1. Why is American Capital distributing a portion of the dividend in shares of its common stock?

This dividend includes the balance of American Capital's 2008 taxable income, which is required to be distributed to stockholders in order for American Capital to maintain its tax status as a regulated investment company and to eliminate its income tax liability. The IRS issued a Revenue Procedure allowing publicly traded regulated investment companies, such as American Capital, to distribute, with respect to a taxable year ending on or before December 31, 2009, its own stock as a dividend for the purpose of fulfilling its distribution requirements if, among other things, the aggregate amount of cash that may be distributed to their stockholders is at least 10% of the total dividend. The Investment Company Act of 1940, as amended (the "Act") could prohibit American Capital from paying any cash dividend when its asset to debt coverage as determined under the Act is less than 200% and it has public bonds outstanding. However, the staff of the Securities and Exchange Commission has provided the Company with no-action relief to the effect that American Capital may declare and pay a cash dividend in these circumstances, provided that the cash portion does not exceed the 10% cash minimum required by the IRS Revenue Procedure.

2. When do I need to purchase shares of American Capital common stock by in order to receive the dividend?

The stock must have been purchased prior to the ex-dividend date, which was June 18, 2009. Only stockholders of record on June 22, 2009 will receive the dividend, which is payable on August 7, 2009.

3. What income is included in the dividend?

The $1.07 dividend declared on June 11, 2009, includes the Company's remaining 2008 taxable income, which is required to be distributed to stockholders prior to September 30, 2009, in order for the Company to eliminate its income tax liability, as well as a portion of estimated 2009 taxable income. Upon payment of the dividend, the Company will have met its distribution requirements for its 2008 taxable income.

4. If I hold my shares with a broker, bank or nominee will I receive an election form? Who should I contact with questions regarding the dividend?

The Company will mail a letter with additional information regarding the distribution election and an election form only to registered stockholders. (Registered stockholders are those who own their stock directly in certificate form, and not through a bank, broker or nominee.) Therefore, if you hold your shares through a broker, bank or nominee, you will not receive an election form from the Company.