AMERICAN CAPITAL, LTD - FORM 10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



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

For the fiscal year ended December 31, 2015



	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 814-00149

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)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock, $0.01 par value per share		The NASDAQ Stock Market LLC (NASDAQ Global Select Market)

Securities registered pursuant to section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x.

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 o

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 o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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 Act.



Large accelerated filer x		Accelerated filer o
Non-accelerated filer o	(Do not check if a smaller reporting company)	Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No. x

As of June 30, 2015, the aggregate market value of the Registrant’s common stock held by non-affiliates of the Registrant was approximately $3.6 billion based upon a closing price of the Registrant’s common stock of $13.55 per share as reported on The NASDAQ Global Select Market on that date. (For this computation, the registrant has excluded the market value of all shares of its common stock reported as beneficially owned by executive officers and directors of the registrant and certain other shareholders; such an exclusion shall not be deemed to constitute an admission that any such person is an “affiliate” of the registrant.)

As of February 1, 2016, there were 239,350,681 shares of the Registrant’s common stock legally outstanding.

DOCUMENTS INCORPORATED BY REFERENCE. Portions of the Registrant’s definitive proxy statement for the 2016 Annual Meeting of Stockholders are incorporated herein by reference into Part III hereof. If such definitive proxy statement is not filed within 120 days after December 31, 2015, the information called for by Part III will be filed as an amendment to this Form 10-K not later than the end of the 120-day period.

Certain exhibits previously filed with the Securities and Exchange Commission are incorporated by reference into Part IV of this report.

________________________________________________________________________________________________________________________

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AMERICAN CAPITAL, LTD. TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.	Business	3
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	27
Item 2.	Properties	27
Item 3.	Legal Proceedings	27
Item 4.	Mine Safety Disclosures	27

PART II.

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	60
Item 8.	Financial Statements and Supplementary Data	62
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	125
Item 9A.	Controls and Procedures	125
Item 9B.	Other Information	125

PART III.

Item 10.	Directors, Executive Officers and Corporate Governance	126
Item 11.	Executive Compensation	126
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	126
Item 13.	Certain Relationships and Related Transactions, and Director Independence	126
Item 14.	Principal Accounting Fees and Services	126

PART IV.

Item 15.	Exhibits, Financial Statement Schedules	126
Signatures		132

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PART I.


Item 1.	Business

General

American Capital, Ltd. (which is referred to throughout this report as “American Capital”, “we”, “our” and “us”) is a publicly traded global asset manager and private equity firm. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate, energy and structured products. It is our practice to sell some of the assets that we originate as an investor into funds that we manage. On August 29, 1997, we completed an initial public offering (“IPO”) and became 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”). As a BDC, we primarily invest in senior and mezzanine debt and equity in buyouts of private companies sponsored by us (“American Capital One Stop Buyouts^®”) or sponsored by other private equity funds and provide capital directly to early stage and mature private and small public companies (“Sponsor Finance and Other Investments”). We also invest in first and second lien floating rate loans to large-market U.S. based companies (“Senior Floating Rate Loans” or “SFRL”) and structured finance investments (“Structured Products”), including collateralized loan obligation (“CLO”) securities and commercial mortgages and commercial mortgage backed securities (“CMBS”). Our primary business objectives are to increase our net earnings and net asset value (“NAV”) by making investments with attractive current yields and/or potential for equity appreciation and realized gains and by growing our fee earning assets under management.

As of December 31, 2015, we managed $21 billion of assets, including assets on our balance sheet and fee earning assets under management by affiliated managers, with $73 billion of total assets under management (including levered assets). Our asset management business is conducted through our wholly-owned portfolio company, American Capital Asset Management, LLC (“ACAM”), a registered investment adviser under the Investment Advisers Act of 1940. As of December 31, 2015, ACAM managed the following funds:


•	American Capital Agency Corp. (“AGNC”)


•	American Capital Mortgage Investment Corp. (“MTGE”)


•	American Capital Senior Floating, Ltd. (“ACSF”)


•	American Capital Equity I, LLC (“ACE I”)


•	American Capital Equity II, LP (“ACE II”)


•	American Capital Equity III, LP (“ACE III”)


•	European Capital UK SME Debt LP (“ECAS UK SME Debt”)


•	European Capital debt fund (“ECAS debt fund”)


•	American Capital CLO Fund I, LP (“ACAS CLO Fund I”)


•	ACAS CLO 2007-1, Ltd. (“ACAS CLO 2007-1”)


•	ACAS CLO 2012-1, Ltd. (“ACAS CLO 2012-1”)


•	ACAS CLO 2013-1, Ltd. (“ACAS CLO 2013-1”)


•	ACAS CLO 2013-2, Ltd. (“ACAS CLO 2013-2”)


•	ACAS CLO 2014-1, Ltd. (“ACAS CLO 2014-1”)


•	ACAS CLO 2014-2, Ltd. (“ACAS CLO 2014-2”)


•	ACAS CLO 2015-1, Ltd. (“ACAS CLO 2015-1”)


•	ACAS CLO 2015-2, Ltd. (“ACAS CLO 2015-2”)

We are taxed as a corporation and pay federal and applicable state corporate taxes on our taxable income. From 1997 through the tax year ended September 30, 2010, we were taxed as a regulated investment company (“RIC”), as defined in Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, we were not subject to federal income tax on the portion of our taxable income and capital gains we distributed to our shareholders, but we were also not able to carry forward net operating losses (“NOL”) from year to year. Beginning with our tax year ended September 30, 2011, our status changed from a RIC subject to taxation under Subchapter M to a corporation subject to taxation under Subchapter C. Under Subchapter C, we are able to carry forward any NOLs historically incurred to succeeding years, which we would not be able to do if we were subject

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to taxation as a RIC under Subchapter M. This change in tax status does not affect our status as a BDC under the 1940 Act or our compliance with the portfolio composition requirements of that statute.

In October 2014, the Securities and Exchange Commission (“SEC”) Division of Investment Management issued SEC IM Guidance Update No. 2014-11, Investment Company Consolidation (“IM Update 2014-11”), which recommends that BDCs consolidate wholly-owned subsidiaries when the intent of the subsidiary is to act as an extension of the BDC’s investment operations and to facilitate the execution of the BDC’s investment strategy. In October 2014, our Board of Directors approved the spin-off of two new publicly traded BDCs to our shareholders, separating the majority of our investment assets from our asset management business. The approval also marked a change in our intent with respect to European Capital Limited (“European Capital”), which we no longer consider a vehicle for third-party capital but rather is viewed as an extension of our investment operations. In accordance with IM Update 2014-11, effective October 1, 2014, European Capital's financial results have been consolidated with the financial results of American Capital.

Recent Developments

On November 25, 2015, we announced that our Board of Directors instructed us to undertake a full strategic review of all alternatives with Goldman Sachs & Co. and Credit Suisse Securities (USA) LLC as our financial advisors to assist in this review. The strategic review considered all alternatives for maximizing shareholder value, including a sale of our company or our various business lines in whole or in part. On January 7, 2016, we announced that our Board of Directors completed the initial phase of our strategic review process and authorized us to proceed with the solicitation of offers to purchase our company or our various business lines in whole or in part. Goldman Sachs & Co. and Credit Suisse Securities (USA) LLC are assisting with the solicitation of offers.

Investment Portfolio

As an investor, we primarily invest in senior and mezzanine debt and equity of middle and large market companies. We and ACAM also invest in assets that can be sold or contributed to public or private funds that ACAM could manage, as a means of “incubating” such funds. We also have investments in Structured Products and in funds managed by us.

In 2015, we have committed $3.3 billion of capital to new investments, composed of $2.2 billion of debt securities, $673 million of equity securities and $378 million of Structured Products investments. Of the $3.3 billion of new investment commitments over the last year, $1.1 billion was committed to Senior Floating Rate Loans, $823 million was committed to new Sponsor Finance and Other Investments, $378 million was committed to new Structured Products, $367 million was committed to European Capital’s investment portfolio, $339 million was committed to add-on investments in our existing portfolio companies and $254 million was committed to ACAM, primarily for fund development. In 2015, we received $3.7 billion of cash realizations, composed of $3.3 billion of debt realizations and $390 million of equity realizations. In addition, in 2015, our investment portfolio has generated operating revenue, net operating income before income taxes and net loss of $671 million, $378 million and $(187) million, respectively. In 2015, our weighted average net operating income return on shareholders’ equity was 4.8% and our weighted average net loss return on shareholders’ equity was (3.5)%.

Over the last three years, we have committed $8.0 billion of capital to new investments, composed of $5.5 billion of debt securities, $1.5 billion of equity securities and $1.0 billion of Structured Products investments. Of the $8.0 billion of new investment commitments over the last three years, $3.0 billion was committed to Senior Floating Rate Loans, $1.6 billion was committed to new Sponsor Finance and Other Investments, $27 million was committed to new American Capital One Stop Buyouts^®, $1.0 billion was committed to new Structured Products, $1.1 billion was committed to add-on investments in our existing portfolio companies, $406 million was committed to European Capital’s investment portfolio and $893 million was committed to ACAM, primarily for fund development. Over the last three years, we received $7.7 billion of cash realizations, composed of $5.1 billion of debt realizations and $2.6 billion of equity realizations. In addition, over the last three years, our investment portfolio has generated operating revenue, net operating income before income taxes and net earnings of $1.6 billion, $793 million and $431 million, respectively. Over the last three years, our weighted average net operating income return on shareholders’ equity was 3.3% and our weighted average net earnings return on shareholders’ equity was 2.7% annualized.

Since our IPO, we have committed capital of $7.4 billion in equity securities, $23.4 billion in debt securities and $2.7 billion in Structured Products. Since our IPO, we had repayments of $27.5 billion, representing 82% of our total capital committed. Since our IPO, our weighted average net earnings return on shareholders’ equity was 3.9% annualized.

During the last year, three years and since our IPO, our economic return (NAV per share growth plus dividend distributions) has totaled (3.0)%, 3.7% and 15.8%, respectively. Since our IPO, our stock price plus dividend distributions has totaled an annualized growth rate of 13.6%.

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Portfolio Composition

Our investments can be divided into the following six business lines: (i) American Capital One Stop Buyouts^®, (ii) Sponsor Finance and Other Investments, (iii) European Capital, (iv) American Capital Asset Management, (v) Structured Products and (vi) Senior Floating Rate Loans.

As of December 31, 2015, we had investments totaling $4.9 billion and $5.0 billion at cost basis and fair value, respectively. As of December 31, 2015, our ten largest investments had a cost basis and fair value of $1.6 billion and $2.3 billion, respectively, or 46% of total investments at fair value, and are as follows (in millions):



Company	Business Line	Industry	Cost Basis		Fair Value
American Capital Asset Management, LLC	American Capital Asset Management	Capital Markets	$	534	$	1,065
CML Pharmaceuticals, LLC	American Capital One Stop Buyouts^®	Life Sciences Tools & Services	298		249
Bellotto Holdings Limited	European Capital	Household Durables	136		166
SEHAC Holding Corporation	American Capital One Stop Buyouts^®	Diversified Consumer Services	15		160
Infogix Parent Corporation	Sponsor Finance and Other Investments	IT Services	154		154
Soil Safe Acquisition Corp.	Sponsor Finance and Other Investments	Professional Services	116		122
WRH, Inc.	American Capital One Stop Buyouts^®	Life Sciences Tools & Services	103		99
MW Acquisition Corporation	American Capital One Stop Buyouts^®	Health Care Providers & Services	77		96
Convergint Technologies, LLC	Sponsor Finance and Other Investments	Commercial Services & Supplies	94		94
European Capital Private Debt LP	European Capital	Diversified Financial Services	81		85
Total			$	1,608	$	2,290

The following tables show the composition of our investment portfolio by business line at cost basis and fair value, as a percentage of total investments, as of December 31, 2015 and 2014:



	2015		2014
Cost
American Capital One Stop Buyouts^®	27.1	%	26.9	%
Sponsor Finance and Other Investments	37.3	%	17.2	%
European Capital	11.2	%	13.1	%
American Capital Asset Management	10.9	%	6.7	%
Structured Products	12.2	%	9.7	%
Senior Floating Rate Loans	1.3	%	26.4	%
Total	100.0	%	100.0	%

Fair Value
American Capital One Stop Buyouts^®	23.5	%	19.3	%
Sponsor Finance and Other Investments	37.1	%	17.3	%
European Capital	8.6	%	9.4	%
American Capital Asset Management	21.3	%	18.5	%
Structured Products	8.4	%	8.9	%
Senior Floating Rate Loans	1.1	%	26.6	%
Total	100.0	%	100.0	%

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The following tables show the composition summaries of our investment portfolio by security type at cost basis and fair value, excluding derivative agreements, as a percentage of total investments, as of December 31, 2015 and 2014:



	2015		2014
Cost
First Lien Senior Debt	20.1	%	40.5	%
Second Lien Senior Debt	19.9	%	11.2	%
Mezzanine Debt	14.0	%	10.0	%
Preferred Equity	12.4	%	13.4	%
Common Equity	21.4	%	15.0	%
Structured Products	12.2	%	9.9	%
Total	100.0	%	100.0	%

Fair Value
First Lien Senior Debt	18.4	%	40.0	%
Second Lien Senior Debt	18.7	%	10.9	%
Mezzanine Debt	12.1	%	7.5	%
Preferred Equity	12.1	%	7.4	%
Common Equity	30.3	%	24.9	%
Structured Products	8.4	%	9.3	%
Total	100.0	%	100.0	%

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Our investments are primarily in portfolio companies located in the United States. We have a diversified investment portfolio and do not concentrate in any one or two industry sectors, apart from Asset Management. We use the Global Industry Classification Standards (“GICS^®”) for classifying the industry groupings of our portfolio companies. The GICS^®was developed by MSCI, an independent provider of global indexes and benchmark-related products and services, and Standard & Poor’s (“S&P”), an independent international financial data and investment services company and provider of global equity indexes. The following chart shows the portfolio composition by industry grouping at fair value as a percentage of total investments as of December 31, 2015. Our investments in CLO securities and derivative agreements are excluded from the table below. Our investments in CMBS are classified in the Real Estate category below.

American Capital One Stop Buyouts^®

In an American Capital One Stop Buyout^®, we lend senior and mezzanine debt and make majority equity investments to finance our acquisition of an operating company through a change in control. A change in control transaction could be the result of a corporate divestiture, a sale by a private equity firm, a sale by a family-owned closely held business, going private transactions or ownership transitions. In addition, we may make additional add-on investments in our American Capital One Stop Buyouts^® to finance strategic acquisitions, growth or for working capital.

As of December 31, 2015, we had 23 companies in our American Capital One Stop Buyouts^® portfolio with a cost basis and fair value of $1,332 million and $1,174 million, respectively, with an average investment size of $51 million at fair value. As of December 31, 2015, our American Capital One Stop Buyouts^® portfolio consisted of $663 million and $511 million of debt and equity investments at fair value, respectively. As of December 31, 2015, the weighted average effective interest rate on the debt investments in this portfolio was 10.0%, which includes the impact of non-accruing loans, and our fully-diluted weighted average ownership interest in the equity investments in this portfolio was 88%. During the year ended December 31, 2015, we recognized interest, dividend and fee income from our American Capital One Stop Buyouts^® portfolio of $141 million.

As a BDC, we are required by law to make significant managerial assistance available to most of our portfolio companies. Such assistance typically involves providing guidance and counsel concerning the management, operations and business objectives

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and policies of the portfolio company to its management and board of directors, including participating on the company’s board of directors. We have an operations team with significant turnaround and bankruptcy experience that assists our investment professionals in providing intensive operational and managerial assistance to our portfolio companies. As of December 31, 2015, we had board seats at 21 companies in our American Capital One Stop Buyouts^® portfolio and had board observation rights at certain other companies. Providing assistance to the companies in our investment portfolio serves as an opportunity for us to maximize their value.

Sponsor Finance and Other Investments

The majority of the investments in our Sponsor Finance and Other Investments portfolio were originated either to assist in the funding of change of control buyouts of privately-held middle and large market companies sponsored by other private equity firms or to support the growth or recapitalization of an existing portfolio company. In these transactions, we generally lend senior, mezzanine and unitranche debt and make minority equity co-investments. We will generally invest between $10 million and $150 million in a single Sponsor Finance transaction. Generally, we make investments in companies that have a minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $10 million.

Our senior loans may consist of first lien secured revolving credit facilities, first and second lien secured term loans and unitranche loans. Our mezzanine loans may consist of secured and unsecured loans. Our loans typically mature in five to ten years and require monthly or quarterly interest payments at fixed rates or variable rates generally based on London Interbank Offered Rate (“LIBOR”), plus a margin. Certain of our loans permit the interest to be paid-in-kind (“PIK”) by adding it to the outstanding loan balance and paid at maturity.

As of December 31, 2015, we had 71 companies in our Sponsor Finance and Other Investments portfolio with a cost basis and fair value of $1,830 million and $1,853 million, respectively, with an average investment size of $26 million at fair value. As of December 31, 2015, our Sponsor Finance and Other Investments portfolio consisted of $1,597 million and $256 million of debt and equity investments at fair value, respectively. As of December 31, 2015, the weighted average effective interest rate on the debt investments in this portfolio was 8.6%, which includes the impact of non-accruing loans, and our fully-diluted weighted average ownership interest in the equity investments in this portfolio was 43%. During the year ended December 31, 2015, we recognized interest, dividend and fee income from our Sponsor Finance and Other Investments portfolio of $132 million. As of December 31, 2015, the cost basis and fair value of our Sponsor Finance investments was $1,509 million and $1,522 million, respectively, and the cost basis and fair value of our Other investments was $321 million and $331 million, respectively.

American Capital Asset Management Investment

Our fund management business is conducted through our wholly-owned portfolio company, ACAM, and its consolidated subsidiaries. In general, subsidiaries of ACAM enter into management agreements with each of its managed funds. As of December 31, 2015, the cost basis and fair value of our investment in ACAM was $534 million and $1,065 million, respectively, or 21% of our total investments at fair value. ACAM, through a wholly-owned subsidiary, also holds direct investments in ACAS CLO 2012-1, ACAS CLO 2013-1, ACAS CLO 2014-1, ACAS CLO 2014-2, ACAS CLO 2015-1 and ACAS CLO 2015-2 consisting of 59% to 70% of the non-rated equity tranche of subordinated notes with an aggregate cost basis and fair value of $162 million and $108 million, respectively, as of December 31, 2015. As of December 31, 2015, ACAM holds a co-investment in ACE III with a cost basis and fair value of $72 million and $70 million, respectively, and a co-investment in ACSF with a cost basis and fair value of $4 million and $3 million, respectively.

As of December 31, 2015, ACAM’s earning assets under management totaled $14.5 billion. As of December 31, 2015, ACAM had $67 billion of total assets under management (including levered assets), including $57 billion of total assets under management for American Capital Agency Corp. (NASDAQ: AGNC), $6 billion of total assets under management for American Capital Mortgage Investment Corp. (NASDAQ: MTGE) and $236 million of total assets under management for American Capital Senior Floating, Ltd. (NASDAQ: ACSF).

As of December 31, 2015, ACAM had over 120 employees, including ten investment teams with over 70 investment professionals located in Bethesda (Maryland), New York, Annapolis (Maryland), London and Paris. We have entered into service agreements with ACAM to provide it with additional asset management and administrative services support. Through these agreements, we provide investment advisory and oversight services to ACAM, as well as access to our employees, infrastructure, business relationships, management expertise and capital raising capabilities. During the year ended December 31, 2015, American Capital earned $26 million from ACAM for these services. ACAM generally earns base management fees based on the shareholders’ equity or the net cost basis of the assets of the funds under management and may earn incentive income, or a carried interest, based on the performance of the funds. In addition, American Capital or ACAM may invest directly into these funds and earn investment income from its investments in those funds.

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The following table sets forth certain information with respect to ACAM’s funds under management as of December 31, 2015:

Fund

Fund type

Established

Assets under management

Earning assets under management

Investment types

Capital type

AGNC

Publicly Traded REIT - NASDAQ (AGNC)

2008

$57.0 Billion

$8.8 Billion

Agency Securities

Permanent

MTGE

Publicly Traded REIT - NASDAQ (MTGE)

2011

$5.5 Billion

$1.1 Billion

Mortgage Investments

Permanent

ACSF

Publicly Traded BDC - NASDAQ (ACSF)

2014

$236 Million

$266 Million

Senior Floating
Rate Loans

Permanent

ACE I

Private Equity Fund

2006

$114 Million

Equity

Finite Life

ACE II

Private Equity Fund

2007

$99 Million

$126 Million

Equity

Finite Life

ACE III

Private Equity Fund

2014

$638 Million

$444 Million

Equity

Finite Life

ECAS UK SME Debt

Private Debt Fund

2014

$25 Million⁽¹⁾

$24 Million⁽¹⁾

Senior and Mezzanine Debt

Finite Life

ECAS debt fund

Private Debt Fund

2015

$294 Million

$230 Million

Senior and Mezzanine Debt

Finite Life

ACAS CLO Fund I

Private CLO Fund

2015

$252 Million

$448 Million

CLO Equity

Finite Life

ACAS CLO 2007-1

CLO

2006

$193 Million

Senior Debt

Finite Life

ACAS CLO 2012-1

CLO

2012

$322 Million

Senior Debt

Finite Life

ACAS CLO 2013-1

CLO

2013

$382 Million

Senior Debt

Finite Life

ACAS CLO 2013-2

CLO

2013

$381 Million

Senior Debt

Finite Life

ACAS CLO 2014-1

CLO

2014

$570 Million

Senior Debt

Finite Life

ACAS CLO 2014-2

CLO

2014

$382 Million

Senior Debt

Finite Life

ACAS CLO 2015-1

CLO

2015

$518 Million

Senior Debt

Finite Life

ACAS CLO 2015-2

CLO

2015

$487 Million

Senior Debt

Finite Life

——————————


(1)	Committed capital of £100 million ($148 million) in ECAS UK SME Debt fund, which remained largely unfunded as of December 31, 2015.

AGNC is a publicly traded real estate investment trust (“REIT”), which invests, on a leveraged basis, primarily in agency mortgage-backed securities, which consist of residential mortgage pass-through securities and collateralized mortgage obligations, for which the interest and principal payments are guaranteed by a U.S. government agency or U.S. government-sponsored entity. It may also invest in other assets reasonably related to agency securities and up to 10% of its assets in AAA non-agency and commercial mortgage-backed securities. Its common stock is traded on The NASDAQ Global Select Market under the symbol “AGNC.” ACAM earns a base management fee of 1.25% of AGNC’s shareholders’ equity, as defined in the management agreement. The management contract is renewable annually and if AGNC were not to renew the management agreement without cause, it would have to pay a termination fee equal to three times the average annual management fee earned by ACAM during the 24-month period immediately preceding the most recently completed month prior to the effective date of termination. If the termination fee were calculated for the period ending December 31, 2015, it would have been $351 million. As of December 31, 2015, AGNC’s total shareholders’ equity was $8.0 billion.

MTGE is also a publicly traded REIT, which invests, on a leveraged basis, in agency residential mortgage-backed investments, non-agency mortgage investments, other mortgage-related investments and healthcare-related real estate investments. Its common stock is traded on The NASDAQ Global Select Market under the symbol “MTGE.” ACAM earns a base management fee of 1.50% of MTGE’s shareholders’ equity, as defined in the management agreement. The management contract is renewable annually and if MTGE were not to renew the management agreement without cause, it would have to pay a termination fee equal to three times the average annual management fee earned by ACAM during the 24-month period immediately preceding the most recently completed month prior to the effective date of termination. If the termination fee were calculated for the period ending December 31, 2015, it would have been $52 million. As of December 31, 2015, MTGE’s total shareholders’ equity was $1.0 billion.

ACSF is a BDC that invests, on a leveraged basis, in diversified investments in first lien and second lien floating rate loans principally to large-market U.S.-based companies and in equity tranches of CLOs. Its common stock is traded on The NASDAQ Global Select Market under the symbol “ACSF.” ACAM earns a base management fee of 0.80% of ACSF’s total assets, as defined

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in ACSF’s management agreement. Subject to ACSF stockholder approval, ACAM has agreed to be responsible through December 31, 2020 for certain of ACSF’s operating expenses in excess of 0.75% of ACSF’s consolidated net assets, less net unrealized appreciation or depreciation, each as determined in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) at the end of the most recently completed fiscal quarter.

ACE I is a private equity fund, which was established in 2006 with $1 billion of equity commitments from third-party investors. At the closing of the fund, ACE I used the majority of its committed capital to purchase 30% of our equity investments in 96 portfolio companies for an aggregate purchase price of $671 million. Also, ACE I co-invested with American Capital in an amount equal to 30% of equity investments made by us between October 2006 and November 2007 until the $329 million remaining equity commitment was exhausted. In addition, 10%, or $100 million, of the $1 billion of distributions to the ACE I investors is recallable for add-on investments. As of December 31, 2015, ACE I investors had invested $1,073 million, received distributions of $1,545 million, had $106 million in total investments at fair value and had $27 million of recallable distributions available for add-on investments. ACAM manages ACE I for a 2% base management fee on the net cost basis of ACE I’s assets (as of December 31, 2015 the net cost basis of ACE I’s assets was $114 million) and 10% to 30% of the net profits of ACE I, subject to certain hurdles (“Carried Interest”). As of December 31, 2015, the Carried Interest allocation to ACAM was $34 million, subject to certain clawback obligations, as defined in ACE I’s operating agreement. On June 30, 2015, ACE I entered into a stock purchase agreement with American Capital and its controlled affiliates, pursuant to which ACE I sold secondary and add-on investments in 22 portfolio companies to American Capital for an aggregate purchase price of $101 million, which was based on the fair value of the investments as of March 31, 2015. Pursuant to the operating agreement, ACE I was to be dissolved on October 1, 2014, unless extended by us for up to two additional years to allow for an orderly dissolution and liquidation of the fund’s investments in accordance with the operating agreement. During the third quarter of 2015, we extended the term of the fund to October 1, 2016.

ACE II is a private equity fund, which was established in 2007 with $585 million of equity commitments from third-party investors. At the closing of the fund, ACE II used the majority of its committed capital to purchase 17% of our equity investments in 80 portfolio companies for an aggregate purchase price of $488 million. The remaining $97 million equity commitment is being used to fund add-on investments in the 80 portfolio companies. As of December 31, 2015, ACE II investors had invested $516 million, received distributions of $583 million, had $97 million in total investments at fair value and had $69 million of remaining equity commitments available for future add-on investments or cost contributions. ACAM manages ACE II for a 2% base management fee on the net cost basis of ACE II’s assets (as of December 31, 2015, the net cost basis of ACE II’s assets was $126 million) and a 10% to 35% Carried Interest, subject to certain hurdles. As of December 31, 2015, ACAM has not recorded an accrual related to its Carried Interest in ACE II. On June 30, 2015, ACE II entered into a stock purchase agreement with American Capital and its controlled affiliates, pursuant to which ACE II sold secondary and add-on investments in 20 portfolio companies to American Capital for an aggregate purchase price of $44 million, which was based on the fair value of the investments as of March 31, 2015. Pursuant to the limited partnership agreement, ACE II will be dissolved on October 1, 2016, unless extended by us for up to two additional years to allow for an orderly dissolution and liquidation of the fund’s investments in accordance with the limited partnership agreement.

ACE III is a private equity fund, which was established in 2014 with $1.1 billion of equity commitments. As of December 31, 2015, ACE III investors had invested $714 million, received distributions of $652 million, had $637 million in total investments at fair value and had $290 million of remaining equity commitments available for future add-on investments or cost contributions. ACAM manages ACE III for a base management fee of 1.25% on the net cost basis of ACE III’s assets (as of December 31, 2015 the net cost basis of ACE III’s assets was $389 million) and 2% on outstanding capital commitments as well as 10% to 20% of the net profits of ACE III, subject to certain hurdles. As of December 31, 2015, the Carried Interest allocation to ACAM was $52 million, subject to certain clawback obligations, as defined in ACE III’s operating agreement. Pursuant to the operating agreement, ACE III will be dissolved on September 23, 2021, unless extended by us, subject to certain approvals, for up to two additional years to allow for an orderly dissolution and liquidation of the fund’s investments in accordance with the operating agreement.

ECAS UK SME Debt is a private equity fund, which was established in 2014 with £100 million ($148 million) of committed capital with the ability to add £50 million of leverage. The British Business Bank has committed £50 million to the fund under the British Business Bank Investment Programme. The remaining £50 million has been committed by European Capital and its affiliates. ECAS UK SME Debt provides debt financing to small and medium sized companies in the United Kingdom. ACAM manages ECAS UK SME Debt for an annual management fee of 1.50% on deployed capital and up to a 15% Carried Interest, subject to certain hurdles. ECAS UK SME Debt will be dissolved on August 17, 2024. As of December 31, 2015, European Capital’s investment in ECAS UK SME Debt had a cost basis and fair value of $13 million and $12 million, respectively. As of December 31, 2015, European Capital had an unfunded commitment of £42 million ($62 million) to ECAS UK SME Debt.

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closing of €69 million which increased the total capital commitments to €387 million. We anticipate a final closing by March 2016 to increase the investment capacity of the fund. The fund will have a three year investment period and a subsidiary of ACAM manages the ECAS debt fund for an annual management fee of 1.50% on deployed capital and up to a 15% carried interest, subject to certain hurdles. The ECAS debt fund will be dissolved on March 19, 2025, unless extended. In April 2015, European Capital sold €162 million ($175 million) of investments at their approximate fair value in 9 portfolio companies to the ECAS debt fund. European Capital received €158 million ($170 million) for the sale of these assets. As of December 31, 2015, European Capital’s investment in the ECAS debt fund had a cost basis and fair value of $81 million and $85 million, respectively. As of December 31, 2015, European Capital had an unfunded commitment of €91 million ($100 million) to the ECAS debt fund.

On August 5, 2015, we entered into a definitive agreement to sell certain CLO equity investments to ACAS CLO Fund I for $300 million. The purchase price was the aggregate fair value of the CLO equity investments as of June 30, 2015, subject to customary adjustments. The closing of the sale occurred on November 2, 2015. ACAS CLO Fund I is a $450 million private investment fund, which invests primarily in equity tranches of CLOs. As of December 31, 2015, ACAS CLO Fund I investors had invested $299 million, received distributions of $0.6 million, had $247 million in total investments at fair value and had $114 million of remaining equity commitments available for future add-on investments or cost contributions. ACAS CLO Fund I is managed by a subsidiary of ACAM for customary management and incentive fees.

In April 2007, ACAS CLO 2007-1 completed a $400 million securitization that invests primarily in senior floating rate loans. ACAM manages ACAS CLO 2007-1 for a base management fee of 0.68% of ACAS CLO 2007-1’s assets and a 20% Carried Interest, subject to certain hurdles. American Capital purchased 70% of the non-rated equity tranche of subordinated notes in ACAS CLO 2007-1 for $26 million and 55% of the originally rated BB/Ba2 notes for $9 million.

In September 2012, ACAS CLO 2012-1 completed a $362 million securitization that invests primarily in senior floating rate loans. ACAM manages ACAS CLO 2012-1 for a base management fee of 0.42% of ACAS CLO 2012-1’s total assets and a 20% Carried Interest, subject to certain hurdles. A subsidiary of ACAM also purchased 70% of the non-rated equity tranche of subordinated notes in ACAS CLO 2012-1 for $30 million.

In March 2013, ACAS CLO 2013-1 completed a $414 million securitization that invests primarily in senior floating rate loans purchased in the primary and secondary markets. ACAM manages ACAS CLO 2013-1 for a base management fee of 0.50% of ACAS CLO 2013-1’s assets and a 20% Carried Interest, subject to certain hurdles. A subsidiary of ACAM also purchased 70% of the non-rated equity tranche of subordinated notes in ACAS CLO 2013-1 for $25 million.

In September 2013, ACAS CLO 2013-2 completed a $414 million securitization that invests primarily in senior floating rate loans purchased in the primary and secondary markets. ACAM manages ACAS CLO 2013-2 for a base management fee of 0.50% of ACAS CLO 2013-2’s assets and a 20% Carried Interest, subject to certain hurdles. American Capital purchased 21% of the non-rated equity tranche of subordinated notes in ACAS CLO 2013-2 for $8 million, which we subsequently sold to ACAS CLO Fund I.

In July 2014, ACAS CLO 2014-1 completed a $619 million securitization that invests primarily in senior floating rate loans purchased in the primary and secondary markets. ACAM manages ACAS CLO 2014-1 for an annual base management fee of 0.50% of ACAS CLO 2014-1’s assets and a 20% Carried Interest, subject to certain hurdles. A subsidiary of ACAM also purchased 60% of the non-rated equity tranche of subordinated notes in ACAS CLO 2014-1 for $31 million.

In November 2014, ACAS CLO 2014-2 completed a $411 million securitization that invests primarily in senior floating rate loans purchased in the primary and secondary markets. ACAM manages ACAS CLO 2014-2 for an annual base management fee of 0.50% of ACAS CLO 2014-2’s assets and a 20% Carried Interest, subject to certain hurdles. A subsidiary of ACAM also purchased 61% of the non-rated equity tranche of subordinated notes in ACAS CLO 2014-2 for $25 million.

In May 2015, ACAS CLO 2015-1 completed a $552 million securitization that invests primarily in broadly syndicated senior secured floating rate loans purchased in the primary and secondary markets. ACAM manages ACAS CLO 2015-1 in exchange for an annual base management fee of 0.50% of ACAS CLO 2015-1’s assets and a 20% carried interest, subject to certain hurdles. A subsidiary of ACAM also purchased 65% of the non-rated subordinated notes in ACAS CLO 2015-1 for $30 million.

In August 2015, ACAS CLO 2015-2 completed a $510 million securitization that invests primarily in broadly syndicated senior secured floating rate loans purchased in the primary and secondary markets. ACAM manages ACAS CLO 2015-2 in exchange for an annual base management fee of 0.50% of ACAS CLO 2015-2’s assets and a 20% carried interest, subject to certain hurdles. A subsidiary of ACAM also purchased 59% of the non-rated subordinated notes in ACAS CLO 2015-2 for $30 million.

Structured Products Investments

Our Structured Products investments consist of investments in CLO, CDO and CMBS securities. Our Structured Products investments are generally in non-investment grade securities. We invest in Structured Products with the intention of holding them until maturity.

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As of December 31, 2015, our investment in CLO and CDO securities had a cost basis and fair value of $548 million and $387 million, respectively, or 8% of our total investments at fair value. This includes our investment in ACAS CLO 2007-1, which represents $21 million at fair value. As of December 31, 2015, our total investment in CMBS bonds had a cost basis and fair value of $49 million and $31 million, respectively, or less than 1% of our total investments at fair value. Our investments in CMBS bonds are secured by diverse pools of commercial mortgage loans.

Senior Floating Rate Loans

Our Senior Floating Rate Loan portfolio is composed primarily of diversified investments in first lien floating rate loans to large-market U.S. based companies (defined as issuers with EBITDA greater than $50 million). Our Senior Floating Rate Loan portfolio may also include second lien floating rate loans. Senior Floating Rate Loans are typically collateralized by a company’s assets and structured with first lien or second lien priority on collateral, providing for greater security and potential recovery in the event of default compared to other subordinated fixed-income products. Senior Floating Rate Loans generally have a stated term of three to seven years and typically pay interest based on a floating rate calculated as a spread over a market index, primarily LIBOR, and generally have a minimum market index floor. Our Senior Floating Rate Loans are also typically traded among investors in an active secondary market with no investor owning a significant percentage of the issue. We generally own less than 2% of any single loan issue.

We initiated our Senior Floating Rate Loan portfolio in 2014 and purchased $3.0 billion of investments through December 31, 2015. During the fourth quarter of 2015, we substantially liquidated our Senior Floating Rate Loan portfolio. Since 2014, we have received $2.5 billion in proceeds from the sale of these investments and have $364 million in unsettled trade receivables as of December 31, 2015. The proceeds from the sale of our Senior Floating Rate Loan portfolio were partially utilized to pay down obligations under the $1.25 billion secured revolving credit facility and $500 million secured revolving credit facility.

As of December 31, 2015, there were debt investments in 13 companies in our Senior Floating Rate Loan portfolio with a cost basis and fair value of $62 million and $57 million, respectively. As of December 31, 2015, approximately 99% of our Senior Floating Rate Loan portfolio, at fair value, was composed of loans with a facility rating by the S&P of at least “B-” or higher. None of the investments in our Senior Floating Rate Loan portfolio were in default or on non-accrual as of December 31, 2015.

During the year ended December 31, 2015, we recognized interest income and interest expense from our Senior Floating Rate Loan Portfolio totaling $84 million and $27 million, respectively. During the year ended December 31, 2014, we recognized interest income and interest expense from our Senior Floating Rate Loan portfolio totaling $33 million and $4 million, respectively. During the year ended December 31, 2015, we realized a loss of $63 million from our Senior Floating Rate Loan portfolio, which was partially offset by a reversal of unrealized depreciation of $30 million.

European Capital

European Capital primarily invests in senior and mezzanine debt and equity in buyouts of private companies sponsored by European Capital (“European Capital One Stop Buyouts^®”), or sponsored by other private equity funds and provides capital directly to early stage and mature private and small public companies (“European Capital Sponsor and Other Finance Investments”).

As of December 31, 2015, European Capital had investments in 14 portfolio companies totaling $431 million at fair value, with an average investment size of $31 million at fair value. As of December 31, 2015, European Capital’s five largest investments at fair value were $387 million, or 90% of its total investments at fair value.

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The following table shows the composition of European Capital’s investment portfolio by security type at cost basis and fair value, as a percentage of total investments, as of December 31, 2015 and 2014:



	2015		2014
Cost
First Lien Senior Debt	4.0	%	33.1	%
Second Lien Senior Debt	4.5	%	3.3	%
Mezzanine Debt	25.5	%	24.1	%
Preferred Equity	26.9	%	24.0	%
Common Equity	39.1	%	14.0	%
Structured Products	—	%	1.5	%
Total	100.0	%	100.0	%

Fair Value
First Lien Senior Debt	4.4	%	46.0	%
Second Lien Senior Debt	—	%	—	%
Mezzanine Debt	20.4	%	15.7	%
Preferred Equity	23.9	%	13.3	%
Common Equity	51.3	%	21.3	%
Structured Products	—	%	3.7	%
Total	100.0	%	100.0	%

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European Capital uses the GICS^® for classifying the industry groupings of its portfolio companies. The following chart shows European Capital’s portfolio composition by industry grouping at fair value as a percentage of its total investments as of December 31, 2015.

Lending and Investment Decision Criteria

We generally review certain criteria in order to make investment decisions. The list below represents a general overview of the criteria we use in making our lending and investment decisions in our investment portfolio. Not all criteria are required to be favorable in order for us to make an investment. Add-on investments for growth, acquisitions or recapitalizations are based on the same general criteria. Add-on investments in distressed situations are based on the same general criteria, but are also evaluated on the potential to preserve prior investments.

Operating History. We generally focus on middle market companies that have been in business over ten years and have an attractive operating history, including generating positive cash flow. We generally target companies with significant market share in their products or services relative to their competitors. In addition, we consider factors such as customer concentration, performance during recessionary periods, competitive environment and ability to sustain margins.

Growth. We consider a target company’s ability to increase its cash flow. Anticipated growth is a key factor in determining the ability of the company to repay its debt and the value ascribed to any warrants and equity interests acquired by us.

Liquidation Value of Assets. Although we do not operate as an asset-based lender, liquidation value of the assets collateralizing our loans is a factor in many credit decisions. Emphasis is placed both on tangible assets such as accounts receivable, inventory, plant, property and equipment as well as intangible assets such as brand recognition, market reputation, customer lists, networks, databases and recurring revenue streams.

Experienced Management Team. We consider the quality of senior management to be extremely important to the long-term performance of most companies. Therefore, we consider it important that senior management be experienced and properly incentivized through meaningful ownership interest in the company.

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Exit Strategy. Almost all of our investments consist of securities acquired directly from their issuers in private transactions. These securities are rarely traded in public markets, thus limiting their liquidity. Therefore, we consider it important that a prospective portfolio company have a number of methods by which our financing can be repaid and our equity investment sold or redeemed. These methods would typically include the sale or refinancing of the business, the ability to generate sufficient cash flow to repurchase our equity securities and repay our loans or the ability to contribute the security to a fund that we manage.

Structured Products Criteria. We receive extensive information from the issuer regarding their track record and the collateral pool. We underwrite the manager and the collateral securing our investment as appropriate.

Fund Investment Criteria. We receive extensive information from the manager regarding their track record and the investment thesis. We assess the ability to raise capital with the manager and underwrite the manager and the investment strategy as appropriate.

Institutional Approach to Investing

We have built an institution with a leading capability to originate, underwrite, finance, syndicate, monitor and exit investments that generate attractive returns. Our dedicated teams of investment professionals are the cornerstone of our institution. We have also created an extensive support structure that provides in-house due diligence, operational, legal and human resources support to our investment professionals and to our portfolio company, ACAM.

Investment Process

Investment Sourcing and Screening: We have a multi-disciplined approach to reach diverse channels of deal sources. Our Investment Teams target a referral network composed of investment bankers, private equity firms, mezzanine debt funds, trade organizations, commercial bankers, attorneys and business and financial brokers. We developed and maintain a proprietary industry-wide database of reported middle market transactions, which enables us to monitor and evaluate the middle market investing environment. This database is used to help us assess whether we are penetrating our target markets and to track terms and pricing. Our financial professionals review financing memorandums and private placement memorandums sourced from this referral network in search of potential buyout or financing opportunities. Our Investment Teams undertake a preliminary evaluation and analysis of potential investment opportunities to determine whether or not they meet our criteria based upon the limited information received in these early stages of the investment process. For investment opportunities that pass an initial screening process, our Investment Teams prepare an initial investment thesis and analysis that is presented to an internal Investment Committee, which includes representatives of our senior officers depending on the nature of the proposed investment, for approval to proceed further.

Due Diligence: In our investment portfolio, our investment professionals along with FACT and our Operations Team conduct due diligence of each target company that passes the initial screening process. This includes one or more on-site visits, a review of the target company’s historical and prospective financial information, identifying and confirming pro-forma financial adjustments, interviews with and assessments of management, employees, customers and vendors, review of the adequacy of the target company’s systems, background investigations of senior management and research on the target company’s products, services and industry. We often engage professionals such as environmental consulting firms, accounting firms, law firms, risk management companies and management consulting firms with relevant industry expertise to perform elements of the due diligence.

Investment Approval: Upon completion of our due diligence, our Investment Teams, FACT and our Operations Team, as well as any consulting firms that we have engaged, prepare and present a report containing the due diligence information for review by our Investment Committee. Our Board of Directors has delegated authority to the Investment Committee to conduct the initial review and approval of our investments. Our Investment Committee generally must approve each investment. Investments exceeding a certain size or meeting certain other criteria must also be approved by our Board of Directors. Our Investment Committee is supported by a dedicated staff that focuses on the due diligence and other research done with regard to each proposed investment.

Documentation and Negotiations: Documentation for the legal agreements for a transaction is completed either by our in-house legal team or through the retention of outside legal counsel. We maintain custody of our investment securities and the original related investment documentation in custodial accounts with qualified banks and members of national securities exchanges in accordance with applicable regulatory and financing requirements.

Investment Funding: Prior to the release of any funding for investments, our treasury department prepares a summary of the investment terms, the funding amounts approved by our Investment Committee and wiring instructions. Our treasury department performs various procedures to confirm any wiring instructions. A senior executive officer must approve this summary of terms and funding amounts prior to the disbursement of the funds.

Portfolio Monitoring: In addition to the due diligence at the time of the original investment decision, we seek to preserve and enhance the performance of our portfolio companies under management through our active involvement with the portfolio companies. As a BDC, we are required by law to make significant managerial assistance available to most of our eligible portfolio companies. This generally includes providing guidance and counsel concerning the management, operations and business objectives

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and policies of the portfolio company to the portfolio company’s management and board of directors, including participating on the company’s board of directors. The respective Investment Teams, FACT, Operations Teams and accounting teams regularly review each portfolio company’s monthly financial statements to assess performance and trends, periodically conduct on-site financial and operational reviews and evaluate industry and economic issues that may affect the portfolio company.

Investment Exits: We regularly evaluate each investment to determine the appropriate time to exit an investment. For investments that we control, portfolio companies are usually sold through an auction process, following the engagement of an investment bank. For performing investments that we do not control, the exit typically occurs when the sponsor or other party in control of the portfolio company decides to recapitalize or sell the business. In both instances, our debt investment is typically paid in full and any equity investment we own realizes a value consistent with the value realized by the controlling parties. For non-performing investments that we do not control, we may determine that based on the facts and circumstances relating to the investment, to accept an amount less than what we are legally owed with any such decision requiring approval by our Investment Committee.

Portfolio Valuation

FACT, with the assistance of our Investment Teams and subject to the oversight of the Audit, Compliance and Valuation Committee, prepares a quarterly valuation of each of our portfolio company investments. Our Board of Directors approves our portfolio valuations as required by the 1940 Act.

Competition

We compete with strategic buyers, private equity funds, mezzanine debt funds and other buyers and financing sources, including traditional financial services companies such as finance companies, commercial banks, investment banks and other equity and non-equity based investment funds. Some of our competitors are substantially larger and have considerably greater financial resources than we do. Competitors may have a lower cost of funds and many have access to funding sources that are not available to us. In addition, certain of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships and build their market shares.

Corporate Information

Our executive offices are located at 2 Bethesda Metro Center, 14^th Floor, Bethesda, Maryland 20814, and our telephone number is (301) 951-6122. In addition to our executive offices, we, or subsidiaries of our wholly-owned portfolio company ACAM, maintain offices in New York, Chicago, Boston, Annapolis (Maryland), London, Paris and Singapore.

We make available all of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports free of charge on our internet website at www.AmericanCapital.com as soon as reasonably practical after such material is electronically filed with or furnished to the SEC. These reports are also available on the SEC’s internet website at www.sec.gov. The public may also read and copy paper filings that we have made with the SEC at the SEC’s Public Reference Room, located at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.

Employees

As of December 31, 2015, we employed 346 full-time employees, which included 124 employees at ACAM, compared to 366 and 394 full-time employees as of December 31, 2014 and 2013, respectively. We believe that we have excellent relations with our employees.

Business Development Company Requirements

We are a closed-end, non-diversified, management investment company that has elected to be regulated as a BDC under the 1940 Act, and, as such, are subject to regulation under that act.

Qualifying Assets

As a BDC, we may not acquire any asset other than certain qualifying assets described in the 1940 Act, unless, at the time the acquisition is made, the value of such qualifying assets represent at least 70% of the value of our total assets. The principal categories of qualifying assets relevant to our business include the following:


•	securities purchased in transactions not involving any public offering from:


(a)	an issuer that (i) is organized and has its principal place of business in the United States, (ii) is neither an investment company other than a wholly-owned small business investment company nor an entity that would be an investment company but for certain statutory exemptions, and (iii) does not have any class of

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securities listed on a national securities exchange with a market capitalization in excess of $250 million; or

(b)

an issuer that satisfies the criteria set forth in clauses (a) (i) and (ii) above but not clause (a)(iii), so long as, at the time of purchase, we own at least 50% of (i) the greatest amount of equity securities of the issuer, including securities convertible into such securities and (ii) the greatest amount of certain debt securities of such issuer, held by us at any point in time during the period when such issuer was an eligible portfolio company, except that options, warrants, and similar securities which have by their terms expired and debt securities which have been converted, or repaid or prepaid in the ordinary course of business or incident to a public offering of securities of such issuer, shall not be considered to have been held by us, and we are one of the 20 largest holders of record of such issuer's outstanding voting securities;


•	securities of an issuer described in clauses (a)(i) and (ii) above with respect to which we control (alone or together as a part of a group), we in fact exercise a controlling influence over such issuer’s management or policies and a person affiliated with us is on the issuer’s board of directors;


•	securities received in exchange for or distributed with respect to securities described above, or pursuant to the exercise of options, warrants or rights relating to such securities; and


•	cash, cash items, U.S. government securities, or high quality debt securities maturing in one year or less from the time of investment.

To include certain securities above as qualifying assets for the purpose of the 70% test, a BDC must either control the issuer of the securities or offer to make significant managerial assistance available to the issuer of those securities, such as providing significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company or making loans to a portfolio company. We make significant managerial assistance available to most of our eligible portfolio companies.

Under the 1940 Act, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC without consent of the holders of a majority of our outstanding voting securities. Since we made our BDC election, we have not made any substantial change in our structure or in the nature of our business.

Temporary Investments

Pending investment in other types of qualifying assets described in the 1940 Act, we may invest our funds in cash items, government securities, agency paper or high quality debt securities maturing in one year or less from the time of investment in such high quality debt investments. We refer to such assets and cash herein as temporary investments.

Leverage

The 1940 Act permits us, as a BDC, to issue senior debt securities and preferred stock (collectively, “Senior Securities”) in amounts such that our asset coverage is at least 200% after each issuance of Senior Securities. Asset coverage is defined in the 1940 Act as the ratio which the value of the total assets, less all liabilities and indebtedness not represented by Senior Securities, bears to the aggregate amount of Senior Securities representing indebtedness. Such indebtedness may also be incurred for the purpose of effecting share repurchases. As a result, we are exposed to the risks of leverage. Although we have no current intention to do so, we have retained the right to issue preferred stock, subject to certain limitations under the 1940 Act. As permitted by the 1940 Act, we may, in addition, borrow amounts up to 5% of our total assets for temporary purposes. As of December 31, 2015, our asset coverage was 482%.

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 200% at the time of the distribution after deducting the amount of such dividend.

Issuance of Stock

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, except (i) with the prior approval of a majority of our shareholders, (ii) in connection with a rights offering to our existing shareholders, or (iii) under such other circumstances as the SEC may permit. As of December 31, 2015, our NAV was $19.88 per share and our closing market price was $13.79 per share. As of the date of this filing, we do not have any authorization to issue shares of our common stock below our NAV per share.

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Investment Objectives

Our primary business objectives are to increase our net earnings and NAV by investing in senior and mezzanine debt and equity securities of private companies and funds managed by ACAM with attractive current yields and/or potential for equity appreciation and realized gains and by growing our fee earning assets under management. Our investment objectives provide that:

•

We will at all times conduct our business so as to retain our status as a BDC. In order to retain that status, we may not acquire any assets (other than non-investment assets necessary and appropriate to our operations as a BDC) if after giving effect to the acquisition the value of our qualifying assets under the 1940 Act amounts to less than 70% of the value of our total assets. See “Business Development Company Requirements” for a discussion of certain qualifying assets described in the 1940 Act. We believe that most of the securities we will acquire (provided that we control, or through our officers or other participants in the financing transaction, make significant managerial assistance available to the issuers of these securities), as well as temporary investments, will generally be qualifying assets. Securities of public companies with a market capitalization in excess of $250 million, on the other hand, are generally not qualifying assets unless they were acquired in a distribution, in exchange for or upon the exercise of a right relating to securities that were qualifying assets.


•	We may invest up to 100% of our assets in securities acquired directly from issuers in privately-negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the Securities Act of 1933.


•	We may issue Senior Securities to the extent permitted by the 1940 Act for the purpose of making investments, to fund share repurchases, or for temporary or emergency purposes. As a BDC, we may issue Senior Securities up to an amount so that the asset coverage, as defined in the 1940 Act, is at least 200% immediately after each issuance of Senior Securities.

