UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



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



For the quarterly period ended March 31, 2009



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.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)



Indicate by check
mark whether the registrant (1) has filed all reports required 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 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 Exchange 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, 2009, was 215,452,177.







---

AMERICAN CAPITAL, LTD.



TABLE OF CONTENTS



|                              |  |                                                                                       |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Consolidated Financial Statements and Notes                                           |  | 3 
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 58
|Item 3.                       |  | Quantitative and Qualitative Disclosure About Market Risk                             |  | 82
|Item 4.                       |  | Controls and Procedures                                                               |  | 82
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 83
|Item 1A.                      |  | Risk Factors                                                                          |  | 83
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 83
|Item 3.                       |  | Defaults upon Senior Securities                                                       |  | 83
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 83
|Item 5.                       |  | Other Information                                                                     |  | 83
|Item 6.                       |  | Exhibits                                                                              |  | 84
|Signatures                    |  | 85                                                                                   



2



---

Item 1.Consolidated Financial Statements



AMERICAN CAPITAL, LTD.

CONSOLIDATED BALANCE SHEETS

(in
millions, except per share amounts)



|                                                                                                                               |  |               |        |   |                  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------ | - | ---------------- | - | ------ | -
|                                                                                                                               |  | March 31,2009 |        |   | December 31,2008 |  
|                                                                                                                               |  | (unaudited)   |        |   |                  |  
|Assets                                                                                                                         |  |               |        |   |                  |   |        |  
|Investments at fair value (cost of $10,707 and $10,691, respectively)                                                          |  |               |        |   |                  |   |        |  
|Non-Control/Non-Affiliate investments (cost of $5,964 and $5,904, respectively)                                                |  | $             | 4,117  |   |                  | $ | 4,182  |  
|Affiliate investments (cost of $424 and $405, respectively)                                                                    |  |               | 335    |   |                  |   | 338    |  
|Control investments (cost of $4,319 and $4,382, respectively)                                                                  |  |               | 2,387  |   |                  |   | 2,898  |  
|Derivative agreements (cost of $0 and $0, respectively)                                                                        |  |               | 10     |   |                  |   | 9      |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total investments at fair value                                                                                                |  |               | 6,849  |   |                  |   | 7,427  |  
|Cash and cash equivalents                                                                                                      |  |               | 88     |   |                  |   | 209    |  
|Restricted cash and cash equivalents                                                                                           |  |               | 68     |   |                  |   | 71     |  
|Interest receivable                                                                                                            |  |               | 44     |   |                  |   | 44     |  
|Other                                                                                                                          |  |               | 162    |   |                  |   | 159    |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total assets                                                                                                                   |  | $             | 7,211  |   |                  | $ | 7,910  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Liabilities and Shareholders Equity                                                                                           |  |               |        |   |                  |   |        |  
|Debt ($2,419 and $2,512 due within one year, respectively)                                                                     |  | $             | 4,377  |   |                  | $ | 4,428  |  
|Derivative and option agreements (cost of $0 and $(20), respectively)                                                          |  |               | 102    |   |                  |   | 222    |  
|Other                                                                                                                          |  |               | 78     |   |                  |   | 105    |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total liabilities                                                                                                              |  |               | 4,557  |   |                  |   | 4,755  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|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, 225.8 and 214.3 issued and 215.4 and 204.7 outstanding, respectively |  |               | 2      |   |                  |   | 2      |  
|Capital in excess of par value                                                                                                 |  |               | 6,591  |   |                  |   | 6,545  |  
|Undistributed net realized earnings                                                                                            |  |               | 21     |   |                  |   | 76     |  
|Net unrealized depreciation of investments                                                                                     |  |               | (3,960 | ) |                  |   | (3,468 | )
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total shareholders equity                                                                                                     |  |               | 2,654  |   |                  |   | 3,155  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Total liabilities and shareholders equity                                                                                     |  | $             | 7,211  |   |                  | $ | 7,910  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  
|Net asset value per common share                                                                                               |  | $             | 12.32  |   |                  | $ | 15.41  |  
|                                                                                                                               |  |               |        |   |                  |   |        |  



See accompanying notes.



3



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in millions, except per share data)



|                                                                  |  |                             |       |   |      |   |       |  
|----------------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                                                  |  | Three MonthsEnded March 31, |      
|                                                                  |  | 2009                        |       |   | 2008 |  
|OPERATING INCOME:                                                 |  |                             |       |   |      |   |       |  
|Interest and dividend income                                      |  |                             |       |   |      |   |       |  
|Non-Control/Non-Affiliate investments                             |  | $                           | 124   |   |      | $ | 166   |  
|Affiliate investments                                             |  |                             | 9     |   |      |   | 11    |  
|Control investments                                               |  |                             | 46    |   |      |   | 81    |  
|                                                                  |  |                             |       |   |      |   |       |  
|Total interest and dividend income                                |  |                             | 179   |   |      |   | 258   |  
|                                                                  |  |                             |       |   |      |   |       |  
|Asset management and other fee income                             |  |                             |       |   |      |   |       |  
|Non-Control/Non-Affiliate investments                             |  |                             | 4     |   |      |   | 9     |  
|Control investments                                               |  |                             | 12    |   |      |   | 25    |  
|                                                                  |  |                             |       |   |      |   |       |  
|Total asset management and other fee income                       |  |                             | 16    |   |      |   | 34    |  
|                                                                  |  |                             |       |   |      |   |       |  
|Total operating income                                            |  |                             | 195   |   |      |   | 292   |  
|                                                                  |  |                             |       |   |      |   |       |  
|OPERATING EXPENSES:                                               |  |                             |       |   |      |   |       |  
|Interest                                                          |  |                             | 52    |   |      |   | 63    |  
|Salaries, benefits and stock-based compensation                   |  |                             | 53    |   |      |   | 56    |  
|General and administrative                                        |  |                             | 26    |   |      |   | 23    |  
|                                                                  |  |                             |       |   |      |   |       |  
|Total operating expenses                                          |  |                             | 131   |   |      |   | 142   |  
|                                                                  |  |                             |       |   |      |   |       |  
|NET OPERATING INCOME BEFORE INCOME TAXES                          |  |                             | 64    |   |      |   | 150   |  
|Benefit for income taxes                                          |  |                             |      |   |      |   | 1     |  
|                                                                  |  |                             |       |   |      |   |       |  
|NET OPERATING INCOME                                              |  |                             | 64    |   |      |   | 151   |  
|                                                                  |  |                             |       |   |      |   |       |  
|Net gain on extinguishment of debt                                |  |                             | 12    |   |      |   |      |  
|                                                                  |  |                             |       |   |      |   |       |  
|Net realized (loss) gain on investments                           |  |                             |       |   |      |   |       |  
|Non-Control/Non-Affiliate investments                             |  |                             | (50   | ) |      |   | (9    | )
|Affiliate investments                                             |  |                             | (5    | ) |      |   | 1     |  
|Control investments                                               |  |                             | (24   | ) |      |   | 36    |  
|Taxes on net realized gain                                        |  |                             |      |   |      |   | (1    | )
|Foreign currency transactions                                     |  |                             | (2    | ) |      |   | 5     |  
|Derivative and option agreements                                  |  |                             | (50   | ) |      |   | 1     |  
|                                                                  |  |                             |       |   |      |   |       |  
|Total net realized (loss) gain on investments                     |  |                             | (131  | ) |      |   | 33    |  
|                                                                  |  |                             |       |   |      |   |       |  
|Net unrealized (depreciation) appreciation of investments         |  |                             |       |   |      |   |       |  
|Portfolio company investments                                     |  |                             | (525  | ) |      |   | (997  | )
|Foreign currency translation                                      |  |                             | (69   | ) |      |   | 73    |  
|Derivative and option agreements                                  |  |                             | 102   |   |      |   | (73   | )
|                                                                  |  |                             |       |   |      |   |       |  
|Total net unrealized depreciation of investments                  |  |                             | (492  | ) |      |   | (997  | )
|                                                                  |  |                             |       |   |      |   |       |  
|Total net loss on investments                                     |  |                             | (623  | ) |      |   | (964  | )
|                                                                  |  |                             |       |   |      |   |       |  
|NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (NET LOSS) |  | $                           | (547  | ) |      | $ | (813  | )
|                                                                  |  |                             |       |   |      |   |       |  
|NET OPERATING INCOME PER COMMON SHARE:                            |  |                             |       |   |      |   |       |  
|Basic                                                             |  | $                           | 0.31  |   |      | $ | 0.77  |  
|Diluted                                                           |  | $                           | 0.31  |   |      | $ | 0.77  |  
|NET LOSS PER COMMON SHARE:                                        |  |                             |       |   |      |   |       |  
|Basic                                                             |  | $                           | (2.65 | ) |      | $ | (4.16 | )
|Diluted                                                           |  | $                           | (2.65 | ) |      | $ | (4.16 | )
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:              |  |                             |       |   |      |   |       |  
|Basic                                                             |  |                             | 206.6 |   |      |   | 195.2 |  
|Diluted                                                           |  |                             | 206.6 |   |      |   | 195.2 |  
|DIVIDENDS DECLARED PER COMMON SHARE                               |  | $                           |      |   |      | $ | 1.01  |  



See accompanying notes.



4



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(unaudited)

(in millions, except per share data)



|                                                                     |  |                             |       |   |      |   |       |  
|-------------------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                                                     |  | Three MonthsEnded March 31, |      
|                                                                     |  | 2009                        |       |   | 2008 |  
|Operations:                                                          |  |                             |       |   |      |   |       |  
|Net operating income                                                 |  | $                           | 64    |   |      | $ | 151   |  
|Net gain on extinguishment of debt                                   |  |                             | 12    |   |      |   |      |  
|Net realized (loss) gain on investments                              |  |                             | (131  | ) |      |   | 33    |  
|Net unrealized depreciation of investments                           |  |                             | (492  | ) |      |   | (997  | )
|                                                                     |  |                             |       |   |      |   |       |  
|Net decrease in net assets resulting from operations                 |  |                             | (547  | ) |      |   | (813  | )
|                                                                     |  |                             |       |   |      |   |       |  
|Shareholder distributions:                                           |  |                             |       |   |      |   |       |  
|Common stock dividends from net operating income                     |  |                             |      |   |      |   | (151  | )
|Common stock dividends in excess of net operating income             |  |                             |      |   |      |   | (45   | )
|                                                                     |  |                             |       |   |      |   |       |  
|Net decrease in net assets resulting from shareholder distributions  |  |                             |      |   |      |   | (196  | )
|                                                                     |  |                             |       |   |      |   |       |  
|Capital share transactions:                                          |  |                             |       |   |      |   |       |  
|Issuance of common stock                                             |  |                             | 25    |   |      |   | 302   |  
|Issuance of common stock under stock option plans                    |  |                             |      |   |      |   | 3     |  
|Purchase of common stock held in deferred compensation trusts        |  |                             |      |   |      |   | (34   | )
|Purchase of treasury stock                                           |  |                             |      |   |      |   | (6    | )
|Stock-based compensation                                             |  |                             | 17    |   |      |   | 23    |  
|Other                                                                |  |                             | 4     |   |      |   | (1    | )
|                                                                     |  |                             |       |   |      |   |       |  
|Net increase in net assets resulting from capital share transactions |  |                             | 46    |   |      |   | 287   |  
|                                                                     |  |                             |       |   |      |   |       |  
|Total decrease in net assets                                         |  |                             | (501  | ) |      |   | (722  | )
|Net assets at beginning of period                                    |  |                             | 3,155 |   |      |   | 6,441 |  
|                                                                     |  |                             |       |   |      |   |       |  
|Net assets at end of period                                          |  | $                           | 2,654 |   |      | $ | 5,719 |  
|                                                                     |  |                             |       |   |      |   |       |  
|Net asset value per common share                                     |  | $                           | 12.32 |   |      | $ | 28.16 |  
|                                                                     |  |                             |       |   |      |   |       |  
|Common shares outstanding at end of period                           |  |                             | 215.4 |   |      |   | 203.1 |  
|                                                                     |  |                             |       |   |      |   |       |  



See accompanying notes.



5



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in millions)



|                                                                                                                                      |  |                             |      |   |      |   |      |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                                                                                                      |  | Three MonthsEnded March 31, |     
|                                                                                                                                      |  | 2009                        |      |   | 2008 |  
|Operating activities:                                                                                                                 |  |                             |      |   |      |   |      |  
|Net decrease in net assets resulting from operations                                                                                  |  | $                           | (547 | ) |      | $ | (813 | )
|Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by (used in) operating
activities: |  |                             |      |   |      |   |      |  
|Net unrealized depreciation of investments                                                                                            |  |                             | 492  |   |      |   | 997  |  
|Net realized loss (gain) on investments                                                                                               |  |                             | 131  |   |      |   | (33  | )
|Net gain on extinguishment of debt                                                                                                    |  |                             | (12  | ) |      |   |     |  
|Accrued payment-in-kind interest and dividends                                                                                        |  |                             | (26  | ) |      |   | (58  | )
|Collection of loan origination fees                                                                                                   |  |                             |     |   |      |   | 6    |  
|Amortization of deferred finance costs, premiums and discounts                                                                        |  |                             | 3    |   |      |   | 2    |  
|Depreciation of property and equipment                                                                                                |  |                             | 3    |   |      |   | 3    |  
|Stock-based compensation                                                                                                              |  |                             | 17   |   |      |   | 23   |  
|Decrease in interest receivable                                                                                                       |  |                             |     |   |      |   | 2    |  
|Increase in other assets                                                                                                              |  |                             |     |   |      |   | (13  | )
|Decrease in other liabilities                                                                                                         |  |                             | (29  | ) |      |   | (122 | )
|Other                                                                                                                                 |  |                             | (1   | ) |      |   | (4   | )
|                                                                                                                                      |  |                             |      |   |      |   |      |  
|Net cash provided by (used in) operating activities                                                                                   |  |                             | 31   |   |      |   | (10  | )
|                                                                                                                                      |  |                             |      |   |      |   |      |  
|Investing activities:                                                                                                                 |  |                             |      |   |      |   |      |  
|Purchases of investments                                                                                                              |  |                             | (51  | ) |      |   | (449 | )
|Fundings on portfolio company revolving credit facility investments, net                                                              |  |                             | (61  | ) |      |   | (14  | )
|Principal repayments                                                                                                                  |  |                             | 52   |   |      |   | 257  |  
|Proceeds from loan syndications and loan sales                                                                                        |  |                             | 8    |   |      |   | 274  |  
|Collection of payment-in-kind notes and dividends and accreted loan discounts                                                         |  |                             | 4    |   |      |   | 20   |  
|Proceeds from sale of equity investments                                                                                              |  |                             | 15   |   |      |   | 380  |  
|Capital expenditures for property and equipment                                                                                       |  |                             | (1   | ) |      |   | (4   | )
|Termination of European Capital Limited put option agreement                                                                          |  |                             | (65  | ) |      |   |     |  
|Other                                                                                                                                 |  |                             | (14  | ) |      |   | 5    |  
|                                                                                                                                      |  |                             |      |   |      |   |      |  
|Net cash (used in) provided by investing activities                                                                                   |  |                             | (113 | ) |      |   | 469  |  
|                                                                                                                                      |  |                             |      |   |      |   |      |  
|Financing activities:                                                                                                                 |  |                             |      |   |      |   |      |  
|Payments on issuance of notes payable from asset securitizations, net                                                                 |  |                             | (27  | ) |      |   | (155 | )
|Payments on revolving credit facilities, net                                                                                          |  |                             | (1   | ) |      |   | (652 | )
|Proceeds from TRS facility, net                                                                                                       |  |                             |     |   |      |   | 52   |  
|Decrease in debt service escrows                                                                                                      |  |                             | 3    |   |      |   | 120  |  
|Issuance of common stock                                                                                                              |  |                             |     |   |      |   | 305  |  
|Purchase of common stock held in deferred compensation trusts                                                                         |  |                             |     |   |      |   | (28  | )
|Purchase of treasury stock                                                                                                            |  |                             |     |   |      |   | (6   | )
|Distributions paid                                                                                                                    |  |                             |     |   |      |   | (201 | )
|Other                                                                                                                                 |  |                             | (14  | ) |      |   |     |  
|                                                                                                                                      |  |                             |      |   |      |   |      |  
|Net cash used in financing activities                                                                                                 |  |                             | (39  | ) |      |   | (565 | )
|                                                                                                                                      |  |                             |      |   |      |   |      |  
|Net decrease in cash and cash equivalents                                                                                             |  |                             | (121 | ) |      |   | (106 | )
|Cash and cash equivalents at beginning of period                                                                                      |  |                             | 209  |   |      |   | 143  |  
|                                                                                                                                      |  |                             |      |   |      |   |      |  
|Cash and cash equivalents at end of period                                                                                            |  | $                           | 88   |   |      | $ | 37   |  
|                                                                                                                                      |  |                             |      |   |      |   |      |  
|Non-cash financing activities:                                                                                                        |  |                             |      |   |      |   |      |  
|Issuance of common stock in conjunction with acquisition of European Capital Limited                                                  |  | $                           | 25   |   |      | $ |     |  



See accompanying notes.



6



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(unaudited)

(in millions, except per share data)



|                                                                               |  |                             |        |    |      |   |       |  
|------------------------------------------------------------------------------ |  | --------------------------- | ------ | -- | ---- | - | ----- | -
|                                                                               |  | Three MonthsEnded March 31, |       
|                                                                               |  | 2009                        |        |    | 2008 |  
|Per Share Data:                                                                |  |                             |        |    |      |   |       |  
|Net asset value at beginning of the period                                     |  | $                           | 15.41  |    |      | $ | 32.88 |  
|                                                                               |  |                             |        |    |      |   |       |  
|Net operating income(1)                                                        |  |                             | 0.31   |    |      |   | 0.77  |  
|Net gain on extinguishment of debt(1)                                          |  |                             | 0.05   |    |      |   |      |  
|Net realized (loss) gain on investments(1)                                     |  |                             | (0.63  | )  |      |   | 0.17  |  
|Net unrealized depreciation on investments(1)                                  |  |                             | (2.38  | )  |      |   | (5.10 | )
|                                                                               |  |                             |        |    |      |   |       |  
|Net decrease in net assets resulting from operations(1)                        |  |                             | (2.65  | )  |      |   | (4.16 | )
|Issuance of common stock                                                       |  |                             | (0.70  | )  |      |   | 0.12  |  
|Shareholder distributions                                                      |  |                             |       |    |      |   | (1.01 | )
|Other, net(2)                                                                  |  |                             | 0.26   |    |      |   | 0.33  |  
|                                                                               |  |                             |        |    |      |   |       |  
|Net asset value at end of period                                               |  | $                           | 12.32  |    |      | $ | 28.16 |  
|                                                                               |  |                             |        |    |      |   |       |  
|Ratio/Supplemental Data:                                                       |  |                             |        |    |      |   |       |  
|Per share market value at end of period                                        |  | $                           | 1.87   |    |      | $ | 34.16 |  
|Total (loss) gain(3)                                                           |  |                             | (42.28 | )% |      |   | 6.65  | %
|Shares outstanding at end of period                                            |  |                             | 215.4  |    |      |   | 203.1 |  
|Net assets at end of period                                                    |  | $                           | 2,654  |    |      | $ | 5,719 |  
|Average net assets(4)                                                          |  | $                           | 2,905  |    |      | $ | 6,080 |  
|Average debt outstanding(5)                                                    |  | $                           | 4,401  |    |      | $ | 4,833 |  
|Average debt outstanding per common share(1)(5)                                |  | $                           | 21.30  |    |      | $ | 24.76 |  
|Ratio of operating expenses to average net assets(6)                           |  |                             | 18.04  | %  |      |   | 9.34  | %
|Ratio of operating expenses, net of interest expense, to average net assets(6) |  |                             | 10.88  | %  |      |   | 5.20  | %
|Ratio of interest expense to average net assets(6)                             |  |                             | 7.16   | %  |      |   | 4.14  | %
|Ratio of net operating income to average net assets(6)                         |  |                             | 8.81   | %  |      |   | 9.93  | %



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

|(2) | Represents the impact of (i) the other components in the changes in net assets, including other capital transactions such as 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Total (loss) gain 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. Total (loss) gain is not annualized.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Based on the average of ending net assets as of the beginning and end of each period presented.
|--- | -----------------------------------------------------------------------------------------------

|(5) | Based on a daily weighted average balance of debt outstanding during the period.
|--- | --------------------------------------------------------------------------------

|(6) | Ratios are annualized.
|--- | ----------------------



See accompanying notes.



7



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2009

(unaudited)

(in millions, except
share data)



|                                        |  |                                  |                               |                                |      |                  |       |       |              |        |                        |      |           |      |      |      |           |      |   |      
|--------------------------------------- |  | -------------------------------- | ----------------------------- | ------------------------------ | ---- | ---------------- | ----- | ----- | ------------ | ------ | ---------------------- | ---- | --------- | ---- | ---- | ---- | --------- | ---- | - | -----
|Company (4)                             |  | Industry                         |                               | Investments                    |      | InterestRate (5) |       |       | MaturityDate |        | # of shares/unitsowned |      | Principal |      | Cost |      | FairValue
|                                        |  |                                  |                               |                               
|NON-CONTROL / NON-AFFILIATE INVESTMENTS |  |                                  |                               |                                |      |                  |       |       |              |        |                       
|Aerus, LLC                              |  | Household Durables               |                               | Common Membership Warrants(1)  |      |                  |       |       |              |        | 250,000                |      |           |      |      | $    | 0.2       |      | $ |     
|Affordable Care Holding Corp.           |  | Health Care Providers & Services |                               | Subordinated Debt(7)           |      | 15.0             | %     |       | 11/13-11/14  |        |                        |      | $         | 65.1 |      |      | 64.3      |      |   | 65.1 
|                                        |  | Convertible Preferred Stock      |                               |                                |      |                  |       |       | 70,752       |        |                        |      |           |      | 85.6 |      |           | 85.6
|                                        |  | Common Stock(1)                  |                               |                                |      |                  |       |       | 17,687,156   |        |                        |      |           |      | 17.7 |      |           | 13.0
|                                        |  |                                  |                               |                                |      |                  |       |       |              |        |                        |      |           |      |      |      | 167.6     |      |   | 163.7
|Algoma Holding Company                  |  | Building Products                |                               | Subordinated Debt(7)           |      | 12.7             | %     |       | 4/13         |        |                        |      |           | 14.9 |      |      | 14.8      |      |   | 14.0 
|American Acquisition, LLC               |  | Diversified Financial Services   |                               | Senior Debt                    |      | 12.6             | %     |       | 12/12        |        |                        |      |           | 21.3 |      |      | 21.0      |      |   | 19.5 
|AmWins Group, Inc.                      |  | Insurance                        |                               | Senior Debt(7)                 |      | 6.8              | %     |       | 6/14         |        |                        |      |           | 18.5 |      |      | 18.6      |      |   | 11.6 
|Anchor Drilling Fluids USA, Inc.        |  | Energy Equipment & Services      |                               | Senior Debt(7)                 |      | 11.3             | %     |       | 4/13         |        |                        |      |           | 7.9  |      |      | 7.9       |      |   | 7.1  
|                                        |  | Subordinated Debt(7)             |                               | 14.5                           | %    |                  | 4/15  |       |              |        |                        | 61.5 |           |      | 60.9 |      |           | 54.2
|                                        |  |                                  |                               |                                |      |                  |       |       |              |        |                        |      |           |      |      |      | 68.8      |      |   | 61.3 
|Aspect Software                         |  | IT Services                      |                               | Senior Debt(7)                 |      | 8.3              | %     |       | 7/12         |        |                        |      |           | 20.0 |      |      | 19.9      |      |   | 16.1 
|Autodis S.A.(3)                         |  | Distributors                     |                               | Senior Debt(6)                 |      | 11.1             | %     |       | 6/15         |        |                        |      |           | 4.6  |      |      | 3.8       |      |   |     
|                                        |  | Subordinated Debt(6)             |                               | 15.4                           | %    |                  | 12/15 |       |              |        |                        | 3.1  |           |      | 2.6  |      |           |    
|                                        |  |                                  |                               |                                |      |                  |       |       |              |        |                        |      |           |      |      |      | 6.4       |      |   |     
|Avalon Laboratories Holding Corp.       |  | Health Care Equipment & Supplies |                               | Senior Debt(7)                 |      | 11.0             | %     |       | 1/14         |        |                        |      |           | 17.8 |      |      | 17.6      |      |   | 17.7 
|                                        |  | Subordinated Debt(7)             |                               | 18.0                           | %    |                  | 1/15  |       |              |        |                        | 22.0 |           |      | 21.3 |      |           | 15.1
|                                        |  |                                  |                               | Convertible Preferred Stock(1) |      |                  |       |       |              |        | 148,742                |      |           |      |      |      | 24.3      |      |   |     
|                                        |  |                                  |                               | Common Stock(1)                |      |                  |       |       |              |        | 7,829                  |      |           |      |      |      | 1.3       |      |   |     
|                                        |  |                                  |                               |                                |      |                  |       |       |              |        |                        |      |           |      |      |      | 64.5      |      |   | 32.8 
|Avanti Park Place LLC                   |  | Real Estate                      |                               | Senior Debt                    |      | 8.3              | %     |       | 6/10         |        |                        |      |           | 5.8  |      |      | 6.0       |      |   | 6.0  
|Axygen Holdings Corporation             |  | Health Care Equipment & Supplies |                               | Subordinated Debt(7)           |      | 14.5             | %     |       | 9/14         |        |                        |      |           | 61.9 |      |      | 61.2      |      |   | 61.9 
|                                        |  | Redeemable Preferred Stock       |                               |                                |      |                  |       |       | 205,204      |        |                        |      |           |      | 46.7 |      |           | 65.4
|                                        |  |                                  |                               | Convertible Preferred Stock    |      |                  |       |       |              |        | 48,736                 |      |           |      |      |      | 14.4      |      |   | 14.4 
|                                        |  |                                  |                               | Common Stock(1)                |      |                  |       |       |              |        | 207,770                |      |           |      |      |      | 20.9      |      |   | 24.2 
|                                        |  |                                  |                               |                                |      |                  |       |       |              |        |                        |      |           |      |      |      | 143.2     |      |   | 165.9
|BBB Industries, LLC                     |  | Auto Components                  |                               | Senior Debt(7)                 |      | 6.0              | %     |       | 6/14         |        |                        |      |           | 21.2 |      |      | 21.2      |      |   | 14.7 
|Belloto Holdings Limited(3)             |  | Household Durables               |                               | Subordinated Debt(6)           |      | 12.1             | %     |       | 6/17         |        |                        |      |           | 3.9  |      |      | 3.6       |      |   |     
|                                        |  |                                  | PIK Note(1)                   |                                | 15.0 | %                |       | 12/17 |              |        |                        |      | 15.2      |      |      | 12.8 |           |      | 
|                                        |  |                                  |                               | Ordinary Shares(1)             |      |                  |       |       |              |        | 32,434                 |      |           |      |      |      | 0.1       |      |   |     
|                                        |  |                                  |                               |                                |      |                  |       |       |              |        |                        |      |           |      |      |      | 16.5      |      |   |     
|Berry-Hill Galleries, Inc.              |  | Distributors                     |                               | Senior Debt                    |      | 14.0             | %     |       | 3/10         |        |                        |      |           | 7.7  |      |      | 7.7       |      |   | 7.7  
|Blue Wolf Capital Fund II, L.P.         |  | Capital Markets                  |                               | Limited Partnership Interest   |      |                  |       |       |              |        |                        |      |           |      |      |      | 1.1       |      |   | 1.1  
|Butler Animal Health Supply, LLC        |  | Health Care Providers & Services |                               | Senior Debt(7)                 |      | 7.8              | %     |       | 7/12         |        |                        |      |           | 8.0  |      |      | 8.0       |      |   | 6.5  
|CAMP Systems International, Inc.        |  | Transportation Infrastructure    |                               | Senior Debt(7)                 |      | 7.5              | %     |       | 9/14         |        |                        |      |           | 30.0 |      |      | 29.8      |      |   | 20.9 
|Carestream Health, Inc.                 |  | Health Care Equipment & Supplies |                               | Senior Debt(7)                 |      | 5.8              | %     |       | 10/13        |        |                        |      |           | 15.0 |      |      | 15.0      |      |   | 8.5  
|CH Holding Corp.                        |  | Leisure Equipment & Products     |                               | Senior Debt(6)                 |      | 7.6              | %     |       | 5/11         |        |                        |      |           | 15.3 |      |      | 13.0      |      |   | 5.0  
|                                        |  |                                  | Redeemable Preferred Stock(1) |                                |      |                  |       |       |              | 21,215 |                        |      |           |      |      | 42.7 |           |      | 
|                                        |  |                                  |                               | Convertible Preferred Stock(1) |      |                  |       |       |              |        | 665,000                |      |           |      |      |      |          |      |   |     
|                                        |  |                                  |                               | Common Stock(1)                |      |                  |       |       |              |        | 1                      |      |           |      |      |      |          |      |   |     
|                                        |  |                                  |                               |                                |      |                  |       |       |              |        |                        |      |           |      |      |      | 55.7      |      |   | 5.0  



8



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                         |  |                                    |  |                                |  |                  |  |              |  |                        |  |           |  |       |  |          
|---------------------------------------- |  | ---------------------------------- |  | ------------------------------ |  | ---------------- |  | ------------ |  | ---------------------- |  | --------- |  | ----- |  | ---------
|Company (4)                              |  | Industry                           |  | Investments                    |  | InterestRate (5) |  | MaturityDate |  | # of shares/unitsowned |  | Principal |  | Cost  |  | FairValue
|Cinelease, Inc.                          |  | Electronic Equipment & Instruments |  | Senior Debt(7)                 |  | 7.8%             |  | 3/12-3/13    |  |                        |  | 58.0      |  | 57.6  |  | 47.7     
|                                         |  | Common Stock(1)                    |  |                                |  |                  |  | 583          |  |                        |  | 0.6       |  | 0.3  
|                                         |  |                                    |  |                                |  |                  |  |              |  |                        |  |           |  | 58.2  |  | 48.0     
|Compusearch Holdings Company, Inc.       |  | Software                           |  | Subordinated Debt(7)           |  | 12.0%            |  | 6/12         |  |                        |  | 12.6      |  | 12.5  |  | 12.5     
|                                         |  | Convertible Preferred Stock(1)     |  |                                |  |                  |  | 23,342       |  |                        |  | 0.8       |  | 1.8  
|                                         |  |                                    |  |                                |  |                  |  |              |  |                        |  |           |  | 13.3  |  | 14.3     
|Contec, LLC                              |  | Household Durables                 |  | Subordinated Debt(7)           |  | 14.0%            |  | 9/15-9/16    |  |                        |  | 135.0     |  | 133.7 |  | 120.0    
|CyrusOne Networks, LLC                   |  | IT Services                        |  | Senior Debt(7)                 |  | 7.8%             |  | 1/14         |  |                        |  | 19.9      |  | 19.8  |  | 17.0     
|Delsey Holding(3)                        |  | Textiles, Apparel & Luxury Goods   |  | Senior Debt                    |  | 8.2%             |  | 2/12         |  |                        |  | 20.7      |  | 20.7  |  | 21.8     
|DelStar, Inc.                            |  | Building Products                  |  | Subordinated Debt(7)           |  | 14.0%            |  | 12/12        |  |                        |  | 18.8      |  | 18.7  |  | 18.8     
|                                         |  |                                    |  | Redeemable Preferred Stock     |  |                  |  |              |  | 26,613                 |  |           |  | 15.4  |  | 32.8     
|                                         |  |                                    |  | Convertible Preferred Stock(1) |  |                  |  |              |  | 29,569                 |  |           |  | 3.0   |  |         
|                                         |  |                                    |  | Common Stock Warrants(1)       |  |                  |  |              |  | 89,020                 |  |           |  | 16.9  |  |         
|                                         |  |                                    |  |                                |  |                  |  |              |  |                        |  |           |  | 54.0  |  | 51.6     
|Direct Marketing International LLC       |  | Media                              |  | Subordinated Debt(7)           |  | 15.2%            |  | 7/11         |  |                        |  | 29.5      |  | 29.3  |  | 26.0     
|Dyno Holding Corp.                       |  | Auto Components                    |  | Senior Debt(7)                 |  | 9.5%             |  | 11/13        |  |                        |  | 41.7      |  | 41.3  |  | 41.7     
|                                         |  |                                    |  | Subordinated Debt(7)           |  | 15.8%            |  | 11/14        |  |                        |  | 13.8      |  | 13.8  |  | 13.8     
|                                         |  |                                    |  | Subordinated Debt(6)           |  | 16.3%            |  | 11/14        |  |                        |  | 13.8      |  | 13.0  |  | 2.6      
|                                         |  |                                    |  | Convertible Preferred Stock(1) |  |                  |  |              |  | 389,759                |  |           |  | 40.5  |  |         
|                                         |  |                                    |  | Common Stock(1)                |  |                  |  |              |  | 97,440                 |  |           |  | 10.1  |  |         
|                                         |  |                                    |  |                                |  |                  |  |              |  |                        |  |           |  | 118.7 |  | 58.1     
|Easton Bell Sports LLC                   |  | Leisure Equipment & Products       |  | Common Units(1)                |  |                  |  |              |  | 1,985,748              |  |           |  | 0.7   |  | 4.2      
|Edline, LLC                              |  | Software                           |  | Subordinated Debt(7)           |  | 14.0%            |  | 7/13         |  |                        |  | 18.2      |  | 14.6  |  | 18.8     
|                                         |  |                                    |  | Membership Warrants(1)         |  |                  |  |              |  | 6,447,500              |  |           |  | 6.0   |  | 16.0     
|                                         |  |                                    |  |                                |  |                  |  |              |  |                        |  |           |  | 20.6  |  | 34.8     
|FAMS Acquisition, Inc.                   |  | Diversified Financial Services     |  | Subordinated Debt(7)           |  | 14.8%            |  | 11/13-11/14  |  |                        |  | 26.3      |  | 26.1  |  | 26.3     
|                                         |  | Convertible Preferred Stock(1)     |  |                                |  |                  |  | 861,364      |  |                        |  | 20.9      |  | 11.0 
|                                         |  |                                    |  |                                |  |                  |  |              |  |                        |  |           |  | 47.0  |  | 37.3     
|FCC Holdings, LLC                        |  | Commercial Banks                   |  | Subordinated Debt              |  | 15.4%            |  | 12/12        |  |                        |  | 75.0      |  | 74.4  |  | 63.8     
|Foamex, L.P.(2)(9)                       |  | Household Durables                 |  | Senior Debt(6)                 |  | 4.9%             |  | 2/13-2/14    |  |                        |  | 23.2      |  | 22.0  |  | 2.5      
|Ford Motor Company(2)                    |  | Automobiles                        |  | Senior Debt                    |  | 3.3%             |  | 12/11        |  |                        |  | 113.0     |  | 106.9 |  | 57.5     
|FPI Holding Corporation                  |  | Food Products                      |  | Senior Debt                    |  | 7.5%             |  | 10/09-5/15   |  |                        |  | 9.2       |  | 9.1   |  | 9.2      
|                                         |  |                                    |  | Senior Debt(6)                 |  | 13.8%            |  | 5/13-5/15    |  |                        |  | 26.1      |  | 25.6  |  | 3.8      
|                                         |  |                                    |  | Subordinated Debt(6)           |  | 21.5%            |  | 5/15-5/16    |  |                        |  | 19.6      |  | 17.4  |  |         
|                                         |  |                                    |  | Redeemable Preferred Stock(1)  |  |                  |  |              |  | 4,469                  |  |           |  | 39.1  |  |         
|                                         |  |                                    |  | Convertible Preferred Stock(1) |  |                  |  |              |  | 21,715                 |  |           |  | 23.3  |  |         
|                                         |  |                                    |  | Common Stock(1)                |  |                  |  |              |  | 5,429                  |  |           |  | 5.8   |  |         
|                                         |  |                                    |  |                                |  |                  |  |              |  |                        |  |           |  | 120.3 |  | 13.0     
|French Lick Resorts & Casino Hotels, LLC |  | Hotels, Restaurants & Leisure      |  | Senior Debt(6)                 |  | 10.8%            |  | 4/14         |  |                        |  | 31.7      |  | 25.7  |  | 17.5     
|FU/WD Opa Locka, LLC                     |  | Real Estate                        |  | Senior Debt                    |  | 8.0%             |  | 9/17-9/24    |  |                        |  | 32.3      |  | 30.9  |  | 26.9     
|Genband Inc.                             |  | Communications Equipment           |  | Common Stock(1)                |  |                  |  |              |  | 2,975,631              |  |           |  | 14.7  |  | 2.5      
|Golden Key US LLC                        |  | Diversified Financial Services     |  | Commercial Paper(1)            |  | 5.3%             |  | 10/17        |  |                        |  | 7.3       |  | 7.3   |  | 3.6      



9



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                  |  |                                  |                            |                             |       |                  |      |              |       |                        |      |      |           |      |      |      |          
|--------------------------------- |  | -------------------------------- | -------------------------- | --------------------------- | ----- | ---------------- | ---- | ------------ | ----- | ---------------------- | ---- | ---- | --------- | ---- | ---- | ---- | ---------
|Company (4)                       |  | Industry                         |                            | Investments                 |       | InterestRate (5) |      | MaturityDate |       | # of shares/unitsowned |      |      | Principal |      | Cost |      | FairValue
|HMSC Corporation                  |  | Insurance                        |                            | Senior Debt(6)(7)           |       | 6.0%             |      | 10/14        |       |                        |      |      | 3.5       |      | 3.5  |      | 1.1      
|HomeAway, Inc.                    |  | Diversified Consumer Services    |                            | Redeemable Preferred Stock  |       |                  |      |              |       | 384,297                |      |      |           |      | 0.7  |      | 0.6      
|                                  |  | Convertible Preferred Stock      |                            |                             |       |                  |      | 1,661,820    |       |                        |      |      | 9.9       |      | 27.0
|                                  |  |                                  |                            |                             |       |                  |      |              |       |                        |      |      |           |      | 10.6 |      | 27.6     
|Hopkins Manufacturing Corporation |  | Auto Components                  |                            | Subordinated Debt(7)        |       | 15.3%            |      | 7/12         |       |                        |      |      | 37.4      |      | 37.2 |      | 34.0     
|                                  |  |                                  | Redeemable Preferred Stock |                             |       |                  |      |              | 2,915 |                        |      |      |           | 6.1  |      | 5.5 
|                                  |  |                                  |                            |                             |       |                  |      |              |       |                        |      |      |           |      | 43.3 |      | 39.5     
|Infiltrator Systems, Inc.         |  | Building Products                |                            | Senior Debt(7)              |       | 16.0 %           |      | 10/13        |       |                        |      |      | 37.6      |      | 37.2 |      | 33.6     
|Innova Holdings, Inc.             |  | Energy Equipment & Services      |                            | Senior Debt(7)              |       | 8.0%             |      | 3/13         |       |                        |      |      | 11.5      |      | 11.4 |      | 11.5     
|                                  |  |                                  | Subordinated Debt(7)       |                             | 15.0% |                  | 3/14 |              |       |                        |      | 17.8 |           | 17.5 |      | 17.8
|                                  |  |                                  |                            | Convertible Preferred Stock |       |                  |      |              |       | 14,283                 |      |      |           |      | 22.0 |      | 28.8     
|                                  |  |                                  |                            |                             |       |                  |      |              |       |                        |      |      |           |      | 50.9 |      | 58.1     
|Inovis International, Inc.        |  | Software                         |                            | Senior Debt(7)              |       | 7.0%             |      | 5/10         |       |                        |      |      | 88.0      |      | 87.6 |      | 82.7     
|Intergraph Corporation            |  | Software                         |                            | Senior Debt(7)              |       | 6.5%             |      | 12/14        |       |                        |      |      | 3.0       |      | 3.0  |      | 2.7      
|iTradeNetwork, Inc.               |  | IT Services                      |                            | Senior Debt(7)              |       | 11.5%            |      | 12/13        |       |                        |      |      | 25.0      |      | 24.8 |      | 24.3     
|JHCI Acquisition, Inc.            |  | Commercial Services & Supplies   |                            | Senior Debt(7)              |       | 6.0%             |      | 12/14        |       |                        |      |      | 19.0      |      | 19.1 |      | 10.9     
|Jones Stephens Corp.              |  | Building Products                |                            | Subordinated Debt(7)        |       | 13.5%            |      | 9/13-9/14    |       |                        |      |      | 23.3      |      | 23.0 |      | 17.0     
|J-Pac, LLC                        |  | Health Care Equipment & Supplies |                            | Senior Debt(7)              |       | 12.0%            |      | 1/14         |       |                        |      |      | 15.1      |      | 14.9 |      | 13.1     
|                                  |  | Subordinated Debt(6)             |                            | 18.9%                       |       | 1/14             |      |              |       |                        | 10.0 |      | 8.7       |      | 2.5 
|                                  |  |                                  |                            | Proffered Unit Warrants     |       |                  |      |              |       | 263,158                |      |      |           |      | 0.2  |      |         
|                                  |  |                                  |                            | Common Unit Warrants(1)     |       |                  |      |              |       | 500,000                |      |      |           |      |     |      |         
|                                  |  |                                  |                            |                             |       |                  |      |              |       |                        |      |      |           |      | 23.8 |      | 15.6     
|KIK Custom Products, Inc.(3)      |  | Household Products               |                            | Senior Debt(6)              |       | 5.5%             |      | 11/14        |       |                        |      |      | 20.8      |      | 20.8 |      | 4.6      
|LabelCorp Holdings, Inc           |  | Paper & Forest Products          |                            | Senior Debt                 |       | 8.1%             |      | 8/13-8/14    |       |                        |      |      | 1.9       |      | 1.5  |      | 0.9      
|                                  |  |                                  |                            | Subordinated Debt           |       | 14.0%            |      | 8/15-8/16    |       |                        |      |      | 60.8      |      | 60.2 |      | 53.9     
|                                  |  |                                  |                            |                             |       |                  |      |              |       |                        |      |      |           |      | 61.7 |      | 54.8     
|LCW Holdings, LLC                 |  | Real Estate                      |                            | Senior Debt                 |       | 7.0%             |      | 10/12        |       |                        |      |      | 31.7      |      | 30.8 |      | 30.1     
|                                  |  |                                  |                            | Warrant(1)                  |       |                  |      |              |       | 12.3                   | %    |      |           |      | 0.8  |      | 6.1      
|                                  |  |                                  |                            |                             |       |                  |      |              |       |                        |      |      |           |      | 31.6 |      | 36.2     
|LJVH Holdings Inc.(3)             |  | Beverages                        |                            | Senior Debt(7)              |       | 6.7%             |      | 1/15         |       |                        |      |      | 28.5      |      | 28.5 |      | 20.4     
|LN Acquisition Corp.              |  | Machinery                        |                            | Senior Debt(7)              |       | 6.3%             |      | 1/15         |       |                        |      |      | 21.5      |      | 21.6 |      | 15.0     
|Logex Corporation                 |  | Road & Rail                      |                            | Subordinated Debt(6)        |       | 0.0%             |      | 6/09         |       |                        |      |      | 12.8      |      | 9.1  |      | 0.2      
|LTM Enterprises, Inc.             |  | Personal Products                |                            | Senior Debt(7)              |       | 9.8%             |      | 11/11        |       |                        |      |      | 19.0      |      | 19.0 |      | 16.0     
|MagnaCare Holdings, Inc.          |  | Health Care Providers & Services |                            | Subordinated Debt(7)        |       | 14.8%            |      | 1/13         |       |                        |      |      | 14.1      |      | 14.0 |      | 14.0     
|Medical Billing Holdings, Inc.    |  | Commercial Services & Supplies   |                            | Subordinated Debt(7)        |       | 15.0%            |      | 9/13         |       |                        |      |      | 10.8      |      | 10.6 |      | 10.8     
|                                  |  | Convertible Preferred Stock(1)   |                            |                             |       |                  |      | 13,199,000   |       |                        |      |      | 13.2      |      | 10.0
|                                  |  |                                  |                            | Common Stock(1)             |       |                  |      |              |       | 3,299,582              |      |      |           |      | 3.3  |      |         
|                                  |  |                                  |                            |                             |       |                  |      |              |       |                        |      |      |           |      | 27.1 |      | 20.8     



