» Table of Contents

Corporate News
American Capital...
    First 9 Months 2000 New Investments Up 43% Over 1999
    Portfolio Valuation
    Adds Principals to New York Office

New Portfolio Investments
American Capital Invests...
    $21 Million in Chromas Technologies for Buyout
    $19.6 Million for Acquisition Financing of Case Logic
    $30 Million for Recapitalization of Cornell Companies

Portfolio Companies:
    o2wireless Solutions Completes IPO
    FAA Approves New Piper Aircraft's Malibu Meridian

» American Capital First 9 Months New Investments Up 43% Over 1999

Thanks to a record breaking third quarter, dollar volume of American Capital's new investments in the first nine months of 2000 increased 43% over 1999.

American Capital New Investments, First 9 Months 2000 Compared with 1999 ($Millions)

                          1999          2000       % Increase,
                                                   1999 - 2000

          3Q              48.4         77.1          59%
          2Q              44.3         61.2          38%
          1Q              26.2         32.0          22%
          --              ----         ----          ---
          First 9
          Months         118.9        170.3          43%

New Investments, $5 million and over, First 9 Months 2000

    Company     Amt ($Millions)  Transaction              Industry

3Q  Chromas           20.5        American Capital         Digital and Analog
    Technologies                  Buyout                   Printing Equipment
                                                           Mfr.

    Case Logic        19.6        Acquisition              Designer, Marketer of
                                  Financing                Storage Products and
                                                           Accessories
 
    Cornell           30.0        Recapitalization         Private Corrections

2Q  Transcore         20.5        Add-on Acquisition       Transport. Info.
    Holdings, Inc.                Existing Portfolio Co.   Mgmt. Systems &
                                                           Services

    The Inca Group     5.0        Add-on Acquisition       Mfr. Industrial
                                  Existing Portfolio Co.   Rack & Shelving

    Goldman           30.0        Direct Investment        Machine Tools
    Industrial                    
    Group                 

1Q  Fulton Bellows    24.5        American Capital         Bellows &
    & Components, Inc.             Buyout                  Control Devices

    A&M Cleaning       7.0        American Capital         All Purpose
    Products, Inc.                Buyout                   Household Cleaner

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» Portfolio Valuation

For the quarter ended September 30, 2000, American Capital expects unrealized appreciation and a realized gain on the common stock warrants of our portfolio company o2wireless Solutions, Inc. (Nasdaq: OTWO), which completed its initial public offering on August 16, 2000. While American Capital has not completed a valuation of our portfolio as of September 30, 2000, we expect that based on declining valuations of other Internet-oriented companies, there will be material unrealized depreciation in the value of American Capital's investment in Capital.com. It is likely that the Capital.com depreciation will exceed unrealized and realized gains associated with o2wireless when the third quarter valuation process is complete. The original cost basis of American Capital's equity investment in o2wireless Solutions was $2.7 million. The original cost basis of American Capital's equity investment in Capital.com is $1.5 million. Realized and unrealized appreciation and depreciation do not affect American Capital's net operating income. American Capital expects to meet consensus estimates projected by analysts surveyed by First Call/Thomson Financial for net operating income for the third quarter of 2000.

» American Capital Adds Principals to New York Office

American Capital added two principals to its New York office.

Douglas Troob joined American Capital in July. Prior to joining American Capital, Mr. Troob was a founding member of GMM Capital Partners, a private equity firm investing in management-led buyouts, owner recapitalizations, and growth opportunities of middle market companies. Prior to GMM, Mr. Troob worked in the investment banking department of Chemical Securities, Inc. focusing on corporate merger and acquisition transactions and public and private debt offerings. Previously, he worked in the investment banking departments at Salomon Brothers Inc., specializing in equipment-related financings and mergers and acquisitions, and at Drexel Burnham Lambert, participating in public financings.

David S. Levin joined American Capital in May to oversee Internet and technology initiatives for ACAS's portfolio companies. Prior to joining American Capital, Mr. Levin served as Director of E-Business for the Northeastern region of Complete Business Solutions, Inc. (Nasdaq: CBSI), a publicly traded, global IT Professional Services firm. Before joining CBSI, Mr. Levin served as Vice President of Marketing for IBNet.com, a leading business-to-business e-marketplace. Mr. Levin also co-founded and served as President of KidTools.com, an early adopter of digital technology that was among the Internet's first "e-tailers." Kidtools offered over 15,000 educational books, toys, audio and video products to parents of newborn to twelve-year-old children.