•

We generally will not (a) act as an underwriter of securities of other issuers (except to the extent that we may (i) be deemed an “underwriter” of securities purchased by us that must be registered under the Securities Act of 1933 before they may be offered or sold to the public or (ii) underwrite securities to be distributed to or purchased by our shareholders in connection with offerings of securities by companies in which we are a shareholder); (b) sell securities short (except with regard to managing risks associated with publicly traded securities issued by portfolio companies); (c) purchase securities on margin (except to the extent that we may purchase securities with borrowed money); (d) write or buy put or call options (except (i) to the extent of warrants or conversion privileges in connection with our acquisition financing or other investments, and rights to require the issuers of such investments or their affiliates to repurchase them under certain circumstances, or (ii) with regard to managing risks associated with publicly traded securities issued by portfolio companies); (e) engage in the purchase or sale of commodities or commodity contracts, including futures contracts (except where necessary in working out distressed loan or investment situations); or (f) acquire more than 3% of the voting stock of, or invest more than 5% of our total assets in any securities issued by, any other investment company (as defined in the 1940 Act), except as they may be acquired as part of a merger, consolidation or acquisition of assets or as otherwise permitted by the staff of the SEC. With regard to that portion of our investments in securities issued by other investment companies it should be noted that such investments may subject our shareholders to additional expenses.

The percentage restrictions set forth above, other than the restriction pertaining to the issuance of Senior Securities, as well as those contained elsewhere herein, apply at the time a transaction is effected, and a subsequent change in a percentage resulting from market fluctuations or any cause other than an action by us will not require us to dispose of portfolio securities or to take other action to satisfy the percentage restriction.

The above investment objectives have been set by our Board of Directors and do not require shareholder consent to be changed.

Investment Adviser

We have no investment adviser and are internally managed by our executive officers under the supervision of our Board of Directors.

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Item 1A.	Risk Factors

You should carefully consider the risks described below, as well as other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes thereto before making an investment decision. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect us in the future. Any of the following risks could materially adversely affect our business, financial condition, results of operations or cash flows. In such case, you may lose all or part of your original investment. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Forward-Looking Statements” in this Annual Report on Form 10-K.

Risks Related to Our Business and Structure

Our previously announced strategic review process may not result in a sale transaction or other strategic alternative, and if there is a sale transaction or other strategic alternative, there can be no assurance that stockholder value will be enhanced

On January 7, 2016, we announced that our Board of Directors had completed the initial phase of its previously announced strategic review process and had authorized us to proceed with a solicitation of offers to purchase our company or our various business lines in whole or in part. Even though the initial phase of the previously announced strategic review process has been completed, our strategic review process remains ongoing. No assurance can be given that the solicitation or strategic review process will result in any sale transaction or other strategic alternative. Any potential sale transaction or other strategic alternative would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in us or any of our business lines, stockholder approval and the availability of financing to potential buyers or us on reasonable terms. We also cannot assure you that a sale transaction or other strategic alternative, if consummated, will provide the anticipated benefits or otherwise enhance stockholder value. In addition, it is possible that we will undertake a sale transaction or other strategic alternative that is materially different than what we have announced or that has a material adverse effect on our financial condition, results of operations or cash flows.

Our strategic review process may have an adverse impact on our business. If we are unable to effectively manage the review process and successfully implement a strategic alternative, our business, financial condition, results of operations or cash flows could be adversely affected

We have incurred and expect to incur additional significant costs associated with identifying and evaluating various strategic alternatives. In addition, the process of pursuing any strategic alternative, including a sale transaction, is time consuming and disruptive to our business operations and may contribute to increased volatility in our stock price. Our review process may also create uncertainty which could impair our ability to motivate and retain qualified employees until any strategic alternative is consummated, as key employees may have concerns about their future employment with us following completion of a strategic alternative. If our key employees depart because of issues relating to the uncertainty and difficulty of completing a strategic alternative, consummation of any such strategic alternative could be negatively impacted or be subject to a differing outcome than if such employees had not departed. In addition, if we do not complete an announced strategic alternative, including a sale transaction, our business, financial condition, results of operation or cash flows could be adversely affected due to the departure of such key employees. See “We are dependent upon our key management personnel for our future success” below.

Future adverse market and economic conditions could cause harm to our operating results

Past recessions have had a significant negative impact on the operating performance and fair value of our portfolio investments. We have experienced losses during those recessions. Many of our portfolio companies could be adversely impacted again by any future economic downturn or recession and may be unable to repay our debt investments, may be unable to be sold at a price that would allow us to recover our investment, or may be unable to operate during such recession. Such portfolio company performance could have a material adverse effect on our business, financial condition and results of operations.

We have loans to and investments in middle market borrowers who may default on their loans and we may lose our investment

We have invested in and made loans to privately-held, middle market businesses and plan to continue to do so. There is generally a limited amount of publicly available information about these businesses. Therefore, we rely on our principals, associates, analysts, other employees and consultants to investigate and monitor these businesses. The portfolio companies in which we have invested may have significant variations in operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, may require substantial additional capital to support their operations, to finance expansion or to maintain their competitive position, may otherwise have a weak financial position or may be adversely affected by changes in the business cycle. Our portfolio companies may not meet net income, cash flow and other coverage tests typically imposed by senior lenders. Numerous factors may affect a portfolio company’s ability to repay its loans, including the failure to meet its business plan, a downturn in its industry or negative economic conditions. Deterioration in a portfolio company’s financial condition and prospects may be accompanied by deterioration in the collateral

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for the loan. We have also made unsecured and mezzanine loans and invested in equity securities, which involve a higher degree of risk than senior secured loans. In certain cases, our involvement in the management of our portfolio companies may subject us to additional defenses and claims from borrowers and third-parties. These conditions may make it difficult for us to obtain repayment of our investments.

Middle market businesses typically have narrower business lines and smaller market shares than large businesses. They tend to be more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. In addition, these companies may face intense competition, including competition from companies with greater financial resources, more extensive development, manufacturing, marketing, and other capabilities, and a larger number of qualified managerial and technical personnel.

These businesses may also experience substantial variations in operating results. Typically, the success of a middle market business also depends on the management talents and efforts of one or two persons or a small group of persons. The death, disability or resignation of one or more of these persons could have a material adverse impact on us. In addition, middle market businesses often need substantial additional capital to expand or compete and may have borrowed money from other lenders with claims that are senior to our claims.

Our senior loans generally are secured by the assets of our borrowers; however, certain of our senior loans may have a second priority lien and thus, our security interest may be subordinated to the payment rights and security interest of the first lien senior lender. Additionally, our mezzanine loans may or may not be secured by the assets of the borrower; however, if a mezzanine loan is secured, our rights to payment and our security interest are usually subordinated to the payment rights and security interests of the first and second lien senior lenders. Therefore, we may be limited in our ability to enforce our rights to collect our second lien senior loans or mezzanine loans and to recover any of the loan balance through a foreclosure of collateral.

Non-accruing loans adversely affect our results of operations and financial condition and could result in further losses in the future

As of December 31, 2015 and 2014, our non-accruing loans at cost totaled $280 million and $371 million, or 10.6% and 9.4% of our total loans at cost, respectively. Non-accruing loans adversely affect net income in various ways. Upon becoming non-accruing, we reverse prior PIK income from a non-accruing loan, if applicable, and no interest income is recorded on non-accruing loans, thereby, in both cases, adversely affecting income and returns on assets and equity. There is no assurance that we will not experience further increases in non-accruing loans in the future, or that non-accruing loans will not result in further losses to come.

There is uncertainty regarding the value of our portfolio investments

Virtually none of our portfolio investments are publicly traded. As required by law, we fair value these investments in accordance with the 1940 Act and Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) based on a determination made in good faith by our Board of Directors. Due to the uncertainty inherent in valuing investments that are not publicly traded, as set forth in our audited consolidated financial statements included in this Annual Report on Form 10-K, our determinations of fair value may differ materially from the values that would exist if a ready market for these investments existed. Our determinations of the fair value of our investments have a material impact on our net earnings through the recording of unrealized appreciation or depreciation of investments as well as our assessment of income recognition. Thus, our NAV could be materially affected in the event of any changes in applicable law or accounting pronouncements governing how we currently fair value assets, or if our determinations regarding the fair value of our investments are materially different from the values that would exist if a ready market existed for these securities.

Our business has significant capital requirements and may be adversely affected by a prolonged inability to access the capital markets or to sell assets

Our business requires a substantial amount of capital to operate. We historically have financed our operations, including the funding of new investments, through cash generated by our operating activities, the repayment of debt investments, the sale of equity investments, the issuance of debt by special purpose affiliates to which we have contributed loan assets, the sale of our stock and through secured and unsecured borrowings. Our ability to continue to rely on such sources or other sources of capital is affected by restrictions in both the 1940 Act and in certain of our debt agreements relating to the incurrence of additional indebtedness as well as changes in the capital markets from the recent economic recession. It is also affected by legal, structural and other factors. There can be no assurance that we will be able to earn or access the funds necessary for our liquidity requirements.

Our ability to recognize the benefits of our deferred tax asset is dependent on future taxable income and could be substantially limited if we experience an “ownership change” within the meaning of Section 382 of the Code

We recognize the expected future tax benefit from a deferred tax asset when the tax benefit is considered more likely than not to be realized. Otherwise, a valuation allowance is applied against the deferred tax asset. Assessing the recoverability of a

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deferred tax asset requires management to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecasted cash flows from investments and operations, the character of expected income or loss as either capital or ordinary and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and the amount or character of taxable income differ significantly from estimates, our ability to realize the deferred tax asset could be impacted. See Note 11 to our audited consolidated financial statements included in this Annual Report on Form 10-K.

Additionally, under Sections 382 and 383 of the Code, following an “ownership change,” certain limitations apply to the use by a “loss corporation” of certain tax attributes including net operating loss carryforwards, capital loss carryforwards, unrealized built-in losses and tax credits arising before the “ownership change.” Such tax attributes represent substantially all of our deferred tax assets. In general, an “ownership change” would occur if there is a cumulative change in the ownership of our common stock of more than 50 percentage points by one or more “5% shareholders” during a three-year period. In the event of an “ownership change,” the tax attributes that may be used to offset our future taxable income in each year after the “ownership change” will be subject to an annual limitation. In general, the annual limitation is equal to the product of the fair market value of our common stock on the date of the “ownership change” and the “long term tax exempt rate” (which is published monthly by the Internal Revenue Service), subject to specified adjustments. This limitation could accelerate our cash tax payments and could result in a significant portion of our deferred tax asset expiring before we could fully use them. We do not believe that we have previously undergone an “ownership change” or that our tax attributes are currently subject to any such limitations.

Changes in laws or regulations governing our operations or our failure to comply with those laws or regulations may adversely affect our business

We and our portfolio companies are subject to regulation by laws at the local, state, federal and foreign level, including with respect to securities laws, tax and accounting standards. These laws and regulations, as well as their interpretation, may be changed from time to time. Accordingly, any change in these laws or regulations or the failure to comply with these laws or regulations could have a material adverse impact on our business. Certain of these laws and regulations pertain specifically to BDCs.

A change in interest rates may adversely affect our profitability

Because we have funded a portion of our investments with borrowings, our earnings are affected by the spread between the interest rate on our investments and the interest rate at which we borrowed funds. We have attempted to match-fund our liabilities and assets by financing floating rate assets with floating rate liabilities and fixed rate assets with fixed rate liabilities or equity. We have entered and may enter into interest rate basis swap agreements to match the interest rate basis of a portion of our assets and liabilities, thereby locking in the spread between our asset yield and the cost of our borrowings, and to fulfill our obligations under the terms of any asset securitizations. However, such derivatives are considered economic hedges that do not qualify for hedge accounting under ASC Topic 815, Derivatives and Hedging (“ASC 815”). Therefore, payments under the hedges are recorded in net realized (loss) gain in our audited consolidated financial statements included in this Annual Report on Form 10-K.

Under any such interest rate swap agreements, we will generally pay a fixed rate and receive a floating interest rate based on LIBOR. We may enter into interest rate swaption agreements where, if exercised, we would receive a fixed rate and pay a floating rate based on LIBOR. We may also enter into interest rate cap agreements that would entitle us to receive an amount, if any, by which our interest payments on our variable rate debt exceed specified interest rates.

An increase or decrease in interest rates could reduce the spread between the rate at which we invest and the rate at which we borrow, and thus, adversely affect our profitability, if we have not appropriately match-funded our liabilities and assets or hedged against such event. Alternatively, our interest rate hedging activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio.

Also, the fair value of certain of our debt investments is based in part on the current market yields or interest rates of similar securities. A change in interest rates could have a significant impact on our determination of the fair value of these debt investments. In addition, a change in interest rates could also have an impact on the fair value of our interest rate swap agreements that could result in the recording of unrealized appreciation or depreciation in future periods. For example, a decline, or a flattening, of the forward interest rate yield curve will typically result in the recording of unrealized depreciation of our interest rate swap agreements.

Therefore, adverse developments resulting from changes in interest rates could have a material adverse effect on our business, financial condition and results of operations. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk and Item 8. Financial Statements and Supplementary Data for additional information on interest rate swap agreements.

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A change in currency exchange rates may adversely affect our profitability

We have or may make investments in debt instruments that are denominated in currencies other than the U.S. dollar. In addition, we have or may make investments in the equity of portfolio companies whose functional currency is not the U.S. dollar. Our domestic portfolio companies may also transact a significant amount of business in foreign countries and therefore their profitability may be impacted by changes in foreign currency exchange rates. The functional currency of our consolidated portfolio company, European Capital, is the Euro. European Capital also has investments in other European currencies, including the British Pound. As a result, an adverse change in currency exchange rates may have a material adverse impact on our business, financial condition and results of operations.

We may experience fluctuations in our quarterly results

We have experienced and could experience material fluctuations in our quarterly operating results due to a number of factors including, among others, variations in and the timing of the recognition of realized and unrealized gains or losses, placing and removing investments on non-accrual status, the degree to which we encounter competition in our markets, the ability to sell investments at attractive terms, the ability to fund and close suitable investments, the timing of the recognition of fee income from closing investment transactions and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We are dependent upon our key management personnel for our future success

We are dependent on the diligence and skill of our senior management and other members of management for raising capital and the selection, structuring, monitoring, restructuring/amendment, sale and exiting of our investments. Our future success depends to a significant extent on the continued service of our senior management and other members of management. Our failure to raise additional capital that would enhance the growth of our business, or our failure to provide appropriate opportunities for or compensate competitively senior management and other members of management may make it difficult to retain such individuals. The departure of certain executive officers or key employees could materially adversely affect our ability to implement our business strategy. We do not maintain key man life insurance on any of our officers or employees. See “Our strategic review process may have an adverse impact on our business. If we are unable to effectively manage the review process and successfully implement a strategic alternative, our business, financial condition, results of operations or cash flows could be adversely affected” above.

We operate in a highly competitive market for investment opportunities

We compete with strategic buyers and hundreds of private equity and mezzanine debt funds and other financing sources, including traditional financial services companies such as finance companies, commercial banks, investment banks and other equity and non-equity based investment funds. Some of our competitors are substantially larger and have considerably greater financial resources than us. Competitors may have lower cost of funds and many have access to funding sources that are not available to us. In addition, certain of our competitors may have higher risk tolerances or different risk assessments, which could allow them to offer better pricing and terms to prospective portfolio companies, consider a wider variety of investments and establish more relationships and build their market shares. There is no assurance that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. In addition, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time and there can be no assurance that we will be able to identify and make investments that satisfy our investment objectives or that we will be able to meet our investment goals.

We could face losses and potential liability if intrusions, viruses or similar disruptions to our technology jeopardize our confidential information or that of users of our technology

Although we have implemented and will continue to implement security measures, our technology platform is and will continue to be vulnerable to intrusion, computer viruses or similar disruptive problems caused by transmission from unauthorized users. In addition, any misappropriation of proprietary information could expose us to a risk of loss or litigation.

Risks Related to Liquidity and Capital Resources

Our business is dependent on external financing

Our business requires a substantial amount of cash to operate. We historically have obtained the cash required for operations through the sale of certain senior loans originated by us, borrowings by us or special purpose affiliates and the sale of our equity. Our ability to continue to rely on such sources or other sources of capital depends on numerous legal, economic, structural and other factors and failure to obtain the cash required for operations could have a material adverse impact on our business.

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Our secured and unsecured borrowing arrangements impose significant limitations on us

Our secured term loans (“Secured Term Loan Facility”) have scheduled amortization and mandatory prepayments in the event of a borrowing base deficiency or the issuance of new debt, and in certain cases, if there are realized proceeds from a portfolio company exit or excess cash flow. As of December 31, 2015, there was $441 million in principal outstanding under the Secured Term Loan Facility. Any loans that may be outstanding under our four-year $250 million secured revolving credit facility (“$250 Million Revolving Credit Facility”) are also subject to scheduled amortization after August 22, 2015 and mandatory prepayments in the event of a borrowing base deficiency.

The Secured Term Loan Facility and the $250 Million Revolving Credit Facility have covenants that in certain circumstances limit our ability to incur additional debt and liens, pay cash dividends, repurchase common stock, dispose of assets and make new investments and acquisitions. We are also prohibited from seeking to resume our status as a RIC and changing our regulatory status as a BDC. Both facilities require us to maintain a 100% borrowing base coverage. The $250 Million Revolving Credit Facility also includes other financial covenants that require us to maintain a maximum total leverage ratio not to exceed 0.75:1.00 and minimum adjusted EBITDA as defined in the $250 Million Revolving Credit Facility for ACAM. There can be no assurance that we will be able to maintain compliance with each of these covenants and a failure to do so could result in an event of default under the facilities. Other events of default under the Secured Term Loan Facility and the $250 Million Revolving Credit Facility include, without limitation, a payment default, an unremedied borrowing base deficiency, a cross default to our other facility, the cross acceleration of any debt in excess of an aggregate $50 million, the liquidation or bankruptcy of us or ACAM, the failure by us to conduct our asset management business through ACAM, one or more judgments in excess of an aggregate $50 million and a change of control.

The indenture relating to the issuance and sale by us of $350 million in aggregate principal amount of senior unsecured five-year notes (“Unsecured Private Notes”) contains restrictive covenants that, among other things, limit our ability to: (i) pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments; (ii) incur additional debt and issue certain disqualified stock and preferred stock; (iii) incur certain liens; (iv) merge or consolidate with another company or sell substantially all of our assets; (v) enter into certain transactions with affiliates; and (vi) allow to exist certain restrictions on the ability of our subsidiaries to pay dividends or make other payments to us. The indenture also contains certain customary events of default. The occurrence of an event of default under the facilities could have a material adverse effect on our business, financial condition and results of operations.

The occurrence of an event of default under our borrowing arrangements could lead to termination of those facilities

Our borrowing arrangements contain certain default provisions, some of which are described in the immediately preceding paragraphs. An event of default under our borrowing arrangements could result, among other things, in termination of further funds availability under the facility, liquidation of the assets securing the facility, an accelerated maturity date for all amounts outstanding and the disruption of all or a portion of the business financed by the facility. This could reduce our revenues and, by delaying any cash payment allowed to us under the facility until the lender has been paid in full, reduce our liquidity and cash flow.

The 1940 Act limits our ability to issue Senior Securities in certain circumstances

As a BDC, the 1940 Act generally limits our ability to issue Senior Securities if our asset coverage ratio does not exceed 200% immediately after each issuance of Senior Securities or is improved immediately upon the issuance. Asset coverage ratio is defined in the 1940 Act as the ratio that the value of the total assets, less all liabilities and indebtedness not represented by Senior Securities, bears to the aggregate amount of Senior Securities representing indebtedness. We have operated at times in the past with our asset coverage ratio below 200% and there are no assurances that we will always operate above this ratio. The resulting restrictions on issuing Senior Securities could have a material adverse impact on our business operations.

The 1940 Act limits our ability to issue equity below our NAV per share

As a BDC, the 1940 Act generally limits our ability 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. Since 2008, shares of our common stock have traded below our NAV per share. While our common stock continues to trade at a price below our NAV per share, there are no assurances that we can issue or sell shares of our common stock if needed to fund our business. In addition, even in certain instances where we could issue or sell shares of our common stock at a price below our NAV per share, such issuance could result in dilution in our NAV per share, which could result in a decline of our stock price.

The lack of liquidity in our privately-held securities may adversely affect our business

Most of our investments consist of securities acquired directly from their issuers in private transactions. Some of these securities are subject to restrictions on resale or otherwise are less liquid than public securities. The illiquidity of our investments may make it difficult for us to obtain cash equal to the value at which we record our investments upon exiting the investment.

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Risks Related to Our Investing and Financing Strategy

We have and may incur additional debt that could increase your investment risks

We and certain of our consolidated affiliates have borrowed or may borrow money or issue debt securities, which give our lenders and the holder of our debt securities fixed dollar claims on our assets or the assets of such consolidated affiliates that are senior to the claims of our shareholders and, thus, our lenders may have preference over our shareholders with respect to these assets. In particular, our consolidated affiliates may pledge assets to lenders from time to time under asset securitizations that are sold or contributed to separate affiliated statutory trusts prior to such pledge. While we may own a beneficial interest in these trusts, such assets will be the property of the respective trusts, available to satisfy the debts of the trusts, and would only become available for distribution to our shareholders to the extent specifically permitted under the agreements governing those term debt notes. Additionally, we have granted a security interest in substantially all of our non-securitized assets to the lenders of our Secured Term Loan Facility and $250 Million Revolving Credit Facility, which impose certain limitations on us.

The following table is designed to illustrate the effect on returns to a holder of our common stock of the leverage created by our use of borrowing, at the weighted average interest rate of 3.7% for the year ended December 31, 2015, and assuming hypothetical annual returns on our portfolio of minus 15% to plus 15%. As illustrated below, leverage generally increases the return to shareholders when the portfolio return is positive and decreases the return when the portfolio return is negative. Actual returns may be greater or less than those appearing in the table.



Assumed Return on Portfolio (Net of Expenses)⁽¹⁾	(15%)	(10%)	(5%)	—%	5%	10%	15%
Corresponding Return to Stockholders⁽²⁾	(21%)	(15%)	(8%)	(2%)	5%	11%	18%


(1)	The assumed portfolio return is required by regulation of the SEC and is not a prediction of, and does not represent, our projected or actual performance.

(2)

In order to compute the “Corresponding Return to Shareholders,” the “Assumed Return on Portfolio” is multiplied by the total value of our assets at the beginning of the period to obtain an assumed return to us. From this amount, all interest expense accrued during the period is subtracted to determine the return available to shareholders. The return available to shareholders is then divided by the total value of our net assets as of the beginning of the period to determine the “Corresponding Return to Shareholders.”

Although outstanding debt increases the potential for gain, it also increases the risk of loss of income or capital. This is the case, whether we are impacted by an increase or decrease in income or due to increases or decreases in asset values. Our ability to pay dividends is similarly impacted by outstanding debt.

Our credit ratings may not reflect all risks of an investment in our debt securities

Our credit ratings are an assessment by major debt rating agencies of our ability to pay our obligations. Consequently, actual or expected changes in our credit ratings will likely affect the market value of our traded debt securities. Our credit ratings, however, may not fully or accurately reflect all of the credit and market risks associated with our outstanding debt securities.

We may not realize gains from our equity investments

We invest in equity assets with the goal to realize income and gains from the performance and disposition of these assets. Some or all of these equity assets may not produce income or gains; accordingly, we may not be able to realize income or gains from our equity assets.

Our portfolio companies may be highly leveraged with debt

The debt levels of our portfolio companies may have important adverse consequences to such companies and to us as an investor. Portfolio companies that are indebted may be subject to restrictive financial and operating covenants. The leverage may impair these companies’ ability to finance their future operations and capital needs. As a result, their flexibility to respond to changing business and economic conditions and to business opportunities may be limited. A company’s income and net worth will tend to increase or decrease at a greater rate than if the company did not capitalize itself in part with debt.

One of our investments has subjected us to Nevada gaming regulation, which could affect our operations and changes in our ownership

Our portfolio company, Hard 8 Games, LLC (“Hard 8”), conducts activities that are subject to the Nevada Gaming Control Act and regulations of the Nevada Gaming Commission (“NGC”), the State Gaming Control Board (“GCB”), and the local laws, regulations and ordinances of various county and municipal regulatory authorities (collectively referred to as “the Nevada Gaming Authorities”). As a controlling member of Hard 8, we have been required to register with the Nevada Gaming Authorities as a publicly traded corporation and have been found suitable as a member of Hard 8. Also, certain of our officers and directors have

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been required to be found suitable and be licensed by the Nevada Gaming Authorities. We are required to make periodic reports to the Nevada Gaming Authorities and, in certain cases, may need to obtain the prior approval of the NGC for certain capital raising transactions.

In addition, beneficial holders of 5% or more of our voting securities may be required to make certain filings with the Nevada Gaming Authorities and beneficial holders of greater than 10% of our voting securities are required to file an application, be investigated, and be found suitable by the Nevada Gaming Authorities. Certain entities considered to be institutional investors who are holding our voting securities for investment purposes only may seek a waiver of this finding of suitability requirement. An applicant for licensing or a finding of suitability is required to pay all costs of the GCB investigation. Entities that fail to comply with these requirements may be guilty of a criminal offense. Thus, for so long as we are a controlling member of Hard 8, changes in control of American Capital through merger, consolidation, acquisition of assets or stock, management or otherwise may not occur without complying with Nevada law, including approval of the NGC. Also, persons having a material relationship or involvement with an entity proposing to acquire control of us would need to be investigated and licensed as part of the approval process relating to a change of control transaction.

Investments in non-investment grade Structured Products may be illiquid, may have a higher risk of default, and may not produce current returns

Our investments in Structured Products securities are generally non-investment grade. Non-investment grade Structured Products bonds and preferred shares tend to be illiquid, have a higher risk of default and may be more difficult to value than investment grade bonds. Recessions or poor economic or pricing conditions in the markets associated with Structured Products may cause higher defaults or losses than expected on these bonds and preferred shares. Non-investment grade securities are considered speculative, and their capacity to pay principal and interest in accordance with the terms of their issue is not certain.

Our assets include investments in Structured Products that are subordinate in right of payment to more senior securities

Our assets include subordinated CLO, CDO and CMBS securities, which are subordinated classes of securities in a structure of securities secured by a pool of loans. Accordingly, such securities are the first or among the first to bear the loss upon a restructuring or liquidation of the underlying collateral and the last to receive payment of interest and principal. Thus, there is generally only a nominal amount of equity or other debt securities junior to our positions, if any, issued in such structures. Additionally, the estimated fair values of our subordinated interests tend to be much more sensitive to changes in economic conditions than more senior securities.

The trading market or market value of our debt securities may fluctuate

Many factors may materially adversely affect the trading market for, and market value of, our debt securities including, but not limited to, the following:


•	future defaults under the securities;


•	our creditworthiness;


•	the time remaining to the maturity of these debt securities;


•	the outstanding principal amount of debt securities with terms identical to these debt securities;


•	the supply of debt securities trading in the secondary market, if any;


•	the redemption or repayment features, if any, of these debt securities;


•	the level, direction and volatility of market interest rates generally; and


•	market rates of interest that are higher or lower than rates borne by the debt securities.

There may also be a limited number of buyers when an investor decides to sell its debt securities. This too may materially adversely affect the market value of the debt securities or the trading market for the debt securities.

We may issue preferred stock in the future to help finance our business, which would magnify the potential for gain or loss and the risks of investing in us in the same way as our borrowings

Preferred stock, which is another form of leverage, has the same risks to our common shareholders as borrowings because the dividends on any preferred stock we issue must be cumulative. Payment of such dividends and repayment of the liquidation preference of such preferred stock must take preference over any dividends or other payments to our common shareholders, and preferred shareholders are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference.

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We have restrictions on the type of assets we can invest in as a BDC

As a BDC, we may not acquire any assets other than certain qualifying assets described in the 1940 Act, unless, at the time of and after giving effect to the acquisition, at least 70% of our total assets consist of such qualifying assets. Thus, in certain instances, we may be precluded from investing in potentially attractive investments that are not qualifying assets for purposes of the 1940 Act. In addition, there is a risk that this restriction could prevent us from making additional investments in our existing non-qualifying investments, which could cause our position to be diluted or limit the access to capital of our non-qualifying investments.

There are conflicts of interest with other funds that we manage

Through our wholly-owned portfolio company, ACAM, we manage various funds that may compete with us for investments. Although we have policies in place to seek to mitigate the effects of conflicts of interest, these policies will not eliminate the conflicts of interest that our officers and employees and the officers and employees of our fund managers and affiliates will face in making investment decisions on behalf of American Capital or any other American Capital-sponsored investment vehicles. Further, we do not have any agreement or understanding with our funds that would give us any priority over them in opportunities to invest in overlapping investments. Accordingly, we may compete for access to investments with other funds that we manage.

Risks Related to Our Common Stock

We may not pay any cash dividends

We are subject to federal and applicable state corporate income taxes on our taxable ordinary income and capital gains beginning with our tax year ended September 30, 2011, and are not subject to the annual distribution requirements under Subchapter M of the Code. We have not paid a cash dividend during the last four fiscal years ended December 31, 2015 and there can be no assurance that we will pay any cash dividends in the future as we may retain our earnings to facilitate the growth of our business, to invest, to provide liquidity, to repurchase our shares or for other corporate purposes.

Future equity issuances may be on terms adverse to shareholder interests

We may issue equity capital at prices below our NAV per share with shareholder approval. As of the date of this filing, we do not have such authorization; however, we may seek such approval in the future or we may elect to conduct a rights offering, which would not require shareholder approval under the 1940 Act. If we issue any shares of common stock below our NAV per share, the interests of our existing shareholders may be diluted. Any such dilution could include a reduction in our NAV per share as a result of the issuance of shares at a price below the NAV per share and a decrease in a shareholder’s interest in our earnings and assets and voting interest. As of December 31, 2015, the closing price of our common stock was below our NAV per share.

The following table is designed to illustrate the dilutive effect on NAV per share if we issue shares of common stock below our NAV per share. The table below reflects NAV per share diluted for the hypothetical issuance of 50,000,000 shares of common stock (about 19% of outstanding shares as of December 31, 2015), at hypothetical sales prices of 5%, 10%, 15%, 20%, 25% and 50% below the December 31, 2015 NAV of $19.88 per share.



Assumed sales price per share below NAV per share⁽¹⁾	(50%)	(25%)	(20%)	(15%)	(10%)	(5%)
Diluted NAV per share	$18.18	$19.03	$19.20	$19.37	$19.54	$19.71
% Dilution	(8.5%)	(4.3%)	(3.4%)	(2.6%)	(1.7%)	(0.9%)


(1)	The assumed sales price per share is assumed to be net of any applicable underwriting commissions or discounts.

The market price of our common stock may fluctuate significantly

The market price and marketability of shares of our securities may from time to time be significantly affected by numerous factors, including many over which we have no control and that may not be directly related to us. These factors include the following:


•	price and volume fluctuations in the stock market from time to time, which are often unrelated to the operating performance of particular companies;


•	defaulting on our debt covenants;


•	significant volatility in the market price and trading volume of securities of BDCs, financial service companies, asset managers or other companies in our sector, which is not necessarily related to the operating performance of particular companies;

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•	changes in laws, regulatory policies, tax guidelines or financial accounting standards, particularly with respect to BDCs;


•	changes in our earnings or variations in operating results;


•	any shortfall in revenue or net income or any increase in losses from levels expected by securities analysts and the market in general;


•	decreases in our NAV per share;


•	general economic trends and other external factors; and


•	loss of a major funding source.

Fluctuations in the trading price of our common stock may adversely affect the liquidity of the trading market for our common stock and, in the event that we seek to raise capital through future equity financings, our ability to raise such equity capital.

Our common stock may be difficult to resell

Investors may not be able to resell shares of common stock at or above their purchase prices due to a number of factors, including:


•	actual or anticipated fluctuation in our operating results;


•	volatility in our common stock price;


•	changes in expectations as to our future financial performance or changes in financial estimates of securities analysts; and


•	departures of key personnel.

Provisions of our Charter and Bylaws could deter takeover attempts

Our charter and bylaws and the Delaware General Corporation Law contain certain provisions that may have the effect of discouraging and delaying or making more difficult a change in control. For example, we are subject to Section 203 of the Delaware General Corporation Law, which prohibits business combinations with interested shareholders except in certain cases. The existence of these provisions may negatively impact the price of our common stock and may discourage third-party bids. These provisions may also reduce any premiums paid to our shareholders for shares of our common stock that they own.


Item 1B.	Unresolved Staff Comments

None.


Item 2.	Properties

We do not own any real estate or other physical properties materially important to our operations. We lease office space in six locations for terms ranging up to eleven years.


Item 3.	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 4.	Mine Safety Disclosures

Not applicable.

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PART II.


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Quarterly Stock Prices

Our common stock is quoted on The NASDAQ Global Select Market under the ticker symbol “ACAS”. As of January 29, 2016, we had 642 shareholders of record. Most of the shares of our common stock are held by brokers and other institutions on behalf of shareholders. We believe that there are approximately 66,000 additional beneficial holders of our common stock. During the years ended December 31, 2015 and 2014, we did not declare any dividends on our common stock. The following table sets forth the range of quarterly high and low sales prices of our common stock as reported on The NASDAQ Global Select Market for the years ended December 31, 2015 and 2014:



	Sales Prices
	High		Low
2015
First Quarter	$	15.34	$	13.93
Second Quarter	$	15.36	$	13.54
Third Quarter	$	14.47	$	11.92
Fourth Quarter	$	15.87	$	12.09

2014
First Quarter	$	16.37	$	14.01
Second Quarter	$	16.03	$	14.24
Third Quarter	$	15.77	$	14.16
Fourth Quarter	$	16.10	$	13.59

Share Repurchase Program

During 2011, our Board of Directors adopted a program that may provide for share repurchases or dividend payments, but suspended repurchases in March 2014. During the first quarter of 2015, our Board of Directors reinstated authorization for share repurchases. Our Board of Directors modified the Program during the fourth quarter of 2015 to authorize the purchase of $600 million to $1 billion of common stock through June 30, 2016 at prices per share below 85% of our most recent quarterly NAV per share, subject to certain conditions. We have entered into a Rule 10b5-1 trading plan to undertake accretive share repurchases on a non-discretionary basis up to the $1 billion limit. The following table provides information for the quarter ended December 31, 2015, regarding shares of our common stock that we repurchased in the open market and were subsequently retired (in millions, except per share amounts):



	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs
November 6, 2015 through November 30, 2015	7.3	$	14.68	7.3	N/A
December 1, 2015 through December 31, 2015	13.4	$	14.30	13.4	N/A
Fourth Quarter 2015	20.7	$	14.44	20.7	N/A


(1)	All shares were purchased by us pursuant to the share repurchase program described in footnote 2 below.


(2)	Under the program, we will consider quarterly setting an amount to be utilized for share repurchases.

Dividend Reinvestment Plan

At the option of a holder of record of common stock, all cash distributions can be reinvested automatically under our dividend reinvestment plan (“DRIP”) in additional whole and fractional shares. Pursuant to our DRIP, a shareholder whose shares are registered in his own name may opt in to the plan and elect to reinvest all or a portion of his or her dividends in shares of our common stock by providing the required enrollment notice to the plan administrator, Computershare Investor Services.

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Shareholders whose shares are held in the name of a broker or the nominee of a broker may have distributions reinvested only if such service is provided by the broker or the nominee, or if the broker or the nominee permits participation in our DRIP. Shareholders whose shares are held in the name of a broker or other nominee should contact the broker or nominee for details. Shareholders that participate in the DRIP will receive the number of whole or fractional shares that can be obtained based on the price per share the plan administrator purchases the shares of common stock. Such shares will be acquired by the plan administrator through either receipt of newly issued shares or treasury shares from us or by purchase of outstanding shares of common stock on the open market. If the market price per share of our common stock on the dividend payment date does not exceed 110% of the NAV per share of our common stock as of the end of the most recently completed fiscal quarter (or as of such other time as may be determined by our Board of Directors), then our plan administrator will acquire shares of our common stock directly from us at a price equal to the greater of NAV per share or the market price on that date at a 2% discount. However, (i) if the market price per share of our common stock on the dividend payment date does not exceed 110% of the NAV per share of our common stock as of the end of the most recently completed fiscal quarter or (ii) if we advise the plan administrator that since such NAV per share was last determined we have become aware of events that indicate the possibility of a change in NAV per share as a result of which the NAV per share of the common stock on the dividend payment date might be higher than the current market price per share of our common stock, then the plan administrator will not acquire any newly issued shares from us at a discount and instead will buy shares of our common stock in the open market. You can find out more information about the DRIP by reading our Third Amended and Restated Dividend Reinvestment Plan, a copy of which is located on our internet website at www.AmericanCapital.com.

Our stock transfer agent, registrar and DRIP administrator is Computershare Investor Services. Requests for information from Computershare can be sent to Computershare Investor Services, P.O. Box 30170, College Station, TX 77842-3170, or calling (800) 733-5001 (U.S. and Canada) (781) 575-3400 (outside U.S. and Canada) or through the Internet, at www.computershare.com.

For the three fiscal years ended December 31, 2015, we have not sold any equity securities that were not registered under the Securities Act.

Equity Compensation Plans

The following table summarizes information, as of December 31, 2015, relating to our equity compensation plans pursuant to which grants of options or other rights to acquire shares of our common stock may be granted from time to time. See Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements for a description of our equity compensation plans (shares in millions).



Plan category	Number of securities to be issued upon exercise of outstanding options	Weighted-average exercise price of outstanding options		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column of this table)
Equity compensation plans approved by security holders⁽¹⁾	32.2	$	9.66	4.1
Equity compensation plans not approved by security holders⁽¹⁾	—	—		—
Total	32.2	$	9.66	4.1


(1)	All of our equity compensation plans have been approved by our shareholders.

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Performance Graph

The performance graph below compares the total cumulative shareholder return on our common stock with the cumulative shareholder return on the equity securities of companies included in the Standard & Poor’s 500 Stock Index (“S&P 500”), S&P 500 Financials Sector Index and BDC Peer Group, measured as of the last trading day of each year shown. The performance graph represents past performance and should not be considered to be an indication of future performance.

The preceding graph and the following table compares a shareholder’s cumulative total return for the last five fiscal years, assuming $100 invested as of December 31, 2010, with the reinvestment of all dividends without commissions, as if such amounts had been invested in: (i) our common stock; (ii) the stocks included in the S&P 500; (iii) the stocks included in the S&P 500 Financials Sector Index; and (iv) an index of selected issuers in our BDC Peer Group, composed of Apollo Investment Corporation, Ares Capital Corporation, BlackRock Kelso Capital Corporation, PennantPark Investment Corporation and Prospect Capital Corporation.



	Cumulative Total Return
	12/10		12/11		12/12		12/13		12/14		12/15
AMERICAN CAPITAL	$	100	$	89	$	159	$	207	$	193	$	182
S&P 500	100		102		118		157		178		181
S&P 500 FINANCIALS SECTOR INDEX	100		83		107		145		167		164
BDC PEER GROUP	100		91		115		141		138		126

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Item 6.Selected Financial Data

AMERICAN CAPITAL, LTD.

Consolidated Selected Financial Data

(in millions, except per share data)

The selected financial data should be read in conjunction with our audited consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K and notes thereto.



	As of and For the Year Ended December 31,
	2015			2014			2013			2012			2011
Total operating revenue	$	671		$	471		$	487		$	646		$	591
Total operating expenses	293			288			255			263			288
Net operating income before income taxes	378			183			232			383			303
Tax (provision) benefit⁽¹⁾	(125		)	(66		)	(76		)	14			145
Net operating income (“NOI”)	253			117			156			397			448
Loss on extinguishment of debt, net of tax	—			—			—			(3		)	—
Net realized (loss) gain, net of tax⁽¹⁾	(627		)	152			(55		)	(270		)	(310		)
Net realized (loss) earnings	(374		)	269			101			124			138
Net unrealized appreciation, net of tax⁽¹⁾	187			165			83			1,012			836
Net (decrease) increase in net assets resulting from operations (“Net (loss) earnings ”)	$	(187	)	$	434		$	184		$	1,136		$	974

Per share data:
NOI:
Basic	$	0.95		$	0.44		$	0.53		$	1.24		$	1.30
Diluted	$	0.95		$	0.42		$	0.51		$	1.20		$	1.26
Net (loss) earnings:
Basic	$	(0.70	)	$	1.62		$	0.63		$	3.55		$	2.83
Diluted	$	(0.70	)	$	1.55		$	0.61		$	3.44		$	2.74
Balance sheet data:
Total assets	$	6,244		$	7,640		$	6,009		$	6,319		$	5,961
Total debt	$	1,257		$	1,703		$	791		$	775		$	1,251
Total shareholders’ equity	$	4,822		$	5,472		$	5,126		$	5,429		$	4,563
NAV per share	$	19.88		$	20.50		$	18.97		$	17.84		$	13.87
Other data (unaudited):
Number of portfolio companies at period end	171			402			132			139			152
New investments⁽²⁾	$	3,305		$	3,610		$	1,107		$	719		$	317
Realizations⁽³⁾	$	3,721		$	2,765		$	1,208		$	1,498		$	1,066
Weighted average effective interest rate on debt investments at period end⁽⁴⁾	8.4		%	6.6		%	10.0		%	11.4		%	10.7		%
NOI return on average shareholders’ equity⁽⁵⁾	4.8		%	2.2		%	2.9		%	7.7		%	10.7		%
Net realized (loss) earnings return on average shareholders’ equity⁽⁵⁾	(7.1		)%	5.1		%	1.9		%	2.4		%	3.3		%
Net (loss) earnings return on average shareholders’ equity⁽⁵⁾	(3.5		)%	8.2		%	3.4		%	22.1		%	23.3		%
Assets under management⁽⁶⁾	$	73,342		$	86,422		$	93,210		$	116,800		$	68,106
Earning assets under management⁽⁷⁾	$	20,711		$	22,107		$	18,603		$	18,642		$	13,496


(1)	Beginning in 2011, we were no longer taxed as a RIC under Subchapter M of the Code and instead became subject to taxation as a corporation under Subchapter C of the Code. As a result, we recorded a net deferred tax asset of $428 million in 2011 comprised of a deferred tax benefit of $145 million in NOI, $75 million in net realized (loss) gain and $208 million in net unrealized appreciation.


(2)	New investments include amounts as of the investment dates that are committed.


(3)	Realizations represent cash proceeds received upon the exit of investments including payment of scheduled principal amortization, debt prepayments, proceeds from loan syndications and sales, payment of accrued PIK notes, and dividends and payments associated with accreted original issue discounts (“OID”) and sale of equity and other securities.

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(4)	Weighted average effective interest rate on debt investments as of period end is computed as (a) annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned on accruing debt investments, divided by (b) total debt investments at amortized cost.


(5)	Return represents net increase or decrease in net assets resulting from operations. Average equity is calculated based on the quarterly shareholders' equity balances.


(6)	Assets under management include both (i) the total assets of American Capital and (ii) the total assets of the funds under management by ACAM, excluding any direct investment we have in those funds.


(7)	Earning assets under management include both (i) the total assets of American Capital and (ii) the total third-party earning assets under management by ACAM from which the associated base management fees are calculated, excluding any direct investment we have in those funds.

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (in millions, except per share data)

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 NAV; (iv) our investments in securities of privately-held companies may be illiquid, which could affect our ability to realize the investment; (v) our portfolio companies could default on their loans or provide no returns on our investments, which could affect our operating results; (vi) we use external financing to fund our business, which may not always be available; (vii) our ability to retain key management personnel; (viii) an economic downturn or recession could 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 NOI; (xi) we cannot incur additional indebtedness unless immediately after a debt issuance we maintain an asset coverage of at least 200%, or equal to or greater than our asset coverage prior to such issuance, which may affect returns to our shareholder; (xii) our common stock price may be volatile; and (xiii) general business and economic conditions and other risk factors described in our reports filed from time to time with the SEC. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, please see the information under the caption “Risk Factors” described in this Annual Report on Form 10-K. 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.

Investing Activity

We primarily invest in senior and mezzanine debt and equity of middle and large market companies. We and ACAM also invest in assets that can be sold or contributed to public or private funds that ACAM could manage, as a means of “incubating” such funds. We also have investments in Structured Products, including CLO, CDO and CMBS securities and invest in funds managed by us.

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 to our portfolio companies 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 fair value of our investment portfolio was $5.0 billion, $6.3 billion and $5.1 billion as of December 31, 2015, 2014 and 2013, respectively. Our new investments totaled $3.3 billion, $3.6 billion and $1.1 billion during the years ended December 31, 2015, 2014 and 2013, respectively.

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The amounts of our new investments are based on committed amounts as of the investment date. The aggregate dollar amount of new investments by type, use and business line were as follows (in millions):



Type	2015		2014		2013
First Lien Senior Debt	$	1,823	$	2,039	$	103
Second Lien Senior Debt	355		589		511
Mezzanine Debt	76		10		—
Preferred Equity	202		35		125
Common Equity	471		405		236
Structured Products	378		532		132
Total by security type	$	3,305	$	3,610	$	1,107



Use	2015		2014		2013
Senior Floating Rate Loans	$	1,144	$	1,891	$	—
Sponsor Finance and Other Investments	823		622		157
Structured Products	378		512		75
European Capital⁽¹⁾	367		39		—
American Capital One Stop Buyouts^®	—		—		27
Investments in ACAM and Fund Development	254		400		239
Add-on financing for growth and working capital	131		128		56
Add-on financing for ACE buybacks	145		—		—
Add-on financing for recapitalizations, not including distressed investments	46		4		104
Add-on financing for working capital in distressed situations	12		14		42
Add-on financing for acquisitions	5		—		391
Add-on financing for purchase of debt of a portfolio company	—		—		16
Total by use	$	3,305	$	3,610	$	1,107



Business Line	2015		2014		2013
Senior Floating Rate Loans	$	1,144	$	1,891	$	—
Sponsor Finance and Other Investments	965		726		290
Structured Products	378		512		75
European Capital⁽¹⁾	367		39		—
Investments in ACAM and Fund Development	254		400		239
American Capital One Stop Buyouts^®	197		42		503
Total by business line	$	3,305	$	3,610	$	1,107


(1)	Effective October 1, 2014, European Capital’s financial results have been consolidated with the financial results of American Capital.

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



Source	2015		2014		2013
Loan syndications and sales	$	2,357	$	98	$	41
Scheduled principal amortization	470		56		14
Principal prepayments	445		699		604
Equity investments	388		1,523		362
Payment of accrued PIK notes and dividend and accreted OID	61		389		187
Total by source	$	3,721	$	2,765	$	1,208



Business Line	2015		2014		2013
Senior Floating Rate Loans	$	2,347	$	163	$	—
Structured Products	470		192		27
European Capital⁽¹⁾	467		651		195
Sponsor Finance and Other Investments	199		386		444
American Capital One Stop Buyouts^®	197		1,167		530
American Capital Asset Management	41		206		12
Total by business line	$	3,721	$	2,765	$	1,208

(1)

Effective October 1, 2014, European Capital’s financial results have been consolidated with the financial results of American Capital. Prior to October 1, 2014, European Capital business line cash proceeds were comprised of dividend distributions on our equity investment in European Capital. Effective October 1, 2014, European Capital business line cash proceeds are comprised of cash proceeds from realizations and repayments on European Capital’s portfolio investments.

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Results of Operations

The following analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements included in this Annual Report on Form 10-K 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 “NOI,” which is primarily the interest, dividends, prepayment fees, finance and transaction fees and portfolio company management fees earned from investing in debt and equity securities and the fees we earn from fund asset management, less our operating expenses and provision or benefit for income taxes.


•	The second element is “Net realized gain (loss),” 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 taxes on realized gains or losses.

•

The third element is “Net unrealized appreciation (depreciation),” 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, and taxes on unrealized gains or losses. In addition, our net unrealized depreciation includes the foreign currency translation from converting the cost basis of our assets and liabilities denominated in a foreign currency to the U.S. dollar.

The consolidated operating results were as follows (in millions):



	2015			2014			2013
Operating revenue	$	671		$	471		$	487
Operating expenses	293			288			255
NOI before income taxes	378			183			232
Tax provision	(125		)	(66		)	(76		)
NOI	253			117			156
Net realized (loss) gain, net of tax	(627		)	152			(55		)
Net realized (loss) earnings	(374		)	269			101
Net unrealized appreciation, net of tax	187			165			83
Net (loss) earnings	$	(187	)	$	434		$	184

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Operating Revenue

We derive the majority of our operating revenue from our investments in senior and mezzanine debt and equity of middle market companies and our investments in Structured Products, as well as dividend income from our fund management business which is conducted through ACAM.

Operating Revenue by Business Line

Operating revenue by business line was as follows (in millions):



Business Line	2015		2014		2013
American Capital Asset Management	$	152	$	111	$	133
American Capital One Stop Buyouts^®	141		194		145
Sponsor Finance and Other Investments	132		56		131
Structured Products	105		65		72
Senior Floating Rate Loans	84		33		—
European Capital⁽¹⁾	57		12		6
Total by business line	$	671	$	471	$	487

——————————


(1)	Effective October 1, 2014, European Capital’s financial results have been consolidated with the financial results of American Capital.

American Capital Asset Management

Interest, dividend and fee income from ACAM increased by $41 million, or 37%, for the year ended December 31, 2015 over the comparable period in 2014, primarily due to $26 million of incentive fees received from ACE I and ACE III, as well as an increase in the funds under management of ACAM, primarily ACE III, ACAS CLO 2014-1, ACAS CLO 2014-2, ACAS CLO 2015-1 and ACAS CLO 2015-2. Interest, dividend and fee income from ACAM decreased by $22 million, or 17%, for the year ended December 31, 2014 over the comparable period in 2013, primarily due to reduced dividend income for the management of AGNC and MTGE due to a decrease in the assets under management for these funds as well as increased costs associated with fund development activities. This was partially offset by an increase in the funds under management of ACAM, primarily ACSF, ACAS CLO 2013-1, ACAS CLO 2013-2, ACAS CLO 2014-1 and ACAS CLO 2014-2.

American Capital One Stop Buyouts^®

Interest, dividend and fee income from our American Capital One Stop Buyouts^® decreased by $53 million, or 27%, for the year ended December 31, 2015 over the comparable period in 2014, primarily due to the sale of our equity-related investments to ACE III on April 28, 2014, as well as exits of other American Capital One Stop Buyouts^®. Interest, dividend and fee income from our American Capital One Stop Buyouts^® increased by $49 million, or 34%, for the year ended December 31, 2014 over the comparable period in 2013, primarily due to additional dividend income as a result of the removal of certain preferred equity securities from non-accrual status as a result of improved portfolio company performance.

Sponsor Finance and Other Investments

Interest, dividend and fee income from our Sponsor Finance and Other Investments increased by $76 million, or 136%, for the year ended December 31, 2015 over the comparable period in 2014, primarily due to a $477 million increase in our weighted average debt investments at cost as well as a net positive impact of $43 million from non-accrual investments for the year ended December 31, 2015 over the comparable period in 2014. Interest, dividend and fee income from our Sponsor Finance Investments decreased by $75 million, or 57%, for the year ended December 31, 2014 over the comparable period in 2013, primarily due to a net negative impact of $58 million from non-accrual investments in 2014 compared to 2013.

Structured Products

Interest income on Structured Products investments increased by $40 million, or 62%, for the year ended December 31, 2015 over the comparable period in 2014, primarily due to higher actual and projected payments on our CLO investments as well as an increase in our weighted average Structured Products investments at cost. During 2015, we realized cash proceeds of $470 million and recognized interest income of $105 million from our Structured Products investments. Interest income on Structured Products investments decreased by $7 million, or 10%, for the year ended December 31, 2014 over the comparable period in 2013, primarily due to the accelerated recognition of income on CLO investments in 2013 due to higher projected payments. During 2014, we realized cash proceeds of $192 million and recognized interest income of $65 million from our Structured Products investments. Our weighted average Structured Products investments outstanding increased by $214 million, or 47%, for the year

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ended December 31, 2015 over the comparable period in 2014, primarily as a result of new investments in CLO securities. Our weighted average Structured Products investments outstanding increased by $83 million, or 22%, for the year ended December 31, 2014 over the comparable period in 2013, primarily as a result of new investments in CLO securities.

