)
Includes such indeterminate number of shares of common stock as may, from time to time, be issued upon conversion or exchange of other securities registered hereunder, to the extent any such securities are, by their terms, convertible or exchangeable for common stock.

(5)
Subject to Note 7 below, there is being registered hereunder an indeterminate number of warrants as may be sold, from time to time separately or as units in combination with other securities registered hereunder, representing rights to purchase common stock, preferred stock or debt securities.

(6)
Subject to Note 7 below, there is being registered hereunder an indeterminate principal amount of debt securities as may be sold, from time to time separately or as units in combination with other securities registered hereunder. If any debt securities are issued at an original issue discount, then the offering price shall be in such greater principal amount as shall result in an aggregate price to investors not to exceed $1,000,000,000.

(7)
In no event will the aggregate offering price of all securities issued from time to time pursuant to this registration statement exceed $1,000,000,000.

                  THE REGISTRANT HEREBY AGREES TO AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated March 19, 2010

PROSPECTUS

$1,000,000,000

LOGO

Common Stock
Preferred Stock
Debt Securities
Subscription Rights
Warrants


              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 Ares Capital Management LLC, an affiliate of Ares Management LLC, a global alternative asset manager and a Securities and Exchange Commission ("SEC") registered investment adviser with approximately $33 billion of total committed capital as of December 31, 2009. Ares Operations LLC, an affiliate 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 [                        ], 2010, the last reported sales price of our common stock on The NASDAQ Global Select Market was $[                        ] per share. The net asset value per share of our common stock at December 31, 2009 (the last date prior to the date of this prospectus on which we determined net asset value) was $11.44.

              Investing in our securities involves risks that are described in the "Risk Factors" section beginning on page 25 of this prospectus, including the risk of leverage.

              We may offer, from time to time, in one or more offerings or series, up to $1,000,000,000 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, separately or as 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 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 [                                    ], 2010.


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              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

  15

Selected Condensed Consolidated Financial Data of Ares Capital

  19

Unaudited Selected Pro Forma Condensed Consolidated Financial Data

  23

Unaudited Pro Forma Per Share Data

  24

Risk Factors

  25

Forward-Looking Statements

  52

Unaudited Pro Forma Condensed Consolidated Financial Statements

  53

Use of Proceeds

  78

Price Range of Common Stock and Distributions

  79

Ratios of Earnings to Fixed Charges

  81

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

  82

Senior Securities

  105

Business

  106

Pending Allied Acquisition

  122

Portfolio Companies

  125

Management

  133

Certain Relationships and Related Transactions

  156

Control Persons and Principal Stockholders

  158

Determination of Net Asset Value

  159

Dividend Reinvestment Plan

  161

Certain Material U.S. Federal Income Tax Considerations

  163

Description of Securities

  172

Description of Our Capital Stock

  172

Sales of Common Stock Below Net Asset Value

  180

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

  185

Description of Our Preferred Stock

  186

Description of Our Subscription Rights

  187

Description of Our Warrants

  188

Description of Our Debt Securities

  190

Regulation

  203

Custodian, Transfer and Dividend Paying Agent and Registrar

  209

Brokerage Allocation and Other Practices

  209

Plan of Distribution

  210

Legal Matters

  212

Independent Registered Public Accounting Firm

  212

Available Information

  212

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, up to $1,000,000,000 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, separately or as 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" or "investment adviser" refers to Ares Capital Management LLC; "Ares Operations" refers to Ares Operations LLC; and "Ares" refers to Ares Partners Management Company LLC and its affiliated companies (other than portfolio companies of its affiliated funds), including Ares Management LLC, which we refer to separately as "Ares Management."

              Other than as specifically set forth herein, information presented with respect to Ares Capital does not reflect the consummation of the Allied Acquisition (as defined below), and any investment decision you make should be made independent of the consummation of the Allied Acquisition. We cannot assure you that the Allied Acquisition will be consummated as scheduled, or at all. See "Pending Allied Acquisition" for a description of the terms of the Allied Acquisition, "Risk Factors—Risks Relating to Our Business—We may fail to consummate the Allied Acquisition" for a description of the risks associated with a failure to consummate the Allied Acquisition and "Risk Factors—Risks Relating to a Consummation of the Allied Acquisition" for a description of the risks that the combined company may face if the Allied Acquisition is consummated.


THE COMPANY

              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, 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 $8 billion of total committed capital under management as of December 31, 2009, including available debt capacity (subject to leverage restrictions), funds co-managed by us and funds managed or sub-managed by our wholly owned portfolio company, Ivy Hill Asset Management, L.P. ("IHAM").

              Ares Capital's 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. EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization.

              On October 26, 2009, we entered into a definitive agreement (the "Merger Agreement") under which we have agreed, subject to the satisfaction of certain closing conditions, to acquire Allied Capital Corporation ("Allied Capital") in an all stock transaction, which we refer to as the "Allied Acquisition." We cannot assure you that the Allied Acquisition will be consummated as scheduled, or at all, and any investment decision you make should be made independent of the consummation of the Allied Acquisition. See "Pending Allied Acquisition" for a description of the terms of the Allied Acquisition, "Risk Factors—Risks Relating to Our Business—We may fail to consummate the Allied Acquisition" for a description of the risks associated with a failure to consummate the Allied Acquisition and "Risk Factors—Risks Relating to a Consummation of the Allied Acquisition" for a description of the risks that the combined company may face if the Allied Acquisition is consummated.

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              We invest primarily in first and second lien senior loans and mezzanine debt, which in some cases includes an equity component like warrants. First and second lien senior loans generally are senior debt instruments that rank ahead of subordinated debt of a given portfolio company. These loans also have the benefit of security interests on the assets of the portfolio company, which may rank ahead of or be junior to other security interests. Mezzanine debt is subordinated to senior loans and is generally unsecured. Our investments have ranged between $10 million and $100 million each, although the investment sizes may be more or less than the targeted range. Our investment sizes are expected to grow with our capital availability and, if completed, upon consummation of the Allied Acquisition. To a lesser extent, we also make equity investments. Each of our equity investments has generally been less than $20 million, but may grow with our capital availability, and is usually made in conjunction with loans we make to these portfolio companies.

              The proportion of these 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 syndicate a portion of such amount to third parties, such that we make a smaller investment than what was reflected in our original commitment.

              The first and second lien senior loans generally have stated terms of three to 10 years and the mezzanine debt investments 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 securities with any maturity or duration. The debt that we invest in typically is 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). We may invest without limit in debt of any rating, as well as debt that has not been rated by any nationally recognized statistical rating organization.

              We believe that our investment adviser, Ares Capital Management, is able to leverage Ares' current investment platform, resources and existing relationships with financial sponsors, financial institutions, hedge funds and other investment firms to provide us with attractive investments. 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 12 years and its senior principals have an average of over 20 years experience investing in senior loans, high yield bonds, mezzanine debt and private equity securities. The Company has access to the Ares staff of approximately 110 investment professionals and to over 150 administrative professionals employed by Ares who provide assistance in accounting, legal, compliance, operations, technology and investor relations.

              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 opportunistic investments of non-eligible portfolio companies. Specifically, as part of this 30% basket, we may invest in debt of middle market companies located outside of the United States, in investment funds that are operating pursuant to certain exceptions to the Investment Company Act, in advisers to similar investment funds and in debt and equity of public companies that do not meet the definition of eligible portfolio companies because their market capitalization of publicly traded equity securities exceeds the levels provided for in the Investment Company Act. We expect that these public companies generally will have debt that may be non-investment grade. From time to time we may also invest in high yield bonds, which, depending on the issuer, may or may not be included in this 30% basket.

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              In addition to making investments in the Ares Capital portfolio, our portfolio company, IHAM, manages three unconsolidated senior debt funds, Ivy Hill Middle Market Credit Fund, Ltd. ("Ivy Hill I"), Ivy Hill Middle Market Credit Fund II, Ltd. ("Ivy Hill II") and Ivy Hill Senior Debt Fund, L.P. and related vehicles ("Ivy Hill SDF" and, together with Ivy Hill I and Ivy Hill II, the "Ivy Hill Funds") and serves as the sub-adviser/sub-manager for four others: CoLTS 2005-1 Ltd., CoLTS 2005-2 Ltd. and CoLTS 2007-1 Ltd., or collectively, the "CoLTS Funds," and FirstLight Financial Corporation, or "FirstLight." As of December 31, 2009, IHAM had total committed capital under management of over $2.3 billion, which includes approximately $0.2 billion of capital committed by Ares Capital.

              We and GE Commercial Finance Investment Advisory Services LLC also co-manage an unconsolidated senior debt fund: the Senior Secured Loan Fund LLC (formerly known as the Unitranche Fund LLC), or the "SL Fund."

About Ares

              Founded in 1997, Ares is a global alternative asset manager and SEC registered investment adviser with approximately $33 billion of total committed capital and over 250 employees as of December 31, 2009.

              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:

              Ares' senior principals have been working together as a group for many years and have an average of over 20 years of experience in leveraged finance, private equity, distressed debt, investment banking and capital markets. They are backed by a large team of highly disciplined professionals. Ares' rigorous investment approach is based upon an intensive, independent financial analysis, with a focus

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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 high net worth individuals investing in Ares' funds.

Ares Capital Management

              Ares Capital Management, our investment adviser, is served by a dedicated origination and transaction development team of approximately 34 investment professionals led by the partners of Ares Capital Management, Michael Arougheti, Eric Beckman, Kipp deVeer, Mitchell Goldstein and Michael Smith. Ares Capital Management leverages off of Ares' entire investment platform and benefits from the significant capital markets, trading and research expertise of all of Ares' investment professionals. Ares funds currently hold over 700 investments in over 30 different industries. Ares Capital Management's investment committee has nine members, including the partners of Ares Capital Management and Senior Partners of Ares' Capital Markets Group and Private Equity Group.

MARKET OPPORTUNITY

              We believe there are opportunities for us to invest in middle market companies for the following reasons:

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COMPETITIVE ADVANTAGES

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

Existing Investment Platform

              As of December 31, 2009, Ares managed approximately $33 billion of committed capital 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.

Seasoned Management Team

              Ares' senior professionals have an average of over 20 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. Ares Capital Management's investment professionals and members of its investment committee also have significant experience investing across market cycles. As a result of Ares' extensive investment experience and the history of its seasoned management team, Ares has developed a strong reputation across U.S. and European capital markets. We believe that Ares' long history in the leveraged loan market and the extensive experience of the principals investing across market cycles provides Ares Capital Management with a competitive advantage in identifying, investing in, and managing a portfolio of investments in middle market companies.

Experience 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 uses Ares' extensive network of relationships with intermediaries 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 long relationships. We believe this network enables us to attract well-positioned prospective portfolio company investments. Our investment adviser works closely with the Ares investment professionals, who oversee a portfolio of investments in over 700 companies, and provide access to an extensive network of relationships and special 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 19 years ago by its founders. Specifically, Ares Capital Management's investment philosophy, portfolio construction and portfolio management involve an assessment of the overall macroeconomic environment, 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, Ares Capital Management's approach seeks to reduce risk in investments by focusing on:

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Extensive Industry Focus

              We 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. Since its inception in 1997, Ares investment professionals have invested in over 30 different industries. Ares investment professionals have developed long-term relationships with management teams and management consultants in these industries, and have accumulated substantial information and identified potential trends within these industries. The experience of Ares' investment professionals investing across these industries throughout various stages of the economic cycle provides our investment adviser with access to market insights and investment opportunities.

Flexible Transaction Structuring

              We are flexible in structuring investments, including the types of securities in which we invest and the terms associated with such investments. Our investment adviser and its affiliates have extensive experience investing in a wide variety of securities for leveraged 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 hold larger investments than many of our competitors. The ability to underwrite, syndicate and hold larger investments (a) increases flexibility, (b) may increase net fee income and earnings through syndication, (c) broadens market relationships and deal flow and (d) allows us to optimize our portfolio composition. We believe that the ability to provide capital at every level 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.

Broad Origination Strategy

              Our investment adviser focuses on self-originating most of our investments by identifying a broad array of investment opportunities across multiple channels. It also leverages off of the extensive relationships of the broader Ares platform, including relationships with the companies in the portfolios of funds managed by IHAM, 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. Our focus on generating proprietary deal flow and lead investing also gives us greater control over capital structure, deal terms, pricing and documentation and results in active portfolio management of investments. Moreover, by leading the investment process, our investment adviser is often able to secure controlling positions in credit tranches, thereby providing additional control in investment outcomes. Our investment adviser also has originated substantial proprietary deal flow from middle market intermediaries, which often allows us to act as the sole or principal source of institutional junior capital to the borrower.

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OPERATING AND REGULATORY STRUCTURE

              Our investment activities are managed by Ares Capital Management and supervised by our board of directors, a majority of whom are independent of Ares and its affiliates. Ares Capital Management is an investment adviser that is registered under the Investment Advisers Act of 1940, or the "Advisers Act." Under our amended and restated investment advisory and management agreement, referred to herein as 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 "Regulation." We have elected to be treated for U.S. federal income tax purposes as a regulated investment company, or a "RIC," under 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 volatility in global markets, the availability of capital and access to capital markets has been limited over the last two years. We have responded to constraints on raising new capital by pursuing other avenues of liquidity and growth, such as adjusting the pace of our investments, becoming more selective in evaluating investment opportunities, pursuing asset sales, developing our third-party asset management capabilities and/or recycling lower yielding investments. We also intend to continue pursuing opportunities to manage third-party funds. 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, there can be no assurances that these activities will be successful. While levels of market disruption and volatility appear to be improving, there can be no assurance that they will not worsen. If they do, we could face materially higher financing costs. Consequently, our operating strategy could be materially and adversely affected.

