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AMERICAN CAPITAL, LTD 10-Q 2008

Documents found in this filing:

  1. 10-Q
  2. Ex-31
  3. Ex-32
  4. Graphic
  5. Graphic
Form 10-Q
Table of Contents

 

 

 

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, 2008

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  x        Accelerated filer  ¨        Non-accelerated filer ¨

 

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, 2008, was 202,896,718.

 

 

 

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

   

Item 1.

   

Consolidated Financial Statements

    3
  

Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007

    3
  

Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007 (unaudited)

    4
  

Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2008 and 2007 (unaudited)

    5
  

Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 (unaudited)

    6
  

Consolidated Financial Highlights for the three months ended March 31, 2008 and 2007 (unaudited)

    7
  

Consolidated Schedules of Investments as of March 31, 2008 (unaudited) and December 31, 2007

    8
  

Notes to Consolidated Financial Statements (unaudited)

    41

Item 2.

   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

    56

Item 3.

   

Quantitative and Qualitative Disclosure About Market Risk

    80

Item 4.

   

Controls and Procedures

    80

PART II. OTHER INFORMATION

   

Item 1.

   

Legal Proceedings

    81

Item 1A.

   

Risk Factors

    81

Item 2.

   

Unregistered Sales of Equity Securities and Use of Proceeds

    81

Item 3.

   

Defaults upon Senior Securities

    82

Item 4.

   

Submission of Matters to a Vote of Security Holders

    82

Item 5.

   

Other Information

    82

Item 6.

   

Exhibits

    83

Signatures

   84

 

2

Table of Contents

Item 1. Consolidated Financial Statements

 

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

 

     March 31,
2008		     December 31,
2007
    
     (Unaudited)      

Assets

     

Investments at fair value (cost of $10,292 and $10,667, respectively)

     

Non-Control/Non-Affiliate investments (cost of $6,199 and $6,467, respectively)

    $ 5,521     $ 6,351

Affiliate investments (cost of $430 and $394, respectively)

      417       396

Control investments (cost of $3,663 and $3,806, respectively)

      3,697       4,177

Derivative agreements (cost of $0 and $0, respectively)

      4       4
              

Total investments at fair value

      9,639       10,928

Cash and cash equivalents

      37       143

Restricted cash and cash equivalents

      280       401

Interest receivable

      55       56

Other

      208       204
              

Total assets

    $ 10,219     $ 11,732
              

Liabilities and Shareholders’ Equity

     

Debt ($157 and $267, maturing within one year, respectively)

    $ 4,079     $ 4,824

Derivative agreements

      150       77

Accrued dividends payable

      196       195

Other

      75       195
              

Total liabilities

      4,500       5,291
              

Commitments and contingencies

     

Shareholders’ equity:

     

Undesignated preferred stock, $0.01 par value, 5.0 shares authorized, 0 issued and outstanding

      —         —  

Common stock, $0.01 par value, 1,000.0 shares authorized, 210.0 and 201.4 issued and 203.1 and 195.9 outstanding, respectively

      2       2

Capital in excess of par value

      6,301       6,013

Undistributed net realized earnings

      241       254

Net unrealized (depreciation) appreciation of investments

      (825 )     172
              

Total shareholders’ equity

      5,719       6,441
              

Total liabilities and shareholders’ equity

    $ 10,219     $ 11,732
              

Net asset value per common share

    $ 28.16     $ 32.88
              

 

See accompanying notes.

 

3

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in millions, except per share data)

 

     Three Months Ended
March 31,		  
         2008             2007      

OPERATING INCOME:

     

Interest and dividend income

     

Non-Control/Non-Affiliate investments

    $ 166     $ 130  

Affiliate investments

      11       17  

Control investments

      81       59  
                

Total interest and dividend income

      258       206  
                

Asset management and other fee income

     

Non-Control/Non-Affiliate investments

      9       7  

Affiliate investments

      —         1  

Control investments

      25       36  
                

Total asset management and other fee income

      34       44  
                

Total operating income

      292       250  
                

OPERATING EXPENSES:

     

Interest

      63       62  

Salaries, benefits and stock-based compensation

      56       51  

General and administrative

      23       25  
                

Total operating expenses

      142       138  
                

OPERATING INCOME BEFORE INCOME TAXES

      150       112  

Benefit for income taxes

      1       2  
                

NET OPERATING INCOME

      151       114  
                

Net realized gain (loss) on investments

     

Non-Control/Non-Affiliate investments

      (9 )     2  

Affiliate investments

      1       —    

Control investments

      36       8  

Taxes on net realized gain

      (1 )     —    

Foreign currency

      5       —    

Derivative agreements

      1       3  
                

Total net realized gain on investments

      33       13  
                

Net unrealized (depreciation) appreciation of investments

     

Portfolio company investments

      (997 )     6  

Foreign currency translation

      73       8  

Derivative agreements

      (73 )     (7 )
                

Total net unrealized (depreciation) appreciation of investments

      (997 )     7  
                

Total net (loss) gain on investments

      (964 )     20  
                

NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS (NET (LOSS) EARNINGS)

    $ (813 )   $ 134  
                

NET OPERATING INCOME PER COMMON SHARE:

     

Basic

    $ 0.77     $ 0.75  

Diluted

    $ 0.77     $ 0.73  

NET (LOSS) EARNINGS PER COMMON SHARE:

     

Basic

    $ (4.16 )   $ 0.88  

Diluted

    $ (4.16 )   $ 0.86  

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:

     

Basic

      195.2       152.7  

Diluted

      195.2       156.1  

DIVIDENDS DECLARED PER COMMON SHARE

    $ 1.01     $ 0.89  

 

See accompanying notes.

 

4

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(unaudited)

(in millions, except per share data)

 

    Three Months Ended
March 31,		  
    2008     2007  

Operations:

    

Net operating income

   $ 151     $ 114  

Net realized gain on investments

     33       13  

Net unrealized (depreciaton) appreciation of investments

     (997 )     7  
               

Net (decrease) increase in net assets resulting from operations

     (813 )     134  
               

Shareholder distributions:

    

Common stock dividends from net operating income

     (151 )     (114 )

Common stock dividends in excess of net operating income

     (45 )     (23 )
               

Net decrease in net assets resulting from shareholder distributions

     (196 )     (137 )
               

Capital share transactions:

    

Issuance of common stock

     302       418  

Issuance of common stock under stock option plans

     3       6  

Issuance of common stock under dividend reinvestment plan

     —         12  

Purchase of common stock held in deferred compensation trusts

     (34 )     (10 )

Purchase of treasury stock

     (6 )     —    

Stock-based compensation

     23       18  

Other

     (1 )     (2 )
               

Net increase in net assets resulting from capital share transactions

     287       442  
               

Total (decrease) increase in net assets

     (722 )     439  

Net assets at beginning of period

     6,441       4,342  
               

Net assets at end of period

   $ 5,719     $ 4,781  
               

Net asset value per common share at end of period

   $ 28.16     $ 30.36  
               

Common shares outstanding at end of period

     203.1       157.5  
               

 

See accompanying notes.