Interest income on Structured Products is recognized using the effective interest method as required by FASB ASC Subtopic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets (“ASC 325-40”). Under ASC 325-40, at the time of purchase, we estimate the future expected cash flows and determine the effective yield of an investment based on these estimated cash flows and the cost basis of the investment. Subsequent to the purchase, these estimated cash flows are updated quarterly and a revised effective yield is calculated prospectively in accordance with ASC 320-10-35, Investment-Debt and Equity Securities. In the event that the fair value of an investment decreases below its current amortized cost basis, we may be required to write down the current amortized cost basis for a credit loss or to fair value depending on our hold expectations for the investment. Current amortized cost basis less the amount of any write down (“Reference Amount”) is used to calculate the effective yield used for interest income recognition purposes over the remaining life of the investment. We are precluded from reversing write downs for any subsequent increase in the expected cash flows of an investment with the effect of increasing total interest income over the life of the investment and increasing the realized loss recorded on the sale or redemption of the investment by the amount of the credit loss write down. During the year ended December 31, 2015, we recorded $20.5 million in credit loss write downs to current amortized cost basis on six Structured Products investments. As of December 31, 2015, in aggregate, the amortized cost basis of our Structured Products investment portfolio exceeded the Reference Amount by approximately $109 million.

See Note 2—Interest and Dividend Income Recognition policy to our audited consolidated financial statements included in this Annual Report on Form 10-K for a description of how projected cash flows affect revenue recognition on our Structured Products investments.

Senior Floating Rate Loans

We initiated our Senior Floating Rate Loan portfolio in 2014 and purchased $3.0 billion of investments through December 31, 2015. During the fourth quarter of 2015, we substantially liquidated our Senior Floating Rate Loan portfolio. Interest income on these loans was $84 million and $33 million for the years ended December 31, 2015 and 2014, respectively. The monthly weighted average effective interest rate on our Senior Floating Rate Loan portfolio was 4.6% and 3.8% for the years ended December 31, 2015 and 2014, on a monthly weighted average balance of $1,807 million and $882 million, respectively.

European Capital

European Capital’s operating revenue for the year ended December 31, 2015 was $57 million, comprised of $33 million of interest income on European Capital debt investments, $20 million of dividend income on European Capital equity investments and $4 million of income on European Capital CLO investments. European Capital’s operating revenue for the fourth quarter of 2014 was $12 million, comprised of $11 million of interest income on European Capital debt investments and $1 million of income on European Capital CLO investments. We did not receive any interest income on our investment in European Capital prior to the consolidation of European Capital on October 1, 2014. We received interest income from European Capital of $6 million for the year ended December 31, 2013 related to interest payments on our unsecured revolving credit facility with European Capital.

For the year ended December 31, 2015, European Capital recorded additional interest income on uncollected PIK interest income recorded in prior periods of $15 million, as a result of debt investments being removed from non-accrual. For the fourth quarter of 2014, European Capital recorded additional interest income on uncollected PIK interest income recorded in prior periods of $3 million, as a result of debt investments being removed from non-accrual.

American Capital Operating Revenue (excluding the financial results related to the consolidation of European Capital)



	2015		2014		2013
Interest income on debt investments	$	270	$	190	$	209
Interest income on Structured Products investments	105		65		72
Dividend income from equity investments, excluding ACAM	49		63		36
Dividend income from ACAM	125		82		105
Other interest income	1		1		1
Interest and dividend income	550		401		423
Portfolio company advisory and administrative fees	14		10		17
Advisory and administrative services – ACAM	26		27		26
Other fees	24		21		21
Fee income	64		58		64
Total operating revenue	$	614	$	459	$	487

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American Capital Interest and Dividend Income (excluding the financial results related to the consolidation of European Capital)

The following table summarizes selected data for our debt (excluding SFRL investments), Structured Products and equity investments outstanding, at cost (dollars in millions):



	2015			2014			2013
Debt investments at cost⁽¹⁾	$	1,982		$	1,636		$	1,804
Average non-accrual debt investments at cost⁽²⁾	$	186		$	272		$	302
Effective interest rate on debt investments	9.4		%	9.6		%	11.6		%
Effective interest rate on debt investments, excluding non-accrual prior period adjustments	9.0		%	10.2		%	10.8		%
Structured Products investments at cost⁽¹⁾	$	667		$	453		$	369
Effective interest rate on Structured Products investments	15.8		%	14.4		%	19.5		%
Debt and Structured Products investments at cost⁽¹⁾	$	2,649		$	2,089		$	2,173
Effective interest rate on debt and Structured Products investments	11.0		%	10.7		%	12.9		%
Average daily one-month LIBOR	0.2		%	0.2		%	0.2		%
Equity investments at cost⁽¹⁾⁽³⁾	$	884		$	1,557		$	2,025
Effective dividend yield on equity investments⁽³⁾	5.6		%	4.0		%	1.8		%
Effective dividend yield on equity investments, excluding non-accrual prior period adjustments⁽³⁾	3.9		%	4.2		%	4.1		%
Debt, Structured Products and equity investments at cost⁽¹⁾⁽³⁾	$	3,533		$	3,646		$	4,198
Effective yield on debt, Structured Products and equity investments⁽³⁾	9.7		%	7.8		%	7.6		%
Effective yield on debt, Structured Products and equity investments, excluding non-accrual prior period adjustments⁽³⁾	9.0		%	8.2		%	8.3		%

——————————


(1)	Monthly weighted average of investments at cost. Excludes SFRL investments.


(2)	Quarterly average of investments at cost.


(3)	Excludes our equity investment in ACAM and our investment in European Capital through September 30, 2014.

Debt Investments

Interest income on debt investments increased by $80 million, or 42%, for the year ended December 31, 2015 over the comparable period in 2014, primarily due to a $51 million increase in interest income on our Senior Floating Rate Loan portfolio as well as a net positive impact from non-accrual investments for the year ended December 31, 2015 over the comparable period in 2014. Our weighted average debt investments outstanding, excluding SFRL investments, increased by $346 million for the year ended December 31, 2015 over the comparable period in 2014, primarily as a result of new Sponsor Finance investments in 2015 as well as the repayment or sale of debt investments in 2014. The average non-accrual debt investments outstanding decreased from $272 million during 2014 to $186 million during 2015.

Interest income on debt investments decreased by $19 million, or 9%, for the year ended December 31, 2014 over the comparable period in 2013, primarily due to the net negative impact from non-accrual investments in 2014 compared to 2013. Interest income on our Senior Floating Rate Loan portfolio for the year ended December 31, 2014 was $33 million. Our weighted average debt investments outstanding, excluding SFRL investments, decreased by $168 million for the year ended December 31, 2014 over the comparable period in 2013, primarily as a result of repayment or sale of debt investments. The average non-accrual debt investments outstanding decreased from $302 million during 2013 to $272 million during 2014.

When a debt investment is placed on non-accrual, we may record reserves on uncollected PIK interest income recorded in prior periods as a reduction of interest income in the current period. Conversely, when a debt investment is removed from non-accrual, we may record interest income in the current period on prior period uncollected PIK interest income which was reserved in prior periods. For the year ended December 31, 2015, we recorded additional interest income on uncollected PIK interest income recorded in prior periods of $8 million as a result of debt investments being removed from non-accrual, which had an approximate 40 basis point positive impact on the effective interest rate on debt investments. For the year ended December 31, 2014, we recorded a net reserve on uncollected PIK interest income recorded in prior periods of $10 million as a result of debt investments being placed on non-accrual, which had an approximate 60 basis point negative impact on the effective interest rate on debt investments. For the year ended December 31, 2013, we recorded additional interest income on uncollected PIK interest income recorded in prior periods of $14 million as a result of debt investments being removed from non-accrual, which had an approximate 80 basis point positive impact on the effective interest rate on debt investments.

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Equity Investments, Excluding ACAM

Dividend income from equity investments, excluding ACAM, decreased by $14 million, or 22%, for the year ended December 31, 2015 over the comparable period in 2014, due to the following:


•	a decrease of $673 million in weighted average equity investments at cost as of December 31, 2015 compared to December 31, 2014 primarily due to the sale of predominantly higher yielding equity assets to ACE III in the fourth quarter of 2014;


•	for the year ended December 31, 2015, we recorded $20 million of dividend income for non-recurring dividends on equity investments compared to $34 million for the year ended December 31, 2014, resulting in a $14 million year-over-year net negative impact; partially offset by

•

for the year ended December 31, 2015, we recorded dividend income for the reversal of reserves of accrued PIK dividend income attributable to prior periods from preferred stock investments of $15 million; however, for the year ended December 31, 2014, we recorded reserves on accrued PIK dividend income recorded in prior periods from preferred equity investments of $2 million resulting in a $17 million year-over-year net positive impact.

As a result, the monthly weighted average effective dividend yield on equity investments was 5.6% for the year ended December 31, 2015, a 160 basis point increase over the comparable period in 2014.

Dividend income from equity investments, excluding ACAM, increased by $27 million, or 75%, for the year ended December 31, 2014 over the comparable period in 2013, due to the following:

•

for the year ended December 31, 2014, we recorded reserves on accrued PIK dividend income recorded in prior periods from preferred equity investments of $2 million; however, for the year ended December 31, 2013, we recorded reserves on accrued PIK dividend income recorded in prior periods from preferred equity investments of $46 million resulting in a $44 million year-over-year net positive impact;


•	for the year ended December 31, 2014, we recorded $34 million of dividend income for non-recurring dividends on equity investments compared to $16 million for the year ended December 31, 2013, resulting in a $18 million year-over-year net positive impact; partially offset by


•	a decrease of $468 million in weighted average equity investments at cost as of December 31, 2014 compared to December 31, 2013.

As a result, the monthly weighted average effective dividend yield on equity investments was 4.0% for the year ended December 31, 2014, a 220 basis point increase over the comparable period in 2013.

When a preferred equity investment is placed on non-accrual, we may record net reserves on uncollected accrued dividend income recorded in prior periods as a reduction of dividend income in the current period. Conversely, when a preferred equity investment is removed from non-accrual, we may record dividend income in the current period for prior period uncollected accrued dividend income which was reserved in prior periods.

Equity Investments - ACAM

Dividend income from ACAM increased by $43 million, or 52%, for the year ended December 31, 2015 over the comparable period in 2014, primarily due to $26 million of incentive fees received from ACE I and ACE III, as well as an increase in the funds under management of ACAM, primarily ACE III, ACAS CLO 2014-1, ACAS CLO 2014-2, ACAS CLO 2015-1 and ACAS CLO 2015-2.

Dividend income from ACAM decreased by $23 million, or 22%, for the year ended December 31, 2014 over the comparable period in 2013, primarily due to a decrease in fees earned for the management of AGNC and MTGE due to a decline in their equity as a result of repurchases of common stock and realized losses as well as increased costs associated with fund development activities. This was partially offset by an increase in the funds under management of ACAM, primarily ACSF, ACAS CLO 2013-1, ACAS CLO 2013-2, ACAS CLO 2014-1 and ACAS CLO 2014-2.

For the years ended December 31, 2015, 2014 and 2013, we received an additional $13 million, $11 million and $6 million, respectively, of dividends from ACAM, which were recorded as a reduction to the cost basis of our investment in ACAM.

Fee Income

Portfolio Company Advisory and Administrative Fees

As a BDC, we are required by law to make significant managerial assistance available to most of our portfolio companies. This generally includes providing guidance and counsel concerning the management, operations and business objectives and policies of the portfolio company to its management and board of directors, including participating on the company’s board of directors. Our portfolio company advisory and administrative fees for the years ended December 31, 2015, 2014 and 2013 were

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$14 million, $10 million and $17 million, respectively. Our portfolio company advisory and administrative fees increased by $4 million, or 40%, for the year ended December 31, 2015 over the comparable period in 2014, primarily due to an increase in Sponsor Finance originations. Our portfolio company advisory and administrative fees decreased by $7 million, or 41%, for the year ended December 31, 2014 over the comparable period in 2013, primarily due to a decrease in the number of our operating portfolio companies.

Advisory and Administrative Services - ACAM

We have entered into service agreements with ACAM to provide additional asset management and administrative service support so that ACAM can fulfill its responsibilities under its management agreements. The fees generated from these service agreements for the years ended December 31, 2015, 2014 and 2013 were $26 million, $27 million and $26 million, respectively.

Other Fees

Other fees are primarily composed of transaction fees for structuring, financing and executing portfolio transactions, which may not be recurring in nature. These fees amounted to $24 million, $21 million and $21 million, for the years ended December 31, 2015, 2014 and 2013, respectively.

Operating Expenses

Operating expenses increased by $5 million, or 2%, for the year ended December 31, 2015 over the comparable period in 2014 and increased by $33 million, or 13%, for the year ended December 31, 2014 over the comparable period in 2013. Operating expenses consisted of the following (in millions):



	2015		2014		2013
Interest	$	79	$	54	$	44
Salaries, benefits and stock-based compensation	125		149		156
Severance related costs	12		19		—
European Capital management fees	13		5		—
General and administrative	64		61		55
Total operating expenses	$	293	$	288	$	255

Interest

Interest expense increased by $25 million, or 46%, for the year ended December 31, 2015, over the comparable period in 2014, primarily due to an increase in the daily weighted average debt balance partially offset by a decrease in the weighted average interest rate on our borrowings. The weighted average interest rate on all of our borrowings, including amortization of deferred financing costs, for the years ended December 31, 2015 and 2014 was 3.7% and 4.9%, respectively. The weighted average interest rate on all of our borrowings, excluding amortization of deferred financing costs, for the years ended December 31, 2015 and 2014 was 3.2% and 4.3%, respectively.

Interest expense increased by $10 million, or 23%, for the year ended December 31, 2014, over the comparable period in 2013, primarily due to an increase in the daily weighted average debt balance, partially offset by a decrease in the weighted average interest rate on our borrowings. The weighted average interest rate on all of our borrowings, including amortization of deferred financing costs, for the years ended December 31, 2014 and 2013 was 4.9% and 6.4%, respectively. The weighted average interest rate on all of our borrowings, excluding amortization of deferred financing costs, for the years ended December 31, 2014 and 2013 was 4.3% and 5.3%, respectively.

As discussed in Note 2 to these consolidated financial statements, we consolidated our investment in European Capital effective October 1, 2014. For the year ended December 31, 2015, we recorded $5 million of interest expense related to European Capital’s debt. For the quarter ended December 31, 2014, we recorded $1 million of interest expense related to European Capital’s debt.

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Salaries, Benefits and Stock-based Compensation and Severance Related Costs

Salaries, benefits and stock-based compensation consisted of the following (in millions):



	2015		2014		2013
Base salaries	$	47	$	57	$	61
Incentive compensation	45		43		52
Benefits	12		12		12
Stock-based compensation	21		37		31
Severance related costs	12		19		—
Total salaries, benefits and stock-based compensation and severance related costs	$	137	$	168	$	156

Salaries, benefits and stock-based compensation for the year ended December 31, 2015 decreased $31 million, or 18%, from the comparable period in 2014, primarily due to a reduction in base salaries and stock-based compensation due to the workforce reductions in the fourth quarter of 2014. Salaries, benefits and stock-based compensation for the year ended December 31, 2014 increased $12 million, or 8%, from the comparable period in 2013, primarily due to (i) $5 million of stock-based compensation expense due to the acceleration of vesting on outstanding stock options for certain employees in conjunction with the ACE III transaction, (ii) $11 million of stock-based compensation expense due to the acceleration of stock options associated with the workforce reduction and (iii) $8 million in severance costs associated with the workforce reduction.

Due to changes in the composition of our investment portfolio and market conditions, we conducted strategic reviews of our business in the fourth quarter of 2014, which resulted in a workforce reduction of approximately 13% of our employees and the closing of one of our offices as well as the elimination of certain functions at other offices. In conjunction with these actions, the vesting of any unvested stock options held by impacted employees as of the date of their separation was accelerated, and they were given a period of up to one year from their separation date, or less if the expiration of the option was within one year from their separation date, to exercise all outstanding options. During the year ended December 31, 2015, we recorded charges for severance and related employee costs of $12 million, including $4 million from the modification of stock options and $8 million for severance costs for additional workforce reductions during 2015. During the year ended December 31, 2014, we recorded charges for severance and related employee costs of $19 million, including $11 million from the modification of stock options and $8 million for severance costs for additional workforce reductions during 2014.

As of December 31, 2015, we employed 346 full-time employees, which included 124 employees at ACAM, compared to 366 and 394 full-time employees as of December 31, 2014 and 2013, respectively. Compensation expense for ACAM employees is not included in our consolidated expenses as the financial results of ACAM are not consolidated with our financial results.

No stock options were granted during the year ended December 31, 2015. In 2014, we granted 0.1 million stock options with a weighted average fair value of $6.89 per option, or $1 million, and in 2013, we granted 3.7 million stock options with a weighted average fair value of $5.88 per option, or $22 million. See Note 5 and Note 6 to our audited consolidated financial statements included in this Annual Report on Form 10-K for further discussion on stock-based compensation.

European Capital Management Fees

Management fees represent fees charged by European Capital Asset Management Limited, a wholly-owned subsidiary of ACAM, to European Capital for management and other services during the year. These fees are recorded as operating revenue in ACAM’s statement of operations and are a component of the dividend income we receive from ACAM.

General and administrative

General and administrative expenses increased by $3 million, or 5%, for the year ended December 31, 2015, over the comparable period in 2014, primarily due to transaction costs associated with our strategic review process. General and administrative expenses increased by $6 million, or 11%, for the year ended December 31, 2014, over the comparable period in 2013, primarily due to charges of approximately $5 million recorded during the fourth quarter of 2014 related to subleasing excess office facilities during the quarter.

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Tax Provision

Our tax provision consisted of the following (in millions):



	2015			2014			2013
Tax provision - net operating income	$	(125	)	$	(66	)	$	(76	)
Tax benefit (provision) - net realized (loss) gain	91			(53		)	60
Tax (provision) benefit - net unrealized appreciation	(118		)	55			(37		)
Total tax provision	$	(152	)	$	(64	)	$	(53	)

The tax provision - net operating income for the year ended December 31, 2015 increased by $59 million from the comparable period in 2014 primarily due to an increase in net operating income. The tax provision - net operating income for the year ended December 31, 2014 decreased by $10 million from the comparable period in 2013 primarily due to a decrease in net operating income.

The tax benefit (provision) - net realized (loss) gain for the year ended December 31, 2015 increased by $144 million from the comparable period in 2014 primarily due to a decrease in the amount of realizations that resulted in losses realized for tax purposes. Losses treated as ordinary for tax purposes have an effective tax rate of approximately 39%. The tax benefit (provision) - net realized (loss) gain for the year ended December 31, 2014 decreased by $113 million from the comparable period in 2013 primarily due to an increase in the amount of realizations that resulted in losses realized for tax purposes. Realized gains and losses that result in capital gains or losses for tax purposes have an effective tax rate of 0% due to our valuation allowance against capital losses and generally do not result in a tax benefit or provision.

The tax (provision) benefit - net unrealized appreciation for the year ended December 31, 2015 decreased by $173 million from the comparable period in 2014 primarily due to an increase to the valuation allowance associated with unrealized losses on certain capital deferred tax assets in addition to the establishment of a valuation allowance against a significant portion of our ordinary deferred tax asset related to our investment in European Capital. The tax (provision) benefit - net unrealized appreciation for the year ended December 31, 2014 increased by $92 million from the comparable period in 2013 primarily due to a decrease in the valuation allowance related to the consolidation of our investment in European Capital in the fourth quarter of 2014.

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Net Realized (Loss) Gain

Our net realized (loss) gain consisted of the following individual portfolio company realized gains (losses) greater than $15 million (in millions):



	2015			2014			2013
Orchard Brands Corporation	$	37		$	—		$	16
FB Raphael 1 Limited (“Farrow & Ball”) (European Capital portfolio company)	—			213			—
Sale to American Capital Equity III, LP	—			107			—
Unwired Holdings, Inc.	—			53			—
Specialty Brands Holdings, Inc.	—			35			—
SPL Acquisition Corp.	2			33			—
Anchor Drilling Fluids USA, Inc.	—			21			—
DelStar, Inc.	1			—			44
Mirion Technologies, Inc.	—			—			27
Other, net	37			12			30
Total gross realized portfolio gain	77			474			117

WRH, Inc.	(225		)	—			—
CML Pharmaceuticals, LLC	(168		)	—			—
Sale of Senior Floating Rate Loans securities	(63		)	—			—
Dyno Holding Corp.	(62		)	—			—
Core Financial Holdings, LLC	(44		)	—			—
Miles 33 Limited	(31		)	—			—
Financière H S.A.S.	(30		)	—			—
Fosbel Holding, Inc.	(29		)	—			—
TestAmerica Environmental Services, LLC	(28		)	—			—
Contour Semiconductor, Inc.	(18		)	—			—
Hilding Anders AB	(16		)	—			—
CH Holding Corp.	—			(50		)	—
FL Acquisitions Holdings, Inc.	—			(33		)	—
Egenera, Inc.	—			(28		)	—
Neways Holdings, L.P.	—			(16		)	—
FPI Holding Corporation	—			(15		)	(13		)
Rebellion Media Group Corp.	—			(15		)	—
Fosbel Global Services (LUXCO) S.C.A.	—			—			(40		)
Paradigm Precision Holdings, LLC	—			—			(30		)
Wachovia Bank Commercial Mortgage Trust, Series 2007-C34	—			—			(27		)
LB-UBS Commercial Mortgage Trust, Series 2007-C6	—			—			(15		)
Other, net	(59		)	(54		)	(96		)
Total gross realized portfolio loss	(773		)	(211		)	(221		)
Total net realized portfolio (loss) gain	(696		)	263			(104		)
Foreign currency transactions	(18		)	(17		)	3
Derivative agreements	(3		)	4			(14		)
WRH, Inc. Equity Option	45			(45		)	—
Long term incentive plan liability	(46		)	—			—
Tax benefit (provision)	91			(53		)	60
Total net realized (loss) gain	$	(627	)	$	152		$	(55	)

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The following are summary descriptions of portfolio companies with realized gains or losses greater than $30 million.

As discussed in Note 14 to our audited consolidated financial statements included in this Annual Report on Form 10-K, on April 28, 2014, we completed a $1.1 billion private placement of partnership interests in American Capital Equity III, LP (“ACE III” or “the Fund”), a new private equity fund focused on investing in U.S. companies in the lower middle market. Concurrent with the private placement, we entered into a Contribution and Redemption Agreement with the Fund pursuant to which we agreed to contribute 100% of our equity and equity-related investments in seven portfolio companies (Affordable Care Holding Corp., Avalon Laboratories Holding Corp., CIBT Investment Holdings, LLC, FAMS Acquisition, Inc., Mirion Technologies, Inc., PHI Acquisitions, Inc. and SMG Holdings, Inc.) to the Fund and to provide the Fund with an option to acquire our equity investment in WRH, Inc. (the “Equity Option”), in exchange for partnership interests in the Fund. Collectively, the eight portfolio companies (including WRH, Inc., assuming the Equity Option is exercised) comprise the Secondary Portfolio for ACE III. During the three months ended September 30, 2014, we recognized a net realized gain of $62 million on the transaction. This was comprised of a $107 million net realized gain on the redemption of our partnership interests in ACE III and a realized loss of $45 million related to the fair value of the Equity Option. On April 1, 2015, the Equity Option was exercised by the Fund for the exercise price of $24 million. We recognized a realized loss of $225 million on our WRH, Inc. equity investment offset by a (i) reversal of unrealized depreciation on the investment of $115 million, (ii) reversal of unrealized depreciation on the Equity Option of $65 million and (iii) realized gain on the Equity Option of $45 million.

During 2015, our portfolio company, Orchard Brands Corporation, was sold. As part of the sale, we received $84 million in cash proceeds, realizing a gain of $37 million which was fully offset by a reversal of unrealized appreciation of $37 million. We also expect to receive $5 million of additional cash proceeds from this sale that remain held in a sale escrow as of December 31, 2015, which are recorded in the financial statement line item other assets in our consolidated balance sheets.

During 2015, we substantially liquidated and sold our Senior Floating Rate Loan portfolio, realizing a loss of $63 million, which was partially offset by a reversal of unrealized depreciation of $30 million. The proceeds from the substantial liquidation and sale of our Senior Floating Rate Loan portfolio were partially utilized to pay down obligations under the $1.25 billion secured revolving credit facility and $500 million secured revolving credit facility.

During 2015, our portfolio company, Dyno Holding Corp., was sold. As part of the sale, we received $56 million in cash proceeds, realizing a loss of $62 million, which was fully offset by a reversal of unrealized depreciation of $62 million.

During 2015, we wrote off our portfolio company, Core Financial Holdings, LLC, and realized a loss of $44 million, which was fully offset by a reversal of unrealized depreciation of $44 million.

During 2015, we wrote off a portion of our senior and mezzanine debt in Miles 33 Limited, and realized a loss of $31 million, which was fully offset by a reversal of unrealized depreciation of $31 million.

During 2015, as a result of a restructuring transaction and the conversion of certain of our debt investments to equity investments, we wrote off a portion of our equity investments in CML Pharmaceuticals, LLC and realized a loss of $168 million which was fully offset by a reversal of unrealized depreciation of $168 million.

As discussed in Note 6 to our audited consolidated financial statements included in this Annual Report on Form 10-K, European Capital has issued restricted mandatorily redeemable preferred shares (“Redeemable Preferred Shares”) to participating employees of subsidiary companies of its manager, ECAM, a wholly-owned subsidiary of ACAM, under Long Term Incentive Plans. In the first quarter of 2015, a portion of the Redeemable Preferred Shares were redeemed and European Capital realized a loss of $46 million, which was fully offset by a reversal of unrealized depreciation of $46 million.

During 2014, European Capital’s portfolio company, Farrow & Ball, was sold. As part of the sale, we received $367 million in cash proceeds, realizing a gain of $213 million, which was partially offset by a reversal of unrealized appreciation of $173 million.

During 2014, our portfolio company, Unwired Holdings, Inc., was sold. As part of the sale, we received $138 million in cash proceeds, realizing a gain of $53 million, which was offset by a reversal of unrealized appreciation of $65 million. We also expect to receive $2 million of additional cash proceeds from this sale that remain held in a sale escrow as of December 31, 2015, which are recorded in the financial statement line item other assets in our consolidated balance sheets.

During 2014, our portfolio company, Specialty Brands Holdings, Inc., was sold. As part of the sale, we received $51 million in cash proceeds, realizing a gain of $35 million, which was offset by a reversal of unrealized appreciation of $38 million.

During 2014, our portfolio company, SPL Acquisition Corp., was sold. As part of the sale, we received $192 million in cash proceeds, realizing a gain of $33 million, which was fully offset by a reversal of unrealized appreciation of $33 million. We also expect to receive $9 million of additional cash proceeds from this sale that remain held in a sale escrow as of December 31, 2015, which are recorded in the financial statement line item other assets in our consolidated balance sheets.

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During 2014, our portfolio company, CH Holding Corp., was sold. As part of the sale, we received $6 million in cash proceeds, realizing a loss of $50 million, which was partially offset by a reversal of unrealized depreciation of $49 million.

During 2014, our portfolio company, FL Acquisitions Holdings, Inc., was sold. As part of the sale, we received $62 million in cash proceeds, realizing a loss of $33 million, which was offset by a reversal of unrealized depreciation of $35 million. We also expect to receive $5 million of additional cash proceeds from this sale that remain held in a sale escrow as of December 31, 2015, which are recorded in the financial statement line item other assets in our consolidated balance sheets.

During 2013, our portfolio company DelStar, Inc. was sold. As part of the sale, we received $93 million in cash proceeds, realizing a gain of $44 million, which was partially offset by a reversal of unrealized appreciation of $43 million.

During 2013, due to declining performance, we wrote off a portion of our unsecured mezzanine debt investments in Fosbel Global Services (LUXCO) S.C.A., realizing a loss of $40 million, which was fully offset by a reversal of unrealized depreciation of $40 million.

During 2013, our portfolio company Paradigm Precision Holdings, LLC was sold. As part of the sale, we received $122 million in cash proceeds, realizing a loss of $30 million, which was partially offset by a reversal of unrealized depreciation of $10 million. We also expect to receive $2 million of additional cash proceeds from this sale that remain held in a sale escrow as of December 31, 2015, which are recorded in the financial statement line item other assets in our consolidated balance sheets.

Net Unrealized Appreciation (Depreciation)

The following table itemizes the change in our net unrealized appreciation (depreciation) (in millions):



	2015			2014			2013
Gross unrealized appreciation of American Capital One Stop Buyouts^®	$	153		$	220		$	190
Gross unrealized depreciation of American Capital One Stop Buyouts^®	(212		)	(267		)	(292		)
Gross unrealized appreciation of Sponsor Finance and Other Investments	74			72			91
Gross unrealized depreciation of Sponsor Finance and Other Investments	(66		)	(61		)	(106		)
Gross unrealized appreciation of European Capital investments	84			26			—
Gross unrealized depreciation of European Capital investments	(57		)	(19		)	—
Net unrealized appreciation of investment in European Capital	—			167			281
Net unrealized appreciation (depreciation) of investment in European Capital's foreign currency translation	—			14			(14		)
Net unrealized (depreciation) appreciation of ACAM	(199		)	222			(165		)
Net unrealized depreciation of Senior Floating Rate Loans	(11		)	(24		)	—
Net unrealized (depreciation) appreciation of Structured Products investments	(125		)	5			(41		)
Reversal of prior period net unrealized depreciation (appreciation) upon realization	570			(206		)	105
Net unrealized appreciation of portfolio investments	211			149			49
Net unrealized appreciation due to consolidation of European Capital	—			87			—
Foreign currency translation - investment in European Capital	—			(75		)	49
Foreign currency translation - European Capital investments	32			11			—
Foreign currency translation - other	(5		)	(10		)	3
Derivative agreements and other	39			(24		)	19
WRH, Inc. Equity Option	28			(28		)	—
Tax (provision) benefit	(118		)	55			(37		)
Net unrealized appreciation	$	187		$	165		$	83

See our “Investment Valuation Policy” in Note 2 to our audited consolidated financial statements included in this Annual Report on Form 10-K for a description of our valuation methodologies.

American Capital One Stop Buyouts^®

For the year ended December 31, 2015, American Capital One Stop Buyouts^® experienced $59 million of net unrealized depreciation primarily driven by specific company performance. For the year ended December 31, 2014, American Capital One Stop Buyouts^® experienced $47 million of net unrealized depreciation driven by the ACE III transaction and specific company performance. For the year ended December 31, 2013, American Capital One Stop Buyouts^® experienced $102 million of net unrealized depreciation primarily driven by declining specific company performance.

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Sponsor Finance and Other Investments

For the years ended December 31, 2015 and 2014, Sponsor Finance and Other Investments experienced net unrealized appreciation of $8 million and $11 million, respectively, primarily driven by improved specific company performance. For the year ended December 31, 2013, Sponsor Finance and Other Investments experienced $15 million of net unrealized depreciation primarily driven by declining specific company performance.

European Capital

As discussed in Note 2 to our audited consolidated financial statements included in this Annual Report on Form 10-K, we consolidated our investment in European Capital effective October 1, 2014. For the year ended December 31, 2015, we recorded $27 million of net unrealized appreciation on the consolidated European Capital investment portfolio. For the year ended December 31, 2015, we recorded net unrealized appreciation of $32 million for foreign currency translation on the European Capital investment portfolio.

For the quarter ended December 31, 2014, we recorded $5 million of net unrealized appreciation on the consolidated European Capital investment portfolio. For the nine months ended September 30, 2014, we recognized net unrealized appreciation of $181 million on our investment in European Capital, composed of $167 million of net unrealized appreciation and $14 million of net unrealized appreciation from foreign currency translation of the cumulative unrealized appreciation of our European Capital investment.

For the year ended December 31, 2013, we recognized net unrealized appreciation of $267 million on our investment in European Capital composed of $281 million unrealized appreciation on our investment and $14 million of unrealized depreciation from foreign currency translation of the cumulative unrealized depreciation of our European Capital investment.

For foreign currency denominated investments recorded at fair value, such as our European Capital portfolio investments, the net unrealized appreciation or depreciation from foreign currency translation on the accompanying consolidated statements of operations represents the economic impact of translating the cost basis of the investment from a foreign currency, such as the Euro, to the U.S. dollar. However, the economic impact of translating the cumulative unrealized appreciation or depreciation from a foreign currency to the U.S. dollar is not recorded as net unrealized depreciation or appreciation from foreign currency translation but rather is included as net unrealized appreciation or depreciation of portfolio company investments on the accompanying consolidated statements of operations.

For the nine months ended September 30, 2014, we recorded unrealized depreciation of $75 million for foreign currency translation on the cost basis in our investment in European Capital (included in our total net unrealized depreciation of $74 million for foreign currency translation for the year ended December 31, 2014). For the year ended December 31, 2013, we recorded unrealized appreciation of $49 million for foreign currency translation on the cost basis in our investment in European Capital (included in our total net unrealized appreciation of $52 million for foreign currency translation for the year ended December 31, 2013).

During the nine months ended September 30, 2014, the unrealized appreciation on our investment in European Capital of $167 million, excluding unrealized appreciation on foreign currency translation, was due primarily to multiple expansion as well as a reduction in the discount applied to the NAV of European Capital.

During the year ended December 31, 2013, the unrealized appreciation on our investment in European Capital of $281 million, excluding unrealized appreciation and depreciation on foreign currency translation, was due primarily to an increase in the NAV of European Capital and a reduction to the discount applied to NAV.

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The following is a summary composition of European Capital’s NAV at fair value and our equity investment’s implied discount to European Capital’s NAV at fair value as of September 30, 2014 and December 31, 2013 (€ and $ in millions):



	September 30, 2014			2013
Debt investments at fair value	€	293		€	406
Equity investments at fair value	439			364
Other assets and liabilities, net	(17		)	56
Third-party secured debt at cost	—			—
Third-party unsecured debt at cost	(112		)	(107		)
American Capital unsecured debt at cost	—			—
NAV (Euros)	603			719
Exchange rate	1.27			1.38
NAV (U.S. dollars)	$	766		$	992
Fair value of American Capital equity investment	$	678		$	841
Implied discount to NAV	11.5		%	15.2		%

——————————

Note: Effective October 1, 2014, European Capital’s financial results have been consolidated with the financial results of American Capital.

American Capital Asset Management, LLC

ACAM had a cost basis and fair value of $534 million and $1,065 million, respectively, as of December 31, 2015. During the year ended December 31, 2015, we recognized $199 million of unrealized depreciation on our investment in ACAM primarily due to a reduction in projected management fees for managing AGNC and MTGE due to a decrease in the equity capital of each company as a result of share repurchases and net realized losses. During the year ended December 31, 2015, AGNC and MTGE repurchased $285 million and $53 million of common stock, respectively. During the year ended December 31, 2015, AGNC and MTGE had realized losses of $443 million and $69 million, respectively.

During the year ended December 31, 2014, we recognized $222 million of unrealized appreciation on our investment in ACAM primarily due to multiple expansion, increases in actual and forecasted growth for AGNC and MTGE and projected fees for managing ACE III, partially offset by increased costs associated with fund development activities.

During the year ended December 31, 2013, we recognized $165 million of unrealized depreciation on our investment in ACAM primarily due to a reduction in projected management fees for managing AGNC and MTGE due to a decrease in the equity capital of each company as a result of share repurchases and net realized losses. During the year ended December 31, 2013, AGNC raised $1.8 billion of equity capital. During the year ended December 31, 2013, MTGE raised $584 million of equity capital. During the year ended December 31, 2013, AGNC and MTGE repurchased $856 million and $154 million of common stock, respectively. During the year ended December 31, 2013, AGNC and MTGE had realized losses of $1.3 billion and $41 million, respectively.

Senior Floating Rate Loans

For the years ended December 31, 2015 and 2014, Senior Floating Rate Loans experienced net unrealized depreciation of $11 million and $24 million, respectively, primarily driven by price declines in the broadly-syndicated loan market.

Structured Products Investments

American Capital has investments in Structured Products (which includes investment and non-investment grade tranches of CLO, CDO and CMBS securities) with a cost basis and fair value of $597 million and $418 million, respectively, as of December 31, 2015. During the year ended December 31, 2015, we realized cash proceeds of $470 million and recognized interest income of $105 million from our Structured Products investments. During the year ended December 31, 2014, we realized cash proceeds of $192 million and recognized interest income of $65 million from our Structured Products investments. During the year ended December 31, 2015, we recorded $125 million of net unrealized depreciation on our Structured Products investments primarily due to a decline in forecasted cash flows and lower dealer marks in our CLO portfolio. During the year ended December 31, 2014, we recorded $5 million of net unrealized appreciation on our Structured Products investments primarily due to an increase in the fair value of marketable equity securities held within one of our CLO investments. During the year ended December 31, 2013, we recorded $41 million of net unrealized depreciation on our Structured Products investments primarily due to unrealized depreciation on our investments in CLO and CDO portfolios of commercial loans due to decreasing spreads on underlying collateral as investments are nearing the end of their life.

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Derivative Agreements and Other and WRH, Inc. Equity Option

For interest rate 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 agreement. The derivative agreements generally appreciate or depreciate primarily based on relative market interest rates and their remaining term to maturity as well as changes in our and our counterparty’s credit risk.

During the year ended December 31, 2015, we recorded $39 million of net unrealized appreciation from derivative agreements and other, primarily due to the reversal of unrealized depreciation on the redemption of Redeemable Preferred Shares. During the year ended December 31, 2015, we recorded $28 million of unrealized appreciation on the WRH, Inc. Equity Option due to the reversal of unrealized depreciation from ACE III’s exercising of the Equity Option on April 1, 2015. During the year ended December 31, 2014, we recorded $24 million of net unrealized depreciation from derivative agreements and other, primarily due to a decrease in the fair value of contingent earnout payments related to the sale of SPL Acquisition Corp. During the year ended December 31, 2014, we recorded $28 million of unrealized depreciation on the WRH, Inc. Equity Option due to an increase in the fair value of the Equity Option. During the year ended December 31, 2013, we recorded $19 million of net unrealized appreciation from derivative agreements and other, primarily due to reversals of unrealized depreciation upon realization of losses for terminated interest rate derivative agreements. The fair value of the liability for our derivative agreements as of December 31, 2015, 2014 and 2013 was $5 million, $84 million and $9 million, respectively.

Financial Condition, Liquidity and Capital Resources

Our primary sources of liquidity are our investment portfolio, cash and cash equivalents and the available capacity under our various revolving credit facilities.

As of December 31, 2015, we had $483 million of cash and cash equivalents and $46 million of restricted cash and cash equivalents and $550 million of available capacity under our various revolving credit facilities. During the years ended December 31, 2015, 2014 and 2013, we principally funded our operations from (i) cash receipts from interest, dividend and fee income from our investment portfolio, (ii) cash proceeds from the realization of portfolio investments and (iii) draws under our various revolving credit facilities.

As of December 31, 2015, our required payments on debt obligations for the next twelve months consists of $4.5 million scheduled amortization on our secured term loan, $167 million for the outstanding balance on our $250 Million Revolving Credit Facility and $33 million for the outstanding balance on our $500 Million Revolving Credit Facility. On January 6, 2016, the $500 Million Revolving Credit Facility was repaid in full and terminated. We believe that we will continue to generate sufficient cash flow through the receipt of interest, dividend and fee payments from our investment portfolio, as well as cash proceeds from the realization of select portfolio investments, to allow us to continue to service our debt, pay our operating costs and expenses, fund capital to our current portfolio companies and originate new investments. However, there is no certainty that we will be able to generate sufficient liquidity.

Operating, Investing and Financing Cash Flows

For the years ended December 31, 2015, 2014 and 2013, net cash provided by operations was $270 million, $145 million and $193 million, respectively. Our cash flow from operations for the years ended December 31, 2015, 2014 and 2013 was primarily from the collection of interest, dividends and fees on our investment portfolio, less operating expenses and the redemption of Redeemable Preferred Shares.

For the years ended December 31, 2015 and 2013, net cash provided by investing activities was $415 million and $173 million, respectively. For the year ended December 31, 2014, net cash used in investing activities was $504 million. Our cash flow from investing activities included cash proceeds from the realization of portfolio investments totaling $3.7 billion, $2.8 billion and $1.2 billion for the years ended December 31, 2015, 2014 and 2013, respectively. Cash used for purchases and originations of investments totaled $3.4 billion, $3.2 billion and $1.0 billion for the years ended December 31, 2015, 2014 and 2013, respectively. The net cash used in investing activities for the year ended December 31, 2014 and the increase in purchases and originations of investments for the years ended December 31, 2015 and 2014 was driven by expansion of our Senior Floating Rate Loan portfolio. As of December 31, 2015, we had portfolio investments totaling $5.0 billion at fair value, including $2.5 billion in debt investments, $2.1 billion in equity investments and $0.4 billion in Structured Products investments. However, a majority of our investments are generally illiquid and no active primary or secondary market exists for the trading of these investments and our estimates of fair value may differ significantly from the values that may be ultimately realized. We are generally repaid or exit our investments upon a change of control event of the portfolio company, such as a sale or recapitalization of the portfolio company.

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For the years ended December 31, 2015 and 2013, net cash used in financing activities was $864 million and $382 million, respectively. For the year ended December 31, 2014, net cash provided by financing activities was $663 million. The primary use of cash from financing activities during the year ended December 31, 2015 was payments on our revolving credit facilities of $305 million and repurchases of our common stock of $526 million. Our cash flow from financing activities during the year ended December 31, 2014 was primarily from proceeds received on our revolving credit facilities of $777 million driven by the expansion of our Senior Floating Rate Loan portfolio, partially offset by repurchases of our common stock of $137 million. The primary use of cash from financing activities during the year ended December 31, 2013 was debt payments on our asset securitizations of $178 million and repurchases of our common stock of $561 million.

Debt Capital

As a BDC, we are permitted to issue senior debt securities and preferred stock (collectively, “Senior Securities”) in any amounts as long as immediately after such issuance our asset coverage is at least 200%, or equal to or greater than our asset coverage prior to such issuance, after taking into account the payment of debt with proceeds from such issuance. Asset coverage is defined as the ratio of the value of the total assets, less all liabilities and indebtedness not represented by Senior Securities, bears to the aggregate amount of Senior Securities representing indebtedness. However, if our asset coverage is below 200%, we may also borrow amounts up to 5% of our total assets for temporary purposes even if that would cause our asset coverage ratio to further decline. As of December 31, 2015, our debt obligations, excluding discounts, were $1,263 million and our asset coverage was 482%. See Note 4 to our audited consolidated financial statements included in this Annual Report on Form 10-K for further discussion of our debt obligations.

The following table sets forth the scheduled amortization on the secured term loans and unsecured private notes:



August 2016	$4.5 million
Secured Term Loans due August 2017	Outstanding Balance
Unsecured Private Notes due September 2018	Outstanding Balance

The following table sets forth the outstanding balances on our revolving credit facilities:



	Outstanding Balance
Secured revolving credit facility due August 2016, $250 million commitment	$	167
Secured revolving credit facility due March 2017, $272 million commitment	272
Secured revolving credit facility due October 2016, $500 million commitment⁽¹⁾	33
Total	$	472


(1)	On January 6, 2016, the $500 Million Revolving Credit Facility was repaid in full and terminated.

Equity Capital

As a BDC, we are generally not able to issue or sell our common stock at a price below our NAV per share, exclusive of any distributing commission or discount, except (i) with the prior approval of a majority of our shareholders, (ii) in connection with a rights offering to our existing shareholders, or (iii) under such other circumstances as the SEC may permit. As of December 31, 2015, our NAV was $19.88 per share per share and our closing market price was $13.79 per share.

During 2011, our Board of Directors adopted a program that may provide for share repurchases or dividend payments (the “Program”) but suspended repurchases in March 2014. During the first quarter of 2015, our Board of Directors reinstated authorization for share repurchases. Our Board of Directors modified the Program during the fourth quarter of 2015 to authorize the purchase of $600 million to $1 billion of common stock through June 30, 2016 at prices per share below 85% of our most recent quarterly NAV per share, subject to certain conditions. We have entered into a Rule 10b5-1 trading plan to undertake accretive share repurchases on a non-discretionary basis up to the $1 billion limit. During the year ended December 31, 2015, we repurchased a total of 36.9 million shares of our common stock in the open market for $526 million at an average price of $14.25 per share. During the year ended December 31, 2014, we repurchased a total of 8.9 million shares of our common stock in the open market for $137 million at an average price of $15.38 per share. During the year ended December 31, 2013, we repurchased a total of 40.4 million shares of our common stock in the open market for $561 million at an average price of $13.90 per share. See Note 10 to our audited consolidated financial statements included in this Annual Report on Form 10-K for further discussion of the Program.

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Contractual Obligations

A summary of our contractual payment obligations as of December 31, 2015 are as follows (in millions):



	Payment Due by Period
	Total		Less than 1 year		2-3 years		4-5 years		After 5 years
Secured revolving credit facility due August 2016	$	167	$	167	$	—	$	—	$	—
Secured revolving credit facility due October 2016⁽¹⁾	33		33		—		—		—
Secured revolving credit facility due March 2017	272		—		272		—		—
Secured Term Loan due August 2017	441		5		436		—		—
Unsecured Private Notes due September 2018	350		—		350		—		—
Interest payments on debt obligations⁽²⁾	101		44		57		—		—
Operating leases⁽³⁾	126		14		29		27		56
Total	$	1,490	$	263	$	1,144	$	27	$	56


(1)	On January 6, 2016, the $500 Million Revolving Credit Facility was repaid in full and terminated.


(2)	For variable rate debt, future interest payments are based on the interest rate as of December 31, 2015.


(3)	Net of estimated sublease revenue.

Off Balance Sheet Arrangements

We have non-cancelable operating leases for office space and office equipment. The leases expire over the next eleven years and contain provisions for certain annual rental escalations. However, certain of the non-cancelable operating leases for office space have been subleased to third-party tenants and we may attempt to further sublease excess office space in the future.

As of December 31, 2015, we had commitments under loan and financing agreements to fund up to $213 million to 28 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 compliance with covenants and availability under borrowing base thresholds. The terms of the borrowings and financings subject to commitment are comparable to the terms of other loan and equity securities in our portfolio. As of December 31, 2015, European Capital and its affiliates had a commitment of $62 million to fund European Capital UK SME Debt LP and $100 million to fund a European Capital debt fund. In addition, as of December 31, 2015, ACAM had a commitment of $125 million to American Capital Equity III, LP, which is to be funded by an equity investment from American Capital. See Note 14 to our audited consolidated financial statements included in this Annual Report on Form 10-K for further discussion of ACAM’s ACE III commitment.

A summary of our loan and equity commitments as of December 31, 2015 is as follows (in millions):



	Amount of Commitment Expiration by Period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Loan and equity commitments	$	375	$	17	$	250	$	52	$	56

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Non-Performing Loans Analysis

We stop accruing interest on our debt 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.

American Capital Non-Performing Loans

As of December 31, 2015, American Capital loans on non-accrual status for 10 portfolio companies had a cost basis and fair value of $185 million and $103 million, respectively. As of December 31, 2015 and 2014, current loans, past due accruing loans and loans on non-accrual status were as follows (dollars in millions):



	2015			2014
Current	$	2,276		$	3,248
0 - 30 days past due	—			—
31 - 60 days past due	—			—
61 - 90 days past due	—			—
Greater than 90 days past due	—			—
Total past due accruing loans at cost	—			—
Non-accruing loans at cost	185			201
Total loans at cost	$	2,461		$	3,449
Non-accruing loans at fair value	$	103		$	116
Total loans at fair value	$	2,352		$	3,311
Non-accruing loans at cost as a percent of total loans at cost	7.5		%	5.8		%
Non-accruing loans at fair value as a percent of total loans at fair value	4.4		%	3.5		%
Non-accruing loans at fair value as a percent of non-accruing loans at cost	55.7		%	57.7		%

Non-accruing loans at cost decreased $16 million from December 31, 2014 to December 31, 2015 primarily due to $94 million of loan restructurings, exits and write-offs and $17 million of loans removed from non-accrual status due to improved performance, partially offset by $58 million of loans placed on non-accrual status due to weaker portfolio company performance and $33 million of fundings on prior period unfunded commitments and approximately $7 million due to PIK allowance reversals. In addition, the cost basis of existing non-accrual loans decreased by $3 million.

During 2015, we recapitalized two portfolio companies by exchanging our loans for common and preferred equity securities that had a cost basis and fair value of $61 million.

During 2014, we recapitalized one portfolio company by exchanging a loan for common equity securities that had a cost basis and fair value of $9 million. Of these recapitalizations, loans which were on non-accrual status had a cost basis and fair value of $9 million.

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European Capital Non-Performing Loans

As of December 31, 2015, European Capital loans on non-accrual status for 4 portfolio companies had a cost basis and fair value of $95 million and $18 million, respectively. As of December 31, 2015 and 2014, current loans, past due accruing loans and loans on non-accrual status were as follows (dollars in millions):



	2015			2014
Current	$	92		$	340
0 - 30 days past due	—			—
31 - 60 days past due	—			—
61 - 90 days past due	—			—
Greater than 90 days past due	—			—
Total past due accruing loans at cost	—			—
Non-accruing loans at cost	95			170
Total loans at cost	$	187		$	510
Non-accruing loans at fair value	$	18		$	32
Total loans at fair value	$	107		$	361
Non-accruing loans at cost as a percent of total loans at cost	50.8		%	33.3		%
Non-accruing loans at fair value as a percent of total loans at fair value	16.8		%	8.9		%
Non-accruing loans at fair value as a percent of non-accruing loans at cost	18.9		%	18.8		%

Non-accruing loans at cost decreased $75 million from December 31, 2014 to December 31, 2015 primarily due to $43 million of loans removed from non-accrual status due to improved portfolio company performance, $42 million of loan restructurings and write-offs, $14 million decrease due to foreign currency translation, $2 million for reserves of accrued PIK interest, partially offset by $14 million of loans placed on non-accrual status due to weaker portfolio performance and $11 million due to PIK allowance reversals.

During 2015, we recapitalized one portfolio company by exchanging a loan for common equity securities that had a cost basis of $25 million and no fair value.

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Impact of Inflation

We believe that inflation can influence the value of our investments through the impact it may have on interest rates, the capital markets, the valuations of business enterprises and the relationship of the valuations to underlying earnings.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements in accordance with U.S. GAAP requires us to utilize accounting policies and make certain estimates and assumptions that could affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time the consolidated financial statements are prepared. Our significant accounting policies are more fully described in Note 2 to our audited consolidated financial statements included in this Annual Report on Form 10-K. The SEC considers an accounting policy to be critical if it is both important to a company’s financial condition and results of operations and it requires significant judgment and estimates on the part of management in its application.

Management believes that the following critical accounting policies are the most affected by judgments, estimates and assumptions. Management has reviewed these critical accounting policies and related disclosures with our independent auditor and the Audit, Compliance and Valuation Committee of our Board of Directors. Although we believe that our judgments and estimates are appropriate and correct, actual results may differ from those estimates. See Item 1A. Risk Factors for certain matters bearing risks on our future results of operations.

Valuation of Investments

Our investments consist of loans and securities issued by public and privately-held companies, including senior debt, mezzanine debt, equity warrants and preferred and common equity securities. We also invest in Structured Products, which includes CLO securities and CMBS.