10



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                          |  |                                        |                      |                                |       |                  |       |              |  |                        |      |      |           |      |       |      |          
|----------------------------------------- |  | -------------------------------------- | -------------------- | ------------------------------ | ----- | ---------------- | ----- | ------------ |  | ---------------------- | ---- | ---- | --------- | ---- | ----- | ---- | ---------
|Company (4)                               |  | Industry                               |                      | Investments                    |       | InterestRate (5) |       | MaturityDate |  | # of shares/unitsowned |      |      | Principal |      | Cost  |      | FairValue
|Mirion Technologies                       |  | Electrical Equipment                   |                      | Senior Debt(7)                 |       | 6.0%             |       | 5/10-11/11   |  |                        |      |      | 125.6     |      | 124.9 |      | 126.3    
|                                          |  |                                        |                      | Subordinated Debt(7)           |       | 14.3%            |       | 9/09-5/12    |  |                        |      |      | 51.3      |      | 51.0  |      | 51.4     
|                                          |  |                                        |                      | Convertible Preferred Stock    |       |                  |       |              |  | 435,724                |      |      |           |      | 50.0  |      | 95.1     
|                                          |  |                                        |                      | Common Stock(1)                |       |                  |       |              |  | 24,503                 |      |      |           |      | 2.8   |      | 3.6      
|                                          |  |                                        |                      | Common Stock Warrants(1)       |       |                  |       |              |  | 222,156                |      |      |           |      | 18.6  |      | 31.0     
|                                          |  |                                        |                      |                                |       |                  |       |              |  |                        |      |      |           |      | 247.3 |      | 307.4    
|Mitchell International,Inc.               |  | IT Services                            |                      | Senior Debt(7)                 |       | 6.5%             |       | 3/15         |  |                        |      |      | 5.0       |      | 5.0   |      | 3.1      
|National Processing Company Group, Inc.   |  | Diversified Financial Services         |                      | Senior Debt(7)                 |       | 7.9%             |       | 9/14         |  |                        |      |      | 53.0      |      | 52.8  |      | 37.1     
|NBD Holdings Corp.                        |  | Diversified Financial Services         |                      | Senior Subordinated Debt(7)    |       | 14.0%            |       | 8/13         |  |                        |      |      | 46.0      |      | 45.5  |      | 45.9     
|                                          |  | Convertible Preferred Stock            |                      |                                |       |                  |       | 84,174       |  |                        |      |      | 10.6      |      | 10.7 
|                                          |  |                                        |                      | Common Stock(1)                |       |                  |       |              |  | 633,408                |      |      |           |      | 0.1   |      | 1.5      
|                                          |  |                                        |                      |                                |       |                  |       |              |  |                        |      |      |           |      | 56.2  |      | 58.1     
|Net1 Las Colinas Manager, LLC             |  | Real Estate                            |                      | Senior Debt                    |       | 7.7%             |       | 10/15        |  |                        |      |      | 5.0       |      | 5.1   |      | 4.6      
|Nivel Holdings, LLC                       |  | Distributors                           |                      | Senior Debt(7)                 |       | 10.6%            |       | 10/13        |  |                        |      |      | 62.1      |      | 61.6  |      | 55.3     
|Orchard Brands Corporation                |  | Internet & Catalog Retail              |                      | Senior Debt(7)                 |       | 8.7%             |       | 4/13-4/14    |  |                        |      |      | 314.6     |      | 311.8 |      | 199.6    
|                                          |  |                                        | Subordinated Debt(6) |                                | 9.9%  |                  | 4/14  |              |  |                        |      | 61.7 |           | 50.0 |       | 30.3
|                                          |  |                                        |                      | Common Stock(1)                |       |                  |       |              |  | 565,885                |      |      |           |      |      |      |         
|                                          |  |                                        |                      |                                |       |                  |       |              |  |                        |      |      |           |      | 361.8 |      | 229.9    
|Pan Am International Flight Academy, Inc. |  | Commercial Services & Supplies         |                      | Subordinated Debt(6)(7)        |       | 18.0 %           |       | 7/13         |  |                        |      |      | 29.8      |      | 25.2  |      | 10.7     
|                                          |  | Convertible Preferred Stock(1)         |                      |                                |       |                  |       | 8,234        |  |                        |      |      | 8.2       |      |     
|                                          |  |                                        |                      |                                |       |                  |       |              |  |                        |      |      |           |      | 33.4  |      | 10.7     
|PaR Systems, Inc.                         |  | Machinery                              |                      | Senior Debt                    |       | 3.8%             |       | 7/13         |  |                        |      |      | 4.6       |      | 4.4   |      | 3.8      
|People Media, Inc.                        |  | Internet Software & Services           |                      | Senior Debt(7)                 |       | 6.5%             |       | 5/13         |  |                        |      |      | 13.8      |      | 13.6  |      | 13.8     
|                                          |  | Subordinated Debt(7)                   |                      | 15.3%                          |       | 5/14             |       |              |  |                        | 21.2 |      | 21.0      |      | 21.2 
|                                          |  |                                        |                      | Convertible Preferred Stock(1) |       |                  |       |              |  | 5,246,686              |      |      |           |      | 7.5   |      | 16.5     
|                                          |  |                                        |                      |                                |       |                  |       |              |  |                        |      |      |           |      | 42.1  |      | 51.5     
|Phillips & Temro Industries, Inc.         |  | Auto Components                        |                      | Senior Debt(7)                 |       | 12.8%            |       | 12/10-12/11  |  |                        |      |      | 23.8      |      | 23.8  |      | 22.8     
|                                          |  |                                        | Subordinated Debt(7) |                                | 16.3% |                  | 12/12 |              |  |                        |      | 17.6 |           | 17.5 |       | 15.6
|                                          |  |                                        |                      |                                |       |                  |       |              |  |                        |      |      |           |      | 41.3  |      | 38.4     
|Qioptiq S.A.R.L.(3)                       |  | Electronic Equipment & Instruments     |                      | Subordinated Debt              |       | 10.3%            |       | 3/18         |  |                        |      |      | 29.7      |      | 29.4  |      | 28.6     
|Ranpak Acquisition Company                |  | Containers & Packaging                 |                      | Senior Debt                    |       | 8.3%             |       | 12/13-12/14  |  |                        |      |      | 140.6     |      | 139.2 |      | 100.2    
|RDR Holdings, Inc.                        |  | Household Durables                     |                      | Subordinated Debt(7)           |       | 15.4%            |       | 10/14-10/15  |  |                        |      |      | 219.5     |      | 217.6 |      | 219.5    
|                                          |  |                                        |                      | Convertible Preferred Stock    |       |                  |       |              |  | 154,142                |      |      |           |      | 166.7 |      | 125.2    
|                                          |  |                                        |                      | Common Stock(1)                |       |                  |       |              |  | 1,541,415              |      |      |           |      | 1.6   |      |         
|                                          |  |                                        |                      |                                |       |                  |       |              |  |                        |      |      |           |      | 385.9 |      | 344.7    
|Roarke - Money Mailer, LLC                |  | Media                                  |                      | Common Membership Units(1)     |       |                  |       |              |  | 3.5                    | %    |      |           |      | 0.9   |      | 1.0      
|Scanner Holdings Corporation              |  | Computers & Peripherals                |                      | Senior Debt(7)                 |       | 5.5%             |       | 5/12-5/13    |  |                        |      |      | 11.1      |      | 10.9  |      | 11.1     
|                                          |  | Subordinated Debt(7)                   |                      | 14.0%                          |       | 5/14             |       |              |  |                        | 20.8 |      | 20.6      |      | 20.8 
|                                          |  |                                        |                      | Convertible Preferred Stock(1) |       |                  |       |              |  | 77,640,000             |      |      |           |      | 7.8   |      | 7.5      
|                                          |  |                                        |                      | Common Stock(1)                |       |                  |       |              |  | 78,242                 |      |      |           |      | 0.1   |      |         
|                                          |  |                                        |                      |                                |       |                  |       |              |  |                        |      |      |           |      | 39.4  |      | 39.4     
|Securus Technologies,Inc.                 |  | Diversified Telecommunication Services |                      | Common Stock(1)                |       |                  |       |              |  | 12                     |      |      |           |      | 0.7   |      |         



11



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      |       |      |          
|--------------------------------------- |  | ---------------------------------- | ------------------------------ | ----------------------------- | ----- | ---------------- | --------- | ------------ | ----------- | ---------------------- | ---- | --------- | ---- | ----- | ---- | ---------
|Company (4)                             |  | Industry                           |                                | Investments                   |       | InterestRate (5) |           | MaturityDate |             | # of shares/unitsowned |      | Principal |      | Cost  |      | FairValue
|Seroyal Holdings, L.P.(3)               |  | Health Care Equipment & Supplies   |                                | Redeemable Preferred          |       |                  |           |              |             | 26,274                 |      |           |      | 0.5   |      | 0.6      
|                                        |  | Partnership Units(1)               |                                |                               |       |                  |           | 95,280       |             |                        |      | 0.8       |      | 1.4  
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 1.3   |      | 2.0      
|Small Smiles Holding Company, LLC       |  | Health Care Providers & Services   |                                | Senior Debt                   |       | 5.3%             |           | 9/12         |             |                        |      | 12.1      |      | 7.3   |      | 5.5      
|                                        |  | Subordinated Debt(6)(7)            |                                | 15.0%                         |       | 9/13-9/14        |           |              |             | 102.0                  |      | 87.9      |      |     
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 95.2  |      | 5.5      
|Soil Safe Holdings, LLC                 |  | Commercial Services & Supplies     |                                | Senior Debt                   |       | 9.1%             |           | 8/13-8/14    |             |                        |      | 55.3      |      | 54.9  |      | 48.7     
|                                        |  |                                    | Subordinated Debt(7)           |                               | 14.7% |                  | 8/15-8/17 |              |             |                        | 59.5 |           | 58.9 |       | 48.3
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 113.8 |      | 97.0     
|SPL Acquisition Corp.                   |  | Pharmaceuticals                    |                                | Senior Debt                   |       | 7.0%             |           | 10/12-10/13  |             |                        |      | 85.2      |      | 84.4  |      | 85.2     
|                                        |  |                                    |                                | Subordinated Debt(7)          |       | 15.3%            |           | 8/14-8/15    |             |                        |      | 50.3      |      | 49.8  |      | 50.3     
|                                        |  |                                    |                                | Convertible Preferred Stock   |       |                  |           |              |             | 84,043                 |      |           |      | 48.8  |      | 48.8     
|                                        |  |                                    |                                | Common Stock(1)               |       |                  |           |              |             | 84,043                 |      |           |      |      |      | 10.6     
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 183.0 |      | 194.9    
|Supreme Corq Holdings, LLC              |  | Household Products                 |                                | Common Membership Warrants(1) |       |                  |           |              |             | 5,670                  |      |           |      | 0.4   |      |         
|Swank Audio Visuals, L.L.C.             |  | Commercial Services & Supplies     |                                | Senior Debt(7)                |       | 7.3%             |           | 8/14         |             |                        |      | 36.4      |      | 36.4  |      | 21.6     
|                                        |  | Senior Debt(6)(7)                  |                                | 8.0%                          |       | 8/14             |           |              |             | 12.1                   |      | 11.7      |      | 1.1  
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 48.1  |      | 22.7     
|Tanenbaum-Harber Co. Holdings, Inc.     |  | Insurance                          |                                | Redeemable Preferred Stock(1) |       |                  |           |              |             | 376                    |      |           |      | 0.5   |      | 0.5      
|                                        |  |                                    | Common Stock(1)                |                               |       |                  |           |              | 3,861       |                        |      |           |     |       |    
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 0.5   |      | 0.5      
|TestAmerica Environmental Services, LLC |  | Commercial Services & Supplies     |                                | Senior Debt(7)                |       | 5.4%             |           | 12/11-12/12  |             |                        |      | 30.5      |      | 24.5  |      | 19.7     
|                                        |  | Senior Debt(6)(7)                  |                                | 9.0%                          |       | 12/13            |           |              |             | 20.7                   |      | 20.4      |      | 2.9  
|                                        |  |                                    | Subordinated Debt(6)           |                               | 14.0% |                  | 12/14     |              |             |                        | 42.0 |           | 39.5 |       |    
|                                        |  |                                    |                                | Preferred Units(1)            |       |                  |           |              |             | 11,659,298             |      |           |      | 6.8   |      |         
|                                        |  |                                    |                                | Preferred Unit Warrants(1)    |       |                  |           |              |             | 1,998,961              |      |           |      | 4.8   |      |         
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 96.0  |      | 22.6     
|The Tensar Corporation                  |  | Construction & Engineering         |                                | Senior Debt(7)                |       | 8.5%             |           | 5/13         |             |                        |      | 82.0      |      | 81.2  |      | 55.4     
|                                        |  |                                    | Subordinated Debt              |                               | 17.5% |                  | 10/13     |              |             |                        | 45.4 |           | 45.1 |       | 33.6
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 126.3 |      | 89.0     
|ThreeSixty Sourcing, Inc.(3)            |  | Commercial Services & Supplies     |                                | Common Stock Warrants(1)      |       |                  |           |              |             | 35                     |      |           |      | 4.1   |      |         
|TransFirst Holdings, Inc.               |  | Commercial Services & Supplies     |                                | Senior Debt(7)                |       | 6.5%             |           | 6/15         |             |                        |      | 50.0      |      | 49.6  |      | 35.8     
|triVIN, Inc.                            |  | Commercial Services & Supplies     |                                | Subordinated Debt(7)          |       | 15.0%            |           | 6/14-6/15    |             |                        |      | 20.0      |      | 19.8  |      | 20.0     
|                                        |  |                                    | Convertible Preferred Stock(1) |                               |       |                  |           |              | 247,000,000 |                        |      |           | 25.7 |       | 13.1
|                                        |  |                                    |                                | Common Stock(1)               |       |                  |           |              |             | 6,319,923              |      |           |      | 6.3   |      |         
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 51.8  |      | 33.1     
|True Temper Sports, Inc.                |  | Leisure Equipment & Products       |                                | Senior Debt                   |       | 6.6%             |           | 6/11         |             |                        |      | 2.0       |      | 1.9   |      | 0.5      
|Tyden Caymen Holdings Corp.             |  | Electronic Equipment & Instruments |                                | Senior Debt(7)                |       | 10.1%            |           | 5/10-11/11   |             |                        |      | 13.4      |      | 13.3  |      | 13.4     
|                                        |  | Subordinated Debt(7)               |                                | 13.8%                         |       | 5/12             |           |              |             | 14.5                   |      | 14.4      |      | 14.3 
|                                        |  |                                    |                                | Common Stock(1)               |       |                  |           |              |             | 1,165,930              |      |           |      | 1.2   |      | 1.3      
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 28.9  |      | 29.0     
|Venus Swimwear, Inc.                    |  | Internet & Catalog Retail          |                                | Senior Debt(6)                |       | 9.3%             |           | 12/11-12/12  |             |                        |      | 16.0      |      | 15.8  |      | 13.0     
|                                        |  |                                    |                                | Subordinated Debt(6)          |       | 20.0%            |           | 12/13        |             |                        |      | 26.0      |      | 19.2  |      |         
|                                        |  |                                    |                                |                               |       |                  |           |              |             |                        |      |           |      | 35.0  |      | 13.0     



12



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                                      |  |                                |                      |                                                                                                                                                          |       |                  |           |              |             |                        |      |           |      |       |      |          
|----------------------------------------------------- |  | ------------------------------ | -------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | ---------------- | --------- | ------------ | ----------- | ---------------------- | ---- | --------- | ---- | ----- | ---- | ---------
|Company (4)                                           |  | Industry                       |                      | Investments                                                                                                                                              |       | InterestRate (5) |           | MaturityDate |             | # of shares/unitsowned |      | Principal |      | Cost  |      | FairValue
|WRH, Inc.                                             |  | Life Sciences Tools & Services |                      | Senior Debt(7)                                                                                                                                           |       | 4.3%             |           | 9/13-9/14    |             |                        |      | 4.0       |      | 4.0   |      | 4.0      
|                                                      |  |                                | Subordinated Debt(7) |                                                                                                                                                          | 14.6% |                  | 7/14-9/14 |              |             |                        | 82.2 |           | 81.5 |       | 81.6
|                                                      |  |                                |                      | Convertible Preferred Stock                                                                                                                              |       |                  |           |              |             | 2,008,575              |      |           |      | 230.6 |      | 230.6    
|                                                      |  |                                |                      | Common Stock(1)                                                                                                                                          |       |                  |           |              |             | 502,144                |      |           |      | 49.9  |      | 9.3      
|                                                      |  |                                |                      |                                                                                                                                                          |       |                  |           |              |             |                        |      |           |      | 366.0 |      | 325.5    
|WWC Acquisitions, Inc.                                |  | Commercial Services & Supplies |                      | Senior Debt(7)                                                                                                                                           |       | 7.3%             |           | 12/11-12/13  |             |                        |      | 34.0      |      | 33.6  |      | 25.8     
|ZSF/WD Fitzgerald, LLC                                |  | Real Estate                    |                      | Senior Debt                                                                                                                                              |       | 8.2%             |           | 9/24         |             |                        |      | 1.2       |      | 1.1   |      | 0.6      
|ZSF/WD Hammond, LLC                                   |  | Real Estate                    |                      | Senior Debt                                                                                                                                              |       | 8.0%             |           | 9/17-9/24    |             |                        |      | 40.5      |      | 38.7  |      | 33.0     
|ZSF/WD Jacksonville, LLC                              |  | Real Estate                    |                      | Senior Debt                                                                                                                                              |       | 8.1%             |           | 9/17-9/24    |             |                        |      | 20.4      |      | 19.4  |      | 15.9     
|ZSF/WD Montgomery-31, LLC                             |  | Real Estate                    |                      | Senior Debt                                                                                                                                              |       | 8.0%             |           | 9/17-9/24    |             |                        |      | 33.6      |      | 32.1  |      | 27.7     
|ZSF/WD Opa Locka, LLC                                 |  | Real Estate                    |                      | Senior Debt                                                                                                                                              |       | 8.2%             |           | 9/24         |             |                        |      | 0.4       |      | 0.4   |      | 0.1      
|ZSF/WD Orlando, LLC                                   |  | Real Estate                    |                      | Senior Debt                                                                                                                                              |       | 8.1%             |           | 9/17-9/24    |             |                        |      | 20.7      |      | 19.7  |      | 16.2     
|CMBS AND REAL ESTATE CDO INVESTMENTS                  |  |                                |                      |                                                                                                                                                          |       |                  |           |              |             |                        |      |          
|ACAS CRE CDO 2007-1, Ltd.                             |  | Real Estate                    |                      | Class C through Class N Notes                                                                                                                            |       | 6.0%             |           | 11/31        |             |                        |      | 345.5     |      | 200.3 |      | 12.4     
|                                                      |  |                                | Preferred Shares(1)  |                                                                                                                                                          |       |                  |           |              | 417,086,293 |                        |      |           | 17.7 |       |    
|                                                      |  |                                |                      |                                                                                                                                                          |       |                  |           |              |             |                        |      |           |      | 218.0 |      | 12.4     
|Banc of America                                       |  | Real Estate                    |                      | Forward Purchase commitment to purchase Banc of America Commercial Mortgage Trust 2007-1 Commercial
Mortgage Pass-Through Certificates ($1.2 Fair Value) |       |                  |           | 4/09         |             |                        |      |           |      | 4.3   |      | 0.9      
|CD 2007-CD4 Commercial Mortgage Trust                 |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates                                                                                                            |       | 5.9%             |           | 4/17         |             |                        |      | 14.0      |      | 8.9   |      | 1.1      
|CD 2007-CD5 Mortgage Trust                            |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates                                                                                                            |       | 6.4%             |           | 12/17        |             |                        |      | 14.8      |      | 10.3  |      | 1.6      
|Citigroup Commercial Mortgage Securites Trust 2007-C6 |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates                                                                                                            |       | 5.6%             |           | 7/17         |             |                        |      | 183.9     |      | 83.8  |      | 16.8     
|COBALT CMBS Commercial Mortgage Trust 2007-C3         |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates                                                                                                            |       | 5.2%             |           | 7/17         |             |                        |      | 11.1      |      | 8.6   |      | 0.7      
|Countrywide Commercial Mortgage Trust 2007-MF1        |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates                                                                                                            |       | 6.3%             |           | 11/40        |             |                        |      | 24.0      |      | 9.2   |      | 1.6      
|Credit Suisse Commercial Mortgage Trust 2007-C3       |  | Real Estate                    |                      | Commercial Mortgage Pass-Through Certificates                                                                                                            |       | 5.6%             |           | 7/17         |             |                        |      | 13.2      |      | 10.7  |      | 0.8      



13



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                                                  |  |                                |                    |                                                                                                                                                                            |  |                  |  |              |  |                        |      |           |      |      |     |          
|----------------------------------------------------------------- |  | ------------------------------ | ------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- |  | ------------ |  | ---------------------- | ---- | --------- | ---- | ---- | --- | ---------
|Company (4)                                                       |  | Industry                       |                    | Investments                                                                                                                                                                |  | InterestRate (5) |  | MaturityDate |  | # of shares/unitsowned |      | Principal |      | Cost |     | FairValue
|Credit Suisse Commercial Mortgage Trust Series 2007-C4            |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.0%             |  | 8/17         |  |                        |      | 20.8      |      | 12.2 |     | 3.7      
|GE Commercial Mortgage Corporation, Series 2007-C1                |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.6%             |  | 12/19        |  |                        |      | 37.0      |      | 31.5 |     | 2.8      
|GS Morgtage Securities Trust 2006-GG10                            |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.7%             |  | 7/17         |  |                        |      | 63.7      |      | 52.6 |     | 4.0      
|J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11 |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.6%             |  | 7/17         |  |                        |      | 157.7     |      | 68.7 |     | 11.4     
|J.P. Morgan Chase                                                 |  | Real Estate                    |                    | Forward Purchase commitment to purchase J.P. Morgan Chase Commercial Mortgage Securities Trust
2007-LDP11, Commercial Mortgage Pass-Through Certificates ($0.5 Fair Value) |  |                  |  | 5/09         |  |                        |      |           |      | 1.7  |     | 0.3      
|LB-UBS Commercial Mortgage Trust 2007-C6                          |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.5%             |  | 8/17         |  |                        |      | 36.6      |      | 22.3 |     | 3.9      
|LB-UBS Commercial Mortgage Trust 2008-C1                          |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.3%             |  | 7/23-7/24    |  |                        |      | 19.4      |      | 7.3  |     | 1.9      
|ML-CFC Commercial Mortgage Trust 2007-6                           |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.0%             |  | 4/17         |  |                        |      | 9.8       |      | 3.4  |     | 0.8      
|ML-CFC Commercial Mortgage Trust 2007-8                           |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.2%             |  | 8/17         |  |                        |      | 32.8      |      | 19.7 |     | 3.6      
|Wachovia Bank Commercial Mortgage Trust 2007-C31                  |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.0%             |  | 5/17         |  |                        |      | 20.0      |      | 11.5 |     | 2.3      
|Wachovia Bank Commercial Mortgage Trust, Series 2007-C32          |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.7%             |  | 10/17        |  |                        |      | 161.6     |      | 76.2 |     | 10.7     
|Wachovia Bank Commercial Mortgage Trust, Series 2007-C34          |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.3%             |  | 10/17-9/24   |  |                        |      | 96.2      |      | 43.6 |     | 7.1      
|Wachovia Bank Commercial Trust 2006-C28                           |  | Real Estate                    |                    | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.2%             |  | 11/16        |  |                        |      | 5.0       |      | 3.1  |     | 0.5      
|CLO INVESTMENTS                                                   |  |                                |                    |                                                                                                                                                                            |  |                  |  |              |  |                        |      |           |      |     
|ACAS CLO 2007-1, Ltd.                                             |  | Diversified Financial Services |                    | Secured Notes                                                                                                                                                              |  |                  |  |              |  |                        |      | 8.5       |      | 8.4  |     | 1.3      
|                                                                  |  |                                | Subordinated Notes |                                                                                                                                                                            |  |                  |  |              |  |                        | 25.9 |           | 23.2 |      | 6.7
|                                                                  |  |                                |                    |                                                                                                                                                                            |  |                  |  |              |  |                        |      |           |      | 31.6 |     | 8.0      
|Ares IIIR/IVR CLO Ltd.                                            |  | Diversified Financial Services |                    | Subordinated Notes                                                                                                                                                         |  |                  |  |              |  |                        |      | 20.0      |      | 16.9 |     | 3.5      



14



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                                                                                                |  |                                |                         |                                   |         |                  |   |              |        |                        |  |           |  |      |      |           |     |    
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ----------------------- | --------------------------------- | ------- | ---------------- | - | ------------ | ------ | ---------------------- |  | --------- |  | ---- | ---- | --------- | --- | ---
|Company (4)                                                                                                     |  | Industry                       |                         | Investments                       |         | InterestRate (5) |   | MaturityDate |        | # of shares/unitsowned |  | Principal |  | Cost |      | FairValue
|Ares VIII CLO, Ltd.                                                                                             |  | Diversified Financial Services |                         | Preference Shares                 |         |                  |   |              |        | 6,241                  |  |           |  |      | 4.4  |           |     | 0.3
|Avalon Capital Ltd. 3                                                                                           |  | Diversified Financial Services |                         | Preferred Securities              |         |                  |   |              |        | 13,796                 |  |           |  |      | 4.7  |           |     | 1.2
|Babson CLO Ltd. 2006-II                                                                                         |  | Diversified Financial Services |                         | Income Notes                      |         |                  |   |              |        |                        |  | 15.0      |  |      | 13.7 |           |     | 3.5
|BALLYROCK CLO 2006-2 LTD.                                                                                       |  | Diversified Financial Services |                         | Deferrable Notes                  |         |                  |   |              |        |                        |  | 2.5       |  |      | 2.1  |           |     | 0.8
|Cent CDO 12 Limited                                                                                             |  | Diversified Financial Services |                         | Income Notes                      |         |                  |   |              |        |                        |  | 26.4      |  |      | 21.8 |           |     | 5.8
|Centurion CDO 8 Limited                                                                                         |  | Diversified Financial Services |                         | Subordinated Notes                |         |                  |   |              |        |                        |  | 5.0       |  |      | 3.2  |           |     | 1.0
|Champlain CLO                                                                                                   |  | Diversified Financial Services |                         | Preferred Securities              |         |                  |   |              |        | 1,000,000              |  |           |  |      | 0.5  |           |     | 0.2
|CoLTs 2005-1 Ltd.(3)                                                                                            |  | Diversified Financial Services |                         | Preference Shares(1)              |         |                  |   |              |        | 360                    |  |           |  |      | 6.7  |           |     | 3.0
|CoLTs 2005-2 Ltd.(3)                                                                                            |  | Diversified Financial Services |                         | Preference Shares                 |         |                  |   |              |        | 34,170,000             |  |           |  |      | 28.5 |           |     | 3.7
|CREST Exeter Street Solar 2004-2                                                                                |  | Diversified Financial Services |                         | Preferred Securities              |         |                  |   |              |        | 3,089,177              |  |           |  |      | 2.7  |           |     | 0.3
|Eaton Vance CDO X PLC(3)                                                                                        |  | Diversified Financial Services |                         | Secured Subordinated Income Notes |         |                  |   |              |        |                        |  | 15.0      |  |      | 12.8 |           |     | 3.4
|Essex Park CDO Ltd.                                                                                             |  | Diversified Financial Services |                         | Preferred Securities              |         |                  |   |              |        | 5,750,000              |  |           |  |      | 1.8  |           |     | 0.8
|Flagship CLO V                                                                                                  |  | Diversified Financial Services |                         | Deferrable Notes                  |         |                  |   |              |        |                        |  | 1.7       |  |      | 1.3  |           |     | 0.3
|                                                                                                                |  |                                | Subordinated Securities |                                   |         |                  |   |              | 15,000 |                        |  |           |  | 12.4 |      |           | 1.9
|                                                                                                                |  |                                |                         |                                   |         |                  |   |              |        |                        |  |           |  |      | 13.7 |           |     | 2.2
|Galaxy III CLO, Ltd                                                                                             |  | Diversified Financial Services |                         | Subordinated Notes                |         |                  |   |              |        |                        |  | 4.0       |  |      | 2.4  |           |     | 0.1
|LightPoint CLO IV, LTD                                                                                          |  | Diversified Financial Services |                         | Income Notes                      |         |                  |   |              |        |                        |  | 6.7       |  |      | 6.4  |           |     | 0.4
|LightPoint CLO VIII, Ltd.                                                                                       |  | Diversified Financial Services |                         | Deferrable Notes                  |         |                  |   |              |        |                        |  | 7.0       |  |      | 6.4  |           |     | 2.1
|LightPoint CLO VII, Ltd.                                                                                        |  | Diversified Financial Services |                         | Subordinated Notes                |         |                  |   |              |        |                        |  | 9.0       |  |      | 7.1  |           |     | 2.1
|Mayport CLO Ltd.                                                                                                |  | Diversified Financial Services |                         | Income Notes                      |         |                  |   |              |        |                        |  | 14.0      |  |      | 12.5 |           |     | 1.2
|NYLIM Flatiron CLO 2006-1 LTD.(3)                                                                               |  | Diversified Financial Services |                         | Subordinated Securities           |         |                  |   |              |        | 10,000                 |  |           |  |      | 8.7  |           |     | 2.2
|Octagon Investment Partners VII, Ltd.                                                                           |  | Diversified Financial Services |                         | Preferred Securities              |         |                  |   |              |        | 5,000,000              |  |           |  |      | 1.9  |           |     | 0.4
|Sapphire Valley CDO I, Ltd.                                                                                     |  | Diversified Financial Services |                         | Subordinated Notes                |         |                  |   |              |        |                        |  | 14.0      |  |      | 13.0 |           |     | 4.3
|Vitesse CLO, Ltd.                                                                                               |  | Diversified Financial Services |                         | Preferred Securities              |         |                  |   |              |        | 20,000,000             |  |           |  |      | 15.5 |           |     | 2.7
|Subtotal Non-Control / Non-Affiliate Investments (61% of total investment assets and
liabilities at fair value) |  |                                |                         | $                                 | 5,964.4 |                  | $ | 4,117.1     



15



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      |       |           |      |      
|--------------------------------------------------------------------------------------------- |  | -------------------------------- | ----------------------------- | ------------------------------ | ----- | ---------------- | - | ----- | ------------ | --------- | ---------------------- | ---- | --------- | - | ---- | ----- | --------- | ---- | -----
|Company (4)                                                                                   |  | Industry                         |                               | Investments                    |       | InterestRate (5) |   |       | MaturityDate |           | # of shares/unitsowned |      | Principal |   | Cost |       | FairValue
|                                                                                              |  |                                  |                               |                               
|AFFILIATE INVESTMENTS                                                                         |  |                                  |                               |                                |       |                  |   |       |              |          
|Aptara, Inc.                                                                                  |  | IT Services                      |                               | Senior Debt                    |       | 11.5             | % |       | 8/09         |           |                        |      | 3.0       |   |      | 3.0   |           |      | 3.0  
|                                                                                              |  |                                  |                               | Subordinated Debt(7)           |       | 16.9             | % |       | 8/09         |           |                        |      | 55.9      |   |      | 54.7  |           |      | 55.6 
|                                                                                              |  |                                  |                               | Redeemable Preferred Stock(1)  |       |                  |   |       |              |           | 15,107                 |      |           |   |      | 14.1  |           |      |     
|                                                                                              |  |                                  |                               | Convertible Preferred Stock(1) |       |                  |   |       |              |           | 2,549,410              |      |           |   |      | 8.7   |           |      |     
|                                                                                              |  |                                  |                               | Preferred Stock Warrants(1)    |       |                  |   |       |              |           | 230,681                |      |           |   |      | 1.0   |           |      |     
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      | 81.5  |           |      | 58.6 
|Comfort Co., Inc.                                                                             |  | Household Durables               |                               | Senior Debt                    |       | 13.5             | % |       | 3/12         |           |                        |      | 2.3       |   |      | 2.3   |           |      | 2.2  
|                                                                                              |  |                                  |                               | Senior Debt(6)                 |       | 11.5             | % |       | 3/12-3/15    |           |                        |      | 11.3      |   |      | 11.2  |           |      | 4.2  
|                                                                                              |  |                                  |                               | Common Stock(1)                |       |                  |   |       |              |           | 110,365                |      |           |   |      | 11.8  |           |      |     
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      | 25.3  |           |      | 6.4  
|Creditcards.com, Inc.                                                                         |  | Diversified Consumer Services    |                               | Senior Debt(7)                 |       | 11.0             | % |       | 6/13         |           |                        |      | 140.6     |   |      | 139.8 |           |      | 130.4
|                                                                                              |  |                                  | Subordinated Debt             |                                | 15.0  | %                |   | 6/14  |              |           |                        | 27.4 |           |   | 27.0 |       |           | 25.6
|                                                                                              |  |                                  |                               | Common Stock(1)                |       |                  |   |       |              |           | 1,094,645              |      |           |   |      | 1.6   |           |      | 2.9  
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      | 168.4 |           |      | 158.9
|Egenera, Inc.                                                                                 |  | Computers & Peripherals          |                               | Subordinated Debt              |       | 15.0             | % |       | 12/10        |           |                        |      | 2.9       |   |      | 2.5   |           |      | 2.3  
|                                                                                              |  |                                  |                               | Redeemable Preferred Stock(1)  |       |                  |   |       |              |           | 523,040                |      |           |   |      | 0.4   |           |      | 4.6  
|                                                                                              |  |                                  |                               | Common Stock(1)                |       |                  |   |       |              |           | 8,046,865              |      |           |   |      | 25.0  |           |      |     
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      | 27.9  |           |      | 6.9  
|HALT Medical, Inc.                                                                            |  | Health Care Equipment & Supplies |                               | Convertible Preferred Stock(1) |       |                  |   |       |              |           | 5,053,292              |      |           |   |      | 8.1   |           |      | 8.8  
|IS Holdings I, Inc.                                                                           |  | Software                         |                               | Senior Debt(7)                 |       | 6.5              | % |       | 6/14         |           |                        |      | 20.0      |   |      | 19.8  |           |      | 15.1 
|                                                                                              |  |                                  |                               | Redeemable Preferred Stock     |       |                  |   |       |              |           | 1,297                  |      |           |   |      | 1.6   |           |      | 1.5  
|                                                                                              |  |                                  |                               | Common Stock(1)                |       |                  |   |       |              |           | 1,165,930              |      |           |   |      |      |           |      | 4.4  
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      | 21.4  |           |      | 21.0 
|Narus, Inc.                                                                                   |  | Internet Software & Services     |                               | Convertible Preferred Stock(1) |       |                  |   |       |              |           | 23,583,196             |      |           |   |      | 8.4   |           |      | 2.1  
|                                                                                              |  | Preferred Stock Warrants(1)      |                               |                                |       |                  |   |       | 5,440,881    |           |                        |      |           |  |      |       |         
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      | 8.4   |           |      | 2.1  
|Nursery Supplies, Inc.                                                                        |  | Containers & Packaging           |                               | Redeemable Preferred Stock(1)  |       |                  |   |       |              |           | 2,116                  |      |           |   |      |      |           |      |     
|                                                                                              |  |                                  |                               | Common Stock Warrants(1)       |       |                  |   |       |              |           | 625                    |      |           |   |      |      |           |      |     
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      |      |           |      |     
|Primrose Holding Corporation                                                                  |  | Diversified Consumer Services    |                               | Common Stock(1)                |       |                  |   |       |              |           | 4,213                  |      |           |   |      | 2.7   |           |      | 6.9  
|Qualitor Component Holdings, LLC                                                              |  | Auto Components                  |                               | Subordinated Debt(7)           |       | 17.0             | % |       | 12/12        |           |                        |      | 36.5      |   |      | 36.2  |           |      | 36.8 
|                                                                                              |  |                                  | Redeemable Preferred Units(1) |                                |       |                  |   |       |              | 3,150,000 |                        |      |           |   | 3.2  |       |           | 1.2 
|                                                                                              |  |                                  |                               | Common Units(1)                |       |                  |   |       |              |           | 350,000                |      |           |   |      | 0.4   |           |      |     
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      | 39.8  |           |      | 38.0 
|Radar Detection Holdings Corp.                                                                |  | Household Durables               |                               | Senior Debt(7)                 |       | 10.5             | % |       | 11/12        |           |                        |      | 13.0      |   |      | 13.0  |           |      | 10.6 
|                                                                                              |  |                                  | Common Stock(1)               |                                |       |                  |   |       |              | 40,688    |                        |      |           |   | 0.6  |       |           | 0.1 
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      | 13.6  |           |      | 10.7 
|Roadrunner Dawes, Inc.                                                                        |  | Road & Rail                      |                               | Subordinated Debt(6)(7)        |       | 18.0             | % |       | 8/12         |           |                        |      | 19.5      |   |      | 18.0  |           |      | 13.7 
|                                                                                              |  |                                  |                               | Common Stock(1)                |       |                  |   |       |              |           | 7,000                  |      |           |   |      | 7.0   |           |      |     
|                                                                                              |  |                                  |                               |                                |       |                  |   |       |              |           |                        |      |           |   |      | 25.0  |           |      | 13.7 
|WFS Holding, Inc.                                                                             |  | Software                         |                               | Convertible Preferred Stock    |       |                  |   |       |              |           | 20,403,772             |      |           |   |      | 2.0   |           |      | 2.5  
|Subtotal Affiliate Investments (5% of total investments assets and liabilities at fair
value) |  |                                  |                               | $                              | 424.1 |                  | $ | 334.5



16



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                      |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       |       |      |          
|------------------------------------- |  | ---------------------------------------- | ----------------- | ------------------------------ | ----- | ---------------- | ---- | ------------ | ----- | ---------------------- | ---- | ----- | --------- | ----- | ----- | ---- | ---------
|Company (4)                           |  | Industry                                 |                   | Investments                    |       | InterestRate (5) |      | MaturityDate |       | # of shares/unitsowned |      |       | Principal |       | Cost  |      | FairValue
|                                      |  |                                          |                   |                                |       |                  |     
|CONTROL INVESTMENTS                   |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       |      
|ACAS Equity Holdings Corp.            |  |                                          |                   | Common Stock(1)                |       |                  |      |              |       | 589                    |      |       |           |       | 14.7  |      | 0.8      
|ACAS Real Estate Holdings Corporation |  | Real Estate                              |                   | Subordinated Debt              |       | 15.0%            |      | 5/16         |       |                        |      |       | 1.4       |       | 1.4   |      |         
|                                      |  |                                          | Common Stock(1)   |                                |       |                  |      |              | 1,000 |                        |      |       |           | 5.6   |       |    
|                                      |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       | 7.0   |      |         
|American Capital Agency Corp(2)(8)    |  | Real Estate Investment Trusts            |                   | Common Stock                   |       |                  |      |              |       | 5,000,100              |      |       |           |       | 100.0 |      | 83.4     
|American Capital, LLC                 |  | Capital Markets                          |                   | Senior Debt                    |       | 6.5%             |      | 9/12         |       |                        |      |       | 9.9       |       | 9.7   |      | 9.2      
|                                      |  |                                          |                   | Common Membership Interest     |       |                  |      |              |       | 100                    | %    |       |           |       | 58.5  |      | 1.5      
|                                      |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       | 68.2  |      | 10.7     
|American Driveline Systems, Inc.      |  | Diversified Consumer Services            |                   | Subordinated Debt(7)           |       | 14.0%            |      | 12/14-12/15  |       |                        |      |       | 41.8      |       | 41.4  |      | 41.8     
|                                      |  | Redeemable Preferred Stock               |                   |                                |       |                  |      | 403,357      |       |                        |      |       | 29.3      |       | 45.0 
|                                      |  |                                          |                   | Common Stock(1)                |       |                  |      |              |       | 128,681                |      |       |           |       | 10.7  |      | 1.4      
|                                      |  |                                          |                   | Common Stock Warrants(1)       |       |                  |      |              |       | 204,663                |      |       |           |       | 17.3  |      | 2.2      
|                                      |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       | 98.7  |      | 90.4     
|Auxi Health, Inc.                     |  | Health Care Providers & Services         |                   | Subordinated Debt(6)           |       | 0.0%             |      | 6/09         |       |                        |      |       | 8.7       |       | 3.2   |      | 1.1      
|Capital.com, Inc.                     |  | Diversified Financial Services           |                   | Common Stock(1)                |       |                  |      |              |       | 8,500,100              |      |       |           |       | 0.9   |      |         
|CIBT Travel Solutions, Inc            |  | Commercial Services & Supplies           |                   | Senior Debt(7)                 |       | 9.5%             |      | 1/13         |       |                        |      |       | 50.2      |       | 49.7  |      | 50.3     
|                                      |  | Subordinated Debt(7)                     |                   | 15.0%                          |       | 1/15-1/16        |      |              |       |                        | 53.5 |       | 53.0      |       | 53.5 
|                                      |  |                                          |                   | Redeemable Preferred Stock(1)  |       |                  |      |              |       | 15,000                 |      |       |           |       | 15.4  |      | 15.5     
|                                      |  |                                          |                   | Convertible Preferred Stock(1) |       |                  |      |              |       | 776,800                |      |       |           |       | 77.7  |      | 18.4     
|                                      |  |                                          |                   | Common Stock(1)                |       |                  |      |              |       | 194,200                |      |       |           |       | 19.4  |      |         
|                                      |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       | 215.2 |      | 137.7    
|CMX Inc.                              |  | Construction & Engineering               |                   | Senior Debt(7)                 |       | 3.7%             |      | 5/11         |       |                        |      |       | 17.5      |       | 17.4  |      | 17.5     
|                                      |  |                                          | Senior Debt(6)(7) |                                | 6.0%  |                  | 5/12 |              |       |                        |      | 124.7 |           | 123.6 |       | 32.4
|                                      |  |                                          |                   | Common Stock(1)                |       |                  |      |              |       | 1,410,100              |      |       |           |       | 0.1   |      |         
|                                      |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       | 141.1 |      | 49.9     
|Consolidated Bedding, Inc.            |  | Household Durables                       |                   | Senior Debt                    |       | 10.0%            |      | 6/13         |       |                        |      |       | 10.9      |       | 10.8  |      | 10.9     
|                                      |  |                                          | Senior Debt(6)    |                                | 10.0% |                  | 6/13 |              |       |                        |      | 116.1 |           | 103.7 |       | 7.5 
|                                      |  |                                          |                   | Subordinated Debt(6)           |       | 21.9%            |      | 4/09-12/13   |       |                        |      |       | 107.5     |       | 88.6  |      |         
|                                      |  |                                          |                   | Convertible Preferred Stock(1) |       |                  |      |              |       | 16,423                 |      |       |           |       | 3.0   |      |         
|                                      |  |                                          |                   | Common Stock(1)                |       |                  |      |              |       | 471,470                |      |       |           |       |      |      |         
|                                      |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       | 206.1 |      | 18.4     
|Contour Semiconductor, Inc.           |  | Semiconductors & Semiconductor Equipment |                   | Convertible Preferred Stock(1) |       |                  |      |              |       | 9,738,995              |      |       |           |       | 10.0  |      | 10.6     
|Core Financial Holdings, LLC          |  | Diversified Financial Services           |                   | Subordinated Debt              |       | 13.8%            |      | 4/14-5/15    |       |                        |      |       | 37.2      |       | 36.8  |      | 36.8     
|                                      |  | Common Stock(1)                          |                   |                                |       |                  |      | 57,940,360   |       |                        |      |       | 54.4      |       | 28.2 
|                                      |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       | 91.2  |      | 65.0     
|ECA Acquisition holdings, Inc         |  | Health Care Equipment & Supplies         |                   | Subordinated Debt(7)           |       | 16.5%            |      | 12/14        |       |                        |      |       | 13.1      |       | 13.0  |      | 13.1     
|                                      |  | Common Stock(1)                          |                   |                                |       |                  |      | 583          |       |                        |      |       | 11.1      |       | 3.7  
|                                      |  |                                          |                   |                                |       |                  |      |              |       |                        |      |       |           |       | 24.1  |      | 16.8     