» American Capital Invests $21 Million in Chromas Technologies for Buyout

On September 6, 2000 American Capital invested $18 million to purchase the Chromas Technologies business from Didde Corporation. American Capital agreed to invest up to a total of $21 million. Chromas manufactures digital and analog printing presses for the packaging and labeling industry. Together with the Digital Label Alliance, a research and development consortium of flexible packaging manufacturers it organized, Chromas has recently introduced an innovative digital printing press that allows printers to economically produce short runs of high resolution graphics. American Capital's investment is in the form of a revolving line of credit, senior term loan, senior subordinated debt and common stock in a new corporation formed to complete the transaction. American Capital is the lead investor in this transaction and will own over 90 percent of the new corporation.

The Chromas sales force and service operations will be based in the United States. Manufacturing and engineering will continue to operate through a subsidiary based in Canada, as will the research and development team. Included in the transaction is Chromas' interest in the Digital Label Alliance, which has led the research and development of digital technology within the flexible packaging industry.

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» American Capital Invests $19.6 Million for Acquisition Financing of Case Logic

On August 28, 2000 American Capital invested $19,625,000 in Case Logic, Inc., a designer and marketer of storage products and accessories for the audio, computer, photo/video, DVD, automotive and recreational markets. American Capital's investment took the form of $15,125,000 in senior subordinated debt and $4,500,000 in junior subordinated debt. KRG Capital Partners, LLC was the transaction sponsor, having signed a definitive purchase agreement to purchase Case Logic from its Dutch parent, Hagemeyer N.V. GE Capital and Chase Manhattan provided the senior debt and a revolving credit facility. American Capital joined with Albion Alliance in providing subordinated debt.

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» American Capital Invests $30 Million for Recapitalization of Cornell Companies

On August 1, 2000 American Capital invested $30,000,000 in the form of seven-year senior subordinated debt with warrants to finance the continued growth of Cornell Companies, Inc. (NYSE: CRN). Cornell is one of the leading private sector providers of correctional, juvenile detention, pre-release and treatment services in the United States. The Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF) invested $10 million in senior subordinated debt with warrants alongside American Capital. TIAA-CREF is the world's largest retirement system with over $290 billion in assets under management.

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» o2wireless Solutions, Inc. Completes IPO

On August 16, 2000 American Capital portfolio company o2wireless Solutions, Inc. (Nasdaq: OTWO), formerly Clear Holdings, Inc., completed an initial public offering of 6.1 million shares of common stock at a price of $12.00 per share. Atlanta-based o2wireless provides a full range of network services to all sectors of the global wireless telecommunications industry. In November 1999 American Capital made a $17.5 million mezzanine commitment to o2wireless' operating subsidiary, Clear Communications Group, of which $13 million was funded. The mezzanine investment was repaid at the time of the offering. American Capital owns warrants to purchase 2.5 million shares of o2wireless' common stock for a nominal exercise price.

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» FAA Approves New Piper Aircraft's Malibu Meridian

On September 27 the Federal Aviation Administration awarded American Capital portfolio company New Piper Aircraft, Inc. the type certificate for its Malibu Meridian PA46-500TP single-engine turboprop. In May 1998, American Capital invested $20 million in subordinated debt with detachable warrants in New Piper to help fund the development of the Malibu Meridian. With a typically equipped price of approximately $1.5 million, the six-seater cruises at more than 300 miles per hour at an altitude of 30,000 feet, and has a a maximum cruise range exceeding 1,000 nautical miles.

To enable New Piper to deliver Meridians concurrently with certification, the company began production in early 2000, and is delivering the first aircraft to its customer one week after regulatory approval. To date, the company has received 135 wholesale orders, representing 105 retail sales from customers in 10 foreign countries and the United States. To accommodate the high market demand, New Piper will build 35 Meridians in 2000, accelerating its production rate to more than 100 aircraft in 2001.

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This newsletter contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 or national economic conditions, or changes in the conditions of the industries in which American Capital has made investments.