FOR IMMEDIATE RELEASE:
July 31, 2007

Contact
John Erickson, Chief Financial Officer (301) 951-6122
Tom McHale, Senior Vice President, Finance (301) 951-6122

AMERICAN CAPITAL INCREASES Q3 DIVIDEND 11% TO $0.92
REPORTS $0.93 NOI AND $1.45 REALIZED EARNINGS IN Q2 2007

Bethesda, MD – July 31, 2007 – American Capital Strategies Ltd. (NASDAQ: ACAS) announced today its third quarter 2007 dividend and its results for the second quarter of 2007.

THIRD QUARTER 2007 DIVIDEND DECLARATION
American Capital's Board of Directors has declared a third quarter 2007 regular dividend of $0.92 per share to record holders as of September 7, 2007, payable on October 1, 2007.  This is an 11% increase over the third quarter 2006 dividend of $0.83 per share.  American Capital has paid a total of $1.7 billion in dividends and paid or declared dividends of $25.16 per share since its August 1997 IPO at $15.00 per share.

2007 DIVIDEND GUIDANCE
American Capital is reiterating its forecast of total 2007 dividends of $3.68 per share to be paid from ordinary taxable income earned in 2007.  This would represent an 11% growth over the total 2006 dividends of $3.33 per share.  American Capital anticipates that its 2007 ordinary taxable income will exceed its dividends paid and it will elect to pay a 4% excise tax and retain its excess ordinary taxable income.  The estimated remaining 2007 dividend per share is $0.96 per share for the fourth quarter of 2007.

2007 OTHER GUIDANCE
The following guidance assumes the economic and capital market environment throughout the rest of 2007 remains substantially the same as current market conditions.

American Capital is forecasting 14% to 27% growth from December 31, 2006, in net asset value per share ("NAV"), totaling $4.08 to $8.08 growth, to a value in the range of $33.50 to $37.50 per share by December 31, 2007.  American Capital is forecasting that it will have between $17 billion and $22 billion of alternative assets under management by year end, of which $6 billion to $8 billion will be in funds managed by American Capital; the balance will be on American Capital's balance sheet.  In addition, American Capital is forecasting $0.79 to $0.83 in net operating income (earnings less appreciation, depreciation, gains and loss ("NOI")) per basic share in the third quarter of 2007. 

SECOND QUARTER 2007 RESULTS
Earnings for the quarter increased 172% to $788 million, compared to $290 million for the second quarter of 2006.  Earnings per basic share for the quarter increased 119% to $4.77 compared to $2.18 for the second quarter of 2006.  For the quarter, net portfolio appreciation and realized gains totaled $584 million compared to $165 million for the second quarter of 2006.  As described below, $493 million of the second quarter 2007 earnings of American Capital are from the appreciation of its asset management portfolio company, American Capital, LLC, driven substantially from the deconsolidation of the European Capital management company, as previously described in its March 31, 2007 Form 10-Q.

Earnings less appreciation and depreciation ("Realized Earnings") increased 48% to $1.45 per basic share for the quarter compared to $0.98 per basic share for the second quarter of 2006.  NOI increased 13% to $0.93 per basic share from $0.82 per basic share for the second quarter of 2006.

In the second quarter of 2007, American Capital received $32 million of revenue related to its wholly-owned asset management portfolio company, American Capital, LLC.  This is a 256% increase in third-party fund management revenues over the second quarter of 2006.

"This is a great time to be one of the best capitalized financial institutions in the world," said Malon Wilkus, American Capital Chairman, President and CEO, "With less than one-to-one debt to equity, American Capital has huge competitive advantages in this new credit environment.  With our One Stop Buyout(TM) and one stop financing, we fund transactions that are impossible for some of our competitors to close.  With demonstrated access to capital in these market conditions, we are taking advantage of lower multiples, wider spreads and better terms to generate outstanding risk adjusted returns for our shareholders." 