              Consistent with the depressed market conditions of the general economy, the stocks of BDCs as an industry have traded at near historic lows for over 12 months as a result of concerns over liquidity, credit quality, leverage restrictions and distribution requirements. As a result of the deterioration of the market, several of our peers are no longer active in the market and are winding down their investments, have defaulted on their indebtedness, have decreased their distributions to stockholders or have announced share repurchase programs. While market conditions have improved, we cannot assure you that the market pressures we face will not have a material adverse effect on our business, financial condition and results of operations.

              See "Risk Factors—Risks Relating to Our Business—Our credit ratings may change and as a result the cost and flexibility under our debt instruments may change."

ACQUISITION OPPORTUNITIES

              We believe that the dislocation in the credit markets has created compelling risk adjusted returns in both the primary and secondary markets. Further, the current dislocation and illiquidity in the credit markets has also increased the likelihood of further consolidation in our industry. To that end, over the past 12-18 months we have evaluated (and expect to continue to evaluate in the future) a number of potential strategic acquisition opportunities, including acquisitions of:

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              For example, in June 2009 our portfolio company IHAM completed the acquisition of contracts to sub-manage approximately $770 million of middle market loan assets in three CLO vehicles managed by affiliates of Wells Fargo & Company. IHAM also acquired certain equity interests in these three CLOs. On October 26, 2009, we entered into a definitive agreement to acquire Allied Capital in an all stock transaction valued at $648 million, or approximately $3.47 per Allied Capital share as of October 23, 2009. In addition, on October 30, 2009, we completed our acquisition of Allied Capital's interests in the SL Fund for $165 million in cash and on December 29, 2009, we made an incremental investment in IHAM to facilitate its acquisition of Allied Capital's management rights in respect of, and interests in, Ivy Hill SDF for approximately $33 million in cash. For further discussion on these transactions, see "Pending Allied Acquisition" and "Business—Investments."

              We have been and continue to be engaged 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 will 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 documentation for any such transaction would be executed or even if executed, that any such transaction will 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

              We are party to the Revolving Credit Facility (as defined herein) that provides for up to $690.0 million of borrowings (comprised of $615.0 million on a stand-alone basis and an additional $75.0 million in commitments contingent upon the closing of the proposed Allied Acquisition) and up to $897.5 million on a stand-alone basis prior to the closing of the proposed Allied Acquisition, or $1.05 billion after the closing of the proposed Allied Acquisition, if we exercise the "accordion" feature. The Revolving Credit Facility expires on January 22, 2013.

              In addition, our wholly owned subsidiary Ares Capital CP (as defined herein) is party to the CP Funding Facility (as defined herein), which, as amended, currently provides for up to $400.0 million of borrowings. The CP Funding Facility expires on January 22, 2013 (with two one year extension options, subject to mutual consent).

              We use the term "Facilities" to refer to the Revolving Credit Facility and the CP Funding Facility.

              Through our wholly owned subsidiary ARCC CLO (as defined herein) we completed a $400.0 million debt securitization referred to herein as the "Debt Securitization" and issued

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approximately $314.0 million principal amount of asset-backed notes (including $50.0 million revolving notes, $48.8 million of which were drawn down as of December 31, 2009), which we refer to as 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 CLO Notes mature on December 20, 2019.

              As of [                    ], 2010, we had $[        ] million available for borrowing under our Facilities. As of [                    ], 2010, we also had outstanding $[        ] million of CLO Notes that mature on December 20, 2019. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources."

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 25 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 a Consummation of the Allied Acquisition

Risks Relating to Offerings Pursuant to this Prospectus

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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 280 Park Avenue, 22nd Floor, Building East, New York, New York 10017, telephone number (212) 750-7300.

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OFFERINGS

              We may offer, from time to time, up to $1,000,000,000 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, 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."

              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 strategies and market conditions 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 intend to distribute quarterly dividends to our stockholders out of assets legally available for distribution. Our quarterly dividends, if any, will be determined by our board of directors. For more information, see "Price Range of Common Stock and Distributions."

Taxation

 

We have elected to be treated for U.S. federal income tax purposes as a RIC. 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 income source 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."

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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."

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 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 prospectus contains a reference to fees or expenses paid or to be paid by "you," "us," "the Company" or "Ares Capital," or that "we" will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Ares Capital.

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

       

Sales load paid by us

        (1)

Offering expenses borne by us

        (2)

Dividend reinvestment plan expenses

    None     (3)
       

Total stockholder transaction expenses paid by us

        (4)
       

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

       

Management fees

    2.76% (6)

Incentive fees payable under investment advisory and management agreement (20% of realized capital gains and 20% of pre-incentive fee net investment income, subject to certain limitations)

    2.65% (7)

Interest payments on borrowed funds

    1.93% (8)

Other expenses

    1.85% (9)

Acquired fund fees and expenses

    0.03% (10)
       

Total annual expenses (estimated)

    9.22% (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. 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 (underwriting discount or commission) 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)
"Consolidated net assets attributable to common stock" equals net assets at December 31, 2009.

(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 and that the management fee will remain at 1.5% as set forth in our current investment advisory and management agreement. We may from time to time decide it is appropriate to change the terms of the agreement. Under the Investment Company Act, any material change to our investment advisory and management agreement must be submitted to stockholders for approval. The 2.76% reflected on the table is calculated on our net assets (rather than our total assets). See "Management—Investment Advisory and Management Agreement."

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(7)
This item represents our investment adviser's incentive fees based on pre-incentive fee net income for the year ended December 31, 2009 and the actual realized capital gains as of December 31, 2009, computed net of realized capital losses and unrealized capital depreciation. It also assumes that this fee will remain constant although it is based on Ares Capital's performance and will not be paid unless Ares Capital achieves certain goals. We expect to invest or otherwise utilize all of the net proceeds from securities registered under the registration statement of which this prospectus is a part pursuant to a particular prospectus supplement within three months of the date of the offering pursuant to such prospectus supplement and may have capital gains and interest income that could result in the payment of an incentive fee to our investment adviser in the first year after completion of offerings pursuant to this prospectus. Since our inception, the average quarterly incentive fee payable to our investment adviser has been approximately 0.63% of our weighted net assets (2.54% on an annualized basis). For more detailed information about incentive fees previously incurred by us, please see Note 3 to our consolidated financial statements for the period ended December 31, 2009.

The incentive fee consists of two parts:

The first, payable quarterly in arrears, equals 20% of our pre-incentive fee net investment income (including interest that is accrued but not yet received in cash), subject to a 2.00% quarterly (8% annualized) hurdle rate and a "catch-up" provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, our investment adviser receives no incentive fee until our net investment income equals the hurdle rate of 2.00% but then receives, as a "catch-up," 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.50%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.50% in any calendar quarter, our investment adviser will receive 20% of our pre-incentive fee net investment income as if a hurdle rate did not apply.

The second part, payable annually in arrears, equals 20% of our realized capital gains on a cumulative basis from inception through the end of the year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.

We will 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) 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 8.0% of our net assets at the beginning of such period. These calculations will be adjusted for any share issuances or repurchases.

See "Management—Investment Advisory and Management Agreement."

(8)
"Interest payments on borrowed funds" represents an estimate of our interest expenses based on actual interest and credit facility expenses incurred for the year ended December 31, 2009. During the year ended December 31, 2009, our average borrowings were $870 million and cash paid for interest expense was $20 million. We had outstanding borrowings of $767.9 million at December 31, 2009. 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

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(9)
Includes our overhead expenses, including payments under the administration agreement (as defined herein) based on our allocable portion of overhead and other expenses incurred by Ares Operations in performing its obligations under the administration agreement. Such expenses are estimated based on "Other expenses" for the year ended December 31, 2009. See "Management—Administration Agreement." 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.

(10)
The Company's stockholders indirectly bear the expenses of underlying investment companies in which the Company invests. This amount includes the fees and expenses of investment companies in which the Company is invested as of December 31, 2009. Certain of these investment companies 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 are based on historic fees and expenses for the investment companies. For those investment companies with little or no operating history, fees and expenses are based on expected fees and expenses stated in the investment companies' offering memorandum, private placement memorandum or other similar communication without giving effect to any performance. Future fees and expenses for these investment companies may be substantially higher or lower because certain fees and expenses are based on the performance of the investment companies, which may fluctuate over time. The amount of the Company's average net assets used in calculating this percentage was based on average net assets of $1.1 billion for the year ended December 31, 2009.

(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 period), rather than the total assets, including assets that have been funded with borrowed monies.

 
  1 year   3 years   5 years   10 years  

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

  $ 67   $ 199   $ 325   $ 628  

(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, $77; 3 years, $227; 5 years, $370; and 10 years, $699. However, cash payment of the capital incentive fee would be deferred if, during the most

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              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) 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 for the years ended December 31, 2009, 2008, 2007, 2006 and 2005 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 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. 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.

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ARES CAPITAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
As of and For the Years Ended December 31, 2009, 2008, 2007, 2006 and 2005
(dollar amounts in thousands, except per share data and as otherwise indicated)

 
  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
  As of and For
the Year Ended
December 31,
2006
  As of and For
the Year Ended
December 31,
2005
 

Total Investment Income

  $ 245,272   $ 240,461   $ 188,873   $ 120,021   $ 41,850  

Total Expenses

    111,290     113,221     94,750     58,458     14,569  
                       

Net Investment Income Before Income Taxes

    133,982     127,240     94,123     61,563     27,281  
                       

Income Tax Expense (Benefit), Including Excise Tax

    576     248     (826 )   4,931     158  
                       

Net Investment Income

    133,406     126,992     94,949     56,632     27,123  
                       

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

    69,287     (266,447 )   (4,117 )   13,064     14,727  
                       

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

  $ 202,693   $ (139,455 ) $ 90,832   $ 69,696   $ 41,850  
                       

Per Share Data:

                               
 

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

                               
 

Basic(1)

  $ 1.99   $ (1.56 ) $ 1.34   $ 1.58   $ 1.75  
 

Diluted(1)

  $ 1.99   $ (1.56 ) $ 1.34   $ 1.58   $ 1.75  
 

Cash Dividend Declared

  $ 1.47   $ 1.68   $ 1.66   $ 1.64   $ 1.30  
 

Net Asset Value

  $ 11.44   $ 11.27   $ 15.47   $ 15.17   $ 15.03  

Total Assets

  $ 2,313,515   $ 2,091,333   $ 1,829,405   $ 1,347,991   $ 613,645  

Total Debt

  $ 969,465   $ 908,786   $ 681,528   $ 482,000   $ 18,000  

Total Stockholders' Equity

  $ 1,257,888   $ 1,094,879   $ 1,124,550   $ 789,433   $ 569,612  

Other Data:

                               
 

Number of Portfolio Companies at Period End(2)

    95     91     78     60     38  
 

Principal Amount of Investments Purchased

  $ 575,046   $ 925,945   $ 1,251,300   $ 1,087,507   $ 504,299  
 

Principal Amount of Investments Sold and Repayments

  $ 515,240   $ 485,270   $ 718,695   $ 430,021   $ 108,415  
 

Total Return Based on Market Value(3)

    119.91 %   (45.25 )%   (14.76 )%   29.12 %   (10.60 )%
 

Total Return Based on Net Asset Value(4)

    17.84 %   (11.17 )%   8.98 %   10.73 %   12.04 %
 

Weighted Average Yield of Debt and Income Producing Equity Securities at Fair Value(5):

    12.67 %   12.79 %   11.68 %   11.95 %   11.25 %
 

Weighted Average Yield of Debt and Income Producing Equity Securities at Amortized Cost(5):

    12.08 %   11.73 %   11.64 %   11.63 %   11.40 %

(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

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

(3)
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 over 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 over 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 for the year ended December 31, 2006 equals the increase of the ending market value at December 31, 2006 of $19.11 per share over the ending market value at December 31, 2005 of $16.07 per share plus the declared dividends of $1.64 per share for the year ended December 31, 2006. Total return based on market value for the year ended December 31, 2005 equals the decrease of the ending market value at December 31, 2005 of $16.07 per share over the ending market value at December 31, 2004 of $19.43 per share plus the declared dividends of $1.30 per share for the year ended December 31, 2005. Total return based on market value is not annualized.

(4)
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 for the year ended December 31, 2006 equals the change in net asset value during the period (adjusted for share issuances) plus the declared dividends of $1.64 per share for the year ended December 31, 2006, divided by the beginning net asset value. Total return based on net asset value for the year ended December 31, 2005 equals the change in net asset value during the period (adjusted for share issuances) plus the declared dividends of $1.30 per share for the year ended December 31, 2005, divided by the beginning net asset value. Total return based on net asset value is not annualized.