17



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  |         |  |          
|--------------------------------------- |  | -------------------------------------- |  | ------------------------------ |  | ---------------- |  | ------------ |  | ---------------------- | ---- |  | --------- |  | ------- |  | ---------
|Company (4)                             |  | Industry                               |  | Investments                    |  | InterestRate (5) |  | MaturityDate |  | # of shares/unitsowned |      |  | Principal |  | Cost    |  | FairValue
|eLynx Holdings, Inc.                    |  | IT Services                            |  | Senior Debt(7)                 |  | 9.8%             |  | 6/13         |  |                        |      |  | 9.8       |  | 9.8     |  | 9.8      
|                                        |  |                                        |  | Subordinated Debt(6)           |  | 10.0%            |  | 6/13         |  |                        |      |  | 15.0      |  | 13.1    |  | 1.1      
|                                        |  |                                        |  | Redeemable Preferred Stock(1)  |  |                  |  |              |  | 21,114                 |      |  |           |  | 8.9     |  |         
|                                        |  |                                        |  | Convertible Preferred Stock(1) |  |                  |  |              |  | 7,929                  |      |  |           |  | 6.0     |  |         
|                                        |  |                                        |  | Common Stock(1)                |  |                  |  |              |  | 11,261                 |      |  |           |  | 1.1     |  |         
|                                        |  |                                        |  | Preferred Stock Warrants(1)    |  |                  |  |              |  | 120,652                |      |  |           |  |        |  |         
|                                        |  |                                        |  | Common Stock Warrants(1)       |  |                  |  |              |  | 1,078,792              |      |  |           |  | 13.1    |  |         
|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  | 52.0    |  | 10.9     
|Endeavor Fund I, LP                     |  | Thrifts & Mortgage Finance             |  | Partnership Interest           |  |                  |  |              |  | 100                    | %    |  |           |  | 29.7    |  | 23.8     
|ETG Holdings, Inc.                      |  | Containers & Packaging                 |  | Senior Debt(6)                 |  | 9.0%             |  | 5/11         |  |                        |      |  | 14.3      |  | 11.3    |  |         
|                                        |  |                                        |  | Subordinated Debt(6)           |  | 13.0%            |  | 5/12-5/13    |  |                        |      |  | 16.3      |  | 10.9    |  |         
|                                        |  |                                        |  | Convertible Preferred Stock(1) |  |                  |  |              |  | 233,201                |      |  |           |  | 11.4    |  |         
|                                        |  |                                        |  | Preferred Stock Warrants(1)    |  |                  |  |              |  | 40,000                 |      |  |           |  |        |  |         
|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  | 33.6    |  |         
|European Capital Limited(3)             |  | Diversified Financial Services         |  | Subordinated Debt              |  | 8.2%             |  | 11/09-2/11   |  |                        |      |  | 308.5     |  | 304.4   |  | 308.5    
|                                        |  | Ordinary Shares(1)                     |  |                                |  |                  |  | 106,812,816  |  |                        |      |  | 950.7     |  | 125.1  
|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  | 1,255.1 |  | 433.6    
|European Touch, LTD. II                 |  | Commercial Services & Supplies         |  | Senior Debt                    |  | 8.3%             |  | 7/11-1/12    |  |                        |      |  | 0.3       |  | 0.3     |  | 0.3      
|                                        |  | Subordinated Debt                      |  | 12.0%                          |  | 12/10            |  |              |  |                        | 3.4  |  | 3.4       |  | 3.4    
|                                        |  |                                        |  | Subordinated Debt(6)           |  | 18.1%            |  | 12/10        |  |                        |      |  | 21.2      |  | 15.4    |  | 2.0      
|                                        |  |                                        |  | Redeemable Preferred Stock(1)  |  |                  |  |              |  | 263                    |      |  |           |  | 0.3     |  |         
|                                        |  |                                        |  | Common Stock(1)                |  |                  |  |              |  | 1,688                  |      |  |           |  | 0.9     |  |         
|                                        |  |                                        |  | Common Stock Warrants(1)       |  |                  |  |              |  | 7,105                  |      |  |           |  | 3.7     |  |         
|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  | 24.0    |  | 5.7      
|EXPL Pipeline Holdings LLC              |  | Oil, Gas & Consumable Fuels            |  | Senior Debt                    |  | 7.2%             |  | 1/17         |  |                        |      |  | 43.3      |  | 42.9    |  | 43.3     
|                                        |  | Common Membership Units(1)             |  |                                |  |                  |  | 58,297       |  |                        |      |  | 44.6      |  | 12.0   
|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  | 87.5    |  | 55.3     
|Formed Fiber Technologies, Inc.         |  | Auto Components                        |  | Common Stock(1)                |  |                  |  |              |  | 31,250                 |      |  |           |  | 8.1     |  |         
|Fosbel Global Services (LUXCO) S.C.A(3) |  | Commercial Services & Supplies         |  | Subordinated Debt              |  | 14.0%            |  | 12/13        |  |                        |      |  | 19.7      |  | 19.7    |  | 19.7     
|                                        |  | Subordinated Debt(6)                   |  | 17.0%                          |  | 12/14            |  |              |  |                        | 19.2 |  | 15.4      |  | 15.5   
|                                        |  |                                        |  | 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     |  |         
|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  | 56.8    |  | 35.2     
|Fountainhead Estate Holding Corp.(3)    |  | Internet Software & Services           |  | Senior Debt                    |  | 4.3%             |  | 10/13        |  |                        |      |  | 23.7      |  | 23.7    |  | 23.7     
|                                        |  | Redeemable Preferred Stock             |  |                                |  |                  |  | 115,538      |  |                        |      |  | 13.4      |  | 13.4   
|                                        |  |                                        |  | Convertible Preferred Stock(1) |  |                  |  |              |  | 59,250                 |      |  |           |  | 59.2    |  | 2.6      
|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  | 96.3    |  | 39.7     
|FreeConferenceroom.com, Inc.            |  | Diversified Telecommunication Services |  | Senior Debt(7)                 |  | 7.0%             |  | 4/11-5/11    |  |                        |      |  | 13.8      |  | 13.7    |  | 13.8     
|                                        |  | Subordinated Debt                      |  | 15.0%                          |  | 5/12             |  |              |  |                        | 10.1 |  | 10.1      |  | 10.1   
|                                        |  | Redeemable Preferred Stock(1)          |  |                                |  |                  |  | 14,042,095   |  |                        |      |  | 13.6      |  | 7.4    
|                                        |  |                                        |  | Common Stock(1)                |  |                  |  |              |  | 6,088,229              |      |  |           |  | 2.3     |  |         
|                                        |  |                                        |  | Common Stock Warrants(1)       |  |                  |  |              |  | 8,181,695              |      |  |           |  |        |  |         
|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  | 39.7    |  | 31.3     
|Future Food, Inc.                       |  | Food Products                          |  | Senior Debt                    |  | 5.5%             |  | 7/10         |  |                        |      |  | 17.0      |  | 17.0    |  | 17.1     
|                                        |  |                                        |  | Subordinated Debt(6)           |  | 12.4%            |  | 7/11-7/12    |  |                        |      |  | 13.7      |  | 12.7    |  | 3.9      
|                                        |  |                                        |  | Common Stock(1)                |  |                  |  |              |  | 64,917                 |      |  |           |  | 13.0    |  |         
|                                        |  |                                        |  | Common Stock Warrants(1)       |  |                  |  |              |  | 6,500                  |      |  |           |  | 1.3     |  |         
|                                        |  |                                        |  |                                |  |                  |  |              |  |                        |      |  |           |  | 44.0    |  | 21.0     



18



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      |      |      |          
|---------------------------------- |  | ---------------------------------- | ----------------------------- | ------------------------------ | ---- | ---------------- | ----- | ----- | ------------ | ------ | ---------------------- | --- | ---- | --------- | ---- | ---- | ---- | ---------
|Company (4)                        |  | Industry                           |                               | Investments                    |      | InterestRate (5) |       |       | MaturityDate |        | # of shares/unitsowned |     |      | Principal |      | Cost |      | FairValue
|FutureLogic, Inc.                  |  | Computers & Peripherals            |                               | Senior Debt(7)                 |      | 8.3%             |       |       | 2/10-2/12    |        |                        |     |      | 48.3      |      | 48.0 |      | 48.3     
|                                   |  |                                    |                               | Subordinated Debt(7)           |      | 15.0%            |       |       | 2/13         |        |                        |     |      | 32.9      |      | 30.0 |      | 24.3     
|                                   |  |                                    |                               | Redeemable Preferred Stock(1)  |      |                  |       |       |              |        | 583,000                |     |      |           |      | 0.6  |      |         
|                                   |  |                                    |                               | Common Stock(1)                |      |                  |       |       |              |        | 129,514                |     |      |           |      | 15.6 |      |         
|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      | 94.2 |      | 72.6     
|FV Holdings Corporation            |  | Food Products                      |                               | Subordinated Debt(7)           |      | 14.5%            |       |       | 6/15         |        |                        |     |      | 23.2      |      | 23.2 |      | 23.2     
|                                   |  |                                    |                               | Convertible Preferred Stock(1) |      |                  |       |       |              |        | 292,000                |     |      |           |      | 14.3 |      | 19.1     
|                                   |  |                                    |                               | Common Stock(1)                |      |                  |       |       |              |        | 125,000                |     |      |           |      | 6.1  |      | 8.1      
|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      | 43.6 |      | 50.4     
|Group Montana, Inc.                |  | Textiles, Apparel & Luxury Goods   |                               | Senior Debt(7)                 |      | 13.7%            |       |       | 10/10-10/11  |        |                        |     |      | 10.9      |      | 10.9 |      | 10.9     
|                                   |  | Senior Debt(6)(7)                  |                               | 12.8%                          |      |                  | 10/11 |       |              |        |                        | 9.4 |      | 8.8       |      | 1.7 
|                                   |  |                                    |                               | Subordinated Debt(6)           |      | 25.0%            |       |       | 10/12        |        |                        |     |      | 20.1      |      | 13.6 |      |         
|                                   |  |                                    |                               | Convertible Preferred Stock(1) |      |                  |       |       |              |        | 4,000                  |     |      |           |      | 1.0  |      |         
|                                   |  |                                    |                               | Common Membership Interest(1)  |      |                  |       |       |              |        | 2.5                    | %   |      |           |      | 0.7  |      |         
|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      | 35.0 |      | 12.6     
|Halex Holdings Corp.               |  | Construction Materials             |                               | Senior Debt(6)                 |      | 12.2             | %     |       | 9/11-10/13   |        |                        |     |      | 25.7      |      | 23.4 |      | 7.9      
|                                   |  |                                    |                               | Subordinated Debt(6)           |      | 18.8             | %     |       | 8/15         |        |                        |     |      | 25.5      |      | 15.9 |      |         
|                                   |  |                                    |                               | Redeemable Preferred Stock(1)  |      |                  |       |       |              |        | 23,504,546             |     |      |           |      | 30.6 |      |         
|                                   |  |                                    |                               | Common Stock(1)                |      |                  |       |       |              |        | 30,263,219             |     |      |           |      |     |      |         
|                                   |  |                                    |                               | Common Stock Warrants(1)       |      |                  |       |       |              |        | 18,750,000             |     |      |           |      |     |      |         
|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      | 69.9 |      | 7.9      
|Hartstrings Holdings Corp.         |  | Textiles, Apparel & Luxury Goods   |                               | Senior Debt                    |      | 4.7              | %     |       | 12/10        |        |                        |     |      | 10.4      |      | 10.4 |      | 10.4     
|                                   |  |                                    | Senior Debt(6)                |                                | 8.0  | %                |       | 12/10 |              |        |                        |     | 6.4  |           | 6.2  |      | 2.9 
|                                   |  |                                    |                               | Convertible Preferred Stock(1) |      |                  |       |       |              |        | 10,196                 |     |      |           |      | 2.9  |      |         
|                                   |  |                                    |                               | Common Stock(1)                |      |                  |       |       |              |        | 14,250                 |     |      |           |      | 4.8  |      |         
|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      | 24.3 |      | 13.3     
|Imperial Supplies Holdings, Inc    |  | Trading Companies and Distributors |                               | Subordinated Debt              |      | 16.0             | %     |       | 10/14        |        |                        |     |      | 22.3      |      | 22.1 |      | 22.3     
|                                   |  | Redeemable Preferred Stock         |                               |                                |      |                  |       |       | 19,604       |        |                        |     |      | 15.2      |      | 22.1
|                                   |  |                                    |                               | Convertible Preferred Stock(1) |      |                  |       |       |              |        | 19,604                 |     |      |           |      | 20.2 |      | 1.2      
|                                   |  |                                    |                               | Common Stock(1)                |      |                  |       |       |              |        | 442,187                |     |      |           |      | 11.3 |      |         
|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      | 68.8 |      | 45.6     
|Kingway Inca Clymer Holdings, Inc. |  | Building Products                  |                               | Subordinated Debt(6)           |      | 12.3             | %     |       | 4/12         |        |                        |     |      | 1.9       |      |     |      |         
|                                   |  |                                    | Redeemable Preferred Stock(1) |                                |      |                  |       |       |              | 13,709 |                        |     |      |           | 9.2  |      | 0.7 
|                                   |  |                                    |                               | Common Stock(1)                |      |                  |       |       |              |        | 7,826                  |     |      |           |      |     |      |         
|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      | 9.2  |      | 0.7      
|Lifoam Holdings, Inc.              |  | Leisure Equipment & Products       |                               | Senior Debt                    |      | 7.4              | %     |       | 6/13         |        |                        |     |      | 26.7      |      | 26.7 |      | 26.7     
|                                   |  |                                    | Subordinated Debt             |                                | 7.8  | %                |       | 6/13  |              |        |                        |     | 18.7 |           | 18.6 |      | 18.6
|                                   |  |                                    |                               | Subordinated Debt(6)           |      | 8.3              | %     |       | 6/13         |        |                        |     |      | 18.8      |      | 16.0 |      | 2.3      
|                                   |  |                                    |                               | Redeemable Preferred Stock(1)  |      |                  |       |       |              |        | 6,160                  |     |      |           |      | 4.2  |      |         
|                                   |  |                                    |                               | Convertible Preferred Stock(1) |      |                  |       |       |              |        | 15,797                 |     |      |           |      | 12.3 |      |         
|                                   |  |                                    |                               | Common Stock(1)                |      |                  |       |       |              |        | 14,000                 |     |      |           |      | 1.4  |      |         
|                                   |  |                                    |                               | Preferred Stock Warrants(1)    |      |                  |       |       |              |        | 15,640                 |     |      |           |      |     |      |         
|                                   |  |                                    |                               | Common Stock Warrants(1)       |      |                  |       |       |              |        | 464,242                |     |      |           |      | 2.9  |      |         
|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      | 82.1 |      | 47.6     
|LLSC Holdings Corporation          |  | Personal Products                  |                               | Senior Debt(7)                 |      | 6.3              | %     |       | 8/12         |        |                        |     |      | 5.4       |      | 5.4  |      | 5.4      
|                                   |  |                                    | Subordinated Debt(7)          |                                | 12.0 | %                |       | 8/13  |              |        |                        |     | 5.5  |           | 5.5  |      | 5.5 
|                                   |  |                                    |                               | Convertible Preferred Stock(1) |      |                  |       |       |              |        | 7,496                  |     |      |           |      | 8.1  |      | 4.7      
|                                   |  |                                    |                               | Common Stock(1)                |      |                  |       |       |              |        | 833                    |     |      |           |      |     |      |         
|                                   |  |                                    |                               | Common Stock Warrants(1)       |      |                  |       |       |              |        | 675                    |     |      |           |      |     |      |         
|                                   |  |                                    |                               |                                |      |                  |       |       |              |        |                        |     |      |           |      | 19.0 |      | 15.6     



19



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       |       |       |          
|-------------------------------- |  | ---------------------------------- | -------------------------- | ----------------------------- | ----- | ---------------- | ----- | ------------ | ----- | ---------------------- | ----- | --------- | ----- | ----- | ----- | ---------
|Company (4)                      |  | Industry                           |                            | Investments                   |       | InterestRate (5) |       | MaturityDate |       | # of shares/unitsowned |       | Principal |       | Cost  |       | FairValue
|LVI Holdings, LLC                |  | Commercial Services & Supplies     |                            | Senior Debt(7)                |       | 7.5%             |       | 2/10         |       |                        |       | 2.3       |       | 2.3   |       | 2.4      
|                                 |  |                                    | Subordinated Debt(7)       |                               | 18.0% |                  | 2/13  |              |       |                        | 11.6  |           | 11.5  |       | 11.6 
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 13.8  |       | 14.0     
|Montgomery Lane, LLC             |  | Diversified Financial Services     |                            | Common Membership Units(1)    |       |                  |       |              |       | 100                    |       |           |       | 9.9   |       | 4.5      
|Montgomery Lane, LTD(3)          |  | Diversified Financial Services     |                            | Common Membership Units(1)    |       |                  |       |              |       | 50,000                 |       |           |       | 7.2   |       | 0.7      
|MW Acquisition Corporation       |  | Health Care Providers & Services   |                            | Subordinated Debt(7)          |       | 16.2%            |       | 2/13-2/14    |       |                        |       | 25.2      |       | 24.9  |       | 25.2     
|                                 |  | Convertible Preferred Stock(1)     |                            |                               |       |                  |       | 38,016       |       |                        |       | 13.5      |       | 9.9  
|                                 |  |                                    |                            | Common Stock(1)               |       |                  |       |              |       | 51,521                 |       |           |       |      |       |         
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 38.4  |       | 35.1     
|NECCO Holdings, Inc.             |  | Food Products                      |                            | Senior Debt                   |       | 12.0%            |       | 12/12        |       |                        |       | 4.2       |       | 4.2   |       | 4.2      
|                                 |  |                                    |                            | Common Stock(1)               |       |                  |       |              |       | 760,869                |       |           |       | 0.1   |       | 3.9      
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 4.3   |       | 8.1      
|NECCO Realty Investments, LLC    |  | Real Estate                        |                            | Senior Debt(7)                |       | 14.0%            |       | 12/17        |       |                        |       | 38.3      |       | 37.6  |       | 38.3     
|                                 |  |                                    | Common Membership Units(1) |                               |       |                  |       |              | 7,000 |                        |       |           | 4.8   |       | 9.7  
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 42.4  |       | 48.0     
|Paradigm Precision Holdings, LLC |  | Aerospace & Defense                |                            | Subordinated Debt             |       | 27.4%            |       | 8/14         |       |                        |       | 77.2      |       | 76.3  |       | 76.3     
|                                 |  |                                    | Subordinated Debt(6)       |                               | 20.0% |                  | 10/14 |              |       |                        | 33.2  |           | 30.0  |       | 3.3  
|                                 |  |                                    |                            | Common Membership Units(1)    |       |                  |       |              |       | 478,488                |       |           |       | 17.5  |       |         
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 123.8 |       | 79.6     
|PHC Sharp Holdings, Inc.         |  | Commercial Services & Supplies     |                            | Senior Debt(7)                |       | 6.3%             |       | 12/11-12/12  |       |                        |       | 16.1      |       | 15.9  |       | 16.1     
|                                 |  | Subordinated Debt(6)               |                            | 18.0%                         |       | 12/14            |       |              |       | 17.5                   |       | 14.7      |       | 1.3  
|                                 |  |                                    |                            | Common Stock(1)               |       |                  |       |              |       | 367,881                |       |           |       | 4.2   |       |         
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 34.8  |       | 17.4     
|PHI Acquisitions, Inc.           |  | Internet & Catalog Retail          |                            | Senior Debt(7)                |       | 7.6%             |       | 6/12         |       |                        |       | 10.0      |       | 9.9   |       | 10.0     
|                                 |  |                                    |                            | Subordinated Debt(7)          |       | 12.5%            |       | 6/13         |       |                        |       | 23.6      |       | 23.4  |       | 23.7     
|                                 |  |                                    |                            | Redeemable Preferred Stock(1) |       |                  |       |              |       | 36,267                 |       |           |       | 24.7  |       | 21.9     
|                                 |  |                                    |                            | Common Stock(1)               |       |                  |       |              |       | 40,295                 |       |           |       | 3.9   |       |         
|                                 |  |                                    |                            | Common Stock Warrants(1)      |       |                  |       |              |       | 116,065                |       |           |       | 11.6  |       |         
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 73.5  |       | 55.6     
|Piper Aircraft, Inc.             |  | Aerospace & Defense                |                            | Subordinated Debt             |       | 8.0%             |       | 7/13         |       |                        |       | 0.8       |       | 0.3   |       | 0.8      
|                                 |  |                                    |                            | Common Stock(1)               |       |                  |       |              |       | 478,797                |       |           |       | 0.1   |       | 22.5     
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 0.4   |       | 23.3     
|Resort Funding Holdings, Inc.    |  | Diversified Financial Services     |                            | Senior Debt                   |       | 8.6%             |       | 4/10         |       |                        |       | 10.6      |       | 10.6  |       | 10.6     
|                                 |  | Common Stock                       |                            |                               |       |                  |       | 583          |       |                        |       | 20.5      |       | 0.4  
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 31.1  |       | 11.0     
|Sixnet, LLC                      |  | Electronic Equipment & Instruments |                            | Senior Debt(7)                |       | 8.3%             |       | 6/12-6/13    |       |                        |       | 38.5      |       | 38.2  |       | 34.3     
|                                 |  |                                    | Membership Units(1)        |                               |       |                  |       |              | 356   |                        |       |           | 4.4   |       | 5.2  
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 42.6  |       | 39.5     
|SMG Holdings, Inc.               |  | Hotels, Restaurants & Leisure      |                            | Senior Debt(7)                |       | 8.0%             |       | 7/14         |       |                        |       | 5.9       |       | 5.9   |       | 5.9      
|                                 |  |                                    | Subordinated Debt(7)       |                               | 12.5% |                  | 6/15  |              |       |                        | 120.7 |           | 119.7 |       | 120.7
|                                 |  |                                    |                            | Convertible Preferred Stock   |       |                  |       |              |       | 1,101,673              |       |           |       | 119.8 |       | 101.2    
|                                 |  |                                    |                            | Common Stock(1)               |       |                  |       |              |       | 275,419                |       |           |       | 27.5  |       |         
|                                 |  |                                    |                            |                               |       |                  |       |              |       |                        |       |           |       | 272.9 |       | 227.8    



20



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                                                                            |  |                                  |                            |                                       |       |                  |      |              |         |                        |         |     |           |      |      |       |           |      |      
|------------------------------------------------------------------------------------------- |  | -------------------------------- | -------------------------- | ------------------------------------- | ----- | ---------------- | ---- | ------------ | ------- | ---------------------- | ------- | --- | --------- | ---- | ---- | ----- | --------- | ---- | -----
|Company (4)                                                                                 |  | Industry                         |                            | Investments                           |       | InterestRate (5) |      | MaturityDate |         | # of shares/unitsowned |         |     | Principal |      | Cost |       | FairValue
|Specialty Brands of America, Inc.                                                           |  | Food Products                    |                            | Subordinated Debt(7)                  |       | 14.0%            |      | 5/14         |         |                        |         |     | 34.3      |      |      | 34.0  |           |      | 34.3 
|                                                                                            |  |                                  | Redeemable Preferred Stock |                                       |       |                  |      |              | 122,017 |                        |         |     |           |      | 8.5  |       |           | 14.1
|                                                                                            |  |                                  |                            | Common Stock(1)                       |       |                  |      |              |         | 128,175                |         |     |           |      |      | 2.3   |           |      | 6.7  
|                                                                                            |  |                                  |                            | Common Stock Warrants(1)              |       |                  |      |              |         | 56,819                 |         |     |           |      |      | 1.4   |           |      | 3.0  
|                                                                                            |  |                                  |                            |                                       |       |                  |      |              |         |                        |         |     |           |      |      | 46.2  |           |      | 58.1 
|Stravina Holdings, Inc.                                                                     |  | Personal Products                |                            | Senior Debt(6)                        |       | 0.0%             |      | 4/11         |         |                        |         |     | 3.5       |      |      | 3.5   |           |      |     
|UFG Holding Corp.                                                                           |  | Food Products                    |                            | Subordinated Debt                     |       | 16.5%            |      | 5/15         |         |                        |         |     | 28.2      |      |      | 28.2  |           |      | 28.2 
|                                                                                            |  |                                  |                            | Subordinated Debt(6)                  |       | 20.1%            |      | 5/16         |         |                        |         |     | 36.3      |      |      | 30.8  |           |      | 7.0  
|                                                                                            |  |                                  |                            | Redeemable Preferred Stock(1)         |       |                  |      |              |         | 23,808                 |         |     |           |      |      | 15.8  |           |      |     
|                                                                                            |  |                                  |                            | Convertible Preferred Stock(1)        |       |                  |      |              |         | 4,777                  |         |     |           |      |      | 4.6   |           |      |     
|                                                                                            |  |                                  |                            | Common Stock(1)                       |       |                  |      |              |         | 51,504                 |         |     |           |      |      | 13.2  |           |      |     
|                                                                                            |  |                                  |                            |                                       |       |                  |      |              |         |                        |         |     |           |      |      | 92.6  |           |      | 35.2 
|UFG Real Estate Holdings, LLC                                                               |  | Real Estate                      |                            | Common Membership(1)                  |       |                  |      |              |         |                        |         |     |           |      |      |      |           |      | 1.4  
|Unique Fabricating Incorporated                                                             |  | Auto Components                  |                            | Senior Debt(7)                        |       | 5.0%             |      | 2/11         |         |                        |         |     | 0.8       |      |      | 0.8   |           |      | 0.8  
|                                                                                            |  |                                  | Senior Debt(6)(7)          |                                       | 11.0% |                  | 2/12 |              |         |                        |         | 4.5 |           |      | 4.2  |       |           |    
|                                                                                            |  |                                  |                            | Subordinated Debt(6)(7)               |       | 17.0%            |      | 2/13         |         |                        |         |     | 7.6       |      |      | 6.3   |           |      |     
|                                                                                            |  |                                  |                            | Redeemable Preferred Stock(1)         |       |                  |      |              |         | 292,958                |         |     |           |      |      | 1.6   |           |      |     
|                                                                                            |  |                                  |                            | Common Stock Warrants(1)              |       |                  |      |              |         | 6,862                  |         |     |           |      |      | 0.2   |           |      |     
|                                                                                            |  |                                  |                            |                                       |       |                  |      |              |         |                        |         |     |           |      |      | 13.1  |           |      | 0.8  
|Unwired Holdings, Inc.                                                                      |  | Household Durables               |                            | Senior Debt                           |       | 6.1%             |      | 6/10         |         |                        |         |     | 0.7       |      |      | 0.6   |           |      | 0.6  
|                                                                                            |  |                                  |                            | Senior Debt(6)                        |       | 9.6%             |      | 6/11         |         |                        |         |     | 10.6      |      |      | 7.6   |           |      | 7.7  
|                                                                                            |  |                                  |                            | Subordinated Debt(6)                  |       | 15.0%            |      | 6/12-6/13    |         |                        |         |     | 22.2      |      |      | 13.8  |           |      | 0.5  
|                                                                                            |  |                                  |                            | Redeemable Preferred Stock(1)         |       |                  |      |              |         | 14,630                 |         |     |           |      |      | 14.6  |           |      |     
|                                                                                            |  |                                  |                            | Common Stock(1)                       |       |                  |      |              |         | 126,001                |         |     |           |      |      | 1.3   |           |      |     
|                                                                                            |  |                                  |                            | Preferred Stock Warrants(1)           |       |                  |      |              |         | 485,133                |         |     |           |      |      |      |           |      |     
|                                                                                            |  |                                  |                            | Common Stock Warrants(1)              |       |                  |      |              |         | 5,479,077              |         |     |           |      |      |      |           |      |     
|                                                                                            |  |                                  |                            |                                       |       |                  |      |              |         |                        |         |     |           |      |      | 37.9  |           |      | 8.8  
|VP Acquisition Holdings, Inc                                                                |  | Health Care Equipment & Supplies |                            | Subordinated Debt(7)                  |       | 14.5%            |      | 10/13-10/14  |         |                        |         |     | 19.7      |      |      | 19.4  |           |      | 19.7 
|                                                                                            |  | Common Stock(1)                  |                            |                                       |       |                  |      | 19,780       |         |                        |         |     |           | 24.7 |      |       | 41.4     
|                                                                                            |  |                                  |                            |                                       |       |                  |      |              |         |                        |         |     |           |      |      | 44.1  |           |      | 61.1 
|Warner Power, LLC                                                                           |  | Electrical Equipment             |                            | Subordinated Debt(7)                  |       | 12.6%            |      | 10/09        |         |                        |         |     | 5.0       |      |      | 5.0   |           |      | 5.0  
|                                                                                            |  |                                  |                            | Redeemable Preferred Membership Units |       |                  |      |              |         | 3,796,269              |         |     |           |      |      | 4.9   |           |      | 5.7  
|                                                                                            |  |                                  |                            | Common Membership Units(1)            |       |                  |      |              |         | 27,400                 |         |     |           |      |      | 1.9   |           |      | 1.5  
|                                                                                            |  |                                  |                            |                                       |       |                  |      |              |         |                        |         |     |           |      |      | 11.8  |           |      | 12.2 
|WIS Holding Company, Inc.                                                                   |  | Commercial Services & Supplies   |                            | Subordinated Debt(7)                  |       | 14.8%            |      | 1/14-1/15    |         |                        |         |     | 105.0     |      |      | 104.3 |           |      | 105.0
|                                                                                            |  | Convertible Preferred Stock      |                            |                                       |       |                  |      | 703,406      |         |                        |         |     |           | 83.9 |      |       | 105.0    
|                                                                                            |  |                                  |                            | Common Stock(1)                       |       |                  |      |              |         | 175,852                |         |     |           |      |      | 17.6  |           |      | 22.9 
|                                                                                            |  |                                  |                            |                                       |       |                  |      |              |         |                        |         |     |           |      |      | 205.8 |           |      | 232.9
|WSACS RR Holdings LLC                                                                       |  | Real Estate                      |                            | Common Membership Units(1)            |       |                  |      |              |         | 3,384,615              |         |     |           |      |      | 3.4   |           |      | 3.4  
|                                                                                            |  |                                  |                            |                                      
|CDO / CLO INVESTMENTS                                                                       |  |                                  |                            |                                       |       |                  |      |              |         |                        |        
|ACAS Wachovia Investments, L.P.                                                             |  | Diversified Financial Services   |                            | Partnership Interest                  |       |                  |      |              |         | 90                     | %       |     |           |      |      | 11.8  |           |      | 1.0  
|Subtotal Control Investments (35% of total investment assets and liabilities at fair
value) |  |                                  |                            |                                       |       |                  | $    | 4,318.6      |         | $                      | 2,387.1



21



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

March 31, 2009

(unaudited)

(in
millions, except share data)



|                                                                                                       |  |                                                      |          |                  |   |                    |   |               |  |          |  |      |   |           |  |       |  
|------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------- | -------- | ---------------- | - | ------------------ | - | ------------- |  | -------- |  | ---- | - | --------- |  | ----- | -
|                                                                                                       |  |                                                      |          |                  |   |                    |  
|Counterparty (4)                                                                                       |  | Instrument                                           |          | InterestRate (5) |   | ExpirationDate (5) |   | # ofcontracts |  | Notional |  | Cost |   | FairValue | 
|                                                                                                       | 
|DERIVATIVE AGREEMENTS                                                                                  |  |                                                      |         
|Citibank, N.A.                                                                                         |  | Interest Rate Swaption - Pay Floating/ Receive Fixed |          | 4.5%             |   | 4/12-11/19         |   | 2             |  | 38.6     |  |      |  |           |  | 3.9   |  
|Wachovia Bank, N.A.                                                                                    |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.3%             |   | 8/16-8/19          |   | 2             |  | 25.2     |  |      |  |           |  | 5.1   |  
|Financial Group                                                                                        |  | Interest Rate Swaption - Pay Floating/ Receive Fixed |          | 5.5%             |   | 11/12              |   | 1             |  | 22.9     |  |      |  |           |  | 1.2   |  
|Subtotal Derivative Agreements (less than 1% of total investment assets and liabilities
at fair value) |  |                                                      |          |                  |  |                    |   | 10.2          | 
|Total Investment Assets                                                                                |  | $                                                    | 10,707.1 |                  | $ | 6,848.9            |  
|DERIVATIVE AGREEMENTS                                                                                  |  |                                                      |         
|Citibank, N.A.                                                                                         |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 4.8%             |   | 4/12-11/19         |   | 4             |  | 672.0    |  |      |  |           |  | (36.9 | )
|BMO Financial Group                                                                                    |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.4%             |   | 2/13-8/17          |   | 5             |  | 479.9    |  |      |  |           |  | (25.6 | )
|Wachovia Bank, N.A.                                                                                    |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 4.8%             |   | 4/16-8/19          |   | 2             |  | 379.9    |  |      |  |           |  | (26.6 | )
|UniCredit Group                                                                                        |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.7%             |   | 7/17               |   | 1             |  | 66.0     |  |      |  |           |  | (2.5  | )
|WestLB AG                                                                                              |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.8%             |   | 6/17               |   | 1             |  | 55.0     |  |      |  |           |  | (2.4  | )
|Credit Suisse International                                                                            |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.8%             |   | 6/17               |   | 1             |  | 26.1     |  |      |  |           |  | (1.2  | )
|Fortis Financial Services LLC                                                                          |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.7%             |   | 7/17               |   | 1             |  | 22.3     |  |      |  |           |  | (5.1  | )
|Citibank, N.A.                                                                                         |  | Foreign Exchange Swap - Pay Euros/ Receive GBP       |          |                  |   | 2/11               |   | 1             |  |          |  |      |  |           |  | (1.4  | )
|Total Investment Liabilities (1% of total investment assets and liabilities at fair
value)             |  | $                                                    |         |                  | $ | (101.7             | )



|(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 or securities are pledged as collateral under various secured financing arrangements.
|--- | -------------------------------------------------------------------------------------------------------------------

|(8) | 2,500,100 shares with a cost of $50.0 and a fair value of $41.7 are restricted for sale until May 2009.
|--- | -------------------------------------------------------------------------------------------------------

|(9) | Portfolio company has filed for reorganization under Chapter 11 of the United States Bankruptcy Code.
|--- | -----------------------------------------------------------------------------------------------------



22



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2008

(in millions, except share data)



|                                        |  |                                  |                                |                                 |       |                  |      |              |        |                       |      |           |      |      |     |           |      |     |      
|--------------------------------------- |  | -------------------------------- | ------------------------------ | ------------------------------- | ----- | ---------------- | ---- | ------------ | ------ | --------------------- | ---- | --------- | ---- | ---- | --- | --------- | ---- | --- | -----
|Company (4)                             |  | Industry                         |                                | Investments                     |       | InterestRate (5) |      | MaturityDate |        | # ofshares/unitsowned |      | Principal |      | Cost |     | FairValue
|                                        |  |                                  |                                |                                
|NON-CONTROL / NON-AFFILIATE INVESTMENTS |  |                                  |                                |                                 |       |                  |      |              |        |                       |     
|Aerus, LLC                              |  | Household Durables               |                                | Common Membership Warrants(1)   |       |                  |      |              |        | 250,000               |      |           |      |      | $   | 0.2       |      | $   |     
|Affordable Care Holding Corp.           |  | Health Care Providers & Services |                                | Subordinated Debt(7)            |       | 15.0%            |      | 11/13-11/14  |        |                       |      | $         | 64.6 |      |     | 63.8      |      |     | 64.6 
|                                        |  | Convertible Preferred Stock      |                                |                                 |       |                  |      | 70,752       |        |                       |      |           |      | 83.9 |     |           | 83.9
|                                        |  | Common Stock(1)                  |                                |                                 |       |                  |      | 17,687,156   |        |                       |      |           |      | 17.7 |     |           | 13.1
|                                        |  |                                  |                                |                                 |       |                  |      |              |        |                       |      |           |      |      |     | 165.4     |      |     | 161.6
|Algoma Holding Company                  |  | Building Products                |                                | Subordinated Debt(7)            |       | 12.3%            |      | 4/13         |        |                       |      |           | 13.4 |      |     | 13.2      |      |     | 12.4 
|                                        |  |                                  | Convertible Preferred Stock(1) |                                 |       |                  |      |              | 23,319 |                       |      |           |      |      |    |           |      | 5.3
|                                        |  |                                  |                                |                                 |       |                  |      |              |        |                       |      |           |      |      |     | 13.2      |      |     | 17.7 
|American Acquisition, LLC               |  | Diversified Financial Services   |                                | Senior Debt                     |       | 12.5%            |      | 12/12        |        |                       |      |           | 26.0 |      |     | 25.6      |      |     | 24.2 
|AmWins Group, Inc.                      |  | Insurance                        |                                | Senior Debt(7)                  |       | 6.5%             |      | 6/14         |        |                       |      |           | 18.6 |      |     | 18.6      |      |     | 12.3 
|Anchor Drilling Fluids USA, Inc.        |  | Energy Equipment & Services      |                                | Senior Debt(7)                  |       | 11.3%            |      | 4/13         |        |                       |      |           | 7.9  |      |     | 7.9       |      |     | 7.9  
|                                        |  | Subordinated Debt(7)             |                                | 14.5%                           |       | 4/15             |      |              |        |                       | 61.1 |           |      | 60.5 |     |           | 60.5
|                                        |  |                                  |                                |                                 |       |                  |      |              |        |                       |      |           |      |      |     | 68.4      |      |     | 68.4 
|Aspect Software                         |  | IT Services                      |                                | Senior Debt                     |       | 9.2%             |      | 7/12         |        |                       |      |           | 20.0 |      |     | 19.9      |      |     | 16.1 
|Autodis S.A.(3)                         |  | Distributors                     |                                | Senior Debt(6)                  |       | 10.3%            |      | 6/15         |        |                       |      |           | 4.6  |      |     | 3.8       |      |     | 1.6  
|                                        |  |                                  |                                | Subordinated Debt(6)            |       | 15.0%            |      | 12/15        |        |                       |      |           | 3.1  |      |     | 2.6       |      |     |     
|                                        |  |                                  |                                |                                 |       |                  |      |              |        |                       |      |           |      |      |     | 6.4       |      |     | 1.6  
|Avalon Laboratories Holding Corp.       |  | Health Care Equipment & Supplies |                                | Senior Debt(7)                  |       | 11.0%            |      | 1/14         |        |                       |      |           | 17.1 |      |     | 17.0      |      |     | 17.2 
|                                        |  | Subordinated Debt(7)             |                                | 18.0%                           |       | 1/15             |      |              |        |                       | 21.8 |           |      | 21.2 |     |           | 17.0
|                                        |  |                                  |                                | Convertible Preferred Stock(1)  |       |                  |      |              |        | 148,742               |      |           |      |      |     | 24.3      |      |     |     
|                                        |  |                                  |                                | Common Stock(1)                 |       |                  |      |              |        | 7,829                 |      |           |      |      |     | 1.3       |      |     |     
|                                        |  |                                  |                                |                                 |       |                  |      |              |        |                       |      |           |      |      |     | 63.8      |      |     | 34.2 
|Avanti Park Place LLC                   |  | Real Estate                      |                                | Senior Debt                     |       | 8.3%             |      | 6/10         |        |                       |      |           | 5.9  |      |     | 6.0       |      |     | 6.0  
|Axygen Holdings Corporation             |  | Health Care Equipment & Supplies |                                | Subordinated Debt(7)            |       | 14.5%            |      | 9/14         |        |                       |      |           | 61.5 |      |     | 60.8      |      |     | 61.5 
|                                        |  | Redeemable Preferred Stock       |                                |                                 |       |                  |      | 205,204      |        |                       |      |           |      | 45.5 |     |           | 64.2
|                                        |  |                                  |                                | Convertible Preferred Stock     |       |                  |      |              |        | 48,736                |      |           |      |      |     | 14.2      |      |     | 14.2 
|                                        |  |                                  |                                | Common Stock(1)                 |       |                  |      |              |        | 207,770               |      |           |      |      |     | 20.9      |      |     | 24.2 
|                                        |  |                                  |                                |                                 |       |                  |      |              |        |                       |      |           |      |      |     | 141.4     |      |     | 164.1
|BBB Industries, LLC                     |  | Auto Components                  |                                | Senior Debt(7)                  |       | 6.0%             |      | 6/14         |        |                       |      |           | 21.2 |      |     | 21.2      |      |     | 15.6 
|Belloto Holdings Limited(3)             |  | Household Durables               |                                | Subordinated Debt               |       | 12.1%            |      | 6/17         |        |                       |      |           | 2.6  |      |     | 2.4       |      |     | 1.7  
|                                        |  |                                  | Subordinated Debt(6)           |                                 | 12.3% |                  | 6/17 |              |        |                       |      | 1.3       |      |      | 1.2 |           |      | 0.1
|                                        |  |                                  |                                | PIK Note(1)                     |       | 15.0%            |      | 12/17        |        |                       |      |           | 10.0 |      |     | 8.9       |      |     |     
|                                        |  |                                  |                                | Ordinary Shares(1)              |       |                  |      |              |        | 32,434                |      |           |      |      |     | 0.1       |      |     |     
|                                        |  |                                  |                                |                                 |       |                  |      |              |        |                       |      |           |      |      |     | 12.6      |      |     | 1.8  
|Berry-Hill Galleries, Inc.              |  | Distributors                     |                                | Senior Debt                     |       | 15.4%            |      | 3/10         |        |                       |      |           | 7.7  |      |     | 7.7       |      |     | 7.7  
|                                        |  |                                  |                                | Common Stock Warrants(1)        |       |                  |      |              |        |                       |      |           |      |      |     | 0.1       |      |     | 0.1  
|                                        |  |                                  |                                |                                 |       |                  |      |              |        |                       |      |           |      |      |     | 7.8       |      |     | 7.8  
|Blue Wolf Capital Fund II, L.P.         |  | Capital Markets                  |                                | Limited Partnership Interest(1) |       |                  |      |              |        |                       |      |           |      |      |     | 1.1       |      |     | 1.1  
|Butler Animal Health Supply, LLC        |  | Health Care Providers & Services |                                | Senior Debt(7)                  |       | 7.8%             |      | 7/12         |        |                       |      |           | 8.0  |      |     | 8.0       |      |     | 6.9  
|CAMP Systems International, Inc.        |  | Transportation Infrastructure    |                                | Senior Debt(7)                  |       | 9.6%             |      | 9/14         |        |                       |      |           | 30.0 |      |     | 29.7      |      |     | 22.6 
|Carestream Health, Inc.                 |  | Health Care Equipment & Supplies |                                | Senior Debt(7)                  |       | 7.4%             |      | 10/13        |        |                       |      |           | 15.0 |      |     | 15.0      |      |     | 9.1  