We fair value our investments in accordance with the 1940 Act and ASC 820 as determined in good faith by our Board of Directors. We undertake a multi-step valuation process each quarter to determine the fair value of our investments in accordance with ASC 820. The quarterly valuation process begins with the development of a preliminary valuation recommendation for each investment by our FACT team, which is composed of valuation and audit professionals responsible for monitoring portfolio compliance and valuations. In preparing the preliminary valuation recommendations, FACT receives assistance from our investment professionals that both originated and monitor the investment as well as assistance from other departments including operations, accounting and legal. The preliminary valuation recommendations are reviewed by senior management and then presented to our Audit, Compliance and Valuation Committee for review and approval. Subsequent to the approval from our Audit, Compliance and Valuation Committee, the valuation recommendations are sent to our Board of Directors for final approval.

When available, we base the fair value of our investments that trade in active markets on directly observable market prices or on market data derived for comparable assets. For restricted securities of companies that are publicly traded, the value is based on the closing market quote on the valuation date less a discount for the restriction. 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. For these investments, we estimate the fair value of our senior debt, mezzanine debt, redeemable and convertible preferred equity, common equity and equity warrants using either an enterprise value waterfall methodology, which generally combines market and income approaches, or a market yield valuation methodology, which utilizes the income approach. We estimate the fair value of our Structured Products using the market and income approaches, third-party broker quotes and counterparty marks.

ASC 820 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. 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.

ASC 820 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 ASC 820, 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 for an asset 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 under ASC 820, it is assumed that the reporting entity has access to the

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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 levels of fair value inputs used to measure our investments are characterized in accordance with the fair value hierarchy established by ASC 820. 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. Our policy is to recognize transfers in and out of levels as of the beginning of each reporting period. 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.


•	Level 2: Level 2 inputs are inputs, other than quoted prices included within Level 1, which 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. As of December 31, 2015, we use Level 3 inputs for measuring the fair value of our investments as follows:

The principal market in which we would sell our Senior Floating Rate Loans and certain of our non-controlled Sponsor Finance debt investments is an active over-the-counter secondary market. For our other debt and equity investments, there is no active market and we are generally repaid our debt investment or sell our equity investment upon a change of control transaction such as through the mergers and acquisition (“M&A”) market. Accordingly, the market in which we would sell certain of our non-controlled debt and all of our equity investments is the M&A market. However, under ASC 820, we have identified the M&A market as the principal market for our investments in these portfolio companies only if we have the ability to control the decision to sell the portfolio company as of the measurement date. We determine whether we have the ability to control the decision to sell 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 and rights within the shareholders agreement. 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 our wholly-owned portfolio company, ACAM, 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, the principal market under ASC 820 is a hypothetical secondary market.

Accordingly, we use the M&A market as the principal market for our investments in portfolio companies that we control or can gain control as of the measurement date, and we use a hypothetical secondary market for our investments in 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 for such investments, we will consider that as the principal market. Our valuation policy considers the fact that no ready active market exists for a significant amount of our investments and that the 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.

Under the Enterprise Value Waterfall valuation methodology, we estimate the enterprise value of a portfolio company and then waterfall the enterprise value over the portfolio company’s securities in order of their preference relative to one another. In applying the Enterprise Value Waterfall valuation methodology, we consider that in a change of control transaction, our loans are generally required to be repaid at par and that a buyer cannot assume the loan.

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The selection of a population of comparable companies requires significant judgment, including a qualitative and quantitative analysis of the comparability of the companies. In determining a discount or premium, if any, to prices of comparable companies, we use significant judgment for factors such as size, marketability, relative performance, and for portfolio companies in which we control, a control premium to the market price of comparable public companies. In determining a discount rate to apply to forecasted cash flows, we use significant judgment in the development of an appropriate discount rate including the evaluation of an appropriate risk premium.

In valuing convertible debt, equity or other similar securities, we value our investment based on its priority in the waterfall and 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 portfolio company, we reduce the fair value of our debt investment beginning with the junior most debt such that the enterprise value less the fair value of the outstanding debt is zero.

Market Yield Valuation Methodology

For debt and redeemable preferred equity investments in portfolio companies for which we are required to identify a hypothetical secondary market as the principal market, we estimate the fair value based on the assumptions that we believe hypothetical market participants would use to value the investment in a current hypothetical sale using a market yield (“Market Yield”) valuation methodology.

For debt and redeemable preferred equity investments of our investment portfolio for which we do not control or cannot gain control as of the measurement date and no active market exists, 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 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, if any, 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, including considering the current maturity date of the loan. The average life used to estimate the fair value of our loans may be shorter than the legal maturity of the loans since 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 the current interest rate spreads on similar loans. We use significant judgment in determining the estimated remaining life as well as the current market yield and interest rate spreads. 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 fair value our investments in Structured Products based on such factors as third-party broker quotes, counterparty marks, purchases or sales of the same or similar securities, and our cash flow forecasts. Cash flow forecasts are subject to 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, industry research reports and transactions of securities and indices with similar structure and risk characteristics. We weight the use of third-party broker quotes or counterparty marks, if any, in determining fair value based on the correlation of changes in third-party broker quotes with underlying performance and other market indices.

Third-party Vendor Pricing

For debt investments that trade in an active market or that have similar assets that trade in an active market, we estimate the fair value based on evaluated prices from a nationally recognized, independent pricing service or from third-party brokers who make markets in such debt instruments. When possible, we make inquiries of third-party pricing sources to understand their use of significant inputs and assumptions. We review the price provided by the third-party pricing service and perform procedures to validate their reasonableness, including a review and analysis of executable broker quote(s), range and dispersion of third-party estimates, frequency of pricing updates, yields of similar securities or other qualitative and quantitative information. If the prices provided by the pricing service are consistent with such information, we will generally use the price provided by the pricing service as fair value.

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Investments in Investment Funds

For an investment in an investment fund that does not have a readily determinable fair value, we measure the fair value of our investment predominately based on the NAV per share of the investment fund if the NAV of the investment fund is calculated in a manner consistent with the measurement principles of ASC 946 as of the measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with ASC 820. However, in determining the fair value of our investment, we may make adjustments to the NAV per share in certain circumstances, based on our analysis of any restrictions on redemption of our shares of our investment as of the measurement date, any restrictions on the ability to receive dividends, comparisons of market price to NAV per share of comparable publicly traded funds and trades or sales of comparable private and publicly traded funds, recent actual sales or redemptions of shares of the investment fund, public to private liquidity discounts, expected future cash flows available to equity holders including the rate of return on those cash flows compared to an implied market return on equity required by market participants, or other uncertainties surrounding our ability to realize the full NAV of the investment fund.

Partnership Interests

For an investment in a partnership, we measure the fair value of our investment based on the NAV per share of the partnership or its equivalent as a practical expedient to measure an alternative investment at fair value consistent with the measurement principles of ASC 820, as amended by Accounting Standards Update (“ASU”) 2009-12, Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent). We make this election on an investment-by-investment basis and apply consistently to our entire position in the investment, unless it is probable at the measurement date that we will sell all or a portion of our investment at an amount other than NAV per share.

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 counterparty credit risk. We consider the impact of any collateral requirements, credit enhancements or netting arrangements in evaluating credit risk.

See Note 3 to our audited consolidated financial statements included in this Annual Report on Form 10-K for further information regarding the classification of our investment portfolio by Levels 1, 2 and 3 as of December 31, 2015.

Interest and Dividend Income Recognition

Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected. OID and purchased discount and premiums are accreted into interest income using the effective interest method, where applicable. Loan origination fees are recorded as fee income upon receipt or deferred and accreted into interest income using the effective interest method. We record prepayment premiums on loans and other investments as interest income when such amounts are received. Dividend income is recognized on the ex-dividend date for publicly traded portfolio companies and the record date for private portfolio companies for common equity securities. Dividend income is recognized 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 portfolio company’s total enterprise value. For investments with 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 that is not sufficient to cover the contractual interest or dividend, we will not accrue interest or dividend income on the notes or securities and will record an allowance for any accrued interest or dividend receivable as a reduction of interest or dividend income in the period we determine it is not collectible.

We also receive interest and dividend income from our debt and equity investments in our asset management company, ACAM. Interest income from ACAM is recorded on an accrual basis to the extent that such amounts are expected to be collected. Dividend income is recorded on the record date.

A change in the portfolio company valuation assigned by us could have an effect on our recognition of interest income on debt investments and dividend income of preferred stock investments. 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 income recognition.

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Interest income on Structured Products is recognized using the effective interest method as required by ASC 325-40. Under ASC 325-40, at the time of purchase, we estimate the future expected cash flows and determine the effective yield of an investment based on these estimated cash flows and the cost basis of the investment. Subsequent to the purchase, these estimated cash flows are updated quarterly and a revised effective yield is calculated prospectively in accordance with ASC 320-10-35, Investment-Debt and Equity Securities. In the event that the fair value of an investment decreases below its current amortized cost basis, we may be required to write down the current amortized cost basis for a credit loss or to fair value depending on our hold expectations for the investment. Reference Amount is used to calculate the effective yield used for interest income recognition purposes over the remaining life of the investment. We are precluded from reversing write downs for any subsequent increase in the expected cash flows of an investment with the effect of increasing total interest income over the life of the investment and increasing the realized loss recorded on the sale or redemption of the investment by the amount of the credit loss write down. 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 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. During the year ended December 31, 2015, we recorded $20.5 million in credit loss write downs to current amortized cost basis on six Structured Products investments. As of December 31, 2015, in aggregate, the amortized cost basis of our Structured Products investment portfolio exceeded the Reference Amount by approximately $109 million.

Income Taxes

As of December 31, 2015, we have a net deferred tax asset of $558 million associated with our total ordinary deferred tax assets. We have a valuation allowance against $153 million of our ordinary deferred tax assets. We also have $171 million in total capital deferred tax assets and $231 million in total capital deferred tax liabilities, which have a $147 million reserve through a valuation allowance and results in a capital deferred tax liability of $207 million. We have a total net deferred tax asset of $198 million. Assessing the recoverability of a deferred tax asset requires management to consider the company’s history of cumulative pretax losses in the prior three years and make estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecasted cash flows from investments and operations, the character of expected income or loss as either capital or ordinary, and the application of existing tax laws in each jurisdiction. We are also required to make estimates related to the expected tax character of recognition of the reversal of the deferred tax assets. To the extent that future cash flows or the amount or character of taxable income differ significantly from these estimates, our ability to realized the net deferred tax asset could be impacted.

Stock-based Compensation

We account for all share-based payments to employees under FASB ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). We estimate the fair value of our employee stock awards at the date of grant using certain subjective assumptions, such as expected volatility, which is based on a combination of historical and market-based implied volatility, and the expected term of the awards which is based on our historical experience of employee stock option exercises. Our valuation assumptions used in estimating the fair value of share-based awards may change in future periods. We recognize the fair value of awards over the vesting period or the requisite service period only for those awards expected to vest using an estimated forfeiture rate. In addition, we calculate our pool of excess tax benefits available within capital in excess of par value on our consolidated balance sheets in accordance with the provisions ASC 718.

No stock options were granted during the year ended December 31, 2015.The following table reflects the weighted average fair value per stock option granted during the years ended December 31, 2014 and 2013, as well as the weighted average assumptions used in determining those fair values using a Black-Scholes option pricing model.



	2014		2013
Options granted (in millions)	0.1		3.7
Weighted average fair value per option on grant date	$6.89		$5.88
Expected dividend yield	—	%	—	%
Expected volatility	42	%	41	%
Risk-free interest rate	2.1	%	1.2	%
Expected life (years)	6.8		6.7

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We determine our expected volatility used in the Black-Scholes option pricing model based on a combination of our historical volatility during the expected term of the option and our implied volatility based on the market prices of traded options of our stock.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the input of subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate based on historical experience and recognize expense only for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period.

Recent Accounting Standards

See Note 2 to our audited consolidated financial statements included in this Annual Report on Form 10-K for further information regarding new accounting pronouncements and their potential impact on our consolidated financial statements.

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Item 7A. Quantitative and Qualitative Disclosure About Market Risk

We are subject to financial market risks, including changes in interest rates and the valuations of our investment portfolio.

Interest Rate Risk

Interest rate sensitivity refers to the change in NOI and net earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our NOI and net earnings are affected by the difference between the interest rate at which we invest and the interest rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our NOI and net earnings.

As of December 31, 2015, approximately 21% of the principal balance of the debt investments in our portfolio were at fixed rates, approximately 59% were at variable rates with interest rate floors, primarily three-month LIBOR, 4% were at variable rates with no interest rate floors and 16% were on non-accrual status (4% of loans on non-accrual status were at variable rates). Additionally, approximately 35% of our borrowings bear interest at variable rates with a 0.75% interest rate floor, 37% of our borrowings bear interest at variable rates with no interest rate floors and 28% of our borrowings bear interest at fixed rates. The three-month LIBOR rate was 0.6% as of December 31, 2015.

We maintain an interest rate risk management strategy under which we use derivative financial instruments to primarily manage the adverse impact of interest rate 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. While our interest rate risk management strategy may mitigate our exposure to adverse fluctuations in interest rates, certain derivative transactions that we may enter into in the future, such as interest rate derivative agreements, may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio investments.

Our derivatives are considered economic hedges that do not qualify for hedge accounting under ASC 815. We record the accrual of the periodic interest settlements of interest rate derivatives in net unrealized appreciation or depreciation and subsequently record the cash payments as a realized gain or loss on the interest settlement date.

Based on our December 31, 2015 consolidated balance sheets, the following table shows the annual impact on NOI and net earnings of base rate changes in the applicable interest rate indexes, primarily three-month LIBOR, (considering interest rate floors for variable rate instruments and excluding changes in the fair value of our investments and derivative instruments and loans on non-accrual status) assuming no changes in our investment, hedging and borrowing structure (in millions):



Basis Point Change	Interest Income		Interest Expense			Net Operating Income (Loss)		Net Earnings (Loss)
Up 400 basis points	$	65	$	36		$	29	$	29
Up 300 basis points	$	47	$	27		$	20	$	20
Up 200 basis points	$	29	$	18		$	11	$	11
Up 100 basis points	$	11	$	9		$	2	$	2
Down 100 basis points	$	—	$	(3	)	$	3	$	3

Foreign Currency Risks

We have a number of investments in portfolio companies, primarily the European Capital investment portfolio, 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. As of December 31, 2015, the cumulative translation adjustment, net of tax, recorded in our consolidated balance sheet was $101 million, due to the translation of European Capital’s balance sheet as of December 31, 2015.

As of December 31, 2015, our exposure to foreign currency exchange risk was estimated using a sensitivity analysis, which illustrates a hypothetical change in the foreign currency exchange rate as of December 31, 2015. As stated above, the Euro is the functional currency for the majority of our investments denominated in a foreign currency, and as such, the sensitivity analysis excludes any changes in other foreign currencies. Actual changes in foreign currency exchange rates may differ from this hypothetical change. Based on a hypothetical increase or decrease of 5% in the Euro to U.S. dollar exchange rate, assuming no hedging, the fair value of our investments would have increased or decreased by approximately $25 million.

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Portfolio Valuation

Our investments are carried at fair value in accordance with the 1940 Act and ASC 820. Due to the uncertainty inherent in the valuation process, such estimates of fair value controls 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. As of December 31, 2015, the fair value of 90% of our investments were estimated using Level 3 inputs determined in good faith by our Board of Directors because there was no active market for such investments.

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Item 8.	Financial Statements and Supplementary Data

Our management is responsible for the preparation, integrity and objectivity of the accompanying consolidated financial statements and the related financial information. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States and necessarily include certain amounts that are based on estimates and informed judgments. Our management also prepared the related financial information included in this Annual Report on Form 10-K and is responsible for its accuracy and consistency with the consolidated financial statements.

The consolidated financial statements have been audited by Ernst & Young LLP, an independent registered public accounting firm, who conducted their audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) as of December 31, 2015 and 2014, and for each of the three years in the period ended December 31, 2015, and the consolidated financial highlights for each of the five years in the period ended December 31, 2015. The independent registered public accounting firm’s responsibility is to express an opinion as to the fairness with which such consolidated financial statements and financial highlights present our financial position, results of operations, changes in net assets and cash flows in accordance with accounting principles generally accepted in the United States.

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Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. American Capital, Ltd.’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). American Capital, Ltd.’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of American Capital, Ltd.’s internal control over financial reporting as of December 31, 2015, utilizing the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the Internal Control-Integrated Framework (2013 Framework). Based on this assessment and those criteria, management determined that American Capital, Ltd.’s internal control over financial reporting was effective as of December 31, 2015. The effectiveness of American Capital, Ltd.’s internal control over financial reporting as of December 31, 2015 has been audited by Ernst & Young LLP, American Capital, Ltd.’s independent registered public accounting firm, as stated in their attestation report included in this Annual Report on Form 10-K.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of American Capital, Ltd.

We have audited American Capital, Ltd.’s internal control over financial reporting as of December 31, 2015 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). American Capital, Ltd.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, American Capital, Ltd. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of American Capital, Ltd., including the consolidated schedules of investments, as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2015, and the consolidated financial highlights for each of the five years in the period ended December 31, 2015 and our report dated February 16, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia

February 16, 2016

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of American Capital, Ltd.

We have audited the accompanying consolidated balance sheets of American Capital, Ltd., including the consolidated schedules of investments, as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2015, and the consolidated financial highlights for each of the five years in the period ended December 31, 2015. Our audit also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements, financial highlights, and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements, financial highlights, and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included verification by examination of securities held by custodians and brokers as of December 31, 2015, and confirmation of securities not held by the custodian by correspondence with brokers, or by other appropriate auditing procedures when replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the consolidated financial position of American Capital, Ltd. at December 31, 2015 and 2014, and the consolidated results of its operations, comprehensive income, changes in its net assets and its cash flows for each of the three years in the period ended December 31, 2015, and its consolidated financial highlights for each of the five years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), American Capital, Ltd.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 16, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia

February 16, 2016

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AMERICAN CAPITAL, LTD.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)



	December 31,
	2015			2014
Assets
Investments at fair value
Non-Control/Non-Affiliate investments (cost of $2,368 and $3,846, respectively)	$	2,097		$	3,472
Affiliate investments (cost of $35 and $29, respectively)	77			26
Control investments (cost of $2,502 and $2,542, respectively)	2,824			2,782
Total investments at fair value (cost of $4,905 and $6,417, respectively)	4,998			6,280
Cash and cash equivalents	483			676
Restricted cash and cash equivalents	46			167
Interest and dividend receivable	48			46
Deferred tax asset, net	198			354
Trade date settlement receivable	373			4
Other	98			113
Total assets	$	6,244		$	7,640
Liabilities and Shareholders’ Equity
Debt ($204 and $5 due within one year, respectively)	$	1,257		$	1,703
Trade date settlement liability	2			191
Long term incentive plan liability	34			82
Other	129			192
Total liabilities	1,422			2,168
Commitments and contingencies (Note 12)
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, 247.3 and 271.1 issued and 242.6 and 266.9 outstanding, respectively	2			3
Capital in excess of par value	5,847			6,246
Cumulative translation adjustment, net of tax	(101		)	(38		)
Distributions in excess of net realized earnings	(879		)	(505		)
Net unrealized depreciation of investments	(47		)	(234		)
Total shareholders’ equity	4,822			5,472
Total liabilities and shareholders’ equity	$	6,244		$	7,640
Net Asset Value Per Common Share Outstanding	$	19.88		$	20.50

See accompanying notes.

Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)



	Year Ended December 31,
	2015			2014			2013
Operating Revenue
Interest and dividend income
Non-Control/Non-Affiliate investments	$	316		$	153		$	162
Affiliate investments	3			(3		)	40
Control investments	288			263			221
Total interest and dividend income	607			413			423
Fee income
Non-Control/Non-Affiliate investments	15			13			11
Affiliate investments	—			3			1
Control investments	49			42			52
Total fee income	64			58			64
Total operating revenue	671			471			487
Operating Expenses
Interest	79			54			44
Salaries, benefits and stock-based compensation	137			168			156
European Capital management fees	13			5			—
General and administrative	64			61			55
Total operating expenses	293			288			255
Net Operating Income Before Income Taxes	378			183			232
Tax provision	(125		)	(66		)	(76		)
Net Operating Income	253			117			156
Net realized gain (loss)
Non-Control/Non-Affiliate investments	(308		)	39			(52		)
Affiliate investments	—			(32		)	11
Control investments	(388		)	256			(63		)
Foreign currency transactions	(18		)	(17		)	3
Derivative agreements and other	(4		)	(41		)	(14		)
Tax benefit (provision)	91			(53		)	60
Total net realized (loss) gain	(627		)	152			(55		)
Net unrealized appreciation (depreciation)
Portfolio company investments	211			149			49
Foreign currency translation	27			(74		)	52
Derivative agreements and other	67			35			19
Tax (provision) benefit	(118		)	55			(37		)
Total net unrealized appreciation	187			165			83
Total net (loss) gain	(440		)	317			28
Net (Decrease) Increase in Net Assets Resulting from Operations (“Net (Loss) Earnings”)	$	(187	)	$	434		$	184

Net Operating Income Per Common Share
Basic	$	0.95		$	0.44		$	0.53
Diluted	$	0.95		$	0.42		$	0.51
Net (Loss) Earnings Per Common Share
Basic	$	(0.70	)	$	1.62		$	0.63
Diluted	$	(0.70	)	$	1.55		$	0.61
Weighted Average Shares of Common Stock Outstanding
Basic	267.2			268.2			291.6
Diluted	267.2			280.7			303.9

See accompanying notes.

Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, except per share data)



	Year Ended December 31,
	2015			2014			2013

Net (loss) earnings	$	(187	)	$	434		$	184
Other comprehensive income (loss):
Cumulative translation adjustment, net of tax of $(1), $(7) and $0, respectively	(63		)	(38		)	—
Comprehensive (loss) income	$	(250	)	$	396		$	184

See accompanying notes.

Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(in millions, except per share data)



	Year Ended December 31,
	2015			2014			2013
Operations
Net operating income, net of tax	$	253		$	117		$	156
Net realized (loss) gain, net of tax	(627		)	152			(55		)
Net unrealized appreciation, net of tax	187			165			83
Net (loss) earnings	(187		)	434			184
Capital Share Transactions
Proceeds from issuance of common stock upon exercise of stock options	89			38			31
Repurchase of common stock	(526		)	(137		)	(561		)
Stock-based compensation	31			42			32
Cumulative translation adjustment, net of tax	(63		)	(38		)	—
Other	6			7			11
Net decrease in net assets resulting from capital share transactions	(463		)	(88		)	(487		)
Total (decrease) increase in net assets	(650		)	346			(303		)
Net assets at beginning of period	5,472			5,126			5,429
Net assets at end of period	$	4,822		$	5,472		$	5,126

Net asset value per common share outstanding	$	19.88		$	20.50		$	18.97
Common shares outstanding at end of period	242.6			266.9			270.2

See accompanying notes.

Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)



	Year Ended December 31,
	2015			2014			2013
Operating Activities
Net (loss) earnings	$	(187	)	$	434		$	184
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Net unrealized appreciation of investments before income taxes	(305		)	(110		)	(120		)
Net realized loss (gain) on investments before income taxes	718			(205		)	115
Effects on exchange rate changes on assets and liabilities denominated in foreign currencies	4			(8		)	—
Accrued PIK interest and dividends on investments	(104		)	(67		)	(100		)
Stock-based compensation	26			48			32
Increase in interest and dividend receivable	(2		)	(20		)	(4		)
Decrease in deferred tax asset, net	160			60			52
(Increase) decrease in other assets	(16		)	1			7
Increase in other liabilities	12			9			27
Payment of Long Term Incentive Plan Liability	(46		)	—			—
Other	10			3			—
Net cash provided by operating activities	270			145			193
Investing Activities
Purchases and originations of investments	(3,409		)	(3,206		)	(1,028		)
(Fundings on) repayments from portfolio company revolving credit facility investments, net	(7		)	(4		)	72
Principal repayments on debt investments	915			755			645
Proceeds from loan syndications and loan sales	2,357			98			14
Payment of accrued PIK notes and dividend and accreted original issue discounts	61			389			187
Proceeds from equity investments	388			1,523			362
Decrease (increase) in cash collateral on total return swaps	100			(35		)	(55		)
Other	10			(24		)	(24		)
Net cash provided by (used in) investing activities	415			(504		)	173
Financing Activities
(Payments on) proceeds from revolving credit facilities	(305		)	777			—
(Payments on) proceeds from secured term loan	(138		)	—			24
Payments on secured borrowings	—			(5		)	(174		)
Proceeds from unsecured borrowings	—			—			342
Payments on notes payable from asset securitizations	—			—			(178		)
Decrease (increase) in debt service escrows	13			(15		)	124
Proceeds from issuance of common stock upon exercise of stock options	89			38			31
Repurchase of common stock	(526		)	(137		)	(561		)
Other	3			5			10
Net cash (used in) provided by financing activities	(864		)	663			(382		)
Effect of currency rate changes on cash and cash equivalents	(14		)	—			—
Net (decrease) increase in cash and cash equivalents	(179		)	304			(16		)
Cash and cash equivalents at beginning of period	676			315			331
Increase in cash due to consolidation of European Capital	—			57			—
Cash and cash equivalents at end of period	$	483		$	676		$	315

Supplemental Disclosures
Cash paid for interest	$	68		$	47		$	33
Cash paid (received) from taxes	$	1		$	(9	)	$	3
Non-cash Investing Activities
Equity investment received related to the management agreement of American Capital Equity III, LP	$	—		$	22		$	—
Equity investment received from the contribution of Structured Products investments	$	—		$	—		$	25

See accompanying notes.

Table of Contents

AMERICAN CAPITAL, LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except per share data)



	Year Ended December 31,
	2015			2014			2013			2012			2011
Per Share Data
Net asset value at beginning of the period	$	20.50		$	18.97		$	17.84		$	13.87		$	10.71
Loss on extinguishment of debt, net of tax⁽¹⁾	—			—			—			(0.01		)	—
Net operating income⁽¹⁾	0.95			0.44			0.53			1.24			1.30
Net realized (loss) gain, net of tax⁽¹⁾	(2.35		)	0.57			(0.18		)	(0.84		)	(0.90		)
Net unrealized appreciation, net of tax⁽¹⁾	0.70			0.61			0.28			3.16			2.43
Net (loss) earnings⁽¹⁾	(0.70		)	1.62			0.63			3.55			2.83
Issuance of common stock from stock compensation plans	(0.56		)	(0.23		)	(0.20		)	(0.24		)	(0.05		)
Repurchase of common stock	0.75			0.16			0.66			0.77			0.32
Cumulative translation adjustment, net of tax	(0.26		)	(0.14		)	—			—			—
Other, net⁽²⁾	0.15			0.12			0.04			(0.11		)	0.06
Net asset value at end of period	$	19.88		$	20.50		$	18.97		$	17.84		$	13.87
Ratio/Supplemental Data
Per share market value at end of period	$	13.79		$	14.61		$	15.64		$	12.02		$	6.73
Total investment (loss) return⁽³⁾	(5.61		%)	(6.59		%)	30.12		%	78.61		%	(10.98		%)
Shares of common stock outstanding at end of period	242.6			266.9			270.2			304.4			329.1
Net assets at end of period	$	4,822		$	5,472		$	5,126		$	5,429		$	4,563
Average net assets⁽⁴⁾	$	5,297		$	5,284		$	5,444		$	5,152		$	4,181
Average debt outstanding⁽⁵⁾	$	2,157		$	1,091		$	694		$	960		$	1,662
Average debt outstanding per common share⁽¹⁾	$	8.07		$	4.07		$	2.38		$	3.00		$	4.83
Portfolio turnover rate	52.90		%	50.55		%	21.23		%	9.47		%	5.39		%
Ratio of operating expenses to average net assets	5.53		%	5.45		%	4.68		%	5.10		%	6.89		%
Ratio of operating expenses, net of interest expense, to average net assets	4.04		%	4.43		%	3.88		%	3.96		%	4.74		%
Ratio of interest expense to average net assets	1.49		%	1.02		%	0.81		%	1.15		%	2.15		%
Ratio of net operating income to average net assets	4.78		%	2.21		%	2.87		%	7.71		%	10.72		%


(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 U.S. GAAP expense credited to additional paid-in capital 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.


(3)	Total investment return is based on the change in the market value of our common stock taking into account dividends, if any, reinvested in accordance with the terms of our dividend reinvestment plan.


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


(5)	Based on a daily weighted average balance of debt outstanding, excluding discounts, during the period.

See accompanying notes.

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS December 31, 2015 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned	Principal		Cost		Fair Value
AMERICAN CAPITAL NON-CONTROL / NON-AFFILIATE INVESTMENTS
2 TransAm LLC(7)	Real Estate	First Lien Senior Debt(6)	5.4	%	N/A		1/18		$	6.1	$	6.1	$	6.1
AmWINS Group, LLC	Insurance	Second Lien Senior Debt	9.5	%	N/A		9/20		46.0		45.0		45.7
Bensussen Deutsch & Associates, LLC	Distributors	Second Lien Senior Debt(6)	12.0	%	2.0	%	9/19		44.0		42.0		44.8
Bensussen Deutsch & Associates, LLC		Common Stock(4)						1,224,089			2.2		12.9
											44.2		57.7
BeyondTrust Software, Inc.	Software	First Lien Senior Debt(6)	8.0	%	N/A		9/19		31.9		31.9		31.9
Blue Wolf Capital Fund II, L.P.(7)	Capital Markets	Limited Partnership Interest(4)									9.0		8.0
BRG Sports, Inc.	Leisure Products	Redeemable Preferred Stock(4)						2,009			2.5		3.0
		Common Units(4)						6,566,655			0.7		—
											3.2		3.0
Buena Vida CRP 17, LP	Real Estate	First Lien Senior Debt(6)	5.5	%	N/A		10/18		3.8		3.8		3.8
CAMP International Holding Company	Transportation Infrastructure	Second Lien Senior Debt(6)	8.3	%	N/A		11/19		15.0		15.0		14.6
Cast & Crew Payroll, LLC	Commercial Services & Supplies	Second Lien Senior Debt(6)	8.8	%	N/A		8/23		36.0		35.7		35.5
CGSC of Delaware Holdings Corporation(7)	Insurance	Second Lien Senior Debt(6)	8.3	%	N/A		10/20		2.0		2.0		1.9
Chariot Acquisition, LLC	Distributors	First Lien Senior Debt(6)	7.3	%	N/A		9/21		29.9		29.6		29.6
Compusearch Software Systems, Inc.	Software	Second Lien Senior Debt(6)	9.8	%	N/A		11/21		51.0		51.0		51.0
Convergint Technologies, LLC	Commercial Services & Supplies	Second Lien Senior Debt(6)	9.0	%	N/A		12/17-12/20		94.0		94.0		94.0
CPI Buyer, LLC	Trading Companies & Distributors	Second Lien Senior Debt(6)	8.5	%	N/A		8/22		25.0		24.7		23.7
Crossroads Equity Holdings LLC	Real Estate	First Lien Senior Debt(6)	5.7	%	N/A		6/18		3.2		3.2		3.2
Datapipe, Inc.	IT Services	Second Lien Senior Debt(6)	8.5	%	N/A		9/19		29.5		29.1		28.8
Delsey Holding S.A.S.(7)	Textiles, Apparel & Luxury Goods	Mezzanine Debt(6)	N/A		13.5	%	7/21		1.4		1.4		0.9
Denver II Hospitality, LLC	Real Estate	First Lien Senior Debt(6)	5.2	%	N/A		7/18		12.0		12.0		12.0
DiversiTech Corporation	Building Products	Second Lien Senior Debt(6)	9.0	%	N/A		11/22		9.5		9.4		9.4
Electronic Warfare Associates, Inc.	IT Services	First Lien Senior Debt(6)	13.0	%	N/A		2/19		15.0		15.0		15.0
Electronic Warfare Associates, Inc.		Common Stock Warrants(4)						863,887			0.8		0.8
											15.8		15.8
Exchange South Owner, LLC(7)	Real Estate	First Lien Senior Debt(6)	5.5	%	N/A		1/18		8.6		8.6		8.6
Financière OFIC S.A.S.(7)	Building Products	Warrants(4)						3,047,200			—		2.8
Flexera Software LLC	Software	Second Lien Senior Debt(6)	8.0	%	N/A		4/21		5.0		5.0		4.7
FXI Holdings, Inc.	Household Durables	Common Stock(4)						3,163			—		0.6
Galls, LLC	Specialty Retail	Second Lien Senior Debt(6)	9.5	%	N/A		6/17-8/21		26.0		26.0		26.0
The Gordian Group, Inc.	Internet Software & Services	First Lien Senior Debt(6)	5.4	%	N/A		7/19		40.4		40.4		39.6
HHG Stone Oak Hotel, LLC	Real Estate	First Lien Senior Debt(6)	5.2	%	N/A		9/18		10.4		10.4		10.4
Hyland Software, Inc.	Software	Second Lien Senior Debt(6)	8.3	%	N/A		7/23		10.0		10.0		9.4
Industrial Container Services, LLC	Containers & Packaging	First Lien Senior Debt(6)	6.8	%	N/A		12/18		49.9		49.9		49.9
		Second Lien Senior Debt(6)	10.2	%	N/A		12/19		10.0		9.9		9.9
											59.8		59.8
Infogix Parent Corporation	IT Services	First Lien Senior Debt(6)	7.8	%	N/A		12/21		155.0		151.6		151.6
		Redeemable Preferred Stock(6)						2,475			2.5		2.5
											154.1		154.1
Inmar, Inc.	Commercial Services & Supplies	Second Lien Senior Debt(6)	8.0	%	N/A		1/22		20.0		19.8		18.9
Iotum Global Holdings, Inc.(7)	Diversified Telecommunication Services	First Lien Senior Debt(6)	N/A		10.0	%	5/17		1.5		1.5		1.5
iParadigms, LLC	Internet Software & Services	Second Lien Senior Debt(6)	8.3	%	N/A		7/22		39.5		39.3		38.7
Jazz Acquisition, Inc.	Aerospace & Defense	Second Lien Senior Debt(6)	7.8	%	N/A		6/22		25.0		24.9		22.5

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2015 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
Kele Holdco, Inc.	Trading Companies & Distributors	First Lien Senior Debt(6)	7.0	%	N/A		10/20-10/22		71.3	71.3	71.3
	Trading Companies & Distributors	Common Stock(4)(6)						30,000		3.0	3.0
										74.3	74.3
Landslide Holdings, Inc.	Software	Second Lien Senior Debt(6)	8.3	%	N/A		2/21		9.0	9.0	8.3
Lenox Park C-F Owner, LLC	Real Estate	First Lien Senior Debt(6)	5.0	%	N/A		4/18		17.0	17.0	17.0
LTG Acquisition, Inc.	Communications Equipment	Second Lien Senior Debt(6)	9.0	%	N/A		10/20		46.0	46.0	42.9
	Communications Equipment	Common Stock(4)(6)						5,000		5.0	4.1
										51.0	47.0
Mitchell International, Inc.	Software	Second Lien Senior Debt(6)	8.5	%	N/A		10/21		17.0	16.9	16.3
M-IV Lake Center LLC(7)	Real Estate	First Lien Senior Debt(6)	5.5	%	N/A		12/17		7.0	7.0	7.0
Novetta Solutions, LLC	IT Services	First Lien Senior Debt(6)	6.0	%	N/A		10/22		13.0	12.9	12.7
		Second Lien Senior Debt(6)	9.5	%	N/A		10/23		31.0	30.7	30.8
										43.6	43.5
OnCourse Learning Corporation	Diversified Consumer Services	First Lien Senior Debt(6)	8.5	%	N/A		2/19		19.6	19.5	19.5
Osmose Utility Services, Inc.	Commercial Services & Supplies	Second Lien Senior Debt(6)	8.8	%	N/A		8/23		34.0	33.7	33.9
Park Place Technologies, LLC	IT Services	Second Lien Senior Debt(6)	10.0	%	N/A		12/22		41.5	41.5	41.5
Parmenter Woodland Park Plaza, LLC	Consumer Finance	First Lien Senior Debt(6)	5.2	%	N/A		9/18		16.9	16.9	16.9
Photonis Technologies SAS(7)	Aerospace & Defense	First Lien Senior Debt(6)	8.5	%	N/A		9/19		29.8	29.5	28.6
Qualium I(7)	Capital Markets	Common Stock(4)						247,939		5.2	4.8
Ranpak Corp.	Containers & Packaging	Second Lien Senior Debt(6)	8.3	%	N/A		10/22		25.0	25.0	24.8
Sage Products Holdings III, LLC	Health Care Equipment & Supplies	Second Lien Senior Debt(6)	9.3	%	N/A		6/20		20.6	20.7	20.7
Severin Acquisition, LLC	Software	Second Lien Senior Debt(6)	9.4	%	N/A		7/22		25.5	25.1	25.1
Sparta Systems, Inc.	IT Services	First Lien Senior Debt(6)	6.5	%	N/A		7/20		24.7	24.5	24.8
		Convertible Preferred Stock(6)						743		0.8	0.8
		Common Stock(4)						308,224		—	0.4
										25.3	26.0
Systems Maintenance Services Holding, Inc.	IT Services	Second Lien Senior Debt(6)	9.3	%	N/A		10/20		35.0	34.8	34.8
TA THI Parent, Inc.	Auto Components	Second Lien Senior Debt(6)	9.8	%	N/A		1/21		41.5	41.0	41.9
		Convertible Preferred Stock(4)(6)						25,000		2.5	3.3
										43.5	45.2
Teasdale Foods, Inc.	Food & Staples Retailing	Second Lien Senior Debt(6)	8.8	%	N/A		10/21		31.5	31.5	31.5
Tyche Holdings, LLC	IT Services	Second Lien Senior Debt(6)	9.0	%	N/A		11/22		35.0	34.9	34.4
Tyden Cayman Holdings Corp.(7)	Electronic Equipment, Instruments & Components	Convertible Preferred Stock(4)(6)						46,276		0.1	0.1
Tyden Cayman Holdings Corp.(7)		Common Stock(4)(6)						5,521,203		5.5	3.8
										5.6	3.9
W3 Co.	Commercial Services & Supplies	Second Lien Senior Debt(6)	9.3	%	N/A		9/20		8.9	8.8	5.0
WP CPP Holdings, LLC	Aerospace & Defense	Second Lien Senior Debt(6)	8.8	%	N/A		4/21		19.7	19.6	17.9
WRH, Inc.	Life Sciences Tools & Services	Mezzanine Debt(6)	9.0	%	6.2	%	8/18		102.8	102.5	98.5

EUROPEAN CAPITAL NON-CONTROL / NON-AFFILIATE INVESTMENTS
Delsey Holding S.A.S.(7)	Textiles, Apparel & Luxury Goods	Mezzanine Debt	N/A		13.5	%	7/21		7.4	7.4	5.4
Financière Newglass S.A.S.(7)	Building Products	Convertible Preferred Stock						15,000,000		17.3	14.0
Modacin France S.A.S.(7)	Specialty Retail	Mezzanine Debt(5)	—	%	4.3	%	11/19		21.7	11.3	—
Mobipark S.A.S.(7)	Electronic Equipment, Instruments & Components	First Lien Senior Debt	0.8	%	N/A		10/17-12/17		2.3	2.1	2.0
Zodiac Marine and Pool S.A.(7)	Marine	Second Lien Senior Debt(5)	—	%	4.0	%	3/17		35.5	24.8	—
Zodiac Marine and Pool S.A.(7)	Marine	Mezzanine Debt(5)	—	%	8.3	%	9/17		76.1	38.9	—
										63.7	—

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2015 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
SENIOR FLOATING RATE LOANS
Advantage Sales & Marketing Inc.	Professional Services	Second Lien Senior Debt(6)	7.5	%	N/A	7/22		0.8	0.7	0.7
Aquilex LLC	Commercial Services & Supplies	First Lien Senior Debt(6)	5.0	%	N/A	12/20		2.0	1.9	1.9
BarBri, Inc.	Diversified Consumer Services	First Lien Senior Debt(6)	4.5	%	N/A	7/19		5.0	5.0	4.2
CT Technologies Intermediate Holdings, Inc.	Health Care Technology	First Lien Senior Debt(6)	5.3	%	N/A	12/21		0.5	0.5	0.5
Drew Marine Group Inc.	Chemicals	First Lien Senior Debt(6)	4.3	%	N/A	11/20		1.9	1.9	1.8
Hudson Products Holdings Inc.	Energy Equipment & Services	First Lien Senior Debt(6)	5.0	%	N/A	3/19		5.0	5.0	4.3
Immucor, Inc.	Health Care Equipment & Supplies	First Lien Senior Debt(6)	5.0	%	N/A	8/18		6.3	6.4	6.1
Indra Holdings Corp.	Textiles, Apparel & Luxury Goods	First Lien Senior Debt(6)	5.3	%	N/A	5/21		3.0	3.0	2.8
Mitchell International, Inc.	Software	First Lien Senior Debt(6)	4.5	%	N/A	10/20		9.2	9.2	8.7
Opal Acquisition, Inc.	Health Care Providers & Services	First Lien Senior Debt(6)	5.0	%	N/A	11/20		9.3	9.3	7.7
Southwire Company, LLC	Electrical Equipment	First Lien Senior Debt(6)	3.3	%	N/A	2/21		12.6	12.6	12.3
STS Operating, Inc.	Trading Companies & Distributors	First Lien Senior Debt(6)	4.8	%	N/A	2/21		2.0	2.0	1.9
Wesco Aircraft Hardware Corp.(7)	Aerospace & Defense	First Lien Senior Debt(6)	3.3	%	N/A	2/21		4.7	4.7	4.5

AMERICAN CAPITAL CMBS INVESTMENTS
CD 2007-CD4 Commercial Mortgage Trust(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.7	%	N/A	12/49		16.0	1.1	3.8
CD 2007-CD5 Mortgage Trust(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	6.1	%	N/A	12/17		8.8	3.6	0.8
Citigroup Commercial Mortgage Securities Trust 2007-C6(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.7	%	N/A	7/17		45.4	15.9	9.3
Credit Suisse Commercial Mortgage Trust Series 2007-C4(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.9	%	N/A	8/17		5.9	2.2	1.8
LB-UBS Commercial Mortgage Trust 2007-C6(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	6.1	%	N/A	8/17		4.9	—	1.8
Wachovia Bank Commercial Mortgage Trust 2007-C31(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.8	%	N/A	5/17		20.0	10.6	1.0
Wachovia Bank Commercial Mortgage Trust, Series 2007-C32(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.7	%	N/A	10/17		60.5	10.5	7.0
Wachovia Bank Commercial Mortgage Trust, Series 2007-C34(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.9	%	N/A	10/17		5.2	5.2	5.1

AMERICAN CAPITAL CLO INVESTMENTS
ACAS CLO 2007-1, Ltd.(7)		Secured Notes(6)				4/21		8.5	8.4	8.3
ACAS CLO 2007-1, Ltd.(7)		Subordinated Notes(6)				4/21		25.9	10.8	12.6
									19.2	20.9
Apidos CLO XVIII, Ltd.(7)		Subordinated Notes(6)				7/26		39.4	33.3	21.2
Apidos CLO XXI(7)		Subordinated Notes(6)				6/27		12.4	11.8	9.7
Ares IIIR/IVR CLO Ltd.(7)		Subordinated Notes(6)				4/21		20.0	11.0	5.2
Babson CLO Ltd. 2006-II(7)		Income Notes(4)(6)				10/20		15.0	2.9	—
Babson CLO Ltd. 2013-II(7)		Income Notes(6)				1/25		5.0	3.9	2.9
Babson CLO Ltd. 2014-I(7)		Subordinated Notes(6)				7/25		8.5	6.4	4.0
Babson CLO Ltd. 2014-II(7)		Subordinated Notes(6)				9/26		25.0	20.7	10.7
Blue Hill CLO, Ltd.(7)		Subordinated Notes(6)				1/26		10.6	17.8	6.7

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2015 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal		Cost		Fair Value
Carlyle Global Market Strategies CLO 2013-3, Ltd.(7)		Subordinated Notes(6)				7/25		5.0		3.5		3.1
Carlyle Global Market Strategies CLO 2015-3, Ltd.(7)		Subordinated Notes(6)				7/28		28.2		25.4		22.9
Cent CDO 12 Limited(7)		Income Notes(6)				11/20		26.4		12.7		29.0
Cent CLO 22 Limited(7)		Subordinated Notes(6)				11/26		45.4		38.1		19.6
Cent CLO 24 Limited(7)		Subordinated Notes(6)				10/26		28.0		25.9		22.7
Centurion CDO 8 Limited(7)		Subordinated Notes(4)(6)				3/17		5.0		0.2		—
CoLTs 2005-1 Ltd.(7)		Preference Shares(4)(6)				3/16	360			1.7		0.1
CoLTs 2005-2 Ltd.(7)		Preference Shares(4)(6)				12/18	34,170,000			11.1		0.4
CREST Exeter Street Solar 2004-1(7)		Preferred Securities(4)(6)				6/39	3,500,000			3.2		—
Dryden 40 Senior Loan Fund(7)		Subordinated Notes(6)				8/28		9.5		8.2		7.0
Eaton Vance CDO X plc(7)		Secured Subordinated Notes(6)				2/27		15.0		11.3		5.6
Flagship CLO V(7)		Deferrable Notes(6)				9/19		1.7		1.5		1.7
		Subordinated Securities(6)				9/19	15,000			7.3		1.1
										8.8		2.8
Galaxy III CLO, Ltd(7)		Subordinated Notes(4)				8/16		4.0		0.2		—
GoldenTree Loan Opportunities VII, Limited(7)		Subordinated Notes(6)				4/25		35.3		31.7		22.7
Halcyon Loan Advisors Funding 2014-1 Ltd.(7)		Subordinated Notes(6)				2/26		1.3		1.0		0.5
Halcyon Loan Advisors Funding 2015-2, Ltd.(7)		Subordinated Notes(6)				7/27		21.7		20.3		18.0
Herbert Park B.V.(7)		Subordinated Notes(6)				10/26		24.0		25.9		19.9
LightPoint CLO IV, LTD(7)		Income Notes(4)(6)				4/18		6.7		3.6		—
LightPoint CLO VII, Ltd.(7)		Subordinated Notes(6)				5/21		9.0		2.6		1.4
Madison Park Funding XII, Ltd.(7)		Subordinated Notes(6)				7/26		10.0		8.6		7.1
Madison Park Funding XIII, Ltd.(7)		Subordinated Notes(6)				1/25		30.9		25.5		19.8
Mayport CLO Ltd.(7)		Income Notes				2/20		14.0		7.8		0.1
NYLIM Flatiron CLO 2006-1 LTD.(7)		Subordinated Securities(6)				8/20	10,000			4.4		2.4
Och Ziff Loan Management XIII, Ltd.(7)		Subordinated Notes(6)				7/27		15.0		14.2		12.3
Octagon Investment Partners XVIII, Ltd.(7)		Subordinated Notes(6)				12/24		16.4		12.9		9.4
Octagon Investment Partners XIX, Ltd.(7)		Subordinated Notes(6)				4/26		25.0		18.8		14.7
OHA Credit Partners XI, Ltd.(7)		Subordinated Notes(6)				10/28		33.5		29.7		27.9
Sapphire Valley CDO I, Ltd.(7)		Subordinated Notes(6)				12/22		14.0		16.7		11.6
THL Credit Wind River 2014-2 CLO Ltd.(7)		Income Notes				7/26		15.0		10.1		7.4
Vitesse CLO, Ltd.(7)		Preferred Securities(4)(6)				8/20	20,000,000			11.9		—
Voya CLO 2014-4, Ltd.(7)		Subordinated Notes(6)				10/26		26.7		23.2		17.0
Subtotal Non-Control / Non-Affiliate Investments (42% of total investments at fair value)										$	2,367.6	$	2,096.7

AMERICAN CAPITAL AFFILIATE INVESTMENTS
IS Holdings I, Inc.	Software	Common Stock(4)(6)					2,000,000			$	5.2	$	13.7
Mobipark S.A.S.(7)	Electronic Equipment, Instruments & Components	First Lien Senior Debt(6)	2.2	%	N/A	12/17		$	4.0	3.8		3.4
		Convertible Preferred Stock(4)(6)					28,317,268			9.0		21.0
		Redeemable Preferred Stock(4)(6)					25,751,312			7.3		24.0
										20.1		48.4

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2015 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned		Principal		Cost		Fair Value
Primrose Holding Corporation	Diversified Consumer Services	Common Stock(6)						7,227				—		6.5
Roark - Money Mailer, LLC	Media	Common Membership Units(4)						6.0	%			0.7		1.7

EUROPEAN CAPITAL AFFILIATE INVESTMENTS
Blue Topco GmbH(7)	Commercial Services & Supplies	First Lien Senior Debt	2.9	%	N/A		6/16-6/18			2.3		2.0		2.0
Blue Topco GmbH(7)	Commercial Services & Supplies	Mezzanine Debt(5)	N/A		3.2%		12/18			8.0		6.9		4.9
												8.9		6.9
Subtotal Affiliate Investments (2% of total investments at fair value)												$	34.9	$	77.2

AMERICAN CAPITAL CONTROL INVESTMENTS
ACAS Real Estate Holdings Corporation	Real Estate	Mezzanine Debt(5)(6)	N/A		15.0	%	5/16			$	6.5	$	3.9	$	4.5
ACAS Real Estate Holdings Corporation		Common Stock(6)						100	%			6.2		24.5
												10.1		29.0
ACEI Singapore Holdings Private LTD(7)	Electric Utilities	Common Stock(4)(6)						7,055,706				7.1		7.1
American Capital Asset Management, LLC	Capital Markets	Mezzanine Debt(6)	5.0	%	N/A		9/16			35.0		35.0		35.0
American Capital Asset Management, LLC		Common Membership Interest(6)						100	%			499.1		1,030.0
												534.1		1,065.0
American Driveline Systems, Inc.	Diversified Consumer Services	Mezzanine Debt(6)	N/A		11.0	%	3/21			47.7		47.7		47.7
		Redeemable Preferred Stock(4)(6)						7,121				83.5		20.2
		Common Stock(4)(6)						289,215				18.2		—
		Common Stock Warrants(4)(6)						233,603				9.8		—
												159.2		67.9
ASAP Industries Holdings, LLC	Energy Equipment & Services	Mezzanine Debt(5)(6)	N/A		14.0	%	12/18			22.7		19.5		—
ASAP Industries Holdings, LLC	Energy Equipment & Services	Membership Units(4)(6)						106,911				30.3		—
												49.8		—
BMR Energy LLC(7)	Independent Power & Renewable Electricity Producers	Preferred Units(6)						32,481				34.5		34.5
		Common Units(4)(6)						85				—		17.5
												34.5		52.0
Capital.com, Inc.	Diversified Financial Services	Common Stock(4)(6)						8,500,100				0.9		—
CML Pharmaceuticals, LLC	Life Sciences Tools & Services	First Lien Senior Debt(6)	6.5	%	N/A		3/17-10/20			97.9		97.1		97.9
		Mezzanine Debt(6)	7.2	%	6.0%		10/20			141.0		139.9		141.0
		Redeemable Preferred Stock(4)(6)						84,936				61.0		10.0
												298.0		248.9
ECA Acquisition Holdings, Inc.	Health Care Equipment & Supplies	First Lien Senior Debt(6)	10.0	%	N/A		3/16			8.9		8.9		8.9
ECA Acquisition Holdings, Inc.	Health Care Equipment & Supplies	Mezzanine Debt(5)(6)	13.0	%	3.5	%	7/16			18.7		12.6		11.1
		Redeemable Preferred Stock(4)(6)						1,550				1.6		—
		Common Stock(4)(6)						1,000				14.9		—
												38.0		20.0
eLynx Holdings, Inc.	IT Services	Convertible Preferred Stock(6)						11,728				34.6		39.7
		Redeemable Preferred Stock(4)(6)						30,162				12.4		—
		Common Stock(4)(6)						16,087				1.1		—
		Common Stock Warrants(4)(6)						1,026,321				5.5		—
												53.6		39.7
EXPL Pipeline Holdings LLC(7)	Oil, Gas & Consumable Fuels	First Lien Senior Debt(6)	8.1	%	N/A		1/17			41.9		41.6		43.7
EXPL Pipeline Holdings LLC(7)	Oil, Gas & Consumable Fuels	Common Membership Units(4)(6)						100,000				60.6		37.2
												102.2		80.9
FAMS Acquisition, Inc.	Diversified Financial Services	Mezzanine Debt(6)	12.3	%	2.7	%	2/16			38.8		38.8		31.1
FPI Holding Corporation	Food Products	First Lien Senior Debt(5)(6)	N/A		20.0	%	1/16			0.4		0.4		—
Group Montana, Inc.	Textiles, Apparel & Luxury Goods	First Lien Senior Debt(6)	6.3	%	N/A		1/17			5.6		5.6		5.6
	Textiles, Apparel & Luxury Goods	Convertible Preferred Stock(4)(6)						4,000				4.0		5.1
		Common Stock(4)(6)						100	%			12.5		—
												22.1		10.7
Halex Holdings, Inc.	Construction Materials	Second Lien Senior Debt(5)(6)	8.5	%	N/A		1/18			15.6		15.6		15.6
		Common Stock(4)(6)						51,853				9.3		11.7
												24.9		27.3
HALT Medical, Inc.	Health Care Equipment & Supplies	First Lien Senior Debt(5)(6)	N/A		22.0	%	6/16			96.0		61.2		23.3
Hard 8 Games, LLC	Hotels, Restaurants & Leisure	First Lien Convertible Senior Debt	N/A		6.6	%	3/16			34.9		34.9		34.9
	Hotels, Restaurants & Leisure	Membership Units(4)						2				24.0		23.1
												58.9		58.0