 

5

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in millions)

 

     Three Months Ended
March 31,		  
         2008             2007      

Operating activities:

     

Net (decrease) increase in net assets resulting from operations

    $ (813 )   $ 134  

Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash (used in) provided by operating activities:

     

Net unrealized depreciation (appreciation) of investments

      997       (7 )

Net realized gain on investments

      (33 )     (13 )

Increase in accrued payment-in-kind interest and dividends

      (58 )     (37 )

Collection of loan origination fees

      6       5  

Stock-based compensation and other deferred compensation expense

      23       18  

Decrease (increase) in interest receivable

      2       (18 )

(Increase) decrease in other assets

      (13 )     8  

Decrease in other liabilities

      (122 )     (10 )

Other

      1       3  
                

Net cash (used in) provided by operating activities

      (10 )     83  
                

Investing activities:

     

Purchases of investments

      (449 )     (1,050 )

Fundings on portfolio company revolving credit facility investments, net

      (14 )     (42 )

Principal repayments

      257       123  

Proceeds from loan syndications and loan sales

      274       424  

Collection of payment-in-kind notes and dividends and accreted loan discounts

      20       3  

Proceeds from sale of equity investments

      380       20  

Capital expenditures for property and equipment

      (4 )     (8 )

Other

      5       3  
                

Net cash provided by (used in) investing activities

      469       (527 )
                

Financing activities:

     

Repayment of notes payable from asset securitizations

      (155 )     —    

(Payments) draws on revolving credit facilities, net

      (652 )     281  

Proceeds (repayments) from TRS facility, net

      52       (201 )

Decrease in debt service escrows

      120       145  

Issuance of common stock

      305       424  

Purchase of common stock held in deferred compensation trusts

      (28 )     (10 )

Purchase of treasury stock

      (6 )     —    

Distributions paid

      (201 )     (118 )

Other

      —         (1 )
                

Net cash (used in) provided by financing activities

      (565 )     520  
                

Net (decrease) increase in cash and cash equivalents

      (106 )     76  

Cash and cash equivalents at beginning of period

      143       77  
                

Cash and cash equivalents at end of period

    $ 37     $ 153  
                

Non-cash financing activities:

     

Issuance of common stock in conjunction with dividend reinvestment plan

    $ —       $ 12  

 

See accompanying notes.

 

6

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(unaudited)

(in millions, except per share data)

 

     Three Months Ended
March 31,		  
         2008             2007      

Per Share Data:

     

Net asset value at beginning of the period

    $ 32.88     $ 29.42  
                

Net operating income(1)

      0.77       0.75  

Net realized gain on investments(1)

      0.17       0.09  

Net unrealized (depreciation) appreciation on investments(1)

      (5.10 )     0.04  
                

Net (decrease) increase in net assets resulting from operations(1)

      (4.16 )     0.88  

Issuance of common stock

      0.12       0.88  

Shareholder distributions

      (1.01 )     (0.89 )

Other, net(2)

      0.33       0.07  
                

Net asset value at end of period

    $ 28.16     $ 30.36  
                

Ratio/Supplemental Data:

     

Per share market value at end of period

    $ 34.16     $ 44.31  

Total gain (loss)(3)

      6.65 %     (2.20 )%

Shares outstanding at end of period

      203.1       157.5  

Net assets at end of period

    $ 5,719     $ 4,781  

Average net assets(4)

    $ 6,080     $ 4,562  

Average debt outstanding(5)

    $ 4,833     $ 4,011  

Average debt per common share(1)

    $ 24.76     $ 26.27  

Ratio of operating expenses, net of interest expense, to average net assets

      1.31 %     1.67 %

Ratio of interest expense to average net assets

      1.04 %     1.36 %
                

Ratio of operating expenses to average net assets

      2.35 %     3.03 %

Ratio of net operating income to average net assets

      2.48 %     2.50 %

 

(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 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 gain (loss) is based on the change in the market value of our common stock taking into account dividends reinvested in accordance with the terms of our dividend reinvestment plan.
(4) Based on the average of ending net assets as of the end of each reporting period.
(5) Based on a daily weighted average balance of debt outstanding for the period.

 

See accompanying notes.

 

7

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

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 (15.0%, Due 11/13 – 11/14)(7)

       53.2     52.5     52.5
   

Convertible Preferred Stock

   70,752       79.0     94.0
   

Common Stock(1)

   17,687,156       17.7     23.0
                   
                        149.2     169.5

Algoma Holding Company

  

Building Products

  

Subordinated Debt (13.0%, Due 4/13)(7)

       13.1     13.0     13.0
   

Convertible Preferred Stock(1)

   23,319       —       7.8
                   
                        13.0     20.8

American Acquisition, LLC

  

Capital Markets

  

Senior Debt (13.3%, Due 12/12)

         17.9     17.4     17.4

AmWins Group, Inc.

  

Insurance

  

Senior Debt (8.6%, Due 6/14)(7)

         18.6     18.6     13.0

Aspect Software

  

IT Services

  

Senior Debt (11.5%, Due 7/12)

         20.0     19.8     18.9

Astrodyne Corporation

  

Electrical Equipment

  

Senior Debt (11.1%, Due 4/11)(7)

       6.5     6.5     6.5
   

Subordinated Debt (12.0%, Due 4/12)(7)

       11.0     10.9     11.0
   

Redeemable Preferred Stock(1)

   1       —       —  
   

Convertible Preferred Stock

   322,208       6.8     12.7
                   
                        24.2     30.2

Avalon Laboratories

  

Health Care Equipment &

  

Senior Debt (10.6%, Due 1/14)(7)

       15.0     14.7     15.0

    Holding Corp.

  

    Supplies

  

Subordinated Debt (16%, Due 1/15)(7)

       21.1     20.9     21.1
   

Convertible Preferred Stock

   148,742       24.7     21.1
   

Common Stock(1)

   7,829       1.3     —  
                   
                        61.6     57.2

Avanti Park Place LLC

  

Real Estate

  

Senior Debt (8.3%, Due 6/10)

         6.2     6.2     6.2

Axygen Holdings

  

Health Care Equipment &

  

Subordinated Debt (14.5%, Due 9/14)(7)

       60.4     59.6     59.6

    Corporation

  

    Supplies

  

Redeemable Preferred Stock

   205,204       41.7     60.4
   

Convertible Preferred Stock

   48,736       13.7     13.7
   

Common Stock(1)

   2,566       0.2     0.4
   

Common Stock Warrants(1)

   205,204       19.1     29.0
                   
                        134.3     163.1

Barton-Cotton Holding

  

Commercial Services &

  

Subordinated Debt (14.0%, Due 9/14)(7)

       30.7     30.3     30.7

    Corporation

  

    Supplies

  

Redeemable Preferred Stock(1)

   28,263       15.7     17.9
   

Convertible Preferred Stock(1)

   67,158       6.7     —  
   

Common Stock Warrants(1)

   125,610       12.6     —  
                   
                        65.3     48.6

BBB Industries, LLC

  

Auto Components

  

Senior Debt (8.3%, Due 6/14)(7)

         21.2     21.2     17.9

Belloto Holdings

  

Household Durables

  

Subordinated Debt (15.0%, Due 6/17)

       3.8     3.8     3.8

    Limited(3)

    

PIK Note (15.0%, Due 12/17)(1)

         9.0     7.4
   

Ordinary Shares(1)

   32,434       0.1     —  
                   
                        12.9     11.2

Berry-Hill Galleries, Inc.