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

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

 
  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 (decrease) 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  

 

 
  2008  
 
  Q4   Q3   Q2   Q1  

Total Investment Income

  $ 62,723   $ 62,067   $ 63,464   $ 52,207  

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

  $ 40,173   $ 41,025   $ 45,076   $ 32,466  

Incentive compensation

  $ 8,035   $ 8,205   $ 9,015   $ 6,493  

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

  $ 32,138   $ 32,820   $ 36,061   $ 25,973  

Net realized and unrealized gains (losses)

  $ (142,638 ) $ (74,213 ) $ (32,789 ) $ (16,807 )

Net increase (decrease) in stockholders' equity resulting from operations

  $ (110,500 ) $ (41,393 ) $ 3,272   $ 9,166  

Basic and diluted earnings per common share

  $ (1.14 ) $ (0.43 ) $ 0.04   $ 0.13  

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

  $ 11.27   $ 12.83   $ 13.67   $ 15.17  

 

 
  2007  
 
  Q4   Q3   Q2   Q1  

Total Investment Income

  $ 53,828   $ 47,931   $ 47,399   $ 39,715  

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

  $ 33,677   $ 29,875   $ 31,220   $ 23,699  

Incentive compensation

  $ 6,573   $ 5,966   $ 6,229   $ 4,755  

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

  $ 27,104   $ 23,909   $ 24,991   $ 18,944  

Net realized and unrealized gains (losses)

  $ (16,353 ) $ (984 ) $ 8,576   $ 4,645  

Net increase (decrease) in stockholders' equity resulting from operations

  $ 10,752   $ 22,924   $ 33,567   $ 23,589  

Basic and diluted earnings per common share

  $ 0.15   $ 0.32   $ 0.48   $ 0.44  

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

  $ 15.47   $ 15.74   $ 15.84   $ 15.34  

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UNAUDITED SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

              The following tables set forth unaudited pro forma condensed consolidated financial data for Ares Capital and Allied Capital as a consolidated entity. The information as of December 31, 2009 is presented as if the Allied Acquisition had been completed on December 31, 2009 and after giving effect to certain transactions that occurred subsequent to December 31, 2009. The unaudited pro forma condensed consolidated operating data for the year ended December 31, 2009 is presented as if the Allied Acquisition had been completed on January 1, 2009. In the opinion of management, all adjustments necessary to reflect the effect of these transactions have been made. The Allied Acquisition will be accounted for under the acquisition method of accounting as provided by ASC 805-10 (previously SFAS No. 141(R)), Business Combinations.

              The unaudited pro forma condensed consolidated financial data should be read together with the respective historical audited and unaudited consolidated financial statements and financial statement notes of Allied Capital and Ares Capital in this document. The unaudited pro forma condensed consolidated financial data is presented for comparative purposes only and does not necessarily indicate what the future operating results or financial position of Ares Capital will be following completion of the Allied Acquisition. The unaudited pro forma condensed consolidated financial data does not include adjustments to reflect any cost savings or other operational efficiencies that may be realized as a result of the Allied Acquisition or any future merger related restructuring or integration expenses.

              We cannot assure you that the Allied Acquisition will be consummated as scheduled, or at all. See "Pending Allied Acquisition" for a description of the terms of the Allied Acquisition and "Risk Factors—Risks Relating to Our Business—We may fail to consummate the Allied Acquisition" for a description of the risks associated with a failure to consummate the Allied Acquisition.

(dollar amounts in thousands, except per share data and as otherwise indicated)

 
  For the
Year Ended
December 31,
2009
 

Total Investment Income

  $ 563,958  

Total Expenses

    373,164  
       

Net Investment Income Before Income Taxes

    190,794  
       

Income Tax Expense

    6,152  
       

Net Investment Income

    184,642  
       

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

    (507,774 )
       

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

  $ (323,132 )
       

 

 
  As of
December 31,
2009
 

Total Assets

  $ 4,245,361  

Total Debt

  $ 1,758,097  

Total Stockholders' Equity

  $ 2,321,128  

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UNAUDITED PRO FORMA PER SHARE DATA

              The following selected unaudited combined pro forma per share information for the year ended December 31, 2009 reflects the Allied Acquisition and related transactions as if they had occurred on January 1, 2009. The unaudited pro forma combined net asset value per common share outstanding reflects the Allied Acquisition and related transactions as if they had occurred on December 31, 2009 and certain other transactions that occurred subsequent to December 31, 2009.

              Such unaudited pro forma combined per share information is based on the historical financial statements of Ares Capital and Allied Capital and on publicly available information and certain assumptions and adjustments as discussed in the section entitled "Unaudited Pro Forma Condensed Consolidated Financial Statements." This unaudited pro forma combined per share information is provided for illustrative purposes only and is not necessarily indicative of what the operating results or financial position of Ares Capital or Allied Capital would have been had the Allied Acquisition and related transactions been completed at the beginning of the periods or on the dates indicated, nor are they necessarily indicative of any future operating results or financial position.

              The following should be read in connection with the section entitled "Unaudited Pro Forma Condensed Consolidated Financial Statements" and other information included in or incorporated by reference into this document.

              We cannot assure you that the Allied Acquisition will be consummated as scheduled, or at all. See "Pending Allied Acquisition" for a description of the terms of the Allied Acquisition and "Risk Factors—Risks Relating to Our Business—We may fail to consummate the Allied Acquisition" for a description of the risks associated with a failure to consummate the Allied Acquisition.

 
  As of and For the Year Ended
December 31, 2009
 
 
  Ares
Capital
  Allied
Capital
  Pro forma
Combined—
Ares Capital
  Per
Equivalent
Allied Capital
Share(3)
 

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

                         

Basic

  $ 1.99   $ (2.91 ) $ (2.02 ) $ (0.66 )

Diluted

  $ 1.99   $ (2.91 ) $ (2.02 ) $ (0.66 )

Cash Dividends Declared(1)

  $ 1.47   $   $ 1.47   $ 0.48  

Net Asset Value per Share(2)

  $ 11.44   $ 6.68   $ 13.78   $ 4.48  

(1)
The cash dividends declared per share represent the actual dividends declared per share for the period presented. The pro forma combined dividends declared is the dividends per share as declared by Ares Capital.

(2)
The pro forma combined net asset value per share is computed by dividing the pro forma combined net assets as of December 31, 2009 by the pro forma combined number of shares outstanding.

(3)
The Allied Capital equivalent pro forma per share amount is calculated by multiplying the pro forma combined share amounts by the common stock exchange ratio of 0.325.

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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 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 recently been in a period of disruption and instability. These market conditions have materially and adversely affected debt and equity capital markets in the United States, which has had, and may in the future have, a negative impact on our business and operations.

              Beginning in 2007, the U.S. capital markets entered into a period of disruption 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 these conditions appear to be improving, they could continue for a prolonged period of time or worsen in the future. While these conditions persist, 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 2009 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 outstanding common stock at the time of such issuance, at a price below its then current net asset value per share during a period beginning on May 4, 2009 and expiring on the earlier of the anniversary of the date of the 2009 annual stockholders meeting and the date of the our 2010 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, if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations.

              Moreover, recent market conditions have made, and may in the future make, it difficult to extend the maturity of or refinance our existing indebtedness and any failure to do so could have a material adverse effect on our business. The illiquidity of our investments may make it difficult for us to sell such investments if required. As a result, we may realize significantly less than the value at which we have recorded our investments.

              Capital markets volatility also affects our investment valuations. 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 valuations.

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              Given the recent extreme volatility and dislocation in the capital markets, many BDCs have faced, and may in the future face, a challenging environment in which to raise capital. As a result of the recent significant changes in the capital markets affecting our ability to raise capital, the pace of our investment activity has slowed. In addition, significant changes in the capital markets, including the recent extreme volatility and disruption, 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. An inability to raise capital, and any required sale of our investments for liquidity purposes, 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 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 Ares Capital Management's key personnel for our future success and upon their access to Ares' investment professionals.

              We depend on the diligence, skill and network of business contacts of Ares Capital Management's key personnel, including its investment committee. We also depend, to a significant extent, on Ares Capital Management's access to the investment professionals of 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 Ares Capital Management's key personnel, including its investment committee. The departure of any of Ares Capital Management's key personnel, including members of its investment committee, 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 Ares Capital Management'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 Ares Capital Management's structuring of the investment process and its ability to provide competent, attentive and efficient services to us. Our executive officers and the members of Ares Capital Management'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 Capital Management will need to hire, train, supervise and manage new employees. However, we cannot assure you that any such employees will be retained. 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.

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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. Ares has elected to be treated as a RIC and operates 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 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 debt securities or preferred stock. We cannot assure you that we will be able to maintain our current Facilities or obtain other lines of credit 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 debt securities or preferred stock, which we refer to collectively as "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 defined in 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 December 31, 2009, our asset coverage for senior securities was 259%.

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

              At our 2009 annual stockholders meeting, subject to the board of directors determination described above, our stockholders approved our ability to sell or otherwise issue shares of our common stock, not exceeding 25% of our outstanding common stock at the time of such issuance, at a price below its then current net asset value per share during a period beginning on May 4, 2009 and expiring

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on the earlier of the anniversary of the date of the 2009 annual stockholders meeting and the date of our 2010 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 recent, unprecedented dislocation of the securitization and finance markets 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.

              As of December 31, 2009, we had $695.7 million of outstanding borrowings under our Facilities and $273.8 million of CLO Notes. In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our December 31, 2009 total assets of at least 1.05%. The weighted average interest rate charged on our borrowings as of December 31, 2009 was 2.05%. We intend to continue borrowing under the Facilities in the future and we may increase the size of the Facilities or issue debt securities or other evidences of indebtedness (although there can be no assurance that we will be successful in doing so). 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 and the CLO 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 could have a material adverse effect on our business, financial condition or results of operations.

              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 in the future, may borrow from or issue debt securities to banks, insurance companies and other lenders. Holders of such debt 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 leveraged.

              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 leveraged. 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 without the leverage, while any decrease in our consolidated income would cause net income to decline more sharply than it would have had we not borrowed. 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.

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              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 interest rate of 2.05% as of December 31, 2009, together with (i) our total value of net assets as of December 31, 2009; (ii) $969.5 million debt outstanding as of December 31, 2009 and (iii) hypothetical annual returns on our portfolio of minus 15 to plus 15 percent.

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

    -15 %   -10 %   -5 %   0 %   5 %   10 %   15 %

Corresponding Return to Common Stockholders(2)

    -29 %   -20 %   -11 %   -1 %   8 %   17 %   26 %

(1)
The assumed portfolio return is required by regulation of the SEC 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.

(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 December 31, 2009 to obtain an assumed return to us. From this amount, the interest expense (calculated by multiplying the weighted average interest rate of 2.05% by the $969.5 million 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 December 31, 2009 to determine the "Corresponding Return to Common Stockholders."

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

              The agreements governing the Facilities and the CLO 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 with the covenants of the Facilities and the CLO Notes. However, our continued compliance 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 and the CLO Notes. Failure to comply with these covenants would result in a default under the Revolving Credit Facility, the CP Funding Facility or the CLO Notes, which, if we were unable to obtain a waiver from the lenders under the Revolving Credit Facility, the purchasers under the CP Funding Facility, or the trustee or holders of the CLO Notes, respectively, could accelerate repayment under the Revolving Credit Facility, the CP Funding Facility or the CLO Notes, respectively, 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 December 31, 2009, we had a long-term counterparty credit rating from Standard & Poor's Ratings Service of BBB, a long-term issuer default rating from Fitch Ratings of BBB and a

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long-term issuer rating from Moody's Investor Service of Ba1. Interest expense on our Revolving Credit Facility and combined CP Funding 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, if the ratings of our CLO Notes are downgraded, our ability to engage in certain transactions in respect of the investments held in the Debt Securitization, among other things, may under certain circumstances be restricted and certain principal proceeds may under certain circumstances be required to be used to further reduce the outstanding principal balance of the CLO Notes. There can be no assurance that the CLO Notes ratings will be maintained.

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, high yield investors, 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 management team, 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 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 better terms to our portfolio companies 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. To qualify as a RIC under the Code, we must meet certain income source, 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.

              The annual distribution requirement for a RIC is satisfied if we 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. 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.

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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. In that event, the resulting corporate-level taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Because we must make distributions to our stockholders as described above, such amounts, to the extent a stockholder is not participating in our dividend reinvestment plan, will not be available to fund investment originations. 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 also meet certain annual income source 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 under the Code are complex with many areas of uncertainty. Accordingly, no assurance can be given that we have qualified or will 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. See "Certain Material U.S. Federal Income Tax Considerations—Taxation as a RIC."

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 include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the making of a loan or possibly in other circumstances, or payment-in-kind interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such original issue discount or increases in loan balances are included in income before we receive any 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, non-cash income from payment-in-kind securities, deferred payment securities and hedging and foreign currency transactions.

              Since, in certain cases, we may recognize income before or without receiving cash representing 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. See "Certain Material U.S. Federal Income Tax Considerations—Taxation as a RIC."

              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. The 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 by an entity on the obligation that resulted in the accrual of such income.

We may in the future determine to fund a portion of our investments with preferred stock, which would magnify the potential for gain or loss and the risks of investing in us in the same way as our borrowings.

              Because preferred stock is another form of leverage and the dividends on any preferred stock we issue must be cumulative, preferred stock has the same risks to our common stockholders as borrowings. Payment of such dividends and repayment of the liquidation preference of such preferred

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stock must take preference over any dividends or other payments to our common stockholders, and preferred stockholders 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.

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. 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 continue to do so in the future. However, we cannot assure you that such transactions will be successful in mitigating our exposure to credit 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 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.

Many of our portfolio investments are not publicly traded and, as a result, there is uncertainty as to the value of our portfolio investments.

              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 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. The valuation process is conducted at the end of each fiscal quarter, with approximately 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 value our investments more frequently as determined in good faith by our board of directors to the extent necessary to reflect significant events affecting the value of our investments. The types of factors that may be considered in valuing our investments include the enterprise value of the portfolio company, the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors. 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.

