Ares Capital Corporation

Market and investment · Interest rate and yield curve risk

We are exposed to risks associated with changes in interest rates, including the current interest rate environment. 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.

Capital structure and performance · Credit rating and cost of capital

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.

Market and investment · Investment portfolio performance

Our financial condition and results of operations could be negatively affected if a significant investment fails to perform as expected. Our investment portfolio includes our investment in IHAM, a wholly owned portfolio company, which as of December 31, 2024, represented 7.1% of our total portfolio at fair value.

Credit and liquidity · Debt service and covenant compliance

Our asset coverage requirement is 150%, which may increase the risk of investing in us. As a BDC, we are currently permitted to incur indebtedness or issue senior securities only in amounts such that our asset coverage, as calculated pursuant to the Investment Company Act, equals at least 150% after each such incurrence or issuance.

International and currency · Foreign exchange and currency exposure

Our investments in foreign companies or investments denominated in foreign currencies may involve significant risks in addition to the risks inherent in U.S. and U.S. dollar denominated investments. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies.

Capital structure and performance · Debt management and refinancing

Terms relating to redemption may materially adversely affect our noteholders' return on any debt securities that we may issue. If our noteholders' debt securities are redeemable at our option, we may choose to redeem their debt securities at times when prevailing interest rates are lower than the interest rate paid on their debt securities.

Capital structure and performance · Dividend policy and capital allocation

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

Capital structure and performance · Financial performance volatility

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.

Credit and liquidity · Access to capital and financing

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 in excess of our repayments.

Market and investment · Asset valuation and impairment

Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio, which in turn would reduce our net asset value. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed.

Cybersecurity and data protection · Data breaches and cyber attacks

Security incidents or cyber-attacks could adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential, personal or other sensitive information and/or damage to our business relationships or reputation, any of which could negatively impact our business, financial condition and operating results.

Cybersecurity and data protection · Data privacy and protection regulations

We are subject to numerous privacy laws, and violation of such laws may subject us to significant fines or penalties, litigation, or reputational damage, and new privacy laws could impact our business and financial performance. Many jurisdictions in which we operate have laws and regulations relating to data privacy, cybersecurity and protection of personal information.

Reputation and brand · Esg environmental social governance performance

Increasing scrutiny from stakeholders and regulators with respect to ESG matters may impose additional costs and expose us to additional risks. Our business (including that of our portfolio companies) faces increasing public scrutiny related to ESG activities.

Stakeholder relations · Investor relations and market confidence

Our shares of common stock have traded at a discount from net asset value and may do so again, 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.

Human capital and workforce · Key personnel dependence and succession

We are dependent upon certain key systems and personnel of Ares for our success and upon their access to other Ares investment professionals. The departure or misconduct of any of these individuals, or of a significant number of the investment professionals or partners of Ares, could have a material adverse effect on our business, financial condition or results of operations.

Tax and financial reporting · Audit and regulatory examinations

We, our executive officers, directors, and our investment adviser, its affiliates and/or any of their respective principals and employees could be the target of litigation or regulatory investigations. We and our investment adviser are each, from time to time, subject to formal and informal examinations, investigations, inquiries, audits and reviews from numerous regulatory authorities.

Tax and financial reporting · Internal controls and compliance programs

Ineffective internal controls could impact our business and operating results. Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud.

Natural and catastrophic events · Climate change and environmental impact

We and/or our portfolio companies may be materially and adversely impacted by global climate change. Climate change is widely considered to be a significant threat to the global economy. Our business operations and our portfolio companies may face risks associated with climate change, including risks related to the impact of climate-related legislation and regulation.

Economic and market conditions · Economic recession and downturns

Economic recessions or downturns could impair our portfolio companies and harm our operating results. Many of our portfolio companies may be susceptible to economic downturns or recessions and may be unable to repay our loans during these periods.

Geopolitical and trade · International conflicts and tensions

Economic and political events in or affecting the world's major economies, such as the ongoing war between Russia and Ukraine and conflicts in the Middle East. Sanctions imposed by the U.S. and other countries in connection with hostilities between Russia and Ukraine and the tensions between China and Taiwan have caused additional financial market volatility and affected the global economy.