23



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      |          |     |          
|---------------------------------- |  | ---------------------------------- | ------------------------------ | --------------------------------------------------- | ---- | ---------------- | ---- | ------------ | --------- | --------------------- | ---- | --------- | ---- | -------- | --- | ---------
|Company (4)                        |  | Industry                           |                                | Investments                                         |      | InterestRate (5) |      | MaturityDate |           | # ofshares/unitsowned |      | Principal |      | Cost     |     | FairValue
|CH Holding Corp.                   |  | Leisure Equipment & Products       |                                | Senior Debt(6) Redeemable Preferred Stock(1)        |      | 8.0%             |      | 5/11         |           | 21,215                |      | 13.1      |      | 13.042.7 |     | 5.0     
|                                   |  |                                    |                                | Convertible Preferred Stock(1)                      |      |                  |      |              |           | 665,000               |      |           |      |         |     |         
|                                   |  |                                    |                                | Common Stock(1)                                     |      |                  |      |              |           | 1                     |      |           |      |         |     |         
|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      | 55.7     |     | 5.0      
|Cinelease, Inc.                    |  | Electronic Equipment & Instruments |                                | Senior Debt(7)                                      |      | 7.8%             |      | 3/12-3/13    |           |                       |      | 58.2      |      | 57.7     |     | 45.8     
|                                   |  |                                    | Common Stock(1)                |                                                     |      |                  |      |              | 583       |                       |      |           | 0.6  |          | 0.7
|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      | 58.3     |     | 46.5     
|CMX Inc.                           |  | Construction & Engineering         |                                | Senior Debt(7)                                      |      | 6.7%             |      | 5/11-5/12    |           |                       |      | 97.1      |      | 95.9     |     | 66.0     
|                                   |  |                                    | Senior Debt(6)(7)              |                                                     | 8.1% |                  | 5/12 |              |           |                       | 46.3 |           | 46.3 |          |   
|                                   |  |                                    |                                | Common Stock(1)                                     |      |                  |      |              |           | 35,000                |      |           |      |         |     |         
|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      | 142.2    |     | 66.0     
|Compusearch Holdings Company, Inc. |  | Software                           |                                | Subordinated Debt(7)                                |      | 12.0%            |      | 6/12         |           |                       |      | 12.6      |      | 12.4     |     | 12.4     
|                                   |  |                                    | Convertible Preferred Stock(1) |                                                     |      |                  |      |              | 23,342    |                       |      |           | 0.9  |          | 1.5
|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      | 13.3     |     | 13.9     
|Contec. LLC                        |  | Household Durables                 |                                | Subordinated Debt(7)                                |      | 14.0%            |      | 9/15-9/16    |           |                       |      | 135.0     |      | 133.7    |     | 127.2    
|Corrpro Companies, Inc.            |  | Construction & Engineering         |                                | Subordinated Debt                                   |      | 12.5%            |      | 3/11         |           |                       |      | 13.0      |      | 11.5     |     | 11.6     
|                                   |  |                                    | Redeemable Preferred Stock     |                                                     |      |                  |      |              | 1,165,930 |                       |      |           | 1.7  |          | 1.7
|                                   |  |                                    |                                | Common Stock Warrants(1)                            |      |                  |      |              |           | 5,022,576             |      |           |      | 3.5      |     | 8.6      
|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      | 16.7     |     | 21.9     
|CyrusOne Networks, LLC             |  | IT Services                        |                                | Senior Debt(7)                                      |      | 9.1%             |      | 1/14         |           |                       |      | 19.9      |      | 19.8     |     | 17.1     
|Delsey Holding(3)                  |  | Textiles, Apparel & Luxury Goods   |                                | Senior Debt                                         |      | 9.5%             |      | 2/12         |           |                       |      | 20.7      |      | 20.7     |     | 23.3     
|DelStar, Inc.                      |  | Building Products                  |                                | Subordinated Debt(7)                                |      | 14.0%            |      | 12/12        |           |                       |      | 18.7      |      | 18.5     |     | 18.7     
|                                   |  |                                    |                                | Redeemable Preferred Stock                          |      |                  |      |              |           | 26,613                |      |           |      | 16.7     |     | 33.6     
|                                   |  |                                    |                                | Convertible Preferred Stock                         |      |                  |      |              |           | 29,569                |      |           |      | 3.4      |     | 3.4      
|                                   |  |                                    |                                | Common Stock Warrants(1)                            |      |                  |      |              |           | 89,020                |      |           |      | 16.9     |     | 5.0      
|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      | 55.5     |     | 60.7     
|Direct Marketing International LLC |  | Media                              |                                | Subordinated Debt(7)                                |      | 15.2%            |      | 7/12         |           |                       |      | 29.3      |      | 29.0     |     | 29.0     
|Dyno Holding Corp.                 |  | Auto Components                    |                                | Senior Debt(7)                                      |      | 9.5%             |      | 11/13        |           |                       |      | 41.9      |      | 41.5     |     | 41.9     
|                                   |  |                                    |                                | Subordinated Debt(7)                                |      | 16.0%            |      | 11/14        |           |                       |      | 27.4      |      | 27.2     |     | 27.4     
|                                   |  |                                    |                                | Convertible Preferred Stock(1)                      |      |                  |      |              |           | 389,759               |      |           |      | 40.5     |     | 6.4      
|                                   |  |                                    |                                | Common Stock(1)                                     |      |                  |      |              |           | 97,440                |      |           |      | 10.1     |     |         
|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      | 119.3    |     | 75.7     
|Easton Bell Sports LLC             |  | Leisure Equipment & Products       |                                | Common Units(1)                                     |      |                  |      |              |           | 1,985,748             |      |           |      | 0.7      |     | 4.2      
|Edline, LLC                        |  | Software                           |                                | Subordinated Debt(7)                                |      | 14.0%            |      | 7/13         |           |                       |      | 18.1      |      | 14.4     |     | 18.6     
|                                   |  |                                    |                                | Membership Warrants(1)                              |      |                  |      |              |           | 6,447,500             |      |           |      | 6.0      |     | 16.0     
|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      | 20.4     |     | 34.6     
|FAMS Acquisition, Inc.             |  | Diversified Financial Services     |                                | Subordinated Debt(7) Convertible Preferred Stock(1) |      | 14.8%            |      | 11/13-11/14  |           | 861,364               |      | 26.1      |      | 25.920.9 |     | 26.111.0 
|                                   |  |                                    |                                |                                                     |      |                  |      |              |           |                       |      |           |      | 46.8     |     | 37.1     
|FCC Holdings, LLC                  |  | Commercial Banks                   |                                | Subordinated Debt                                   |      | 15.8%            |      | 12/12        |           |                       |      | 75.0      |      | 74.4     |     | 63.8     
|Foamex, L.P.(2)                    |  | Household Durables                 |                                | Senior Debt(6)                                      |      | 8.3%             |      | 2/13-2/14    |           |                       |      | 23.2      |      | 22.0     |     | 6.2      
|Ford Motor Company(2)              |  | Automobiles                        |                                | Revolver Commitment                                 |      |                  |      | 12/11        |           |                       |      |           |      | (6.7)    |     | (60.4)   



24



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                         |  |                                  |                                |                                                    |       |                  |      |              |           |                       |      |           |      |       |      |          
|---------------------------------------- |  | -------------------------------- | ------------------------------ | -------------------------------------------------- | ----- | ---------------- | ---- | ------------ | --------- | --------------------- | ---- | --------- | ---- | ----- | ---- | ---------
|Company (4)                              |  | Industry                         |                                | Investments                                        |       | InterestRate (5) |      | MaturityDate |           | # ofshares/unitsowned |      | Principal |      | Cost  |      | FairValue
|Formed Fiber Technologies, Inc.          |  | Auto Components                  |                                | Subordinated Debt(6)                               |       | 15.0%            |      | 8/11         |           |                       |      | 13.9      |      | 11.1  |      | 3.0      
|                                         |  |                                  | Common Stock Warrants(1)       |                                                    |       |                  |      |              | 122,397   |                       |      |           | 0.1  |       |    
|                                         |  |                                  |                                |                                                    |       |                  |      |              |           |                       |      |           |      | 11.2  |      | 3.0      
|FPI Holding Corporation                  |  | Food Products                    |                                | Senior Debt                                        |       | 14.7%            |      | 5/11-5/14    |           |                       |      | 23.4      |      | 23.3  |      | 23.4     
|                                         |  |                                  |                                | Senior Debt(6)                                     |       | 17.3%            |      | 5/15         |           |                       |      | 9.1       |      | 8.7   |      | 5.5      
|                                         |  |                                  |                                | Subordinated Debt(6)                               |       | 21.5%            |      | 5/15-5/16    |           |                       |      | 18.6      |      | 17.4  |      |         
|                                         |  |                                  |                                | Redeemable Preferred Stock(1)                      |       |                  |      |              |           | 4,469                 |      |           |      | 39.1  |      |         
|                                         |  |                                  |                                | Convertible Preferred Stock(1)                     |       |                  |      |              |           | 21,715                |      |           |      | 23.3  |      |         
|                                         |  |                                  |                                | Common Stock(1)                                    |       |                  |      |              |           | 5,429                 |      |           |      | 5.8   |      |         
|                                         |  |                                  |                                |                                                    |       |                  |      |              |           |                       |      |           |      | 117.6 |      | 28.9     
|French Lick Resorts & Casino Hotels, LLC |  | Hotels, Restaurants & Leisure    |                                | Senior Debt                                        |       | 10.8%            |      | 4/14         |           |                       |      | 31.7      |      | 25.7  |      | 18.3     
|FU/WD Opa Locka, LLC                     |  | Real Estate                      |                                | Senior Debt                                        |       | 8.0%             |      | 9/17-9/24    |           |                       |      | 32.5      |      | 31.0  |      | 27.1     
|Genband Inc.                             |  | Communications Equipment         |                                | Common Stock(1)                                    |       |                  |      |              |           | 2,975,631             |      |           |      | 14.7  |      | 4.0      
|Golden Key US LLC                        |  | Diversified Financial Services   |                                | Commercial Paper(1)                                |       | 5.3%             |      | 10/07        |           |                       |      | 7.3       |      | 7.3   |      | 4.0      
|HMSC Corporation                         |  | Insurance                        |                                | Senior Debt(7)                                     |       | 6.0%             |      | 10/14        |           |                       |      | 3.5       |      | 3.5   |      | 2.0      
|HomeAway, Inc.                           |  | Diversified Consumer Services    |                                | Redeemable Preferred Stock(1)                      |       |                  |      |              |           | 384,297               |      |           |      | 0.7   |      | 0.6      
|                                         |  |                                  | Convertible Preferred Stock(1) |                                                    |       |                  |      |              | 1,661,820 |                       |      |           | 9.7  |       | 26.8
|                                         |  |                                  |                                |                                                    |       |                  |      |              |           |                       |      |           |      | 10.4  |      | 27.4     
|Hopkins Manufacturing Corporation        |  | Auto Components                  |                                | Subordinated Debt(7)                               |       | 15.3%            |      | 7/12         |           |                       |      | 36.9      |      | 36.6  |      | 35.4     
|                                         |  |                                  | Redeemable Preferred Stock     |                                                    |       |                  |      |              | 2,915     |                       |      |           | 5.9  |       | 5.6 
|                                         |  |                                  |                                |                                                    |       |                  |      |              |           |                       |      |           |      | 42.5  |      | 41.0     
|III Exploration II, LP                   |  | Oil, Gas & Consumable Fuels      |                                | Senior Debt(7)                                     |       | 8.8%             |      | 4/14         |           |                       |      | 20.0      |      | 20.0  |      | 16.9     
|Infiltrator Systems, Inc.                |  | Building Products                |                                | Senior Debt(7)                                     |       | 16.0%            |      | 10/13        |           |                       |      | 37.0      |      | 36.6  |      | 36.6     
|Innova Holdings, Inc.                    |  | Energy Equipment & Services      |                                | Senior Debt(7)                                     |       | 9.4%             |      | 3/13         |           |                       |      | 11.5      |      | 11.4  |      | 11.5     
|                                         |  |                                  | Subordinated Debt(7)           |                                                    | 15.0% |                  | 3/14 |              |           |                       | 17.7 |           | 17.5 |       | 17.7
|                                         |  |                                  |                                | Convertible Preferred Stock                        |       |                  |      |              |           | 14,283                |      |           |      | 21.6  |      | 30.8     
|                                         |  |                                  |                                |                                                    |       |                  |      |              |           |                       |      |           |      | 50.5  |      | 60.0     
|Inovis International, Inc.               |  | Software                         |                                | Senior Debt(7)                                     |       | 8.4%             |      | 5/10         |           |                       |      | 88.0      |      | 87.5  |      | 82.6     
|Intergraph Corporation                   |  | Software                         |                                | Senior Debt(7)                                     |       | 8.2%             |      | 12/14        |           |                       |      | 3.0       |      | 3.0   |      | 2.7      
|iTradeNetwork, Inc.                      |  | IT Services                      |                                | Senior Debt(7)                                     |       | 11.5%            |      | 12/13        |           |                       |      | 25.0      |      | 24.8  |      | 24.3     
|JHCI Acquisition, Inc.                   |  | Commercial Services & Supplies   |                                | Senior Debt(7)                                     |       | 6.0%             |      | 12/14        |           |                       |      | 19.0      |      | 19.1  |      | 11.7     
|Jones Stephens Corp.                     |  | Building Products                |                                | Subordinated Debt(7)                               |       | 13.5%            |      | 9/13-9/14    |           |                       |      | 23.2      |      | 22.9  |      | 19.5     
|J-Pac, LLC                               |  | Health Care Equipment & Supplies |                                | Senior Debt(7)                                     |       | 12.0%            |      | 1/14         |           |                       |      | 15.0      |      | 14.8  |      | 14.5     
|                                         |  |                                  | Subordinated Debt              |                                                    | 18.9% |                  | 1/14 |              |           |                       | 9.6  |           | 9.3  |       | 8.8 
|                                         |  |                                  |                                | Preferred Unit Warrants(1) Common Unit Warrants(1) |       |                  |      |              |           | 263,158               |      |           |      | 0.2   |      | 0.1      
|                                         |  |                                  |                                |                                                    |       |                  |      |              | 500,000   |                       |      |           |     |       | 0.1 
|                                         |  |                                  |                                |                                                    |       |                  |      |              |           |                       |      |           |      | 24.3  |      | 23.5     
|KIK Custom Products, Inc.(3)             |  | Household Products               |                                | Senior Debt(6)                                     |       | 8.5%             |      | 11/14        |           |                       |      | 21.5      |      | 21.5  |      | 3.6      
|LabelCorp Holdings, Inc                  |  | Paper & Forest Products          |                                | Senior Debt                                        |       | 8.1%             |      | 8/13-8/14    |           |                       |      | 2.0       |      | 1.6   |      | 1.1      
|                                         |  |                                  |                                | Subordinated Debt                                  |       | 14.0%            |      | 8/15-8/16    |           |                       |      | 60.5      |      | 59.9  |      | 57.0     
|                                         |  |                                  |                                |                                                    |       |                  |      |              |           |                       |      |           |      | 61.5  |      | 58.1     



25



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                          |  |                                    |                                |                             |       |                  |       |              |            |                       |      |           |      |       |      |          
|----------------------------------------- |  | ---------------------------------- | ------------------------------ | --------------------------- | ----- | ---------------- | ----- | ------------ | ---------- | --------------------- | ---- | --------- | ---- | ----- | ---- | ---------
|Company (4)                               |  | Industry                           |                                | Investments                 |       | InterestRate (5) |       | MaturityDate |            | # ofshares/unitsowned |      | Principal |      | Cost  |      | FairValue
|LCW Holdings, LLC                         |  | Real Estate                        |                                | Senior Debt                 |       | 8.4%             |       | 10/12        |            |                       |      | 31.5      |      | 30.5  |      | 32.9     
|                                          |  |                                    |                                | Warrant(1)                  |       |                  |       |              |            | 12.3%                 |      |           |      | 0.9   |      | 5.4      
|                                          |  |                                    |                                |                             |       |                  |       |              |            |                       |      |           |      | 31.4  |      | 38.3     
|LJVH Holdings Inc.(3)                     |  | Beverages                          |                                | Senior Debt(7)              |       | 7.0%             |       | 1/15         |            |                       |      | 28.5      |      | 28.6  |      | 21.4     
|LN Acquisition Corp.                      |  | Machinery                          |                                | Senior Debt(7)              |       | 6.8%             |       | 1/15         |            |                       |      | 21.5      |      | 21.6  |      | 15.9     
|Logex Corporation                         |  | Road & Rail                        |                                | Subordinated Debt(6)        |       | 12.2%            |       | 3/09         |            |                       |      | 12.8      |      | 9.1   |      | 0.2      
|LTM Enterprises, Inc.                     |  | Personal Products                  |                                | Senior Debt(7)              |       | 10.2%            |       | 11/11        |            |                       |      | 19.0      |      | 19.0  |      | 17.0     
|MagnaCare Holdings, Inc.                  |  | Health Care Providers & Services   |                                | Subordinated Debt(7)        |       | 14.8%            |       | 1/13         |            |                       |      | 14.0      |      | 13.9  |      | 13.9     
|Medical Billing Holdings, Inc.            |  |                                    |                                | Subordinated Debt(7)        |       | 15.0%            |       | 9/13         |            |                       |      | 10.7      |      | 10.5  |      | 10.7     
|                                          |  |                                    | Convertible Preferred Stock(1) |                             |       |                  |       |              | 13,199,000 |                       |      |           | 13.2 |       | 13.7
|                                          |  |                                    |                                | Common Stock(1)             |       |                  |       |              |            | 3,299,582             |      |           |      | 3.3   |      |         
|                                          |  |                                    |                                |                             |       |                  |       |              |            |                       |      |           |      | 27.0  |      | 24.4     
|MGM Holdings II, Inc.                     |  | Media                              |                                | Senior Debt(6)              |       | 4.7%             |       | 6/11         |            |                       |      | 2.0       |      | 1.7   |      | 0.9      
|Mirion Technologies                       |  | Electrical Equipment               |                                | Senior Debt(7)              |       | 7.2%             |       | 5/10-11/11   |            |                       |      | 124.7     |      | 124.2 |      | 126.1    
|                                          |  |                                    |                                | Subordinated Debt(7)        |       | 15.2%            |       | 9/09-5/12    |            |                       |      | 50.8      |      | 50.5  |      | 50.9     
|                                          |  |                                    |                                | Convertible Preferred Stock |       |                  |       |              |            | 435,724               |      |           |      | 48.5  |      | 93.7     
|                                          |  |                                    |                                | Common Stock(1)             |       |                  |       |              |            | 24,503                |      |           |      | 2.8   |      | 3.6      
|                                          |  |                                    |                                | Common Stock Warrants(1)    |       |                  |       |              |            | 222,156               |      |           |      | 18.6  |      | 31.0     
|                                          |  |                                    |                                |                             |       |                  |       |              |            |                       |      |           |      | 244.6 |      | 305.3    
|Mitchell International, Inc.              |  | IT Services                        |                                | Senior Debt(7)              |       | 6.8%             |       | 3/15         |            |                       |      | 5.0       |      | 5.0   |      | 3.3      
|National Processing Company Group, Inc.   |  | Diversified Financial Services     |                                | Senior Debt(7)              |       | 10.7%            |       | 9/14         |            |                       |      | 53.0      |      | 52.8  |      | 38.8     
|NBD Holdings Corp.                        |  | Diversified Financial Services     |                                | Senior Subordinated Debt(7) |       | 14.0%            |       | 8/13         |            |                       |      | 45.7      |      | 45.2  |      | 45.2     
|                                          |  |                                    | Convertible Preferred Stock    |                             |       |                  |       |              | 84,174     |                       |      |           | 10.4 |       | 10.4
|                                          |  |                                    |                                | Common Stock(1)             |       |                  |       |              |            | 633,408               |      |           |      | 0.1   |      | 0.1      
|                                          |  |                                    |                                |                             |       |                  |       |              |            |                       |      |           |      | 55.7  |      | 55.7     
|Net1 Las Colinas Manager, LLC             |  | Real Estate                        |                                | Senior Debt                 |       | 7.7%             |       | 10/15        |            |                       |      | 5.1       |      | 5.2   |      | 4.8      
|Nivel Holdings, LLC                       |  | Distributors                       |                                | Senior Debt(7)              |       | 10.6%            |       | 10/13        |            |                       |      | 62.2      |      | 61.7  |      | 57.5     
|Orchard Brands Corporation                |  | Internet & Catalog Retail          |                                | Senior Debt(7)              |       | 13.5%            |       | 4/13-4/14    |            |                       |      | 308.8     |      | 305.9 |      | 211.0    
|                                          |  |                                    | Subordinated Debt              |                             | 10.0% |                  | 4/14  |              |            |                       | 60.2 |           | 60.2 |       | 32.1
|                                          |  |                                    |                                | Common Stock(1)             |       |                  |       |              |            | 565,885               |      |           |      |      |      | 0.1      
|                                          |  |                                    |                                |                             |       |                  |       |              |            |                       |      |           |      | 366.1 |      | 243.2    
|Pan Am International Flight Academy, Inc. |  | Commercial Services & Supplies     |                                | Subordinated Debt(6)(7)     |       | 18.0%            |       | 7/13         |            |                       |      | 28.6      |      | 25.2  |      | 21.3     
|                                          |  | Convertible Preferred Stock(1)     |                                |                             |       |                  |       | 8,234        |            |                       |      | 8.2       |      |     
|                                          |  |                                    |                                |                             |       |                  |       |              |            |                       |      |           |      | 33.4  |      | 21.3     
|Panavision, Inc.                          |  | Electronic Equipment & Instruments |                                | Senior Debt                 |       | 6.6%             |       | 3/11         |            |                       |      | 2.0       |      | 1.7   |      | 1.1      
|PaR Systems, Inc.                         |  | Machinery                          |                                | Senior Debt                 |       | 4.7%             |       | 7/13         |            |                       |      | 4.7       |      | 4.5   |      | 4.5      
|Phillips & Temro Industries, Inc.         |  | Auto Components                    |                                | Senior Debt(7)              |       | 12.8%            |       | 12/10-12/11  |            |                       |      | 23.8      |      | 23.7  |      | 23.7     
|                                          |  |                                    | Subordinated Debt(7)           |                             | 16.3% |                  | 12/12 |              |            |                       | 17.4 |           | 17.4 |       | 17.4
|                                          |  |                                    |                                |                             |       |                  |       |              |            |                       |      |           |      | 41.1  |      | 41.1     
|Qioptiq S.A.R.L.(3)                       |  | Electronic Equipment & Instruments |                                | Subordinated Debt           |       | 10.2%            |       | 3/18         |            |                       |      | 29.3      |      | 29.0  |      | 29.0     
|Ranpak Acquisition Company                |  | Containers & Packaging             |                                | Senior Debt(7)              |       | 8.8%             |       | 12/13-12/14  |            |                       |      | 142.2     |      | 140.9 |      | 114.0    



26



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      |       |      |          
|--------------------------------------- |  | -------------------------------------- | -------------------- | -------------------------------------- | ----- | ---------------- | --------- | ------------ | ----- | --------------------- | ---- | --------- | ---- | ----- | ---- | ---------
|Company (4)                             |  | Industry                               |                      | Investments                            |       | InterestRate (5) |           | MaturityDate |       | # ofshares/unitsowned |      | Principal |      | Cost  |      | FairValue
|RDR Holdings, Inc.                      |  | Household Durables                     |                      | Subordinated Debt(7)                   |       | 15.4%            |           | 10/14-10/15  |       |                       |      | 216.8     |      | 215.0 |      | 216.8    
|                                        |  |                                        |                      | Convertible Preferred Stock            |       |                  |           |              |       | 154,142               |      |           |      | 164.4 |      | 122.9    
|                                        |  |                                        |                      | Common Stock(1)                        |       |                  |           |              |       | 1,541,415             |      |           |      | 1.5   |      |         
|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      | 380.9 |      | 339.7    
|Roarke - Money Mailer, LLC              |  | Media                                  |                      | Common Membership Units(1)             |       |                  |           |              |       | 3.5%                  |      |           |      | 0.9   |      | 1.3      
|Scanner Holdings Corporation            |  | Computers & Peripherals                |                      | Senior Debt(7)                         |       | 5.3%             |           | 5/12-5/13    |       |                       |      | 11.9      |      | 11.6  |      | 11.9     
|                                        |  |                                        | Subordinated Debt(7) |                                        | 14.0% |                  | 5/14      |              |       |                       | 20.7 |           | 20.5 |       | 20.7
|                                        |  |                                        |                      | Convertible Preferred Stock(1)         |       |                  |           |              |       | 77,640,000            |      |           |      | 7.8   |      | 7.4      
|                                        |  |                                        |                      | Common Stock(1)                        |       |                  |           |              |       | 78,242                |      |           |      | 0.1   |      |         
|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      | 40.0  |      | 40.0     
|Securus Technologies, Inc.              |  | Diversified Telecommunication Services |                      | Common Stock(1)                        |       |                  |           |              |       | 12                    |      |           |      | 0.7   |      |         
|Seroyal Holdings, L.P.(3)               |  | Health Care Equipment & Supplies       |                      | Redeemable Preferred Partnership Units |       |                  |           |              |       | 26,274                |      |           |      | 0.5   |      | 0.6      
|                                        |  |                                        |                      | Partnership Units(1)                   |       |                  |           |              |       | 95,280                |      |           |      | 0.8   |      | 1.4      
|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      | 1.3   |      | 2.0      
|Sleep Innovations, Inc.(9)              |  | Household Durables                     |                      | Senior Debt                            |       | 11.0%            |           | 4/9          |       |                       |      | 2.3       |      | 2.3   |      | 2.3      
|                                        |  |                                        |                      | Senior Debt(6)                         |       | 7.9%             |           | 4/09-4/14    |       |                       |      | 30.6      |      | 22.9  |      | 6.8      
|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      | 25.2  |      | 9.1      
|Small Smiles Holding Company, LLC       |  | Health Care Providers & Services       |                      | Senior Debt                            |       | 5.6%             |           | 9/12         |       |                       |      | 12.1      |      | 7.0   |      | 5.2      
|                                        |  | Subordinated Debt(6)(7)                |                      | 15.0%                                  |       | 9/13-9/14        |           |              |       | 100.5                 |      | 87.9      |      |     
|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      | 94.9  |      | 5.2      
|Soil Safe Holdings, LLC                 |  | Commercial Services & Supplies         |                      | Senior Debt                            |       | 9.1%             |           | 8/13-8/14    |       |                       |      | 52.2      |      | 51.7  |      | 50.0     
|                                        |  |                                        | Subordinated Debt(7) |                                        | 14.7% |                  | 8/15-8/17 |              |       |                       | 58.5 |           | 57.9 |       | 54.5
|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      | 109.6 |      | 104.5    
|Spectrum Brands, Inc.(2)                |  | Household Products                     |                      | Senior Debt(6)                         |       | 6.6 %            |           | 3/13         |       |                       |      | 8.7       |      | 8.3   |      | 5.0      
|Supreme Corq Holdings, LLC              |  | Household Products                     |                      | Common Membership Warrants(1)          |       |                  |           |              |       | 5,670                 |      |           |      | 0.4   |      |         
|Swank Audio Visuals, L.L.C.             |  | Commercial Services & Supplies         |                      | Senior Debt(7)                         |       | 8.9%             |           | 8/14         |       |                       |      | 48.5      |      | 48.1  |      | 31.7     
|Tanenbaum-Harber Co. Holdings, Inc.     |  |                                        |                      | Redeemable Preferred Stock(1)          |       |                  |           |              |       | 376                   |      |           |      | 0.5   |      | 0.5      
|                                        |  |                                        | Common Stock(1)      |                                        |       |                  |           |              | 3,861 |                       |      |           |     |       |    
|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      | 0.5   |      | 0.5      
|TestAmerica Environmental Services, LLC |  | Commercial Services & Supplies         |                      | Senior Debt(7)                         |       | 5.9%             |           | 12/11-12/13  |       |                       |      | 11.1      |      | 10.9  |      | 9.5      
|                                        |  | Senior Debt(6)(7)                      |                      | 9.2%                                   |       | 12/13            |           |              |       | 21.2                  |      | 20.9      |      |     
|                                        |  |                                        | Subordinated Debt(6) |                                        | 14.0% |                  | 12/14     |              |       |                       | 41.7 |           | 39.5 |       |    
|                                        |  |                                        |                      | Preferred Unit(1)                      |       |                  |           |              |       | 11,659,298            |      |           |      | 6.9   |      |         
|                                        |  |                                        |                      | Preferred Unit Warrants(1)             |       |                  |           |              |       | 1,998,961             |      |           |      | 4.8   |      |         
|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      | 83.0  |      | 9.5      
|The Tensar Corporation                  |  | Construction & Engineering             |                      | Senior Debt(7)                         |       | 8.5%             |           | 5/13         |       |                       |      | 82.0      |      | 81.2  |      | 60.0     
|                                        |  |                                        | Subordinated Debt    |                                        | 17.5% |                  | 10/13     |              |       |                       | 43.5 |           | 43.2 |       | 38.1
|                                        |  |                                        |                      |                                        |       |                  |           |              |       |                       |      |           |      | 124.4 |      | 98.1     
|ThreeSixty Sourcing, Inc.(3)            |  | Commercial Services & Supplies         |                      | Common Stock Warrants(1)               |       |                  |           |              |       | 35                    |      |           |      | 4.1   |      | 1.3      
|TransFirst Holdings, Inc.               |  | Commercial Services & Supplies         |                      | Senior Debt(7)                         |       | 7.5%             |           | 6/15         |       |                       |      | 50.0      |      | 49.6  |      | 39.3     



27



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                      |  |                                    |                                |                                                                                                                                                           |       |                  |           |              |             |                       |      |           |      |           |      |          
|------------------------------------- |  | ---------------------------------- | ------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | ---------------- | --------- | ------------ | ----------- | --------------------- | ---- | --------- | ---- | --------- | ---- | ---------
|Company (4)                           |  | Industry                           |                                | Investments                                                                                                                                               |       | InterestRate (5) |           | MaturityDate |             | # ofshares/unitsowned |      | Principal |      | Cost      |      | FairValue
|triVIN, Inc.                          |  | Commercial Services & Supplies     |                                | Subordinated Debt(7)                                                                                                                                      |       | 15.0%            |           | 6/14-6/15    |             |                       |      | 19.9      |      | 19.7      |      | 19.9     
|                                      |  |                                    | Convertible Preferred Stock(1) |                                                                                                                                                           |       |                  |           |              | 247,000,000 |                       |      |           | 26.3 |           | 16.6
|                                      |  |                                    |                                | Common Stock(1)                                                                                                                                           |       |                  |           |              |             | 6,319,923             |      |           |      | 6.3       |      |         
|                                      |  |                                    |                                |                                                                                                                                                           |       |                  |           |              |             |                       |      |           |      | 52.3      |      | 36.5     
|True Temper Sports, Inc.              |  | Leisure Equipment & Products       |                                | Senior Debt                                                                                                                                               |       | 9.3%             |           | 6/11         |             |                       |      | 2.0       |      | 1.9       |      | 1.3      
|Tyden Caymen Holdings Corp.           |  | Electronic Equipment & Instruments |                                | Senior Debt(7)                                                                                                                                            |       | 10.5%            |           | 5/10-11/11   |             |                       |      | 12.0      |      | 11.9      |      | 12.0     
|                                      |  | Subordinated Debt(7)               |                                | 13.8%                                                                                                                                                     |       | 5/12             |           |              |             | 14.5                  |      | 14.4      |      | 14.6     
|                                      |  |                                    |                                | Common Stock(1)                                                                                                                                           |       |                  |           |              |             | 1,165,930             |      |           |      | 1.1       |      | 2.9      
|                                      |  |                                    |                                |                                                                                                                                                           |       |                  |           |              |             |                       |      |           |      | 27.4      |      | 29.5     
|Velocity Financial Group, Inc.        |  | Diversified Financial Services     |                                | Subordinated Debt                                                                                                                                         |       | 15.0%            |           | 4/14         |             |                       |      | 17.8      |      | 17.6      |      | 17.6     
|                                      |  | Convertible Preferred Stock(1)     |                                |                                                                                                                                                           |       |                  |           | 11,659,298   |             |                       |      | 20.4      |      | 8.7      
|                                      |  |                                    |                                |                                                                                                                                                           |       |                  |           |              |             |                       |      |           |      | 38.0      |      | 26.3     
|Venus Swimwear, Inc.                  |  | Internet & Catalog Retail          |                                | Senior Debt                                                                                                                                               |       | 9.7%             |           | 12/11-12/12  |             |                       |      | 21.9      |      | 21.6      |      | 17.6     
|                                      |  |                                    |                                | Subordinated Debt(6)                                                                                                                                      |       | 20.0%            |           | 12/13        |             |                       |      | 25.4      |      | 19.2      |      | 1.3      
|                                      |  |                                    |                                |                                                                                                                                                           |       |                  |           |              |             |                       |      |           |      | 40.8      |      | 18.9     
|WRH, Inc.                             |  | Life Sciences Tools & Services     |                                | Senior Debt(7)                                                                                                                                            |       | 5.7%             |           | 9/13-9/14    |             |                       |      | 4.3       |      | 4.3       |      | 4.3      
|                                      |  |                                    | Subordinated Debt(7)           |                                                                                                                                                           | 14.7% |                  | 7/14-9/14 |              |             |                       | 81.7 |           | 81.0 |           | 81.4
|                                      |  |                                    |                                | Convertible Preferred Stock                                                                                                                               |       |                  |           |              |             | 2,008,575             |      |           |      | 226.0     |      | 226.0    
|                                      |  |                                    |                                | Common Stock(1)                                                                                                                                           |       |                  |           |              |             | 502,144               |      |           |      | 49.9      |      | 20.6     
|                                      |  |                                    |                                |                                                                                                                                                           |       |                  |           |              |             |                       |      |           |      | 361.2     |      | 332.3    
|WWC Acquisitions, Inc.                |  | Commercial Services & Supplies     |                                | Senior Debt(7)                                                                                                                                            |       | 7.2%             |           | 12/11-12/13  |             |                       |      | 34.0      |      | 33.6      |      | 26.7     
|Zencon Holdings Corporation           |  | Internet Software & Services       |                                | Senior Debt(7)                                                                                                                                            |       | 6.5%             |           | 5/13         |             |                       |      | 17.2      |      | 17.1      |      | 17.2     
|                                      |  | Subordinated Debt(7)               |                                | 15.3%                                                                                                                                                     |       | 5/14             |           |              |             | 21.0                  |      | 20.8      |      | 21.0     
|                                      |  |                                    |                                | Convertible Preferred Stock(1)                                                                                                                            |       |                  |           |              |             | 5,246,686             |      |           |      | 7.5       |      | 16.5     
|                                      |  |                                    |                                |                                                                                                                                                           |       |                  |           |              |             |                       |      |           |      | 45.4      |      | 54.7     
|ZSF/WD Fitzgerald, LLC                |  | Real Estate                        |                                | Senior Debt                                                                                                                                               |       | 8.2%             |           | 9/24         |             |                       |      | 1.2       |      | 1.1       |      | 0.6      
|ZSF/WD Hammond, LLC                   |  | Real Estate                        |                                | Senior Debt                                                                                                                                               |       | 8.0%             |           | 9/17-9/24    |             |                       |      | 40.7      |      | 38.9      |      | 33.2     
|ZSF/WD Jacksonville, LLC              |  | Real Estate                        |                                | Senior Debt                                                                                                                                               |       | 8.1%             |           | 9/17-9/24    |             |                       |      | 20.5      |      | 19.5      |      | 15.9     
|ZSF/WD Montgomery-31, LLC             |  | Real Estate                        |                                | Senior Debt                                                                                                                                               |       | 8.0%             |           | 9/17-9/24    |             |                       |      | 33.8      |      | 32.2      |      | 27.9     
|ZSF/WD Opa Locka, LLC                 |  | Real Estate                        |                                | Senior Debt                                                                                                                                               |       | 8.2%             |           | 9/24         |             |                       |      | 0.4       |      | 0.4       |      | 0.1      
|ZSF/WD Orlando, LLC                   |  | Real Estate                        |                                | Senior Debt                                                                                                                                               |       | 8.1%             |           | 9/17-9/24    |             |                       |      | 20.8      |      | 19.7      |      | 16.2     
|CMBS AND REAL ESTATE CDO INVESTMENTS  |  |                                    |                                |                                                                                                                                                           |       |                  |           |             
|ACAS CRE CDO 2007-1, Ltd.             |  | Real Estate                        |                                | Class C through Class N Notes Preferred Shares                                                                                                            |       | 5.7%             |           | 11/31        |             | 417,086,293           |      | 345.5     |      | 201.117.7 |      | 13.74.2  
|                                      |  |                                    |                                |                                                                                                                                                           |       |                  |           |              |             |                       |      |           |      | 218.8     |      | 17.9     
|Banc of America                       |  | Real Estate                        |                                | Forward Purchase commitment to purchase Banc of America Commercial Mortgage Trust 2007-1, Commercial
Mortgage Pass-Through Certificates ($5.8 Fair Value) |       |                  |           | 4/09         |             |                       |      |           |      | 18.2      |      | 3.7      
|CD 2007-CD4 Commercial Mortgage Trust |  | Real Estate                        |                                | Commercial Mortgage Pass-Through Certificates                                                                                                             |       | 5.7%             |           | 4/17         |             |                       |      | 14.1      |      | 8.8       |      | 1.3      



28



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                                                  |  |             |  |                                                                                                                                                                            |  |                  |  |              |  |                       |  |           |  |      |  |          
|----------------------------------------------------------------- |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- |  | ------------ |  | --------------------- |  | --------- |  | ---- |  | ---------
|Company (4)                                                       |  | Industry    |  | Investments                                                                                                                                                                |  | InterestRate (5) |  | MaturityDate |  | # ofshares/unitsowned |  | Principal |  | Cost |  | FairValue
|CD 2007-CD5 Mortgage Trust                                        |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.2%             |  | 12/17        |  |                       |  | 14.8      |  | 10.2 |  | 2.1      
|Citigroup Commercial Mortgage Securites Trust 2007-C6             |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.5%             |  | 7/17         |  |                       |  | 152.9     |  | 68.1 |  | 16.4     
|COBALT CMBS Commercial Mortgage Trust 2007-C3                     |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.2%             |  | 10/17        |  |                       |  | 11.1      |  | 8.6  |  | 0.8      
|Countrywide Commercial Mortgage Trust 2007-MF1                    |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.1%             |  | 11/37-11/40  |  |                       |  | 24.0      |  | 9.3  |  | 1.8      
|Credit Suisse Commercial Mortgage Trust 2007-C3                   |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.6%             |  | 7/17         |  |                       |  | 13.2      |  | 10.6 |  | 1.0      
|Credit Suisse Commercial Mortgage Trust Series 2007-C4            |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.8%             |  | 8/17         |  |                       |  | 20.8      |  | 12.1 |  | 4.6      
|GE Commercial Mortgage Corporation, Series 2007-C1                |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.5%             |  | 12/19        |  |                       |  | 37.0      |  | 31.4 |  | 3.4      
|GS Morgtage Securities Trust 2006-GG10                            |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.7%             |  | 7/17         |  |                       |  | 63.7      |  | 52.3 |  | 4.7      
|J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11 |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.6%             |  | 7/17         |  |                       |  | 142.7     |  | 62.7 |  | 11.7     
|J.P. Morgan Chase                                                 |  |             |  | Forward Purchase commitment to purchase J.P. Morgan Chase Commercial Mortgage Securities Trust
2007-LDP11, Commercial Mortgage Pass-Through Certificates ($1.9 Fair Value) |  |                  |  | 1/09-5/09    |  |                       |  |           |  | 7.2  |  | 0.8      
|J.P. Morgan Chase                                                 |  |             |  | Forward Purchase commitment to purchase ML-CFC Commercial Mortgage Trust 2007-6, Commercial Mortgage
Pass-Through Certificates ($0.9 Fair Value)                           |  |                  |  | 1/09         |  |                       |  |           |  | 2.9  |  | 0.6      
|LB-UBS Commercial Mortgage Trust 2007-C6                          |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.2%             |  | 8/17         |  |                       |  | 36.6      |  | 22.1 |  | 4.9      
|LB-UBS Commercial Mortgage Trust 2008-C1                          |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.2%             |  | 7/23-7/24    |  |                       |  | 19.4      |  | 7.3  |  | 2.4      
|ML-CFC Commercial Mortgage Trust 2007-8                           |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 6.0%             |  | 8/17         |  |                       |  | 32.8      |  | 19.5 |  | 4.4      
|Wachovia Bank Commercial Mortgage Trust 2007-C31                  |  | Real Estate |  | Commercial Mortgage Pass-Through Certificates                                                                                                                              |  | 5.8%             |  | 5/17         |  |                       |  | 20.0      |  | 11.4 |  | 2.8      



29



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                                         |  |                                |                         |                                               |  |                  |  |              |        |                       |      |           |      |      |     |          
|-------------------------------------------------------- |  | ------------------------------ | ----------------------- | --------------------------------------------- |  | ---------------- |  | ------------ | ------ | --------------------- | ---- | --------- | ---- | ---- | --- | ---------
|Company (4)                                              |  | Industry                       |                         | Investments                                   |  | InterestRate (5) |  | MaturityDate |        | # ofshares/unitsowned |      | Principal |      | Cost |     | FairValue
|Wachovia Bank Commercial Mortgage Trust, Series 2007-C32 |  | Real Estate                    |                         | Commercial Mortgage Pass-Through Certificates |  | 5.7%             |  | 10/17        |        |                       |      | 161.6     |      | 76.1 |     | 13.4     
|Wachovia Bank Commercial Mortgage Trust, Series 2007-C34 |  | Real Estate                    |                         | Commercial Mortgage Pass-Through Certificates |  | 5.3%             |  | 10/17-9/24   |        |                       |      | 96.2      |      | 43.4 |     | 8.3      
|Wachovia Bank Commercial Trust 2006-C28                  |  | Real Estate                    |                         | Commercial Mortgage Pass-Through Certificates |  | 6.0%             |  | 11/16        |        |                       |      | 5.0       |      | 3.1  |     | 0.5      
|CLO INVESTMENTS                                          |  |                                |                         |                                               |  |                  |  |             
|ACAS CLO 2007-1, Ltd.                                    |  | Diversified Financial Services |                         | Secured Notes                                 |  |                  |  |              |        |                       |      | 8.5       |      | 8.4  |     | 1.3      
|                                                         |  |                                | Subordinated Notes      |                                               |  |                  |  |              |        |                       | 25.9 |           | 23.0 |      | 8.2
|                                                         |  |                                |                         |                                               |  |                  |  |              |        |                       |      |           |      | 31.4 |     | 9.5      
|Ares IIIR/IVR CLO Ltd.                                   |  | Diversified Financial Services |                         | Subordinated Notes                            |  |                  |  |              |        |                       |      | 20.0      |      | 16.8 |     | 5.1      
|Ares VIII CLO, Ltd.                                      |  | Diversified Financial Services |                         | Preference Shares                             |  |                  |  |              |        | 6,241                 |      |           |      | 4.3  |     | 1.1      
|Avalon Capital Ltd. 3                                    |  | Diversified Financial Services |                         | Preferred Securities                          |  |                  |  |              |        | 13,796                |      |           |      | 4.5  |     | 1.7      
|Babson CLO Ltd. 2006-II                                  |  | Diversified Financial Services |                         | Income Notes                                  |  |                  |  |              |        |                       |      | 15.0      |      | 13.4 |     | 5.7      
|BALLYROCK CLO 2006-2 LTD.                                |  | Diversified Financial Services |                         | Deferrable Notes                              |  |                  |  |              |        |                       |      | 2.5       |      | 2.1  |     | 0.5      
|Cent CDO 12 Limited                                      |  | Diversified Financial Services |                         | Income Notes                                  |  |                  |  |              |        |                       |      | 26.4      |      | 22.6 |     | 8.3      
|Centurion CDO 8 Limited                                  |  | Diversified Financial Services |                         | Subordinated Notes                            |  |                  |  |              |        |                       |      | 5.0       |      | 3.1  |     | 1.4      
|Champlain CLO                                            |  | Diversified Financial Services |                         | Preferred Securities                          |  |                  |  |              |        | 1,000,000             |      |           |      | 0.5  |     | 0.1      
|CoLTs 2005-1 Ltd.(3)                                     |  | Diversified Financial Services |                         | Preference Shares(1)                          |  |                  |  |              |        | 360                   |      |           |      | 6.7  |     | 3.0      
|CoLTs 2005-2 Ltd.(3)                                     |  | Diversified Financial Services |                         | Preference Shares                             |  |                  |  |              |        | 34,170,000            |      |           |      | 29.3 |     | 7.8      
|CREST Exeter Street Solar 2004-2                         |  | Diversified Financial Services |                         | Preferred Securities                          |  |                  |  |              |        | 3,089,177             |      |           |      | 2.7  |     | 0.3      
|Eaton Vance CDO X PLC(3)                                 |  | Diversified Financial Services |                         | Secured Subordinated Income Notes             |  |                  |  |              |        |                       |      | 15.0      |      | 13.0 |     | 4.3      
|Essex Park CDO Ltd.                                      |  | Diversified Financial Services |                         | Preferred Securities                          |  |                  |  |              |        | 5,750,000             |      |           |      | 1.8  |     | 1.3      
|Flagship CLO V                                           |  | Diversified Financial Services |                         | Deferrable Notes                              |  |                  |  |              |        |                       |      | 1.7       |      | 1.3  |     | 0.3      
|                                                         |  |                                | Subordinated Securities |                                               |  |                  |  |              | 15,000 |                       |      |           | 13.2 |      | 4.0
|                                                         |  |                                |                         |                                               |  |                  |  |              |        |                       |      |           |      | 14.5 |     | 4.3      
|Galaxy III CLO, Ltd                                      |  | Diversified Financial Services |                         | Subordinated Notes                            |  |                  |  |              |        |                       |      | 4.0       |      | 2.3  |     | 0.9      
|LightPoint CLO IV, LTD                                   |  | Diversified Financial Services |                         | Income Notes                                  |  |                  |  |              |        |                       |      | 6.7       |      | 6.2  |     | 0.7      
|LightPoint CLO VIII, Ltd.                                |  | Diversified Financial Services |                         | Deferrable Notes                              |  |                  |  |              |        |                       |      | 7.0       |      | 6.5  |     | 1.7      
|LightPoint CLO VII, Ltd.                                 |  | Diversified Financial Services |                         | Subordinated Notes                            |  |                  |  |              |        |                       |      | 9.0       |      | 7.6  |     | 3.2      



