INVESTOR RELATIONS

Frequently Asked Questions

American Capital offers answers to frequently asked questions. Click on a specific question below. If you have additional questions, please contact Investor Relations at (301) 951-5917.

Please click on the icon (+ or -) to the left to expand or collapse ALL answers.

General

1. What is American Capital's ticker symbol and what exchange does the stock trade on?

   American Capital trades on The NASDAQ Global Select Market under the ticker symbol "ACAS."

2. What types of investments does American Capital make?

   Both directly and through our global asset management business, American Capital invests primarily in privately held middle-market companies. We serve as an equity partner in management and employee buyouts, provide mezzanine and senior debt financing for buyouts led by private equity firms and provide capital directly to early stage and mature private and public companies. American Capital has the capability to provide One-Stop Buyouts™, senior debt, mezzanine and equity. American Capital and its affiliates generally invest from $5 million to $800 million per company in North America and €5 million to €500 million per company in Europe.

3. How can I learn more about your investment in a specific portfolio company?

   American Capital has dedicated a section of its website to portfolio company information. To read more about our portfolio companies, please visit the Our Portfolio page.

4. What type of return have American Capital shareholders received?

   Please visit the American Capital Stock Performance section of our website for detail.

5. Which research analysts cover American Capital?

   Please visit the Analyst Coverage page of our website for a complete list of analysts currently covering American Capital.

6. Where can I find copies of American Capital’s SEC filings and financial reports (historical 10Qs, 10Ks, Annual Reports, etc.)?

   Please visit the SEC Filings page on our website to see American Capital’s historical SEC filings and other financial reports.

Stock Purchase and Record Keeping

7. Does American Capital offer direct stock purchase or do I need to purchase shares through a broker?

   American Capital does not offer direct stock purchase. All initial and subsequent stock purchases must be made through a broker.

8. Who do I contact with questions about my account activity, replacing lost or stolen certificates, transferring securities, dividend payments, direct deposit information, or processing a change of address?

   If your shares are held with a broker, please contact your broker directly.

   If you are a shareholder of record, please contact our transfer agent:

   Computershare
   Investor Services
   P.O. Box 43078
   Providence, RI 02940-3078
   (800) 733-5001
   www.computershare.com/equiserve

Dividends

9. What is the dividend history (ex-dividend dates, payable dates, etc.) for American Capital?

   The table below provides American Capital's dividend history from 2002 through the present:

   

10. Why is American Capital required to pay out its taxable earnings as dividends?

    To qualify as a Regulated Investment Company (RIC) for tax purposes, American Capital must distribute annually to our stockholders, based on our tax fiscal year that ends on September 30, at least 90% of our investment company taxable income. Investment company taxable income includes our taxable ordinary income and short-term capital gains.

11. Is a dividend from American Capital “qualified”? What is the tax treatment of American Capital dividends?

    The majority of American Capital’s dividends have historically been non-qualified. Additional details can be found on the Tax Characteristics page of the website.

12. What date do I need to purchase the stock by to ensure I receive the dividend?

    The stock must be purchased before the ex-dividend date. Ex-dividend dates are listed above (please see chart in question #9).

13. Does American Capital have a Dividend Reinvestment Plan (DRIP)? How do I enroll? Can I participate if my shares are held with a broker?

    In appreciation of the loyal support of our shareholders, American Capital’s Dividend Reinvestment Plan grants a 2% discount to the market price for reinvested dividends when the market price per share equals or exceeds the NAV per share by at least 110%. Please see the prospectus for additional information.

    As of March 31, 2008, brokers that have confirmed participation* in the DRIP include:

    AG Edwards
    Citigroup - Smith Barney
    Fidelity
    Merrill Lynch
    Morgan Keegan
    RBC Dain Rauscher
    UBS Financial
    Wachovia Securities
    Wedbush Morgan

    *Other brokerages may elect to participate; please contact your broker if they are not listed.

    If you hold your shares with a participating brokerage, please contact your broker directly for enrollment information.

    If you hold your shares in certificate form and are on record with American Capital's transfer agent, you must obtain an Enrollment Form from Computershare, complete and return it to enroll. To obtain an Enrollment Form, write or call:

    Computershare
    Investor Services
    P.O. Box 43078
    Providence, RI 02940-3078
    (800) 733-5001
    www.computershare.com/equiserve

14. Once I have my account set up on the DRIP through your transfer agent, Computershare, can I make additional cash investments?

    No, additional stock purchases cannot be made through our transfer agent, Computershare. All initial and subsequent stock purchases must be made through a broker. American Capital does not offer direct stock purchase.