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2015 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned		Principal	Cost	Fair Value
Hollyhock Limited(7)	Independent Power & Renewable Electricity Producers	Common Stock(4)(6)						34,000,000			34.0	33.2
LLSC Holdings Corporation	Personal Products	Convertible Preferred Stock(4)(6)						9,000			10.9	18.8
LLSC Holdings Corporation		Common Stock(4)(6)						1,000			—	0.4
		Common Stock Warrants(4)(6)						675			—	0.3
											10.9	19.5
Montgomery Lane, LLC(7)	Diversified Financial Services	Common Membership Units(4)(6)						100			—	6.4
MW Acquisition Corporation	Health Care Providers & Services	Mezzanine Debt(6)	14.4	%	1.0	%	2/19			24.2	24.2	24.2
MW Acquisition Corporation	Health Care Providers & Services	Redeemable Preferred Stock(6)						2,485			2.7	2.8
		Convertible Preferred Stock(6)						88,084			50.1	63.2
		Common Stock(4)(6)						110,720			—	5.7
											77.0	95.9
NECCO Holdings, Inc.	Food Products	First Lien Senior Debt(5)(6)	6.5	%	N/A		11/16			19.1	16.2	14.0
		Second Lien Senior Debt(5)(6)	N/A		18.0	%	11/16			7.7	3.1	—
		Common Stock(4)(6)						860,189			0.1	—
											19.4	14.0
NECCO Realty Investments, LLC	Real Estate	First Lien Senior Debt(5)(6)	2.8	%	11.2	%	12/17			75.4	32.8	24.9
NECCO Realty Investments, LLC		Common Membership Units(4)(6)						7,450			4.9	—
											37.7	24.9
PHC Sharp Holdings, Inc.	Commercial Services & Supplies	First Lien Senior Debt(6)	12.5	%	N/A		1/18			1.4	1.4	1.4
	Commercial Services & Supplies	Mezzanine Debt(6)	N/A		17.0	%	1/18			11.6	11.6	11.6
		Mezzanine Debt(5)(6)	N/A		19.0	%	1/18			30.3	20.2	20.5
		Common Stock(4)(6)						631,049			4.2	—
											37.4	33.5
RD Holdco Inc.	Household Durables	Second Lien Senior Debt(6)	11.3	%	N/A		12/18			16.9	15.4	16.6
		Common Stock(4)(6)						458,596			23.6	13.9
		Common Stock Warrants(4)(6)						56,372			2.9	1.7
											41.9	32.2
Rebellion Media Group Corp.(7)	Internet Software & Services	First Lien Senior Debt(5)(6)	N/A		12.0	%	4/16			20.3	12.3	3.9
Scanner Holdings Corporation	Technology Hardware, Storage & Peripherals	Mezzanine Debt(6)	14.0	%	N/A		6/22			16.6	16.6	16.6
Scanner Holdings Corporation		Convertible Preferred Stock(6)						66,424,135			8.7	11.2
		Common Stock						167,387			0.1	—
											25.4	27.8
SEHAC Holding Corporation	Diversified Consumer Services	Convertible Preferred Stock(6)						14,850			14.8	158.5
SEHAC Holding Corporation	Diversified Consumer Services	Common Stock(4)(6)						150			0.2	1.6
											15.0	160.1
Soil Safe Acquisition Corp.	Professional Services	First Lien Senior Debt(6)	8.0	%	N/A		1/18-12/18			21.7	21.7	21.7
		Second Lien Senior Debt(6)	10.8	%	N/A		7/19			12.7	12.7	12.7
		Mezzanine Debt(6)	8.6	%	7.5	%	12/19			72.3	72.2	72.3
		Common Stock(4)						810			9.0	15.3
											115.6	122.0
Taiba Wind Energy, LLC(7)	Independent Power & Renewable Electricity Producers	Membership Units(4)(6)						100	%		1.3	1.3
Warner Power, LLC	Electrical Equipment	Mezzanine Debt(5)(6)	N/A		14.6	%	1/16			11.2	3.1	0.9
		Redeemable Preferred Membership Units(4)(6)						6,512,000			3.0	—
		Common Membership Units(4)(6)						47,000			1.9	—
											8.0	0.9
WIS Holding Company, Inc.	Commercial Services & Supplies	Convertible Preferred Stock(4)(6)						1,206,598			115.3	84.5
WIS Holding Company, Inc.	Commercial Services & Supplies	Common Stock(4)(6)						301,650			16.0	—
											131.3	84.5

EUROPEAN CAPITAL CONTROL INVESTMENTS
Bellotto Holdings Limited(7)	Household Durables	Redeemable Preferred Stock						7,300,610		2.3	40.0	41.8
Bellotto Holdings Limited(7)		Common Stock(4)						2,697,010			95.5	123.7
											135.5	165.5
Columbo TopCo Limited(7)	Commercial Services & Supplies	Redeemable Preferred Stock(4)						34,179,330		23.5	74.2	47.3
	Commercial Services & Supplies	Common Stock(4)						757,743			1.1	—
											75.3	47.3

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2015 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned		Principal	Cost		Fair Value
European Capital Private Debt LP(7)	Diversified Financial Services	Partnership Interest						1,650			80.5		84.9
European Capital UK SME Debt LP(7)	Diversified Financial Services	Partnership Interest						500			12.5		12.3
Financière Tarmac S.A.S.(7)	Commercial Services & Supplies	First Lien Senior Debt	4.0%		N/A		12/20			3.8	3.1		3.8
Financière Tarmac S.A.S.(7)	Commercial Services & Supplies	Mezzanine Debt	N/A		4.0	%	12/21			73.5	62.0		64.1
		Convertible Preferred Stock(4)						15,500,000			9.4		—
		Redeemable Preferred Stock(4)								5.3	7.3		—
											81.8		67.9
HCV1 S.A.S(7)	Machinery	First Lien Senior Debt	6.0	%	7.7	%	2/20			3.4	3.4		3.4
		Common Stock(4)						14,569,412			25.2		—
											28.6		3.4
Holding Saint Augustine S.A.S.(7)	Air Freight & Logistics	First Lien Senior Debt	N/A		N/A		9/19			4.4	4.4		—
Miles 33 Limited(7)	Software	First Lien Senior Debt	4.0%		1.3	%	12/17-9/18			7.5	7.5		7.5
		Mezzanine Debt(5)	5.0%		5.0	%	9/21			16.9	13.4		13.4
											20.9		20.9

AMERICAN CAPITAL CONTROL CLO INVESTMENT
ACAS Wachovia Investments, L.P.(7)	Diversified Financial Services	Partnership Interest(4)						90	%		1.9		0.5
Subtotal Control Investments (56% of total investments at fair value)											$	2,502.4	$	2,823.7
Total Investment Assets											$	4,904.9	$	4,997.6



Counterparty	Instrument	Interest Rate(2)	Expiration Date(2)	# of Contracts	Notional		Cost		Fair Value
DERIVATIVE AGREEMENTS

Citibank, N.A.	Interest Rate Swap - Pay Fixed/ Receive Floating(6)	5.6%/LIBOR	5/16-7/17	2	$	27.5	$	—	$	(2.3	)
BNP Paribas	Interest Rate Swap - Pay Fixed/ Receive Floating(6)	5.7%/LIBOR	7/17	1	22.3		—		(2.1		)
Wells Fargo Bank, N.A	Interest Rate Swap - Pay Fixed/ Receive Floating(6)	5.6%/LIBOR	8/16	1	11.9		—		(0.4		)
Total Derivative Agreements							$	—	$	(4.8	)



Funds	Cost		Fair Value
MONEY MARKET FUNDS(3)
JPMorgan Prime Money Market Fund	$	22.0	$	22.0
BlackRock Liquidity Funds TempFund Institutional Shares(6)	15.0		15.0
BofA Funds Series Trust - BofA Money Market Reserves(6)	15.0		15.0
Fidelity Institutional Money Market Prime Money Market Portfolio - Institutional CL(6)	15.0		15.0
Heritage Money Market Fund(6)	15.0		15.0
Deutsche Global Liquidity Managed Sterling Fund	5.6		5.6
Total Money Market Funds	$	87.6	$	87.6


(1)	Certain of the securities are issued by affiliate(s) of the listed portfolio company.

(2)

Interest rates represent the weighted average annual stated interest rate on loans and debt securities in effect on the date presented, which are presented by the nature of indebtedness by a single issuer. Some loans and debt securities bear interest at variable rates, primarily the three-month London Interbank Offered Rate (“LIBOR”), with interest rate floors. Payment-in-kind interest (“PIK”) represents contractually deferred interest that is typically compounded into the principal balance of the loan or debt security, if not paid on a current basis. PIK interest may be prepaid by the portfolio company’s election, but generally is paid upon a change of control transaction or maturity. The maturity date represents the latest date in which the loan or debt security is scheduled to terminate.


(3)	Included in cash and cash equivalents and restricted cash and cash equivalents on our consolidated balance sheets.


(4)	Some or all of the securities are non-income producing.


(5)	Loan is on non-accrual status and therefore considered non-income producing.


(6)	All or a portion of the investments or instruments are pledged as collateral under various secured financing arrangements.


(7)	Investments that are not “qualifying assets” under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.As of December 31, 2015, non-qualifying assets were approximately $1.2 billion, or 25% of net assets.

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned		Principal		Cost		Fair Value
AMERICAN CAPITAL NON-CONTROL / NON-AFFILIATE INVESTMENTS
2 TransAm LLC	Real Estate	First Lien Senior Debt(6)	5.4	%	N/A		1/18			$	5.6	$	5.6	$	5.6
Aderant North America, Inc.	Software	Second Lien Senior Debt(6)	10.0	%	N/A		6/19			16.0		15.8		16.2
American Acquisition, LLC(7)	Capital Markets	First Lien Senior Debt(6)	19.3	%	N/A		3/15			2.7		2.7		2.7
AmWINS Group, LLC	Insurance	Second Lien Senior Debt	9.5	%	N/A		9/20			46.0		44.8		45.1
Bensussen Deutsch & Associates, LLC	Distributors	Second Lien Senior Debt(6)	12.0	%	2.0	%	9/19			45.3		42.9		42.8
		Common Stock(4)						1,224,089				2.5		4.7
												45.4		47.5
BeyondTrust Software, Inc.	Software	First Lien Senior Debt(6)	8.0	%	N/A		9/19			27.6		27.6		27.6
Blue Wolf Capital Fund II, L.P.(7)	Capital Markets	Limited Partnership Interest(4)										8.8		8.6
BRG Sports, Inc.	Leisure Products	Redeemable Preferred Stock(4)						1,171				1.2		1.8
		Common Units(4)						3,830,068				0.7		—
												1.9		1.8
CAMP International Holding Company	Transportation Infrastructure	Second Lien Senior Debt(6)	8.3	%	N/A		11/19			15.0		15.0		15.1
CGSC of Delaware Holdings Corporation(7)	Insurance	Second Lien Senior Debt(6)	8.3	%	N/A		10/20			2.0		2.0		1.8
Convergint Technologies, LLC	Commercial Services & Supplies	Second Lien Senior Debt(6)	9.0	%	N/A		12/17-12/20			75.0		75.0		75.0
CPI Buyer, LLC	Trading Companies & Distributors	Second Lien Senior Debt(6)	8.5	%	N/A		8/22			25.0		24.6		24.7
Datapipe, Inc.	IT Services	Second Lien Senior Debt(6)	8.5	%	N/A		9/19			29.5		29.1		28.5
Delsey Holding S.A.S.(7)	Textiles, Apparel & Luxury Goods	First Lien Senior Debt(6)	6.5	%	3.3	%	12/16			15.3		15.2		13.9
	Textiles, Apparel & Luxury Goods	Mezzanine Debt(5)(6)	N/A		11.0	%	12/22			2.1		1.8		0.4
												17.0		14.3
Exchange South Owner, LLC(7)	Real Estate	First Lien Senior Debt(6)	7.7	%	N/A		1/19			6.9		6.9		6.9
Flexera Software LLC	Software	Second Lien Senior Debt(6)	8.0	%	N/A		4/21			5.0		5.0		4.8
FXI Holdings, Inc.	Household Durables	Common Stock(4)						2,708				—		0.6
		Common Stock Warrants(4)(6)						7,067				—		0.2
												—		0.8
Inmar, Inc.	Commercial Services & Supplies	Second Lien Senior Debt(6)	8.0	%	N/A		1/22			20.0		19.8		19.6
Iotum Global Holdings, Inc.(7)	Diversified Telecommunication Services	First Lien Senior Debt(6)	N/A		10.0	%				2.4		2.4		2.4
iParadigms, LLC	Internet Software & Services	Second Lien Senior Debt(6)	8.3	%	N/A		7/22			27.0		26.8		26.6
Jazz Acquisition, Inc.	Aerospace & Defense	Second Lien Senior Debt(6)	7.8	%	N/A		6/22			25.0		24.9		24.5
Landslide Holdings, Inc.	Software	Second Lien Senior Debt(6)	8.3	%	N/A		2/21			9.0		9.0		8.8
LTG Acquisition, Inc.	Communications Equipment	Second Lien Senior Debt(6)	9.0	%	N/A		10/20			46.0		46.0		45.6
	Communications Equipment	Common Stock(4)(6)						5,000				5.0		7.3
												51.0		52.9
Mitchell International, Inc.	Software	Second Lien Senior Debt(6)	8.5	%	N/A		10/21			7.0		6.9		7.0
M-IV Lake Center LLC(7)	Real Estate	First Lien Senior Debt(6)	5.4	%	N/A		12/17			6.1		6.1		6.1
Mobipark S.A.S.(7)	Electronic Equipment, Instruments & Components	First Lien Senior Debt(6)	2.4	%	N/A		12/17			4.3		4.0		3.6
		Redeemable Preferred Stock(4)(6)						5,234,743				0.5		1.2
												4.5		4.8
Parts Holding Coörperatief U.A(7)	Distributors	Membership Entitlements(4)						173,060				6.4		1.7
Qualium I(7)	Capital Markets	Common Stock(4)						247,939				6.9		6.9
Ranpak Corp.	Containers & Packaging	Second Lien Senior Debt(6)	8.3	%	N/A		10/22			25.0		25.0		25.0
Roark - Money Mailer, LLC	Media	Common Membership Units						3.5	%			—		0.8
Sage Products Holdings III, LLC	Health Care Equipment & Supplies	Second Lien Senior Debt(6)	9.3	%	N/A		6/20			22.8		22.9		22.6
Sparta Systems, Inc.	IT Services	First Lien Senior Debt(6)	6.3	%	1.5%		7/20			24.9		24.7		24.7
		Convertible Preferred Stock(6)						743				0.8		0.8
												25.5		25.5

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
Systems Maintenance Services Holding, Inc.	IT Services	Second Lien Senior Debt(6)	9.3	%	N/A		10/20		28.0	27.8	27.8
TA THI Parent, Inc.	Auto Components	Second Lien Senior Debt(6)	9.8	%	N/A		1/21		41.5	40.9	40.9
		Convertible Preferred Stock(4)(6)						25,000		2.5	2.5
										43.4	43.4
Teasdale Foods, Inc.	Food & Staples Retailing	Second Lien Senior Debt(6)	8.8	%	N/A		10/21		31.5	31.5	31.5
Tyche Holdings, LLC	IT Services	Second Lien Senior Debt(6)	9.0	%	N/A		11/22		27.0	26.9	26.7
Tyden Cayman Holdings Corp.(7)	Electronic Equipment, Instruments & Components	Convertible Preferred Stock(4)(6)						26,977		0.1	0.1
Tyden Cayman Holdings Corp.(7)		Common Stock(4)(6)						3,218,667		3.8	2.3
										3.9	2.4
W3 Co.	Health Care Equipment & Supplies	Second Lien Senior Debt(6)	9.3	%	N/A		9/20		17.0	16.8	16.4
WP CPP Holdings, LLC	Aerospace & Defense	Second Lien Senior Debt(6)	8.8	%	N/A		4/21		40.0	39.8	38.2
WRH, Inc.(8)	Life Sciences Tools & Services	Mezzanine Debt(6)	9.3	%	5.9	%	8/18		95.8	95.6	92.5
	Life Sciences Tools & Services	Convertible Preferred Stock(4)(6)						2,008,575		200.9	96.9
		Common Stock(4)(6)						502,144		49.8	—
										346.3	189.4

EUROPEAN CAPITAL NON-CONTROL / NON-AFFILIATE INVESTMENTS
Delsey Holding S.A.S.(7)	Textiles, Apparel & Luxury Goods	First Lien Senior Debt	6.5%		2.0	%	12/16		89.4	89.4	84.2
	Textiles, Apparel & Luxury Goods	Mezzanine Debt(5)	N/A		11.0	%	12/22		12.2	10.5	2.4
										99.9	86.6
Financière OFIC S.A.S.(7)	Building Products	Warrants(4)						1,574,600		—	2.8
Financière Poult S.A.S.(7)	Food Products	Mezzanine Debt	5.0%		5.3	%	6/22		16.2	16.2	15.9
Financière Riskeco S.A.S.(7)	Diversified Consumer Services	First Lien Senior Debt	6.5%		2.0	%	7/21		14.1	14.1	13.7
The Flexitallic Group S.A.S.(7)	Energy Equipment & Services	First Lien Senior Debt	4.5%		4.5	%	7/20		26.6	26.6	26.3
Groupe INSEEC(7)	Education Services	First Lien Senior Debt	6.0%		3.0	%	12/20		47.1	47.1	45.8
HCV1 S.A.S(7)	Machinery	Mezzanine Debt(5)	4.5%		5.0	%	2/17		49.1	28.1	—
Hilding Anders AB(7)	Household Durables	Mezzanine Debt(5)	N/A		12.0	%	12/19		36.2	17.7	—
Legendre Holding 31 S.A.(7)	Leisure Products	First Lien Senior Debt	5.7%		N/A		1/21		68.4	68.4	65.0
Legendre Holding 31 S.A.(7)		Common Stock(4)						51,975,983		6.3	6.3
										74.7	71.3
Modacin France S.A.S.(7)	Textiles, Apparel & Luxury Goods	Mezzanine Debt(5)	4.0%		4.5	%	5/17		23.2	12.6	—
Parts Holding Coörperatief U.A.(7)	Auto Components	Common Stock(4)						568,624		—	5.4
Skrubbe Vermogensverwaltungsgesellschaft mbH(7)	Hotels, Restaurants & Leisure	First Lien Senior Debt	4.5%		3.0	%	7/20		12.3	12.3	12.1
Unipex Neptune International SAS(7)	Chemicals	Mezzanine Debt	7.0%		5.0	%	9/20		5.3	5.3	5.3
Zodiac Marine and Pool S.A.(7)	Marine	Second Lien Senior Debt(5)	—	%	4.0	%	3/17		38.0	27.6	—
Zodiac Marine and Pool S.A.(7)		Mezzanine Debt(5)	—	%	8.0	%	9/17		69.9	38.8	—
										66.4	—

SENIOR FLOATING RATE LOANS
1011778 B.C. Unlimited Liability Company(7)	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.5	%	N/A		12/21		17.0	16.8	17.0
24 Hour Fitness Worldwide, Inc.	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.8	%	N/A		5/21		8.3	8.4	8.0
Accellent Inc.	Health Care Equipment & Supplies	First Lien Senior Debt(6)	4.5	%	N/A		3/21		7.4	7.4	7.3
Acosta, Inc.	Media	First Lien Senior Debt(6)	5.0	%	N/A		9/21		16.0	15.9	16.0
Advantage Sales & Marketing Inc.	Professional Services	First Lien Senior Debt(6)	4.3	%	N/A		7/21		16.0	16.0	15.8
Advantage Sales & Marketing Inc.		Second Lien Senior Debt(6)	7.5	%	N/A		7/22		1.0	1.0	1.0
										17.0	16.8
Aecom Technology Corp(7)	Construction & Engineering	First Lien Senior Debt(6)	3.8	%	N/A		10/21		4.2	4.2	4.2
Affinia Group Inc.	Auto Components	First Lien Senior Debt(6)	4.8	%	N/A		4/20		7.6	7.6	7.6

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
Akorn, Inc.(7)	Pharmaceuticals	First Lien Senior Debt(6)	4.5	%	N/A	4/21		5.0	5.0	5.0
Albertson's LLC	Food & Staples Retailing	First Lien Senior Debt(6)	4.6	%	N/A	3/19-8/21		2.0	2.0	2.0
AlixPartners, LLP	Diversified Financial Services	First Lien Senior Debt(6)	4.0	%	N/A	7/20		12.0	12.0	11.9
Alliance Laundry Systems LLC	Machinery	First Lien Senior Debt(6)	4.3	%	N/A	12/18		4.5	4.5	4.4
American Airlines, Inc.(7)	Airlines	First Lien Senior Debt(6)	3.8	%	N/A	6/19		9.9	9.9	9.9
American Renal Holdings Inc.	Health Care Providers & Services	First Lien Senior Debt(6)	4.5	%	N/A	8/19		7.7	7.7	7.7
American Tire Distributors, Inc.	Distributors	First Lien Senior Debt(6)	5.8	%	N/A	6/18		5.0	5.0	5.0
AmSurg Corp.(7)	Health Care Providers & Services	First Lien Senior Debt(6)	3.8	%	N/A	7/21		10.0	10.0	9.9
AmWINS Group, LLC	Insurance	First Lien Senior Debt(6)	5.3	%	N/A	9/19		8.8	8.8	8.8
Anchor Glass Container Corporation	Containers & Packaging	First Lien Senior Debt(6)	4.3	%	N/A	6/21		7.5	7.5	7.4
Aquilex LLC	Commercial Services & Supplies	First Lien Senior Debt(6)	5.0	%	N/A	12/20		3.0	3.0	2.9
Aramark Corporation(7)	Commercial Services & Supplies	First Lien Senior Debt(6)	3.3	%	N/A	2/21		14.8	14.6	14.6
Ardent Medical Services, Inc.	Health Care Providers & Services	First Lien Senior Debt(6)	6.8	%	N/A	7/18		0.3	0.3	0.3
ARG IH Corporation	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.8	%	N/A	11/20		5.5	5.5	5.5
Aristocrat Leisure Limited(7)	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.8	%	N/A	10/21		5.0	4.9	4.9
Ascend Learning, LLC	Diversified Consumer Services	First Lien Senior Debt(6)	5.0	%	N/A	7/19		2.4	2.4	2.4
Ascensus, Inc.	Commercial Services & Supplies	First Lien Senior Debt(6)	5.0	%	N/A	12/19		6.0	6.1	6.0
Asurion, LLC	Commercial Services & Supplies	First Lien Senior Debt(6)	5.0	%	N/A	5/19		7.4	7.4	7.3
Atlantic Power Limited Partnership(7)	Independent Power & Renewable Electricity Producers	First Lien Senior Debt(6)	4.8	%	N/A	2/21		4.5	4.5	4.5
AZ Chem US Inc.	Chemicals	First Lien Senior Debt(6)	4.5	%	N/A	6/21		9.6	9.7	9.4
BarBri, Inc.	Diversified Consumer Services	First Lien Senior Debt(6)	4.5	%	N/A	7/19		9.8	9.8	9.6
Berlin Packaging L.L.C.	Containers & Packaging	First Lien Senior Debt(6)	4.5	%	N/A	10/21		6.5	6.4	6.5
Biomet, Inc.	Health Care Equipment & Supplies	First Lien Senior Debt(6)	3.7	%	N/A	7/17		4.0	4.0	4.0
BJ’s Wholesale Club, Inc.	Food & Staples Retailing	First Lien Senior Debt(6)	4.5	%	N/A	9/19		4.9	4.9	4.9
Blackboard Inc.	Software	First Lien Senior Debt(6)	4.8	%	N/A	10/18		5.0	5.0	4.9
Boulder Brands, Inc.(7)	Food Products	First Lien Senior Debt(6)	4.5	%	N/A	7/20		7.1	7.1	7.1
Boyd Gaming Corporation(7)	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.0	%	N/A	8/20		6.4	6.4	6.3
The Brickman Group Ltd. LLC	Commercial Services & Supplies	First Lien Senior Debt(6)	4.0	%	N/A	12/20		5.0	5.0	4.8
Burlington Coat Factory Warehouse Corporation(7)	Specialty Retail	First Lien Senior Debt(6)	4.3	%	N/A	8/21		4.0	4.0	3.9
BWAY Intermediate Company, Inc.	Containers & Packaging	First Lien Senior Debt(6)	5.6	%	N/A	8/20		4.0	3.9	4.0
Camp International Holding Company	Transportation Infrastructure	First Lien Senior Debt(6)	4.8	%	N/A	5/19		7.7	7.7	7.7
Capital Automotive L.P.	Real Estate	First Lien Senior Debt(6)	4.0	%	N/A	4/19		12.3	12.3	12.1
Capital Safety North America Holdings Inc.	Commercial Services & Supplies	First Lien Senior Debt(6)	3.8	%	N/A	3/21		9.4	9.2	9.2
Capsugel Holdings US, Inc.	Pharmaceuticals	First Lien Senior Debt(6)	3.5	%	N/A	8/18		11.5	11.5	11.3

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
Carecore National, LLC	Health Care Providers & Services	First Lien Senior Debt(6)	5.5	%	N/A	3/21		5.0	5.0	4.9
Carros Finance Luxembourg S.A.R.L.(7)	Machinery	First Lien Senior Debt(6)	4.5	%	N/A	9/21		9.0	9.0	8.9
Catalent Pharma Solutions, Inc.(7)	Pharmaceuticals	First Lien Senior Debt(6)	4.3	%	N/A	5/21		12.4	12.5	12.4
CCM Merger Inc.	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.5	%	N/A	8/21		4.9	4.9	4.8
CEC Entertainment, Inc.	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.0	%	N/A	2/21		12.4	12.3	12.1
Cequel Communications, LLC	Media	First Lien Senior Debt(6)	3.5	%	N/A	2/19		15.1	14.9	15.0
Charter Communications Operating, LLC(7)	Media	First Lien Senior Debt(6)	4.3	%	N/A	9/21		1.3	1.2	1.3
Checkout Holding Corp.	Media	First Lien Senior Debt(6)	4.5	%	N/A	4/21		5.0	5.0	4.8
CityCenter Holdings, LLC	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.3	%	N/A	10/20		12.5	12.4	12.4
Connolly, LLC	Professional Services	First Lien Senior Debt(6)	5.0	%	N/A	5/21		8.8	8.8	8.8
		Second Lien Senior Debt(6)	8.0	%	N/A	5/22		1.0	1.0	1.0
									9.8	9.8
Consolidated Communications, Inc.(7)	Diversified Telecommunication Services	First Lien Senior Debt(6)	4.3	%	N/A	12/20		5.0	5.0	4.9
CPG International Inc.	Building Products	First Lien Senior Debt(6)	4.8	%	N/A	9/20		7.4	7.5	7.4
CPI Buyer, LLC	Trading Companies & Distributors	First Lien Senior Debt(6)	5.5	%	N/A	8/21		2.0	2.0	2.0
CPI International Inc.	Electronic Equipment, Instruments & Components	First Lien Senior Debt(6)	4.3	%	N/A	11/17		10.4	10.4	10.3
CT Technologies Intermediate Holdings, Inc.	Health Care Technology	First Lien Senior Debt(6)	6.0	%	N/A	12/21		3.0	3.0	3.0
DAE Aviation Holdings, Inc.	Aerospace & Defense	First Lien Senior Debt(6)	5.0	%	N/A	11/18		3.6	3.6	3.6
Dave & Buster's, Inc.	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.3	%	N/A	7/20		6.1	6.1	6.1
Del Monte Foods, Inc.(7)	Food Products	First Lien Senior Debt(6)	4.3	%	N/A	2/21		5.0	5.0	4.6
Dell International LLC	Technology Hardware, Storage & Peripherals	First Lien Senior Debt(6)	4.5	%	N/A	4/20		9.5	9.4	9.5
Deltek, Inc.	Software	First Lien Senior Debt(6)	4.5	%	N/A	10/18		5.0	4.9	4.9
Dialysis Newco, Inc.	Health Care Providers & Services	First Lien Senior Debt(6)	4.5	%	N/A	4/21		11.9	12.0	11.9
Dole Food Company, Inc.	Food Products	First Lien Senior Debt(6)	4.5	%	N/A	11/18		10.2	10.3	10.1
DPX Holdings B.V. (7)	Life Sciences Tools & Services	First Lien Senior Debt(6)	4.3	%	N/A	3/21		7.0	6.9	6.8
Drew Marine Group Inc.	Chemicals	First Lien Senior Debt(6)	4.5	%	N/A	11/20		5.0	5.0	4.9
DTZ U.S. Borrower, LLC(7)	Real Estate	First Lien Senior Debt(6)	5.5	%	N/A	11/21		2.0	2.0	2.0
Duff & Phelps Corporation	Capital Markets	First Lien Senior Debt(6)	4.5	%	N/A	4/20		10.4	10.5	10.3
Dunkin' Brands, Inc.(7)	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	3.3	%	N/A	2/21		7.5	7.4	7.3
DynCorp International Inc.	Aerospace & Defense	First Lien Senior Debt(6)	6.3	%	N/A	7/16		1.0	1.0	1.0
Eco Services Operations LLC	Chemicals	First Lien Senior Debt(6)	4.8	%	N/A	12/21		2.0	2.0	2.0
EFS Cogen Holdings I, LLC	Independent Power & Renewable Electricity Producers	First Lien Senior Debt(6)	3.8	%	N/A	12/20		11.3	11.3	11.2
Electrical Components International, Inc.	Electrical Equipment	First Lien Senior Debt(6)	5.8	%	N/A	5/21		3.0	3.0	3.0
Emdeon Inc.	Health Care Providers & Services	First Lien Senior Debt(6)	3.8	%	N/A	11/18		10.0	9.9	9.8

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
Emerald Expositions Holding, Inc.	Media	First Lien Senior Debt(6)	4.8	%	N/A	6/20		4.8	4.8	4.7
Entravision Communications Corporation(7)	Media	First Lien Senior Debt(6)	3.5	%	N/A	5/20		1.9	1.9	1.8
EquiPower Resources Holdings, LLC	Independent Power & Renewable Electricity Producers	First Lien Senior Debt(6)	4.3	%	N/A	12/18-12/19		4.9	4.9	4.8
Evergreen Acqco 1 LP	Multiline Retail	First Lien Senior Debt(6)	5.0	%	N/A	7/19		12.4	12.5	12.0
EWT Holdings III Corp.	Machinery	First Lien Senior Debt(6)	4.8	%	N/A	1/21		5.0	5.0	4.9
Fairmount Minerals, Ltd.	Metals & Mining	First Lien Senior Debt(6)	4.5	%	N/A	9/19		5.0	5.0	4.5
FCA US LLC(7)	Automobiles	First Lien Senior Debt(6)	3.3	%	N/A	12/18		9.9	9.9	9.9
Ferro Corporation(7)	Chemicals	First Lien Senior Debt(6)	4.0	%	N/A	7/21		6.0	6.0	5.9
Filtration Group Corporation	Industrial Conglomerates	First Lien Senior Debt(6)	4.5	%	N/A	11/20		10.0	10.0	9.9
First Data Corporation	IT Services	First Lien Senior Debt(6)	4.0	%	N/A	3/18-3/21		17.4	17.4	17.2
Fitness International, LLC	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	5.5	%	N/A	7/20		3.6	3.6	3.5
Flexera Software LLC	Software	First Lien Senior Debt(6)	4.5	%	N/A	4/20		5.4	5.4	5.3
Fly Funding II S.à r.l.(7)	Trading Companies & Distributors	First Lien Senior Debt(6)	4.5	%	N/A	8/19		4.6	4.6	4.5
Flying Fortress Inc.(7)	Capital Markets	First Lien Senior Debt(6)	3.5	%	N/A	6/17		5.3	5.3	5.3
FMG Resources (August 2006) Pty LTD(7)	Metals & Mining	First Lien Senior Debt(6)	3.8	%	N/A	6/19		5.0	5.0	4.5
FullBeauty Brands, Inc.	Internet & Catalog Retail	First Lien Senior Debt(6)	4.5	%	N/A	3/21		11.5	11.5	11.4
Gates Global LLC	Machinery	First Lien Senior Debt(6)	4.3	%	N/A	7/21		18.1	18.0	17.7
Global Tel*Link Corporation	Diversified Telecommunication Services	First Lien Senior Debt(6)	5.0	%	N/A	5/20		4.3	4.3	4.2
The Goodyear Tire & Rubber Company(7)	Auto Components	Second Lien Senior Debt(6)	4.8	%	N/A	4/19		7.5	7.5	7.5
Great Wolf Resorts, Inc.	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	5.8	%	N/A	8/20		7.9	8.0	7.9
Greeneden U.S. Holdings II, LLC	Software	First Lien Senior Debt(6)	4.0	%	N/A	2/20		5.0	4.9	4.9
Grosvenor Capital Management Holdings, LLLP	Capital Markets	First Lien Senior Debt(6)	3.8	%	N/A	1/21		13.6	13.5	13.3
Guggenheim Partners Investment Management Holdings, LLC	Capital Markets	First Lien Senior Debt(6)	4.3	%	N/A	7/20		9.0	8.9	8.9
H. J. Heinz Company	Food Products	First Lien Senior Debt(6)	3.5	%	N/A	6/20		25.9	25.9	25.8
Hampton Rubber Company	Energy Equipment & Services	First Lien Senior Debt(6)	5.0	%	N/A	3/21		4.0	4.0	3.8
Harbor Freight Tools USA, Inc.	Specialty Retail	First Lien Senior Debt(6)	4.8	%	N/A	7/19		10.6	10.6	10.6
Hearthside Group Holdings, LLC	Food Products	First Lien Senior Debt(6)	4.5	%	N/A	6/21		10.4	10.5	10.4
Hemisphere Media Holdings, LLC(7)	Media	First Lien Senior Debt(6)	5.0	%	N/A	7/20		0.9	0.9	0.9
HFOTCO LLC	Oil, Gas & Consumable Fuels	First Lien Senior Debt(6)	4.3	%	N/A	8/21		1.0	1.0	1.0
The Hillman Group, Inc.	Machinery	First Lien Senior Debt(6)	4.5	%	N/A	6/21		9.0	9.0	8.9
Hub International Limited	Insurance	First Lien Senior Debt(6)	4.3	%	N/A	10/20		8.5	8.4	8.2
Hudson Products Holdings Inc.	Energy Equipment & Services	First Lien Senior Debt(6)	5.0	%	N/A	3/19		7.5	7.5	7.2
Hyland Software, Inc.	Software	First Lien Senior Debt(6)	4.8	%	N/A	2/21		4.0	4.0	4.0
Ikaria, Inc.	Health Care Providers & Services	First Lien Senior Debt(6)	5.0	%	N/A	2/21		8.2	8.3	8.2

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
Immucor, Inc.	Health Care Equipment & Supplies	First Lien Senior Debt(6)	5.0	%	N/A	8/18		7.9	8.0	7.8
IMS Health Incorporated(7)	Health Care Technology	First Lien Senior Debt(6)	3.5	%	N/A	3/21		5.4	5.3	5.3
Indra Holdings Corp.	Textiles, Apparel & Luxury Goods	First Lien Senior Debt(6)	5.3	%	N/A	4/21		4.1	4.2	4.1
Infinity Acquisition LLC	Software	First Lien Senior Debt(6)	4.3	%	N/A	8/21		5.0	5.0	4.9
Information Resources, Inc.	Professional Services	First Lien Senior Debt(6)	4.8	%	N/A	9/20		7.4	7.5	7.4
Inmar, Inc.	Commercial Services & Supplies	First Lien Senior Debt(6)	4.3	%	N/A	1/21		4.9	4.9	4.8
Intelsat Jackson Holdings S.A.(7)	Diversified Telecommunication Services	First Lien Senior Debt(6)	3.8	%	N/A	6/19		5.0	5.0	4.9
Interactive Data Corporation	Media	First Lien Senior Debt(6)	4.8	%	N/A	4/21		8.5	8.5	8.4
Ion Media Networks, Inc.	Media	First Lien Senior Debt(6)	4.8	%	N/A	12/20		5.0	5.0	4.9
J. Crew Group, Inc.	Specialty Retail	First Lien Senior Debt(6)	4.0	%	N/A	3/21		7.5	7.4	7.1
J.C. Penney Corporation, Inc.(7)	Multiline Retail	First Lien Senior Debt(6)	5.0	%	N/A	6/19		2.0	2.0	1.9
Jaguar Holding Company I	Life Sciences Tools & Services	First Lien Senior Debt(6)	4.0	%	N/A	12/18		28.2	28.3	28.0
Jazz Acquisition, Inc.	Aerospace & Defense	First Lien Senior Debt(6)	4.5	%	N/A	6/21		5.0	5.0	4.9
The Kenan Advantage Group, Inc.	Road & Rail	First Lien Senior Debt(6)	3.8	%	N/A	6/16		4.9	5.0	4.9
Key Safety Systems, Inc.	Auto Components	First Lien Senior Debt(6)	4.8	%	N/A	8/21		5.2	5.2	5.2
Kindred Healthcare, Inc.(7)	Health Care Providers & Services	First Lien Senior Debt(6)	4.3	%	N/A	4/21		7.4	7.3	7.2
La Frontera Generation, LLC	Independent Power & Renewable Electricity Producers	First Lien Senior Debt(6)	4.5	%	N/A	9/20		8.7	8.7	8.6
La Quinta Intermediate Holdings L.L.C.(7)	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.0	%	N/A	4/21		6.8	6.8	6.7
Landmark Aviation FBO Canada, Inc.(7)	Aerospace & Defense	First Lien Senior Debt(6)	4.8	%	N/A	10/19		0.3	0.3	0.3
Landslide Holdings, Inc.	Software	First Lien Senior Debt(6)	5.0	%	N/A	2/20		7.4	7.4	7.2
Learning Care Group (US) No. 2 Inc.	Diversified Consumer Services	First Lien Senior Debt(6)	5.5	%	N/A	5/21		3.7	3.7	3.7
Leonardo Acquisition Corp.	Internet & Catalog Retail	First Lien Senior Debt(6)	4.3	%	N/A	1/21		10.4	10.4	10.2
Level 3 Financing, Inc.(7)	Diversified Telecommunication Services	First Lien Senior Debt(6)	4.5	%	N/A	1/22		4.0	4.0	4.0
Libbey Glass Inc.(7)	Household Durables	First Lien Senior Debt(6)	3.8	%	N/A	4/21		4.5	4.5	4.4
Liberty Cablevision of Puerto Rico LLC	Media	First Lien Senior Debt(6)	4.5	%	N/A	1/22		5.0	5.0	4.9
LM U.S. Member LLC	Aerospace & Defense	First Lien Senior Debt(6)	4.8	%	N/A	10/19		7.7	7.6	7.6
MCC Iowa LLC	Media	First Lien Senior Debt(6)	4.0	%	N/A	1/20-6/21		14.3	14.3	14.0
McJunkin Red Man Corporation(7)	Trading Companies & Distributors	First Lien Senior Debt(6)	5.0	%	N/A	11/19		5.0	5.0	4.6
Mediacom Illinois, LLC	Media	First Lien Senior Debt(6)	3.8	%	N/A	6/21		7.5	7.4	7.3
The Men’s Wearhouse, Inc.(7)	Specialty Retail	First Lien Senior Debt(6)	4.5	%	N/A	6/21		10.0	10.0	10.0
Michaels Stores, Inc.(7)	Specialty Retail	First Lien Senior Debt(6)	3.8	%	N/A	1/20		19.7	19.7	19.3
Midas Intermediate Holdco II, LLC	Diversified Consumer Services	First Lien Senior Debt(6)	4.8	%	N/A	8/21		2.0	2.0	2.0
Millennium Health, LLC	Health Care Providers & Services	First Lien Senior Debt(6)	5.3	%	N/A	4/21		7.3	7.4	7.3
Minerals Technologies Inc.(7)	Chemicals	First Lien Senior Debt(6)	4.0	%	N/A	5/21		2.8	2.8	2.8
Mirror Bidco Corp.(7)	Machinery	First Lien Senior Debt(6)	4.3	%	N/A	12/19		7.8	7.9	7.8

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
Mitchell International, Inc.	Software	First Lien Senior Debt(6)	4.5	%	N/A	10/20		9.4	9.5	9.3
Mitel US Holdings, Inc.(7)	Communications Equipment	First Lien Senior Debt(6)	5.3	%	N/A	1/20		2.3	2.3	2.3
Moneygram International, Inc.(7)	IT Services	First Lien Senior Debt(6)	4.3	%	N/A	3/20		5.0	4.9	4.6
MPG Holdco I Inc.	Auto Components	First Lien Senior Debt(6)	4.3	%	N/A	10/21		7.8	7.8	7.9
MPH Acquisition Holdings LLC	Health Care Providers & Services	First Lien Senior Debt(6)	3.8	%	N/A	3/21		16.5	16.4	16.1
Murray Energy Corporation	Oil, Gas & Consumable Fuels	First Lien Senior Debt(6)	5.3	%	N/A	12/19		4.5	4.5	4.3
National Financial Partners Corp.	Insurance	First Lien Senior Debt(6)	4.5	%	N/A	7/20		6.5	6.5	6.4
National Surgical Hospitals, Inc	Health Care Providers & Services	First Lien Senior Debt(6)	5.3	%	N/A	8/19		5.5	5.5	5.4
The Neiman Marcus Group Inc.	Multiline Retail	First Lien Senior Debt(6)	4.3	%	N/A	10/20		10.5	10.4	10.2
Numericable U.S. LLC(7)	Media	First Lien Senior Debt(6)	4.5	%	N/A	5/20		4.0	4.0	4.0
NVA Holdings, Inc.	Health Care Providers & Services	First Lien Senior Debt(6)	4.8	%	N/A	8/21		8.5	8.5	8.4
Onex Carestream Finance LP	Health Care Equipment & Supplies	First Lien Senior Debt(6)	5.0	%	N/A	6/19		14.1	14.2	14.1
Opal Acquisition, Inc.	Health Care Providers & Services	First Lien Senior Debt(6)	5.0	%	N/A	11/20		5.0	5.0	4.9
Ortho-Clinical Diagnostics S.A.(7)	Health Care Providers & Services	First Lien Senior Debt(6)	4.8	%	N/A	6/21		12.3	12.4	12.2
OSG Bulk Ships, Inc.(7)	Oil, Gas & Consumable Fuels	First Lien Senior Debt(6)	5.3	%	N/A	8/19		8.7	8.8	8.5
Oxbow Carbon LLC	Metals & Mining	First Lien Senior Debt(6)	4.3	%	N/A	7/19		4.9	4.9	4.5
P2 Lower Acquisition, LLC	Health Care Providers & Services	First Lien Senior Debt(6)	5.5	%	N/A	10/20		1.9	1.8	1.8
Party City Holdings Inc.	Specialty Retail	First Lien Senior Debt(6)	4.0	%	N/A	7/19		11.6	11.5	11.4
Peabody Energy Corporation(7)	Metals & Mining	First Lien Senior Debt(6)	4.3	%	N/A	9/20		7.5	7.5	6.8
Penn Engineering & Manufacturing Corp.	Building Products	First Lien Senior Debt(6)	4.5	%	N/A	8/21		6.5	6.5	6.5
Performance Food Group, Inc.	Food & Staples Retailing	Second Lien Senior Debt(6)	6.3	%	N/A	11/19		4.0	4.0	3.9
Petroleum GEO-Services ASA(7)	Energy Equipment & Services	First Lien Senior Debt(6)	3.3	%	N/A	3/21		5.0	4.9	4.2
PharMEDium Healthcare Corporation	Pharmaceuticals	First Lien Senior Debt(6)	4.3	%	N/A	1/21		4.7	4.8	4.6
Phillips-Medisize Corporation	Health Care Equipment & Supplies	First Lien Senior Debt(6)	4.8	%	N/A	6/21		6.0	6.0	6.0
Pilot Travel Centers LLC	Specialty Retail	First Lien Senior Debt(6)	4.3	%	N/A	10/21		10.0	9.9	10.0
Pinnacle Foods Finance LLC(7)	Food Products	First Lien Senior Debt(6)	3.0	%	N/A	4/20		14.3	14.2	13.9
Planet Fitness Holdings, LLC	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.8	%	N/A	3/21		5.3	5.4	5.3
Post Holdings Inc.(7)	Food Products	First Lien Senior Debt(6)	3.8	%	N/A	6/21		8.0	8.0	7.9
PQ Corporation	Chemicals	First Lien Senior Debt(6)	4.0	%	N/A	8/17		5.0	5.0	4.9
Presidio, Inc.	IT Services	First Lien Senior Debt(6)	5.0	%	N/A	3/17		4.6	4.7	4.6
Quikrete Holdings, Inc.	Construction Materials	First Lien Senior Debt(6)	4.0	%	N/A	9/20		12.5	12.4	12.3
Quintiles Transnational Corp.(7)	Life Sciences Tools & Services	First Lien Senior Debt(6)	3.8	%	N/A	6/18		3.0	2.9	2.9
Renaissance Learning, Inc.	Software	First Lien Senior Debt(6)	4.5	%	N/A	4/21		9.9	9.9	9.7
Road Infrastructure Investment, LLC	Chemicals	First Lien Senior Debt(6)	4.3	%	N/A	3/21		12.4	12.4	11.9
RPI Finance Trust(7)	Pharmaceuticals	First Lien Senior Debt(6)	3.5	%	N/A	11/20		4.0	4.0	4.0
Sabre GLBL Inc.(7)	Software	First Lien Senior Debt(6)	4.5	%	N/A	2/19		7.4	7.5	7.3
Sage Products Holdings III, LLC	Health Care Equipment & Supplies	First Lien Senior Debt(6)	5.0	%	N/A	12/19		2.0	2.0	2.0

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
Schaeffler AG(7)	Auto Components	First Lien Senior Debt(6)	4.3	%	N/A	5/20		1.0	1.0	1.0
Scientific Games International Inc.(7)	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	6.0	%	N/A	10/21		4.0	4.0	4.0
Sears Roebuck Acceptance Corp.(7)	Multiline Retail	First Lien Senior Debt(6)	5.5	%	N/A	6/18		5.0	5.0	4.8
Securus Technologies Holdings, Inc.	Diversified Telecommunication Services	First Lien Senior Debt(6)	4.8	%	N/A	4/20		4.9	5.0	4.9
Sedgwick Claims Management Services, Inc.	Insurance	First Lien Senior Debt(6)	3.8	%	N/A	3/21		13.9	13.7	13.6
		Second Lien Senior Debt(6)	6.8	%	N/A	2/22		5.0	5.0	4.7
									18.7	18.3
Seminole Hard Rock Entertainment, Inc.	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	3.5	%	N/A	5/20		5.9	5.9	5.7
Serta Simmons Holdings, LLC	Household Durables	First Lien Senior Debt(6)	4.3	%	N/A	10/19		8.8	8.8	8.7
The Servicemaster Company, LLC(7)	Diversified Consumer Services	First Lien Senior Debt(6)	4.3	%	N/A	7/21		5.5	5.4	5.4
Ship Luxco 3 S.a.r.l(7)	IT Services	First Lien Senior Debt(6)	4.8	%	N/A	11/19		5.0	5.0	5.0
Sinclair Television Group, Inc.(7)	Media	First Lien Senior Debt(6)	3.5	%	N/A	7/21		4.0	4.0	4.0
Southcross Energy Partners, L.P.(7)	Oil, Gas & Consumable Fuels	First Lien Senior Debt(6)	5.3	%	N/A	8/21		1.0	1.0	0.9
Southwire Company, LLC	Electrical Equipment	First Lien Senior Debt(6)	3.3	%	N/A	2/21		20.3	20.2	19.6
Spectrum Brands, Inc(7)	Household Products	First Lien Senior Debt(6)	3.5	%	N/A	9/19		1.2	1.2	1.2
Spin Holdco Inc.	Diversified Consumer Services	First Lien Senior Debt(6)	4.3	%	N/A	11/19		7.4	7.5	7.3
Standard Aero Limited(7)	Aerospace & Defense	First Lien Senior Debt(6)	5.0	%	N/A	11/18		1.4	1.4	1.4
Star West Generation LLC	Independent Power & Renewable Electricity Producers	First Lien Senior Debt(6)	4.3	%	N/A	3/20		2.0	2.0	2.0
Station Casinos LLC	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.3	%	N/A	3/20		12.0	11.9	11.7
Steinway Musical Instruments, Inc.	Leisure Products	First Lien Senior Debt(6)	4.8	%	N/A	9/19		5.0	5.0	5.0
STHI Holding Corp.	Life Sciences Tools & Services	First Lien Senior Debt(6)	4.5	%	N/A	8/21		7.0	7.0	6.9
STS Operating, Inc.	Trading Companies & Distributors	First Lien Senior Debt(6)	4.8	%	N/A	2/21		2.0	2.0	2.0
Syniverse Holdings, Inc.	Wireless Telecommunication Services	First Lien Senior Debt(6)	4.0	%	N/A	4/19		15.0	14.9	14.6
Tallgrass Operations, LLC	Oil, Gas & Consumable Fuels	First Lien Senior Debt(6)	4.3	%	N/A	11/18		8.4	8.4	8.3
TI Group Automotive Systems, L.L.C.(7)	Auto Components	First Lien Senior Debt(6)	4.3	%	N/A	7/21		7.5	7.4	7.4
TMS International Corp.	Metals & Mining	First Lien Senior Debt(6)	4.5	%	N/A	10/20		12.8	12.9	12.8
TNS, Inc.	IT Services	First Lien Senior Debt(6)	5.0	%	N/A	2/20		4.0	4.0	3.9
TPF II LC, LLC	Independent Power & Renewable Electricity Producers	First Lien Senior Debt(6)	5.5	%	N/A	9/21		2.0	2.0	2.0
TransDigm Inc.(7)	Aerospace & Defense	First Lien Senior Debt(6)	3.8	%	N/A	6/21		7.5	7.4	7.4
Trans Union LLC	Professional Services	First Lien Senior Debt(6)	4.0	%	N/A	4/21		19.9	19.8	19.7
Travelport Finance (Luxembourg) S.à r.l.(7)	Internet Software & Services	First Lien Senior Debt(6)	6.0	%	N/A	9/21		4.0	3.9	4.0
TWCC Holding Corp.	Media	First Lien Senior Debt(6)	3.5	%	N/A	2/17		5.0	4.9	4.9
		Second Lien Senior Debt(6)	7.0	%	N/A	6/20		5.0	5.0	4.8
									9.9	9.7
Tyche Holdings, LLC	IT Services	First Lien Senior Debt(6)	5.5	%	N/A	11/21		5.4	5.4	5.4
U.S. Renal Care, Inc.	Health Care Providers & Services	First Lien Senior Debt(6)	4.3	%	N/A	7/19		13.3	13.4	13.2
United Air Lines, Inc.(7)	Airlines	First Lien Senior Debt(6)	3.8	%	N/A	9/21		8.0	7.9	7.9