30



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                                                                                                |  |                                  |                                |                                                    |         |                  |      |              |           |                       |      |           |  |      |         |           |      |        
|--------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------------------------------ | -------------------------------------------------- | ------- | ---------------- | ---- | ------------ | --------- | --------------------- | ---- | --------- |  | ---- | ------- | --------- | ---- | -------
|Company (4)                                                                                                     |  | Industry                         |                                | Investments                                        |         | InterestRate (5) |      | MaturityDate |           | # ofshares/unitsowned |      | Principal |  | Cost |         | FairValue
|Mayport CLO Ltd.                                                                                                |  | Diversified Financial Services   |                                | Income Notes                                       |         |                  |      |              |           |                       |      | 14.0      |  |      | 12.1    |           |      | 4.0    
|NYLIM Flatiron CLO 2006-1 LTD.(3)                                                                               |  | Diversified Financial Services   |                                | Subordinated Securities                            |         |                  |      |              |           | 10,000                |      |           |  |      | 8.9     |           |      | 3.2    
|Octagon Investment Partners VII, Ltd.                                                                           |  | Diversified Financial Services   |                                | Preferred Securities                               |         |                  |      |              |           | 5,000,000             |      |           |  |      | 2.1     |           |      | 0.8    
|Sapphire Valley CDO I, Ltd.                                                                                     |  | Diversified Financial Services   |                                | Subordinated Notes                                 |         |                  |      |              |           |                       |      | 14.0      |  |      | 12.4    |           |      | 4.8    
|Vitesse CLO, Ltd.                                                                                               |  | Diversified Financial Services   |                                | Preferred Securities                               |         |                  |      |              |           | 20,000,000            |      |           |  |      | 15.2    |           |      | 3.8    
|Subtotal Non-Control / Non-Affiliate Investments (58% of total investment assets and
liabilities at fair value) |  |                                  |                                | $                                                  | 5,904.1 |                  | $    | 4,182.0     
|                                                                                                                |  |                                  |                                |                                                   
|AFFILIATE INVESTMENTS                                                                                           |  |                                  |                                |                                                    |         |                  |      |              |           |                      
|Aptara, Inc.                                                                                                    |  | IT Services                      |                                | Senior Debt                                        |         | 11.5%            |      | 8/09         |           |                       |      | 3.0       |  |      | 3.0     |           |      | 3.0    
|                                                                                                                |  |                                  |                                | Subordinated Debt(7)                               |         | 16.3%            |      | 8/09         |           |                       |      | 43.5      |  |      | 43.3    |           |      | 43.3   
|                                                                                                                |  |                                  |                                | Subordinated Debt(6)(7)                            |         | 19.0%            |      | 8/09         |           |                       |      | 11.8      |  |      | 10.0    |           |      | 3.7    
|                                                                                                                |  |                                  |                                | Redeemable Preferred Stock(1)                      |         |                  |      |              |           | 15,107                |      |           |  |      | 14.1    |           |      |       
|                                                                                                                |  |                                  |                                | Convertible Preferred Stock(1)                     |         |                  |      |              |           | 2,549,410             |      |           |  |      | 8.8     |           |      |       
|                                                                                                                |  |                                  |                                | Preferred Stock Warrants(1)                        |         |                  |      |              |           | 230,681               |      |           |  |      | 1.0     |           |      |       
|                                                                                                                |  |                                  |                                |                                                    |         |                  |      |              |           |                       |      |           |  |      | 80.2    |           |      | 50.0   
|Coghead, Inc.                                                                                                   |  | Internet Software & Services     |                                | Subordinated Debt                                  |         | 10.0%            |      | 4/09         |           |                       |      | 0.1       |  |      | 0.1     |           |      | 0.1    
|                                                                                                                |  |                                  | Convertible Preferred Stock(1) |                                                    |         |                  |      |              | 5,489,656 |                       |      |           |  | 2.6  |         |           | 0.2 
|                                                                                                                |  |                                  |                                | Preferred Stock Warrants                           |         |                  |      |              |           | 1                     |      |           |  |      |        |           |      |       
|                                                                                                                |  |                                  |                                |                                                    |         |                  |      |              |           |                       |      |           |  |      | 2.7     |           |      | 0.3    
|Creditcards.com, Inc.                                                                                           |  | Diversified Consumer Services    |                                | Senior Debt(7)                                     |         | 11.0%            |      | 6/13         |           |                       |      | 140.9     |  |      | 140.1   |           |      | 136.1  
|                                                                                                                |  |                                  | Subordinated Debt(7)           |                                                    | 15.0%   |                  | 6/14 |              |           |                       | 28.4 |           |  | 28.0 |         |           | 26.6
|                                                                                                                |  |                                  |                                | Common Stock(1)                                    |         |                  |      |              |           | 1,094,645             |      |           |  |      | 1.6     |           |      | 4.2    
|                                                                                                                |  |                                  |                                |                                                    |         |                  |      |              |           |                       |      |           |  |      | 169.7   |           |      | 166.9  
|Egenera, Inc.                                                                                                   |  | Computers & Peripherals          |                                | Subordinated Debt                                  |         | 15.0%            |      | 12/10        |           |                       |      | 2.8       |  |      | 2.4     |           |      | 2.4    
|                                                                                                                |  |                                  |                                | Redeemable Preferred Stock(1)                      |         |                  |      |              |           | 523,040               |      |           |  |      | 0.4     |           |      | 9.7    
|                                                                                                                |  |                                  |                                | Common Stock(1)                                    |         |                  |      |              |           | 8,046,865             |      |           |  |      | 25.0    |           |      |       
|                                                                                                                |  |                                  |                                |                                                    |         |                  |      |              |           |                       |      |           |  |      | 27.8    |           |      | 12.1   
|HALT Medical, Inc.                                                                                              |  | Health Care Equipment & Supplies |                                | Convertible Preferred Stock(1)                     |         |                  |      |              |           | 5,053,292             |      |           |  |      | 8.1     |           |      | 8.7    
|IS Holdings I, Inc.                                                                                             |  | Software                         |                                | Senior Debt(7)                                     |         | 7.9%             |      | 6/14         |           |                       |      | 20.0      |  |      | 19.8    |           |      | 15.6   
|                                                                                                                |  |                                  |                                | Redeemable Preferred Stock                         |         |                  |      |              |           | 1,297                 |      |           |  |      | 1.6     |           |      | 1.5    
|                                                                                                                |  |                                  |                                | Common Stock(1)                                    |         |                  |      |              |           | 1,165,930             |      |           |  |      |        |           |      | 4.6    
|                                                                                                                |  |                                  |                                |                                                    |         |                  |      |              |           |                       |      |           |  |      | 21.4    |           |      | 21.7   
|Narus, Inc.                                                                                                     |  | Internet Software & Services     |                                | Convertible Preferred Stock(1)                     |         |                  |      |              |           | 23,583,196            |      |           |  |      | 8.4     |           |      | 2.1    
|                                                                                                                |  |                                  | Preferred Stock Warrants(1)    |                                                    |         |                  |      |              | 5,440,881 |                       |      |           |  |     |         |           |    
|                                                                                                                |  |                                  |                                |                                                    |         |                  |      |              |           |                       |      |           |  |      | 8.4     |           |      | 2.1    
|Nursery Supplies, Inc.                                                                                          |  | Containers & Packaging           |                                | Redeemable Preferred Stock(1)                      |         |                  |      |              |           | 2,116                 |      |           |  |      |        |           |      |       
|                                                                                                                |  |                                  |                                | Common Stock Warrants(1)                           |         |                  |      |              |           | 625                   |      |           |  |      |        |           |      |       
|                                                                                                                |  |                                  |                                |                                                    |         |                  |      |              |           |                       |      |           |  |      |        |           |      |       
|Primrose Holding Corporation                                                                                    |  | Diversified Consumer Services    |                                | Common Stock(1)                                    |         |                  |      |              |           | 4,213                 |      |           |  |      | 2.7     |           |      | 7.4    
|Qualitor Component Holdings, LLC                                                                                |  | Auto Components                  |                                | Subordinated Debt(7) Redeemable Preferred Units(1) |         | 17.0%            |      | 12/12        |           | 3,150,000             |      | 35.6      |  |      | 35.33.1 |           |      | 35.91.1
|                                                                                                                |  |                                  |                                | Common Units(1)                                    |         |                  |      |              |           | 350,000               |      |           |  |      | 0.4     |           |      |       
|                                                                                                                |  |                                  |                                |                                                    |         |                  |      |              |           |                       |      |           |  |      | 38.8    |           |      | 37.0   



31



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                                                                             |  |                                    |                |                                   |       |                  |      |              |  |                       |       |           |      |       |         |           |      |       
|-------------------------------------------------------------------------------------------- |  | ---------------------------------- | -------------- | --------------------------------- | ----- | ---------------- | ---- | ------------ |  | --------------------- | ----- | --------- | ---- | ----- | ------- | --------- | ---- | ------
|Company (4)                                                                                  |  | Industry                           |                | Investments                       |       | InterestRate (5) |      | MaturityDate |  | # ofshares/unitsowned |       | Principal |      | Cost  |         | FairValue
|Radar Detection Holdings Corp.                                                               |  | Household Durables                 |                | Senior Debt(7) Common Stock(1)    |       | 9.4%             |      | 11/12        |  | 40,688                |       | 13.0      |      |       | 13.00.6 |           |      | 9.50.6
|                                                                                             |  |                                    |                |                                   |       |                  |      |              |  |                       |       |           |      |       | 13.6    |           |      | 10.1  
|Roadrunner Dawes, Inc.                                                                       |  | Road & Rail                        |                | Subordinated Debt(7)              |       | 18.0%            |      | 9/12         |  |                       |       | 19.3      |      |       | 19.2    |           |      | 19.2  
|                                                                                             |  |                                    |                | Common Stock(1)                   |       |                  |      |              |  | 7,000                 |       |           |      |       | 7.0     |           |      | 0.1   
|                                                                                             |  |                                    |                |                                   |       |                  |      |              |  |                       |       |           |      |       | 26.2    |           |      | 19.3  
|Tymphany Corporation                                                                         |  | Electronic Equipment & Instruments |                | Senior Debt(1)                    |       | 0.0%             |      | 4/09         |  |                       |       | 2.2       |      |       | 2.2     |           |      |      
|WFS Holding, Inc.                                                                            |  | Software                           |                | Convertible Preferred Stock       |       |                  |      |              |  | 20,403,772            |       |           |      |       | 2.8     |           |      | 2.8   
|Subtotal Affiliate Investments (5% of total investment assets and liabilities at fair
value) |  |                                    |                | $                                 | 404.6 |                  | $    | 338.4       
|                                                                                             |  |                                    |                |                                  
|CONTROL INVESTMENTS                                                                          |  |                                    |                |                                   |       |                  |      |              |  |                      
|ACAS Equity Holdings Corp.                                                                   |  | Diversified Financial Services     |                | Common Stock(1)                   |       |                  |      |              |  | 589                   |       |           |      |       | 14.7    |           |      | 4.3   
|ACAS Real Estate Holdings Corporation                                                        |  | Real Estate                        |                | Subordinated Debt Common Stock(1) |       | 15.0%            |      | 5/16         |  | 1,000                 |       | 0.8       |      |       | 0.85.4  |           |      |     
|                                                                                             |  |                                    |                |                                   |       |                  |      |              |  |                       |       |           |      |       | 6.2     |           |      |      
|American Capital Agency Corp.(2)(8)                                                          |  | Real Estate Investment Trusts      |                | Common Stock                      |       |                  |      |              |  | 5,000,100             |       |           |      |       | 100.0   |           |      | 101.5 
|American Capital, LLC                                                                        |  | Capital Markets                    |                | Senior Debt                       |       | 7.7%             |      | 9/12         |  |                       |       | 10.6      |      |       | 10.4    |           |      | 10.6  
|                                                                                             |  |                                    |                | Common Membership Interest        |       |                  |      |              |  | 100%                  |       |           |      |       | 58.5    |           |      | 164.7 
|                                                                                             |  |                                    |                |                                   |       |                  |      |              |  |                       |       |           |      |       | 68.9    |           |      | 175.3 
|American Driveline Systems, Inc.                                                             |  | Diversified Consumer Services      |                | Subordinated Debt(7)              |       | 14.0%            |      | 12/14-12/15  |  |                       |       | 41.7      |      |       | 41.2    |           |      | 41.7  
|                                                                                             |  | Redeemable Preferred Stock         |                |                                   |       |                  |      | 403,357      |  |                       |       |           | 28.4 |       |         | 44.1     
|                                                                                             |  |                                    |                | Common Stock(1)                   |       |                  |      |              |  | 128,681               |       |           |      |       | 10.8    |           |      | 2.7   
|                                                                                             |  |                                    |                | Common Stock Warrants(1)          |       |                  |      |              |  | 204,663               |       |           |      |       | 17.3    |           |      | 4.2   
|                                                                                             |  |                                    |                |                                   |       |                  |      |              |  |                       |       |           |      |       | 97.7    |           |      | 92.7  
|Auxi Health, Inc.                                                                            |  | Health Care Providers & Services   |                | Subordinated Debt(6)              |       | 5.8%             |      | 3/09         |  |                       |       | 8.9       |      |       | 3.2     |           |      | 1.1   
|Barton-Cotton Holding Corporation                                                            |  | Commercial Services & Supplies     |                | Subordinated Debt(6)              |       | 14.0%            |      | 9/14         |  |                       |       | 34.1      |      |       | 28.6    |           |      |      
|                                                                                             |  | Redeemable Preferred Stock(1)      |                |                                   |       |                  |      | 28,263       |  |                       |       |           | 15.7 |       |         |         
|                                                                                             |  |                                    |                | Convertible Preferred Stock(1)    |       |                  |      |              |  | 66,551                |       |           |      |       | 6.7     |           |      |      
|                                                                                             |  |                                    |                | Common Stock(1)                   |       |                  |      |              |  | 607                   |       |           |      |       | 0.1     |           |      |      
|                                                                                             |  |                                    |                | Common Stock Warrants(1)          |       |                  |      |              |  | 125,610               |       |           |      |       | 12.5    |           |      |      
|                                                                                             |  |                                    |                | Guarantee                         |       |                  |      |              |  |                       |       |           |      |       |        |           |      | (10.0)
|                                                                                             |  |                                    |                |                                   |       |                  |      |              |  |                       |       |           |      |       | 63.6    |           |      | (10.0)
|Capital.com, Inc.                                                                            |  | Diversified Financial Services     |                | Common Stock(1)                   |       |                  |      |              |  | 8,500,100             |       |           |      |       | 1.5     |           |      | 0.4   
|CIBT Travel Solutions, Inc.                                                                  |  | Commercial Services & Supplies     |                | Senior Debt                       |       | 5.9%             |      | 1/13-1/14    |  |                       |       | 74.8      |      |       | 74.0    |           |      | 74.8  
|                                                                                             |  | Subordinated Debt(7)               |                | 15.0%                             |       | 1/10-1/16        |      |              |  | 43.1                  |       |           | 42.7 |       |         | 43.1     
|                                                                                             |  |                                    |                | Convertible Preferred Stock(1)    |       |                  |      |              |  | 776,800               |       |           |      |       | 77.7    |           |      | 35.2  
|                                                                                             |  |                                    |                | Common Stock(1)                   |       |                  |      |              |  | 194,200               |       |           |      |       | 19.4    |           |      |      
|                                                                                             |  |                                    |                |                                   |       |                  |      |              |  |                       |       |           |      |       | 213.8   |           |      | 153.1 
|Consolidated Bedding, Inc.                                                                   |  | Household Durables                 |                | Senior Debt                       |       | 11.4%            |      | 6/13         |  |                       |       | 10.7      |      |       | 10.5    |           |      | 10.2  
|                                                                                             |  |                                    | Senior Debt(6) |                                   | 11.4% |                  | 6/13 |              |  |                       | 113.1 |           |      | 103.7 |         |           | 23.0
|                                                                                             |  |                                    |                | Subordinated Debt(6)              |       | 21.7%            |      | 12/13        |  |                       |       | 92.0      |      |       | 78.4    |           |      |      
|                                                                                             |  |                                    |                | Convertible Preferred Stock(1)    |       |                  |      |              |  | 16,423                |       |           |      |       | 3.0     |           |      |      
|                                                                                             |  |                                    |                | Common Stock(1)                   |       |                  |      |              |  | 471,470               |       |           |      |       |        |           |      |      
|                                                                                             |  |                                    |                |                                   |       |                  |      |              |  |                       |       |           |      |       | 195.6   |           |      | 33.2  



32



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      |          |     |          
|--------------------------------------- |  | ---------------------------------------- | -------------------- | ----------------------------------------- | ----- | ---------------- | ----- | ------------ |  | --------------------- | ---- | --------- | ---- | -------- | --- | ---------
|Company (4)                             |  | Industry                                 |                      | Investments                               |       | InterestRate (5) |       | MaturityDate |  | # ofshares/unitsowned |      | Principal |      | Cost     |     | FairValue
|Contour Semiconductor, Inc.             |  | Semiconductors & Semiconductor Equipment |                      | Convertible Preferred Stock(1)            |       |                  |       |              |  | 9,738,995             |      |           |      | 10.0     |     | 10.6     
|Core Business Credit, LLC               |  | Diversified Financial Services           |                      | Subordinated Debt                         |       | 14.1%            |       | 5/15         |  |                       |      | 19.5      |      | 19.3     |     | 19.3     
|                                        |  | Convertible Preferred Units(1)           |                      |                                           |       |                  |       | 155,150      |  |                       |      | 15.5      |      | 16.1    
|                                        |  |                                          |                      | Common Units(1)                           |       |                  |       |              |  | 38,788                |      |           |      | 3.9      |     | 3.3      
|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      | 38.7     |     | 38.7     
|ECA Acquisition Holdings, Inc           |  | Health Care Equipment & Supplies         |                      | Subordinated Debt(7)                      |       | 16.5%            |       | 12/14        |  |                       |      | 13.0      |      | 12.9     |     | 13.0     
|                                        |  | Common Stock(1)                          |                      |                                           |       |                  |       | 583          |  |                       |      | 11.1      |      | 5.1     
|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      | 24.0     |     | 18.1     
|eLynx Holdings, Inc.                    |  | IT Services                              |                      | Senior Debt(7)                            |       | 9.8%             |       | 6/13         |  |                       |      | 9.6       |      | 9.5      |     | 9.6      
|                                        |  |                                          |                      | Subordinated Debt(6)(7)                   |       | 10.0%            |       | 6/13         |  |                       |      | 14.6      |      | 13.4     |     | 1.4      
|                                        |  |                                          |                      | Redeemable Preferred Stock(1)             |       |                  |       |              |  | 21,114                |      |           |      | 9.0      |     |         
|                                        |  |                                          |                      | Convertible Preferred Stock(1)            |       |                  |       |              |  | 7,929                 |      |           |      | 6.0      |     |         
|                                        |  |                                          |                      | Common Stock(1)                           |       |                  |       |              |  | 11,261                |      |           |      | 1.1      |     |         
|                                        |  |                                          |                      | Preferred Stock Warrants(1)               |       |                  |       |              |  | 120,652               |      |           |      |         |     |         
|                                        |  |                                          |                      | Common Stock Warrants(1)                  |       |                  |       |              |  | 1,078,792             |      |           |      | 13.1     |     |         
|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      | 52.1     |     | 11.0     
|Endeavor Fund I, LP                     |  | Thrifts & Mortgage Finance               |                      | Partnership Interest                      |       |                  |       |              |  | 100%                  |      |           |      | 29.7     |     | 20.9     
|ETG Holdings, Inc.                      |  | Containers & Packaging                   |                      | Senior Debt(6)                            |       | 10.4%            |       | 5/11         |  |                       |      | 13.4      |      | 10.8     |     | 2.6      
|                                        |  |                                          |                      | Subordinated Debt(6)                      |       | 14.3%            |       | 5/12-5/13    |  |                       |      | 15.8      |      | 10.9     |     |         
|                                        |  |                                          |                      | Convertible Preferred Stock(1)            |       |                  |       |              |  | 233,201               |      |           |      | 11.4     |     |         
|                                        |  |                                          |                      | Preferred Stock Warrants(1)               |       |                  |       |              |  | 40,000                |      |           |      |         |     |         
|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      | 33.1     |     | 2.6      
|European Capital Limited(2)(3)          |  | Diversified Financial Services           |                      | Subordinated Debt                         |       | 7.5%             |       | 11/09-2/11   |  |                       |      | 363.6     |      | 358.7    |     | 363.6    
|                                        |  | Ordinary Shares                          |                      |                                           |       |                  |       | 72,305,938   |  |                       |      | 921.8     |      | 116.9   
|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      | 1,280.5  |     | 480.5    
|European Touch, LTD. II                 |  | Commercial Services & Supplies           |                      | Subordinated Debt                         |       | 12.0%            |       | 12/10        |  |                       |      | 3.1       |      | 3.1      |     | 3.1      
|                                        |  |                                          | Subordinated Debt(6) |                                           | 18.1% |                  | 12/10 |              |  |                       | 20.5 |           | 15.6 |          | 2.2
|                                        |  |                                          |                      | Redeemable Preferred Stock(1)             |       |                  |       |              |  | 263                   |      |           |      | 0.3      |     |         
|                                        |  |                                          |                      | Common Stock(1)                           |       |                  |       |              |  | 1,688                 |      |           |      | 0.9      |     |         
|                                        |  |                                          |                      | Common Stock Warrants(1)                  |       |                  |       |              |  | 7,105                 |      |           |      | 3.7      |     |         
|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      | 23.6     |     | 5.3      
|EXPL Pipeline Holdings LLC              |  | Oil, Gas & Consumable Fuels              |                      | Senior Debt                               |       | 9.6%             |       | 1/17         |  |                       |      | 42.3      |      | 41.9     |     | 42.3     
|                                        |  | Common Membership Units(1)               |                      |                                           |       |                  |       | 58,297       |  |                       |      | 44.5      |      | 12.0    
|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      | 86.4     |     | 54.3     
|Fosbel Global Services (LUXCO) S.C.A(3) |  | Commercial Services & Supplies           |                      | Subordinated Debt(7)                      |       | 14.0%            |       | 12/13        |  |                       |      | 19.6      |      | 19.6     |     | 19.6     
|                                        |  | Subordinated Debt(6)(7)                  |                      | 17.0%                                     |       | 12/14            |       |              |  | 18.6                  |      | 15.5      |      | 15.7    
|                                        |  |                                          |                      | 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      |     |         
|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      | 56.8     |     | 35.3     
|Fountainhead Estate Holding Corp.(3)    |  | Internet Software & Services             |                      | Senior Debt Redeemable Preferred Stock(1) |       | 5.7%             |       | 10/13        |  | 115,538               |      | 24.5      |      | 24.511.6 |     | 24.511.6 
|                                        |  |                                          |                      | Convertible Preferred Stock(1)            |       |                  |       |              |  | 59,250                |      |           |      | 59.3     |     | 2.6      
|                                        |  |                                          |                      |                                           |       |                  |       |              |  |                       |      |           |      | 95.4     |     | 38.7     



33



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      |      |     |          
|---------------------------------- |  | -------------------------------------- | ----------------------------- | ------------------------------ | ----- | ---------------- | ----- | ------------ | ---------- | --------------------- | --- | --------- | ---- | ---- | --- | ---------
|Company (4)                        |  | Industry                               |                               | Investments                    |       | InterestRate (5) |       | MaturityDate |            | # ofshares/unitsowned |     | Principal |      | Cost |     | FairValue
|FreeConferenceroom.com, Inc.       |  | Diversified Telecommunication Services |                               | Senior Debt(7)                 |       | 8.3%             |       | 4/11-5/11    |            |                       |     | 14.8      |      | 14.7 |     | 14.9     
|                                   |  | Subordinated Debt                      |                               | 15.0%                          |       | 5/12             |       |              |            | 10.1                  |     | 10.0      |      | 10.1
|                                   |  |                                        | Redeemable Preferred Stock(1) |                                |       |                  |       |              | 14,042,095 |                       |     |           | 12.8 |      | 4.5
|                                   |  |                                        |                               | Common Stock(1)                |       |                  |       |              |            | 6,088,229             |     |           |      | 2.3  |     |         
|                                   |  |                                        |                               | Common Stock Warrants(1)       |       |                  |       |              |            | 8,181,695             |     |           |      |     |     |         
|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      | 39.8 |     | 29.5     
|Future Food, Inc.                  |  | Food Products                          |                               | Senior Debt                    |       | 6.9%             |       | 7/10         |            |                       |     | 17.2      |      | 17.2 |     | 17.3     
|                                   |  |                                        |                               | Subordinated Debt(6)           |       | 12.4%            |       | 7/11-7/12    |            |                       |     | 13.5      |      | 12.5 |     | 3.8      
|                                   |  |                                        |                               | Common Stock(1)                |       |                  |       |              |            | 64,917                |     |           |      | 13.0 |     |         
|                                   |  |                                        |                               | Common Stock Warrants(1)       |       |                  |       |              |            | 6,500                 |     |           |      | 1.3  |     |         
|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      | 44.0 |     | 21.1     
|FutureLogic, Inc.                  |  | Computers & Peripherals                |                               | Senior Debt(7)                 |       | 9.7%             |       | 2/10-2/12    |            |                       |     | 48.2      |      | 48.0 |     | 48.2     
|                                   |  |                                        |                               | Subordinated Debt(7)           |       | 15.0%            |       | 2/13         |            |                       |     | 32.6      |      | 32.3 |     | 32.6     
|                                   |  |                                        |                               | Common Stock(1)                |       |                  |       |              |            | 129,514               |     |           |      | 15.6 |     | 3.7      
|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      | 95.9 |     | 84.5     
|FV Holdings Corporation            |  | Food Products                          |                               | Subordinated Debt(7)           |       | 14.5%            |       | 6/15         |            |                       |     | 23.1      |      | 23.1 |     | 23.1     
|                                   |  |                                        |                               | Convertible Preferred Stock(1) |       |                  |       |              |            | 292,000               |     |           |      | 14.3 |     | 23.8     
|                                   |  |                                        |                               | Common Stock(1)                |       |                  |       |              |            | 125,000               |     |           |      | 6.1  |     | 10.2     
|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      | 43.5 |     | 57.1     
|Group Montana, Inc.                |  | Textiles, Apparel & Luxury Goods       |                               | Senior Debt(7)                 |       | 10.4%            |       | 10/10-10/11  |            |                       |     | 16.1      |      | 16.1 |     | 16.1     
|                                   |  |                                        | Senior Debt(6)(7)             |                                | 12.9% |                  | 10/11 |              |            |                       | 5.1 |           | 4.8  |      | 2.1
|                                   |  |                                        |                               | Subordinated Debt(6)           |       | 25.0%            |       | 10/12        |            |                       |     | 18.8      |      | 13.6 |     |         
|                                   |  |                                        |                               | Convertible Preferred Stock(1) |       |                  |       |              |            | 4,000                 |     |           |      | 1.0  |     |         
|                                   |  |                                        |                               | Common Membership Interest(1)  |       |                  |       |              |            | 2.5%                  |     |           |      | 0.7  |     |         
|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      | 36.2 |     | 18.2     
|Halex Holdings Corp.               |  | Construction Materials                 |                               | Senior Debt(6)                 |       | 13.5%            |       | 9/11-10/13   |            |                       |     | 24.9      |      | 23.4 |     | 9.9      
|                                   |  |                                        |                               | Subordinated Debt(6)           |       | 18.8%            |       | 8/15         |            |                       |     | 24.3      |      | 15.9 |     |         
|                                   |  |                                        |                               | Redeemable Preferred Stock(1)  |       |                  |       |              |            | 23,213,046            |     |           |      | 30.2 |     |         
|                                   |  |                                        |                               | Common Stock(1)                |       |                  |       |              |            | 30,263,219            |     |           |      |     |     |         
|                                   |  |                                        |                               | Common Stock Warrants(1)       |       |                  |       |              |            | 18,750,000            |     |           |      |     |     |         
|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      | 69.5 |     | 9.9      
|Hartstrings Holdings Corp.         |  | Textiles, Apparel & Luxury Goods       |                               | Senior Debt(1)                 |       | 0.0%             |       | 12/10        |            |                       |     | 13.5      |      | 13.5 |     | 13.5     
|                                   |  |                                        | Senior Debt(6)                |                                | 0.0%  |                  | 12/10 |              |            |                       | 2.9 |           | 2.7  |      | 0.7
|                                   |  |                                        |                               | Convertible Preferred Stock(1) |       |                  |       |              |            | 10,196                |     |           |      | 3.0  |     |         
|                                   |  |                                        |                               | Common Stock(1)                |       |                  |       |              |            | 14,250                |     |           |      | 4.8  |     |         
|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      | 24.0 |     | 14.2     
|Imperial Supplies Holdings, Inc.   |  | Trading Companies and Distributors     |                               | Subordinated Debt              |       | 16.0%            |       | 10/14        |            |                       |     | 22.1      |      | 21.9 |     | 21.9     
|                                   |  | Redeemable Preferred Stock             |                               |                                |       |                  |       | 19,604       |            |                       |     | 14.7      |      | 21.6
|                                   |  |                                        |                               | Convertible Preferred Stock(1) |       |                  |       |              |            | 19,604                |     |           |      | 20.2 |     | 8.1      
|                                   |  |                                        |                               | Common Stock(1)                |       |                  |       |              |            | 442,187               |     |           |      | 11.3 |     |         
|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      | 68.1 |     | 51.6     
|Kingway Inca Clymer Holdings, Inc. |  | Building Products                      |                               | Subordinated Debt(6)           |       | 12.3%            |       | 4/12         |            |                       |     | 1.8       |      |     |     |         
|                                   |  |                                        | Redeemable Preferred Stock(1) |                                |       |                  |       |              | 13,709     |                       |     |           | 9.2  |      | 0.7
|                                   |  |                                        |                               | Common Stock(1)                |       |                  |       |              |            | 7,826                 |     |           |      |     |     |         
|                                   |  |                                        |                               |                                |       |                  |       |              |            |                       |     |           |      | 9.2  |     | 0.7      



34



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      |       |      |          
|-------------------------------- |  | -------------------------------- | -------------------------- | ------------------------------ | ----- | ---------------- | ----------- | ------------ | ----- | --------------------- | ---- | --------- | ---- | ----- | ---- | ---------
|Company (4)                      |  | Industry                         |                            | Investments                    |       | InterestRate (5) |             | MaturityDate |       | # ofshares/unitsowned |      | Principal |      | Cost  |      | FairValue
|Lifoam Holdings, Inc.            |  | Leisure Equipment & Products     |                            | Senior Debt                    |       | 8.0%             |             | 6/13         |       |                       |      | 22.2      |      | 22.2  |      | 22.2     
|                                 |  |                                  | Subordinated Debt          |                                | 7.8%  |                  | 6/13        |              |       |                       | 18.3 |           | 18.3 |       | 18.2
|                                 |  |                                  |                            | Subordinated Debt(6)           |       | 8.3%             |             | 6/13         |       |                       |      | 18.4      |      | 15.9  |      | 2.3      
|                                 |  |                                  |                            | Redeemable Preferred Stock(1)  |       |                  |             |              |       | 6,160                 |      |           |      | 4.2   |      |         
|                                 |  |                                  |                            | Convertible Preferred Stock(1) |       |                  |             |              |       | 15,797                |      |           |      | 12.2  |      |         
|                                 |  |                                  |                            | Common Stock(1)                |       |                  |             |              |       | 14,000                |      |           |      | 1.4   |      |         
|                                 |  |                                  |                            | Preferred Stock Warrants(1)    |       |                  |             |              |       | 15,640                |      |           |      |      |      |         
|                                 |  |                                  |                            | Common Stock Warrants(1)       |       |                  |             |              |       | 434,938               |      |           |      | 2.9   |      |         
|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      | 77.1  |      | 42.7     
|LLSC Holdings Corporation        |  | Personal Products                |                            | Senior Debt(7)                 |       | 7.7%             |             | 8/12         |       |                       |      | 5.5       |      | 5.5   |      | 5.5      
|                                 |  |                                  | Subordinated Debt(7)       |                                | 12.0% |                  | 8/13        |              |       |                       | 5.5  |           | 5.5  |       | 5.5 
|                                 |  |                                  |                            | Convertible Preferred Stock(1) |       |                  |             |              |       | 7,496                 |      |           |      | 8.1   |      | 4.7      
|                                 |  |                                  |                            | Common Stock(1)                |       |                  |             |              |       | 833                   |      |           |      |      |      |         
|                                 |  |                                  |                            | Common Stock Warrants(1)       |       |                  |             |              |       | 675                   |      |           |      |      |      |         
|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      | 19.1  |      | 15.7     
|LVI Holdings, LLC                |  | Commercial Services & Supplies   |                            | Senior Debt(7)                 |       | 8.9%             |             | 2/10         |       |                       |      | 2.4       |      | 2.4   |      | 2.3      
|                                 |  |                                  | Subordinated Debt(7)       |                                | 18.0% |                  | 2/13        |              |       |                       | 11.4 |           | 11.3 |       | 11.4
|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      | 13.7  |      | 13.7     
|Montgomery Lane, LLC (DE LLC)    |  | Diversified Financial Services   |                            | Common Membership Units(1)     |       |                  |             |              |       | 100                   |      |           |      | 10.3  |      | 6.8      
|Montgomery Lane, LTD (Cayman)(3) |  | Diversified Financial Services   |                            | Common Membership Units(1)     |       |                  |             |              |       | 50,000                |      |           |      | 7.2   |      | 0.8      
|MW Acquisition Corporation       |  | Health Care Providers & Services |                            | Subordinated Debt(7)           |       | 11.3%            |             | 2/13-2/14    |       |                       |      | 25.0      |      | 24.7  |      | 25.0     
|                                 |  | Convertible Preferred Stock(1)   |                            |                                |       |                  |             | 38,016       |       |                       |      | 13.5      |      | 13.9 
|                                 |  |                                  |                            | Common Stock(1)                |       |                  |             |              |       | 51,521                |      |           |      |      |      | 0.1      
|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      | 38.2  |      | 39.0     
|NECCO Holdings, Inc.             |  | Food Products                    |                            | Senior Debt                    |       | 13.4%            |             | 12/12        |       |                       |      | 4.1       |      | 4.1   |      | 4.1      
|                                 |  |                                  |                            | Common Stock(1)                |       |                  |             |              |       | 760,869               |      |           |      | 0.1   |      | 0.1      
|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      | 4.2   |      | 4.2      
|NECCO Realty Investments, LLC    |  | Real Estate                      |                            | Senior Debt(7)                 |       | 14.0%            |             | 12/17        |       |                       |      | 37.7      |      | 37.0  |      | 37.7     
|                                 |  |                                  | Common Membership Units(1) |                                |       |                  |             |              | 7,000 |                       |      |           | 4.9  |       | 9.8 
|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      | 41.9  |      | 47.5     
|Oceana Media Finance, LLC        |  | Commercial Banks                 |                            | Common Membership Units(1)     |       |                  |             |              |       | 145,742               |      |           |      | 14.6  |      | 11.4     
|Paradigm Precision Holdings, LLC |  | Aerospace & Defense              |                            | Senior Debt                    |       | 6.4%             |             | 2/09         |       |                       |      | 19.2      |      | 19.1  |      | 19.1     
|                                 |  |                                  | Subordinated Debt          |                                | 18.7% |                  | 10/13-10/14 |              |       |                       | 93.7 |           | 92.8 |       | 92.8
|                                 |  |                                  |                            | Common Membership Units(1)     |       |                  |             |              |       | 478,488               |      |           |      | 17.5  |      | 6.1      
|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      | 129.4 |      | 118.0    
|PHC Sharp Holdings, Inc.         |  | Commercial Services & Supplies   |                            | Senior Debt(7)                 |       | 7.7%             |             | 12/11-12/12  |       |                       |      | 16.0      |      | 15.8  |      | 16.0     
|                                 |  |                                  | Subordinated Debt          |                                | 17.0% |                  | 12/14       |              |       |                       | 8.3  |           | 8.3  |       | 8.3 
|                                 |  |                                  |                            | Subordinated Debt(6)           |       | 19.0%            |             | 12/14        |       |                       |      | 8.4       |      | 7.3   |      | 0.5      
|                                 |  |                                  |                            | Common Stock(1)                |       |                  |             |              |       | 367,881               |      |           |      | 4.2   |      |         
|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      | 35.6  |      | 24.8     
|PHI Acquisitions, Inc.           |  | Internet & Catalog Retail        |                            | Senior Debt(7)                 |       | 8.0%             |             | 6/12         |       |                       |      | 10.0      |      | 9.9   |      | 10.0     
|                                 |  |                                  |                            | Subordinated Debt(7)           |       | 12.7%            |             | 6/13         |       |                       |      | 23.6      |      | 23.4  |      | 23.6     
|                                 |  |                                  |                            | Redeemable Preferred Stock(1)  |       |                  |             |              |       | 36,267                |      |           |      | 24.6  |      | 19.2     
|                                 |  |                                  |                            | Common Stock(1)                |       |                  |             |              |       | 40,295                |      |           |      | 3.9   |      |         
|                                 |  |                                  |                            | Common Stock Warrants(1)       |       |                  |             |              |       | 116,065               |      |           |      | 11.6  |      |         
|                                 |  |                                  |                            |                                |       |                  |             |              |       |                       |      |           |      | 73.4  |      | 52.8     



35



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       |       |       |          
|--------------------------------- |  | ---------------------------------- | -------------------------- | ------------------------------ | ----- | ---------------- | ---- | ------------ | ------- | --------------------- | ----- | --------- | ----- | ----- | ----- | ---------
|Company (4)                       |  | Industry                           |                            | Investments                    |       | InterestRate (5) |      | MaturityDate |         | # ofshares/unitsowned |       | Principal |       | Cost  |       | FairValue
|Piper Aircraft, Inc.              |  | Aerospace & Defense                |                            | Subordinated Debt              |       | 8.0%             |      | 7/13         |         |                       |       | 0.7       |       | 0.2   |       | 0.7      
|                                  |  |                                    |                            | Common Stock(1)                |       |                  |      |              |         | 478,797               |       |           |       | 0.1   |       | 22.6     
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 0.3   |       | 23.3     
|Resort Funding Holdings, Inc.     |  | Diversified Financial Services     |                            | Senior Debt                    |       | 9.2%             |      | 4/10         |         |                       |       | 10.6      |       | 10.6  |       | 10.6     
|                                  |  | Common Stock(1)                    |                            |                                |       |                  |      | 583          |         |                       |       | 20.5      |       | 1.2  
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 31.1  |       | 11.8     
|Sixnet, LLC                       |  | Electronic Equipment & Instruments |                            | Senior Debt(7)                 |       | 9.8%             |      | 6/12-6/13    |         |                       |       | 37.4      |       | 37.0  |       | 34.4     
|                                  |  |                                    | Membership Units(1)        |                                |       |                  |      |              | 356     |                       |       |           | 4.5   |       | 7.2  
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 41.5  |       | 41.6     
|SMG Holdings, Inc.                |  | Hotels, Restaurants & Leisure      |                            | Senior Debt(7)                 |       | 6.9%             |      | 7/14         |         |                       |       | 5.9       |       | 5.9   |       | 5.9      
|                                  |  |                                    | Subordinated Debt(7)       |                                | 12.5% |                  | 6/15 |              |         |                       | 119.4 |           | 118.5 |       | 119.5
|                                  |  |                                    |                            | Convertible Preferred Stock    |       |                  |      |              |         | 1,101,673             |       |           |       | 121.5 |       | 102.9    
|                                  |  |                                    |                            | Common Stock(1)                |       |                  |      |              |         | 275,419               |       |           |       | 27.5  |       |         
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 273.4 |       | 228.3    
|Specialty Brands of America, Inc. |  | Food Products                      |                            | Subordinated Debt(7)           |       | 14.0%            |      | 5/14         |         |                       |       | 34.1      |       | 33.8  |       | 34.1     
|                                  |  |                                    | Redeemable Preferred Stock |                                |       |                  |      |              | 122,017 |                       |       |           | 8.2   |       | 13.8 
|                                  |  |                                    |                            | Common Stock(1)                |       |                  |      |              |         | 128,175               |       |           |       | 2.3   |       | 4.0      
|                                  |  |                                    |                            | Common Stock Warrants(1)       |       |                  |      |              |         | 56,819                |       |           |       | 1.4   |       | 1.8      
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 45.7  |       | 53.7     
|SPL Acquisition Corp.             |  | Pharmaceuticals                    |                            | Senior Debt                    |       | 7.0%             |      | 10/12-10/13  |         |                       |       | 83.9      |       | 83.0  |       | 83.9     
|                                  |  |                                    |                            | Subordinated Debt(7)           |       | 15.3%            |      | 8/14-8/15    |         |                       |       | 49.9      |       | 49.3  |       | 49.9     
|                                  |  |                                    |                            | Convertible Preferred Stock    |       |                  |      |              |         | 84,043                |       |           |       | 48.0  |       | 48.0     
|                                  |  |                                    |                            | Common Stock(1)                |       |                  |      |              |         | 84,043                |       |           |       |      |       | 10.4     
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 180.3 |       | 192.2    
|Stravina Holdings, Inc.           |  | Personal Products                  |                            | Senior Debt(6)                 |       | 0.0%             |      | 4/11         |         |                       |       | 3.5       |       | 3.5   |       |         
|UFG Holding Corp.                 |  | Food Products                      |                            | Subordinated Debt              |       | 16.5%            |      | 5/15         |         |                       |       | 27.9      |       | 27.4  |       | 27.4     
|                                  |  |                                    |                            | Subordinated Debt(6)           |       | 20.1%            |      | 5/16         |         |                       |       | 35.4      |       | 31.3  |       | 18.7     
|                                  |  |                                    |                            | Redeemable Preferred Stock(1)  |       |                  |      |              |         | 20,602                |       |           |       | 12.6  |       |         
|                                  |  |                                    |                            | Convertible Preferred Stock(1) |       |                  |      |              |         | 4,777                 |       |           |       | 4.6   |       |         
|                                  |  |                                    |                            | Common Stock(1)                |       |                  |      |              |         | 51,504                |       |           |       | 13.2  |       |         
|                                  |  |                                    |                            | Guarantee                      |       |                  |      |              |         |                       |       |           |       |      |       | (1.5)    
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 89.1  |       | 44.6     
|UFG Real Estate Holdings, LLC     |  | Real Estate                        |                            | Common Membership(1)           |       |                  |      |              |         |                       |       |           |       |      |       | 1.4      
|Unique Fabricating Incorporated   |  | Auto Components                    |                            | Senior Debt(7)                 |       | 11.5%            |      | 2/10-2/12    |         |                       |       | 5.3       |       | 5.2   |       | 5.3      
|                                  |  |                                    | Subordinated Debt(6)(7)    |                                | 17.0% |                  | 2/13 |              |         |                       | 7.7   |           | 6.5   |       | 0.5  
|                                  |  |                                    |                            | Redeemable Preferred Stock(1)  |       |                  |      |              |         | 292,958               |       |           |       | 1.6   |       |         
|                                  |  |                                    |                            | Common Stock Warrants(1)       |       |                  |      |              |         | 6,862                 |       |           |       | 0.2   |       |         
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 13.5  |       | 5.8      
|Unwired Holdings, Inc.            |  | Household Durables                 |                            | Senior Debt                    |       | 10.2%            |      | 6/10-6/11    |         |                       |       | 10.4      |       | 10.3  |       | 10.4     
|                                  |  |                                    |                            | Subordinated Debt(6)           |       | 15.0%            |      | 6/12-6/13    |         |                       |       | 21.5      |       | 14.0  |       | 0.6      
|                                  |  |                                    |                            | Redeemable Preferred Stock(1)  |       |                  |      |              |         | 14,630                |       |           |       | 14.6  |       |         
|                                  |  |                                    |                            | Common Stock(1)                |       |                  |      |              |         | 126,001               |       |           |       | 1.3   |       |         
|                                  |  |                                    |                            | Preferred Stock Warrants(1)    |       |                  |      |              |         | 485,133               |       |           |       |      |       |         
|                                  |  |                                    |                            | Common Stock Warrants(1)       |       |                  |      |              |         | 5,479,077             |       |           |       |      |       |         
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 40.2  |       | 11.0     
|VP Acquisition Holdings, Inc.     |  | Health Care Equipment & Supplies   |                            | Subordinated Debt(7)           |       | 14.5%            |      | 10/13-10/14  |         |                       |       | 19.5      |       | 19.3  |       | 19.5     
|                                  |  | Common Stock(1)                    |                            |                                |       |                  |      | 19,780       |         |                       |       | 24.7      |       | 45.1 
|                                  |  |                                    |                            |                                |       |                  |      |              |         |                       |       |           |       | 44.0  |       | 64.6     



