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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)

| | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2010



OR



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------



Commission file number 814-00149



LOGO



AMERICAN CAPITAL, LTD.



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 52-1451377                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer
Identification No.)



2 Bethesda Metro Center

14th Floor

Bethesda, Maryland 20814

(Address of principal executive offices)

(301) 951-6122

(Registrants telephone number, including area code)



Securities registered pursuant to Section 12(b) of
the Act:



|                                        |  |                                                          
|--------------------------------------- |  | ---------------------------------------------------------
|Title of each class                     |  | Name of each exchange
on which registered                
|Common Stock, $0.01 par value per share |  | The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)



Securities registered pursuant to section 12(g) of the
Act: NONE



Indicate by check mark whether the
registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter earlier period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈



Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of
the Act.



|                           |  |                                               |  |                             
|-------------------------- |  | --------------------------------------------- |  | ----------------------------
|Large accelerated filer  x |  |                                               |  | Accelerated filer   ̈        
|Non-accelerated filer   ̈   |  | (Do not check if a smaller reporting company) |  | Smaller Reporting Company   ̈



Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x



The number of shares of the issuers common stock,
$0.01 par value, outstanding as of April 30, 2010, was 339,630,900.







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##### Table of Contents

AMERICAN CAPITAL, LTD.



TABLE OF CONTENTS



|                              |  |                                                                                       |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements                                                                  |  | 3 
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations |  | 51
|Item 3.                       |  | Quantitative and Qualitative Disclosure About Market Risk                             |  | 71
|Item 4.                       |  | Controls and Procedures                                                               |  | 71
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 72
|Item 1A.                      |  | Risk Factors                                                                          |  | 72
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 72
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 72
|Item 4.                       |  | [Reserved]                                                                            |  | 72
|Item 5.                       |  | Other Information                                                                     |  | 72
|Item 6.                       |  | Exhibits                                                                              |  | 74
|Signatures                    |  | 75                                                                                   



2



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##### Table of Contents

Item 1.Financial Statements



AMERICAN CAPITAL, LTD.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)



|                                                                                                                               |  |               |        |   |                  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------ | - | ---------------- | - | ------ | -
|                                                                                                                               |  | March 31,2010 |        |   | December 31,2009 |  
|                                                                                                                               |  | (unaudited)   |        |   |                  |  
|Assets                                                                                                                         |  |               |        |   |                  |   |        |  
|Investments at fair value (cost of $9,013 and $9,158, respectively)                                                            |  |               |        |   |                  |   |        |  
|Non-Control/Non-Affiliate investments (cost of $4,824 and $4,839, respectively)                                                |  | $             | 3,143  |   |                  | $ | 3,036  |  
|Affiliate investments (cost of $325 and $251, respectively)                                                                    |  |               | 217    |   |                  |   | 204    |  
|Control investments (cost of $3,864 and $4,068, respectively)                                                                  |  |               | 2,338  |   |                  |   | 2,335  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total investments at fair value                                                                                                |  |               | 5,698  |   |                  |   | 5,575  |  
|Cash and cash equivalents                                                                                                      |  |               | 820    |   |                  |   | 835    |  
|Restricted cash and cash equivalents                                                                                           |  |               | 79     |   |                  |   | 96     |  
|Interest receivable                                                                                                            |  |               | 39     |   |                  |   | 38     |  
|Derivative agreements at fair value                                                                                            |  |               | 2      |   |                  |   | 1      |  
|Other                                                                                                                          |  |               | 119    |   |                  |   | 127    |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total assets                                                                                                                   |  | $             | 6,757  |   |                  | $ | 6,672  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Liabilities and Shareholders Equity                                                                                           |  |               |        |   |                  |   |        |  
|Debt ($2,567 and $2,666 due within one year, respectively)                                                                     |  | $             | 4,026  |   |                  | $ | 4,142  |  
|Derivative agreements at fair value                                                                                            |  |               | 109    |   |                  |   | 102    |  
|Other                                                                                                                          |  |               | 96     |   |                  |   | 99     |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total liabilities                                                                                                              |  |               | 4,231  |   |                  |   | 4,343  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Commitments and contingencies                                                                                                  |  |               |        |   |                  |   |        |  
|Shareholders equity:                                                                                                          |  |               |        |   |                  |   |        |  
|Undesignated preferred stock, $0.01 par value, 5.0 shares authorized, 0 issued and outstanding                                 |  |               |       |   |                  |   |       |  
|Common stock, $0.01 par value, 1,000.0 shares authorized, 292.9 and 292.9 issued and 281.3 and 280.9 outstanding, respectively |  |               | 3      |   |                  |   | 3      |  
|Capital in excess of par value                                                                                                 |  |               | 6,745  |   |                  |   | 6,735  |  
|Distributions in excess of net realized earnings                                                                               |  |               | (786   | ) |                  |   | (709   | )
|Net unrealized depreciation of investments                                                                                     |  |               | (3,436 | ) |                  |   | (3,700 | )
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total shareholders equity                                                                                                     |  |               | 2,526  |   |                  |   | 2,329  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total liabilities and shareholders equity                                                                                     |  | $             | 6,757  |   |                  | $ | 6,672  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Net Asset Value Per Common Share                                                                                               |  | $             | 8.98   |   |                  | $ | 8.29   |  
|                                                                                                                               |  |               |        |   |                  |   |        |  



See accompanying notes.



3



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AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in millions, except per share data)



|                                                                                        |  |                             |       |   |      |   |       |  
|--------------------------------------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                                                                        |  | Three MonthsEnded March 31, |      
|                                                                                        |  | 2010                        |       |   | 2009 |  
|Operating Income                                                                        |  |                             |       |   |      |   |       |  
|Interest and dividend income                                                            |  |                             |       |   |      |   |       |  
|Non-Control/Non-Affiliate investments                                                   |  | $                           | 93    |   |      | $ | 124   |  
|Affiliate investments                                                                   |  |                             | 8     |   |      |   | 9     |  
|Control investments                                                                     |  |                             | 49    |   |      |   | 46    |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Total interest and dividend income                                                      |  |                             | 150   |   |      |   | 179   |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Fee income                                                                              |  |                             |       |   |      |   |       |  
|Non-Control/Non-Affiliate investments                                                   |  |                             | 4     |   |      |   | 4     |  
|Control investments                                                                     |  |                             | 10    |   |      |   | 12    |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Total fee income                                                                        |  |                             | 14    |   |      |   | 16    |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Total operating income                                                                  |  |                             | 164   |   |      |   | 195   |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Operating Expenses                                                                      |  |                             |       |   |      |   |       |  
|Interest                                                                                |  |                             | 57    |   |      |   | 52    |  
|Salaries, benefits and stock-based compensation                                         |  |                             | 34    |   |      |   | 53    |  
|General and administrative                                                              |  |                             | 24    |   |      |   | 26    |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Total operating expenses                                                                |  |                             | 115   |   |      |   | 131   |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Net Operating Income                                                                    |  |                             | 49    |   |      |   | 64    |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Net gain on extinguishment of debt                                                      |  |                             |      |   |      |   | 12    |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Net realized (loss) gain on investments                                                 |  |                             |       |   |      |   |       |  
|Non-Control/Non-Affiliate investments                                                   |  |                             | (40   | ) |      |   | 2     |  
|Affiliate investments                                                                   |  |                             |      |   |      |   | (5    | )
|Control investments                                                                     |  |                             | (67   | ) |      |   | (76   | )
|Foreign currency transactions                                                           |  |                             | (3    | ) |      |   | (2    | )
|Derivative and option agreements                                                        |  |                             | (16   | ) |      |   | (50   | )
|                                                                                        |  |                             |       |   |      |   |       |  
|Total net realized loss on investments                                                  |  |                             | (126  | ) |      |   | (131  | )
|                                                                                        |  |                             |       |   |      |   |       |  
|Net unrealized appreciation (depreciation) of investments                               |  |                             |       |   |      |   |       |  
|Portfolio company investments                                                           |  |                             | 357   |   |      |   | (525  | )
|Foreign currency translation                                                            |  |                             | (87   | ) |      |   | (69   | )
|Derivative and option agreements and other                                              |  |                             | (6    | ) |      |   | 102   |  
|                                                                                        |  |                             |       |   |      |   |       |  
|Total net unrealized appreciation (depreciation) of investments                         |  |                             | 264   |   |      |   | (492  | )
|                                                                                        |  |                             |       |   |      |   |       |  
|Total net gain (loss) on investments                                                    |  |                             | 138   |   |      |   | (623  | )
|                                                                                        |  |                             |       |   |      |   |       |  
|Net Increase (Decrease) in Net Assets Resulting from Operations (Net Earnings (Loss)) |  | $                           | 187   |   |      | $ | (547  | )
|                                                                                        |  |                             |       |   |      |   |       |  
|Net Operating Income Per Common Share                                                   |  |                             |       |   |      |   |       |  
|Basic                                                                                   |  | $                           | 0.17  |   |      | $ | 0.31  |  
|Diluted                                                                                 |  | $                           | 0.17  |   |      | $ | 0.31  |  
|Net Earnings (Loss) Per Common Share                                                    |  |                             |       |   |      |   |       |  
|Basic                                                                                   |  | $                           | 0.66  |   |      | $ | (2.65 | )
|Diluted                                                                                 |  | $                           | 0.65  |   |      | $ | (2.65 | )
|Weighted Average Shares of Common Stock Outstanding                                     |  |                             |       |   |      |   |       |  
|Basic                                                                                   |  |                             | 283.7 |   |      |   | 206.6 |  
|Diluted                                                                                 |  |                             | 286.0 |   |      |   | 206.6 |  
|Dividends Declared Per Common Share                                                     |  | $                           |      |   |      | $ |      |  



See accompanying notes.



4



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AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(unaudited)

(in millions, except per share data)



|                                                                     |  |                             |       |   |      |   |       |  
|-------------------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                                                     |  | Three MonthsEnded March 31, |      
|                                                                     |  | 2010                        |       |   | 2009 |  
|Operations                                                           |  |                             |       |   |      |   |       |  
|Net operating income                                                 |  | $                           | 49    |   |      | $ | 64    |  
|Net gain on extinguishment of debt                                   |  |                             |      |   |      |   | 12    |  
|Net realized loss on investments                                     |  |                             | (126  | ) |      |   | (131  | )
|Net unrealized appreciation (depreciation) of investments            |  |                             | 264   |   |      |   | (492  | )
|                                                                     |  |                             |       |   |      |   |       |  
|Net earnings (loss)                                                  |  |                             | 187   |   |      |   | (547  | )
|                                                                     |  |                             |       |   |      |   |       |  
|Capital Share Transactions                                           |  |                             |       |   |      |   |       |  
|Issuance of common stock                                             |  |                             |      |   |      |   | 25    |  
|Stock-based compensation                                             |  |                             | 10    |   |      |   | 17    |  
|Other                                                                |  |                             |      |   |      |   | 4     |  
|                                                                     |  |                             |       |   |      |   |       |  
|Net increase in net assets resulting from capital share transactions |  |                             | 10    |   |      |   | 46    |  
|                                                                     |  |                             |       |   |      |   |       |  
|Total increase (decrease) in net assets                              |  |                             | 197   |   |      |   | (501  | )
|Net assets at beginning of period                                    |  |                             | 2,329 |   |      |   | 3,155 |  
|                                                                     |  |                             |       |   |      |   |       |  
|Net assets at end of period                                          |  | $                           | 2,526 |   |      | $ | 2,654 |  
|                                                                     |  |                             |       |   |      |   |       |  
|Net asset value per common share                                     |  | $                           | 8.98  |   |      | $ | 12.32 |  
|                                                                     |  |                             |       |   |      |   |       |  
|Common shares outstanding at end of period                           |  |                             | 281.3 |   |      |   | 215.4 |  
|                                                                     |  |                             |       |   |      |   |       |  



See accompanying notes.



5



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AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in millions)



|                                                                                           |  |                             |      |   |      |   |      |  
|------------------------------------------------------------------------------------------ |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                                                           |  | Three MonthsEnded March 31, |     
|                                                                                           |  | 2010                        |      |   | 2009 |  
|Operating Activities                                                                       |  |                             |      |   |      |   |      |  
|Net earnings (loss)                                                                        |  | $                           | 187  |   |      | $ | (547 | )
|Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: |  |                             |      |   |      |   |      |  
|Net unrealized (appreciation) depreciation of investments                                  |  |                             | (264 | ) |      |   | 492  |  
|Net realized loss on investments                                                           |  |                             | 126  |   |      |   | 131  |  
|Net gain on extinguishment of debt                                                         |  |                             |     |   |      |   | (12  | )
|Accrued payment-in-kind interest and dividends on investments                              |  |                             | (46  | ) |      |   | (26  | )
|Amortization of deferred finance costs, premiums and discounts                             |  |                             | 2    |   |      |   | 3    |  
|Depreciation of property and equipment                                                     |  |                             | 5    |   |      |   | 3    |  
|Stock-based compensation                                                                   |  |                             | 10   |   |      |   | 17   |  
|Increase in interest receivable                                                            |  |                             | (3   | ) |      |   |     |  
|Decrease in other assets                                                                   |  |                             | 8    |   |      |   |     |  
|Decrease in other liabilities                                                              |  |                             | (5   | ) |      |   | (29  | )
|Other                                                                                      |  |                             | 1    |   |      |   | (1   | )
|                                                                                           |  |                             |      |   |      |   |      |  
|Net cash provided by operating activities                                                  |  |                             | 21   |   |      |   | 31   |  
|                                                                                           |  |                             |      |   |      |   |      |  
|Investing Activities                                                                       |  |                             |      |   |      |   |      |  
|Purchases of investments                                                                   |  |                             | (99  | ) |      |   | (51  | )
|Repayments from (fundings on) portfolio company revolving credit facility investments, net |  |                             | 13   |   |      |   | (61  | )
|Principal repayments                                                                       |  |                             | 97   |   |      |   | 52   |  
|Proceeds from loan syndications and loan sales                                             |  |                             | 15   |   |      |   | 8    |  
|Collection of payment-in-kind notes and dividends and accreted loan discounts              |  |                             | 2    |   |      |   | 4    |  
|Proceeds from sales of equity investments                                                  |  |                             | 49   |   |      |   | 15   |  
|Capital expenditures for property and equipment                                            |  |                             | (1   | ) |      |   | (1   | )
|Termination of European Capital Limited put option agreement                               |  |                             |     |   |      |   | (65  | )
|Other                                                                                      |  |                             | (16  | ) |      |   | (14  | )
|                                                                                           |  |                             |      |   |      |   |      |  
|Net cash provided by (used in) investing activities                                        |  |                             | 60   |   |      |   | (113 | )
|                                                                                           |  |                             |      |   |      |   |      |  
|Financing Activities                                                                       |  |                             |      |   |      |   |      |  
|Payments on issuance of notes payable from asset securitizations                           |  |                             | (113 | ) |      |   | (27  | )
|Decrease in debt service escrows                                                           |  |                             | 17   |   |      |   | 3    |  
|Other                                                                                      |  |                             |     |   |      |   | (15  | )
|                                                                                           |  |                             |      |   |      |   |      |  
|Net cash used in financing activities                                                      |  |                             | (96  | ) |      |   | (39  | )
|                                                                                           |  |                             |      |   |      |   |      |  
|Net decrease in cash and cash equivalents                                                  |  |                             | (15  | ) |      |   | (121 | )
|Cash and cash equivalents at beginning of period                                           |  |                             | 835  |   |      |   | 209  |  
|                                                                                           |  |                             |      |   |      |   |      |  
|Cash and cash equivalents at end of period                                                 |  | $                           | 820  |   |      | $ | 88   |  
|                                                                                           |  |                             |      |   |      |   |      |  
|Non-cash Financing Activities                                                              |  |                             |      |   |      |   |      |  
|Issuance of common stock in conjunction with acquisition of European Capital Limited       |  | $                           |     |   |      | $ | 25   |  



See accompanying notes.



6



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AMERICAN CAPITAL, LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(unaudited)

(in millions, except per share data)



|                                                                               |  |                             |        |   |      |   |        |   
|------------------------------------------------------------------------------ |  | --------------------------- | ------ | - | ---- | - | ------ | --
|                                                                               |  | Three Months EndedMarch 31, |       
|                                                                               |  | 2010                        |        |   | 2009 |  
|Per Share Data                                                                 |  |                             |        |   |      |   |        |   
|Net asset value at beginning of the period                                     |  | $                           | 8.29   |   |      | $ | 15.41  |   
|                                                                               |  |                             |        |   |      |   |        |   
|Net operating income(1)                                                        |  |                             | 0.17   |   |      |   | 0.31   |   
|Net gain on extinguishment of debt(1)                                          |  |                             |       |   |      |   | 0.05   |   
|Net realized loss on investments(1)                                            |  |                             | (0.44  | ) |      |   | (0.63  | ) 
|Net unrealized appreciation (depreciation) on investments(1)                   |  |                             | 0.93   |   |      |   | (2.38  | ) 
|                                                                               |  |                             |        |   |      |   |        |   
|Net increase (decrease) in net assets resulting from operations(1)             |  |                             | 0.66   |   |      |   | (2.65  | ) 
|Issuance of common stock(2)                                                    |  |                             |       |   |      |   | (0.70  | ) 
|Other, net(3)                                                                  |  |                             | 0.03   |   |      |   | 0.26   |   
|                                                                               |  |                             |        |   |      |   |        |   
|Net asset value at end of period                                               |  | $                           | 8.98   |   |      | $ | 12.32  |   
|                                                                               |  |                             |        |   |      |   |        |   
|Ratio/Supplemental Data                                                        |  |                             |        |   |      |   |        |   
|Per share market value at end of period                                        |  | $                           | 5.08   |   |      | $ | 1.87   |   
|Total investment return (loss)(4)                                              |  |                             | 108.20 | % |      |   | (42.28 | )%
|Shares outstanding at end of period                                            |  |                             | 281.3  |   |      |   | 215.4  |   
|Net assets at end of period                                                    |  | $                           | 2,526  |   |      | $ | 2,654  |   
|Average net assets(5)                                                          |  | $                           | 2,428  |   |      | $ | 2,905  |   
|Average debt outstanding(6)                                                    |  | $                           | 4,076  |   |      | $ | 4,401  |   
|Average debt outstanding per common share(1)                                   |  | $                           | 14.37  |   |      | $ | 21.30  |   
|Ratio of operating expenses to average net assets(7)                           |  |                             | 18.95  | % |      |   | 18.04  | % 
|Ratio of operating expenses, net of interest expense, to average net assets(7) |  |                             | 9.56   | % |      |   | 10.88  | % 
|Ratio of interest expense to average net assets(7)                             |  |                             | 9.39   | % |      |   | 7.16   | % 
|Ratio of net operating income to average net assets(7)                         |  |                             | 8.07   | % |      |   | 8.81   | % 



|(1) | Weighted average basic per share data.
|--- | --------------------------------------

|(2) | For the three months ended March 31, 2009, represents the issuance of common stock in conjunction with the acquisition of European Capital Limited (European
Capital).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents the impact of (i) the other components in the changes in net assets, including other capital transactions such as the issuance of common stock through a
shareholder distribution, the purchase of common stock held in deferred compensation trusts, stock-based compensation, income tax deductions related to the exercise of stock options and distribution of stock awards in excess of GAAP expense credited
to additional paid-in capital, repayments of notes receivable from the sale of common stock and the purchase of treasury stock and (ii) the different share amounts used in calculating per share data as a result of calculating certain per share
data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Total investment return (loss) is based on the change in the market value of our common stock taking into account dividends reinvested in accordance with the terms of
our dividend reinvestment plan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Based on the average of net assets as of the beginning and end of each period presented.
|--- | ----------------------------------------------------------------------------------------

|(6) | Based on a daily weighted average balance of debt outstanding during the period.
|--- | --------------------------------------------------------------------------------

|(7) | Ratios are annualized.
|--- | ----------------------



See accompanying notes.



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AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2010

(unaudited)

(in millions, except share data)



|                                        |  |                                                |  |                                |   |                  |           |  |              |  |                        |      |           |       |      |      |           |       |      |      
|--------------------------------------- |  | ---------------------------------------------- |  | ------------------------------ | - | ---------------- | --------- |  | ------------ |  | ---------------------- | ---- | --------- | ----- | ---- | ---- | --------- | ----- | ---- | -----
|Company (4)                             |  | Industry                                       |  | Investments                    |   | InterestRate (5) |           |  | MaturityDate |  | # of
shares/unitsowned |      | Principal |       | Cost |      | FairValue
|                                        |  |                                                |  |                                |   |                 
|NON-CONTROL / NON-AFFILIATE INVESTMENTS |  |                                                |  |                                |   |                  |           |  |              |  |                        |      |           |       |      |     
|AFA Investment Inc.                     |  | Food Products                                  |  | Senior Debt                    |   | 12.5             | %         |  | 2/15         |  |                        |      | $         | 4.7   |      | $    | 3.9       |       | $    | 3.9  
|Affordable Care Holding Corp.           |  | Health Care Providers & Services               |  | Subordinated Debt(7)           |   | 15.0             | %         |  | 11/13-11/14  |  |                        |      |           | 67.1  |      |      | 66.4      |       |      | 67.1 
|                                        |  | Convertible Preferred Stock                    |  |                                |   |                  |           |  | 70,752       |  |                        |      |           |       | 92.8 |      |           | 101.2
|                                        |  |                                                |  | Common Stock(1)                |   |                  |           |  |              |  | 17,687,156             |      |           |       |      |      | 17.7      |       |      | 19.8 
|                                        |  |                                                |  |                                |   |                  |           |  |              |  |                        |      |           |       |      |      | 176.9     |       |      | 188.1
|Algoma Holding Company                  |  | Building Products                              |  | Subordinated Debt(7)           |   | 12.7             | %         |  | 4/13         |  |                        |      |           | 15.3  |      |      | 15.2      |       |      | 15.0 
|American Acquisition, LLC               |  | Capital Markets                                |  | Senior Debt                    |   | 14.8             | %         |  | 12/12        |  |                        |      |           | 14.8  |      |      | 14.5      |       |      | 12.7 
|AmWins Group, Inc.                      |  | Insurance                                      |  | Senior Debt(7)                 |   | 5.8              | %         |  | 6/14         |  |                        |      |           | 18.5  |      |      | 18.6      |       |      | 12.1 
|Aspect Software                         |  | IT Services                                    |  | Senior Debt(7)                 |   | 7.3              | %         |  | 7/12         |  |                        |      |           | 20.0  |      |      | 19.9      |       |      | 17.1 
|Avalon Laboratories Holding Corp.       |  | Health Care Equipment & Supplies               |  | Senior Debt(7)                 |   | 11.0             | %         |  | 1/14         |  |                        |      |           | 17.6  |      |      | 17.5      |       |      | 17.6 
|                                        |  | Subordinated Debt(7)                           |  | 18.5                           | % |                  | 1/15      |  |              |  |                        | 23.7 |           |       | 23.5 |      |           | 23.7 
|                                        |  |                                                |  | Convertible Preferred Stock(1) |   |                  |           |  |              |  | 148,742                |      |           |       |      |      | 24.3      |       |      | 2.1  
|                                        |  |                                                |  | Common Stock(1)                |   |                  |           |  |              |  | 7,829                  |      |           |       |      |      | 1.3       |       |      |     
|                                        |  |                                                |  |                                |   |                  |           |  |              |  |                        |      |           |       |      |      | 66.6      |       |      | 43.4 
|Avanti Park Place LLC                   |  | Real Estate                                    |  | Senior Debt                    |   | 8.3              | %         |  | 6/10         |  |                        |      |           | 5.7   |      |      | 5.7       |       |      | 5.3  
|BBB Industries, LLC                     |  | Auto Components                                |  | Senior Debt(7)                 |   | 5.7              | %         |  | 6/14         |  |                        |      |           | 21.2  |      |      | 21.2      |       |      | 18.6 
|Berry-Hill Galleries, Inc.              |  | Distributors                                   |  | Senior Debt                    |   | 13.7             | %         |  | 6/10         |  |                        |      |           | 8.2   |      |      | 8.2       |       |      | 7.8  
|Blue Wolf Capital Fund II, L.P.         |  | Capital Markets                                |  | Limited Partnership Interest   |   |                  |           |  |              |  |                        |      |           |       |      |      | 2.5       |       |      | 2.5  
|CAMP Systems International, Inc.        |  | Air Freight & Logistics                        |  | Senior Debt(7)                 |   | 6.2              | %         |  | 9/14         |  |                        |      |           | 30.0  |      |      | 29.8      |       |      | 21.6 
|Carestream Health, Inc.                 |  | Health Care Equipment & Supplies               |  | Senior Debt(7)                 |   | 5.5              | %         |  | 10/13        |  |                        |      |           | 15.0  |      |      | 15.0      |       |      | 11.6 
|CH Holding Corp.                        |  | Leisure Equipment & Products                   |  | Senior Debt(6)                 |   | 7.2              | %         |  | 5/11         |  |                        |      |           | 16.5  |      |      | 13.0      |       |      | 16.8 
|                                        |  | Redeemable Preferred Stock(1)                  |  |                                |   |                  |           |  | 21,215       |  |                        |      |           |       | 42.7 |      |           |     
|                                        |  |                                                |  |                                |   |                  |           |  |              |  |                        |      |           |       |      |      | 55.7      |       |      | 16.8 
|CIBT Travel Solutions, LLC              |  | Commercial Services & Supplies                 |  | Senior Debt(7)                 |   | 9.5              | %         |  | 1/13         |  |                        |      |           | 48.7  |      |      | 48.3      |       |      | 48.7 
|                                        |  | Subordinated Debt(7)                           |  | 15.0                           | % |                  | 1/15-1/16 |  |              |  |                        | 55.0 |           |       | 54.6 |      |           | 55.0 
|                                        |  |                                                |  | Redeemable Preferred Stock     |   |                  |           |  |              |  | 15,000                 |      |           |       |      |      | 18.4      |       |      | 18.5 
|                                        |  |                                                |  | Convertible Preferred Stock(1) |   |                  |           |  |              |  | 776,800                |      |           |       |      |      | 77.7      |       |      | 27.1 
|                                        |  |                                                |  | Common Stock(1)                |   |                  |           |  |              |  | 194,200                |      |           |       |      |      | 19.4      |       |      |     
|                                        |  |                                                |  |                                |   |                  |           |  |              |  |                        |      |           |       |      |      | 218.4     |       |      | 149.3
|Cinelease Holdings, LLC                 |  | Electronic Equipment, Instruments & Components |  | Senior Debt(7)                 |   | 12.0             | %         |  | 3/12-4/13    |  |                        |      |           | 53.5  |      |      | 53.1      |       |      | 49.4 
|                                        |  | Common Stock(1)                                |  |                                |   |                  |           |  | 583          |  |                        |      |           |       | 0.6  |      |           | 0.2  
|                                        |  |                                                |  |                                |   |                  |           |  |              |  |                        |      |           |       |      | 53.7 |           |       | 49.6
|Compusearch Holdings Company, Inc.      |  | Software                                       |  | Subordinated Debt(7)           |   | 12.0             | %         |  | 7/12         |  |                        |      |           | 12.6  |      |      | 12.5      |       |      | 12.6 
|                                        |  | Convertible Preferred Stock(1)                 |  |                                |   |                  |           |  | 23,342       |  |                        |      |           |       | 0.9  |      |           | 2.7  
|                                        |  |                                                |  |                                |   |                  |           |  |              |  |                        |      |           |       |      |      | 13.4      |       |      | 15.3 
|Contec, LLC                             |  | Household Durables                             |  | Subordinated Debt(7)           |   | 14.0             | %         |  | 9/15-9/16    |  |                        |      |           | 135.0 |      |      | 133.8     |       |      | 119.2
|Delsey Holding(3)                       |  | Textiles, Apparel & Luxury Goods               |  | Senior Debt                    |   | 6.9              | %         |  | 2/12         |  |                        |      |           | 22.0  |      |      | 20.5      |       |      | 14.1 
|DelStar, Inc.                           |  | Building Products                              |  | Subordinated Debt(7)           |   | 14.0             | %         |  | 12/12        |  |                        |      |           | 19.2  |      |      | 19.1      |       |      | 19.2 
|                                        |  |                                                |  | Redeemable Preferred Stock     |   |                  |           |  |              |  | 26,613                 |      |           |       |      |      | 20.0      |       |      | 37.0 
|                                        |  |                                                |  | Convertible Preferred Stock(1) |   |                  |           |  |              |  | 29,569                 |      |           |       |      |      | 3.0       |       |      | 3.5  
|                                        |  |                                                |  | Common Stock Warrants(1)       |   |                  |           |  |              |  | 89,020                 |      |           |       |      |      | 16.9      |       |      | 1.0  
|                                        |  |                                                |  |                                |   |                  |           |  |              |  |                        |      |           |       |      |      | 59.0      |       |      | 60.7 



8



---

##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                        |  |                                |                      |                                |      |                  |       |      |              |  |                        |      |      |           |      |       |      |          
|--------------------------------------- |  | ------------------------------ | -------------------- | ------------------------------ | ---- | ---------------- | ----- | ---- | ------------ |  | ---------------------- | ---- | ---- | --------- | ---- | ----- | ---- | ---------
|Company (4)                             |  | Industry                       |                      | Investments                    |      | InterestRate (5) |       |      | MaturityDate |  | # of
shares/unitsowned |      |      | Principal |      | Cost  |      | FairValue
|Direct Marketing International LLC      |  | Media                          |                      | Subordinated Debt(7)           |      | 15.2             | %     |      | 7/12         |  |                        |      |      | 30.5      |      | 30.3  |      | 27.0     
|Dyno Holding Corp.                      |  | Auto Components                |                      | Senior Debt(7)                 |      | 11.7             | %     |      | 11/13-11/15  |  |                        |      |      | 41.5      |      | 41.3  |      | 41.5     
|                                        |  |                                |                      | Subordinated Debt(6)(7)        |      | 3.7              | %     |      | 11/16        |  |                        |      |      | 27.2      |      | 25.6  |      | 4.7      
|                                        |  |                                |                      | Convertible Preferred Stock(1) |      |                  |       |      |              |  | 389,759                |      |      |           |      | 40.5  |      |         
|                                        |  |                                |                      | Common Stock(1)                |      |                  |       |      |              |  | 97,440                 |      |      |           |      | 10.1  |      |         
|                                        |  |                                |                      |                                |      |                  |       |      |              |  |                        |      |      |           |      | 117.5 |      | 46.2     
|Easton Bell Sports, LLC                 |  | Leisure Equipment & Products   |                      | Redeemable Preferred Stock     |      |                  |       |      |              |  | 1,171                  |      |      |           |      | 1.3   |      | 1.3      
|                                        |  | Common Units(1)                |                      |                                |      |                  |       |      | 3,830,068    |  |                        |      |      | 0.7       |      | 2.0  
|                                        |  |                                |                      |                                |      |                  |       |      |              |  |                        |      |      |           |      | 2.0   |      | 3.3      
|FAMS Acquisition, Inc.                  |  | Diversified Financial Services |                      | Subordinated Debt(7)           |      | 14.0             | %     |      | 11/13        |  |                        |      |      | 13.2      |      | 13.1  |      | 13.2     
|                                        |  | Subordinated Debt(6)(7)        |                      | 15.5                           | %    |                  | 11/14 |      |              |  |                        | 13.7 |      | 11.8      |      | 3.1  
|                                        |  |                                |                      | Redeemable Preferred Stock(1)  |      |                  |       |      |              |  | 919                    |      |      |           |      | 0.9   |      |         
|                                        |  |                                |                      | Convertible Preferred Stock(1) |      |                  |       |      |              |  | 861,364                |      |      |           |      | 20.9  |      |         
|                                        |  |                                |                      |                                |      |                  |       |      |              |  |                        |      |      |           |      | 46.7  |      | 16.3     
|FCC Holdings, LLC                       |  | Commercial Banks               |                      | Subordinated Debt              |      | 15.1             | %     |      | 12/12        |  |                        |      |      | 75.0      |      | 74.6  |      | 71.7     
|Ford Motor Company(2)                   |  | Automobiles                    |                      | Senior Debt                    |      | 3.3              | %     |      | 12/13        |  |                        |      |      | 7.9       |      | 7.7   |      | 7.7      
|FPI Holding Corporation                 |  | Food Products                  |                      | Senior Debt                    |      | 8.6              | %     |      | 11/10-5/11   |  |                        |      |      | 12.2      |      | 12.1  |      | 12.2     
|                                        |  |                                |                      | Senior Debt(6)                 |      | 13.9             | %     |      | 5/13-6/15    |  |                        |      |      | 23.2      |      | 22.4  |      | 4.9      
|                                        |  |                                |                      | Subordinated Debt(6)           |      | 21.6             | %     |      | 6/15-5/16    |  |                        |      |      | 24.5      |      | 17.3  |      |         
|                                        |  |                                |                      | Redeemable Preferred Stock(1)  |      |                  |       |      |              |  | 4,469                  |      |      |           |      | 39.1  |      |         
|                                        |  |                                |                      | Convertible Preferred Stock(1) |      |                  |       |      |              |  | 21,715                 |      |      |           |      | 23.3  |      |         
|                                        |  |                                |                      | Common Stock(1)                |      |                  |       |      |              |  | 5,429                  |      |      |           |      | 5.8   |      |         
|                                        |  |                                |                      |                                |      |                  |       |      |              |  |                        |      |      |           |      | 120.0 |      | 17.1     
|Golden Key US LLC                       |  | Diversified Financial Services |                      | Commercial Paper(1)            |      | 5.3              | %     |      | 1/14         |  |                        |      |      | 7.3       |      | 7.3   |      | 3.9      
|HMSC Corporation                        |  | Insurance                      |                      | Senior Debt(6)(7)              |      | 5.7              | %     |      | 10/14        |  |                        |      |      | 3.3       |      | 3.3   |      | 1.2      
|Hoppy Holdings, Corp.                   |  | Auto Components                |                      | Subordinated Debt(7)           |      | 15.1             | %     |      | 7/12         |  |                        |      |      | 39.4      |      | 39.2  |      | 38.7     
|                                        |  |                                |                      | Redeemable Preferred Stock     |      |                  |       |      |              |  | 2,915                  |      |      |           |      | 7.2   |      | 7.0      
|                                        |  |                                |                      |                                |      |                  |       |      |              |  |                        |      |      |           |      | 46.4  |      | 45.7     
|Infiltrator Systems, Inc.               |  | Building Products              |                      | Senior Debt(7)                 |      | 16.5             | %     |      | 10/13        |  |                        |      |      | 40.1      |      | 39.8  |      | 39.1     
|Innova-Extel Acquisition Holdings, Inc. |  | Software                       |                      | Senior Debt(7)                 |      | 7.7              | %     |      | 4/13         |  |                        |      |      | 11.5      |      | 11.4  |      | 11.5     
|                                        |  |                                | Subordinated Debt(7) |                                | 15.0 | %                |       | 3/14 |              |  |                        |      | 18.3 |           | 18.1 |       | 18.3
|                                        |  |                                |                      | Convertible Preferred Stock    |      |                  |       |      |              |  | 14,283                 |      |      |           |      | 23.8  |      | 25.7     
|                                        |  |                                |                      |                                |      |                  |       |      |              |  |                        |      |      |           |      | 53.3  |      | 55.5     
|Inovis International, Inc.              |  | Software                       |                      | Senior Debt(7)                 |      | 16.0             | %     |      | 8/10         |  |                        |      |      | 89.6      |      | 89.6  |      | 89.6     
|Intergraph Corporation                  |  | Software                       |                      | Senior Debt(7)                 |      | 6.3              | %     |      | 12/14        |  |                        |      |      | 3.0       |      | 3.0   |      | 2.8      
|iTradeNetwork, Inc.                     |  | IT Services                    |                      | Senior Debt(7)                 |      | 11.5             | %     |      | 12/13        |  |                        |      |      | 25.0      |      | 24.8  |      | 25.0     
|JHCI Acquisition, Inc.                  |  | Air Freight & Logistics        |                      | Senior Debt(7)                 |      | 5.8              | %     |      | 12/14        |  |                        |      |      | 19.0      |      | 19.1  |      | 13.1     
|Jones Stephens Corp.(8)                 |  | Building Products              |                      | Subordinated Debt(6)(7)        |      | 13.0             | %     |      | 9/13         |  |                        |      |      | 11.6      |      | 11.1  |      | 6.0      
|KIK Custom Products, Inc.(3)            |  | Household Products             |                      | Senior Debt(6)                 |      | 5.2              | %     |      | 12/14        |  |                        |      |      | 19.7      |      | 19.7  |      | 12.7     
|LabelCorp Holdings, Inc                 |  | Paper & Forest Products        |                      | Senior Debt                    |      | 8.0              | %     |      | 8/13-8/14    |  |                        |      |      | 3.6       |      | 3.2   |      | 3.3      
|                                        |  |                                |                      | Subordinated Debt(7)           |      | 14.0             | %     |      | 8/15-8/16    |  |                        |      |      | 44.8      |      | 44.4  |      | 39.4     
|                                        |  |                                |                      |                                |      |                  |       |      |              |  |                        |      |      |           |      | 47.6  |      | 42.7     
|LCW Holdings, LLC                       |  | Real Estate                    |                      | Senior Debt                    |      | 6.7              | %     |      | 10/12        |  |                        |      |      | 32.3      |      | 31.6  |      | 30.5     
|                                        |  |                                |                      | Warrant(1)                     |      |                  |       |      |              |  | 12.5                   | %    |      |           |      | 0.8   |      | 3.5      
|                                        |  |                                |                      |                                |      |                  |       |      |              |  |                        |      |      |           |      | 32.4  |      | 34.0     
|LJVH Holdings Inc.(3)                   |  | Beverages                      |                      | Senior Debt(7)                 |      | 5.8              | %     |      | 1/15         |  |                        |      |      | 28.5      |      | 28.5  |      | 22.5     



9



---

##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                          |  |                                                |                                |                                |      |                  |   |       |              |            |                        |   |       |           |       |       |      |          
|----------------------------------------- |  | ---------------------------------------------- | ------------------------------ | ------------------------------ | ---- | ---------------- | - | ----- | ------------ | ---------- | ---------------------- | - | ----- | --------- | ----- | ----- | ---- | ---------
|Company (4)                               |  | Industry                                       |                                | Investments                    |      | InterestRate (5) |   |       | MaturityDate |            | # of
shares/unitsowned |   |       | Principal |       | Cost  |      | FairValue
|LN Acquisition Corp.                      |  | Machinery                                      |                                | Senior Debt(7)                 |      | 6.0              | % |       | 1/15         |            |                        |   |       | 21.5      |       | 21.6  |      | 15.4     
|Mirion Technologies, Inc.                 |  | Electrical Equipment                           |                                | Senior Debt(7)                 |      | 5.3              | % |       | 6/11-11/11   |            |                        |   |       | 128.4     |       | 127.3 |      | 128.4    
|                                          |  |                                                |                                | Subordinated Debt(7)           |      | 13.8             | % |       | 7/11-5/12    |            |                        |   |       | 53.4      |       | 53.1  |      | 53.4     
|                                          |  |                                                |                                | Convertible Preferred Stock    |      |                  |   |       |              |            | 435,724                |   |       |           |       | 56.2  |      | 105.7    
|                                          |  |                                                |                                | Common Stock(1)                |      |                  |   |       |              |            | 24,503                 |   |       |           |       | 2.8   |      | 3.6      
|                                          |  |                                                |                                | Common Stock Warrants(1)       |      |                  |   |       |              |            | 222,156                |   |       |           |       | 18.6  |      | 31.8     
|                                          |  |                                                |                                |                                |      |                  |   |       |              |            |                        |   |       |           |       | 258.0 |      | 322.9    
|Mitchell International, Inc.              |  | IT Services                                    |                                | Senior Debt(7)                 |      | 5.6              | % |       | 3/15         |            |                        |   |       | 5.0       |       | 5.0   |      | 3.3      
|National Processing Company Group, Inc.   |  | IT Services                                    |                                | Senior Debt(7)                 |      | 10.8             | % |       | 9/14         |            |                        |   |       | 53.0      |       | 52.8  |      | 45.0     
|NBD Holdings Corp.                        |  | Diversified Financial Services                 |                                | Subordinated Debt(7)           |      | 14.0             | % |       | 8/13         |            |                        |   |       | 47.1      |       | 46.7  |      | 47.1     
|                                          |  | Convertible Preferred Stock                    |                                |                                |      |                  |   |       | 84,174       |            |                        |   |       | 11.5      |       | 11.5 
|                                          |  |                                                |                                | Common Stock(1)                |      |                  |   |       |              |            | 633,408                |   |       |           |       | 0.1   |      | 1.5      
|                                          |  |                                                |                                |                                |      |                  |   |       |              |            |                        |   |       |           |       | 58.3  |      | 60.1     
|Net1 Las Colinas Manager, LLC             |  | Real Estate                                    |                                | Senior Debt                    |      | 7.7              | % |       | 10/15        |            |                        |   |       | 4.4       |       | 4.5   |      | 3.8      
|Nivel Holdings, LLC                       |  | Distributors                                   |                                | Senior Debt(7)                 |      | 11.2             | % |       | 10/12-10/13  |            |                        |   |       | 61.4      |       | 61.0  |      | 58.5     
|Orchard Brands Corporation                |  | Internet & Catalog Retail                      |                                | Senior Debt(7)                 |      | 7.3              | % |       | 4/13-4/14    |            |                        |   |       | 176.7     |       | 175.5 |      | 139.6    
|                                          |  |                                                | Senior Debt(6)                 |                                | 10.0 | %                |   | 4/14  |              |            |                        |   | 162.5 |           | 118.6 |       | 34.6
|                                          |  |                                                |                                | Subordinated Debt(6)           |      | 9.8              | % |       | 4/14         |            |                        |   |       | 68.1      |       | 49.9  |      |         
|                                          |  |                                                |                                |                                |      |                  |   |       |              |            |                        |   |       |           |       | 344.0 |      | 174.2    
|Pan Am International Flight Academy, Inc. |  | Professional Services                          |                                | Subordinated Debt(6)(7)        |      | 18.0             | % |       | 7/13         |            |                        |   |       | 34.6      |       | 24.8  |      | 20.2     
|                                          |  |                                                | Convertible Preferred Stock(1) |                                |      |                  |   |       |              | 8,234      |                        |   |       |           | 8.2   |       |    
|                                          |  |                                                |                                |                                |      |                  |   |       |              |            |                        |   |       |           |       | 33.0  |      | 20.2     
|PaR Systems, Inc.                         |  | Machinery                                      |                                | Senior Debt                    |      | 3.3              | % |       | 7/13         |            |                        |   |       | 3.9       |       | 3.8   |      | 3.2      
|Parts Holding Coörperatief U.A(3)         |  | Distributors                                   |                                | Membership Entitlements(1)     |      |                  |   |       |              |            | 173,060                |   |       |           |       | 6.4   |      |         
|Phillips & Temro Industries, Inc.         |  | Auto Components                                |                                | Senior Debt(7)                 |      | 13.0             | % |       | 12/13        |            |                        |   |       | 24.2      |       | 24.2  |      | 24.4     
|                                          |  |                                                | Subordinated Debt(7)           |                                | 18.0 | %                |   | 12/13 |              |            |                        |   | 19.2  |           | 19.2  |       | 18.2
|                                          |  |                                                |                                | Common Stock Warrants(1)       |      |                  |   |       |              |            | 5,000,000              |   |       |           |       |      |      | 0.8      
|                                          |  |                                                |                                |                                |      |                  |   |       |              |            |                        |   |       |           |       | 43.4  |      | 43.4     
|Qioptiq S.A.R.L.(3)                       |  | Electronic Equipment, Instruments & Components |                                | Subordinated Debt              |      | 10.0             | % |       | 3/18         |            |                        |   |       | 31.3      |       | 31.1  |      | 29.8     
|Ranpak Acquisition Company                |  | Containers & Packaging                         |                                | Senior Debt(7)                 |      | 6.8              | % |       | 12/13-12/14  |            |                        |   |       | 20.4      |       | 20.1  |      | 16.3     
|RDR Holdings, Inc.                        |  | Household Durables                             |                                | Subordinated Debt(7)           |      | 16.2             | % |       | 10/14-11/15  |            |                        |   |       | 100.1     |       | 99.4  |      | 100.1    
|                                          |  |                                                |                                | Convertible Preferred Stock(1) |      |                  |   |       |              |            | 1,541                  |   |       |           |       | 164.1 |      | 48.2     
|                                          |  |                                                |                                | Common Stock(1)                |      |                  |   |       |              |            | 15,414                 |   |       |           |       | 1.5   |      |         
|                                          |  |                                                |                                |                                |      |                  |   |       |              |            |                        |   |       |           |       | 265.0 |      | 148.3    
|RoarkMoney Mailer, LLC                   |  | Media                                          |                                | Common Membership Units(1)     |      |                  |   |       |              |            | 3.5                    | % |       |           |       | 0.9   |      |         
|Scanner Holdings Corporation              |  | Computers & Peripherals                        |                                | Subordinated Debt(7)           |      | 14.0             | % |       | 6/14         |            |                        |   |       | 17.1      |       | 17.0  |      | 17.1     
|                                          |  |                                                | Convertible Preferred Stock(1) |                                |      |                  |   |       |              | 77,640,000 |                        |   |       |           | 7.8   |       | 15.0
|                                          |  |                                                |                                | Common Stock(1)                |      |                  |   |       |              |            | 78,242                 |   |       |           |       | 0.1   |      |         
|                                          |  |                                                |                                |                                |      |                  |   |       |              |            |                        |   |       |           |       | 24.9  |      | 32.1     
|Seroyal Holdings, L.P.(3)                 |  | Pharmaceuticals                                |                                | Redeemable Preferred Units     |      |                  |   |       |              |            | 32,462                 |   |       |           |       | 0.8   |      | 0.9      
|                                          |  |                                                |                                | Common Units(1)                |      |                  |   |       |              |            | 95,280                 |   |       |           |       | 0.8   |      | 1.1      
|                                          |  |                                                |                                | Common Unit Warrants(1)        |      |                  |   |       |              |            | 41,661                 |   |       |           |       | 0.1   |      | 0.4      
|                                          |  |                                                |                                |                                |      |                  |   |       |              |            |                        |   |       |           |       | 1.7   |      | 2.4      