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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 may 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 and 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. For example, Messrs. Ressler, Rosenthal, Kissick and Sachs each have significant responsibilities for other Ares funds. Messrs. Ressler and Rosenthal are required to devote a substantial majority of their business time, and Mr. Kissick is required to devote a majority of his business time, to the affairs of ACOF. However, Ares believes that the efforts of Messrs. Ressler, Rosenthal and Kissick relative to Ares Capital and ACOF are synergistic with and beneficial to the affairs of each of Ares Capital and ACOF.

              Although other Ares funds generally have different primary investment objectives than Ares Capital, they may from time to time invest in asset classes similar to those targeted by Ares Capital. In addition, Ares is not restricted from raising an investment fund with investment objectives similar to that of Ares Capital. Any such funds may also, from time to time, invest in asset classes similar to those targeted by Ares Capital. 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 managed by investment managers affiliated with Ares Capital Management. 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, including IHAM, 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 funds managed by IHAM and, as part of our investment strategy, we may offer to sell additional assets to funds managed by us and/or one or more of our controlled affiliates or we may purchase assets from funds managed by us and/or one or more of our controlled affiliates. In addition, funds managed by us or one or more of our controlled affiliates 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

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although these types of transactions generally require approval of one or more independent parties, there is 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 Ares Capital Management, and reimburse Ares Capital Management 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 through direct investments.

              Ares Capital Management's 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 Ares Capital Management 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 engage in the Allied Acquisition.

              The part of the incentive fee payable by us 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 adviser, Ares Capital Management, also has financial interests in the Allied Acquisition that are different from, and/or in addition to, the interests of our stockholders. For example, Ares Capital Management's management fee is based on a percentage of Ares Capital's total assets. Because total assets under management will increase as a result of the Allied Acquisition, the dollar amount of Ares Capital Management's management fee will increase as a result of the Allied Acquisition. In addition, the incentive fee payable by us to Ares Capital Management may be positively impacted as a result of the Allied Acquisition. See "Unaudited Pro Forma Condensed Consolidated Financial Statements."

              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 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 Ares Capital Management 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. 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.

              Pursuant to a separate amended and restated administration agreement, referred to herein as our "administration agreement," Ares Operations, an affiliate of Ares Capital Management, furnishes us with administrative services and we pay Ares Operations 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 our officers and their respective staffs.

              Our portfolio company, IHAM, is party to a services agreement, referred to herein as the "services agreement," with Ares Capital Management, pursuant to which Ares Capital Management provides IHAM with the facilities, investment advisory services and administrative services necessary for the operations of IHAM. IHAM reimburses Ares Capital Management for the 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 agreement.

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              We rent office space directly from a third party pursuant to a lease that expires on February 27, 2011. In addition, we have entered into a sublease with Ares Management whereby Ares Management subleases approximately 25% of the 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.

              As a result of the arrangements described above, there may be times when the management team of Ares Management 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 disposition 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.

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 managing members, officers and employees 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 managing members, officers and employees 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 Ares Capital Management to make certain investments, including speculative investments."

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, net operating losses 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 that we may incur in the fiscal quarter, even if such capital losses or depreciation result in a net loss on our statement of operations for that quarter. Thus, we may be required to pay our manager 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.

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              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 8.0% of our net assets 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.

Changes in laws or regulations governing our operations or the operations of our portfolio companies, or changes in the interpretation thereof, and any failure by us or our portfolio companies to comply with laws or regulations governing our operations may adversely affect our business.

              We and our portfolio companies are subject to regulation by laws at the local, state and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Accordingly, any change in these laws or regulations, or their interpretation, or any failure by us or our portfolio companies to comply with these laws or regulations may adversely affect our business or the business of our portfolio companies.

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

              Our primary focus in making investments differs from those of other private funds that are or have been managed by Ares' investment professionals. Further, investors in Ares Capital are not acquiring an interest in other Ares managed funds. Accordingly, 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 those private 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, 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 then existing.

              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 will be subject 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.

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We may fail to consummate the Allied Acquisition.

              While there can be no assurances as to the exact timing, or that the Allied Acquisition will be completed at all, we are working to complete the Allied Acquisition in the first quarter of 2010. The consummation of the Allied Acquisition is subject to certain conditions, including, among others, Allied Capital stockholder approval, our stockholder approval and other customary closing conditions. We intend to consummate the Allied Acquisition as soon as possible; however, we cannot assure you that the conditions required to consummate the Allied Acquisition will be satisfied or waived on the anticipated schedule, or at all. If the Allied Acquisition is not completed, we will have incurred substantial expenses for which no ultimate benefit will have been received. See "Risk Factors—Risks Relating to a Consummation of the Allied Acquisition—If the Allied Acquisition does not close, we won't benefit from the expenses incurred in its pursuit." In addition, the Merger Agreement provides for the payment by us to Allied Capital of a reverse termination fee of $30 million under certain circumstances ($30 million if Ares Capital stockholders do not approve the issuance of shares of Ares Capital common stock in the Allied Acquisition). See "Risk Factors—Risks Relating to a Consummation of the Allied Acquisition—Under certain circumstances, we and Allied Capital are obligated to pay each other a termination fee upon termination of the Merger Agreement." See "Pending Allied Acquisition" for a description of the terms of the Allied Acquisition and "Risk Factors—Risks Relating to a Consummation of the Allied Acquisition" for a description of the risks that the combined company may face if the Allied Acquisition is consummated. Any investment decision you make should be made independent of the consummation of the Allied Acquisition.

RISKS RELATING TO OUR INVESTMENTS

Price declines and illiquidity in the corporate debt markets have adversely affected, and may in the future adversely affect, the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.

              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 (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 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 use the pricing indicated by the external event to corroborate our valuation. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. Unprecedented declines in prices and liquidity in the corporate debt markets resulted in significant net unrealized depreciation in our portfolio in the recent past. The effect of all of these factors on our portfolio has reduced 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 additional unrealized losses in future periods, 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.

              As of the date of this prospectus, the economy recently has been in the midst of a recession and in the difficult part of a credit cycle with industry defaults increasing. Many of our portfolio

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companies may be materially and adversely affected by the credit cycle and, in turn, may be unable to satisfy their financial obligations (including their loans to us) over the coming months.

              Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods if we are required to write down the values of our investments. Adverse economic conditions also may 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 lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results.

              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 secured assets, 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

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Moody's Investors Service, lower than "BBB-" by Fitch Ratings or lower than "BBB-" by Standard & Poor's). 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. Our mezzanine investments may result in an above average amount of risk and volatility or loss of principal. We also invest in assets other than mezzanine investments, including first and second lien loans, high-yield securities, U.S. government securities, credit derivatives and other structured securities and certain direct equity investments. These investments will entail additional risks that could adversely affect our investment returns. In addition, to the extent interest payments associated with such debt are deferred, such debt will be subject to greater fluctuations in value based on changes in interest rates. Also, such debt could subject us to phantom income, and since we generally do not receive any cash prior to maturity of the debt, the investment is of greater risk.

Investments in equity securities involve a substantial degree of risk.

              We may purchase common and other equity securities. Although common stocks have historically generated higher average total returns than fixed income securities over the long term, common stocks also have experienced significantly more volatility in those returns and in recent years have 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:

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              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 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.

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 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

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have the ability to control or direct such actions, even if as a result our rights as junior lenders are adversely affected.

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

              We make both debt and minority equity investments; therefore, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and the stockholders 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 Ares Capital Management 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, including investors in offerings of common stock, securities convertible into our common stock or warrants representing rights to purchase our common stock or securities convertible into our common stock pursuant to this prospectus. In addition, the 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, the 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. The 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 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

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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.

Our investments in foreign debt may involve significant risks in addition to the risks inherent in U.S. investments. We may expose ourselves to risks if we engage in hedging transactions.

              Our investment strategy contemplates potential investments in debt of 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.

              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, 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 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 A CONSUMMATION OF THE ALLIED ACQUISITION

Consummation of the Allied Acquisition will cause immediate dilution to our stockholders' voting interests in us and may cause immediate dilution to the net asset value per share of our common stock.

              Upon consummation of the Allied Acquisition, each of Allied Capital's common shares issued and outstanding immediately prior to the effective time of the Allied Acquisition will be converted into and become exchangeable for 0.325 of our common shares, subject to the payment of cash instead of fractional shares. If the Allied Acquisition is consummated, based on the number of our common shares issued and outstanding on the date hereof and assuming that holders of all "in-the-money" Allied Capital stock options elect to be cashed out, our stockholders will own approximately 70% of the combined company's outstanding common stock and Allied Capital stockholders will own approximately 30% of the combined company's outstanding common stock. Consequently, our stockholders should expect to exercise less influence over the management and policies of the combined company following the Allied Acquisition than they currently exercise over our management and policies.

              The exchange ratio of 0.325 of a share of our common stock for each share of Allied Capital common stock was fixed on October 26, 2009, the date of the signing of the Merger Agreement, and is not subject to adjustment based on changes in the trading price of our or Allied Capital common stock before the closing of the Allied Acquisition. Any change in the market price of our common stock prior to completion of the Allied Acquisition will affect the market value of the Allied Acquisition consideration that Allied Capital common stockholders will receive upon completion of the Allied Acquisition. It is possible that the conversion of Allied Capital common shares into our common shares may result in the issuance of our common shares at a price below our net asset value per share at the time of such conversion, which would result in dilution to the net asset value per share of our common stock. For a description of the impact of such an issuance, 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."

              We cannot assure you that the Allied Acquisition will be consummated as scheduled, or at all. See "Pending Allied Acquisition" for a description of the terms of the Allied Acquisition and "Risk Factors—Risks Relating to Our Business—We may fail to consummate the Allied Acquisition" for a description of the risks associated with a failure to consummate the Allied Acquisition."

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We may be unable to realize the benefits anticipated by the Allied Acquisition, including estimated cost savings and synergies, or it may take longer than anticipated to achieve such benefits.

              The realization of certain benefits anticipated as a result of the Allied Acquisition will depend in part on the integration of Allied Capital's investment portfolio with our investment portfolio and the integration of Allied Capital's investment portfolio or business with our investment portfolio or business. There can be no assurance that Allied Capital's investment portfolio or business can be operated profitably or integrated successfully into our operations in a timely fashion, or at all. The dedication of management resources to such integration may detract attention from our day-to-day business and there can be no assurance that there will not be substantial costs associated with the transition process or there will not be other material adverse effects as a result of these integration efforts. Such effects, including, but not limited to, incurring unexpected costs or delays in connection with such integration and failure of Allied Capital's investment portfolio to perform as expected, could have a material adverse effect on our financial results.

              We also expect to achieve certain cost savings and synergies from the Allied Acquisition when the two companies have fully integrated their portfolios. It is possible that our estimates of the potential cost savings and synergies could turn out to be incorrect. Allied Capital had significantly higher average borrowings and cash paid for interest expense for the year ended December 31, 2009. Assuming such debt remained outstanding, the combined company's annual expenses as a percentage of consolidated net assets attributable to common stock is estimated to increase for Ares Capital stockholders on a pro forma combined basis. In addition, the cost savings and synergies estimates also assume our ability to pay down or refinance certain portions of Allied Capital's debt and to combine our investment portfolio and business with Allied Capital's investment portfolio and business in a manner that permits those cost savings and synergies to be fully realized. If the estimates turn out to be incorrect or we are not able to successfully refinance or pay down other Allied Capital's debt while certain of this debt has been refinanced and combine the investment portfolios and businesses of the two companies, the anticipated cost savings and synergies may not be fully realized, or realized at all, or may take longer to realize than expected.

Our and Allied Capital's inability to obtain certain third party approvals, confirmations and consents with respect to certain of our and Allied Capital's outstanding indebtedness could delay or prevent the completion of the Allied Acquisition.

              Under the Merger Agreement, our obligation to complete the Allied Acquisition is subject to the prior receipt of certain approvals, confirmations and consents required to be obtained from certain agents, lenders, noteholders and other parties in respect of our and Allied Capital's outstanding indebtedness. As of the date of this prospectus, we and Allied Capital believe that, subject to the satisfaction of certain conditions, we have obtained all necessary third party consents other than stockholder approvals and, if necessary, rating agency confirmation with respect to the Debt Securitization.

              Although we and Allied Capital expect that all such approvals, confirmations and consents will be obtained and remain in effect and all conditions related to such consents will be satisfied, if they are not, the closing of the Allied Acquisition could be significantly delayed or the Allied Acquisition may not occur at all.

The Allied Acquisition or subsequent combination may trigger certain "change of control" provisions and other restrictions in certain of our and Allied Capital's contracts and the failure to obtain any required consents or waivers could adversely impact the combined company.

              Certain agreements of Allied Capital and Ares Capital or their controlled affiliates, including with respect to certain managed funds of Allied Capital and its affiliates, will or may require the

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consent of one or more counterparties in connection with the Allied Acquisition or subsequent combination. The failure to obtain any such consent may permit such counter-parties to terminate, or otherwise increase their rights or our or Allied Capital's obligations under, any such agreement because the Allied Acquisition may violate an anti-assignment, change of control or similar provision. If this happens, we may have to seek to replace that agreement with a new agreement or seek a waiver or amendment to such agreement. We cannot assure you that we will be able to replace, amend or obtain a waiver under any such agreement on comparable terms or at all.

              If any such agreement is material, the failure to obtain consents, amendments or waivers under, or to replace on similar terms or at all, any of these agreements could adversely affect the financial performance or results of operations of the combined company following the Allied Acquisition and subsequent combination, including preventing us from operating a material part of Allied Capital's business.