  

Distributors

  

Senior Debt (14.2%, Due 9/08 – 3/10)

       26.1     26.0     26.0
   

Common Stock Warrants(1)

   1       0.1     0.1
                   
                        26.1     26.1

 

8

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

BSW Investors II, LLC

  

Real Estate

  

Senior Debt (7.3%, Due 8/28)(7)

       2.0   2.0   2.0

Butler Animal Health Supply, LLC

  

Health Care Providers & Services

  

Senior Debt (11.2%, Due 7/12)(7)

       8.0   8.0   7.5

CAMP Systems International, Inc.

  

Transportation Infrastructure

  

Senior Debt (10.6%, Due 9/14)(7)

       30.0   29.7   24.3

Carestream Health, Inc.

  

Health Care Equipment & Supplies

  

Senior Debt (9.4%, Due 10/13)(7)

       15.0   15.0   12.2

CH Holding Corp.

  

Leisure Equipment & Products

  

Senior Debt (9.8%, Due 5/11)(6)

     13.1   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

Cinelease, Inc.

  

Electronic Equipment &

  

Senior Debt (8.9%, Due 12/8—3/13)(7)

     61.6   61.0   54.1
 

    Instruments

  

Common Stock(1)

   583     0.6   0.3
               
                    61.6   54.4

CMX Inc.

  

Construction &

  

Senior Debt (8.4%, Due 5/11—5/12)(7)

     145.8   144.3   134.4
 

    Engineering

  

Common Stock(1)

   35,000     0.1   —  
               
                    144.4   134.4

Compusearch Holdings

  

Software

  

Subordinated Debt (12.0%, Due 6/12)(7)

     12.5   12.4   12.4

    Company, Inc.

    

Convertible Preferred Stock(1)

   23,342     0.9   0.9
               
                    13.3   13.3

Consolidated Bedding,

  

Household Durables

  

Senior Debt (12.2%, Due 6/13)(7)

     64.7   64.2   63.4

    Inc.

    

Senior Debt (13.1%, Due 6/13)(7)(6)

     55.5   54.5   10.1
   

Subordinated Debt (20.0%, Due 12/13)(6)

     40.2   36.0   —  
   

Common Stock Warrants(1)

   154,127     —     —  
               
                    154.7   73.5

Contec Holdings Ltd.

  

Commercial Services and Supplies

  

Subordinated Debt (14.0%, Due 6/13—6/14)(7)

     87.1   86.1   87.1
   

Convertible Preferred Stock

   76,952     88.2   141.0
   

Common Stock(1)

   19,237,842     19.2   35.2
               
                    193.5   263.3

Corrpro Companies, Inc.

  

Construction &

  

Subordinated Debt (12.5%, Due 3/11)(7)

     14.0   12.2   12.5
 

    Engineering

  

Redeemable Preferred Stock

   1,165,930     1.4   2.0
   

Common Stock Warrants(1)

   5,022,576     3.5   6.6
               
                    17.1   21.1

CyrusOne Networks, LLC

  

IT Services

  

Senior Debt (10.4%, Due 1/14)(7)

       16.3   16.2   15.4

DelStar, Inc.

  

Building Products

  

Subordinated Debt (14.0%, Due 12/12)(7)

     18.5   18.2   18.2
   

Redeemable Preferred Stock

   26,613     14.9   31.8
   

Convertible Preferred Stock

   29,569     3.2   3.5
   

Common Stock Warrants(1)

   89,020     16.9   11.5
               
                    53.2   65.0

Direct Marketing International LLC

  

Media

  

Subordinated Debt (14.2%, Due 7/12)(7)

       28.6   28.3   28.3

 

9

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

    

Fair
  Value  

  

Dyno Holding Corp.

  

Auto Components

  

Senior Debt (7.1%, Due 11/13)

     45.5   45.1     45.5  
   

Subordinated Debt (16.0%, Due 11/14)(7)

     26.8   26.5     26.8  
   

Convertible Preferred Stock

   389,759     41.3     40.3  
   

Common Stock(1)

   97,440     10.1     —    
                   
                    123.0     112.6  

Easton Bell Sports LLC

  

Leisure Equipment & Products

  

Common Units(1)

   2,049,204       0.7     3.8  

Edline, LLC

  

Software

  

Subordinated Debt (14.0%, Due 7/13)(7)

     17.9   13.8     18.3  
   

Membership Warrants(1)

   6,447,500     6.0     11.0  
                   
                    19.8     29.3  

FAMS Acquisition, Inc.

  

Diversified Financial Services

  

Subordinated Debt (14.8%, Due 8/12—11/14)(7)

     25.7   25.4     25.4  
   

Convertible Preferred Stock(1)

   861,364     20.9     20.2  
                   
                    46.3     45.6  

FCC Holdings, LLC

  

Commercial Banks

  

Subordinated Debt (17.7%, Due 12/12)

       75.0   74.3     74.3  

Ford Motor Company(2)

  

Automobiles

  

Senior Debt (12.9%, Due 6/11)

           (5.0 )   (16.5 )

Formed Fiber Technologies, Inc.

 

Auto Components

  

Subordinated Debt (15.0%, Due 8/11)(6)

     16.0   11.1     2.6  
   

Common Stock Warrants(1)

   122,397     0.1     —    
                   
                    11.2     2.6  

FPI Holding Corporation

  

Food Products

  

Senior Debt (8.1%, Due 5/11—5/12)(7)

     57.9   57.2     57.9  
   

Redeemable Preferred Stock(1)

   4,469     39.1     1.0  
   

Convertible Preferred Stock(1)

   21,715     23.3     —    
   

Common Stock(1)

   5,429     5.8     —    
                   
                    125.4     58.9  

French Lick Resorts & Casino Hotels, LLC

  

Hotels, Restaurants & Leisure

  

Senior Debt (10.8%, Due 4/14)

       47.7   40.5     36.0  

FU/WD Opa Locka, LLC

  

Real Estate

  

Senior Debt (8.0%, Due 9/17—9/24)

       32.9   31.4     31.1  

Golden Key US LLC

  

Diversified Financial Services

  

Commercial Paper (5.3%, Due 1/14)(1)

       7.3   7.3     5.3  

HMSC Corporation

  

Insurance

  

Senior Debt (9.5%, Due 10/14)(7)

       3.5   3.5     2.6  

HomeAway, Inc.

