1287750--2/25/2010--ARES_CAPITAL

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{investment, property, distribution}

{stock, price, share}

{tax, income, asset}

{debt, indebtedness, cash}

{acquisition, growth, future}

{loan, real, estate}

{interest, director, officer}

{provision, law, control}

{stock, price, operating}

{condition, economic, financial}

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{loss, insurance, financial}

{cost, operation, labor}

{cost, contract, operation}

{regulation, change, law}

{personnel, key, retain}

{operation, international, foreign}

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. A failure on our part to maintain our status as a BDC would significantly reduce our operating flexibility. We are dependent upon Ares Capital Management's key personnel for our future success and upon their access to Ares' investment professionals. Our financial condition and results of operations depend on our ability to manage future growth effectively. Our ability to grow depends on our ability to raise capital. Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital. We borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing with us. 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. Our credit ratings may change and as a result the cost and flexibility under our debt instruments may change. We operate in a highly competitive market for investment opportunities. We may be subject to certain corporate-level taxes regardless of whether we continue to qualify 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. 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. We are exposed to risks associated with changes in interest rates. Many of our portfolio investments are not publicly traded and, as a result, there is uncertainty as to the value of our portfolio investments. The lack of liquidity in our investments may adversely affect our business. We may experience fluctuations in our quarterly results. There are significant potential conflicts of interest that could impact our investment returns. 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. We may be obligated to pay our investment adviser incentive compensation even if we incur a loss. 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 may not replicate Ares' historical success and our ability to enter into transactions with Ares and our other affiliates is restricted. We may fail to consummate 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. Economic recessions or downturns could impair our portfolio companies and harm our operating results. Investments in privately held middle-market companies involve significant risks. Our debt investments may be risky, and we could lose all or part of our investment. Investments in equity securities involve a substantial degree of risk. 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. Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies. 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. Our portfolio companies may be highly leveraged. Our investment adviser's incentive fee may induce Ares Capital Management to make certain investments, including speculative investments. 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. 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. 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 Company's and Allied Capital's inability to obtain certain third party approvals, confirmations and consents with respect to certain of their outstanding indebtedness could delay or prevent the completion of the Allied Acquisition. 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. 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. Allied Capital has received an unsolicited non-binding acquisition proposal from Prospect Capital, which may complicate or delay or prevent completion of the Allied Acquisition. 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. If the Allied Acquisition does not close, we won't benefit from the expenses incurred in its pursuit. Termination of the Merger Agreement could negatively impact us. Under certain circumstances, we and Allied Capital are obligated to pay each other a termination fee upon termination of the Merger Agreement. The market price of our common stock after the Allied Acquisition may be affected by factors different from those affecting our common stock currently. RISKS RELATING TO OUR COMMON STOCK 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. There is a risk that investors in our equity securities may not receive dividends or that our dividends may not grow over time. 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. Investing in our securities may involve an above average degree of risk. The market price of our common stock may fluctuate significantly. Our stockholders will experience dilution in their ownership percentage if they do not participate in our dividend reinvestment plan. Our stockholders may receive shares of our common stock as dividends, which could result in adverse tax consequences to you. 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.

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1287750--2/25/2010--ARES_CAPITAL_CORP