36



---

AMERICAN CAPITAL, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS(Continued)

December 31, 2008

(in millions, except share data)



|                                                                                            |  |                                |  |                                       |  |                  |         |              |   |                       |  |           |      |      |       |           |  |      
|------------------------------------------------------------------------------------------- |  | ------------------------------ |  | ------------------------------------- |  | ---------------- | ------- | ------------ | - | --------------------- |  | --------- | ---- | ---- | ----- | --------- |  | -----
|Company (4)                                                                                 |  | Industry                       |  | Investments                           |  | InterestRate (5) |         | MaturityDate |   | # ofshares/unitsowned |  | Principal |      | Cost |       | FairValue
|Warner Power, LLC                                                                           |  | Electrical Equipment           |  | Subordinated Debt(7)                  |  | 12.6%            |         | 10/09        |   |                       |  | 5.0       |      |      | 5.0   |           |  | 5.0  
|                                                                                            |  |                                |  | Redeemable Preferred Membership Units |  |                  |         |              |   | 3,796,269             |  |           |      |      | 4.8   |           |  | 5.5  
|                                                                                            |  |                                |  | Common Membership Units(1)            |  |                  |         |              |   | 27,400                |  |           |      |      | 1.9   |           |  | 6.0  
|                                                                                            |  |                                |  |                                       |  |                  |         |              |   |                       |  |           |      |      | 11.7  |           |  | 16.5 
|WIS Holding Company, Inc.                                                                   |  | Commercial Services & Supplies |  | Subordinated Debt(7)                  |  | 14.8%            |         | 1/14-1/15    |   |                       |  | 103.8     |      |      | 103.0 |           |  | 103.8
|                                                                                            |  | Convertible Preferred Stock    |  |                                       |  |                  |         | 703,406      |   |                       |  |           | 82.3 |      |       | 132.6    
|                                                                                            |  |                                |  | Common Stock(1)                       |  |                  |         |              |   | 175,852               |  |           |      |      | 17.6  |           |  | 30.2 
|                                                                                            |  |                                |  |                                       |  |                  |         |              |   |                       |  |           |      |      | 202.9 |           |  | 266.6
|WSACS RR Holdings LLC                                                                       |  | Real Estate                    |  | Common Membership Units(1)            |  |                  |         |              |   | 3,170,176             |  |           |      |      | 3.2   |           |  | 3.2  
|                                                                                            |  |                                |  |                                      
|CDO / CLO INVESTMENTS                                                                       |  |                                |  |                                       |  |                  |         |              |   |                      
|ACAS Wachovia Investments, L.P.                                                             |  | Diversified Financial Services |  | Partnership Interest                  |  |                  |         |              |   | 90%                   |  |           |      |      | 11.5  |           |  | 1.4  
|Subtotal Control Investments (40% of total investment assets and liabilities at fair
value) |  |                                |  |                                       |  | $                | 4,382.3 |              | $ | 2,897.8              

|                                                                                                       |  |                                                      |          |                  |   |                    |  |               |  |          |  |      |        |           |  |       
|------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------- | -------- | ---------------- | - | ------------------ |  | ------------- |  | -------- |  | ---- | ------ | --------- |  | ------
|                                                                                                       |  |                                                      |          |                  |   |                    | 
|Counterparty (4)                                                                                       |  | Instrument                                           |          | InterestRate (5) |   | ExpirationDate (5) |  | # ofcontracts |  | Notional |  | Cost |        | FairValue
|                                                                                                       | 
|DERIVATIVE AGREEMENTS                                                                                  |  |                                                     
|Citibank, N.A.                                                                                         |  | Interest Rate Swaption - Pay Floating/ Receive Fixed |          | 4.6%             |   | 4/12-11/19         |  | 2             |  | 43.5     |  |      |       |           |  | 3.8   
|Wachovia Bank, N.A.                                                                                    |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.1%             |   | 8/19               |  | 1             |  | 37.0     |  |      |       |           |  | 3.8   
|BMO Financial Group                                                                                    |  | Interest Rate Swaption - Pay Floating/ Receive Fixed |          | 5.5%             |   | 11/12              |  | 1             |  | 22.9     |  |      |       |           |  | 1.1   
|Subtotal Derivative Agreements (less than 1% of total investment assets and liabilities at
fair value) |  |                                                      |          |                  |  |                    |  | 8.7          
|Total Investment Assets                                                                                |  | $                                                    | 10,691.0 |                  | $ | 7,426.9           
|DERIVATIVE & OPTION AGREEMENTS                                                                         |  |                                                     
|Citibank, N.A.                                                                                         |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 4.8%             |   | 4/12-11/19         |  | 4             |  | 666.9    |  |      |       |           |  | (45.9)
|BMO Financial Group                                                                                    |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.4%             |   | 2/13-8/17          |  | 5             |  | 479.9    |  |      |       |           |  | (43.5)
|Wachovia Bank, N.A.                                                                                    |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 4.9%             |   | 1/14-8/19          |  | 3             |  | 379.1    |  |      |       |           |  | (33.0)
|UniCredit Group                                                                                        |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.7%             |   | 7/17               |  | 1             |  | 66.0     |  |      |       |           |  | (10.6)
|WestLB AG                                                                                              |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.8%             |   | 6/17               |  | 1             |  | 55.0     |  |      |       |           |  | (8.3) 
|Credit Suisse International                                                                            |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.8%             |   | 6/17               |  | 1             |  | 26.1     |  |      |       |           |  | (3.9) 
|Fortis Financial Services LLC                                                                          |  | Interest Rate Swap - Pay Fixed/ Receive Floating     |          | 5.7%             |   | 7/17               |  | 1             |  | 22.3     |  |      |       |           |  | (5.9) 
|Citibank, N.A.                                                                                         |  | Foreign Exchange Swap - Pay Euros/ Receive GBP       |          |                  |   | 2/11               |  | 1             |  |          |  |      |       |           |  | (1.5) 
|European Capital Limited(2)(3)                                                                         |  | Put Option                                           |          |                  |   | 12/10              |  |               |  |          |  |      | (19.7) |           |  | (69.4)
|Total Investment Liabilities (3% of total investment
assets and liabilities at fair value)             |  | $                                                    | (19.7)   |                  | $ | (222.0)           



|(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 or securities are pledged as collateral under various secured financing arrangements.
|--- | -------------------------------------------------------------------------------------------------------------------

|(8) | 2,500,100 shares with a cost of $50.0 and a fair value of $48.1 are restricted for sale until May 2009.
|--- | -------------------------------------------------------------------------------------------------------

|(9) | Portfolio company has filed for reorganization under Chapter 11 of the United States Bankruptcy Code.
|--- | -----------------------------------------------------------------------------------------------------



37



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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, 2008, 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 (American Capital One-Stop Buyouts), the buyouts of private
companies sponsored by other private equity firms (American Capital One Stop Financings) 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 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 through subsidiaries of our wholly-owned portfolio company, American Capital, LLC. As an alternative asset manager, we had $11 billion of capital resources under
management as of March 31, 2009.



We are the sole
shareholder of American Capital Financial Services, Inc. (ACFS). Through ACFS, we provide advisory, management and other services to our portfolio companies. 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, 2008, 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, 2009, we continued to be in breach of these financial covenants
on $2.3 billion of unsecured borrowing arrangements. As a result, during the continuance of these events of defaults, the lenders and note holders under such borrowing arrangements may declare all borrowings outstanding under their respective
arrangements to be immediately due and payable after any applicable notice periods. If this were to occur, there is no assurance that we will have sufficient funds available to pay in full the total amount of obligations that



38



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



would become due as a result of such acceleration or that we will be able to obtain additional or alternative financing to pay or refinance any such
accelerated obligations.



However, we continue to believe that
we will have adequate liquidity to continue to fund our operations and the interest payments on our borrowing arrangements, including any default interest, in the absence of an acceleration of the maturity of the debt. We continue to have active
discussions with our unsecured lenders and note holders regarding a restructuring of our borrowing arrangements. During the first quarter of 2009, we also retained Miller Buckfire & Co. LLC as a financial advisor to assist us in our efforts
to restructure these borrowing arrangements. We continue to believe that we will successfully renegotiate the unsecured borrowing arrangements with our lenders and note holders and that we will continue to exist as a going concern.



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 consolidated financial statements included in this Form 10-Q 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.



Note 4. Significant Accounting Policies



Interest and Dividend Income Recognition



Interest income is recorded on the accrual basis to the extent that such amounts are expected to be collected. Original issue discount (OID) is accreted into interest income using the effective interest method. OID initially
represents the value of detachable equity warrants obtained in conjunction with the origination or purchase of loans and loan origination fees that represent yield enhancement. Dividend income is recognized on the ex-dividend date for common equity
securities and on an accrual basis for preferred equity securities to the extent that such amounts are expected to be collected or realized. In determining the amount of dividend income to recognize, if any, from cash distributions on common equity
securities, we will assess many factors including a portfolio companys cumulative undistributed income and operating cash flow. Cash distributions from common equity securities received in excess of such undistributed amounts are recorded
first as a reduction of our investment and then as a realized gain on investment. We stop accruing interest or dividends on our investments when it is determined that the interest or dividend is not collectible. We assess the collectability of the
interest and dividends based on many factors including the portfolio companys ability to service our loan based on current and projected cash flows as well as the current valuation of the enterprise. For investments with payment-in-kind
(PIK) interest and cumulative dividends, we base income and dividend accruals on the valuation of the PIK notes or securities received from the borrower or the redemption value of the security. If the portfolio company valuation
indicates a value of the PIK notes or securities or redemption value that is not sufficient to cover the contractual interest or dividend, we will generally not accrue interest or dividend income on the notes or securities.



Interest income on CMBS, CLO and CDO investments is recognized on the
effective interest method as required by Emerging Issues Task Force (EITF) Issue No. 99-20,Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets
(EITF No. 99-20).



39



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



Under EITF No. 99-20, at the time of purchase, we estimate the future expected cash flows and determine the effective interest rate based on these
estimated cash flows and our cost basis. Subsequent to the purchase and on a quarterly basis, these estimated cash flows are updated and a revised yield is calculated prospectively based on the current amortized cost of the investment. To the extent
the current quarterly estimated cash flows decrease from the prior quarterly estimated cash flows, the revised yield is calculated prospectively based on the amortized cost basis of the investment calculated in accordance with Financial Accounting
Standards Board (the FASB) Staff Position No. FAS 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairment, (FSP FAS 115-2). In estimating these cash flows, there are a number of assumptions
that are subject to uncertainties and contingencies. These include the amount and timing of principal payments (including prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate fluctuations. In
addition, interest payment shortfalls due to delinquencies on the underlying loans, and the timing of and magnitude of projected credit losses on the loans underlying the securities have to be estimated. These uncertainties and contingencies are
difficult to predict and are subject to future events that may impact our estimates and interest income. As a result, actual results may differ significantly from these estimates.



Investment Valuation Policy



Our investments are carried at fair value in accordance with the 1940 Act and SFAS No. 157, Fair Value Measurements (SFAS
No. 157). In accordance with the 1940 Act, unrestricted minority-owned publicly traded securities for which market quotations are readily available are valued at the closing market quote on the valuation date and majority-owned and
restricted publicly traded securities and other privately held securities are valued as determined in good faith by our Board of Directors. For restricted securities of companies that are publicly traded, the value is based on the closing market
quote on the valuation date minus a discount for the restriction. For unrestricted securities of companies that are publicly traded for which we have a majority-owned interest, the value is based on the closing market quote on the valuation date
plus a control premium if our Board of Directors determines in good faith that additional value above the closing market quote would be obtainable upon a sale or transfer of our controlling interest.



We adopted SFAS No. 157 on January 1, 2008. SFAS No. 157
provides a framework for measuring the fair value of assets and liabilities and provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings. SFAS
No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. 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.



In April 2009, the FASB issued FASB Staff Position No. 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(FSP No. 157-4). FSP No. 157-4 made amendments to SFAS No. 157 to provide additional guidance for estimating fair value
in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased and includes guidance on identifying circumstances that indicate a transaction is not orderly. It emphasizes that even
if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique used, the objective of a fair value measurement remains the same that the fair value is the price that
would be received to sell an asset or paid



40



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date
under current market conditions. The guidance in FSP No. 157-4 is effective for periods ending after June 15, 2009 and is applied prospectively with early adoption permitted for periods ending after March 15, 2009. We adopted FSP
No. 157-4 during the quarter ended March 31, 2009. The adoption of FSP No. 157-4 did not have a material impact on our consolidated financial statements.



SFAS No. 157 defines fair value in terms of the price that would be received upon the sale of an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date under current market conditions. The price used to measure the fair value is not adjusted for transaction costs while the cost basis of our investments may include initial
transaction costs. Under SFAS No. 157, the fair value measurement also assumes that the transaction to sell an asset occurs in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the
asset. The principal market is the market in which the reporting entity would sell or transfer the asset with the greatest volume and level of activity for the asset. In determining the principal market for an asset or liability under SFAS
No. 157, it is assumed that the reporting entity has access to the market as of the measurement date. If no market for the asset exists or if the reporting entity does not have access to the principal market, the reporting entity should use a
hypothetical market.



The market in which we would sell our
private finance investments is the mergers and acquisition (M&A) market. Under SFAS No. 157, we have indentified the M&A market as our principal market for portfolio companies only if we have the ability to initiate a sale
of the portfolio company as of the measurement date. We determine whether we have the ability to initiate a sale of a portfolio company based on our ability to control or gain control of the board of directors of the portfolio company as of the
measurement date. In evaluating if we can control or gain control of a portfolio company as of the measurement date, we include our equity securities and those securities held by entities managed by American Capital, LLC, on a fully diluted basis.
For investments in portfolio companies for which we do not have the ability to control or gain control as of the measurement date and for which there is no active market, our principal market under SFAS No. 157 is a hypothetical secondary
market.



Accordingly, we use the M&A market as our
principal market for portfolio companies that we control or can gain control as of the measurement date, and we use a hypothetical secondary market for portfolio companies that we do not control or cannot gain control as of the measurement date.
However, to the extent that an active market exists, we will consider that as our principal market. Our valuation policy considers the fact that no ready market exists for substantially all of our investments and that fair value for our investments
must typically be determined using unobservable inputs.



Enterprise Value Waterfall Methodology



For
investments in portfolio companies that we have identified the M&A market as the principal market, we estimate the fair value based on the enterprise value waterfall (Enterprise Value Waterfall) valuation methodology. For minority
equity securities in which the principal market is the hypothetical secondary market, we also estimate the fair value using the Enterprise Value Waterfall valuation methodology. Prior to the adoption of SFAS No. 157, we generally used the
Enterprise Value Waterfall methodology for valuing our entire private finance portfolio that was not publicly traded. Upon the adoption of SFAS No. 157, we no longer use the Enterprise Value Waterfall methodology for valuing debt and redeemable
preferred equity investments that we do not control or cannot gain control as of the measurement date.



41



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



Under the Enterprise Value Waterfall valuation methodology, we estimate the enterprise value of the
portfolio company and then waterfall the enterprise value over the portfolio companys securities in order of their preference relative to one another. In using the Enterprise Value Waterfall valuation methodology, we consider the in-use
valuation premise under SFAS No. 157, which assumes the loans and equity securities are sold together, and which we believe is appropriate as this would provide the maximum proceeds to the seller. In applying the Enterprise Value Waterfall
valuation methodology, we also consider that in a change of control transaction, our loans are generally required to be repaid and that a buyer cannot assume the loan.



To estimate the enterprise value of the portfolio company, we prepare an analysis consisting of traditional valuation methodologies
including market, income and cost approaches. We weight some or all of the traditional valuation methods based on the individual circumstances of the portfolio company in order to conclude on our estimate of the enterprise value. The methodologies
consist of valuation estimates based on: 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 of the portfolio companys assets, third-party valuations of the portfolio company, considering 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.



In valuing convertible debt, equity or other similar securities, we value our investment based on our pro rata share of the residual equity value available after deducting all outstanding debt from the estimated enterprise value. We value
non-convertible debt at the face amount of the debt to the extent that the estimated enterprise value of the portfolio company exceeds the outstanding debt of the portfolio company. If the estimated enterprise value is less than the outstanding debt
of the company, we reduce the value of our debt investment beginning with the junior most debt such that the enterprise value less the value of the outstanding debt is zero.



Market Yield Valuation Methodology



For investments in portfolio companies for which we are required to identify the hypothetical secondary market as the principal market, we
determine the fair value based on the assumptions that hypothetical market participants would use to value the investment in a current hypothetical sale using a market yield (Market Yield) valuation methodology based on an exchange
valuation premise under SFAS No. 157.



For debt and
redeemable preferred equity investments of our private finance portfolio for which we do not control or cannot gain control as of the measurement date, we estimate the fair value based on such factors as third-party broker quotes and our own
assumptions in the absence of market observable data, including synthetic credit ratings, 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 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.



We also value our investments in Structured Products using the
Market Yield valuation methodology. We estimate the fair value based on such factors as third-party broker quotes and our cash flow forecasts subject to



42



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



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. Cash flow forecasts are discounted using a market participants market yield assumptions that are derived from multiple sources including, but not limited to, third-party broker quotes,
recent investments and securities and indices with similar structure and risk characteristics. We weight the use of third-party broker quotes 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.



Interest Rate Derivatives



For interest rate derivative agreements, we estimate the fair value based on the estimated net present value of the future cash flows using a forward interest rate yield curve in effect as of the end of the measurement period, adjusted for
nonperformance risk, if any, including a quantitative and/or qualitative evaluation of both our credit risk and our counterpartys credit risk.



New Accounting Pronouncement



In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments
(FSP No. 107-1), which expands the fair value disclosures required for all financial instruments within the scope of SFAS No. 107 to interim periods for publicly traded entities. FSP No. 107-1 also requires entities to
disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments in financial statements on an interim basis and to highlight any changes of the methods and significant assumptions from prior periods. FSP
No. 107-1 is effective for interim reporting periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. We adopted the interim disclosure requirements of FSP No. 107-1 as of
March 31, 2009.



Derivative Financial Instruments



We maintain an interest rate risk management strategy
under which we use derivative financial instruments to primarily manage the adverse impact of interest rates changes on our cash flows by locking in the spread between our asset yield and the cost of our borrowings, and to fulfill our obligation
under the terms of our asset securitizations. We do not hold or issue derivative financial instruments for speculative purposes. All derivative financial instruments are recorded at fair value with changes in fair value reflected in net unrealized
appreciation or depreciation of investments during the reporting period. The fair value of interest rate derivative agreements 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 non-performance risk based on our credit risk and our counterpartys credit risk. We consider the impact of any collateral requirements, credit enhancements or netting arrangements in evaluating credit
risk.



Our derivatives are considered economic hedges that do
not qualify for hedge accounting under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities(SFAS No. 133). We record the accrual of the periodic interest settlements of interest rate derivatives in
net unrealized appreciation or depreciation of investments and subsequently record the amount as a realized gain or loss on investments on the interest settlement date.



43



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS No. 161). The objective of SFAS No. 161 is to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entitys financial position, financial performance, and cash flows. We have applied the disclosure requirements of SFAS No. 161 as of March 31, 2009.



Note 5. Investments



Investments consist of loans and securities issued by publicly- and privately-held companies consisting of senior debt,
subordinated debt, equity warrants, preferred and common equity securities and derivative agreements. Our loans are payable in installments with final maturities ranging generally from five to ten years and many are collateralized by assets of the
borrower. We also make investments that do not produce current income. These investments typically consist of equity warrants, common equity and preferred equity and are identified in the accompanying consolidated schedule of investments. We also
invest in both investment grade and non-investment grade Structured Products.



We fair value our investments in accordance with GAAP 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.



The levels of fair value inputs used to measure
our investments are characterized in accordance with the fair value hierarchy established by SFAS No. 157. 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.
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 in publicly traded unrestricted securities for which we do not have a controlling interest. Such investments are valued at the closing price on the measurement date. We did not value any of our
investments using Level 1 inputs as of March 31, 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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. See Note 4, Investment Valuation Policy for further information regarding the investment valuation policies used to determine the fair value of our Level 3 investments.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



The following fair value hierarchy table sets forth our investment portfolio by level as of
March 31, 2009 and December 31, 2008, respectively (in millions):



|                                      |  |                   |   |         |   |         |  |   |       |   |  |   |       |  
|------------------------------------- |  | ----------------- | - | ------- | - | ------- |  | - | ----- | - |  | - | ----- | -
|                                      |  | March 31, 2009    |  
|                                      |  | Level 1           |   | Level 2 |   | Level 3 |  |   | Total |  
|Senior debt                           |  | $                 |  |         | $ |        |  | $ | 2,616 |   |  | $ | 2,616 |  
|Subordinated debt                     |  |                   |  |         |   |        |  |   | 2,250 |   |  |   | 2,250 |  
|Preferred equity                      |  |                   |  |         |   |        |  |   | 1,271 |   |  |   | 1,271 |  
|Common equity                         |  |                   |  |         |   | 83      |  |   | 418   |   |  |   | 501   |  
|Equity warrants                       |  |                   |  |         |   |        |  |   | 58    |   |  |   | 58    |  
|Structured products                   |  |                   |  |         |   |        |  |   | 143   |   |  |   | 143   |  
|Derivative agreements, net            |  |                   |  |         |   |        |  |   | (92   | ) |  |   | (92   | )
|                                      |  |                   |   |         |   |         |  |   |       |   |  |   |       |  
|Total investments, net                |  | $                 |  |         | $ | 83      |  | $ | 6,664 |   |  | $ | 6,747 |  
|                                      |  |                   |   |         |   |         |  |   |       |   |  |   |       |  
|                                      | 
|                                      |  | December 31, 2008 |  
|                                      |  | Level 1           |   | Level 2 |   | Level 3 |  |   | Total |  
|Senior debt                           |  | $                 |  |         | $ |        |  | $ | 2,760 |   |  | $ | 2,760 |  
|Subordinated debt                     |  |                   |  |         |   |        |  |   | 2,351 |   |  |   | 2,351 |  
|Preferred equity                      |  |                   |  |         |   |        |  |   | 1,344 |   |  |   | 1,344 |  
|Common equity                         |  |                   |  |         |   | 102     |  |   | 601   |   |  |   | 703   |  
|Equity warrants                       |  |                   |  |         |   |        |  |   | 74    |   |  |   | 74    |  
|Structured products                   |  |                   |  |         |   |        |  |   | 186   |   |  |   | 186   |  
|Derivative and option agreements, net |  |                   |  |         |   |        |  |   | (213  | ) |  |   | (213  | )
|                                      |  |                   |   |         |   |         |  |   |       |   |  |   |       |  
|Total investments, net                |  | $                 |  |         | $ | 102     |  | $ | 7,103 |   |  | $ | 7,205 |  
|                                      |  |                   |   |         |   |         |  |   |       |   |  |   |       |  



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



|                                      |  |                         |       |   |                           |   |      |                                                       |  |                                             |     |  |                                                 |      |   |                             |   |                        |   |  |   |   |  |   |       |  
|------------------------------------- |  | ----------------------- | ----- | - | ------------------------- | - | ---- | ----------------------------------------------------- |  | ------------------------------------------- | --- |  | ----------------------------------------------- | ---- | - | --------------------------- | - | ---------------------- | - |  | - | - |  | - | ----- | -
|                                      |  | Balances,January 1,2009 |       |   | RealizedGains/(Losses)(1) |   |      | Reversal of PriorPeriod Depreciationon
Realization(2) |  | UnrealizedAppreciation/(Depreciation)(2)(3) |     |  | Purchases, Sales,Issuances &Settlements, net(4) |      |   | TransfersIn & Out ofLevel 3 |   | Balances,March 31,2009 |  
|Senior debt                           |  | $                       | 2,760 |   |                           | $ | (11  | )                                                     |  | $                                           | 11  |  | $                                               | (138 | ) |                             | $ | (6                     | ) |  | $ |  |  | $ | 2,616 |  
|Subordinated debt                     |  |                         | 2,351 |   |                           |   | (27  | )                                                     |  |                                             | 30  |  |                                                 | (125 | ) |                             |   | 21                     |   |  |   |  |  |   | 2,250 |  
|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, net |  |                         | (213  | ) |                           |   | (50  | )                                                     |  |                                             | 49  |  |                                                 | 53   |   |                             |   | 69                     |   |  |   |  |  |   | (92   | )
|                                      |  |                         |       |   |                           |   |      |                                                       |  |                                             |     |  |                                                 |      |   |                             |   |                        |   |  |   |   |  |   |       |  
|Total                                 |  | $                       | 7,103 |   |                           | $ | (129 | )                                                     |  | $                                           | 127 |  | $                                               | (603 | ) |                             | $ | 166                    |   |  | $ |  |  | $ | 6,664 |  
|                                      |  |                         |       |   |                           |   |      |                                                       |  |                                             |     |  |                                                 |      |   |                             |   |                        |   |  |   |   |  |   |       |  



|(1) | Included in net realized (loss) gain on investments in the consolidated statements of operations. Excludes $2 million in losses on realized foreign currency transactions on other
corporate activity denominated in a foreign currency.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



45



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



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

|(3) | Excludes $2 million of unrealized appreciation related to foreign currency translation for American Capital borrowings that are denominated in a foreign currency.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes increases in the cost basis of investments resulting from new portfolio investments, PIK interest or cumulative 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of
March 31, 2009 and December 31, 2008, loans on non-accrual status were $1,103 million and $871 million, respectively, calculated as the cost plus unamortized OID, and $214 million and $150 million, respectively, at fair value. As of
March 31, 2009 and December 31, 2008, loans with a principal balance of $28 million were greater than three months 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, excluding derivative
and option agreements, are shown in the following tables:



|                    |  |                |   |  |                   |  
|------------------- |  | -------------- | - |  | ----------------- | -
|                    |  | March 31, 2009 |   |  | December 31, 2008 |  
|COST                |  |                |   |  |                   |  
|                    |  |               
|Senior debt         |  | 31.7           | % |  | 31.9              | %
|Subordinated debt   |  | 26.3           | % |  | 26.5              | %
|Preferred equity    |  | 16.0           | % |  | 16.3              | %
|Common equity       |  | 16.0           | % |  | 15.2              | %
|Structured products |  | 9.0            | % |  | 9.0               | %
|Equity warrants     |  | 1.0            | % |  | 1.1               | %
|                    |  |                |   |  |                   |  
|                    |  | 100.0          | % |  | 100.0             | %
|                    |  |                |   |  |                   |  
|                    |  |               
|                    |  | March 31, 2009 |   |  | December 31, 2008 |  
|FAIR VALUE          |  |                |   |  |                   |  
|                    |  |               
|Senior debt         |  | 38.2           | % |  | 37.2              | %
|Subordinated debt   |  | 32.9           | % |  | 31.7              | %
|Preferred equity    |  | 18.6           | % |  | 18.1              | %
|Common equity       |  | 7.3            | % |  | 9.5               | %
|Structured products |  | 2.1            | % |  | 2.5               | %
|Equity warrants     |  | 0.9            | % |  | 1.0               | %
|                    |  |                |   |  |                   |  
|                    |  | 100.0          | % |  | 100.0             | %
|                    |  |                |   |  |                   |  



46



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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, excluding derivative and option agreements. Our investments in European Capital Limited
(European Capital), 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 category.



|                                     |  |                |   |  |                   |  
|------------------------------------ |  | -------------- | - |  | ----------------- | -
|                                     |  | March 31, 2009 |   |  | December 31, 2008 |  
|COST                                 |  |                |   |  |                   |  
|                                     |  |               
|Commercial Services and Supplies     |  | 11.2           | % |  | 11.7              | %
|Real Estate                          |  | 10.3           | % |  | 10.3              | %
|Household Durables                   |  | 9.1            | % |  | 9.0               | %
|Internet and Catalog Retail          |  | 5.1            | % |  | 5.2               | %
|Life Sciences Tools and Services     |  | 4.0            | % |  | 3.9               | %
|Food Products                        |  | 3.8            | % |  | 3.8               | %
|Health Care Providers and Services   |  | 3.6            | % |  | 3.6               | %
|Health Care Equipment and Supplies   |  | 3.5            | % |  | 3.5               | %
|Diversified Financial Services       |  | 3.5            | % |  | 3.4               | %
|Hotels, Restaurants and Leisure      |  | 3.3            | % |  | 3.3               | %
|Auto Components                      |  | 3.1            | % |  | 3.1               | %
|Diversified Consumer Services        |  | 3.1            | % |  | 3.1               | %
|Construction and Engineering         |  | 2.9            | % |  | 3.1               | %
|Electrical Equipment                 |  | 2.8            | % |  | 2.8               | %
|IT Services                          |  | 2.2            | % |  | 2.2               | %
|Pharmaceuticals                      |  | 2.0            | % |  | 2.0               | %
|Containers and Packaging             |  | 1.9            | % |  | 1.9               | %
|Computers and Peripherals            |  | 1.8            | % |  | 1.8               | %
|Electronic Equipment and Instruments |  | 1.7            | % |  | 1.8               | %
|Software                             |  | 1.6            | % |  | 1.6               | %
|Internet Software and Services       |  | 1.6            | % |  | 1.7               | %
|Leisure Equipment and Products       |  | 1.5            | % |  | 1.5               | %
|Building Products                    |  | 1.5            | % |  | 1.5               | %
|Aerospace and Defense                |  | 1.4            | % |  | 1.4               | %
|Other                                |  | 13.5           | % |  | 12.8              | %
|                                     |  |                |   |  |                   |  
|                                     |  | 100.0          | % |  | 100.0             | %
|                                     |  |                |   |  |                   |  



47



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



|                                     |  |                |   |  |                   |  
|------------------------------------ |  | -------------- | - |  | ----------------- | -
|                                     |  | March 31, 2009 |   |  | December 31, 2008 |  
|FAIR VALUE                           |  |                |   |  |                   |  
|                                     |  |               
|Commercial Services and Supplies     |  | 11.4           | % |  | 11.6              | %
|Household Durables                   |  | 8.0            | % |  | 7.8               | %
|Life Sciences Tools and Services     |  | 5.1            | % |  | 4.8               | %
|Electrical Equipment                 |  | 5.0            | % |  | 4.7               | %
|Health Care Equipment and Supplies   |  | 4.9            | % |  | 4.7               | %
|Real Estate                          |  | 4.9            | % |  | 4.8               | %
|Internet and Catalog Retail          |  | 4.7            | % |  | 4.6               | %
|Diversified Consumer Services        |  | 4.5            | % |  | 4.3               | %
|Hotels, Restaurants and Leisure      |  | 3.9            | % |  | 3.6               | %
|Diversified Financial Services       |  | 3.7            | % |  | 3.6               | %
|Health Care Providers and Services   |  | 3.6            | % |  | 3.3               | %
|Pharmaceuticals                      |  | 3.1            | % |  | 2.8               | %
|Auto Components                      |  | 3.0            | % |  | 3.2               | %
|Food Products                        |  | 2.9            | % |  | 3.0               | %
|Software                             |  | 2.5            | % |  | 2.3               | %
|Electronic Equipment and Instruments |  | 2.3            | % |  | 2.2               | %
|Construction and Engineering         |  | 2.2            | % |  | 2.7               | %
|IT Services                          |  | 2.0            | % |  | 1.8               | %
|Energy Equipment and Services        |  | 1.9            | % |  | 1.8               | %
|Computers and Peripherals            |  | 1.9            | % |  | 2.0               | %
|Building Products                    |  | 1.8            | % |  | 2.0               | %
|Aerospace and Defense                |  | 1.6            | % |  | 2.1               | %
|Containers and Packaging             |  | 1.6            | % |  | 1.7               | %
|Internet Software and Services       |  | 1.5            | % |  | 1.4               | %
|Other                                |  | 12.0           | % |  | 13.2              | %
|                                     |  |                |   |  |                   |  
|                                     |  | 100.0          | % |  | 100.0             | %
|                                     |  |                |   |  |                   |  



48



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



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 and derivative and option agreements. The geographic composition is determined by the location of the corporate headquarters of the portfolio company.



|              |  |                |   |  |                   |  
|------------- |  | -------------- | - |  | ----------------- | -
|              |  | March 31, 2009 |   |  | December 31, 2008 |  
|COST          |  |                |   |  |                   |  
|              |  |               
|Southwest     |  | 20.5           | % |  | 20.8              | %
|Mid-Atlantic  |  | 18.8           | % |  | 19.5              | %
|International |  | 15.8           | % |  | 16.1              | %
|Southeast     |  | 12.6           | % |  | 12.4              | %
|South-Central |  | 12.2           | % |  | 11.6              | %
|Northeast     |  | 11.6           | % |  | 11.7              | %
|North-Central |  | 8.1            | % |  | 7.3               | %
|Northwest     |  | 0.4            | % |  | 0.6               | %
|              |  |                |   |  |                   |  
|              |  | 100.0          | % |  | 100.0             | %
|              |  |                |   |  |                   |  
|              |  |               
|              |  | March 31, 2009 |   |  | December 31, 2008 |  
|FAIR VALUE    |  |                |   |  |                   |  
|              |  |               
|Southwest     |  | 23.5           | % |  | 24.3              | %
|Mid-Atlantic  |  | 19.6           | % |  | 21.7              | %
|South-Central |  | 15.0           | % |  | 13.8              | %
|Northeast     |  | 12.1           | % |  | 12.0              | %
|Southeast     |  | 11.1           | % |  | 10.7              | %
|North-Central |  | 9.6            | % |  | 8.1               | %
|International |  | 8.8            | % |  | 8.8               | %
|Northwest     |  | 0.3            | % |  | 0.6               | %
|              |  |                |   |  |                   |  
|              |  | 100.0          | % |  | 100.0             | %
|              |  |                |   |  |                   |  



Note 6. Borrowings



Our debt obligations consisted of the following as of March 31, 2009
and December 31, 2008 (in millions):



|                                                               |  |                |       |                   |   |      
|-------------------------------------------------------------- |  | -------------- | ----- | ----------------- | - | -----
|                                                               |  | March 31, 2009 |       | December 31, 2008
|Unsecured revolving credit facility, $1,409 million commitment |  | $              | 1,386 |                   | $ | 1,389
|Unsecured public debt due October 2012                         |  |                | 548   |                   |   | 548  
|Unsecured private debt due September 2009                      |  |                | 82    |                   |   | 82   
|Unsecured private debt due August 2010                         |  |                | 126   |                   |   | 126  
|Unsecured private debt due February 2011                       |  |                | 23    |                   |   | 24   
|Unsecured private debt due September 2011                      |  |                | 85    |                   |   | 85   
|Unsecured private debt due October 2020                        |  |                | 75    |                   |   | 75   
|ACAS Business Loan Trust 2004-1 asset securitization           |  |                | 196   |                   |   | 201  
|ACAS Business Loan Trust 2005-1 asset securitization           |  |                | 798   |                   |   | 798  
|ACAS Business Loan Trust 2006-1 asset securitization           |  |                | 421   |                   |   | 427  
|ACAS Business Loan Trust 2007-1 asset securitization           |  |                | 352   |                   |   | 381  
|ACAS Business Loan Trust 2007-2 asset securitization           |  |                | 285   |                   |   | 292  
|                                                               |  |                |       |                   |   |      
|Total                                                          |  | $              | 4,377 |                   | $ | 4,428
|                                                               |  |                |       |                   |   |      



49



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



The daily weighted average debt balance for the three months ended March 31, 2009 and 2008 was
$4,401 million and $4,833 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, 2009 and 2008 was 4.7% and 5.2%,
respectively.



As of March 31, 2009 and December 31,
2008, the aggregate fair value of the above borrowings was $2,722 million and $3,172 million, respectively. The fair values of our debt obligations are determined in accordance with SFAS No. 157, 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.



Secured Revolving Credit Facility



On March 12, 2009, we terminated our $500 million secured revolving
credit facility with Wachovia Capital Markets, LLC, as deal agent. All borrowings under the facility were repaid during the third quarter of 2008 and had not been redrawn. We terminated the facility in connection with our effort to further delever
our balance sheet and to reduce our overall borrowing costs. We did not incur any early termination fees or penalties as a result of the termination of the facility. We recorded a loss on debt extinguishment of $5 million as a result of writing off
the deferred debt issuance costs, which is recorded in net gain on debt extinguishment in the accompanying consolidated statements of operations.



Unsecured Revolving Credit Facility



As of March 31, 2009 and December 31, 2008, we were not in compliance with the minimum consolidated tangible net worth covenant and certain
other covenants for this facility. On March 5, 2009, the lenders under this facility sent a notice of such events of default to us. 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. Pursuant to the terms of the facility, the applicable spread on any borrowings outstanding under this facility increased during the first quarter of 2009 by
2.00% as a result of an event 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, 2009, the total interest rate on this facility was 9.00% for borrowings denominated in U.S. dollars.



Unsecured Public Debt



As of March 31, 2009 and December 31, 2008, we were not in compliance with the asset coverage covenant for these
notes. Under the indenture for the notes, we had a 60-day period to cure the default, which commenced on March 3, 2009, the date that we received notice of the default from certain note holders. Following the expiration of the 60-day cure
period, the default matured into an event of default under the indenture. Pursuant to



50



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



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, no acceleration actions have been taken by the note holders. As a result of rating agency downgrades during the first quarter of 2009, the interest rate on these notes increased by
1.75 % effective February 2, 2009 to a total rate of 8.60% as of March 31, 2009.



Unsecured Private Debt



As of March 31, 2009 and December 31, 2008, we were not in compliance with certain financial covenants, including the minimum consolidated
tangible net worth covenant, the available debt asset coverage covenant and the asset coverage covenant for each series of these notes. In addition, as of March 31, 2009, we were not in compliance with the ratio of consolidated debt to
consolidated shareholders equity covenant for each series. On March 5, 2009, the note holders sent a notice of such events of default to us. 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 can 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. As of the date of this filing, no acceleration actions have been
taken by the note holders.



Securitizations



In February 2009, we repurchased $20 million of Class
B notes issued by our indirect wholly owned consolidated subsidiary, ACAS Business Loan Trust 2007-1 for $3 million. As a result of this purchase, we recognized a $17 million gain during the quarter ended March 31, 2009 which is recorded in net
gain on debt extinguishment in the accompanying consolidated statements of operations.



As of March 31, 2009, we were in compliance with all of our asset securitizations.



Note 7. 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 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 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.



We have interest rate swap agreements where we generally pay a fixed rate and receive a floating rate based on LIBOR. We also have 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 schedule of investments.



51



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



Periodically, an interest rate swap agreement will also be amended. 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.



During the quarter ended March 31, 2009, we recorded $53 million of net unrealized appreciation from interest rate swap agreements in the financial statement line item derivative and option agreements in our
consolidated statements of operations, primarily due to a credit risk adjustment related to an adverse change in our credit rating. During the quarter ended March 31, 2009, we recorded $6 million 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.



Cash payments received or paid for the termination of an interest rate derivative agreement are recorded as a realized gain or loss upon termination in
our consolidated statements of operations and are classified under investing activities on our consolidated statements of cash flows. During the first quarter of 2009, no interest rate swap agreements were terminated prior to their maturity as
compared to a net cash settlement payment of $1 million for the three months ended March 31, 2008.



Credit Risk-Related Contingent Features



We have 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
of our indebtedness in amounts that range from the greater of $5 million to $15 million. As of March 31, 2009, the fair value of derivatives in a liability position related to these agreements was $14 million, and our liability in the event the
counterparties should elect to terminate their derivative transactions outstanding with us was $69 million.



We also have agreements with certain of our derivative counterparties that contain a provision that states that if a counterparty has accelerated certain
of our indebtedness in an amount greater than $15 million, then the counterparty may declare an early termination event on its derivative transactions outstanding with us. As of March 31, 2009, the fair value of derivatives in a liability
position related to these agreements was $9 million, and our liability in the event the counterparties should elect to terminate their derivative transactions outstanding with us was $19 million.



We have an agreement with a derivative counterparty that contains a provision
that states 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., then an additional termination event will
occur, which gives the counterparty an option to declare an early termination event on its derivative transactions outstanding with us. As of March 31, 2009, this termination event had occurred, but the counterparty had not elected to terminate
its transactions outstanding with us. As of March 31, 2009, the fair value of derivatives in a liability position related to this agreement was $9 million, and our liability in the event the counterparty should elect to terminate its derivative
transactions outstanding with us was $40 million.



52



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



We have agreements with certain of our derivative counterparties that contain a provision that states
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, then an additional termination event will occur, which gives the counterparty an option to declare an early
termination event on its derivative transactions outstanding with us. As of March 31, 2009, this termination event had not occurred. As of March 31, 2009, the fair value of derivatives in a liability position related to these agreements
was zero.



Note 8. Earnings Per Share



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 shares issued under forward sales agreements is 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 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 and 2008 as we incurred a net loss for those periods.



Stock options and unvested employee stock awards of 40.7 million and 28.7 million were not included in the computation of diluted earnings per share for the three months ended March 31, 2009 and 2008,
respectively, 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 9. Segment Data



Reportable segments are identified based on our organizational structure and the business activities from which we earn income. We have determined that we
have two primary lines of business: 1) Investing and 2) Asset Management/Advisory.



We derive the majority of our operating income and net operating income from our Investing segment, which primarily invests in senior and subordinated debt and equity of middle market companies.



Our Asset Management/Advisory segment provides management services to both
our portfolio companies and alternative asset funds. Our Asset Management/Advisory segment includes financial advisory services provided to our portfolio companies and includes both management fees for providing advice and analysis to our portfolio
companies, which can be recurring in nature, and transaction structuring and financing fees for structuring, financing and executing middle market transactions, which may not be recurring in nature. Our Asset Management/Advisory segment also
includes our alternative asset fund management business, which is conducted through our wholly-owned portfolio company, American Capital, LLC. To the extent that American Capital, LLC declares regular quarterly dividends of its quarterly net
operating income to us, such dividends would be included in our Asset Management/Advisory segment as dividend income. The results for our Asset Management/Advisory segment also include the net realized gain (loss) and net unrealized appreciation
(depreciation) of our investment in American Capital, LLC.