  

Diversified Consumer

  

Senior Debt (8.9%, Due 12/12)(7)

     96.8   95.9     95.9  
 

    Services

  

Redeemable Preferred Stock

   384,297     0.7     0.5  
   

Convertible Preferred Stock

   1,923,786     10.6     24.8  
   

Common Stock(1)

   153,475     0.3     2.0  
                   
                    107.5     123.2  

Hopkins Manufacturing Corporation

  

Auto Components

  

Subordinated Debt (15.6%, Due 7/12)(7)

     35.2   34.9     34.9  
   

Redeemable Preferred Stock

   2,915     5.3     5.3  
                   
                    40.2     40.2  

III Exploration II, LP

  

Oil, Gas & Consumable Fuels

  

Senior Debt (10.6%, Due 4/14)

       20.0   20.0     18.8  

Infiltrator Systems, Inc.

  

Building Products

  

Senior Debt (10.1%, Due 10/13)(7)

       52.2   51.5     50.8  

 

10

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

Innova Holdings, Inc.

  

Energy Equipment &

  

Senior Debt (10.6%, Due 3/13)(7)

     11.5   11.4   11.4
 

    Services

  

Subordinated Debt (15.0%, Due 3/14)(7)

     17.4   17.1   17.1
   

Convertible Preferred Stock

   14,283     17.8   30.2
               
                    46.3   58.7

Inovis International, Inc.

  

Software

  

Senior Debt (9.6%, Due 5/10)(7)

       88.0   87.3   87.3

Intergraph Corporation

  

Software

  

Senior Debt (9.1%, Due 12/14)(7)

       3.0   3.0   2.7

iTradeNetwork, Inc.

  

IT Services

  

Senior Debt (9.9%, Due 12/13)(7)

       25.0   24.8   24.3

JHCI Acquisition, Inc.

  

Commercial Services & Supplies

  

Senior Debt (8.2%, Due 12/14)(7)

       19.1   19.1   13.4

Jones Stephens Corp.

  

Building Products

  

Subordinated Debt (13.5%, Due 9/13—9/14)(7)

       22.9   22.6   22.6

J-Pac, LLC

  

Health Care Equipment & Supplies

  

Senior Debt (9.6%, Due 1/14 )(7)

       24.8   24.5   25.1

KIK Custom Products, Inc.(3)

  

Household Products

  

Senior Debt (7.6%, Due 11/14)(6)

       22.5   22.5   6.4

LCW Holdings, LLC

  

Real Estate

  

Senior Debt (9.6%, Due 10/12)

     33.4   32.3   32.6
   

Warrant (12.5% Membership interest)(1)

       0.8   1.9
               
                    33.1   34.5

LJVH Holdings Inc.(3)

  

Beverages

  

Senior Debt (9.8%, Due 1/15)(7)

       28.6   28.6   24.9

LN Acquisition Corp.

  

Machinery

  

Senior Debt (8.7%, Due 1/15)(7)

       21.6   21.6   19.6

Logex Corporation

  

Road & Rail

  

Subordinated Debt (12.2%, Due 7/08)(6)

       12.3   9.1   1.1

LTM Enterprises, Inc.

  

Personal Products

  

Senior Debt (11.1%, Due 11/11)(7)

       19.1   19.1   18.3

MagnaCare Holdings, Inc.

  

Health Care Providers & Services

  

Subordinated Debt (14.8%, Due 1/13)(7)

       13.8   13.7   13.7

Medical Billing Holdings, Inc.

  

Commercial Services & Supplies

  

Subordinated Debt (15.0%, Due 9/13)(7)

     10.5   10.3   10.3
   

Convertible Preferred Stock

   13,199     14.9   19.8
   

Common Stock(1)

   3,299,582     3.3   4.5
               
                    28.5   34.6

Mirion Technologies

  

Electrical Equipment

  

Senior Debt (8.5%, Due 5/08—11/11)(7)

     118.3   117.6   120.7
   

Subordinated Debt (15.4%, Due 9/09—5/12)(7)

     49.4   49.0   49.4
   

Convertible Preferred Stock

   435,724     44.3   84.6
   

Common Stock(1)

   24,503     2.8   3.4
   

Common Stock Warrants(1)

   222,156     18.6   29.6
                    232.3   287.7

Mitchell International, Inc.

  

IT Services

  

Senior Debt (7.9%, Due 3/15)(7)

       5.0   5.0   4.3

MTS Group, LLC

  

Textiles, Apparel & Luxury Goods

  

Senior Debt (9.7%, Due 10/08—10/11)(7)

     18.8   18.7   18.7
   

Subordinated Debt (16.0%, Due 10/12)(6)

     17.7   14.0   1.6
   

Common Units(1)

   558,214     0.7   —  
               
                    33.4   20.3

National Processing Company Group, Inc.

  

Diversified Financial Services

  

Senior Debt (11.2%, Due 9/14)(7)

       53.0   52.8   47.0

 

11

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

NBD Holdings Corp.

  

Diversified Financial

  

Senior Subordinated Debt (14.0%, Due 8/13)(7)

     44.8   44.3   44.3
 

    Services

  

Convertible Preferred Stock(1)

   84,174     9.8   9.8
   

Common Stock (1)

   633,408     0.1   0.1
               
                    54.2   54.2

Net1 Las Colinas Manager, LLC

  

Real Estate

  

Senior Debt (7.7%, Due 10/15)(7)

       5.6   5.6   5.6

Nivel Holdings, LLC

  

Distributors

  

Senior Debt (10.7%, Due 10/13)(7)

       63.3   62.4   62.4

NPC Holdings, Inc.

  

Building Products

  

Senior Debt (9.6%, Due 6/08 – 6/12)(7)

     5.2   5.2   5.2
   

Subordinated Debt (15.0%, Due 6/13)(6)(7)

     8.6   7.9   5.9
   

Redeemable Preferred Stock(1)

   7,739     5.2   —  
   

Convertible Preferred Stock(1)

   7,981     0.8   —  
   

Preferred Stock Warrants(1)

   25,523     2.5   —  
   

Common Stock(1)

   47     —     —  
               
                    21.6   11.1

Orchard Brands Corporation

  

Internet & Catalog Retail

  

Senior Debt (9.0%, Due 4/13 – 4/14)(7)

     295.2   292.1   252.1
   

Subordinated Debt (11.5%, Due 4/14)

     55.1   55.1   40.6
   

Common Stock(1)

   565,885     —     0.6
               
                    347.2   293.3

Pan Am International Flight

  

Commercial Services &

  

Senior Debt (7.1%, Due 4/12 – 7/12)(7)

     21.3   21.0   21.0

    Academy, Inc.

  

    Supplies

  

Senior Subordinated Debt (16.0%, Due 7/13)(7)

     27.2   26.9   26.9
   

Convertible Preferred Stock (1)

   8,234     8.3   12.8
               
                    56.2   60.7

PHC Acquisition, Inc.