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
Univision Communications Inc.	Media	First Lien Senior Debt(6)	4.0	%	N/A	2/20-3/20		12.5	12.4	12.2
USIC Holdings, Inc.	Construction & Engineering	First Lien Senior Debt(6)	4.0	%	N/A	7/20		14.9	14.8	14.6
USI, Inc.	Insurance	First Lien Senior Debt(6)	4.3	%	N/A	12/19		8.4	8.5	8.3
Valeant Pharmaceuticals International, Inc.(7)	Pharmaceuticals	First Lien Senior Debt(6)	3.5	%	N/A	2/19		8.7	8.7	8.6
Vencore, Inc.	Aerospace & Defense	First Lien Senior Debt(6)	5.8	%	N/A	11/19		4.2	4.2	4.2
Veyance Technologies, Inc.	Machinery	First Lien Senior Debt(6)	5.3	%	N/A	9/17		1.9	1.9	1.9
VWR Funding, Inc.(7)	Distributors	First Lien Senior Debt(6)	3.4	%	N/A	4/17		9.9	9.9	9.9
Wall Street Systems Delaware, Inc.(7)	Software	First Lien Senior Debt(6)	4.5	%	N/A	4/21		4.9	4.8	4.9
Wastequip, LLC	Machinery	First Lien Senior Debt(6)	5.5	%	N/A	8/19		5.0	5.0	4.9
WaveDivision Holdings, LLC	Media	First Lien Senior Debt(6)	4.0	%	N/A	10/19		8.4	8.5	8.3
WideOpenWest Finance, LLC	Media	First Lien Senior Debt(6)	4.8	%	N/A	4/19		5.0	5.0	4.9
Wilsonart LLC	Building Products	First Lien Senior Debt(6)	4.0	%	N/A	10/19		8.4	8.4	8.2
WP CPP Holdings, LLC	Aerospace & Defense	First Lien Senior Debt(6)	4.8	%	N/A	12/19		7.1	7.1	7.1
XO Communications, LLC	Diversified Telecommunication Services	First Lien Senior Debt(6)	4.3	%	N/A	3/21		10.4	10.4	10.3
Yankee Cable Acquisition, LLC	Media	First Lien Senior Debt(6)	4.5	%	N/A	2/20-3/20		13.3	13.3	13.3
Yonkers Racing Corporation	Hotels, Restaurants & Leisure	First Lien Senior Debt(6)	4.3	%	N/A	8/19		4.8	4.8	4.3
York Risk Services Holding Corp.(7)	Insurance	First Lien Senior Debt(6)	4.8	%	N/A	10/21		1.0	1.0	1.0
Zayo Group LLC	Diversified Telecommunication Services	First Lien Senior Debt(6)	4.0	%	N/A	7/19		5.0	5.0	4.9

AMERICAN CAPITAL CMBS INVESTMENTS
CD 2007-CD4 Commercial Mortgage Trust(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.7	%	N/A	12/49		16.0	1.1	2.5
CD 2007-CD5 Mortgage Trust(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	6.1	%	N/A	12/17		14.8	7.3	1.8
Citigroup Commercial Mortgage Securities Trust 2007-C6(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.7	%	N/A	7/17		30.9	17.5	7.4
Credit Suisse Commercial Mortgage Trust Series 2007-C4(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.9	%	N/A	8/17		20.8	7.8	1.4
J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.8	%	N/A	7/17		25.2	—	2.6
LB-UBS Commercial Mortgage Trust 2007-C6(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	6.2	%	N/A	8/17		12.0	3.0	1.4
Wachovia Bank Commercial Mortgage Trust 2005-C22(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.4	%	N/A	3/16		15.0	1.1	4.0
Wachovia Bank Commercial Mortgage Trust 2006-C24(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.7	%	N/A	3/16		15.0	1.0	2.1
Wachovia Bank Commercial Mortgage Trust 2007-C31(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.8	%	N/A	5/17		20.0	10.6	1.1
Wachovia Bank Commercial Mortgage Trust, Series 2007-C32(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.7	%	N/A	10/17		60.9	12.3	6.9
Wachovia Bank Commercial Mortgage Trust, Series 2007-C34(7)	Real Estate	Commercial Mortgage Pass-Through Certificates(4)(6)	5.9	%	N/A	10/17-12/20		5.6	5.6	3.9

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)	PIK Interest Rate(2)	Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
AMERICAN CAPITAL CLO INVESTMENTS
ACAS CLO 2007-1, Ltd.(7)		Secured Notes(6)			4/21		8.5	8.4	8.3
		Subordinated Notes(6)			4/21		25.9	9.8	14.4
								18.2	22.7
ACAS CLO 2013-2, Ltd.(7)		Subordinated Notes(6)			10/25		8.0	7.0	6.6
Apidos CLO XIV(7)		Income Notes(6)			4/25		8.1	7.3	7.3
Apidos CLO XIX(7)		Income Notes(6)			10/26		10.5	9.4	9.4
Apidos CLO XVIII, Ltd.(7)		Subordinated Notes(6)			7/26		34.0	33.9	32.2
Ares IIIR/IVR CLO Ltd.(7)		Subordinated Notes(6)			4/21		20.0	10.8	7.8
Ares XXIX CLO Ltd.(7)		Subordinated Notes(6)			4/26		7.3	6.6	6.6
Avery Point II CLO, Limited(7)		Income Notes(6)			7/25		2.6	2.2	2.2
Babson CLO Ltd. 2006-II(7)		Income Notes(6)			10/20		15.0	7.9	9.5
Babson CLO Ltd. 2014-II(7)		Subordinated Notes(6)			9/26		25.0	23.6	23.6
Babson CLO Ltd. 2014-III(7)		Subordinated Notes(6)			1/26		3.8	3.4	3.4
Blue Hill CLO, Ltd.(7)		Subordinated Notes(6)			1/26		10.7	9.2	9.1
Carlyle Global Market Strategies CLO 2013-3, Ltd.(7)		Subordinated Notes(6)			7/25		2.3	1.8	1.8
Carlyle Global Market Strategies CLO 2014-4, Ltd.(7)		Subordinated Notes(6)			10/26		14.6	13.4	12.9
Cent CDO 12 Limited(7)		Income Notes(6)			11/20		26.4	9.3	28.0
Cent CLO 18 Limited(7)		Subordinated Notes(6)			7/25		3.8	3.0	3.4
Cent CLO 19 Limited(7)		Subordinated Notes(6)			10/25		5.3	4.6	4.6
Cent CLO 22 Limited(7)		Subordinated Notes(6)			11/26		35.0	33.7	33.7
Centurion CDO 8 Limited(7)		Subordinated Notes(4)(6)			3/17		5.0	0.2	—
CoLTs 2005-1 Ltd.(7)		Preference Shares(4)(6)			3/15	360		1.9	0.3
CoLTs 2005-2 Ltd.(7)		Preference Shares(4)(6)			12/18	34,170,000		12.5	1.8
CREST Exeter Street Solar 2004-1(7)		Preferred Securities(4)(6)			6/39	3,500,000		3.2	—
Dryden 31 Senior Loan Fund(7)		Subordinated Notes(6)			3/26		2.3	2.0	2.0
Eaton Vance CDO X plc(7)		Secured Subordinated Notes(6)			2/27		15.0	11.4	9.1
Flagship CLO V(7)		Deferrable Notes(6)			9/19		1.7	1.5	1.6
		Subordinated Securities(6)			9/19	15,000		7.0	2.3
								8.5	3.9
Galaxy III CLO, Ltd(7)		Subordinated Notes(4)			8/16		4.0	0.2	—
Galaxy XVI CLO, Ltd.(7)		Subordinated Notes(6)			11/25		2.3	2.1	2.1
GoldenTree Loan Opportunities IX, Limited(7)		Subordinated Notes(6)			10/26		40.8	37.7	37.7
Halcyon Loan Advisors Funding 2014-1 Ltd.(7)		Subordinated Notes(6)			2/26		1.3	1.1	1.1
Halcyon Loan Advisors Funding 2015-2, Ltd.(7)		Subordinated Notes(4)(6)			12/17		15.0	15.0	15.0
Herbert Park B.V.(7)		Subordinated Notes(6)			10/26		26.7	27.7	22.4
Highbridge Loan Management 2013-2, Ltd.(7)		Subordinated Notes(6)			10/24		27.0	22.9	22.9
LightPoint CLO IV, LTD(7)		Income Notes(6)			4/18		6.7	9.1	5.5
LightPoint CLO VII, Ltd.(7)		Subordinated Notes(6)			5/21		9.0	3.0	2.5
Limerock CLO III, Ltd.(7)		Subordinated Notes(6)			10/26		12.5	11.4	11.4
Magnetite VIII, Limited(7)		Subordinated Notes(6)			5/26		6.7	6.5	6.2
Magnetite XIV, Limited(7)		Subordinated Notes(4)(6)			6/16		20.0	20.0	20.0

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned		Principal		Cost		Fair Value
Mayport CLO Ltd.(7)		Income Notes					2/20			14.0		8.6		3.2
Neuberger Berman CLO XV, Ltd.(7)		Subordinated Notes(6)					10/25			2.8		2.3		2.3
NYLIM Flatiron CLO 2006-1 LTD.(7)		Subordinated Securities(6)					8/20	10,000				3.5		4.3
Och-Ziff VIII, Ltd.(7)		Subordinated Notes(6)					9/26			16.0		15.1		15.1
Octagon Investment Partners VII, Ltd.(7)		Preferred Securities(4)(6)					12/16	5,000,000				1.1		—
Octagon Investment Partners XIV, Ltd.(7)		Income Notes(6)					1/24			4.5		3.3		3.4
Octagon Investment Partners XIX, Ltd.(7)		Subordinated Notes(6)					4/26			25.0		21.5		22.8
Octagon Investment Partners XX, Ltd.(7)		Subordinated Notes(6)					8/26			2.5		2.5		2.5
Octagon Investment Partners XXII, Ltd.(7)		Subordinated Notes(6)					11/25			8.4		7.7		7.7
Octagon Loan Funding, Ltd.(7)		Subordinated Notes(6)					9/26			4.0		3.6		3.6
OHA Credit Partners VIII, Ltd.(7)		Subordinated Notes(6)					4/25			5.0		4.5		4.5
Sapphire Valley CDO I, Ltd.(7)		Subordinated Notes(6)					12/22			14.0		14.5		11.1
THL Credit Wind River 2014-1 CLO Ltd.(7)		Subordinated Notes(6)					4/26			16.0		14.4		13.9
Vitesse CLO, Ltd.(7)		Preferred Securities(6)					8/20	20,000,000				12.9		7.2
Voya CLO 2014-2, Ltd.(7)		Subordinated Notes(6)					7/26			10.0		10.0		9.1
Voya CLO 2014-4, Ltd.(7)		Subordinated Notes(6)					10/26			26.7		25.0		25.0

EUROPEAN CAPITAL CLO INVESTMENTS
Ares European III B.V.(7)	Diversified Financial Services	Subordinated Notes					8/24			6.1		3.4		3.5
Cordatus CLO II plc(7)	Diversified Financial Services	Subordinated Notes					7/24			6.1		2.2		6.1
Eaton Vance CDO X plc(7)	Diversified Financial Services	Secured Subordinated Notes					2/27			8.5		1.4		5.2
Euro-Galaxy II CLO B.V.(7)	Diversified Financial Services	Income Notes					10/22			3.0		2.7		2.8
		Subordinated Notes					10/22			6.7		3.3		5.0
												6.0		7.8
Subtotal Non-Control / Non-Affiliate Investments (55% of total investments at fair value)												$	3,846.1	$	3,472.1

AMERICAN CAPITAL AFFILIATE INVESTMENTS
IS Holdings I, Inc.	Software	Common Stock(4)(6)						1,165,930				$	—	$	7.9
Primrose Holding Corporation	Diversified Consumer Services	Common Stock(4)(6)						4,213				—		4.6

EUROPEAN CAPITAL AFFILIATE INVESTMENTS
Blue Topco GmbH(7)	Commercial Services & Supplies	First Lien Senior Debt	2.3	%	N/A		6/16-6/18			$	2.7	2.1		2.1
		Mezzanine Debt(5)	N/A		3.1%		12/18			8.6		7.6		2.6
												9.7		4.7
Mobipark S.A.S.(7)	Electronic Equipment, Instruments & Components	First Lien Senior Debt	1.3	%	N/A		10/17-12/17			1.7		1.7		1.6
		Second Lien Senior Debt	—	%	N/A		11/17			0.7		0.7		0.6
		Convertible Preferred Stock(4)						23,082,525				9.3		1.7
		Redeemable Preferred Stock(4)						25,751,312				7.9		4.4
												19.6		8.3
Subtotal Affiliate Investments (1% of total investments at fair value)												$	29.3	$	25.5

AMERICAN CAPITAL CONTROL INVESTMENTS
ACAS Real Estate Holdings Corporation	Real Estate	Mezzanine Debt(5)(6)	N/A		15.0	%	5/16			$	8.7	$	4.7	$	5.0
		Common Stock(6)						100	%			13.8		25.7
												18.5		30.7
American Capital Asset Management, LLC	Capital Markets	Mezzanine Debt(6)	5.0	%	N/A		9/16			33.0		33.0		33.0
		Common Membership Interest(6)						100	%			395.5		1,131.4
												428.5		1,164.4

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned		Principal	Cost	Fair Value
American Driveline Systems, Inc.	Diversified Consumer Services	Redeemable Preferred Stock(4)(6)						6,818,008			81.9	20.6
American Driveline Systems, Inc.	Diversified Consumer Services	Common Stock(4)(6)						197,161			18.2	—
		Common Stock Warrants(4)(6)						136,183			9.9	—
											110.0	20.6
ASAP Industries Holdings, LLC	Energy Equipment & Services	Mezzanine Debt(6)	12.0	%	2.0	%	12/18			20.5	20.3	20.5
ASAP Industries Holdings, LLC	Energy Equipment & Services	Membership Units(4)(6)						106,911			30.3	15.0
											50.6	35.5
BMR Energy LLC	Independent Power & Renewable Electricity Producers	Preferred Units(6)						11,620			11.9	11.9
Capital.com, Inc.	Diversified Financial Services	Common Stock(4)(6)						8,500,100			0.9	—
CML Pharmaceuticals, Inc.	Life Sciences Tools & Services	First Lien Senior Debt(6)	8.0	%	N/A		12/15-10/20			315.7	313.1	289.8
CML Pharmaceuticals, Inc.	Life Sciences Tools & Services	Convertible Preferred Stock(4)(6)						243,642			144.6	—
											457.7	289.8
Contour Semiconductor, Inc.	Semiconductors & Semiconductor Equipment	First Lien Senior Debt(6)	N/A		8.0	%	3/15-4/15			9.3	9.3	9.3
Contour Semiconductor, Inc.		Convertible Preferred Stock(4)(6)						143,896,948			13.5	—
											22.8	9.3
Core Financial Holdings, LLC(7)	Diversified Financial Services	Common Units(4)(6)						57,940,360			43.8	0.2
Dyno Holding Corp.	Auto Components	First Lien Senior Debt(6)	8.9	%	2.2	%	11/15			35.2	35.1	35.2
		Mezzanine Debt(5)(6)	N/A		4.3	%	11/16			34.7	28.1	16.7
		Convertible Preferred Stock(4)(6)						389,759			40.5	—
		Common Stock(4)(6)						97,440			10.1	—
											113.8	51.9
ECA Acquisition Holdings, Inc.	Health Care Equipment & Supplies	First Lien Senior Debt(6)	10.0	%	N/A		3/16			6.8	6.8	6.8
ECA Acquisition Holdings, Inc.	Health Care Equipment & Supplies	Mezzanine Debt(6)	13.0	%	3.5	%	7/16			18.1	18.1	18.1
		Common Stock(4)(6)						583			13.4	4.7
											38.3	29.6
eLynx Holdings, Inc.	IT Services	Convertible Preferred Stock(4)(6)						11,728			20.6	16.0
		Redeemable Preferred Stock(4)(6)						21,113			9.0	—
		Common Stock(4)(6)						11,261			1.1	—
		Common Stock Warrants(4)(6)						1,002,678			5.5	—
											36.2	16.0
EXPL Pipeline Holdings LLC(7)	Oil, Gas & Consumable Fuels	First Lien Senior Debt(6)	8.1	%	N/A		1/17			46.0	45.7	46.8
EXPL Pipeline Holdings LLC(7)	Oil, Gas & Consumable Fuels	Common Membership Units(4)(6)						58,297			44.5	20.1
											90.2	66.9
FAMS Acquisition, Inc.	Diversified Financial Services	Mezzanine Debt(6)	12.3	%	2.6	%	1/16			42.8	42.8	40.7
Fosbel Holding, Inc.	Commercial Services & Supplies	Mezzanine Debt(6)	N/A		17.0	%	10/18			9.8	9.8	9.8
	Commercial Services & Supplies	Mezzanine Debt(5)(6)	N/A		17.0	%	10/18			45.6	19.1	3.7
											28.9	13.5
FPI Holding Corporation	Food Products	First Lien Senior Debt(5)(6)	N/A		5.2	%	1/19			32.6	11.6	11.6
Group Montana, Inc.	Textiles, Apparel & Luxury Goods	First Lien Senior Debt(6)	6.3	%	N/A		1/17			6.4	6.4	6.4
	Textiles, Apparel & Luxury Goods	Convertible Preferred Stock(6)						4,000			4.7	6.7
		Common Stock(4)(6)						100	%		12.5	1.6
											23.6	14.7
Halex Holdings, Inc.	Construction Materials	Second Lien Senior Debt(5)(6)	—	%	12.0	%	3/15			18.3	18.3	18.8
		Redeemable Preferred Stock(4)(6)						6,482,972			6.6	—
											24.9	18.8
HALT Medical, Inc.	Health Care Equipment & Supplies	First Lien Senior Debt(5)(6)	N/A		22.0	%	3/15			45.2	36.5	35.6
	Health Care Equipment & Supplies	Convertible Preferred Stock(4)(6)						12,811,818			2.6	—
		Common Stock(4)(6)						22,416,432			6.4	—
											45.5	35.6
Hard 8 Games, LLC	Hotels, Restaurants & Leisure	First Lien Convertible Senior Debt(6)	N/A		6.0	%	2/15			8.2	8.2	8.2
	Hotels, Restaurants & Leisure	Membership Unit(4)(6)						1			19.0	28.8
											27.2	37.0
Hollyhock Limited(7)	Independent Power & Renewable Electricity Producers	Common Stock(4)(6)						22,000,000			22.0	21.2

Table of Contents

AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)		PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned	Principal	Cost	Fair Value
LLSC Holdings Corporation	Personal Products	Convertible Preferred Stock(4)(6)						7,496		8.1	13.8
Montgomery Lane, LLC(7)	Diversified Financial Services	Common Membership Units(4)(6)						100		—	6.9
MW Acquisition Corporation	Health Care Providers & Services	Mezzanine Debt(6)	14.4	%	1.0	%	2/19		24.0	23.9	24.0
MW Acquisition Corporation	Health Care Providers & Services	Redeemable Preferred Stock(6)						2,485		2.3	2.3
		Convertible Preferred Stock(4)(6)						51,351		23.0	17.9
										49.2	44.2
NECCO Holdings, Inc.	Food Products	First Lien Senior Debt(5)(6)	6.5	%	N/A		12/15		13.9	11.8	8.9
		Second Lien Senior Debt(5)(6)	N/A		18.0	%	11/15		6.4	3.2	—
		Common Stock(4)(6)						860,189		0.1	—
										15.1	8.9
NECCO Realty Investments, LLC	Real Estate	First Lien Senior Debt(5)(6)	2.9	%	11.1	%	12/17		67.0	32.8	19.9
NECCO Realty Investments, LLC		Common Membership Units(4)(6)						7,450		4.9	—
										37.7	19.9
Orchard Brands Corporation	Internet & Catalog Retail	Common Stock(4)(6)						87,838		55.1	87.9
PHC Sharp Holdings, Inc.	Commercial Services & Supplies	First Lien Senior Debt(6)	12.5	%	N/A		12/15		1.4	1.4	1.4
	Commercial Services & Supplies	Mezzanine Debt(6)	N/A		17.0	%	12/16		13.6	13.6	13.6
		Mezzanine Debt(5)(6)	N/A		19.0	%	12/16		25.0	11.0	12.0
		Common Stock(4)(6)						367,881		4.2	—
										30.2	27.0
RD Holdco Inc.	Household Durables	Second Lien Senior Debt(6)	11.3	%	N/A		6/17		16.9	14.6	17.1
		Common Stock(4)(6)						458,596		23.6	18.6
		Common Stock Warrants(4)(6)						56,372		2.9	2.3
										41.1	38.0
Rebellion Media Group Corp.(7)	Internet Software & Services	First Lien Senior Debt(6)	N/A		12.0	%	3/15		4.3	4.3	3.5
Rebellion Media Group Corp.(7)	Internet Software & Services	First Lien Senior Debt(5)(6)	N/A		12.0	%	12/15		10.8	8.1	—
										12.4	3.5
Scanner Holdings Corporation	Technology Hardware, Storage & Peripherals	Mezzanine Debt(6)	14.8	%	N/A		10/16-7/17		20.5	20.5	20.5
Scanner Holdings Corporation		Convertible Preferred Stock(6)						38,723,509		5.4	5.4
		Common Stock(4)(6)						97,540		0.1	—
										26.0	25.9
SEHAC Holding Corporation	Diversified Consumer Services	Convertible Preferred Stock(6)						14,850		14.8	103.6
SEHAC Holding Corporation	Diversified Consumer Services	Common Stock(6)						150		0.2	1.0
										15.0	104.6
Soil Safe Acquisition Corp.	Professional Services	First Lien Senior Debt(6)	8.0	%	N/A		1/18-12/18		23.5	23.4	23.5
		Second Lien Senior Debt(6)	10.8	%	N/A		7/19		12.7	12.7	12.7
		Mezzanine Debt(6)	8.9	%	7.2	%	12/19		67.1	66.3	67.1
		Common Stock						810		9.5	9.2
										111.9	112.5
TestAmerica Environmental Services, LLC	Commercial Services & Supplies	Mezzanine Debt(5)(6)	10.0	%	2.5	%	6/18		35.2	26.5	—
TestAmerica Environmental Services, LLC	Commercial Services & Supplies	Common Units(4)(6)						490,000		2.0	—
										28.5	—
Warner Power, LLC	Electrical Equipment	Mezzanine Debt(5)(6)	N/A		14.6	%	3/15		9.7	5.7	2.6
		Redeemable Preferred Membership Units(4)(6)						3,796,269		3.0	—
		Common Membership Units(4)(6)						27,400		1.9	—
										10.6	2.6
WIS Holding Company, Inc.	Commercial Services & Supplies	Convertible Preferred Stock(6)						703,406		57.9	82.9
WIS Holding Company, Inc.	Commercial Services & Supplies	Common Stock(4)(6)						175,853		11.4	16.9
										69.3	99.8

EUROPEAN CAPITAL CONTROL INVESTMENTS
Bellotto Holdings Limited(7)	Household Durables	Redeemable Preferred Stock						7,300,610	2.0	34.6	36.5
Bellotto Holdings Limited(7)		Common Stock(4)						2,697,010		100.0	103.6
										134.6	140.1
European Capital UK SME Debt LP(7)		Partnership Interest						500		0.6	0.6
Financière H S.A.S.(7)	Health Care Equipment & Supplies	Mezzanine Debt(5)	3.0%		5.8	%	10/15		15.0	9.7	9.5
Financière H S.A.S.(7)	Health Care Equipment & Supplies	Convertible Preferred Stock(4)						930,558		58.1	—
										67.8	9.5

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AMERICAN CAPITAL, LTD. CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued) December 31, 2014 (in millions, except share data)

Company(1)	Industry	Investments	Cash Interest Rate(2)	PIK Interest Rate(2)		Maturity Date(2)	# of Shares/ Units Owned		Principal	Cost		Fair Value
Financière Newglass S.A.S.(7)	Building Products	Convertible Preferred Stock(4)					1			26.1		26.1
Financière Newglass S.A.S.(7)		Common Stock(4)					8,000,000			9.7		6.2
										35.8		32.3
Financière Tarmac S.A.S.(7)	Commercial Services & Supplies	First Lien Senior Debt	4.0%	N/A		12/20			5.0	4.1		5.1
Financière Tarmac S.A.S.(7)	Commercial Services & Supplies	Mezzanine Debt	N/A	4.0	%	12/21			22.1	22.1		22.1
		Mezzanine Debt(5)	N/A	4.0	%	12/21			28.8	17.2		17.2
		Convertible Preferred Stock(4)					8,665,001			10.5		—
		Redeemable Preferred Stock(4)							3.7	8.1		—
										62.0		44.4
Holding Saint Augustine S.A.S.(7)	Air Freight & Logistics	First Lien Senior Debt	N/A	N/A		9/19			4.9	4.9		4.9
Holding Saint Augustine S.A.S.(7)	Air Freight & Logistics	Convertible Preferred Stock(4)					1,982,668			15.0		—
		Redeemable Preferred Stock(4)					1			—		1.0
										19.9		5.9
Miles 33 Limited(7)	Media	First Lien Senior Debt	3.5%	N/A		9/17			8.3	8.3		8.3
		Mezzanine Debt	4.5%	5.0	%	9/17			16.7	16.7		16.7
		Redeemable Preferred Stock(4)							71.9	30.3		8.6
		Common Stock(4)					600,000			0.9		—
										56.2		33.6
MP Equity S.A.S.(7)	Food Products	Redeemable Preferred Stock(4)							2.7	2.5		—

AMERICAN CAPITAL CONTROL CLO INVESTMENT
ACAS Wachovia Investments, L.P.(7)	Diversified Financial Services	Partnership Interest(4)					90	%		2.2		0.6
Subtotal Control Investments (44% of total investments at fair value)										$	2,541.5	$	2,782.4
Total Investment Assets										$	6,416.9	$	6,280.0



Counterparty	Instrument	Interest Rate(2)	Expiration Date(2)	# of Contracts	Notional		Cost		Fair Value
DERIVATIVE AGREEMENTS

Citibank, N.A.	Interest Rate Swap - Pay Fixed/ Receive Floating(6)	5.6%/LIBOR	5/16-7/17	2	$	27.5	$	—	$	(3.4	)
BNP Paribas	Interest Rate Swap - Pay Fixed/ Receive Floating(6)	5.7%/LIBOR	7/17	1	22.3		—		(3.1		)
Wells Fargo Bank, N.A	Interest Rate Swap - Pay Fixed/ Receive Floating(6)	5.6%/LIBOR	8/16	1	11.9		—		(1.0		)
Citibank, N.A.	Total Return Swaps		12/14	2	27.1		—		(3.0		)
American Capital Equity III, LP(8)	WRH, Inc. Equity Option		4/15	1			—		(73.6		)
Total Derivative Agreements							$	—	$	(84.1	)



Funds	Cost		Fair Value
MONEY MARKET FUNDS(3)
Deutsche Global Liquidity Managed Sterling Fund	$	264.9	$	264.9
Wells Fargo Advantage Heritage Money Market Fund(6)	10.0		10.0
Fidelity Institutional Money Market Fund(6)	10.0		10.0
BofA Funds Series Trust - BofA Money Market Reserves(6)	10.0		10.0
Dreyfus Institutional Cash Advantage-I Fund(6)	10.0		10.0
STIT - Liquid Assets Portfolio(6)	5.0		5.0
JPMorgan Prime Money Market Fund(6)	5.0		5.0
Fidelity Institutional Money Market Funds - Prime Money Market Portfolio(6)	5.0		5.0
Total Money Market Funds	$	319.9	$	319.9


(1)	Certain of the securities are issued by affiliate(s) of the listed portfolio company.

(2)

Interest rates represent the weighted average annual stated interest rate on loans and debt securities in effect on the date presented, which are presented by the nature of indebtedness by a single issuer. Some loans and debt securities bear interest at variable rates, primarily three-month LIBOR, with interest rate floors. PIK represents contractually deferred interest that is typically compounded into the principal balance of the loan or debt security, if not paid on a current basis. PIK interest may be prepaid by the portfolio company’s election, but generally is paid upon a change of control transaction or maturity. The maturity date represents the latest date in which the loan or debt security is scheduled to terminate.


(3)	Included in cash and cash equivalents on our consolidated balance sheets.


(4)	Some or all of the securities are non-income producing.


(5)	Loan is on non-accrual status and therefore considered non-income producing.


(6)	All or a portion of the investments or instruments are pledged as collateral under various secured financing arrangements.


(7)	Investments that are not “qualifying assets” under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of December 31, 2014, non-qualifying assets were approximately $1.7 billion, or 31% of net assets.


(8)	For further discussion on the WRH, Inc. Equity Option, see Note 14 to our audited consolidated financial statements included in this Annual Report on Form 10-K.

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AMERICAN CAPITAL, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Note 1. Organization

American Capital, Ltd., (which is referred to throughout this report as “American Capital”, “we”, “our” and “us”) was incorporated in 1986. On August 29, 1997, we completed an initial public offering and became 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”). As a BDC, we primarily invest in senior and mezzanine debt and equity in buyouts of private companies sponsored by us (“American Capital One Stop Buyouts^®”) or sponsored by other private equity funds and provide capital directly to early stage and mature private and small public companies (“Sponsor Finance and Other Investments”). We also invest in first and second lien floating rate loans to large-market U.S. based companies (“Senior Floating Rate Loans”) and structured finance investments (“Structured Products”), including collateralized loan obligation (“CLO”) securities and commercial mortgages and commercial mortgage backed securities (“CMBS”). Our primary business objectives are to increase our net earnings and net asset value (“NAV”) by making investments with attractive current yields and/or potential for equity appreciation and realized gains.

Through our tax years ended September 30, 1998 through September 30, 2010, we qualified to be taxed as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Effective with our tax year ended September 30, 2011, we did not qualify to be taxed as a RIC and became subject to taxation as a corporation under Subchapter C of the Code (a “Subchapter C corporation”). This change in tax status does not affect our status as a BDC under the 1940 Act or our compliance with the portfolio composition requirements of that statute.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

Reclassifications

We have reclassified certain prior period amounts in our consolidated financial statements to conform to our current period presentation. These reclassifications had no impact on prior periods’ net earnings or shareholders’ equity.

Consolidation

Under the investment company rules and regulations pursuant to Article 6 of Regulation S-X, the Securities and Exchange Commission’s (“SEC”) Division of Investment Management’s consolidation guidance in IM Guidance Update No. 2014-11 issued in October 2014 and Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services-Investment Companies (“ASC 946”), we are precluded from consolidating any entity other than another investment company that acts as an extension of our investment operations and facilitates the execution of our investment strategy. An exception to this guidance occurs if we have an investment in a controlled operating company that provides substantially all of its services to us.

We have determined that as of December 31, 2015 or for the periods presented in our audited consolidated financial statements included in this Annual Report on Form 10-K, European Capital Limited (“European Capital”) and American Capital Asset Management, LLC (“ACAM”), have met the conditions of a significant subsidiary under Rule 1-02(w) of Regulation S-X for which we are required, pursuant to Rule 3-09 of Regulation S-X, to attach separate financial statements as exhibits to our Form 10-K. As such, separate financial statements for European Capital and ACAM are filed herewith as Exhibits 99.1 and 99.2, respectively.

We currently consolidate ACAS Funding I, LLC and ACAS Funding II, LLC, which are wholly-owned special purpose financing vehicles that were formed for the purpose of purchasing Senior Floating Rate Loans under a $1.25 billion secured revolving credit facility and $500 million secured revolving credit facility, respectively. As of December 31, 2015, ACAS Funding I, LLC and ACAS Funding II, LLC did not have any other operations or activities. We also consolidate American Capital TRS, LLC (“ACTRS”), which is a wholly-owned entity that has entered into non-recourse total return swaps (“TRS”) with Citibank, N.A. As of December 31, 2015, ACTRS did not have any other operations or activities. The TRS is accounted for as a derivative pursuant to FASB ASC Topic 815, Derivatives and Hedging.

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AMERICAN CAPITAL, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

Our consolidated financial statements also include the accounts of European Capital, which is a wholly-owned investment company that, effective October 1, 2014, acts as an extension of our investment operations and facilitates the execution of our investment strategy. In addition, our consolidated financial statements include the accounts of AC Corporate Holdings, Inc. (“ACCH”) and ACE Acquisition Holdings, LLC (“ACE Acquisition”), which are wholly-owned entities that have purchased numerous investment securities on behalf of American Capital. As of December 31, 2015, European Capital, ACCH and ACE Acquisition did not have any other operations or activities and were considered to be investment companies under ASC 946, as amended by Accounting Standards Update (“ASU”) No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements.

Trade Date Accounting

In accordance with ASC 946, we account for security purchases and sales on a trade date basis other than when it is not in accordance with standard industry practice to account for the purchase or sale transaction on a trade date basis and the transaction is outside conventional channels, such as through a private placement or by submitting shares in a tender offer. In such circumstances, we record the transaction on the date we obtain a right to demand the securities purchased or collect the proceeds of sale and incur an obligation to pay the price of the securities purchased or to deliver the securities sold, respectively.

Investment Valuation Policy

We fair value our investments in accordance with the 1940 Act and FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) as determined in good faith by our Board of Directors. We undertake a multi-step valuation process each quarter to determine the fair value of our investments in accordance with ASC 820. The quarterly valuation process begins with the development of a preliminary valuation recommendation for each investment by our Financial Advisory and Consulting Team (“FACT”), which is composed of valuation and audit professionals responsible for monitoring portfolio compliance and valuations. In preparing the preliminary valuation recommendations, FACT receives assistance from our investment professionals that both originated and monitor the investment as well as assistance from other departments including operations, accounting and legal. The preliminary valuation recommendations are reviewed by senior management and then presented to our Audit, Compliance and Valuation Committee for review and approval. Subsequent to the approval from our Audit, Compliance and Valuation Committee, the valuation recommendations are sent to our Board of Directors for final approval.

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AMERICAN CAPITAL, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

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 principal market in which we would sell our Senior Floating Rate Loans and certain of our non-controlled Sponsor Finance debt investments is an active over-the-counter secondary market. For our other debt and equity investments, there is no active market and we are generally repaid our debt investment or sell our equity investment upon a change of control transaction such as through the mergers and acquisition (“M&A”) market. Accordingly, the market in which we would sell certain of our non-controlled debt and all of our equity investments is the M&A market. However, under ASC 820, we have identified the M&A market as the principal market for our investments in these portfolio companies only if we have the ability to control the decision to sell the portfolio company as of the measurement date. We determine whether we have the ability to control the decision to sell 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 and rights within the shareholders agreement. 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 our wholly-owned portfolio company, ACAM 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, the principal market under ASC 820 is a hypothetical secondary market.

Enterprise Value Waterfall Methodology

To estimate the enterprise value of the portfolio company, we prepare an analysis of traditional valuation methodologies including 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, offers from third-parties to buy the portfolio company and considering the value of recent third-party investments in the equity securities of the portfolio company. Significant inputs in these valuation methodologies to estimate enterprise value include the historical or projected operating results of the portfolio company, selection of comparable companies, discounts or premiums to the prices of comparable companies and discount rates applied to the forecasted cash flows. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for non-recurring items or to normalize the operating results that may require significant judgment in its determination. In addition, projecting future financial results requires significant judgment regarding future growth assumptions. In evaluating the operating results, we also analyze the impact of exposure to litigation, loss of customers or other contingencies. The selection of a population of comparable companies requires significant judgment, including a qualitative and quantitative analysis of the comparability of the companies. In determining a discount or premium, if any, to prices of comparable companies, we use significant judgment for factors such as size, marketability, relative performance, and for portfolio companies in which we control, a control premium to the market price of comparable public companies. In determining a discount rate to apply to forecasted cash flows, we use significant judgment in the development of an appropriate discount rate including the evaluation of an appropriate risk premium.

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AMERICAN CAPITAL, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

outstanding debt of the portfolio company, we reduce the fair value of our debt investment beginning with the junior most debt such that the enterprise value less the fair value of the outstanding debt is zero.

Market Yield Valuation Methodology

Third-party Vendor Pricing

Investments in Investment Funds

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AMERICAN CAPITAL, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

Partnership Interests

For an investment in a partnership, we measure the fair value of our investment based on the NAV per share of the partnership or its equivalent as a practical expedient to measure an alternative investment at fair value consistent with the measurement principles of ASC 820, as amended by ASU 2009-12, Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent). We make this election on an investment-by-investment basis and apply consistently to our entire position in the investment, unless it is probable at the measurement date that we will sell all or a portion of our investment at an amount other than NAV per share.

Interest Rate Derivatives

Investment Classification

As required by the 1940 Act, we classify our investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that we are deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of us, as defined in the 1940 Act, other than Control Investments. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. Generally, under the 1940 Act, we are deemed to control a company if we own more than 25% of the voting securities of such company or have greater than 50% representation on its board of directors. We are deemed to be an affiliate of a company in which we have invested if we own between 5% and 25% of the voting securities of such company.

Cash and Cash Equivalents

Cash and cash equivalents consist of money market funds, demand deposits and highly liquid investments with original maturities of three months or less. Cash and cash equivalents are carried at cost which approximates fair value.

Concentration of Credit Risk

We place our cash and cash equivalents with major financial institutions and cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit. Our interest rate derivative agreements are with multiple large commercial financial institutions.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents primarily consist of funded cash collateral on deposit with a custodian under our TRS. Restricted cash and cash equivalents are carried at cost which approximates fair value.

Interest and Dividend Income Recognition

Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected. Original issue discount and purchased discount and premiums are accreted into interest income using the effective interest method, where applicable. Loan origination fees are recorded as fee income upon receipt or deferred and accreted into interest income using the effective interest method. We record prepayment premiums on loans and other investments as interest income when such amounts are received. Dividend income is recognized on the ex-dividend date for publicly traded portfolio companies and the record date for private portfolio companies for common equity securities. Dividend income is recognized 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 portfolio company’s total enterprise value. 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 that is not sufficient to cover the contractual interest or dividend,

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AMERICAN CAPITAL, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

we will not accrue interest or dividend income on the notes or securities and will record an allowance for any accrued interest or dividend receivable as a reduction of interest or dividend income in the period we determine it is not collectible.

Interest income on Structured Products is recognized using the effective interest method as required by FASB ASC Subtopic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets (“ASC 325-40”). Under ASC 325-40, at the time of purchase, we estimate the future expected cash flows and determine the effective yield of an investment based on these estimated cash flows and the cost basis of the investment. Subsequent to the purchase, these estimated cash flows are updated quarterly and a revised effective yield is calculated prospectively in accordance with ASC 320-10-35, Investment-Debt and Equity Securities. In the event that the fair value of an investment decreases below its current amortized cost basis, we may be required to write down the current amortized cost basis for a credit loss or to fair value depending on our hold expectations for the investment. Current amortized cost basis less the amount of any write down (“Reference Amount”) is used to calculate the effective yield used for interest income recognition purposes over the remaining life of the investment. We are precluded from reversing write downs for any subsequent increase in the expected cash flows of an investment with the effect of increasing total interest income over the life of the investment and increasing the realized loss recorded on the sale or redemption of the investment by the amount of the credit loss write down. 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 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. During the year ended December 31, 2015, we recorded $20.5 million in credit loss write downs to current amortized cost basis on six Structured Products investments. As of December 31, 2015, in aggregate, the amortized cost basis of our Structured Products investment portfolio exceeded the Reference Amount by approximately $109 million.

Fee Income Recognition

Fees primarily include asset management, portfolio company management, transaction, structuring, financing and prepayment fees. Asset management fees primarily represent fees for providing investment advisory and support services to ACAM, our asset management portfolio company. Portfolio company management fees, which are generally recurring in nature, represent amounts received for providing advice and analysis to the companies in our investment portfolio. Asset management and portfolio company management fees are recognized as earned, provided that collection is probable. Transaction structuring and financing fees represent amounts received for structuring, financing and executing transactions and are generally payable only if the transaction closes and are recognized as earned when the transaction is completed. Debt prepayment fees are recognized as they are received.

Realized Gain or Loss and Unrealized Appreciation or Depreciation of Portfolio Investments

Realized gain or loss is recorded at the disposition of an investment and is the difference between the net proceeds from the sale and the cost basis of the investment using the specific identification method. We include the fair value of all financial assets received in our net proceeds in determining the realized gain or loss at disposition, including anticipated sale proceeds held in escrow at the time of sale. For an investment with a fair value of zero, we record a realized loss on the investment in the period in which we record a loss for income tax purposes.

Unrealized appreciation or depreciation reflects the difference between the Board of Directors’ valuation of the investment and the cost basis of the investment. For portfolio investments denominated in a functional currency other than the U.S. dollar, the cost basis of our investment is translated at the exchange rate in effect at the balance sheet date. The resulting translation adjustment is recorded as foreign currency translation in our consolidated statements of operations.

Foreign Currency Translation

We translate the financial statements of European Capital from its functional currency, the Euro, to U.S. dollars in accordance

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AMERICAN CAPITAL, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

with FASB ASC Topic 830, Foreign Currency Matters (“ASC 830”). Assets and liabilities are translated at the exchange rate prevailing at the end of the period and revenues and expenses are translated at monthly average exchange rates. Under ASC 830, we are required to include translation adjustments associated with the translation of European Capital’s balance sheet in accumulated other comprehensive income.

Income Taxes

Income taxes are accounted for using the asset and liability approach in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities reflect the impact of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at tax rates expected to be in effect when taxes are actually paid or recovered. Deferred tax assets are also recorded for net operating losses, capital losses and any tax credit carryforwards. A valuation allowance is provided against a deferred tax asset when it is more likely than not that some or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is considered to determine whether a valuation allowance for deferred tax assets is needed. Items considered in determining our valuation allowance include expectations of future earnings of the appropriate tax character, recent historical financial results, tax planning strategies, the length of statutory carryforward periods and the expected timing of the reversal of temporary differences. Under ASC 740, forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence, such as cumulative losses in recent years.

We recognize tax benefits of uncertain tax positions only when the position is more likely than not to be sustained assuming examination by tax authorities. We record income tax related interest and penalties, if applicable, within current income tax expense.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates.

Deferred Financing Costs

Financing costs related to long-term debt obligations are deferred and amortized over the life of the debt using either the effective interest method or straight-line method. Deferred financing costs are included in other assets on our consolidated balance sheets.

Transfer of Financial Assets

For a transfer of financial assets to be considered a sale, the transfer must meet the sale criteria of FASB ASC Topic 860, Transfers and Servicing (“ASC 860”), under which we must surrender control over the transferred assets. The assets must be isolated from us, even in bankruptcy or other receivership; the purchaser must have the right to pledge or sell the assets transferred and we may not have the right or obligation to reacquire the assets. If the sale criteria are not met, the transfer is considered to be a secured borrowing, the assets remain on our consolidated balance sheets and the sale proceeds are recognized as a liability. The transfers of financial assets to funds managed by subsidiaries of our wholly-owned portfolio company, ACAM, have been treated as sales by us under ASC 860.

Stock-Based Compensation

Recent Accounting Pronouncements

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements-Amendments to SEC

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AMERICAN CAPITAL, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update) (“ASU 2015-15”), which codifies existing practice and the SEC staff position on the presentation and subsequent measurement of debt issuance costs related to line-of-credit (“LOC”) arrangements and provides that such costs may be deferred and presented as an asset and subsequently amortized ratably over the term of the LOC arrangement, regardless of whether there are any outstanding borrowings on the LOC arrangement. An entity is required to apply the guidance in ASU 2015-03 on a retrospective basis such that the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in accounting principle including the nature and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial statement line items (that is, debt issuance cost asset and the debt liability). ASU 2015-03 is effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. We do not believe the adoption of ASU 2015-03 and ASU 2015-15 will have a material impact on our consolidated financial statements.

In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820) - Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (“ASU 2015-07”), which removes the requirement to include, as well as provide certain disclosure for, investments in the fair value hierarchy for which the fair value is measured at NAV using the practical expedient. Disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. ASU 2015-07 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early adoption is permitted. We do not believe the adoption of ASU 2015-07 will have a material impact on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which makes targeted improvements to the recognition, measurement, presentation and disclosure of certain financial instruments. ASU 2016-01 focuses primarily on the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for certain financial instruments. Among its provisions for public business entities, ASU 2016-01 eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost, requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires the separate presentation in other comprehensive income of the change in fair value of a liability due to instrument-specific credit risk for a liability for which the reporting entity has elected the fair value option, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) and clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. ASU 2016-1 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted for a limited number of provisions. We do not believe the adoption of ASU 2016-01 will have a material impact on our consolidated financial statements.

Note 3. Investments


•	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.


•	Level 2: Level 2 inputs are inputs, other than quoted prices included within Level 1, which 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.

100

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AMERICAN CAPITAL, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

The following fair value hierarchy tables set forth our assets and liabilities that are measured at fair value on a recurring basis by level as of December 31, 2015 and 2014:



	2015
	Level 1		Level 2			Level 3			Total
First Lien Senior Debt	$	—	$	57		$	863		$	920
Second Lien Senior Debt	—		445			490			935
Mezzanine Debt	—		—			604			604
Preferred Equity	—		—			606			606
Common Equity	—		—			1,515			1,515
Structured Products	—		—			418			418
Investments at Fair Value	—		502			4,496			4,998
Other Assets	—		—			31			31
Derivative Agreements	—		(5		)	—			(5		)
Long Term Incentive Plan Liability	—		—			(34		)	(34		)
Other Assets and Liabilities at Fair Value	—		(5		)	(3		)	(8		)
Total	$	—	$	497		$	4,493		$	4,990

	2014
	Level 1		Level 2			Level 3			Total
First Lien Senior Debt	$	—	$	1,644		$	870		$	2,514
Second Lien Senior Debt	—		340			347			687
Mezzanine Debt	—		—			472			472
Preferred Equity	—		—			462			462
Common Equity	—		—			1,562			1,562
Structured Products	—		—			583			583
Investments at Fair Value	—		1,984			4,296			6,280
Other Assets	—		—			51			51
Derivative Agreements	—		(10		)	(74		)	(84		)
Long Term Incentive Plan Liability	—		—			(82		)	(82		)
Other Assets and Liabilities at Fair Value	—		(10		)	(105		)	(115		)
Total	$	—	$	1,974		$	4,191		$	6,165

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

The following tables set forth the summary of changes in the fair value of investment assets and liabilities measured using Level 3 inputs for the years ended December 31, 2015 and 2014:



	Senior Debt			Mezzanine Debt			Preferred Equity			Common Equity			Structured Products			Other Assets			Long Term Incentive Plan Liability			Derivative Agreement			Total
Balances, January 1, 2015	$	1,217		$	472		$	462		$	1,562		$	583		$	51		$	(82	)	$	(74	)	$	4,191
Net realized (loss) gain⁽¹⁾	(28		)	(86		)	(407		)	(110		)	(5		)	—			(46		)	45			(637		)
Reversal of prior period net depreciation on realization⁽²⁾	34			112			304			85			5			—			46			65			651
Net unrealized (depreciation) appreciation⁽²⁾⁽³⁾	(38		)	(32		)	34			(164		)	(132		)	(2		)	(2		)	(37		)	(373		)
Purchases⁽⁴⁾	772			125			245			362			458			8			—			—			1,970
Sales⁽⁵⁾	(244		)	(46		)	(86		)	(240		)	(286		)	—			—			—			(902		)
Settlements, net⁽⁶⁾	(332		)	68			59			34			(202		)	(26		)	46			1			(352		)
Effects of exchange rate changes	(26		)	(9		)	(5		)	(14		)	(3		)	—			4			—			(53		)
Transfers into Level 3⁽⁷⁾	3			—			—			—			—			—			—			—			3
Transfers out of Level 3⁽⁷⁾	(5		)	—			—			—			—			—			—			—			(5		)
Balances, December 31, 2015	$	1,353		$	604		$	606		$	1,515		$	418		$	31		$	(34	)	$	—		$	4,493



	Senior Debt			Mezzanine Debt			Preferred Equity			Common Equity			Structured Products			Other Assets			Long Term Incentive Plan Liability			Derivative Agreement			Total
Balances, January 1, 2014	$	1,060		$	520		$	1,125		$	2,091		$	276		$	29		$	—		$	—		$	5,101
Net realized (loss) gain⁽¹⁾	(34		)	(4		)	90			212			(10		)	—			—			(45		)	209
Reversal of prior period net depreciation (appreciation) on realization⁽²⁾	48			8			(104		)	(167		)	14			(2		)	—			—			(203		)
Net unrealized (depreciation) appreciation⁽²⁾⁽³⁾	(57		)	(2		)	(35		)	383			9			(20		)	(7		)	(28		)	243
Purchases⁽⁴⁾	519			24			65			370			471			59			—			—			1,508
Sales⁽⁵⁾	(35		)	(18		)	(841		)	(1,011		)	—			—			—			(1		)	(1,906		)
Settlements, net⁽⁶⁾	(398		)	(169		)	(63		)	71			(194		)	(15		)	—			—			(768		)
Transfers out of Level 3⁽⁷⁾	(129		)	—			—			—			—			—			—			—			(129		)
Impact of consolidation of European Capital⁽⁸⁾	243			113			225			(387		)	17			—			(75		)	—			136
Balances, December 31, 2014	$	1,217		$	472		$	462		$	1,562		$	583		$	51		$	(82	)	$	(74	)	$	4,191


(1)	Included in net realized (loss) gain in the consolidated statements of operations. Excludes (loss) gain on realized foreign currency transactions on American Capital other assets and liabilities that are denominated in a foreign currency and any tax benefit (provision). Also, excludes realized gain (loss) from other assets and liabilities not measured at fair value.


(2)	Included in net unrealized appreciation in the consolidated statements of operations.


(3)	Excludes unrealized appreciation (depreciation) related to foreign currency translation for American Capital other assets and liabilities not measured at fair value that are denominated in a foreign currency.


(4)	Includes increases in the cost basis of investments resulting from new and add-on portfolio investments, the accrual or allowance of PIK interest or cumulative dividends and the amortization of discounts, premiums and closing fees.


(5)	Includes the proceeds from equity investments, collection of cumulative dividends, loan syndications and loan sales.


(6)	Includes principal repayments on debt investments, collection of PIK interest, collection of accreted loan discounts, the exchange of one or more existing securities for one or more new securities and net interest rate derivative periodic interest and termination payments.


(7)	Investments were transferred into and out of Level 3 and Level 2 due to changes in the quantity and quality of inputs obtained to support the fair value of each investment. Our policy is to recognize transfers as of the first day of a reporting period for investments existing as of the end of the period.


(8)	Effective October 1, 2014, European Capital’s financial results have been consolidated with the financial results of American Capital.

