FOR IMMEDIATE RELEASE:
June 21, 2005

Contact
Brian Graff, Regional Managing Director (212) 213-2009
Dale Stohr, Principal (212) 213-2009
Adam Spence, Vice President (212) 213-2009
Brian Maney, Director, Corporate Communications (301) 951-6122

AMERICAN CAPITAL INVESTS $188 MILLION IN BUYOUT OF POTPOURRI GROUP

Bethesda, MD - June 21, 2005 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today it has invested $188 million in the buyout of Potpourri Group Inc. ("PGI"), a multi-title catalog company offering a broad product line of distinctive home décor, casual apparel, gifts and unique accessories. American Capital's investment takes the form of senior term loans, senior and junior subordinated debt and redeemable preferred and common equity. American Capital is also providing a revolving credit facility. PGI management is investing in equity and will continue to manage the Company. Post close, American Capital owns approximately 83% of PGI on a fully diluted basis.

"Our one-stop buyout of Potpourri Group is our 8th buyout of 2005," said American Capital COO Ira Wagner. "Our ability to rapidly conduct thorough in-house due diligence and fund the entire capital structure of a transaction definitely sets us apart from our competition. We're pleased to partner with a seasoned management team as they continue to build their existing platform company and acquire complementary direct-to-consumer catalogs."

American Capital has invested $2.5 billion in the last twelve months, $1.2 billion year to date and $800 million quarter to date. For more information about American Capital's portfolio click here.

"Through its portfolio of 12 diverse catalog titles, PGI caters to one of the largest, fastest growing and attractive demographics in the country: middle-to-upper-middle income female baby boomers, who increasingly rely on the convenience, speed and ease of catalog shopping due to the greater demands placed upon them in the workplace and at home," said American Capital Regional Managing Director Brian Graff. "In addition to providing its target audience with an enormous selection of specialty, niche products, PGI's portfolio creates a well-diversified revenue stream."

"PGI's multi-title format results in strong selling synergies. The Company is able to leverage its loyal customer base and effectively cross-market products and titles to likely buyers," said American Capital Principal Dale Stohr. "In addition, PGI's multiple titles create numerous operational efficiencies, resulting in a low cost, scalable platform."

"American Capital is backing a strong management with deep experience in the catalog industry and a proven track record of significantly growing the Company both organically and through strategic acquisitions," said American Capital Vice President Adam Spence. "Under management's leadership, the Company has consistently grown revenues and improved margins by leveraging its scale across its product portfolio. We are confident in the management team and believe that they will capitalize on opportunities to enhance long-term growth, increase response rates and average order sizes, and improve productivity and margins.

Formed in 1998, Chelmsford, MA-headquartered Potpourri Group is a catalog company with 12 diverse titles catering primarily to women. Through its portfolio of catalogs, PGI offers a broad product line of distinctive home décor, casual apparel, gifts and accessories that are unique or difficult to find in other outlets. The Company's catalogs include: The Stitchery, offering needle craft and cross stitch products; Expressions, offering home and garden décor and unique collectibles and accessories; Potpourri, offering a unique range of sentimental and whimsical gifts, home décor items and personalized items; Back in the Saddle, offering equine-themed home décor, casual apparel and gifts; Nature's Jewelry, offering nature-themed jewelry, casual apparel and gifts; NorthStyle, offering cabin-themed home décor, casual apparel and jewelry; The Pyramid Collection, offering personal growth, spiritual and meditation gifts, home décor items, apparel and jewelry, Serengeti; offering nature and wildlife themed gifts, casual apparel and gifts; In the Company of Dogs, offering dog-themed merchandise for pet owners; Young Explorers, offering educational toys and games; Whatever Works, offering home improvement and utilitarian household products; and Catalog Favorites (pictured at left), offering a combination of the best selling items from all the catalogs in PGI's portfolio. PGI has recorded sales growth of approximately 18% annualized over the last five years and recorded annual net sales of $160 million for the fiscal year ending March 31, 2005. The Company has approximately 300 year-round employees.

"American Capital's support will enable us to continue to acquire and grow new catalog titles that will generate strong synergies within the Company's catalog platform," said Potpourri Group President and CEO Jonathan Fleischmann.

"We look forward to building our partnership with American Capital. Their financing capabilities, extensive experience in growing companies in various industries and ability to work closely with management teams made them precisely the investment partner we need for our future growth," said Potpourri Group Chairman Jack Rosenfeld.

ABOUT AMERICAN CAPITAL

American Capital is a publicly traded buyout and mezzanine fund with capital resources of approximately $5.4 billion. American Capital invests in and sponsors management and employee buyouts, invests in private equity buyouts, and provides capital directly to private and small public companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions and recapitalizations.

As of May 31, 2005, American Capital shareholders have enjoyed a total return of 364% since the Company's IPO - an annualized return of 22%, assuming reinvestment of dividends. American Capital outperformed 86%, 72%, 85% and 91% of all U.S. public companies with a current market capitalization greater than $1 billion^* in the one-year, three-years, five-years and the approximately seven and a half years since the IPO, in each case ending May 31, 2005. American Capital has paid a total of $717 million in dividends and paid or declared $17.51 dividends per share since its August 1997 IPO at $15 per share.

Companies interested in learning more about American Capital's flexible financing should contact Mark Opel, Senior Vice President, Business Development, at (800) 248-9340, or visit our website.

^*Figures were updated on June 28, 2005

Performance data quoted above represents past performance of American Capital. Past performance does not guarantee future results and the investment return and principal value of an investment in American Capital will likely fluctuate. Consequently, an investor's shares, when sold, may be worth more or less than their original cost. Additionally, American Capital's current performance may be lower or higher than the performance data quoted above.

This press release contains forward-looking statements. The statements regarding expected results of American Capital Strategies are subject to various factors and uncertainties, including the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional, national or international economic conditions, or changes in the conditions of the industries in which American Capital has made investments.

This announcement is neither an offer to sell nor a solicitation to buy securities.
This announcement appears as a matter of record only.