ACAS American Capital, Ltd.

Additional Taxable Income to be Retained BETHESDA, Md., Dec. 15 /PRNewswire-FirstCall/ -- American Capital Strategies Ltd. (NASDAQ:ACAS) announced today that its Board of Directors has declared an additional dividend on its common stock of $.03 per share payable on January 18, 2006 to shareholders of record as of December 30, 2005. Total dividends declared for 2005 are $3.08 per share, an increase of 6% over 2004. This additional dividend reflects a change in American Capital dividend practices. Previously, the Company has paid an additional year-end dividend in an amount sufficient to avoid the imposition of excise taxes. However, for 2005, the Company intends to retain a portion of its ordinary taxable income and pay a 4% excise tax on the retained portion. "American Capital has increased our total annual dividend every year since our 1997 IPO and we increased the 2005 dividend by 6% over 2004," said American Capital Chairman, President and CEO Malon Wilkus. "Due to very strong performance this year, we expect our ordinary taxable income to exceed our dividend by 5% to 10%. Rather than declaring a larger year-end additional dividend we believe it is preferable to retain income and pay a small excise tax of approximately $1 million. This 'spill-over' of ordinary taxable income into 2006 allows us to start the year in a great position with some of 2006's dividend 'in-the-bank.'" In addition, American Capital intends to continue its existing policy of retaining its net long-term capital gains and treating them as deemed distributions for tax purposes, while paying a tax on them for the benefit of its stockholders. Therefore, the 2005 taxable income that has been and will be distributed as dividends is expected to be treated as ordinary income for tax purposes, except to the extent it results from qualifying dividend income to American Capital, in which case it will be classified as qualified income. American Capital reports the estimated tax characteristics of each dividend when declared, while the actual tax characteristics of dividends are reported annually to each stockholder on Form 1099DIV. This additional dividend is expected to be a distribution of ordinary taxable income, though a portion of it will be qualified income that may be taxable to the recipient at the applicable capital gains rate. American Capital will inform stockholders in its 2005 earnings release and in its Form 10-K of the amount of ordinary taxable income it retained, including the amount by which its ordinary taxable income exceeded the dividends paid and the amount of excise taxes it paid. American Capital has instituted a 5% discount on shares purchased through the reinvestment of dividends subject to the terms of its Dividend Reinvestment Plan (DRIP). Stockholders who are not now enrolled in the DRIP but enroll in advance of the record date for American Capital's forthcoming additional dividend and in conformity with Nominee or Equiserve rules may also benefit from the 5% discount. Stockholders interested in the DRIP should review a DRIP prospectus, which is available from American Capital and accessible on the American Capital website at http://www.acas.com/investor_relations/dividends/dividend_reinvestment.cfm, or call the Investor Relations Department at (301) 951-6122. A summary of American Capital's dividend history follows. AMERICAN CAPITAL'S DIVIDEND HISTORY $19.11 Declared Since August 1997 IPO at $15.00 Per Share % Change of % Change of Regular Total Dividend Dividend Year/ Regular Over Prior Additional Over Prior Quarter Dividend Year Dividend Total Year 2005 $3.05 7 % $.03 $3.08 6 % Q4 $0.79 8 % Q3 $0.78 8 % Q2 $0.75 7 % Q1 $0.73 4 % 2004 $2.85 4 % $0.06 $2.91 4 % Q4 $0.73 6 % Q3 $0.72 4 % Q2 $0.70 3 % Q1 $0.70 4 % 2003 $2.73 7 % $0.06 $2.79 9 % Q4 $0.69 3 % Q3 $0.69 5 % Q2 $0.68 8 % Q1 $0.67 14 % 2002 $2.55 15 % $0.02 $2.57 12 % Q4 $0.67 18 % Q3 $0.66 18 % Q2 $0.63 15 % Q1 $0.59 11 % 2001 $2.21 13 % $0.09 $2.30 6 % Q4 $0.57 10 % Q3 $0.56 14 % Q2 $0.55 12 % Q1 $0.53 18 % 2000 $1.95 14 % $0.22 $2.17 25 % Q4 $0.52 18 % Q3 $0.49 14 % Q2 $0.49 14 % Q1 $0.45 10 % 1999 $1.71 39 % $0.03 $1.74 30 % Q4 $0.44 19 % Q3 $0.43 34 % Q2 $0.43 48 % Q1 $0.41 64 % 1998 $1.23 N/A $0.11 $1.34 Q4 $0.37 76 % Q3 $0.32 N/A Q2 $0.29 N/A Q1 $0.25 N/A 1997 Q4 $0.21 $0.21 Total $19.11 ABOUT AMERICAN CAPITAL American Capital is a publicly traded buyout and mezzanine fund with capital resources of approximately $7 billion. American Capital invests in and sponsors management and employee buyouts, invests in private equity buyouts, provides capital directly to private and small public companies and through its asset management business is a manager of debt and equity investments in private companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions and recapitalizations. As of November 30, 2005, American Capital shareholders have enjoyed a total return of 431% since the Company's IPO - an annualized return of 22%, assuming reinvestment of dividends. American Capital has paid a total of $868 million in dividends and declared $19.11 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 at http://www.americancapital.com/. 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. DATASOURCE: American Capital Strategies Ltd. CONTACT: John Erickson, Chief Financial Officer, +1-301-951-6122, or Tom McHale, Vice President, Finance and Investor Relations, +1-301-951-6122, both of American Capital Strategies Ltd. Web site: http://www.americancapital.com/

Copyright