              In addition, the consummation of the Allied Acquisition and subsequent combination may violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or result in the termination, cancellation, acceleration or other change of any right or obligation (including any payment obligation) under our or Allied Capital's agreements. Any such violation, conflict, breach, loss, default or other effect could, either individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Allied Acquisition and subsequent combination.

Several lawsuits have been filed against Allied Capital, members of Allied Capital's board of directors, us and the merger subsidiary challenging the Allied Acquisition. An adverse ruling in any such lawsuit may prevent the Allied Acquisition from becoming effective within the expected timeframe, or at all. If the Allied Acquisition is consummated, these lawsuits and other legal proceedings could have a material impact on the results of operations, cash flows or financial condition of the combined company.

              We and Allied Capital are aware that a number of lawsuits have been filed by stockholders of Allied Capital challenging the Allied Acquisition. The suits are filed either as putative stockholder class actions, shareholder derivative actions or both. All of the actions assert similar claims against the members of Allied Capital's board of directors alleging that the Merger Agreement is the product of a flawed sales process and that Allied Capital's directors breached their fiduciary duties by agreeing to a structure that was not designed to maximize the value of Allied Capital's stockholders, by failing to adequately value and obtain fair consideration for Allied Capital's shares and by improperly rejecting competing offers by Prospect Capital. They also claim that we (and, in several cases, the merger subsidiary, and, in several other cases, Allied Capital) aided and abetted the directors' alleged breaches of fiduciary duties. In addition, in one case, the plaintiffs also allege violations of Rule 14a-9(a) under the Securities Exchange Act of 1934. All of the actions demand, among other things, a preliminary and permanent injunction enjoining the Allied Acquisition and rescinding the transaction or any part thereof that may be implemented. While we have reached an agreement in principle to settle certain of these actions in Maryland, certain state and federal actions in the District of Columbia remain pending. There can be no assurance that the settlement will be finalized or that the Maryland court will approve the settlement. The settlement terms, which require court approval, provide that the Maryland suits will be dismissed with prejudice against all defendants. Any of these legal proceedings could delay or prevent the transaction from becoming effective within the agreed upon timeframe, or at all, and, if the Allied Acquisition is consummated, may be material to the results of operations, cash flows or financial condition of the combined company.

              Allied Capital is also involved in various other legal proceedings. In addition, Allied Capital's portfolio company, Ciena, is the subject of ongoing governmental investigations, audits and reviews

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being conducted by the Small Business Administration, the United States Secret Service, the U.S. Department of Agriculture and the U.S. Department of Justice. Neither we nor Allied Capital can predict the eventual outcome of these investigations, audits and reviews or other legal proceedings and the ultimate outcome of such matters could, upon consummation of the Allied Acquisition, be material to the results of operations, cash flows or financial condition of the combined company. It is possible that third parties could try to seek to impose liability against the combined company in connection with these matters.

The opinion obtained by us from our financial advisor will not reflect changes in circumstances between signing the Merger Agreement and completion of the Allied Acquisition.

              We have not obtained an updated opinion as of the date of this prospectus from our financial advisor and we do not anticipate obtaining an updated opinion prior to closing. Changes in our operations and prospects, general market and economic conditions and other factors that may be beyond our control, and on which our financial advisor's opinion was based, may significantly alter the value of Allied Capital or the prices of shares of our common stock or Allied Capital common stock by the time the Allied Acquisition is completed. The opinion does not speak as of the time the Allied Acquisition will be completed or as of any date other than the date of the opinion. Because we do not currently anticipate asking our financial advisor to update its opinion, the opinion will not address the fairness of the exchange ratio from a financial point of view at the time the Allied Acquisition is completed.

If the Allied Acquisition does not close, we won't benefit from the expenses incurred in its pursuit.

              The Allied Acquisition may not be completed. If the Allied Acquisition is not completed, we will have incurred substantial expenses for which no ultimate benefit will have been received. We have incurred out-of-pocket expenses in connection with the Allied Acquisition for investment banking, legal and accounting fees and financial printing and other related charges, much of which will be incurred even if the Allied Acquisition is not completed.

Termination of the Merger Agreement could negatively impact us.

              If the Merger Agreement is terminated, there may be various consequences, including:

Under certain circumstances, we and Allied Capital are obligated to pay each other a termination fee upon termination of the Merger Agreement.

              No assurance can be given that the Allied Acquisition will be completed. The Merger Agreement provides for the payment by Allied Capital to us of a termination fee of $30 million if the Allied Acquisition is terminated by Allied Capital or us under certain circumstances ($15 million if Allied Capital stockholders do not approve the Allied Acquisition and the Merger Agreement). In addition, the Merger Agreement provides for a payment by us to Allied Capital of a reverse

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termination fee of $30 million under certain other circumstances. See "Pending Allied Acquisition" for a description of the terms of the Allied Acquisition.

The market price of our common stock after the Allied Acquisition may be affected by factors different from those affecting our common stock currently.

              Our business differs from that of Allied Capital in some respects and, accordingly, the results of operations of the combined company and the market price of our shares of common stock after the Allied Acquisition may be affected by factors different from those currently affecting our results of operations prior to the consummation of the Allied Acquisition.

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 common stock offered hereby will trade at, above, or below net asset value. 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.

There is a risk that investors in our equity securities 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 securities, which may cause a default under the terms of our debt securities. 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 securities.

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, subject to any applicable

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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 does 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 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 in 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 in one or more classes or series, to cause the issuance of additional shares of our stock, and to amend our charter, without stockholder approval, to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.

Investing in our securities 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 a period of extreme volatility and disruption that began in 2007. 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.

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 2009 Annual Stockholders Meeting, our stockholders approved two proposals designed to allow us to access the capital markets in ways that we would otherwise be unable to as a result of restrictions that, absent stockholder approval, apply to BDCs under the Investment Company Act. Specifically, our stockholders have authorized us to sell or otherwise issue (a) shares of our common stock below its then current net asset value per share in one or more offerings subject to certain limitations (including, without limitation, that the number of shares issuable does not exceed 25% of our then outstanding common stock) and (b) 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). 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.

              In addition, our common stock will suffer immediate dilution of their voting power if the Allied Acquisition is consummated. See "Risk Factors—Risks Relating to a Consummation of the Allied Acquisition—Consummation of the Allied Acquisition will cause immediate dilution to our

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stockholders' voting interests in us and may cause immediate dilution to the net asset value per share of our common stock."

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 and our stockholders' voting interests in us 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 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 do not participate in 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 do not participate in our dividend reinvestment plan will experience dilution in their ownership percentage of our common stock over time.

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

              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 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

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be taxed on 100% of the dividend 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, 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.

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

              Upon issuance, our publicly issued debt securities will 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 implied or expressed 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 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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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              The Merger Agreement provides that the holders of Allied Capital common stock will be entitled to receive 0.325 shares of our common stock for each share of Allied Capital common stock held by them immediately prior to the effective time. This is estimated to result in approximately 58.5 million shares of our common stock being issued in connection with the Allied Acquisition (assuming that holders of all "in-the-money" Allied Capital stock options elect to be cashed out). The unaudited pro forma condensed consolidated financial information has been derived from and should be read in conjunction with the historical consolidated financial statements and the related notes of both us and Allied Capital, which are included elsewhere in this document. See "Financial Statements—Index to Financial Statements."

              The following unaudited pro forma condensed consolidated financial information and explanatory notes illustrate the effect of the Allied Acquisition on our financial position and results of operations based upon the companies' respective historical financial positions and results of operations under the acquisition method of accounting with us treated as the acquirer.

              In accordance with GAAP, the assets and liabilities of Allied Capital will be recorded by us at their estimated fair values as of the date the Allied Acquisition is completed. The unaudited pro forma condensed consolidated financial information of us and Allied Capital reflects the unaudited pro forma condensed consolidated balance sheet as of December 31, 2009 and the unaudited pro forma condensed consolidated income statement for the year ended December 31, 2009. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2009 assumes the Allied Acquisition took place on that date. The unaudited pro forma condensed consolidated income statement for the year ended December 31, 2009 assumes the Allied Acquisition took place on January 1, 2009. The unaudited pro forma condensed consolidated balance sheet also reflects the impact of certain transactions that occurred subsequent to December 31, 2009.

              The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and does not necessarily indicate the results of operations or the combined financial position that would have resulted had the Allied Acquisition and subsequent combination been completed at the beginning of the applicable period presented, nor the impact of expense efficiencies, asset dispositions, share repurchases and other factors. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed consolidated financial information, the allocation of the pro forma purchase price reflected in the unaudited pro forma condensed consolidated financial information involves estimates, is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon completion of the Allied Acquisition.

              We cannot assure you that the Allied Acquisition will be consummated as scheduled, or at all. See "Pending Allied Acquisition" for a description of the terms of the Allied Acquisition and "Risk Factors—Risks Relating to Our Business—We may fail to consummate the Allied Acquisition" for a description of the risks associated with a failure to consummate the Allied Acquisition.

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Ares Capital Corporation and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2009
Unaudited
(in thousands, except share and per share data)

 
  Ares
Capital
  Adjusted Allied
Capital(A)*
  Pro Forma
Adjustments
  Ares Capital
Pro Forma
Combined
 

Assets and Liabilities Data:

                         

Investments

  $ 2,171,814   $ 1,975,046   $ (140,587 )B* $ 4,006,273  

Cash and cash equivalents

    99,227     138,418     (45,086 )C   85,546  

                (107,013 )B      

Other assets

    42,474     124,698     (13,630 )B   153,542  
                   
 

Total assets

  $ 2,313,515   $ 2,238,162   $ (306,316 ) $ 4,245,361  
                   

Debt

  $ 969,465   $ 995,544   $ (111,115 )B $ 1,758,097  

                (95,797 )B      

Other liabilities

    86,162     41,284     38,690   B   166,136  
                   
 

Total liabilities

    1,055,627     1,036,828     (168,222 )   1,924,233  

Stockholders' equity

   
1,257,888
   
1,201,334
   
(140,587

)B
 
2,321,128
 

                (45,086 )C      

                (49,906 )B      

                (13,630 )B      

                111,115   B      
                   
 

Total liabilities and stockholders' equity

  $ 2,313,515   $ 2,238,162   $ (306,316 ) $ 4,245,361  
                   

Total shares outstanding

    109,944,674     179,940,040     58,480,513   I   168,425,187  
                   

Net assets per share

  $ 11.44   $ 6.68   $ (2.40 ) $ 13.78  
                   

*
Please see Note 3 of the accompanying notes to pro forma condensed consolidated financial statements on page 74.

54


Table of Contents


Ares Capital Corporation and Subsidiaries
Pro Forma Condensed Consolidated Income Statement
For the Year Ended December 31, 2009
Unaudited
(in thousands, except share and per share data)

 
  Actual Ares
Capital
  Actual Allied
Capital
  Pro Forma
Adjustments
  Ares Capital
Pro Forma
Combined
 

Performance Data:

                         

Interest and dividend income

  $ 229,169   $ 290,986   $   (D)* $ 520,155  

Fees and other income

    16,103     27,700         43,803  
                   
 

Total investment income

    245,272     318,686         563,958  

Interest and credit facility fees

    24,262     171,068       (E)   195,330  

Base management fees

    30,409         43,039   (F)   73,448  

Incentive management fees

    33,332           (G)   33,332  

Other expenses

    23,287     86,479     (38,711 )(H)   71,055  
                   
 

Total expenses

    111,290     257,547     4,327     373,164  
                   

Net investment income before taxes

    133,982     61,139     (4,327 )   190,794  
                   

Income tax expense

    576     5,576         6,152  
                   

Net investment income

    133,406     55,563     (4,327 )   184,642  
                   

Net realized gains (losses)

    (45,963 )   (361,128 )       (407,091 )

Net unrealized gains (losses)

    88,707     (176,689 )       (87,982 )
                   

Net realized and unrealized gains (losses)

    42,744     (537,817 )       (495,073 )

Gain on extinguishment of debt

    26,543     83,532         110,075  

Loss on extinguishment of debt

        (122,776 )       (122,776 )
                   

Net increase (decrease) in stockholders' equity

  $ 202,693   $ (521,498 ) $ (4,327 ) $ (323,132 )
                   

Weighted average shares outstanding

    101,719,800     178,994,228     58,480,513   (I)   160,200,313  
                   

Earnings (loss) per share

  $ 1.99   $ (2.91 ) $ (0.07 ) $ (2.02 )
                   

*
Please see Note 3 of the accompanying notes to pro forma condensed consolidated financial statements on page 74.

55


Table of Contents


Ares Capital Corporation

Pro Forma Schedule of Investments
As of December 31, 2009
Unaudited
(Dollar Amounts in Thousands)

 
   
   
  Ares Capital   Allied Capital   Pro Forma Ares Capital  
Company
  Description   Investment   Cost   Fair
Value
  Cost   Fair
Value
  Cost   Fair
Value
 
Financial                                              
AGILE Fund I, LLC(4)   Investment company   Member interest               $ 637   $ 449   $ 637   $ 449  

AllBridge Financial, LLC(4)

 

Investment company

 

Senior secured loan (6.3%, due 4/10)

 

 

 

 

 

 

 

 

1,500

 

 

1,500

 

 

1,500

 

 

1,500

 
        Common equity                 40,118     15,805     40,118     15,805  

BB&T Capital Partners/Windsor Mezzanine Fund, LLC(5)

 

Investment company

 

Member interest

 

 

 

 

 

 

 

 

11,789

 

 

10,379

 

 

11,789

 

 

10,379

 

Callidus Capital Corporation(4)

 

Investment company

 

Senior subordinated note (18.0%, due 8/13)(2)

 

 

 

 

 

 

 

 

21,782

 

 

19,108

 

 

21,782

 

 

19,108

 
        Common stock (100 shares)                              
        Guaranty ($3,189)                              

Callidus Debt Partners CDO Fund I, Ltd.