  

Diversified Consumer

  

Subordinated Debt (14.8%, Due 3/12 – 3/13)(7)

     26.8   26.5   26.8
 

    Services

  

Convertible Preferred Stock(1)

   6,556     0.3   0.5
   

Common Stock(1)

   529,153     23.0   45.6
               
                    49.8   72.9

Phillips & Temro

   Auto Components   Senior Debt (9.5%, Due 12/10 – 12/11)(7)     23.8   23.7   23.7

    Industries, Inc.

     Subordinated Debt (15.0%, Due 12/12)(7)     16.9   17.0   17.0
               
                    40.7   40.7

Ranpak Acquisition Company

   Containers & Packaging   Senior Debt (10.5%, Due 12/13 – 12/14)       151.7   150.0   146.3

RDR Holdings, Inc.

   Household Durables   Subordinated Debt (15.3%, Due 10/14 – 10/15)(7)     181.6   179.9   181.6
    Convertible Preferred Stock   154,142     158.8   132.0
    Common Stock(1)   1,541,415     1.5   —  
               
                    340.2   313.6

Rhinebridge, LLC

   Diversified Financial Services   Commercial Paper (5.3%, Due 1/14)(1)       23.5   23.5   19.3

Roarke – Money Mailer, LLC

   Media   Common Membership Units(1)   20,404       0.9   2.3

 

12

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

Safemark Acquisitions, Inc.

  

Commercial Services &

   Senior Debt (9.0%, Due 7/09 – 6/10)(7)     26.6   26.5   26.6
 

    Supplies

   Subordinated Debt (14.3%, Due 6/11 – 6/12)(7)     10.6   10.4   10.4
    Subordinated Debt (15.0%, Due 6/12)(6)(7)     3.3   2.2   0.6
    Redeemable Preferred Stock(1)   7,700     4.8   —  
    Convertible Preferred Stock(1)   2,100     0.2   —  
    Preferred Stock Warrants(1)   35,522     3.5   —  
               
                    47.6   37.6

Sanda Kan (Cayman I) Holdings Company Limited(3)

  

Leisure Equipment & Products

   Common Stock(1)   67,973       4.6   —  

Sanlo Holdings, Inc.

  

Electrical Equipment

   Common Stock Warrants(1)   5,187       0.5   1.0

Scanner Holdings

  

Computers & Peripherals

   Senior Debt (6.6%, Due 5/13)(7)     16.7   16.4   16.4

    Corporation

     Subordinated Debt (14.0%, Due 5/14)(7)     20.3   20.1   20.1
    Convertible Preferred Stock   7,764     7.8   7.8
    Common Stock(1)   78,242     0.1   0.1
               
                    44.4   44.4

Securus Technologies, Inc.

  

Diversified Telecommunication Services

   Common Stock(1)   12,281       0.7   —  

Seroyal Holdings, L.P.(3)

  

Health Care Equipment &

   Redeemable Preferred Partnership Units(1)   26,274     0.4   0.5
 

    Supplies

   Partnership Units(1)   95,280     0.8   1.4
               
                    1.2   1.9

Small Smiles Holding Company, LLC

  

Health Care Providers & Services

   Subordinated Debt (15.0%, Due 9/13 – 9/14)(7)       96.3   95.1   89.5

SSH Acquisition, Inc.

  

Commercial Services &

   Senior Debt (11.7%, Due 9/12)(7)     12.5   12.4   12.4
 

    Supplies

   Subordinated Debt (14.0%, Due 9/13)(7)     19.6   19.4   19.4
    Convertible Preferred Stock   297,896     22.7   67.7
               
                    54.5   99.5

Stein World, LLC

  

Household Durables

   Senior Debt (13.3%, Due 10/11)(6)     8.9   8.5   —  
    Subordinated Debt (19.3%, Due 10/12 – 10/13)(6)     28.0   23.0   —  
               
                    31.5   —  

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 (10.1%, Due 8/14)(7)       48.5   48.0   45.7

Tanenbaum-Harber Co.

  

Insurance

   Redeemable Preferred Stock   376     0.4   0.4

    Holdings, Inc.

     Common Stock(1)   3,861     0.1   0.1
               
                    0.5   0.5

Technical Concepts Holdings, LLC

  

Building Products

   Common Membership Warrants(1)   792,149       1.7   12.8

The Tensar Corporation

  

Construction &

   Senior Debt (10.7%, Due 5/13)(7)     82.0   81.0   81.0
 

    Engineering

   Subordinated Debt (17.5%, Due 10/13)     38.5   38.2   38.2
               
                    119.2   119.2

 

13

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

TestAmerica

   Commercial Services &   Senior Debt (9.3%, Due 12/11 – 12/13)(7)     26.7   26.1   26.1

    Environmental Services,

       Supplies   Subordinated Debt (14.0%, Due 12/14)(7)     41.0   40.5   40.5

    LLC

     Preferred Unit   11,659,298     8.1   8.5
    Preferred Unit Warrants(1)   1,998,961     4.8   1.1
               
                    79.5   76.2

ThreeSixty Sourcing,

   Commercial Services &   Senior Debt (11.1%, Due 9/08)     4.5   4.5   4.5

    Inc.(3)

       Supplies   Common Stock Warrants(1)   35     4.1   1.1
               
                    8.6   5.6

TransFirst Holdings, Inc.

   Commercial Services &     Supplies   Senior Debt (8.7%, Due 6/15)(7)       50.0   49.5   48.2

triVIN, Inc.

   Commercial Services &   Subordinated Debt (15.0%, Due 6/14 – 6/15)(7)     19.4   19.3   19.4
      Supplies   Convertible Preferred Stock   24,700     26.4   28.7
    Common Stock(1)   6,319,923     6.3   6.9
               
                    52.0   55.0

Tyden Caymen Holdings

   Electronic Equipment &   Senior Debt (10.6%, Due 11/11)(7)     12.0   11.9   12.0

    Corp.

       Instruments   Subordinated Debt (13.8%, Due 5/12)(7)     14.5   14.3   14.5
    Common Stock(1)   1,165,930     1.2   2.9
               
                    27.4   29.4

UFG Holding Corp.

   Food Products   Subordinated Debt (15.0%, Due 5/15 – 5/16)(7)     55.0   54.3   54.3
    Redeemable Preferred Stock(1)   20,602     12.6   4.1
    Convertible Preferred Stock(1)   25,752     2.6   —  
    Common Stock(1)   25,752     10.6   —  
               
                    80.1   58.4

Unique Fabricating

   Auto Components   Senior Debt (13.3%, Due 2/10 – 2/12)(7)     4.7   4.6   4.6

    Incorporated

     Subordinated Debt (17.0%, Due 2/13)(7)     7.6   7.5   7.5
    Redeemable Preferred Stock(1)   1,458     2.0   1.7
    Common Stock Warrants(1)   6,862     0.2   —  
               
                    14.3   13.8

US Express Leasing, Inc.

   Diversified Financial   Subordinated Debt (11.1%, Due 7/14)     37.6   37.6   37.6
      Services   Common Stock Warrants(1)   20,427     —     —  
    Preferred Stock Warrants(1)   35,035     —     —  
               
                    37.6   37.6

Velocity Financial Group, Inc.