10



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                                       |  |                                                |                      |                                                  |      |                  |      |           |              |  |                        |      |           |       |      |      |           |      |      |      
|------------------------------------------------------ |  | ---------------------------------------------- | -------------------- | ------------------------------------------------ | ---- | ---------------- | ---- | --------- | ------------ |  | ---------------------- | ---- | --------- | ----- | ---- | ---- | --------- | ---- | ---- | -----
|Company (4)                                            |  | Industry                                       |                      | Investments                                      |      | InterestRate (5) |      |           | MaturityDate |  | # of
shares/unitsowned |      | Principal |       | Cost |      | FairValue
|Soil Safe Holdings, LLC                                |  | Professional Services                          |                      | Senior Debt                                      |      | 9.7              | %    |           | 8/13-8/14    |  |                        |      |           | 40.7  |      |      | 40.4      |      |      | 38.3 
|                                                       |  |                                                |                      | Subordinated Debt(7)                             |      | 16.3             | %    |           | 8/15-8/17    |  |                        |      |           | 64.1  |      |      | 63.6      |      |      | 54.0 
|                                                       |  |                                                |                      |                                                  |      |                  |      |           |              |  |                        |      |           |       |      |      | 104.0     |      |      | 92.3 
|SPL Acquisition Corp.                                  |  | Pharmaceuticals                                |                      | Senior Debt                                      |      | 11.0             | %    |           | 6/14         |  |                        |      |           | 58.3  |      |      | 57.9      |      |      | 58.3 
|                                                       |  |                                                |                      | Subordinated Debt(7)                             |      | 15.3             | %    |           | 6/15-6/16    |  |                        |      |           | 52.0  |      |      | 51.5      |      |      | 52.0 
|                                                       |  |                                                |                      | Convertible Preferred Stock(1)                   |      |                  |      |           |              |  | 84,043                 |      |           |       |      |      | 40.8      |      |      | 31.2 
|                                                       |  |                                                |                      |                                                  |      |                  |      |           |              |  |                        |      |           |       |      |      | 150.2     |      |      | 141.5
|Swank Audio Visuals, LLC                               |  | Commercial Services & Supplies                 |                      | Senior Debt(7)                                   |      | 6.7              | %    |           | 8/14         |  |                        |      |           | 12.1  |      |      | 12.0      |      |      | 12.1 
|                                                       |  | Senior Debt(6)(7)                              |                      | 7.4                                              | %    |                  | 8/14 |           |              |  |                        | 35.9 |           |       | 35.6 |      |           | 11.9
|                                                       |  |                                                |                      |                                                  |      |                  |      |           |              |  |                        |      |           |       |      |      | 47.6      |      |      | 24.0 
|Tanenbaum-Harber Co. Holdings, Inc.                    |  | Insurance                                      |                      | Redeemable Preferred Stock                       |      |                  |      |           |              |  | 376                    |      |           |       |      |      | 0.5       |      |      | 0.5  
|The Tensar Corporation                                 |  | Construction & Engineering                     |                      | Senior Debt(7)                                   |      | 8.2              | %    |           | 5/13         |  |                        |      |           | 82.0  |      |      | 81.3      |      |      | 58.2 
|                                                       |  |                                                | Subordinated Debt(6) |                                                  | 17.5 | %                |      | 10/13     |              |  |                        |      | 53.4      |       |      | 38.3 |           |      | 38.7
|                                                       |  |                                                |                      |                                                  |      |                  |      |           |              |  |                        |      |           |       |      |      | 119.6     |      |      | 96.9 
|ThreeSixty Sourcing, Inc.(3)                           |  | Commercial Services & Supplies                 |                      | Common Stock Warrants(1)                         |      |                  |      |           |              |  | 35                     |      |           |       |      |      | 4.1       |      |      |     
|TransFirst Holdings, Inc.                              |  | Commercial Services & Supplies                 |                      | Senior Debt(7)                                   |      | 7.0              | %    |           | 6/15         |  |                        |      |           | 52.7  |      |      | 52.4      |      |      | 39.5 
|triVIN Holdings, Inc.                                  |  | IT Services                                    |                      | Subordinated Debt(7)                             |      | 15.0             | %    |           | 6/14-6/15    |  |                        |      |           | 20.6  |      |      | 20.4      |      |      | 20.6 
|                                                       |  |                                                |                      | Convertible Preferred Stock(1)                   |      |                  |      |           |              |  | 247,000,000            |      |           |       |      |      | 29.4      |      |      | 28.6 
|                                                       |  |                                                |                      | Common Stock(1)                                  |      |                  |      |           |              |  | 6,319,923              |      |           |       |      |      | 6.3       |      |      |     
|                                                       |  |                                                |                      |                                                  |      |                  |      |           |              |  |                        |      |           |       |      |      | 56.1      |      |      | 49.2 
|Tyden Cayman Holdings Corp.                            |  | Electronic Equipment, Instruments & Components |                      | Common Stock(1)                                  |      |                  |      |           |              |  | 3,072,494              |      |           |       |      |      | 3.5       |      |      | 4.1  
|WRH, Inc.                                              |  | Life Sciences Tools & Services                 |                      | Senior Debt(7)                                   |      | 4.2              | %    |           | 9/13-9/14    |  |                        |      |           | 4.0   |      |      | 3.9       |      |      | 4.0  
|                                                       |  |                                                | Subordinated Debt(7) |                                                  | 14.6 | %                |      | 7/14-9/15 |              |  |                        |      | 91.4      |       |      | 91.7 |           |      | 91.4
|                                                       |  |                                                |                      | Convertible Preferred Stock(1)                   |      |                  |      |           |              |  | 2,008,575              |      |           |       |      |      | 216.3     |      |      | 63.1 
|                                                       |  |                                                |                      | Common Stock(1)                                  |      |                  |      |           |              |  | 502,144                |      |           |       |      |      | 49.8      |      |      |     
|                                                       |  |                                                |                      |                                                  |      |                  |      |           |              |  |                        |      |           |       |      |      | 361.7     |      |      | 158.5
|WWC Acquisitions, Inc.                                 |  | Professional Services                          |                      | Senior Debt(7)                                   |      | 7.0              | %    |           | 12/11-12/13  |  |                        |      |           | 34.0  |      |      | 33.7      |      |      | 26.3 
|                                                       |  |                                                |                      |                                                  |      |                 
|CMBS AND REAL ESTATE CDO INVESTMENTS                   |  |                                                |                      |                                                  |      |                  |      |           |              |  |                        |      |           |       |      |     
|ACAS CRE CDO 2007-1, Ltd                               |  | Real Estate                                    |                      | Class C through Class K Notes(1)                 |      | 6.4              | %    |           | 7/16-2/21    |  |                        |      | $         | 242.2 |      | $    | 170.5     |      | $    |     
|Banc of America Commercial Mortgage Trust 2007-1       |  | Real Estate                                    |                      | Commercial Mortgage Pass-Through Certificates    |      | 5.7              | %    |           | 2/17-2/18    |  |                        |      |           | 12.4  |      |      | 4.8       |      |      | 1.4  
|CD 2007-CD4 Commercial Mortgage Trust                  |  | Real Estate                                    |                      | Commercial Mortgage Pass-Through Certificates(1) |      | 5.7              | %    |           | 4/17         |  |                        |      |           | 14.0  |      |      | 8.8       |      |      |     
|CD 2007-CD5 Mortgage Trust                             |  | Real Estate                                    |                      | Commercial Mortgage Pass-Through Certificates    |      | 6.2              | %    |           | 12/17        |  |                        |      |           | 14.8  |      |      | 10.6      |      |      | 1.7  
|Citigroup Commercial Mortgage Securities Trust 2007-C6 |  | Real Estate                                    |                      | Commercial Mortgage Pass-Through Certificates    |      | 5.5              | %    |           | 7/17         |  |                        |      |           | 175.6 |      |      | 81.0      |      |      | 11.5 
|COBALT CMBS Commercial Mortgage Trust 2007-C3          |  | Real Estate                                    |                      | Commercial Mortgage Pass-Through Certificates    |      | 5.2              | %    |           | 10/17        |  |                        |      |           | 11.1  |      |      | 8.5       |      |      | 0.7  



11



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                                                  |  |                                |                    |                                                  |  |                  |   |  |              |  |                        |  |           |       |      |      |           |  |      |     
|----------------------------------------------------------------- |  | ------------------------------ | ------------------ | ------------------------------------------------ |  | ---------------- | - |  | ------------ |  | ---------------------- |  | --------- | ----- | ---- | ---- | --------- |  | ---- | ----
|Company (4)                                                       |  | Industry                       |                    | Investments                                      |  | InterestRate (5) |   |  | MaturityDate |  | # of
shares/unitsowned |  | Principal |       | Cost |      | FairValue
|Countrywide Commercial Mortgage Trust 2007-MF1                    |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 6.1              | % |  | 11/37-11/40  |  |                        |  |           | 24.0  |      |      | 8.4       |  |      | 1.0 
|Credit Suisse Commercial Mortgage Trust 2007-C3                   |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates(1) |  | 5.6              | % |  | 7/17         |  |                        |  |           | 13.2  |      |      | 10.7      |  |      |    
|Credit Suisse Commercial Mortgage Trust Series 2007-C4            |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 5.8              | % |  | 8/17         |  |                        |  |           | 20.8  |      |      | 12.7      |  |      | 5.7 
|GE Commercial Mortgage Corporation, Series 2007-C1                |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 5.5              | % |  | 12/19        |  |                        |  |           | 37.0  |      |      | 31.0      |  |      | 0.6 
|GS Mortgage Securities Trust 2007-GG10                            |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates(1) |  | 5.7              | % |  | 7/17         |  |                        |  |           | 63.7  |      |      | 52.7      |  |      |    
|J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11 |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 5.6              | % |  | 7/17         |  |                        |  |           | 87.2  |      |      | 55.7      |  |      | 0.8 
|LB-UBS Commercial Mortgage Trust 2007-C6                          |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 6.2              | % |  | 8/17         |  |                        |  |           | 36.6  |      |      | 23.1      |  |      | 4.7 
|LB-UBS Commercial Mortgage Trust 2008-C1                          |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 6.2              | % |  | 7/23-7/24    |  |                        |  |           | 19.4  |      |      | 7.5       |  |      | 1.9 
|ML-CFC Commercial Mortgage Trust 2007-6                           |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates(1) |  | 5.8              | % |  | 4/17         |  |                        |  |           | 9.8   |      |      | 3.2       |  |      | 0.1 
|ML-CFC Commercial Mortgage Trust 2007-8                           |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 6.0              | % |  | 8/17         |  |                        |  |           | 32.8  |      |      | 19.9      |  |      | 3.6 
|Wachovia Bank Commercial Mortgage Trust 2007-C31                  |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 5.8              | % |  | 5/17         |  |                        |  |           | 20.0  |      |      | 12.0      |  |      | 3.0 
|Wachovia Bank Commercial Mortgage Trust, Series 2007-C32          |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 5.7              | % |  | 10/17        |  |                        |  |           | 160.5 |      |      | 74.8      |  |      | 4.5 
|Wachovia Bank Commercial Mortgage Trust, Series 2007-C34          |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 5.3              | % |  | 10/17-9/24   |  |                        |  |           | 96.2  |      |      | 43.0      |  |      | 5.3 
|Wachovia Bank Commercial Trust 2006-C28                           |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates    |  | 6.0              | % |  | 11/16        |  |                        |  |           | 5.0   |      |      | 3.1       |  |      | 0.3 
|                                                                  |  |                                |                    |                                                  |  |                  |  
|CLO INVESTMENTS                                                   |  |                                |                    |                                                  |  |                  |   |  |              |  |                        |  |           |       |      |      |           | 
|ACAS CLO 2007-1, Ltd.                                             |  | Diversified Financial Services |                    | Secured Notes                                    |  |                  |   |  |              |  |                        |  | $         | 8.5   |      | $    | 8.3       |  | $    | 4.0 
|                                                                  |  |                                | Subordinated Notes |                                                  |  |                  |   |  |              |  |                        |  | 25.9      |       |      | 20.9 |           |  | 13.8
|                                                                  |  |                                |                    |                                                  |  |                  |   |  |              |  |                        |  |           |       |      |      | 29.2      |  |      | 17.8
|Ares IIIR/IVR CLO Ltd.                                            |  | Diversified Financial Services |                    | Subordinated Notes                               |  |                  |   |  |              |  |                        |  |           | 20.0  |      |      | 18.3      |  |      | 7.3 
|Ares VIII CLO, Ltd.                                               |  | Diversified Financial Services |                    | Preference Shares                                |  |                  |   |  |              |  | 6,241                  |  |           |       |      |      | 4.8       |  |      | 2.2 
|Avalon Capital Ltd. 3                                             |  | Diversified Financial Services |                    | Preferred Securities                             |  |                  |   |  |              |  | 13,796                 |  |           |       |      |      | 5.4       |  |      | 4.9 



12



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AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                                                                          |  |                                |                         |                                   |   |                  |   |   |              |        |                        |  |           |      |      |      |           |     |     |     
|----------------------------------------------------------------------------------------- |  | ------------------------------ | ----------------------- | --------------------------------- | - | ---------------- | - | - | ------------ | ------ | ---------------------- |  | --------- | ---- | ---- | ---- | --------- | --- | --- | ----
|Company (4)                                                                               |  | Industry                       |                         | Investments                       |   | InterestRate (5) |   |   | MaturityDate |        | # of
shares/unitsowned |  | Principal |      | Cost |      | FairValue
|Babson CLO Ltd. 2006-II                                                                   |  | Diversified Financial Services |                         | Income Notes                      |   |                  |   |   |              |        |                        |  |           | 15.0 |      |      | 14.0      |     |     | 9.7 
|BALLYROCK CLO 2006-2 LTD.                                                                 |  | Diversified Financial Services |                         | Deferrable Notes                  |   |                  |   |   |              |        |                        |  |           | 2.0  |      |      | 1.6       |     |     | 1.0 
|Cent CDO 12 Limited                                                                       |  | Diversified Financial Services |                         | Income Notes                      |   |                  |   |   |              |        |                        |  |           | 26.4 |      |      | 19.9      |     |     | 14.5
|Centurion CDO 8 Limited                                                                   |  | Diversified Financial Services |                         | Subordinated Notes                |   |                  |   |   |              |        |                        |  |           | 5.0  |      |      | 3.0       |     |     | 2.6 
|Champlain CLO                                                                             |  | Diversified Financial Services |                         | Preferred Securities              |   |                  |   |   |              |        | 1,000,000              |  |           |      |      |      | 0.7       |     |     | 0.4 
|CoLTs 2005-1 Ltd.(3)                                                                      |  | Diversified Financial Services |                         | Preference Shares(1)              |   |                  |   |   |              |        | 360                    |  |           |      |      |      | 6.7       |     |     | 0.4 
|CoLTs 2005-2 Ltd.(3)                                                                      |  | Diversified Financial Services |                         | Preference Shares                 |   |                  |   |   |              |        | 34,170,000             |  |           |      |      |      | 25.0      |     |     | 10.2
|CREST Exeter Street Solar 2004-2                                                          |  | Diversified Financial Services |                         | Preferred Securities              |   |                  |   |   |              |        | 3,089,177              |  |           |      |      |      | 2.9       |     |     | 0.4 
|Eaton Vance CDO X PLC(3)                                                                  |  | Diversified Financial Services |                         | Secured Subordinated Income Notes |   |                  |   |   |              |        |                        |  |           | 15.0 |      |      | 13.9      |     |     | 4.8 
|Essex Park CDO Ltd.                                                                       |  | Diversified Financial Services |                         | Preferred Securities              |   |                  |   |   |              |        | 5,750,000              |  |           |      |      |      | 2.2       |     |     | 1.9 
|Flagship CLO V                                                                            |  | Diversified Financial Services |                         | Deferrable Notes                  |   |                  |   |   |              |        |                        |  |           | 1.7  |      |      | 1.3       |     |     | 0.9 
|                                                                                          |  |                                | Subordinated Securities |                                   |   |                  |   |   |              | 15,000 |                        |  |           |      |      | 12.0 |           |     | 7.3
|                                                                                          |  |                                |                         |                                   |   |                  |   |   |              |        |                        |  |           |      |      |      | 13.3      |     |     | 8.2 
|Galaxy III CLO, Ltd                                                                       |  | Diversified Financial Services |                         | Subordinated Notes(1)             |   |                  |   |   |              |        |                        |  |           | 4.0  |      |      | 2.4       |     |     | 0.5 
|LightPoint CLO IV, LTD                                                                    |  | Diversified Financial Services |                         | Income Notes                      |   |                  |   |   |              |        |                        |  |           | 6.7  |      |      | 7.1       |     |     | 1.3 
|LightPoint CLO VII, Ltd.                                                                  |  | Diversified Financial Services |                         | Subordinated Notes                |   |                  |   |   |              |        |                        |  |           | 9.0  |      |      | 7.2       |     |     | 4.0 
|LightPoint CLO VIII, Ltd.                                                                 |  | Diversified Financial Services |                         | Deferrable Notes                  |   |                  |   |   |              |        |                        |  |           | 7.0  |      |      | 6.5       |     |     | 3.7 
|Mayport CLO Ltd.                                                                          |  | Diversified Financial Services |                         | Income Notes                      |   |                  |   |   |              |        |                        |  |           | 14.0 |      |      | 13.1      |     |     | 5.2 
|NYLIM Flatiron CLO 2006-1 LTD.(3)                                                         |  | Diversified Financial Services |                         | Subordinated Securities           |   |                  |   |   |              |        | 10,000                 |  |           |      |      |      | 7.5       |     |     | 5.5 
|Octagon Investment Partners VII, Ltd.                                                     |  | Diversified Financial Services |                         | Preferred Securities              |   |                  |   |   |              |        | 5,000,000              |  |           |      |      |      | 1.9       |     |     | 1.6 
|Sapphire Valley CDO I, Ltd.                                                               |  | Diversified Financial Services |                         | Subordinated Notes                |   |                  |   |   |              |        |                        |  |           | 14.0 |      |      | 14.2      |     |     | 1.2 
|Vitesse CLO, Ltd.                                                                         |  | Diversified Financial Services |                         | Preferred Securities              |   |                  |   |   |              |        | 20,000,000             |  |           |      |      |      | 15.4      |     |     | 7.8 
|Subtotal Non-Control / Non-Affiliate Investments (55% of total
investments at fair value) |  |                                |                         |                                   | $ | 4,824.3          |   | $ | 3,143.4     
|                                                                                          |  |                                |                         |                                   |   |                 
|AFFILIATE INVESTMENTS                                                                     |  |                                |                         |                                   |   |                  |   |   |              |        |                        |  |           |      |      |     
|American Capital Agency Corp(2)                                                           |  | Real Estate Investment Trusts  |                         | Common Stock                      |   |                  |   |   |              |        | 2,500,100              |  |           |      |      | $    | 50.0      |     | $   | 64.0
|Anchor Drilling Fluids USA, Inc.                                                          |  | Energy Equipment & Services    |                         | Senior Debt(7)                    |   | 11.3             | % |   | 12/13        |        |                        |  | $         | 6.5  |      |      | 6.4       |     |     | 5.1 
|                                                                                          |  | Redeemable Preferred Stock(1)  |                         |                                   |   |                  |   |   | 859          |        |                        |  |           |      | 1.6  |      |           | 0.2
|                                                                                          |  |                                |                         | Common Stock(1)                   |   |                  |   |   |              |        | 3,061                  |  |           |      |      |      | 5.0       |     |     |    
|                                                                                          |  |                                |                         |                                   |   |                  |   |   |              |        |                        |  |           |      |      |      | 13.0      |     |     | 5.3 



13



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     |           |     |     |     
|---------------------------------------------------------------------- |  | -------------------------------- | ------------------------------ | -------------------------------- | - | ---------------- | ----- |  | ------------ | --------- | ---------------------- | - | ---- | --------- | ---- | ---- | --- | --------- | --- | --- | ----
|Company (4)                                                            |  | Industry                         |                                | Investments                      |   | InterestRate (5) |       |  | MaturityDate |           | # of
shares/unitsowned |   |      | Principal |      | Cost |     | FairValue
|Comfort Co., Inc.                                                      |  | Household Durables               |                                | Senior Debt                      |   | 11.5             | %     |  | 3/12-3/15    |           |                        |   |      |           | 12.6 |      |     | 12.5      |     |     | 10.0
|                                                                       |  |                                  |                                | Common Stock(1)                  |   |                  |       |  |              |           | 110,365                |   |      |           |      |      |     | 11.8      |     |     | 5.9 
|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 24.3      |     |     | 15.9
|Egenera, Inc.                                                          |  | Computers & Peripherals          |                                | Subordinated Debt(6)             |   | 15.0             | %     |  | 12/10        |           |                        |   |      |           | 4.0  |      |     | 3.2       |     |     | 2.1 
|                                                                       |  |                                  |                                | Redeemable Preferred Stock(1)    |   |                  |       |  |              |           | 523,040                |   |      |           |      |      |     | 0.4       |     |     |    
|                                                                       |  |                                  |                                | Common Stock(1)                  |   |                  |       |  |              |           | 8,046,865              |   |      |           |      |      |     | 25.0      |     |     |    
|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 28.6      |     |     | 2.1 
|HALT Medical, Inc.                                                     |  | Health Care Equipment & Supplies |                                | Convertible Preferred Stock(1)   |   |                  |       |  |              |           | 5,592,367              |   |      |           |      |      |     | 8.9       |     |     | 10.4
|IEE Holding 1 S.A.(3)                                                  |  | Auto Components                  |                                | Common Stock(1)                  |   |                  |       |  |              |           | 250,000                |   |      |           |      |      |     | 4.5       |     |     |    
|IS Holdings I, Inc.                                                    |  | Software                         |                                | Redeemable Preferred Stock(1)    |   |                  |       |  |              |           | 1,297                  |   |      |           |      |      |     | 1.8       |     |     | 1.9 
|                                                                       |  |                                  |                                | Common Stock(1)                  |   |                  |       |  |              |           | 1,165,930              |   |      |           |      |      |     |          |     |     | 7.1 
|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 1.8       |     |     | 9.0 
|LTM Enterprises, Inc.                                                  |  | Personal Products                |                                | Senior Debt(6)(7)                |   | 17.3             | %     |  | 11/11        |           |                        |   |      |           | 21.0 |      |     | 18.5      |     |     | 8.4 
|Narus, Inc.                                                            |  | Internet Software & Services     |                                | Convertible Preferred Stock(1)   |   |                  |       |  |              |           | 31,835,900             |   |      |           |      |      |     | 9.2       |     |     | 4.9 
|                                                                       |  |                                  | Preferred Stock Warrants(1)    |                                  |   |                  |       |  |              | 9,567,232 |                        |   |      |           |      |      | 0.1 |           |     | 1.4
|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 9.3       |     |     | 6.3 
|Primrose Holding Corporation                                           |  | Diversified Consumer Services    |                                | Common Stock(1)                  |   |                  |       |  |              |           | 4,213                  |   |      |           |      |      |     | 2.7       |     |     | 3.3 
|Qualitor Component Holdings, LLC                                       |  | Auto Components                  |                                | Subordinated Debt(7)             |   | 17.1             | %     |  | 7/13         |           |                        |   |      |           | 37.0 |      |     | 36.8      |     |     | 36.9
|                                                                       |  |                                  | Redeemable Preferred Units(1)  |                                  |   |                  |       |  |              | 3,150,000 |                        |   |      |           |      |      | 3.1 |           |     |   
|                                                                       |  |                                  |                                | Common Units(1)                  |   |                  |       |  |              |           | 350,000                |   |      |           |      |      |     | 0.4       |     |     |    
|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 40.3      |     |     | 36.9
|Radar Detection Holdings Corp.                                         |  | Household Durables               |                                | Senior Debt(7)                   |   | 13.0             | %     |  | 11/12        |           |                        |   |      |           | 13.0 |      |     | 13.0      |     |     | 10.5
|                                                                       |  |                                  | Convertible Preferred Stock(1) |                                  |   |                  |       |  |              | 7,075     |                        |   |      |           |      |      | 0.7 |           |     | 1.7
|                                                                       |  |                                  |                                | Common Stock(1)                  |   |                  |       |  |              |           | 40,688                 |   |      |           |      |      |     | 0.6       |     |     |    
|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 14.3      |     |     | 12.2
|Roadrunner Dawes, Inc.                                                 |  | Road & Rail                      |                                | Subordinated Debt(7)             |   | 18.5             | %     |  | 8/12         |           |                        |   |      |           | 20.8 |      |     | 20.8      |     |     | 21.0
|                                                                       |  |                                  |                                | Common Stock(1)                  |   |                  |       |  |              |           | 7,000                  |   |      |           |      |      |     | 7.0       |     |     | 7.9 
|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 27.8      |     |     | 28.9
|Small Smiles Holding Company, LLC                                      |  | Health Care Providers & Services |                                | Senior Debt                      |   | 3.8              | %     |  | 2/15         |           |                        |   |      |           | 10.2 |      |     | 6.8       |     |     | 5.0 
|                                                                       |  | Subordinated Debt(6)             |                                | 11.0                             | % |                  | 2/17  |  |              |           |                        |   | 26.4 |           |      | 19.1 |     |           | 5.4
|                                                                       |  |                                  |                                | Common Membership Interest(1)    |   |                  |       |  |              |           | 12.8                   | % |      |           |      |      |     | 13.8      |     |     |    
|                                                                       |  |                                  |                                | Preferred Membership Interest(1) |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 37.8      |     |     |    
|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 77.5      |     |     | 10.4
|WFS Holding, LLC                                                       |  | Software                         |                                | Preferred Interest               |   |                  |       |  |              |           | 20,403,772             |   |      |           |      |      |     | 3.1       |     |     | 3.8 
|Subtotal Affiliate Investments (4% of total investments at fair
value) |  |                                  |                                |                                  |   | $                | 324.6 |  | $            | 216.9    
|                                                                       |  |                                  |                                |                                  |   |                 
|CONTROL INVESTMENTS                                                    |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |    
|ACAS Equity Holdings Corp.                                             |  | Diversified Financial Services   |                                | Common Stock(1)                  |   |                  |       |  |              |           | 589                    |   |      |           |      |      | $   | 15.1      |     | $   | 1.4 
|ACAS Real Estate Holdings Corporation                                  |  | Real Estate                      |                                | Subordinated Debt(6)             |   | 15.0             | %     |  | 5/16         |           |                        |   |      | $         | 4.2  |      |     | 3.7       |     |     | 4.1 
|                                                                       |  | Common Stock(1)                  |                                |                                  |   |                  |       |  | 100          | %         |                        |   |      |           |      | 11.5 |     |           | 0.6
|                                                                       |  |                                  |                                |                                  |   |                  |       |  |              |           |                        |   |      |           |      |      |     | 15.2      |     |     | 4.7 
|American Capital, LLC                                                  |  | Capital Markets                  |                                | Common Membership Interest(1)    |   |                  |       |  |              |           | 100                    | % |      |           |      |      |     | 75.0      |     |     | 60.4



14



---

##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      |         |  |          
|-------------------------------- |  | ---------------------------------------- |  | -------------------------------------------------- | - | ---------------- | ----- | ------- | ------------ |  | ---------------------- | ---- | --------- | ---- | ------- |  | ---------
|Company (4)                      |  | Industry                                 |  | Investments                                        |   | InterestRate (5) |       |         | MaturityDate |  | # of
shares/unitsowned |      | Principal |      | Cost    |  | FairValue
|American Driveline Systems, Inc. |  | Diversified Consumer Services            |  | Subordinated Debt(7)
Redeemable Preferred Stock(7) |   |                  |       |         | 12/14-12/15  |  |                        |      | 42.5      |      | 42.1    |  | 42.5     
|                                 |  |                                          |  |                                                    |   |                  |       | 403,357 |              |  |                        | 33.0 |           | 48.7
|                                 |  |                                          |  | Common Stock(1)                                    |   |                  |       |         |              |  | 128,681                |      |           |      | 10.8    |  | 2.9      
|                                 |  |                                          |  | Common Stock Warrants(1)                           |   |                  |       |         |              |  | 204,663                |      |           |      | 17.3    |  | 4.6      
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 103.2   |  | 98.7     
|Aptara, Inc.                     |  | IT Services                              |  | Senior Debt                                        |   | 11.5             | %     |         | 2/11         |  |                        |      | 3.0       |      | 3.0     |  | 3.0      
|                                 |  |                                          |  | Subordinated Debt(7)                               |   | 16.9             | %     |         | 2/11         |  |                        |      | 58.7      |      | 58.4    |  | 60.7     
|                                 |  |                                          |  | Redeemable Preferred Stock                         |   |                  |       |         |              |  | 15,107                 |      |           |      | 14.1    |  | 21.0     
|                                 |  |                                          |  | Convertible Preferred Stock(1)                     |   |                  |       |         |              |  | 2,549,410              |      |           |      | 8.8     |  |         
|                                 |  |                                          |  | Preferred Stock Warrants(1)                        |   |                  |       |         |              |  | 230,681                |      |           |      | 1.0     |  |         
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 85.3    |  | 84.7     
|Capital.com, Inc.                |  | Diversified Financial Services           |  | Common Stock(1)                                    |   |                  |       |         |              |  | 8,500,100              |      |           |      | 0.9     |  |         
|CMX Inc.                         |  | Construction & Engineering               |  | Senior Debt(6)(7)                                  |   | 3.5              | %     |         | 5/11         |  |                        |      | 17.5      |      | 17.4    |  | 7.1      
|Contour Semiconductor, Inc.      |  | Semiconductors & Semiconductor Equipment |  | Convertible Preferred Stock(1)                     |   |                  |       |         |              |  | 11,532,842             |      |           |      | 12.4    |  | 23.2     
|Core Financial Holdings, LLC     |  | Diversified Financial Services           |  | Subordinated Debt                                  |   | 13.6             | %     |         | 4/14-5/15    |  |                        |      | 37.8      |      | 37.5    |  | 37.5     
|                                 |  | Common Units(1)                          |  |                                                    |   |                  |       |         | 57,940,360   |  |                        |      | 54.4      |      | 23.7   
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 91.9    |  | 61.2     
|Creditcards.com, Inc.            |  | Internet Software & Services             |  | Senior Debt(7)                                     |   | 13.9             | %     |         | 6/13-10/13   |  |                        |      | 80.7      |      | 80.3    |  | 80.7     
|                                 |  | Subordinated Debt(7)                     |  | 19.0                                               | % |                  | 10/14 |         |              |  | 16.2                   |      | 16.2      |      | 16.2   
|                                 |  |                                          |  | Redeemable Preferred Stock(1)                      |   |                  |       |         |              |  | 257,510                |      |           |      | 53.6    |  | 22.3     
|                                 |  |                                          |  | Common Stock(1)                                    |   |                  |       |         |              |  | 176,430,690            |      |           |      | 2.4     |  |         
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 152.5   |  | 119.2    
|ECA Acquisition Holdings, Inc    |  | Health Care Equipment & Supplies         |  | Subordinated Debt(7)                               |   | 16.5             | %     |         | 12/14        |  |                        |      | 13.6      |      | 13.5    |  | 13.6     
|                                 |  | Common Stock(1)                          |  |                                                    |   |                  |       |         | 583          |  |                        |      | 11.1      |      | 15.2   
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 24.6    |  | 28.8     
|eLynx Holdings, Inc.             |  | IT Services                              |  | Senior Debt(7)                                     |   | 7.7              | %     |         | 7/13         |  |                        |      | 9.6       |      | 9.6     |  | 9.6      
|                                 |  |                                          |  | Subordinated Debt                                  |   | 7.5              | %     |         | 7/13         |  |                        |      | 4.1       |      | 4.0     |  | 4.1      
|                                 |  |                                          |  | Subordinated Debt(6)                               |   | 8.2              | %     |         | 7/13         |  |                        |      | 12.3      |      | 10.0    |  | 0.3      
|                                 |  |                                          |  | Redeemable Preferred Stock(1)                      |   |                  |       |         |              |  | 21,113                 |      |           |      | 8.9     |  |         
|                                 |  |                                          |  | Convertible Preferred Stock(1)                     |   |                  |       |         |              |  | 7,929                  |      |           |      | 6.0     |  |         
|                                 |  |                                          |  | Common Stock(1)                                    |   |                  |       |         |              |  | 11,261                 |      |           |      | 1.1     |  |         
|                                 |  |                                          |  | Common Stock Warrants(1)                           |   |                  |       |         |              |  | 1,078,792              |      |           |      | 13.1    |  |         
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 52.7    |  | 14.0     
|ETG Holdings, Inc.               |  | Containers & Packaging                   |  | Senior Debt(6)                                     |   | 8.7              | %     |         | 5/11         |  |                        |      | 15.9      |      | 11.6    |  |         
|                                 |  |                                          |  | Convertible Preferred Stock(1)                     |   |                  |       |         |              |  | 233,201                |      |           |      | 11.4    |  |         
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 23.0    |  |         
|European Capital Limited(3)      |  | Diversified Financial Services           |  | Subordinated Debt                                  |   | 7.4              | %     |         | 9/10         |  |                        |      | 113.3     |      | 113.0   |  | 113.3    
|                                 |  | Ordinary Shares(1)                       |  |                                                    |   |                  |       |         | 431,895,528  |  |                        |      | 1,267.3   |      | 278.4  
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 1,380.3 |  | 391.7    
|European Touch, LTD. II          |  | Leisure Equipment & Products             |  | Senior Debt                                        |   | 8.3              | %     |         | 8/11-1/12    |  |                        |      | 0.5       |      | 0.5     |  | 0.5      
|                                 |  | Subordinated Debt(6)                     |  | 16.0                                               | % |                  | 1/11  |         |              |  | 19.7                   |      | 13.5      |      | 1.8    
|                                 |  |                                          |  | Redeemable Preferred Stock(1)                      |   |                  |       |         |              |  | 263                    |      |           |      | 0.3     |  |         
|                                 |  |                                          |  | Common Stock(1)                                    |   |                  |       |         |              |  | 1,688                  |      |           |      | 0.9     |  |         
|                                 |  |                                          |  | Common Stock Warrants(1)                           |   |                  |       |         |              |  | 7,105                  |      |           |      | 3.7     |  |         
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 18.9    |  | 2.3      
|EXPL Pipeline Holdings LLC       |  | Oil, Gas & Consumable Fuels              |  | Senior Debt                                        |   | 8.0              | %     |         | 1/17         |  |                        |      | 44.7      |      | 44.4    |  | 44.7     
|                                 |  | Common Membership Units(1)               |  |                                                    |   |                  |       |         | 58,297       |  |                        |      | 44.5      |      | 7.8    
|                                 |  |                                          |  |                                                    |   |                  |       |         |              |  |                        |      |           |      | 88.9    |  | 52.5     



15



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      |      |      |          
|---------------------------------------- |  | -------------------------------------- | ------------------------------ | ------------------------------ | ---- | ---------------- | ----- | ---------- | ------------ | ---------- | ---------------------- | ---- | ---- | --------- | ---- | ---- | ---- | ---------
|Company (4)                              |  | Industry                               |                                | Investments                    |      | InterestRate (5) |       |            | MaturityDate |            | # of
shares/unitsowned |      |      | Principal |      | Cost |      | FairValue
|FL Acquisitions Holdings, Inc.           |  | Computers & Peripherals                |                                | Senior Debt(7)                 |      | 8.3              | %     |            | 10/12-10/13  |            |                        |      |      | 40.0      |      | 39.8 |      | 40.0     
|                                         |  |                                        | Subordinated Debt(7)           |                                | 18.5 | %                |       | 4/14-10/14 |              |            |                        |      | 31.6 |           | 31.4 |      | 31.5
|                                         |  |                                        |                                | Subordinated Debt(6)           |      | 22.5             | %     |            | 10/14        |            |                        |      |      | 14.0      |      | 8.7  |      | 8.5      
|                                         |  |                                        |                                | Redeemable Preferred Stock(1)  |      |                  |       |            |              |            | 583,000                |      |      |           |      | 0.6  |      |         
|                                         |  |                                        |                                | Common Stock(1)                |      |                  |       |            |              |            | 129,514                |      |      |           |      | 15.6 |      |         
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 96.1 |      | 80.0     
|Formed Fiber Technologies, Inc.          |  | Auto Components                        |                                | Common Stock(1)                |      |                  |       |            |              |            | 31,250                 |      |      |           |      | 8.1  |      | 3.5      
|Fosbel Global Services (LUXCO) S.C.A.(3) |  | Commercial Services & Supplies         |                                | Subordinated Debt(7)           |      | 17.3             | %     |            | 12/13        |            |                        |      |      | 24.6      |      | 24.4 |      | 24.7     
|                                         |  | Subordinated Debt(6)                   |                                | 20.0                           | %    |                  | 12/14 |            |              |            |                        | 22.7 |      | 15.1      |      | 16.4
|                                         |  |                                        |                                | Redeemable Preferred Stock(1)  |      |                  |       |            |              |            | 18,449,456             |      |      |           |      | 18.5 |      |         
|                                         |  |                                        |                                | Convertible Preferred Stock(1) |      |                  |       |            |              |            | 1,519,368              |      |      |           |      | 3.0  |      |         
|                                         |  |                                        |                                | Common Stock(1)                |      |                  |       |            |              |            | 108,526                |      |      |           |      | 0.2  |      |         
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 61.2 |      | 41.1     
|Fountainhead Estate Holding Corp.(3)     |  | Internet Software & Services           |                                | Senior Debt                    |      | 4.0              | %     |            | 10/13        |            |                        |      |      | 10.8      |      | 10.8 |      | 10.8     
|                                         |  | Redeemable Preferred Stock             |                                |                                |      |                  |       |            | 115,538      |            |                        |      |      | 16.3      |      | 16.3
|                                         |  |                                        |                                | Convertible Preferred Stock(1) |      |                  |       |            |              |            | 59,250                 |      |      |           |      | 59.2 |      | 29.6     
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 86.3 |      | 56.7     
|FreeConference.com, Inc.                 |  | Diversified Telecommunication Services |                                | Senior Debt(7)                 |      | 6.7              | %     |            | 4/11-5/11    |            |                        |      |      | 11.2      |      | 11.2 |      | 11.2     
|                                         |  |                                        | Subordinated Debt              |                                | 15.0 | %                |       | 5/12       |              |            |                        |      | 10.5 |           | 9.2  |      | 10.1
|                                         |  |                                        | Redeemable Preferred Stock(1)  |                                |      |                  |       |            |              | 14,042,095 |                        |      |      |           | 12.8 |      |    
|                                         |  |                                        |                                | Common Stock(1)                |      |                  |       |            |              |            | 6,088,229              |      |      |           |      | 2.3  |      |         
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 35.5 |      | 21.3     
|Future Food, Inc.                        |  | Food Products                          |                                | Senior Debt                    |      | 5.2              | %     |            | 8/10         |            |                        |      |      | 17.0      |      | 17.0 |      | 11.8     
|                                         |  |                                        |                                | Common Stock(1)                |      |                  |       |            |              |            | 64,917                 |      |      |           |      | 13.0 |      |         
|                                         |  |                                        |                                | Common Stock Warrants(1)       |      |                  |       |            |              |            | 6,500                  |      |      |           |      | 1.3  |      |         
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 31.3 |      | 11.8     
|Group Montana, Inc.                      |  | Textiles, Apparel & Luxury Goods       |                                | Senior Debt(7)                 |      | 10.8             | %     |            | 1/11-10/11   |            |                        |      |      | 16.2      |      | 16.2 |      | 16.2     
|                                         |  |                                        | Senior Debt(6)                 |                                | 12.7 | %                |       | 10/11      |              |            |                        |      | 5.5  |           | 4.7  |      | 3.6 
|                                         |  |                                        |                                | Subordinated Debt(6)           |      | 24.5             | %     |            | 10/12        |            |                        |      |      | 13.1      |      | 6.8  |      |         
|                                         |  |                                        |                                | Convertible Preferred Stock(1) |      |                  |       |            |              |            | 4,000                  |      |      |           |      | 1.0  |      |         
|                                         |  |                                        |                                | Common Stock(1)                |      |                  |       |            |              |            | 2.5                    | %    |      |           |      | 0.7  |      |         
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 29.4 |      | 19.8     
|Halex Holdings Inc.                      |  | Construction Materials                 |                                | Senior Debt(6)                 |      | 7.0              | %     |            | 9/11         |            |                        |      |      | 11.2      |      | 9.8  |      | 6.0      
|                                         |  |                                        |                                | Redeemable Preferred Stock(1)  |      |                  |       |            |              |            | 23,737,746             |      |      |           |      | 30.8 |      |         
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 40.6 |      | 6.0      
|Hartstrings Holdings Corp.               |  | Textiles, Apparel & Luxury Goods       |                                | Senior Debt(6)                 |      | 4.5              | %     |            | 12/10        |            |                        |      |      | 8.8       |      | 8.8  |      | 6.1      
|                                         |  |                                        | Convertible Preferred Stock(1) |                                |      |                  |       |            |              | 10,196     |                        |      |      |           | 2.9  |      |    
|                                         |  |                                        |                                | Common Stock(1)                |      |                  |       |            |              |            | 14,250                 |      |      |           |      | 4.8  |      |         
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 16.5 |      | 6.1      
|J-Pac, LLC                               |  | Health Care Equipment & Supplies       |                                | Senior Debt(7)                 |      | 11.0             | %     |            | 1/12-1/14    |            |                        |      |      | 3.1       |      | 3.0  |      | 3.1      
|                                         |  |                                        | Senior Debt(6)(7)              |                                | 12.3 | %                |       | 1/14       |              |            |                        |      | 11.7 |           | 11.6 |      | 1.0 
|                                         |  |                                        |                                | Subordinated Debt(6)           |      | 18.9             | %     |            | 1/14         |            |                        |      |      | 12.1      |      | 8.7  |      |         
|                                         |  |                                        |                                | Common Unit Warrants(1)        |      |                  |       |            |              |            | 500,000                |      |      |           |      | 0.2  |      |         
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 23.5 |      | 4.1      
|Kingway Inca Clymer Holdings, Inc.       |  | Building Products                      |                                | Subordinated Debt(6)           |      | 12.3             | %     |            | 4/12         |            |                        |      |      | 2.2       |      |     |      | 1.1      
|                                         |  |                                        | Redeemable Preferred Stock(1)  |                                |      |                  |       |            |              | 13,709     |                        |      |      |           | 9.2  |      |    
|                                         |  |                                        |                                |                                |      |                  |       |            |              |            |                        |      |      |           |      | 9.2  |      | 1.1      