 

Investment company

 

Class C notes (12.9%, due 12/13)(3)

 

 

 

 

 

 

 

 

19,527

 

 

2,163

 

 

19,527

 

 

2,163

 
        Class D notes (17.0%, due 12/13)(3)                 9,454         9,454      

Callidus Debt Partners CLO Fund III, Ltd.

 

Investment company

 

Preferred stock (23,600,000 shares)

 

 

 

 

 

 

 

 

20,138

 

 

4,112

 

 

20,138

 

 

4,112

 

Callidus Debt Partners CLO

 

Investment company

 

Class D notes (4.8%, due 4/20)

 

 

 

 

 

 

 

 

2,206

 

 

1,710

 

 

2,206

 

 

1,710

 
Fund IV, Ltd.       Income notes (0.0%)                 14,859     5,433     14,859     5,433  

Callidus Debt Partners CLO Fund V, Ltd.

 

Investment company

 

Income notes (1.4%)

 

 

 

 

 

 

 

 

13,432

 

 

5,012

 

 

13,432

 

 

5,012

 

Callidus Debt Partners CLO Fund VI, Ltd.

 

Investment company

 

Class D notes (6.3%, due 10/21)

 

 

 

 

 

 

 

 

7,809

 

 

4,256

 

 

7,809

 

 

4,256

 
        Income notes (0.0%)                 29,144     4,978     29,144     4,978  

Callidus Debt Partners CLO Fund VII, Ltd.

 

Investment company

 

Income notes (0.0%)

 

 

 

 

 

 

 

 

24,824

 

 

7,148

 

 

24,824

 

 

7,148

 

Callidus MAPS CLO Fund I LLC

 

Investment company

 

Class E notes (5.8%, due 12/17)

 

 

 

 

 

 

 

 

17,000

 

 

11,695

 

 

17,000

 

 

11,695

 
        Income notes (0.0%)                 38,509     14,119     38,509     14,119  

Callidus MAPS CLO

 

Investment company

 

Class D notes (4.5%, due 7/22)

 

 

 

 

 

 

 

 

3,880

 

 

3,215

 

 

3,880

 

 

3,215

 
Fund II, Ltd.       Income notes (2.5%)                 17,824     6,310     17,824     6,310  

Carador PLC(5)

 

Investment company

 

Ordinary shares (7,110,525 shares)

 

$

9,033

 

$

2,489

 

 

 

 

 

 

 

 

9,033

 

 

2,489

 

Catterton Partners VI, L.P.

 

Investment partnership

 

Limited partnership interest

 

 

 

 

 

 

 

 

3,327

 

 

2,014

 

 

3,327

 

 

2,014

 

CIC Flex, LP

 

Investment partnership

 

Limited partnership units (0.69 units)

 

 

41

 

 

41

 

 

 

 

 

 

 

 

41

 

 

41

 

Ciena Capital LLC(4)

 

Investment banking services

 

Senior secured loan (5.5%, due 3/09)(3)

 

 

 

 

 

 

 

 

319,031

 

 

100,051

 

 

319,031

 

 

100,051

 
        Class B equity interest                 119,436         119,436      
        Class C equity interest                 109,097         109,097      
        Guaranty ($5,000)                              

Commercial Credit Group, Inc.

 

Commercial equipment finance and leasing

 

Senior subordinated note (15.0%, due 6/15)

 

 

 

 

 

 

 

 

21,970

 

 

21,970

 

 

21,970

 

 

21,970

 
    company   Preferred stock (64,679 shares)                 15,543     6,005     15,543     6,005  
        Warrants                              

56


Table of Contents

 
   
   
  Ares Capital   Allied Capital   Pro Forma Ares Capital  
Company
  Description   Investment   Cost   Fair
Value
  Cost   Fair
Value
  Cost   Fair
Value
 
Cortec Group Fund IV, L.P.   Investment partnership   Limited partnership interest                 6,390     3,917     6,390     3,917  

Covestia Capital Partners, LP

 

Investment partnership

 

Limited partnership units

 

 

1,059

 

 

1,059

 

 

 

 

 

 

 

 

1,059

 

 

1,059

 

Direct Capital Corporation(4)

 

Commercial equipment finance and leasing

 

Senior secured loan (8.0%, due 1/14)(3)

 

 

 

 

 

 

 

 

8,175

 

 

8,744

 

 

8,175

 

 

8,744

 
    company   Senior subordinated note (16.0%, due 3/13)(3)                 55,496     6,797     55,496     6,797  
        Common stock (2,317,020 shares)                 25,732         25,732      

Dryden XVIII Leveraged Loan 2007 Limited

 

Investment company

 

Class B notes (4.8%, due 10/19)(3)

 

 

 

 

 

 

 

 

7,497

 

 

2,115

 

 

7,497

 

 

2,115

 
        Income notes (0.0%)                 23,164     2,427     23,164     2,427  

Dynamic India Fund IV

 

Investment company

 

Common equity

 

 

 

 

 

 

 

 

9,350

 

 

8,224

 

 

9,350

 

 

8,224

 

eCentury Capital Partners, L.P.

 

Investment partnership

 

Limited partnership interest

 

 

 

 

 

 

 

 

7,274

 

 


 

 

7,274

 

 


 

Fidus Mezzanine Capital, L.P.

 

Investment partnership

 

Limited partnership interest

 

 

 

 

 

 

 

 

14,720

 

 

9,921

 

 

14,720

 

 

9,921

 

Financial Pacific Company(4)

 

Commercial property and casualty insurance

 

Senior subordinated loan (17.0%, due 2/12)(2)

 

 

 

 

 

 

 

 

58,870

 

 

34,780

 

 

58,870

 

 

34,780

 
    provider   Junior subordinated loan (20.0% due 8/12)(2)                 10,010         10,010      
        Preferred stock (9,458 shares)                 8,865         8,865      
        Common stock (12,711 shares)                 12,783         12,783      

Firstlight Financial Corporation(5)

 

Investment company

 

Senior subordinated note (1.0%, due 12/16)(2)

 

 

73,032

 

 

54,808

 

 

 

 

 

 

 

 

73,032

 

 

54,808

 
        Common stock (40,000 shares)     40,000                     40,000      

HCI Equity, LLC(4)

 

Investment company

 

Member interest

 

 

 

 

 

 

 

 

1,100

 

 

877

 

 

1,100

 

 

877

 

Ivy Hill Asset Management, L.P.(4)

 

Investment manager

 

Member interest

 

 

37,176

 

 

48,321

 

 

 

 

 

 

 

 

37,176

 

 

48,321

 

Ivy Hill Middle Market Credit Fund, Ltd.(4)

 

Investment company

 

Class B deferrable interest notes (6.3%, due 11/18)

 

 

40,000

 

 

36,800

 

 

 

 

 

 

 

 

40,000

 

 

36,800

 
        Subordinated notes (18.0%, due 11/18)     15,681     14,583                 15,681     14,583  

Imperial Capital Group, LLC and Imperial

 

Investment banking services

 

Limited partnership interest

 

 

6,094

 

 

5,663

 

 

 

 

 

 

 

 

6,094

 

 

5,663

 

Capital Private Opportunities, LP(5)

 

 

 

Common units (10,551 units)

 

 

15,000

 

 

18,403

 

 

 

 

 

 

 

 

15,000

 

 

18,403

 

Knightsbridge CLO

 

Investment company

 

Class E notes (9.3%, due 1/22)

 

 

 

 

 

 

 

 

18,700

 

 

11,360

 

 

18,700

 

 

11,360

 
2007-1 Ltd.(4)       Income notes (4.4%)                 39,174     16,220     39,174     16,220  

Knightsbridge CLO

 

Investment company

 

Class C notes (7.8%, due 6/18)

 

 

 

 

 

 

 

 

12,800

 

 

12,289

 

 

12,800

 

 

12,289

 
2008-1 Ltd.(4)       Class D notes (8.8%, due 6/18)                 8,000     7,160     8,000     7,160  
        Class E notes (5.3%, due 6/18)                 11,291     10,091     11,291     10,091  
        Income notes (20.8%)                 21,893     20,637     21,893     20,637  

Kodiak Fund LP

 

Investment partnership

 

Limited partnership interest

 

 

 

 

 

 

 

 

9,323

 

 

1,917

 

 

9,323

 

 

1,917

 

Novak Biddle Venture Partners III, L.P.

 

Investment partnership

 

Limited partnership interest

 

 

 

 

 

 

 

 

2,018

 

 

1,070

 

 

2,018

 

 

1,070

 

Pangaea CLO 2007-1 Ltd.

 

Investment company

 

Class D notes (5.0%, due 1/21)

 

 

 

 

 

 

 

 

12,119

 

 

6,651

 

 

12,119

 

 

6,651

 

Partnership Capital Growth Fund I, LP

 

Investment partnership

 

Limited partnership interest

 

 

3,045

 

 

3,045

 

 

 

 

 

 

 

 

3,045

 

 

3,045

 

SPP Mezzanine Funding II, L.P.

 

Investment partnership

 

Limited partnership interest

 

 

 

 

 

 

 

 

7,476

 

 

7,145

 

 

7,476

 

 

7,145

 

Senior Secured Loan Fund LLC(4)

 

Investment partnership

 

Subordinated certificates (16.2%, due 12/15)

 

 

165,000

 

 

165,000

 

 

 

 

 

 

 

 

165,000

 

 

165,000

 

Trivergence Capital Partners, LP

 

Investment partnership

 

Limited partnership interest

 

 

2,016

 

 

2,016

 

 

 

 

 

 

 

 

2,016

 

 

2,016

 

57


Table of Contents

 
   
   
  Ares Capital   Allied Capital   Pro Forma Ares Capital  
Company
  Description   Investment   Cost   Fair
Value
  Cost   Fair
Value
  Cost   Fair
Value
 
VSC Investors LLC   Investment company   Member interest     648     648                 648     648  

Webster Capital II, L.P.

 

Investment partnership

 

Limited partnership interest

 

 

 

 

 

 

 

 

1,742

 

 

1,235

 

 

1,742

 

 

1,235

 
                                   
  Total             407,825     352,876     1,276,798     421,009     1,684,623     773,885  
                                   

Business Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
BenefitMall Holdings, Inc.   Employee benefits broker services   Senior subordinated note (18.0%, due 6/14)(2)                 40,254     40,254     40,254     40,254  
    company   Common stock (39,274,290 shares)                 39,274     68,822     39,274     68,822  
        Warrants                              

Booz Allen Hamilton, Inc.

 

Strategy and technology consulting

 

Senior secured loan (7.5%, due 7/15)

 

 

727

 

 

741

 

 

 

 

 

 

 

 

727

 

 

741

 
    services   Senior subordinated loan (13.0%, due 7/16)(2)     12,541     12,650                 12,541     12,650  

CitiPostal Inc.(4)

 

Document storage and management services

 

Senior secured revolving loan (3.7%, due 12/13)

 

 

 

 

 

 

 

 

683

 

 

683

 

 

683

 

 

683

 
        Senior secured loan (12.0%, due 12/13)(2)                 50,633     50,633     50,633     50,633  
        Senior subordinated note (16.0%, due 12/15)(2)                 10,685     10,685     10,685     10,685  
        Common stock (37,024 shares)                 12,726     1,432     12,726     1,432  

Cook Inlet Alternative Risk, LLC

 

Risk management services

 

Senior secured loan (13.0%, due 4/13)

 

 

 

 

 

 

 

 

87,309

 

 

62,100

 

 

87,309

 

 

62,100

 
        Member interest                 552         552      

Digital VideoStream, LLC

 

Media content supply chain services company

 

Senior secured loan (11.0%, due 2/12)(2)

 

 

 

 

 

 

 

 

12,940

 

 

12,811

 

 

12,940

 

 

12,811

 
        Convertible subordinated note (10.0%, due 2/16)(2)                 5,006     5,006     5,006     5,006  

Diversified Mercury Communications, LLC

 

Business media consulting services

 

Senior secured loan (6.8%, due 3/13)

 

 

 

 

 

 

 

 

2,657

 

 

2,391

 

 

2,657

 

 

2,391

 

Impact Innovations Group, LLC(4)

 

Management consulting services

 

Member interest

 

 

 

 

 

 

 

 


 

 

215

 

 


 

 

215

 

Investor Group Services, LLC(5)

 

Financial consulting services

 

Member interest

 

 


 

 

500

 

 

 

 

 

 

 

 


 

 

500

 

Market Track Holdings, LLC

 

Business media consulting services

 

Senior secured revolving loan (8.0%, due 6/14)

 

 

 

 

 

 

 

 

2,450

 

 

2,412

 

 

2,450

 

 

2,412

 
    company   Junior subordinated loan (15.9%, due 6/14)(2)                 24,509     23,680     24,509     23,680  

Multi-Ad Services, Inc.(5)

 

Marketing services and software provider

 

Senior secured loan (11.3%, due 11/11)

 

 

 

 

 

 

 

 

2,485

 

 

2,491

 

 

2,485

 

 