53



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



The following table presents segment data for the three months ended March 31, 2009 (in
millions):



|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  
|---------------------------------------------------- |  | --------- | ----- | - | ------------------------ | - | ---- | ------------ |  | - | ----- | -
|                                                     |  | Investing |       |   | AssetManagement/Advisory |   |      | Consolidated | 
|Interest and dividend income                         |  | $         | 179   |   |                          | $ |     |              |  | $ | 179   |  
|Fee and other income                                 |  |           | 2     |   |                          |   | 14   |              |  |   | 16    |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  
|Total operating income                               |  |           | 181   |   |                          |   | 14   |              |  |   | 195   |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  
|Interest                                             |  |           | 52    |   |                          |   |     |              |  |   | 52    |  
|Salaries, benefits and stock-based compensation      |  |           | 34    |   |                          |   | 19   |              |  |   | 53    |  
|General and administrative                           |  |           | 15    |   |                          |   | 11   |              |  |   | 26    |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  
|Total operating expenses                             |  |           | 101   |   |                          |   | 30   |              |  |   | 131   |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  
|Operating income (loss) before income taxes          |  |           | 80    |   |                          |   | (16  | )            |  |   | 64    |  
|Provision for income taxes                           |  |           |      |   |                          |   |     |              |  |   |      |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  
|Net operating income (loss)                          |  |           | 80    |   |                          |   | (16  | )            |  |   | 64    |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  
|Net gain on extinguishment of debt                   |  |           | 12    |   |                          |   |     |              |  |   | 12    |  
|Net realized loss on investments                     |  |           | (131  | ) |                          |   |     |              |  |   | (131  | )
|Net unrealized depreciation of investments           |  |           | (330  | ) |                          |   | (162 | )            |  |   | (492  | )
|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  
|Net decrease in net assets resulting from operations |  | $         | (369  | ) |                          | $ | (178 | )            |  | $ | (547  | )
|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  
|Total assets                                         |  | $         | 7,154 |   |                          | $ | 57   |              |  | $ | 7,211 |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |       |  



The following table
presents segment data for the three months ended March 31, 2008 (in millions):



|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  
|---------------------------------------------------- |  | --------- | ----- | - | ------------------------ | - | ---- | ------------ |  | - | ------ | -
|                                                     |  | Investing |       |   | AssetManagement/Advisory |   |      | Consolidated | 
|Interest and dividend income                         |  | $         | 251   |   |                          | $ | 7    |              |  | $ | 258    |  
|Fee and other income                                 |  |           | 4     |   |                          |   | 30   |              |  |   | 34     |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  
|Total operating income                               |  |           | 255   |   |                          |   | 37   |              |  |   | 292    |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  
|Interest                                             |  |           | 63    |   |                          |   |     |              |  |   | 63     |  
|Salaries, benefits and stock-based compensation      |  |           | 25    |   |                          |   | 31   |              |  |   | 56     |  
|General and administrative                           |  |           | 13    |   |                          |   | 10   |              |  |   | 23     |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  
|Total operating expenses                             |  |           | 101   |   |                          |   | 41   |              |  |   | 142    |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  
|Operating income (loss) before income taxes          |  |           | 154   |   |                          |   | (4   | )            |  |   | 150    |  
|(Provision) benefit for income taxes                 |  |           | (3    | ) |                          |   | 4    |              |  |   | 1      |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  
|Net operating income                                 |  |           | 151   |   |                          |   |     |              |  |   | 151    |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  
|Net realized gain on investments                     |  |           | 33    |   |                          |   |     |              |  |   | 33     |  
|Net unrealized depreciation of investments           |  |           | (857  | ) |                          |   | (140 | )            |  |   | (997   | )
|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  
|Net decrease in net assets resulting from operations |  | $         | (673  | ) |                          | $ | (140 | )            |  | $ | (813   | )
|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  
|Total assets                                         |  | $         | 9,848 |   |                          | $ | 371  |              |  | $ | 10,219 |  
|                                                     |  |           |       |   |                          |   |      |              |  |   |        |  



54



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



Note 10. Commitments



As of March 31, 2009, we had commitments under loan and financing agreements to fund up to $669 million to 54 portfolio companies. 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 meeting covenant compliance
and availability under borrowing base thresholds. The terms of the borrowings and financings subject to commitment are comparable to the terms of other debt and equity securities in our portfolio.



Note 11. 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 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 ordinary income and long-term capital gains that are distributed to its 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 distributed, or intend to distribute, sufficient dividends to eliminate taxable income for all of our tax fiscal years. 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.



On January 7, 2009, the Internal Revenue Service issued a revenue
procedure that temporarily allows a RIC to distribute its own stock as a dividend for the purpose of fulfilling its distribution requirements. Pursuant to this revenue procedure, a RIC may treat a distribution of its own stock as a dividend if
(i) the stock is publicly traded on an established securities market, (ii) the distribution is declared with respect to a taxable year ending on or before December 31, 2009 and (iii) each shareholder may elect to receive his or
her entire distribution in either cash or stock of the RIC 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.



Under the 1940 Act, if a BDC
has any senior debt securities outstanding that were publicly issued, the BDC must make provision to prohibit the declaration of any dividend (except a dividend payable in the stock of the BDC) if its asset coverage is below certain thresholds at
the time of the distribution after deducting the amount of such dividend. However, we have received guidance from the staff of the SEC that notwithstanding this provision of the 1940 Act, we may declare and pay dividends pursuant to the above
revenue procedure issued by the Internal Revenue Service.



Note 12. Related
Party Transactions



Prior to the enactment of the
Sarbanes-Oxley Act in June 2002, we provided loans to employees for the exercise of options under the employee stock option plans. The loans required the current payment of interest at a market rate, had varying terms not exceeding nine years and
were recorded as a reduction of shareholders equity



55



---

AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



in the accompanying consolidated balance sheets. The loans were evidenced by full recourse notes and had to be repaid in full at the earlier of maturity or
60 days following termination of employment. The shares of our common stock that the employees purchased with the proceeds of a loan were posted as collateral. Under the terms of the loan agreements, if 95% of the outstanding loan balance was less
than the aggregate value of the common stock collateral for such loan and any additional collateral, the loan maturity would be automatically accelerated and the collateral foreclosed upon. Pursuant to the loan agreements, the value of the original
shares of common stock collateral was the greater of NAV per share or the average of the closing prices for the last 20 trading days. The employees could avoid acceleration under their respective loans and foreclosure by delivering additional
collateral to us prior to an event of default. As of December 31, 2008, the aggregate amount of the notes receivable relating to the option exercise was $5 million. The loans were secured by an aggregate 0.2 million shares of the common
stock purchased with the proceeds from the loans.



During
February 2009, an employee pledged additional 0.9 million shares of our common stock as collateral, which was valued at the closing prices for the last 20 trading days. Due to the decline in our NAV per share as of December 31, 2008, the
outstanding stock option loans became under collateralized on March 2, 2009, triggering an automatic event of default and foreclosure on the 1.1 million shares of common stock collateral in satisfaction of the loans. The shares of common
stock that we received in the foreclosure are included in treasury stock and are not included in our outstanding shares of common stock. We had no further stock option loans outstanding as of March 31, 2009.



Note 13. Investment in European Capital



Acquisition of European Capital



On November 10, 2008, American Capital and European Capital entered
into an implementation agreement regarding our proposal to acquire all of the ordinary shares of European Capital held by other investors, representing 32.3% of European Capitals outstanding ordinary shares, by means of a scheme of
arrangement under Guernsey company law. Under the terms of the agreement, each European Capital shareholder other than us would receive 0.333 of our shares of common stock for every one ordinary share that they owned of European Capital. On
February 19, 2009, our shareholders approved a proposal authorizing us to sell shares of our common stock below NAV per share in certain instances, including in connection with the proposed acquisition of European Capital. On March 19,
2009, the proposed transaction was approved by a special majority of the shareholders of European Capital, not including us. The acquisition became effective as of March 26, 2009, following approval by of the Royal Court of Guernsey. In
connection with the transaction, we issued 11.5 million shares of our common stock with a value of $25 million as of March 26, 2009 in exchange for the outstanding European Capital ordinary shares.



Put Option Agreement



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). The fair value of the put option liability as of December 31, 2008 was $69 million (49 million) which is included in derivative
and option agreements in our consolidated balance sheet. On March 30, 2009, we entered into a termination agreement with European Capital to terminate the put option



56



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AMERICAN CAPITAL, LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)

(in millions, except per share data)



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.



Revolving Credit Facilities



In February 2008, we provided a $400 million subordinated, unsecured
revolving credit facility (the Term A Facility) to European Capital. Borrowings under the Term A Facility bear interest at LIBOR plus 700 basis points. The Term A Facility has an unused commitment fee of 20 basis points and matures in
February 2011. As of March 31, 2009, the outstanding balance under the Term A Facility was $308 million and the remaining unfunded commitment was $92 million. 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. Borrowings under the Term B Facility bear interest at LIBOR plus 800 basis points. The Term B Facility has an unused commitment fee of 20 basis
points and matures in November 2009. As of March 31, 2009, there was no outstanding balance under the Term B Facility. Under each facility, standby letters of credit can be issued for the account of European Capital. Issuances of standby
letters of credit would reduce the available commitments under each facility. Any funding of a standby letter of credit that is not reimbursed by European Capital on the disbursement date will bear interest at the rate of the respective facility. As
of March 31, 2009, there were $116 million of standby letters of credit issued under both facilities.



57



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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 American Capitals 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 (American Capital One-Stop Buyouts) and buyouts of private companies sponsored by other private equity firms (American Capital One Stop Financings) and provide capital directly to
early stage and mature private and small public companies. In addition, we also invest in structured product investments including CMBS, CLO and CDO securities (Structured Products) and invest in alternative asset funds managed by us. We
are also an alternative asset manager with $11 billion of capital resources under management as of March 31, 2009.



Our primary business objectives are to increase our taxable income, net realized earnings and net asset value (NAV) by investing in private
equity, private debt, private real estate investments, early, middle and late stage technology investments, special situations, credit opportunities, alternative asset funds managed by us and structured finance investments with attractive current
yields and/or potential for equity appreciation and realized gains.



American Capital Investing Activities



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, mezzanine 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 $400 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 of our investment portfolio by segment and geographic area, see Note 5 to the interim
consolidated financial statements in Part I, Item I of this Quarterly Report on 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 needs capital to fund operating costs, debt service, or growth in receivables or inventory.



The total value of our investment portfolio was $6,849 million and $7,427 million as of March 31, 2009 and
December 31, 2008, respectively. During the three months ended March 31, 2009 and 2008, we originated investments in 12 and 23 portfolio companies, respectively. Our new investment amounts represent the gross



58



---

committed capital on the origination date. The type and aggregate dollar amount of our new investments during the three months ended March 31, 2009 and
2008 were as follows (in millions):



|                                                              |  |                             |  |     
|------------------------------------------------------------- |  | --------------------------- |  | ----
|                                                              |  | Three Months EndedMarch 31,
|                                                              |  | 2009                        |  | 2008
|American Capital sponsored buyouts                            |  | $                          |  | $303
|Direct investments                                            |  |                            |  | 113 
|Investments in managed funds                                  |  |                            |  | 400 
|Structured products                                           |  |                            |  | 48  
|Add-on financing for growth and working capital               |  |                            |  | 13  
|Add-on financing for working capital in distressed situations |  | 25                          |  | 30  
|Add-on financing for recapitalizations                        |  | 15                          |  | 2   
|                                                              |  |                             |  |     
|Total                                                         |  | $40                         |  | $909
|                                                              |  |                             |  |     



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



|                                                                          |  |                             |    |      |   |    
|------------------------------------------------------------------------- |  | --------------------------- | -- | ---- | - | ---
|                                                                          |  | Three Months EndedMarch 31,
|                                                                          |  | 2009                        |    | 2008
|Principal prepayments                                                     |  | $                           | 42 |      | $ | 240
|Loan syndications and sales                                               |  |                             | 8  |      |   | 274
|Scheduled principal amortization                                          |  |                             | 10 |      |   | 17 
|Payment of accrued PIK interest and dividend and original issue discounts |  |                             | 4  |      |   | 20 
|Sale of equity investments                                                |  |                             | 15 |      |   | 380
|                                                                          |  |                             |    |      |   |    
|Total                                                                     |  | $                           | 79 |      | $ | 931
|                                                                          |  |                             |    |      |   |    



Public Manager of Funds of
Alternative Assets



We are a leading global alternative
asset manager of third-party funds. In addition to managing American Capitals assets and providing management services to portfolio companies of American Capital, we also manage European Capital Limited (European Capital), American
Capital Agency Corp. (AGNC), American Capital Equity I, LLC (ACE I), American Capital Equity II, LLC (ACE II), ACAS CLO 2007-1, Ltd. (ACAS CLO-1) and American Capital CRE CDO 2007-1, Ltd. (ACAS
CRE CDO). We refer to the asset management business throughout this report to include the asset management activities conducted by our wholly-owned portfolio company, American Capital, LLC.



As of March 31, 2009, our assets under management totaled $11 billion,
including $4 billion under management in the third-party funds named above. As of March 31, 2009, our capital resources under management totaled $11 billion, including $4 billion under management in the third-party funds named above. Our
third-party assets under management do not include the assets of European Capital since we own 100% of European Capital. As a result, only our investment in European Capital is included in our assets under management.



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. We intend to grow our existing funds, while continuing to create innovative products to meet the increasing demand of sophisticated investors for superior risk-adjusted investment returns.



59



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The following table sets forth certain information with respect to our funds under management as of
March 31, 2009:



|                 |  |                                                         |  |                                                         |  |                                             |  |              |  |              |  |              |  |             
|---------------- |  | ------------------------------------------------------- |  | ------------------------------------------------------- |  | ------------------------------------------- |  | ------------ |  | ------------ |  | ------------ |  | ------------
|                 |  | American Capital                                        |  | European Capital                                        |  | AGNC                                        |  | ACE I        |  | ACE II       |  | ACASCLO-1    |  | ACASCRE CDO 
|Fund type        |  | Public Alternative Asset Manager & Fund                 |  | Private Fund                                            |  | Public REIT Fund - The NASDAQ Global Market |  | Private Fund |  | Private Fund |  | Private Fund |  | Private Fund
|Established      |  | 1986                                                    |  | 2005                                                    |  | 2008                                        |  | 2006         |  | 2007         |  | 2006         |  | 2007        
|Assets           |  | $7.2 Billion(1)                                         |  | $1.8 Billion(2)                                         |  | $2.4 Billion                                |  | $0.6 Billion |  | $0.3 Billion |  | $0.4 Billion |  | $0.1 Billion
|Investment types |  | Senior & Subordinated Debt, Equity, Structured Products |  | Senior & Subordinated Debt, 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 as we now own 100% of ECAS.
|--- | ---------------------------------------------------------------



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, 2008. The following are critical accounting policies for valuation of Investments and interest and dividend income recognition.



Valuation of Investments



Our investments are carried at fair value in accordance with the 1940 Act
and SFAS No. 157. In accordance with the 1940 Act, unrestricted minority-owned publicly traded securities for which market quotations are readily available are valued at the closing market quote on the valuation date and majority-owned publicly
traded securities and other privately held securities are valued as determined in good faith by our Board of Directors. For securities of companies that are publicly traded for which we have a majority-owned interest, the value is based on the
closing market quote on the valuation date plus a control premium if our Board of Directors determines in good faith that additional value above the closing market quote would be obtainable upon a sale or transfer of our controlling interest.



We adopted SFAS No. 157 on January 1, 2008. SFAS
No. 157 provides a framework for measuring the fair value of assets and liabilities and also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements
on. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances.



In April 2009, the Financial Accounting Standards Board (FASB)
issued FASB Staff Position No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(FSP
No. 157-4). FSP No. 157-4 made amendments to SFAS No. 157 to provide additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have
significantly decreased and includes guidance on identifying circumstances that indicate a transaction is not orderly. It emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability
and regardless of the valuation technique used, the objective of a fair value measurement remains the same that the fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is,
not a



60



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forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. The guidance in FSP
No. 157-4 is effective for periods ending after June 15, 2009 and is applied prospectively with early adoption permitted for periods ending after March 15, 2009. We adopted FSP No. 157-4 during the quarter ended March 31,
2009. The adoption of FSP No. 157-4 did not have a material impact on our consolidated financial statements.



SFAS No. 157 defines fair value in terms of the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date under current market conditions. The price used to measure the fair value is not adjusted for transaction costs while the cost basis of our investments may include initial transaction
costs. Under SFAS No. 157, the fair value measurement also assumes that the transaction to sell an asset occurs in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset. The
principal market is the market in which the reporting entity would sell or transfer the asset with the greatest volume and level of activity for the asset. In determining the principal market for an asset or liability under SFAS No. 157, it is
assumed that the reporting entity has access to the market as of the measurement date. If no market for the asset exists or if the reporting entity does not have access to the principal market, the reporting entity should use a hypothetical market.



The market in which we would sell our private finance
investments is the M&A market. Under SFAS No. 157, we have indentified the M&A market as our principal market for portfolio companies only if we have the ability to initiate a sale of the portfolio company as of the measurement date. We
decide whether we have the ability to initiate a sale of a portfolio company based on our ability to control or gain control of the board of directors of the portfolio company as of the measurement date. In evaluating if we can control or gain
control of a portfolio company as of the measurement date, we include our equity securities and those securities held by entities managed by American Capital, LLC, on a fully diluted basis. For investments in portfolio companies for which we do not
have the ability to control or gain control as of the measurement date and for which there is no active market, our principal market under SFAS No. 157 is a hypothetical secondary market. The determination of the principal market used to
estimate the fair value of each of our investments can have a material impact on our estimate of the fair value of our investments.



The levels of fair value inputs used to measure our investments are characterized in accordance with the fair value hierarchy established by SFAS
No. 157. Where inputs for an asset or liability fall into 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. 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 in publicly traded unrestricted securities for which we do not have a controlling interest. Such investments are valued at the closing price on the measurement date. We did not value any of our
investments using Level 1 inputs as of March 31, 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 as follows:
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | For investments in securities of companies that are publicly traded for which we have a controlling interest, the fair value of the investment is based on the closing price of the
security on the measurement date adjusted for the fair value of a control premium, if any, based on the value above the closing market quote that would be obtainable upon a sale of our controlling interest. A control premium incorporated into the
valuation would be considered a Level 3 input if it has a significant impact on the determination of fair value.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



61



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| | - | For investments in portfolio companies for which we have identified the M&A market as the principal market, we estimate the fair value based on the Enterprise Value Waterfall
valuation methodology. Under the Enterprise Value Waterfall valuation methodology, we estimate the enterprise fair value of the portfolio company and then waterfall the enterprise value over the portfolio companys securities in order of their
preference relative to one another. For minority equity securities, we also estimate the fair value using the Enterprise Value Waterfall valuation methodology. To estimate the enterprise value of the portfolio company, we prepare an analysis
consisting of traditional valuation methodologies including market, income and cost approaches. We weight some or all of the traditional valuation methods based on the individual circumstances of the portfolio company in order to conclude on our
estimate of the enterprise value. The methodologies consist of valuation estimates based on: 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 of the portfolio companys assets, third-party valuations of the portfolio company, considering 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. To determine the enterprise value of a portfolio company, we analyze its historical and projected financial results. This financial and other
information is generally obtained from our portfolio companies, and may represent unaudited, projected or pro-forma financial information. The assumptions incorporated in the valuation methodologies used to estimate the enterprise value consists
primarily of unobservable Level 3 inputs, including management assumptions based on judgment. A change in these assumptions could have a material impact on the determination of fair value.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | For investments in portfolio companies for which we have identified the hypothetical secondary market as the principal market, we determine the fair value based on the assumptions
that a hypothetical market participant would use to value the investment in a current hypothetical sale using a Market Yield valuation methodology. In applying the Market Yield valuation methodology, we estimate the fair value based on such factors
as third-party broker quotes and market participant assumptions including synthetic credit ratings, estimated remaining life, current market yield and interest rate spreads of similar securities as of the measurement date. The assumptions used to
estimate the fair value in a hypothetical secondary market are considered primarily Level 3 inputs. We weight third-party broker quotes 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. In estimating the remaining life, we generally use an average 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 life based on the expected repayment date. The average life used to estimate the fair value of our loans is generally shorter than the legal maturity of the
loans as our loans have historically been prepaid prior to the maturity date. The current interest rate spreads used to estimate the fair value of our loans is based on our experience of current interest rate spreads on similar loans. A change in
the unobservable inputs and assumptions that we use to estimate the fair value of our loans could have a material impact on the determination of fair value.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | We value our investments in Structured Products using the Market Yield valuation methodology. We estimate the fair value based on such factors as third-party broker
quotes and our cash flow forecasts subject to our 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. Cash flow forecasts are discounted using a market participants market yield assumptions which are derived from multiple sources including, but not limited to, third-party broker quotes, recent investments and securities with
similar structure and risk characteristics. We weight the use of third-party broker quotes in determining fair value based on our understanding of the level of actual transactions used by the broker to develop the quote
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



62



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| | and whether the quote was an indicative price or binding offer. The cash flow forecasts and market yields used to discount the cash flows incorporate a
significant amount of Level 3 inputs. A change in our default and recovery rate assumptions in the cash flow forecasts or a change in the market yield assumptions could have a material impact on the determination of fair value.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | We value derivative instruments based on fair value information from both the derivative counterparty, as adjusted for nonperformance risk considerations, and third-party pricing
services. We corroborate the fair value by analyzing the estimated net present value of the future cash flows using relevant market forward interest rate yield curves in effect at the end of the period as adjusted for quantitative and qualitative
nonperformance risk considerations. A change in our determination of the nonperformance risk could have a material impact on the determination of fair value.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Due to the uncertainty inherent in the valuation process, such estimates of fair value may differ significantly from the values that would
have been used had a ready market for the 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.



See Note 5 to our consolidated financial statements in this Quarterly Report on Form 10-Q for further information regarding the classification of our
investment portfolio by Levels 1, 2 and 3 as of March 31, 2009.



Interest and Dividend Income Recognition



Interest income is recorded on the accrual basis to the extent that such amounts are expected to be collected. Original issue discount (OID) is accreted into interest income using the effective interest method. OID initially
represents the value of detachable equity warrants obtained in conjunction with the origination or purchase of loans and loan origination fees that represent yield enhancement. Dividend income is recognized on the ex-dividend date for common equity
securities and on an accrual basis for preferred equity securities to the extent that such amounts are expected to be collected or realized. In determining the amount of dividend income to recognize, if any, from cash distributions on common equity
securities, we will assess many factors including a portfolio companys cumulative undistributed income and operating cash flow. Cash distributions from common equity securities received in excess of such undistributed amounts are recorded
first as a reduction of our investment and then as a realized gain on investment. We stop accruing interest or dividends on our investments when it is determined that the interest or dividend is not collectible. We assess the collectability of the
interest and dividends based on many factors including the portfolio companys ability to service our loan based on current and projected cash flows as well as the current valuation of the enterprise. For investments with payment-in-kind
(PIK) interest and cumulative dividends, we base income and dividend accruals on the valuation of the PIK notes or securities received from the borrower or the redemption value of the security. If the portfolio company valuation
indicates a value of the PIK notes or securities or redemption value that is not sufficient to cover the contractual interest or dividend, we will not accrue interest or dividend income on the notes or securities.



A change in the portfolio company valuation assigned by us could have an
effect on the amount of loans on non-accrual status. Also, a change in a portfolio companys operating performance and cash flows can impact a portfolio companys ability to service our debt and therefore could impact our interest
recognition.



Interest income on CMBS, CLO and CDO investments
is recognized on the effective interest method as required by Emerging Issues Task Force (EITF) Issue No. 99-20,Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets (EITF No. 99-20). Under EITF No. 99-20, at the time of purchase, we estimate the future expected cash flows and determine the effective interest rate based on these estimated cash flows and our cost basis.
Subsequent to the purchase and on



63



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a quarterly basis, these estimated cash flows are updated and a revised yield is calculated prospectively based on the current amortized cost of the
investment. To the extent the current quarterly estimated cash flows decrease from the prior quarterly estimated cash flows, the revised yield is calculated prospectively based on the amortized cost basis of the investment calculated in accordance
with Financial Accounting Standards Board (the FASB) Staff Position No. FAS 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairment, (FSP FAS 115-2). In estimating these cash flows, there are a
number of assumptions that are subject to uncertainties and contingencies. These include the amount and timing of principal payments (including prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate
fluctuations. In addition, interest payment shortfalls due to delinquencies on the underlying loans, and the timing of and magnitude of projected credit losses on the loans underlying the securities have to be estimated. These uncertainties and
contingencies are difficult to predict and are subject to future events that may impact our estimates and interest income. As a result, actual results may differ significantly from these estimates.



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 and prepayment fees earned from investing in debt and equity
securities and the fees we earn from portfolio company management, asset management, financing and transaction structuring activities, 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 appreciation (depreciation) of
investments includes the foreign currency translation from converting assets and liabilities denominated in a foreign currency to the U.S. dollar.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The consolidated operating results for the three months ended March 31, 2009 and 2008 were as follows (in millions):



|                                                     |  |                             |      |   |      |   |      |  
|---------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                     |  | Three Months EndedMarch 31, |     
|                                                     |  | 2009                        |      |   | 2008 |  
|Operating income                                     |  | $                           | 195  |   |      | $ | 292  |  
|Operating expenses                                   |  |                             | 131  |   |      |   | 142  |  
|                                                     |  |                             |      |   |      |   |      |  
|Operating income before income taxes                 |  |                             | 64   |   |      |   | 150  |  
|Benefit for income taxes                             |  |                             |     |   |      |   | 1    |  
|                                                     |  |                             |      |   |      |   |      |  
|Net operating income                                 |  |                             | 64   |   |      |   | 151  |  
|Net gain on extinguishment of debt                   |  |                             | 12   |   |      |   |     |  
|Net realized (loss) gain on investments              |  |                             | (131 | ) |      |   | 33   |  
|                                                     |  |                             |      |   |      |   |      |  
|Net realized (loss) earnings                         |  |                             | (55  | ) |      |   | 184  |  
|Net unrealized depreciation of investments           |  |                             | (492 | ) |      |   | (997 | )
|                                                     |  |                             |      |   |      |   |      |  
|Net decrease in net assets resulting from operations |  | $                           | (547 | ) |      | $ | (813 | )
|                                                     |  |                             |      |   |      |   |      |  



64



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Net Operating Income



Operating Income



We have two primary lines of business: Investing and Asset Management/Advisory. We derive the majority of our operating income from our Investing segment,
which primarily invests in senior and subordinated debt and equity of middle market companies with attractive current yields and/or potential for equity appreciation and realized gains.



Our Asset Management/Advisory segment provides management services to both our portfolio company investments and our
alternative asset funds. Our Asset Management/Advisory segment 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 M&A transactions, which may not be recurring in nature. Our Asset Management/Advisory
segment also includes our third-party alternative asset fund management business. As of March 31, 2009, all of our third-party alternative asset fund management services are conducted through our wholly-owned portfolio company, American
Capital, LLC. To the extent that American Capital, LLC declares regular quarterly dividends of its net operating income to us, such dividends would be included in our Asset Management/Advisory segment as dividend income.



The following is a summary of our operating income by segment for the three
months ended March 31, 2009 and 2008 (in millions):



|                             |  |                              |     |                          |   |              |  |           |     |                          |   |              |  |   |    |  |   |    
|---------------------------- |  | ---------------------------- | --- | ------------------------ | - | ------------ |  | --------- | --- | ------------------------ | - | ------------ |  | - | -- |  | - | ---
|                             |  | Three Months Ended March 31,
|                             |  | 2009                         |     | 2008                    
|                             |  | Investing                    |     | AssetManagement/Advisory |   | Consolidated |  | Investing |     | AssetManagement/Advisory |   | Consolidated
|Interest and dividend income |  | $                            | 179 |                          | $ |             |  | $         | 179 |                          | $ | 251          |  | $ | 7  |  | $ | 258
|Fee and other income         |  |                              | 2   |                          |   | 14           |  |           | 16  |                          |   | 4            |  |   | 30 |  |   | 34 
|                             |  |                              |     |                          |   |              |  |           |     |                          |   |              |  |   |    |  |   |    
|Total operating income       |  | $                            | 181 |                          | $ | 14           |  | $         | 195 |                          | $ | 255          |  | $ | 37 |  | $ | 292
|                             |  |                              |     |                          |   |              |  |           |     |                          |   |              |  |   |    |  |   |    



Investing Segment



Operating income from our Investing segment consisted of
the following for the three months ended March 31, 2009 and 2008 (in millions):



|                                     |  |                             |     |      |   |    
|------------------------------------ |  | --------------------------- | --- | ---- | - | ---
|                                     |  | Three Months EndedMarch 31,
|                                     |  | 2009                        |     | 2008
|Interest income on debt securities   |  | $                           | 150 |      | $ | 194
|Dividend income on equity securities |  |                             | 28  |      |   | 53 
|Interest income on bank deposits     |  |                             | 1   |      |   | 4  
|                                     |  |                             |     |      |   |    
|Interest and dividend income         |  |                             | 179 |      |   | 251
|                                     |  |                             |     |      |   |    
|Prepayment fees                      |  |                             |    |      |   | 2  
|Other fees                           |  |                             | 2   |      |   | 2  
|                                     |  |                             |     |      |   |    
|Fee and other income                 |  |                             | 2   |      |   | 4  
|                                     |  |                             |     |      |   |    
|Total operating income               |  | $                           | 181 |      | $ | 255
|                                     |  |                             |     |      |   |    



Interest income on
debt investments decreased by $44 million, or 23%, to $150 million for the three months ended March 31, 2009 from $194 million for the comparable period in 2008 due to a decline in the weighted average effective interest rate on our debt
investments. Dividend income on equity securities decreased by $25



65



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million, or 47%, to $28 for the three months ended March 31, 2009 from $53 million for the comparable period in 2008, primarily due to the
discontinuation of dividends by European Capital and a reduction in accrued dividends on private finance preferred stock investments primarily due to uncertainty on future collectability.



The following table summaries selected data for our debt and equity investments, at cost, for the three months ended
March 31, 2009 and 2008 (dollars in millions):



|                                                     |  |                             |        |   |      |   |        |  
|---------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                     |  | Three Months EndedMarch 31, |       
|                                                     |  | 2009                        |        |   | 2008 |  
|Effective interest rate on debt investments(1)(2)    |  |                             | 8.6    | % |      |   | 11.8   | %
|Debt investments(1)                                  |  | $                           | 6,973  |   |      | $ | 6,596  |  
|Average monthly one-month LIBOR                      |  |                             | 0.5    | % |      |   | 3.0    | %
|Non-accrual loans at face as of period end           |  | $                           | 1,103  |   |      | $ | 375    |  
|Non-accrual loans at fair value as of period end     |  | $                           | 214    |   |      | $ | 80     |  
|Effective yield on equity investments(1)(3)          |  |                             | 3.1    | % |      |   | 5.3    | %
|Equity investments(1)(3)                             |  | $                           | 3,745  |   |      | $ | 4,049  |  
|Effective yield on debt and equity investments(1)(3) |  |                             | 6.7    | % |      |   | 9.3    | %
|Debt and equity investments(1)(3)                    |  | $                           | 10,718 |   |      | $ | 10,645 |  

| | 
| | 

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

| | (2) | Includes CMBS
| | --- | -------------

| | (3) | Excludes our equity investments in alternative asset fund management portfolio companies.
| | --- | -----------------------------------------------------------------------------------------



The monthly weighted average effective interest rate on debt investments decreased 320 basis points to 8.6% for the three months ended
March 31, 2009 from 11.8% for the three months ended March 31, 2008 due to (i) a 250 basis point decrease in the average monthly one-month LIBOR from the prior year, (ii) an increase in non-accrual loans, (iii) partially
offset by an increase in the interest spreads on recent loan originations.



The monthly weighted average effective yield on equity investments decreased 220 basis points to 3.1% for the three months ended March 31, 2009 from 5.3% for the three months ended March 31, 2008. The
decrease is primarily due to (i) a lower accrual of dividends on our preferred stock investments of our private finance portfolio and (ii) lower cash dividends from our investment in European Capital. We recorded dividend income on our
equity investment in European Capital of $17 million for the three months ended March 31, 2008. We did not record any dividend income on our equity investment in European Capital for the three months ended March 31 2009.



Asset Management/Advisory Segment



Operating income from our Asset Management/Advisory segment consisted of the
following for the three months ended March 31, 2009 and 2008 (in millions):



|                                                   |  |                             |  |     
|-------------------------------------------------- |  | --------------------------- |  | ----
|                                                   |  | Three Months EndedMarch 31,
|                                                   |  | 2009                        |  | 2008
|Dividend income from American Capital, LLC         |  | $                          |  | $7  
|                                                   |  |                             |  |     
|Dividend income                                    |  |                            |  | 7   
|                                                   |  |                             |  |     
|Loan financing fees                                |  |                            |  | 8   
|Equity financing fees                              |  |                            |  | 4   
|Transaction structuring fees                       |  |                            |  | 3   
|Fund asset management fees and reimbursements      |  | 8                           |  | 6   
|Portfolio company advisory and administrative fees |  | 5                           |  | 6   
|Other                                              |  | 1                           |  | 3   
|                                                   |  |                             |  |     
|Fee and other income                               |  | 14                          |  | 30  
|                                                   |  |                             |  |     
|Total operating income                             |  | $14                         |  | $37 
|                                                   |  |                             |  |     



66



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Dividend Income



To the extent American Capital, LLC declares dividends of its net operating income to us, such dividends would be included as dividend
income. The net operating income of American Capital, LLC is comprised of the base management fees, profit sharing (called carried interest or incentive fee) and transaction fees it earns less the operating expenses it incurs for providing fund
management services. American Capital, LLC did not declare a dividend during the three months ended March 31, 2009. American Capital, LLC declared dividends of $7 million for three months ended March 31, 2008.



Fee and Other Income



During the three months ended March 31, 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, 2009.



Operating Expenses



Operating expenses decreased $11 million, or 8%, for the three months ended
March 31, 2009 over the comparable period in 2008. Operating expenses consisted of the following for the three months ended March 31, 2009 and 2008 (in millions):



|                                                |  |                             |     |      |   |    
|----------------------------------------------- |  | --------------------------- | --- | ---- | - | ---
|                                                |  | Three Months EndedMarch 31,
|                                                |  | 2009                        |     | 2008
|Interest                                        |  | $                           | 52  |      | $ | 63 
|Salaries, benefits and stock-based compensation |  |                             | 53  |      |   | 56 
|General and administrative                      |  |                             | 26  |      |   | 23 
|                                                |  |                             |     |      |   |    
|Total operating expenses                        |  | $                           | 131 |      | $ | 142
|                                                |  |                             |     |      |   |    



Interest Expense



Interest expense for the three months ended
March 31, 2009 decreased $11 million, or 17%, over the comparable period in 2008. The decrease in interest expense for the three months ended March 31, 2009 was primarily attributable to (i) a decline in LIBOR, (ii) a decrease in
our weighted average borrowings, (iii) partially offset by an increase in interest rates for default interest and ratings downgrades. The weighted average interest rate on all of our borrowings for the three months ended March 31, 2009 and
2008 was 4.7% and 5.2%, respectively. Our weighted average borrowings were $4,401 million and $4,833 million for the three months ended March 31, 2009 and 2008, respectively. As of March 2, 2009, we were in default under our unsecured
revolving credit facility. As a result, the applicable spread on the outstanding borrowings under this facility increased by 2.00% to remain in effect as long as we are in an event of default. Also, under the terms of our unsecured revolving credit
facility and unsecured public notes, if our corporate rating from the rating agencies decreases, the interest rate for each of these facilities increases based on specified levels in the credit agreements. As a result of ratings downgrades from each
of the three major rating agencies, the applicable spread on our unsecured revolving credit facility has increased an additional 1.50% and the interest rate on the unsecured public notes has increased by 1.75%.



67



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Salaries, Benefits and Stock-based Compensation



Salaries, benefits and stock-based compensation consisted of the following
for the three months ended March 31, 2009 and 2008 (in millions):



|                                                      |  |                             |  |     
|----------------------------------------------------- |  | --------------------------- |  | ----
|                                                      |  | Three Months EndedMarch 31,
|                                                      |  | 2009                        |  | 2008
|Base salaries                                         |  | $22                         |  | $26 
|Incentive compensation                                |  | 9                           |  |    
|Benefits                                              |  | 5                           |  | 7   
|Stock-based compensation                              |  | 17                          |  | 23  
|                                                      |  |                             |  |     
|Total salaries, benefits and stock-based compensation |  | $53                         |  | $56 
|                                                      |  |                             |  |     



Salaries, benefits and
stock-based compensation for the three months ended March 31, 2009 decreased $3 million, or 5%, over the comparable period in 2008. The decrease is primarily due to a decrease in the number of employees, partially offset by an increase in
incentive compensation. Our incentive compensation during the three months ended March 31, 2009 increased by $9 million, or 100%, over the comparable period in 2008 as a result of retention bonus payments. As of March 31, 2009, we had
total employees of 450 compared to total employees of 589 as of March 31, 2008.



General and Administrative Expenses



General and administrative expenses increased by $3 million, or 13%, for the three months ended March 31, 2009 over the comparable period in 2008. The increase is primarily due to (i) $4 million of fees from
both our and our unsecured creditors legal and financial advisors that have been engaged in connection with our debt restructuring negotiations and (ii) an additional $4 million of restructuring costs related to excess facilities.



Net Gain on Extinguishment of Debt



In February 2009, we repurchased $20 million of Class B notes issued by our
indirect wholly owned consolidated subsidiary, ACAS Business Loan Trust 2007-1 for $3 million. As a result of this purchase, we recognized a $17 million gain during quarter ended March 31, 2009 which is recorded in net gain on debt
extinguishment in the accompanying consolidated statements of operations.



On March 12, 2009, we terminated our $500 million secured revolving credit facility with Wachovia Capital Markets, LLC, as deal agent. All borrowings under the facility were repaid during the third quarter of
2008 and had not been redrawn. We terminated the facility in connection with our effort to further delever our balance sheet and to reduce our overall borrowing costs. We recorded a loss on debt extinguishment of $5 million as a result of writing
off the deferred debt issuance costs, which is recorded in net gain on debt extinguishment in the accompanying consolidated statements of operations.



68



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Net Realized (Loss) Gain on Investments



Our net realized (loss) gain on investments for the three months ended March 31, 2009 and 2008 consisted of the
following individual portfolio company realized (loss) gain greater than $10 million (in millions):



|                                                           |  |                             |      |   |      |   |     |  
|---------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | --- | -
|                                                           |  | Three Months EndedMarch 31, |     
|                                                           |  | 2009                        |      |   | 2008 |  
|Pasternack Enterprises, Inc                                |  | $                           |     |   |      | $ | 33  |  
|Exstream Holdings, Inc.                                    |  |                             |     |   |      |   | 18  |  
|Other, net                                                 |  |                             | 8    |   |      |   |    |  
|                                                           |  |                             |      |   |      |   |     |  
|Total gross realized portfolio gain                        |  |                             | 8    |   |      |   | 51  |  
|                                                           |  |                             |      |   |      |   |     |  
|Barton-Cotton Holding Corporation                          |  |                             | (74  | ) |      |   |    |  
|nSpired Natural Foods, Inc                                 |  |                             |     |   |      |   | (10 | )
|Other, net                                                 |  |                             | (13  | ) |      |   | (13 | )
|                                                           |  |                             |      |   |      |   |     |  
|Total gross realized portfolio loss                        |  |                             | (87  | ) |      |   | (23 | )
|                                                           |  |                             |      |   |      |   |     |  
|Total net realized portfolio (loss) gain                   |  |                             | (79  | ) |      |   | 28  |  
|European Capital put option agreement                      |  |                             | (44  | ) |      |   |    |  
|Interest rate derivative periodic (payments) receipts, net |  |                             | (6   | ) |      |   | 2   |  
|Interest rate derivative termination payments, net         |  |                             |     |   |      |   | (1  | )
|Foreign currency transactions                              |  |                             | (2   | ) |      |   | 5   |  
|Taxes on net realized gain                                 |  |                             |     |   |      |   | (1  | )
|                                                           |  |                             |      |   |      |   |     |  
|Total net realized (loss) gain                             |  | $                           | (131 | ) |      | $ | 33  |  
|                                                           |  |                             |      |   |      |   |     |  



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 U.S. Bankruptcy Court. 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). The fair value of the put option liability as of
December 31, 2008 was $69 million (49 million) which is included in derivative and option agreements in our consolidated balance sheet. 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.



In the first quarter of 2008, we received full repayment of our remaining $29 million subordinated debt investment in Pasternack Enterprises, Inc and sold
all of our equity interests for $44 million in proceeds realizing a total gain of $33 million offset by a reversal of unrealized appreciation of $35 million. The gain that we recognized included escrowed proceeds that we expected to receive of $2
million.



In the first quarter of 2008, we received full
repayment of our remaining $65 million subordinated debt investment in Exstream Holdings, Inc. and sold our equity interests for $306 million in proceeds realizing a total gain of $18 million offset by a reversal of unrealized appreciation of $23
million. The gain that we recognized included escrowed proceeds that we expected to receive of $8 million.



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Unrealized Appreciation (Depreciation) of Investments



The net unrealized appreciation (depreciation) of investments is based on
valuations approved by our Board of Directors. The following table itemizes the change in net unrealized appreciation (depreciation) of investments for the three months ended March 31, 2009 and 2008 (in millions):



|                                                                                          |  |                             |      |   |      |   |      |  
|----------------------------------------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                                                          |  | Three Months EndedMarch 31, |     
|                                                                                          |  | 2009                        |      |   | 2008 |  
|Gross unrealized appreciation of private finance portfolio investments                    |  | $                           | 33   |   |      | $ | 129  |  
|Gross unrealized depreciation of private finance portfolio investments                    |  |                             | (401 | ) |      |   | (276 | )
|Impact of adopting SFAS No. 157                                                           |  |                             | (52  | ) |      |   | (180 | )
|                                                                                          |  |                             |      |   |      |   |      |  
|Net unrealized depreciation of private finance portfolio investments                      |  |                             | (420 | ) |      |   | (327 | )
|Net unrealized appreciation (depreciation) of managed funds(1)                            |  |                             | 25   |   |      |   | (123 | )
|Net unrealized depreciation of American Capital, LLC(1)                                   |  |                             | (162 | ) |      |   | (140 | )
|Net unrealized depreciation of Structured Products                                        |  |                             | (46  | ) |      |   | (361 | )
|Reversal of prior period net unrealized depreciation (appreciation) upon realization      |  |                             | 78   |   |      |   | (46  | )
|                                                                                          |  |                             |      |   |      |   |      |  
|Net unrealized depreciation of portfolio investments                                      |  |                             | (525 | ) |      |   | (997 | )
|Foreign currency translation                                                              |  |                             | (69  | ) |      |   | 73   |  
|Derivative agreements                                                                     |  |                             | 53   |   |      |   | (73  | )
|Reversal of prior period net unrealized depreciation on option agreement upon realization |  |                             | 49   |   |      |   |     |  
|                                                                                          |  |                             |      |   |      |   |      |  
|Net unrealized depreciation of investments                                                |  | $                           | (492 | ) |      | $ | (997 | )
|                                                                                          |  |                             |      |   |      |   |      |  



|(1) | Excludes foreign currency translation.
|--- | --------------------------------------



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.



During the three months ended March 31, 2009, we recorded $420 million of net unrealized depreciation on our private finance portfolio investments,
including $52 million of net unrealized depreciation as a result of applying the Market Yield valuation methodology under SFAS No. 157. The remaining $368 million of net unrealized depreciation on our private finance portfolio investments
during the first quarter of 2009 was driven primarily by declines in multiples of comparable companies and reduction of historic and projected cash flows of certain portfolio companies.



As discussed in Notes 3 and 5 to our interim consolidated financial statements in Part I, Item I of this Quarterly Report on
Form 10-Q, we adopted SFAS No. 157 on January 1, 2008. As a result of the adoption of SFAS No. 157, we were required to modify our valuation methodologies for certain of our private finance investments. Prior to the adoption of SFAS
No. 157, we generally determined the fair value of our private finance portfolio investments by using the enterprise value waterfall (Enterprise Value Waterfall) valuation methodology. This valuation approach results in the
determination of a fair value of our investments based on a change of control in an M&A transaction or a recapitalization of the enterprise based on the value of the enterprise. However, upon the adoption of SFAS No. 157, for investments in
debt and redeemable preferred equity securities of portfolio companies for which we do not have the ability to initiate a sale of the portfolio company as of the measurement date and for which there is no active market, we are required under SFAS
No. 157 to use a hypothetical secondary market as our principal market. We determine the fair value based on the assumptions that hypothetical market participants would use to value the investment in a current hypothetical



70



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sale using the market yield (Market Yield) valuation methodology. During the three months ended March 31, 2009, we recorded $52 million of
net unrealized depreciation as a result of using a Market Yield valuation methodology to determine the fair value of these investments instead of the Enterprise Value Waterfall valuation methodology. As of March 31, 2009, we have recognized
cumulatively $495 million of net unrealized depreciation as a result of using a market yield valuation methodology. We intend to hold these private finance portfolio investments until settlement or maturity which would generally be on a change of
control event such as a sale or recapitalization of the company. In general, we would not exit these investments in a secondary market where the sale proceeds would be based on a market yield. Accordingly, we do not expect to realize this $495
million of cumulative net unrealized depreciation if we hold the investments to settlement or maturity and there are no significant unanticipated credit impairments.