16



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      |       |      |          
|-------------------------------- |  | ---------------------------------------------- | ------------------------------ | ------------------------------ | ---- | ---------------- | - | ---------- | ------------ | ---------- | ---------------------- | ---- | --------- | ---- | ----- | ---- | ---------
|Company (4)                      |  | Industry                                       |                                | Investments                    |      | InterestRate (5) |   |            | MaturityDate |            | # of
shares/unitsowned |      | Principal |      | Cost  |      | FairValue
|Lifoam Holdings, Inc.            |  | Leisure Equipment & Products                   |                                | Senior Debt                    |      | 10.5             | % |            | 12/14        |            |                        |      | 19.1      |      | 19.1  |      | 19.1     
|                                 |  |                                                | Subordinated Debt              |                                | 8.0  | %                |   | 12/14      |              |            |                        | 40.6 |           | 40.5 |       | 40.6
|                                 |  |                                                |                                | Redeemable Preferred Stock(1)  |      |                  |   |            |              |            | 6,160                  |      |           |      | 4.2   |      | 7.4      
|                                 |  |                                                |                                | Convertible Preferred Stock(1) |      |                  |   |            |              |            | 15,797                 |      |           |      | 12.2  |      |         
|                                 |  |                                                |                                | Common Stock(1)                |      |                  |   |            |              |            | 14,000                 |      |           |      | 1.4   |      |         
|                                 |  |                                                |                                | Common Stock Warrants(1)       |      |                  |   |            |              |            | 464,242                |      |           |      | 2.9   |      |         
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 80.3  |      | 67.1     
|LLSC Holdings Corporation        |  | Personal Products                              |                                | Senior Debt(7)                 |      | 6.2              | % |            | 8/12         |            |                        |      | 4.4       |      | 4.4   |      | 4.4      
|                                 |  |                                                | Subordinated Debt (7)          |                                | 12.0 | %                |   | 9/13       |              |            |                        | 5.5  |           | 5.5  |       | 5.5 
|                                 |  |                                                |                                | Convertible Preferred Stock(1) |      |                  |   |            |              |            | 7,496                  |      |           |      | 8.1   |      | 4.7      
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 18.0  |      | 14.6     
|LVI Holdings, LLC                |  | Professional Services                          |                                | Senior Debt                    |      | 7.2              | % |            | 6/10         |            |                        |      | 2.7       |      | 2.7   |      | 2.8      
|                                 |  |                                                |                                | Subordinated Debt(6)(7)        |      | 18.0             | % |            | 2/13         |            |                        |      | 12.3      |      | 10.2  |      | 5.0      
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 12.9  |      | 7.8      
|Medical Billing Holdings, Inc.   |  | IT Services                                    |                                | Subordinated Debt(7)           |      | 15.0             | % |            | 9/13         |            |                        |      | 11.1      |      | 10.9  |      | 11.1     
|                                 |  |                                                | Convertible Preferred Stock(1) |                                |      |                  |   |            |              | 13,199,000 |                        |      |           | 13.2 |       | 7.4 
|                                 |  |                                                |                                | Common Stock(1)                |      |                  |   |            |              |            | 3,299,582              |      |           |      | 3.3   |      |         
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 27.4  |      | 18.5     
|Montgomery Lane, LLC             |  | Diversified Financial Services                 |                                | Common Membership Units(1)     |      |                  |   |            |              |            | 100                    |      |           |      | 8.3   |      | 5.1      
|Montgomery Lane, LTD(3)          |  | Diversified Financial Services                 |                                | Common Membership Units(1)     |      |                  |   |            |              |            | 50,000                 |      |           |      | 6.7   |      | 0.3      
|MW Acquisition Corporation       |  | Health Care Providers & Services               |                                | Subordinated Debt(7)           |      | 16.3             | % |            | 2/13-2/14    |            |                        |      | 26.1      |      | 25.9  |      | 25.5     
|                                 |  |                                                |                                | Redeemable Preferred Stock     |      |                  |   |            |              |            | 2,485                  |      |           |      | 1.0   |      | 1.0      
|                                 |  |                                                |                                | Convertible Preferred Stock(1) |      |                  |   |            |              |            | 38,016                 |      |           |      | 13.5  |      | 12.3     
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 40.4  |      | 38.8     
|NECCO Holdings, Inc.             |  | Food Products                                  |                                | Senior Debt(6)                 |      | 13.5             | % |            | 12/12        |            |                        |      | 4.2       |      | 3.7   |      | 0.9      
|                                 |  |                                                |                                | Common Stock(1)                |      |                  |   |            |              |            | 760,869                |      |           |      | 0.1   |      |         
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 3.8   |      | 0.9      
|NECCO Realty Investments, LLC    |  | Real Estate                                    |                                | Senior Debt(7)                 |      | 14.0             | % |            | 12/17        |            |                        |      | 40.3      |      | 39.7  |      | 40.3     
|                                 |  |                                                | Common Membership Units(1)     |                                |      |                  |   |            |              | 7,000      |                        |      |           | 4.8  |       | 1.4 
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 44.5  |      | 41.7     
|Paradigm Precision Holdings, LLC |  | Aerospace & Defense                            |                                | Subordinated Debt              |      | 17.0             | % |            | 8/14         |            |                        |      | 59.4      |      | 59.0  |      | 59.4     
|                                 |  |                                                | Subordinated Debt(6)           |                                | 20.0 | %                |   | 8/14-10/14 |              |            |                        | 71.7 |           | 54.1 |       | 0.8 
|                                 |  |                                                |                                | Common Membership Units(1)     |      |                  |   |            |              |            | 478,488                |      |           |      | 17.5  |      |         
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 130.6 |      | 60.2     
|PHC Sharp Holdings, Inc.         |  | Commercial Services & Supplies                 |                                | Senior Debt(7)                 |      | 5.9              | % |            | 12/11-12/12  |            |                        |      | 16.8      |      | 16.6  |      | 12.3     
|                                 |  |                                                | Subordinated Debt(6)           |                                | 17.0 | %                |   | 12/14      |              |            |                        | 10.1 |           | 7.3  |       |    
|                                 |  |                                                |                                | Common Stock(1)                |      |                  |   |            |              |            | 367,881                |      |           |      | 4.2   |      |         
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 28.1  |      | 12.3     
|PHI Acquisitions, Inc.           |  | Internet & Catalog Retail                      |                                | Senior Debt(7)                 |      | 12.0             | % |            | 6/12         |            |                        |      | 10.4      |      | 10.3  |      | 10.4     
|                                 |  |                                                |                                | Subordinated Debt(7)           |      | 17.7             | % |            | 6/13         |            |                        |      | 25.0      |      | 24.8  |      | 25.0     
|                                 |  |                                                |                                | Redeemable Preferred Stock     |      |                  |   |            |              |            | 36,267                 |      |           |      | 41.7  |      | 53.3     
|                                 |  |                                                |                                | Common Stock(1)                |      |                  |   |            |              |            | 40,295                 |      |           |      | 3.9   |      | 3.9      
|                                 |  |                                                |                                | Common Stock Warrants(1)       |      |                  |   |            |              |            | 116,065                |      |           |      | 11.6  |      | 11.3     
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 92.3  |      | 103.9    
|Resort Funding Holdings, Inc.    |  | Diversified Financial Services                 |                                | Senior Debt                    |      | 8.2              | % |            | 4/10         |            |                        |      | 7.4       |      | 7.4   |      | 7.4      
|                                 |  | Common Stock                                   |                                |                                |      |                  |   |            | 583          |            |                        |      | 20.5      |      |     
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 27.9  |      | 7.4      
|Sixnet Holdings, LLC             |  | Electronic Equipment, Instruments & Components |                                | Senior Debt(7)                 |      | 11.1             | % |            | 6/12-6/13    |            |                        |      | 37.2      |      | 37.0  |      | 36.4     
|                                 |  |                                                | Convertible Preferred Stock(1) |                                |      |                  |   |            |              | 94         |                        |      |           | 0.5  |       | 0.7 
|                                 |  |                                                | Membership Units(1)            |                                |      |                  |   |            |              | 446        |                        |      |           | 5.6  |       | 3.1 
|                                 |  |                                                |                                |                                |      |                  |   |            |              |            |                        |      |           |      | 43.1  |      | 40.2     



17



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                                                      |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |       |         |           |       |        
|--------------------------------------------------------------------- |  | ---------------------------------------- | -------------------------- | ------------------------------ | ---- | ---------------- | - | ---- | ------------ | ------- | ---------------------- | - | ----- | --------- | ---- | ----- | ------- | --------- | ----- | -------
|Company (4)                                                           |  | Industry                                 |                            | Investments                    |      | InterestRate (5) |   |      | MaturityDate |         | # of
shares/unitsowned |   |       | Principal |      | Cost  |         | FairValue
|SMG Holdings, Inc.                                                    |  | Hotels, Restaurants & Leisure            |                            | Senior Debt(7)                 |      | 3.3              | % |      | 7/14         |         |                        |   |       | 5.9       |      |       | 5.9     |           |       | 5.9    
|                                                                      |  |                                          | Subordinated Debt(7)       |                                | 12.5 | %                |   | 6/15 |              |         |                        |   | 126.0 |           |      | 125.2 |         |           | 126.1
|                                                                      |  |                                          |                            | Convertible Preferred Stock(1) |      |                  |   |      |              |         | 1,101,673              |   |       |           |      |       | 131.6   |           |       | 128.1  
|                                                                      |  |                                          |                            | Common Stock(1)                |      |                  |   |      |              |         | 275,419                |   |       |           |      |       | 27.5    |           |       |       
|                                                                      |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |       | 290.2   |           |       | 260.1  
|Specialty Brands of America, Inc.                                     |  | Food Products                            |                            | Subordinated Debt(7)           |      | 14.0             | % |      | 5/14         |         |                        |   |       | 35.0      |      |       | 34.7    |           |       | 35.0   
|                                                                      |  |                                          | Redeemable Preferred Stock |                                |      |                  |   |      |              | 122,017 |                        |   |       |           |      | 9.6   |         |           | 15.3 
|                                                                      |  |                                          |                            | Common Stock(1)                |      |                  |   |      |              |         | 128,175                |   |       |           |      |       | 2.3     |           |       | 18.0   
|                                                                      |  |                                          |                            | Common Stock Warrants(1)       |      |                  |   |      |              |         | 56,819                 |   |       |           |      |       | 1.4     |           |       | 8.0    
|                                                                      |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |       | 48.0    |           |       | 76.3   
|Spring Air International, LLC                                         |  | Household Durables                       |                            | Common Membership Units(1)     |      |                  |   |      |              |         | 49                     | % |       |           |      |       | 2.7     |           |       | 0.4    
|TestAmerica Environmental Services, LLC                               |  | Commercial Services & Supplies           |                            | Senior Debt(6)                 |      | 6.5              | % |      | 12/12-12/13  |         |                        |   |       | 21.8      |      |       | 16.0    |           |       | 13.3   
|                                                                      |  | Preferred Units(1)                       |                            |                                |      |                  |   |      | 20,000       |         |                        |   |       |           | 19.3 |       |         |         
|                                                                      |  |                                          | Preferred Unit Warrants(1) |                                |      |                  |   |      |              | 490,000 |                        |   |       |           |      | 2.0   |         |           |     
|                                                                      |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |       | 37.3    |           |       | 13.3   
|UFG Real Estate Holdings, LLC                                         |  | Real Estate                              |                            | Common Membership(1)           |      |                  |   |      |              |         |                        |   |       |           |      |       |        |           |       | 0.9    
|Unique Fabricating Incorporated                                       |  | Auto Components                          |                            | Senior Debt                    |      | 4.5              | % |      | 10/10-2/11   |         |                        |   |       | 0.8       |      |       | 0.8     |           |       | 0.8    
|                                                                      |  |                                          | Senior Debt(6)             |                                | 10.7 | %                |   | 2/12 |              |         |                        |   | 5.1   |           |      | 4.2   |         |           | 3.8  
|                                                                      |  |                                          |                            | Redeemable Preferred Stock(1)  |      |                  |   |      |              |         | 301,556                |   |       |           |      |       | 7.9     |           |       |       
|                                                                      |  |                                          |                            | Common Stock Warrants(1)       |      |                  |   |      |              |         | 6,862                  |   |       |           |      |       | 0.2     |           |       |       
|                                                                      |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |       | 13.1    |           |       | 4.6    
|Unwired Holdings, Inc.                                                |  | Household Durables                       |                            | Senior Debt                    |      | 4.9              | % |      | 6/10-6/11    |         |                        |   |       | 1.6       |      |       | 1.6     |           |       | 1.6    
|                                                                      |  |                                          |                            | Senior Debt(6)                 |      | 8.4              | % |      | 6/11         |         |                        |   |       | 11.7      |      |       | 7.6     |           |       | 10.8   
|                                                                      |  |                                          |                            | Redeemable Preferred Stock(1)  |      |                  |   |      |              |         | 14,630                 |   |       |           |      |       | 14.6    |           |       |       
|                                                                      |  |                                          |                            | Common Stock(1)                |      |                  |   |      |              |         | 126,001                |   |       |           |      |       | 1.3     |           |       |       
|                                                                      |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |       | 25.1    |           |       | 12.4   
|VP Acquisition Holdings, Inc.                                         |  | Health Care Equipment & Supplies         |                            | Subordinated Debt(7)           |      | 14.5             | % |      | 10/13-10/14  |         |                        |   |       | 20.2      |      |       | 20.0    |           |       | 20.2   
|                                                                      |  | Common Stock(1)                          |                            |                                |      |                  |   |      | 19,780       |         |                        |   |       |           | 24.7 |       |         | 46.4     
|                                                                      |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |       | 44.7    |           |       | 66.6   
|Warner Power, LLC                                                     |  | Electrical Equipment                     |                            | Subordinated Debt(6)(7)        |      | 12.6%            |   |      | 11/10        |         |                        |   |       | 5.0       |      |       | 5.0     |           |       | 1.7    
|                                                                      |  | Redeemable Preferred Membership Units(1) |                            |                                |      |                  |   |      | 3,796,269    |         |                        |   |       |           | 3.0  |       |         |         
|                                                                      |  |                                          |                            | Common Membership Units(1)     |      |                  |   |      |              |         | 27,400                 |   |       |           |      |       | 1.9     |           |       |       
|                                                                      |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |       | 9.9     |           |       | 1.7    
|WIS Holding Company, Inc.                                             |  | Commercial Services & Supplies           |                            | Subordinated Debt(7)           |      | 14.8%            |   |      | 1/14-1/15    |         |                        |   |       | 110.5     |      |       | 109.9   |           |       | 110.5  
|                                                                      |  | Convertible Preferred Stock              |                            |                                |      |                  |   |      | 703,406      |         |                        |   |       |           | 91.0 |       |         | 139.0    
|                                                                      |  |                                          |                            | Common Stock(1)                |      |                  |   |      |              |         | 175,852                |   |       |           |      |       | 17.6    |           |       | 29.6   
|                                                                      |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |       | 218.5   |           |       | 279.1  
|WSACS RR Holdings, LLC                                                |  | Real Estate                              |                            | Common Membership Units(1)     |      |                  |   |      |              |         | 3,384,615              |   |       |           |      |       | 3.4     |           |       |       
|                                                                      |  |                                          |                            |                                |      |                 
|CDO/ CLO INVESTMENTS                                                  |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      |      
|ACAS Wachovia Investments, L.P.                                       |  | Diversified Financial Services           |                            | Partnership Interest           |      |                  |   |      |              |         | 90                     | % |       |           |      |       | 12.2    |           |       | 2.2    
|Subtotal Control Investments (41% of total investments at fair value) |  |                                          |                            |                                | $    | 3,864.4          |   | $    | 2,337.8     
|Total Investment Assets                                               |  |                                          |                            |                                |      |                  |   |      |              |         |                        |   |       |           |      | $     | 9,013.3 |           | $     | 5,698.1



18



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2010

(unaudited)

(in millions, except share data)



|                                 |  |                                                         |  |                  |  |                    |  |               |  |          |   |      |   |           |   |       |   |  | 
|-------------------------------- |  | ------------------------------------------------------- |  | ---------------- |  | ------------------ |  | ------------- |  | -------- | - | ---- | - | --------- | - | ----- | - |  | 
|Counterparty                     |  | Instrument                                              |  | InterestRate (5) |  | ExpirationDate (5) |  | # ofcontracts |  | Notional |   | Cost |   | FairValue |  
|                                 |  |                                                         |  |                  |  |                   
|DERIVATIVE AGREEMENTS            |  |                                                         |  |                  |  |                    |  |               |  |          |   |      |   |           |  
|Wachovia Bank, N.A.              |  | Balance Differential Swap  Pay Fixed/ Receive Floating |  | LIBOR/5.1%       |  | 8/19               |  | 1             |  | 13.7     |   |      |  |           |   | 2.1   |  
|Subtotal Derivative Assets       |  |                                                         |  |                  |  |                    |  |               |  |          |   | $    |  |           | $ | 2.1   |  
|                                 |  |                                                         |  |                  |  |                   
|DERIVATIVE AGREEMENTS            |  |                                                         |  |                  |  |                    |  |               |  |          |   |      |   |           |  
|Citibank, N.A.                   |  | Interest Rate Swap  Pay Fixed/ Receive Floating        |  | 4.8%/LIBOR       |  | 4/12-11/19         |  | 4             |  | 462.2    |   |      |  |           |   | (28.1 | )
|BMO Financial Group              |  | Interest Rate Swap  Pay Fixed/ Receive Floating        |  | 5.4%/LIBOR       |  | 2/13-8/17          |  | 5             |  | 368.6    |   |      |  |           |   | (34.6 | )
|Wachovia Bank, N.A.              |  | Interest Rate Swap  Pay Fixed/ Receive Floating        |  | 4.9%/LIBOR       |  | 1/14-8/19          |  | 3             |  | 323.3    |   |      |  |           |   | (28.6 | )
|UniCredit Group                  |  | Interest Rate Swap  Pay Fixed/ Receive Floating        |  | 5.7%/LIBOR       |  | 7/17               |  | 1             |  | 66.0     |   |      |  |           |   | (9.0  | )
|Citibank, N.A.                   |  | Balance Differential Swap  Pay Fixed/ Receive Floating |  | 5.2%/LIBOR       |  | 11/19              |  | 1             |  | 50.2     |   |      |  |           |   | (4.4  | )
|Fortis Financial Services LLC    |  | Interest Rate Swap  Pay Fixed/ Receive Floating        |  | 5.7%/LIBOR       |  | 7/17               |  | 1             |  | 22.3     |   |      |  |           |   | (3.1  | )
|Citibank, N.A.                   |  | Foreign Exchange Swap  Pay Euros/ Receive GBP          |  |                  |  | 2/11               |  | 1             |  |          |   |      |  |           |   | (1.1  | )
|Subtotal Derivative Liabilities  |  |                                                         |  |                  |  |                    |  |               |  | $        |  |      | $ | (108.9    | )
|Total Derivative Agreements, Net |  |                                                         |  |                  |  |                    |  |               |  | $        |  |      | $ | (106.8    | )



|                                                                       |  |      |       |           |   |      
|---------------------------------------------------------------------- |  | ---- | ----- | --------- | - | -----
|Funds                                                                  |  | Cost |       | FairValue
|MONEY MARKET FUNDS(9)                                                  |  |      |       |           |   |      
|Federated Tax-Free Obligations Fund                                    |  | $    | 76.0  |           | $ | 76.0 
|AIM STITLiquid Assets Portfolio                                       |  |      | 69.5  |           |   | 69.5 
|Federated Government Obligations Fund                                  |  |      | 53.5  |           |   | 53.5 
|Fidelity Institutional Money Market FundsMoney Market Portfolio       |  |      | 47.4  |           |   | 47.4 
|Dreyfus Cash Advantage Fund                                            |  |      | 44.3  |           |   | 44.3 
|BlackRock Cash FundsPrime                                             |  |      | 44.2  |           |   | 44.2 
|BlackRock Liquidity Funds TempFund Portfolio                           |  |      | 43.8  |           |   | 43.8 
|Dreyfus Institutional Reserves Money Fund                              |  |      | 43.2  |           |   | 43.2 
|Federated Prime Cash Obligations Fund                                  |  |      | 42.9  |           |   | 42.9 
|Fidelity Institutional Money Market FundsPrime Money Market Portfolio |  |      | 42.9  |           |   | 42.9 
|Dreyfus Government Cash Management                                     |  |      | 40.5  |           |   | 40.5 
|Federated Prime Obligations Fund                                       |  |      | 37.5  |           |   | 37.5 
|Goldman Sachs Financial Square FundsPrime Obligations Fund            |  |      | 37.0  |           |   | 37.0 
|Goldman Sachs Financial Square FundMoney Market Fund                  |  |      | 34.1  |           |   | 34.1 
|First American Prime Obligations Fund                                  |  |      | 30.3  |           |   | 30.3 
|Fidelity Institutional Money Market FundsGovernment Portfolio         |  |      | 9.9   |           |   | 9.9  
|Goldman Sachs Financial Square FundsGovernment Fund                   |  |      | 2.0   |           |   | 2.0  
|First American Government Obligations Fund                             |  |      | 1.6   |           |   | 1.6  
|AIM STIT-STIC Prime Portfolio                                          |  |      | 1.5   |           |   | 1.5  
|Total Money Market Funds                                               |  | $    | 702.1 |           | $ | 702.1



|(1) | Non-income producing.
|--- | ---------------------

|(2) | Publicly traded company or a consolidated subsidiary of a public company.
|--- | -------------------------------------------------------------------------

|(3) | International investment.
|--- | -------------------------

|(4) | Certain of the securities are issued by affiliate(s) of the listed portfolio company.
|--- | -------------------------------------------------------------------------------------

|(5) | Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by the nature of indebtedness by a single
issuer. The maturity dates represent the earliest and the latest maturity dates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Loan is on non-accrual status and therefore considered non-income producing.
|--- | ----------------------------------------------------------------------------

|(7) | All or a portion of the loans are pledged as collateral under various secured financing arrangements.
|--- | -----------------------------------------------------------------------------------------------------

|(8) | Portfolio company has filed for reorganization under Chapter 11 of the United States Code.
|--- | ------------------------------------------------------------------------------------------

|(9) | Included in Cash and cash equivalents on our Consolidated Balance Sheets.
|--- | -------------------------------------------------------------------------



19



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2009

(in millions, except share data)



|                                        |  |                                                |                               |                                |      |                  |      |                  |        |                       |      |           |       |      |      |           |      |      |      
|--------------------------------------- |  | ---------------------------------------------- | ----------------------------- | ------------------------------ | ---- | ---------------- | ---- | ---------------- | ------ | --------------------- | ---- | --------- | ----- | ---- | ---- | --------- | ---- | ---- | -----
|Company (4)                             |  | Industry                                       |                               | Investments                    |      | InterestRate (5) |      | Maturity    Date |        | # ofshares/unitsowned |      | Principal |       | Cost |      | FairValue
|NON-CONTROL / NON-AFFILIATE INVESTMENTS |  |                                                |                               |                                |      |                  |      |                  |        |                       |     
|Affordable Care Holding Corp.           |  | Health Care Providers & Services               |                               | Subordinated Debt(7)           |      | 15.0%            |      | 11/13-11/14      |        |                       |      | $         | 66.6  |      | $    | 65.9      |      | $    | 66.6 
|                                        |  | Convertible Preferred Stock                    |                               |                                |      |                  |      | 70,752           |        |                       |      |           |       | 91.0 |      |           | 99.4
|                                        |  |                                                |                               | Common Stock(1)                |      |                  |      |                  |        | 17,687,156            |      |           |       |      |      | 17.7      |      |      | 19.8 
|                                        |  |                                                |                               |                                |      |                  |      |                  |        |                       |      |           |       |      |      | 174.6     |      |      | 185.8
|Algoma Holding Company                  |  | Building Products                              |                               | Subordinated Debt(7)           |      | 12.6%            |      | 4/13             |        |                       |      |           | 15.2  |      |      | 15.1      |      |      | 14.9 
|American Acquisition, LLC               |  | Capital Markets                                |                               | Senior Debt                    |      | 14.2%            |      | 12/12            |        |                       |      |           | 15.7  |      |      | 15.4      |      |      | 13.5 
|AmWins Group, Inc.                      |  | Insurance                                      |                               | Senior Debt(7)                 |      | 5.8%             |      | 6/14             |        |                       |      |           | 18.5  |      |      | 18.6      |      |      | 12.1 
|Anchor Drilling Fluids USA, Inc.        |  | Energy Equipment & Services                    |                               | Senior Debt(7)                 |      | 11.3%            |      | 4/13             |        |                       |      |           | 7.9   |      |      | 7.8       |      |      | 6.3  
|                                        |  | Subordinated Debt(6)(7)                        |                               | 14.7%                          |      | 4/15             |      |                  |        |                       | 5.2  |           |       | 5.0  |      |           |    
|                                        |  |                                                |                               |                                |      |                  |      |                  |        |                       |      |           |       |      |      | 12.8      |      |      | 6.3  
|Aspect Software                         |  | IT Services                                    |                               | Senior Debt(7)                 |      | 7.3%             |      | 7/12             |        |                       |      |           | 20.0  |      |      | 19.9      |      |      | 16.6 
|Avalon Laboratories Holding Corp.       |  | Health Care Equipment & Supplies               |                               | Senior Debt(7)                 |      | 11.0%            |      | 1/14             |        |                       |      |           | 17.7  |      |      | 17.6      |      |      | 17.7 
|                                        |  | Subordinated Debt(7)                           |                               | 18.0%                          |      | 1/15             |      |                  |        |                       | 22.9 |           |       | 21.7 |      |           | 20.6
|                                        |  |                                                |                               | Convertible Preferred Stock(1) |      |                  |      |                  |        | 148,742               |      |           |       |      |      | 24.3      |      |      |     
|                                        |  |                                                |                               | Common Stock(1)                |      |                  |      |                  |        | 7,829                 |      |           |       |      |      | 1.3       |      |      |     
|                                        |  |                                                |                               |                                |      |                  |      |                  |        |                       |      |           |       |      |      | 64.9      |      |      | 38.3 
|Avanti Park Place LLC                   |  | Real Estate                                    |                               | Senior Debt                    |      | 8.3%             |      | 6/10             |        |                       |      |           | 5.7   |      |      | 5.8       |      |      | 5.8  
|BBB Industries, LLC                     |  | Auto Components                                |                               | Senior Debt(7)                 |      | 5.7%             |      | 6/14             |        |                       |      |           | 21.2  |      |      | 21.2      |      |      | 15.9 
|Berry-Hill Galleries, Inc.              |  | Distributors                                   |                               | Senior Debt                    |      | 13.7%            |      | 3/10             |        |                       |      |           | 7.9   |      |      | 7.9       |      |      | 7.9  
|Blue Wolf Capital Fund II, L.P.         |  | Capital Markets                                |                               | Limited Partnership Interest   |      |                  |      |                  |        |                       |      |           |       |      |      | 2.5       |      |      | 2.5  
|CAMP Systems International, Inc.        |  | Air Freight & Logistics                        |                               | Senior Debt(7)                 |      | 6.4%             |      | 9/14             |        |                       |      |           | 30.0  |      |      | 29.8      |      |      | 20.6 
|Carestream Health, Inc.                 |  | Health Care Equipment & Supplies               |                               | Senior Debt(7)                 |      | 5.5%             |      | 10/13            |        |                       |      |           | 15.0  |      |      | 15.0      |      |      | 11.6 
|CH Holding Corp.                        |  | Leisure Equipment & Products                   |                               | Senior Debt(6)                 |      | 7.2%             |      | 5/11             |        |                       |      |           | 16.2  |      |      | 13.0      |      |      | 13.7 
|                                        |  |                                                | Redeemable Preferred Stock(1) |                                |      |                  |      |                  | 21,215 |                       |      |           |       |      | 42.7 |           |      |    
|                                        |  |                                                |                               |                                |      |                  |      |                  |        |                       |      |           |       |      |      | 55.7      |      |      | 13.7 
|Cinelease Holdings, LLC                 |  | Electronic Equipment, Instruments & Components |                               | Senior Debt(7)                 |      | 7.7%             |      | 3/12-4/13        |        |                       |      |           | 47.9  |      |      | 47.6      |      |      | 41.3 
|                                        |  |                                                | Senior Debt(6)(7)             |                                | 8.3% |                  | 4/13 |                  |        |                       |      | 10.4      |       |      | 10.4 |           |      | 7.1 
|                                        |  |                                                | Common Stock(1)               |                                |      |                  |      |                  | 583    |                       |      |           |       |      | 0.5  |           |      |    
|                                        |  |                                                |                               |                                |      |                  |      |                  |        |                       |      |           |       |      |      | 58.5      |      |      | 48.4 
|Compusearch Holdings Company, Inc.      |  | Software                                       |                               | Subordinated Debt(7)           |      | 12.0%            |      | 7/12             |        |                       |      |           | 12.6  |      |      | 12.5      |      |      | 12.6 
|                                        |  | Convertible Preferred Stock(1)                 |                               |                                |      |                  |      | 23,342           |        |                       |      |           |       | 0.9  |      |           | 2.7 
|                                        |  |                                                |                               |                                |      |                  |      |                  |        |                       |      |           |       |      |      | 13.4      |      |      | 15.3 
|Contec, LLC                             |  | Household Durables                             |                               | Subordinated Debt(7)           |      | 14.0%            |      | 9/15-9/16        |        |                       |      |           | 135.0 |      |      | 133.8     |      |      | 114.6
|Delsey Holding(3)                       |  | Textiles, Apparel & Luxury Goods               |                               | Senior Debt                    |      | 7.2%             |      | 2/12             |        |                       |      |           | 20.5  |      |      | 20.5      |      |      | 15.0 
|DelStar, Inc.                           |  | Building Products                              |                               | Subordinated Debt(7)           |      | 14.0%            |      | 12/12            |        |                       |      |           | 19.1  |      |      | 19.0      |      |      | 19.1 
|                                        |  |                                                | Redeemable Preferred Stock    |                                |      |                  |      |                  | 26,613 |                       |      |           |       |      | 19.4 |           |      | 36.7
|                                        |  |                                                |                               | Convertible Preferred Stock(1) |      |                  |      |                  |        | 29,569                |      |           |       |      |      | 3.0       |      |      |     
|                                        |  |                                                |                               | Common Stock Warrants(1)       |      |                  |      |                  |        | 89,020                |      |           |       |      |      | 16.9      |      |      |     
|                                        |  |                                                |                               |                                |      |                  |      |                  |        |                       |      |           |       |      |      | 58.3      |      |      | 55.8 
|Direct Marketing International LLC      |  | Media                                          |                               | Subordinated Debt(7)           |      | 15.2%            |      | 7/12             |        |                       |      |           | 30.3  |      |      | 30.1      |      |      | 26.8 



20



---

##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                        |  |                                  |                            |                                              |       |                  |       |                  |       |                       |      |           |      |          |      |          
|--------------------------------------- |  | -------------------------------- | -------------------------- | -------------------------------------------- | ----- | ---------------- | ----- | ---------------- | ----- | --------------------- | ---- | --------- | ---- | -------- | ---- | ---------
|Company (4)                             |  | Industry                         |                            | Investments                                  |       | InterestRate (5) |       | Maturity    Date |       | # ofshares/unitsowned |      | Principal |      | Cost     |      | FairValue
|Dyno Holding Corp.                      |  | Auto Components                  |                            | Senior Debt(7)                               |       | 11.7%            |       | 11/13-11/15      |       |                       |      | 41.6      |      | 41.3     |      | 41.6     
|                                        |  |                                  | Subordinated Debt(6)(7)    |                                              | 3.7%  |                  | 11/16 |                  |       |                       | 27.0 |           | 25.6 |          | 9.9 
|                                        |  |                                  |                            | Convertible Preferred Stock(1)               |       |                  |       |                  |       | 389,759               |      |           |      | 40.5     |      |         
|                                        |  |                                  |                            | Common Stock(1)                              |       |                  |       |                  |       | 97,440                |      |           |      | 10.1     |      |         
|                                        |  |                                  |                            |                                              |       |                  |       |                  |       |                       |      |           |      | 117.5    |      | 51.5     
|Easton Bell Sports, LLC                 |  | Leisure Equipment & Products     |                            | Redeemable Preferred Stock
Common Units(1)   |       |                  |       |                  |       | 1,1713,830,068        |      |           |      | 1.30.7   |      | 1.32.0   
|                                        |  |                                  |                            |                                              |       |                  |       |                  |       |                       |      |           |      | 2.0      |      | 3.3      
|FAMS Acquisition, Inc.                  |  | Diversified Financial Services   |                            | Subordinated Debt(7)
Subordinated Debt(6)(7) |       | 14.0%15.5%       |       | 11/1311/14       |       |                       |      | 13.113.6  |      | 13.011.8 |      | 13.13.1  
|                                        |  |                                  |                            | Redeemable Preferred Stock(1)                |       |                  |       |                  |       | 919                   |      |           |      | 0.9      |      |         
|                                        |  |                                  |                            | Convertible Preferred Stock(1)               |       |                  |       |                  |       | 861,364               |      |           |      | 20.9     |      |         
|                                        |  |                                  |                            |                                              |       |                  |       |                  |       |                       |      |           |      | 46.6     |      | 16.2     
|FCC Holdings, LLC                       |  | Commercial Banks                 |                            | Subordinated Debt                            |       | 15.1%            |       | 12/12            |       |                       |      | 75.0      |      | 74.6     |      | 67.7     
|Ford Motor Company(2)                   |  | Automobiles                      |                            | Senior Debt                                  |       | 3.4%             |       | 12/13            |       |                       |      | 21.2      |      | 20.6     |      | 18.3     
|FPI Holding Corporation                 |  | Food Products                    |                            | Senior Debt                                  |       | 7.6%             |       | 11/10-5/11       |       |                       |      | 7.4       |      | 7.3      |      | 7.4      
|                                        |  |                                  |                            | Senior Debt(6)                               |       | 13.9%            |       | 5/13-6/15        |       |                       |      | 24.0      |      | 23.2     |      | 5.7      
|                                        |  |                                  |                            | Subordinated Debt(6)                         |       | 21.6%            |       | 6/15-5/16        |       |                       |      | 23.2      |      | 17.3     |      |         
|                                        |  |                                  |                            | Redeemable Preferred Stock(1)                |       |                  |       |                  |       | 4,469                 |      |           |      | 39.1     |      |         
|                                        |  |                                  |                            | Convertible Preferred Stock(1)               |       |                  |       |                  |       | 21,715                |      |           |      | 23.3     |      |         
|                                        |  |                                  |                            | Common Stock(1)                              |       |                  |       |                  |       | 5,429                 |      |           |      | 5.8      |      |         
|                                        |  |                                  |                            |                                              |       |                  |       |                  |       |                       |      |           |      | 116.0    |      | 13.1     
|Genband Inc.                            |  | Communications Equipment         |                            | Common Stock(1)                              |       |                  |       |                  |       | 3,407,419             |      |           |      | 14.7     |      | 0.2      
|Golden Key US LLC                       |  | Diversified Financial Services   |                            | Commercial Paper(1)                          |       | 5.3%             |       | 1/14             |       |                       |      | 7.3       |      | 7.3      |      | 3.9      
|HMSC Corporation                        |  | Insurance                        |                            | Senior Debt(6)(7)                            |       | 5.8%             |       | 10/14            |       |                       |      | 3.4       |      | 3.4      |      | 1.2      
|Hoppy Holdings, Corp.                   |  | Auto Components                  |                            | Subordinated Debt(7)                         |       | 15.3%            |       | 7/12             |       |                       |      | 39.0      |      | 38.8     |      | 38.4     
|                                        |  |                                  | Redeemable Preferred Stock |                                              |       |                  |       |                  | 2,915 |                       |      |           | 7.0  |          | 6.8 
|                                        |  |                                  |                            |                                              |       |                  |       |                  |       |                       |      |           |      | 45.8     |      | 45.2     
|Infiltrator Systems, Inc.               |  | Building Products                |                            | Senior Debt(7)                               |       | 16.5%            |       | 10/13            |       |                       |      | 39.5      |      | 39.1     |      | 38.5     
|Innova-Extel Acquisition Holdings, Inc. |  | Software                         |                            | Senior Debt(7)                               |       | 7.7%             |       | 4/13             |       |                       |      | 11.5      |      | 11.4     |      | 11.5     
|                                        |  |                                  | Subordinated Debt(7)       |                                              | 15.0% |                  | 3/14  |                  |       |                       | 18.2 |           | 18.0 |          | 18.2
|                                        |  |                                  |                            | Convertible Preferred Stock                  |       |                  |       |                  |       | 14,283                |      |           |      | 23.3     |      | 28.9     
|                                        |  |                                  |                            |                                              |       |                  |       |                  |       |                       |      |           |      | 52.7     |      | 58.6     
|Inovis International, Inc.              |  | Software                         |                            | Senior Debt(7)                               |       | 16.0%            |       | 6/10             |       |                       |      | 89.2      |      | 89.0     |      | 89.0     
|Intergraph Corporation                  |  | Software                         |                            | Senior Debt(7)                               |       | 6.3%             |       | 12/14            |       |                       |      | 3.0       |      | 3.0      |      | 2.8      
|iTradeNetwork, Inc.                     |  | IT Services                      |                            | Senior Debt(7)                               |       | 11.5%            |       | 12/13            |       |                       |      | 25.0      |      | 24.8     |      | 25.0     
|JHCI Acquisition, Inc.                  |  | Air Freight & Logistics          |                            | Senior Debt(7)                               |       | 5.7%             |       | 12/14            |       |                       |      | 19.0      |      | 19.1     |      | 12.1     
|Jones Stephens Corp.(8)                 |  | Building Products                |                            | Subordinated Debt(6)(7)                      |       | 13.5%            |       | 9/13-9/14        |       |                       |      | 23.5      |      | 22.1     |      | 13.2     
|J-Pac, LLC                              |  | Health Care Equipment & Supplies |                            | Senior Debt(7)                               |       | 11.0%            |       | 1/14             |       |                       |      | 3.1       |      | 3.0      |      | 3.1      
|                                        |  |                                  | Senior Debt(6)(7)          |                                              | 12.3% |                  | 1/14  |                  |       |                       | 11.9 |           | 11.8 |          | 1.2 
|                                        |  |                                  |                            | Subordinated Debt(6)                         |       | 18.9%            |       | 1/14             |       |                       |      | 11.6      |      | 8.7      |      |         
|                                        |  |                                  |                            | Common Unit Warrants(1)                      |       |                  |       |                  |       | 500,000               |      |           |      | 0.2      |      |         
|                                        |  |                                  |                            |                                              |       |                  |       |                  |       |                       |      |           |      | 23.7     |      | 4.3      
|KIK Custom Products, Inc.(3)            |  | Household Products               |                            | Senior Debt(6)                               |       | 5.3%             |       | 12/14            |       |                       |      | 20.0      |      | 20.0     |      | 12.3     
|LabelCorp Holdings, Inc                 |  | Paper & Forest Products          |                            | Senior Debt                                  |       | 8.2%             |       | 8/13-8/14        |       |                       |      | 2.5       |      | 2.2      |      | 2.3      
|                                        |  |                                  |                            | Subordinated Debt(7)                         |       | 14.0%            |       | 8/15-8/16        |       |                       |      | 44.5      |      | 44.2     |      | 39.2     
|                                        |  |                                  |                            |                                              |       |                  |       |                  |       |                       |      |           |      | 46.4     |      | 41.5     