2,491

 
        Preferred equity                 1,737     1,418     1,737     1,418  

MVL Group, Inc.(4)

 

Marketing research provider

 

Senior secured loan (12.0%, due 7/12)

 

 

 

 

 

 

 

 

25,256

 

 

25,260

 

 

25,256

 

 

25,260

 
        Senior subordinated loan (14.5%, due 7/12)(2)                 35,578     34,306     35,578     34,306  
        Junior subordinated note (8.0%, due 7/12)(3)                 139         139      
        Common stock (560,716 shares)                 555         555      

PC Helps Support, LLC

 

Technology support provider

 

Senior secured loan (4.3%, due 12/13)

 

 

 

 

 

 

 

 

8,092

 

 

7,756

 

 

8,092

 

 

7,756

 
        Junior subordinated loan (12.8%, due 12/13)                 26,633     26,490     26,633     26,490  

Pendum Acquisition, Inc.(5)

 

Outsourced provider of ATM services

 

Common stock (8,872 shares)

 

 

 

 

 

 

 

 


 

 

200

 

 


 

 

200

 

58


Table of Contents

 
   
   
  Ares Capital   Allied Capital   Pro Forma Ares Capital  
Company
  Description   Investment   Cost   Fair
Value
  Cost   Fair
Value
  Cost   Fair
Value
 
Pillar Holdings LLC and PHL Holding Co.(5)   Mortgage services   Senior secured revolving loan (5.8%, due 11/13)     1,313     1,313                 1,313     1,313  
        Senior secured loan (14.5%, due 5/14)     7,375     7,375                 7,375     7,375  
        Senior secured loan (5.8%, due 11/13)     27,208     27,208                 27,208     27,208  
        Common stock (84.78 shares)     3,768     7,818                 3,768     7,818  

Primis Marketing Group, Inc. and Primis Holdings, LLC(5)

 

Database marketing services

 

Senior subordinated note (15.5%, due 2/13)(2)(3)

 

 

10,222

 

 

511

 

 

 

 

 

 

 

 

10,222

 

 

511

 
        Preferred units (4,000 units)     3,600                     3,600      
        Common units (4,000,000 units)     400                     400      

Prommis Solutions LLC, E-Default Statewide Tax and

 

Bankruptcy and foreclosure

 

Senior subordinated note (13.5%, due 2/14)(2)

 

 

53,156

 

 

53,156

 

 

 

 

 

 

 

 

53,156

 

 

53,156

 
Title Services, LLC
Statewide Publishing
Services, LLC (formerly known
as MR Processing Holding
Corp.)
  Services, LLC, and processing services   Preferred stock (30,000 shares)     3,000     6,221                 3,000     6,221  

Promo Works, LLC

 

Marketing services

 

Senior secured loan (16.0%, due 12/12)

 

 

 

 

 

 

 

 

19,859

 

 

12,557

 

 

19,859

 

 

12,557

 

R2 Acquisition Corp.

 

Marketing services

 

Common stock (250,000 shares)

 

 

250

 

 

250

 

 

 

 

 

 

 

 

250

 

 

250

 

SGT India Private Limited(5)

 

Technology consulting services

 

Common stock (150,596 shares)

 

 

 

 

 

 

 

 

4,161

 

 


 

 

4,161

 

 


 

Summit Business Media, LLC

 

Business media consulting services

 

Junior secured loan (15.0%, due 7/14)(2)(3)

 

 

10,018

 

 

554

 

 

 

 

 

 

 

 

10,018

 

 

554

 

Summit Energy Services, Inc.

 

Energy management consulting services

 

Common stock (415,982 shares)

 

 

 

 

 

 

 

 

1,861

 

 

2,200

 

 

1,861

 

 

2,200

 

Venturehouse-Cibernet Investors, LLC

 

Financial settlement services for intercarrier wireless roaming

 

Equity interest

 

 

 

 

 

 

 

 


 

 


 

 


 

 


 

VSS-Tranzact Holdings, LLC(5)

 

Management consulting services

 

Member interest

 

 

10,000

 

 

7,850

 

 

 

 

 

 

 

 

10,000

 

 

7,850

 
                                   
  Total             143,578     126,147     416,034     393,802     559,612     519,949  
                                   

Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Air Medical Group Holdings LLC(5)   Medical escort services   Senior secured revolving loan (2.8%, due 3/11)                 6,056     5,845     6,056     5,845  
        Preferred stock                 2,993     19,500     2,993     19,500  

American Renal Associates, Inc.

 

Dialysis provider

 

Senior secured loan (8.5%, due 12/10)

 

 

902

 

 

902

 

 

 

 

 

 

 

 

902

 

 

902

 
        Senior secured loan (8.5%, due 12/11)     10,389     10,389                 10,389     10,389  

Axium Healthcare Pharmacy, Inc.

 

Specialty pharmacy provider

 

Senior subordinated note (8.0%, due 3/15)(2)

 

 

 

 

 

 

 

 

3,036

 

 

2,641

 

 

3,036

 

 

2,641

 

Capella Healthcare, Inc.

 

Acute care hospital operator

 

Junior secured loan (13.0%, due 2/16)

 

 

42,500

 

 

42,500

 

 

 

 

 

 

 

 

42,500

 

 

42,500

 

CT Technologies Intermediate Holdings, Inc. and

 

Healthcare analysis services

 

Preferred stock (14.0%, 7,427 shares)(2)

 

 

8,467

 

 

8,043

 

 

 

 

 

 

 

 

8,467

 

 

8,043

 
CT Technologies Holdings, LLC(5)       Common stock (11,225 shares)     4,000     8,114                 4,000     8,114  

DSI Renal, Inc.

 

Dialysis provider

 

Senior secured revolving loan (7.3%, due 3/11)

 

 

7,668

 

 

7,285

 

 

 

 

 

 

 

 

7,668

 

 

7,285

 
        Senior secured loan (7.3%, due 3/13)     12,591     16,476                 12,591     16,476  
        Senior subordinated note (16.0%, due 4/14)(2)     80,426     76,791                 80,426     76,791  

59


Table of Contents

 
   
   
  Ares Capital   Allied Capital   Pro Forma Ares Capital  
Company
  Description   Investment   Cost   Fair
Value
  Cost   Fair
Value
  Cost   Fair
Value
 
GC Merger Sub I, Inc.   Drug testing services   Senior secured loan (4.3%, due 12/14)     22,379     20,997                 22,379     20,997  

HCP Acquisition Holdings, LLC(4)

 

Healthcare compliance advisory services

 

Class A units (10,044,176 units)

 

 

10,044

 

 

4,256

 

 

 

 

 

 

 

 

10,044

 

 

4,256

 

Heartland Dental Care, Inc.

 

Dental services

 

Senior subordinated note (14.3%, due 8/13)(2)

 

 

32,717

 

 

32,717

 

 

 

 

 

 

 

 

32,717

 

 

32,717

 

Insight Pharmaceuticals Corporation(4)

 

OTC drug products manufacturer

 

Senior subordinated note (15.0%, due 9/12)(2)

 

 

 

 

 

 

 

 

54,385

 

 

54,023

 

 

54,385

 

 

54,023

 
        Common stock (155,000 shares)                 40,413     9,400     40,413     9,400  

Magnacare Holdings, Inc., Magnacare Administrative Services, LLC, and Magnacare, LLC

 

Healthcare professional provider

 

Senior subordinated note (14.8%, due 1/13)(2)

 

 

3,363

 

 

4,670

 

 

 

 

 

 

 

 

3,363

 

 

4,670

 

MPBP Holdings, Inc., Cohr

 

Healthcare equipment

 

Senior secured loan (due 1/13)

 

 

489

 

 

628

 

 

 

 

 

 

 

 

489

 

 

628

 
Holdings, Inc., and MPBP Acquisition Co., Inc.   services   Junior secured loan (6.5%, due 1/14)     32,049     8,000                 32,049     8,000  
        Common stock (50,000 shares)     5,000                     5,000      

MWD Acquisition Sub, Inc.

 

Dental services

 

Junior secured loan (6.5%, due 5/12)

 

 

5,000

 

 

4,350

 

 

 

 

 

 

 

 

5,000

 

 

4,350

 

OnCURE Medical Corp.

 

Radiation oncology care provider

 

Senior secured loan (3.8%, due 6/12)

 

 

3,068

 

 

2,761

 

 

 

 

 

 

 

 

3,068

 

 

2,761

 
        Senior subordinated note (12.5%, due 8/13)(2)     32,664     29,378                 32,664     29,378  
        Common stock (857,143 shares)     3,000     3,000                 3,000     3,000  

Passport Health Communications, Inc., Passport

 

Healthcare technology provider

 

Senior secured loan (10.5%, due 5/14)

 

 

24,346

 

 

24,346

 

 

 

 

 

 

 

 

24,346

 

 

24,346

 
Holding Corp, and Prism Holding Corp.       Series A preferred stock (1,594,457 shares)     9,900     9,900                 9,900     9,900  
        Common stock (16,106 shares)     100     100                 100     100  

PG Mergersub, Inc.

 

Provider of patient surveys, management

 

Senior subordinated note (12.5%, due 3/16)

 

 

3,938

 

 

4,000

 

 

 

 

 

 

 

 

3,938

 

 

4,000

 
    reports and national   Preferred stock (333 shares)     333     333                 333     333  
    databases for the integrated healthcare delivery system   Common stock (16,667 shares)     167     167                 167     167  

Reed Group, Ltd.

 

Medical disability management services

 

Senior secured loan (6.0%, due 12/13)

 

 

 

 

 

 

 

 

11,903

 

 

10,186

 

 

11,903

 

 

10,186

 
    provider   Senior subordinated loan (15.8%, due 12/13)(2)                 19,199     15,260     19,199     15,260  
        Common equity                 1,800     28     1,800     28  

Regency Healthcare Group, LLC(5)

 

Hospice provider

 

Preferred member interest

 

 

 

 

 

 

 

 

1,302

 

 

1,898

 

 

1,302

 

 

1,898

 

The Schumacher Group of Delaware, Inc.

 

Outsourced physician service provider

 

Senior subordinated note (12.1%, due 7/13)(2)

 

 

36,172

 

 

36,138

 

 

 

 

 

 

 

 

36,172

 

 

36,138

 

Soteria Imaging Services, LLC(5)

 

Outpatient medical imaging provider

 

Junior secured loan (11.3%, due 11/10)

 

 

 

 

 

 

 

 

4,216

 

 

4,210

 

 

4,216

 

 

4,210

 
        Preferred member interest                 1,881     1,279     1,881     1,279  

Univita Health, Inc.

 

Outsourced services provider

 

Senior subordinated loan (15.0%, due 12/14)

 

 

20,500

 

 

20,500

 

 

 

 

 

 

 

 

20,500

 

 

20,500

 

VOTC Acquisition Corp.

 

Radiation oncology care provider

 

Senior secured loan (13.0%, due 7/12)(2)

 

 

17,417

 

 

17,417

 

 

 

 

 

 

 

 

17,417

 

 

17,417

 
        Preferred stock (3,888,222 shares)     8,748     3,800                 8,748     3,800  
                                   
  Total             438,337     397,958     147,184     124,270     585,521     522,228  
                                   

60


Table of Contents

 
   
   
  Ares Capital   Allied Capital   Pro Forma Ares Capital  
Company
  Description   Investment   Cost   Fair
Value
  Cost   Fair
Value
  Cost   Fair
Value
 
Services—Other                                              
3SI Security Systems, Inc.   Cash protection systems provider   Senior subordinated note (16.0%, due 8/13)(3)                 20,443     9,542     20,443     9,542  
        Subordinated loan (18.0%, due 8/13)(2)(3)                 9,030         9,030      

American Residential Services, LLC

 

Plumbing, heating and air-conditioning services

 

Junior secured loan (12.0%, due 4/15)(2)

 

 

20,608

 

 

20,195

 

 

 

 

 

 

 

 

20,608

 

 

20,195

 

Avborne, Inc.(4)

 

Maintenance, repair and overhaul service provider

 

Common stock (27,500 shares)

 

 

 

 

 

 

 

 


 

 

39

 

 


 

 

39

 

Aviation Properties Corporation(4)

 

Aviation services

 

Common stock (100 shares)

 

 

 

 

 

 

 

 

123

 

 


 

 

123

 

 


 

Coverall North America, Inc.(4)

 

Commercial janitorial service provider

 

Senior secured loan (12.0%, due 7/11)

 

 

 

 

 

 

 

 

31,573

 

 

31,573

 

 

31,573

 

 

31,573

 
        Senior subordinated note (15.0%, due 7/11)(2)                 5,555     5,555     5,555     5,555  
        Common stock (763,333 shares)                 14,361     11,386     14,361     11,386  

Diversified Collection Services, Inc.

 

Collections services

 

Senior secured loan (9.50%, due 2/11)

 

 

13,027

 

 

14,276

 

 

 

 

 

 

 

 

13,027

 

 

14,276

 
        Senior secured loan (13.8%, due 8/11)     9,423     9,423                 9,423     9,423  
        Preferred stock (14,927 shares)     169     269                 169     269  
        Common stock (592,820 shares)     295     402     734     1,400     1,029     1,802  

Driven Brands, Inc.(5)(6)

 

Automotive aftermarket service

 

Junior subordinated notes (15.0%, due 7/15)

 

 

 

 

 

 

 

 

42,848

 

 

43,024

 

 

42,848

 

 

43,024

 
    provider   Subordinated loan (18.0%, due 7/15)(2)                 48,799     48,875     48,799     48,875  
        Common stock (3,772,098 shares)                 9,516     3,000     9,516     3,000  

GCA Services Group, Inc.