Under the Market Yield valuation methodology, the net unrealized depreciation of $52 million for the three months ended
March 31, 2009 was driven by an increase in expected current market yields and interest rate spreads of similar loans or securities as well as a decline in LIBOR.



The remaining $368 million of net unrealized depreciation on our private finance portfolio was driven primarily by declines in multiples of
comparable companies and reduction of historical and projected cash flows of certain portfolio companies. Of our $368 million of remaining net unrealized depreciation on our private finance portfolio during the three months ended March 31,
2009, we estimate that approximately $270 million was due to portfolio company performance and credit and the balance due to multiple compression and other factors. The declines related to portfolio company performance and credit is driven mostly by
declines in the operating results of certain of our portfolio companies due to the global economic recession.



Managed Funds



For the three months ended March 31, 2009, we recognized net unrealized appreciation of $25 million on our investments in managed funds, consisting
of $43 million of unrealized appreciation on our investment in European Capital partially offset by $18 million of unrealized depreciation on our investment in AGNC. Our investment in European Capital consists of a debt investment with a cost basis
and fair value of $304 million and $309 million, respectively, and a 100% equity investment with a cost basis and fair value of $951 million and $125 million, respectively. In the first quarter of 2009, we acquired the remaining 32% equity interest
not already owned by us. However, we did not value our 100% equity investment in European Capital at its NAV because European Capital is currently in covenant default of certain of credit facilities which could prevent us from realizing all of its
NAV.



American Capital, LLC



American Capital, LLC, a wholly-owned portfolio company of American Capital,
is a holding company of wholly-owned alternative asset fund managers. During the three months ended March 31, 2009, we recognized $162 million of unrealized depreciation on our investment in American Capital, LLC. One of the Funds managed by
American Capital, LLC is European Capital. The decline in value of American Capital, LLC is due primarily due to a reduction in projected management fees and carried interest for managing European Capital.



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, 2009, we recorded $46 million of net unrealized depreciation on our Structured Products investments. Our CMBS portfolio, which includes a
commercial real estate CDO, experienced $22 million of net unrealized depreciation and our CLO and CDO portfolios experienced $24 million of net unrealized depreciation during the three months ended March 31, 2009. As of March 31, 2009,
our CMBS portfolio has a cost basis of $708 million and a fair value of $89 million and our CLO and CDO portfolio has a cost basis of $251 million and a fair value of $54 million. Since the fourth quarter of 2007, we have experienced a substantial
amount of depreciation on our Structured Products.



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We value our Structured Products investments using the Market Yield valuation methodology. We estimate
fair value based on third-party broker quotes and our cash flow forecasts subject to our 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. Cash flow forecasts are discounted using a market participants market yield assumptions that are derived from multiple sources including, but not limited to, third-party broker quotes,
recent investments and securities and indices with similar structure and risk characteristics. We weight the use of third-party broker quotes 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 considered that the current market for our Structured Products investments may be considered an inactive market and that the information used by the third-party
brokers to develop the quotes may generally not based on actual transactions. We attempted to obtain multiple third-party broker quotes for all of Structured Products investments. We were generally able to receive third-party broker quotes for a
significant majority of our Structured Products investments; however we generally received a limited number of third-party broker quotes per investment. The third-party broker quotes that we were able to obtain were provided as a source of
indicative prices and were not binding offers. We evaluated the reasonableness of the broker quotes based on our knowledge of recent secondary offerings of similar securities reviewed by us, and to the extent possible, based on our knowledge of
actual trades of similar securities. The reliance on broker quotes in determining the fair value of our Structured Products investments is specific to the facts and circumstances of each individual investment, but generally we weighted the use of
broker quotes in determining the fair value of our Structured Products investments between 10% and 25%. The $46 million of net unrealized depreciation during the three months ended March 31, 2009 and the accumulated net unrealized depreciation
as of March 31, 2009 of $815 million is driven primarily by dramatic widening of the investments spreads caused by the liquidity crisis in the market. The liquidity crisis has driven investors expected returns higher on Structured
Products investments. In general, there is not a liquid market for our non-investment grade Structured Products investments. However, there have been a few trades of securities of similar Structured Products investments in what is considered to be
an illiquid distressed market during 2008 and the first quarter of 2009, which has had the effect of decreasing the values of the overall Structured Products market. Our unrealized depreciation was driven less by actual credit quality of the
underlying loan pools as compared to the widening of investments spreads.



We expect that we will hold these Structured Products investments until settlement or maturity. Based on our March 31, 2009 assumptions of future default and recovery rates, reinvestment spreads and prepayment
rates, we anticipate that we will realize upon the settlement or maturity approximately $633 million more in proceeds than the fair value as of March 31, 2009. The primary difference between the fair value as of March 31, 2009 and our
anticipated proceeds at maturity is that the current market yields used to value these securities do not have an impact on our anticipated proceeds at settlement or maturity if our current assumptions of the future credit quality and cash flows
prove accurate.



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. During the three months ended March 31, 2009, the foreign currency translation adjustment recorded in our consolidated statements of operations as net unrealized
depreciation was $69 million, primarily as a result of the Euro depreciating against the U.S. dollar.



Derivative and Option Agreements



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.



72



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For interest rate derivative agreements, we estimate the fair value based on the estimated net present
value of the future cash flows using a forward interest rate yield curve in effect as of the end of the measurement period, adjusted for nonperformance risk, if any, including an evaluation of our credit risk and our counterpartys credit risk.
A negative fair value would represent an amount we would have to pay a third-party and a positive fair value would represent an amount we would receive from a third-party to assume our obligation under an interest rate derivative agreement. They
generally appreciate or depreciate primarily based on relative market interest rates and their remaining term to maturity. The change in fair value is recorded as unrealized appreciation (depreciation) of derivative agreements. The decrease in the
liability of our interest rate derivative agreements during the three months ended March 31, 2009 is primarily due to an increase in our credit risk as a result of our default under our unsecured borrowing arrangements and rating downgrades
which resulted in appreciation of $44 million.



Fair Value
Compared to Realizable Value



We invest primarily in Level
3 assets, generally with the intention to hold the assets to settlement or maturity. We anticipate holding the debt investments in our private finance portfolio until maturity or until they are repaid through a change of control of the portfolio
company; however we cannot estimate either the future sale date or the time period before the debt investments may be prepaid before their maturity date. We also intend to hold our Structured Products investments until maturity, which could be in
excess of ten years. The current lack of liquidity in the financial markets has caused investment spreads between the cost of funds and investment income to widen dramatically on our investments, which in most cases results in current fair values
for many Level 3 assets that are materially lower than the values we anticipate realizing on settlement or maturity (Realizable Value). This is especially true regarding fair value estimates on investments with longer expected settlement
or maturity dates. The current market yields used to value these investments should not have an impact on the amount of proceeds we would expect to receive upon settlement or maturity.



For example, as of March 31, 2009, we held an investment in a commercial real estate collateralized debt obligation
(ACAS CRE CDO) that has been depreciated $206 million inception to date. This investment produced $5 million of cash flow in the first quarter of 2009, but its fair value determined in accordance with GAAP is $12 million as of
March 31, 2009; however, we anticipate realizing $88 million of our investment on settlement or maturity based on our assumptions as of March 31, 2009 of future credit losses, which includes the recession, over the life of the investment.
Further, our Structured Products produced a total of $28 million of cash flow for in the first quarter of 2009, but the total fair value determined in accordance with GAAP is $143 million as of March 31, 2009. Accordingly, the current fair
value of our Structured Products determined in accordance with GAAP is approximately 1.3 times the annualized current quarterly cash flow. We believe the valuations of investments such as these are significantly impacted by both the lack of demand
for such products and the lack of liquidity in the current market to finance the acquisition of these investments, thereby decreasing leveraged returns and prices that market participants are willing to pay for these securities. As such, there are
material differences between the current GAAP fair value of several classes of our Level 3 assets compared to the value we anticipate we will realize on settlement or maturity if our current assumptions of future credit quality and cash flows are
accurate.



We noted that in March 2008, the staff of the
SECs Division of Corporation Finance published a letter that it had sent to a number of public companies regarding the disclosures in their periodic reports of the impact of SFAS No. 157. In the letter, companies are asked to consider
disclosing for Level 3 assets  whether you believe the fair values diverge materially from the amounts you currently anticipate realizing on settlement or maturity. If so, disclose why and provide the basis for your views. Because
we believe many of these GAAP fair values diverge materially from the Realizable Value, we are providing pro forma information on the Realizable Value of our assets in comparison to the fair value determined under GAAP.



As of March 31, 2009, we expect that our Realizable Value will exceed
our fair value determined in accordance with GAAP as of March 31, 2009 by approximately $1,022 million.



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As of March 31, 2009, 99% of our portfolio investments are valued using Level 3 inputs. The
following table summarizes the current GAAP cost basis and fair value of our investments as of March 31, 2009 compared to the Realizable Value (in millions):



|                           |  |                               |        |                                    |   |       |                    |  |   |                                                       |   |  |   |       |  
|-------------------------- |  | ----------------------------- | ------ | ---------------------------------- | - | ----- | ------------------ |  | - | ----------------------------------------------------- | - |  | - | ----- | -
|Asset Class                |  | Cost BasisAs ofMarch 31, 2009 |        | GAAP Fair ValueAs ofMarch 31,
2009 |   |       | RealizableValue(1) |  |   | Difference BetweenRealizable Value andGAAP
Fair Value |  
|Private Finance            |  | $                             | 8,326  |                                    | $ | 6,168 |                    |  | $ | 6,663                                                 |   |  | $ | 495   |  
|Managed funds              |  |                               | 1,355  |                                    |   | 517   |                    |  |   | 517                                                   |   |  |   |      |  
|Structured Products        |  |                               | 958    |                                    |   | 143   |                    |  |   | 776                                                   |   |  |   | 633   |  
|American Capital, LLC      |  |                               | 68     |                                    |   | 11    |                    |  |   | 11                                                    |   |  |   |      |  
|Derivative agreements, net |  |                               |       |                                    |   | (92   | )                  |  |   | (198                                                  | ) |  |   | (106  | )
|                           |  |                               |        |                                    |   |       |                    |  |   |                                                       |   |  |   |       |  
|Total                      |  | $                             | 10,707 |                                    | $ | 6,747 |                    |  | $ | 7,769                                                 |   |  | $ | 1,022 |  
|                           |  |                               |        |                                    |   |       |                    |  |   |                                                       |   |  |   |       |  



|(1) | Use of Non-GAAP InformationRealizable Value is a non-GAAP financial measure which management uses in its internal analysis of results, and believes may be informative to
investors gauging the quality of our assets and financial performance from a long-term perspective, identifying trends in our results and providing meaningful period-to-period comparisons. Realizable Value is defined as the future value that
American Capital anticipates realizing on the settlement or maturity of its investments. As of the measurement date, it does not represent current GAAP fair value or net present value and is based on assumptions as of the measurement date.
Accordingly, changes to expectations of future cash flows as a result of events subsequent to the measurement date are not reflected in the Realizable Value as of the measurement date. American Capital believes that this non-GAAP financial measure
provides information useful to investors because American Capital generally intends to hold its assets to settlement or maturity, and there may be material differences between the GAAP fair values of its investments and the amounts American Capital
expects to realize on settlement or maturity. This is primarily because the current lack of liquidity in the financial markets has caused investment spreads between the cost of funds and investment income to widen significantly on investments,
resulting in current fair values under SFAS No. 157 that are materially lower than what American Capital currently anticipates realizing on settlement or maturity. It cannot be assured that American Capital will have the ability to hold its
investments until settlement or maturity. American Capital could monetize an investment prior to settlement or maturity at a value below Realizable Value. American Capital believes that providing investors with Realizable Value in addition to the
related GAAP fair value gives investors greater transparency to the information used by management in its financial operational decision-making. Although American Capital believes that this non-GAAP financial measure enhances investors
understanding of its business and performance, Realizable Value should not be considered as an alternative to GAAP basis financial measures. A reconciliation of non-GAAP Realizable Value to GAAP fair value is set forth above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Return on Shareholders Equity



The following table summarizes our returns on shareholders equity for
the quarter and latest twelve months (LTM) ended March 31, 2009 and 2008:



|                                                                                     |  |                       |    |  |       |   
|------------------------------------------------------------------------------------ |  | --------------------- | -- |  | ----- | --
|                                                                                     |  | Period EndedMarch 31, |   
|                                                                                     |  | 2009                  |    |  | 2008  |   
|LTM net operating income return on average equity at cost                            |  | 6.1                   | %  |  | 10.9  | % 
|LTM realized earnings return on average equity at cost                               |  | 4.3                   | %  |  | 15.0  | % 
|LTM loss return on average equity                                                    |  | (64.2                 | )% |  | (4.1  | )%
|Current quarter net operating income return on average equity at cost annualized     |  | 3.9                   | %  |  | 9.4   | % 
|Current quarter realized (loss) earnings return on average equity at cost annualized |  | (3.4                  | )% |  | 11.5  | % 
|Current quarter loss return on average equity annualized                             |  | (75.4                 | )% |  | (53.5 | )%



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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES



The crisis in the global credit markets during the past year has adversely
affected all industry sectors. We believe that the market disruption may continue to adversely affect financial services companies with respect to the valuation of their investment portfolios, tighter lending standards and reduced access to capital.
The U.S. and global economies have entered into a recession. The recession may lead to a further decline in earnings and/or decline in valuation multiples for our portfolio companies. Also, the liquidity crisis could further widen the investment
spreads on Structured Products and certain of our private finance portfolio 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 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. Additionally, our 2009 business plan has been developed with certain assumptions, such as no new capital raises, the reinvestment of capital only as we experience liquidity through realizations from exits and repayments and
repayment of debt with excess cash flows. However, to the extent that the capital markets improve, we may elect to raise new capital.



Our current primary sources of liquidity are our cash and cash equivalents and our portfolio investments. As of March 31, 2009, we had $88 million in
cash and cash equivalents and $68 million of restricted cash and cash equivalents. 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, those funds are generally distributed each quarter to pay interest and principal on the securitized debt and are not available for our general operations. During the three months ended March 31,
2009, we received cash proceeds from the realizations of portfolio investments of $79 million. During the three months ended March 31, 2009, 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) repayments of loan investments and the sale of equity and loan investments.



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Operating Cash Flow



Historically, our investment portfolio has generated a substantial amount of current cash flow from interest, dividends and
fees on our investment portfolio that allows us to service our debt. One common indicator of the ability to service debt is interest coverage. Our interest coverage is defined as our earnings before interest expense, taxes, depreciation and
amortization (EBITDA) divided by our cash interest expense. In calculating EBITDA, we exclude our net realized gains and losses and our net unrealized depreciation and appreciation of our portfolio investments, except the accrual or
payments and receipts of periodic interest settlements on our interest rate derivative agreements included in our net realized gains and losses and net unrealized depreciation and appreciation. Our cash interest expense is our interest expense
excluding the amortization of deferred financing costs and debt premiums and discounts. During the three months ended March 31, 2009, our interest coverage was 2.2x. EBITDA and interest coverage are non-GAAP financial measures within the
meaning of the SEC. Management believes EBITDA and interest coverage provide useful information to investors regarding our results of operations because it helps investors evaluate the ongoing operating performance of our investment portfolio and
our ability to service our debt. The following is a reconciliation of our net decrease in net assets resulting from operations to EBITDA and our interest expense to our cash interest expense for the three months ended March 31, 2009 and 2008
(in millions):



|                                                                    |  |                             |      |   |      |   |      |  
|------------------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                                    |  | Three Months EndedMarch 31, |     
|                                                                    |  | 2009                        |      |   | 2008 |  
|Net decrease in net assets resulting from operations                |  | $                           | (547 | ) |      | $ | (813 | )
|Interest expense                                                    |  |                             | 52   |   |      |   | 63   |  
|Benefit for income taxes                                            |  |                             |     |   |      |   | (1   | )
|Depreciation of property and equipment                              |  |                             | 3    |   |      |   | 3    |  
|Net unrealized depreciation of investments                          |  |                             | 492  |   |      |   | 997  |  
|Net realized loss (gain) on investments                             |  |                             | 131  |   |      |   | (33  | )
|Net gain on extinguishment of debt                                  |  |                             | (12  | ) |      |   |     |  
|Interest rate derivative periodic interest accrual                  |  |                             | (7   | ) |      |   | (7   | )
|Interest rate derivative periodic interest (payments) receipts, net |  |                             | (6   | ) |      |   | 2    |  
|                                                                    |  |                             |      |   |      |   |      |  
|EBITDA                                                              |  | $                           | 106  |   |      | $ | 211  |  
|                                                                    |  |                             |      |   |      |   |      |  
|Interest expense                                                    |  | $                           | 52   |   |      | $ | 63   |  
|Amortization of deferred financing costs, premiums and discounts    |  |                             | (3   | ) |      |   | (2   | )
|                                                                    |  |                             |      |   |      |   |      |  
|Cash interest expense                                               |  | $                           | 49   |   |      | $ | 61   |  
|                                                                    |  |                             |      |   |      |   |      |  
|Interest coverage                                                   |  |                             | 2.2  | x |      |   | 3.5  | x
|                                                                    |  |                             |      |   |      |   |      |  



As a result of our
breach of certain financial covenants and the subsequent declaration of events of default by the lenders and note holders of our unsecured borrowing arrangements, we began incurring increased interest costs in March 2009. Therefore, we expect that
our interest coverage will decrease during the second quarter of 2009 and for the remainder of 2009 depending upon the timing and outcome of our debt restructuring efforts. See Note 3. Going Concern and Note 6. Borrowings in Part I, Item I of this
Form 10-Q for addition information regarding our borrowing arrangements.



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Debt Capital



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



|                                                               |  |               |       |                  |   |      
|-------------------------------------------------------------- |  | ------------- | ----- | ---------------- | - | -----
|                                                               |  | March 31,2009 |       | December 31,2008
|Unsecured revolving credit facility, $1,409 million commitment |  | $             | 1,386 |                  | $ | 1,389
|Unsecured public debt due October 2012                         |  |               | 548   |                  |   | 548  
|Unsecured private debt due September 2009                      |  |               | 82    |                  |   | 82   
|Unsecured private debt due August 2010                         |  |               | 126   |                  |   | 126  
|Unsecured private debt due February 2011                       |  |               | 23    |                  |   | 24   
|Unsecured private debt due September 2011                      |  |               | 85    |                  |   | 85   
|Unsecured private debt due October 2020                        |  |               | 75    |                  |   | 75   
|ACAS Business Loan Trust 2004-1 asset securitization           |  |               | 196   |                  |   | 201  
|ACAS Business Loan Trust 2005-1 asset securitization           |  |               | 798   |                  |   | 798  
|ACAS Business Loan Trust 2006-1 asset securitization           |  |               | 421   |                  |   | 427  
|ACAS Business Loan Trust 2007-1 asset securitization           |  |               | 352   |                  |   | 381  
|ACAS Business Loan Trust 2007-2 asset securitization           |  |               | 285   |                  |   | 292  
|                                                               |  |               |       |                  |   |      
|Total                                                          |  | $             | 4,377 |                  | $ | 4,428
|                                                               |  |               |       |                  |   |      



The daily weighted
average debt balance for the three months ended March 31, 2009 and 2008 was $4,401 million and $4,833 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, 2009 and 2008 was 4.7% and 5.2%, respectively.



As a BDC, our asset coverage, as defined in the 1940 Act, must be at least 200% after each issuance of senior securities. As of March 31, 2009 and December 31, 2008, our asset coverage was 161% and 171%,
respectively. Accordingly, we are generally prohibited from issuing any additional senior securities until our asset coverage exceeds 200%.



Secured Revolving Credit Facility



On March 12, 2009, we terminated our $500 million secured revolving credit facility with Wachovia Capital Markets, LLC, as deal agent. All borrowings
under the facility were repaid during the third quarter of 2008 and had not been redrawn. We terminated the facility in connection with our effort to further delever our balance sheet and to reduce our overall borrowing costs. We did not incur any
early termination fees or penalties as a result of the termination of the facility. We recorded a loss on debt extinguishment of $5 million as a result of writing off the deferred debt issuance costs, which is recorded in net gain on debt
extinguishment in the accompanying consolidated statements of operations.



Unsecured Revolving Credit Facility



As of March 31, 2009 and December 31, 2008, we were not in compliance with the minimum consolidated tangible net worth covenant and certain other covenants for this facility. On March 5, 2009, the
lenders under this facility sent a notice of such events of default to us. 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. Pursuant to the terms of the facility, the applicable spread on any borrowings outstanding under this facility increased by 2.00% as a result of an event 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, 2009, the total interest
rate on this facility was 9.00% for borrowings denominated in U.S. dollars.



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Unsecured Public Debt



As of March 31, 2009 and December 31, 2008, we were not in compliance with the asset coverage covenant for these
notes. Under the indenture for the notes, we had a 60-day period to cure the default, which commenced on March 3, 2009, the date that we received notice of the default from certain note holders. Following the expiration of the 60-day cure
period, the default matured into an event of default under the indenture. 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, no acceleration actions have been taken by the note holders. As a result of rating agency downgrades during the first quarter of 2009, the interest rate on these notes increased by
1.75 % effective February 2, 2009 to a total rate of 8.60% as of March 31, 2009.



Unsecured Private Debt



As of March 31, 2009 and December 31, 2008, we were not in compliance with certain financial covenants, including the minimum consolidated
tangible net worth covenant, the available debt asset coverage covenant and the asset coverage covenant for each series of these notes. In addition, as of March 31, 2009, we were not in compliance with the ratio of consolidated debt to
consolidated shareholders equity covenant for each series. On March 5, 2009, the note holders sent a notice of such events of default to us. 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 can 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. As of the date of this filing, no acceleration actions have been
taken by the note holders.



Securitizations



In February 2009, we repurchased $20 million of Class B notes issued by
our indirect wholly owned consolidated subsidiary, ACAS Business Loan Trust 2007-1 for $3 million. As a result of this purchase, we recognized a $17 million gain during the quarter ended March 31, 2009 which is recorded in net gain on debt
extinguishment in the accompanying consolidated statements of operations.



As of March 31, 2009, we were in compliance with all of our asset securitizations.



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 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 have 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 schedule 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



78



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a counterparty has accelerated certain of our indebtedness in an amount greater than $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, 2009, the fair value of our interest rate swap agreements with these early termination event provisions was a
liability of $24 million which is net of a $65 million non-performance 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 $89 million as of March 31, 2009.



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, without shareholder approval. As of March 31, 2009, our NAV per share was $12.32 per share and our closing market price was $1.87 per share. On February 19, 2009, 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 19, 2010 and the number of shares that may be issued below the NAV per share is limited to (i) the number of shares of our common stock required to be issued to complete the acquisition of the ordinary shares of European Capital
and (ii) a maximum of an additional 42,812,640 shares of common stock, which was 20% of the number of shares outstanding as of the record date for 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.



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 have undistributed ordinary income from our tax year ended
September 30, 2008. In order for this undistributed ordinary income to be considered distributed for our tax year ended September 30, 2008, it will need to be declared as a dividend by June 15, 2009 and paid by September 30,
2009. Further, in order to continue to maintain our qualification as a RIC for our tax year ending September 30, 2009, we will be required to distribute at least 90% of the ordinary taxable income by declaring it by June 15, 2010 and
paying it by September 30, 2010. We expect to distribute all of our taxable income in accordance with the above dates to maintain our qualification as a RIC and to eliminate all of our taxable income.



For any tax years ending on or before December 31, 2009, 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.



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, 2009, loans on non-accrual status for 38 portfolio companies were $1,103 million, calculated as the cost plus unamortized OID, and had a fair value of $214 million.



79



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As of March 31, 2009 and December 31, 2008, loans on accrual status, past due loans and loans
on non-accrual status were as follows (dollars in millions):



|                                                            |  |                             |  |               |       |   |                             |     |                  |   |       |  
|----------------------------------------------------------- |  | --------------------------- |  | ------------- | ----- | - | --------------------------- | --- | ---------------- | - | ----- | -
|                                                            |  | Number ofPortfolioCompanies |  | March 31,2009 |       |   | Number ofPortfolioCompanies |     | December 31,2008 |  
|Current                                                     |  | 98                          |  | $             | 5,176 |   |                             | 110 |                  | $ | 5,438 |  
|                                                            |  |                             |  |               |       |   |                             |     |                  |   |       |  
|One Month Past Due                                          |  |                             |  |               | 1     |   |                             |     |                  |   | 22    |  
|Two Months Past Due                                         |  |                             |  |               |      |   |                             |     |                  |   |      |  
|Three Months Past Due                                       |  |                             |  |               | 12    |   |                             |     |                  |   |      |  
|Greater than Three Months Past Due                          |  |                             |  |               | 28    |   |                             |     |                  |   | 28    |  
|Loans on Non-accrual Status                                 |  |                             |  |               | 1,103 |   |                             |     |                  |   | 871   |  
|                                                            |  |                             |  |               |       |   |                             |     |                  |   |       |  
|Subtotal                                                    |  | 38                          |  |               | 1,144 |   |                             | 35  |                  |   | 921   |  
|                                                            |  |                             |  |               |       |   |                             |     |                  |   |       |  
|Total Loans at Face                                         |  | 136                         |  | $             | 6,320 |   |                             | 145 |                  | $ | 6,359 |  
|                                                            |  |                             |  |               |       |   |                             |     |                  |   |       |  
|Total Loans at Fair Value                                   |  | 136                         |  | $             | 4,866 |   |                             | 145 |                  | $ | 5,112 |  
|                                                            |  |                             |  |               |       |   |                             |     |                  |   |       |  
|Past Due and Non-accural Loans as a Percent of Total Loans  |  |                             |  |               | 18.1  | % |                             |     |                  |   | 14.5  | %
|Non-accrual Loans as a Percent of Total Loans at Fair Value |  |                             |  |               | 4.4   | % |                             |     |                  |   | 2.9   | %



The loan balances at
face above reflect our cost of the debt, excluding Structured Products, plus unamortized OID. We believe that debt service collection is probable for our loans that are past due.



During the first quarter of 2009, three portfolio companies were recapitalized that included exchanging our loans for a
preferred or common equity securities that had a cost basis of $35 million and a fair value of $22 million.



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 mezzanine 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.



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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-2000 static pool consists of the investments made from the time of our IPO through the year ended December 31, 1999. The following table contains a summary of portfolio statistics as of and for the period ended
March 31, 2009:



|                                                                            |  |          |        |   |      |   |      |      |  |   |        |   |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |      |  |                          |        |   |                      |   |        |   |  |   |   |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------------- |  | -------- | ------ | - | ---- | - | ---- | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | ---- |  | ------------------------ | ------ | - | -------------------- | - | ------ | - |  | - | - |  | - | ------ | - |  | - | ------ | -
|Portfolio Statistics (1) ($ in millions,unaudited)                          |  | Pre-2000 |        |   | 2000 |   |      | 2001 |  |   | 2002   |   |  | 2003 |        |   | 2004 |   |        | 2005 |  |   | 2006   |   |  | 2007 |        |   | 2008 |   |        | 2009 |  | Pre-2000 - 2009Aggregate |        |   | 2004 - 2009Aggregate |  
|IRR-Realizable Value-All Investments(2)                                     |  |          | 7.7    | % |      |   | 8.0  | %    |  |   | 18.3   | % |  |      | 7.8    | % |      |   | 21.3   | %    |  |   | 13.7   | % |  |      | 2.9    | % |      |   | 8.6    | %    |  |                          | -1.9   | % |                      |   | -2.6   | % |  |   |  |  |   | 7.3    | % |  |   | 4.7    | %
|IRR-GAAP Fair Value-All Investments(3)                                      |  |          | 7.7    | % |      |   | 8.0  | %    |  |   | 18.3   | % |  |      | 7.7    | % |      |   | 21.3   | %    |  |   | 13.1   | % |  |      | 2.1    | % |      |   | 6.3    | %    |  |                          | -14.4  | % |                      |   | -18.4  | % |  |   |  |  |   | 4.0    | % |  |   | -0.2   | %
|IRR-GAAP Fair Value-Equity Investments Only(3)(4)(5)                        |  |          | 1.6    | % |      |   | 12.1 | %    |  |   | 46.9   | % |  |      | 11.1   | % |      |   | 29.6   | %    |  |   | 27.1   | % |  |      | -15.1  | % |      |   | 13.8   | %    |  |                          | -11.7  | % |                      |   | -41.5  | % |  |   |  |  |   | 1.8    | % |  |   | -3.1   | %
|IRR-Exited Investments(6)                                                   |  |          | 7.7    | % |      |   | 8.0  | %    |  |   | 20.8   | % |  |      | 10.5   | % |      |   | 23.5   | %    |  |   | 21.6   | % |  |      | 25.2   | % |      |   | 15.4   | %    |  |                          | 11.4   | % |                      |   | 75.0   | % |  |   |  |  |   | 16.1   | % |  |   | 20.6   | %
|Original Investments and Commitments                                        |  | $        | 780    |   |      | $ | 285  |      |  | $ | 376    |   |  | $    | 961    |   |      | $ | 1,432  |      |  | $ | 2,266  |   |  | $    | 4,527  |   |      | $ | 5,157  |      |  | $                        | 7,315  |   |                      | $ | 1,014  |   |  | $ |  |  | $ | 24,113 |   |  | $ | 20,279 |  
|Total Exits and Prepayments of Original Investments                         |  | $        | 690    |   |      | $ | 285  |      |  | $ | 336    |   |  | $    | 706    |   |      | $ | 1,083  |      |  | $ | 1,655  |   |  | $    | 2,005  |   |      | $ | 2,813  |      |  | $                        | 1,888  |   |                      | $ | 15     |   |  | $ |  |  | $ | 11,476 |   |  | $ | 8,376  |  
|Total Interest, Dividends and Fees Collected                                |  | $        | 302    |   |      | $ | 105  |      |  | $ | 148    |   |  | $    | 314    |   |      | $ | 374    |      |  | $ | 570    |   |  | $    | 881    |   |      | $ | 782    |      |  | $                        | 669    |   |                      | $ | 105    |   |  | $ |  |  | $ | 4,250  |   |  | $ | 3,007  |  
|Total Net Realized (Loss) Gain on Investments                               |  | $        | (118   | ) |      | $ | (39  | )    |  | $ | 9      |   |  | $    | (51    | ) |      | $ | 142    |      |  | $ | 166    |   |  | $    | 322    |   |      | $ | 66     |      |  | $                        | (36    | ) |                      | $ | 6      |   |  | $ |  |  | $ | 467    |   |  | $ | 524    |  
|Current Cost of Investments                                                 |  | $        | 82     |   |      | $ |     |      |  | $ | 37     |   |  | $    | 233    |   |      | $ | 317    |      |  | $ | 606    |   |  | $    | 2,237  |   |      | $ | 2,002  |      |  | $                        | 4,289  |   |                      | $ | 904    |   |  | $ |  |  | $ | 10,707 |   |  | $ | 10,038 |  
|Current Fair Value of Investments                                           |  | $        | 43     |   |      | $ |     |      |  | $ | 6      |   |  | $    | 132    |   |      | $ | 381    |      |  | $ | 350    |   |  | $    | 1,159  |   |      | $ | 1,493  |      |  | $                        | 2,618  |   |                      | $ | 657    |   |  | $ |  |  | $ | 6,839  |   |  | $ | 6,277  |  
|Current Fair Value of Investments as a % of Total Investments at Fair Value |  |          | 0.6    | % |      |   |     |      |  |   | 0.1    | % |  |      | 1.9    | % |      |   | 5.6    | %    |  |   | 5.1    | % |  |      | 17.0   | % |      |   | 21.8   | %    |  |                          | 38.3   | % |                      |   | 9.6    | % |  |   |  |  |   | 100.0  | % |  |   | 91.8   | %
|Net Unrealized Appreciation/(Depreciation)                                  |  | $        | (39    | ) |      | $ |     |      |  | $ | (31    | ) |  | $    | (101   | ) |      | $ | 64     |      |  | $ | (256   | ) |  | $    | (1,078 | ) |      | $ | (509   | )    |  | $                        | (1,671 | ) |                      | $ | (247   | ) |  | $ |  |  | $ | (3,868 | ) |  | $ | (3,761 | )
|Non-Accruing Loans at Face                                                  |  | $        | 20     |   |      | $ |     |      |  | $ | 50     |   |  | $    | 57     |   |      | $ |       |      |  | $ | 72     |   |  | $    | 90     |   |      | $ | 404    |      |  | $                        | 380    |   |                      | $ | 30     |   |  | $ |  |  | $ | 1,103  |   |  | $ | 976    |  
|Non-Accruing Loans at Fair Value                                            |  | $        | 6      |   |      | $ |     |      |  | $ | 2      |   |  | $    | 11     |   |      | $ |       |      |  | $ | 13     |   |  | $    | 37     |   |      | $ | 67     |      |  | $                        | 75     |   |                      | $ | 3      |   |  | $ |  |  | $ | 214    |   |  | $ | 195    |  
|Equity Interest at Fair Value(4)                                            |  | $        | 31     |   |      | $ |     |      |  | $ |       |   |  | $    |       |   |      | $ | 159    |      |  | $ | 57     |   |  | $    | 264    |   |      | $ | 501    |      |  | $                        | 682    |   |                      | $ | 136    |   |  | $ |  |  | $ | 1,830  |   |  | $ | 1,640  |  
|Debt to EBITDA(7)(8)(9)                                                     |  |          | 6.3    |   |      | $ |     |      |  |   | NM     |   |  |      | 5.7    |   |      |   | 4.3    |      |  |   | 7.6    |   |  |      | 4.8    |   |      |   | 5.3    |      |  |                          | 6.3    |   |                      |   | 6.2    |   |  |   |  |  |   | 5.8    |   |  |   | 5.9    |  
|Interest Coverage(7)(9)                                                     |  |          | 3.3    |   |      |   |     |      |  |   | NM     |   |  |      | 1.4    |   |      |   | 2.0    |      |  |   | 1.6    |   |  |      | 2.3    |   |      |   | 2.3    |      |  |                          | 1.9    |   |                      |   | 1.8    |   |  |   |  |  |   | 2.0    |   |  |   | 2.0    |  
|Debt Service Coverage(7)(9)                                                 |  |          | 2.6    |   |      |   |     |      |  |   | NM     |   |  |      | 0.9    |   |      |   | 1.9    |      |  |   | 1.3    |   |  |      | 1.6    |   |      |   | 1.8    |      |  |                          | 1.7    |   |                      |   | 1.5    |   |  |   |  |  |   | 1.7    |   |  |   | 1.7    |  
|Average Age of Companies(9)                                                 |  |          | 63 yrs |   |      |   |     |      |  |   | 26 yrs |   |  |      | 47 yrs |   |      |   | 40 yrs |      |  |   | 42 yrs |   |  |      | 31 yrs |   |      |   | 26 yrs |      |  |                          | 30 yrs |   |                      |   | 26 yrs |   |  |   |  |  |   | 31 yrs |   |  |   | 30 yrs |  
|Diluted Ownership Percentage(4)                                             |  |          | 54     | % |      |   |     |      |  |   | 83     | % |  |      | 37     | % |      |   | 52     | %    |  |   | 45     | % |  |      | 54     | % |      |   | 35     | %    |  |                          | 47     | % |                      |   | 30     | % |  |   |  |  |   | 44     | % |  |   | 43     | %
|Average Sales(9)(10)                                                        |  | $        | 146    |   |      | $ |     |      |  | $ | 12     |   |  | $    | 61     |   |      | $ | 198    |      |  | $ | 109    |   |  | $    | 114    |   |      | $ | 137    |      |  | $                        | 199    |   |                      | $ | 128    |   |  | $ |  |  | $ | 159    |   |  | $ | 159    |  
|Average EBITDA(9)(11)                                                       |  | $        | 11     |   |      | $ |     |      |  | $ |       |   |  | $    | 11     |   |      | $ | 39     |      |  | $ | 23     |   |  | $    | 22     |   |      | $ | 33     |      |  | $                        | 39     |   |                      | $ | 33     |   |  | $ |  |  | $ | 33     |   |  | $ | 34     |  
|Average EBITDA Margin                                                       |  |          | 7.5    | % |      |   |     |      |  |   |       |   |  |      | 18.0   | % |      |   | 19.7   | %    |  |   | 21.1   | % |  |      | 19.3   | % |      |   | 24.1   | %    |  |                          | 19.6   | % |                      |   | 25.8   | % |  |   |  |  |   | 20.8   | % |  |   | 21.4   | %
|Total Sales(9)(10)                                                          |  | $        | 374    |   |      | $ |     |      |  | $ | 248    |   |  | $    | 233    |   |      | $ | 1,392  |      |  | $ | 1,341  |   |  | $    | 2,619  |   |      | $ | 5,980  |      |  | $                        | 10,889 |   |                      | $ | 1,244  |   |  | $ |  |  | $ | 24,320 |   |  | $ | 22,073 |  
|Total EBITDA(9)(11)                                                         |  | $        | 29     |   |      | $ |     |      |  | $ | 5      |   |  | $    | 26     |   |      | $ | 195    |      |  | $ | 232    |   |  | $    | 363    |   |      | $ | 979    |      |  | $                        | 1,669  |   |                      | $ | 277    |   |  | $ |  |  | $ | 3,775  |   |  | $ | 3,520  |  
|% of Senior Loans(9)(12)                                                    |  |          | 42     | % |      |   |     |      |  |   | 5      | % |  |      | 70     | % |      |   | 61     | %    |  |   | 53     | % |  |      | 64     | % |      |   | 42     | %    |  |                          | 61     | % |                      |   | 26     | % |  |   |  |  |   | 54     | % |  |   | 53     | %
|% of Loans with Lien(9)(12)                                                 |  |          | 100    | % |      |   |     |      |  |   | 100    | % |  |      | 100    | % |      |   | 100    | %    |  |   | 92     | % |  |      | 92     | % |      |   | 94     | %    |  |                          | 94     | % |                      |   | 55     | % |  |   |  |  |   | 90     | % |  |   | 89     | %



|(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.
Investments in government securities and interest rate derivative agreements are excluded.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Assumes investments are exited at realizable based on anticipated proceeds to be received upon settlement or maturity.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(3) | Assumes investments are exited at current GAAP fair value.
|--- | ----------------------------------------------------------

|(4) | Excludes investments in Structured Products.
|--- | --------------------------------------------

|(5) | Excludes equity investments that are the result of conversions of debt and warrants received with the issuance of debt.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(6) | Includes fully exited portfolio companies. Partially exited portfolio companies are not included.
|--- | -------------------------------------------------------------------------------------------------

|(7) | These amounts do not include investments in which we own only equity.
|--- | ---------------------------------------------------------------------

|(8) | For portfolio companies with a nominal EBITDA amount, the portfolio companys maximum debt leverage is limited to 15 times EBITDA.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(9) | Excludes investments in Structured Products, investments in managed funds and American Capital, LLC.
|--- | ----------------------------------------------------------------------------------------------------

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

|(11) | EBITDA of the most recent twelve months, or when appropriate, the forecasted twelve months.
|---- | -------------------------------------------------------------------------------------------

|(12) | As a percentage of our total debt investments.
|---- | ----------------------------------------------



81



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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 American Capitals Annual Report on Form 10-K for the year ended December 31, 2008. The Company believes that there have been no
material changes in these market risks since December 31, 2008.



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, 2009. 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 2009.



82



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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, 2008 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 unsecured public debt and our unsecured private debt. Although we are not in default of any payments, we are in default of certain financial covenants as well as cross defaults, as further described in
Note 6 of Part I, Item 1. Consolidated Financial Statements and Notes.



Item 4.Submission of Matters to a Vote of Security Holders



On February 19, 2009, we held a special meeting of stockholders. Two matters were 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; and



2. To transact such other business as may properly come before the meeting or any adjournment thereof.



The results of the shares voted with regard to each of these matters are 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  
|95,799,473 |  | 12,552,632 |  | 1,672,545



2. Approval to
transact such other business as may properly come before the meeting or any adjournment thereof



|           |  |            |  |          
|---------- |  | ---------- |  | ---------
|For        |  | Against    |  | Abstain  
|63,035,926 |  | 43,428,499 |  | 3,560,225



Item 5.Other Information



None.



83



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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 II to the Definitive Proxy Statement for the 2008 Annual
Meeting (File No. 814-00149), filed on April 9, 2008.                                              
|       | 
|*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.  |  | First Amendment, dated as of March 30, 2009, to the Note Purchase Agreement dated as of September 1, 2004 between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.)
and each of the Noteholders listed on the signature pages thereto.                                              
|       | 
|10.2.  |  | First Amendment, dated as of March 30, 2009, to the Note Purchase Agreement dated as of August 1, 2005 between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) and
each of the Noteholders listed on the signature pages thereto.                                                 
|       | 
|10.3.  |  | First Amendment, dated as of March 30, 2009, to the Note Purchase Agreement dated as of September 26, 2005 between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.)
and each of the Noteholders listed on the signature pages thereto.                                             
|       | 
|10.4.  |  | First Amendment, dated as of March 30, 2009, to the Note Purchase Agreement dated as of February 9, 2006 between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) and
each of the Noteholders listed on the signature pages thereto.                                               
|       | 
|10.5.  |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Steven W. Burge and American Capital, Ltd.                                                                                                                                                
|       | 
|10.6.  |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Roland Cline and American Capital, Ltd.                                                                                                                                                   
|       | 
|10.7.  |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between John Erickson and American Capital, Ltd.                                                                                                                                                  
|       | 
|10.8.  |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Samuel A. Flax and American Capital, Ltd.                                                                                                                                                 
|       | 
|10.9.  |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Brian Graff and American Capital, Ltd.                                                                                                                                                    
|       | 
|10.10. |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Gordon OBrien and American Capital, Ltd.                                                                                                                                                 
|       | 
|10.11. |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Ira Wagner and American Capital, Ltd.                                                                                                                                                     
|       | 
|10.12. |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Malon Wilkus and American Capital, Ltd.                                                                                                                                                   
|       | 
|10.13. |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Darin Winn and American Capital, Ltd.                                                                                                                                                     
|       | 
|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.                                                                                                                                                             



|* | Previously filed in whole or in part.
|- | -------------------------------------



84



---

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 and Reporting




Date: May 11, 2009



85



---

INDEX TO EXHIBITS



|            |  |                                                                                                                                                                                                                                                       
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                           
|10.1.       |  | First Amendment, dated as of March 30, 2009, to the Note Purchase Agreement dated as of September 1, 2004 between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) and each of
the Noteholders listed on the signature pages thereto. 
|            | 
|10.2.       |  | First Amendment, dated as of March 30, 2009, to the Note Purchase Agreement dated as of August 1, 2005 between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) and each of the
Noteholders listed on the signature pages thereto.    
|            | 
|10.3.       |  | First Amendment, dated as of March 30, 2009, to the Note Purchase Agreement dated as of September 26, 2005 between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) and each of
the Noteholders listed on the signature pages thereto.
|            | 
|10.4.       |  | First Amendment, dated as of March 30, 2009, to the Note Purchase Agreement dated as of February 9, 2006 between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) and each of
the Noteholders listed on the signature pages thereto.  
|            | 
|10.5.       |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Steven W. Burge and American Capital, Ltd.                                                                                                   
|            | 
|10.6.       |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Roland Cline and American Capital, Ltd.                                                                                                      
|            | 
|10.7.       |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between John Erickson and American Capital, Ltd.                                                                                                     
|            | 
|10.8.       |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Samuel A. Flax and American Capital, Ltd.                                                                                                    
|            | 
|10.9.       |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Brian Graff and American Capital, Ltd.                                                                                                       
|            | 
|10.10.      |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Gordon OBrien and American Capital, Ltd.                                                                                                    
|            | 
|10.11.      |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Ira Wagner and American Capital, Ltd.                                                                                                        
|            | 
|10.12.      |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Malon Wilkus and American Capital, Ltd.                                                                                                      
|            | 
|10.13.      |  | Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Darin Winn and American Capital, Ltd.                                                                                                        
|            | 
|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.