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(in millions, except per share data)

Significant Unobservable Inputs

The following table summarizes the significant unobservable inputs in the fair value measurements of our Level 3 investments by category of investment and valuation technique as of December 31, 2015:



						Range
	Fair Value			Valuation Techniques	Unobservable Inputs	Minimum	Maximum	Weighted Average
	Fair Value			Valuation Techniques	Unobservable Inputs	Minimum	Maximum	Weighted Average
Enterprise Value Waterfall Methodology
Senior Debt	$	409		Enterprise discounted cash flow	Discount rate	11%	40%	19%
					Terminal value growth rate	2%	10%	4%
				Public comparable companies	Premium or (discount) to multiples of comparable companies	(50)%	(15)%	(44)%
					Control premium	—%	15%	9%
				Sales of comparable companies	Premium or (discount) to multiples of comparable companies	(45)%	30%	(32)%
Mezzanine Debt	$	468		Enterprise discounted cash flow	Discount rate	12%	35%	14%
					Terminal value growth rate	2%	4%	3%
				Public comparable companies	Premium or (discount) to multiples of comparable companies	(55%)	30%	(35%)
					Control premium	9%	20%	13%
				Sales of comparable companies	Premium or (discount) to multiples of comparable companies	(45%)	10%	(24%)
Preferred Equity	$	546		Enterprise discounted cash flow	Discount rate	9%	37%	17%
					Terminal value growth rate	2%	4%	3%
				Public comparable companies	Premium or (discount) to multiples of comparable companies	(55%)	30%	(38%)
					Control premium	9%	20%	13%
				Sales of comparable companies	Premium or (discount) to multiples of comparable companies	(45%)	10%	(22%)
Common Equity	$	1,515		Enterprise discounted cash flow	Discount rate	8%	40%	13%
					Terminal value growth rate	2%	10%	3%
				Public comparable companies	Premium or (discount) to multiples of comparable companies	(55%)	30%	17%
					Control premium	—%	20%	13%
				Sales of comparable companies	Premium or (discount) to multiples of comparable companies	(45%)	10%	(5%)
Long Term Incentive Plan Liability	$	(34	)	Discounted cash flow	Discount rate	11%	11%	11%
					(Discount) due to lack of control and marketability	(25%)	—%	(23%)

Market Yield Valuation Methodology
Senior Debt	$	871		Discounted cash flow	Market yield	5%	15%	9%
					Estimated remaining life	1 yr	4 yrs	4 yrs
Mezzanine Debt	$	136		Discounted cash flow	Market yield	14%	22%	16%
					Estimated remaining life	1 yr	4 yrs	2 yrs
Preferred Equity	$	60		Discounted cash flow	Market yield	14%	15%	14%
					Estimated remaining life	1 yr	4 yrs	1 yr
Structured Products	$	418		Discounted cash flow	Discount rate	5%	52%	19%
					Constant prepayment rate	30%	35%	31%
					Constant default rate	—%	2%	1%

Third-Party Vendor Pricing Service
Senior Debt	$	73		Third-party vendor pricing	Bid/Ask	56	99	95

Total	$	4,462

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(in millions, except per share data)

The following table summarizes the significant unobservable inputs in the fair value measurements of our Level 3 investments by category of investment and valuation technique as of December 31, 2014:



						Range
	Fair Value			Valuation Techniques	Unobservable Inputs	Minimum	Maximum	Weighted Average
	Fair Value			Valuation Techniques	Unobservable Inputs	Minimum	Maximum	Weighted Average
Enterprise Value Waterfall Methodology
Senior Debt	$	558		Enterprise discounted cash flow	Discount rate	10%	53%	16%
					Terminal value growth rate	2%	5%	4%
				Public comparable companies	Premium or (discount) to multiples of comparable companies	(55)%	(30)%	(44)%
					Control premium	—%	21%	15%
				Sales of comparable companies	Premium or (discount) to multiples of comparable companies	(45)%	5%	(36)%
Mezzanine Debt	$	308		Enterprise discounted cash flow	Discount rate	11%	34%	15%
					Terminal value growth rate	2%	4%	3%
				Public comparable companies	Premium or (discount) to multiples of comparable companies	(55%)	—%	(38%)
					Control premium	7%	21%	13%
				Sales of comparable companies	Premium or (discount) to multiples of comparable companies	(50%)	5%	(12%)
Preferred Equity	$	459		Enterprise discounted cash flow	Discount rate	7%	38%	16%
					Terminal value growth rate	2%	5%	3%
				Public comparable companies	Premium or (discount) to multiples of comparable companies	(55%)	35%	(34%)
					Control premium	4%	19%	12%
				Sales of comparable companies	Premium or (discount) to multiples of comparable companies	(50%)	5%	(27%)
Common Equity	$	1,562		Enterprise discounted cash flow	Discount rate	4%	53%	14%
					Terminal value growth rate	2%	5%	3%
				Public comparable companies	Premium or (discount) to multiples of comparable companies	(55%)	35%	(23%)
					Control premium	—%	21%	13%
				Sales of comparable companies	Premium or (discount) to multiples of comparable companies	(50%)	15%	(17%)
Long Term Incentive Plan Liability	$	(82	)	Discounted cash flow	Discount rate	11%	11%	11%
					(Discount) due to lack of control and marketability	(30%)	(10%)	(30%)

Market Yield Valuation Methodology
Senior Debt	$	641		Discounted cash flow	Market yield	5%	18%	10%
					Estimated remaining life	0 yrs	4 yrs	4 yrs
Mezzanine Debt	$	164		Discounted cash flow	Market yield	13%	22%	15%
					Estimated remaining life	1 yr	4 yrs	2 yrs
Preferred Equity	$	3		Discounted cash flow	Market yield	16%	27%	23%
					Estimated remaining life	3 yrs	4 yrs	4 yrs
Structured Products	$	583		Discounted cash flow	Discount rate	5%	57%	13%
					Constant prepayment rate	30%	35%	31%
					Constant default rate	—%	2%	1%

Third-Party Vendor Pricing Service
Senior Debt	$	18		Third-party vendor pricing	Bid/Ask	95	97	96

Black-Scholes Option Pricing Methodology
Derivative Agreement	$	(74	)	Black-Scholes model	Volatility	117%	117%	117%
					Estimated remaining life	0.3 yrs	0.3 yrs	0.3 yrs


Total	$	4,140

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(in millions, except per share data)

The following tables show the composition summaries of our investment portfolio at cost basis and fair value, excluding derivative agreements, as a percentage of total investments as of December 31, 2015 and 2014:



	2015		2014
Cost
First Lien Senior Debt	20.1	%	40.5	%
Second Lien Senior Debt	19.9	%	11.2	%
Mezzanine Debt	14.0	%	10.0	%
Preferred Equity	12.4	%	13.4	%
Common Equity	21.4	%	15.0	%
Structured Products	12.2	%	9.9	%
Total	100.0	%	100.0	%

Fair Value
First Lien Senior Debt	18.4	%	40.0	%
Second Lien Senior Debt	18.7	%	10.9	%
Mezzanine Debt	12.1	%	7.5	%
Preferred Equity	12.1	%	7.4	%
Common Equity	30.3	%	24.9	%
Structured Products	8.4	%	9.3	%
Total	100.0	%	100.0	%

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(in millions, except per share data)

We use the Global Industry Classification Standards (“GICS^®”) for classifying the industry groupings of our portfolio companies. The GICS^®was developed by MSCI, an independent provider of global indexes and benchmark-related products and services, and Standard & Poor’s, an independent international financial data and investment services company and provider of global equity indexes. The following tables show the portfolio composition by industry grouping at cost and at fair value as a percentage of total investments as of December 31, 2015 and 2014. Our investments in CLO securities and derivative agreements are excluded from the table below. Our investments in CMBS are classified in the Real Estate category.



	2015		2014
Cost
Capital Markets	12.6	%	8.3	%
Commercial Services and Supplies	12.1	%	6.4	%
IT Services	9.9	%	3.2	%
Life Sciences Tools and Services	9.2	%	14.5	%
Diversified Consumer Services	4.5	%	3.7	%
Software	4.2	%	3.2	%
Household Durables	4.1	%	3.5	%
Real Estate	3.8	%	2.7	%
Diversified Financial Services	3.0	%	1.7	%
Health Care Equipment and Supplies	2.9	%	4.0	%
Professional Services	2.7	%	2.8	%
Oil, Gas and Consumable Fuels	2.3	%	2.0	%
Trading Companies and Distributors	2.3	%	0.7	%
Internet Software and Services	2.1	%	0.7	%
Health Care Providers and Services	2.0	%	2.9	%
Containers and Packaging	1.9	%	0.7	%
Aerospace and Defense	1.8	%	1.7	%
Distributors	1.7	%	1.1	%
Independent Power and Renewable Electricity Producers	1.6	%	1.2	%
Marine	1.5	%	1.1	%
Hotels, Restaurants and Leisure	1.4	%	3.0	%
Energy Equipment and Services	1.2	%	1.6	%
Insurance	1.1	%	1.7	%
Auto Components	1.0	%	3.3	%
Specialty Retail	0.9	%	1.5	%
Textiles, Apparel and Luxury Goods	0.8	%	2.5	%
Machinery	0.7	%	1.8	%
Food Products	0.5	%	2.2	%
Media	—	%	2.4	%
Other	6.2	%	13.9	%
Total	100.0	%	100.0	%

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(in millions, except per share data)



	2015		2014
Fair Value
Capital Markets	23.4	%	21.3	%
Commercial Services and Supplies	9.3	%	5.8	%
IT Services	9.1	%	2.9	%
Life Sciences Tools and Services	7.5	%	9.2	%
Diversified Consumer Services	5.6	%	3.8	%
Household Durables	4.3	%	3.3	%
Software	4.1	%	3.0	%
Real Estate	3.3	%	2.1	%
Diversified Financial Services	2.9	%	1.1	%
Professional Services	2.7	%	2.9	%
Health Care Providers and Services	2.2	%	2.9	%
Trading Companies and Distributors	2.2	%	0.7	%
Distributors	1.9	%	1.1	%
Independent Power and Renewable Electricity Producers	1.9	%	1.2	%
Containers and Packaging	1.8	%	0.7	%
Internet Software and Services	1.8	%	0.6	%
Oil, Gas and Consumable Fuels	1.8	%	1.6	%
Aerospace and Defense	1.6	%	1.7	%
Health Care Equipment and Supplies	1.5	%	2.7	%
Hotels, Restaurants and Leisure	1.3	%	3.2	%
Insurance	1.0	%	1.7	%
Auto Components	1.0	%	2.3	%
Specialty Retail	0.6	%	1.5	%
Textiles, Apparel and Luxury Goods	0.4	%	2.1	%
Food Products	0.3	%	2.0	%
Media	—	%	2.5	%
Internet and Catalog Retail	—	%	1.9	%
Other	6.5	%	14.2	%
Total	100.0	%	100.0	%

Note 4. Borrowings

Our debt obligations consisted of the following as of December 31, 2015 and 2014:



	2015		2014
Secured revolving credit facility due August 2016, $250 million commitment	$	167	$	—
Secured revolving credit facility due March 2017, $272 million commitment	272		726
Secured revolving credit facility due October 2016, $500 million commitment	33		51
Secured term loan due August 2017, net of discount	440		444
Unsecured Private Notes due September 2018, net of discount	345		344
European Capital unsecured senior notes, Series 2006-I due January 2022, €52 million	—		64
European Capital unsecured senior notes, Series 2007-I due July 2022, $37.5 million	—		37
European Capital unsecured senior notes, Series 2007-II due July 2022, $37.5 million	—		37
Total	$	1,257	$	1,703

The daily weighted average debt balance, excluding discounts, for the years ended December 31, 2015 and 2014 was $2,157 million and $1,091 million, respectively. The weighted average interest rate on all of our borrowings, including amortization of

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(in millions, except per share data)

deferred financing costs, for the years ended December 31, 2015 and 2014 was 3.7% and 4.9%, respectively. The weighted average interest rate on all of our borrowings, excluding amortization of deferred financing costs, for the years ended December 31, 2015 and 2014 was 3.2% and 4.3%, respectively. The weighted average interest rate on all of our borrowings, excluding deferred financing costs, as of December 31, 2015 was 4.0%.

As of December 31, 2015 and 2014, the aggregate fair value of the above borrowings was $1,273 million and $1,729 million, respectively. The fair values of our debt obligations are determined in accordance with ASC 820, 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, and are measured using Level 3 inputs for our debt as of December 31, 2015 and 2014. 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 valued at the closing market quotes as of the measurement date or estimated 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.

Unsecured Private Notes

On September 20, 2013, we entered into an indenture with U.S. Bank National Association, as trustee, relating to the issuance and sale by us of $350 million in aggregate principal amount of senior unsecured five-year notes (“Private Notes”), for proceeds of $342 million, net of underwriters’ discounts. The Private Notes were sold in a private offering to qualified institutional buyers under Rule 144A and outside of the United States pursuant to Regulation S of the Securities Act of 1933, as amended. The Private Notes have a fixed interest rate of 6.50% and mature in September 2018. Interest payments are due semi-annually on March 15 and September 15 and all principal is due on maturity. The Private Notes are rated B3, BB and BB- by Moody’s Investor Services, Standard & Poor’s Ratings Services and Fitch Ratings, respectively. The indenture contains restrictive covenants that, among other things, limit our ability to: (i) pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments; (ii) incur additional debt and issue certain disqualified stock and preferred stock; (iii) incur certain liens; (iv) merge or consolidate with another company or sell substantially all of our assets; (v) enter into certain transactions with affiliates; and (vi) allow to exist certain restrictions on the ability of our subsidiaries to pay dividends or make other payments to us. The indenture also contains certain customary events of default, including but not limited to those relating to the failure to make principal or interest payments on such debt, a cross payment or acceleration default on an aggregate $50 million or more of other indebtedness, covenant defaults, bankruptcy events and failure to pay judgments. As of December 31, 2015, we were in compliance with all of the covenants under the Private Notes.

European Capital Unsecured Senior Notes

In December 2006, European Capital entered into a note purchase agreement to issue €52 million of senior unsecured 15-year notes due January 2022 to accredited investors in a private placement offering (“Series 2006-I Notes”). The Series 2006-I Notes had a floating rate of EURIBOR plus 2.75%. On June 17, 2015, the Series 2006-I Notes were repaid in full. In March 2007, European Capital entered into note purchase agreements to issue two $37.5 million of senior unsecured notes due July 2022 to accredited investors in a private placement offering (“Series 2007-I Notes” and “Series 2007-II Notes”). The Series 2007-I Notes and Series 2007-II Notes had a floating rate of LIBOR plus 2.75%. On August 18, 2015, the Series 2007-I Notes and Series 2007-II Notes were repaid in full.

Secured Term Loan Facility

On February 26, 2014, we entered into an amendment (the “Amendment”) to the amended secured term loan facility under our Senior Secured Term Loan Credit Agreement, dated as of August 23, 2013, with the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Secured Term Loan Facility”).

The Amendment reduced the interest rate on the Secured Term Loan Facility, which had an outstanding principal balance of $450 million as of the closing date, from LIBOR plus 3.00%, with a LIBOR floor of 1.00%, to LIBOR plus 2.75%, with a LIBOR floor of 0.75%. The Amendment also extended the Secured Term Loan Facility’s maturity date by one year to August 2017.

In accordance with FASB ASC Subtopic No. 470-50, Modifications and Extinguishments, $447 million of debt exchanged with the same lenders met the criterion for and was accounted as a modification of debt. Existing unamortized deferred financing costs and discount attributable to the modification of the Secured Term Loan Facility of $9 million will be amortized into interest expense over the life of the Secured Term Loan Facility using the effective interest method, while fees paid to other third-party

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(in millions, except per share data)

advisors of $1 million were expensed and included in general and administrative expenses in the consolidated statements of operations.

As of December 31, 2015, the interest rate on our Secured Term Loan Facility was 3.50% and the borrowing base coverage was 385%. The Senior Term Loan Facility contains various events of default, including but not limited to those relating to the failure to make principal or interest payments on such debt, an event of default under the $250 Million Revolving Credit Facility, a cross default on an aggregate $50 million or more of certain other indebtedness, the breach of representations or covenants, bankruptcy events, the failure to conduct our asset management business through ACAM, a change in control and the failure to pay judgments. As of December 31, 2015, we were in compliance with all of the covenants under the Secured Term Loan Facility.

The following table sets forth the scheduled amortization on the secured term loans and unsecured private notes:



August 2016	$4.5 million
Secured Term Loans due August 2017	Outstanding Balance
Unsecured Private Notes due September 2018	Outstanding Balance

$250 Million Revolving Credit Facility

On August 22, 2012, we obtained a four-year $250 million secured revolving credit facility (the “$250 Million Revolving Credit Facility”), which bears interest at a rate per annum equal to LIBOR plus 3.75%. As of December 31, 2015, the interest rate on the $250 Million Revolving Credit Facility was 4.00%.

On August 22, 2015, the commitment termination date, we chose not to renew commitments under the facility, and as a result, the outstanding balance on the $250 Million Revolving Credit Facility is repayable ratably over the final 12 months until the maturity date on August 22, 2016.

As of December 31, 2015, the total debt outstanding under our $250 Million Revolving Credit Facility was $167 million. The $250 Million Revolving Credit Facility contains various events of default, including but not limited to those relating to the failure to make principal or interest payments on such debt, an event of default under the Secured Term Loan Facility, a cross default on an aggregate $50 million or more of certain other indebtedness, the breach of representations or covenants, bankruptcy events, the failure to conduct our asset management business through ACAM, a change in control and the failure to pay judgments. As of December 31, 2015, we were in compliance with all of the covenants under the $250 Million Revolving Credit Facility.

$1.25 Billion Revolving Credit Facility

On June 27, 2014, ACAS Funding I, LLC, a wholly-owned financing subsidiary, obtained a $750 million secured revolving credit facility provided by Bank of America, N.A. On March 6, 2015, the commitments to the existing $750 million secured revolving credit facility were increased by $500 million to $1.25 billion (the “$1.25 Billion Revolving Credit Facility”). In addition to the increase, the maturity date of the facility was extended to March 6, 2017. On December 11, 2015, we closed an amendment which amended certain covenants to permit ACAS Funding I, LLC to repatriate the remaining proceeds from its senior floating rate loan portfolio sales while settling any associated liabilities. In addition, commencing on December 27, 2015 the commitments are calculated as the greater of total debt outstanding or $100 million. The facility bears interest at a rate per annum equal to LIBOR plus 1.60%. As of December 31, 2015, the interest rate on the $1.25 Billion Revolving Credit Facility was 1.99%.

As of December 31, 2015, the facility is in a wind down period that prohibits us from purchasing additional assets or borrowing under the facility. We can reinstate our ability to borrow and purchase assets at any time prior to February 6, 2017, subject to certain terms outlined in the credit agreement.

We are required to pay a fee on the unused commitments under the facility in an amount equal to 1.60% on the average daily unused amount of lender commitments up to 60% of the daily average of total commitments, and 0.75% on the lesser of 40% of the daily average total commitments and average daily unused amount. Under the amendment, the unused fee was reduced to 0.50% on the average daily unused amount. To the extent we reinstate our ability to borrow, the unused fees will increase to the rates paid prior to the amendment on the three month anniversary of our ability to borrow under the facility being reinstated. All fees are payable quarterly. As of December 31, 2015, the total debt outstanding under our $1.25 Billion Revolving Credit Facility was $272 million, which was secured by cash, receivables and portfolio investments with a fair value of $535 million. The credit facility contains various events of default, including but not limited to those relating to the failure to make principal or interest payments on such debt, the breach of representations or covenants, credit triggers, the loss of key personnel, a change in investment manager, the occurrence of certain regulatory or criminal proceedings, bankruptcy events and the failure to pay

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judgments. As of December 31, 2015, we were in compliance with all of the covenants under the $1.25 Billion Revolving Credit Facility.

$500 Million Revolving Credit Facility

On October 30, 2014, ACAS Funding II, LLC, a wholly-owned financing subsidiary, obtained a $500 million secured revolving credit facility (the “$500 Million Revolving Credit Facility”), provided by Deutsche Bank AG. The $500 Million Revolving Credit Facility, which matures in October 2016, bears interest at a rate per annum equal to LIBOR plus 1.60%. On December 14, 2015, we closed an amendment that amended certain covenants to permit ACAS Funding II, LLC to repatriate the remaining proceeds from its senior floating rate loan portfolio sales while settling any associated liabilities. As of December 31, 2015, the interest rate on the $500 Million Revolving Credit Facility was 1.93%.

As of December 31, 2015, the total debt outstanding under our $500 Million Revolving Credit Facility was $33 million, which was secured by cash, receivables and portfolio investments with a fair value of $113 million. As of December 31, 2015, we were in compliance with all of the covenants under the $500 Million Revolving Credit Facility. On January 6, 2016, the $500 Million Revolving Credit Facility was repaid in full and terminated.

Future Debt Maturities

The maturities of our debt obligations, excluding discounts, as of December 31, 2015 were as follows:



2016	$	204
2017	709
2018	350
Thereafter	—
Total	$	1,263

Note 5. Stock Options

We have stock option plans which provide for the granting of options to employees and non-employee directors to purchase shares of common stock at a price of not less than the fair market value of the common stock on the date of grant. Stock options granted under the employee stock option plans vest over either a three or five year period and may be exercised for a period of no more than ten years from the date of grant. Options granted under these plans may be either incentive stock options within the meaning of Section 422 of the Code or non-qualified stock options. As required by the 1940 Act, we are restricted from issuing awards to our employees and non-employee directors to the extent that the amount of voting securities that would result from the exercise of all such awards at the time of issuance exceeds 20% of our outstanding voting securities. As of December 31, 2015, there were 4.1 million shares available to be granted under the employee stock option plans and in accordance with the 1940 Act restrictions.

Our shareholders approved non-employee director stock option plans in 1998, 2000, 2006, 2007, 2008, 2009 and 2010 and we subsequently received orders from the SEC authorizing such plans. Stock options granted under the non-employee director stock option plans are non-qualified stock options that vest over a three year period and may be exercised for a period of no more than ten years from the date of grant. As of December 31, 2015, there were no shares available to be granted under the non-employee director stock option plans. No employee or non-employee director stock options were granted during the year ended December 31, 2015. Employee stock options of 0.1 million were granted during the year ended December 31, 2014. No non-employee director stock options were granted during the year ended December 31, 2014. Employee and non-employee director stock options of 3.7 million were granted during the year ended December 31, 2013.

During the first quarter of 2014, we concluded that our Chief Executive Officer had been granted stock options in excess of the individual employee limits established in certain of our stock option plans. These stock option grants were made during fiscal years 2010, 2011 and 2012. As a result, the stock option grants in excess of the individual limits in any stock option plan have been considered null and void. Therefore, stock-based compensation expense associated with the null and void options of $3.5 million was reversed in the first quarter of 2014.

In addition, the communication of the voided stock option grants to our Chief Executive Officer resulted in a financial obligation under U.S. GAAP to provide equity compensation commensurate with the terms of the voided stock option grants in return for services to be performed by our Chief Executive Officer during the option vesting periods. This financial obligation has been accounted for as a liability award and stock-based compensation expense of $5.8 million associated with prior periods was

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(in millions, except per share data)

recorded in the second quarter of 2014. The net impact of these adjustments was additional stock-based compensation expense of $2.3 million during the first quarter of 2014. An additional $1.4 million of income tax expense was recorded during the first quarter of 2014 as a result of these adjustments. These errors were immaterial to the individual prior periods impacted. During the second quarter of 2014, pursuant to the Deferred Plan, an award of $10 million was granted to our Chief Executive Officer that partially settled this financial obligation. During the first quarter of 2015, an award of $7 million was granted to our Chief Executive Officer that settled the remainder of this financial obligation. These grants were funded with shares of common stock from the Trust that had previously been forfeited by former employees prior to being fully vested in their shares.

In conjunction with the American Capital Equity III, LP transaction, certain investment professionals were transferred to a wholly-owned subsidiary of ACAM, our wholly-owned portfolio company which manages American Capital Equity III, LP. Concurrent with this transfer, the vesting of any unvested stock options held by these investment professionals as of the date of the transfer was accelerated. In accordance with ASC 718, the acceleration of the unvested stock options was accounted for as a modification and resulted in additional stock-based compensation expense of approximately $5 million during the third quarter of 2014.

As discussed in Note 9, due to changes in the composition of our investment portfolio and market conditions, we conducted strategic reviews of our business which resulted in a workforce reduction of our employees in the fourth quarter of 2014. In conjunction with the restructuring, the vesting of any unvested stock options held by impacted employees as of the date of their separation was accelerated, and the employees were given a period of up to one year from their separation date, or less if the expiration of the option was within one year from their separation date, to exercise all outstanding options. During the year ended December 31, 2015, in accordance with FASB ASC Topic 718, Compensation-Stock Compensation, the acceleration of 1.0 million unvested stock options was accounted for as a modification and resulted in additional stock-based compensation expense of approximately $4 million related to additional workforce reductions.

Fair Value Disclosures

No stock options were granted during the year ended December 31, 2015. The following table reflects the weighted average fair value per stock option granted during the years ended December 31, 2014 and 2013, as well as the weighted average assumptions used in determining those fair values using a Black-Scholes option pricing model.



	2014		2013
Options granted (in millions)	0.1		3.7
Weighted average fair value per option on grant date	$6.89		$5.88
Expected dividend yield	—	%	—	%
Expected volatility	42	%	41	%
Risk-free interest rate	2.1	%	1.2	%
Expected life (years)	6.8		6.7

Stock Option Activity

A summary of the activity of our stock option plans as of and for the year ended December 31, 2015 is as follows:



	Shares	Weighted Average Exercise Price
Options outstanding, beginning of year	45.1	$	9.21
Exercised	(12.0)	$	7.71
Canceled and expired	(0.9)	$	13.17
Options outstanding, end of year	32.2	$	9.66
Options exercisable, end of year	26.4	$	9.56

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(in millions, except per share data)

The following table summarizes information about our stock options outstanding as of December 31, 2015:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Outstanding	Weighted Average Remaining Contractual life	Weighted Average Exercise Price		Exercisable	Weighted Average Remaining Contractual life	Weighted Average Exercise Price
$0.94 to $5.00	3.6	3.2	$	4.02	3.6	3.2	$	4.02
$5.01 to $10.00	16.5	5.1	$	7.35	13.5	5.0	$	7.11
$10.01 to $15.00	8.3	5.9	$	11.31	5.5	5.7	$	11.03
$15.01 to $20.00	3.0	2.8	$	16.69	3.0	2.7	$	16.71
$20.01 to $47.90	0.8	1.1	$	39.41	0.8	1.1	$	39.41
	32.2	4.8	$	9.66	26.4	4.5	$	9.56

As of December 31, 2015, the total compensation cost related to non-vested stock options not yet recognized was $6 million with a weighted average period to be recognized of 1.5 years. As of December 31, 2015, the intrinsic value for stock options outstanding and exercisable was $163 million and $141 million, respectively.

For the years ended December 31, 2015, 2014 and 2013, we recorded stock-based compensation expense attributable to our stock options of $18 million, $44 million and $30 million, respectively. Stock-based compensation expense was recognized only for options expected to vest, using an estimated forfeiture rate based on historical experience. For the years ended December 31, 2015, 2014 and 2013, the intrinsic value of stock options exercised were $80 million, $44 million and $41 million, respectively.

Note 6. Deferred Compensation Plan

We have a non-qualified deferred compensation plan (the “Deferred Plan”) for the purpose of granting cash bonus awards to our employees. The Compensation, Corporate Governance and Nominating Committee is the administrator of the Deferred Plan. The Deferred Plan is funded through a trust (the “Trust”) which is administered by a third-party trustee. The Compensation, Corporate Governance and Nominating Committee determines cash bonus awards to be granted under the Deferred Plan and the terms of such awards, including vesting schedules. The cash bonus awards are invested by the Trust in our common stock by purchasing shares in the open market. Awards vest contingent on the employee’s continued employment or the achievement of performance goals, if any, as determined by the Compensation, Corporate Governance and Nominating Committee. The Trust provides certain protections of its assets from events other than claims against our assets in the case of bankruptcy. The assets and liabilities of the Trust are consolidated in the accompanying consolidated financial statements. Shares of our common stock held by the Trust are accounted for as treasury stock in the accompanying consolidated balance sheets.

The Deferred Plan does not permit diversification and the cash bonus awards must be settled by the delivery of a fixed number of shares of our common stock. The awards under the Deferred Plan are accounted for as grants of unvested stock. We record stock-based compensation expense based on the fair market value of our stock on the date of grant. The compensation cost for awards with service conditions is recognized using the straight-line attribution method over the requisite service period. The compensation cost for bonus awards with performance and service conditions is recognized using the accelerated attribution method over the requisite service period. During the years ended December 31, 2015, 2014 and 2013, cash bonus awards of $13 million, $10 million and $1.5 million, respectively, were granted under the Deferred Plan.

As discussed in Note 5, during the first quarter of 2014, we concluded that our Chief Executive Officer had been granted $2.6 million of cash bonus awards in fiscal year 2007 in excess of the annual individual employee limit established in the Deferred Plan. As a result, the $2.6 million of cash bonus awards have been considered null and void. Stock-based compensation expense associated with the null and void cash bonus awards of $2.6 million was reversed in the first quarter of 2014.

In addition, the communication of the $2.6 million of excess cash bonus awards to our Chief Executive Officer resulted in a financial obligation under U.S. GAAP to provide equity compensation commensurate with the terms of the cash bonus awards in return for services to be performed by our Chief Executive Officer during the award vesting period. The financial obligation has been accounted for as a liability award and stock-based compensation expense of $1.5 million associated with prior periods was recorded in the first quarter of 2014. The net impact of these adjustments was a $1.1 million reduction to stock-based compensation expense in the first quarter of 2014. An additional $0.3 million of income tax expense was recorded during the first quarter of 2014 as a result of these adjustments. These errors were immaterial to the individual prior periods impacted. During the second quarter of 2014, pursuant to the Deferred Plan, an award of $10 million was granted to our Chief Executive Officer that partially settled this financial obligation. During the first quarter of 2015, an award of $7 million was granted to our Chief

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(in millions, except per share data)

Executive Officer that settled the remainder of this financial obligation. These grants were funded with shares from the Trust which had previously been forfeited by former employees prior to being fully vested in their shares.

During the years ended December 31, 2015, 2014 and 2013, we recorded stock-based compensation expense of $8 million, $5 million and $2 million, respectively, attributable to the Deferred Plan. As of December 31, 2015, the total compensation cost related to non-vested cash bonus awards not yet recognized was $10 million with a weighted average period to be recognized of 2.3 years.

A summary of the bonus awards under the Deferred Plan as of and for the year ended December 31, 2015 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Non-vested, beginning of year	0.5		$14.84
Granted	0.9		$14.35
Vested	(0.5	)	$14.73
Canceled	0.0		$13.38
Non-vested, end of year	0.9		$14.40

As of December 31, 2015, there were 2.8 million shares of our common stock in the Trust that were vested but not yet distributed to the employees.

Long Term Incentive Plan Liability

European Capital has issued restricted mandatorily redeemable preferred shares (“Redeemable Preferred Shares”) to participating employees of subsidiary companies of its manager, European Capital Asset Management Limited (“ECAM”), a wholly-owned subsidiary of ACAM, under Long Term Incentive Plans (the “Plans”) for an issue price determined at the time of issuance. The Plans have a 5-year vesting period. The Redeemable Preferred Shares are subdivided into subclasses of shares. The redemption value of each sub-class of Redeemable Preferred Shares is calculated using a predetermined formula and is based on the net liquidity proceeds, as defined in the Plans, on the exit of specifically referenced investments of European Capital in excess of certain hurdle rates. The Plans have annual calculation and redemption dates through December 31, 2018 and March 1, 2019, respectively, for sub-classes A, B and C and December 31, 2023 and March 1, 2024, respectively, for sub-classes D, E and F. Redeemable Preferred Shares related to specifically referenced investments not exited at the final annual calculation dates will be redeemed after the receipt of subsequent net liquidity proceeds or, if specifically referenced investments that remain outstanding on January 1, 2020 for sub-classes A, B and C and January 1, 2025 for sub-classes D, E and F, will be redeemed based on the realizable value of the remaining referenced investments. European Capital elected to recognize the Redeemable Preferred Shares at fair value in accordance with FASB ASC Topic 825, Financial Instruments.

The holders of the Redeemable Preferred Shares have no rights to participate in or receive notice of any general meeting of European Capital and the shares are generally not transferable. The Redeemable Preferred Shares have no rights to receive dividends. During the three months ended March 31, 2015, a portion of Redeemable Preferred Shares were redeemed and European Capital realized a loss of $46 million, offset by a reversal of unrealized depreciation of $46 million, which is included in net realized (loss) gain and net unrealized appreciation in our consolidated statements of operations.

The fair value of the Redeemable Preferred Shares is calculated as of December 31, 2015 and 2014 using the net present value of the estimated future cash flows of the underlying European Capital investments with discounts applied for equity risk, liquidity risk, credit risk, minority interests, lack of marketability and a forfeiture rate. The fair value of the Redeemable Preferred Shares as of December 31, 2015 and 2014 was $34 million and $82 million, respectively, which is included in other liabilities in our consolidated balance sheets. The fair value of the underlying European Capital investments as of December 31, 2015 and 2014 was $367 million and $608 million, respectively. As of December 31, 2015, the redemption amount for 2016 is expected to be approximately $11 million.

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(in millions, except per share data)

The following table summarizes the number of shares issued and redeemed for the year ended December 31, 2015:



	Class A		Class B		Class C		Class D	Class E	Class F	Total
Balance, December 31, 2014	412		413		589		100	100	100	1,714
Shares Issued	—		—		—		—	—	—	—
Shares Redeemed	(68	)	(68	)	(98	)	—	—	—	(234	)
Balance, December 31, 2015	344		345		491		100	100	100	1,480

Note 7. Net Operating Income and Net Earnings Per Common Share

The following table sets forth the computation of basic and diluted net operating income and net earnings per common share for the years ended December 31, 2015, 2014 and 2013:



	2015			2014		2013
Numerator for basic and diluted net operating income per common share	$	253		$	117	$	156
Numerator for basic and diluted net (loss) earnings per common share	$	(187	)	$	434	$	184
Denominator for basic weighted average common shares	267.2			268.2		291.6
Employee stock options and awards	—			12.5		12.3
Denominator for diluted weighted average common shares	267.2			280.7		303.9
Basic net operating income per common share	$	0.95		$	0.44	$	0.53
Diluted net operating income per common share	$	0.95		$	0.42	$	0.51
Basic net (loss) earnings per common share	$	(0.70	)	$	1.62	$	0.63
Diluted net (loss) earnings per common share	$	(0.70	)	$	1.55	$	0.61

In accordance with the provisions of FASB ASC Topic 260, Earnings per Share, basic earnings per share (“EPS”) is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating EPS on a diluted basis.

In computing diluted EPS, only potential common shares that are dilutive, those that reduce EPS or increase loss per share, are included. The effect of stock options, unvested employee stock awards and contingently issuable shares are not included if the result would be anti-dilutive, such as when a net loss is reported. Therefore, basic EPS and diluted EPS are computed using the same number of weighted average shares for the year ended December 31, 2015 as we incurred a net loss for that period.

Stock options and unvested shares under our deferred compensation plan of 37.7 million, 7.6 million and 8.6 million for the years ended December 31, 2015, 2014 and 2013, respectively, were not included in the computation of diluted EPS either because the respective exercise or grant prices are greater than the average market value of the underlying stock or their inclusion would have been anti-dilutive, as determined using the treasury stock method.

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(in millions, except per share data)

Note 8. Geographic Data

The following table presents total operating revenue and total assets as of and for the years ended December 31, 2015, 2014 and 2013 by geographic location, excluding Structured Products. The geographic location of a portfolio company investment is determined by the location of the corporate headquarters of the portfolio company.



	2015		2014		2013
Operating revenue
United States	$	504	$	392	$	400
International	58		14		15
Total operating revenue	$	562	$	406	$	415

Total assets
United States	$	5,185	$	6,311	$	4,834
International	641		746		899
Total assets	$	5,826	$	7,057	$	5,733

Note 9. Restructuring Costs

Due to changes in the composition of our investment portfolio and market conditions, we conducted strategic reviews of our business in the fourth quarter of 2014, which resulted in a workforce reduction of approximately 13% of our employees and the closing of one of our offices as well as the elimination of certain functions at other offices. In conjunction with the restructuring, the vesting of any unvested stock options held by impacted employees as of the date of their separation was accelerated, and they were given a period of up to one year from their separation date, or less if the expiration of the option was within one year from their separation date, to exercise all outstanding options. We recorded charges for both severance and related employee costs and excess office facilities costs of $24 million for the year ended December 31, 2014, including $11 million from the modification of stock options. In addition, during the year ended December 31, 2015, we recorded charges for both severance and related employee costs of $12 million, including $4 million from the modification of stock options related to additional workforce reductions. The severance and related employee costs and the additional stock-based compensation expense resulting from the modification are included in salaries, benefits and stock-based compensation and the excess facilities costs are included in general and administrative in our consolidated statements of operations. The liability for employee severance costs and excess facilities is included in other liabilities in our consolidated balance sheet as of December 31, 2015.

In determining our liability related to excess office facilities, we are required to estimate such factors as future vacancy rates, the time required to sublet properties and sublease rates. These estimates are reviewed quarterly based on known real estate market conditions and the credit-worthiness of subtenants, and may result in revisions to the liability. Our remaining liability of $4 million as of December 31, 2015 related to these excess office facilities represents gross lease commitments with agreements expiring at various dates through 2023 of approximately $20 million, net of committed and estimated sublease income of approximately $15 million and a present value factor of $1 million. We have entered into signed sublease arrangements for approximately $2 million, with the remaining $13 million based on estimated future sublease income.

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(in millions, except per share data)

The following table summarizes the restructuring accrual activity during the year ended December 31, 2015:



	Severance			Excess Office Facilities			Total
Balance, December 31, 2014	$	8		$	5		$	13
Restructuring charges	6			—			6
Cash payments	(7		)	(1		)	(8		)
Balance, March 31, 2015	7			4			11
Restructuring charges	—			—			—
Cash payments	(4		)	—			(4		)
Balance, June 30, 2015	3			4			7
Restructuring charges	—			—			—
Cash payments	(1		)	—			(1		)
Accretion of net present value	—			1			1
Balance, September 30, 2015	2			5			7
Restructuring charges	2			—			2
Cash payments	—			(1		)	(1		)
Balance, December 31, 2015	$	4		$	4		$	8

Note 10. Shareholders’ Equity

Our common stock activity for the years ended December 31, 2015, 2014 and 2013 was as follows:



	2015		2014		2013
Common stock outstanding at beginning of period	266.9		270.2		304.4
Issuance of common stock under stock option plans	12.0		5.3		5.1
Repurchase of common stock	(36.9	)	(8.9	)	(40.4	)
Distribution of common stock held in deferred compensation trust	0.6		0.3		1.1
Common stock outstanding at end of period	242.6		266.9		270.2

Share Repurchase Program

During 2011, our Board of Directors adopted a program pursuant to which it will consider quarterly setting an amount to be utilized for share repurchases or dividends (the “Program”). Generally, the amount may be utilized for repurchases if the price of our common stock represents a discount to its NAV per share, and the amount may be utilized for the payment of cash dividends if the price of our common stock represents a premium to its NAV per share.

Repurchases under the Program were suspended in March 2014 as we undertook a process to evaluate potential capital requirements that could result from our previously announced plan to consider organizational changes to enhance shareholder value. We later announced that our Board had unanimously approved a plan to proceed with the spin-off of most of its investments in new a BDC to our shareholders, with American Capital continuing as a public asset manager. During the first quarter of 2015, our Board of Directors determined that it was appropriate to reinstate authorization for share repurchases while we seek to accomplish the announced spin-off. We included the written notice to stockholders required by Section 23(c) of the 1940 Act regarding the possibility of share repurchases over the next six months in a Letter to Stockholders dated September 11, 2015. Our Board of Directors modified the Program during the fourth quarter of 2015 to authorize the purchase of $600 million to $1 billion of common stock through June 30, 2016 at prices per share below 85% of our most recent quarterly NAV per share, subject to certain conditions. We have entered into a Rule 10b5-1 trading plan to undertake accretive share repurchases on a non-discretionary basis up to the $1 billion limit.

In determining the quarterly amount, the Board of Directors will be guided by our net cash provided by operating activities in preceding quarters, our capital requirements associated with completion of the spin-off transaction, our cash position, operational issues, economic conditions and the current trading price of our common stock and other factors. During the year ended December 31, 2015, we repurchased a total of 36.9 million shares of our common stock in the open market for $526 million at an

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(in millions, except per share data)

average price of $14.25 per share. During the year ended December 31, 2014, we repurchased a total of 8.9 million shares of our common stock in the open market for $137 million at an average price of $15.38 per share. During the year ended December 31, 2013, we repurchased a total of 40.4 million shares of our common stock in the open market for $561 million at an average price of $13.90 per share.

The Program may be further suspended, terminated or modified at any time for any reason. The Program does not obligate us to acquire any specific number of shares of our common stock.

Note 11. Income Taxes

As a taxable corporation under Subchapter C of the Code, we are subject to federal and applicable state corporate income taxes on our taxable ordinary income and capital gains. However, we estimate that for income tax purposes, we had both net operating loss carryforwards and net long-term capital loss carryforwards as of December 31, 2015. Our tax fiscal year ends on September 30.

Effective October 1, 2014, we consolidated our wholly-owned portfolio company, European Capital in our consolidated financial statements. European Capital and its wholly-owned subsidiary, European Capital S.A. SICAR (collectively, “ECAS”) are both controlled foreign corporations for U.S. tax purposes. Each entity pays an immaterial amount of non-U.S. income taxes. ECAS may produce subpart F income that must be reported on the U.S. tax return of American Capital.

We file a consolidated federal income tax return with eligible corporate subsidiaries, including portfolio companies in which we hold 80% or more of the outstanding equity interest measured by both vote and fair value. As a result, we have entered into a tax sharing agreement under which members of the consolidated tax group are compensated for losses and other tax benefits by members that are able to use those losses and tax benefits on their pro forma stand-alone federal income tax return.

The following table sets forth the significant components of our deferred tax assets and liabilities as of December 31, 2015 and 2014:



	2015			2014
Deferred Tax Assets
Net operating loss carryforwards	$	233		$	195
Basis differences in ordinary investments	102			139
Stock-based compensation	57			65
Basis differences in investments held in European Capital	155			193
Other	25			25
Total ordinary deferred tax assets	572			617
Net capital loss carryforwards	72			—
Basis differences in capital investments	99			230
Total capital deferred tax assets	171			230
Total deferred tax assets	743			847
Less valuation allowance	(300		)	(168		)
Total deferred tax assets less valuation allowance	443			679

Deferred Tax Liabilities
Basis differences in ACAM	(231		)	(309		)
Other	(14		)	(16		)
Total deferred tax liabilities	(245		)	(325		)
Total net deferred tax asset	$	198		$	354

The table above classifies certain deferred tax assets and liabilities based on management’s estimate of the expected tax character of recognition of the reversal of the timing differences that give rise to the deferred tax assets and liabilities as either ordinary or capital income. However, the ultimate tax character of the deferred tax asset or liability may change from the above classification based on the ultimate form of recognition of the timing difference.

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(in millions, except per share data)

As of December 31, 2015, our deferred tax asset was $743 million, our deferred tax liability was $245 million, our valuation allowance was $300 million and our net deferred tax asset was $198 million.

We estimate the expected tax character of recognition of the reversal of the timing differences that give rise to the deferred tax assets and liabilities as either ordinary or capital income. However, the ultimate tax character of the deferred tax asset or liability may change from our estimated classification based on the ultimate form of recognition of the timing difference. As of December 31, 2015, we believe that it is more likely than not that we will have future ordinary income to realize the majority of our ordinary deferred tax assets and therefore did not record a valuation allowance against these ordinary deferred tax assets.

As of December 31, 2015, we determined that it is not more likely than not that we will be able to utilize our ordinary deferred tax asset related to our investment in European Capital in its entirety. In determining the amount of the valuation allowance to be established, we assessed all available evidence, both positive and negative. During the three months ended December 31, 2015, the negative evidence outweighed the positive evidence in determining whether it was more likely than not that the ordinary deferred tax asset would be realized. Significant negative evidence existed in management’s update to the strategic review, resulting in uncertainty about the ability to generate sufficient income to utilize the deductible inside basis differences and qualified deficits related to the investment in European Capital. We believe that $14 million of the ordinary deferred tax asset will be realized; however, we established a valuation allowance against the remaining portion of the ordinary deferred tax asset. As a result, we recognized a tax provision of $141 million associated with the establishment of the valuation allowance.

On April 1, 2015, the New York State Legislature passed legislation that enacted several tax law changes that impact American Capital. As a result of the tax law changes, it is more likely than not that a portion of our net operating losses (“NOL”) generated in New York City will expire unutilized. Therefore, during the year ended December 31, 2015, we recorded a $12 million valuation allowance against a $13 million deferred tax asset related to $144 million of NOLs generated in New York City.

We continue to maintain a valuation allowance against a significant portion of our capital deferred tax assets. We believe that it is more likely than not that we will be able to utilize $25 million of our capital deferred tax assets as of December 31, 2015 and we have established a valuation allowance of $147 million against the remaining capital deferred tax assets.

We continue to assess our ability to realize our existing capital deferred tax assets. We believe that due to the recent decision to solicit offers to acquire individual lines of business or the company in its entirety, certain investments that had previously been determined to be long-lived assets may provide a source of taxable income to realize certain capital deferred tax assets. Assessing the recoverability of a deferred tax asset requires management to make estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecasted cash flows from investments and operations, the character of expected income or loss as either capital or ordinary, and the application of existing tax laws in each jurisdiction. To the extent that future cash flows or the amount or character of taxable income differ significantly from these estimates, our ability to realize the deferred tax assets could be impacted.

Under ASC 718, our capital in excess of par value in our shareholders’ equity includes the excess tax benefits generated from our stock-based compensation plans when our allowable income tax deduction for the award exceeds the compensation expense recorded for book purposes (“APIC Pool”). As of December 31, 2015, our APIC Pool totaled $35 million.

Additionally, under Sections 382 and 383 of the Code, following an “ownership change,” certain limitations apply to the use by a “loss corporation” of certain tax attributes including net operating loss carryforwards, capital loss carryforwards, unrealized built-in losses and tax credits arising before the “ownership change.” Such tax attributes represent substantially all of our deferred tax assets. In general, an “ownership change” would occur if there is a cumulative change in the ownership of our common stock of more than 50% by one or more “5% shareholders” during a three-year period. In the event of an “ownership change,” the tax attributes that may be used to offset our future taxable income in each year after the “ownership change” will be subject to an annual limitation. In general, the annual limitation is equal to the product of the fair market value of our common stock on the date of the “ownership change” and the “long term tax exempt rate” (which is published monthly by the Internal Revenue Service), subject to specified adjustments. This limitation could accelerate our cash tax payments and could result in a significant portion of our deferred tax asset expiring before we could fully use it. On April 27, 2012, we amended our Certificate of Incorporation to impose certain restrictions on the transfer of our common stock through April 27, 2015. These restrictions reduced, but did not eliminate, the risk of an “ownership change” through their expiration date.

As of December 31, 2015, we estimate that we had $555 million of federal net operating loss carryforwards and various state net operating loss carryforwards for which we have recorded a gross ordinary deferred tax asset of $233 million. The ordinary deferred tax asset includes a reduction of $14 million for the excess tax benefits generated from our stock-based compensation plans that resulted in an increase in our net operating losses, but which may not be recorded until utilization. For federal income tax purposes, the net operating loss carryforwards expire in various years from 2030 through 2034. The timing and manner in

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(in millions, except per share data)

which we will utilize any net operating loss carryforwards in any year, or in total, may be limited in the future under the provisions of the Code and applicable state laws.

A reconciliation of the provision (benefit) for income taxes computed at the U.S. federal statutory corporate income tax rate and our effective tax rate for the years ended December 31, 2015, 2014 and 2013 were as follows:



	2015			2014			2013
Tax on income computed at federal statutory corporate tax rate	$	(12	)	$	174		$	83
State taxes, net of federal tax benefit	(4		)	22			12
Valuation allowance	142			(236		)	7
Rate difference on dividend income	(10		)	(10		)	(6		)
Change in state tax rate	(10		)	(26		)	(12		)
Disallowed compensation pursuant to IRS Sec. 162(m)	—			13			—
Consolidation of ACCH	—			69			—
Consolidation of European Capital	—			71			—
Earnings of European Capital	10			—			—
Permanent difference on European Capital appreciation	—			(30		)	—
State deferred tax offset by valuation allowance	—			—			(27		)
Capital gain on tax deconsolidation of a CML subsidiary	35			—			—
Other	1			17			(4		)
Total provision for income taxes	$	152		$	64		$	53

During the first quarter of 2015, we restructured our investment in CML Pharmaceuticals, Inc. (“CML”), which resulted in the recognition of an ordinary loss. We recognized a $136 million ordinary loss on our equity investment in CML, which was $9 million less than the book realized loss of $145 million, due to consolidated basis adjustments in prior years as a result of CML filing with American Capital’s consolidated tax return. In addition, CML recognized an $83 million capital gain on an operating subsidiary that was offset by capital loss carryforwards at American Capital. We will not be reimbursed through the tax sharing agreement for the utilization of the capital loss carryforward and this was a permanent difference in income recognition. The net impact was a decrease of our gross deferred tax asset of $35 million, offset by a reduction in the valuation allowance of $35 million, resulting in no net tax impact to the provision.

During the first and second quarters of 2015, we recognized subpart F income on our U.S. tax return from our investment in European Capital that resulted in a $10 million tax provision, net of related changes in European Capital’s deferred tax assets.

We recognized a provision of $142 million in 2015 related to an increase in the valuation allowance against our net deferred tax assets. A significant portion of the increase is due to the change in judgment that it was not more likely than not that the company would be able to realize its deferred tax asset related to its investment in European Capital in its entirety.

Components of our tax provision (benefit) for the years ended December 31, 2015, 2014 and 2013 were as follows:



	2015			2014		2013
Current Tax (Benefit) Provision
Federal	$	(8	)	$	7	$	2
State	1			—		1
Total current tax (benefit) provision	(7		)	7		3

Deferred Tax Provision
Federal	143			49		50
State	16			8		—
Total deferred tax provision	159			57		50
Total provision for income taxes	$	152		$	64	$	53

We identify our major tax jurisdictions as federal, New York and Maryland. The federal tax fiscal years ended September 30, 2012, 2013 and 2014 for American Capital remain subject to examination by the Internal Revenue Service (“IRS”). During

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

the first quarter of 2014, we received notice from the IRS that their examination of the September 30, 2008 tax year was concluded and no changes to income or tax resulted.

We recognize tax benefits of uncertain tax positions only when the position is more likely than not to be sustained assuming examination by tax authorities. The following is a reconciliation of the beginning and ending balance of unrecognized tax benefits:



Unrecognized tax benefits - January 1, 2015	$	48
Increase related to positions taken during the current year	—
Unrecognized tax benefits - December 31, 2015	$	48

The unrecognized tax benefit has been presented as a reduction of an ordinary deferred tax asset for a net operating loss.

Note 12. Commitments and Contingencies

In the normal course of business, we enter into contractual agreements that facilitate transactions or provide general indemnifications against losses, costs, claims and liabilities arising from the performance of our obligations under such agreements. We have not had any claims nor made any payments pursuant to such agreements. We cannot estimate the maximum potential exposure under these arrangements as this would involve future claims that may be made against us that have not yet occurred. However, based on our experience, we expect the risk of any material loss to us to be remote.