 

Custodial services

 

Senior secured loan (12.0%, due 12/11)

 

 

37,802

 

 

37,889

 

 

 

 

 

 

 

 

37,802

 

 

37,889

 

Growing Family, Inc. and GFH Holdings, LLC

 

Photography services

 

Senior secured revolving loan (due 8/11)(2)(3)

 

 

1,513

 

 

303

 

 

 

 

 

 

 

 

1,513

 

 

303

 
        Senior secured loan (due 8/11)(2)(3)     15,282     3,056                 15,282     3,056  
        Common stock (552,430 shares)     872                     872      

NPA Acquisition, LLC

 

Powersport vehicle auction operator

 

Junior secured loan (7.0%, due 2/13)

 

 

12,000

 

 

12,000

 

 

 

 

 

 

 

 

12,000

 

 

12,000

 
        Common units (1,709 shares)     1,000     2,570                 1,000     2,570  

PODS Funding Corp.

 

Storage and warehousing provider

 

Senior subordinated loan (15.0%, due 6/15)

 

 

25,125

 

 

25,125

 

 

 

 

 

 

 

 

25,125

 

 

25,125

 
        Subordinated loan (16.7%, due 12/15)     5,079     5,070                 5,079     5,070  

Tradesmen International, Inc.

 

Construction labor support

 

Junior secured loan (15.0%, due 12/12)

 

 

 

 

 

 

 

 

39,793

 

 

11,532

 

 

39,793

 

 

11,532

 

Trover Solutions, Inc.

 

Healthcare collections services

 

Junior subordinated loan (12.0%, due 11/12)(2)

 

 

 

 

 

 

 

 

53,674

 

 

51,270

 

 

53,674

 

 

51,270

 

United Road Towing, Inc.

 

Towing company

 

Junior secured loan (11.8%, due 1/14)

 

 

 

 

 

 

 

 

18,993

 

 

18,367

 

 

18,993

 

 

18,367

 

Web Services Company, LLC

 

Laundry service and equipment provider

 

Senior secured loan (7.0%, due 8/14)

 

 

4,607

 

 

4,938

 

 

 

 

 

 

 

 

4,607

 

 

4,938

 
        Senior subordinated loan (14.0%, due 8/16)(2)     44,023     41,821                 44,023     41,821  
                                   
  Total             190,825     177,337     295,442     235,563     486,267     412,900  
                                   

61


Table of Contents

 
   
   
  Ares Capital   Allied Capital   Pro Forma Ares Capital  
Company
  Description   Investment   Cost   Fair
Value
  Cost   Fair
Value
  Cost   Fair
Value
 
Consumer Products—Non-Durable                                              
Blacksmith Brands Holdings, Inc. and Blacksmith Brands, Inc.   Consumer products and Personal care manufacturer   Senior secured loan (12.5%, due 12/14)     32,500     32,500                 32,500     32,500  

Bushnell, Inc.

 

Sports optics manufacturer

 

Junior secured loan (6.8%, due 2/14)

 

 

 

 

 

 

 

 

40,217

 

 

30,456

 

 

40,217

 

 

30,456

 

Gilchrist & Soames, Inc.

 

Personal care manufacturer

 

Senior subordinated loan (13.4%, due 10/13)

 

 

 

 

 

 

 

 

24,310

 

 

23,181

 

 

24,310

 

 

23,181

 

The Homax Group, Inc.

 

Home improvement products manufacturer

 

Senior secured revolver (8.0% due 10/12)(2)

 

 

 

 

 

 

 

 

653

 

 

648

 

 

653

 

 

648

 
        Senior subordinated note (14.5%, due 4/14)(2)                 13,649     9,804     13,649     9,804  
        Preferred stock (76 shares)                 76         76      
        Common stock (24 shares)                 5         5      
        Warrants                 954         954      

Innovative Brands, LLC

 

Consumer products and personal care manufacturer

 

Senior secured loan (15.5%, due 9/11)

 

 

17,079

 

 

17,079

 

 

 

 

 

 

 

 

17,079

 

 

17,079

 

Making Memories Wholesale, Inc.(4)

 

Scrapbooking branded products manufacturer

 

Senior secured loan (10.0%, due 8/14)

 

 

7,770

 

 

9,750

 

 

 

 

 

 

 

 

7,770

 

 

9,750

 
        Senior secured loan (15.0%, due 8/14)(2)     4,062     514                 4,062     514  
        Common stock (100 shares)                              

The Step2 Company, LLC

 

Toy manufacturer

 

Senior secured loan (11.0%, due 4/12)(2)

 

 

 

 

 

 

 

 

93,937

 

 

89,614

 

 

93,937

 

 

89,614

 
        Equity interests                 2,156     705     2,156     705  

The Thymes, LLC(4)

 

Cosmetic products manufacturer

 

Preferred stock (8.0%, 6,283 shares)(2)

 

 

6,785

 

 

6,107

 

 

 

 

 

 

 

 

6,785

 

 

6,107

 
        Common stock (5,400 shares)                              

Woodstream Corporation(6)

 

Pest control, wildlife caring and control

 

Senior subordinated note (12.0%, due 2/15)

 

 

 

 

 

 

 

 

89,693

 

 

77,400

 

 

89,693

 

 

77,400

 
    products manufacturer   Common stock (6,960 shares)                 6,961     2,700     6,961     2,700  
                                   
  Total             68,196     65,950     272,611     234,508     340,807     300,458  
                                   

Restaurants and Food Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
ADF Capital, Inc. and ADF Restaurant Group, LLC   Restaurant owner and operator   Senior secured revolving loan(6.5%, due 11/12)(2)     3,418     3,418                 3,418     3,418  
        Senior secured loan (12.5%, due 11/13)(2)     34,629     34,623                 34,629     34,623  
        Promissory note (12.0%, due 11/16)(2)     13,093     13,105                 13,093     13,105  
        Warrants to purchase 0.61 shares         2,719                     2,719  

Encanto Restaurants, Inc.

 

Restaurant owner and operator

 

Junior secured loan (11.0%, due 8/13)(2)

 

 

24,996

 

 

23,746

 

 

 

 

 

 

 

 

24,996

 

 

23,746

 

Hot Light Brands, Inc.(4)

 

Restaurant owner and operator

 

Senior secured loan (9.0%, due 2/11)(3)

 

 

 

 

 

 

 

 

29,257

 

 

9,116

 

 

29,257

 

 

9,116

 
        Common stock (93,500 shares)                 5,151         5,151      

62


Table of Contents

 
   
   
  Ares Capital   Allied Capital   Pro Forma
Ares Capital
 
Company
  Description   Investment   Cost   Fair
Value
  Cost   Fair
Value
  Cost   Fair
Value
 
Hot Stuff Foods, LLC(4)   Convenience food service retailer   Senior secured loan (3.7%, due 2/12)                 44,602     44,697     44,602     44,697  
        Junior secured loan (7.2% due 8/12)(3)                 31,237     35,549     31,237     35,549  
        Senior subordinated note (15.0%, due 2/13)(2)(3)                 31,401     12,691     31,401     12,691  
        Subordinated note (16.0%, due 2/13)(2)(3)                 20,749         20,749      
        Common stock (1,147,453 shares)                 56,187         56,187      

Huddle House, Inc.(4)

 

Restaurant owner and operator

 

Senior subordinated note (15.0%, due 12/15)(2)

 

 

 

 

 

 

 

 

19,646

 

 

19,646

 

 

19,646

 

 

19,646

 
        Common stock (358,428 shares)                 36,348     3,919     36,348     3,919  

OTG Management, Inc.

 

Airport restaurant operator

 

Junior secured loan (20.5%, due 6/13)(2)

 

 

16,149

 

 

16,149

 

 

 

 

 

 

 

 

16,149

 

 

16,149

 
        Warrants to purchase 89,000 shares         1,102                     1,102  

S.B. Restaurant Company

 

Restaurant owner and operator

 

Senior secured loan (11.8%, due 4/11)

 

 

 

 

 

 

 

 

38,207

 

 

32,693

 

 

38,207

 

 

32,693

 
        Preferred stock (46,690 shares)                 117         117      
        Warrants                 534         534      

Vistar Corporation and Wellspring Distribution

 

Food service distributor

 

Senior subordinated note (13.5%, due 5/15)

 

 

73,625

 

 

69,944

 

 

 

 

 

 

 

 

73,625

 

 

69,944

 
Corporation       Class A non-voting common stock (1,366,120 shares)     7,500     4,050                 7,500     4,050  
                                   
  Total             173,410     168,856     313,436     158,311     486,846     327,167  
                                   

Beverage, Food and Tobacco

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
3091779 Nova Scotia Inc.   Baked goods manufacturer   Senior secured revolving loan (8.0%, due 1/10)     2,401     2,463                 2,401     2,463  
        Junior secured loan (14.0%, due 1/10)(2)     15,147     10,292                 15,147     10,292  
        Warrants to purchase 57,545 shares                              

Apple & Eve, LLC and US Juice Partners, LLC(5)

 

Juice manufacturer

 

Senior secured revolving loan (12.0%, due 10/13)

 

 

3,000

 

 

3,000

 

 

 

 

 

 

 

 

3,000

 

 

3,000

 
        Senior secured loan (12.0%, due 10/13)     33,900     33,900                 33,900     33,900  
        Senior units (50,000 units)     5,000     5,000                 5,000     5,000  

Best Brands Corporation

 

Baked goods manufacturer

 

Senior secured loan (7.5%, due 12/12)(2)

 

 

11,359

 

 

13,358

 

 

 

 

 

 

 

 

11,359

 

 

13,358

 
        Junior secured loan (16.0%, due 6/13)(2)     48,376     49,036                 48,376     49,036  

Border Foods, Inc.(4)

 

Green chile and jalapeno products

 

Senior secured loan (12.9%, due 3/12)

 

 

 

 

 

 

 

 

29,064

 

 

34,126

 

 

29,064

 

 

34,126

 
    manufacturer   Preferred stock (100,000 shares)                 12,721     20,901     12,721     20,901  
        Common stock (260,467 shares)                 3,847     9,663     3,847     9,663  

Bumble Bee Foods, LLC and BB Co-Invest LP

 

Canned seafood manufacturer

 

Common stock (4,000 shares)

 

 

4,000

 

 

6,760

 

 

 

 

 

 

 

 

4,000

 

 

6,760

 

Charter Baking Company, Inc.

 

Baked goods manufacturer

 

Senior subordinated note (13.0%, due 2/13)(2)

 

 

5,883

 

 

5,883

 

 

 

 

 

 

 

 

5,883

 

 

5,883

 
        Preferred stock (6,258 shares)     2,500     1,725                 2,500     1,725  

Distant Lands Trading Co.

 

Coffee manufacturer

 

Senior secured revolving loan (8.3%, due 11/11)

 

 

 

 

 

 

 

 

8,284

 

 

7,852

 

 

8,284

 

 

7,852

 
        Senior secured loan (13.0%, due 11/11)                 43,509     43,026     43,509     43,026  
        Common stock (3,451 shares)                 3,451     1,046     3,451     1,046  

63


Table of Contents

 
   
   
  Ares Capital   Allied Capital   Pro Forma
Ares Capital
 
Company
  Description   Investment   Cost   Fair
Value
  Cost   Fair
Value
  Cost   Fair
Value
 
Ideal Snacks Corporation   Snacks manufacturer   Senior secured loan (8.5%, due 6/11)                 967     958     967     958  
                                   
  Total             131,566     131,417     101,843     117,572     233,409     248,989  
                                   

Education

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Campus Management Corp. and Campus Management   Education software developer   Senior secured loan (13.0%, due 8/13)(2)     42,486     42,486                 42,486     42,486  
Acquisition Corp.(5)       Preferred stock (8.0%, 493,147 shares)(2)     9,668     13,750                 9,668     13,750  

Community Education Centers, Inc.

 

Offender re-entry and in-prison treatment services provider

 

Senior subordinated loan (21.5%, due 11/13)(2)

 

 

 

 

 

 

 

 

37,307

 

 

35,869

 

 

37,307

 

 

35,869

 

eInstruction Corporation

 

Developer, manufacturer and

 

Junior secured loan (7.8%, due 7/14)

 

 

 

 

 

 

 

 

16,942

 

 

15,475

 

 

16,942

 

 

15,475

 
    retailer of educational products   Subordinated loan (16.0%, due 1/15)(2)                 19,795     18,699     19,795     18,699  
        Common stock (2,406 shares)                 2,500     1,050     2,500     1,050  

ELC Acquisition Corporation

 

Developer, manufacturer and

 

Senior secured loan (3.5%, due 11/12)

 

 

162

 

 

157

 

 

 

 

 

 

 

 

162

 

 

157

 
    retailer of educational products   Junior secured loan (7.2%, due 11/13)     8,333     8,167                 8,333     8,167  

Instituto de Banca y Comercio, Inc.

 

Private school operator

 

Senior secured loan (8.5%, due 3/14)

 

 

11,700

 

 

11,700

 

 

 

 

 

 

 

 

11,700

 

 

11,700

 

Leeds IV Advisors, Inc.

 

 

 

Senior subordinated loan (16.0%, due 6/14)(2)

 

 

30,877

 

 

30,877

 

 

 

 

 

 

 

 

30,877

 

 

30,877

 
        Preferred stock (306,388 shares)     1,456     3,925