   Diversified Financial Services   Convertible Preferred Stock(1)   11,659,298       20.4   18.8

Venus Swimwear, Inc.

   Internet & Catalog Retail   Senior Debt (10.6%, Due 12/12)(7)     25.7   25.3   22.2
    Subordinated Debt (20.0%, Due 12/13)(6)(7)     23.0   19.2   7.5
               
                    44.5   29.7

Visador Holding Corp.

   Building Products   Subordinated Debt (15.0%, Due 2/10)(6)     11.1   9.1   3.0
    Common Stock Warrants(1)   4,284     0.5   —  
               
                    9.6   3.0

WRH, Inc.

   Biotechnology   Senior Debt (6.8%, Due 9/13)     4.4   4.4   4.4
    Subordinated Debt (15.0%, Due 7/14 – 9/14)(7)     77.0   76.3   77.0
    Convertible Preferred Stock   2,008,575     212.6   257.2
    Common Stock(1)   502,144     49.9   61.7
               
                    343.2   400.3

 

14

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

WSACS RR Holdings LLC

   Real Estate   Partnership Units   2,185,637       2.2   2.2

WWC Acquisitions, Inc.

   Commercial Services &     Supplies   Senior Debt (9.8%, Due 12/11 – 12/13)(7)       35.0   34.5   32.0

Zencon Holdings

   Internet Software &   Senior Debt (9.0%, Due 5/13)(7)     19.3   19.1   19.3

    Corporation

       Services   Subordinated Debt (15.3%, Due 5/14)(7)     20.5   20.3   20.5
    Convertible Preferred Stock   5,246,686     9.5   26.1
               
                    48.9   65.9

ZSF/WD Fitzgerald, LLC

   Real Estate   Senior Debt (8.2%, Due 9/24)(7)       1.1   1.0   0.6

ZSF/WD Hammond, LLC

   Real Estate   Senior Debt (8.0%, Due 9/17 – 9/24)(7)       41.3   39.4   39.0

ZSF/WD Jacksonville, LLC

   Real Estate   Senior Debt (8.1%, Due 9/17 – 9/24)       20.6   19.6   18.6

ZSF/WD Montgomery-31, LLC

   Real Estate   Senior Debt (8.0%, Due 9/17 – 9/24)       34.2   32.6   32.3

ZSF/WD Opa Locka, LLC

   Real Estate   Senior Debt (8.2%, Due 9/24)       0.4   0.4   0.4

ZSF/WD Orlando, LLC

   Real Estate   Senior Debt (8.1%, Due 9/17 – 9/24)       20.9   19.8   18.9

CMBS AND REAL ESTATE CDO INVESTMENTS

      

ACAS CRE CDO 2007-1, Ltd.

   Real Estate   Class C through Class N Notes (5.7%, Due 11/31)     345.5   200.8   11.4
    Preferred Shares   415,820,971     19.6   —  
               
                    220.4   11.4

CD 2007-CD4 Commercial Mortgage Trust

   Real Estate   Commercial Mortgage Pass-Through Certificates (5.7%, Due 4/17)(7)       14.0   8.5   5.4

CD 2007-CD5 Mortgage Trust

   Real Estate   Commercial Mortgage Pass-Through Certificates (6.6%, Due 12/17)       14.8   10.0   5.6

Citigroup Commercial Mortgage Securites Trust 2007-C6

   Real Estate   Commercial Mortgage Pass-Through Certificates (5.4%, Due 7/17)       116.3   50.2   27.1

COBALT CMBS Commercial Mortgage Trust 2007-C3

   Real Estate   Commercial Mortgage Pass-Through Certificates (5.2%, Due 10/17)       11.1   8.4   2.9

Countrywide Commercial Mortgage Trust 2007-MF1

   Real Estate   Commercial Mortgage Pass-Through Certificates (6.3%, Due 11/37 – 11/40)       24.0   9.3   5.2

Credit Suisse Commercial Mortgage Trust 2007-C3

   Real Estate   Commercial Mortgage Pass-Through Certificates (5.6%, Due 7/17)       13.2   10.4   3.3

GE Commercial
Mortgage Corporation, Series 2007-C1

   Real Estate   Commercial Mortgage Pass-Through Certificates (5.5%, Due 5/17 – 12/19)       37.0   31.0   10.2

GS Morgtage Securities Trust 2006-GG10

   Real Estate   Commercial Mortgage Pass-Through Certificates (5.7%, Due 7/17)(7)       63.7   51.4   17.2

 

15

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11

   Real Estate  

Commercial Mortgage Pass-Through

    Certificates (5.6%, Due 7/17)

       144.7   63.0   30.1

J.P. Morgan Chase

  

Real Estate

  

Receivable net of Forward Purchase commitment to purchase J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11, Commercial Mortgage Pass-Through Certificates (5.6%, Due 7/17) (Notional $10 million)

           2.1   0.9

LB-UBS

  

Real Estate

  

Receivable net of Forward Purchase commitment to purchase LB-UBS Commercial Mortgage Trust 2007-C6, Commercial Mortgage Pass-Through Certificates (6.2%, Due 8/17) (Notional amount $25.4 million)

           8.4   1.7

ML-CFC

  

Real Estate

  

Receivable net of Forward Purchase commitment to purchase ML-CFC Commercial Mortgage Trust 2007-8, Commercial Mortgage Pass-Through Certificates (6.0%, Due 8/17) (Notional amount $32.8 million)

           10.9   4.9

Wachovia Bank Commercial Mortgage Trust, Series 2006-C28

  

Real Estate

  

Commercial Mortgage Pass-Through Certificates (6.0%, Due 11/16)

       5.0   3.0   1.8

Wachovia Bank Commercial Mortgage Trust, Series 2007-C32

  

Real Estate

  

Commercial Mortgage Pass-Through Certificates (5.7%, Due 10/17)(7)

       141.6   64.2   31.8

Wachovia Bank Commercial Mortgage Trust, Series 2007-C34

  

Real Estate

  

Commercial Mortgage Pass-Through Certificates (5.3%, Due 10/17—9/24)(7)

       96.2   42.3   25.2

CLO INVESTMENTS

          

ACAS CLO 2007-1, Ltd.

    

Secured Notes (9.6%, Due 11/31—11/52 )(7)

     8.5   8.5   4.7
   

Subordinated Notes

       24.7   12.5
               
                    33.2   17.2

Ares VIII CLO, Ltd.

      

Preference Shares

   5,000       3.8   2.3

Ares IIIR/IVR CLO Ltd.

      

Subordinated Notes

   20,000       18.2   10.5

Babson CLO Ltd. 2006-II

      

Income Notes

   15,000       14.4   11.2

BALLYROCK CLO 2006-2 LTD.