21



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                          |  |                                                |                                |                             |       |                  |      |                  |            |                       |      |       |           |       |       |      |          
|----------------------------------------- |  | ---------------------------------------------- | ------------------------------ | --------------------------- | ----- | ---------------- | ---- | ---------------- | ---------- | --------------------- | ---- | ----- | --------- | ----- | ----- | ---- | ---------
|Company (4)                               |  | Industry                                       |                                | Investments                 |       | InterestRate (5) |      | Maturity    Date |            | # ofshares/unitsowned |      |       | Principal |       | Cost  |      | FairValue
|LCW Holdings, LLC                         |  | Real Estate                                    |                                | Senior Debt                 |       | 6.7%             |      | 10/12            |            |                       |      |       | 32.2      |       | 31.4  |      | 30.3     
|                                          |  |                                                |                                | Warrant(1)                  |       |                  |      |                  |            | 12.5                  | %    |       |           |       | 0.9   |      | 3.5      
|                                          |  |                                                |                                |                             |       |                  |      |                  |            |                       |      |       |           |       | 32.3  |      | 33.8     
|LJVH Holdings Inc.(3)                     |  | Beverages                                      |                                | Senior Debt(7)              |       | 5.8%             |      | 1/15             |            |                       |      |       | 28.5      |       | 28.5  |      | 21.0     
|LN Acquisition Corp.                      |  | Machinery                                      |                                | Senior Debt(7)              |       | 6.0%             |      | 1/15             |            |                       |      |       | 21.5      |       | 21.6  |      | 14.4     
|Logex Corporation                         |  | Road & Rail                                    |                                | Subordinated Debt(6)        |       | 0.0%             |      | 3/10             |            |                       |      |       | 1.1       |       | 0.9   |      | 1.0      
|MagnaCare Holdings, Inc.                  |  | Health Care Providers & Services               |                                | Subordinated Debt(7)        |       | 14.8%            |      | 1/13             |            |                       |      |       | 14.3      |       | 14.2  |      | 14.2     
|Medical Billing Holdings, Inc.            |  | IT Services                                    |                                | Subordinated Debt(7)        |       | 15.0%            |      | 9/13             |            |                       |      |       | 11.0      |       | 10.9  |      | 11.0     
|                                          |  |                                                | Convertible Preferred Stock(1) |                             |       |                  |      |                  | 13,199,000 |                       |      |       |           | 13.2  |       | 10.0
|                                          |  |                                                |                                | Common Stock(1)             |       |                  |      |                  |            | 3,299,582             |      |       |           |       | 3.3   |      |         
|                                          |  |                                                |                                |                             |       |                  |      |                  |            |                       |      |       |           |       | 27.4  |      | 21.0     
|Mirion Technologies, Inc.                 |  | Electrical Equipment                           |                                | Senior Debt(7)              |       | 5.3%             |      | 6/11-11/11       |            |                       |      |       | 127.7     |       | 127.4 |      | 129.1    
|                                          |  |                                                |                                | Subordinated Debt(7)        |       | 13.8%            |      | 7/11-5/12        |            |                       |      |       | 52.9      |       | 52.6  |      | 52.9     
|                                          |  |                                                |                                | Convertible Preferred Stock |       |                  |      |                  |            | 435,724               |      |       |           |       | 54.6  |      | 104.1    
|                                          |  |                                                |                                | Common Stock(1)             |       |                  |      |                  |            | 24,503                |      |       |           |       | 2.8   |      | 3.6      
|                                          |  |                                                |                                | Common Stock Warrants(1)    |       |                  |      |                  |            | 222,156               |      |       |           |       | 18.5  |      | 31.8     
|                                          |  |                                                |                                |                             |       |                  |      |                  |            |                       |      |       |           |       | 255.9 |      | 321.5    
|Mitchell International, Inc.              |  | IT Services                                    |                                | Senior Debt(7)              |       | 5.6%             |      | 3/15             |            |                       |      |       | 5.0       |       | 5.0   |      | 3.3      
|National Processing Company Group, Inc.   |  | IT Services                                    |                                | Senior Debt(7)              |       | 10.8%            |      | 9/14             |            |                       |      |       | 53.0      |       | 52.8  |      | 43.6     
|NBD Holdings Corp.                        |  | Diversified Financial Services                 |                                | Subordinated Debt(7)        |       | 14.0%            |      | 8/13             |            |                       |      |       | 46.8      |       | 46.4  |      | 46.8     
|                                          |  |                                                | Convertible Preferred Stock    |                             |       |                  |      |                  | 84,174     |                       |      |       |           | 11.3  |       | 11.3
|                                          |  |                                                |                                | Common Stock(1)             |       |                  |      |                  |            | 633,408               |      |       |           |       | 0.1   |      | 1.5      
|                                          |  |                                                |                                |                             |       |                  |      |                  |            |                       |      |       |           |       | 57.8  |      | 59.6     
|Net1 Las Colinas Manager, LLC             |  | Real Estate                                    |                                | Senior Debt                 |       | 7.7%             |      | 10/15            |            |                       |      |       | 4.5       |       | 4.6   |      | 3.9      
|Nivel Holdings, LLC                       |  | Distributors                                   |                                | Senior Debt(7)              |       | 10.8%            |      | 10/12-10/13      |            |                       |      |       | 61.6      |       | 61.1  |      | 58.6     
|Orchard Brands Corporation                |  | Internet & Catalog Retail                      |                                | Senior Debt(7)              |       | 7.3%             |      | 4/13-4/14        |            |                       |      |       | 174.4     |       | 173.2 |      | 138.8    
|                                          |  |                                                | Senior Debt(6)                 |                             | 10.0% |                  | 4/14 |                  |            |                       |      | 158.5 |           | 118.6 |       | 33.1
|                                          |  |                                                |                                | Subordinated Debt(6)        |       | 9.7%             |      | 4/14             |            |                       |      |       | 66.4      |       | 49.9  |      |         
|                                          |  |                                                |                                |                             |       |                  |      |                  |            |                       |      |       |           |       | 341.7 |      | 171.9    
|Pan Am International Flight Academy, Inc. |  | Professional Services                          |                                | Subordinated Debt(6)(7)     |       | 18.0%            |      | 7/13             |            |                       |      |       | 33.4      |       | 25.0  |      | 14.2     
|                                          |  | Convertible Preferred Stock(1)                 |                                |                             |       |                  |      | 8,234            |            |                       |      |       | 8.2       |       |     
|                                          |  |                                                |                                |                             |       |                  |      |                  |            |                       |      |       |           |       | 33.2  |      | 14.2     
|PaR Systems, Inc.                         |  | Machinery                                      |                                | Senior Debt                 |       | 3.6%             |      | 7/13             |            |                       |      |       | 4.1       |       | 3.9   |      | 3.4      
|Parts HoldingCoörperatief U.A(3)          |  | Distributors                                   |                                | Membership Entitlements(1)  |       |                  |      |                  |            | 173,060               |      |       |           |       | 6.4   |      |         
|Phillips & Temro Industries, Inc.         |  | Auto Components                                |                                | Senior Debt(7)              |       | 13.0%            |      | 12/13            |            |                       |      |       | 24.1      |       | 24.1  |      | 24.1     
|                                          |  | Subordinated Debt(7)                           |                                | 18.0%                       |       | 12/13            |      |                  |            |                       | 18.4 |       | 18.3      |       | 17.0 
|                                          |  |                                                |                                |                             |       |                  |      |                  |            |                       |      |       |           |       | 42.4  |      | 41.1     
|Qioptiq S.A.R.L.(3)                       |  | Electronic Equipment, Instruments & Components |                                | Subordinated Debt           |       | 10.0%            |      | 3/18             |            |                       |      |       | 30.9      |       | 30.7  |      | 29.3     
|Ranpak Acquisition Company                |  | Containers & Packaging                         |                                | Senior Debt(7)              |       | 6.7%             |      | 12/13-12/14      |            |                       |      |       | 20.8      |       | 20.4  |      | 16.9     



22



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       |       |      |          
|--------------------------------------- |  | ---------------------------------------------- | ------------------------------ | ------------------------------ | ----- | ---------------- | ----------- | --------- | ---------------- | ---------- | --------------------- | ---- | ---- | --------- | ----- | ----- | ---- | ---------
|Company (4)                             |  | Industry                                       |                                | Investments                    |       | InterestRate (5) |             |           | Maturity    Date |            | # ofshares/unitsowned |      |      | Principal |       | Cost  |      | FairValue
|RDR Holdings, Inc.                      |  | Household Durables                             |                                | Subordinated Debt(7)           |       | 16.1%            |             |           | 10/14-11/15      |            |                       |      |      | 98.1      |       | 97.4  |      | 98.1     
|                                        |  |                                                | Convertible Preferred Stock(1) |                                |       |                  |             |           |                  | 1,541      |                       |      |      |           | 165.6 |       | 56.7
|                                        |  |                                                |                                | Common Stock(1)                |       |                  |             |           |                  |            | 15,414                |      |      |           |       | 1.6   |      |         
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 264.6 |      | 154.8    
|Roark - Money Mailer, LLC               |  | Media                                          |                                | Common Membership Units(1)     |       |                  |             |           |                  |            | 3.5                   | %    |      |           |       | 0.9   |      |         
|Scanner Holdings Corporation            |  | Computers & Peripherals                        |                                | Subordinated Debt(7)           |       | 14.0%            |             |           | 6/14             |            |                       |      |      | 19.1      |       | 18.9  |      | 19.1     
|                                        |  |                                                | Convertible Preferred Stock(1) |                                |       |                  |             |           |                  | 77,640,000 |                       |      |      |           | 7.8   |       | 13.7
|                                        |  |                                                |                                | Common Stock(1)                |       |                  |             |           |                  |            | 78,242                |      |      |           |       | 0.1   |      |         
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 26.8  |      | 32.8     
|Seroyal Holdings, L.P.(3)               |  | Pharmaceuticals                                |                                | Redeemable Preferred Units     |       |                  |             |           |                  |            | 32,462                |      |      |           |       | 0.7   |      | 0.9      
|                                        |  |                                                | Common Units(1)                |                                |       |                  |             |           |                  | 95,280     |                       |      |      |           | 0.8   |       | 1.6 
|                                        |  |                                                |                                | Common Unit Warrants(1)        |       |                  |             |           |                  |            | 41,661                |      |      |           |       | 0.1   |      | 0.1      
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 1.6   |      | 2.6      
|Small Smiles Holding Company, LLC       |  | Health Care Providers & Services               |                                | Senior Debt                    |       | 5.3%             |             |           | 9/12             |            |                       |      |      | 12.1      |       | 8.1   |      | 6.1      
|                                        |  | Subordinated Debt(6)                           |                                | 14.5%                          |       |                  | 9/13        |           |                  |            |                       | 77.2 |      | 70.6      |       |     
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 78.7  |      | 6.1      
|Soil Safe Holdings, LLC                 |  | Professional Services                          |                                | Senior Debt                    |       | 9.6%             |             |           | 8/13-8/14        |            |                       |      |      | 40.8      |       | 40.5  |      | 38.4     
|                                        |  |                                                | Subordinated Debt(7)           |                                | 16.3% |                  |             | 8/15-8/17 |                  |            |                       |      | 62.7 |           | 62.2  |       | 52.6
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 102.7 |      | 91.0     
|SPL Acquisition Corp.                   |  | Pharmaceuticals                                |                                | Senior Debt                    |       | 6.7%             |             |           | 10/12-10/13      |            |                       |      |      | 58.5      |       | 57.9  |      | 58.5     
|                                        |  |                                                | Subordinated Debt(7)           |                                | 15.3% |                  |             | 8/14-8/15 |                  |            |                       |      | 51.6 |           | 51.1  |       | 51.6
|                                        |  |                                                |                                | Convertible Preferred Stock(1) |       |                  |             |           |                  |            | 84,043                |      |      |           |       | 40.8  |      | 31.1     
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 149.8 |      | 141.2    
|Swank Audio Visuals, LLC                |  | Commercial Services & Supplies                 |                                | Senior Debt(7)                 |       | 6.7%             |             |           | 8/14             |            |                       |      |      | 12.1      |       | 12.0  |      | 12.1     
|                                        |  | Senior Debt(6)(7)                              |                                | 7.4%                           |       |                  | 8/14        |           |                  |            |                       | 35.9 |      | 35.6      |       | 3.7  
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 47.6  |      | 15.8     
|Tanenbaum-Harber Co. Holdings, Inc.     |  | Insurance                                      |                                | Redeemable Preferred Stock     |       |                  |             |           |                  |            | 376                   |      |      |           |       | 0.5   |      | 0.5      
|TestAmerica Environmental Services, LLC |  | Commercial Services & Supplies                 |                                | Senior Debt(7)                 |       | 5.3%             |             |           | 12/11            |            |                       |      |      | 7.5       |       | 7.4   |      | 6.9      
|                                        |  | Senior Debt(6)(7)                              |                                | 7.2%                           |       |                  | 12/12-12/13 |           |                  |            |                       | 43.3 |      | 37.3      |       | 12.6 
|                                        |  |                                                | Preferred Units(1)             |                                |       |                  |             |           |                  | 11,659,298 |                       |      |      |           | 6.9   |       |    
|                                        |  |                                                |                                | Preferred Unit Warrants(1)     |       |                  |             |           |                  |            | 1,998,961             |      |      |           |       | 4.8   |      |         
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 56.4  |      | 19.5     
|The Tensar Corporation                  |  | Construction & Engineering                     |                                | Senior Debt(7)                 |       | 8.2%             |             |           | 5/13             |            |                       |      |      | 82.0      |       | 81.3  |      | 57.0     
|                                        |  |                                                | Subordinated Debt(6)           |                                | 17.5% |                  |             | 10/13     |                  |            |                       |      | 51.2 |           | 39.9  |       | 36.3
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 121.2 |      | 93.3     
|ThreeSixty Sourcing, Inc.(3)            |  | Commercial Services & Supplies                 |                                | Common Stock Warrants(1)       |       |                  |             |           |                  |            | 35                    |      |      |           |       | 4.1   |      |         
|TransFirst Holdings, Inc.               |  | Commercial Services & Supplies                 |                                | Senior Debt(7)                 |       | 7.0              | %           |           | 6/15             |            |                       |      |      | 51.8      |       | 51.4  |      | 36.6     
|triVIN, Holdings, Inc.                  |  | IT Services                                    |                                | Subordinated Debt(7)           |       | 15.0%            |             |           | 6/14-6/15        |            |                       |      |      | 20.4      |       | 20.3  |      | 20.4     
|                                        |  |                                                |                                | Convertible Preferred Stock    |       |                  |             |           |                  |            | 247,000,000           |      |      |           |       | 28.9  |      | 24.4     
|                                        |  |                                                |                                | Common Stock(1)                |       |                  |             |           |                  |            | 6,319,923             |      |      |           |       | 6.3   |      |         
|                                        |  |                                                |                                |                                |       |                  |             |           |                  |            |                       |      |      |           |       | 55.5  |      | 44.8     
|Tyden Cayman Holdings Corp.             |  | Electronic Equipment, Instruments & Components |                                | Common Stock(1)                |       |                  |             |           |                  |            | 3,072,494             |      |      |           |       | 3.5   |      | 3.7      



23



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                                                  |  |                                |                      |                                                  |       |                  |           |                  |  |                       |  |           |       |      |      |           |  |      |      
|----------------------------------------------------------------- |  | ------------------------------ | -------------------- | ------------------------------------------------ | ----- | ---------------- | --------- | ---------------- |  | --------------------- |  | --------- | ----- | ---- | ---- | --------- |  | ---- | -----
|Company (4)                                                       |  | Industry                       |                      | Investments                                      |       | InterestRate (5) |           | Maturity    Date |  | # ofshares/unitsowned |  | Principal |       | Cost |      | FairValue
|WRH, Inc.                                                         |  | Life Sciences Tools & Services |                      | Senior Debt(7)                                   |       | 4.0%             |           | 9/13-9/14        |  |                       |  |           | 4.0   |      |      | 3.9       |  |      | 4.0  
|                                                                  |  |                                | Subordinated Debt(7) |                                                  | 14.6% |                  | 7/14-9/15 |                  |  |                       |  | 87.8      |       |      | 87.2 |           |  | 88.3
|                                                                  |  |                                |                      | Convertible Preferred Stock(1)                   |       |                  |           |                  |  | 2,008,575             |  |           |       |      |      | 214.7     |  |      | 77.6 
|                                                                  |  |                                |                      | Common Stock(1)                                  |       |                  |           |                  |  | 502,144               |  |           |       |      |      | 49.9      |  |      |     
|                                                                  |  |                                |                      |                                                  |       |                  |           |                  |  |                       |  |           |       |      |      | 355.7     |  |      | 169.9
|WWC Acquisitions, Inc.                                            |  | Professional Services          |                      | Senior Debt(7)                                   |       | 7.0%             |           | 12/11-12/13      |  |                       |  |           | 34.0  |      |      | 33.6      |  |      | 26.3 
|CMBS AND REAL ESTATE CDO INVESTMENTS                              |  |                                |                      |                                                  |       |                  |           |                  |  |                       | 
|ACAS CRE CDO 2007-1, Ltd                                          |  | Real Estate                    |                      | Class C through Class K Notes(1)                 |       | 2.7%             |           | 11/31            |  |                       |  | $         | 345.5 |      | $    | 170.5     |  | $    | 0.5  
|Banc of America Commercial Mortgage Trust 2007-1                  |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 5.7%             |           | 2/17-2/18        |  |                       |  |           | 12.4  |      |      | 4.8       |  |      | 1.3  
|CD 2007-CD4 Commercial Mortgage Trust                             |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates(1) |       | 5.7%             |           | 4/17             |  |                       |  |           | 14.0  |      |      | 8.9       |  |      |     
|CD 2007-CD5 Mortgage Trust                                        |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 6.4%             |           | 12/17            |  |                       |  |           | 14.8  |      |      | 10.5      |  |      | 1.8  
|Citigroup Commercial Mortgage Securities Trust 2007-C6            |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 5.5%             |           | 7/17             |  |                       |  |           | 112.5 |      |      | 82.9      |  |      | 10.9 
|COBALT CMBS Commercial Mortgage Trust 2007-C3                     |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 5.2%             |           | 10/17            |  |                       |  |           | 11.1  |      |      | 8.6       |  |      | 0.7  
|Countrywide Commercial Mortgage Trust 2007-MF1                    |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 6.1%             |           | 11/37-11/40      |  |                       |  |           | 12.8  |      |      | 8.7       |  |      | 1.0  
|Credit Suisse Commercial Mortgage Trust 2007-C3                   |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates(1) |       | 5.6%             |           | 7/17             |  |                       |  |           | 13.2  |      |      | 10.7      |  |      |     
|Credit Suisse Commercial Mortgage Trust Series 2007-C4            |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 5.8%             |           | 8/17             |  |                       |  |           | 20.8  |      |      | 12.6      |  |      | 5.4  
|GE Commercial Mortgage Corporation, Series 2007-C1                |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 5.5%             |           | 12/19            |  |                       |  |           | 37.0  |      |      | 31.2      |  |      | 2.6  
|GS Mortgage Securities Trust 2007-GG10                            |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates(1) |       | 5.7%             |           | 7/17             |  |                       |  |           | 63.7  |      |      | 52.7      |  |      |     
|J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11 |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 5.6%             |           | 7/17             |  |                       |  |           | 87.2  |      |      | 55.8      |  |      | 1.3  
|LB-UBS Commercial Mortgage Trust 2007-C6                          |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 6.2%             |           | 8/17             |  |                       |  |           | 36.6  |      |      | 22.9      |  |      | 4.7  
|LB-UBS Commercial Mortgage Trust 2008-C1                          |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 6.1%             |           | 7/23-7/24        |  |                       |  |           | 19.4  |      |      | 7.4       |  |      | 2.0  
|ML-CFC Commercial Mortgage Trust 2007-6                           |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates(1) |       | 5.8%             |           | 4/17             |  |                       |  |           | 9.8   |      |      | 3.3       |  |      | 0.2  
|ML-CFC Commercial Mortgage Trust 2007-8                           |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates    |       | 6.0%             |           | 8/17             |  |                       |  |           | 32.8  |      |      | 20.0      |  |      | 3.6  



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AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                                         |  |                                |                         |                                               |  |                  |   |  |                  |        |                       |  |           |      |      |      |           |  |      |     
|-------------------------------------------------------- |  | ------------------------------ | ----------------------- | --------------------------------------------- |  | ---------------- | - |  | ---------------- | ------ | --------------------- |  | --------- | ---- | ---- | ---- | --------- |  | ---- | ----
|Company (4)                                              |  | Industry                       |                         | Investments                                   |  | InterestRate (5) |   |  | Maturity    Date |        | # ofshares/unitsowned |  | Principal |      | Cost |      | FairValue
|Wachovia Bank Commercial Mortgage Trust 2007-C31         |  | Real Estate                    |                         | Commercial Mortgage Pass-Through Certificates |  | 5.8              | % |  | 5/17             |        |                       |  |           | 20.0 |      |      | 11.9      |  |      | 2.9 
|Wachovia Bank Commercial Mortgage Trust, Series 2007-C32 |  | Real Estate                    |                         | Commercial Mortgage Pass-Through Certificates |  | 5.7              | % |  | 10/17            |        |                       |  |           | 85.1 |      |      | 75.2      |  |      | 6.7 
|Wachovia Bank Commercial Mortgage Trust, Series 2007-C34 |  | Real Estate                    |                         | Commercial Mortgage Pass-Through Certificates |  | 5.3              | % |  | 10/17-9/24       |        |                       |  |           | 70.3 |      |      | 43.4      |  |      | 6.0 
|Wachovia Bank Commercial Trust 2006-C28                  |  | Real Estate                    |                         | Commercial Mortgage Pass-Through Certificates |  | 6.0              | % |  | 11/16            |        |                       |  |           | 5.0  |      |      | 3.1       |  |      | 0.4 
|CLO INVESTMENTS                                          |  |                                |                         |                                               |  |                  |   |  |                  |        |                      
|ACAS CLO 2007-1, Ltd.                                    |  | Diversified Financial Services |                         | Secured Notes                                 |  |                  |   |  |                  |        |                       |  | $         | 8.5  |      | $    | 8.4       |  | $    | 4.0 
|                                                         |  |                                | Subordinated Notes      |                                               |  |                  |   |  |                  |        |                       |  | 25.9      |      |      | 21.5 |           |  | 13.4
|                                                         |  |                                |                         |                                               |  |                  |   |  |                  |        |                       |  |           |      |      |      | 29.9      |  |      | 17.4
|Ares IIIR/IVR CLO Ltd.                                   |  | Diversified Financial Services |                         | Subordinated Notes                            |  |                  |   |  |                  |        |                       |  |           | 20.0 |      |      | 18.3      |  |      | 7.2 
|Ares VIII CLO, Ltd.                                      |  | Diversified Financial Services |                         | Preference Shares                             |  |                  |   |  |                  |        | 6,241                 |  |           |      |      |      | 4.7       |  |      | 1.4 
|Avalon Capital Ltd.(3)                                   |  | Diversified Financial Services |                         | Preferred Securities                          |  |                  |   |  |                  |        | 13,796                |  |           |      |      |      | 5.2       |  |      | 4.1 
|Babson CLO Ltd. 2006-II                                  |  | Diversified Financial Services |                         | Income Notes                                  |  |                  |   |  |                  |        |                       |  |           | 15.0 |      |      | 14.4      |  |      | 8.8 
|BALLYROCK CLO 2006-2 LTD.                                |  | Diversified Financial Services |                         | Deferrable Notes                              |  |                  |   |  |                  |        |                       |  |           | 2.0  |      |      | 1.6       |  |      | 1.0 
|Cent CDO 12 Limited                                      |  | Diversified Financial Services |                         | Income Notes                                  |  |                  |   |  |                  |        |                       |  |           | 26.4 |      |      | 19.9      |  |      | 14.0
|Centurion CDO 8 Limited                                  |  | Diversified Financial Services |                         | Subordinated Notes                            |  |                  |   |  |                  |        |                       |  |           | 5.0  |      |      | 3.1       |  |      | 2.2 
|Champlain CLO                                            |  | Diversified Financial Services |                         | Preferred Securities                          |  |                  |   |  |                  |        | 1,000,000             |  |           |      |      |      | 0.7       |  |      | 0.3 
|CoLTs 2005-1 Ltd.(3)                                     |  | Diversified Financial Services |                         | Preference Shares(1)                          |  |                  |   |  |                  |        | 360                   |  |           |      |      |      | 6.7       |  |      | 2.2 
|CoLTs 2005-2 Ltd.(3)                                     |  | Diversified Financial Services |                         | Preference Shares                             |  |                  |   |  |                  |        | 34,170,000            |  |           |      |      |      | 24.5      |  |      | 9.7 
|CREST Exeter Street Solar 2004-2                         |  | Diversified Financial Services |                         | Preferred Securities                          |  |                  |   |  |                  |        | 3,089,177             |  |           |      |      |      | 2.9       |  |      | 0.9 
|Eaton Vance CDO X PLC(3)                                 |  | Diversified Financial Services |                         | Secured Subordinated Income Notes             |  |                  |   |  |                  |        |                       |  |           | 15.0 |      |      | 13.9      |  |      | 4.7 
|Essex Park CDO Ltd.                                      |  | Diversified Financial Services |                         | Preferred Securities                          |  |                  |   |  |                  |        | 5,750,000             |  |           |      |      |      | 2.1       |  |      | 1.8 
|Flagship CLO V                                           |  | Diversified Financial Services |                         | Deferrable Notes                              |  |                  |   |  |                  |        |                       |  |           | 1.7  |      |      | 1.3       |  |      | 0.6 
|                                                         |  |                                | Subordinated Securities |                                               |  |                  |   |  |                  | 15,000 |                       |  |           |      |      | 12.1 |           |  | 7.7 
|                                                         |  |                                |                         |                                               |  |                  |   |  |                  |        |                       |  |           |      |      |      | 13.4      |  |      | 8.3 
|Galaxy III CLO, Ltd                                      |  | Diversified Financial Services |                         | Subordinated Notes                            |  |                  |   |  |                  |        |                       |  |           | 4.0  |      |      | 2.5       |  |      | 0.3 
|LightPoint CLO IV, LTD                                   |  | Diversified Financial Services |                         | Income Notes                                  |  |                  |   |  |                  |        |                       |  |           | 6.7  |      |      | 6.8       |  |      | 1.5 



25



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AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                                                                          |  |                                  |                             |                                                    |   |                  |   |   |                  |           |                       |  |           |      |      |     |           |  |     |        
|----------------------------------------------------------------------------------------- |  | -------------------------------- | --------------------------- | -------------------------------------------------- | - | ---------------- | - | - | ---------------- | --------- | --------------------- |  | --------- | ---- | ---- | --- | --------- |  | --- | -------
|Company (4)                                                                               |  | Industry                         |                             | Investments                                        |   | InterestRate (5) |   |   | Maturity    Date |           | # ofshares/unitsowned |  | Principal |      | Cost |     | FairValue
|LightPoint CLO VII, Ltd.                                                                  |  | Diversified Financial Services   |                             | Subordinated Notes                                 |   |                  |   |   |                  |           |                       |  |           | 9.0  |      |     | 7.5       |  |     | 3.8    
|LightPoint CLO VIII, Ltd.                                                                 |  | Diversified Financial Services   |                             | Deferrable Notes                                   |   |                  |   |   |                  |           |                       |  |           | 7.0  |      |     | 6.4       |  |     | 3.7    
|Mayport CLO Ltd.                                                                          |  | Diversified Financial Services   |                             | Income Notes                                       |   |                  |   |   |                  |           |                       |  |           | 14.0 |      |     | 12.7      |  |     | 4.9    
|NYLIM Flatiron CLO 2006-1 LTD.(3)                                                         |  | Diversified Financial Services   |                             | Subordinated Securities                            |   |                  |   |   |                  |           | 10,000                |  |           |      |      |     | 7.6       |  |     | 5.2    
|Octagon Investment Partners VII, Ltd.                                                     |  | Diversified Financial Services   |                             | Preferred Securities                               |   |                  |   |   |                  |           | 5,000,000             |  |           |      |      |     | 2.0       |  |     | 1.3    
|Sapphire Valley CDO I, Ltd.                                                               |  | Diversified Financial Services   |                             | Subordinated Notes                                 |   |                  |   |   |                  |           |                       |  |           | 14.0 |      |     | 13.8      |  |     | 0.8    
|Vitesse CLO, Ltd.                                                                         |  | Diversified Financial Services   |                             | Preferred Securities                               |   |                  |   |   |                  |           | 20,000,000            |  |           |      |      |     | 15.5      |  |     | 7.8    
|Subtotal Non-Control / Non-Affiliate Investments (54% of total
investments at fair value) |  |                                  |                             |                                                    | $ | 4,838.8          |   | $ | 3,036.2         
|                                                                                          |  |                                  |                             |                                                   
|AFFILIATE INVESTMENTS                                                                     |  |                                  |                             |                                                    |   |                  |   |   |                  |           |                      
|American Capital Agency Corp(2)                                                           |  | Real Estate Investment Trusts    |                             | Common Stock                                       |   |                  |   |   |                  |           | 2,500,100             |  |           |      |      | $   | 50.0      |  | $   | 66.4   
|Comfort Co., Inc.                                                                         |  | Household Durables               |                             | Senior Debt(6)(7)                                  |   | 11.5%            |   |   | 3/12-3/15        |           |                       |  | $         | 12.1 |      |     | 11.1      |  |     | 8.7    
|                                                                                          |  |                                  |                             | Common Stock(1)                                    |   |                  |   |   |                  |           | 110,365               |  |           |      |      |     | 11.8      |  |     |       
|                                                                                          |  |                                  |                             |                                                    |   |                  |   |   |                  |           |                       |  |           |      |      |     | 22.9      |  |     | 8.7    
|Egenera, Inc.                                                                             |  | Computers & Peripherals          |                             | Subordinated Debt                                  |   | 15.0%            |   |   | 12/10            |           |                       |  |           | 3.9  |      |     | 3.7       |  |     | 2.5    
|                                                                                          |  |                                  |                             | Redeemable Preferred Stock(1)                      |   |                  |   |   |                  |           | 523,040               |  |           |      |      |     | 0.4       |  |     |       
|                                                                                          |  |                                  |                             | Common Stock(1)                                    |   |                  |   |   |                  |           | 8,046,865             |  |           |      |      |     | 25.0      |  |     |       
|                                                                                          |  |                                  |                             |                                                    |   |                  |   |   |                  |           |                       |  |           |      |      |     | 29.1      |  |     | 2.5    
|HALT Medical, Inc.                                                                        |  | Health Care Equipment & Supplies |                             | Convertible Preferred Stock(1)                     |   |                  |   |   |                  |           | 5,592,367             |  |           |      |      |     | 8.9       |  |     | 9.6    
|IEE Holding 1 S.A.(3)                                                                     |  | Auto Components                  |                             | Common Stock(1)                                    |   |                  |   |   |                  |           | 250,000               |  |           |      |      |     | 4.5       |  |     |       
|IS Holdings I, Inc.                                                                       |  | Software                         |                             | Senior Debt(7)                                     |   | 6.2%             |   |   | 6/14             |           |                       |  |           | 20.0 |      |     | 19.9      |  |     | 18.2   
|                                                                                          |  |                                  |                             | Redeemable Preferred Stock(1)                      |   |                  |   |   |                  |           | 1,297                 |  |           |      |      |     | 1.7       |  |     | 1.9    
|                                                                                          |  |                                  |                             | Common Stock(1)                                    |   |                  |   |   |                  |           | 1,165,930             |  |           |      |      |     |          |  |     | 6.4    
|                                                                                          |  |                                  |                             |                                                    |   |                  |   |   |                  |           |                       |  |           |      |      |     | 21.6      |  |     | 26.5   
|LTM Enterprises, Inc.                                                                     |  | Personal Products                |                             | Senior Debt(6)(7)                                  |   | 17.3             | % |   | 11/11            |           |                       |  |           | 20.1 |      |     | 18.5      |  |     | 5.5    
|Narus, Inc.                                                                               |  | Internet Software & Services     |                             | Convertible Preferred Stock(1)                     |   |                  |   |   |                  |           | 31,835,900            |  |           |      |      |     | 9.2       |  |     | 6.8    
|                                                                                          |  |                                  | Preferred Stock Warrants(1) |                                                    |   |                  |   |   |                  | 9,567,232 |                       |  |           |      |      | 0.1 |           |  | 2.2
|                                                                                          |  |                                  |                             |                                                    |   |                  |   |   |                  |           |                       |  |           |      |      |     | 9.3       |  |     | 9.0    
|Primrose Holding Corporation                                                              |  | Diversified Consumer Services    |                             | Common Stock(1)                                    |   |                  |   |   |                  |           | 4,213                 |  |           |      |      |     | 2.7       |  |     | 3.3    
|Qualitor Component Holdings, LLC                                                          |  | Auto Components                  |                             | Subordinated Debt(7)
Redeemable Preferred Units(1) |   | 17.1%            |   |   | 7/13             |           | 3,150,000             |  |           | 36.2 |      |     | 36.03.1   |  |     | 36.0  
|                                                                                          |  |                                  |                             | Common Units(1)                                    |   |                  |   |   |                  |           | 350,000               |  |           |      |      |     | 0.4       |  |     |       
|                                                                                          |  |                                  |                             |                                                    |   |                  |   |   |                  |           |                       |  |           |      |      |     | 39.5      |  |     | 36.0   
|Radar Detection Holdings Corp.                                                            |  | Household Durables               |                             | Senior Debt(7)
Common Stock(1)                     |   | 9.5%             |   |   | 11/12            |           | 40,688                |  |           | 13.0 |      |     | 13.00.6   |  |     | 10.51.0
|                                                                                          |  |                                  |                             |                                                    |   |                  |   |   |                  |           |                       |  |           |      |      |     | 13.6      |  |     | 11.5   
|Roadrunner Dawes, Inc.                                                                    |  | Road & Rail                      |                             | Subordinated Debt(7)                               |   | 18.5%            |   |   | 8/12             |           |                       |  |           | 20.5 |      |     | 20.4      |  |     | 20.5   
|                                                                                          |  |                                  |                             | Common Stock(1)                                    |   |                  |   |   |                  |           | 7,000                 |  |           |      |      |     | 7.0       |  |     | 0.9    
|                                                                                          |  |                                  |                             |                                                    |   |                  |   |   |                  |           |                       |  |           |      |      |     | 27.4      |  |     | 21.4   



26



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                                                       |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |   |      |           |      |      |      |           |      |      |         
|---------------------------------------------------------------------- |  | ---------------------------------------- | -------------------- | ------------------------------------ | ----- | ---------------- | --------- | ---------- | ---------------- | ----- | --------------------- | - | ---- | --------- | ---- | ---- | ---- | --------- | ---- | ---- | --------
|Company (4)                                                            |  | Industry                                 |                      | Investments                          |       | InterestRate (5) |           |            | Maturity    Date |       | # ofshares/unitsowned |   |      | Principal |      | Cost |      | FairValue
|WFS Holding, LLC                                                       |  | Software                                 |                      | Preferred Interest                   |       |                  |           |            |                  |       | 20,403,772            |   |      |           |      |      |      | 3.0       |      |      | 3.7     
|Subtotal Affiliate Investments (4% of total investments at fair
value) |  |                                          |                      |                                      |       | $                | 251.0     |            | $                | 204.1
|                                                                       |  |                                          |                      |                                     
|CONTROL INVESTMENTS                                                    |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |  
|ACAS Equity Holdings Corp.                                             |  | Diversified Financial Services           |                      | Common Stock(1)                      |       |                  |           |            |                  |       | 589                   |   |      |           |      |      | $    | 14.8      |      | $    | 1.4     
|ACAS Real Estate Holdings Corporation                                  |  | Real Estate                              |                      | Subordinated Debt(6)
Common Stock(1) |       | 15.0%            |           |            | 5/16             |       | 100                   | % |      | $         | 3.9  |      |      | 3.511.5   |      |      | 3.90.6  
|                                                                       |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |   |      |           |      |      |      | 15.0      |      |      | 4.5     
|American Capital, LLC                                                  |  | Capital Markets                          |                      | Senior Debt                          |       | 5.7%             |           |            | 9/12             |       |                       |   |      |           | 7.4  |      |      | 7.3       |      |      | 7.5     
|                                                                       |  |                                          |                      | Common Membership Interest           |       |                  |           |            |                  |       | 100                   | % |      |           |      |      |      | 82.0      |      |      | 41.6    
|                                                                       |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |   |      |           |      |      |      | 89.3      |      |      | 49.1    
|American Driveline Systems, Inc.                                       |  | Diversified Consumer Services            |                      | Subordinated Debt(7)                 |       | 14.0%            |           |            | 12/14-12/15      |       |                       |   |      |           | 42.3 |      |      | 41.9      |      |      | 42.3    
|                                                                       |  | Redeemable Preferred Stock               |                      |                                      |       |                  |           |            | 403,357          |       |                       |   |      |           |      | 32.1 |      |           | 47.8
|                                                                       |  |                                          |                      | Common Stock(1)                      |       |                  |           |            |                  |       | 128,681               |   |      |           |      |      |      | 10.7      |      |      | 1.4     
|                                                                       |  |                                          |                      | Common Stock Warrants(1)             |       |                  |           |            |                  |       | 204,663               |   |      |           |      |      |      | 17.3      |      |      | 2.2     
|                                                                       |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |   |      |           |      |      |      | 102.0     |      |      | 93.7    
|Aptara, Inc.                                                           |  | IT Services                              |                      | Senior Debt                          |       | 11.5%            |           |            | 2/11             |       |                       |   |      |           | 3.0  |      |      | 3.0       |      |      | 3.0     
|                                                                       |  |                                          |                      | Subordinated Debt(7)                 |       | 16.9%            |           |            | 2/11             |       |                       |   |      |           | 58.0 |      |      | 57.8      |      |      | 60.0    
|                                                                       |  |                                          |                      | Redeemable Preferred Stock(1)        |       |                  |           |            |                  |       | 15,107                |   |      |           |      |      |      | 14.1      |      |      | 21.0    
|                                                                       |  |                                          |                      | Convertible Preferred Stock(1)       |       |                  |           |            |                  |       | 2,549,410             |   |      |           |      |      |      | 8.7       |      |      |        
|                                                                       |  |                                          |                      | Preferred Stock Warrants(1)          |       |                  |           |            |                  |       | 230,681               |   |      |           |      |      |      | 1.0       |      |      |        
|                                                                       |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |   |      |           |      |      |      | 84.6      |      |      | 84.0    
|Capital.com, Inc.                                                      |  | Diversified Financial Services           |                      | Common Stock(1)                      |       |                  |           |            |                  |       | 8,500,100             |   |      |           |      |      |      | 0.9       |      |      |        
|CIBT Travel Solutions, LLC                                             |  | Commercial Services & Supplies           |                      | Senior Debt(7)                       |       | 9.5%             |           |            | 1/13             |       |                       |   |      |           | 49.8 |      |      | 49.4      |      |      | 49.9    
|                                                                       |  | Subordinated Debt(7)                     |                      | 15.0%                                |       |                  | 1/15-1/16 |            |                  |       |                       |   | 54.6 |           |      | 54.2 |      |           | 54.6
|                                                                       |  |                                          |                      | Redeemable Preferred Stock           |       |                  |           |            |                  |       | 15,000                |   |      |           |      |      |      | 17.6      |      |      | 17.7    
|                                                                       |  |                                          |                      | Convertible Preferred Stock(1)       |       |                  |           |            |                  |       | 776,800               |   |      |           |      |      |      | 77.7      |      |      | 14.2    
|                                                                       |  |                                          |                      | Common Stock(1)                      |       |                  |           |            |                  |       | 194,200               |   |      |           |      |      |      | 19.4      |      |      |        
|                                                                       |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |   |      |           |      |      |      | 218.3     |      |      | 136.4   
|CMX Inc.                                                               |  | Construction & Engineering               |                      | Senior Debt(6)(7)                    |       | 5.2              | %         |            | 5/12             |       |                       |   |      |           | 19.3 |      |      | 19.2      |      |      | 16.1    
|Contour Semiconductor, Inc.                                            |  | Semiconductors & Semiconductor Equipment |                      | Convertible Preferred Stock(1)       |       |                  |           |            |                  |       | 11,532,842            |   |      |           |      |      |      | 12.4      |      |      | 19.6    
|Core Financial Holdings, LLC                                           |  | Diversified Financial Services           |                      | Subordinated Debt
Common Stock(1)    |       | 13.6%            |           |            | 4/14-5/15        |       | 57,940,360            |   |      |           | 37.8 |      |      | 37.554.4  |      |      | 37.523.7
|                                                                       |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |   |      |           |      |      |      | 91.9      |      |      | 61.2    
|Creditcards.com, Inc.                                                  |  | Internet Software & Services             |                      | Senior Debt(7)                       |       | 13.9%            |           |            | 6/13-10/13       |       |                       |   |      |           | 79.9 |      |      | 79.5      |      |      | 79.9    
|                                                                       |  |                                          | Subordinated Debt(7) |                                      | 19.0% |                  |           | 6/14-10/14 |                  |       |                       |   |      | 15.5      |      |      | 15.4 |           |      | 15.5
|                                                                       |  |                                          |                      | Redeemable Preferred Stock(1)        |       |                  |           |            |                  |       | 257,510               |   |      |           |      |      |      | 53.6      |      |      | 11.8    
|                                                                       |  |                                          |                      | Common Stock(1)                      |       |                  |           |            |                  |       | 176,430,690           |   |      |           |      |      |      | 2.5       |      |      |        
|                                                                       |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |   |      |           |      |      |      | 151.0     |      |      | 107.2   
|ECA AcquisitionHoldings, Inc                                           |  | Health Care Equipment & Supplies         |                      | Subordinated Debt(7)                 |       | 16.5%            |           |            | 12/14            |       |                       |   |      |           | 13.5 |      |      | 13.3      |      |      | 13.5    
|                                                                       |  | Common Stock(1)                          |                      |                                      |       |                  |           |            | 583              |       |                       |   |      |           |      | 11.1 |      |           | 12.8
|                                                                       |  |                                          |                      |                                      |       |                  |           |            |                  |       |                       |   |      |           |      |      |      | 24.4      |      |      | 26.3    



