INVESTOR RELATIONS

Form 2439

AMERICAN CAPITAL, LTD.
IMPORTANT NOTICE REGARDING 2007 FORM 2439

TO SHAREHOLDERS OF RECORD ON SEPTEMBER 30, 2008:

For American Capital, Ltd.'s tax year ended September 30, 2008, American Capital retained its taxable net long-term capital gain on investments and paid a federal income tax thereon on behalf of its shareholders.

Enclosed is a Form 2439 furnished under section 852(b)(3)(D) of the U.S. Internal Revenue Code.  Form 2439 reports your portion of such capital gain and your portion of the Federal income tax paid. You must include on your federal income tax return for 2008 your portion of American Capital's taxable net long-term capital gain and you may take a credit for the tax paid by American Capital on your behalf.  The amount of the credit may be more than your actual tax liability for those gains.  You may take credit for the full amount of the federal income tax paid on your behalf and create a balance in your favor to offset other tax liabilities or to entitle you to a refund.  You should also increase the tax basis of your investment in American Capital's stock by the difference between your portion of the taxable net long-term capital gain and the federal income tax paid on your behalf.

If you also owned shares on September 30, 2008 registered in the name of a broker or a nominee, you should receive a similar Form 2439 from the broker or nominee pertaining to such shares.  If you owned shares on September 30, 2008 in a tax deferred account such as an IRA, you are also entitled to the tax credit and may obtain this tax credit by filing a Form 990-T.  The custodian, broker or nominee of your tax deferred account would have to file the Form 990-T on your behalf.  Please consult with your custodian, broker or nominee.

Line 1a of Form 2439 reports your portion of the total taxable net long-term capital gain realized and retained by American Capital for the period from October 1, 2007 through September 30, 2008 based on the total number of shares of American Capital's stock registered in your name on September 30, 2008.  Most U.S. individual tax payers would include this as long-term capital gain income on their 2008 federal income tax return.  This amount is equivalent to $0.747872430 per share.

Line 2 of Form 2439 reports the federal income tax paid by American Capital on your behalf on the gain shown on Line 1a.  Most U.S. individual tax payers would include this as a credit for income tax paid on their 2008 federal income tax return.  It is equivalent to $0.261755351 per share.

You should also increase the tax basis of your stock by the excess of Line 1a over Line 2 of Form 2439.  This amount is equivalent to $0.486117080 per share.

Please refer to the instructions on the reverse side of Copies B and C of Form 2439.  Your copy of Form 2439 should be retained as part of your records evidencing the increase in the tax basis of your investment in American Capital's stock.

Form 2439 applies only to your portion of the taxable net long-term capital gains realized and retained by American Capital for the period from October 1, 2007 through September 30, 2008 and the federal income tax paid thereon by American Capital.  All shareholders will also separately receive in January 2009 a Form 1099-DIV reporting all cash dividends paid in 2008 including the characterization of those dividends.  The amounts reported on Form 2439 are not included on the Form 1099-DIV and are in addition to your cash dividends received for 2008 and reported on Form 1099-DIV.

Download Form 2439 Frequently Asked Questions (10 slides)

Note: American Capital does not provide advice regarding a shareholder's federal, state, or local tax liability and this notice does not constitute such advice.  Please consult with your personal tax adviser regarding the enclosed Form 2439.