On July 6, 2007, American Capital was the first alternative asset manager and the only private equity firm to be included in the S&P 500 Index.  American Capital was added to the S&P 500 in the category of Financials, Asset Management and Custody Banks.  As of its inclusion, American Capital was the 355th largest firm in the index based on market capitalization. 

"We have outperformed the S&P 500 in each of the ten calendar years since our IPO, including the last recession, with the exception of our first full year as a public company," said Malon Wilkus.  "We've done this by growing our dividend at a 13% compound annual growth rate and providing a 22% total return to our shareholders over the past ten years.  The current credit and economic environment is ideal for us to continue this exceptional performance.  In the past few weeks, American Capital's stock price has declined along with most financial stocks.  However, American Capital has a much better capitalized balance sheet than many financial institutions, CLOs and hedge funds; some of which are levered above 4:1 debt to equity.  We are levered less than one-to-one debt to equity and are in good shape to handle continued uncertainty in the capital markets."

Second quarter 2007 dividends were $0.91 per share, an 11% growth over the second quarter 2006 dividends of $0.82 per share.  For the quarter, American Capital's dividend payout ratio was 63% of Realized Earnings of $1.45 per basic share.  Over the past year, the dividend payout ratio was 77% of Realized Earnings.  American Capital's net asset value ("NAV") per share at June 30, 2007 was $35.54, a $7.91 or 29% growth over the June 30, 2006 NAV per share of $27.63.  In the second quarter, NAV was $5.18 per share greater than the prior quarter.

"The advantage of our business model becomes more evident in a widening spread environment like today," said Chief Financial Officer John Erickson.  "As spreads widen, our interest income and our spread income generally grows, which allows us to increase our NOI and our dividends.  During widening spread environments, we may experience slower growth in our equity portfolio as more expensive credit reduces valuation multiples, but our growing spread income should allow us to continue to generate excellent returns on equity, just when other companies find it difficult to produce similar results.  We believe this is why during the last recession and recovery, we materially out performed the S&P 500, when the index declined three years in a row."

In the second quarter of 2007, American Capital invested $3.5 billion of capital and received $1.0 billion of proceeds from realizations of portfolio investments.  In addition, American Capital funds under management invested an additional $1.1 billion, for a total of $4.6 billion of new investments in the second quarter of 2007.  In the second quarter of 2007, American Capital had $635 million of net appreciation, depreciation, gains and losses comprised of net appreciation of $549 million and net gains of $86 million.  As described below, $493 million of the $549 million of net appreciation of American Capital is related to appreciation in its asset management portfolio company, American Capital, LLC, driven substantially from the deconsolidation of the European Capital management company, as previously described in its March 31, 2007 Form 10-Q.

The weighted average effective interest rate on American Capital's total investments in debt securities at June 30, 2007 was 11.8%.  At the same time, loans totaling $232 million, with a fair value of $56 million, were on non-accrual.  Delinquent and non-accruing loans to 19 portfolio companies totaled $259 million, or 4% of total loans at June 30, 2007, compared to $238 million, or 6% of total loans at June 30, 2006.  The $56 million fair value of non-accruing loans represented 1% of total loans at fair value at June 30, 2007, compared to the $55 million fair value of non-accruing loans representing 1% of total loans at fair value at June 30, 2006.

"Our portfolio continues to perform very well," said Ira Wagner, Chief Operating Officer, "with our delinquencies and non-accruals remaining at 4% over the last four quarters.  We believe the current environment, whereby many investors have lost access to capital despite very low commercial loan default rates, will result in a significant increase in our investment opportunities over and above our already industry-leading deal flow.  We continue to focus on having the largest middle market deal flow in our industry so that we can continue to be extraordinarily selective as to which companies we invest in.  We also continue to have the significant advantage of not being reliant on commercial or investment banks for financing for our One Stop Buyouts(TM) and one-stop-financings because we are able to fund the entire transaction.  In addition, when we conclude that it is time to sell a portfolio company, we may choose to provide the buyer with the appropriate debt financing to supplement their equity to fund the transaction; a capability most of our competitors lack.  Therefore, we continue to believe that our capital flexibility and our very large deal flow will provide us with excellent investment and exit opportunities going forward."