27



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##### Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      |         |      |          
|---------------------------------------- |  | -------------------------------------- | ----------------------------- | ------------------------------ | ----- | ---------------- | ---------- | ---------------- | ---------- | --------------------- | ---- | ---- | --------- | ---- | ------- | ---- | ---------
|Company (4)                              |  | Industry                               |                               | Investments                    |       | InterestRate (5) |            | Maturity    Date |            | # ofshares/unitsowned |      |      | Principal |      | Cost    |      | FairValue
|eLynx Holdings, Inc.                     |  | IT Services                            |                               | Senior Debt                    |       | 8.7%             |            | 7/13             |            |                       |      |      | 9.6       |      | 9.6     |      | 9.7      
|                                         |  |                                        |                               | Subordinated Debt              |       | 8.5%             |            | 7/13             |            |                       |      |      | 4.0       |      | 4.0     |      | 4.0      
|                                         |  |                                        |                               | Subordinated Debt(6)           |       | 9.2%             |            | 7/13             |            |                       |      |      | 12.1      |      | 10.0    |      | 4.3      
|                                         |  |                                        |                               | Redeemable Preferred Stock(1)  |       |                  |            |                  |            | 21,113                |      |      |           |      | 8.9     |      |         
|                                         |  |                                        |                               | Convertible Preferred Stock(1) |       |                  |            |                  |            | 7,929                 |      |      |           |      | 6.0     |      |         
|                                         |  |                                        |                               | Common Stock(1)                |       |                  |            |                  |            | 11,261                |      |      |           |      | 1.1     |      |         
|                                         |  |                                        |                               | Common Stock Warrants(1)       |       |                  |            |                  |            | 1,078,792             |      |      |           |      | 13.1    |      |         
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      | 52.7    |      | 18.0     
|Endeavor Fund I, LP                      |  | Thrifts & Mortgage Finance             |                               | Partnership Interest           |       |                  |            |                  |            | 100                   | %    |      |           |      | 18.2    |      | 17.0     
|ETG Holdings, Inc.                       |  | Containers & Packaging                 |                               | Senior Debt(6)                 |       | 8.7%             |            | 5/11             |            |                       |      |      | 15.6      |      | 11.6    |      |         
|                                         |  |                                        |                               | Convertible Preferred Stock(1) |       |                  |            |                  |            | 233,201               |      |      |           |      | 11.4    |      |         
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      | 23.0    |      |         
|European Capital Limited(3)              |  | Diversified Financial Services         |                               | Subordinated Debt              |       | 7.3%             |            | 2/11             |            |                       |      |      | 25.3      |      | 25.0    |      | 25.8     
|                                         |  | Ordinary Shares(1)                     |                               |                                |       |                  |            | 431,895,528      |            |                       |      |      | 1,267.3   |      | 243.1  
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      | 1,292.3 |      | 268.9    
|European Touch, LTD. II                  |  | Leisure Equipment & Products           |                               | Senior Debt                    |       | 6.8%             |            | 8/11-1/12        |            |                       |      |      | 0.4       |      | 0.3     |      | 0.4      
|                                         |  |                                        | Subordinated Debt(6)          |                                | 16.0% |                  | 1/11       |                  |            |                       |      | 18.9 |           | 13.5 |         | 1.8 
|                                         |  |                                        |                               | Redeemable Preferred Stock(1)  |       |                  |            |                  |            | 263                   |      |      |           |      | 0.3     |      |         
|                                         |  |                                        |                               | Common Stock(1)                |       |                  |            |                  |            | 1,688                 |      |      |           |      | 0.9     |      |         
|                                         |  |                                        |                               | Common Stock Warrants(1)       |       |                  |            |                  |            | 7,105                 |      |      |           |      | 3.7     |      |         
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      | 18.7    |      | 2.2      
|EXPL Pipeline Holdings LLC               |  | Oil, Gas & Consumable Fuels            |                               | Senior Debt                    |       | 8.0%             |            | 1/17             |            |                       |      |      | 43.9      |      | 43.6    |      | 43.9     
|                                         |  | Common Membership Units(1)             |                               |                                |       |                  |            | 58,297           |            |                       |      |      | 44.5      |      | 12.1   
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      | 88.1      |      | 56.0   
|FL Acquisitions Holdings, Inc.           |  | Computers & Peripherals                |                               | Senior Debt(7)                 |       | 8.3%             |            | 10/12-10/13      |            |                       |      |      | 40.0      |      | 39.8    |      | 40.0     
|                                         |  |                                        | Subordinated Debt(7)          |                                | 18.5% |                  | 4/14-10/14 |                  |            |                       |      | 30.8 |           | 30.6 |         | 30.8
|                                         |  |                                        |                               | Subordinated Debt(6)(7)        |       | 22.5%            |            | 10/14            |            |                       |      |      | 13.4      |      | 8.8     |      | 8.6      
|                                         |  |                                        |                               | Redeemable Preferred Stock(1)  |       |                  |            |                  |            | 583,000               |      |      |           |      | 0.6     |      |         
|                                         |  |                                        |                               | Common Stock(1)                |       |                  |            |                  |            | 129,514               |      |      |           |      | 15.6    |      |         
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      | 95.4    |      | 79.4     
|Formed Fiber Technologies, Inc.          |  | Auto Components                        |                               | Common Stock(1)                |       |                  |            |                  |            | 31,250                |      |      |           |      | 8.1     |      | 0.5      
|Fosbel Global Services (LUXCO) S.C.A.(3) |  | Commercial Services & Supplies         |                               | Subordinated Debt              |       | 17.3%            |            | 12/13            |            |                       |      |      | 23.6      |      | 23.4    |      | 23.6     
|                                         |  | Subordinated Debt(6)                   |                               | 20.0%                          |       | 12/14            |            |                  |            |                       | 21.6 |      | 15.1      |      | 5.6    
|                                         |  |                                        |                               | Redeemable Preferred Stock(1)  |       |                  |            |                  |            | 18,449,456            |      |      |           |      | 18.5    |      |         
|                                         |  |                                        |                               | Convertible Preferred Stock(1) |       |                  |            |                  |            | 1,519,368             |      |      |           |      | 3.0     |      |         
|                                         |  |                                        |                               | Common Stock(1)                |       |                  |            |                  |            | 108,526               |      |      |           |      | 0.2     |      |         
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      | 60.2    |      | 29.2     
|Fountainhead Estate Holding Corp.(3)     |  | Internet Software & Services           |                               | Senior Debt                    |       | 4.0%             |            | 10/13            |            |                       |      |      | 21.0      |      | 21.0    |      | 21.0     
|                                         |  | Redeemable Preferred Stock             |                               |                                |       |                  |            | 115,538          |            |                       |      |      | 15.5      |      | 15.5   
|                                         |  |                                        |                               | Convertible Preferred Stock(1) |       |                  |            |                  |            | 59,250                |      |      |           |      | 59.2    |      | 16.9     
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      | 95.7    |      | 53.4     
|FreeConference.com, Inc.                 |  | Diversified Telecommunication Services |                               | Senior Debt(7)                 |       | 6.7%             |            | 4/11-5/11        |            |                       |      |      | 11.9      |      | 11.8    |      | 11.9     
|                                         |  |                                        | Subordinated Debt             |                                | 15.0% |                  | 5/12       |                  |            |                       |      | 10.4 |           | 10.3 |         | 10.4
|                                         |  |                                        | Redeemable Preferred Stock(1) |                                |       |                  |            |                  | 14,042,095 |                       |      |      |           | 12.8 |         | 4.0 
|                                         |  |                                        |                               | Common Stock(1)                |       |                  |            |                  |            | 6,088,229             |      |      |           |      | 2.3     |      |         
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      | 37.2    |      | 26.3     
|Future Food, Inc.                        |  | Food Products                          |                               | Senior Debt                    |       | 5.2%             |            | 8/10             |            |                       |      |      | 17.1      |      | 17.1    |      | 13.5     
|                                         |  |                                        |                               | Common Stock(1)                |       |                  |            |                  |            | 64,917                |      |      |           |      | 13.0    |      |         
|                                         |  |                                        |                               | Common Stock Warrants(1)       |       |                  |            |                  |            | 6,500                 |      |      |           |      | 1.3     |      |         
|                                         |  |                                        |                               |                                |       |                  |            |                  |            |                       |      |      |           |      | 31.4    |      | 13.5     



28



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AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      |      |      |          
|---------------------------------- |  | -------------------------------- | ------------------------------ | ------------------------------ | ----- | ---------------- | ----- | ---------------- | ------ | --------------------- | - | ---- | --------- | ---- | ---- | ---- | ---------
|Company (4)                        |  | Industry                         |                                | Investments                    |       | InterestRate (5) |       | Maturity    Date |        | # ofshares/unitsowned |   |      | Principal |      | Cost |      | FairValue
|FV Holdings Corporation            |  | Food Products                    |                                | Subordinated Debt(7)           |       | 14.5%            |       | 6/15             |        |                       |   |      | 23.7      |      | 23.7 |      | 23.7     
|                                   |  |                                  |                                | Convertible Preferred Stock(1) |       |                  |       |                  |        | 292,000               |   |      |           |      | 14.3 |      | 20.9     
|                                   |  |                                  |                                | Common Stock(1)                |       |                  |       |                  |        | 125,000               |   |      |           |      | 6.1  |      | 8.9      
|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      | 44.1 |      | 53.5     
|Group Montana, Inc.                |  | Textiles, Apparel & Luxury Goods |                                | Senior Debt(7)                 |       | 10.0%            |       | 10/10-10/11      |        |                       |   |      | 15.9      |      | 15.8 |      | 15.9     
|                                   |  |                                  | Senior Debt(6)(7)              |                                | 12.5% |                  | 10/11 |                  |        |                       |   | 5.4  |           | 4.8  |      | 3.7 
|                                   |  |                                  |                                | Subordinated Debt(6)           |       | 24.5%            |       | 10/12            |        |                       |   |      | 12.3      |      | 6.8  |      |         
|                                   |  |                                  |                                | Convertible Preferred Stock(1) |       |                  |       |                  |        | 4,000                 |   |      |           |      | 1.0  |      |         
|                                   |  |                                  |                                | Common Membership Interest(1)  |       |                  |       |                  |        | 2.5                   | % |      |           |      | 0.7  |      |         
|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      | 29.1 |      | 19.6     
|Halex Holdings, Inc.               |  | Construction Materials           |                                | Senior Debt(6)                 |       | 7.0%             |       | 9/11             |        |                       |   |      | 11.0      |      | 9.8  |      | 6.8      
|                                   |  |                                  |                                | Redeemable Preferred Stock(1)  |       |                  |       |                  |        | 23,504,546            |   |      |           |      | 30.6 |      |         
|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      | 40.4 |      | 6.8      
|Hartstrings Holdings Corp.         |  | Textiles, Apparel & Luxury Goods |                                | Senior Debt(6)                 |       | 4.5%             |       | 12/10            |        |                       |   |      | 9.3       |      | 9.3  |      | 6.6      
|                                   |  |                                  | Convertible Preferred Stock(1) |                                |       |                  |       |                  | 10,196 |                       |   |      |           | 2.9  |      |    
|                                   |  |                                  |                                | Common Stock(1)                |       |                  |       |                  |        | 14,250                |   |      |           |      | 4.8  |      |         
|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      | 17.0 |      | 6.6      
|Kingway Inca Clymer Holdings, Inc. |  | Building Products                |                                | Subordinated Debt(6)           |       | 12.2%            |       | 4/12             |        |                       |   |      | 2.1       |      |     |      | 1.1      
|                                   |  |                                  | Redeemable Preferred Stock(1)  |                                |       |                  |       |                  | 13,709 |                       |   |      |           | 9.2  |      |    
|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      | 9.2  |      | 1.1      
|Lifoam Holdings, Inc.              |  | Leisure Equipment & Products     |                                | Senior Debt                    |       | 10.5%            |       | 12/14            |        |                       |   |      | 19.1      |      | 19.1 |      | 19.1     
|                                   |  |                                  | Subordinated Debt              |                                | 8.0%  |                  | 12/14 |                  |        |                       |   | 39.8 |           | 39.7 |      | 39.8
|                                   |  |                                  |                                | Redeemable Preferred Stock(1)  |       |                  |       |                  |        | 6,160                 |   |      |           |      | 4.2  |      | 7.4      
|                                   |  |                                  |                                | Convertible Preferred Stock(1) |       |                  |       |                  |        | 15,797                |   |      |           |      | 12.2 |      |         
|                                   |  |                                  |                                | Common Stock(1)                |       |                  |       |                  |        | 14,000                |   |      |           |      | 1.4  |      |         
|                                   |  |                                  |                                | Common Stock Warrants(1)       |       |                  |       |                  |        | 464,242               |   |      |           |      | 2.9  |      |         
|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      | 79.5 |      | 66.3     
|LLSC Holdings Corporation          |  | Personal Products                |                                | Senior Debt(7)                 |       | 6.2%             |       | 8/12             |        |                       |   |      | 4.5       |      | 4.5  |      | 4.5      
|                                   |  |                                  | Subordinated Debt(7)           |                                | 12.0% |                  | 9/13  |                  |        |                       |   | 5.5  |           | 5.5  |      | 5.5 
|                                   |  |                                  |                                | Convertible Preferred Stock(1) |       |                  |       |                  |        | 7,496                 |   |      |           |      | 8.1  |      | 4.8      
|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      | 18.1 |      | 14.8     
|LVI Holdings, LLC                  |  | Professional Services            |                                | Senior Debt(7)                 |       | 7.2%             |       | 2/10             |        |                       |   |      | 2.7       |      | 2.7  |      | 2.7      
|                                   |  |                                  |                                | Subordinated Debt(6)(7)        |       | 18.0%            |       | 2/13             |        |                       |   |      | 12.1      |      | 10.2 |      | 11.0     
|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      | 12.9 |      | 13.7     
|Montgomery Lane, LLC               |  | Diversified Financial Services   |                                | Common Membership Units(1)     |       |                  |       |                  |        | 100                   |   |      |           |      | 8.6  |      | 4.9      
|Montgomery Lane, LTD(3)            |  | Diversified Financial Services   |                                | Common Membership Units(1)     |       |                  |       |                  |        | 50,000                |   |      |           |      | 6.9  |      | 0.5      
|MW Acquisition Corporation         |  | Health Care Providers & Services |                                | Subordinated Debt(7)           |       | 16.2%            |       | 2/13-2/14        |        |                       |   |      | 25.5      |      | 25.3 |      | 25.5     
|                                   |  | Redeemable Preferred Stock       |                                |                                |       |                  |       | 2,485            |        |                       |   |      | 1.0       |      | 1.0 
|                                   |  |                                  |                                | Convertible Preferred Stock(1) |       |                  |       |                  |        | 38,016                |   |      |           |      | 13.4 |      | 8.5      
|                                   |  |                                  |                                |                                |       |                  |       |                  |        |                       |   |      |           |      | 39.7 |      | 35.0     



29



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AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       |       |       |          
|--------------------------------- |  | ---------------------------------------------- | -------------------------- | ------------------------------ | ----- | ---------------- | ---------- | ---------------- | ------- | --------------------- | - | ----- | --------- | ----- | ----- | ----- | ---------
|Company (4)                       |  | Industry                                       |                            | Investments                    |       | InterestRate (5) |            | Maturity    Date |         | # ofshares/unitsowned |   |       | Principal |       | Cost  |       | FairValue
|NECCO Holdings, Inc.              |  | Food Products                                  |                            | Senior Debt                    |       | 13.5%            |            | 12/12            |         |                       |   |       | 4.4       |       | 4.4   |       | 4.4      
|                                  |  |                                                |                            | Common Stock(1)                |       |                  |            |                  |         | 760,869               |   |       |           |       | 0.1   |       |         
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 4.5   |       | 4.4      
|NECCO Realty Investments, LLC     |  | Real Estate                                    |                            | Senior Debt(7)                 |       | 14.0%            |            | 12/17            |         |                       |   |       | 40.0      |       | 39.3  |       | 40.0     
|                                  |  |                                                | Common Membership Units(1) |                                |       |                  |            |                  | 7,000   |                       |   |       |           | 4.9   |       | 8.0  
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 44.2  |       | 48.0     
|Paradigm Precision Holdings, LLC  |  | Aerospace & Defense                            |                            | Subordinated Debt              |       | 17.0%            |            | 8/14             |         |                       |   |       | 57.0      |       | 56.6  |       | 57.0     
|                                  |  |                                                | Subordinated Debt(6)       |                                | 20.0% |                  | 8/14-10/14 |                  |         |                       |   | 68.4  |           | 54.1  |       | 0.8  
|                                  |  |                                                |                            | Common Membership Units(1)     |       |                  |            |                  |         | 478,488               |   |       |           |       | 17.5  |       |         
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 128.2 |       | 57.8     
|PHC Sharp Holdings, Inc.          |  | Commercial Services & Supplies                 |                            | Senior Debt(7)                 |       | 5.9%             |            | 12/11-12/12      |         |                       |   |       | 16.9      |       | 16.8  |       | 12.5     
|                                  |  |                                                | Subordinated Debt(6)       |                                | 17.0% |                  | 12/14      |                  |         |                       |   | 9.8   |           | 7.3   |       |     
|                                  |  |                                                |                            | Common Stock(1)                |       |                  |            |                  |         | 367,881               |   |       |           |       | 4.2   |       |         
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 28.3  |       | 12.5     
|PHI Acquisitions, Inc.            |  | Internet & Catalog Retail                      |                            | Senior Debt(7)                 |       | 12.0%            |            | 6/12             |         |                       |   |       | 10.2      |       | 10.2  |       | 10.3     
|                                  |  |                                                |                            | Subordinated Debt(7)           |       | 17.7%            |            | 6/13             |         |                       |   |       | 24.5      |       | 24.3  |       | 24.6     
|                                  |  |                                                |                            | Redeemable Preferred Stock     |       |                  |            |                  |         | 36,267                |   |       |           |       | 40.6  |       | 52.2     
|                                  |  |                                                |                            | Common Stock(1)                |       |                  |            |                  |         | 40,295                |   |       |           |       | 3.9   |       | 3.0      
|                                  |  |                                                |                            | Common Stock Warrants(1)       |       |                  |            |                  |         | 116,065               |   |       |           |       | 11.6  |       | 8.6      
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 90.6  |       | 98.7     
|Resort Funding Holdings, Inc.     |  | Diversified Financial Services                 |                            | Senior Debt                    |       | 8.2%             |            | 4/10             |         |                       |   |       | 8.8       |       | 8.8   |       | 7.7      
|                                  |  | Common Stock(1)                                |                            |                                |       |                  |            | 583              |         |                       |   |       | 20.5      |       |     
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 29.3  |       | 7.7      
|Sixnet Holdings, LLC              |  | Electronic Equipment, Instruments & Components |                            | Senior Debt(7)                 |       | 11.1%            |            | 6/12-6/13        |         |                       |   |       | 37.3      |       | 37.1  |       | 36.2     
|                                  |  |                                                | Membership Units(1)        |                                |       |                  |            |                  | 446     |                       |   |       |           | 5.6   |       | 2.6  
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           | 42.7  |       | 38.8 
|SMG Holdings, Inc.                |  | Hotels, Restaurants & Leisure                  |                            | Senior Debt(7)                 |       | 3.4%             |            | 7/14             |         |                       |   |       | 5.9       |       | 5.9   |       | 5.9      
|                                  |  |                                                | Subordinated Debt(7)       |                                | 12.5% |                  | 6/15       |                  |         |                       |   | 124.6 |           | 123.8 |       | 124.8
|                                  |  |                                                |                            | Convertible Preferred Stock(1) |       |                  |            |                  |         | 1,101,673             |   |       |           |       | 124.2 |       | 105.6    
|                                  |  |                                                |                            | Common Stock(1)                |       |                  |            |                  |         | 275,419               |   |       |           |       | 27.5  |       |         
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 281.4 |       | 236.3    
|Specialty Brands of America, Inc. |  | Food Products                                  |                            | Subordinated Debt(7)           |       | 14.0%            |            | 5/14             |         |                       |   |       | 34.8      |       | 34.6  |       | 34.8     
|                                  |  |                                                | Redeemable Preferred Stock |                                |       |                  |            |                  | 122,017 |                       |   |       |           | 9.3   |       | 15.0 
|                                  |  |                                                |                            | Common Stock(1)                |       |                  |            |                  |         | 128,175               |   |       |           |       | 2.3   |       | 12.1     
|                                  |  |                                                |                            | Common Stock Warrants(1)       |       |                  |            |                  |         | 56,819                |   |       |           |       | 1.4   |       | 5.3      
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 47.6  |       | 67.2     
|Spring Air International, LLC     |  | Household Durables                             |                            | Common Membership Units(1)     |       |                  |            |                  |         | 49                    | % |       |           |       | 2.8   |       | 0.5      
|UFG Member, LLC                   |  | Food Products                                  |                            | Subordinated Debt(6)           |       | 16.5%            |            | 5/15             |         |                       |   |       | 36.4      |       | 30.4  |       | 26.9     
|                                  |  |                                                |                            | Common Stock(1)                |       |                  |            |                  |         | 937                   |   |       |           |       | 64.7  |       |         
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 95.1  |       | 26.9     
|UFG Real Estate Holdings, LLC     |  | Real Estate                                    |                            | Common Membership(1)           |       |                  |            |                  |         |                       |   |       |           |       |      |       | 0.9      
|Unique Fabricating Incorporated   |  | Auto Components                                |                            | Senior Debt                    |       | 5.1%             |            | 10/10-2/11       |         |                       |   |       | 1.0       |       | 1.0   |       | 1.0      
|                                  |  |                                                | Senior Debt(6)             |                                | 10.7% |                  | 2/12       |                  |         |                       |   | 5.0   |           | 4.2   |       | 0.9  
|                                  |  |                                                |                            | Redeemable Preferred Stock(1)  |       |                  |            |                  |         | 301,556               |   |       |           |       | 7.9   |       |         
|                                  |  |                                                |                            | Common Stock Warrants(1)       |       |                  |            |                  |         | 6,862                 |   |       |           |       | 0.2   |       |         
|                                  |  |                                                |                            |                                |       |                  |            |                  |         |                       |   |       |           |       | 13.3  |       | 1.9      



30



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AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                                                      |  |                                  |  |                                          |  |                  |   |                  |  |                       |         |  |           |      |      |       |           |   |      
|--------------------------------------------------------------------- |  | -------------------------------- |  | ---------------------------------------- |  | ---------------- | - | ---------------- |  | --------------------- | ------- |  | --------- | ---- | ---- | ----- | --------- | - | -----
|Company (4)                                                           |  | Industry                         |  | Investments                              |  | InterestRate (5) |   | Maturity    Date |  | # ofshares/unitsowned |         |  | Principal |      | Cost |       | FairValue
|Unwired Holdings, Inc.                                                |  | Household Durables               |  | Senior Debt                              |  | 5.0%             |   | 6/10             |  |                       |         |  | 1.6       |      |      | 1.6   |           |   | 1.6  
|                                                                      |  |                                  |  | Senior Debt(6)                           |  | 8.5%             |   | 6/11             |  |                       |         |  | 11.4      |      |      | 7.6   |           |   | 8.1  
|                                                                      |  |                                  |  | Redeemable Preferred Stock(1)            |  |                  |   |                  |  | 14,630                |         |  |           |      |      | 14.6  |           |   |     
|                                                                      |  |                                  |  | Common Stock(1)                          |  |                  |   |                  |  | 126,001               |         |  |           |      |      | 1.3   |           |   |     
|                                                                      |  |                                  |  |                                          |  |                  |   |                  |  |                       |         |  |           |      |      | 25.1  |           |   | 9.7  
|VP Acquisition Holdings, Inc.                                         |  | Health Care Equipment & Supplies |  | Subordinated Debt(7)                     |  | 14.5%            |   | 10/13-10/14      |  |                       |         |  | 20.0      |      |      | 19.8  |           |   | 20.0 
|                                                                      |  | Common Stock(1)                  |  |                                          |  |                  |   | 19,780           |  |                       |         |  |           | 24.7 |      |       | 37.4     
|                                                                      |  |                                  |  |                                          |  |                  |   |                  |  |                       |         |  |           |      |      | 44.5  |           |   | 57.4 
|Warner Power, LLC                                                     |  | Electrical Equipment             |  | Subordinated Debt(6)(7)                  |  | 12.6%            |   | 11/10            |  |                       |         |  | 5.0       |      |      | 5.0   |           |   | 1.7  
|                                                                      |  |                                  |  | Redeemable Preferred Membership Units(1) |  |                  |   |                  |  | 3,796,269             |         |  |           |      |      | 3.0   |           |   |     
|                                                                      |  |                                  |  | Common Membership Units(1)               |  |                  |   |                  |  | 27,400                |         |  |           |      |      | 1.9   |           |   |     
|                                                                      |  |                                  |  |                                          |  |                  |   |                  |  |                       |         |  |           |      |      | 9.9   |           |   | 1.7  
|WIS Holding Company, Inc.                                             |  | Commercial Services & Supplies   |  | Subordinated Debt(7)                     |  | 14.8%            |   | 1/14-1/15        |  |                       |         |  | 109.1     |      |      | 108.4 |           |   | 109.1
|                                                                      |  | Convertible Preferred Stock      |  |                                          |  |                  |   | 703,406          |  |                       |         |  |           | 89.2 |      |       | 137.2    
|                                                                      |  |                                  |  | Common Stock(1)                          |  |                  |   |                  |  | 175,852               |         |  |           |      |      | 17.6  |           |   | 29.6 
|                                                                      |  |                                  |  |                                          |  |                  |   |                  |  |                       |         |  |           |      |      | 215.2 |           |   | 275.9
|WSACS RR Holdings, LLC                                                |  | Real Estate                      |  | Common Membership Units(1)               |  |                  |   |                  |  | 3,384,615             |         |  |           |      |      | 3.4   |           |   |     
|                                                                      |  |                                  |  |                                         
|CDO/ CLO INVESTMENTS                                                  |  |                                  |  |                                          |  |                  |   |                  |  |                       |        
|ACAS Wachovia Investments, L.P.                                       |  | Diversified Financial Services   |  | Partnership Interest                     |  |                  |   |                  |  | 90                    | %       |  |           |      | $    | 12.0  |           | $ | 2.0  
|Subtotal Control Investments (42% of total investments at fair value) |  |                                  |  |                                          |  |                  | $ | 4,068.4          |  | $                     | 2,335.0
|Total Investment Assets                                               |  |                                  |  |                                          |  |                  | $ | 9,158.2          |  | $                     | 5,575.3

|                                 |  |                                                         |   |                  |   |                      |  |               |     |          |       |      |   |           |  |   |       
|-------------------------------- |  | ------------------------------------------------------- | - | ---------------- | - | -------------------- |  | ------------- | --- | -------- | ----- | ---- | - | --------- |  | - | ------
|Counterparty                     |  | Instrument                                              |   | InterestRate (5) |   | Expiration  Date (5) |  | # ofcontracts |     | Notional |       | Cost |   | FairValue
|                                 | 
|DERIVATIVE AGREEMENTS            |  |                                                        
|Wachovia Bank, N.A.              |  | Balance Differential Swap - Pay Fixed/ Receive Floating |   | LIBOR/5.1%       |   | 8/19                 |  | 1             |     | $        | 22.5  |      | $ |          |  | $ | 0.9   
|Subtotal Derivative Agreements   |  |                                                         |   |                  |   |                     |  |               | 0.9
|Total Derivative Assets          |  | $                                                       |  |                  | $ | 0.9                 
|DERIVATIVE AGREEMENTS            |  |                                                        
|BMO Financial Group              |  | Interest Rate Swap - Pay Fixed/ Receive Floating        |   | 5.4%/LIBOR       |   | 2/13-8/17            |  | 5             |     | $        | 391.4 |      | $ |          |  | $ | (30.2)
|Citibank, N.A.                   |  | Interest Rate Swap - Pay Fixed/ Receive Floating        |   | 4.8%/LIBOR       |   | 4/12-11/19           |  | 4             |     |          | 524.0 |      |   |          |  |   | (30.7)
|Wachovia Bank, N.A.              |  | Interest Rate Swap - Pay Fixed/ Receive Floating        |   | 4.9%/LIBOR       |   | 1/14-8/19            |  | 3             |     |          | 323.3 |      |   |          |  |   | (25.7)
|Citibank, N.A.                   |  | Balance Differential Swap - Pay Fixed/ Receive Floating |   | 5.2%/LIBOR       |   | 11/19                |  | 1             |     |          | 30.5  |      |   |          |  |   | (2.5) 
|UniCredit Group                  |  | Interest Rate Swap - Pay Fixed/ Receive Floating        |   | 5.7%/LIBOR       |   | 7/17                 |  | 1             |     |          | 66.0  |      |   |          |  |   | (8.8) 
|Fortis Financial Services LLC    |  | Interest Rate Swap - Pay Fixed/ Receive Floating        |   | 5.7%/LIBOR       |   | 7/17                 |  | 1             |     |          | 22.3  |      |   |          |  |   | (3.0) 
|Citibank, N.A.                   |  | Foreign Exchange Swap - Pay Euros/ Receive GBP          |   |                  |   | 2/11                 |  | 1             |     |          |       |      |   |          |  |   | (1.2) 
|Total Derivative Liabilities     |  | $                                                       |  |                  | $ | (102.1)             
|Total Derivative Agreements, Net |  | $                                                       |  |                  | $ | (101.2)             

|                                                                         |  |  |  |  |  |  |  |  |  |  |  |      |      |           |   |     
|------------------------------------------------------------------------ |  |  |  |  |  |  |  |  |  |  |  | ---- | ---- | --------- | - | ----
|Fund                                                                     |  |  |  |  |  |  |  |  |  |  |  | Cost |      | FairValue
|MONEY MARKET FUNDS(9)                                                    |  |  | 
|Federated Government Obligations Fund                                    |  |  |  |  |  |  |  |  |  |  |  | $    | 57.6 |           | $ | 57.6
|Fidelity Institutional Money Market Funds - Money Market Portfolio       |  |  |  |  |  |  |  |  |  |  |  |      | 48.5 |           |   | 48.5
|Fidelity Institutional Money Market Funds - Prime Money Market Portfolio |  |  |  |  |  |  |  |  |  |  |  |      | 47.1 |           |   | 47.1
|Dreyfus Cash Advantage Fund                                              |  |  |  |  |  |  |  |  |  |  |  |      | 47.0 |           |   | 47.0
|Federated Tax-Free Obligations Fund                                      |  |  |  |  |  |  |  |  |  |  |  |      | 46.9 |           |   | 46.9
|First American Prime Obligations Fund                                    |  |  |  |  |  |  |  |  |  |  |  |      | 45.7 |           |   | 45.7
|BlackRock Liquidity Funds TempFund Portfolio                             |  |  |  |  |  |  |  |  |  |  |  |      | 44.9 |           |   | 44.9
|Goldman Sachs Financial Square Funds - Prime Obligations Fund            |  |  |  |  |  |  |  |  |  |  |  |      | 44.7 |           |   | 44.7
|Federated Prime Cash Obligations Fund                                    |  |  |  |  |  |  |  |  |  |  |  |      | 39.0 |           |   | 39.0
|Goldman Sachs Financial Square Fund - Money Market Fund                  |  |  |  |  |  |  |  |  |  |  |  |      | 38.7 |           |   | 38.7
|AIM STIT - Liquid Assets Portfolio                                       |  |  |  |  |  |  |  |  |  |  |  |      | 37.5 |           |   | 37.5



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AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2009

(in millions, except share data)



|                                                                 |  |   |       |  |   |       |  |  |  |  |  |      |      |           |  |     
|---------------------------------------------------------------- |  | - | ----- |  | - | ----- |  |  |  |  |  | ---- | ---- | --------- |  | ----
|Fund                                                             |  |   |       |  |   |       |  |  |  |  |  | Cost |      | FairValue
|Dreyfus Institutional Reserves Money Fund                        |  |   |       |  |   |       |  |  |  |  |  |      | 37.4 |           |  | 37.4
|BlackRock Cash Funds - Prime                                     |  |   |       |  |   |       |  |  |  |  |  |      | 34.1 |           |  | 34.1
|Dreyfus Government Cash Management                               |  |   |       |  |   |       |  |  |  |  |  |      | 31.5 |           |  | 31.5
|Goldman Sachs Financial Square Funds - Government Fund           |  |   |       |  |   |       |  |  |  |  |  |      | 28.3 |           |  | 28.3
|AIM STIT-STIC Prime Portfolio                                    |  |   |       |  |   |       |  |  |  |  |  |      | 25.0 |           |  | 25.0
|Federated Prime Obligations Fund                                 |  |   |       |  |   |       |  |  |  |  |  |      | 25.0 |           |  | 25.0
|Fidelity Institutional Money Market Funds - Government Portfolio |  |   |       |  |   |       |  |  |  |  |  |      | 10.2 |           |  | 10.2
|First American Government Obligations Fund                       |  |   |       |  |   |       |  |  |  |  |  |      | 5.7  |           |  | 5.7 
|Total Money Market
Funds                                         |  | $ | 694.8 |  | $ | 694.8



|(1) | Non-income producing.
|--- | ---------------------

|(2) | Publicly traded company or a consolidated subsidiary of a public company.
|--- | -------------------------------------------------------------------------

|(3) | International investment.
|--- | -------------------------

|(4) | Certain of the securities are issued by affiliate(s) of the listed portfolio company.
|--- | -------------------------------------------------------------------------------------

|(5) | Interest rates represent the weighted average annual stated interest rate on loans and debt securities, which are presented by the nature of indebtedness by a single
issuer. The maturity dates represent the earliest and the latest maturity dates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Loan is on non-accrual status and therefore considered non-income producing.
|--- | ----------------------------------------------------------------------------

|(7) | All or a portion of the loans are pledged as collateral under various secured financing arrangements.
|--- | -----------------------------------------------------------------------------------------------------

|(8) | Portfolio Company has filed for reorganization under Chapter 11 of the United States Code.
|--- | ------------------------------------------------------------------------------------------

|(9) | Included in Cash and cash equivalents on our Consolidated Balance Sheets.
|--- | -------------------------------------------------------------------------



32



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in millions, except per share data)



Note 1. Unaudited Interim Consolidated Financial Statements



Interim consolidated financial statements of American
Capital, Ltd. (which is referred throughout this report as American Capital, the Company, we, us and our) are prepared in accordance with accounting principles generally accepted in the
United States (GAAP) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in
accordance with GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of financial statements for the interim periods have been included. The current
periods results of operations are not necessarily indicative of results that ultimately may be achieved for the year. The unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the consolidated
financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission (SEC).



Note 2. Organization



We are a non-diversified, closed end investment company that
has elected to be regulated as a business development company (BDC) under the Investment Company Act of 1940, as amended (1940 Act). We operate so as to qualify to be taxed as a regulated investment company (RIC)
as defined in Subtitle A, Chapter 1, under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). As a BDC, we primarily invest in senior debt, subordinated debt and equity in the buyouts of private companies
sponsored by us, the buyouts of private companies sponsored by other private equity firms and directly to early stage and mature private and small public companies. We refer to these investments as our private finance portfolio. We also invest in
structured financial product investments (Structured Products) including commercial mortgage backed securities (CMBS), commercial collateralized loan obligation (CLO) securities and collateralized debt obligation
(CDO) securities and invest in alternative asset funds managed by us. Our primary business objectives are to increase our taxable income, net realized earnings and net asset value (NAV) by making investments with attractive
current yields and/or potential for equity appreciation and realized gains.



Note 3. Going Concern



In our annual report on Form 10-K for the year ended December 31, 2009, our independent registered public accounting firm,
Ernst & Young LLP, concluded that substantial doubt existed about our ability to continue as a going concern as a result of being in breach of certain financial covenants under our unsecured borrowing arrangements. The breach of these
financial covenants was primarily due to the significant decrease in our shareholders equity as a result of net unrealized depreciation on our portfolio investments during 2008. As of March 31, 2010, we continued to be in breach of these
financial covenants on $2.3 billion of unsecured borrowing arrangements.



A fundamental principle of the preparation of financial statements in accordance with GAAP is the assumption that an entity will continue
in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business. This principle is applicable to all entities except for entities
in liquidation or entities for which liquidation appears imminent. In accordance with this requirement, our policy is to prepare our consolidated financial statements on a going concern basis unless we intend to liquidate or have no other
alternative but to liquidate. Our interim consolidated financial statements have been prepared on a going concern basis and do not reflect any adjustments that might specifically result from the outcome of this uncertainty or our debt restructuring
activities.



33



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



Note 4. Investments



Our investments consist of loans and securities issued by
public and privately-held companies, including senior debt, subordinated debt, equity warrants and preferred and common equity securities. Certain of our investments do not produce current income. These investments typically consist of equity
warrants, common equity and preferred equity and are identified in the accompanying consolidated schedules of investments. We also invest in both investment grade and non-investment grade Structured Products.



We fair value our investments in accordance with the 1940 Act
and Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures (ASC 820) as determined in good faith by our Board of Directors.
When available, we base the fair value of our investments on directly observable market prices or on market data derived for comparable assets. For all other investments, inputs used to measure fair value reflect managements best estimate of
assumptions that would be used by market participants in pricing the investment in a hypothetical transaction. For these investments, we estimate the fair value of our senior debt, subordinated debt, redeemable and convertible preferred equity,
common equity and equity warrants using either an enterprise value waterfall methodology or a market yield valuation methodology that generally combines market, income and cost approaches and we estimate the fair value of our Structured Products
using a market yield valuation methodology that combines market and income approaches.



Under the enterprise value waterfall methodology, we estimate the enterprise value of a portfolio company and then waterfall the
enterprise value over the portfolio companys securities in order of their preference relative to one another. To estimate the enterprise value of the portfolio company, we prepare an analysis of traditional valuation methodologies including
valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, estimating the liquidation or collateral value the portfolio companys assets,
third-party valuations of the portfolio company, offers from third-parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company.
Significant inputs in these valuation methodologies to estimate enterprise value include the historical or projected operating results of the portfolio company, discounts or premiums to the prices of comparable companies and discount rates applied
to the projected cash flows. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require significant judgment in its determination. In determining a discount or premium, if any, to
prices of comparable companies, we use significant judgment for factors such as size, marketability and relative performance. In determining a discount rate to apply to projected operating cash flows, we use significant judgment in the development
of an appropriate discount rate including the evaluation of an appropriate risk premium.



For an investment in an investment fund that does not have a readily determinable fair value, we measure the fair value of our investment
predominately based on the NAV per share of the investment fund if the NAV of the investment fund is calculated in a manner consistent with the measurement principles of ASC Topic 946, Financial ServicesInvestments Companies, as of our
measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with ASC 820. However, in determining the fair value of our investment, we may make adjustments to the NAV per share in
certain circumstances, based on our analysis of any restrictions on redemption of our shares of our investment as of the measurement date, comparisons of price to NAV per share of comparable publicly traded funds and trades or sales of comparable
private and publicly traded funds, recent actual sales or redemptions of shares of the investment fund, expected future cash flows available to equity holders or other uncertainties surrounding our ability to realize the full NAV of the investment
fund.



34



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)





As of March
31, 2010 and December 31, 2009, we had an investment in European Capital, a wholly-owned investment fund that invests in and sponsors management and employee buyouts, invests in private equity buyouts and provides capital directly to private and
mid-sized public companies primarily in Europe. It primarily invests in senior debt, subordinated debt and equity. We concluded that the fair value of our investment in European Capital should be less than the NAV of European Capital due to the
risks associated with European Capitals ability to realize the full fair value of its underlying assets for several reasons, including the covenants and tenor of its credit facilities and comparable publicly traded funds currently trading at a
discount to NAV. See Note 11 for unfunded commitments related to European Capital.



Significant inputs to the market yield valuation methodology for senior debt, subordinated debt and redeemable preferred equity include
third-party broker quotes, estimated remaining life, current market yield and interest rate spreads of similar loans and securities as of the measurement date. We weight the use of third-party broker quotes, if any, in determining fair value based
on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer. We estimate the remaining life based on market data of the average life of similar
loans. However, if we have information available to us that the loan is expected to be repaid in the near term, we would use an estimated remaining life based on the expected repayment date. If there is a significant deterioration of the credit
quality of a loan, we may consider other factors that a hypothetical market participant would use to estimate fair value, including the proceeds that would be received in a liquidation analysis.



Significant inputs to the market yield valuation methodology
for Structured Products include third-party broker quotes, sales of the same or similar securities, and our cash flow forecasts subject to assumptions a market participant would use regarding the investments underlying collateral including,
but not limited to, assumptions of default and recovery rates, reinvestment spreads and prepayment rates, industry research reports and transactions of securities and indices with similar structure and risk characteristics. We weight the use of
third-party broker quotes, if any, in determining fair value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer.



Due to the uncertainty inherent in the valuation process,
estimates of fair value may differ significantly from the values that would have been used had a ready market for our investments existed, and the differences could be material. Additionally, changes in the market environment and other events that
may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.



