Why is American Capital distributing a portion of the dividend in shares of its common stock?
This dividend includes the balance of American Capital’s 2008 taxable income, which is required to be distributed to stockholders in order for American Capital to maintain its tax status as a regulated investment company and to eliminate its income tax liability. The IRS issued a Revenue Procedure allowing publicly traded regulated investment companies, such as American Capital, to distribute, with respect to a taxable year ending on or before December 31, 2009, its own stock as a dividend for the purpose of fulfilling its distribution requirements if, among other things, the aggregate amount of cash that may be distributed to their stockholders is at least 10% of the total dividend. The Investment Company Act of 1940, as amended (the “Act”) could prohibit American Capital from paying any cash dividend when its asset to debt coverage as determined under the Act is less than 200% and it has public bonds outstanding. However, the staff of the Securities and Exchange Commission has provid