In the second quarter of 2007, American Capital completed a $1 billion equity offering at $45.05 per share, which was 1.5x book value.  Also during the second quarter of 2007, American Capital raised $492 million through its ninth on balance sheet term securitization and increased its capacity under its unsecured revolving credit facility by $665 million and increased the term to five years.  In July 2007, it raised an additional $550 million in an unsecured, BBB rated, inaugural public debt offering.

"Our low levered balance sheet and capital markets creditability have allowed us to execute a CRE CDO transaction for our CMBS portfolio, issue our first unsecured public debt, issue our ninth term debt securitization and raise $1 billion of equity, during a time when access to capital was closed to many institutions," said Tom McHale, Senior Vice President of Finance.  "We have no investments in sub prime residential mortgages.  Only 3% of our portfolio today is in CMBS investments and there have been no losses on commercial real estate loans underlying those investments.  Three percent of our portfolio assets are in CDOs, which have produced a 17% IRR.  We have few covenant-light loans.  And, our equity investments, excluding our investment in American Capital, LLC, have produced a 31% IRR over the past year.  We are very well capitalized and have a portfolio that is performing in a market where opportunities have just become far more profitable."

During the second quarter of 2007, European Capital completed an initial public offering ("IPO") of 14.6 million shares, including the full exercise of the over-allotment option granted to the underwriters, at a price of euro 9.84 per share, for gross proceeds of approximately euro 144 million ($196 million).  The shares are traded on the London Stock Exchange under the ticker symbol "ECAS."  Prior to the IPO, American Capital exercised its warrant to purchase 18.75 million shares of European Capital for an exercise price of euro 9.50 per share, or euro 178 million ($242 million).  Subsequent to the IPO, American Capital owns 65% of European Capital with a cost basis of $905 million and fair value of $1.0 billion.

European Capital is managed by European Capital Financial Services (Guernsey) Limited ("ECFS").  ECFS was a direct wholly-owned operating subsidiary, which was consolidated by American Capital in accordance with generally accepted accounting principles ("GAAP") prior to the IPO of European Capital.  In accordance with American Capital's accounting policy for consolidation, American Capital consolidates a controlled operating subsidiary that provides all or substantially all of its services to American Capital or portfolio companies in which American Capital has substantially all the ownership.  As a result of the European Capital IPO and the dilution of American Capital's ownership interest in European Capital, ECFS is no longer considered to be providing substantially all of its services to American Capital or its portfolio companies.  Therefore, as required by American Capital's consolidation policy, which was developed based on discussions with regulatory authorities, and as disclosed in its March 31, 2007 Form 10-Q, ECFS was deconsolidated prospectively during the second quarter of 2007 and is carried at fair value on American Capital's balance sheet at June 30, 2007, as required by GAAP.

In addition, during the second quarter of 2007, American Capital formed a parent holding company, American Capital, LLC, to own all American Capital owned third party fund managers.  Accordingly, American Capital transferred the ownership of ECFS and its two other wholly-owned fund managers to American Capital, LLC subsequent to the IPO of European Capital.  American Capital, LLC is treated as a portfolio company investment and carried at fair value on American Capital's balance sheet at June 30, 2007.  During the second quarter of 2007, American Capital recognized appreciation of $493 million, or $2.99 per basic share, for its investment in American Capital, LLC, the value of which primarily consists of the appreciation associated with ECFS, which was for the first time accounted for as a portfolio company at fair value. The appreciation of ECFS occurred over the period since its inception in the fourth quarter of 2005.  American Capital, LLC has a total fair value of $529 million at June 30, 2007.  As noted below, as of June 30, 2007, the fair value of this investment as determined by American Capital's Board is within the range of fair value for the investment as determined by Houlihan Lokey Howard & Zukin Financial Advisors Inc.