The levels of fair value inputs used to measure our investments are characterized in accordance with the fair value hierarchy
established by ASC 820. Where inputs for an asset or liability fall in more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investments fair
value measurement. We use judgment and consider factors specific to the investment in determining the significance of an input to a fair value measurement. Our policy is to recognize transfers in and out of levels as of the beginning of each
reporting period. The three levels of the fair value hierarchy and investments that fall into each of the levels are described below:



| |  |  | Level 1: Level 1 inputs are unadjusted quoted prices in active markets that are accessible at the measurement date for identical,
unrestricted assets or liabilities. We use Level 1 inputs for investments
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



| | in publicly traded unrestricted securities. Such investments are valued at the closing price on the measurement date.
| | ---------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2: Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly. We did not value any of our investments using Level 2 inputs as of March 31, 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Level 3 inputs are unobservable and cannot be corroborated by observable market data. We use Level 3 inputs for measuring the
fair value of substantially all of our investments.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following fair value hierarchy tables set forth our assets and liabilities that are measured at fair value on a recurring basis by
level as of March 31, 2010 and December 31, 2009:



|                                     |  |                   |    |         |   |         |  |   |       |   |  |   |       |  
|------------------------------------ |  | ----------------- | -- | ------- | - | ------- |  | - | ----- | - |  | - | ----- | -
|                                     |  | March 31, 2010    |   
|                                     |  | Level 1           |    | Level 2 |   | Level 3 |  |   | Total |  
|Senior debt                          |  | $                 |   |         | $ |        |  | $ | 1,764 |   |  | $ | 1,764 |  
|Subordinated debt                    |  |                   |   |         |   |        |  |   | 1,995 |   |  |   | 1,995 |  
|Preferred equity                     |  |                   |   |         |   |        |  |   | 1,084 |   |  |   | 1,084 |  
|Common equity                        |  |                   | 64 |         |   |        |  |   | 562   |   |  |   | 626   |  
|Structured Products                  |  |                   |   |         |   |        |  |   | 166   |   |  |   | 166   |  
|Equity warrants                      |  |                   |   |         |   |        |  |   | 63    |   |  |   | 63    |  
|Derivative agreements and other, net |  |                   |   |         |   |        |  |   | (120  | ) |  |   | (120  | )
|                                     |  |                   |    |         |   |         |  |   |       |   |  |   |       |  
|Total                                |  | $                 | 64 |         | $ |        |  | $ | 5,514 |   |  | $ | 5,578 |  
|                                     |  |                   |    |         |   |         |  |   |       |   |  |   |       |  
|                                     | 
|                                     |  | December 31, 2009 |   
|                                     |  | Level 1           |    | Level 2 |   | Level 3 |  |   | Total |  
|Senior debt                          |  | $                 |   |         | $ |        |  | $ | 1,791 |   |  | $ | 1,791 |  
|Subordinated debt                    |  |                   |   |         |   |        |  |   | 1,938 |   |  |   | 1,938 |  
|Preferred equity                     |  |                   |   |         |   |        |  |   | 1,049 |   |  |   | 1,049 |  
|Common equity                        |  |                   | 66 |         |   |        |  |   | 510   |   |  |   | 576   |  
|Structured Products                  |  |                   |   |         |   |        |  |   | 167   |   |  |   | 167   |  
|Equity warrants                      |  |                   |   |         |   |        |  |   | 54    |   |  |   | 54    |  
|Derivative agreements and other, net |  |                   |   |         |   |        |  |   | (113  | ) |  |   | (113  | )
|                                     |  |                   |    |         |   |         |  |   |       |   |  |   |       |  
|Total                                |  | $                 | 66 |         | $ |        |  | $ | 5,396 |   |  | $ | 5,462 |  
|                                     |  |                   |    |         |   |         |  |   |       |   |  |   |       |  



36



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



The following tables set forth the summary of changes in the fair value of investment
assets and liabilities measured using Level 3 inputs for the three months ended March 31, 2010 and 2009:



|                                                |  |                         |       |   |                            |   |      |                                                                     |  |                                              |     |  |                                                  |      |   |                             |   |                        |   |  |   |   |  |   |       |  
|----------------------------------------------- |  | ----------------------- | ----- | - | -------------------------- | - | ---- | ------------------------------------------------------------------- |  | -------------------------------------------- | --- |  | ------------------------------------------------ | ---- | - | --------------------------- | - | ---------------------- | - |  | - | - |  | - | ----- | -
|                                                |  | Balances,January 1,2010 |       |   | RealizedGains(Losses) (1)  |   |      | Reversalof 
PriorPeriod(Appreciation)Depreciationon Realization (2) |  | UnrealizedAppreciation(Depreciation) (2)(3)  |     |  | Purchases, Sales,Issuances &Settlements, Net (4) |      |   | TransfersIn &Out ofLevel 3  |   | Balances,March 31,2010 |  
|Senior debt                                     |  | $                       | 1,791 |   |                            | $ | (1   | )                                                                   |  | $                                            | 6   |  | $                                                | 22   |   |                             | $ | (54                    | ) |  | $ |  |  | $ | 1,764 |  
|Subordinated debt                               |  |                         | 1,938 |   |                            |   | (22  | )                                                                   |  |                                              | 12  |  |                                                  | 67   |   |                             |   |                       |   |  |   |  |  |   | 1,995 |  
|Preferred equity                                |  |                         | 1,049 |   |                            |   | 2    |                                                                     |  |                                              |    |  |                                                  | (4   | ) |                             |   | 37                     |   |  |   |  |  |   | 1,084 |  
|Common equity                                   |  |                         | 510   |   |                            |   | (80  | )                                                                   |  |                                              | 78  |  |                                                  | 74   |   |                             |   | (20                    | ) |  |   |  |  |   | 562   |  
|Structured Products                             |  |                         | 167   |   |                            |   | (1   | )                                                                   |  |                                              | 2   |  |                                                  |     |   |                             |   | (2                     | ) |  |   |  |  |   | 166   |  
|Equity warrants                                 |  |                         | 54    |   |                            |   | (5   | )                                                                   |  |                                              | 5   |  |                                                  | 9    |   |                             |   |                       |   |  |   |  |  |   | 63    |  
|Derivative agreements and other, net            |  |                         | (113  | ) |                            |   | (16  | )                                                                   |  |                                              | 14  |  |                                                  | (21  | ) |                             |   | 16                     |   |  |   |  |  |   | (120  | )
|                                                |  |                         |       |   |                            |   |      |                                                                     |  |                                              |     |  |                                                  |      |   |                             |   |                        |   |  |   |   |  |   |       |  
|Total                                           |  | $                       | 5,396 |   |                            | $ | (123 | )                                                                   |  | $                                            | 117 |  | $                                                | 147  |   |                             | $ | (23                    | ) |  | $ |  |  | $ | 5,514 |  
|                                                |  |                         |       |   |                            |   |      |                                                                     |  |                                              |     |  |                                                  |      |   |                             |   |                        |   |  |   |   |  |   |       |  
|                                                |  |                         |       |   |                            |   |     
|                                                |  | Balances,January 1,2009 |       |   | RealizedGains/(Losses) (1) |   |      | Reversalof
PriorPeriod(Appreciation)Depreciationon Realization (2)  |  | UnrealizedAppreciation/(Depreciation) (2)(3) |     |  | Purchases, Sales,Issuances &Settlements, Net (4) |      |   | TransfersIn 
&Outof Level 3 |   | Balances,March 31,2009 |  
|Senior debt                                     |  | $                       | 2,396 |   |                            | $ | (11  | )                                                                   |  | $                                            | 11  |  | $                                                | (137 | ) |                             | $ | 49                     |   |  | $ |  |  | $ | 2,308 |  
|Subordinated debt                               |  |                         | 2,715 |   |                            |   | (27  | )                                                                   |  |                                              | 30  |  |                                                  | (126 | ) |                             |   | (34                    | ) |  |   |  |  |   | 2,558 |  
|Preferred equity                                |  |                         | 1,344 |   |                            |   | (29  | )                                                                   |  |                                              | 30  |  |                                                  | (89  | ) |                             |   | 15                     |   |  |   |  |  |   | 1,271 |  
|Common equity                                   |  |                         | 601   |   |                            |   | (3   | )                                                                   |  |                                              |    |  |                                                  | (251 | ) |                             |   | 71                     |   |  |   |  |  |   | 418   |  
|Equity warrants                                 |  |                         | 74    |   |                            |   | (9   | )                                                                   |  |                                              | 7   |  |                                                  | (6   | ) |                             |   | (8                     | ) |  |   |  |  |   | 58    |  
|Structured products                             |  |                         | 186   |   |                            |   |     |                                                                     |  |                                              |    |  |                                                  | (47  | ) |                             |   | 4                      |   |  |   |  |  |   | 143   |  
|Derivative and option agreements and other, net |  |                         | (213  | ) |                            |   | (50  | )                                                                   |  |                                              | 49  |  |                                                  | 53   |   |                             |   | 69                     |   |  |   |  |  |   | (92   | )
|                                                |  |                         |       |   |                            |   |      |                                                                     |  |                                              |     |  |                                                  |      |   |                             |   |                        |   |  |   |   |  |   |       |  
|Total                                           |  | $                       | 7,103 |   |                            | $ | (129 | )                                                                   |  | $                                            | 127 |  | $                                                | (603 | ) |                             | $ | 166                    |   |  | $ |  |  | $ | 6,664 |  
|                                                |  |                         |       |   |                            |   |      |                                                                     |  |                                              |     |  |                                                  |      |   |                             |   |                        |   |  |   |   |  |   |       |  



|(1) | Included in net realized loss on investments in the consolidated statements of operations. Excludes $3 million and $2 million in losses on realized foreign currency
transactions on American Capital assets and liabilities that are denominated in a foreign currency for the three months ended March 31, 2010 and 2009, respectively. Also excludes realized gains (losses) from Level 1 and 2 assets and
liabilities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Included in net unrealized appreciation (depreciation) of investments in the consolidated statements of operations.
|--- | -------------------------------------------------------------------------------------------------------------------

|(3) | Excludes $2 million of unrealized appreciation related to foreign currency translation for American Capital assets and liabilities not measured at fair value that are
denominated in a foreign currency for the three months ended March 31, 2010 and 2009. Also excludes unrealized appreciation (depreciation) from Level 1 and 2 assets and liabilities.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of discounts, premiums and
closing fees and the exchange of one or more existing securities for one or more new securities as well as decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities
for one or more new securities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



37



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



As of March 31, 2010 and December 31, 2009, loans on non-accrual status had a
cost basis of $671 million and $811 million, respectively, and fair value of $263 million and $290 million, respectively. As of March 31, 2010 and December 31, 2009, loans with a cost basis of $44 million and $50 million, respectively,
were greater than 90 days due, excluding loans on non-accrual status.



The composition summaries of our investment portfolio at cost and fair value as a percentage of total investments are shown in the
following tables:



|                    |  |                |   |  |                   |  
|------------------- |  | -------------- | - |  | ----------------- | -
|                    |  | March 31, 2010 |   |  | December 31, 2009 |  
|COST                |  |                |   |  |                   |  
|                    |  |               
|Subordinated debt   |  | 24.9           | % |  | 24.8              | %
|Senior debt         |  | 23.5           | % |  | 24.0              | %
|Common equity       |  | 21.6           | % |  | 22.2              | %
|Preferred equity    |  | 19.1           | % |  | 18.1              | %
|Structured Products |  | 9.9            | % |  | 9.8               | %
|Equity warrants     |  | 1.0            | % |  | 1.1               | %
|                    |  |                |   |  |                   |  
|                    |  | 100.0          | % |  | 100.0             | %
|                    |  |                |   |  |                   |  
|FAIR VALUE          |  |                |   |  |                   |  
|                    |  |               
|Subordinated debt   |  | 35.0           | % |  | 34.8              | %
|Senior debt         |  | 31.0           | % |  | 32.1              | %
|Preferred equity    |  | 19.0           | % |  | 18.8              | %
|Common equity       |  | 11.0           | % |  | 10.3              | %
|Structured Products |  | 2.9            | % |  | 3.0               | %
|Equity warrants     |  | 1.1            | % |  | 1.0               | %
|                    |  |                |   |  |                   |  
|                    |  | 100.0          | % |  | 100.0             | %
|                    |  |                |   |  |                   |  



38



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



We use the Global Industry Classification Standards for classifying the industry
groupings of our portfolio companies. The following tables show the portfolio composition by industry grouping at cost and at fair value as a percentage of total investments. Our investments in European Capital and CLO and CDO securities are
excluded from the table below. Our investments in ACAS CRE CDO 2007-1, Ltd. and CMBS are classified in the Real Estate and Real Estate Investment Trusts category.



|                                                 |  |                |   |  |                   |  
|------------------------------------------------ |  | -------------- | - |  | ----------------- | -
|                                                 |  | March 31, 2010 |   |  | December 31, 2009 |  
|COST                                             |  |                |   |  |                   |  
|                                                 |  |               
|Real Estate and Real Estate Investment Trusts    |  | 10.8           | % |  | 10.5              | %
|Commercial Services and Supplies                 |  | 9.0            | % |  | 8.9               | %
|Household Durables                               |  | 6.3            | % |  | 6.1               | %
|Internet and Catalog Retail                      |  | 5.9            | % |  | 5.7               | %
|Life Sciences Tools and Services                 |  | 4.9            | % |  | 4.7               | %
|IT Services                                      |  | 4.4            | % |  | 4.2               | %
|Health Care Providers and Services               |  | 4.1            | % |  | 4.1               | %
|Auto Components                                  |  | 4.0            | % |  | 3.8               | %
|Hotels, Restaurants and Leisure                  |  | 3.9            | % |  | 3.7               | %
|Electrical Equipment                             |  | 3.6            | % |  | 3.5               | %
|Internet Software and Services                   |  | 3.4            | % |  | 3.4               | %
|Diversified Financial Services                   |  | 3.4            | % |  | 3.3               | %
|Food Products                                    |  | 2.8            | % |  | 4.4               | %
|Professional Services                            |  | 2.6            | % |  | 2.5               | %
|Health Care Equipment and Supplies               |  | 2.5            | % |  | 2.4               | %
|Software                                         |  | 2.2            | % |  | 2.4               | %
|Leisure Equipment and Products                   |  | 2.1            | % |  | 2.0               | %
|Pharmaceuticals                                  |  | 2.1            | % |  | 2.0               | %
|Computers and Peripherals                        |  | 2.0            | % |  | 2.0               | %
|Construction and Engineering                     |  | 1.8            | % |  | 1.8               | %
|Building Products                                |  | 1.8            | % |  | 1.9               | %
|Electronic Equipment, Instruments and Components |  | 1.8            | % |  | 1.8               | %
|Aerospace and Defense                            |  | 1.8            | % |  | 1.7               | %
|Other                                            |  | 12.8           | % |  | 13.2              | %
|                                                 |  |                |   |  |                   |  
|                                                 |  | 100.0          | % |  | 100.0             | %
|                                                 |  |                |   |  |                   |  



39



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



|                                                 |  |                |   |  |                   |  
|------------------------------------------------ |  | -------------- | - |  | ----------------- | -
|                                                 |  | March 31, 2010 |   |  | December 31, 2009 |  
|FAIR VALUE                                       |  |                |   |  |                   |  
|                                                 |  |               
|Commercial Services and Supplies                 |  | 10.8           | % |  | 10.1              | %
|Electrical Equipment                             |  | 6.3            | % |  | 6.2               | %
|Household Durables                               |  | 5.9            | % |  | 5.8               | %
|Internet and Catalog Retail                      |  | 5.4            | % |  | 5.2               | %
|Hotels, Restaurants and Leisure                  |  | 5.0            | % |  | 4.6               | %
|IT Services                                      |  | 4.9            | % |  | 4.9               | %
|Health Care Providers and Services               |  | 4.6            | % |  | 4.6               | %
|Real Estate and Real Estate Investment Trusts    |  | 3.9            | % |  | 4.1               | %
|Auto Components                                  |  | 3.8            | % |  | 3.7               | %
|Internet Software and Services                   |  | 3.5            | % |  | 3.3               | %
|Software                                         |  | 3.4            | % |  | 3.8               | %
|Health Care Equipment and Supplies               |  | 3.2            | % |  | 2.8               | %
|Diversified Financial Services                   |  | 3.0            | % |  | 3.0               | %
|Life Sciences Tools and Services                 |  | 3.0            | % |  | 3.3               | %
|Professional Services                            |  | 2.8            | % |  | 2.8               | %
|Pharmaceuticals                                  |  | 2.8            | % |  | 2.8               | %
|Electronic Equipment, Instruments and Components |  | 2.4            | % |  | 2.3               | %
|Building Products                                |  | 2.3            | % |  | 2.4               | %
|Computers and Peripherals                        |  | 2.2            | % |  | 2.2               | %
|Food Products                                    |  | 2.1            | % |  | 3.4               | %
|Construction and Engineering                     |  | 2.0            | % |  | 2.1               | %
|Diversified Consumer Services                    |  | 2.0            | % |  | 1.9               | %
|Leisure Equipment and Products                   |  | 1.7            | % |  | 1.7               | %
|Capital Markets                                  |  | 1.5            | % |  | 1.3               | %
|Other                                            |  | 11.5           | % |  | 11.7              | %
|                                                 |  |                |   |  |                   |  
|                                                 |  | 100.0          | % |  | 100.0             | %
|                                                 |  |                |   |  |                   |  



The following tables show the
portfolio composition by geographic location at cost and at fair value as a percentage of total investments, excluding Structured Products. The geographic composition is determined by the location of the corporate headquarters of the portfolio
company.



|              |  |                |   |  |                   |  
|------------- |  | -------------- | - |  | ----------------- | -
|              |  | March 31, 2010 |   |  | December 31, 2009 |  
|COST          |  |                |   |  |                   |  
|              |  |               
|International |  | 20.4           | % |  | 19.0              | %
|Southwest     |  | 19.7           | % |  | 21.1              | %
|Mid-Atlantic  |  | 18.4           | % |  | 18.4              | %
|Northeast     |  | 13.6           | % |  | 13.5              | %
|South-Central |  | 11.7           | % |  | 11.6              | %
|Southeast     |  | 9.6            | % |  | 9.7               | %
|North-Central |  | 6.2            | % |  | 6.3               | %
|Northwest     |  | 0.4            | % |  | 0.4               | %
|              |  |                |   |  |                   |  
|              |  | 100.0          | % |  | 100.0             | %
|              |  |                |   |  |                   |  



40



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



|              |  |                |   |  |                   |  
|------------- |  | -------------- | - |  | ----------------- | -
|              |  | March 31, 2010 |   |  | December 31, 2009 |  
|FAIR VALUE    |  |                |   |  |                   |  
|              |  |               
|Southwest     |  | 23.4           | % |  | 25.3              | %
|Mid-Atlantic  |  | 19.6           | % |  | 19.8              | %
|Northeast     |  | 15.0           | % |  | 14.9              | %
|South-Central |  | 12.2           | % |  | 12.5              | %
|Southeast     |  | 11.2           | % |  | 11.2              | %
|International |  | 10.4           | % |  | 8.0               | %
|North-Central |  | 7.7            | % |  | 7.8               | %
|Northwest     |  | 0.5            | % |  | 0.5               | %
|              |  |                |   |  |                   |  
|              |  | 100.0          | % |  | 100.0             | %
|              |  |                |   |  |                   |  



Note 5. Borrowings



Our debt obligations consisted of the following as of
March 31, 2010 and December 31, 2009:



|                                                     |  |                |       |                   |   |      
|---------------------------------------------------- |  | -------------- | ----- | ----------------- | - | -----
|                                                     |  | March 31, 2010 |       | December 31, 2009
|Unsecured revolving credit facility                  |  | $              | 1,387 |                   | $ | 1,388
|Unsecured public debt due October 2012               |  |                | 549   |                   |   | 548  
|Unsecured private debt due September 2009            |  |                | 84    |                   |   | 84   
|Unsecured private debt due August 2010               |  |                | 134   |                   |   | 134  
|Unsecured private debt due February 2011             |  |                | 25    |                   |   | 26   
|Unsecured private debt due September 2011            |  |                | 95    |                   |   | 95   
|Unsecured private debt due October 2020              |  |                | 75    |                   |   | 75   
|ACAS Business Loan Trust 2004-1 asset securitization |  |                | 164   |                   |   | 170  
|ACAS Business Loan Trust 2005-1 asset securitization |  |                | 651   |                   |   | 696  
|ACAS Business Loan Trust 2006-1 asset securitization |  |                | 358   |                   |   | 377  
|ACAS Business Loan Trust 2007-1 asset securitization |  |                | 272   |                   |   | 294  
|ACAS Business Loan Trust 2007-2 asset securitization |  |                | 232   |                   |   | 255  
|                                                     |  |                |       |                   |   |      
|Total                                                |  | $              | 4,026 |                   | $ | 4,142
|                                                     |  |                |       |                   |   |      



The daily weighted average debt balance for the three months ended March 31, 2010 and 2009 was $4,076 million and $4,401 million,
respectively. The weighted average interest rate on all of our borrowings, including amortization of deferred financing costs, for the three months ended March 31, 2010 and 2009 was 5.6% and 4.7%, respectively.



As of March 31, 2010 and December 31, 2009, the
aggregate fair value of the above borrowings was $3,955 million and $3,929 million, respectively. The fair values of our debt obligations are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to
transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. It assumes that the liability is transferred to a market participant at the measurement date and that the
nonperformance risk relating to that liability is the same before and after the transfer. Nonperformance risk refers to the risk that the obligation will not be fulfilled and affects the value at which the liability is transferred. The fair value of
our debt obligations is based upon market interest rates for our own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any, based on a quantitative and/or qualitative evaluation of our credit risk.



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



Unsecured Revolving Credit Facility



As of March 31, 2010 and December 31, 2009, we
were not in compliance with the minimum consolidated tangible net worth covenant and certain other covenants under our unsecured revolving credit facility (the Credit Facility). During the continuance of these events of default, lenders
representing a majority of the commitments may declare the outstanding principal and accrued interest to be due and payable immediately subject to the lock-up agreement discussed below. Pursuant to the terms of the Credit Facility, the applicable
spread on any borrowings outstanding under the Credit Facility increased by 2.00% as a result of these events of default. Also, due to the events of default, all LIBOR borrowings outstanding were automatically converted into base rate loans from
index rate loans. The applicable interest rate for base rate loans is the greater of the prime rate or the federal funds rate plus 0.50%. As a result of rating agency downgrades during the first quarter of 2009, the applicable spread over the
applicable base rate increased from 2.25% to 3.75% and the unused commitment fee increased from 0.50% to 0.80% as of March 2, 2009. As of March 31, 2010, the total interest rate on this facility was 9.00% for borrowings denominated in
U.S. dollars.



In November 2009, we entered into a
lock-up agreement with the lenders under the Credit Facility to further our efforts to restructure the Credit Facility and our other principal unsecured debt arrangements based on our previously announced agreement in principle with the lenders to
restructure the Credit Facility. The lock-up agreement generally requires all of the lenders under the Credit Facility to agree to the proposed restructuring assuming specified conditions are met. However, the lock-up agreement may be terminated if
various stages of the proposed restructuring are not completed by certain dates. These deadlines have been extended on several occasions and currently, the lock-up agreement may be terminated (i) upon the earlier of the consummation of the
exchange transaction, the effective date of a prepackaged plan of reorganization or a written agreement to terminate the lock-up agreement, (ii) if the exchange transaction is not consummated in accordance with the proposed restructuring and we
have not commenced a voluntary reorganization case by June 30, 2010 or (iii) if we commence a voluntary reorganization case and (1) any material order is entered that is inconsistent with the lock-up agreement or the proposed
restructuring, which is objected to by a majority of the lenders, (2) an order finding that the solicitation complying with applicable law and confirming the plan has not been entered on or before July 31, 2010 (unless the administrative
agent under the Credit Facility agrees to an extension of not later than August 15, 2010), (3) the plan is not consummated by August 15, 2010, or (4) the voluntary reorganization case is dismissed or converted to a case under
chapter seven of title eleven of the United States Code or a trustee or examiner shall have been appointed in the voluntary reorganization. In addition, either party may terminate the lock-up agreement upon a breach of material obligations by
the other party.



Unsecured Public Debt



We were not in compliance with the asset
coverage ratio covenant in the indenture for our public notes as of March 31, 2010 and December 31, 2009. Pursuant to the terms of the notes, during the continuance of this event of default, the trustee or the holders of at least 25% of
the outstanding principal amount of the notes may declare the principal and accrued interest to be due and payable immediately. The holders of more than 50% of the outstanding principal amount of the notes can rescind any acceleration if all late
payments are made and any events of default are cured or waived. As of the date of this filing, the noteholders have not accelerated the amounts outstanding under the notes. As a result of rating agency downgrades during 2009, the interest rate on
these notes increased by 2.00%. As of March 31, 2010, the interest rate on our public notes was 8.85%.



Unsecured Private Debt



As of March 31, 2010 and December 31, 2009, we were not in compliance with certain financial covenants, including the minimum
consolidated tangible net worth covenant, the available debt asset coverage ratio



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



covenant and the asset coverage ratio covenant, for each series of these notes. Pursuant to the terms of the notes, during the continuance of these events of default, the holders of more than 50%
of the outstanding principal amount of each series of the notes can declare that all amounts outstanding under the notes for the respective series are immediately due and payable, at which time a default rate equal to the greater of 2.00% above the
stated rate for each series or 2.00% over the prime rate will be applied on all overdue amounts. The holders of more than 50% of the outstanding principal amount of each series of notes could rescind any acceleration of the notes in that series if
all late payments are made, any events of default are cured or waived and no judgment or decree has been entered for the payment of any monies due on the notes. On August 28, 2009, the noteholders declared the unpaid principal amount of the
notes outstanding, plus all accrued and unpaid interest and the respective make-whole interest payment for each series, if any, immediately due and payable. Although we have not repaid these obligations in full, we entered into forbearance
agreements with all of these noteholders, under which the noteholders agreed to forbear from exercising certain rights and remedies with respect to the events of default that have occurred under the notes. The holders of a majority in principal
amount of the notes outstanding under each series may terminate the forbearance agreement for the series at any time. In consideration for entering into the forbearance agreements, we paid all accrued and unpaid interest due on the notes as of
September 1, 2009 at the default rate retroactive to March 30, 2009 and agreed to add to the outstanding principal amounts of certain of the notes a $22 million make-whole interest payment. As of March 31, 2010, the total weighted
average interest rate of our unsecured private notes was 8.27%.



Securitizations



As of March 31, 2010, we were in compliance with all of the covenants for our asset securitizations. Under the terms of each of our
asset securitizations, if any loan collateral in each trust becomes a defaulted loan, as defined in each indenture, all interest and principal collections that would be applied to the subordinated notes retained by us are paid sequentially to pay
down the principal of the notes that are generally held by third party institutional investors in an amount equal to the principal amount of the defaulted loan collateral. As of March 31, 2010, there was defaulted loan collateral in each of the
asset securitization trusts and therefore all interest and principal collections that would have been applied to the subordinated notes retained by us will continue to be applied sequentially to pay down the principal of the notes generally held by
third party institutional investors in an amount equal to the principal amount of the defaulted loan collateral. Our asset securitizations are secured by portfolio investments and assets with a fair value of $2.1 billion as of March 31, 2010.



Note 6. Interest Rate Derivatives



We enter into derivative agreements, primarily interest rate
swap agreements, to manage interest rate risk and also to fulfill our obligations under the terms of our asset securitizations. We do not hold or issue interest rate swap agreements or other derivative financial instruments for speculative purposes.
We fair value our derivatives in accordance with the 1940 Act and ASC 820 as determined in good faith by our Board of Directors. All derivative financial instruments are recorded at fair value with changes in value reflected in net unrealized
appreciation or depreciation of investments during the reporting period. The fair value of our interest rate swap agreements is based on an income approach using a discounted cash flow methodology. Significant inputs to the discounted future cash
flow methodology include forward interest rate yield curves in effect as of the end of the measurement period and an evaluation of both our and our counterpartys credit risk that consider collateral requirements, credit enhancements and the
impact of netting arrangements.



We record the
accrual of periodic interest settlements of interest rate swap agreements in net unrealized appreciation or depreciation of investments and subsequently record the amount as a net realized gain or loss on investments on the interest settlement date.
Cash payments received or paid for the termination of an interest rate



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



derivative agreement are recorded as a realized gain or loss upon termination in our consolidated statements of operations and are classified under investing activities in our consolidated
statements of cash flows.



We have interest rate
swap agreements where we generally pay a fixed rate and receive a floating rate based on LIBOR. We may also enter into interest rate swaption agreements where, if exercised, we pay a floating rate based on LIBOR and receive a fixed rate. The fair
value of our interest rate derivative agreements are identified as separate items on our consolidated balance sheets and are described in the accompanying consolidated schedules of investments.



During the three months ended March 31, 2010, we
recorded $6 million of net unrealized depreciation from interest rate swap agreements in the financial statement line item derivative and option agreements and other. During the three months ended March 31, 2009, we recorded $53 million of net
unrealized appreciation from interest rate swap agreements, primarily due to a credit risk adjustment related to an adverse change in our credit rating, and a $49 million reversal of prior period net unrealized depreciation from the termination of
the European Capital put option agreement in the financial statement line item derivative and option agreements and other.



During the three months ended March 31, 2010 and 2009, we recorded $16 million and $6 million, respectively, of net realized loss
from interest rate swap agreements in the financial statement line item derivative and option agreements in our consolidated statements of operations for periodic interest settlements of interest rate swap agreements. During the three months ended
March 31, 2009, we also recorded a realized loss of $44 million from the termination of the European Capital put option agreement. During the three months ended March 31, 2010 and 2009, no interest rate swap agreements were terminated
prior to their maturity.



Periodically, an
interest rate swap agreement will also be amended whereby any underlying unrealized appreciation or depreciation associated with the original interest rate swap agreement at the time of amendment will be factored into the contractual interest terms
of the amended interest rate swap agreement. The contractual terms of the amended interest rate swap agreement are set such that its estimated fair value is equivalent to the estimated fair value of the original interest rate swap agreement. No
realized gain or loss is recorded upon amendment when the estimated fair values of the original and amended interest rate swap agreement are substantially the same.



Credit Risk-Related Contingent Features



Certain of our interest rate swap
agreements contain an event of default that allows the counterparty to terminate transactions outstanding under the agreement following the occurrence of a cross default on certain of our other indebtedness in amounts equal to or greater than $5
million to $15 million, as applicable. As of March 31, 2010, one counterparty had elected to terminate its interest rate swap agreement with us due to a cross default on certain of our other indebtedness, which interest rate swap agreement had
a fair value liability of $13 million as of March 31, 2010. This amount had not been settled as of March 31, 2010 and is included in other liabilities in our consolidated balance sheets. Derivatives under these agreements in a liability
position had a GAAP fair value liability of $35 million as of March 31, 2010. In the event that these counterparties terminated their transactions with us, the termination liability would have been $41 million as of March 31, 2010. The
difference between the GAAP fair value liability and the termination liability represents an adjustment for nonperformance risk of us and our counterparties.



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



Certain of our interest rate swap agreements also contain an event of default that
allows the counterparty to terminate transactions outstanding under the agreement if certain of our other indebtedness in amounts equal to or greater than $5 million or $15 million, as applicable, is accelerated. While this event of default has
occurred, none of our counterparties have elected to terminate their transactions with us as a result of this provision as of March 31, 2010. Derivatives under these agreements in a liability position had a GAAP fair value liability of $8
million as of March 31, 2010. In the event that these counterparties terminated their transactions with us, the termination liability would have been $9 million as of March 31, 2010. The difference between the GAAP fair value liability and
the termination liability represents an adjustment for nonperformance risk of us and our counterparties.



In addition, one of our interest rate swap agreements provides that, if our unsecured debt rating falls below BB- as rated by Fitch
Ratings, BB- as rated by Standard & Poors Rating Services or Ba3 by Moodys Investors Services, Inc., the counterparty may terminate transactions outstanding under the agreement. While this additional termination event has
occurred, the counterparty had not elected to terminate its transactions outstanding with us as of March 31, 2010. Derivatives under this agreement in a liability position had a GAAP fair value liability of $24 million as of March 31,
2010. In the event that this counterparty terminated its transactions with us, the termination liability would have been $28 million as of March 31, 2010. The difference between the GAAP fair value liability and the termination liability
represents an adjustment for nonperformance risk of us and our counterparties.



Certain of our interest rate swap agreements also provide that, if our unsecured revolving credit facility is terminated, or the
counterparty does not continue to be a lender under our unsecured revolving credit facility, and we do not post collateral for our derivative obligations related to this counterparty or make arrangements for the counterparty to transfer its rights
and obligations under the derivative agreement within 30 days, the counterparty may terminate the transactions outstanding under the agreement. As of March 31, 2010, this additional termination event had not occurred. Derivatives under these
agreements in a liability position had a GAAP fair value liability of $2 million as of March 31, 2010. In the event that these counterparties terminated their transactions with us, the termination liability would have been $2 million as of
March 31, 2010.



Note 7. Earnings Per Share



In accordance with the provisions of FASB
ASC Topic 260, Earnings per Share (ASC 260), basic earnings per share (EPS) is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period.
Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating EPS on a diluted basis.



In computing diluted EPS, only potential common shares that are dilutive, those that reduce earnings per share or increase loss per share,
are included. The effect of stock options, unvested employee stock awards and contingently issuable shares are not included if the result would be anti-dilutive, such as when a net loss is reported. The control number for determining
whether including potential common shares in the diluted EPS computation would be anti-dilutive is net earnings (loss). As a result, if there is a net loss, diluted EPS is computed using the same number of weighted average shares as used in
computing basic EPS, even if we have positive net operating income. Therefore, basic EPS and diluted EPS are computed using the same number of weighted average shares for the three months ended March 31, 2009 as we incurred a net loss. For the
three months ended March 31, 2010, 2.3 million shares of employee stock options and awards are included in our dilutive weighted average shares.



45



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



Stock options and unvested employee stock awards of 21.2 million and
40.7 million for the three months ended March 31, 2010 and 2009, respectively, were not included in the computation of diluted EPS either because the respective exercise prices are greater than the average market value of the underlying
stock or their inclusion would have been anti-dilutive.



Note
8. Commitments



As of March 31, 2010, we
had commitments under loan and financing agreements to fund up to $202 million to 38 portfolio companies, with $15 million of the commitments related to undrawn revolving credit facilities for European Capital (see Note 11). These commitments
are primarily composed of working capital credit facilities, acquisition credit facilities and subscription agreements. The commitments are generally subject to the borrowers meeting certain criteria such as compliance with covenants and
availability under borrowing base thresholds. The terms of the borrowings and financings subject to commitment are comparable to the terms of other loan and equity securities in our portfolio.



Note 9. Restructuring Costs



To better align our organization and cost structure with
current economic conditions, we conducted strategic reviews of our business in 2009 and 2008 which resulted in the closing of several offices and the elimination of certain functions at other offices. As a result, we have recorded restructuring
charges for both severance and related employee costs and excess office facilities costs, including restructuring charges of $5 million and $4 million during the three months ended March 31, 2010 and 2009, respectively. The restructuring
charges for the three months ended March 31, 2010 consisted of $5 million of costs related to excess office facilities, including $2 million of accelerated depreciation expense offset by a $2 million write-off of a deferred rent liability. The
restructuring charges for the three months ended March 31, 2009 consisted of $4 million of costs related to excess office facilities, including a $1 million write-off of a deferred rent liability. The excess office facilities costs are included
in general and administrative in our consolidated statements of operations. The liability for employee severance costs and excess office facilities is included in other liabilities in the consolidated balance sheets as of March 31, 2010 and
December 31, 2009.



In determining our
liability related to excess office facilities, we are required to estimate such factors as future vacancy rates, the time required to sublet properties and sublease rates. These estimates are reviewed quarterly based on known real estate market
conditions and the credit-worthiness of subtenants, and may result in revisions to the liability. Our remaining liability of $16 million as of March 31, 2010 related to excess office facilities represents gross lease commitments with
agreements expiring at various dates through 2016 of approximately $51 million, net of committed and estimated sublease income of approximately $30 million and a present value factor of $5 million. We have entered into signed sublease
arrangements for approximately $12 million, with the remaining $18 million based on estimated future sublease income.



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##### Table of Contents

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



The following table summarizes the restructuring accrual activity during the three
months ended March 31, 2010 and 2009:



|                               |  |           |    |   |                         |   |    |       |  |   |    |  
|------------------------------ |  | --------- | -- | - | ----------------------- | - | -- | ----- |  | - | -- | -
|                               |  | Severance |    |   | Excess OfficeFacilities |   |    | Total | 
|Balance, December 31, 2008     |  | $         | 7  |   |                         | $ | 5  |       |  | $ | 12 |  
|Restructuring charges          |  |           |   |   |                         |   | 4  |       |  |   | 4  |  
|Cash payments                  |  |           | (5 | ) |                         |   | (1 | )     |  |   | (6 | )
|Accretion of net present value |  |           |   |   |                         |   | 1  |       |  |   | 1  |  
|                               |  |           |    |   |                         |   |    |       |  |   |    |  
|Balance, March 31, 2009        |  | $         | 2  |   |                         | $ | 9  |       |  | $ | 11 |  
|                               |  |           |    |   |                         |   |    |       |  |   |    |  
|                               |  |           |   
|Balance, December 31, 2009     |  | $         | 7  |   |                         | $ | 13 |       |  | $ | 20 |  
|Restructuring charges          |  |           |   |   |                         |   | 4  |       |  |   | 4  |  
|Cash payments                  |  |           | (5 | ) |                         |   | (1 | )     |  |   | (6 | )
|                               |  |           |    |   |                         |   |    |       |  |   |    |  
|Balance, March 31, 2010        |  | $         | 2  |   |                         | $ | 16 |       |  | $ | 18 |  
|                               |  |           |    |   |                         |   |    |       |  |   |    |  



Note 10. Income Taxes



We operate to qualify as a RIC under Subchapter M of the
Code. In order to qualify as a RIC, we must annually distribute in a timely manner to our shareholders at least 90% of our taxable ordinary income of our investment company based on our tax fiscal year. Ordinary taxable income includes net
short-term capital gains but excludes net long-term capital gains. A RIC is not subject to federal income tax on the portion of its taxable ordinary income and long-term capital gains that are distributed to its shareholders, including deemed
distributions. As permitted by the Code, a RIC can designate dividends paid in the subsequent tax year as dividends of current year ordinary income and net long-term capital gains if those dividends are both declared by the extended due date
of the RICs federal income tax return and paid to shareholders by the last day of the subsequent tax year. We have distributed, or intend to distribute, sufficient dividends to eliminate taxable income for all of our tax fiscal years. However,
we may elect to not distribute sufficient dividends to eliminate all of our taxable income so long as we distribute at least 90% of our taxable ordinary income in order to maintain our qualification as a RIC. To the extent we maintain our
qualification as a RIC but do not distribute all of our taxable income, we would be subject to income tax on such undistributed amounts. If we fail to satisfy the 90% distribution requirement or otherwise fail to qualify as a RIC in any tax year, we
would be subject to income tax in such year on all of our taxable income, regardless of whether we made any distributions to our shareholders. We have a tax fiscal year that ends on September 30.



Our ordinary taxable income and net long-term capital gains
comprise our investment company taxable income which differs from net income as defined by GAAP due primarily to temporary and permanent differences in interest and dividend income recognition, stock-based compensation and other expense recognition
and unrealized appreciation or depreciation of investments. In addition, there are classification differences between GAAP and tax as it relates to what is characterized as net operating income for GAAP compared to ordinary taxable income for tax
and what is characterized as net realized gains or losses for GAAP compared to net long-term capital gains or losses for tax. These characterization differences between GAAP and tax include the characterization of realized losses for loans, interest
receivable write-offs for uncollectible accounts, periodic interest settlements for interest rate swap agreements and the holding period of capital investments.



As a RIC, we are also subject to a nondeductible federal excise tax of 4% if we do not distribute at least 98% of our ordinary income,
excluding net short-term capital gains, in any calendar year and 98% of our capital gains for each one-year period ending October 31, including any undistributed income from the prior excise tax



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



year. For the three months ended March 31, 2010 and 2009, we did not accrue a federal excise tax because we distributed or intend to distribute sufficient dividends to eliminate any federal
excise tax for the respective excise tax years.



In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act were enacted. This
legislation has not resulted in an income tax provision for American Capital or American Capital Financial Services, Inc., our consolidated taxable operating subsidiary.



Note 11. Investment in European Capital



Revolving Credit Facilities and Loans



In February 2008, we entered into a loan agreement to
provide a $400 million subordinated, unsecured revolving credit facility (the Term A Facility) to European Capital with an original maturity in February 2011. In June 2009, American Capital and European Capital entered into an agreement
whereby the outstanding borrowings under the Term A Facility of $319 million were exchanged for 325.1 million ordinary shares of European Capital and the Term A Facility commitment amount was reduced from $400 million to $87 million. In March
2010, we further amended the Term A Facility to further reduce the commitment amount from $87 million to $53 million, extend the maturity date to June 2012, and change the interest rate to LIBOR plus 7.00% payable in kind. As of March 31, 2010,
there was a $38 million outstanding balance under the Term A Facility.



In October 2008, we amended the loan agreement to extend an additional $250 million subordinated, unsecured revolving credit facility (the
Term B Facility) to European Capital. In November 2009, the loan agreement was amended to reduce the Term B Facility commitment of $250 million to an amount equal to the existing standby letter of credit issued to European Capital for
the benefit of The Royal Bank of Scotland, plc, the agent on European Capitals unsecured multicurrency revolving facility. In March 2010, we amended the loan agreement to terminate the Term B Facility commitment.



In March 2010, we entered into another loan agreement with
European Capital under which we made a loan (the Bridge Loan) for $75 million to European Capital. The Bridge Loan bears interest at LIBOR plus 7.00% payable in kind and matures at the earlier of (i) the date on which all obligations
under the loan agreement are repaid in full and (ii) September 1, 2010. Under the loan agreement, European Capital may not pledge certain of its investments (the Deferred Assets). We also entered into a purchase agreement with European
Capital in March 2010 pursuant to which we agreed to purchase the Deferred Assets from European Capital by September 1, 2010 subject to certain conditions. We may pay the purchase price by setting off any outstanding obligations then due and payable
by European Capital to us, including under the Bridge Loan. European Capital used the $75 million of proceeds from the Bridge Loan to repay in full and terminate its unsecured multicurrency revolving facility, which also resulted in the termination
of the standby letter of credit that we issued in connection with the facility for the benefit of The Royal Bank of Scotland, plc. As of March 31, 2010, the outstanding balance under the Bridge Loan was $75 million.



Note 12. Subsequent Events



Equity Offering



In April 2010, we completed a registered direct offering of
58,300,000 shares of our common stock to a group of institutional investors at a price of $5.06 per share. Upon completion of the offering, we received gross proceeds of approximately $295 million.



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



Exchange Offer



On May 3, 2010, we commenced a private offer to
exchange our outstanding unsecured public and private notes for cash payments and new secured notes (the Exchange Offer). The Exchange Offer expires at 5:00 PM (EDT) on June 1, 2010, unless extended or earlier terminated.



The Exchange Offer is part of a comprehensive
financial restructuring of substantially all of our outstanding unsecured indebtedness, which addresses breaches of certain financial covenants and other defaults under the agreements governing the indebtedness. The restructuring transactions
involve cash principal payments to the holders of existing indebtedness totaling $960 million and the issuance of new secured notes and loans totaling approximately $1,390 million. The restructuring transactions are intended to be accomplished by
means of an out-of-court procedure, but if the conditions to completion of the out-of court restructuring are not satisfied or waived, they may be completed through a pre-packaged in-court restructuring.



The out-of-court restructuring includes an offer to exchange
all of our existing private unsecured notes and public unsecured notes, which have an aggregate principal amount of approximately $963 million, for (A) an aggregate cash payment of a minimum of 39% of the aggregate principal amount of the
existing notes (subject to certain potential adjustments), (B) four series of newly issued amortizing secured notes due December 31, 2013, equal in principal amount to the existing notes exchanged (less the aggregate cash payment), and
(C) the payment of a fee equal to 2% of the aggregate principal amount of the new secured notes, plus accrued and unpaid interest on notes exchanged in the offer. The Exchange Offer also includes a solicitation of consents from the holders
of the existing public notes to remove the basis for an existing default under the provisions of the indenture for the existing public notes.



Simultaneously with the completion of the out-of-court Exchange Offer, there will be a refinancing of approximately $1,387 million in
loans outstanding under our unsecured credit agreement. Under the refinancing, American Capital and the lenders will enter into a new credit agreement providing for (A) the repayment of a minimum of 39% in aggregate principal amount of the
existing loans (subject to certain potential adjustments), (B) the conversion of the remaining outstanding principal amount of the existing loans into new secured term loans maturing on December 31, 2013, and (C) the payment of a fee
equal to 2% of the aggregate principal amount of the new secured loans, plus accrued and unpaid interest under the existing credit agreement. As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009, the lenders under
the existing credit agreement have executed a lock-up agreement, generally obligating them to enter into this refinancing, subject to the satisfaction of various conditions.



The holders of the existing notes and the lenders under the
credit agreement participating in the out-of-court restructuring may elect to receive either cash or new secured debt in exchange for their unsecured debt, subject to certain minimum cash payments and other adjustments or reallocations as may be
required to allow for the payment of the full $960 million of cash. The consummation of the Exchange Offer is subject to, among other things, the condition that (i) all of the lenders under the credit agreement execute the new credit
agreement, (ii) all of the holders of our existing private notes tender in the Exchange Offer all of the existing private notes, and (iii) holders of at least 85% in aggregate principal amount of the existing public notes tender those
notes in the Exchange Offer (or such lesser amount as may be agreed by a majority in aggregate principal amount of the lenders under the credit agreement and the respective committees representing holders of the existing private notes and the
holders of the existing public notes).