      

Deferrable Notes

       2.5   2.1   1.3

Cent CDO 12 Limited

      

Income Notes

   26,355,270       24.0   15.4

Centurion CDO 8 Limited

      

Subordinated Notes

   5,000       3.3   2.4

CoLTs 2005-1 Ltd.(3)

      

Preference Shares(1)

   360       6.7   3.0

CoLTs 2005-2 Ltd.(3)

      

Preference Shares

   34,170,000       31.8   10.8

Eaton Vance CDO X PLC(3)

      

Secured Subordinated Income Notes

   30       13.1   7.3

 

16

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

Flagship CLO V

    

Deferrable Notes

     1.7   1.3   0.9
   

Subordinated Securities

   15,000     14.0   6.9
               
                    15.3   7.8

Galaxy III CLO, Ltd

      

Subordinated Notes

   4,000       2.5   1.5

LightPoint CLO IV, LTD

      

Income Notes

   6,700,000       6.1   2.8

LightPoint CLO VIII, Ltd.

      

Deferrable Notes

       7.0   6.5   5.7

LightPoint CLO VII, Ltd.

      

Subordinated Notes

   90       8.2   4.4

Mayport CLO Ltd.

      

Income Notes

   14,000       13.1   8.1

NYLIM Flatiron CLO 2006-1 LTD.(3)

      

Subordinated Securities

   10,000       9.5   4.8

Sapphire Valley CDO I, Ltd.

      

Subordinated Notes

   14,000,000       13.3   6.7

Vitesse CLO, Ltd.

      

Preferred Securities

   15,000,000       13.7   7.4

CDO INVESTMENTS

          

ZAIS Investment Grade Limited IX

      

Subordinated Notes(1)

   14,500       12.3   0.4

Subtotal Non-Control /Non-Affiliate Investments (57% of total investment assets and liabilities at fair value)

       6,199.5   5,521.0

AFFILIATE INVESTMENTS

          

Aptara, Inc.

  

IT Services

  

Subordinated Debt (16.7%, Due 8/09)(7)

     53.3   53.0   53.0
   

Redeemable Preferred Stock

   13,942     15.1   15.9
   

Convertible Preferred Stock(1)

   2,549,410     8.7   14.9
   

Preferred Stock Warrants(1)

   172,382     0.9   1.0
               
                    77.7   84.8

BLI Partners, LLC

  

Personal Products

  

Common Membership Interest(1)

           17.3   2.3

CCRD Operating Company, Inc.

  

Diversified Consumer Services

  

Senior Debt (11.0%, Due 6/13)(7)

     143.5   142.5   142.5
   

Subordinated Debt (15.0%, Due 6/14)

     10.4   10.2   10.2
   

Common Stock(1)

   729,763     1.6   8.6
               
                    154.3   161.3

Coghead, Inc.

  

Internet Software & Services

  

Convertible Preferred Stock(1)

   5,489,656       2.6   2.6

EAG Limited(2)(3)

  

Commercial Services & Supplies

  

Common Stock(1)

   8,275,000       14.6   12.9

Egenera, Inc.

  

Computers & Peripherals

  

Convertible Preferred Stock(1)

   8,046,865       25.0   25.0

HALT Medical, Inc.

  

Health Care Equipment & Supplies

  

Convertible Preferred Stock(1)

   3,231,417       5.2   5.2

IS Holdings I, Inc.

  

Software

  

Senior Debt (9.1%, Due 6/14)(7)

     20.0   19.8   17.9
   

Redeemable Preferred Stock

   1,297     1.5   1.5
   

Common Stock(1)

   1,165,930     —     4.4
               
                    21.3   23.8

Marcal Paper Mills. Inc.

  

Household Products

  

Common Stock Warrants(1)

   209,255     —     —  
   

Common Stock(1)

   146,478     —     —  
               
                    —     —  

 

17

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

    

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

Narus, Inc.

  

Internet Software & Services

  

Convertible Preferred Stock(1)

   12,563,900         7.3   7.3

NextPoint Networks, Inc.

  

Communications

  

Convertible Preferred Stock(1)

   10,416,324       11.0   8.9
 

    Equipment

  

Common Stock(1)

   1,542,366       2.5   1.5
               
                      13.5   10.4

Nursery Supplies, Inc.

  

Containers & Packaging

  

Redeemable Preferred Stock(1)

   2,116       —     —  
   

Common Stock Warrants(1)

   625       —     —  
               
                      —     —  

Qualitor Component

  

Auto Components

  

Subordinated Debt (17.0%, Due 12/12)(7)

     33.3   33.0   33.5

    Holdings, LLC

    

Redeemable Preferred Stock(1)

   3,150,000       3.2   1.2
   

Common Units(1)

   350,000       0.3   —  
               
                      36.5   34.7

Radar Detection

  

Household Durables

  

Senior Debt (10.0%, Due 11/12)(7)

     13.0   13.0   12.6

    Holdings Corp.

    

Common Stock(1)

   40,688       0.6   7.0
               
                      13.6   19.6

Roadrunner Dawes, Inc.

  

Road & Rail

  

Subordinated Debt (16.0%, Due 9/12)(7)

     18.9   18.7   18.7
   

Common Stock(1)

   7,000       7.0   1.5
               
                      25.7   20.2

Tymphany Corporation

  

Electronic Equipment & Instruments

  

Convertible Preferred Stock(1)

   7,723,525         12.3   2.9

WFS Holding, Inc.

  

Software

  

Convertible Preferred Stock

   20,403,772         2.6   3.6

Subtotal Affiliate Investments (4% of total investment assets and liabilities at fair value)

             429.5   416.6

CONTROL INVESTMENTS

  

ACAS Equity Holdings Corp.

  

Diversified Financial Services

  

Common Stock(1)

   589         14.6   5.6

Aeriform Corporation

  

Chemicals

  

Subordinated Debt (0.0%, Due 5/09)(1)

         4.1   3.0   0.8

American Capital, LLC

  

Capital Markets

  

Senior Debt (9.7%, Due 9/12)

     10.6   10.4   10.4
   

Common Membership Interest

   100 %     58.5   329.1
               
                      68.9   339.5

American Driveline Systems, Inc.

  

Commercial Services & Supplies

  

Subordinated Debt (14.0%, Due 12/14—12/15)(7)

     41.2   40.7   41.2
   

Redeemable Preferred Stock

   403,357       25.8   41.6
   

Common Stock(1)

   128,681       10.8   5.0
   

Common Stock Warrants(1)

   204,663       17.3   8.0
               
                      94.6   95.8

Auxi Health, Inc.

  

Health Care Providers & Services

  

Subordinated Debt (14.0%, Due 3/09)(6)

         10.1   4.4   2.0

BPWest, Inc.

  

Energy Equipment &

  

Subordinated Debt (15.0%, Due 7/12)(7)

     8.6   8.5   8.5
 

    Services

  

Redeemable Preferred Stock

   5,167       6.0   6.4
   

Common Stock(1)

   516,643       —     70.7
               
                      14.5   85.6

 

18

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

    

Principal/

  Notional  

  

  Cost  

    

Fair
  Value  

Capital.com, Inc.