Since its inception in September of 2005 through June 30, 2007, European Capital has invested in 58 portfolio companies totaling $3.1 billion.  European Capital declared a dividend for the second quarter of 2007 of euro 0.10 per ordinary share, of which American Capital received dividend income totaling $9 million from its equity investment in European Capital.

Since its August 1997 IPO through the second quarter of 2007, American Capital has earned a 16% compounded annual return, including interest, dividends, fees and net gains, on 201 realizations of senior debt, subordinated debt and equity investments, totaling $6.6 billion of invested capital.  These realizations represent 36% of all amounts invested by American Capital since its August 1997 IPO.  Proceeds from these realizations exceeded the total associated prior quarter valuation of the investments by 2%.  American Capital earned a 30% compound annual return on the exit of its equity investments, including dividends, fees and net gains.

THIRD PARTY VALUATION OF PORTFOLIO INVESTMENTS
American Capital's Board of Directors is responsible for determining the fair value of American Capital's portfolio investments on a quarterly basis.  In that regard, the board retains Houlihan Lokey Howard & Zukin Financial Advisors Inc. ("Houlihan Lokey") to assist it by having Houlihan Lokey regularly review a designated percentage of fair value determinations.  Houlihan Lokey is a leading valuation firm in the U.S., engaged in approximately 1,000 valuation assignments per year for clients worldwide.  Each quarter, Houlihan Lokey reviews American Capital's determination of the fair value of its portfolio company investments that have been portfolio companies for at least one year and that have a fair value in excess of $25 million.  In the second quarter of 2007, Houlihan Lokey reviewed valuations of 20 portfolio company investments having an aggregate $1.2 billion in fair value as of the period end.  Over the last four quarters, Houlihan Lokey has reviewed 84 portfolio companies totaling $5.3 billion in fair value as of their respective valuation dates.  In addition, Houlihan Lokey representatives attend American Capital's quarterly valuation meetings and provide periodic reports and recommendations to the Audit and Compliance Committee of the Board of Directors.

For those portfolio company investments that Houlihan Lokey has reviewed during each applicable period, using the scope of review set forth by American Capital's Board of Directors, the Board has made a fair value determination that is within the aggregate range of fair value for such investments as determined by Houlihan Lokey.

In addition to its standard scope, American Capital engaged Houlihan Lokey to review the value of American Capital's wholly-owned portfolio company, American Capital, LLC, a third party fund manager.  As of June 30, 2007, the fair value of this investment as determined by American Capital's Board is within the range of fair value for the investment as determined by Houlihan Lokey.

Financial highlights for the quarter are as follows:

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED BALANCE SHEETS

As of June 30, 2007, December 31, 2006 and June 30, 2006

(in millions)

AMERICAN CAPITAL STRATEGIES, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three and Six Months Ended June 30, 2007 and 2006

(in millions, except per share data)

(unaudited)

NM = Not meaningful.

* May not recalculate due to rounding.

(1) The investing operating income consists of interest, dividends, prepayment fees and other investment fee income.

(2) The asset management and advisory operating income consists primarily of asset management fees and reimbursements, dividends from portfolio company fund managers, transaction structuring fees, equity and loan financing fees, portfolio company management and administrative fees and other fee income.

AMERICAN CAPITAL STRATEGIES, LTD.

OTHER FINANCIAL INFORMATION

Three Months Ended June 30, 2007, December 31, 2006 and June 30, 2006

(in millions, except per share data)

(unaudited)

NM = Not meaningful

(1) Excludes Repayments of European Capital Limited Bridge Loans.

(2) Includes American Capital’s investment in its externally managed funds.

(3) Includes European Capital, American Capital Equity I , American Capital CLO 2007-1 and American Capital CLO 2007-2.

(4) American Capital has elected to retain n