The four
series of new secured notes include floating rate notes denominated in US Dollars and adjustable fixed rate notes denominated in US Dollars, Euros and Pounds Sterling. The floating rate notes and the new secured loans will initially bear interest at
a rate per annum equal to one, two, or three month LIBOR (subject to



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



a LIBOR floor of 2% per annum), plus an additional 6.5%, subject to a reduction of such additional amount to 5.5% once the aggregate principal amount of new secured notes and loans that
remain outstanding drops below $1 billion. The adjustable fixed rate notes denominated in US Dollars, Euros and Sterling will initially bear interest at a rate per annum of 2.46%, 2.25% and 2.58%, respectively, plus an additional 6.5%, which
additional amount is similarly subject to reduction to 5.5%. All of the interest rates are subject to increase for, among other things, the non-payment of certain principal amounts, by certain dates. Both the new secured notes and the new secured
loans provide for certain scheduled mandatory amortization payments during their term as well as certain scheduled penalty amortization payments, which if not satisfied would lead to an increase in the interest rates.



Both the new secured notes and the new secured loans will be
secured by a first priority lien (subject to certain permitted liens and exceptions) on substantially all of our existing unencumbered and after-acquired tangible and intangible assets.



As part of the restructuring, we are also soliciting from the
lenders under our credit agreement, holders of our existing notes (with certain exceptions) and counterparties to certain interest rate swap agreements, votes to accept a standby plan of reorganization, under which these creditors would receive
substantially identical consideration to that they would receive under the out-of-court restructuring, although creditors would not have the right to elect whether they preferred to receive cash or new secured debt. If the Exchange Offer and the new
credit agreement are not consummated, but at least one of the classes of the holders of our existing private notes, existing public notes and existing loans under the credit agreement has voted to accept the standby plan by the expiration of the
Exchange Offer in a manner that satisfies the requisite voting thresholds under chapter 11 of title 11 of the United States Code, we may file a voluntary petition for relief and seek prompt confirmation of the standby plan. In such circumstances, a
class of claims votes to accept a plan of reorganization if holders holding at least two-thirds of the aggregate principal amount of the class of claims and more than one half in number of such class of claims that submit votes on the plan vote to
accept the plan.



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ITEM 2.Managements Discussion and Analysis of Financial
Condition and Results of Operations (in millions, except per share data)



Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a
reader of our financial statements with a narrative from the perspective of management. Our MD&A is presented in four sections:



| |  |  | Executive Overview
| | - |  | ------------------



| |  |  | Results of Operations
| | - |  | ---------------------



| |  |  | Financial Condition, Liquidity and Capital Resources
| | - |  | ----------------------------------------------------



| |  |  | Forward-Looking Statements
| | - |  | --------------------------



EXECUTIVE OVERVIEW



We are a publicly traded private equity firm and a global asset manager. We primarily invest in senior debt, subordinated debt and equity
in the buyouts of private companies sponsored by us and buyouts of private companies sponsored by other private equity firms and provide capital directly to early stage and mature private and small public companies. In addition, we also invest in
structured product investments (Structured Products) including commercial mortgage backed securities (CMBS), commercial collateralized loan obligation (CLO) securities and collateralized debt obligation
(CDO) securities and invest in alternative asset funds managed by us. We are also an alternative asset manager with $14 billion of capital resources under management as of March 31, 2010, including $7 billion of third-party capital
resources.



Our primary business objectives are to
increase our taxable income, net realized earnings and net asset value (NAV) by making investments with attractive current yields and/or potential for equity appreciation and realized gains.



American Capital Investing Activity



We provide investment capital to middle market companies,
which we generally consider to be companies with sales between $10 million and $750 million. We primarily invest in senior debt, subordinated debt and equity in the buyouts of private companies sponsored by us, the buyouts of private companies
sponsored by other private equity firms and provide capital directly to early stage and mature private and small public companies. Currently, we will invest up to $100 million in a single middle market transaction in North America. We also invest in
Structured Products and alternative asset funds managed by us. For summary financial information by geographic area, see Note 4 to our consolidated interim financial statements in this Form 10-Q.



We seek to be a long-term partner with our portfolio
companies. As a long-term partner, we will invest capital in a portfolio company subsequent to our initial investment if we believe that it can achieve appropriate returns for our investment. Add-on financings fund (i) strategic acquisitions by
a portfolio company of either a complete business or specific lines of a business that are related to the portfolio companys business, (ii) recapitalization of a portfolio company to raise financing on better terms, buyout one or several
owners or to pay a dividend, (iii) growth of the portfolio company such as product development or plant expansions, or (iv) working capital for a portfolio company, sometimes in distressed situations, that need capital to fund operating
costs, debt service, or growth in receivables or inventory.



The total fair value of our investment portfolio was $5.7 billion and $5.6 billion as of March 31, 2010 and December 31, 2009,
respectively. Our new investments totaled $84 million and $40 million during the three months ended March 31, 2010 and 2009, respectively. The amount of our new investments include both funded commitments and unfunded commitments as of the
investment date. During the three months ended March 31, 2010 and 2009, we generally limited our investment originations to providing funding to our existing portfolio companies for working capital or to recapitalize or refinance their balance
sheets, primarily to preserve our



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investments. Since our asset coverage ratio was below 200% and our NAV per share was greater than the trading price of our common stock during the three months ended March 31, 2010,
regulatory restrictions generally limited our ability to raise debt or equity capital during the quarter to be able to make significant new investments. In addition, we have retained the cash from any realized proceeds from the exit of portfolio
investments during the three months ended March 31, 2010 in anticipation of restructuring our debt obligations and delevering our balance sheet instead of reinvesting the proceeds into new investment opportunities.



The type and aggregate dollar amount of our new investments
during the three months ended March 31, 2010 and 2009 were as follows (in millions):



|                                                              |  |                             |    |      |   |   
|------------------------------------------------------------- |  | --------------------------- | -- | ---- | - | --
|                                                              |  | Three Months EndedMarch 31,
|                                                              |  | 2010                        |    | 2009
|Add-on financing for working capital in distressed situations |  | $                           | 8  |      | $ | 25
|Add-on financing for recapitalizations                        |  |                             | 75 |      |   | 15
|Add-on financing for growth and working capital               |  |                             | 1  |      |   |  
|                                                              |  |                             |    |      |   |   
|Total                                                         |  | $                           | 84 |      | $ | 40
|                                                              |  |                             |    |      |   |   



The add-on financing for recapitalizations of $75 million for the three months ended March 31, 2010 consists of a $75 million bridge
loan issued to European Capital Limited (European Capital), the proceeds of which were utilized to repay in full and terminate European Capitals unsecured multicurrency revolving facility. The bridge loan matures by September 2010
and is expected to be repaid either in kind with certain portfolio investments owned by European Capital or in cash with the proceeds therefrom.



We received cash proceeds from realizations and repayments of portfolio investments as follows (in millions):



|                                                                          |  |                             |     |      |   |   
|------------------------------------------------------------------------- |  | --------------------------- | --- | ---- | - | --
|                                                                          |  | Three Months EndedMarch 31,
|                                                                          |  | 2010                        |     | 2009
|Principal prepayments                                                     |  | $                           | 90  |      | $ | 42
|Sales of equity investments                                               |  |                             | 49  |      |   | 15
|Loan syndications and sales                                               |  |                             | 15  |      |   | 8 
|Scheduled principal amortization                                          |  |                             | 7   |      |   | 10
|Payment of accrued PIK interest and dividend and original issue discounts |  |                             | 2   |      |   | 4 
|                                                                          |  |                             |     |      |   |   
|Total                                                                     |  | $                           | 163 |      | $ | 79
|                                                                          |  |                             |     |      |   |   



Public Manager of Funds of Alternative Assets



We are a global alternative asset manager of third-party funds. Our third-party alternative asset management business is conducted through
our wholly-owned portfolio company, American Capital, LLC. We refer to the asset management business throughout this report to include the asset management activities conducted by American Capital, LLC. In addition to managing American
Capitals assets and providing management services to portfolio companies of American Capital, we also manage European Capital, American Capital Agency Corp. (AGNC), American Capital Equity I, LLC (ACE I), American
Capital Equity II, LP (ACE II), ACAS CLO 2007-1, Ltd. (ACAS CLO-1) and American Capital CRE CDO 2007-1, Ltd. (ACAS CRE CDO). As of March 31, 2010, our assets under management totaled $14 billion, including $7
billion under management in the third-party funds named above.



Through our asset management business, American Capital, LLC generally earns base management fees based on the size of the funds and
incentive income based on the performance of the funds it manages. In addition, we may invest directly into our alternative asset funds and earn investment income from our direct investments in those funds.



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The following table sets forth certain information with respect to our funds under
management as of March 31, 2010:



|                        |  |                                                       |  |                                                       |  |                                            |  |              |  |              |  |              |  |             
|----------------------- |  | ----------------------------------------------------- |  | ----------------------------------------------------- |  | ------------------------------------------ |  | ------------ |  | ------------ |  | ------------ |  | ------------
|                        |  | American Capital                                      |  | European Capital                                      |  | AGNC                                       |  | ACE I        |  | ACE II       |  | ACASCLO-1    |  | ACASCRE CDO 
|Fund type               |  | Public Alternative AssetManager & Fund                |  | Private Fund                                          |  | Public REIT Fund -The NASDAQ Global Market |  | PrivateFund  |  | PrivateFund  |  | PrivateFund  |  | PrivateFund 
|Established             |  | 1986                                                  |  | 2005                                                  |  | 2008                                       |  | 2006         |  | 2007         |  | 2006         |  | 2007        
|Assets under management |  | $6.8 Billion(1)                                       |  | $1.8 Billion(2)                                       |  | $5.8 Billion                               |  | $0.7 Billion |  | $0.4 Billion |  | $0.4 Billion |  | $0.0 Billion
|Investment types        |  | Senior & SubordinatedDebt, Equity,Structured Products |  | Senior & SubordinatedDebt, Equity,Structured Products |  | Agency Securities                          |  | Equity       |  | Equity       |  | Senior Debt  |  | CMBS        
|Capital type            |  | Permanent                                             |  | Permanent                                             |  | Permanent                                  |  | Finite Life  |  | Finite Life  |  | Finite Life  |  | Finite Life 



|(1) | Includes our investment in third-party funds that we manage.
|--- | ------------------------------------------------------------

|(2) | Excluded from our third-party funds under management as we own 100% of European Capital.
|--- | ----------------------------------------------------------------------------------------



Summary of Critical Accounting Policies



The preparation of our financial condition and results of
operations requires us to make judgments and estimates that may have a significant impact upon our financial results. We believe that of our significant accounting policies, the following require estimates and assumptions that require complex,
subjective judgments by management, which can materially impact reported results: valuation of investments; interest and dividend income recognition; stock-based compensation; and derivative financial instruments. All of our critical accounting
policies are fully described in Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2009.



See Note 4 to our interim consolidated financial statements
for further information regarding the classification of our investment portfolio by levels of fair value inputs used to measure our investments as of March 31, 2010.



RESULTS OF OPERATIONS



The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and the notes thereto.



Our
consolidated financial performance, as reflected in our consolidated statements of operations, is composed of the following three primary elements:



| |  |  | The first element is Net operating income, which is primarily the interest, dividends, prepayment fees, finance and transaction fees and
portfolio company management fees earned from investing in debt and equity securities and the fees we earn from fund asset management, less our operating expenses and provision for income taxes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The second element is Net realized gain (loss) on investments, which reflects the difference between the proceeds from an exit of an
investment and the cost at which the investment was carried on our consolidated balance sheets and periodic interest settlements and termination receipts or payments on derivatives, foreign currency transaction gains or losses and income taxes on
realized gains.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The third element is Net unrealized appreciation (depreciation) of investments, which is the net change in the estimated fair value of our
portfolio investments and of our interest rate derivatives at the end of the period compared with their estimated fair values at the beginning of the period or their stated costs, as appropriate. In addition, our net unrealized depreciation of
investments includes the foreign currency translation from converting assets and liabilities denominated in a foreign currency to the U.S. dollar.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The consolidated operating results for the three months ended March 31, 2010 and 2009
were as follows (in millions):



|                                                          |  |                             |      |   |      |   |      |  
|--------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                          |  | Three Months EndedMarch 31, |     
|                                                          |  | 2010                        |      |   | 2009 |  
|Operating income                                          |  | $                           | 164  |   |      | $ | 195  |  
|Operating expenses                                        |  |                             | 115  |   |      |   | 131  |  
|                                                          |  |                             |      |   |      |   |      |  
|Net operating income                                      |  |                             | 49   |   |      |   | 64   |  
|Net gain on extinguishment of debt                        |  |                             |     |   |      |   | 12   |  
|Net realized loss on investments                          |  |                             | (126 | ) |      |   | (131 | )
|                                                          |  |                             |      |   |      |   |      |  
|Net realized loss                                         |  |                             | (77  | ) |      |   | (55  | )
|                                                          |  |                             |      |   |      |   |      |  
|Net unrealized appreciation (depreciation) of investments |  |                             | 264  |   |      |   | (492 | )
|                                                          |  |                             |      |   |      |   |      |  
|Net earnings (loss)                                       |  | $                           | 187  |   |      | $ | (547 | )
|                                                          |  |                             |      |   |      |   |      |  



Operating Income



We derive the majority of our operating income
by investing in senior and subordinated debt and equity of middle market companies with attractive current yields and/or potential for equity appreciation and realized gains. We also derive operating income from investing in Structured Products.
Operating income consisted of the following for the three months ended March 31, 2010 and 2009 (in millions):



|                                                            |  |                             |     |      |   |    
|----------------------------------------------------------- |  | --------------------------- | --- | ---- | - | ---
|                                                            |  | Three Months EndedMarch 31,
|                                                            |  | 2010                        |     | 2009
|Interest income on debt and Structured Products investments |  | $                           | 126 |      | $ | 159
|Dividend income                                             |  |                             | 24  |      |   | 19 
|Interest income on bank deposits                            |  |                             |    |      |   | 1  
|                                                            |  |                             |     |      |   |    
|Interest and dividend income                                |  |                             | 150 |      |   | 179
|                                                            |  |                             |     |      |   |    
|Fund asset management fees and reimbursements               |  |                             | 4   |      |   | 8  
|Portfolio company advisory and administrative fees          |  |                             | 6   |      |   | 5  
|Other fees                                                  |  |                             | 4   |      |   | 3  
|                                                            |  |                             |     |      |   |    
|Fee income                                                  |  |                             | 14  |      |   | 16 
|                                                            |  |                             |     |      |   |    
|Total operating income                                      |  | $                           | 164 |      | $ | 195
|                                                            |  |                             |     |      |   |    



Interest and Dividend Income



Interest income on debt and Structured Products investments decreased by $33 million, or 21%, to $126 million for the three months ended
March 31, 2010 from $159 million for the comparable period in 2009, due to a decrease in our monthly weighted average debt and Structured Products investments partially offset by an increase in the weighted average effective interest rate.
Dividend income increased by $5 million, or 26%, to $24 million for the three months ended March 31, 2010 from $19 million for the comparable period in 2009, primarily due to an increase in the weighted average effective dividend yield.



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The following table summarizes selected data for our debt and equity investments, at cost,
for the three months ended March 31, 2010 and 2009 (dollars in millions):



|                                                                       |  |                             |       |   |      |   |        |  
|---------------------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ------ | -
|                                                                       |  | Three Months EndedMarch 31, |      
|                                                                       |  | 2010                        |       |   | 2009 |  
|Debt and Structured Products investments(1)                            |  | $                           | 5,304 |   |      | $ | 7,207  |  
|Effective interest rate on debt and Structured Products investments(1) |  |                             | 9.5   | % |      |   | 8.8    | %
|Average monthly one-month LIBOR                                        |  |                             | 0.2   | % |      |   | 0.5    | %
|Average non-accrual debt investments at cost(2)                        |  | $                           | 741   |   |      | $ | 942    |  
|Equity investments(1)                                                  |  | $                           | 3,762 |   |      | $ | 3,511  |  
|Effective dividend yield on equity investments(1)                      |  |                             | 2.6   | % |      |   | 2.3    | %
|Debt, Structured Products and equity investments(1)                    |  | $                           | 9,066 |   |      | $ | 10,718 |  
|Effective yield on debt, Structured Products and equity investments(1) |  |                             | 6.6   | % |      |   | 6.7    | %



|(1) | Monthly weighted average.
|--- | -------------------------

|(2) | Quarterly average.
|--- | ------------------



Our weighted average debt and Structured Products investments decreased from the three months ended March 31, 2009 to the three
months ended March 31, 2010 primarily as a result of the repayment or sale of debt investments. We have chosen to accumulate cash on our balance sheet from realization of proceeds from the exit of portfolio investments during the year ended
December 31, 2009 and three months ended March 31, 2010 in anticipation of restructuring our debt obligations and delevering our balance sheet instead of reinvesting the proceeds into new investments. Our cash and cash equivalents earn
interest at approximately 23 basis points on an annualized basis.



The monthly weighted average effective interest rate on our debt and Structured Products investments during the three months ended
March 31, 2010 increased 70 basis points from the prior period primarily due to (i) a greater negative impact of non-accrual debt investments in the three months ended March 31, 2009 as compared to the current period and (ii) an
increase in the interest spreads on recent loan originations and modifications, partially offset by (iii) a 30 basis point decrease in the average one-month LIBOR and (iv) a decline in interest income recognized from CMBS investments as
compared to the prior period.



When a debt
investment is placed on non-accrual, we record reserves on uncollected payment-in-kind (PIK) interest income recorded in prior periods as a reduction of interest income in the current period. Conversely, when a debt investment is removed
from non-accrual, we record income in the current period on prior period PIK interest income which was reserved in prior periods. For the three months ended March 31, 2010 and 2009, we recorded net reserves on uncollected PIK interest income
recorded in prior periods of $2 million and $20 million, respectively, which had an approximate 10 basis point impact on the weighted average effective interest rate for the three months ended March 31, 2010 compared to an approximate 110 basis
point impact for the three months ended March 31, 2009.



The interest income we earn on our debt investments was generally positively impacted by loans that were originated or modified during
2009 and the first quarter of 2010. These recent new loans originations and modifications have been priced at generally higher spreads as compared to loans that have been repaid during this period as market spreads have increased during this period.



A portion of our debt investments, particularly
our senior debt investments, accrue interest at LIBOR plus a spread. These debt investments either have no LIBOR floor or may have a LIBOR floor that is generally around 2.0%. As a result, as LIBOR declines, our interest income generally will
decline for our debt investments with interest rates that are based on LIBOR without a LIBOR floor.



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Our recognition of interest income on Structured Product investments is based in part on our
estimate of their future expected cash flows. Our estimate of future expected cash flows used for interest income recognition for our CMBS investments declined during the three months ended March 31, 2010 as compared to the comparable prior
period resulting in lower interest income recognized for the three months ended March 31, 2010.



The monthly weighted average effective dividend yield on equity investments was 2.6% for the three months ended March 31, 2010, a 30
basis points increase from the comparable period in 2009. This is primarily due to a decrease in the amount of preferred equity investments on non-accrual during the three months ended March 31, 2010 compared to the comparable period in 2009.



When a preferred equity investment is placed on
non-accrual, we record net reserves on uncollected accrued dividend income recorded in prior periods as a reduction of dividend income in the current period. Conversely, when a preferred equity investment is removed from non-accrual, we record
income in the current period on prior period accrued dividend income which was reserved in prior periods. For the three months ended March 31, 2010, we recorded dividend income for the reversal of reserves of accrued dividend income
attributable to prior periods from private finance preferred stock investments of $4 million. For the three months ended March 31, 2009, we recorded reserves on uncollected accrued dividend income recorded in prior periods from private finance
preferred stock investments of $4 million .



Fee Income



As of March 31, 2010, all of our
third-party alternative asset fund management services are conducted through our wholly-owned portfolio company, American Capital, LLC. Fund asset management fees and reimbursements revenue for the three months ended March 31, 2010 and 2009
represent fees of $4 million and $8 million, respectively, for providing advisory and administrative services to American Capital, LLC.



Our fee income includes financial advisory services provided to our portfolio company investments and includes both management fees for
providing managerial advice and analysis to our middle market portfolio companies, which can be recurring in nature, and transaction structuring and financing fees for structuring, financing and executing middle market portfolio transactions, which
may not be recurring in nature.



During the three
months ended March 31, 2010 and 2009, we did not complete any American Capital sponsored buyouts and did not provide any financing in buyouts sponsored by other private equity firms. As a result, we did not earn any loan financing, equity
financing or transaction structuring fees for the three months ended March 31, 2010 and 2009.



Operating Expenses



Operating expenses decreased $16 million, or 12 %, for the three months ended March 31, 2010 from the comparable period in 2009.
Operating expenses consisted of the following for the three months ended March 31, 2010 and 2009 (in millions):



|                                                |  |                             |     |      |   |    
|----------------------------------------------- |  | --------------------------- | --- | ---- | - | ---
|                                                |  | Three Months EndedMarch 31,
|                                                |  | 2010                        |     | 2009
|Interest                                        |  | $                           | 57  |      | $ | 52 
|Salaries, benefits and stock-based compensation |  |                             | 34  |      |   | 53 
|General and administrative                      |  |                             | 24  |      |   | 26 
|                                                |  |                             |     |      |   |    
|Total operating expenses                        |  | $                           | 115 |      | $ | 131
|                                                |  |                             |     |      |   |    



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Interest



Interest expense for the three months ended March 31,
2010 increased $5 million, or 10%, from the comparable period in 2009. The increase in interest expense was primarily attributable to an increase in interest rates for default interest and ratings downgrades, partially offset by a decline in LIBOR
and lower weighted average borrowings. The weighted average interest rate on all of our borrowings, including amortization of deferred financing costs, for the three months ended March 31, 2010 was 5.6%, compared to 4.7% for the comparable
period in 2009. Our weighted average borrowings decreased to $4,076 million for the three months ended March 31, 2010 from $4,401 million for the comparable period in 2009.



Salaries, Benefits and Stock-based Compensation



Salaries, benefits and stock-based
compensation consisted of the following for the three months ended March 31, 2010 and 2009 (in millions):



|                                                      |  |                             |    |      |   |   
|----------------------------------------------------- |  | --------------------------- | -- | ---- | - | --
|                                                      |  | Three Months EndedMarch 31,
|                                                      |  | 2010                        |    | 2009
|Base salaries                                         |  | $                           | 14 |      | $ | 22
|Incentive compensation                                |  |                             | 7  |      |   | 9 
|Benefits                                              |  |                             | 3  |      |   | 5 
|Stock-based compensation                              |  |                             | 10 |      |   | 17
|                                                      |  |                             |    |      |   |   
|Total salaries, benefits and stock-based compensation |  | $                           | 34 |      | $ | 53
|                                                      |  |                             |    |      |   |   



Salaries, benefits and stock-based compensation for the three months ended March 31, 2010 decreased $19 million, or 36%, from the
comparable period in 2009 primarily due to (i) a decrease in the number of employees and (ii) lower stock-based compensation during the three months ended March 31, 2010 as a result of the acceleration of stock-based compensation in
the fourth quarter of 2009 from the completion of a tender offer for certain eligible employee stock options.



To better align our organization and cost structure with the current economic conditions, we undertook strategic reviews of our business
in 2009 and 2008. As a result of these reviews, we eliminated 160 and 72 positions during the 2008 and 2009 fiscal years, respectively. As of March 31, 2010, we had total employees of 261 compared to total employees of 372 as of March 31,
2009.



During the fourth quarter of 2009, we
completed a tender offer for certain eligible employee stock options. Pursuant to the tender offer, we offered employees a cash payment for the voluntary cancellation of certain eligible outstanding employee stock options. As a result of the tender
offer, unrecognized compensation cost of $21 million for the tendered unvested options expected to vest was accelerated and recorded as compensation expense in the fourth quarter of 2009. Accordingly, the stock-based compensation cost for the three
months ended March 31, 2010 is lower as compared to the comparable prior period in part due to the positive impact of the accelerated employee stock options.



General and Administrative



General and administrative expenses decreased by $2 million,
or 8%, for the three months ended March 31, 2010 over the comparable period in 2009 primarily due to fewer employees and offices. During both the three months ended March 31, 2010 and 2009, we recorded non-recurring restructuring charges
of $4 million related to excess office facilities due to office closures and employee headcount reductions. During both the three months ended March 31, 2010 and 2009, we also accrued non-recurring professional fees of $4 million from both our
and our unsecured creditors legal and financial advisors that have been engaged in connection with our debt restructuring negotiations.



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Net Realized (Loss) Gain on Investments



Our net realized (loss) gain on investments for the three
months ended March 31, 2010 and 2009 consisted of the following individual portfolio company realized gain (loss) greater than $15 million (in millions):



|                                                         |  |                             |      |   |      |   |      |  
|-------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                         |  | Three Months EndedMarch 31, |     
|                                                         |  | 2010                        |      |   | 2009 |  
|Other, net                                               |  | $                           | 8    |   |      | $ | 8    |  
|                                                         |  |                             |      |   |      |   |      |  
|Total gross realized portfolio gain                      |  | $                           | 8    |   |      | $ | 8    |  
|                                                         |  |                             |      |   |      |   |      |  
|UFG Member, LLC                                          |  |                             | (76  | ) |      |   |     |  
|Genband Inc.                                             |  |                             | (15  | ) |      |   |     |  
|Barton-Cotton Holding Corporation                        |  |                             |     |   |      |   | (74  | )
|Other, net                                               |  |                             | (24  | ) |      |   | (13  | )
|                                                         |  |                             |      |   |      |   |      |  
|Total gross realized portfolio loss                      |  | $                           | (115 | ) |      | $ | (87  | )
|                                                         |  |                             |      |   |      |   |      |  
|Total net realized portfolio loss                        |  | $                           | (107 | ) |      | $ | (79  | )
|Interest rate derivative periodic interest payments, net |  |                             | (16  | ) |      |   | (6   | )
|European Capital put option agreement                    |  |                             |     |   |      |   | (44  | )
|Foreign currency transactions                            |  |                             | (3   | ) |      |   | (2   | )
|                                                         |  |                             |      |   |      |   |      |  
|Total net realized loss                                  |  | $                           | (126 | ) |      | $ | (131 | )
|                                                         |  |                             |      |   |      |   |      |  



The following are summary
descriptions of portfolio company realized gains or losses greater than $30 million.



In the first quarter of 2010, our portfolio company UFG Member, LLC was sold. As part of the sale proceeds, we received a partial payment
on our remaining subordinated debt investment. The sale proceeds we received included a subordinated note from the purchaser, AFA Investments, Inc., that had a fair value of $4 million. We wrote off our remaining subordinated debt investment and our
equity investment in UFG Member, LLC realizing a total loss of $76 million offset by a reversal of unrealized depreciation of $68 million.



In the first quarter of 2009, Barton-Cotton, Incorporated, the wholly-owned operating subsidiary of Barton-Cotton Holding Corporation
(Barton-Cotton), filed for bankruptcy protection under Chapter 7 of the United States Code. Although we are pursuing our claims, we do not expect to receive any proceeds for our subordinated debt or equity investments in Barton-Cotton.
We deemed our investments to be worthless and recognized a realized loss of $74 million fully offset by a reversal of unrealized depreciation.



On November 19, 2008, we entered into a put option agreement with European Capital under which European Capital could put some or all
of certain investments to us at a predetermined put price. Under the terms of the agreement, the put option could be exercised at any time commencing on January 1, 2010 and expiring on December 31, 2010. In consideration for entering into
the put option agreement, European Capital paid us 16 million ($20 million). On March 30, 2009, we entered into a termination agreement with European Capital to terminate the put option agreement. Under the terms of the termination
agreement, we settled the put option obligation by paying European Capital the fair value of the put option obligation of $65 million (49 million). As a result, we recognized a realized loss of $44 million offset by the reversal of unrealized
depreciation of $49 million in our consolidated statements of operations.



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Net Unrealized Appreciation (Depreciation) of Investments



The following table itemizes the change in net unrealized
appreciation (depreciation) of investments for the three months ended March 31, 2010 and 2009 (in millions):



|                                                                                           |  |                             |     |   |      |   |      |  
|------------------------------------------------------------------------------------------ |  | --------------------------- | --- | - | ---- | - | ---- | -
|                                                                                           |  | Three Months EndedMarch 31, |    
|                                                                                           |  | 2010                        |     |   | 2009 |  
|Gross unrealized appreciation of private finance portfolio investments                     |  | $                           | 195 |   |      | $ | 33   |  
|Gross unrealized depreciation of private finance portfolio investments                     |  |                             | (84 | ) |      |   | (453 | )
|                                                                                           |  |                             |     |   |      |   |      |  
|Net unrealized appreciation (depreciation) of private finance portfolio investments        |  |                             | 111 |   |      |   | (420 | )
|Net unrealized appreciation (depreciation) of European Capital investment                  |  |                             | 50  |   |      |   | (13  | )
|Net unrealized appreciation of European Capital foreign currency translation               |  |                             | 69  |   |      |   | 56   |  
|Net unrealized depreciation of AGNC                                                        |  |                             | (2  | ) |      |   | (18  | )
|Net unrealized appreciation (depreciation) of American Capital, LLC                        |  |                             | 26  |   |      |   | (162 | )
|Net unrealized depreciation of Structured Products investments                             |  |                             |    |   |      |   | (46  | )
|Reversal of prior period net unrealized depreciation upon realization                      |  |                             | 103 |   |      |   | 78   |  
|                                                                                           |  |                             |     |   |      |   |      |  
|Net unrealized appreciation (depreciation) of portfolio investments                        |  |                             | 357 |   |      |   | (525 | )
|Foreign currency translation                                                               |  |                             | (87 | ) |      |   | (69  | )
|Derivative agreements                                                                      |  |                             | (6  | ) |      |   | 53   |  
|Reversal of prior period net unrealized depreciation on option agreements upon realization |  |                             |    |   |      |   | 49   |  
|                                                                                           |  |                             |     |   |      |   |      |  
|Net unrealized appreciation (depreciation) of investments                                  |  | $                           | 264 |   |      | $ | (492 | )
|                                                                                           |  |                             |     |   |      |   |      |  



See our Investment
Valuation Policy in Note 3 in our Annual Report on Form 10-K for the year ended December 31, 2009 for a description of our valuation methodologies.



Private Finance Portfolio



Our private finance portfolio investments consist of loans and equity securities primarily to privately-held middle market companies.
There is generally no publicly available information about these companies and an active primary or secondary market for the trading of these privately issued loans and securities generally does not exist. Our investments have been historically
exited through normal repayment or a change in control transaction such as a sale or recapitalization of the portfolio company.



For the three months ended March 31, 2010, the $111 million of net unrealized appreciation on our private finance portfolio
investments was driven primarily by improved portfolio company performance and multiple expansion. The operating results for our private finance portfolio companies have improved starting in the latter half of 2009 as the recent global economic
recession appears to be ending.



For the three
months ended March 31, 2009, the $420 million of net unrealized depreciation on our private finance portfolio investments was driven primarily by declines in multiples of comparable companies and reduction of historic and projected cash flows
of certain portfolio companies due to the global economic recession.



European Capital



For the three months ended March 31, 2010, we recognized unrealized appreciation of $119 million on our investment in European
Capital comprised of $50 million of unrealized appreciation on our investment and $69 million of unrealized appreciation from foreign currency translation. As of March 31, 2010, our investment in European Capital consisted of an equity
investment with a cost basis and fair value of $1,267 million and $278 million, respectively and a debt investment with a fair value and cost basis of $113 million.



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European Capital is an investment fund that invests in and sponsors management and employee
buyouts, invests in private equity buyouts and provides capital directly to private and mid-sized public companies primarily in Europe. It primarily invests in senior debt, subordinated debt and equity. European Capitals underlying portfolio
investments are recorded at fair value determined in accordance with GAAP and by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures
(ASC 820). In determining the fair value of our investment in European Capital, we concluded that our wholly-owned equity investment should be less than the NAV of European Capital due to the risks associated with our ability to realize
the full fair value of European Capitals underlying assets for several reasons, including the covenants and tenor of European Capitals credit facilities and recent comparable transactions and public comparables, which indicate fair
values at a discount to NAV. The unrealized appreciation on our investment of $50 million during the three months ended March 31, 2010, excluding unrealized appreciation on foreign currency, is due primarily to an increase in the NAV of
European Capital and a reduction to the discount applied to NAV.



The following is a summary composition of European Capitals NAV and our equity investments implied discount to its NAV as of
March 31, 2010 and December 31, 2009 (in millions):



|                                                 |  |                |       |   |                   |   |       |  
|------------------------------------------------ |  | -------------- | ----- | - | ----------------- | - | ----- | -
|                                                 |  | March 31, 2010 |       |   | December 31, 2009 |  
|Debt investments at fair value                   |  |               | 1,066 |   |                   |  | 1,038 |  
|Equity investments at fair value                 |  |                | 199   |   |                   |   | 174   |  
|Other assets and liabilities, net                |  |                | 40    |   |                   |   | 94    |  
|Secured debt at cost                             |  |                | (542  | ) |                   |   | (569  | )
|Unsecured debt at cost                           |  |                | (109  | ) |                   |   | (191  | )
|Secured debt from American Capital at cost       |  |                | (56   | ) |                   |   |      |  
|Unsecured debt from American Capital at cost     |  |                | (28   | ) |                   |   | (18   | )
|                                                 |  |                |       |   |                   |   |       |  
|NAV (Euros)                                      |  |               | 570   |   |                   |  | 528   |  
|Exchange rate                                    |  |                | 1.35  |   |                   |   | 1.43  |  
|                                                 |  |                |       |   |                   |   |       |  
|NAV (U.S. dollars)                               |  | $              | 770   |   |                   | $ | 755   |  
|                                                 |  |                |       |   |                   |   |       |  
|Fair value of American Capital equity investment |  | $              | 278   |   |                   | $ | 243   |  
|                                                 |  |                |       |   |                   |   |       |  
|Implied discount to NAV                          |  |                | 63.9  | % |                   |   | 67.8  | %
|                                                 |  |                |       |   |                   |   |       |  



AGNC



For the three months ended March 31, 2010, we
recognized unrealized depreciation of $2 million on our investment in AGNC due to a decrease in the closing market quote of AGNC common stock.



American Capital, LLC



American Capital, LLC, a wholly-owned portfolio company of American Capital, is a holding company of wholly-owned third-party fund
managers. During the three months ended March 31, 2010, we recognized $26 million of unrealized appreciation on our investment in American Capital, LLC. The funds managed by American Capital, LLC are European Capital, AGNC, ACE I, ACE II, ACAS
CLO-1 and ACAS CRE CDO. The appreciation in the fair value of American Capital, LLC for the three months ended March 31, 2010 is primarily due to improved performance of the funds that it manages.



Structured Products



American Capital has investments in Structured Products such
as investment and non-investment grade tranches of CMBS, CLO and CDO securities. During the three months ended March 31, 2010, we recorded no net unrealized appreciation on our Structured Products investments. Our CMBS portfolio, which includes
a



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commercial real estate CDO, experienced $4 million of net unrealized depreciation during the three months ended March 31, 2010 and our CLO and CDO portfolios of commercial loans experienced
$4 million of net unrealized appreciation during the three months ended March 31, 2010.



Foreign Currency Translation



We have a limited amount of investments in portfolio companies, including European Capital, for which the investment is denominated in a
foreign currency, primarily the Euro. We also have other assets and liabilities denominated in foreign currencies. Fluctuations in exchange rates therefore impact our financial condition and results of operations, as reported in U.S. dollars. For
the three months ended March 31, 2010, we recorded net unrealized depreciation of $87 million primarily as a result of the Euro depreciation against the U.S. dollar.



Derivative and Option Agreements



During the three months ended March 31, 2010, we
recorded $6 million of net unrealized depreciation from derivative agreements, primarily interest rate swaps, partially due to a reduction of our credit risk for non-performance during the period. Cumulatively, the fair value of the net liability
for our derivative agreements as of March 31, 2010 includes a $14 million reduction due to the incorporation of our credit risk as a result of the impact of our default under our unsecured borrowing arrangements and credit rating downgrades.



During the three months ended March 31,
2009, we recorded $102 million of net unrealized appreciation from derivative and option agreements. We recorded $53 million of net unrealized appreciation from derivative agreements, primarily interest rate swaps, and a $49 million reversal of
prior period net unrealized depreciation from the termination of the European Capital put option agreement.



Return on Shareholders Equity



The following table summarizes our returns on shareholders equity for the last twelve months (LTM) and quarter ended
March 31, 2010 and 2009:



|                                                                                 |  |                        |    |  |       |   
|-------------------------------------------------------------------------------- |  | ---------------------- | -- |  | ----- | --
|                                                                                 |  | Period Ended March 31, |   
|                                                                                 |  | 2010                   |    |  | 2009  |   
|LTM net operating income return on average equity at cost                        |  | 1.9                    | %  |  | 6.1   | % 
|LTM realized (loss) earnings return on average equity at cost                    |  | (11.3                  | )% |  | 4.3   | % 
|LTM loss return on average equity                                                |  | (7.6                   | )% |  | (64.2 | )%
|Current quarter net operating income return on average equity at cost annualized |  | 3.2                    | %  |  | 3.9   | % 
|Current quarter realized loss return on average equity at cost annualized        |  | (5.1                   | )% |  | (3.4  | )%
|Current quarter earnings (loss) return on average equity annualized              |  | 30.7                   | %  |  | (75.4 | )%



Financial Condition, Liquidity and Capital Resources



The economic recession and crisis in the global credit markets during the past two years has adversely affected all industry sectors.
During the period, we suffered significant net depreciation, higher defaults and losses in many of our investments, and as a result became overlevered and defaulted on our primary unsecured arrangements. Additionally we believe that the economic
recession and global financial has resulted in fewer firms interested in financing assets or businesses, tighter lending standards and reduced access to capital. The economic recession and global financial crisis has contributed to a decline in
earnings and/or decline in valuation multiples for our portfolio companies and widened the investment spreads on Structured Products and certain of our private finance debt investments causing decreases in the fair value of these investments during
this two-year period. Although we began to experience some signs of stabilization and improvement during the latter part of 2009 and the first quarter of 2010 in the earnings and valuation multiples of our portfolio companies and in the



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investments spreads on our Structured Products and private finance debt investments, we may experience volatile market swings that could lead to a further decline in earnings and/or decline in
valuation multiples for our portfolio companies or could lead to further widening of investment spreads on Structured Products or private finance debt investments causing a further decrease in the fair value of these investments. Although we cannot
predict future market conditions, we believe that our continuing ability to generate positive operating cash flows and sell existing portfolio investments will provide us with adequate liquidity to execute our current business strategy including the
payment of our debt service and the minimum amount of dividends to maintain our qualification as a RIC. However, there is no certainty that we will generate sufficient liquidity from these realizations to meet our needs. We may elect to raise new
capital if we can do so at terms that we deem to be attractive.



Currently, our primary sources of liquidity are our cash and cash equivalents and our portfolio investments. As of March 31, 2010, we
had $820 million of cash and cash equivalents and $79 million of restricted cash and cash equivalents. As of April 30, 2010, we had approximately $1.2 billion of cash and cash equivalents. A substantial amount of our existing cash balance is
expected to be used to pay down our unsecured revolving credit facility and unsecured public and private notes as part of a restructuring transaction. See Exchange Offer discussion below for additional information. Our restricted cash and cash
equivalents consists primarily of collections of interest and principal payments on assets that are securitized. In accordance with the terms of the related securitized debt agreements, based on current characteristics of the securitized loan
portfolios, the restricted funds are generally used each quarter to pay interest and principal on the securitized debt and are not distributed to us or available for our general operations. During the three months ended March 31, 2010, we
received cash proceeds from the realizations of portfolio investments of $163 million. During the three months ended March 31, 2010, we principally funded our operations, including our investing activities, from (i) cash receipts from
interest, dividend and fee income from our investment portfolio and (ii) cash proceeds from the realization of portfolio investments through the repayments of loan investments and the sale of loan and equity investments.



Operating and Investing Cash Flow



Historically, our investment portfolio has generated a
substantial amount of operating cash flow from interest, dividends and fees. For the three months ended March 31, 2010, we generated $21 million of cash flow from operations. One of our other sources of liquidity is our investment portfolio.
For the three months ended March 31, 2010, we received net cash from investing activities totaling $60 million. Included in our cash from investing activities were cash proceeds from the realization of portfolio investments totaling $163
million for the three months ended March 31, 2010. As of March 31, 2010, we had portfolio investments totaling $5.7 billion at fair value, including $3.8 billion in debt investments, $1.7 billion in equity investments and $0.2 billion in
Structured Product investments. Our investments are generally illiquid and no active primary or secondary market for the trading of these investments exists. We are generally repaid our investments upon a change of control event of the portfolio
company such as sale or recapitalization of the portfolio company. We currently have several portfolio companies in various stages of the sale process; however, there are no assurances that we will be able to realize proceeds from our investments in
the future.



Due to the exit of several of our
portfolio investments and a dramatic decline in our investing activities, our investment portfolio at cost decreased from $10.7 billion as of December 31, 2008 to $9.0 billion as of March 31, 2010. Our private finance debt portfolio, which
is the significant contributor to our operating income and our operating cash flows, also decreased from $6.2 billion at cost as of December 31, 2008 to $4.4 billion at cost as of March 31, 2010. In addition, the weighted average interest
rate on our outstanding borrowings increased from 4.9% for the year ended December 31, 2008 to 5.6% for the quarter ended March 31, 2010. As a result of the decrease in our private finance debt portfolio and the increase in our cost of
capital during 2009 and 2010, our operating cash flows decreased from $31 million for the three months ended March 31, 2009 to $21 million for the three months ended March 31, 2010. For the quarter ended March 31, 2010, approximately $51
million of interest income collected during the quarter was generated from securitized assets, all of which is currently



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required to be used to pay interest and principal on the outstanding notes in our securitizations. We believe that we will continue to generate sufficient cash flow through the receipt of
interest, dividend and fee payments from our investment portfolio, as well as the disposition of select portfolio investments, to allow us to continue to service our debt, pay our operating costs and expenses, distribute dividends to maintain our
status as a RIC and fund capital to our current portfolio companies.