We are a party to certain legal proceedings incidental to the normal course of our business, including the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect on our financial condition or results of operations.

Loan and Financing Agreements

As of December 31, 2015, we had commitments under loan and financing agreements to fund up to $213 million to 28 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 compliance with covenants and availability under borrowing base thresholds. The terms of the borrowings and financings subject to commitment are comparable to the terms of other loan and equity securities in our portfolio. As of December 31, 2015, European Capital and its affiliates had a commitment of $62 million to fund European Capital UK SME Debt LP and $100 million to fund a European Capital debt fund (“ECAS debt fund”). In addition, as of December 31, 2015, ACAM had a commitment of $125 million to American Capital Equity III, LP, which is to be funded by an equity investment from American Capital. See Note 14 to our audited consolidated financial statements included in this Annual Report on Form 10-K for further discussion of ACAM’s American Capital Equity III, LP’s commitment.

Non-Cancelable Operating Leases

We have non-cancelable operating leases for office space and office equipment. The leases expire over the next eleven years and contain provisions for certain annual rental escalations. Rent expense for operating leases for the years ended December 31, 2015, 2014 and 2013 was $10 million, $10 million and $9 million, respectively.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2015, net of any expected receipts under non-cancelable subleases, were as follows:



2016	$	14
2017	14
2018	15
2019	14
2020	13
Thereafter	56
Total	$	126

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(in millions, except per share data)

Total Return Swaps

ACTRS, a wholly-owned consolidated affiliate of American Capital, entered into TRS transactions with Citibank, N.A. (the “2012 TRS” and “2012 TRS II”). The TRS’, which are non-recourse to American Capital, replicate the performance of reference pools of senior floating rate loans (each, a “Reference Pool”). The maximum amount of the loans that was included in the Reference Pool was $400 million (determined at the time each such loan is added to the Reference Pool) and the maximum cash collateral requirement was $100 million. As of December 31, 2014, ACTRS had provided $100 million of cash collateral for the loans in the 2012 TRS and 2012 TRS II Reference Pools, which is recorded in the financial statement line item restricted cash and cash equivalents in our consolidated balance sheets. As of December 31, 2014, the loans in the Reference Pools for the 2012 TRS and the 2012 TRS II had a notional of approximately $27 million. The 2012 TRS and 2012 TRS II matured in December 2014 and the posted cash collateral was returned to ACTRS in 2015.

Note 13. Significant Subsidiaries

We have determined that for the year ended December 31, 2015, or for the periods presented in our audited consolidated financial statements included in this Annual Report on Form 10-K, European Capital Limited, CML Pharmaceuticals, Inc., SEHAC Holding Corporation and WIS Holding Company, Inc. have met the conditions of a significant subsidiary under Rule 1-02(w) of Regulation S-X. Accordingly, pursuant to Rule 4-08(g) of Regulation S-X, aggregate financial information for the nine months ended September 30, 2014 and year ended December 31, 2013 for European Capital Limited and for the years ended December 31, 2015, 2014 and 2013 for CML Pharmaceuticals, Inc., SEHAC Holding Corporation and WIS Holding Company, Inc. have been included as follows:



	2015		2014		2013
Current assets	$	179	$	248	$	307
Noncurrent assets	$	720	$	1,667	$	1,947
Current liabilities	$	148	$	162	$	133
Noncurrent liabilities	$	589	$	818	$	861
Redeemable preferred stock	$	—	$	222	$	219

Total revenue	$	926	$	934	$	829
Total operating expenses	$	856	$	853	$	707
Net operating income	$	70	$	81	$	122
Net income	$	5	$	22	$	183

Note 14. Asset Sales

On August 5, 2015, we entered into a definitive agreement to sell certain CLO equity investments to American Capital CLO Fund I, LP (“ACAS CLO Fund I”) for $300 million. The purchase price was the aggregate fair value of the CLO equity investments as of June 30, 2015, subject to customary adjustments. The closing of the sale occurred on November 2, 2015. ACAS CLO Fund I is a $450 million private investment fund, which invests primarily in equity tranches of CLOs. ACAS CLO Fund I is managed by a subsidiary of ACAM for customary management and incentive fees.

The ECAS debt fund is a private debt fund that closed during the second quarter of 2015 with €318 million of capital commitments, of which €165 million was committed by European Capital and its affiliates. The ECAS debt fund provides debt financing to mid-market companies in Europe, primarily through unitranche, second lien and mezzanine financing, with secondary purchases of senior loans on an opportunistic basis. During the fourth quarter of 2015, the ECAS debt fund had an additional closing of €69 million which increased the total capital commitments to €387 million. We anticipate a final closing by March 2016 to increase the investment capacity of the fund. The fund will have a three year investment period and a subsidiary of ACAM manages the ECAS debt fund for an annual management fee of 1.50% on deployed capital and up to a 15% carried interest, subject to certain hurdles. The ECAS debt fund will be dissolved on March 19, 2025, unless extended. In April 2015, European Capital sold €162 million ($175 million) of investments at their approximate fair value in 9 portfolio companies to the ECAS debt fund. European Capital received €158 million ($170 million) for the sale of these assets and recognized a realized loss of €4 million ($5 million). As of December 31, 2015, European Capital’s investment in the ECAS debt fund had a cost basis and fair value of $81 million and $85 million, respectively. As of December 31, 2015, European Capital had an unfunded commitment of €91 million ($100 million) to the ECAS debt fund.

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(in millions, except per share data)

On April 28, 2014, we completed a $1.1 billion private placement of partnership interests in American Capital Equity III, LP (“ACE III” or “the Fund”), a new private equity fund focused on investing in U.S. companies in the lower middle market. Concurrent with the private placement, we entered into a Contribution and Redemption Agreement with the Fund pursuant to which we agreed to contribute 100% of our equity and equity-related investments in seven portfolio companies (Affordable Care Holding Corp., Avalon Laboratories Holding Corp., CIBT Investment Holdings, LLC, FAMS Acquisition, Inc., Mirion Technologies, Inc., PHI Acquisitions, Inc. and SMG Holdings, Inc.) to the Fund and to provide the Fund with an option to acquire our equity investment in WRH, Inc. (the “Equity Option”), in exchange for partnership interests in the Fund. Collectively, the eight portfolio companies (including WRH, Inc., assuming the Equity Option is exercised) comprise the Secondary Portfolio for ACE III. On April 1, 2015, the Equity Option was exercised by the Fund for the exercise price of $24 million. For the three months ended June 30, 2015, we recognized a realized loss of $225 million on our WRH, Inc. equity investment offset by a (i) $115 million reversal of unrealized depreciation on the investment, (ii) $65 million reversal of unrealized depreciation on the Equity Option derivative and (iii) $45 million realized gain on the Equity Option. The Fund’s aggregate $1.1 billion capital commitment includes a commitment of $200 million from ACAM for Primary Investments, of which $125 million was undrawn as of December 31, 2015.

Note 15. Related Party Transactions

As a BDC, we are required by law to make available significant managerial assistance to our eligible portfolio companies. Such assistance typically involves providing guidance and counsel concerning the management, operations and business objectives and policies of the portfolio company to its management and board of directors, including participating on the company’s board of directors. We have an operations team with significant turnaround and bankruptcy experience that assists our investment professionals in providing intensive operational and managerial assistance to our portfolio companies that require such assistance. As of December 31, 2015, we had board seats on 38 companies in our investment portfolio. Providing assistance to the companies in our investment portfolio serves as an opportunity for us to maximize their value.

The following table shows the operating revenue from our control investments, as defined under the 1940 Act, for the years ended December 31, 2015, 2014 and 2013:



	2015		2014		2013
Operating Revenue - Control Investments
Interest and dividend income	$	288	$	263	$	221
Fee income	$	49	$	42	$	52

American Capital Asset Management

Our fund management business is conducted through ACAM. In general, ACAM provides investment management services through consolidated subsidiaries that enter into management agreements with each of its managed funds. In addition, American Capital or ACAM may invest directly into these funds and earn investment income from its investments in those funds. Under the management agreements, ACAM’s responsibilities include, but are not limited to, sourcing, analyzing and executing investments and asset sales, delivering financial and compliance reports to investors in the funds under management, administering the daily business and affairs of the funds under management and performing other asset management duties. We have entered into service agreements with ACAM to provide it with additional asset management and administrative services support. Through these agreements, we provide investment advisory and oversight services to ACAM, as well as access to our employees, infrastructure, business relationships, management expertise and capital raising capabilities. During the years ended December 31, 2015, 2014 and 2013, we recognized operating revenues from our investment in ACAM of $152 million, $111 million and $133 million, respectively.

European Capital

As discussed in Note 2 to these consolidated financial statements, we consolidated our investment in European Capital effective October 1, 2014. ACAM, through its subsidiary, ECAM, acts as the investment manager to European Capital. Under ACAM’s investment management agreement with European Capital, ACAM is entitled to receive an annual management fee of 2% of the weighted average monthly consolidated gross asset value of all the investments at fair value of European Capital, an incentive fee equal to 100% of the net earnings in excess of a return of 8% but less than a return of 10%, and 20% of the net earnings thereafter. The investment management agreement with European Capital was amended to waive the incentive fee for 2011, 2012, 2013 and 2014. During the first quarter of 2015, the investment management agreement with European Capital was amended to cancel the incentive fee for 2015 and going forward. The management fee charged by ACAM was $13 million for the

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(in millions, except per share data)

year ended December 31, 2015 and $5 million for the quarter ended December 31, 2014, which is included in our consolidated statements of operations.

As discussed in Note 6 to these consolidated financial statements, European Capital has issued Redeemable Preferred Shares to employees of ECAM as part of long term employee incentive plans. These shares are redeemable by European Capital based on the aggregate returns on investments made after January 1, 2012 and are treated as mandatorily redeemable preferred stock in our consolidated balance sheets in accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity. The fair value of the Redeemable Preferred Shares as of December 31, 2015 and 2014 was $34 million and $82 million, respectively, which is included in other liabilities in our consolidated balance sheets. For the year ended December 31, 2015, Redeemable Preferred Shares were redeemed and European Capital realized a loss of $46 million offset by a reversal of unrealized depreciation of $46 million, which is included in net realized (loss) gain and net unrealized appreciation in our consolidated statements of operations.

American Capital Equity I, LLC and American Capital Equity II, LP

On June 30, 2015, we entered into stock purchase agreements with American Capital Equity I, LLC and American Capital Equity II, LP under which we acquired secondary and add-on investments in 24 portfolio companies for an aggregate purchase price of $145 million. The initial purchase price for such investments was based on the fair value of the investments as of March 31, 2015, but is potentially subject to increase on June 30, 2016 as a result of certain post-closing adjustments. For the year ended December 31, 2015, we recorded $31 million of net unrealized depreciation after our acquisition of these investments, which is included in net unrealized appreciation in our consolidated statements of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in millions, except per share data)

Note 16. Selected Quarterly Data (Unaudited)

The following tables present our quarterly financial information for the fiscal years ended December 31, 2015 and 2014:



	Three Months Ended										Year Ended December 31, 2015
	March 31, 2015		June 30, 2015		September 30, 2015			December 31, 2015			Year Ended December 31, 2015
Total operating revenue	$	154	$	168	$	176		$	173		$	671
Net operating income (“NOI”)	$	50	$	67	$	75		$	61		$	253
Net increase (decrease) in net assets resulting from operations	$	15	$	62	$	(37	)	$	(227	)	$	(187	)
NOI per basic common share⁽²⁾	$	0.18	$	0.25	$	0.28		$	0.24		$	0.95
NOI per diluted common share⁽²⁾	$	0.18	$	0.24	$	0.28		$	0.24		$	0.95
Net earnings (loss) per basic common share⁽²⁾	$	0.06	$	0.23	$	(0.14	)	$	(0.88	)	$	(0.70	)
Net earnings (loss) per diluted common share⁽²⁾	$	0.05	$	0.22	$	(0.14	)	(0.88		)	$	(0.70	)
Weighted average shares outstanding
Basic	271.1		272.4		267.7			257.6			267.2
Diluted	282.9		283.4		267.7			257.6			267.2



	Three Months Ended								Year Ended December 31, 2014
	March 31, 2014		June 30, 2014		September 30, 2014		December 31, 2014⁽¹⁾		Year Ended December 31, 2014
Total operating revenue	$	84	$	100	$	129	$	158	$	471
Net operating income	$	5	$	26	$	51	$	35	$	117
Net increase in net assets resulting from operations	$	70	$	212	$	114	$	38	$	434
NOI per basic common share⁽²⁾	$	0.02	$	0.10	$	0.19	$	0.13	$	0.44
NOI per diluted common share⁽²⁾	$	0.02	$	0.09	$	0.18	$	0.12	$	0.42
Net earnings per basic common share⁽²⁾	$	0.26	$	0.80	$	0.43	$	0.14	$	1.62
Net earnings per diluted common share⁽²⁾	$	0.25	$	0.76	$	0.41	$	0.14	$	1.55
Weighted average shares outstanding
Basic	270.7		266.2		267.1		269.0		268.2
Diluted	283.4		278.5		279.9		281.1		280.7

——————————


(1)	Effective October 1, 2014, European Capital’s financial results have been consolidated with the financial results of American Capital.


(2)	Quarterly amounts may not equal full-year amounts due to changes in the weighted average shares outstanding.

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Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.


Item 9A.	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 SEC 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. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2015.

Management’s Report on Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting is included in “Item 8.—Financial Statements and Supplementary Data.”

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended) that occurred during the year ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.	Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information in response to this Item is incorporated herein by reference to the information provided in our Proxy Statement for our 2016 Annual Meeting of Stockholders (the “2016 Proxy Statement”) under the headings “PROPOSAL 1: ELECTION OF DIRECTORS”, “EXECUTIVE OFFICERS”, “BOARD AND GOVERNANCE MATTERS”, “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” and “CERTAIN TRANSACTIONS WITH RELATED PERSONS.”


Item 11.	Executive Compensation

Information in response to this Item is incorporated herein by reference to the information provided in the 2016 Proxy Statement under the headings “COMPENSATION DISCUSSION AND ANALYSIS”, “REPORT OF THE COMPENSATION, CORPORATE GOVERNANCE AND NOMINATING COMMITEE”, “SUMMARY COMPENSATION TABLE”, “GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2015”, “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END”, “OPTION EXERCISES AND STOCK VESTED”, “SEVERANCE AND CHANGE OF CONTROL PAYMENTS”, “PROPOSAL 1: ELECTION OF DIRECTORS” and “COMPENSATION, CORPORATE GOVERNANCE AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.”


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information in response to this Item is incorporated herein by reference to the information provided in the 2016 Proxy Statement under the heading “SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS.”


Item 13.	Certain Relationships and Related Transactions, and Director Independence

Information in response to this Item is incorporated herein by reference to the information provided in the 2016 Proxy Statement under the headings “CERTAIN TRANSACTIONS WITH RELATED PERSONS” and “PROPOSAL 1: ELECTION OF DIRECTORS.”


Item 14.	Principal Accounting Fees and Services

Information in response to this Item is incorporated herein by reference to the information provided in the 2016 Proxy Statement under the heading “PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANT FOR 2016.”

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES


(a)	Financial Statements, Financial Statement Schedules and Exhibits.


(1)	Financial Statements.

The following financial statements and related notes are filed herewith (all financial statements listed below are those of American Capital and its consolidated subsidiaries):


	Consolidated Balance Sheets as of December 31, 2015 and 2014.


	Consolidated Statements of Operations for the Fiscal Years Ended December 31, 2015, 2014 and 2013.

Consolidated Statements of Comprehensive Income for the Fiscal Years Ended December 31, 2015, 2014 and 2013.

Consolidated Statements of Changes in Net Assets for the Fiscal Years Ended December 31, 2015, 2014 and 2013.


	Consolidated Statements of Cash Flows for the Fiscal Years Ended December 31, 2015, 2014 and 2013.

Consolidated Financial Highlights for the Fiscal Years Ended December 31, 2015, 2014, 2013, 2012 and 2011.


	Consolidated Schedule of Investments as of December 31, 2015 and 2014.

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The following financial statements and related notes of European Capital Limited are filed herewith pursuant to Rule 3-09 of Regulation S-X:

Balance Sheets as of December 31, 2014 and 2013.

Statements of Operations for the Fiscal Years Ended December 31, 2014, 2013 and 2012.

Statements of Changes in Net Assets for the Fiscal Years Ended December 31, 2014, 2013 and 2012.

Statements of Cash Flows for the Fiscal Years Ended December 31, 2014, 2013 and 2012.

Financial Highlights for the Fiscal Years Ended December 31, 2014, 2013 and 2012.

Schedule of Investments as of December 31, 2014 and 2013.

The following financial statements and related notes of American Capital Asset Management, LLC are filed herewith pursuant to Rule 3-09 of Regulation S-X:

Balance Sheets as of December 31, 2015 and 2014.

Statements of Operations for the Fiscal Years Ended December 31, 2015, 2014 and 2013.

Statements of Comprehensive Income for the Fiscal Years Ended December 31, 2015, 2014 and 2013.

Statements of Cash Flows for the Fiscal Years Ended December 31, 2015, 2014 and 2013.

Statements of Changes in Member's Equity for the Fiscal Years Ended December 31, 2015, 2014 and 2013.


(2)	Financial Statement Schedules.

The following financial statement schedules are filed herewith:

Schedule 12-14 Investments in and Advances to Affiliates.

Financial statement schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not required or applicable.


(3)	Exhibits.



*3.1.	American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) Third Amended and Restated Certificate of Incorporation, as amended, incorporated herein by reference to Exhibit 3.1 of Form 10-Q for the quarter ended March 31, 2012 (File No. 814-00149), filed May 7, 2012.

*3.2.	American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) Second Amended and Restated Bylaws, as amended, incorporated herein by reference to Exhibit 3.2 of Form 10-Q for the quarter ended June 30, 2008 (File No. 814-00149), filed 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, as amended, incorporated herein by reference to Exhibit 3.1 of Form 10-Q for the quarter ended March 31, 2012 (File No. 814-00149), filed May 7, 2012.

*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 for the quarter ended June 30, 2008 (File No. 814-00149), filed August 11, 2008.

*4.3.	Indenture, dated as of September 20, 2013, between American Capital, Ltd. and U.S. Bank National Association, as Trustee, incorporated herein by reference to Exhibit 4.1 of Form 8-K (File No. 814-00149), filed September 24, 2013.

*4.4.	Supplemental Indenture, dated as of September 10, 2014, between AC Corporate Holdings, Inc. and U.S. Bank National Association, filed herewith.

*4.5.	Second Supplemental Indenture, dated as of August 10, 2015, between ACE Acquisition Holdings, LLC and U.S. Bank National Association, incorporated herein by reference to Exhibit 4.3 of Form 10-Q (File No. 814-00149), filed November 9, 2015.

127



*10.1.	Senior Secured Term Loan Credit Agreement, dated as of August 22, 2012, among American Capital, Ltd., as Borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities LLC, BMO Capital Markets Corp. and UBS Securities LLC, as Syndication Agents, Joint Bookrunners and Joint Lead Arrangers, and Citibank, N.A., Credit Suisse Securities (USA) LLC and Goldman Sachs Bank USA, as Managing Agents, incorporated herein by reference to Exhibit 2.k.1 of Form N-2 (File No. 333-183926), filed September 14, 2012.

*10.2.	Amendment No. 1 to the Senior Secured Term Loan Credit Agreement, dated as of August 23, 2013, among American Capital, Ltd., as Borrower, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, incorporated herein by reference to Exhibit 2.k.2 of Form N-2/A (File No. 333-183926), filed September 27, 2013.

*10.3.	Amendment No. 2 to the Senior Secured Term Loan Credit Agreement, dated as of February 26, 2014, among American Capital, Ltd., as Borrower, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, incorporated herein by reference to Exhibit 10.1 of Form 10-Q for the quarter ended March 31, 2014 (File No. 814-00149), filed May 12, 2014.

*10.4.	Senior Secured Revolving Credit Agreement, dated as of August 22, 2012, among American Capital, Ltd., as Borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities LLC, BMO Capital Markets Corp. and UBS Securities LLC, as Syndication Agents, Joint Bookrunners and Joint Lead Arrangers, and Bank of America, N.A., Citibank N.A., Credit Suisse Securities (USA) LLC and Goldman Sachs Bank USA, as Managing Agents, incorporated herein by reference to Exhibit 2.k.2 of Form N-2 (File No. 333-183926), filed September 14, 2012.

*10.5.	Collateral Agency and Intercreditor Agreement, dated as of August 22, 2012, among American Capital, Ltd. and JPMorgan Chase Bank, N.A., as Revolver Representative, Term Loan Representative and Collateral Agent, incorporated herein by reference to Exhibit 2.k.3 of Form N-2 (File No. 333-183926), filed September 14, 2012.

*10.6.	Guarantee and Security Agreement, dated as of August 22, 2012, made by American Capital, Ltd. in favor of JPMorgan Chase Bank, N.A, as Collateral Agent, incorporated herein by reference to Exhibit 2.k.4 of Form N-2 (File No. 333-183926), filed September 14, 2012.

*10.7.	Second Amended and Restated Credit Agreement, dated as of December 11, 2015, among ACAS Funding I, LLC, as Borrower, the lender parties thereto and Bank of America, N.A., as Administrative Agent, filed herewith.

*10.8.	Security Agreement, dated as of June 27, 2014, between ACAS Funding I, LLC, as Borrower, and Bank of America, N.A., as Administrative Agent, incorporated herein by reference to Exhibit 10.2 of Form 10-Q for the quarter ended June 30, 2014 (File No. 814-00149), filed August 11, 2014.

*10.9.	Collateral Administration Agreement, dated as of June 27, 2014, among ACAS Funding I, LLC, as Borrower, Bank of America, N.A., as Administrative Agent, and Deutsche Bank Trust Company Americas, as Collateral Administrator, incorporated herein by reference to Exhibit 10.3 of Form 10-Q for the quarter ended June 30, 2014 (File No. 814-00149), filed August 11, 2014.

*10.10.	Sale and Participation Agreement, dated as of June 27, 2014, between American Capital, Ltd. and ACAS Funding I, LLC, incorporated herein by reference to Exhibit 10.4 of Form 10-Q for the quarter ended June 30, 2014 (File No. 814-00149), filed August 11, 2014.

*10.11.	Credit Agreement, dated as of October 30, 2014, among ACAS Funding II, LLC, as Borrower, the lender parties thereto and Deutsche Bank AG, New York Branch, as Administrative Agent, filed herewith.

*10.12.	First Amendment to Credit Agreement, dated as of December 14, 2015, among ACAS Funding II, LLC, as Borrower, the lender parties thereto and Deutsche Bank AG, New York Branch, as Administrative Agent, filed herewith.

*10.13.	Security Agreement, dated as of October 30, 2014, between ACAS Funding II, LLC, as Borrower, and Deutsche Bank AG, New York Branch, as Administrative Agent, incorporated herein by reference to Exhibit 10.12 of Form 10-K for the year ended December 31, 2014 (File No. 814-00149) filed March 2, 2015.

*10.14.	Custodial Agreement, dated as of October 30, 2014, among ACAS Funding II, LLC, as Borrower, American Capital Leveraged Finance Management, LLC, as Manager, Deutsche Bank AG, New York Branch, as Administrative Agent, and Deutsche Bank Trust Company Americas, as Custodian, incorporated herein by reference to Exhibit 10.13 of Form 10-K for the year ended December 31, 2014 (File No. 814-00149) filed March 2, 2015.

*10.15.	Contribution and Master Participation Agreement, dated as of October 30, 2014, between American Capital, Ltd. and ACAS Funding II, LLC, incorporated herein by reference to Exhibit 10.14 of Form 10-K for the year ended December 31, 2014 (File No. 814-00149) filed March 2, 2015.

*10.16.	Amended and Restated Custodian Agreement between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) and PNC Bank, N.A., December 18, 2007, incorporated herein by reference to Exhibit 10.32 of Form 10-K for the year ended December 31, 2011 (File No. 814-00149), filed February 27, 2012.

128



*10.17.	Second Amended and Restated Custodian Agreement between American Capital, Ltd. (f/k/a American Capital Strategies, Ltd.) and Wells Fargo Bank, National Association, dated as of June 28, 2010, incorporated herein by reference to Exhibit 10.33 of Form 10-K for the year ended December 31, 2011 (File No. 814-00149), filed February 27, 2012.

†*10.18.	Custodian Agreement between American Capital, Ltd. and Wells Fargo Bank, National Association, dated as of June 28, 2010, incorporated herein by reference to Exhibit 10.34 of Form 10-K for the year ended December 31, 2011 (File No. 814-00149), filed February 27, 2012.

†*10.19.	Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between John Erickson and American Capital, Ltd., incorporated herein by reference to Exhibit 10.7 of Form 10-Q for the quarter ended March 31, 2009 (File No. 814-00149), filed May 11, 2009.

†*10.20.	Amendment No.1 to Amended and Restated Employment Agreement between American Capital, Ltd. and John Erickson effective as of December 10, 2009, incorporated herein by reference to Exhibit 2.k.8 of Form N-2 (File No. 333-183296), filed September 14, 2012.

†*10.21.	Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Samuel A. Flax and American Capital, Ltd., incorporated herein by reference to Exhibit 10.8 of Form 10-Q for the quarter ended March 31, 2009 (File No. 814-00149), filed May 11, 2009.

†*10.22.	Amendment No.1 to Amended and Restated Employment Agreement between American Capital, Ltd. and Samuel A. Flax effective as of December 10, 2009, incorporated herein by reference to Exhibit 2.k.18 of Form N-2 (File No. 333-183296), filed September 14, 2012.

†*10.23.	Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Gordon O’Brien and American Capital, Ltd., incorporated herein by reference to Exhibit 10.10 of Form 10-Q for the quarter ended March 31, 2009 (File No. 814-00149), filed May 11, 2009.

†*10.24.	Amendment No.1 to Amended and Restated Employment Agreement between American Capital, Ltd. and Gordon O’Brien effective as of December 10, 2009, incorporated herein by reference to Exhibit 2.k.14 of Form N-2 (File No. 333-183296), filed September 14, 2012.

†*10.25.	Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Ira Wagner and American Capital, Ltd. thereto, incorporated herein by reference to Exhibit 10.11 of Form 10-Q for the quarter ended March 31, 2009 (File No. 814-00149), filed May 11, 2009.

†*10.26.	Amendment No.1 to Amended and Restated Employment Agreement between American Capital, Ltd. and Ira Wagner effective as of December 10, 2009, incorporated herein by reference to Exhibit 2.k.10 of Form N-2 (File No. 333-183296), filed September 14, 2012.

†*10.27.	Amended and Restated Employment Agreement entered into and effective as of March 27, 2009 by and between Malon Wilkus and American Capital, Ltd., incorporated herein by reference to Exhibit 10.12 of Form 10-Q for the quarter ended March 31, 2009 (File No. 814-00149), filed May 11, 2009.

†*10.28.	Amendment No.1 to Amended and Restated Employment Agreement between American Capital, Ltd. and Malon Wilkus effective as of December 10, 2009, incorporated herein by reference to Exhibit 2.k.6 of Form N-2 (File No. 333-183296), filed September 14, 2012.

†*10.29.	Form of Indemnification Agreement entered into by and between American Capital, Ltd. and each of Mary Baskin, Neil Hahl, Philip Harper, Stan Lundine, Kristen L. Manos, Susan K. Nestegard, Kenneth Peterson, Jr., Alvine Puryear, David G. Richards and Malon Wilkus, incorporated herein by reference to Exhibit 10.1 of Form 8-K (File No. 814-00149), filed October 28, 2009.

†*10.30.	Form of American Capital Strategies, Ltd. 2000 Employee Stock Option Plan, incorporated herein by reference to Appendix II to the Definitive Proxy Statement for the 2000 Annual Meeting filed April 5, 2000, as amended by Amendment No. 1, incorporated herein by reference to Exhibit II of the Definitive Proxy Statement for the 2001 Annual Meeting (File No. 814-00149), filed April 3, 2001.

†*10.31.	Form of American Capital Strategies, Ltd. 2002 Employee Stock Option Plan, incorporated herein by reference to Exhibit I of the Definitive Proxy Statement for the 2002 Annual Meeting (File No. 814-00149), filed April 12, 2002.

†*10.32.	Form of American Capital Strategies, Ltd. 2003 Employee Stock Option Plan, incorporated herein by reference to Exhibit I of the Definitive Proxy Statement for the 2003 Annual Meeting (File No. 814-00149), filed April 10, 2003.

†*10.33.	Form of American Capital Strategies, Ltd. 2004 Employee Stock Option Plan, incorporated herein by reference to Exhibit II of the Definitive Proxy Statement for the 2004 Annual Meeting (File No. 814-00149), filed March 26, 2004.

†*10.34.	Form of American Capital Strategies, Ltd. 2005 Employee Stock Option Plan, incorporated herein by reference to Exhibit III of the Definitive Proxy Statement for the 2004 Annual Meeting (File No. 814-00149), filed April 26, 2005.

129




†*10.35.	Form of American Capital Strategies, Ltd. 2006 Employee Stock Option Plan, incorporated herein by reference to Exhibit I of the Definitive Proxy Statement for the 2006 Annual Meeting (File No. 814-00149), filed April 11, 2006.

†*10.36.	Form of American Capital Strategies, Ltd. 2007 Stock Option Plan, incorporated herein by reference to Exhibit I of the Definitive Proxy Statement for the 2007 Annual Meeting (File No. 814-00149), filed March 27, 2007.

†*10.37.	Form of American Capital Strategies, Ltd. 2008 Stock Option Plan, incorporated herein by reference to Exhibit I of the Definitive Proxy Statement for the 2008 Annual Meeting (File No. 814-00149), filed April 9, 2008.

†*10.38.	Form of American Capital, Ltd. 2009 Stock Option Plan, incorporated herein by reference to Exhibit II of the Definitive Proxy Statement for the 2009 Annual Meeting (File No. 814-00149), filed April 30, 2009.

†*10.39.	Form of 2014 Amended and Restated American Capital Performance Incentive Plan, as adopted June 12, 2014, incorporated herein by reference to Exhibit 10.5 of Form 10-Q for the quarter ended June 30, 2014 (File No. 814-00149), filed August 11, 2014.

†*10.40.	Form of Acceptance and Election Agreement for Amended and Restated American Capital Incentive Bonus Plan, incorporated herein by reference to Exhibit 2.i.12 of the Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-133571), filed June 26, 2006.

†*10.41.	Form of American Capital, Ltd. 2010 Disinterested Director Stock Option Plan, incorporated herein by reference to Exhibit I of the Definitive Proxy Statement for the 2010 Annual Meeting (File No. 814-00149), filed August 6, 2010.

†*10.42.	Amended and Restated American Capital Strategies, Ltd. Employee Stock Ownership Plan, effective as of January 1, 2009 Amended and Restated American Capital Strategies, Ltd. 401(k) Plan, effective as of January 1, 2009, incorporated herein by reference to Exhibit 10.34 of Form 10-K for the year ended December 31, 2009 (File No. 814-00149), filed March 1, 2010.

*10.43.	Agreement and Release dated as of March 12, 2015, between American Capital, Ltd. and Malon Wilkus, incorporated herein by reference to Exhibit 10.2 of Form 10-Q for the quarter ended March 31, 2015 (File No. 814-00149), filed May 11, 2015.

†*10.44.	Form of American Capital, Ltd. Employee Cash Incentive Plan, incorporated herein by reference to Appendix A to the Definitive Proxy Statement for the 2015 Annual Meeting (File No. 814-00149), filed March 11, 2015.

*10.45.	First Amended and Restated Custody Agreement, dated as of April 15, 2015, between American Capital, Ltd. and U.S. Bank National Association, incorporated by reference to Exhibit 10.2 of Form 10-Q for the quarter ended March 31, 2015 (File No. 814-00149), filed May 11, 2015.

12.1.	Computation of Ratio of Earnings to Fixed Charges.

*14.0.	American Capital Strategies, Ltd. Code of Ethics and Conduct, incorporated herein by reference to Exhibit 2.r of Form N-2 (File No. 333-183296), filed September 14, 2012 and American Capital Strategies, Ltd. Personal Investments Code, incorporated herein by reference to Exhibit 2.r of Form N-2 (File No. 333-183296), filed September 14, 2012.

21.	Subsidiaries of American Capital and jurisdiction of incorporation:

	1) AC Corporate Holdings, Inc., a Delaware corporation

	2) ACAS Funding I, LLC, a Delaware limited liability company

	3) ACAS Funding II, LLC, a Delaware limited liability company

	4) ACE Acquisition Holdings, LLC, a Delaware limited liability company

	5) American Capital Agent Services, LLC, a Delaware limited liability company

	6) European Capital Limited, a private limited company incorporated in the United Kingdom

23.1.	Consent of Ernst & Young LLP.

23.2.	Consent of Ernst & Young LLP relating to the financial statements of European Capital Limited.

23.3.	Consent of Ernst & Young LLP relating to the financial statements of American Capital Asset Management, LLC.

24.	Powers of Attorneys of directors and officers.

31.1.	Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2.	Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

130



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.

99.1.	European Capital Limited Consolidated Financial Statements as of December 31, 2014 and 2013 and for each of the Three Years Ended December 31, 2014.

99.2.	American Capital Asset Management, LLC Consolidated Financial Statements as of December 31, 2015 and 2014 and for each of the Three Years Ended December 31, 2015.


*	Fully or partly previously filed


†	Management contract or compensatory plan or arrangement


(b)	Exhibits

See the exhibits filed herewith.


(c)	Additional financial statement schedules

NONE

131

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ JOHN R. ERICKSON
		John R. Erickson Chief Financial Officer

Date: February 16, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Name	Title	Date

*	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	February 16, 2016
Malon Wilkus

/s/ JOHN R. ERICKSON	Chief Financial Officer (Principal Financial Officer)	February 16, 2016
John R. Erickson

*	Chief Accounting Officer (Principal Accounting Officer)	February 16, 2016
Mark Lindsey

*	Director	February 16, 2016
Mary C. Baskin

*	Director	February 16, 2016
Neil M. Hahl

*	Director	February 16, 2016
Philip R. Harper

*	Director	February 16, 2016
Stan Lundine

*	Director	February 16, 2016
Susan K. Nestegard

*	Director	February 16, 2016
Kenneth D. Peterson, Jr.

*	Director	February 16, 2016
Alvin N. Puryear

*	Director	February 16, 2016
David G. Richards

* By: /s/ JOHN R. ERICKSON
John R. Erickson Attorney-in-fact

132

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Schedule 12-14 AMERICAN CAPITAL, LTD. SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES As of and for the year ended December 31, 2015 (in millions)

		Amount of Interest or Dividends
Company (1)	Investments	Credited to Income (2)			Other (3)		December 31, 2014 Fair Value		Gross Additions (4)		Gross Reductions (5)		December 31, 2015 Fair Value
AMERICAN CAPITAL CONTROL INVESTMENTS
ACAS Real Estate Holdings Corporation	Mezzanine Debt	$	2.7		$	—	$	5.0	$	2.9	$	3.4	$	4.5
ACAS Real Estate Holdings Corporation	Common Stock	6.7			8.5		25.7		7.3		8.5		24.5
		9.4			8.5		30.7		10.2		11.9		29.0
ACAS Wachovia Investments, L.P.	Partnership Interest	—			—		0.6		0.2		0.3		0.5
ACEI Singapore Holdings Private LTD	Common Stock	—			—		—		7.1		—		7.1
American Capital Asset Management, LLC	Mezzanine Debt	1.7			—		33.0		2.0		—		35.0
American Capital Asset Management, LLC	Common Membership Interest	124.7			12.8		1,131.4		187.5		288.9		1,030.0
		126.4			12.8		1,164.4		189.5		288.9		1,065.0
American Driveline Systems, Inc.	Mezzanine Debt	3.9			—		—		47.7		—		47.7
American Driveline Systems, Inc.	Redeemable Preferred Stock	—			—		20.6		1.6		2.0		20.2
	Common Stock	—			—		—		—		—		—
	Common Stock Warrants	—			—		—		—		—		—
		3.9			—		20.6		49.3		2.0		67.9
ASAP Industries Holdings, LLC	Mezzanine Debt	—			—		20.5		—		20.5		—
ASAP Industries Holdings, LLC	Membership Units	—			—		15.0		—		15.0		—
		—			—		35.5		—		35.5		—
BMR Energy LLC	Preferred Units	1.7			—		11.9		22.6		—		34.5
	Common Units	—			—		—		17.5		—		17.5
		1.7			—		11.9		40.1		—		52.0
Capital.com, Inc.	Common Stock	—			—		—		—		—		—
CML Pharmaceuticals, Inc.	Senior Debt	11.1			—		289.8		109.6		301.5		97.9
	Mezzanine Debt	13.9			—		—		141.0		—		141.0
	Redeemable Preferred Stock	—			—		—		61.1		51.1		10.0
	Convertible Preferred Stock	—			—		—		—		—		—
		25.0			—		289.8		311.7		352.6		248.9
Contour Semiconductor, Inc.	Senior Debt	(0.6		)	—		9.3		0.3		9.6		—
Contour Semiconductor, Inc.	Convertible Preferred Stock	—			—		—		—		—		—
		(0.6		)	—		9.3		0.3		9.6		—
Core Financial Holdings, LLC	Common Units	—			—		0.2		0.1		0.3		—
Dyno Holding Corp.	Senior Debt	3.5			—		35.2		0.7		35.9		—
	Mezzanine Debt	3.9			—		16.7		—		16.7		—
	Convertible Preferred Stock	—			—		—		—		—		—
	Common Stock	—			—		—		—		—		—
		7.4			—		51.9		0.7		52.6		—
ECA Acquisition Holdings, Inc.	Senior Debt	0.8			—		6.8		3.0		0.9		8.9
ECA Acquisition Holdings, Inc.	Mezzanine Debt	(3.1		)	0.7		18.1		—		7.0		11.1
	Redeemable Preferred Stock	—			—		—		1.6		1.6		—
	Common Stock	—			—		4.7		1.5		6.2		—
		(2.3		)	0.7		29.6		6.1		15.7		20.0
eLynx Holdings, Inc.	Convertible Preferred Stock	14.0			—		16.0		23.7		—		39.7
	Redeemable Preferred Stock	3.4			—		—		3.4		3.4		—
	Common Stock	—			—		—		—		—		—
	Common Stock Warrants	—			—		—		—		—		—
		17.4			—		16.0		27.1		3.4		39.7
EXPL Pipeline Holdings LLC	Senior Debt	3.7			—		46.8		1.0		4.1		43.7
EXPL Pipeline Holdings LLC	Common Membership Units	—			—		20.1		17.1		—		37.2
		3.7			—		66.9		18.1		4.1		80.9
FAMS Acquisition, Inc.	Mezzanine Debt	5.8			—		40.7		1.1		10.7		31.1
Fosbel Holding, Inc.	Mezzanine Debt	(1.3		)	—		13.5		1.0		14.5		—
FPI Holding Corporation	Senior Debt	—			—		11.6		0.4		12.0		—
Group Montana, Inc.	Senior Debt	0.4			—		6.4		0.8		1.6		5.6
	Convertible Preferred Stock	(0.7		)	—		6.7		—		1.6		5.1
	Common Stock	—			—		1.6		—		1.6		—
		(0.3		)	—		14.7		0.8		4.8		10.7

133

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Schedule 12-14 AMERICAN CAPITAL, LTD. SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES—(Continued) As of and for the year ended December 31, 2015 (in millions)

		Amount of Interest or Dividends
Company (1)	Investments	Credited to Income (2)		Other (3)	December 31, 2014 Fair Value	Gross Additions (4)	Gross Reductions (5)	December 31, 2015 Fair Value
Halex Holdings, Inc.	Senior Debt	1.5		—	18.8	0.2	3.4	15.6
	Redeemable Preferred Stock	—		—	—	—	—	—
	Common Stock	—		—	—	11.7	—	11.7
		1.5		—	18.8	11.9	3.4	27.3
HALT Medical, Inc.	Senior Debt	—		—	35.6	25.2	37.5	23.3
	Convertible Preferred Stock	—		—	—	1.9	1.9	—
	Common Stock	—		—	—	—	—	—
		—		—	35.6	27.1	39.4	23.3
Hard 8 Games, LLC	Senior Debt	1.2		—	8.2	29.3	2.6	34.9
	Membership Unit	—		—	28.8	5.0	10.7	23.1
		1.2		—	37.0	34.3	13.3	58.0
Hollyhock Limited	Common Stock	—		—	21.2	12.0	—	33.2
LLSC Holdings Corporation	Convertible Preferred Stock	—		—	13.8	5.0	—	18.8
LLSC Holdings Corporation	Common Stock	—		—	—	0.4	—	0.4
	Common Stock Warrants	—		—	—	0.3	—	0.3
		—		—	13.8	5.7	—	19.5
Montgomery Lane, LLC	Common Membership Units	—		—	6.9	—	0.5	6.4
MW Acquisition Corporation	Mezzanine Debt	3.8		—	24.0	0.2	—	24.2
MW Acquisition Corporation	Redeemable Preferred Stock	0.4		—	2.3	0.5	—	2.8
	Convertible Preferred Stock	11.8		—	17.9	45.3	—	63.2
	Common Stock	—		—	—	5.7	—	5.7
		16.0		—	44.2	51.7	—	95.9
NECCO Holdings, Inc.	Senior Debt	—		0.9	8.9	61.6	56.5	14.0
	Common Stock	—		—	—	—	—	—
		—		0.9	8.9	61.6	56.5	14.0
NECCO Realty Investments, LLC	Senior Debt	—		—	19.9	5.0	—	24.9
NECCO Realty Investments, LLC	Common Membership Units	—		—	—	—	—	—
		—		—	19.9	5.0	—	24.9
Orchard Brands Corporation	Common Stock	—		—	87.9	—	87.9	—
PHC Sharp Holdings, Inc.	Senior Debt	0.2		—	1.4	—	—	1.4
PHC Sharp Holdings, Inc.	Mezzanine Debt	11.5		—	25.6	11.5	5.0	32.1
	Common Stock	—		—	—	—	—	—
		11.7		—	27.0	11.5	5.0	33.5
RD Holdco Inc.	Senior Debt	2.7		—	17.1	0.8	1.3	16.6
	Common Stock	—		—	18.6	—	4.7	13.9
	Common Stock Warrants	—		—	2.3	—	0.6	1.7
		2.7		—	38.0	0.8	6.6	32.2
Rebellion Media Group Corp.	Senior Debt	(0.3	)	—	3.5	0.7	0.3	3.9
Rebellion Media Group Corp.	Convertible Preferred Stock	—		—	—	—	—	—
		(0.3	)	—	3.5	0.7	0.3	3.9
Scanner Holdings Corporation	Mezzanine Debt	3.3		—	20.5	5.4	9.3	16.6
Scanner Holdings Corporation	Convertible Preferred Stock	2.8		—	5.4	8.4	2.6	11.2
	Common Stock	0.1		—	—	—	—	—
		6.2		—	25.9	13.8	11.9	27.8
SEHAC Holding Corporation	Convertible Preferred Stock	10.2		—	103.6	56.1	1.2	158.5
SEHAC Holding Corporation	Common Stock	0.1		—	1.0	0.6	—	1.6
		10.3		—	104.6	56.7	1.2	160.1
Soil Safe Acquisition Corp.	Senior Debt	3.2		—	36.2	2.2	4.0	34.4
Soil Safe Acquisition Corp.	Mezzanine Debt	11.4		—	67.1	5.5	0.3	72.3
	Common Stock	—		—	9.2	6.1	—	15.3
		14.6		—	112.5	13.8	4.3	122.0
Taiba Wind Energy, LLC	Membership Units	—		—	—	1.3	—	1.3
TestAmerica Environmental Services, LLC	Mezzanine Debt	—		—	—	—	—	—
	Common Units	—		—	—	—	—	—
		—		—	—	—	—	—

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Schedule 12-14 AMERICAN CAPITAL, LTD. SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES—(Continued) As of and for the year ended December 31, 2015 (in millions)

		Amount of Interest or Dividends
Company (1)	Investments	Credited to Income (2)			Other (3)		December 31, 2014 Fair Value		Gross Additions (4)		Gross Reductions (5)		December 31, 2015 Fair Value
Warner Power, LLC	Mezzanine Debt	—			—		2.6		0.9		2.6		0.9
	Redeemable Preferred Membership Units	—			—		—		—		—		—
	Common Membership Units	—			—		—		—		—		—
		—			—		2.6		0.9		2.6		0.9
WIS Holding Company, Inc.	Convertible Preferred Stock	(3.0		)	—		82.9		65.2		63.6		84.5
WIS Holding Company, Inc.	Common Stock	—			—		16.9		4.6		21.5		—
		(3.0		)	—		99.8		69.8		85.1		84.5

EUROPEAN CAPITAL CONTROL INVESTMENTS
Bellotto Holdings Limited	Redeemable Preferred Stock	7.0			—		36.5		9.0		3.7		41.8
Bellotto Holdings Limited	Common Stock	—			—		103.6		30.6		10.5		123.7
		7.0			—		140.1		39.6		14.2		165.5
Columbo TopCo Limited	Redeemable Preferred Stock	2.5			—		—		73.7		26.4		47.3
	Common Stock	—			—		—		1.2		1.2		—
		2.5			—		—		74.9		27.6		47.3
European Capital Private Debt LP	Partnership Interest	3.8			—		—		103.9		19.0		84.9
European Capital UK SME Debt LP	Partnership Interest	0.6			—		0.6		12.3		0.6		12.3
Financière H S.A.S.	Mezzanine Debt	5.6			—		9.5		—		9.5		—
	Convertible Preferred Stock	—			—		—		—		—		—
		5.6			—		9.5		—		9.5		—
Financière Newglass S.A.S.(6)	Convertible Preferred Stock	4.9			—		26.1		—		26.1		—
Financière Newglass S.A.S.(6)	Common Stock	—			—		6.2		—		6.2		—
		4.9			—		32.3		—		32.3		—
Financière Tarmac S.A.S.	Senior Debt	0.5			—		5.1		0.3		1.6		3.8
	Mezzanine Debt	12.7			—		39.3		32.5		7.7		64.1
	Convertible Preferred Stock	—			—		—		—		—		—
	Redeemable Preferred Stock	—			—		—		—		—		—
		13.2			—		44.4		32.8		9.3		67.9
HCV1 S.A.S(7)	Senior Debt	—			—		—		3.4		—		3.4
	Common Stock	—			—		—		—		—		—
		—			—		—		3.4		—		3.4
Holding Saint Augustine S.A.S.	Senior Debt	—			—		4.9		—		4.9		—
Holding Saint Augustine S.A.S.	Convertible Preferred Stock	—			—		—		—		—		—
	Redeemable Preferred Stock	—			—		1.0		—		1.0		—
		—			—		5.9		—		5.9		—
Miles 33 Limited	Senior Debt	0.3			—		8.3		0.9		1.7		7.5
	Mezzanine Debt	(1.9		)	0.3		16.7		—		3.3		13.4
	Redeemable Preferred Stock	—			—		8.6		—		8.6		—
	Common Stock	—			—		—		—		—		—
		(1.6		)	0.3		33.6		0.9		13.6		20.9
Subtotal Control Investments		$	293.1		$	23.2	$	2,782.4	$	1,310.2	$	1,268.9	$	2,823.7

AMERICAN CAPITAL AFFILIATE INVESTMENTS
IS Holdings I, Inc.	Common Stock	$	—		$	—	$	7.9	$	5.8	$	—	$	13.7
Mobipark S.A.S.(8)	Senior Debt	0.1					—		3.7		0.3		3.4
	Convertible Preferred Stock	—			—		—		21.4		0.4		21.0
	Redeemable Preferred Stock	—			—		—		24.0		—		24.0
		0.1			—		—		49.1		0.7		48.4
NSI Holdings, Inc.(9)	Redeemable Preferred Stock	0.6			—		—		0.6		0.6		—
Primrose Holding Corporation	Common Stock	1.3			3.4		4.6		5.3		3.4		6.5
Qualitor Component Holdings, LLC(10)	Redeemable Preferred Units	0.1			—		—		—		—		—
Roark - Money Mailer, LLC(8)	Common Membership Units	—			—		—		1.7		—		1.7

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Schedule 12-14 AMERICAN CAPITAL, LTD. SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES—(Continued) As of and for the year ended December 31, 2015 (in millions)

		Amount of Interest or Dividends
Company (1)	Investments	Credited to Income (2)		Other (3)		December 31, 2014 Fair Value		Gross Additions (4)		Gross Reductions (5)		December 31, 2015 Fair Value
EUROPEAN CAPITAL AFFILIATE INVESTMENTS
Blue Topco GmbH	Senior Debt	0.3		—		2.1		0.3		0.4		2.0
	Mezzanine Debt	0.1		—		2.6		2.5		0.2		4.9
		0.4		—		4.7		2.8		0.6		6.9
Mobipark S.A.S.(11)	Senior Debt	—		—		2.2		—		2.2		—
	Convertible Preferred Stock	—		—		1.7		—		1.7		—
	Redeemable Preferred Stock	—		—		4.4		—		4.4		—
		—		—		8.3		—		8.3		—
Subtotal Affiliate Investments		$	2.5	$	3.4	$	25.5	$	65.3	$	13.6	$	77.2
Total Control and Affiliate Investments		$	295.6	$	26.6	$	2,807.9	$	1,375.5	$	1,282.5	$	2,900.9


(1)	Certain of the securities are issued by affiliate(s) of the listed portfolio company.


(2)	Represents the total amount of interest or dividends credited to income for the portion of the year an investment was included in Control or Affiliate categories. Includes payment-in-kind (“PIK”) interest or dividends.


(3)	Other includes interest, dividend, or other income which was applied to the cost basis of the investment and therefore reduced the total investment. These reductions are also included in the Gross Reductions for the investments, as applicable.

(4)

Gross Additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of discounts and closing fees and the exchange of one or more existing securities for one or more new securities. Gross Additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as allowances for discounts, closing fees, and PIK interest or dividends accrued during the year.


(5)	Gross Reductions include 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. Gross Reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as allowances for PIK interest and dividends recognized in prior periods.


(6)	As of December 31, 2014, the portfolio company was classified as a Control Investment. As of December 31, 2015, European Capital no longer has a controlling interest in the portfolio company and is therefore classified as a Non-Control Investment.


(7)	As of December 31, 2014, the portfolio company was classified as a Non-Control Investment. As of December 31, 2015, European Capital now has more than 25% voting interest or has greater than 50% representation of the board of directors of the portfolio company and is therefore classified as a Control Investment.


(8)	As of December 31, 2014, the portfolio company was classified as a Non-Control Investment. As of December 31, 2015, American Capital now has between 5% and 25% of the voting interest of the portfolio company and is therefore classified as an Affiliate Investment.


(9)	The portfolio company, which had zero cost basis and fair value as of December 31, 2014 and December 31, 2015, accrued and collected PIK dividends and recognized income for the PIK dividends collected.


(10)	The portfolio company, which was classified as an Affiliate Investment, was exited as of December 31, 2014. During the year ended December 31, 2015, American Capital collected additional PIK dividends and recognized income in excess of the amount accrued at the time of exit.


(11)	As of December 31, 2014, the portfolio company was classified as an Affiliate Investment. As of December 31, 2015, European Capital no longer has a controlling interest in the portfolio company and is therefore classified as a Non-Control Investment.

Information related to the amount of equity in the net profit and loss for the period for the investments listed has not been included in this schedule. This information is not considered to be meaningful due to the complex capital structures of the portfolio companies, with different classes of equity securities outstanding with different preferences in liquidation. These investments are not consolidated, nor are they accounted for under the equity method of accounting.

136

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