  

Diversified Financial Services

  

Common Stock(1)

   8,500,100         1.5     0.4

CIBT Travel Solutions,

  

Commercial Services &

  

Senior Debt (7.1%, Due 1/13—1/14)

     76.5   75.6     75.6

    LLC

  

    Supplies

  

Subordinated Debt (15.0%, Due 1/15—1/16)

     42.2   41.8     41.8
   

Convertible Preferred Stock

   776,800       77.7     77.7
   

Common Stock(1)

   194,200       19.4     19.4
                 
                      214.5     214.5

Contour Semiconductor, Inc.

  

Semiconductors & Semiconductor Equipment

  

Convertible Preferred Stock(1)

   9,738,995         10.0     10.0

Core Business Credit,

  

Diversified Financial

  

Common Units(1)

   33,313       3.3     3.3

    LLC

  

    Services

  

Convertible Preferred Units(1)

   133,250       13.3     13.3
                 
                      16.6     16.6

Credit Opportunities Fund I, LLC

  

Diversified Financial Services

  

Common Membership Interest

   100 %       53.7     51.3

DanChem Technologies,

  

Chemicals

  

Senior Debt (8.7%, Due 12/10)

     15.2   15.2     15.2

    Inc.

    

Redeemable Preferred Stock(1)

   9,067       7.6     1.9
   

Common Stock(1)

   299,403       1.8     —  
   

Common Stock Warrants(1)

   401,622       2.2     —  
                 
                      26.8     17.1

ECA Acquisition Holdings,

  

Health Care Equipment &

  

Subordinated Debt (16.5%, Due 12/14)

     12.6   12.5     12.6

    Inc.

  

    Supplies

  

Common Stock(1)

   583       11.1     18.8
                 
                      23.6     31.4

eLynx Holdings, Inc.

  

IT Services

  

Senior Debt (11.3%, Due 12/09—9/12)(7)

     18.0   17.9     18.0
   

Subordinated Debt (18.3%, Due 12/10—12/12)(6)

     10.6   9.4     0.7
   

Redeemable Preferred Stock(1)

   21,114       8.9     —  
   

Common Stock(1)

   11,261       1.1     —  
   

Common Stock Warrants(1)

   131,280       13.1     —  
                 
                      50.4     18.7

Endeavor Fund I, LP

  

Capital Markets

  

Common Membership Interest

   100 %       105.0     103.1

ETG Holdings, Inc.

  

Containers & Packaging

  

Senior Debt (13.3%, Due 5/11)(6)

     11.6   10.0     10.2
   

Subordinated Debt (16.8%, Due 5/12 – 5/13)(6)

     14.2   10.9     —  
   

Convertible Preferred Stock(1)

   233,201       11.4     —  
   

Preferred Stock Warrants(1)

   40,000       —       —  
                 
                      32.3     10.2

European Capital

  

Diversified Financial

  

Senior Debt (10.1%, Due 2/11)

       (3.8 )   —  

    Limited(2)(3)

  

    Services

  

Ordinary Shares

   72,305,938       921.8     789.5
                 
                      918.0     789.5

 

19

Table of Contents

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)

March 31, 2008

(unaudited)

(in millions, except share data)

 

  Company (4)  

  

  Industry  

  

  Investments (5)  

  

# of

shares/
units

  owned  

  

Principal/

  Notional  

  

  Cost  

  

Fair
  Value  

European Touch, LTD. II

  

Commercial Services &

  

Senior Subordinated Debt (12.0%, Due 12/9)

     2.6   2.6   2.6
 

    Supplies

  

Senior Subordinated Debt (17.0%, Due 12/10)(6)

     11.2   10.5   7.0
   

Junior Subordinated Debt (20.0%, Due 12/10)(6)

     6.4   4.9   2.9
   

Redeemable Preferred Stock(1)

   263     0.2   —  
   

Common Stock(1)

   1,688     0.9   —  
   

Common Stock Warrants(1)

   7,105     3.7   —  
               
                    22.8   12.5

EXPL Pipeline Holdings

  

Oil, Gas & Consumable

  

Senior Debt (9.3%, Due 1/17)(7)

     42.0   41.6   42.0

    LLC

  

    Fuels

  

Common Membership Units(1)

   58,297     44.5   50.4
               
                    86.1   92.4

Fosbel Global Services

  

Commercial Services &

  

Subordinated Debt (15.4%, Due 12/13 – 12/14)

     35.6   35.3   35.6

    (LUXCO) S.C.A(3)

  

    Supplies

  

Redeemable Preferred Stock(1)

   18,449,456     18.5   12.9
   

Convertible Preferred Stock(1)

   1,519,368     3.0   —  
   

Common Stock(1)

   108,526     0.2   —  
               
                    57.0   48.5

Fountainhead Estate

  

Internet Software &

  

Senior Debt (7.1%, Due 10/13)

     36.1   36.1   36.1

     Holding Corp.(3)

  

    Services

  

Convertible Preferred Stock(1)

   59,250     59.3   1.7
               
                    95.4   37.8

FreeConferenceroom.com,

  

Diversified

  

Senior Debt (9.5%, Due 4/11 – 5/11)(7)

     16.4   16.2   16.4

    Inc.

  

    Telecommunication

  

Subordinated Debt (15.0%, Due 5/12)

     9.8   9.7   9.8
 

    Services

  

Redeemable Preferred Stock(1)

   12,375,428     12.1   1.5
   

Common Stock(1)

   5,860,400     2.3   —  
   

Common Stock Warrants(1)

   6,515,028     —     —  
               
                    40.3   27.7

Future Food, Inc.

  

Food Products

  

Senior Debt (8.1%, Due 7/10)

     16.8   16.7   16.7
   

Subordinated Debt (12.4%, Due 7/11 – 7/12)(6)

     14.0   12.6   5.9
   

Common Stock(1)

   64,917     12.9   —  
   

Common Stock Warrants(1)

   6,500     1.3   —  
               
                    43.5   22.6

FutureLogic, Inc.

  

Computers & Peripherals

  

Senior Debt (10.9%, Due 2/10 – 2/12)(7)

     49.4   49.1   49.1
   

Subordinated Debt (15.0%, Due 2/13)(7)

     31.9   31.5   31.5
   

Common Stock(1)

   129,514     15.6   25.8
               
                    96.2   106.4

FV Holdings Corporation

  

Food Products

  

Subordinated Debt (14.5%, Due 6/15)(7)

     22.7   22.7   22.7
   

Convertible Preferred Stock

   292     14.3   23.6
   

Common Stock(1)

   125     6.1   10.1
               
                    43.1   56.4

Halex Holdings Corp.

  

Construction Materials

  

Senior Debt (7.4%, Due 7/8)

     9.8   9.8   9.8
   

Senior Debt (11.6%, Due 10/8)(6)

     13.6   13.6   2.3
   

Subordinated Debt (15.9%, Due 8/10)(6)

     17.8   15.9   —  
   

Redeemable Preferred Stock(1)

   21,464,046     28.5   —  
   

Common Stock(1)

   30,263,219     —     —  
   

Common Stock Warrants(1)

   18,750,000     —     —