Debt Capital



Our debt obligations consisted of the following (in millions):



|                                                     |  |               |       |                  |   |      
|---------------------------------------------------- |  | ------------- | ----- | ---------------- | - | -----
|                                                     |  | March 31,2010 |       | December 31,2009
|Unsecured revolving credit facility                  |  | $             | 1,387 |                  | $ | 1,388
|Unsecured public debt due October 2012               |  |               | 549   |                  |   | 548  
|Unsecured private debt due September 2009            |  |               | 84    |                  |   | 84   
|Unsecured private debt due August 2010               |  |               | 134   |                  |   | 134  
|Unsecured private debt due February 2011             |  |               | 25    |                  |   | 26   
|Unsecured private debt due September 2011            |  |               | 95    |                  |   | 95   
|Unsecured private debt due October 2020              |  |               | 75    |                  |   | 75   
|ACAS Business Loan Trust 2004-1 asset securitization |  |               | 164   |                  |   | 170  
|ACAS Business Loan Trust 2005-1 asset securitization |  |               | 651   |                  |   | 696  
|ACAS Business Loan Trust 2006-1 asset securitization |  |               | 358   |                  |   | 377  
|ACAS Business Loan Trust 2007-1 asset securitization |  |               | 272   |                  |   | 294  
|ACAS Business Loan Trust 2007-2 asset securitization |  |               | 232   |                  |   | 255  
|                                                     |  |               |       |                  |   |      
|Total                                                |  | $             | 4,026 |                  | $ | 4,142
|                                                     |  |               |       |                  |   |      



The daily weighted average debt balance for the three months ended March 31, 2010 and 2009 was $4,076 million and $4,401 million,
respectively. The weighted average interest rate on all of our borrowings, including amortization of deferred financing costs, for the three months ended March 31, 2010 and 2009 was 5.6% and 4.7%, respectively.



As a BDC, we are permitted to issue senior debt securities
and preferred stock (collectively, Senior Securities) in amounts such that our asset coverage is at least 200% after each issuance of Senior Securities. Asset coverage is defined as the ratio which the value of the total assets, less all
liabilities and indebtedness not represented by Senior Securities, bears to the aggregate amount of Senior Securities representing indebtedness. However, we may borrow amounts up to 5% of our total assets for temporary purposes. As of March 31,
2010, our asset coverage was 163%. Accordingly, we are generally prohibited from issuing any additional Senior Securities until our asset coverage is at least 200%.



Unsecured Revolving Credit Facility



As of March 31, 2010 and December 31, 2009, we
were not in compliance with the minimum consolidated tangible net worth covenant and certain other covenants under our unsecured revolving credit facility (the Credit Facility). During the continuance of these events of default, lenders
representing a majority of the commitments may declare the outstanding principal and accrued interest to be due and payable immediately subject to the lock-up agreement discussed below. Pursuant to the terms of the Credit Facility, the applicable
spread on any borrowings outstanding under the Credit Facility increased by 2.00% as a result of these events of default. Also, due to the events of default, all LIBOR borrowings outstanding were automatically converted into base rate loans from
index rate loans. The applicable interest rate for base rate loans is the greater of the prime rate or the federal



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funds rate plus 0.50%. As a result of rating agency downgrades during the first quarter of 2009, the applicable spread over the applicable base rate increased from 2.25% to 3.75% and the unused
commitment fee increased from 0.50% to 0.80% as of March 2, 2009. As of March 31, 2010, the total interest rate on this facility was 9.00% for borrowings denominated in U.S. dollars.



In November 2009, we entered into a lock-up agreement with
the lenders under the Credit Facility to further our efforts to restructure the Credit Facility and our other principal unsecured debt arrangements based on our previously announced agreement in principle with the lenders to restructure the Credit
Facility. The lock-up agreement generally requires all of the lenders under the Credit Facility to agree to the proposed restructuring assuming specified conditions are met. However, the lock-up agreement may be terminated if various stages of the
proposed restructuring are not completed by certain dates. These deadlines have been extended on several occasions and currently, the lock-up agreement may be terminated (i) upon the earlier of the consummation of the exchange transaction, the
effective date of a prepackaged plan of reorganization or a written agreement to terminate the lock-up agreement, (ii) if the exchange transaction is not consummated in accordance with the proposed restructuring and we have not commenced a
voluntary reorganization case by June 30, 2010 or (iii) if we commence a voluntary reorganization case and (1) any material order is entered that is inconsistent with the lock-up agreement or the proposed restructuring, which is objected
to by a majority of the lenders, (2) an order finding that the solicitation complying with applicable law and confirming the plan has not been entered on or before July 31, 2010 (unless the administrative agent under the Credit Facility
agrees to an extension of not later than August 15, 2010), (3) the plan is not consummated by August 15, 2010, or (4) the voluntary reorganization case is dismissed or converted to a case under chapter seven of title eleven
of the United States Code or a trustee or examiner shall have been appointed in the voluntary reorganization. In addition, either party may terminate the lock-up agreement upon a breach of material obligations by the other party.



Unsecured Public Debt



We were not in compliance with the asset coverage ratio
covenant in the indenture for our public notes as of March 31, 2010 and December 31, 2009. Pursuant to the terms of the notes, during the continuance of this event of default, the trustee or the holders of at least 25% of the outstanding
principal amount of the notes may declare the principal and accrued interest to be due and payable immediately. The holders of more than 50% of the outstanding principal amount of the notes can rescind any acceleration if all late payments are made
and any events of default are cured or waived. As of the date of this filing, the noteholders have not accelerated the amounts outstanding under the notes. As a result of rating agency downgrades during 2009, the interest rate on these notes
increased by 2.00%. As of March 31, 2010, the interest rate on our public notes was 8.85%.



Unsecured Private Debt



As of March 31, 2010 and December 31, 2009, we were not in compliance with certain financial covenants, including the minimum
consolidated tangible net worth covenant, the available debt asset coverage ratio covenant and the asset coverage ratio covenant, for each series of these notes. Pursuant to the terms of the notes, during the continuance of these events of default,
the holders of more than 50% of the outstanding principal amount of each series of the notes can declare that all amounts outstanding under the notes for the respective series are immediately due and payable, at which time a default rate equal to
the greater of 2.00% above the stated rate for each series or 2.00% over the prime rate will be applied on all overdue amounts. The holders of more than 50% of the outstanding principal amount of each series of notes could rescind any acceleration
of the notes in that series if all late payments are made, any events of default are cured or waived and no judgment or decree has been entered for the payment of any monies due on the notes. On August 28, 2009, the noteholders declared the
unpaid principal amount of the notes outstanding, plus all accrued and unpaid interest and the respective make-whole interest payment for each series, if any, immediately due and payable. Although we have not repaid these obligations in full, we
entered into forbearance agreements with all of these noteholders, under which the noteholders agreed to forbear from exercising certain rights and remedies with respect to the events of



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default that have occurred under the notes. The holders of a majority in principal amount of the notes outstanding under each series may terminate the forbearance agreement for the series at any
time. In consideration for entering into the forbearance agreements, we paid all accrued and unpaid interest due on the notes as of September 1, 2009 at the default rate retroactive to March 30, 2009 and agreed to add to the outstanding
principal amounts of certain of the notes a $22 million make-whole interest payment. As of March 31, 2010, the total weighted average interest rate of our unsecured private notes was 8.27%.



Securitizations



As of March 31, 2010, we were in compliance with all of
the covenants for our asset securitizations. Under the terms of each of our asset securitizations, if any loan collateral in each trust becomes a defaulted loan, as defined in each indenture, all interest and principal collections that would be
applied to the subordinated notes retained by us are paid sequentially to pay down the principal of the notes that are generally held by third party institutional investors in an amount equal to the principal amount of the defaulted loan collateral.
As of March 31, 2010, there was defaulted loan collateral in each of the asset securitization trusts and therefore all interest and principal collections that would have been applied to the subordinated notes retained by us will continue to be
applied sequentially to pay down the principal of the notes generally held by third party institutional investors in an amount equal to the principal amount of the defaulted loan collateral. Our asset securitizations are secured by portfolio
investments and assets with a fair value of $2.1 billion as of March 31, 2010.



Exchange Offer



On May 3, 2010, we announced that we had commenced an offer to exchange our outstanding unsecured public and private notes for cash
payments and new secured notes (the Exchange Offer). The Exchange Offer expires at 5:00 PM (EDT) on June 1, 2010, unless extended or earlier terminated.



The Exchange Offer is part of a comprehensive financial
restructuring of substantially all of our outstanding unsecured indebtedness, which addresses breaches of certain financial covenants and other defaults under the agreements governing the indebtedness. The restructuring transactions involve cash
principal payments to the holders of existing indebtedness totaling $960 million and the issuance of new secured notes and loans totaling approximately $1,390 million. The restructuring transactions are intended to be accomplished by means of an
out-of-court procedure, but if the conditions to completion of the out-of court restructuring are not satisfied or waived, they may be completed through a pre-packaged in-court restructuring.



The out-of-court restructuring includes an offer to exchange
all of our existing private unsecured notes and public unsecured notes, which have an aggregate principal amount of approximately $963 million, for (A) an aggregate cash payment of a minimum of 39% of the aggregate principal amount of the
existing notes (subject to certain potential adjustments), (B) four series of newly issued amortizing secured notes due December 31, 2013, equal in principal amount to the existing notes exchanged (less the aggregate cash payment), and (C) the
payment of a fee equal to 2% of the aggregate principal amount of the new secured notes, plus accrued and unpaid interest on notes exchanged in the offer. The Exchange Offer also includes a solicitation of consents from the holders of the
existing public notes to remove the basis for an existing default under the provisions of the indenture for the existing public notes.



Simultaneously with the completion of the out-of-court Exchange Offer, there will be a refinancing of approximately $1,387 million in
loans outstanding under our unsecured credit agreement. Under the refinancing, American Capital and the lenders will enter into a new credit agreement providing for (A) the repayment of a minimum of 39% in aggregate principal amount of the existing
loans (subject to certain potential adjustments), (B) the conversion of the remaining outstanding principal amount of the existing loans into new secured term loans maturing on December 31, 2013, and (C) the payment of a fee equal to 2% of the
aggregate principal



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amount of the new secured loans, plus accrued and unpaid interest under the existing credit agreement. As previously announced, the lenders under the existing credit agreement have executed a
lock-up agreement, generally obligating them to enter into this refinancing, subject to the satisfaction of various conditions.



The holders of the existing notes and the lenders under the credit agreement participating in the out-of-court restructuring may elect to
receive either cash or new secured debt in exchange for their unsecured debt, subject to certain minimum cash payments and other adjustments or reallocations as may be required to allow for the payment of the full $960 million of cash. The
consummation of the Exchange Offer is subject to, among other things, the condition that (i) all of the lenders under the credit agreement execute the new credit agreement, (ii) all of the holders of our existing private notes tender in the Exchange
Offer all of the existing private notes, and (iii) holders of at least 85% in aggregate principal amount of the existing public notes tender those notes in the Exchange Offer (or such lesser amount as may be agreed by a majority in aggregate
principal amount of the lenders under the credit agreement and the respective committees representing holders of the existing private notes and the holders of the existing public notes).



The four series of new secured notes include floating rate
notes denominated in US Dollars and adjustable fixed rate notes denominated in US Dollars, Euros and Pounds Sterling. The floating rate notes and the new secured loans will initially bear interest at a rate per annum equal to one, two, or three
month LIBOR (subject to a LIBOR floor of 2% per annum), plus an additional 6.5%, subject to a reduction of such additional amount to 5.5% once the aggregate principal amount of new secured notes and loans that remain outstanding drops below $1
billion. The adjustable fixed rate notes denominated in US Dollars, Euros and Sterling will initially bear interest at a rate per annum of 2.46%, 2.25% and 2.58%, respectively, plus an additional 6.5%, which additional amount is similarly subject to
reduction to 5.5%. All of the interest rates are subject to increase for, among other things, the non-payment of certain principal amounts, by certain dates. Both the new secured notes and the new secured loans provide for certain scheduled
mandatory amortization payments during their term as well as certain scheduled penalty amortization payments, which if not satisfied would lead to an increase in the interest rates.



Both the new secured notes and the new secured loans will be
secured by a first priority lien (subject to certain permitted liens and exceptions) on substantially all of our existing unencumbered and after-acquired tangible and intangible assets.



As part of the restructuring, we are also soliciting from the
lenders under our credit agreement, holders of our existing notes (with certain exceptions) and counterparties to certain interest rate swap agreements, votes to accept a standby plan of reorganization, under which these creditors would receive
substantially identical consideration to that they would receive under the out-of-court restructuring, although creditors would not have the right to elect whether they preferred to receive cash or new secured debt. If the Exchange Offer and the new
credit agreement are not consummated, but at least one of the classes of the holders of our existing private notes, existing public notes and existing loans under the credit agreement has voted to accept the standby plan by the expiration of the
Exchange Offer in a manner that satisfies the requisite voting thresholds under chapter 11 of title 11 of the United States Code, we may file a voluntary petition for relief and seek prompt confirmation of the standby plan. In such circumstances, a
class of claims votes to accept a plan of reorganization if holders holding at least two-thirds of the aggregate principal amount of the class of claims and more than one half in number of such class of claims that submit votes on the plan vote to
accept the plan.



Interest Rate Derivatives



We use interest rate derivative
financial instruments to manage interest rate risk and also to fulfill our obligations under the terms of our asset securitizations. We do not hold or issue derivative financial instruments for speculative purposes. All interest rate derivative
financial instruments are recorded at fair value with changes in value reflected in net unrealized appreciation or depreciation of investments during the reporting period. The



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fair value of these instruments is based on the estimated net present value of the future cash flows using the forward interest rate yield curve in effect at the end of the period, adjusted for
the nonperformance risk of us and our counterparties.



We have interest rate swap agreements where we generally pay a fixed rate and receive a floating rate based on LIBOR. We also may enter
into interest rate swaption agreements where, if exercised, we pay a floating rate based on LIBOR and receive a fixed rate. The fair value of our interest rate derivative agreements are identified as separate items on our consolidated balance sheets
and are described in the accompanying consolidated schedules of investments.



We have interest rate swap agreements with certain of our derivative counterparties that allow the counterparty to declare an early
termination event on its outstanding derivative transactions with us if an event of default on certain or all of our indebtedness in amounts that range from the greater of $5 million to $15 million, if a counterparty has accelerated certain of our
indebtedness in amounts that range from the greater of $5 million to $15 million or if our unsecured debt rating falls below BB- as rated by Fitch Ratings, BB-, as rated by Standard & Poors Rating Services or Ba3 by Moodys
Investors Services, Inc. As of March 31, 2010, the GAAP fair value of our interest rate swap agreements with these early termination event provisions was a liability of $43 million, which is net of a $7 million credit risk adjustment based on
our credit risk and our counterpartys credit risk. Our liability in the event the counterparties should elect to terminate their outstanding interest rate swap agreements as a result of these early termination events was $50 million as of
March 31, 2010.



Equity Capital



As a BDC, we are generally not able to issue and sell our
common stock at a price below our NAV per share, exclusive of any distributing commission or discount, except (i) with the prior approval of a majority of our shareholders, (ii) in connection with a rights offering to our existing shareholders, or
(iii) under such other circumstances as the SEC may permit. As of March 31, 2010, our NAV per share was $8.98 per share and our closing market price was $5.08 per share. On February 12, 2010, our shareholders approved a proposal to
authorize us to sell shares of our common stock at prices below the NAV per share in one or more offerings subject to certain limitations, including the prior approval of our Board of Directors. The authorization is effective for a twelve month
period expiring on February 12, 2011 and the number of shares that may be issued below NAV per share is limited to 58,324,930 shares of common stock, which was 20% of the number of shares outstanding as of the record date for the
shareholder vote of the proposal, subject to adjustment for shares issued following the occurrence of events such as stock splits, stock dividends, distributions and recapitalizations.



In April 2010, we completed a registered direct offering of
58,300,000 shares of our common stock to a group of institutional investors at a price of $5.06 per share. Upon completion of the offering, we received gross proceeds of approximately $295 million. As such, except as noted above, we presently have
the authority to only issue 24,930 additional shares of common stock below our NAV per share.



Future Distribution Requirements



If we qualify as a RIC and annually distribute to our shareholders in a timely manner at least 90% of our investment company taxable
ordinary income, we will not be subject to federal income tax on the portion of our taxable ordinary income and long-term capital gains we distribute to our shareholders. As permitted by the Code, a RIC can designate dividends paid in the subsequent
tax year as dividends of current year ordinary income and net long-term gains if those dividends are both declared by the extended due date of the RICs federal income tax return and paid to shareholders by the last day of the subsequent tax
year. We have a tax fiscal year that ends on September 30. We intend to continue to distribute sufficient dividends to eliminate our taxable income. However, we may elect to not distribute sufficient dividends to eliminate all of our taxable
income so long as we distribute at least 90% of our taxable ordinary income in order to maintain our qualification as a RIC. To the extent we maintain our qualification as a RIC but do not distribute all of our taxable income, we would be subject to
federal income tax on such undistributed amounts. For our tax year ended September 30, 2009, we estimate that we have less than $10 million of remaining undistributed ordinary taxable income.



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For any tax years ending on or before December 31, 2011, we can fulfill our
distribution requirements by distributing up to 90% of our common stock as a form of payment of the declared dividend. In order to utilize this option, we must allow each shareholder to elect to receive his or her entire distribution in either cash
or our stock subject to a limitation on the aggregate amount of cash to be distributed to all shareholders, which must be at least 10% of the aggregate declared distribution. If too many shareholders elect to receive cash, each shareholder electing
to receive cash will receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any shareholder electing to receive cash receive less than 10% of his or her entire distribution in cash.



Commitments



As of March 31, 2010, we had commitments under loan and
financing agreements to fund up to $202 million to 38 portfolio companies, with $15 million of the commitments related to undrawn revolving credit facilities for European Capital (see Note 11 to our consolidated interim financial statements in
this Form 10-Q). These commitments are primarily composed of working capital credit facilities, acquisition credit facilities and subscription agreements. The commitments are generally subject to the borrowers meeting certain criteria such as
compliance with covenants and availability under borrowing base thresholds. The terms of the borrowings and financings subject to commitment are comparable to the terms of other loan and equity securities in our portfolio.



Portfolio Credit Quality



We stop accruing interest on our investments when it is
determined that interest is no longer collectible. Our valuation analysis serves as a critical piece of data in this determination. A significant change in the portfolio company valuation assigned by us could have an effect on the amount of our
loans on non-accrual status. As of March 31, 2010, loans on non-accrual status for 34 portfolio companies had a cost basis of $671 million and had a fair value of $263 million.



As of March 31, 2010 and December 31, 2009, current
loans, past due loans and loans on non-accrual status were as follows (dollars in millions):



|                                                                           |  |                |       |   |                   |   |       |  
|-------------------------------------------------------------------------- |  | -------------- | ----- | - | ----------------- | - | ----- | -
|                                                                           |  | March 31, 2010 |       |   | December 31, 2009 |  
|Current                                                                    |  | $              | 3,648 |   |                   | $ | 3,572 |  
|                                                                           |  |                |       |   |                   |   |       |  
|0 - 30 days past due                                                       |  |                |      |   |                   |   | 38    |  
|31 - 60 days past due                                                      |  |                | 3     |   |                   |   |      |  
|61 - 90 days past due                                                      |  |                |      |   |                   |   |      |  
|Greater than 90 days past due                                              |  |                | 44    |   |                   |   | 50    |  
|                                                                           |  |                |       |   |                   |   |       |  
|Total past due loans at cost                                               |  |                | 47    |   |                   |   | 88    |  
|Non-accruing loans at cost                                                 |  |                | 671   |   |                   |   | 811   |  
|                                                                           |  |                |       |   |                   |   |       |  
|Total loans at cost                                                        |  | $              | 4,366 |   |                   | $ | 4,471 |  
|                                                                           |  |                |       |   |                   |   |       |  
|Non-accruing loans at fair value                                           |  | $              | 263   |   |                   | $ | 290   |  
|                                                                           |  |                |       |   |                   |   |       |  
|Total loans at fair value                                                  |  | $              | 3,759 |   |                   | $ | 3,729 |  
|                                                                           |  |                |       |   |                   |   |       |  
|Non-accruing loans at cost as a percent of total loans at cost             |  |                | 15.4  | % |                   |   | 18.1  | %
|                                                                           |  |                |       |   |                   |   |       |  
|Non-accruing loans at fair value as a percent of total loans at fair value |  |                | 7.0   | % |                   |   | 7.8   | %
|                                                                           |  |                |       |   |                   |   |       |  



We believe that debt service
collection is probable for our loans that are past due.



Non-accruing loans at cost decreased from December 31, 2009 to March 31, 2010 primarily due to loan write-offs, exits, improved
portfolio company performance and recapitalizations. During the first quarter of 2010, three portfolio companies were recapitalized that included exchanging our loans for preferred or common equity securities that had a cost basis of $77 million and
a fair value of $6 million.



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Credit Statistics



We monitor several key credit statistics that provide
information about credit quality and portfolio performance. These key statistics include:



| |  |  | Debt to EBITDA Ratiothe sum of all debt with equal or senior security rights to our debt investments divided by the total adjusted earnings
before interest, taxes, depreciation and amortization, or EBITDA, of the most recent twelve months or, when appropriate, the forecasted twelve months.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest Coverage RatioEBITDA divided by the total scheduled cash interest payments required to have been made by the portfolio company during
the most recent twelve-month period, or when appropriate, the forecasted twelve months.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Debt Service Coverage RatioEBITDA divided by the total scheduled principal amortization and the total scheduled cash interest payments required
to have been made during the most recent twelve-month period, or when appropriate, the forecasted twelve months.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We generally require our portfolio companies to provide annual audited and monthly or quarterly unaudited financial statements. Using
these financial statements, we calculate the statistics described above. Buyout and subordinated funds typically adjust EBITDA due to the nature of change of control transactions. Such adjustments are intended to normalize and restate EBITDA to
reflect the pro forma results of a company in a change of control transaction. For purposes of analyzing the financial performance of our portfolio companies, we make certain adjustments to EBITDA to reflect the pro forma results of a company
consistent with a change of control transaction in addition to adjusting EBITDA for significant non-recurring, unusual or infrequent items. Adjustments to EBITDA may include anticipated cost savings resulting from a merger or restructuring, costs
related to new product development, compensation to previous owners, non-recurring revenues or expenses, and other acquisition or restructuring related items.



We track our portfolio investments on a static pool basis, including based on the statistics described above. A static pool consists of
the investments made during a given year. The static pool classification is based on the year the initial investment was made. Subsequent add-on investments are included in the static pool year of the original investment. The Pre-2001 static pool
consists of the investments made from the time of our IPO through the year ended December 31, 2000. The following table contains a summary of portfolio statistics as of and for the period ended March 31, 2010:



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|                                                                           |  |                 |        |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |   |                        |   |        |                    |  |   |   |  |   |   |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------- |  | --------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | - | ---------------------- | - | ------ | ------------------ |  | - | - |  | - | - |  | - | ------ | - |  | - | ------ | -
|                                                                           |  | Static Pool (1) |       
|Portfolio Statistics ($ in millions, unaudited)                            |  | Pre-2001        |        |   | 2001 |   |        | 2002 |  |   | 2003   |   |  | 2004 |        |   | 2005 |   |        | 2006 |  |   | 2007   |   |  | 2008 |        |   | 2009 |   | 2010   |   | Pre-2001-2010Aggregate |   |        | 2005-2010Aggregate | 
|IRR - Fair Value - All Investments(2)                                      |  |                 | 7.9    | % |      |   | 18.1   | %    |  |   | 7.9    | % |  |      | 20.9   | % |      |   | 13.2   | %    |  |   | 2.9    | % |  |      | 7.2    | % |      |   | -10.5  | % |                        |   | -2.5   | %                  |  |   |  |  |   |  |  |   | 4.5    | % |  |   | -0.9   | %
|IRR - Fair Value - Equity Investments Only(2)(3)(4)                        |  |                 | 5.8    | % |      |   | 46.9   | %    |  |   | 11.4   | % |  |      | 28.7   | % |      |   | 27.6   | %    |  |   | -8.2   | % |  |      | 12.7   | % |      |   | -16.5  | % |                        |   | -9.6   | %                  |  |   |  |  |   |  |  |   | 2.5    | % |  |   | -5.0   | %
|IRR - Exited Investments(5)                                                |  |                 | 8.6    | % |      |   | 20.2   | %    |  |   | 9.1    | % |  |      | 23.5   | % |      |   | 17.0   | %    |  |   | 23.9   | % |  |      | 9.7    | % |      |   | -3.3   | % |                        |   | -74.9  | %                  |  |   |  |  |   |  |  |   | 13.0   | % |  |   | 11.5   | %
|Original Investments and Commitments                                       |  | $               | 1,065  |   |      | $ | 376    |      |  | $ | 962    |   |  | $    | 1,434  |   |      | $ | 2,266  |      |  | $ | 4,636  |   |  | $    | 5,179  |   |      | $ | 7,328  |   |                        | $ | 1,021  |                    |  | $ |  |  | $ |  |  | $ | 24,267 |   |  | $ | 18,164 |  
|Total Exits and Prepayments of Original Investments and Commitments        |  | $               | 998    |   |      | $ | 353    |      |  | $ | 757    |   |  | $    | 1,083  |   |      | $ | 1,830  |      |  | $ | 2,096  |   |  | $    | 3,277  |   |      | $ | 3,151  |   |                        | $ | 55     |                    |  | $ |  |  | $ |  |  | $ | 13,600 |   |  | $ | 8,579  |  
|Total Interest, Dividends and Fees Collected                               |  | $               | 386    |   |      | $ | 142    |      |  | $ | 307    |   |  | $    | 365    |   |      | $ | 540    |      |  | $ | 696    |   |  | $    | 785    |   |      | $ | 815    |   |                        | $ | 154    |                    |  | $ |  |  | $ |  |  | $ | 4,190  |   |  | $ | 2,450  |  
|Total Net Realized (Loss) Gain on Investments                              |  | $               | (128   | ) |      | $ | (4     | )    |  | $ | (90    | ) |  | $    | 142    |   |      | $ | 29     |      |  | $ | 293    |   |  | $    | (92    | ) |      | $ | (377   | ) |                        | $ | (50    | )                  |  | $ |  |  | $ |  |  | $ | (277   | ) |  | $ | (226   | )
|Current Cost of Investments                                                |  | $               | 76     |   |      | $ | 23     |      |  | $ | 196    |   |  | $    | 331    |   |      | $ | 471    |      |  | $ | 2,326  |   |  | $    | 1,570  |   |      | $ | 3,221  |   |                        | $ | 799    |                    |  | $ |  |  | $ |  |  | $ | 9,013  |   |  | $ | 7,916  |  
|Current Fair Value of Investments                                          |  | $               | 20     |   |      | $ | 2      |      |  | $ | 136    |   |  | $    | 418    |   |      | $ | 351    |      |  | $ | 1,224  |   |  | $    | 1,249  |   |      | $ | 1,691  |   |                        | $ | 607    |                    |  | $ |  |  | $ |  |  | $ | 5,698  |   |  | $ | 4,771  |  
|Current Fair Value of Investments as a % of TotalInvestments at Fair Value |  |                 | 0.4    | % |      |   | 0.0    | %    |  |   | 2.4    | % |  |      | 7.3    | % |      |   | 6.2    | %    |  |   | 21.5   | % |  |      | 21.9   | % |      |   | 29.7   | % |                        |   | 10.6   | %                  |  |   |  |  |   |  |  |   | 100.0  | % |  |   | 83.7   | %
|Net Unrealized Appreciation (Depreciation)                                 |  | $               | (56    | ) |      | $ | (21    | )    |  | $ | (60    | ) |  | $    | 87     |   |      | $ | (120   | )    |  | $ | (1,102 | ) |  | $    | (321   | ) |      | $ | (1,530 | ) |                        | $ | (192   | )                  |  | $ |  |  | $ |  |  | $ | (3,315 | ) |  | $ | (3,145 | )
|Non-Accruing Loans at Cost                                                 |  | $               | 18     |   |      | $ | 14     |      |  | $ | 27     |   |  | $    |       |   |      | $ | 39     |      |  | $ | 99     |   |  | $    | 136    |   |      | $ | 334    |   |                        | $ | 4      |                    |  | $ |  |  | $ |  |  | $ | 671    |   |  | $ | 573    |  
|Non-Accruing Loans at Fair Value                                           |  | $               | 20     |   |      | $ | 2      |      |  | $ | 20     |   |  | $    |       |   |      | $ | 11     |      |  | $ | 78     |   |  | $    | 58     |   |      | $ | 70     |   |                        | $ | 4      |                    |  | $ |  |  | $ |  |  | $ | 263    |   |  | $ | 210    |  
|Equity Interest at Fair Value(3)                                           |  | $               |       |   |      | $ |       |      |  | $ | 1      |   |  | $    | 191    |   |      | $ | 73     |      |  | $ | 554    |   |  | $    | 422    |   |      | $ | 394    |   |                        | $ | 138    |                    |  | $ |  |  | $ |  |  | $ | 1,773  |   |  | $ | 1,508  |  
|Debt to EBITDA(6)(7)(8)                                                    |  |                 | 7.0    |   |      |   | NM     |      |  |   | 8.1    |   |  |      | 4.5    |   |      |   | 6.2    |      |  |   | 4.6    |   |  |      | 5.3    |   |      |   | 6.9    |   |                        |   | 6.3    |                    |  |   |  |  |   |  |  |   | 5.9    |   |  |   | 5.9    |  
|Interest Coverage(6)(8)                                                    |  |                 | 1.9    |   |      |   | NM     |      |  |   | 0.9    |   |  |      | 2.7    |   |      |   | 2.1    |      |  |   | 2.4    |   |  |      | 2.5    |   |      |   | 2.2    |   |                        |   | 1.4    |                    |  |   |  |  |   |  |  |   | 2.2    |   |  |   | 2.2    |  
|Debt Service Coverage(6)(8)                                                |  |                 | 1.9    |   |      |   | NM     |      |  |   | 0.8    |   |  |      | 2.5    |   |      |   | 1.5    |      |  |   | 1.6    |   |  |      | 2.0    |   |      |   | 1.9    |   |                        |   | 1.2    |                    |  |   |  |  |   |  |  |   | 1.8    |   |  |   | 1.8    |  
|Average Age of Companies(8)                                                |  |                 | 37 yrs |   |      |   | 25 yrs |      |  |   | 50 yrs |   |  |      | 40 yrs |   |      |   | 45 yrs |      |  |   | 29 yrs |   |  |      | 31 yrs |   |      |   | 28 yrs |   |                        |   | 25 yrs |                    |  |   |  |  |   |  |  |   | 31 yrs |   |  |   | 29 yrs |  
|Diluted Ownership Percentage(3)                                            |  |                 | 64     | % |      |   | 86     | %    |  |   | 39     | % |  |      | 52     | % |      |   | 45     | %    |  |   | 54     | % |  |      | 44     | % |      |   | 44     | % |                        |   | 35     | %                  |  |   |  |  |   |  |  |   | 46     | % |  |   | 46     | %
|Average Sales(8)(9)                                                        |  | $               | 46     |   |      | $ | 7      |      |  | $ | 46     |   |  | $    | 187    |   |      | $ | 95     |      |  | $ | 122    |   |  | $    | 132    |   |      | $ | 234    |   |                        | $ | 98     |                    |  | $ |  |  | $ |  |  | $ | 159    |   |  | $ | 166    |  
|Average EBITDA(8)(10)                                                      |  | $               | 4      |   |      | $ |       |      |  | $ | 9      |   |  | $    | 36     |   |      | $ | 23     |      |  | $ | 24     |   |  | $    | 36     |   |      | $ | 40     |   |                        | $ | 28     |                    |  | $ |  |  | $ |  |  | $ | 33     |   |  | $ | 34     |  
|Average EBITDA Margin                                                      |  |                 | 8.7    | % |      |   |       |      |  |   | 19.6   | % |  |      | 19.3   | % |      |   | 24.2   | %    |  |   | 19.7   | % |  |      | 27.3   | % |      |   | 17.1   | % |                        |   | 28.6   | %                  |  |   |  |  |   |  |  |   | 20.8   | % |  |   | 20.5   | %
|Total Sales(8)(9)                                                          |  | $               | 70     |   |      | $ | 267    |      |  | $ | 169    |   |  | $    | 1,269  |   |      | $ | 820    |      |  | $ | 1,954  |   |  | $    | 5,854  |   |      | $ | 8,107  |   |                        | $ | 1,190  |                    |  | $ |  |  | $ |  |  | $ | 19,700 |   |  | $ | 17,105 |  
|Total EBITDA(8)(10)                                                        |  | $               | 6      |   |      | $ | 4      |      |  | $ | 18     |   |  | $    | 179    |   |      | $ | 167    |      |  | $ | 323    |   |  | $    | 896    |   |      | $ | 1,538  |   |                        | $ | 234    |                    |  | $ |  |  | $ |  |  | $ | 3,365  |   |  | $ | 2,991  |  
|% of Senior Loans(8)(11)                                                   |  |                 | 86     | % |      |   | 21     | %    |  |   | 57     | % |  |      | 61     | % |      |   | 41     | %    |  |   | 38     | % |  |      | 37     | % |      |   | 62     | % |                        |   | 26     | %                  |  |   |  |  |   |  |  |   | 47     | % |  |   | 46     | %
|% of Loans with Lien(8)(11)                                                |  |                 | 100    | % |      |   | 68     | %    |  |   | 100    | % |  |      | 100    | % |      |   | 91     | %    |  |   | 89     | % |  |      | 93     | % |      |   | 93     | % |                        |   | 61     | %                  |  |   |  |  |   |  |  |   | 89     | % |  |   | 87     | %



|(1) | Static pool classification is based on the year the initial investment was made. Subsequent add-on investments are included in the static pool year of the original
investment.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Assumes investments are exited at current fair value.
|--- | -----------------------------------------------------

|(3) | Excludes investments in structured products.
|--- | --------------------------------------------

|(4) | Excludes equity investments that are the result of conversions of debt and warrants received with the issuance of debt.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(5) | Includes exited securities of existing portfolio companies.
|--- | -----------------------------------------------------------

|(6) | These amounts do not include investments in which we own only equity.
|--- | ---------------------------------------------------------------------

|(7) | For portfolio companies with a nominal EBITDA amount, the portfolio companys maximum debt leverage is limited to 15 times EBITDA.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(8) | Excludes investments in structured products, managed funds and American Capital, LLC.
|--- | -------------------------------------------------------------------------------------

|(9) | Sales of the most recent twelve months, or when appropriate, the forecasted twelve months.
|--- | ------------------------------------------------------------------------------------------

|(10) | EBITDA of the most recent twelve months, or when appropriate, the forecasted twelve months.
|---- | -------------------------------------------------------------------------------------------

|(11) | As a percentage of our total debt investments.
|---- | ----------------------------------------------



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FORWARD-LOOKING STATEMENTS



All statements contained herein that are not historical
facts including, but not limited to, statements regarding anticipated activity are forward looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to
differ materially are the following: (i) changes in the economic conditions in which we operate negatively impacting our financial resources; (ii) certain of our competitors have greater financial resources than us reducing the number of
suitable investment opportunities offered to us or reducing the yield necessary to consummate the investment; (iii) there is uncertainty regarding the value of our privately held securities that require our good faith estimate of fair value,
and a change in estimate could affect our net asset value; (iv) our investments in securities of privately-held companies may be illiquid which could affect our ability to realize a gain; (v) our portfolio companies could default on their
loans or provide no returns on our investments which could affect our operating results; (vi) we are dependent on external financing to fund our business; (vii) our ability to retain key management personnel; (viii) a continued
economic downturn or recession could further impair our portfolio companies and therefore harm our operating results; (ix) our borrowing arrangements impose certain restrictions; (x) changes in interest rates may affect our cost of capital
and net operating income; (xi) we cannot incur additional indebtedness unless we maintain an asset coverage of at least 200%, which may affect returns to our shareholder; (xii) we may fail to continue to qualify for our pass-through
treatment as a RIC, which could have an affect on shareholder return; (xiii) our common stock price may be volatile; (xiv) there could be substantial doubt about our ability to continue as a going concern as a result of our default under
certain financial covenants in our debt facilities; and (xv) general business and economic conditions and other risk factors described in our reports filed from time to time with the SEC. We caution readers not to place undue reliance on any
such forward-looking statements, which statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made.



Item 3.Quantitative and Qualitative Disclosure About Market Risk



In the context of Item 3, market risk refers to the
risk of loss arising from adverse changes in financial and derivative instrument market rates and prices, such as fluctuations in interest rates and currency exchange rates. For a discussion of sensitivity analysis related to these types of
market risks, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended December 31, 2009. We believe that there has been no material changes in
these market risks since December 31, 2009.



Item 4.Controls and Procedures



Evaluation of Disclosure Controls and Procedures



We maintain disclosure controls and procedures
that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of disclosure controls and
procedures as promulgated under the Securities Exchange Act of 1934, as amended. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.



American Capital, including our Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2010. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective.



Changes in Internal Control over Financial Reporting



There have been no significant changes in our internal controls over financial reporting or in other factors that could
significantly affect the internal controls over financial reporting during the first quarter of 2010.



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PART II. OTHER INFORMATION



Item 1.Legal
Proceedings



Neither we, nor any
of our consolidated subsidiaries, are currently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us or any consolidated subsidiary, other than routine litigation and administrative proceedings
arising in the ordinary course of business. Such proceedings are not expected to have a material adverse effect on the business, financial conditions, or results of our operations.



Item 1A.Risk Factors



The risk factors in our Annual Report on
Form 10-K for the year ended December 31, 2009 have not materially changed.



Item 2.Unregistered Sales of Equity Securities and Use of Proceeds



None.



Item 3.Defaults Upon Senior
Securities



We are currently in
default under our unsecured revolving credit facility, our public unsecured notes and our private unsecured notes. On August 28, 2009, the holders of our private unsecured notes accelerated the amounts due under the notes and declared that all
borrowings outstanding, plus all accrued and unpaid interest and the respective make-whole amount for each series, were immediately due and payable, causing us to be in default on the payment of all amounts due under these notes. We have entered
into forbearance agreements with all of these noteholders, under which the noteholders have agreed to forbear from exercising certain rights and remedies with respect to events of default that have occurred under their respective series. In
consideration for entering into the forbearance agreements, we have paid all accrued and unpaid interest due on these notes as of September 1, 2009. As of April 21, 2010, we are however currently, in default on payment of certain amounts
due under these notes in the following amounts: with respect to (i) the Note Purchase Agreement dated as of September 1, 2004 relating to $82,000,000 of 5.92% Senior Notes, Series A, due September 1, 2009 and $85,000,000 of 6.46%
Senior Notes, Series B, due September 1, 2011, we are in default in payment of $185,692,838 in principal amount, which includes a make-whole amount of $11,680,009; (ii) the Note Purchase Agreement dated as of August 1, 2005 relating
to $126,000,000 of 6.14% Senior Notes, Series 2005-A, due August 1, 2010, we are in default in payment of $136,281,536 in principal amount, which includes a make-whole amount of $8,263,024; (iii) the Note Purchase Agreement dated as of
September 26, 2005 relating to $75,000,000 of Floating Rate Senior Notes, Series 2005-B, due October 30, 2020, we are in default in payment of $75,566,260 in principal amount, with no make-whole amount due; and (iv) the Note Purchase
Agreement dated as of February 9, 2006 relating to EUR 14,000,000 of 5.177% Senior Notes, Series 2006-A and GBP 3,000,000 of 6.565% Senior Notes, Series 2006-B due February 9, 2011, we are in default on EUR 15,394,825 and GBP 3,311,818 in
principal amount, which includes a make-whole amount of EUR 842,253 and GBP 263,524, respectively. We are also in default of certain financial covenants and cross defaults under each of these unsecured borrowing arrangements, as further described in
Note 5 to our accompanying interim consolidated financial statements in this Form 10-Q.



Item 4.[Reserved]



Item 5.Other
Information



On February 12,
2010, we held a special meeting of stockholders. One matter was submitted to the stockholders for consideration:



1. To approve a proposal to authorize us, with the approval of our Board of Directors, to sell shares of our common stock at prices below
the net asset value per share in one or more offerings subject to certain limitations.



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The results of the shares voted with regard to this matter is as follows:



1. Approval to sell shares of our common stock at prices
below the net asset value per share in one or more offerings subject to certain limitations:



|            |  |            |  |          
|----------- |  | ---------- |  | ---------
|For         |  | Against    |  | Abstain  
|128,444,760 |  | 18,981,785 |  | 2,177,678



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Item 6.Exhibits



(a) Exhibits



|       |  |                                                                                                                                                                                                                                                                                                                                           |  | 
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|       | 
|*3.1.  |  | American Capital Strategies, Ltd. Third Amended and Restated Certificate of Incorporation, incorporated herein by reference to Exhibit 2.a. of the Registration
Statement on Form N-2(File No. 333-161421), filed August 19, 2009.                                                                                                       
|       | 
|*3.2.  |  | American Capital Strategies, Ltd. Second Amended and Restated Bylaws, as amended, incorporated herein by reference to Exhibit 3.2 of Form 10-Q dated August 11,
2008.                                                                                                                                                                    
|       | 
|*4.1.  |  | Instruments defining the rights of holders of securities: See Article IV of our Third Amended and Restated Certificate of Incorporation, incorporated herein by
reference to Exhibit II to the Definitive Proxy Statement for the 2008 Annual Meeting (File No. 814-00149), filed on April 9, 2008.                                      
|       | 
|*4.2.  |  | Instruments defining the rights of holders of securities: See Section I of our Second Amended and Restated Bylaws, as amended, incorporated herein by reference to
Exhibit 3.2 of Form 10-Q dated August 11, 2008.                                                                                                                       
|       | 
|*10.1. |  | Second Amendment, dated August 18, 2009, to that certain Note Purchase Agreement dated as of September 26, 2005, as amended, between American Capital, Ltd. and each
of the Noteholders thereto, incorporated herein by reference to Exhibit 2.k.37 of the Registration Statement onForm N-2 (File No. 333-166396), filed April 29, 2010.
|       | 
|*10.2. |  | Extension Letter Agreement to American Capital, Ltd. Lock-Up Agreement, dated as of January 11, 2010 between American Capital, Ltd. and Wachovia Bank, N.A., as
administrative agent, incorporated herein by reference to Exhibit 2.k.45 of the Registration Statement on Form N-2(File No. 333-166396), filed April 29, 2010.           
|       | 
|*10.3. |  | Extension Letter Agreement to American Capital, Ltd. Lock-Up Agreement, dated as of March 9, 2010 between American Capital, Ltd. and Wachovia Bank, N.A., as
administrative agent, incorporated herein by reference to Exhibit 2.k.47 of the Registration Statement on Form N-2(File No. 333-166396), filed April 29, 2010.              
|       | 
|*10.4. |  | Second Amendment to American Capital, Ltd. Lock-Up Agreement, dated as of March 26, 2010 between American Capital, Ltd. and the creditors party thereto, incorporated
herein by reference to Exhibit 10.1 of Form 8-K dated March 30, 2010.                                                                                              
|       | 
|31.    |  | Certification of CEO and CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                  
|       | 
|32.    |  | Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                   



|* | Fully or partly previously filed
|- | --------------------------------



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



AMERICAN CAPITAL, LTD.By:

/s/    RICHARD E.
KONZMANNRichard E. Konzmann
Senior Vice President, Accounting




Date: May 10, 2010



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