15. Does the American Capital DRIP include a discount if the stock is trading at a discount to NAV?

    Pursuant to Question 10 in our Dividend Reinvestment Plan prospectus, if the market price per share of common stock on the dividend or distribution payment date does not equal or exceed by at least 110% the net asset value per share of our common stock as of the end of the most recently completed fiscal quarter, then the plan administrator will acquire shares in the open market and a discount will not be applied.

    For additional information, please see our DRIP prospectus.

16. Does American Capital issue a K-1? What other tax forms should I expect?

    No, American Capital does not issue a K-1. American Capital shareholders will receive a Form 1099. In addition, if American Capital opts to retain its long-term capital gains, you will receive a Form 2439. You can read more about these forms on the Tax Characteristics and Form 2439 sections of our website.

Ownership

17. Who are the major stockholders of American Capital?

    As of March 31, 2008, American Capital has over 321,000 stockholders. The Major Stockholders page of our website lists American Capital's stockholders.

Operations

18. Are you able to assist your portfolio companies in their operations, if necessary?

    Yes. As a Business Development Company (BDC), under the Investment Company Act of 1940, we are required to make available significant managerial assistance to our portfolio companies. American Capital has an outstanding Operations Team that is capable of assisting in the management of our portfolio companies, if necessary. As of March 31, 2008, the Operations Team, including principals, consists of approximately 32 members.

Portfolio Valuation and Performance

19. How has the American Capital portfolio performed?

    Since its 1997 IPO and through March 31, 2008, American Capital has returned a 16% weighted average IRR on its senior debt, sub-debt and equity realizations. We have returned a 29% weighted average IRR on equity realizations. The chart below provides additional detail on ACAS realizations through March 31, 2008:

    

    To learn more about American Capital's realizations, please click here.

20. What are the procedures for valuing American Capital’s investments?

    Investments are carried at fair value, as determined in good faith by our Board of Directors. For securities of companies that are not publicly traded, or for which there are various degrees of trading restrictions, we prepare an analysis consisting of traditional valuation methodologies to estimate the enterprise value of the portfolio company, including any investment company that is a portfolio company, issuing the securities. The methodologies consist of valuation estimates based on: valuations of comparable public companies, recent sales of comparable companies, discounting the forecasted cash flows of the portfolio company, the liquidation or collateral value of the portfolio company’s assets, third party valuations of the portfolio company, third party sale offers, potential strategic buyer analysis and the value of recent investments in the equity securities of the portfolio company.

    For our investments in controlling interests of publicly traded equity securities, we also incorporate the closing market price of the publicly traded equity security on the valuation date as an additional valuation methodology. We weight some or all of the above valuation methods in order to conclude on our estimate of value. In valuing convertible debt, equity or other securities, we value our equity 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 securities at cost plus amortized original issue discount (“OID”) 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. If there is sufficient enterprise value to cover the face amount of a debt security that has been discounted due to detachable equity warrants received with that security, that detachable equity warrant will be valued such that the sum of the discounted debt security and the detachable equity warrant equal the face value of the debt security.

    For CMBS and CDO securities, we prepare a fair value analysis that is based on third party sale offers, when available, or a discounted cash flow model that utilizes prepayment and loss assumptions based on historical experience and project performance, economic factors, the characteristics of the underlying cash flow and comparable yields for similar securities, when available.

    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 securities 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.

21. Does American Capital engage an outside valuation firm?

    American Capital’s Board of Directors is responsible for determining the fair value of our portfolio investments on a quarterly basis. Our Board of Directors has retained Houlihan Lokey Howard & Zukin Financial Advisors Inc. ("Houlihan Lokey") to assist it by having Houlihan Lokey regularly review a designated percentage of our fair value determinations. Houlihan Lokey is a leading valuation firm in the U.S, engaged in approximately 1,000 valuation assignments per year for clients worldwide. Each quarter, Houlihan Lokey reviews our determination of the fair value of American Capital’s portfolio company investments that have been portfolio companies for at least one year and that have a fair value in excess of $25 million.

Contact Information

22. How can I receive email alerts from American Capital?

    Please complete the form located on the Get Email Updates page of our website to receive information and updates from American Capital. Note that all entries will be kept strictly confidential and will not be made public or disclosed to other parties except as required by law.

23. How can I request additional information from American Capital?

    You can request information by contacting Investor Relations at (301) 951-5917 or IR@americancapital.com.

The information above contains summaries of certain financial and statistical information about American Capital Strategies, Ltd. They should be read in conjunction with our periodic reports that are filed from time-to-time with the Securities and Exchange Commission including our annual report on Form 10-K for the year ended December 31, 2007, and our quarterly reports on Form 10-Q for the fiscal quarter ended March 31, 2008.